November 20, 1998
TV COMMUNICATIONS NETWORK INC (TVCN)
Quarterly Report (SEC form 10QSB)
Management's Discussion and Analysis of Financial Conditions and Results of
Operations
Wireless Cable Operations
Salina, Kansas. TVCN is currently operating the Salina station which
broadcasts on 19 channels to a base of 520 subscribers and has three
employees. Zenith scrambling equipment was introduced into the Salina
head-end equipment in November and December, 1996, each subscriber's
household received a new descrambler (set-top converter), and the Company
added ESPN, Showtime and Flix to its programming package.
Mobile, Alabama. The Company's Mobile, Alabama license is operated by Mobile
Wireless TV. For the use of this license the Company received a cash payment
of $100,000, and a promissory note in the amount of $100,000. The note was
paid on May 22, 1997. In addition, the Company receives a transmission fee
which is the greater of $2,000 per month; $0.50 per subscriber per month; or
two percent of the gross monthly revenues of the station.
Woodward, Oklahoma. The Company's Woodward, Oklahoma license is the fifth
license acquired by the Company from MDA, Inc., an affiliated company. The
other four licenses are those of Salina and Hays, Kansas; San Luis Obispo,
California; and Mobile Alabama. The Company temporarily leased the station
to a non-affiliated entity at the rate of $500 per month for a period of one
year, ending March 31, 1998.
San Luis Obispo, California. The Company repossessed the San Luis Obispo,
California WCTV station from Wireless Telecommunica- tions, Inc. (WTCI) in
1996 and has been operating it since that time. As part of a settlement with
WTCI, WTCI conveyed all of its assets in the San Luis Obispo station to the
Company, and the Company agreed to purchase the San Luis Obispo Basic
Trading Area (BTA) from WTCI. The purchase price for the BTA was $452,168.
Of this amount $90,000 was paid in cash, and $362,168 was paid in the form
of the Company's assumption of an obligation in that amount payable to the
FCC over 10 years, with interest only payments for the first two years and
principal and interest payments for the final eight years. The FCC approved
the transfer of the BTA on May 23, 1997, and the Company is in the process
of applying for six additional channels in San Luis Obispo. In addition, the
Company purchased the rights to all three of the H channels for a total of
$20,000 and is awaiting FCC approval of the transfer of these channels.
Currently, the Company is broadcasting on seven channels to 25 subscribers
in the San Luis Obispo area.
Other Stations. The Company also owns a WCTV station in Hays, Kansas. In
cooperation with its affiliate, Multichannel Distribution of American, Inc.
(MDA) the Company has constructed four channel WCTV stations in Myrtle
Beach, South Carolina; Quincy, Illinois; and Scottsbluff, Nebraska. None of
these stations has been leased.
In addition, in an effort to expand its concentration of WCTV stations in
the West Virginia and Pennsylvania areas, the Company has received the
licenses from the FCC for five channels in the
Scranton/Wilkes-Barre/Hazelton BTA.
Sale of WCTV Stations
Detroit, Michigan
In 1994 the Company sold its WCTV station in Detroit, Michigan to Eastern
Cable Networks of Michigan, Inc. (ECNM), a subsidiary of ECNC. The
consideration received by TVCN was $11,000,000.00 payable as follows: (1) a
deposit of $250,000; (2) $2.25 million cash at closing; (3) $500,000 90 days
after closing; (4) up to $2.0 million payable as a function of ECNM's
ability to successfully expand its services; (5) $500,000 nine months after
closing; and (6) a $5.5 million promissory note secured by a lien upon the
entire station.
On August 30, 1995, ECNM sold the Detroit station to a subsidiary of
People's Choice TV (PCTV). In September 1995 the Company filed a lawsuit in
the District of Columbia Superior Court seeking damages and to set aside the
transaction on the grounds that it violated the agreement pursuant to which
TVCN sold the Detroit station to ECNM in 1994. On January 12, 1996 the
parties settled the lawsuit effective December 31, 1995. Pursuant to the
settlement, the Company released ECNC from all liability and consented to
PCTV's assumption of the note secured by the Detroit station (the Original
Detroit Note). In return, ECNC and PCTV paid the Company $614,120 in cash;
PCTV assumed the Original Detroit Note; and one of PCTV's wholly-owned
subsidiaries executed a second note (the Additional Detroit Note) in favor
of the Company in the amount of $2.15 million. As of September 30, 1998 the
total outstanding deferred purchase price of the Detroit station was the
$1,407,504 principal balance of the Original Detroit Note.
Mining Business
Mining and Energy International Corp./Liberty Hill Mine -
On September 2, 1997 the company's subsidiary, Mining and Energy
International Corp. ("MEICO") entered into two agreements with "Big Trees'
Trust" and "Naylor 1996 Charitable Remainder Trust under date of December
30, 1996," of Applegate, California (collectively, "Big Trees Trust")
concerning the Liberty Hill Mine in Nevada County, California. Under the
first agreement MEICO agreed to lease ten unpatented mining claims,
consisting of about 200 acres of the Liberty Hill Mine, for thirty years.
Under the second agreement, MEICO acquired an option to lease 109 other
unpatented mining claims, consisting of approximately 1,750 acres of the
Liberty Hill Mine, for a nominal option price. Big Trees Trust is controlled
by Ray Naylor, who for many years was an officer of the Company's Century 21
mining subsidiary.
Under the terms of the lease agreement, MEICO agreed to lease the subject
mining property for thirty years, with an option to terminate the lease
without penalty. MEICO agreed to pay the out-of-pocket costs of operating
the mine. In addition to these out-of-pocket expenses MEICO agreed to pay
Big Trees Trust a nonrefundable advance against royalties of $40,000 per
month (or 15% of the ores mined and sold, whichever is greater). As of
September 30, 1998 MEICO had expended a total of $2,130,400 in out-of-pocket
expenses to bring the mine into operation. In addition, to these expenses,
MEICO has paid Big Trees Trust a total of $955,000 in advance royalties.
Capital expenditures on the mine amounted to $433,399. Thus, total
expenditures of all kinds through September 30, 1998 were $3,518,799. An
additional $33,800 was spent on Century 21 mining equipment used at the
Liberty Hill Mine.
Development of the Liberty Hill Project began in the winter of 1996. MEICO
contracted with Ray Naylor to be the operator of the mine and to develop the
project. Beginning in the summer of 1996, Ray Naylor assured MEICO that the
mine was on the verge of production. However, for one reason or another,
including inclement weather, inadequate water purification equipment,
unanticipated clay content of the ore, etc., Mr. Naylor never actually
brought the mine into operation. Therefore, in the fall of 1997 MEICO began
to suspect that Mr. Naylor was unable or unwilling to bring the mine into
production. On March 5, 1998 TVCN and MEICO sued, inter alia, Big Trees
Trust and Ray Naylor in a dispute over the lease and operation of the
Liberty Hill Mine. In its complaint MEICO alleges that it was fraudulently
induced to enter into the mining lease and that Ray Naylor breached his
contract to operate the mine on MEICO's behalf in a good and miner-like
fashion. MEICO and TVCN claim damages in excess of $3.5 million. While no
answer has been filed in the case, Mr. Naylor has informed MEICO that he
believes it is in default under the lease and has served a notice of
termination of the lease on the Company. On May 20, 1998 the Court entered
an order on the parties' stipulated motion submitting the matter to binding
arbitration. The parties have agreed to the appointment of Mr. Murray
Richtel of the Judicial Arbiter Group, Inc. as the arbitrator in this
matter, and an arbitration hearing has been set for September 10, 1998. The
arbitration proceeding is in its initial stages, and discovery is
proceeding. At this preliminary stage it is not possible to predict with any
certainty the probable outcome of this matter. However, TVCN intends to
prosecute its claims vigorously.
Century 21/Mountain House Mine
The Company acquired a controlling interest in Century 21 Mining, Inc. in
December 1989. Century 21's principal asset is the Mountain House Mine. The
mine is not yet in operation. The status of this mine has not changed since
the last fiscal year. For more information, see the Company's previous
annual reports, which are incorporated herein by reference.
Reema International Corp.
Reema International Corp. (Reema) is a wholly-owned subsidiary of TVCN,
Incorporated to explore for and develop business opportunities in the oil
and gas industry. Specifically, Reema is in the business of developing
projects designed to convert natural gas into transportation fuels (Gas
Conversion Project). For more information, see the company's previous annual
reports, which are incorporated herein by reference.
Internet Business Opportunities
On February 16, 1996 the Company incorporated its wholly-owned subsidiary,
Planet Internet Corp. as an Internet Service Provider (ISP). Planet Internet
provides internet service to subscribers. During the first year of testing
and operation, Planet Internet concentrated its efforts on local individual
accounts. Recently, Planet Internet has begun concentrating on commercial
accounts and expanding its services nationwide.
Individual dial-up subscribers are charged an average of $19.95 per month
per subscriber with a certain discount for a paid- up yearly subscription.
Planet Internet offers a wide range of services to commercial accounts for
as little as $50.00 per month for dial-up subscribers to as high as $350.00
per month per subscriber for accounts with high speed digital modems and
other internet services. As of September 30, 1997, Planet Internet had 990
subscribers.
As of September 30, 1998, Planet Internet has purchased internet equipment
worth $548,728, and has spent $466,485 for the development of its internet
services.
Middle East Investment Authorization
At a special meeting of the Company's board of directors held on December
13, 1995, Omar Duwaik was authorized to explore investment opportunities in
the Middle East. Mr. Duwaik was authorized to enter into such agreements as
were necessary and to invest in a holding company on behalf of the Company
if he deemed such an investment to be in the best interests of the Company.
To date Mr. Duwaik has explored numerous investment opportunities. However,
none have met the criteria he has established for making such an investment.
Therefore, although Mr. Duwaik was authorized to commit up to $3 million, no
funds have been expended to date pursuant to the board's authorization.
Pursuant to its general policy of seeking shareholder approval of major
investments, the Company will seek shareholder approval of any investment
made pursuant to this authority.
Qatari WCTV Station
In 1992 the Company received a contract from Qatari Government
Telecommunications Corporation (Q-Tel) to build a WCTV station in Doha,
Qatar and train operations personnel. The Company built the station in 1993,
and a provisional acceptance certificate for the station was issued on
August 14, 1993. Through May 1996 TVCN personnel assisted in the management
and operation of the station and trained Qatari personnel. TVCN has
guaranteed the supply of all compatible equipment and spare parts that may
be needed for the maintenance, and refurbishment of the equipment, and the
continuation of the WCTV operation without interruption over a period of 10
years. The Qatari Wireless cable system was awarded Cable Operator of the
Year honors at the CABSAT '95 (cable and satellite exhibition).
Property, Plant and Equipment
The Company retains ownership of substantially all system equipment
necessary to provide its services to subscribers. Such system equipment
includes all reception and transmission equipment located at the tower
(i.e., the head-end equipment), reception equipment located at each
subscriber location (i.e., subscriber equipment) and related computers,
diagnostic equipment and service vehicles and facilities. The Salina, Kansas
system equipment is valued at $542,499. The Company's WCTV facilities are,
in the opinion of management, suitable and adequate by industry standards.
The Company owns its executive offices in Denver, Colorado. The Company also
owns a warehouse in Detroit, which is leased to PCTV at the rate of $4,000
per month until March 1999, and vacant land in Arapahoe and Jefferson
Counties in Colorado, which is being held for future development. Physical
assets of the Company, except for the mortgage on corporate headquarters,
are not held subject to any major encumbrance.
Total Revenues
The total revenue for the three and six months periods ending September 30,
1998, was $653,320 and $1,309,140 respectively, as compared to $485,773 and
$3,131,940 for the same periods ending
September 30, 1997. The increase was due to the sale of the Rome, Georgia
station in 1997.
Operating Expenses
Total operating expenses for the three and six months periods ending
September 30, 1998, are $981,751 and $2.016,579 as compared to $1,1,499,122
and $2,774,515 during the same period ending September 30, 1997. The change
in expenses of $757,936 is summarized as follows:
Increase in Cost of Goods Sold 23,582
Increase in General & Administrative Expense 211,585
Increase in Depreciation and Amortization 73,381
Increase in Interest Expense 450
The decrease in salaries is a result of streamlining staff Requirements. The
increase in cost of Goods Sold, General and Administrative Expenses is due
to the increased efforts to increase Operating Revenues. The increase in
Mine Development expenses is due to the increased activity in developing the
Liberty Hill Mine.
Net Gain
the six months ending September 30, 1997 and a gain of $233,063 during the
six months ended September 30, 1997. The decreased income during the first
six months ended September 30, 1998, is due to the sale of the station in
Rome, Georgia in June 1997. Operating costs were lower due to the suspension
of mine development.
Income Taxes
See Page 8 Income Tax note.
Estimated income taxes are calculated at 35% for federal obligations.
Liquidity and Capital Resources
The Company initially financed its growth through loans and the sale of
stock. The Company will finance its future growth primarily from the sale of
domestic operations.
To date, the Company has not engaged in any debt financing, with the
exception of the BTA's funded through the FCC, and the purchase of the
internet equipment. Instead, it has relied on individual or group
investments. The company's cash flow for the three months ended September
30, 1998, and September 30, 1997, are summarized as follows:
Sept. 30, 1998 Sept. 30, 1997
Unaudited Unaudited
Cash Flow From Operating Cash Flow From Investing
Activities $ 659,280 $1,424,134
Cash Flow From Financing
Activities $ 118,965 $ 156,253
Cash - Beginning of Period $ 490,985 $1,517,449
Cash - End of Period $ 699,283 $2,206,778
The sales of the Denver, Colorado, Washington, D.C., and Detroit, Michigan
systems for approximately $17.5 million with a resulting gain of $15.5
million and the sale of the Rome, Georgia station are expected to adequately
continue covering the Company's current liabilities along with allowing the
Company develop other wireless cable TV markets in the United States and
explore other business opportunities domestically and internationally.
Currently, the Company has $2,252,814 in long term debt which is primarily
for the purchase of the TVCN corporate headquarters building in Denver,
Colorado, for the Basic Trade Area rights purchased during the FCC BTA
Auction, and for Equipment Purchases.
The Company's current assets and liabilities are $1,241,225 and $1,683,123,
respectively. The Company's cash position is such that management
anticipates no difficulty in its ability to meet its current obligations.
The company currently has $90,780 investments in government securities.
The President, a shareholder, and a Director, have advanced loans to the
Company totaling $892,922.
Accounts Receivable and Payable
The decrease in notes receivable as of September 30, 1998, is due to the
receipt of note payments.
Advance from Stockholders
During the period from March 31, 1998 to September 30, 1998, the Company
repaid advances from stockholders totaling $11,381.
Subscriber Deposits
The purchasers of the Denver and Detroit stations limited the subscriber
deposits assumed by purchasers to $50,000 and $114,000, respectively. TVCN
is responsible for subscriber deposits above these amounts.
On February 14, 1995, Mr. Omar Duwaik was granted a cash bonus of $100,000
by the Board of Directors. Because of cash flow constraints, the bonus had
not been paid.
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Recent Filings: Feb 1998 (Qtrly Rpt) | Jul 1998 (Annual Rpt) | Aug 1998
(Qtrly Rpt) | Nov 1998 (Qtrly Rpt)
More filings for TVCN available from EDGAR Online
Tuesday January 19, 8:12 am Eastern Time
Company Press Release
InterOmni Services Inc. Announces Technology to Protect Online Privacy
InterOmni Wallet will Both Protect Consumer Privacy and Allow Consumers to
Benefit From Selling Some or All of Their Data
DENVER--(BUSINESS WIRE)--Jan. 19, 1999-- InterOmni Services Inc., a
wholly-owned subsidiary of TV Communications Network Inc. (OTC BB: TVCN),
Tuesday announced that it is developing the InterOmni Wallet(tm), a digital
software profile system that allows consumers to control, own and protect
their personal profile data from Web sites and marketers.
The InterOmni Wallet software will store a consumer's personal data profile
including the consumer's medical and financial records, purchasing behavior
and demographic data. The InterOmni Wallet will be able to track Web surfing
to determine tastes and preferences for TV shows, movies, music, books,
magazines, and newspapers.
In addition, the InterOmni Wallet will be able to record every interaction
with an electronic device. Protected with strong encryption, the InterOmni
Wallet will permit only the owner to have unrestricted access to this
sensitive data.
The development of the InterOmni Wallet will coincide with increased
spending for online advertising that Forrester Research forecasts will reach
$15 billion by 2003, with Internet commerce sales reaching as high as $3.2
trillion in the same period. But, along with this growth in online
advertising and Internet commerce comes growing concerns over online
consumer privacy.
''We believe that true privacy exists when an individual has complete
control over the flow of their personal data,'' said Jad Duwaik, President
of InterOmni Services. ''The InterOmni Wallet will give this control back to
the individual and allow them to profit from sharing some or all of their
data or to benefit from the privacy created by completely closing access to
advertisers.''
InterOmni Services expects to launch the free InterOmni Wallet from its Web
site (www.InterOmni.com) by the fourth quarter of 1999. The InterOmni Wallet
will follow and enforce the Federal Trade Commission's Fair Information
Principles.
InterOmni Services and its sister company, Planet Internet Corp., are wholly
owned subsidiaries of TV Communications Network (TVCN), a publicly owned
company since 1987. InterOmni is located at 910 16th Street, Suite 801,
Denver, Colo., 80202. InterOmni can be reached by phone at 303/892-1631, by
fax at 303/892-1570 and on the Internet at interomni.com.
This news release contains forward-looking statements. These forward-looking
statements are subject to risks and uncertainties. Actual results may differ
materially from such forward-looking statements as a result of these risks
and uncertainties. Please consult the company's SEC filings for more
information about the company.
Editors Note: InterOmni Services Inc., InterOmni Wallet and IO Wallet are
trademarks of InterOmni Services Inc. All other trade or brand names
mentioned herein are the property of their respective owners.
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Contact:
InterOmni Services Inc., Denver
Jad Duwaik, 303/892-1631
www.InterOmni.com
jad@plinet.com
or
Pathway Communications
Theresa Smith, 818/704-8481
www.pathwaypr.com
tls@pathwaypr.com |
