TO OUR SHAREHOLDERS
TORONTO, Aug. 8 /CNW/ - The purpose of the Management's Discussion and
Analysis ("MD&A") is to provide readers with additional and complementary
information regarding Asian Television Network International Limited (ATN)
(the Company) (TSX-SAT) and results of operations as at June 30, 2006. These
comments should be read in conjunction with the audited consolidated financial
statements and related notes for the year ended December 31, 2005.
PROFILE
ATN is Canada's largest South Asian Broadcaster and also Canada's largest
Distributor of World Class Cricket programming. ATN operates thirteen channels
comprised of general interest, movies, news, music, regional languages and a
Commonwealth channel with live cricket from around the world.
NET EARNINGS BEFORE INCOME TAXES
The Company's strong fiscal performance continues through the six months
ending June 30th 2006. Our net earnings at June 30, 2006 are $1,158,517
compared to June 30, 2005 of $540,571, a 214.3% or $617,946 year over year
increase. This is the fourteenth consecutive quarter of the consistent trend
of positive net earnings before taxes, for the Company. Management has set
goals for and hopes that this trend shall continue. We have persevered and
shall continue to persevere to strive at achieving these goals through
steadfastly enriching our programming with creativity, diversification and
variety and progressive increase in our subscriber base.
REVENUES
Our revenues for the first half of 2006 were again at an all time high at
$4,817,155 as against $2,900,074 for 2005 a year over year substantial
improvement of 166.1% OR $1,917,181. Our focus continues to be to maximize our
principal sources of revenue by: 1) increasing the number and variety of our
channels, 2) increasing the number of subscribers for all our channels, and
3) increasing advertising revenue. We are very optimistic about the continued
progress on all these fronts. We now have 8 of our 13 channels available
nationwide and all 13 channels available in southern Ontario, and we continue
to keep increasing distribution and wider distribution and availability of our
channels on a nationwide basis.
OPERATING EXPENSES
The operating expenses for the six months ending June 30, 2006 were
$3,258,252 and for 2005 were $2,088,872. The year over year increase of 155.9%
is due principally to increase in programming, production and pay-roll costs.
When seen in the context of the remarkable increase in the operating revenues
related to the same reporting periods, this indicates that the continued
growth of the Company has been maintained with better deployment of its
resources. The Company shall endeavor to continue on the same course and hopes
to maintain itself on the same track as we continue to expand and increase our
operations, channels and operating revenues.
EBITDA
Earnings before interest, taxes, depreciation and amortization (EBITDA),
also shows the substantial financial success the Company has achieved. At June
30, 2006 EBITDA was $1,558,903 or 6.4 cents per share, which is more than a
192.2% or $747,701 increase over the June 30th, 2005 EBITDA of $811,202 or
3 cents per share. We anticipate that for the remaining quarters of 2006
EBITDA will continue to show significant growth.
OPPORTUNITIES & STRATEGY
In 2006, the Canadian Radio-Television and Telecommunication Commission
(CRTC) granted to ATN three new sports channel licenses. This will enable ATN
to continue to diversify more and more. ATN will continue to keep growing,
diversifying and increasing its market share, market appeal and market
penetration through continuing to take on more challenging and pioneering
projects and adapting to changing technology. Management's commitment to bring
quality entertainment to our viewers will also result in adding long-term
value to our business. However management will carefully analyze these
investments as their cost continues to rapidly increase to ensure we obtain an
appropriate return on investment. The company looks forward to obtaining
substantial fiscal results by continuing to develop new growth opportunities
within our core markets and at the same time expanding our operating
efficiencies throughout 2006.
CASH FLOW ACTIVITIES
The Company, as noted in the Consolidated Statement of Cash Flows, has
through diligent management of its cash flows through the six months ending
June 30th 2006, been able to reduce its debt by over $440,000.00 and at the
same time purchase new programming and invest in new plant and equipment by
over $600,000.00 without incurring any new debt.
INCOME TAXES
The effective income tax rate of 0.0% for the year is lower than the
statutory rate of 36.1% due to loss carry forwards and unused capital cost
allowances. All will be utilized in future years, as the company is confident
for its future profitability. We realized these loss carry forwards in 2005
and are utilizing this asset starting in 2006. This amount of $418,224 is a
non-cash, non-payable item.
FORWARD LOOKING
This MD&A also contains forward looking statements and includes
statements based on current expectations, estimates, forecasts and projections
about economies and markets in which we operate and our beliefs and
assumptions regarding these economies and markets.
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Asian Television Network International Limited
Consolidated Balance Sheets
(Unaudited) June 30 December 31
(in Canadian dollars) 2006 2005
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ASSETS
Current
Cash and cash equivalents 481,814 441,519
Accounts receivable 961,672 1,028,947
Prepaid and sundry assets 52,449 14,449
Future income tax asset 678,000 678,000
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2,173,935 2,162,915
Property, Plant and Equipment 1,369,175 1,111,040
Other Assets 482,069 342,848
Future Income Tax Asset 1,565,776 1,984,000
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5,590,955 5,600,803
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LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current
Accounts payable and accrued charges 1,008,990 963,821
Unearned revenue 18,683 58,676
Program rights payable 72,634 96,173
Loans payable - current portion 630,533 706,318
Other payables 185,456 277,015
Mortgage payable 29,673 29,218
Capital lease obligations - current portion 0 2,136
Debentures payable - current portion 278,214 266,600
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2,224,183 2,399,957
Program rights payable 0 139,560
Loans payable 1,389,036 1,622,170
Other payables 69,972 123,930
Mortgage payable 341,926 358,308
Debentures payable 706,332 837,665
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4,731,449 5,481,590
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SHAREHOLDERS' DEFICIENCY
Capital stock 5,919,582 5,919,582
Other paid in capital 354,192 354,192
Deficit (5,414,268) (6,154,561)
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859,506 119,213
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5,590,955 5,600,803
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Asian Television Network International Limited
Consolidated Statements of Income and Deficit
Three months ended Six months ended
(Unaudited) June 30 June 30 June 30 June 30
(in Canadian dollars) 2006 2005 2006 2005
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Revenue
Subscription 1,699,364 1,108,840 3,453,155 1,889,249
Advertising 602,661 438,363 1,191,507 734,213
Programming and sundry 84,563 210,099 172,493 276,612
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2,386,588 1,757,302 4,817,155 2,900,074
Operating, general and
administrative
expenses 1,502,137 1,177,533 3,258,252 2,088,872
Amortization 143,770 41,363 228,959 61,749
Financial expense 83,165 102,894 171,427 208,882
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1,729,072 1,321,790 3,658,638 2,359,503
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Earnings before income
taxes 657,516 435,512 1,158,517 540,571
Provision for income
taxes 237,363 0 418,224 0
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Net Earnings 420,153 435,512 740,293 540,571
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Deficit, beginning
of Period (5,834,421) (10,277,556) (6,154,561) (10,277,556)
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Deficit, end of Period (5,414,268) (9,842,044) (5,414,268) (9,736,985)
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Earnings per common
share 0.02 0.02 0.03 0.02
Weighted average number
of shares outstanding 24,137,240 23,837,240 24,137,240 23,837,240
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Asian Television Network International Limited
Consolidated Statements of Cash Flows
Three months ended Six months ended
(Unaudited) June 30 June 30 June 30 June 30
(in Canadian dollars) 2006 2005 2006 2005
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OPERATING ACTIVITIES
Net income 420,153 435,512 740,293 540,571
Add (deduct) non-cash
items:
Amortization - plant
and equipment 31,799 20,528 62,350 40,914
Amortization - other 111,972 20,835 166,609 20,835
Future income taxes 237,363 - 418,224 -
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Cash flow derived from
operations 801,287 476,875 1,387,476 602,320
Net change in non-cash
working capital
Accounts receivable 58,368 (154,403) 67,275 (98,418)
Prepaid expenses and
sundry assets 1,000 98,600 (38,000) 2,000
Accounts payable and
accrued charges (119,844) 112,912 45,169 146,432
Other payables (76,559) (50,000) (145,517) (80,000)
Program rights payable (81,991) 216,360 (163,099) 216,360
Unearned revenue 9,230 (7,100) (39,993) (12,472)
Income taxes payable - (31,340) - (30,906)
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Cash provided by
operating activities 591,491 661,904 1,113,311 745,316
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INVESTING ACTIVITIES
Acquisition of plant
and equipment (174,310) (4,170) (314,646) (10,480)
Acquisition of other
assets (8,722) (312,520) (311,669) (312,520)
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Cash provided by (used in)
investing activities (183,032) (316,690) (626,315) (323,000)
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FINANCING ACTIVITIES
Repayment in loans
payable (155,910) (84,759) (308,919) (169,664)
Repayment in debentures (60,857) (27,442) (119,719) (46,185)
Repayment of mortgage (8,029) (5,843) (15,927) (11,829)
Repayment of capital
leases 0 (5,872) (2,136) (13,338)
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Cash provided by (used in)
financing activities (224,796) (123,916) (446,701) (241,016)
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Net Increase (decrease)
in cash and cash
equivalents during
period 183,663 221,298 40,295 181,300
Cash and cash equivalents
- beginning of period 298,151 178,598 441,519 218,596
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Cash and cash equivalents
- end of period 481,814 399,896 481,814 399,896
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ASIAN TELEVISION NETWORK INTERNATIONAL LIMITED
Notes to Consolidated Financial Statements
Unaudited
June 30, 2006
1. Nature of Operations
Asian Television Network International Limited (the "Company" or
"ATNIL") was incorporated under the laws of the Province of Ontario.
The Company is engaged in the business of broadcasting specialty
language television channels for the South Asian community across
Canada.
2. Summary of Significant Accounting Policies
The notes presented in these interim financial statements include
only significant events and transactions occurring since the
Company's last fiscal year and are not fully inclusive of all matters
normally disclosed in the Company's annual audited financial
statements. As a result, these interim financial statements should be
read in conjunction with the Company's consolidated financial
statements for the year ended December 31, 2005.
These interim unaudited consolidated financial statements follow the
same accounting policies and methods of application as the most
recent annual consolidated financial statements.
a) Nature of Operations
Asian Television Network International Limited is incorporated
under the laws of the Province of Ontario. The Corporation is
engaged in the business of broadcasting a specialty language
television channel for the South Asian community in Canada.
b) Basis of Presentation
Management in accordance with accounting principles generally
accepted in Canada has prepared the consolidated financial
statements of the corporation. The consolidated financial
statements include the accounts of the Corporation and its wholly-
owned subsidiaries, Asian Television Network Inc. ("ATNI"), JCTV
Productions Limited ("JCTV"), South Asian Television Limited
("SATL"), South Asian Television Canada Ltd. ("SATV") and 1272558
Ontario Inc. ("CBN"). All significant intercompany transactions
and balances have been eliminated on consolidation.
c) Cash and Cash Equivalents
Cash and highly liquid investments with an initial maturing period
of 90 days or less are considered cash equivalents and are
recorded at cost.
d) Use of Estimates
The preparation of consolidated financial statements in conformity
with Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the year. Actual results could differ from those
estimates.
e) Property, Plant and Equipment and Amortization
Property, plant and equipment are stated at cost. Amortization,
based on the estimated useful lives of the assets provided using
the undernoted annual rates and methods:
Building 5% Declining balance
Broadcast equipment 20% Declining balance
Production equipment 20% Declining balance
Furniture and fixtures 20% Declining balance
Computer equipment 30% Declining balance
f) Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment as least annually,
or whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. An impairment loss would be
recognized when the carrying amount of an asset exceeds the
estimated undiscounted future cash flows expected to result from
the use of the asset and its eventual disposition. The amount of
the impairment loss to be recorded is calculated by the excess of
the asset's carrying value over its face value. Fair value is
generally determined using a discounted cash flow analysis.
g) Other Assets
The Canadian Radio-television and Telecommunications Commission
("CRTC") licence and tape library are recorded at cost and are
amortized on the straight-line basis over their estimated useful
lives of 7 and 10 years respectively.
h) Revenue Recognition
Subscription revenue is recognized over the period of the
subscription as programming is provided to subscribers.
Advertising revenue is recognized in the periods in which the
commercials are broadcast. Programming revenue is recognized over
the period the programming is provided to subscribers.
i) Foreign Currency Translation
Monetary assets and liabilities denominated in currencies other
than the Canadian currency are translated into Canadian dollars at
the rate of exchange prevailing at the balance sheet date. Non-
monetary assets and liabilities are translated at the exchange
rate existing on the transaction date. Revenue and expenses are
translated at average exchange rates for the year. Gains and
losses incurred on transactions are included in the determination
of net income.
j) Income Taxes
The Company follows the liability method of accounting for income
taxes. Under this method future income tax assets and liabilities
are determined based on differences between the financial
reporting and tax bases if the assets and liabilities are
measured using substantively enacted rates and laws that are
expected to be in effect in the periods in which the future tax
assets or liabilities are expected to be realized or settled. The
effect of a change in income tax rates on future tax assets and
liabilities is recognized in income in the period that the change
occurs.
k) Earnings Per Share
Basic earnings per share is computed by dividing the earnings
available to common shareholders by the weighted average number of
common shares outstanding during the year. The computation of
fully diluted earnings per share reflects a reduction in interest
costs, representing imputed earnings on the exercise of the common
share options and the related income tax effect resulting from the
above assumptions.
l) Stock-Based Compensation
The Company accounts for its stock option plan in accordance with
CICA handbook 3870, "Stock-based Compensation and other Stock-
based Payments", which established standards for the recognition,
measurement and disclosure of stock-based compensation and other
stock-based payments made in exchange for goods and services
provided by employees and non-employees. The standard requires
that a fair value-based method of accounting be applied to all
stock-based payments to non-employees and to employee awards that
are direct awards of stock that call for settlement in cash or
other assets or are stock appreciation rights that call for
settlement by the issuance of equity instruments. The Company
records a stock based compensation expense in the consolidated
statement of operations and retained earnings for all options
granted on or after January 1, 2002, with a corresponding increase
to contributed surplus. Compensation expense for options granted
is based on the estimated fair values at the time of the grant and
the expenses recognized over the vesting period of the option. The
Company did not grant options during the year.
m) Program rights
The Company reports an asset and a liability for the licence
agreements entered into to acquire broadcast rights of feature
films, live events and television programs. Agreements are
recorded when the program cost is reasonably determinable, the
licence period has begun and the program material is available for
telecast or resale. Such costs are allocated between current and
non-current assets using management's estimate of usage or
recovery in the next fiscal year.
Program rights are reported at the lower of net amortized cost and
net realizable value. The costs of broadcast rights are amortized
over the period of the rights contract on the basis of usage.
Where the initial airing generates more benefit to the television
channel than later airings, an accelerated method of amortization
is used. The amortization rates range from 35% to 100% on the
first airing. If each airing is expected to generate similar
benefit, the straight-line method of amortization is used based on
the expected number of airings during the rights period.
Liabilities for program rights are payable in installments in
accordance with the licence agreements or on the basis of usage of
the program material. The liability is segregated between current
and non-current using payment terms and management's estimate of
usage in the next fiscal year.
3. Unaudited Financial Statements
The company's external auditors have not reviewed these financial
statements.
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