REDWOOD BROADCASTING INC, SB-2/A, 1997-02-13

REDWOOD BROADCASTING INC
SB-2/A, 1997-02-13
RADIO BROADCASTING STATIONS

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As filed with the Securities and Exchange Commission on February 13, 1997.

Registration No. 33-80321
==========================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

PRE-EFFECTIVE AMENDMENT NO. 4 TO

FORM SB-2
REGISTRATION STATEMENT
UNDER
SECURITIES ACT OF 1933

REDWOOD BROADCASTING, INC.
----------------------------------------------
(Name of small business issuer in its Charter)
Colorado 4832 84-1295270
- ---------------------------- ------------------------- ------------------
(State or other jurisdiction (Primary Standard IRS Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number

7518 Elbow Bend Rd., Bldg. A, Ste. I John C. Power, President
P.O. Box 3463 7518 Elbow Bend Rd., Bldg. A, Ste. I
Carefree, Arizona 85377 P.O. Box 3463
(602) 488-2596 Carefree, Arizona 85377
- --------------------------------- (602) 488-2596
(Address, including zip code, and ------------------------------------
telephone number, including area (Name, address, including zip code,
code, of Registrant's principal and telephone number, including area
executive offices) code, of Agent for service of
process)

REDWOOD MICROCAP FUND, INC.
----------------------------------------------
(Name of small business issuer in its Charter)
Colorado 6282 84-0937822
- ---------------------------- ------------------------- ------------------
(State or other jurisdiction (Primary Standard IRS Employer
of incorporation or Industrial Classification Identification
organization) Code Number) Number

Copies to:
Clifford L. Neuman, Esq.
Neuman & Cobb
1507 Pine Street
Boulder, Colorado 80302
(303) 449-2100

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
As soon as practicable after the effective date of the Registration
Statement.

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check, the following box. / X /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
==========================================================================<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of Maximum Maximum
Each Class of Amount Offering Aggregate Amount of
Securities To be Price Per Offering Registration
To be Registered Registered Share(1) Price(1) Fee
- ------------------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C>
Common Stock,
$.004 par value (2) 500,429 $2.00 $1,000,858 $345.12

Common Stock,
$.004 par value (3) 300,008 $.0013 $400.01 $0.14

Common Stock,
$.004 par value 400,000 $2.00 $800,000 $275.86

Common Stock
Put Options (4) 203,008 $1.50 $304,512 $105.01

Put Option
Guarantees (5) 203,008 -0- -0- -0-

TOTAL: $2,105,770 $726.13
- ----------------------------------

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.

(2) Constitutes shares of Common Stock being offered by certain Selling
Shareholders of the Company. (See "TERMS OF THE OFFERINGS -- Selling
Shareholders Offering.")

(3) Consists of Common Stock to be distributed to holders of record of Cell
Robotics International, Inc. ("CRI") common stock on December 16, 1994
(the "Spin-Off Record Date") to effect a spin-off of the Company (the
"Spin-Off") pursuant to the terms of a certain Agreement and Plan of
Reorganization between and among CRI, Cell Robotics, Inc., a New Mexico
corporation, MiCEL, Inc., a Delaware corporation and others, dated as of
December 12, 1994 ("CRI Agreement"). The CRI Shareholders will not be
charged or assessed, and the Company will receive no consideration, for
the distribution of the foregoing shares of Common Stock in the Spin-Off.
There currently exists no market for the Company's securities and the
Company has an accumulated capital deficit. As a result, the registration
fee has been calculated based on one-third (1/3) of the par value of the
shares in accordance with the provisions of Rule 457(f)(2).

(4) Consists of Common Stock Put Options ("Puts") to be issued to certain CRI
Shareholders ("Putholders") pursuant to the terms of the RBI Agreement,
which Puts will grant to the holders thereof the right and option to sell
to the Company up to 203,008 shares of the Company's Common Stock at a
price of $1.50 per share. The Putholders will not be charged or assessed,
and the Company will receive no consideration, for the issuance of the
Puts. The registration fee has been calculated in accordance with the
provisions of Rule 457(g).

(5) Consists of the guarantee of Redwood Microcap Fund, Inc. ("Microcap") of
the Company's obligation under the Puts.
</TABLE>

The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
REDWOOD BROADCASTING, INC.

CROSS-REFERENCE INDEX

Item No. and Heading
In Form SB-2 Location
Registration Statement in Prospectus
---------------------- -------------

1. Forepart of the Registration Forepart of Registration
Statement and outside front cover Statement and outside front
page of Prospectus cover page of Prospectus

2. Inside front and outside back cover Inside front and outside back
pages of Prospectus cover pages of Prospectus

3. Summary Information, Risk Factors PROSPECTUS SUMMARY; RISK
and Ratio of Earnings to Fixed FACTORS
Charges

4. Use of Proceeds USE OF PROCEEDS

5. Determination of Offering Price Front Cover Page; TERMS OF
OFFERING - Company Offering

6. Dilution DILUTION

7. Selling Securityholders TERMS OF OFFERINGS - The Selling
Shareholders' Offering

8. Plan of Distribution TERMS OF OFFERINGS

9. Legal Proceedings LEGAL PROCEEDINGS

10. Directors, Executive Officers, MANAGEMENT
Promoters and Control Persons

11. Security Ownership of Certain SECURITY OWNERSHIP OF
Beneficial Owners and Management MANAGEMENT AND PRINCIPAL
SHAREHOLDERS

12. Description of Securities to be DESCRIPTION OF SECURITIES
Registered

13. Interest of Named Experts and Counsel LEGAL MATTERS; EXPERTS

14. Disclosure of SEC Position on INDEMNIFICATION
Indemnification for Securities Act
Liabilities

15. Organization Within Last Five Years *

16. Description of Business PROSPECTUS SUMMARY; RISK FACTORS;
BUSINESS; REDWOOD MICROCAP FUND,
INC.

17. Management's Discussion and Analysis MANAGEMENT'S DISCUSSION AND
Plan of Operation ANALYSIS OR PLAN OF OPERATION;
FINANCIAL STATEMENTS

18. Description of Property BUSINESS

19. Certain Relationships and Related CERTAIN TRANSACTIONS
Transactions

20. Market for Common Equity and Related MARKET FOR COMMON STOCK
Stockholder Matters

21. Executive Compensation EXECUTIVE COMPENSATION

22. Financial Statements FINANCIAL STATEMENTS

23. Changes in and Disagreements *
with Accountants on Accounting
and Financial Disclosure

- ---------------------

* Omitted from Prospectus because Item inapplicable or answer is in the
negative.
<PAGE>
PROSPECTUS

REDWOOD BROADCASTING, INC.

----------------------------------------------------------

1,200,437 Shares of
$.004 Par Value Common Stock

----------------------------------------------------------

203,008
Common Stock Put Options

----------------------------------------------------------

REDWOOD MICROCAP FUND, INC.

----------------------------------------------------------

203,008 Put Option Guarantees

----------------------------------------------------------

This Prospectus relates to four (4) offerings of securities of Redwood
Broadcasting, Inc., f/k/a Intelligent Financial Holding Corporation, a Colorado
corporation (the "Company" or "RBI"). The first offering (the "Spin-Off
Offering") relates to the distribution by Cell Robotics International, Inc., a
Colorado corporation ("CRI"), the Company's former parent corporation, of up to
300,008 shares of the Company's $.004 par value common stock (the "Common
Stock"), as a spin-off (the "Spin-Off Shares" and "Spin-Off," respectively)
pursuant to the terms of a certain Agreement and Plan of Reorganization between
and among CRI, Cell Robotics, Inc., a New Mexico corporation ("Cell"), MiCEL,
Inc., a Delaware corporation, and others, dated as of December 12, 1994 (the
"CRI Agreement"), pursuant to which CRI agreed to distribute all 300,008 shares
of Company Common Stock owned by it to the shareholders of record of CRI (the
"CRI Shareholders") as of December 16, 1994 (the "Spin-Off Record Date") upon
the effective date of the Registration Statement of which this Prospectus forms
a part (the "Registration Statement"). The Spin-Off Shares will be distributed
by mail within 10 days after the effective date of the Registration Statement
on a "pro-rata" one-for-one (1-for-1) basis, with each CRI Shareholder entitled
to receive without cost one (1) share of Company Common Stock for every share
of CRI common stock held of record on the Spin-Off Record Date. The Company is
bearing all costs incurred in connection with the Spin-Off Offering. (See
"TERMS OF OFFERINGS - The Spin-Off Offering.")

This Prospectus also relates to the offering by the Company to the public
of up to 400,000 shares of the Company's $.004 par value Common Stock at an
offering price of $2.00 per share, (the "Company Offering"). The Company is
offering the shares of Common Stock to the public through its officers and
directors. The Company may retain the services of Selling Agents who are
members of the National Association of Securities Dealers to assist in the
Company Offering. On any sales made by Selling Agents, a commission of up to
ten percent (10%) may be paid. To date, there exists no arrangements or
commitments by the Company to retain any Selling Agent. (See "TERMS OF
OFFERINGS - THE COMPANY OFFERING.")

This Prospectus also relates to the issuance by the Company to certain CRI
Shareholders (the "Putholders") of up to 203,008 Common Stock Put Options (the
"Puts" and "Put Offering," respectively) pursuant to the terms of a certain
Agreement and Plan of Reorganization between and among the Company, Redwood
Broadcasting, Inc., a Colorado corporation ("Broadcasting") and Redwood
MicroCap Fund, Inc., a Colorado corporation ("MicroCap") dated as of June 16,
1995 (the "RBI Agreement"). The Puts grant to each Putholder the right and
option to sell to the Company and require the Company to purchase for
redemption, all or a portion of the shares of Common Stock which the Putholder
has the right to receive in the Spin-Off Offering. The Puts will require the
Company to purchase and redeem any and all shares tendered in accordance with
the terms of the Puts at a price of $1.50 per share (the "Put Redemption
Price"). The Puts will be exercisable for a period of ninety (90) days
following the effective date of the Registration Statement of which this
Prospectus forms a part. The Puts being issued to the Putholders will be
distributed by mail within 10 days after the effective date of the Registration
Statement. The Putholders will not be charged or assessed for Puts and the
Company will not receive any proceeds from the distribution of the Puts. The
Company is bearing the cost of the Put Option Offering. (See "TERMS OF
OFFERINGS - THE PUT OPTION OFFERING.")

The obligation of the Company to pay the Put Redemption Price upon
exercise of the Puts has been guaranteed by Microcap, a principal shareholder
of the Company. The issuance by Microcap of the guarantee under the Puts is
being registered in the Registration Statement of which this Prospectus forms a
part. The guarantee of Microcap is secured by a pledge by Microcap in favor of
the Company of 195,371 shares of Common Stock of the Company also being
registered herewith as part of the Selling Shareholder Offering. By virtue of
Microcap's guarantee, Microcap would be deemed a co-issuer of securities
herein. Pursuant to the guarantee and stock pledge, in the event that the
Company is unable to purchase and redeem shares of Common Stock pursuant to the
exercise of a Put, and Microcap defaults in its guarantee to pay the Put
Redemption Price, shares of Microcap subject to the pledge may be sold under
this Prospectus, the proceeds of which will be used to pay the Put Redemption
Price. As the Put Options expire 90 days following the effective date of the
Registration Statement, the Company does not anticipate updating the Prospectus
during the term of the Put Option to reflect the sale of pledged shares unless,
in the judgment of the Company, the number of shares sold becomes material.

Finally, this Prospectus relates to the offer and sale of 500,429 shares
of Common Stock by certain shareholders of the Company (the "Selling
Shareholders" and "Selling Shareholder Offering," respectively). 195,371
shares of Common Stock being offered by the Selling Shareholders have been
pledged by MicroCap as security for its guarantee of the Company's obligation
to purchase and redeem up to 203,008 shares of Common Stock upon exercise of
the Puts. The Company will not receive any of the proceeds from the sales of
the Common Stock by the Selling Shareholders. The Common Stock offered by the
Selling Shareholders may be sold by them from time to time commencing on the
date of this Prospectus, based upon prevailing market conditions for the
Company's Common Stock. No underwriting arrangements have been entered into by
the Selling Shareholders. Sales of Common Stock by the Selling Shareholders
may be effected in one or more transactions that may take place on the over-
the-counter market, including ordinary broker's transactions, privately-
negotiated transactions or through sales to one or more dealers for resale of
such shares as principals, at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or negotiated prices. Usual
and customary or specifically negotiated brokerage fees or commissions may be
paid by the Selling Shareholders in connection with the sales of securities.

The Selling Shareholders may be deemed to be "Underwriters" as defined in
the Securities Act of 1933 (the "Securities Act"). If any broker-dealers are
used by the Selling Shareholders, any commissions paid to broker-dealers and,
if broker-dealers purchase any securities as principals, any profits received
by such broker-dealers on the resales of the securities may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition,
any profits realized by the Selling Shareholders may be deemed to be
underwriting commissions. By agreement between the Company and the Selling
Shareholders, all costs, expenses and fees in connection with the registration
of the securities offered by Selling Shareholders will be borne by the Company.
Brokerage commissions, if any, attributable to the sale of the securities will
be borne by the Selling Shareholders. The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including liabilities under
the Securities Act. (See "SELLING SHAREHOLDERS" and "PLAN OF DISTRIBUTION.")

This Prospectus does not relate to any resales of Common Stock by the
transferees of the Selling Shareholders.

Prior to this Offering, there has been no public market for the Common
Stock or the Puts, and despite the anticipated listing of the Common Stock and
Puts on the over-the-counter market, there is no assurance that an active
market will develop in the Common Stock or Puts. The Company intends to
develop separate trading markets for the Common Stock and the Puts on the over-
the-counter market. The Company, however, has no arrangements with any broker
or dealer to act as a market maker for the Company's securities and there can
be no assurance that the Company will be successful in obtaining any market
makers.

-------------------------------------------------

THESE ARE SPECULATIVE SECURITIES AND INVOLVE A HIGH DEGREE OF RISK AND NO
ONE SHOULD INVEST IN THESE SECURITIES UNLESS HE OR SHE CAN AFFORD A COMPLETE
LOSS OF HIS OR HER INVESTMENT.

-------------------------------------------------

FOR DISCUSSION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED IN EVALUATING
AN INVESTMENT IN THE COMPANY, SEE "RISK FACTORS" COMMENCING AT PAGE 15.

-------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

-------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
Proceeds to
Price Selling Proceeds Selling
to Agents' to Security-
Public Commission Company holders (4)(5)
- -------------------- --------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
Per Share (1)(2).... $2.00 $0.20 (3) $1.80 *
-------- --------- ----------- --------------
Total $800,000 $80,000 $720,000(4) *
- -------------------- -------- --------- ----------- --------------

(See Footnotes on following page)

The Date of This Prospectus is _____________, 1997.

(1) Contemplates the offering by the Company of up to 400,000 shares of the
Company's $.004 par value Common Stock at an offering price of $2.00 per
share in the Company Offering.

(2) The Company will not receive any proceeds from the distributions
contemplated in the Selling Shareholders Offering or Put Option Offering.

(3) No underwriter has been engaged to participate in the Company Offering.
Consequently, the Company will offer shares of Common Stock in the Company
Offering primarily through its officers and directors and possibly through
broker-dealers who are members of the National Association of Securities
Dealers, Inc. ("Selling Agents"). No commission or finders' fees will be
paid on sales made by officers and/or directors. On sales made by Selling
Agents, a commission will be paid. The Company's Board of Directors has
authorized payment of commissions to Selling Agents up to ten percent
(10%) of the purchase price of each share of Common Stock sold, or $.20
per share. To the extent that sales will be made through such Selling
Agents, the net proceeds to the Company will be reduced by the
commissions. Although it is unlikely, if all of the shares of Common
Stock are offered and sold through such Selling Agents, $80,000 would be
paid as commissions and the net proceeds to the Company would be $720,000
if the maximum number of shares of Common Stock are sold, excluding
expenses of the Offering. To date, no Selling Agents have been retained
or are under any obligation to participate in the distribution of the
shares in the Company Offering

(4) Before deducting the expenses of the Offering, including legal, accounting
and printing expenses, estimated to be $50,000. Assumes the sale of all
400,000 shares of Common Stock being offered by the Company at $2.00 per
share.

(5) The Selling Shareholders will offer their shares in transactions in the
over-the-counter market at prices obtainable at the time of sale in
privately-negotiated transactions at prices determined by negotiation. The
Selling Shareholders may effect transactions by selling to or through
securities broker-dealers and such broker-dealers may receive compensation
in the form of discounts, concessions, or commissions from the Selling
Shareholders. While it is impracticable to determine the precise amount
that the Selling Shareholders will incur, it is anticipated that any such
discounts, selling concessions or commissions will be consistent with
those customarily charged by broker-dealers who are members of the
National Association of Securities Dealers, Inc. ("NASD").

(6) The net proceeds to be realized by the Selling Shareholders will be an
amount equal to the gross selling price of the shares, as determined by
the market, less any discounts, concessions or commissions paid to the
broker-dealers.

</TABLE>

No person is authorized in connection with any offering made hereby to
give any information or to make any representation other than as contained in
this Prospectus, and if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, by
any person in any jurisdiction in which it is unlawful for such person to make
such an offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall under any circumstances create any implication that
the information herein is correct as of any date subsequent to the date hereof.

<PAGE>
AVAILABLE INFORMATION
---------------------
The Company has filed a Registration Statement on Form SB-2 with the
Securities and Exchange Commission, Washington, D.C. (the "Commission"), in
accordance with the provisions of the Securities Act of 1933, as amended (the
"Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information pertaining to the shares of Common Stock offered hereby and the
Company, reference is made to the Registration Statement, including the
exhibits and financial statement schedules filed as a part thereof. Statements
herein contained concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of such document
filed as an Exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. The Registration Statement may be
obtained from the Commission upon payment of the fees prescribed therefor and
may be examined at the principal office of the Commission in Washington, D.C.

<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-9-
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-9-
THE SPIN-OFF OFFERING . . . . . . . . . . . . . . . . . . . . . . . . -12-
THE PUT OPTION OFFERING . . . . . . . . . . . . . . . . . . . . . . . -12-
COMPANY OFFERING. . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
THE SELLING SHAREHOLDERS' OFFERING. . . . . . . . . . . . . . . . . . -14-
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
SUMMARY FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . -14-

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANY . . . . . . . . . -16-
RISK FACTORS RELATED TO THIS OFFERING . . . . . . . . . . . . . . . . -20-

USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-

DILUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. . . . . . . . . -25-
OVERVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1996 COMPARED TO
JULY 31, 1995. . . . . . . . . . . . . . . . . . . . . . . . . . -25-
RESULTS OF OPERATIONS - EIGHT MONTHS ENDED MARCH 31, 1996
COMPARED WITH FISCAL YEAR ENDED JULY 31, 1995. . . . . . . . . . -30-
LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1996 TO
MARCH 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . -31-
RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1996
COMPARED WITH SIX MONTHS ENDED SEPTEMBER 30, 1995. . . . . . . . -32-

BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
OVERVIEW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
ACQUISITIONS AND DEVELOPMENT. . . . . . . . . . . . . . . . . . . . . -36-
OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-

REDWOOD MICROCAP FUND, INC.. . . . . . . . . . . . . . . . . . . . . . . . -46-
CHANGES IN INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . . . . -46-

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES . . . . . . . . . . . -47-
DIRECTOR COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . -48-

EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . -49-
1995 INCENTIVE STOCK OPTION PLAN. . . . . . . . . . . . . . . . . . . -50-

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . -51-

DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . . . . . -53-
COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
PREFERRED SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
COMMON STOCK PUT OPTIONS. . . . . . . . . . . . . . . . . . . . . . . -53-

TERMS OF OFFERINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
THE SPIN-OFF OFFERING . . . . . . . . . . . . . . . . . . . . . . . . -55-
THE PUT OPTION OFFERING . . . . . . . . . . . . . . . . . . . . . . . -55-
THE COMPANY OFFERING. . . . . . . . . . . . . . . . . . . . . . . . . -57-
THE SELLING SHAREHOLDERS' OFFERING. . . . . . . . . . . . . . . . . . -57-

CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
CRI AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
RBI AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -61-
MICROCAP GUARANTEE. . . . . . . . . . . . . . . . . . . . . . . . . . -61-
MICROCAP DEBT CONVERSION. . . . . . . . . . . . . . . . . . . . . . . -62-
MICROCAP CONSULTATION AGREEMENT . . . . . . . . . . . . . . . . . . . -62-
TRIPOWER RESOURCES, INC. DEBT OBLIGATION. . . . . . . . . . . . . . . -62-
MICROCAP ADVANCES . . . . . . . . . . . . . . . . . . . . . . . . . . -62-
J. ANDREW MOORER STOCK PURCHASE . . . . . . . . . . . . . . . . . . . -62-
POWER CURVE, INC. STOCK PURCHASE. . . . . . . . . . . . . . . . . . . -63-

INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-

INDEMNIFICATION OF DIRECTORS AND OFFICERS. . . . . . . . . . . . . . . . . -65-
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. . . . . . . . . . . . . . . . -70-
RECENT SALES OF UNREGISTERED SECURITIES. . . . . . . . . . . . . . . . . . -70-
EXHIBITS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
UNDERTAKINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-

</TABLE>

<PAGE>
[The following text is contained in a box]

PROSPECTUS SUMMARY
------------------
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED AND PRO FORMA FINANCIAL STATEMENTS, INCLUDING THE
RELATED NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS.

THE COMPANY
-----------
Redwood Broadcasting, Inc., f/k/a Intelligent Financial Holding
Corporation (the "Company" or "RBI") and its subsidiaries operate in the
rapidly-developing and expanding radio broadcasting industry in Northern
California and Arizona. The Company has embarked upon an aggressive
acquisition and development strategy and continues to seek acquisition and
development opportunities in the broadcast industry.

By agreement dated June 16, 1995, the Company acquired one hundred percent
(100%) of the issued and outstanding shares of Common Stock of Broadcasting in
exchange for 300,000 shares of Common Stock of the Company. Following the
acquisition, Broadcasting was merged with and into the Company, with the
Company remaining as the surviving entity. Thereafter, at a special meeting of
the Company's shareholders an amendment of the Company's Articles of
Incorporation changing the Company's name to Redwood Broadcasting, Inc. was
approved.

Broadcasting was incorporated in 1993 by entrepreneurs focused on
acquiring and developing undervalued radio broadcasting properties located in
small-to-medium sized markets as defined by industry standards. Broadcasting
began broadcast operations by entering into a joint venture with Quick
Broadcasting, Inc., an established broadcaster, to pursue the acquisition of a
station licensed to Vallejo, California. The station was attractive to
Broadcasting as it was eligible for the "Expanded Band" which, if granted,
would increase the station's broadcast capability. Greater signal range would
encompass more listeners which, in turn, would attract more advertising
clients. In addition, the purchase included real property that had a defined
buyer. The acquisition was completed in October, 1993, and in a simultaneous
separate transaction, the real property was sold leaving Broadcasting with a
minimal cash outlay for its capital investment. In 1994, Broadcasting sold its
fifty percent ownership interest in the joint venture.

In May, 1994, Broadcasting formed a wholly-owned subsidiary, Alta
California Broadcasting, Inc. ("Alta"), to pursue radio acquisition
opportunities it had determined were available in northern California. In
June, 1994, Alta entered into an Asset Purchase Agreement to acquire KHSL-AM\FM
licensed to Chico and Paradise, California respectively ("KHSL"). The
acquisition, valued at $1.15 million, included 11.7 acres of real property
located in Chico zoned for residential housing. The real property was sold in
April, 1996, for $450,000. Alta began operating KHSL in February, 1995 under a
Local Management Agreement ("LMA") while the station licenses were submitted to
the FCC to approve the change in ownership. In April, 1995, Alta also changed
the call letters of KHSL-AM to KNSN or KNSN Talk 1290. Located at 1290 on the
AM band, KNSN's programming is primarily originated through satellite
programming companies. In June, 1995, Alta completed the acquisition of KHSL
resulting in a termination of the LMA.

In March, 1995, Alta entered into an LMA with an option to purchase radio
station KCFM-FM licensed to Shingletown, California. KCFM-FM primarily serves
the Redding, California market. KCFM-FM began commercial broadcasting in
August, 1995, with a "Country" music format. The source of the programming was
simulcasting with KHSL-FM, also a country music format station, through the use
of high speed data transmission lines. In September, 1995, KCFM-FM changed its
call letters to KHZL-FM. During the Company's review of the performance of
KHZL-FM, it was decided that a format change would best serve the goal of
revenue enhancement. A new music format was developed using a satellite
delivered "Oldies" format. The change proved to be highly successful as KHZL-
FM posted a rating of 6.4 in The Arbitron Company's ("Arbitron") 1996 Spring
Survey versus not qualifying for any rated status in the Fall Survey under the
previous format. In May, 1996, Alta applied for an upgrade to increase the
station's broadcast power, the granting of which cannot be assured. In July,
1996, Alta completed the acquisition of KHZL-FM, thereby terminating the LMA.
Effective September 27, 1996, Alta changed KHZL-FM's call letters to KRDG-FM.

In December, 1995, Alta formed its own wholly-owned subsidiary, Northern
California Broadcasting, Inc. ("Northern"), to pursue the acquisition of radio
station KNNN-FM licensed to Central Valley, California, which primarily serves
the Redding, California market with an "Adult Contemporary" format. In May,
1996, Northern entered into an Asset Purchase Agreement to acquire KNNN-FM.
KNNN has obtained an upgrade to increase the station's broadcast power.

In March, 1996, Alta entered into separate Asset Sale Agreements to sell
the assets of both KHSL-FM and KNSN-AM, in a transaction valued at
$1.47 million. The proceeds from closing, which is scheduled to close on March
12, 1997 and is awaiting approval from the FCC for a change of ownership and
certain engineering modifications, will provide the capital for the Company's
plan of expansion into Redding, California, a market with greater opportunity
for the Company to implement its strategy to acquire multiple stations and
become a dominate force, unlike the Chico, California market, which has already
been consolidated.

In May, 1996, Alta also entered in an Asset Purchase Agreement to acquire
radio station KLXR-AM, presently a "dark" station (a station not broadcasting)
licensed to and serving the Redding, California market.

The Company has also filed for, and is the only applicant seeking, a
construction permit for an FM radio station in Payson, Arizona. Payson is not
a ranked market in the industry and the Company has no current plans to develop
the station. In July, 1996, Alta filed an application with the FCC for the
issuance of a construction permit to build an FM radio station to be licensed
to Shasta Lake City, California, which would also serve the Redding, California
market. In August, 1996, the Company also filed for a construction permit for
an FM radio station in Mesquite, Nevada. Numerous applicants are seeking
construction permits in both Shasta Lake City and Mesquite. As a result, there
can be no assurance that the Company's will be granted these construction
permits, or if granted, that the Company will have the resources or ability to
construct, and thereafter operate, one or both of the stations.

The Company's focus will continue to be multi-station ownership in small
and medium markets which it has termed its "Heartland" strategy. It believes
the markets it terms as "Heartland" markets tend to attract small local
operators with limited financial resources. The small-to-mid-sized market as
rated by Arbitron, in terms of population, holds a ranking of 150 to 250.
There are between 10,000 and 11,000 radio stations in the United States, the
majority of which are located in markets ranked small-to- medium sized,
"Heartland" sized, which offers the Company multiple opportunities for
acquisitions. To this end, the Company regularly evaluates possibilities for
the acquisition of additional radio stations, but at present, except as set
forth above, there are no negotiations, or arrangements or understandings with
respect to any potential material acquisition. (See "BUSINESS".)

The Company maintains its principal executive offices at Building A,
Suite I, 7518 Elbow Bend Road, P.O. Box 3463, Carefree, Arizona 85377, where
its telephone number is (602) 488-2596.

<PAGE>
THE SPIN-OFF OFFERING
- ---------------------
Purpose: To permit the distribution of shares of
the Company's Common Stock issuable to
the CRI Shareholders pursuant to the
terms of the Spin-Off.

Securities Offered: 300,008 shares of Common Stock.

Terms of the Spin-off (1): Upon the effective date of the
Registration Statement and the
qualification of the Offering under all
applicable state Blue Sky laws, the
Company will distribute to the CRI
Shareholders of record as of December
16, 1994, on a "pro rata" one-for-one
(1-for-1) basis, 300,008 shares of the
Company's Common Stock, which shares
are currently being held in escrow
pursuant to the terms of the CRI
Agreement.

- -----------------------------------

(1) Pursuant to the terms of the CRI Agreement, the Company was formed and
organized by CRI as a wholly-owned subsidiary. 300,008 shares of Company
Common Stock were issued to CRI and escrowed to be distributed to the
Shareholders of record of CRI as of December 16, 1994 upon the effective
date of the Registration Statement. Does not include any of the 695,750
shares of Common Stock of the Company issued in transactions following the
initial formation and organization of the Company by CRI.

<PAGE>
THE PUT OPTION OFFERING
- -----------------------
Purpose: To give those CRI Shareholders with the
right to acquire shares of the
Company's Common Stock in the Spin-Off
Offering the right and option to sell
to the Company any or all Spin-Off
Shares.

Terms of the Puts:

Put Price: $1.50 per share

Expiration Date: The Puts will be exercisable for a
period of ninety (90) days following
the effective date of the Registration
Statement.

Maximum Number of Puts: 203,008

Guarantee: The Company's obligation to purchase
and redeem up to 203,008 shares of the
Company' Common Stock upon exercise of
the Puts has been guaranteed by
MicroCap, which guarantee is secured by
a pledge of 195,371 shares of the
Company's Common Stock owned by
MicroCap which are included in the
shares being registered for resale by
the Selling Shareholders.

COMPANY OFFERING
- ----------------
Securities Offered: 400,000 shares of Common Stock, $.004
par value.

Offering Price: $2.00 per share

Common Shares Outstanding:

Before Offering: 995,758
After Offering:(2) 1,395,758

Use of Proceeds: The proceeds, if any, from the Company
Offering will be used for working
capital and debt retirement (See "USE
OF PROCEEDS".)

- ----------------------------------------

(2) Assumes no Put Options are exercised.

<PAGE>
THE SELLING SHAREHOLDERS' OFFERING
- ----------------------------------
Securities Offered: 500,429 shares of Common Stock, $.004
par value (See "DESCRIPTION OF
SECURITIES.")

Offering Price: Prevailing market price

RISK FACTORS
------------
Investment in the securities offered by this Prospectus involves a high
degree of risk, including development stage of business, lack of profitable
operating history, lack of working capital, and possible volatility of price of
Common Stock. Prospective investors should carefully consider the factors set
forth under "RISK FACTORS."

SUMMARY FINANCIAL DATA
----------------------
Set forth below is selected summary financial information with
respect to the Company. Financial information for the eight months ended March
31, 1996, for the years in the two-year period ended July 31, 1995 and 1994,
and as of and for the six months ended September 30, 1996 and September 30,
1995 is derived from the financial statements included elsewhere in this
Prospectus and is qualified by reference to such financial statements and the
notes related thereto.

<PAGE>
<TABLE>
<CAPTION>
QUALITY BROADCASTERS OF
RBI CONSOLIDATED CALIFORNIA, L.P. (KNNN) RBI CONSOLIDATED
FOR THE FOR THE YEARS FOR THE 6 MONTHS
------------------------ ENDED ENDED
8 MOS ENDED YEAR ENDED ---------------------- -----------------------
STATEMENTS OF MARCH 31 JULY 31 MARCH 31 MARCH 31 SEPT. 30 SEPT. 30
OPERATIONS DATA: 1996 1995 1996 1995 1996 1995
- --------------- ---------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 429,386 $ 367,548 $ 725,163 $ 803,849 $ 130,847 $ 341,559

Operating (Loss) (363,121) (160,453) (102,350) (131,758) (168,503) (130,281)

Net (Loss) (368,659) (160,453) (135,378) (176,055) (226,010) (147,638)

Net (Loss Per Share) (.53) (.49) N/A N/A (.29) (.25)

Weighted Average
Shares Outstanding 690,258 325,000 N/A N/A 793,008 600,008
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA
RBI KHSL (1) KNNN COMBINED
FOR THE FOR THE FOR THE -----------
PRO FORMA 6 MOS ENDED 6 MOS ENDED 6 MOS ENDED 6 MOS ENDED
STATEMENTS OF SEPT. 30, SEPT. 30, SEPT. 30, PRO FORMA SEPT. 30,
OPERATIONS DATA: 1996 1996 (1) 1996 (1) ADJUSTMENT (2) 1996
----------- ----------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 130,847 $ (24,170) $ 201,423 $ - $ 308,100

Operating Income (Loss) (168,503) 79,215 (11,038) (40,889) (141,215)

Net Income (Loss) (226,010) 159,215 (32,676) (40,889) (140,360)

Net (Loss Per Share) (0.29) N/A N/A - (.18)

Weighted Average
Shares Outstanding 793,008 N/A N/A - 793,008
_____________________________

(1) Stated separately to reflect the sale of KHSL-AM\FM which is pending
regulatory approval.

(2) Reflects amortization expense associated with purchase of KNNN license.

</TABLE>
<TABLE>
<CAPTION>
AS OF PRO FORMA PRO FORMA
BALANCE SHEET DATA: SEPT. 30, 1996 ADJUSTMENTS(1) AS ADJUSTED(1)(2) AS ADJUSTED(2)(3)
- ------------------ -------------- -------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Total Assets $2,155,412 $ (144,480) $2,010,932 $2,760,932

Working Capital (Deficit) (1,628,287) 1,266,000 (362,287) 387,713

Total Long-Term Obligations 665,222 - 665,222 665,222

Stockholders' Equity (Deficit) (257,989) 781,859 523,870 1,193,870

- ---------------------------------------

(1) Pro forma adjusted to reflect the purchase of KNNN and the sale of KHSL-
AM\FM, which is pending regulatory approval.

(2) Adjusted to reflect the sale by the Company of 400,000 shares of Common
Stock at a price of $2.00 per share, after deducting an estimated $50,000
in offering expenses and $80,000 for Selling Agents' commission. However,
there can be no assurance how many, if any, shares of Common Stock will be
sold in the Company Offering.

(3) Assumes no Put Options are exercised.

</TABLE>

[REMAINING TEXT NOT CONTAINED WITHIN BOX]

<PAGE>
RISK FACTORS
------------
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE POSSIBILITY OF THE
LOSS OF THEIR ENTIRE INVESTMENT IN THE COMPANY'S SECURITIES AND, ALONG WITH
EACH OF THE FOLLOWING FACTORS, CONSIDER THE INFORMATION SET FORTH ELSEWHERE IN
THIS PROSPECTUS.

RISK FACTORS RELATED TO THE BUSINESS OF THE COMPANY
- ---------------------------------------------------

RISK OF NEW BUSINESS. The Company's operations are subject to all of the
risks inherent in a new business enterprise, including the absence of a
substantial operating history, shortage of cash, under-capitalization, and the
need for additional financing. As such, problems, expenses, complications and
delays are expected to be encountered in connection with the implementation of
the Company's business plan. Future growth beyond present capacity will
require significant expenditures for the acquisition and development of
additional radio stations. These expenses must be paid either out of the
proceeds of future debt and/or equity offerings or out of generated revenues
and Company profits. The availability of funds from either of these sources
cannot be assured. (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION," and the Financial Statements and Notes
thereto.)

BUSINESS OF THE COMPANY. The principal business of the Company is
acquiring, developing, maintaining and operating, primarily through operating
subsidiaries, radio broadcasting properties . The foregoing business involves
substantial risks which include, without limitation, intense competition from
others who possess more experience and greater resources, the need to obtain
and maintain all necessary licenses and permits, extensive governmental
regulation, attracting qualified management, engaging in effective marketing
and numerous other factors, many of which are beyond the Company's control.

NEW BUSINESS AND LIMITED RADIO BROADCASTING EXPERIENCE. The Company has
only been engaged in the radio broadcasting industry since August, 1993. While
the Company has and will continue to hire individuals with experience in the
radio broadcast industry, the Company has limited experience in the radio
broadcast industry, and there is no assurance that its intended activities will
be successful or result in profitable operations. The Company also faces all
the risks associated with a new business, including the need for additional
personnel and working capital.

SUBSTANTIAL INDEBTEDNESS. As of September 30, 1996, the Company was
indebted to a number of lenders in the aggregate amount of $1,491,561.
Interest is payable at rates ranging from 10% to 18% per annum with respect to
such borrowings. Consequently, a substantial portion of the Company's cash
flow has been and will be utilized to pay principal and interest with respect
to such indebtedness. Unless the Company can generate substantial positive
cash flow, an event that cannot be assured, the Company will require additional
financing as to which it has no commitments. Should any such financing become
available, there can be no assurance that it will be upon terms or conditions
favorable to the Company or its shareholders. (See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION," "BUSINESS - Proposed
Acquisitions," and Financial Statements and the Notes thereto.)

SIGNIFICANT CASH REQUIREMENTS. The Company's cash requirements have been
and will continue to be significant. Net cash (used) by operating activities
for the six (6) months ended September 30, 1996, was $(26,335). The Company is
dependent upon the net proceeds of the Company Offering or other financing in
order to meet its obligations upon exercise of the Puts, and to fund its
working capital requirements. Accordingly, substantial capital resources and
additional working capital will be needed to support the current operations and
obligations of the Company, and to support the operations of its proposed
acquisitions. There can be no assurance that any future financing will be
available to the Company on acceptable terms, if at all. (See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION," "BUSINESS
- - PROPOSED ACQUISITIONS," AND FINANCIAL STATEMENTS AND THE NOTES THERETO.)

SECURED LIENS - EXISTENCE OF LIENS ON ASSETS. Substantially all of the
Company's assets have been pledged as collateral to secure the Company's
indebtedness in connection with the acquisition of radio stations and certain
other lending arrangements. In the event that the Company fails to meet its
obligations, including the making of required payments of principal and
interest, the Company's indebtedness could be declared immediately due and
payable and, in certain cases, the Company's assets could be foreclosed upon.
Moreover, to the extent that substantially all of the Company's assets continue
to be pledged to secure outstanding indebtedness, such assets will be
unavailable to secure additional debt financing, which may adversely affect the
Company's ability to borrow in the future. (See "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION," AND "CERTAIN
TRANSACTIONS.")

ADDITIONAL CAPITAL REQUIREMENTS. The Company's plans include the possible
development and operation of KLXR-AM in Redding, California, the construction
and operation of new radio stations in Payson, Arizona, Shasta Lake City,
California, and Mesquite, Nevada, and increased marketing efforts aimed at
improving the operations of all of the Company's radio stations. Proceeds of
the Company Offering will, however, be limited, and it is likely that such
proceeds will be substantially below the funding necessary for the Company to
fully develop its strategy. As a result, it is probable that the Company will
require additional capital in the future to finance its business activities.
Additional needed capital may be obtained through borrowings or by additional
equity financing. Future equity financing may occur through the sale of either
unregistered common stock in exempt offerings or through the public offering of
registered equity securities. In any case, such additional equity financing
may result in additional dilution to investors. There can be no assurance that
any additional capital, funding or revenues can be satisfactorily arranged.
The Company has no arrangements for or understandings with respect to the
acquisition of additional capital. (See "BUSINESS.")

LACK OF PROFITABLE OPERATING HISTORY. For the eight months ended March
31, 1996, on a consolidated basis, the Company generated a net loss of
$(368,659) on net revenues of $429,386. Similarly, for the six months ended
September 30, 1996, on a consolidated basis, the Company generated a net loss
of $(226,010) on revenues of $130,847. There can be no assurance that the
Company's sales will continue to improve, or that the Company's operations will
not continue to result in a net loss.

RISKS OF RECENT ACQUISITIONS AND RAPID EXPANSION. The Company acquired
radio station KHZL-FM licensed to Shingletown, California, in July, 1996 and
radio station KNNN licensed to Central Valley, California, in September, 1996.
The Company's strategic plan also contemplates the development of radio station
KLXR-AM licensed to Redding, California, and the construction of additional
radio stations in Payson, Arizona, Shasta
Lake City, California, and Mesquite, Nevada in 1997. While the Company
believes that current management has the capacity to adequately oversee the
operation of these radio stations, there can be no assurance that management
will be able to meet the demands inherent in such rapid growth. Further, the
acquisition and development of radio stations in new geographical locations
will result in the dispersion of key personnel over significant distances.
Such dispersion will impose additional burdens on existing management.

LIQUIDITY AND CAPITAL RESOURCES. In the past the Company has operated on
limited capital resources and has depended primarily on funds generated from
stock sales and short-term loans for on-going operations. Even if the Company
is able to achieve its business plan objectives, it does not anticipate having
substantial net operating profits until at least 1999. In the meantime, there
can be no assurance that funds necessary for operations can be generated from
stock sales and short-term loans from investors and affiliates.

DEPENDENCE UPON MANAGEMENT. The Company's future success depends in a
large part on the continued service of its key marketing, sales, promotional
and management personnel and on its ability to continue to attract, motivate
and retain highly qualified employees. The Company currently does not have
written employment contracts with its key executive officers, and, as a result,
there can be no assurance of their continued service to the Company. The loss
of the services of key personnel could have a material adverse effect upon the
Company's operations and development efforts. The Company does not have key
person life insurance covering its management personnel or other key employees.
(See "MANAGEMENT.")

DEPENDENCE UPON ADVERTISING REVENUES. Substantially all of the Company's
revenues are derived from the sale of local, regional and national advertising
for broadcast on its radio stations. Although the format of a particular
station's programming can vary, there are only a limited number of
advertisements broadcast each hour of broadcast time. The Company determines
the number of advertisements broadcast hourly based upon its assessment of the
maximum amount of advertising revenue it can derive without jeopardizing
listening levels. While there may be shifts from time to time in the number of
advertisements broadcast during a particular time of day, the total number of
advertisements broadcast on a particular station generally does not vary
significantly from year to year. Any change in the Company's revenues, with
the exception of those instances where stations are acquired or sold, is
generally the result of pricing adjustments which are made to ensure that the
station fully utilizes available inventory. Advertising rates are directly
related to the size of a radio station's listening audience. Increasing the
audience base is an important factor in achieving profitability and this cannot
be assured. (See "BUSINESS - ADVERTISING.")

SUBSTANTIAL COMPETITION. Radio broadcasting is an extremely competitive
business. The Company's radio stations compete for listeners and advertising
revenues directly with other radio stations within their market place.
Competition for radio listeners is primarily based upon program content and on-
air talent which appeals to a particular demographic group. By building a
strong base of listeners, the Company attempts to attract advertisers who wish
to reach a particular demographic group of listeners who may purchase their
products. Thus, a decrease in the number of listeners will likely result in a
decrease in advertising revenues. There can be no assurance that the Company
can successfully compete for listeners or advertising revenues. In addition,
the Company's radio stations compete for listeners and advertising revenues
with other forms of communications media, including broadcast television, cable
television, newspapers, magazines, direct mail coupons and billboard
advertising. (See "BUSINESS - COMPETITION.")

FEDERAL REGULATION OF RADIO BROADCASTING; LICENSE RENEWAL. The ownership,
operation and sale of radio stations, including those licensed to the Company,
are subject to regulation by the Federal Communications Commission ("FCC").
Among other things, the FCC assigns frequency bands for broadcasting;
determines the particular frequencies, locations and operating power of
stations; issues, renews, revokes and modifies station licenses; determines
whether to approve changes to ownership or control of station licensees;
regulates transmitting equipment used by stations; adopts and implements
regulations and policies that directly or indirectly affect the ownership,
operation and employment practices of radio broadcasting stations; and has the
power to impose penalties for violations of its rules or the Communication Act
of 1934, as amended (the "Communication Act"). Federal regulations, including,
without limitation, those affecting the regulation of radio broadcasting and
advertising, govern the promotion and advertising activities of the Company and
its advertisers' products. The Communications Act also prohibits the
assignment of an FCC license or any transfer of control of an FCC license
without the prior approval of the FCC. In determining whether to grant
requests for consents to such assignments or transfers, and in determining
whether to grant or renew a radio broadcast license, the FCC considers a number
of factors pertaining to the licensee or proposed licensee including compliance
with alien ownership restrictions and rules governing the multiple ownership
and cross-ownership of broadcast and other media properties, the "character" of
the applicant and those persons or entities holding "attributable" interests in
the applicant and compliance with the Anti-Drug Abuse Act of 1988. Compliance
with such laws and regulations could be costly and changes in laws and
regulations could increase the cost of compliance and materially affect the
Company in other respects not presently foreseeable. The Company monitors laws
and regulations, as well as pending legislation. However, there can be no
assurance that such laws and regulations will not have a material adverse
effect upon the Company.

The Company's current licenses expire on December 1, 1997. There can be
no assurance that any of the Company's current or proposed licenses will be
renewed. (See "BUSINESS - GOVERNMENT REGULATION.")

RESTRICTIONS ON FOREIGN OWNERSHIP. In accordance with the Communication
Act and rules promulgated by the FCC, the ownership, voting and transfer of the
Company's capital stock is restricted with respect to foreign owners. Such
regulations prohibit the ownership of more than twenty percent (20%) of the
Company's outstanding capital stock (or more than twentypercent (20%) of the
voting rights represented), by or for the account of foreign individuals or
corporations otherwise subject to the control of foreign individuals or
entities. Such restrictions could adversely influence the market for and/or
price of the Company's securities. (See "BUSINESS - GOVERNMENT REGULATION.")

CERTAIN CONFLICTS OF INTEREST - CORPORATE OPPORTUNITIES. As of the date
of this Prospectus, MicroCap is the beneficial owner of 487,692 shares of the
Company's Common Stock, which shares represent 48.9% of the issued and
outstanding shares of the Company's Common Stock. Additionally, John C. Power
and J. Andrew Moorer, both officers and directors of the Company, also serve as
officers and directors of MicroCap. The Company's officers and directors are
aware of the fact that they owe a fiduciary duty to the Company not to withhold
any corporate opportunity which may arise because of their association with the
Company. However, the Company may not have sufficient capital to take
advantage of opportunities which may be presented to its officers and
directors; and these persons may, either alone or jointly with third parties,
make acquisitions or otherwise take advantage of opportunities which might
otherwise be available to the Company and within the Company's area of
interest. It is also possible that in the future these opportunities may be
presented to the Company by these individuals at a time when the Company has
sufficient capital; however, it is likely that under those circumstances these
individuals will expect a profit or reasonable return on their investment in
the terms offered to the Company. All of these situations represent the
potential for conflicts of interest from these transactions. While the Company
has clearly defined its area of interest to include only "heartland" sized
markets with Arbitron ranking of 150-250, the officers and directors of the
Company have neither adopted nor articulated any policy with respect to
corporate opportunity should it arise. It is possible that the Company's
officers would be unable to reconcile their fiduciary duties to their various
affiliated entities, in which event shareholder suits may be possible. (See
"MANAGEMENT.")

RISK FACTORS RELATED TO THIS OFFERING
- -------------------------------------
OFFERING PRICE ARBITRARILY DETERMINED. The Offering Price of the Common
Stock being offered hereby and the exercise price and other terms of the Puts
were arbitrarily determined by the Company and are not necessarily related to
the Company's assets, book value or financial condition, and may not be
indicative of the actual value of the Company.

LACK OF DIVIDENDS. The Company has not declared or paid any dividends on
outstanding shares of Common Stock and does not intend to declare or pay any
dividends on its outstanding shares of Common Stock in the foreseeable future.
(See "DIVIDENDS.")

NO PUBLIC TRADING MARKET FOR THE COMPANY'S COMMON STOCK OR PUTS. There
currently exists no public trading market for the Company's Common Stock, and
there can be no assurance that such a market will develop in the future or that
a public market for the Puts will be developed or sustained. In the absence of
an active public trading market, there can be no assurances that an investor
will be able to liquidate his investment without considerable delay, if at all.
If a market does develop, the price for the Company's securities may be highly
volatile and may bear no relationship to the Company's actual financial
condition or results of operations. (See "DESCRIPTION OF SECURITIES.")

NO MARKETMAKER. The Company's securities may be quoted in the "pink-
sheets" maintained by the National Quotations Bureau, Inc., which reports
quotations by brokers or dealers making a market in particular securities. The
Company has no agreement with any broker or dealer to act as a marketmaker for
the Company's securities and there is no assurance that Management will be
successful in obtaining any marketmakers. The lack of a marketmaker for the
Company's securities could adversely influence the market for and price of the
Company's securities, as well as the ability of investors to dispose of, or to
obtain accurate quotations as to the price of, the Company's securities. (See
"TERMS OF OFFERINGS.")

NASDAQ LISTING AND MAINTENANCE REQUIREMENTS; RISKS OF LOW-PRICED STOCKS.
The Securities and Exchange Commission (the "Commission") has approved rules
imposing more stringent criteria for the listing of securities on NASDAQ,
including standards for maintenance of such listing. Even upon successful
closing of this Offering, the Company will be unable to satisfy NASDAQ's
initial listing criteria and, as a result, trading of the Company's securities,
if any, will be conducted in the over-the-counter market in the so-called "pink
sheets" or on the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc. ("NASD"). As a consequence, an investor could find it
more difficult to dispose of, or to obtain accurate quotations as to the price
of, the Company's securities.

The Securities Enforcement and Penny Stock Reform Act of 1990
requires additional disclosure, relating to the market for penny stocks, in
connection with trades in any stock defined as a penny stock. The Commission
has adopted regulations that generally define a penny stock to be any equity
security that has a market price of less than $5.00 per share, subject to
certain exceptions. Such exceptions include any equity security listed on
NASDAQ and any equity security issued by an issuer that has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three years, (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than three years, or
(iii) average annual revenue of at least $6,000,000, if such issuer has been in
continuous operation for less than three years. Unless an exception is
available, the regulations require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith.

Because the Company's securities will not be quoted on NASDAQ, and
the Company does not have $5,000,000 in net tangible assets, or average annual
revenue of $6,000,000, trading in the Company's securities will be covered by
Rules 15-g-1 through 15-g-6 promulgated under the Exchange Act for non-NASDAQ
and non-exchange listed securities. Under such rules, broker-dealers who
recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to this transaction. Securities are exempt from
these rules if the market price of the Common Stock is at least $5.00 per
share.

Because the Company's Common Stock will, as of the date of this
Prospectus, be within the definitional scope of a penny stock, the market
liquidity for the Company's securities could be severely affected.
Specifically, the regulations on penny stocks could limit the willingness
and/or ability of broker-dealers to sell the Company's securities and thus the
ability of purchasers of the Company's securities to sell their securities in
the secondary market.

SHARES ELIGIBLE FOR FUTURE SALE. As of December 20, 1996, 995,758 shares
of the Company's $.004 par value Common Stock, were issued and outstanding, all
of which are "restricted securities" and are being registered for future sale.
Of these 995,758 restricted securities, approximately 63.6% are beneficially
owned by officers, directors and affiliates of the Company. No prediction can
be made as to the effect, if any, that sales of shares of Common Stock or the
availability of such shares for sale will have on the market prices prevailing
from time to time. Nevertheless, the possibility that substantial amounts of
Common Stock may be sold in the public market may adversely affect prevailing
market prices for the Common Stock and could impair the Company's ability to
raise capital in the future through the sale of equity securities. Actual
sales or the prospect of future sales of shares of Common Stock may have a
depressive effect upon the price of the Common Stock and the market therefor.

AUTHORIZATION OF PREFERRED STOCK. The Company's Articles of
Incorporation, as amended, authorize the issuance of up to 2,500,000 shares of
preferred stock. The Board of Directors has been granted the authority to fix
and determine the relative rights and preferences of preferred shares, as well
as the authority to issue such shares, without further stockholder approval.
As a result, the Board of Directors could authorize the issuance of a series of
preferred stock which would grant to holders preferred rights to the assets of
the Company upon liquidation, the right to receive dividend coupons before
dividends would be declared to common stockholders, and the right to the
redemption of such shares, together with a premium, prior to the redemption of
Common Stock. Common stockholders have no redemption rights. In addition, the
Board could issue large blocks of voting stock to fend against unwanted tender
offers or hostile takeovers without further shareholder approval. (See
"DESCRIPTION OF SECURITIES.")

AUTHORIZATION OF ADDITIONAL SHARES. The Company's Articles of
Incorporation, as amended, authorized the issuance of up to 12,500,000 shares
of Common Stock, of which 995,758 shares are outstanding on the date of this
Prospectus. The Company's Board of Directors has the authority to issue
additional shares of Common Stock and to issue options and warrants to purchase
shares of the Company's Common Stock without shareholder approval. Future
issuance of Common Stock could be at values substantially below the Offering
Price in the Offering and therefore could represent further substantial
dilution to investors in the Offering. In addition, the Board could issue
large blocks of voting stock to fend off unwanted tender offers or hostile
takeovers without further shareholder approval. (See "DESCRIPTION OF
SECURITIES.")

DILUTION. At September 30, 1996, the Company had issued the outstanding
895,758 shares of Common Stock at an average cost per share of approximately
$.56, which is $1.44 per share less than the price to the public in the Company
Offering. At September 30, 1996, the Company had a pro forma net tangible book
value of $523,870, or $.59 per share of Common Stock outstanding, based on
895,758 shares issued and outstanding. Giving effect to the sale of 400,000
shares of Common Stock by the Company in the Company Offering, and after
deduction of expenses of the Offerings, the Company will have a net tangible
book value of approximately $1,193,870, or $.92 per share. Investors in this
Offering will sustain an immediate substantial dilution of $1.08 or 54% of
their price per share. (See "DILUTION.")

RETENTION OF CONTROL. The Company's Articles of Incorporation do not
provide for cumulative voting in the election of Directors. Giving effect to
the sale of 400,000 shares of Common Stock in the Company Offering, the
existing shareholders will own or control 895,758 shares of Common Stock, or
approximately 69% of the shares then outstanding and will be in a position to
influence the election of the Board of Directors of the Company who, in turn,
appoint all of the Company's officers.

NEED FOR CURRENT PROSPECTUS AND STATE BLUE SKY QUALIFICATIONS. The CRI
Shareholders will receive shares of the Spin-Off Shares, and Putholders will
receive Puts, only if there is a current and effective Registration Statement
and Prospectus covering the shares of Spin-Off Shares and Puts, and only if the
Spin-Off Shares and Puts are qualified for issuance under the securities laws
of the applicable state or states. Although the Company plans to qualify the
issuance of the Spin-Off Shares and Puts in those states in which the
securities are to be distributed, no assurance can be given that such
qualification will occur. CRI Shareholders residing in states where the
Company is unable to qualify the Spin-Off Shares for distribution, and
Putholders residing in states where the Company is unable to qualify the Puts
for issuance, will not be eligible to participate in the Spin-Off or Put Option
Offering. Any Spin-Off Shares or Puts which cannot be qualified for
distribution to residents of certain states will be distributed PRO-RATA to the
remaining CRI Shareholders who reside in States where the distributions have
been qualified. (See "DESCRIPTION OF SECURITIES.")

USE OF PROCEEDS
---------------
The proceeds to the Company from the Company Offering, net of the expenses
of the Company Offering and the maximum Selling Agents' commissions, will be
approximately $670,000. Management anticipates that the proceeds will be
applied with the following priority during the next twelve (12) month period:

<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF USE AMOUNT PERCENT
------------------ -------- -------
<S> <C> <C>
Put Option Exercise(1) $304,500 45.4%

Working Capital(2) 365,500 54.6%
-------- -------
Total: $670,000 100.0%
======== ======
- -----------------------------------

(1) Reflects the Company's total obligation in the event all 203,008 Puts are
exercised at a put price of $1.50 per share. If fewer than 203,008 Puts
are exercised, the excess proceeds allocated to cover the exercise of
outstanding Puts will be re-allocated to working capital and/or the
reduction of existing debt obligations of the Company.

(2) The proceeds allocated to working capital will be applied, to the extent
necessary, to the Company's current and proposed operations. (See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.") However, as
it is an inherent part of the Company's strategic plan to achieve long-
term growth through acquisitions and/or the development of additional
stations, a portion of the proceeds allocated to working capital may be
used in connection with the development of one or more additional radio
stations, including the possible development of KLXR-AM in Redding,
California, and/or the development of radio stations in Payson, Arizona,
Shasta Lake City, California and/or Mesquite, Nevada. While the Company
regularly evaluates opportunities for the acquisition of existing radio
stations, other than KLXR-AM, there are no substantive negotiations,
arrangements, agreements or understandings with respect to any potential
acquisition. The Company's development plans are currently limited to the
development of one (1) station in Payson, Arizona and, possibly stations
in Shasta Lake City and/or Mesquite, Nevada. (See "BUSINESS.")

</TABLE>

Due to an inability to precisely forecast the number of shares which may
be sold by the Company in the Company Offering, the Company is unable to
predict the precise period for which the Company Offering will provide
financing. The proceeds of the Company Offering will not be sufficient to
satisfy all of the Company's working capital requirements. The Company will
need additional financing in the future. (See "RISK FACTORS")

<PAGE>
DILUTION
--------

The pro forma net tangible book value of the Company at September 30,
1996, giving effect to the sale of KHSL-AM\FM but before giving effect to (i)
the sale in December 1996 of 100,000 shares of Common Stock for $1.20 per share
or (ii) the Company Offering, was $523,870 or $.59 per share, based upon
895,758 shares outstanding. Net tangible book value per share is determined by
dividing the number of outstanding shares of Common Stock into the net tangible
book value of the Company (total assets less total liabilities and intangible
assets). After giving effect to the sale of 400,000 shares of Common Stock by
the Company in the Company Offering and receipt of the estimated net proceeds
therefrom (assuming the maximum Selling Agent's Commissions are paid), the pro
forma, adjusted net tangible book value at September 30, 1996 was $1,193,870,
or $.92 per share of Common Stock, based upon 1,295,758 shares outstanding.
This represents an immediate increase of $.33 per share to current shareholders
and an immediate dilution of $1.08 per share to the investors in the Company
Offering. The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Public Offering Price $2.00

Pro Forma Net Tangible Book Value
per share before Offering: (1) $(.59)

Total Assets (1)(3) $2,010,932

Total Tangible Assets (1)(3) $2,010,932

Total Liabilities (1)(3) $1,487,062

Net Tangible Book Value (1)(3) $523,870

Net Tangible Book Value Per Share

After Offering (1)(2)(3) $.92

Increase in Net Tangible Book Value per
share Attributable to Offering (1)(2)(3) $.33

Dilution of Net Tangible Book Value per
share to new investors (1)(4) $1.08
=====
Dilution as a Percentage of Offering
Price (1)(4) 54%
===
- -----------------------------------
(1) Does not give effect to the sale in December, 1996 of 100,000 shares of
Common Stock at a price of $1.20 per share.

(2) After deduction of estimated Offering costs, and maximum potential Selling
Agents' commissions.

(3) Based upon 1,290,758 shares outstanding.

(4) Determined by subtracting the net tangible book value per share after the
Company Offering from the amount of cash paid by a new investor for a
share of Common Stock.
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
The following discussion and analysis should be read in conjunction with
the Financial Statements and notes thereto appearing elsewhere in this
Prospectus.

OVERVIEW
- --------
By agreement dated June 16, 1995, the Company acquired one hundred percent
(100%) of the issued and outstanding shares of common stock of Redwood
Broadcasting, Inc. ("Broadcasting") in exchange for 300,000 shares of Common
Stock of the Company. Immediately prior to the acquisition of Broadcasting,
the Company's assets consisted primarily of personal property, machinery and
equipment, and certain contracts, leases, accounts and agreements previously
owned by CRI (the Company's former parent corporation) and transferred to the
Company in February, 1995, in exchange for 300,008 shares of the Company's
Common Stock pursuant to the CRI Agreement. Subsequent to the acquisition,
Broadcasting was merged with and into the Company, with the Company remaining
as the surviving entity (the "Merger"). (See "BUSINESS - HISTORY - FORMATION
OF THE COMPANY"). The acquisition of Broadcasting was accounted for as a
reverse acquisition because MicroCap, the controlling shareholder of
Broadcasting, was in control of the Company upon consummation of the Merger.
(See "SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS".) Following
the Merger, the Company changed its name to Redwood Broadcasting, Inc.

Subsequent to consummation of the Merger, the Company changed its fiscal
year end from July 31 to March 31. As a result, the Company's income
statements relate to the eight (8) months ended March 31, 1996, and the year
ended July 31, 1995.

LIQUIDITY AND CAPITAL RESOURCES - MARCH 31, 1996 COMPARED TO JULY 31, 1995
- --------------------------------------------------------------------------
The Company's balance sheet at March 31, 1996 reflects a slight increase
in assets, liabilities and stockholders' equity when compared with the
Company's balance sheet at July 31, 1995.

Total current assets at March 31, 1996 were $160,727, consisting of
accounts receivable of $86,834, net of allowance for doubtful accounts of
$16,400, and other assets of $73,893. Total current liabilities at March 31,
1996 were $1,585,368, resulting in a working capital deficit of $1,424,641.
This compares with a working capital deficit of $1,415,137 at July 31, 1995,
based on current assets of $149,779 and current liabilities of $1,564,916.

Contributing significantly to the Company's working capital deficiency was
$735,000 in short-term debt created by Alta in conjunction with its purchase of
radio stations KHSL-AM\FM, which at March 31, 1996, had been paid down to
$685,000. Specifically, by agreement dated March 3, 1995, Alta entered into an
asset purchase agreement to acquire radio stations KHSL-AM\FM, for $1,150,000
("KHSL AGREEMENT"). Effective February 15, 1995, prior to consummation of the
acquisition, Alta commenced operating KHSL-AM\FM under a Local Management
Agreement ("LMA"). On June 19, 1995, Alta completed the acquisition of KHSL-
AM\FM. Based on management's estimate of the values of the assets acquired,
the Purchase Price was originally allocated as follows:

<TABLE>
<S> <C>
Land $ 600,000
License 350,000
Station equipment 200,000
----------
$1,150,000
</TABLE>

However, the appraised value of $600,000 for the land failed to take into
account a long-term ground lease for use of space by a third party on the radio
tower located on the property. Based on this subsequently obtained
information, the allocation of the purchase price was retroactively changed to
reclassify the difference between the sale price of the land and the original
cost allocation to land, in the amount of $150,000, to the value of the
license. The July 31, 1995 financial statements have been retroactively
adjusted for this correction of an error in the allocation of the purchase
price.

In order to facilitate the acquisition, Alta created the following notes
payable:

* A $375,000 note payable to TriPower Resources, Inc., a controlled
corporation of the Company's President, John C. Power, which note
bears interest at the rate of fourteen percent (14%) per annum, and
was originally due and not paid on August 18, 1995 (the "TriPower
Note"). By mutual agreement of the parties, the maturity date of the
TriPower Note has been extended to September, 1996. The TriPower
Note was originally collateralized by a deed of trust on certain
real estate acquired in conjunction with the purchase of KHSL-AM\FM
located in Chico, California, ("Chico Property"), which property was
sold by the Company in April, 1996. The TriPower Note is now
collateralized by a pledge of 100% of the shares of Alta Common
Stock. Alta is the Company's principal operating subsidiary, which
owns and operates both KNNN and KRDG in Northern California, the
Company's principal assets. In addition, Alta is the owner of KHSL,
which will receive the remaining proceeds of the sale of that station
once regulatory approval is obtained. The TriPower Note was paid
down by $75,000 with proceeds from the sale of the Chico Property,
and has since been paid in full, and the Alta shares released from
pledge.

* Alta also created a $260,000 note payable to the former owner of
KHSL-AM\FM, which note bears interest at the rate of ten percent
(10%) per annum and was due in full in June, 1996 (the "June Note").
The June Note was collateralized by all of the assets of KHSL-AM\FM
acquired by Alta as part of the acquisitionand was guaranteed by
MicroCap. The June Note was paid in full in April, 1996, prior to
the maturity date, with proceeds from the sale of the Chico Property.

* A note payable to an individual in the original principal amount of
$100,000, which note bears interest at the rate of eight percent (8%)
per annum and was due and not paid in full, on September, 15, 1995
(the "September Note"). Subsequent to the original maturity date,
the Company made a principal reduction payment of $50,000, and the
holder of the September Note agreed to extend the maturity date to
September, 1996. The September Note is uncollateralized but is
guaranteed by MicroCap and a principal shareholder of the Company,
and has since been paid in full.

Also contributing to the Company's working capital deficit is the
Company's obligation, pursuant to the terms of the RBI Agreement, to purchase
and redeem up to 203,008 shares of Company Common Stock upon the exercise of
certain put options ("Puts") at a purchase price of $1.50 per share. The Puts
are exercisable for a period of ninety (90) days following the effective date
of the Registration Statement. As a result of the Company's obligation under
the Puts, the Company has included in its balance sheet a current liability of
$304,512.

Other short-term debts contributing to the Company's working capital
deficit at March 31, 1996, include trade accounts payable of $108,319, accrued
expenses of $91,991, and payroll tax withholding of $73,121. At March 31,
1996, the Company also reported accounts payable to certain related parties
totalling $232,730, and the current portion of unearned income totalling
$23,333. Unearned income relates to a portion of the proceeds received by RBI
in conjunction with the sale of a fifty percent (50%) interest in a joint
venture formed to acquire radio station KNBA licensed to Vallejo, California.
In addition to receiving $180,000 in cash for this fifty percent (50%)
interest, RBI received $70,000 in cash for a three (3) year covenant not to
compete. This covenant is being amortized into income on a straight-line basis
over a three (3) year term.

In an effort to reduce its working capital deficit, the Company has taken
or plans to take the following actions:

* During the eight months ended March 31, 1996, the Company received
approximately $200,000 from MicroCap in the form of intercompany
advances. Although this infusion of capital contributed to the
Company's overall working capital deficit by increasing current
liabilities, the funds received were used to pay down the September
Note by $50,000 (to a principal balance of $50,000) thereby reducing
the Company's interest burden.

* During the eight (8) months ended March 31, 1996, the Company
completed a private offering in which it sold a total of 25,000
shares of Common Stock for an aggregate purchase price of $30,000, or
$1.20 per share. The shares were "restricted securities" under the
Securities Act. The private offering price per share was negotiated
by the Company with the investor, who was and remains unaffiliated
with the Company and/or its officers and directors.

* During the eight (8) months ended March 31, 1996, the Company
established relationships with several lenders for the purpose of
leasing capital equipment. These leases are for periods of not less
than three years and are at what management believes to be favorable
interest rates. The use of leases for the acquisition of capital
equipment will, in the opinion of management, allow the Company to
utilize cash flow from operations to reduce the Company's short-term
debt obligations, and increase the amount of working capital
available for future needs.

* The Company has entered into agreements to sell radio stations KHSL-
AM\FM for a combined purchase price of $1,466,000, of which
$1,266,000 will be payable in cash at closing and the balance of
which, $200,000, will be payable in the form of a promissory note.
The Company plans to use the sale proceeds to significantly reduce
its outstanding notes payable and to repay the advances from
Microcap. Because both stations were incurring operating losses at
the time Alta entered into the LMA, Alta will benefit from this
transaction by not having to fund current operating losses. In
addition, upon closing, Alta will obtain necessary capital to reduce
its notes payable and to continue its acquisition plan and growth
strategy.

* In April, 1996, Alta sold the Chico Property for a purchase price of
$450,000. As part of the transaction, Alta remitted to the purchaser
of the land a total of $80,000 in the form of a charitable donation.
As a result, net proceeds to the Company from the sale were $370,000.
Proceeds from this sale were used to pay all amounts due and owing
under the September Note ($260,000), and to reduce the TriPower Note
by $75,000.

* In August, 1996, the Company completed another private placement of
stock in which it sold a total of 37,750 shares of Common Stock to
four (4) investors for an aggregate purchase price of $45,300, or
$1.20 per share. The shares were "restricted securities" under the
Securities Act. The private offering price per share was negotiated
by the Company with the investors.

* The Company plans to use the net proceeds from the Company Offering,
if any, to reduce its current liabilities. If the Company is able to
successfully complete the sale of all 400,000 shares of Common Stock,
of which there can be no assurance, the Company will receive
approximately $690,000 in net proceeds after all costs and selling
agent commissions. The net proceeds, if any, will be used to meet
the Company's obligation upon exercise of the Puts, and, if proceeds
remain, will be allocated to working capital and/or the reduction of
debt obligations. (See "USE OF PROCEEDS".)

At March 31, 1996, the Company reported total assets of $1,545,105,
including property and equipment of $749,560, net of accumulated depreciation
of $74,855. Significant assets included in property and equipment at March 31,
1996 included the Chico Property recorded at $450,000, radio broadcasting
equipment valued at $296,142, and computer equipment valued at $44,443, all of
which was either acquired in conjunction with the purchase of KHSL-AM\FM, or
subsequently purchased by the Company in an effort to maintain or enhance the
quality of the Company's broadcast signal and/or automate operations at the
Company's Chico, California studio, or as part of the construction and ultimate
purchase of KRDG more fully described below. Total assets also includes radio
broadcast licenses valued at $489,833, net of accumulated amortization of
$16,667, and other assets valued at $144,985.

Total liabilities of $1,607,084 as of March 31, 1996 include, in addition
to the current liabilities referred to above, the long-term portion of notes
payable of $11,994 and unearned income of $9,722. This compares with total
liabilities of $1,611,649 as of July 31, 1995, and represents a decrease of
$4,565.

For the eight months ended March 31, 1996, the Company reported an
accumulated deficit of $(532,224). The Company's accumulated deficit, when
combined with additional paid-in capital of $467,123, resulted in a
stockholders' deficit of $(61,979) at March 31, 1996. This compares with
stockholder's equity of $93,380 at July 31, 1995, and represents a decrease of
$155,359.

RECENT ACQUISITIONS
-------------------
In March, 1995, Alta entered into a Local Management Agreement ("LMA")
with an option to purchase radio station KCFM licensed to Shingletown,
California. Upon exercise of its option, Alta advanced $50,000 to the license
holder of KCFM-FM, which sum was credited towards the purchase price of the
station. In addition, Alta advanced an additional $100,000 to build the radio
station and construct the transmitter site. Upon consummation of the
acquisition, which was finalized in July, 1996, Alta delivered the balance of
the purchase price in the form of $15,000 in cash and Alta's promissory note in
the principal amount of $155,000, which note bears interest at the prime rate
per annum as quoted by Chemical Bank of New York, and is secured by KCFM's
assets and guaranteed by MicroCap. In August, 1995, KCFM began commercial
broadcasting at 105.3 Mhz on the FM band. In September, 1995, KCFM changed its
call letters to KRDG, and presently broadcasts a satellite delivered oldies
format. (See "BUSINESS - Operations - RECENT ACQUISITIONS".)

In December, 1995, Alta executed a Letter of Intent regarding the
acquisition by Alta's wholly owned subsidiary, Northern California
Broadcasting, Inc. ("Northern"), of radio station KNNN licensed to Central
Valley, California, for a total purchase price of $825,000. $325,000 of the
Purchase Price was paid in certified funds at closing, and the balance,
$500,000, in the form of Northern's promissory note, secured by 100% of the
stock of Northern and guaranteed by the Company. The acquisition of KNNN was
consummated in September, 1996.

PROPOSED DEVELOPMENT
--------------------
In May, 1996, Alta entered into an Asset Purchase Agreement to acquire
radio station KLXR-AM, presently a "dark" station (a station not broadcasting)
licensed to and serving the Redding, California market for a total purchase
price of $100,000 in cash. The acquisition of KLXR-AM is subject to a number
of contingencies including obtaining all necessary approvals from the FCC.
There can be no assurance that the Company's attempts to acquire KLXR-AM will
be successful, or if successful, that the operation of KLXR-AM will be
profitable.

The Company has also filed for, and is the only applicant seeking, a
construction permit for an FM radio station in Payson, Arizona. Additionally,
in July, 1996, Alta filed an application with the FCC for the issuance of a
construction permit to build an FM radio station to be licensed to Shasta Lake
City, California, which would also serve the Redding, California, market. In
August, the Company filed for a construction permit for an FM radio station in
Mesquite, Nevada. Numerous applicants are seeking construction permits for
both Shasta Lake City, California and Mesquite, Nevada. Accordingly, there can
be no assurance that the Company will be granted construction permits for
either location, or, if granted, that the Company will be able to complete
development of the stations. To this end, the Company estimates that it will
cost approximately $350,000 to complete construction of all three (3) stations.
The Company's current capital resources are substantially below the funding
necessary for the Company to fully complete its development strategy.
Microcap, the Company's majority shareholder, has agreed in principle to
provide the working capital necessary to complete the station construction in
Payson and to cover operating expenses for the first three months of operation.
While the terms of the capital infusion have not been finalized, it is expected
that the funds will be advanced in the form of loans, secured by the tangible
and intangible assets of the Payson station. As the Company is a controlled
corporation of Microcap, it has been agreed that the terms of the funding will
be no less favorable to the Company than terms that would otherwise be
available to the Company from unaffiliated third parties through arms-length
negotiations. Nevertheless, the transaction has the potential for creating
conflicts of interest. (See "RISK FACTORS - Risk Factors Related to Business
of Company - Conflicts of Interests.")

Even if the Company successfully completes the Company Offering, it is
probable that the Company will require additional capital in the future to
finance its proposed development activities. Such additional needed capital
may be obtained through the sale of radio stations KNSN-AM and KHSL-FM, or
through borrowings or additional equity financing. Future equity financing may
occur through the sale of either unregistered common stock in exempt offerings,
or through the public offering of registered equity securities. To date,
however, the Company has no arrangement for or understandings with respect to
the acquisition of additional capital, and there can be no assurance that any
additional capital, funding or revenues can be satisfactorily arranged on terms
acceptable to the Company.

RESULTS OF OPERATIONS - EIGHT MONTHS ENDED MARCH 31, 1996 COMPARED WITH FISCAL
YEAR ENDED JULY 31, 1995
- -----------------------------------------------------------------------
Effective January 12, 1996, the Company changed its fiscal year end from
July 31 to March 31. As a result, the Company's financial statements are
reported for the eight months ended March 31, 1996, and the year ending July
31, 1995. Accordingly, results of operations for the period ended March 31,
1996 reflect only eight months of operations, and therefore, a meaningful
comparison with the previous year's operations cannot be made.

Because the Merger with Broadcasting was accounted for as a reverse
acquisition, the results of operations of IFHC prior to June 16, 1995, have
been excluded from the consolidated results of operations set forth in the
Company's Financial Statements. The results of operations of KHSL-AM\FM have
been included in the Consolidated Financial Statements of RBI since February
15, 1995, the effective date of the KHSL-AM\FM LMA which transferred control of
KHSL-AM\FM to Alta. Likewise, the results of operations of KHZL-FM (f/k/a
KCFM-FM) have been included in the Consolidated Financial Statement of RBI
since March, 1995, the effective date of the KHZL-FM LMA. For comparative
presentation purposes, the results of operations of KHSL-AM\FM for the year
ended July 31, 1994, and for the six and one-half month period ended February
15, 1995, have been shown in separate Statements of Operations included with
the Company's financial statements.

The Company's combined sales for the eight months ended March 31, 1996
were $440,457, and represent revenue in the amount of $397,775 generated by
KHSL-FM and KNSN-AM which the Company began operating on February 15, 1995.
This figure also represents revenue in the amount of $14,031 generated by KHZL-
FM which began commercial operation in August, 1995.

Operating expenses for the eight months ended March 31, 1996, were
$792,507. Of this total, KNSN-AM and KHSL-FM combined for a total of $560,006,
and KHZL-FM generated operating expenses of approximately $96,388. In addition
to the foregoing, the Company generated general and administrative expenses of
$58,464 during the eight months ended March 31, 1996, consisting primarily of
travel and related costs. The Company also recorded depreciation expense of
$77,649 during the eight-month period ended March 31, 1996 which the Company
did not incur during the fiscal year ended July 31, 1995. Although the Company
assumed operating control of radio stations KNSN-AM and KHSL-FM in February,
1995, under an LMA, the Company did not formerly close on the acquisition of
these stations until June, 1995. Because the Company did not own the assets of
the stations during the period of the LMA, no depreciation expense was recorded
during that time.

During the eight months ended March 31, 1996, the Company also incurred
interest expense of $22,436. The interest expense incurred during the eight
months ended March 31, 1996, is primarily the result of acquisition debt
incurred by the Company in conjunction with the acquisition of radio stations
KNSN-AM and KHSL-FM.

As a result of the foregoing, the Company incurred a net loss for the
eight-month period ended March 31, 1996, of $368,659 or $.53 per share based on
a weighted average number of shares outstanding of 690,258.

Management believes that the revenue base provided by radio stations KNSN-
AM and KHSL-FM is not sufficient to support the staff and operational burden of
operating both stations. Moreover, realizing that revenue growth in a market
that management feels is saturated with other radio stations is not going to
increase substantially in the near future, management has determined that the
best course of action is to sell radio stations KNSN-AM and KHSL-FM, and to use
the proceeds the sale to acquire additional stations in the Redding, California
market, a market already served by KHZL-FM. To this end, the Company has
entered into agreements to sell both radio stations in a transaction valued at
approximately $1,466,000. Simultaneously with the signing of the KHSL Asset
Sale Agreements, Alta entered into an LMA with the prospective buyer of the
stations, giving the prospective buyer operational control of the stations
until such time as the sale closes, at which time the LMA will terminate. The
transfer applications have been filed with the FCC and approval of the transfer
of ownership is pending. Although Alta will not receive sale proceeds until
closing (anticipated by management to occur in March, 1997), under the LMA, the
operating expenses of both stations have been assumed by the prospective buyer.
Accordingly, during the LMA, Alta has no cash outlays related to the operation
of KHSL-AM\FM.

LIQUIDITY AND CAPITAL RESOURCES - SEPTEMBER 30, 1996 TO MARCH 31, 1996
- ----------------------------------------------------------------------
At September 30, 1996, the Company had total current assets of $119,892,
consisting primarily of accounts receivable of $49,041, net of an allowance for
doubtful accounts of $16,400, and other current assets of $70,851. Total
current liabilities as of September 30, 1996 were $1,748,179, resulting in a
working capital deficit of $1,628,287. This compares with a working capital
deficit of $1,424,641 at March 31, 1996, based on total current assets of
$160,727 and total current liabilities of $1,585,368. The increase in the
Company's working capital deficit of $203,646 is attributable to the following:

* a reduction in accounts receivable of $37,793 which was used to
reduce a technical book overdraft by $10,882 and to pay down accounts
payable and accrued expenses by $25,051;

* repayment of the June Note in the principal amount of $260,000;

* principal reduction of $75,000 applied against the TriPower Note;

* increases in short-term borrowings (notes payable) associated with
the acquisition of KRDG-FM and KNNN-FM in the amount of approximately
$433,165;

* increases in related party payables associated with funding
operations in the amount of $113,652.

As of September 30, 1996, the Company reported total assets of $2,155,412,
including property and equipment of $1,320,813, net of accumulated depreciation
of $122,302. This compares with total assets at March 31, 1996 of $1,545,105,
including property and equipment of $749,560, net of accumulated depreciation
of $74,855. The increase in property and equipment of $571,253 is primarily
the result of the acquisition of KNNN ($825,000 purchase price) and KRDG
($220,000 purchase price) offset by the sale of the Chico property valued at
$450,000.

As of September 30, 1996, the Company reported total liabilities of
$2,413,401, including, in addition to the current liabilities referred to
above, the long-term portion of notes payable in the amount of $665,222. Long-
term notes payable as of September 30, 1996 is made up of acquisition debt
associated with KNNN and KRDG in the amount of $689,978 and $155,000,
respectively. This compares with total liabilities of $1,607,084 as of March
31, 1996, and represents an increase of $806,317.

As of September 30, 1996, the Company reported an accumulated deficit of
$758,234. This compares with an accumulated deficit at March 31, 1996, of
$532,224. The Company's accumulated deficit at September 30, 1996, when
combined with Common Stock and additional paid-in capital of $500,245, resulted
in a stockholders' deficit of $257,989. This compares with a stockholders'
deficit as of March 31, 1996, of $61,979.

RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH SIX
MONTHS ENDED SEPTEMBER 30, 1995
- -------------------------------------------------------------------------
Sales for the six months ended September 30, 1996, were $139,392 compared
to sales of $375,282 for the same period in fiscal 1995. As previously stated,
1996 sales do not include revenues generated by KHSL-FM and/or KNSN-AM.
Rather, sales for this six-month period are comprised primarily of LMA fee
income (associated with KHSL-FM and KNSN-AM) of $24,000, deferred revenue of
$23,333 associated with the amortization of a covenant not to compete, and
radio advertising revenues of stations KRDG-FM in the amount of $16,000 and
KNNN-FM (for August and September, 1996) in the amount of $73,000. Sales in
1995 were comprised entirely of advertising revenues associated with the
operation of KHSL-FM.

Station operating expenses for the six months ended September 30, 1996 of
$229,099 represent a reduction of $208,060 over the same six-month period in
fiscal 1995. The 1996 expenses reflect the inclusion of $105,496 in costs
associated with operating KNNN-FM for the period August 1, 1996 through
September 30, 1996. The 1996 expenses also reflect certain operating costs for
KHSL-FM and KNSN-AM the Company was not able to transfer to the prospective
buyer of the stations under the LMA. Specifically, employee costs for a
general manager and an engineer must be maintained by the Company during the
LMA in accordance with FCC regulations. In 1995, station operating expenses
consisted of all expenses associated with operating both KHSL-FM and KNSN-AM
for the six-month period ended September 30, 1995.

Depreciation and amortization expenses for the six months ended September
30, 1996 amounted to $47,447 and represents a 100% increase over the six months
ended September 30, 1995. Although the Company assumed operating control of
both stations in February, 1995, under the LMA and closed on the acquisition in
June, 1995, no depreciation expense was recorded until the licenses of these
stations were formally transferred to the Company by the FCC. This occurred in
September, 1995. The first month depreciation was recorded in October, 1995.

General and administrative expenses for the six months ended September 30,
1996 amounted to $22,804, a decrease of $11,877 over the six months ended
September 30, 1995. General and administrative expenses are comprised
primarily of travel and related costs.

Other expenses of $57,507 incurred during the six-month period ended
September 30, 1996 increased $40,150 over the same period in 1995. The primary
reason for the increase is related to an $80,000 charitable contribution made
by the Company to the buyer of the Chico property. The buyer, a local
hospital, required the Company to make the donation to the hospital as part of
the closing.

For the six months ended September 30, 1996, the Company reported a net
loss of $226,010 compared to a net loss of $147,638 for the same six-month
period a year ago. Adjusting for the one-time $80,000 charitable contribution
made by the Company in conjunction with the sale of the Chico property in
April, 1996, the Company sustained a net loss of $146,010 for the current
period, approximating the loss for the six-month period ended September 30,
1995. The Company attributes this current period loss to only having had the
benefit of revenues associated with KNNN-FM for two months (August and
September, 1996) during the six-month period ended September 30, 1996.

Inflation has not had any material effect on the Company's operations, and
is not expected to in the foreseeable future. Other than the foregoing,
management knows of no trends or other demands, commitments, events or
uncertainties that will result in, or that are reasonably likely to result in,
a material impact on the Company's liquidity and capital resources or
operations.

<PAGE>
BUSINESS
--------
OVERVIEW
- --------
Redwood Broadcasting, Inc., f/k/a Intelligent Financial Holding
Corporation (the "Company" or "RBI") and its subsidiaries operate in the
rapidly-developing and expanding radio broadcasting industry. Organized as a
holding company for the purpose of acquiring and/or developing undervalued
radio broadcasting properties located in small-to-medium sized markets, the
Company has recently embarked upon an aggressive acquisition and development
program and continues to seek acquisition and development opportunities in the
broadcast industry.

HISTORY
- -------
FORMATION OF THE COMPANY
------------------------
By agreement dated December 12, 1994, Cell Robotics International, Inc.
f/k/a Intelligent Financial Corporation ("CRI") executed and entered into a
definitive Agreement and Plan of Reorganization between and among CRI, Cell
Robotics, Inc., a New Mexico corporation ("Cell"), MiCEL, Inc., a Delaware
corporation, Bridgeworks Investors I, L.L.C., an Oregon limited liability
company and Ronald K. Lohrding, individually (the "CRI Agreement"), providing
INTER ALIA, for the acquisition by CRI of 100% of the issued and outstanding
equity securities of Cell. The CRI Agreement also provided for the formation
of a new wholly-owned subsidiary of CRI and the transfer to the subsidiary of
certain assets of CRI, subject to certain liabilities.

The Company was formed on December 1, 1994, and in February, 1995, CRI
transferred to the Company in a tax-free reorganization ("Reorganization")
undertaken in reliance upon the provisions of Section 351 of the Internal
Revenue Code of 1986, as amended, one hundred percent (100%) of CRI's real and
personal property ("Property"), subject to certain liabilities ("Liabilities"),
saving and excepting cash, cash equivalents or marketable securities having an
aggregate fair market value of not less than $250,000 (collectively the
"Retained Assets"), solely in exchange for 300,008 shares of the Company's
$.004 par value common stock ("Spin-Off Shares"). Immediately following the
Reorganization, CRI's assets consisted entirely of the Retained Assets and the
Spin-Off Shares, and the Company became a wholly-owned subsidiary of CRI,
owning the Property, subject to the Liabilities.

Pursuant to the terms of the CRI Agreement, CRI further agreed to
distribute the Spin-Off Shares to the shareholders of record of CRI ("CRI
Shareholders") as of December 16, 1994 upon the effective date of this
Registration Statement. (See "TERMS OF OFFERINGS - THE SPIN-OFF OFFERING".)

REDWOOD BROADCASTING, INC.
--------------------------
By agreement dated June 16, 1995, the Company acquired one hundred percent
(100%) of the issued and outstanding shares of Common Stock of Redwood
Broadcasting, Inc. ("Broadcasting") in exchange for 300,000 shares of Common
Stock of the Company. Subsequent to the acquisition, Broadcasting was merged
with and into the Company, with the Company remaining as the surviving entity.
Thereafter, at a special meeting of the Company's shareholders, an amendment of
the Company's Articles of Incorporation was approved changing the Company's
name to Redwood Broadcasting, Inc.

Broadcasting was formed in 1993 as a majority-owned subsidiary of MicroCap
to pursue the acquisition of radio station KNBA (1190 AM) licensed to Vallejo,
California. Broadcasting entered into a joint venture with Quick Broadcasting,
Inc., an established broadcaster, and acquired KNBA in October, 1993. KNBA was
attractive to Broadcasting because it was eligible for the "Expanded Band"
which, if granted, would increase the station's broadcast capability. Greater
signal strength would encompass more listeners which, in turn, would attract
more advertising clients. In 1994, Broadcasting sold its 50% ownership
interest in the joint venture to Quick Broadcasting, Inc for $180,000 in cash
and a three (3) year, pre-paid, agreement not to compete valued at $70,000.
Broadcasting sold its interest in KNBA in order to focus its resources on
wholly and majority-owned radio properties.

SOLO YOLO BROADCASTING
----------------------
In 1994, MicroCap assigned to its subsidiary, Broadcasting, a ninety
percent (90%) ownership interest in Solo Yolo Broadcasting ("Solo Yolo"), a
California general partnership. Solo Yolo was one of only two applicants to
file for an FM construction permit for Esparto, California. Solo Yolo
subsequently settled with the competing applicant and received a reimbursement
of its expenses in the amount of $18,000 in cash in exchange for Solo Yolo's
agreement to withdraw its application.

ALTA CALIFORNIA BROADCASTING, INC.
----------------------------------
In 1994, Broadcasting formed its own wholly-owned subsidiary, Alta
California Broadcasting, Inc. ("Alta"), to pursue radio acquisition
opportunities it had determined were available in northern California.

KHSL-AM\FM
----------
In June, 1994, Alta entered into an Asset Purchase Agreement to
acquire radio stations KHSL-AM\FM licensed to Chico and Paradise, California,
respectively ("KHSL Agreement"). The acquisition, valued at $1.15 million,
included furniture and fixtures, broadcast equipment, broadcast licenses and
11.70 acres of real property located in Chico, California, zoned for
residential housing development. On February 15, 1995, Alta commenced
operating KHSL-AM\FM under a Local Management Agreement ("LMA"), while transfer
applications were filed with the FCC to approve the change in ownership. On
June 19, 1995, Alta completed the acquisition of KHSL-AM\FM ("KHSL
Acquisition") resulting in the termination of the LMA.

KHSL-FM has a country format and is located at 103.5 on the FM
band. All programming for KHSL-FM originates at its studio in Chico.
Subsequent to its acquisition by Alta, KHSL-AM changed its call letters and
format. The new call letters are KNSN-AM. The new format is "Talk" , and its
programming is primarily originated through satellite delivery companies.

In March, 1996, Alta entered into separate Asset Sale Agreements
to sell the assets of both KNSN-AM and KHSL-FM, excluding the 11.70 acres of
real property, in a transaction valued at $1.47 million. Simultaneously with
signing the Asset Purchase Agreements, Alta entered into an LMA with the
prospective purchaser until the sale closes, at which time the LMA will
terminate. The transfer applications associated with the sale of the two (2)
stations are presently awaiting approval by the FCC. In April, 1996, the
11.70 acres of real property was sold to an unrelated party for $450,000.

KRDG-FM (F/K/A KHZL AND KCFM)
-----------------------------
In March, 1995, Alta entered into an LMA with an option to
purchase radio station KCFM-FM licensed to Shingletown, California, which began
commercial broadcasting, with a "Country" music format, at 105.3 on the FM band
in August, 1995. The source of its programming was simulcasting with KHSL-FM,
through the use of high speed data transmission lines. KCFM-FM primarily
serves the Redding, California market. In September, 1995, KCFM-FM changed its
call letters to KHZL-FM. During the Company's review of KHZL-FM's performance,
it was determined that a format change would best serve the goal of revenue
enhancement. A new music format was developed using a satellite delivered
"Oldies" format. The change proved to be highly successful as KHZL-FM posted a
6.4 in Arbitron's 1996 Spring Survey, versus not qualifying for any rating
status in the fall survey under the previous format. In May, 1996, the Company
filed for an upgrade to increase the station's broadcast power. In July, 1996,
Alta completed the acquisition of KHZL-FM, thereby terminating the LMA.
Effective September 27, 1996, Alta changed KHZL-FM's call letters to KRDG-FM.

KNNN-FM
-------
In May, 1996, Alta entered into an Asset Purchase Agreement to
acquire KNNN-FM licensed to Central Valley, California. The Asset Purchase
Agreement was subsequently assigned to Alta's wholly-owned subsidiary, Northern
California Broadcasting, Inc. KNNN-FM primarily serves the Redding, California
market and broadcasts an "Adult Contemporary" format at 99.3 on the FM band.
In August, 1996, Alta began operating KNNN-FM under an LMA pending approval of
the transfer of ownership by the FCC. The Company has obtained an upgrade to
increase the station's broadcast power. In September, 1996, Northern completed
the acquisition of KNNN-FM, thereby terminating the LMA. The purchase price
for KNNN was $825,000, $325,000 of which was paid in cash at closing, and the
balance was paid in the form of a promissory note secured by the assets of KNNN
and guaranteed by the Company.

ACQUISITIONS AND DEVELOPMENT
- ----------------------------
The Company's strategy is to grow by acquiring additional radio stations
meeting specified criteria and by maximizing the revenues and Broadcast Cash
Flow of the stations it owns and operates. Broadcast Cash Flow is defined as
operating income (loss), exclusive of trade (non-cash) revenue and expenses,
before deductions for interest, taxes, depreciation, amortization and corporate
expense. Although Broadcast Cash Flow is not recognized under generally
accepted accounting principles ("GAAP"), it is accepted by the broadcast
industry as a generally recognized measure of performance and is used by
analysts who report publicly on the condition and performance of broadcast
companies. Broadcast Cash Flow should not,
however, be considered an alternative to operating income as determined in
accordance with GAAP or to cash flows from operating activities (as a measure
of liquidity) or other indicators of the Company's performance as reported
under GAAP.

The Company generally intends to acquire established stations and/or build
stations in small- to medium-size media markets as defined by industry
standards. The Company defines these markets as those ranked 150 to 250 in
terms of population by the Arbitron Company ("Arbitron").

In general, the Company seeks to acquire stations: (i) located in markets
with well established and relatively stable economies, which are often
characterized by the presence of universities, tourism or a substantial
industrial base, (ii) with a demonstrated track record of audience share and
(iii) which can be purchased at attractive prices. The Company believes that
it can most effectively maintain and improve operating results of stations with
these characteristics. Factors considered by the Company in evaluating an
acquisition candidate include (i) the size, rates of growth and projected
future rates of growth of the market's broadcast revenue and population, (ii)
the number of competitive stations in the market, (iii) the operating history
and performance of the stations, (iv) the success of the station's format, (v)
the quality of and the ability to enhance the station's broadcast signal, (vi)
the terms of the purchase and (vii) duopoly (or greater) ownership
possibilities or other unique synergies with the then existing stations of the
Company.

The Company intends to pursue acquisition opportunities, including
acquisition opportunities made possible by recently adopted Federal
Communications Commission ("FCC") rules (the "New FCC Rules") which
substantially increased the number of stations in the same radio service (i.e.,
AM or FM) one entity may own, both nationally and in a single geographic
market. The Company believes that the ability to own multiple stations in a
single geographic market, known as a duopoly, offers the potential for both
substantial cost savings and increased revenues. For example, a duopoly
permits the consolidation of studios and office space, thereby reducing
administrative, engineering and management expenses. Furthermore, additional
stations in a particular market enable the Company to take advantage of its
existing relationships with advertisers, provide advertisers a larger, combined
audience and permit joint promotional efforts, which may result in increased
revenues and reduce the risk of a particular acquisition.

By combining the operations of KHZL and KNNN, the Company hopes to create
a duopoly serving the Redding, California market. This approach is consistent
with the Company's strategy of creating duopolies and implementing other cost
saving and revenue enhancement programs.

OPERATIONS
- ----------
The Company's business is devoted to acquiring and operating radio
stations, and generating revenue principally through the sale of advertising.
Through its subsidiaries, the Company currently offers advertisers a radio
listening audience in the Redding, California market. The Company has also
filed for an FM construction permit in Payson, Arizona, and, if the permit is
awarded, will develop and operate a radio station in Payson. Additionally, in
July, 1996, Alta filed an application with the FCC for the issuance of a
construction permit to build an FM radio station to be licensed to Shasta Lake
City, California, which would
serve the Redding, California market. The Company also filed for a
construction permit for an FM radio station in Mesquite, Nevada. Numerous
applicants are seeking construction permits in both Shasta Lake City,
California and Mesquite, Nevada. As a result, there can be no assurance that
the Company will be granted these construction permits, or, if granted, that
the Company's operations will be successful.

The Company believes a large percentage of radio advertising dollars are
expended in small-to- medium-sized media markets. The Company believes that it
can improve the financial performance and Broadcast Cash Flow of small- to
medium-sized stations by enhancing revenues while, at the same time,
controlling costs. The Company seeks to enhance billings by implementing or
expanding: (i) targeted programming designed to increase audience share within
specific demographic groups considered to be particularly attractive to
advertisers, (ii) sales and marketing programs intended to increase both
audience share and the sale of advertising time, from which substantially all
of the Company's revenues are derived, and (iii) effective advertising rate
management and inventory control. Extensive market research is conducted to
refine and enhance the Company's programming. The Company's stations employ a
variety of programming formats. The Company believes that selling advertising
time in small- to medium-sized markets is less dependent upon ratings and more
dependent upon aggressive marketing, promotional and selling techniques. Local
advertising and promotional tie-ins with local events are designed to heighten
public awareness of the Company's stations. Duopoly ownership structures will
enable the Company to offer advertisers a broader range of creative advertising
packages and enable the Company to derive increased benefits from its
advertising rate management and inventory control techniques.

As a result of the acquisitions of KNNN-FM and KRDG-FM, a duopoly, the
Company now has 13.4% of listenership in the overall Redding, California
market, making it the third largest radio group in the market as reported by
Arbitron's 1996 Spring Survey. The Company hopes to increase its percentage of
the Redding, California listenership through the development, and subsequent
operation of radio station KLXR-AM in Redding, and a new station licensed to
Shasta Lake City, California, which will also serve primarily the Redding,
California market. According to the BIA 1996 Radio Yearbook, the Redding,
California Total Service Area ("TSA") has a population of 166,694, with nine FM
stations and seven AM stations. The Redding, California Metro Rank is 207.
BIA estimates annual revenues of $4.6 million for the Redding market.

THE COMPANY'S RADIO STATIONS
----------------------------
The following table sets forth certain information covering the Company's
current and proposed radio stations:

<TABLE>
STATIONS CURRENTLY OWNED BY COMPANY
-----------------------------------
<CAPTION>
TARGET
STATION CITY OF LICENSE STATION FORMAT DEMOGRAPHICS
- ------- ------------------------- -------------- ------------
<S> <C> <C> <C>
KRDG-FM Shingletown, California Oldies Ages 35+

KHSL-FM (1) Paradise, California Country Ages 18 to 54

KNSN-AM (1) Chico, California News/Talk Ages 35+

KNNN Central Valley, Adult Ages 25-54
California Contemporary

PROPOSED ACQUISITIONS OR FOR DEVELOPMENT
----------------------------------------
KLXR-AM Redding, California TBD TBD

TBD Payson, Arizona TBD TBD

TBD Shasta Lake, California TBD TBD

TBD Mesquite, Nevada TBD TBD

- -----------------------------------

(1) The Company has executed a definitive agreement to sell these stations,
which are currently being operated by the prospective purchaser under an
LMA. The sale, which is scheduled to close on March 12, 1997, is awaiting
regulatory approval by the FCC, and engineering modifications.

</TABLE>

In developing its stations, the Company utilizes a variety of practices
designed to improve the station's Broadcast Cash Flow, including implementation
of strict financial reporting requirements and cost controls, directing
promotional activities, developing programming to improve the station's appeal
to targeted audience groups and enhancing advertising sales efforts. In
particular, the Company emphasizes increasing local advertising revenues in
order to reduce dependence on national advertising revenues.

In operating its stations, the Company concentrates on the development of
strong decentralized local management, which is responsible for the day-to-day
operations of the station and is compensated, in part, based on incentives
related to the station's financial performance. Local management, in
cooperation with corporate management, is responsible for sales and marketing,
hiring on-air talent and developing programming. Corporate management is
responsible for long-range planning, establishing policies and procedures,
resources allocation and maintaining overall control of the stations.

The Company has purchased and installed at its studio in Redding,
California, a digital control system which the Company believes will result in
a significant reduction in live disc jockey time. Certain non-peak broadcast
periods such as nights and weekends will be voice tracked on a weekly basis
with local talent. Listeners generally will not be able to tell the difference
between the live and voice tracked disc jockey.

The Company continues to seek opportunities to acquire radio stations with
strong growth potential in the Company's current markets, subject to the
Communication Act and FCC rules, which currently limit, among other things, the
maximum number of radio stations that can be owned by the Company in the same
geographic market. Since the Company has historically grown in part through
the acquisition of broadcasting properties, current or subsequent limitations
imposed by the FCC on the number of broadcasting properties the Company may
acquire could limit the Company's ability to grow in the future.

ADVERTISING
-----------
Substantially all of the Company's revenues are generated from the sale of
advertising for broadcast on its radio stations. Depending upon the format of
a particular station, there are a predetermined number of advertisements
broadcast each hour. The Company attempts to maximize the number of
advertisements broadcast hourly without jeopardizing listening levels. Any
change in the Company's revenues, with the exception of those instances where
stations are acquired or sold, is generally the result of additional
advertising revenues and pricing adjustments which are made to ensure that the
station fully utilizes available inventory.

The Company believes that radio is one of the most efficient, cost-
effective means for advertisers to reach specific demographic groups. The
Company also believes that radio in general is more resistant to economic
downturns than other advertising-supported media due to its relatively lower
rates and lower commercial production costs.

Depending on the programming format of a particular station, the Company
estimates the optimum number of advertisements available for sale.
Accordingly, changes in the Company's net revenues (except to give effect to
the acquisition or disposition of a radio station) are generally the result of
pricing adjustments or an increase in the number of commercials sold.

Advertising rates charged by radio stations are based primarily on a
station's ability to attract audiences in the demographic groups targeted by
advertisers. The number of listeners of a station is often reported by rating
service surveys such as Arbitron, although most small radio markets are not
serviced by Arbitron. Advertising rates are also dependent upon the number of
stations in the market competing for the same demographic group and on the
supply of and demand for radio advertising time. Rates are generally highest
during the morning and afternoon drive-time hours.

Substantially all of the revenues generated by a radio station, including
the Company's radio stations, are derived from local, regional and national
advertising. Local and regional sales generally are made by a station's sales
staff. National sales are made by "national representative" firms, which
specialize in radio advertising sales on the national level. These firms are
compensated on a commission-only basis. Most advertising contracts are short-
term, generally running for only a few weeks.

COMPETITION
-----------
Radio broadcasting is an extremely competitive business. The Company's
radio stations compete for listeners and advertising revenues directly with
other radio stations within their markets, many of which have more experience
and greater resources than the Company. Radio stations compete for listeners
primarily on the basis of program content and by hiring high-profile talent
that appeals to a particular demographic group. The Company competes for
advertising revenues principally through effective promotion of its stations'
listener demographics and audience shares, and through the number of listeners
in a target group that can be reached for the price charged for the air-time.
The Company's stations also compete for advertising revenues with other media
within their markets, including broadcast television, cable television,
newspapers, magazines, direct mail, coupons and billboard advertising. By
building a strong listening base comprised of a specific demographic group in
each of its markets, the Company is able to attract advertisers seeking to
reach those listeners. Other factors that affect a station's competitive
position include its authorized power, terrain, assigned frequency, audience
characteristics, local program acceptance and the number and characteristics of
other stations in the market area.

The radio broadcasting industry is also subject to competition from new
media technologies that are being developed or introduced, such as the delivery
of audio programming by cable television systems and by digital audio
broadcasting. The radio broadcasting industry historically has grown despite
the introduction of new technologies for the delivery of entertainment and
information, such as television broadcasting, cable television, audio tapes and
compact disks. There can be no assurance, however, that the development or
introduction in the future of any new media technology will not have an adverse
effect on the radio broadcasting industry. The Company also competes with
other radio station groups to purchase additional stations. Some of these
other groups are owned or operated by companies that have substantially greater
financial and other resources than the Company.

The Telecommunications Act of 1996 will permit other radio broadcasting
companies to enter the markets in which the Company operates or may operate in
the future, some of which may be larger and have more financial resources than
the Company. There can be no assurance that the Company's existing stations,
or those stations acquired by the Company in the future, will be able to
maintain or increase their respective current audience ratings or advertising
revenue market share.

GOVERNMENTAL REGULATION
-----------------------
The ownership, operation and sale of radio stations, including those
licensed to the Company and its subsidiaries, are subject to the jurisdiction
of the FCC, which acts under authority granted by the Communication Act. Among
other things, the FCC assigns frequency bands for broadcasting; determines the
particular frequencies, locations and operating power of stations; issues,
renews, revokes and modifies station licenses; determines whether to approve
changes to ownership or control of station licenses; regulates equipment used
by stations; adopts and implements regulations and policies that directly or
indirectly affect the ownership, operation and employment practices of
stations; and has the power to impose penalties for violations of its rules or
the Communication Act.

The following is a brief summary of certain provisions of the
Communication Act, including amendments thereto recently effectuated by the
Telecommunications Act of 1996 (the "1996 Telecom Act") and of specific FCC
regulations and policies that affect the business of the Company. Reference
should be made to the Communication Act, FCC rules and the public notices and
rulings of the FCC for further information concerning the nature and extent of
federal regulation of broadcast stations.

LICENSE RENEWALS AND TRANSFERS
------------------------------
Under the 1996 Telecom Act, radio broadcasting licenses are granted
for maximum terms of eight (8) years. Such licenses are subject to renewal
upon application to the FCC. Under the 1996 Telecom Act, the FCC shall adopt
regulations which will implement a two-step procedure, pursuant to which
competing applications for an incumbent licensee's frequency will be explicitly
prohibited, and the FCC shall grant the incumbent licensee's renewal
application if it finds that (i) the incumbent licensee has served the public
interest, convenience and necessity; (ii) the incumbent licensee has not
engaged in any serious violations of the Communications Act or the FCC's rules;
and (iii) there have been no other violations by the incumbent licensee of the
Communications Act or of the FCC's rules which, taken together, would
constitute a pattern of abuse. If, based upon a review of the incumbent
licensee's renewal application, or of other facts that are brought to the FCC's
attention in a petition to deny or other third party filing, the FCC is unable
to make the foregoing findings, the incumbent licensee is entitled to a full
evidentiary hearing to establish that it is entitled to renewal. If, following
the evidentiary hearing, the FCC determines that the incumbent licensee has
failed to meet the basic requirements for renewal and that no mitigating
factors justify the imposition of a sanction less than denial of renewal (such
as, for instance, a "short" term renewal or the imposition of forfeitures), the
FCC is obligated to deny the renewal application. Should such denial become
final following judicial review, the FCC may thereafter entertain applications
for the incumbent licensee's frequency. The 1996 Telecom Act makes these
provisions retroactively applicable to renewal applications filed after May 1,
1995. The FCC intends to initiate a rule-making proceeding during 1996 to
implement these procedures.

The following table sets forth the frequency of each of the Company's
stations and the date on which the FCC license for each such station expires,
as well as certain information regarding radio station licenses that are the
subject of certain acquisition agreements with the Company:

<TABLE>
<CAPTION>
EXPIRATION
DATE OF FCC
STATION CITY OF LICENSE FREQUENCY AUTHORIZATION
- ------- --------------- --------- -------------
CURRENTLY OWNED STATIONS
------------------------
<S> <C> <C> <C>
KRDG-FM Shingletown, California 105.3 Mhz December 1, 1997

KHSL-FM (1) Paradise, California 103.5 Mhz December 1, 1997

KNSN-AM (1) Chico, California 1290 Khz December 1, 1997

KNNN Central Valley, 99.3 Mhz December 1, 1997
California

PROPOSED ACQUISITIONS OR DEVELOPMENT
------------------------------------
KLXR-AM Redding, California 1230 Khz TBD

TBD Payson, Arizona 101.1 Mhz TBD

TBD Shasta Lake City, TBD TBD
California

TBD Mesquite, Nevada TBD TBD
- -----------------------------------

</TABLE>

OWNERSHIP MATTERS
-----------------
The Communication Act prohibits the assignment of a broadcast license
or the transfer of control of a broadcast licensee without the prior approval
of the FCC. To obtain the FCC's prior consent to transfer or assign a
broadcast license, appropriate applications must be filed with the FCC. In
determining whether to grant or renew a broadcast license, the FCC considers a
number of factors pertaining to the licensee, including compliance with the
Communications Act's limitations on alien ownership, compliance with various
rules limiting common ownership of broadcast, cable and newspaper properties,
and the "character" of a licensee and those persons holding "attributable"
interests therein.

Under the Communications Act, broadcast licenses may not be granted
to any corporation having more than twenty percent (20%) of its issued and
outstanding capital stock owned or voted by aliens (including non-U.S.
corporations), foreign governments or their representatives (collectively
"aliens"). The Communications Act also prohibits a corporation, without FCC
waiver, from holding a broadcast license if that corporation is controlled,
directly or indirectly, by another corporation, in which more than twenty-five
percent (25%) of the issued and outstanding capital stock is owned or voted by
Aliens. The FCC has issued interpretations of existing law under which these
restrictions in modified form apply to other forms of business organizations,
including partnerships. As a result of these provisions, in the absence of a
waiver, the Company, which serves as a holding company for its various
subsidiaries, cannot have more than twenty-five percent (25%) of its stock
owned or voted by Aliens.

Under the 1996 Telecom Act, the FCC's national and local multiple
ownership rules were revised. The FCC's formal rules prohibited the Company
from owning, operating or controlling, directly or indirectly, more than twenty
AM and twenty FM radio stations in the United States. The 1996 Telecom Act
completely eliminated national ownership limitations. In addition, the 1996
Telecom Act substantially relaxed restrictions on local radio multiple
ownership (often referred to as the "duopoly") rules. Under the new law, which
was implemented by the FCC in March, 1996, in markets with fourteen or fewer
radio stations, the Company is permitted to own up to a total of five (5) radio
stations, no more than three (3) of which may be FM, so long as the Company's
owned radio stations represent less than fifty percent (50%) of the radio
stations in the market. In markets between fifteen (15) and twenty-nine (29)
radio stations, the Company will be permitted to own up to a total of six (6)
radio stations, no more than four (4) of which may be FM. In markets with
between thirty (30) and forty-four (44) radio stations, the Company will be
permitted to own up to a total of seven (7) radio stations, no more than four
(4) of
which may be FM. Finally, in markets with forty-five (45) or more radio
stations, the Company may own up to a total of eight (8) radio stations, no
more than five (5) of which may be FM. All of the Company's current holdings
and proposed acquisitions are consistent with these new local multiple
ownership restrictions.

The Communications Act and FCC rules also generally limit the common
ownership, operation or control of a radio broadcast station and a television
broadcast station serving the same geographic market and of a radio broadcast
station and a daily newspaper serving the same geographic market. Under these
rules, absent waivers, the Company would not be permitted to acquire any
newspaper or television broadcast station (other than low-power television) in
a geographic market in which it now owns a broadcast property. However, the
FCC's policies, as modified by the 1996 Telecom Act, provide for the liberal
grant of waivers of the rule prohibiting ownership of radio and television
stations in the same geographic market in the top fifty television markets if
certain other conditions are satisfied. The FCC has also indicated that it
intends to hold a rule-making proceeding looking toward the liberal grant of
waivers of the rule prohibiting common ownership of a radio station and a
newspaper in the same market in large markets.

The FCC generally applies its ownership limits to "attributable"
interests held by an individual, corporation, partnership or other association.
In the case of corporations holding broadcast licenses, the interests of
officers, directors and those who, directly or indirectly, have the right to
vote five percent (5%) or more of the corporation's stock (or ten percent (10%)
or more of such stock in the case of insurance companies, investment companies
and bank trust departments that are holding stock for investment purposes only)
are generally attributable, as are positions of an officer or director of a
corporate parent of a broadcast licensee. Currently, none of the Company's
officers, directors or stockholders has an attributable interest in any company
licensed to operate broadcast stations other than the Company and/or its
subsidiaries.

LOCAL MARKETING AGREEMENTS
--------------------------
Over the past few years, a number of radio stations have entered into
what have commonly been referred to as "Local Marketing Agreements" or "LMAs".
While these agreements may take different forms, under a typical LMA,
separately owned and licensed radio stations agree to enter into cooperative
arrangements of varying sorts, subject to compliance with the requirements of
the antitrust laws and the FCC's rules and policies, including the requirement
that the licensee of each station maintain independent control over the
programming and operation of its own stations. The most prevalent kind of LMA
is a time brokerage agreement among two separately-owned radio stations serving
a common service area, whereby the licensee of one station programs substantial
parts of the broadcast day on the other licensee's station, subject to ultimate
editorial and other controls being exercised by the latter licensee, and sells
advertising time during such program segments. The FCC has held that such
agreements involving radio stations are not contrary to the Communications Act,
provided that the licensee of the station that is being substantially
programmed by another entity maintains complete responsibility for, and control
over, the operations of its broadcast station, and assures compliance with
applicable FCC rules and policies.

The FCC rules specifically permit LMAs but provide that a station
leasing time and broadcasting programming on another station servicing the same
market will be considered to have an attributable ownership interest in the
other station for purposes of the FCC's multiple ownership rules. As a result,
the Company would not be permitted to enter into an LMA with another local
station which it could not own under the FCC's local ownership rules unless the
Company's programming constituted less than fifteen percent (15%) of the other
station's programming on a weekly basis. Under the 1996 Telecom Act, in
markets with fourteen or fewer radio stations, such as the Redding, California
market, the Company is permitted to own up to a total of five radio stations,
no more than three (3) of which may be FM so long as the Company's owned radio
stations represent less than fifty percent of the radio stations in the market.
As a result of the KNNN acquisition, the Company can only acquire or enter into
an LMA relating to the operation of one (1) more FM station that serves the
Redding, California market.

PROGRAMMING AND OPERATION
-------------------------
The Communication Act requires broadcasters to serve the "public
interest." Licensees are required to present programming that is responsive to
community issues and to maintain certain records demonstrating such
responsiveness. Complaints from listeners concerning a station's programming
may be considered by the FCC when it evaluates renewal applications of a
licensee, although such complaints may be filed at any time. Stations also
must follow various rules promulgated under the Communication Act that
regulate, among other things, political advertising, sponsorship
identifications, and advertisement of contests and lotteries and technical
operations, including limits on radio frequency radiation. In addition,
licensees must develop and implement programs designed to promote equal
employment opportunities and must submit reports to the FCC with respect to
these matters on an annual basis and in connection with a renewal application.

Failure to observe these or other rules and policies can result in
the imposition of various sanctions, including monetary forfeitures,
conditional grants of licenses, the grant of "short" (less than the full eight
(8) year term) renewal terms or, for particularly egregious violations, the
denial of a license renewal application or the revocation of a license.

PROPOSED CHANGES
----------------
The Congress and the FCC have under consideration, and may in the
future consider and adopt, new laws, regulations and policies, regarding a wide
variety of matters that could, directly or indirectly, affect the operation and
ownership of the Company's radio broadcast properties. Such matters include,
for example, proposals to impose spectrum use or other governmentally imposed
fees upon licensees; the FCC's equal employment opportunity rules and other
matters relating to minority and female involvement in the broadcasting
industry including enhancement of ownership opportunities; proposals to change
rules relating to political broadcasting; proposals to change the thresholds,
benchmarks or concepts applicable to attributing ownership interest in
broadcast media; proposals to permit lenders to take a security interest in FCC
licenses; technical and frequency allocation matters, including those relative
to the implementation of digital audio broadcasting on both a satellite and
terrestrial basis, spectrum for which has been allocated by the FCC; proposals
to permit expanded use of FM translator stations; proposals to restrict or
prohibit the advertising of tobacco products and/or beer, wine or other
alcoholic beverages on radio; and changes to broadcast technical requirements
in frequency allocation matters. The Company cannot predict whether any such
proposed changes will be adopted nor can it judge in advance what impact, if
any, any such proposed changes might have on its business.

LEGAL PROCEEDINGS
-----------------
Neither the Company nor any of its subsidiaries is a party to any material
legal proceedings, nor are they aware of any pending or threatened claim of a
material nature.

During 1994, 1995 and 1996, John C. Power, the Company's President and
Director, and Microcap, the Company's principal shareholder, received several
requests from the Securities and Exchange Commission (the "Commission") to
produce documents covering numerous transactions involving Mr. Power, Microcap
and other parties. In September, 1996, Mr. Power was notified by Commission's
staff that it intends to request that the Commission commence an administrative
proceeding against Mr. Power and others based upon certain transactions in
securities of issuers other than the Company or Microcap. Microcap did not
receive any such notification. Mr. Power has responded to the Commission with
a written submission which sets forth why there exists no basis in fact or law
for such a proceeding. It is impossible to predict whether the staff will
recommend a proceeding against Mr. Power, and if such a recommendation is made,
whether the Commission will authorize the institution of a proceeding. If a
proceeding is instituted against Mr. Power, there can be no assurance that such
a proceeding will not have an adverse impact upon Mr. Power and indirectly, an
adverse impact upon the Company's financial condition or operating results, or
the market for the Company's securities.

EMPLOYEES
---------
The Company presently has fourteen (14) full time employees. The
Company's principal executive officers are John C. Power, Chief Executive
Officer and President, J. Andrew Moorer, Chief Financial Officer, Secretary and
Treasurer, and Donald P. Griffin, Chief Operating Officer. The foregoing
individuals are responsible for all of the Company's budget, legal and
financial matters, as well as for evaluating, investigating and negotiating all
acquisition opportunities.

The stations have not experienced any significant labor problems under the
Company's ownership, and the Company considers its labor relations on the whole
to be good.

The Company has plans for aggressive acquisition and growth using current
management and staff as an infrastructure. The Company believes that it has
full-time management sufficient to operate six (6) radio stations; however,
there can be no assurance that rapid expansion will not necessitate further
demand for local management. (See "RISK FACTORS -- RISK OF EXPANSION.")

<PAGE>
REDWOOD MICROCAP FUND, INC.
---------------------------

Redwood Microcap Fund, Inc. ("Microcap") has unconditionally agreed to
guarantee to each Putholder payment of the Put Option price upon exercise of a
Put in the event the Company defaults in its obligation to purchase and redeem
the underlying shares of Common Stock upon exercise of the Put.

Microcap is a diversified, closed-end management investment company
registered under the Investment Company Act of 1940 (the "1940 Act"). It is a
reporting company under the 1940 Act and its securities are traded in the over-
the-counter market and quoted on the OTC Electronic Bulletin Board.

Microcap's assets, totaling approximately $4,617,874 at September 30,
1996, are invested primarily in securities of issuers with market
capitalizations of less than $50,000,000, real estate, radio broadcasting, oil
and gas and cash equivalents. In addition to its securities portfolio,
Microcap has two principal operating divisions: oil and gas and radio
broadcasting. TDP Energy Company is a majority-owned subsidiary based in
Ardmore, Oklahoma which is engaged in the exploration of oil and gas and
operates over 500 producing wells and manages 13 oil and gas limited
partnerships. The Company's ownership of Redwood Broadcasting, Inc. represents
its radio broadcasting operating division.

At September 30, 1996, Microcap had total assets consisted principally of
investments in securities of both affiliated and unaffiliated issuers. Total
liabilities at September 30, 1996 were $1,106,937, resulting in Microcap's net
assets at September 30, 1996 being $3,510,936.

For the six-month period ended September 30, 1996, Microcap's net asset
value ("NAV") increased from $2,089,000 to $3,510,936, a gain of 68.7%. The
increase was primarily due to the increase in the unrealized appreciation of
one portfolio security position of an issuer that was the subject of a
corporate acquisition during 1996. As a result of that transaction, Microcap
realized an increase in NAV of more than $1,500,000. Subsequent to
September 30, 1996, the securities position was fully liquidated through market
transactions.

The maximum exposure of Microcap under its guarantee of the Puts is
approximately $312,000. In view of foregoing, this maximum potential liability
represents less than 10% of Microcap's NAV at September 30, 1996. Further, due
to Microcap's subsequent liquidation of the one portfolio position discussed
above, as of the date of this Prospectus Microcap has cash or cash equivalent
in excess of its maximum potential liability under the Put Option guarantee.

John C. Power is President and director and James Andrew Moorer is CFO,
Secretary and Treasurer of Microcap, as well as officers and directors of the
Company.

CHANGES IN INDEPENDENT PUBLIC ACCOUNTANTS
- -----------------------------------------

On May 7, 1996 the Microcap Board of Directors approved a change in
Microcap's independent accountant due to the closure of the former independent
accountant's local office. The change was effective May 7, 1996.

The independent accountant who was previously engaged as the principal
accountant to audit Microcap's financial statements was Deloitte & Touche llp.
None of Deloitte & Touche llp's reports on the financial statements of Microcap
contained any adverse opinion or disclaimer of opinion, or was qualified or was
modified as to uncertainty, audit scope or accounting principles, except that
each of such reports contained the modification that the financial statements
covered thereby included securities whose values had been determined by the
Board of Directors in the absence of a readily ascertainable market value, or
are thinly-traded securities; that Deloitte & Touche llp had reviewed the
procedures used by the Board of Directors in arriving at its estimate of value
of such securities and had inspected underlying documentation and in the
circumstances, Deloitte & Touche llp believed that the procedures were
reasonable and the documentation appropriate. However, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the securities
existed, and the differences could be material. There have not been any
disagreements between Microcap and Deloitte & Touche llp on any matter of
accounting principle or practice, financial statement disclosure, or accounting
scope or procedure, during the prior two years or through the date of the
change in certifying accountants.

Microcap retained the accounting firm of Stockman Kast Ryan & Scruggs,
P.C. to serve as Microcap's independent accountant to audit Microcap's
financial statements. This engagement was effective on May 7, 1996. Prior to
its engagement as Microcap's independent accountant, Stockman Kast Ryan &
Scruggs, P.C. had not been consulted by Microcap either with respect to the
application of accounting principles to a specific transaction or the type of
audit opinion that might be rendered on Microcap financial statements.

<PAGE>
MANAGEMENT
----------
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
- -----------------------------------------------
Name, position with the Company, age of each Director or executive
officer, and the period during which each Director and officer has served are
as follows:

<TABLE>
<CAPTION>
DIRECTOR/OFFICER
NAME AGE POSITION SINCE
- ----------------- --- ------------------------ ----------------
<S> <C> <C> <C>
John C. Power 34 Chairman of the Board 1995
Chief Executive Officer,
President

J. Andrew Moorer 34 Chief Financial Officer, 1995
Secretary, Treasurer,
and Director

Donald P. Griffin 49 Chief Operating Officer, 1996
Director

- -----------------------------------
</TABLE>

JOHN C. POWER. Mr. Power began his service as President, Chief Executive
Officer and Chairman of the Board of the Company in June, 1995 upon
consummation of the Company's acquisition of RBI. Mr. Power has also served as
President and Chief Executive Officer of Redwood MicroCap Fund, Inc.
("MicroCap") since February, 1992. MicroCap is registered as an Investment
Company under the Investment Company Act of 1940, as amended (the "40 Act"),
but is attempting to de-register from the 40 Act. MicroCap has majority and/or
wholly-owned subsidiaries engaged in oil and gas exploration, production and
management and radio broadcasting. Since November 1996, Mr. Power has been the
Managing Member of Northern Lights Broadcasting, L.L.C., a limited liability
company engaged in the acquisition and development of radio stations in Montana
and North Dakota. Since November 1996, Mr. Power has also been President of
Power Surge, Inc. Mr. Power has also served as president of Power Curve, Inc.,
a private investment and consulting firm since 1986, and as an officer and
director of Signature Wines of Napa Valley, Inc. from September, 1995 to June
1996. Signature Wines is engaged in the resale and marketing of wines through
a private label program. From March, 1994 to September, 1995, Mr. Power served
as a general partner of Signature Wines, a California general partnership, a
predecessor entity of Signature Wines of Napa Valley, Inc. Mr. Power served as
a director of BioSource International, Inc. (NASDAQ: BIOI) from August, 1993 to
December, 1994, of Optimax Industries, Inc. (NASDAQ: OPMX) from April 1993 to
March, 1995, and of AirSoft Corporation, a manufacturer of network
communications software and systems, from 1993 to June 1996. Mr. Power
received his formal education at Occidental College and at the University of
California at Davis.

J. ANDREW MOORER. Mr. Moorer, like Mr. Power, began his service with the
Company upon consummation of the Company's acquisition of RBI in June, 1995,
and currently serves as the Company's Chief Financial Officer, Secretary,
Treasurer, and as a member of the Company's Board of Directors. Mr. Moorer has
also served as a Director of MicroCap since December, 1993, and as Chief
Financial Officer of MicroCap since July, 1994. From May, 1990 to May 1994,
Mr. Moorer held the position of Chief Financial Officer of Applied Research
Corporation, a large, publicly traded, scientific research and development
company based in Landover, Maryland. From March, 1987 to May, 1990, Mr. Moorer
was employed as a business analyst with Compudyne Corporation, a defense
electronics manufacturer located in Annapolis, Maryland. Prior to accepting
employment with Compudyne, Mr. Moorer was employed as a Certified Public
Accountant with the international accounting firm of Coopers & Lybrand where he
worked in the Audit and Emerging Business Services Group from January, 1985 to
March, 1987. Mr. Moorer received his formal education at Loyola College,
Baltimore, Maryland.

DONALD P. GRIFFIN. Mr. Griffin recently joined the Company as a Director
and as the Chief Operating Officer. He is responsible for the sales, marketing
and broadcasting operations in Redding, California. Mr. Griffin joins the
Company with an extensive and highly successful career in radio broadcasting.
Most recently, Mr. Griffin was Vice President and General Manager of WLQT\WDOL
Radio in Dayton, Ohio. At WLQT\WDOL he was responsible for tripling revenues
in three years, growing from seven percent (7%) to twelve and one-half percent
(12.5%) of the market. He also held the position of General Sales Manager for
WONE\WTUE Radio, a country/AOR format, in Dayton, Ohio. While at WONE\WTUE,
Mr. Griffin took revenues from nineteen percent (19%) to twenty-nine percent
(29%) in three years, and was Sales Manager of the year in 1988. Mr. Griffin
has been a General Manager in a number of turn-around stations producing
dramatic increases in revenues in his initial year of responsibility. His
sales programs have included the addition of college and professional sport
broadcasting, special weekend programs and value-rated sales concepts which
increased revenues as much as seventy-five percent (75%) in a six-month period.
Mr. Griffin holds a B.A. degree in Communications Arts from the University of
Dayton.

Each Director is elected to serve for a term of one (1) year until the
next Annual Meeting of Shareholders or until a successor is duly elected and
qualified.

During the eight (8) months ended March 31, 1996, the Company did not have
standing Audit, Compensation or Nominating Committees of the Board of
Directors. However, the Company plans to form an Audit Committee during fiscal
1997. No member of the Audit Committee will receive any additional
compensation for his service as a member of that Committee. The Audit Committee
will be responsible for providing assurance that financial disclosures made by
Management reasonably portray the Company's financial condition, results of
operations, plan and long-term commitments. To accomplish this, the Audit
Committee will oversee the external audit coverage, including the annual
nomination of the independent public accountants, review accounting policies
and policy decisions, review the financial statements, including interim
financial statements and annual financial statements, together with auditor's
opinions, inquire about the existence and substance of any significant
accounting accruals, reserves or estimates made by Management, review with
Management the Management's Discussion and Analysis section of the Annual
Report, review the letter of Management representations given to the
independent public accountants, meet privately with the independent public
accountants to discuss all pertinent matters, and report regularly to the Board
of Directors regarding its activities.

During the eight (8) months ended March 31, 1996, three (3) meetings of
the Board of Directors of the Company were held. Each meeting was attended by
all members of the Board of Directors.

Any transactions between the Company and its officers, directors,
principal shareholders, or other affiliates have been and will be on terms no
less favorable to the Company than could be obtained from unaffiliated third
parties on an arms-length basis.

<PAGE>
DIRECTOR COMPENSATION
- ---------------------
Outside Directors receive no cash compensation for their services as such,
however they are reimbursed their expenses associated with attendance at
meetings or otherwise incurred in connection with the discharge of their duties
as Directors of the Company. Directors who are also executive officers of the
Company receive no additional compensation for their services as Directors.

<PAGE>
EXECUTIVE COMPENSATION
----------------------
The following table and discussion sets forth information with respect to
all plan and non-plan compensation awarded to, earned by or paid to the Chief
Executive Officer ("CEO"), and the Company's four (4) most highly compensated
executive officers other than the CEO, for all services rendered in all
capacities to the Company and its subsidiaries for the eight (8) months ended
March 31, 1996, and each of the years in the two (2) fiscal years ended
July 31, 1995 and 1994; provided, however, that no disclosure has been made for
any executive officer, other than the CEO, whose total annual salary and bonus
does not exceed $100,000.

<TABLE>
TABLE 1
SUMMARY COMPENSATION TABLE
--------------------------
<CAPTION>
Long Term Compensation
----------------------------------
Annual Compensation(1) Awards Payouts
-------------------------- --------------------- -------
Other All
Annual Restricted Other
Name and Compen- Stock LTIP Compen-
Principal Salary Bonus sation Award(s) Options/ Payouts sation
Position Year ($) ($) ($)(2) ($) SARs ($) ($)
- --------------- ------- -------- ----- --------- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John C. Power, 1996(2) $-0- $-0- $7,500 -0- -0- -0- -0-
President, CEO
and Chairman of 1995 $-0- (3) $-0- $5,000(3) -0- -0- -0- -0-
the Board
1994 $-0- $-0- $-0- -0- -0- -0- -0-
- -----------------------------------

(1) No executive officer received perquisites and other personal benefits
which, in the aggregate, exceeded the lesser of either $50,000 or 10% of
the total of annual salary and bonus paid during the respective fiscal
years.

(2) In January 1996, the Company changed its fiscal year from
July 31 to March 31. As a result, information reported for fiscal 1996
represents compensation paid during the eight (8) months ended March 31,
1996.

(3) To date, no officer or director of the Company has received cash
compensation for services rendered on behalf of the Company. The Company
did, however, pay to MicroCap a consultation fee in the amount of $7,500
during the eight (8) months ended March 31, 1996 and the sum of $5,000
during the year ended July 31, 1995, and has agreed to continue to pay
MicroCap the sum of $2,500.00 per month through March 31, 1997. The
consultation fee paid to MicroCap is the equivalent and representative of
the reasonable management expenses of the Company on a stand-alone basis.
No consulting fee was paid during the fiscal year ended July 31, 1994.
Mr. Power currently serves as President, CEO and Chairman of the Board of
MicroCap.

</TABLE>

1995 INCENTIVE STOCK OPTION PLAN
- --------------------------------
On December 5, 1995, the Board of Directors of the Company adopted the
Redwood Broadcasting, Inc. 1995 Incentive Stock Option Plan (the "ISOP"),
subject to shareholder approval. Pursuant to the ISOP, the Company's Board of
Directors is authorized to issue options for the purchase of up to 150,000
shares of the Company's Common Stock to key employees of the Company. Options
granted under the ISOP to eligible participants may take the form of Incentive
Stock Options ("ISOs") under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code") or options which do not qualify as ISOs (Non-Qualified
Stock Options or "NQSOs"). As required by Section 422 of the Code, the
aggregate fair market value (as defined in the ISOP) of the Company's Common
Stock (determined as of the date of grant of the ISO) with respect to which
ISOs granted to an employee are exercisable for the first time in any calendar
year may not exceed $100,000. The foregoing limitation does not apply to
NQSOs. The exercise price of an ISO may not be less than 100% of the fair
market value of the shares of the Company's Common Stock (or 110% of the fair
market value if granted to a person who owns 10% or more of the Company's
outstanding shares) on the date of grant. The exercise price of a NQSO may be
set by the administrator of the ISOP. The exercise price under any option will
be adjusted as provided in the ISOP to reflect stock dividends, splits, other
recapitalizations or reclassifications or changes affecting the number or kind
of outstanding shares. Fair market value of the Company's Common Stock is
defined in the ISOP as the closing sale price of the Common Stock on the OTC
Electronic Bulletin Board System or any securities exchange on which the shares
of Common Stock are then listed.

The ISOP is administered by a committee made up of members of the
Company's Board of Directors (the"Committee"), which determines eligible
employees, the time and number of options to be granted, and the periods for
which such options are granted. There are limitations on the number of options
which can be granted and the aggregate fair market value of the stock in any
given year. All options granted under the ISOP can be made subject to vesting
by the Committee in its discretion.

As of March 31, 1996, no ISOs or NQSOs, had been issued or were
outstanding under the ISOP.

<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock, as of the date of this Prospectus,
and as adjusted to reflect the sale of the securities offered by this
Prospectus by: (i) each of the directors and executive officers of the Company,
(ii) all officers and directors of the Company as a group, and (iii) holders of
5% or more of the Company's Common Stock. Each person has sole voting and
investment power with respect to the shares shown, except as noted.

<TABLE>
<CAPTION>
PERCENT(1)
NUMBER OF SHARES ---------------------
NAME AND ADDRESS BENEFICIALLY BEFORE AFTER
OF BENEFICIAL OWNER OWNED OFFERING OFFERING
- -------------------- --------------- -------- --------
OFFICERS, DIRECTORS,
AND PRINCIPAL SHAREHOLDERS
- --------------------------
<S> <C> <C> <C>
John C. Power(2) 595,442 60.0% 42.7%
P.O. Box 3458
Carefree, AZ 85377

J. Andrew Moorer(3) 525,192 52.7% 37.6%
4528 E. Duane Lane
Cave Creek, AZ 85331

Redwood MicroCap Fund, Inc.(4)(5) 487,692 48.9% 34.9%
P.O. Box 3463
Carefree, AZ 85377

Combined Penny Stock Fund, Inc.(6) 51,652 5.2% 3.7%
2055 Anglo Drive, Suite 105
Colorado Springs, CO 80918

Brian Power(7) 65,938 6.6% 4.7%
Nut Tree Ranch
Nut Tree, CA 95696

Officers and Directors as a 632,942 63.6% 45.3%
Group (three (3) individuals)
- -----------------------------------
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire then as of the date of this Prospectus, or
within 60 days of such date, are treated as outstanding when determining
the percent of the class owned by such individual and when determining the
percent owned by the group. For purposes of calculating the percent of
class owned after this offering, it was assumed that the officers,
directors and principal shareholders will not be purchasing shares in this
offering.

(2) Includes 487,692 shares held of record by Redwood MicroCap Fund, Inc., a
Colorado corporation, of which Mr. Power is an officer, director and
shareholder and, as such, would be deemed to exercise the shared voting
and investment power with respect to such securities. Mr. Power disclaims
beneficial ownership of the securities for purposes of Section 16 under
the Exchange Act. Assumes no shares are sold by MicroCap in the Selling
Shareholders' Offering. Also, includes 7,750 shares held of record by the
John C. Power Profit Sharing Plan. Mr. Power currently serves as the
Plan's administrator and is a beneficiary and as such, would be deemed to
exercise voting and investment power with respect to such securities.
Also includes 100,000 shares held of record by Power Curve, Inc., a
controlled corporation of Mr. Power.

(3) Includes 487,692 shares held of record by Redwood MicroCap Fund, Inc., a
Colorado corporation, of which Mr. Moorer is an officer and director and,
as such, would be deemed to exercise the shared voting and investment
power with respect to such securities. Mr. Moorer disclaims beneficial
ownership of the securities for purposes of Section 16 under the Exchange
Act. Assumes no shares are sold by MicroCap in the Selling Shareholders'
Offering.

(4) Includes 195,371 shares of Common Stock acquired pursuant to the terms of
the RBI Agreement. (See "CERTAIN TRANSACTIONS - RBI Agreement"), which
have been pledged as collateral to secure MicroCap's guarantee of the
Company's obligation to purchase up to 203,008 shares of the Company's
Common Stock upon exercise of the Puts. Also includes 150,000 shares of
Common Stock issued to MicroCap in satisfaction of $180,000 in debt owed
to MicroCap by the Company. Also includes 97,000 shares of Common Stock
to be acquired from certain CRI Shareholders.

(5) Redwood MicroCap Fund, Inc. is a diversified, closed-end, mutual fund
registered under the Investment Company Act of 1940 (the "1940 Act").
Voting and investment power with respect to these securities is exercised
by the company's Board of Directors, whose members are John C. Power,
Joseph O. Smith, and J. Andrew Moorer.

(6) Combined Penny Stock Fund, Inc is a Colorado-based business development
company located in Colorado Springs, Colorado. Voting and investment
power with respect to these securities is exercised by the Company's Board
of Directors whose members include Allan W. Williams, Dr. A. Leonard
Nacht. Brian Power and John Overturf.

(8) Includes 51,562 shares of Common Stock owned of record by Combined Penny
Stock Fund, Inc., on which Mr. Power serves as a member of the Board of
Directors. Mr. Power disclaims beneficial ownership of the shares held of
record by Combined Penny Stock Fund, Inc. for purposes of Section 16 of
the Exchange Act.
</TABLE>
<PAGE>
DESCRIPTION OF SECURITIES
-------------------------
COMMON STOCK
- ------------
The authorized capital stock of the Company consists of 12,500,000 shares
of Common Stock having a par value of $.004 per share. All shares have equal
voting rights and are not assessable. Voting rights are not cumulative and,
therefore, the holders of more than 50% of the Common Stock of the Company
could, if they chose to do so, elect all the Directors. The terms of the
directors are not staggered. Directors are elected annually to serve until the
next annual meeting of shareholders or until their successors are elected and
qualified.

Upon liquidation, dissolution or winding up of the Company, the assets of
the Company, after satisfaction of all liabilities, will be distributed PRO
RATA to the holders of the Common Stock. The holders of the Common Stock do
not have preemptive rights to subscribe for any securities of the Company and
have no right to require the Company to redeem or purchase their shares. The
shares of Common Stock presently outstanding are, and the shares of the Common
Stock to be sold pursuant to this offering will be, upon issuance, fully paid
and non-assessable.

Holders of Common Stock are entitled to dividends when, as and if declared
by the Board of Directors of the Company, out of funds legally available
therefor. The Company has not paid any cash dividends on its Common Stock, and
it is unlikely that any such dividends will be declared in the foreseeable
future.

PREFERRED SHARES
- ----------------
The Articles of Incorporation of the Company authorize issuance of a
maximum of 2,500,000 shares of preferred stock having a par value of $.04 per
share. The Articles of Incorporation vest the Board of Directors of the
Company with authority to divide the class of Preferred Shares into series and
to fix and determine the relative rights and preferences of the shares of any
such series so established to the full extent permitted by the laws of the
State of Colorado and the Articles of Incorporation in respect of, among other
things, (i) the number of Preferred Shares to constitute such series and the
distinctive designations thereof, (ii) the rate and preference of dividends, if
any, the time of payment of dividends, whether dividends are cumulative and the
date from which any dividend shall accrue, (iii) whether Preferred Shares may
be redeemed and, if so, the redemption price and the terms and conditions of
redemption, (iv) the liquidation preferences payable on Preferred Shares in the
event of involuntary or voluntary liquidation, (v) sinking fund or other
provisions, if any, for redemption or purchase of Preferred Shares, (vi) the
terms and conditions by which Preferred Shares may be converted, if the
Preferred Shares of any series are issued with the privilege of conversion, and
(vii) voting rights, if any.

COMMON STOCK PUT OPTIONS
- ------------------------
Pursuant to the terms of the RBI Agreement, and upon the effective
date of the Registration Statement of which this Prospectus forms a part, the
Company has agreed to issue up to 203,008 Common Stock Put Options ("Puts") to
certain of the CRI shareholders (the "Putholders"). Upon issuance, the Puts
will grant to each Putholder the right and option to sell to the Company for
redemption any or all of the number of shares of the Company's Common Stock
which such Putholders have the right to receive by virtue of the CRI Agreement.
The Puts will require the Company to purchase and redeem any and all shares
tendered at a price of $1.50 per share. The Puts will be exercisable for a
period of ninety (90) days following the effective date of the Registration
Statement of which this Prospectus forms a part ("Redemption Period"). The
Company has the option to extend the exercise period of the Put Options and to
increase the Put Redemption Price upon written notice to the holders thereof.
Once issued, the Put Options shall be freely transferrable and tradeable by the
holders, should a market for the Put Options develop, of which there can be no
assurance.

Upon exercise of a Put Option and the execution and delivery to the
Company by the exercising Putholder of the Put redemption certificate as well
as certificates representing the underlying shares of Common Stock, the Company
shall be obligated to pay to the exercising Putholder within ten days the Put
Redemption Price of $1.50 per share of Common Stock put to the Company for
redemption. An exercising Putholder must cover the exercise of the Put Option
by delivering to the Company underlying shares of Common Stock, which may be
acquired by such exercising Putholder through market purchasers or in
privately-negotiated purchases. (See "TERMS OF OFFERINGS - The Put Option
Offering.")(See "TERMS OF OFFERINGS - THE PUT OPTION OFFERING.")
<PAGE>
TERMS OF OFFERINGS
------------------

This Prospectus relates to four (4) offerings of the Company's securities,
the terms and conditions of which are set forth below.

THE SPIN-OFF OFFERING
- ---------------------
The first offering relates to the distribution by Cell Robotics
International, Inc., a Colorado corporation ("CRI") of up to 300,008 shares of
the Company's $.004 par value common stock pursuant to the terms of a certain
Agreement and Plan of Reorganization between and among CRI, Cell Robotics,
Inc., a New Mexico corporation ("Cell"), MiCEL, Inc., a Delaware corporation,
Bridgeworks Investors I, LLC, an Oregon limited liability company, and Ronald
K. Lohrding individually, dated as of December 12, 1994 (the "CRI Agreement"),
pursuant to which CRI agreed to distribute 300,008 shares of the Company's
Common Stock ("Spin-Off Shares") to the shareholders of record of CRI (the "CRI
Shareholders") as of December 16, 1994 (the "Record Date") upon the effective
date of the Registration Statement of which this Prospectus forms a part (the
"Registration Statement"). (See "BUSINESS - HISTORY - FORMATION OF THE
COMPANY.")

The Spin-Off Shares will be distributed by mail within 10 days after the
effective date of the Registration Statement on a "pro-rata", one-for-one (1-
for-1) basis, with each CRI Shareholder receiving one (1) Spin-Off Share for
each share of CRI common stock held of record on the Record Date. No
fractional shares will be distributed.

Only CRI Shareholders residing in states where the Spin-Off Shares have
been qualified for issuance under the applicable state securities laws will be
eligible to receive shares of the Company's Common Stock. Although the Company
plans to qualify the issuance of the Spin-Off Shares in those states in which
the securities are to be distributed, no assurance can be given that such
qualification will occur. CRI Shareholders residing in states where the
Company is unable to qualify the Spin-Off Shares for distribution will not be
eligible to participate in the distribution. In the event the Company is
unable to qualify the distribution of the Spin-Off Shares under one or more
applicable state securities laws, the Company will provide the CRI shareholders
residing in such states with written notice of their ineligibility to
participate in the Spin-Off. Any Spin-Off shares which cannot be distributed
due to the Company's inability to qualify the Spin-Off Offering under a state's
securities laws will be distributed pro rata to the remaining CRI Shareholders.
In such event, the Company does not intend to amend this Prospectus unless the
aggregate number of Spin-Off Shares which are ineligible to be distributed
exceeds 5% of the total Spin-Off Shares. All questions as to the eligibility
of the CRI Shareholders to participate in the distribution will be determined
by the Company in its sole discretion.

The CRI Shareholders will not be charged or assessed for the Spin-Off
Shares and neither CRI nor the Company will receive any proceeds from the
distribution of the Spin-Off Shares. Pursuant to the terms of the CRI
Agreement, the Company is bearing the cost of the distribution.

THE PUT OPTION OFFERING
- -----------------------
This Prospectus also relates to the distribution by the Company of up to
203,008 Common Stock Put Options ("Puts") issuable pursuant to the terms of a
certain Agreement and Plan of Reorganization between and among the Company,
Broadcasting and MicroCap dated as of June 16, 1995, pursuant to which the
Company agreed to issue to certain of the CRI Shareholders (the "Putholders") a
Put exercisable to sell to the Company for redemption, any or all of the Spin-
Off Shares which such Putholders have the right to receive in the Spin-Off.
The Put will require the Company to purchase and redeem any and all shares
tendered at a price of $1.50 per share (the "Put Price"). The Puts will be
exercisable for a period of ninety (90) days following the effective date of
the Registration Statement (the "Put Expiration Date"). The Company's
obligation to purchase and redeem any and all shares tendered has been
guaranteed by MicroCap, which guarantee is secured by 195,371 shares of the
Company's Common Stock owned by MicroCap. The guarantee of MicroCap is direct,
unconditional and independent of the obligations of the Company. In the event
the Company fails to redeem Spin-Off Shares which have been tendered in
accordance with the Put Exercise Procedure described below, a cause or causes
of action may be brought and prosecuted against the Company and MicroCap or
against MicroCap for the full amount of the outstanding indebtedness due and
owing upon said exercise without the necessity of first proceeding against or
joining the Company.

The Puts being issued to the Putholders, together with Put Redemption
Certificates, will be distributed by mail within 10 days after the effective
date of the Registration Statement. No fractional Puts will be distributed.
Only Putholders residing in states where the Puts have been qualified for
issuance under the applicable state securities laws will be eligible to
participate in the distribution. Although the Company seeks to qualify the
issuance of the Puts in those states in which the Puts are to be distributed,
no assurance can be given that such qualification will occur. In the event the
Company is unable to qualify the distribution of the Puts to any CRI
shareholders due to the applicable state securities laws of the state of such
putholder's residence, the Company will provide the putholder with written
notice of such ineligibility and will amend this Prospectus to disclose those
states in which the Put Option Offering will not be conducted. Putholders
residing in states where the Company is unable to qualify the Puts for issuance
will not be eligible to participate in the distribution. The Putholders will
not be charged or assessed for Puts and the Company will not receive any
proceeds from the distribution of the Puts. Pursuant to the terms of the RBI
Agreement, the Company is bearing the cost of the distribution.

PUT EXERCISE PROCEDURE
----------------------
Puts may be exercised by mailing or delivering to the Company a duly
executed and completed Put Redemption Certificate indicating the number of
shares being tendered for redemption and a certificate or certificates
representing the number of shares of Company Common Stock being tendered. Put
Redemption Certificates must arrive on or before the Put Expiration Date. Any
Put Redemption Certificates received after the Put Expiration Date will not be
honored. Once a Putholder has exercised a Put, the exercise is irrevocable.
Within ten (10) days of receipt of the foregoing, the Company will return to
each tendering Putholder a certificate for all shares surrendered in excess of
those tendered for redemption, if any, and will mail to each exercising
Putholder a check from the Company in consideration for the shares that were
tendered and redeemed by the Company.

The instructions on the Put Redemption Certificate should be read
carefully and followed in detail. No Puts will be accepted until the Company
has received delivery of a duly executed Put Redemption Certificate. The risk
of delivery of Put Redemption Certificates and Common Stock to the Company will
be borne by the Putholders and not by the Company. If the mail is used to
exercise Puts, it is recommended that insured, registered mail be used. Any
questions or requests for assistance concerning the method of exercising the
Puts should be directed to the Company. All questions as to the validity,
form, eligibility and acceptance of any exercise of Puts will be determined by
the Company in its sole discretion. The Company may waive any defect or
irregularity, permit a defect or irregularity to be corrected within such time
as it may determine, or reject any exercise of a Put which it determines to
have been made improperly.

THE COMPANY OFFERING
- --------------------
The Company is offering on a best efforts basis up to 400,000 shares of
the Company's $.004 par value Common Stock at an offering price of $2.00 per
share. The Offering Price of the Common Stock being offered hereby was
arbitrarily determined by the Company and is not necessarily related to the
Company's assets, book value or financial condition. In determining the
offering price and the number of shares of Common Stock to be offered, the
Company considered such factors as the financial condition of the Company, its
net tangible book value, limited operating history and general condition of the
securities market. Accordingly, the offering price of the Common Stock may not
be indicative of the actual value of the Company. (See "RISK FACTORS - RISK
FACTORS RELATED TO THIS OFFERING.")

The Company is offering the shares of Common Stock to the public through
its officers and directors. The Company may retain the services of Selling
Agents who are members of the National Association of Securities Dealers to
assist in the Company Offering. On any sales made by Selling Agents, a
commission of up to ten percent (10%) may be paid. To date, there exists no
arrangements or commitments by the Company to retain any Selling Agent.

There currently exists no public trading market for the Company's Common
Stock, and there can be no assurance that such a market will develop in the
future. In the absence of an active public trading market, there can be no
assurances that an investor will be able to liquidate his investment without
considerable delay, if at all. If a market does develop, the price for the
Company's securities may be highly volatile and may bear no relationship to the
Company's actual financial condition or results of operations. (See
"DESCRIPTION OF SECURITIES" and "RISK FACTORS - RISK FACTORS RELATED TO THIS
OFFERING.")

The Company's securities may be quoted in the "pink-sheets" maintained by
the National Quotations Bureau, Inc., which reports quotations by brokers or
dealers making a market in particular securities. The Company has no agreement
with any broker or dealer to act as a marketmaker for the Company's securities
and there is no assurance that Management will be successful in obtaining any
marketmakers. The lack of a marketmaker for the Company's securities could
adversely influence the market for and price of the Company's securities, as
well as the ability of investors to dispose of, or to obtain accurate
quotations as to the price of, the Company's securities. (See "RISK FACTORS -
RISK FACTORS RELATED TO THIS OFFERING.")

THE SELLING SHAREHOLDERS' OFFERING
- ----------------------------------
This Prospectus relates to the resale to the public of 500,429 shares of
Common Stock by the Selling Shareholders set forth below. The following table
sets forth certain information with respect to persons for whom the Company is
registering the Common Stock for resale to the public. None of the Selling
Shareholders have had any material relationship with the Company, or any of its
predecessors or affiliates within the past three years, except as noted. The
Company will not receive any of the proceeds from the sale of the Common Stock
by the Selling Shareholders. Beneficial ownership of the Common Stock by such
Selling Shareholders after this Offering will depend on the number of shares
sold by each Selling Shareholder.

<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO SHARES OWNED AFTER
OFFERING OFFERED OFFERING
NAME AND ADDRESS ------------------- ------- -------------------
OF BENEFICIAL OWNER NUMBER PERCENT(1) NUMBER NUMBER PERCENT(1)
- ------------------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Stefan Ponek 15,000 1.5% 15,000 -0- -0-
642 O'Farrel Drive
Benicia, CA 94510

Brian Power(2) 14,376 1.4% 14,376 -0- -0-
Nut Tree Ranch
Nut Tree, CA 95696

Redwood MicroCap Fund, Inc.(3) 487,692 48.9% 195,371 292,321 20.9%
P.O. Box 3463
Carefree, AZ 85377

Allan Williams 13,719 1.4% 13,719 -0- -0-
21071 43A Avenue
Langley, British Columbia,
Canada V3A 8K4

Combined Penny Stock Fund, Inc. 51,562 5.2% 51,562 -0- -0-
2055 Anglo Drive, Suite 105
Colorado Springs, CO 80918

Peter L. Hirschburg, Jr. 7,651 .8% 7,651 -0- -0-
471 N. Curtis Road
Boise, Idaho 83706

Edward Gizdich 20,000 2.0% 20,000 -0- -0-
23 Pinnacle Peak
Napa, California 94558

Raymond and Phyllis Walker 5,000 .5% 5,000 -0- -0-
c/o Paula Power
P.O. Box 3458
Carefree, Arizona 85377

The John C. Power Profit 7,750 .8% 7,750 -0- -0-
Sharing Plan(4)
P.O. Box 3458
Carefree, Arizona 85377

<PAGE>
Vernon D. Moorer, Jr. Trust 25,000 2.5% 25,000 -0- -0-
c/o Joan B. Moorer, Trustee
141 Spring Place Way
Annapolis, Maryland 21401

Clifford L. Neuman(5) 5,000 .5% 5,000 -0- -0-
1507 Pine Street
Boulder, Colorado 80302

J. Andrew Moorer 37,500 3.8% 37,500 -0- -0-
P.O. Box 3463
Carefree, Arizona 85377

Ronald Woodward 2,500 .2% 2,500 -0- -0-
c/o KNNN-FM
1326 Market Street
Redding, California 96001

Power Curve, Inc.(6) 100,000 10.0% 100,000 -0- -0-
P.O. Box 3458
Carefree, Arizona 85377

- -----------------------------

(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of the date of this Prospectus, or
within 60 days of such date, are treated as outstanding when determining
the percent of the class owned by such individual and when determining the
percent owned by the group.

(2) Brian Power is the brother of John C. Power, President and Director of the
Company and President and Director of Microcap, the Company's principal
shareholder.

(3) Includes 195,371 shares of Common Stock acquired pursuant to the terms of
the RBI Agreement. (See "CERTAIN TRANSACTIONS - RBI Agreement"), which
shares have been pledged as security for MicroCap's guarantee of the
Company's obligation to purchase up to 203,008 shares of the Company's
Common Stock upon exercise of the Puts. Also includes 150,000 shares of
Common Stock issued to MicroCap in exchange for MicroCap's agreement to
release and forever discharge $180,000 in debt owed to MicroCap by the
Company. Finally, includes 97,000 shares of Common Stock to be acquired
from certain CRI Shareholders upon the effective date of the Registration
Statement.

(4) John C. Power is the beneficiary of the John C. Power Profit Sharing Plan.

(5) Clifford L. Neuman is the principal of Neuman & Cobb, legal counsel to the
Company.

(6) Power Curve, Inc. is a controlled corporation of John C. Power.

</TABLE>

The 195,371 shares of Common Stock owned by Microcap and included in the
Selling Shareholder Offering have been pledged to secure Microcap's conditional
obligation under its guarantee of the Company's obligation under the Put
Option. In the event the Company defaults in its obligation to pay the Put
Redemption Price upon its due exercise and Microcap also defaults under its
guarantee, shares of Common Stock owned by Microcap and included in the Selling
Shareholder Offering may be sold by the Company in market transactions in such
quantities as may be necessary to fulfill the Company's obligation under the
Put Options which have been exercised. Following the expiration of the Put
Options after 90 days from the date of this Prospectus, any shares of Common
Stock owned by Microcap and included in the Selling Shareholder Offering which
have not been sold to fulfill Microcap's obligation under its conditional
guarantee will be withdrawn from registration and shall no longer be subject to
resale under the Selling Shareholder Offering.

The Selling Shareholders have advised the Company that sales of the shares
of Common Stock may be effected from time to time in transactions (which may
include block transactions) in the over-the-counter market, in negotiated
transactions, through the writing of options on the Common Stock or a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, or at negotiated prices. The
Selling Shareholders may effect such transactions by selling the Common Stock
directly to purchasers or through broker-dealers that may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions or commissions from the Selling Shareholders and/or the
purchasers of shares of Common Stock for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).

The Selling Shareholders and any broker-dealers that act in connection
with the sale of the shares of Common Stock as principals may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and
any commissions received by them and any profit on the resale of the shares of
Common Stock as principals might be deemed to be underwriting discounts and
commissions under the Securities Act. The Selling Shareholders may agree to
indemnify any agent, dealer or broker-dealer that participates in transactions
involving sales of the shares of Common Stock against certain liabilities,
including liabilities arising under the Securities Act. The Company will not
receive any proceeds from the sales of shares of Common Stock by the Selling
Shareholders. Sales of the shares of Common Stock by the Selling Shareholders,
or even the potential of such sales, would likely have an adverse effect on the
market price of the Common Stock.

The shares of Common Stock are offered by the Selling Shareholders on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act. The
Company has agreed to pay all expenses incurred in connection with the
registration of the shares offered by the Selling Shareholders; provided,
however, that the Selling Shareholders shall be exclusively liable to pay any
and all commissions, discounts and other payments to broker-dealers incurred in
connection with their sale of the shares.

<PAGE>
CERTAIN TRANSACTIONS
--------------------
CRI AGREEMENT
- -------------
In connection with the formation of the Company, the Company issued to CRI
300,008 shares of the Company's $.004 par value Common Stock ("Spin-Off
Shares"), in exchange for one hundred percent (100%) of CRI's real and personal
property, subject to certain liabilities, saving and excepting cash, cash
equivalents or marketable securities having an aggregate fair market value of
not less than $250,000. Pursuant to the terms of the CRI Agreement, CRI agreed
to distribute the Spin-Off Shares to the shareholders of record of CRI as of
December 16, 1994, upon the effective date of the Registration Statement of
which this Prospectus forms a part. The CRI Shareholders will not be charged
or assessed for the shares of Company Common Stock and neither CRI nor the
Company will receive any proceeds from the distribution of the Company Common
Stock. Pursuant to the terms of the CRI Agreement, the Company is bearing the
cost of the distribution. (See "TERMS OF OFFERING - THE SPIN-OFF OFFERING.")

RBI AGREEMENT
- -------------
In connection with the Company's acquisition of Broadcasting (see
"BUSINESS - HISTORY - REDWOOD BROADCASTING, INC."), the Company issued to RBI's
shareholders 300,000 shares of the Company's Common Stock in exchange for one
hundred percent (100%) of the issued and outstanding shares of Common Stock of
Broadcasting. Subsequent to the acquisition, Broadcastsing was merged with and
into the Company, with the Company remaining as the surviving entity.

In connection with the acquisition of Broadcasting, the Company did not
obtain an opinion of an investment banker, accountant or other third party that
the terms of the transaction were fair to the Company's future shareholders who
would receive their shares in their shares in the Spin-Off. In lieu of
obtaining such opinions, MicroCap (Broadcasting's parent corporation) agreed to
purchase from certain of the CRI Shareholders the right to receive a total of
97,000 Spin-Off Shares at a price of $1.20 per share. As MicroCap lacked the
resources and capital to extend the same offer and opportunity to all CRI
Shareholders, the Company required as a condition to closing the transaction
that MicroCap guarantee its obligations under the Put Options being issued to
the remaining CRI Shareholders. The Puts require the Company to purchase and
redeem any and all shares tendered at a price of $1.50 per share. The Puts
will be exercisable for a period of ninety (90) days following the effective
date of the Registration Statement of which this Prospectus forms a part. The
Putholders will not be charged or assessed for Puts and the Company will not
receive any proceeds from the proceeds of the Puts. The Company is bearing the
cost of the distribution of the Puts.

On June 16, 1995, as part of the RBI Agreement, the Company's Board of
Directors was reconstituted to consist of John C. Power, J. Andrew Moorer, and
Stefan Ponek, until the next Annual Meeting of the Company's Shareholders or
until a successor is duly elected and qualified. Subsequently, Mr. Ponek
resigned from the Company's Board of Directors, and was replaced by Brian
Power. Brian Power was subsequently replaced by Donald Griffin.

MICROCAP GUARANTEE
- ------------------
Pursuant to the terms of the RBI Agreement, the Company's obligation to
purchase and redeem any and all shares tendered upon exercise of the Puts has
been guaranteed by MicroCap, which guarantee is secured by shares of the
Company's Common Stock owned by MicroCap. MicroCap's obligations under the
Guarantee are direct, unconditional and independent of the obligations of the
Company. In the event the Company fails to redeem shares of Common Stock which
have been tendered in accordance with Put Exercise Procedures, a cause or
causes of action may be brought and prosecuted against the Company alone, or
the Company and MicroCap or only MicroCap for the full amount of the
outstanding indebtedness due and owing upon said exercise without the necessity
of first proceeding against or joining the Company.

MICROCAP DEBT CONVERSION
- ------------------------
By agreement dated September 30, 1995, the Company agreed to issue to
MicroCap 150,000 shares of Common Stock in satisfaction of debt totalling
$180,000. Pursuant to the Agreement to Convert Debt, all costs associated with
the Conversion and issuance of shares of Common Stock to MicroCap have been
paid by the Company.

MICROCAP CONSULTATION AGREEMENT
- -------------------------------
During the eight (8) months ended March 31, 1996, the Company paid to
MicroCap consultation fees totalling $7,500, and during fiscal 1995, the
Company paid to MicroCap consultation fees totalling $5,000. The Company has
agreed to continue to pay MicroCap a monthly consulting fee of $2,500 through
at least the year ending March 31, 1997, and possibly longer. Under the
arrangement, MicroCap provides general management services to the Company.
Messrs. Power and Moorer, officers and directors of the Company, are also
officers and directors of MicroCap. The Company believes that the fees were
and are commercially reasonable, competitive, and more favorable to the Company
than terms available from unaffiliated third-parties on an arms-length basis.

TRIPOWER RESOURCES, INC. DEBT OBLIGATION
- ----------------------------------------
In conjunction with the acquisition of KHSL-AM-FM by Alta, Alta borrowed
the sum of $375,000 from TriPower Resources, Inc., which indebtedness is
evidenced by Alta's promissory note (the "Note") and was originally secured by
the Chico Property, which was sold by the Company in April, 1996. The TriPower
Note is now collateralized by a pledge of 100% of the shares of Alta Common
Stock. TriPower Resources, Inc. is a controlled corporation of the Company's
President, John C. Power. Pursuant to the terms of the Note, Alta has agreed
to pay TriPower Resources, Inc. interest on the unpaid principal balance at the
rate of fourteen percent (14%) per annum. During the eight (8) months ended
March 31, 1996, the Company made a principal reduction payment of $75,000,
leaving a principal balance of $300,000. The TriPower Note has been paid in
full.

MICROCAP ADVANCES
- -----------------
The Company has received approximately $350,000 from MicroCap in the form
of inter-company advances, which indebtedness is unsecured. The funds received
were used in part to pay down the September Note, to retire the TriPower Note,
and the remaining amount used for working capital. The remaining portion of
the advances was used by the Company to cover operating expenses. The balance
of approximately $350,000 is due on demand.

J. ANDREW MOORER STOCK PURCHASE
- -------------------------------
In August, 1996, the Company issued a total of 37,500 shares of Common
Stock to J. Andrew Moorer, the Company's Chief Financial Officer, Secretary and
Treasurer, and who is also a member of the Company's Board of Directors, at a
price of $1.20 per share in exchange for a $45,000 promissory note, which note
bears interest at the rate of 7%, is secured by Mr. Moorer's principal
residence, which is due and payable in full on or before August 1, 2001.

POWER CURVE, INC. STOCK PURCHASE
- --------------------------------
In December, 1996, the Company sold and issued 100,000 shares of Common
Stock to Power Curve, Inc., a controlled corporation of John C. Power, the
Company's President and Director. Mr. Power is also a Director and President
of Microcap, the Company's principal shareholder. The shares were sold to
Power Curve, Inc. at a price of $1.20 per share.

INDEMNIFICATION
---------------
In accordance with the Colorado Business Corporation Act, the Company has
included a provision in its Articles of Incorporation to limit the personal
liability of its officers and directors to the maximum extent allowable under
Colorado law. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable.

LEGAL MATTERS
-------------
The validity of the issuance of the Common Stock and Puts offered hereby
will be passed upon for the Company by Neuman & Cobb, Boulder, Colorado.
Clifford L. Neuman, a partner in the firm of Neuman & Cobb, was an officer and
director of the Company until June 16, 1995. Mr. Neuman resigned as an officer
and director of the Company in connection with the Company's acquisition of RBI
which closed effective June 16, 1995.

EXPERTS
-------
The financial statements of the Company as of March 31, 1996 and for each
of the years in the fiscal years ended July 31, 1995 and 1994 are included
herein in reliance on the reports of Schumacher & Bruce, Inc., independent
certified public accountants, and upon the authority of that firm as experts in
auditing and accounting.

The financial statements of MicroCap as of March 31, 1996 and for each of
the years in the fiscal years ended March 31, 1996 and 1995 are included herein
in reliance on the reports of Stockman Kast Ryan & Scruggs, P.C., independent
certified public accountants, and upon the authority of that firm as experts in
auditing and accounting.

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

FINANCIAL STATEMENTS
<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

MASTER INDEX

Index of Redwood Broadcasting, Inc. and
Consolidated Subsidiaries Financial Statements
for the Eight Month Period Ended March 31, 1996
and Years Ended July 31, 1995 and 1994 F-3

Index of KHSL AM-FM Financial Statements For the
Six and One-half Months Ended February 15, 1995
and for the Year Ended July 31, 1994 F-17

Index of Quality Broadcasters of California, L.P.
Financial Statements for the Years Ended
March 31, 1995 and 1996 F-25

Index of Redwood Broadcasting, Inc., Pro Forma
Financial Statements for the Eight Month Period
Ended March 31, 1996 (Unaudited) F-33

Index of Redwood Broadcasting, Inc. and Consolidated
Subsidiaries Financial Statements for the Six
Months Ended September 30, 1996 (Unaudited) F-39

Index of Redwood Broadcasting, Inc., Pro Forma
Financial Statements for the Six Month Period
Ended September 30, 1996 (Unaudited) F-51

REDWOOD MICROCAP FUND, INC.

Index of Redwood Microcap Fund,Inc. and
Consolidated Subsidiaries Financial
Statements as of and for the Six Months
Ended September 30, 1995 F-56

Index of Redwood Microcap Fund,Inc. and
Consolidated Subsidiaries Financial
Statements as of and for the Year
Ended March 31, 1996 F-67

Index of Redwood Microcap Fund,Inc. and
Consolidated Subsidiaries Financial
Statements as of and for the Six Months
Ended September 30, 1996 F-78

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

FINANCIAL STATEMENTS

and

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

March 31, 1996, July 31, 1995 and July 31, 1994

<TABLE>
TABLE OF CONTENTS

<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants F-4

Financial Statements:

Balance Sheets F-5

Statements of Operations F-6

Statement of Changes in Stockholders' Equity F-7

Statements of Cash Flows F-8

Notes to Financial Statements F-9

</TABLE>

<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------

The Board of Directors
Redwood Broadcasting, Inc.

We have audited the consolidated balance sheet of Redwood Broadcasting, Inc.
and consolidated subsidiaries as of March 31, 1996 and July 31, 1995 and the
related statements of operations, changes in stockholders' equity and cash
flows for the eight months ended March 31, 1996 and the two years ended July
31, 1995 and 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Redwood
Broadcasting, Inc. and consolidated subsidiaries as of March 31, 1996 and July
31, 1995 and the results of its operations, its changes in stockholders' equity
and its cash flows for the eight months ended march 31, 1996 and the two years
ended July 31, 1995 and 1994 in conformity with generally accepted accounting
principles.

The financial statements as of July 31, 1995 have been corrected for an
accounting error in the allocation of the purchase price of KHSL AM-FM as
described in Note 1 to the financial statements.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to
the consolidated financial statements, the Company has suffered recurring
losses from operations, and has a net working capital deficiency, that raise
substantial doubt about its ability to continue as a going concern. Note 9 also
discusses management's plan regarding these matters. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
June 6, 1996

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

BALANCE SHEET
<CAPTION>
March 31, July 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
------
Current Assets
Cash $ - $ 3,518
Accounts receivable, net of allowance for
doubtful accounts of $16,400 at March 31,
1996 and $7,027 at July 31, 1995 86,834 139,538
Other 73,893 6,723
----------- -----------
Total Current Assets 160,727 149,779

Property and equipment, net of accumulated
depreciation of $74,855 at March 31, 1996
and $69,482 at July 31, 1995 (Note 4) 749,560 906,200
License, net of accumulated amortization
of $16,667 at March 31, 1996 489,833 500,000
Other assets 144,985 149,050
----------- -----------
Total Assets $1,545,105 $1,705,029
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities
Outstanding checks in excess of amounts
reported by banks $ 23,188 $ -
Accounts payable and accrued expenses
(Note 12) 273,431 206,924
Notes payable, current portion (Note 2) 728,174 974,289
Common stock subject to mandatory
redemption (Note 3) 304,512 304,512
Accounts payable, related parties 232,730 15,185
Income taxes payable - 40,673
Unearned income, current portion (Note 8) 23,333 23,333
----------- -----------
Total Current Liabilities 1,585,368 1,564,916

Unearned income, net of current portion (Note 8) 9,722 25,278
Notes payable, net of current portion (Note 2) 11,994 21,455
----------- -----------
Total Liabilities 1,607,084 1,611,649
----------- -----------
<PAGE>
Commitments and contingencies (Notes 2,3,5,6,
8,9,10 and 11) - -
Stockholders' Equity (Notes 3 and 7):
Preferred stock - $.04 par value,
2,500,000 shares authorized,
none issued and outstanding - -
Common stock - $.004 par value,
12,500,000 shares authorized; 780,508 and
600,008 shares issued and outstanding as
of March 31, 1996 and July 31, 1995,
respectively 3,122 2,400
Additional paid-in capital 467,123 254,545
Accumulated (deficit) (532,224) (163,565)
----------- -----------
Total Stockholders' Equity (61,979) 93,380
----------- -----------
Total Liabilities and Stockholders' Equity $1,545,105 $1,705,029
========== ==========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

STATEMENTS OF OPERATIONS

<CAPTION>
For the Eight For the Years
Months Ended ---------------------
March 31, Ended July 31,
1996 1995 1994
----------- ---------- ---------
<S> <C> <C> <C>
Total revenues $ 440,457 $ 377,023 $ -
Less agency commissions (11,071) (9,475) -
---------- ---------- ---------
Net revenues 429,386 367,548 -

Operating Expenses:
Station operating expenses excluding
depreciation and amortization 656,394 470,445 -
Depreciation and amortization 77,649 9,108 -
Corporate general and administrative
expenses 58,464 48,448 3,112
---------- ---------- ---------
Total operating expenses 792,507 528,001 3,112
---------- ---------- ---------
Operating Loss (363,121) (160,453) (3,112)

Other Income (Expense):
Other income 16,898 - -
Interest expense (22,436) - -
---------- ---------- ---------
Total Other Income (Expense) (5,538) - -
---------- ---------- ---------
Net loss $(368,659) $(160,453) $ (3,112)
========== ========== =========

Net loss per share $ (.53) $ (.49) $ (.01)
========== ========== =========
Weighted average shares
outstanding 690,258 325,000 300,000
======= ======= =======

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Two Years Ended July 31, 1995
and for the Eight Months Ended March 31, 1996

<CAPTION>
Additional
Common Stock Common Stock Paid-In Accumulated
No./Shares Amount Capital (Deficit) Total
------------ ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1993 - - - - -

Common stock issued 300,000 1,200 2,300 - 3,500

Net (loss) for the year ended July 31, 1994 - - - (3,112) (3,112)
------- ------- --------- ---------- ----------
Balance at July 31, 1994 300,000 $ 1,200 $ 2,300 $ (3,112) $ 388

Capital contribution - - 241,798 - 241,798

Reorganization (Note 1) 300,008 1,200 10,447 - 11,647

Net (loss) for the year ended July 31, 1995 - - - (160,453) (160,453)
------- ------- --------- ---------- ----------
Balance at July 31, 1995 600,008 2,400 254,545 (163,565) 93,380

Common stock issued in private placement 25,000 100 29,900 - 30,000

Common stock issued in debt conversion 150,000 600 179,400 - 180,000

Common stock issued for services 5,500 22 3,278 - 3,300

Net (loss) for the eight month period
ended March 31, 1996 - - - (368,659) (368,659)
------- ------- --------- ---------- ----------
Balance at March 31, 1996 780,508 $ 3,122 $ 467,123 $(532,224) $ (61,979)
======= ======= ========= ========== ==========

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

<CAPTION>
For the For the
Eight Month Years Ended July 31
Period Ended ---------------------
March 31, 1996 1995 1994
-------------- ---------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $(368,659) $(160,453) $(3,112)
Adjustments to reconcile net
income to net cash (used) by
operating activities
Depreciation 77,649 9,108 -
Increase in accounts payable
and accrued expenses 266,564 222,109 -
(Increase) decrease in
accounts receivable 52,704 (139,538) -
Increase (decrease) in
unearned income (15,556) 48,611 -
Other, net (49,635) (6,723) -
---------- ---------- --------
Net Cash (Used) by Operating
Activities (36,933) (26,886) (3,112)
---------- ---------- --------
Cash Flows from Investing Activities:
(Acquisition) disposition of
property and equipment and
other (Note A) 78,991 (329,173) -
---------- ---------- --------
Net Cash Provided (Used) by
Investing Activities 78,991 (329,173) -
---------- ---------- --------
Cash Flows from Financing Activities:
Proceeds from notes payable - 131,844 -
(Repayment) of notes payable (75,576) (26,100) -
Common stock issued and capital
contributed 30,000 253,445 3,500
---------- ---------- --------
Net Cash Provided (Used) by
Financing Activities (45,576) 359,189 3,500
---------- ---------- --------
Increase (decrease) in cash (3,518) 3,130 388

Cash, beginning of period 3,518 388 -
---------- ---------- --------
Cash, end of period $ - $ 3,518 $ 388
========= ========= =======
Interest paid $ 22,436 $ - $ -
========= ========= =======
Income taxes paid $ - $ - $ -
========= ========= =======

Note A: During the year ended July 31, 1995 the Company acquired certain
radio station assets and real property at a cost of $1,150,000. The
Company made a cash down payment of $415,000 and incurred
indebtedness of $735,000 related to this acquisition.

Note B: During the period ended March 31, 1996 the Company issued 150,000
shares of its common stock in lieu of cash or money payment of an
obligation to a related party totalling $180,000.

</TABLE>
The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS
March 31, 1996, July 31, 1995 and July 31, 1994

(1) SUMMARY OF ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:

(a) GENERAL
-------
Redwood Broadcasting, Inc. (RBI) was organized under the laws of the
State of Colorado. Pursuant to a spin-off agreement, certain assets
of its parent company were contributed to RBI in exchange for
300,008 shares of RBI $.004 par value common stock. Pursuant to the
terms of the agreement the 300,008 shares were issued in escrow with
the provision that upon the effective date of a registration
statement the shares would be distributed to the shareholders of
record as of December 16, 1994 of RBI's parent company.

By an agreement dated June 16, 1995, RBI issued 300,000 shares of
its common stock for one hundred percent of the issued and
outstanding common stock of Redwood Broadcasting, Inc. The
shareholders of RBI and affiliates acquired 97,000 shares of the
outstanding shares of RBI from RBI shareholders and as disclosed in
note 3 entered into a put arrangement on the remaining 203,008
shares of RBI outstanding. Subsequent to the RBI business
combination, and effective September 30, 1995 RBI agreed to issue
150,000 shares of RBI common stock to Redwood MicroCap Fund, Inc.
(MicroCap) in lieu of cash or money payment of an obligation to
MicroCap totalling $180,000. MicroCap was the former controlling
shareholder of RBI. This business combination with RBI was
accounted for as a reverse acquisition since the controlling
shareholder of RBI controlled RBI after the business combination.
The net monetary book value of RBI at June 16, 1995 was accounted
for as issued for the 300,008 shares of RBI outstanding at that
time. The results of operations of RBI prior to June 16, 1995 have
been excluded from the consolidated results of operations since the
transaction was recorded as a reverse acquisition.

Prior to RBI's business combination with RBI, RBI acquired a ninety
percent (90%) ownership interest in Solo Yolo Broadcasting (Solo
Yolo), a California general partner-ship from MicroCap. Solo Yolo's
only business was the application for an FM construction permit for
Esparto, California. Solo Yolo was one of only two applicants to
file for the same permit. Solo Yolo was paid $18,000 in cash in
exchange for withdrawing its application.

Also prior to the business combination RBI formed a wholly-owned
subsidiary, Alta California Broadcasting, Inc. (Alta) to pursue
radio acquisition opportunities in northern California.

In June, 1994, Alta entered into as asset purchase agreement to
acquire radio stations KHSL AM-FM in Chico, California, for
$1,150,000.

The $1,150,000 purchase price was allocated as follows:

<TABLE>
<S> <C> <C>
Land $ 600,000
License 350,000
Station equipment 200,000
----------
$1,150,000
</TABLE>

The allocation was based on management's estimate of the current
values of the assets. The land was appraised as of November, 1995 at
$600,000. Subsequent to March 31, 1996 the land was sold for
$450,000. The appraised value of $600,000 failed to take into
account a long-term ground lease for use of space by a third party on
the radio tower located on the property. This lease diminished the
value of the property. Based on this subsequently obtained
information, the allocation of the purchase price was retroactively
changed to reclassify the difference between the sale price of the
land and the original cost allocation to land to the value of the
license in the amount of $150,000. The July 31, 1995 financial
statements have been retroactively adjusted for this correction of an
error in the allocation of the purchase price.

On February 15, 1995, Alta commenced operating KHSL AM-FM under a
local management agreement (LMA). On June 19, 1995 Alta completed
the acquisition of KHSL AM-FM resulting in the termination of the
LMA. The acquisition of KHSL-AM by Alta was accounted for as a
purchase effective June 19, 1995. The results of operations of KHSL
AM-FM have been included in the consolidated financial statements of
RBI since February 15, 1995, the effective date of the LMA which
transferred control to Alta.

KHSL-FM has a country format and is located at 103.5 on the FM band.
All programming for KHSL-FM originates at its studios in Chico,
California. Subsequent to its acquisition by Alta, KHSL-AM changed
its call letters to KNSN-AM. Located at 1290 on the AM band, KNSN-
AM has a news-talk format with programming originating through
satellite delivery companies.

In March, 1995 Alta entered into an LMA with an option to purchase
radio station KCFM licensed to Shingletown, California and has
advanced funds under a purchase option agreement to the license
holder of KCFM to build the station. As of March 31, 1996 the
Company has advanced $50,000 to the license holder which will be
fully credited against the purchase price. These option payments
have been included in other assets in the financial statements. The
Company has entered into an agreement to acquire this radio station
by paying an additional $15,000 in cash and issuing a note payable
for $155,000. In August, 1995, KCFM began commercial broadcasting at
105.3 on the FM band. In September, 1995, KCFM changed its call
letters to KHZL and presently broadcasts an "Oldies" format via
satellite programming. KHZL primarily serves the Redding, California
market.

In transactions involving the purchase and sale of radio stations
where an LMA is executed between the buyer and the seller pending FCC
approval, the buyer retains all revenues from the sale of advertising
and responsible for all costs associated with the delivery of
programming for which revenues are generated during the LMA period.
While the seller, as the holder of the FCC license, is technically
accountable to the FCC during the LMA period, effective control of
all functions, activities and operations of the station is exercised
by the buyer. Since the economic risk of station operations is born
by the buyer during the LMA period, results of station operations
during the LMA period are consolidated with the buyer. During the
LMA period, the expenses and revenues recorded by the LMA seller
consist of LMA fee income, depreciation, occupancy and maintenance
costs, FCC compliance costs, and severance costs. During the LMA
period, seller may only terminate the LMA agreement in the event of a
material default by the buyer. There is a material impact upon the
financial statements of the Company resulting from the consolidation
of operations of KHSL as of the LMA date.

During the five month period ended December 31, 1995 the Company
exercised its option to acquire KCFM. In August, 1995, KCFM began
commercial broadcasting at 105.3 on the FM band. In September, 1995,
KCFM changed its call letters to KHZL and presently simulcasts its
programming from KHSL's station in Chico, California. KHSL and KHZL
are, however, designed to air separate commercials and commercials
and public service announcements simultaneously in their respective
markets. The KHLZ transaction, formerly KCFM was in substance a
transaction whereby the Company constructed a radio station. An
individual had a FCC construction permit to build a radio station.
Rather than acquiring the construction permit, which could not be
sold, the Company entered into a LMA agreement and purchase option
agreement for the radio station to be built. The Company has
exercised its option and acquired the station. The legal form of the
transaction was an LMA plus option agreement. The substance of the
transaction was a construction project. The costs related to this
construction project totalled approximately $194,000 and have been
included in the assets of the Company. KHZL primarily serves the
Redding, California market.

All intercompany accounts and transactions have been eliminated in
the consolidated financial statements. All references to "the
Company" refer to RBI and consolidated subsidiaries.

Financial statements prepared in accordance with generally accepted
accounting principles require managements estimates and assumptions.
Significant assumptions in the accompanying financial statements
relate to the Company's ability to continue as a going concern as
described in note 9, and estimated useful lives of property and
equipment as disclosed in note 1(c). The ultimate resolution of the
reasonableness of the related assumptions cannot presently be
determined. Actual results could differ from the Company's
estimates.

(b) BAD DEBTS
---------
An allowance for uncollectible accounts has been provided based on
the Company's past collection history.

(c) PROPERTY AND EQUIPMENT
----------------------
Property and equipment are carried at cost, net of accumulated
depreciation. Depreciation is provided on a straight-line basis over
estimated useful lives ranging from three to twenty years.

(d) CONCENTRATION OF CREDIT RISK
----------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts
receivable. The Company grants credit to various businesses
principally in California.

(e) ADVERTISING COSTS
-----------------
Advertising costs are expensed as incurred.

(f) GEOGRAPHIC AREA OF OPERATIONS AND INTEREST RATES
------------------------------------------------
The Company's radio stations broadcast principally in Northern
California. The potential for severe financial impact can result
from negative effects of economic conditions within a market or
geographic area. Since the Company's business is principally in one
area, this concentration of operations results in an associated risk
and uncertainty.

(g) REVENUE RECOGNITION
-------------------
Revenues are recognized when advertisements are aired.

(h) LOSS PER SHARE
--------------
Loss per share is based on the weighted average number of common
shares and common equivalent shares (where inclusion of such
equivalent shares would not be anti-dilutive) outstanding during the
year.

(i) INTANGIBLE ASSETS
-----------------
Intangible assets including goodwill are being amortized over a 20-
year period based upon management's estimate of their estimated
useful lives. The Company periodically evaluates the value of its
intangible assets and if the cost of such assets are in excess of
associated expected operating cash flows, the related assets are
written down to fair value.

(j) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
-----------------------------------------------------------
The preparation of financial statements in conformity with 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 financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.

(2) NOTES PAYABLE
-------------
<TABLE>
<S> <C>
Note payable to a related party corporation,
interest rate of 14% per annum. The note is
due September, 1996. $ 375,000

Note payable to a corporation, interest rate
of 10% per annum. The note is due in full
in June, 1996. The note is collateralized
by all of the assets of KHSL AM-FM acquired
by the Company and 100% of the common stock
of Alta. The note is guaranteed by MicroCap. 260,000

Other notes payable, various interest rates
ranging from 10% to 18%. The notes are due
at different times ranging from June, 1996
to September, 1996. Certain notes are
guaranteed by MicroCap. 105,168
--------
Total 740,168

Current Portion 728,174
--------
Long-term Portion $ 11,994
========
</TABLE>

Maturities on notes payable including notes already due, are summarized as
follows:

<TABLE>
<S> <C>
Year ending March 31, 1997 $ 728,174
Year ending March 31, 1998 $ 11,994
</TABLE>

<PAGE>
(3) PROPOSED SECURITIES OFFERING
----------------------------
RBI is proposing to offer securities to the public through a Registration
Statement Form SB-2, pursuant to the Securities Act of 1933. The proposal
includes four offerings as follows:

1. The first proposed offering relates to the distribution of up to the
300,008 shares of RBI common stock to shareholders of RBI's former
parent of record as of December 16, 1994. RBI will not receive any
proceeds from the distribution of the shares.

2. The third proposed offering relates to the distribution by RBI of up
to 203,008 common stock put options (puts) pursuant to the terms of
the RBI business combination agreement. The puts will require RBI to
purchase and redeem any and all shares tendered at a price of $1.50
per share. The puts will be exercisable for a period of ninety days
following the effective date of the registration statement. RBI will
not receive any proceeds from the distribution of the puts. Since
RBI agreed to redeem up to 203,008 of the shares outstanding at $1.50
per share, as part of the RBI business combination agreement, RBI has
shown this commitment as a liability in the financial statements
under the caption, securities subject to mandatory redemption.

3. The second proposed offering relates to selling up to 400,000 shares
of RBI common stock at $2.00 per share.

4. Finally, the proposed offering relates to the offer and sale of
590,750 shares of common stock by certain shareholders of RBI. RBI
will not receive any proceeds from the sale of the common stock by
the selling shareholders.

RBI will bear the cost of the proposed offering. If the offering is
successful, the offering costs will be offset against the proceeds of the
offering. If the offering is not successful, the costs will be charged to
operations as a period expense. As of March 31, 1996 RBI had incurred
$30,500 in offering costs. These costs are included in Other Assets.

(4) PROPERTY AND EQUIPMENT
----------------------
The Company's property and equipment is summarized as follows:

<TABLE>
<CAPTION>
March 31, July 31,
1996 1995
---------- ----------
<S> <C> <C>
Land $ 450,000 $ 450,000
Buildings and improvements 24,671 18,507
Furniture and fixtures 9,159 13,453
Radio broadcasting equipment 296,142 395,429
Computer equipment 44,443 98,293
---------- ----------
824,415 975,682

Accumulated depreciation (74,855) (69,482)
---------- ----------
749,560 $ 906,200
======= =========
</TABLE>

<PAGE>
(5) CONSULTATION AGREEMENT, RELATED PARTY
-------------------------------------
During the eight month period ended March 31, 1996 and the year ended
July 31, 1995 the Company paid $7,500 and $5,000, respectively in
consulting fees to MicroCap. RBI has agreed to pay MicroCap a monthly
consulting fee of $2,500 through the year ending March 31, 1997.

(6) INDEMNIFICATION
---------------
In accordance with the Colorado Business Corporation Act, RBI has included
a provision in its Articles of Incorporation to limit the personal
liability of its officers and directors to the maximum extent provided
under Colorado law.

(7) PREFERRED STOCK
---------------
The Company has 2,500,000 shares of $.04 par value preferred stock
authorized. Preferences may be determined by the Company's Board of
Directors. As of July 31, 1995 there were no preferred shares issued.

(8) UNEARNED INCOME
---------------
RBI was formed in 1993 to pursue the acquisition of radio station KNBA
licensed in Vallejo California. RBI entered into a joint venture to
acquire KNBA in October, 1993. Effective November 1, 1994, RBI sold its
50% interest in the joint venture. In addition to receiving $180,000 in
cash for this 50% interest, RBI received $70,000 cash for a three year
covenant not to compete. This covenant is being amortized into income on
a straight-line basis over the three year term.

(9) BASIS OF PRESENTATION - GOING CONCERN
-------------------------------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company has
sustained operating losses since its inception and has a net working
capital deficiency. Management is attempting to raise additional capital
through a public securities offering.

In view of these matters, realization of certain of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, raise additional capital, and the success of its
future operations. Management believes that its ability to raise
additional capital provide the opportunity for the Company to continue as
a going concern.

(10) LEASE COMMITMENTS
-----------------
Effective January 18, 1995 Alta entered into a three year local marketing
agreement for the right to operate radio station, KHZL, formerly known as
KCFM licensed to Shingletown, California. Monthly payments under the
agreement are $350. If Alta exercises its right to acquire the radio
station, these payments will be terminated.

Effective December 18, 1994, Alta entered into a five year lease for
studio space for radio station KHZL located in Redding California. The
monthly rental payments due under the terms of the lease are:

<TABLE>
<S> <C>
$ 800 per month in 1995
$ 900 per month in 1996
$ 950 per month in 1997
$ 990 per month in 1998
$1,040 per month in 1999
</TABLE>

(10) LEASE COMMITMENTS, CONTINUED
----------------------------
Minimum future rental payments under operating leases with terms greater
than one year are summarized as follows:

<TABLE>
<S> <C>
Year ending March 31, 1997 $ 15,150
Year ending March 31, 1998 $ 15,020
Year ending March 31, 1999 $ 12,030
Year ending March 31, 2000 $ 9,360
</TABLE>

Rent expense was $36,540 and $101,418 for the eight months ended March 31,
1996 and the year ended July 31, 1995, respectively.

(11) INCOME TAXES PAYABLE
--------------------
The Company has approximately $530,000 of net operating loss carryovers
expiring in years through 2011. As of March 31, 1996 the Company has
total deferred tax assets of approximately $106,000 due to operating loss
carryforwards. However, because of the uncertainty of potential
realization of these deferred tax assets, the Company has provided a
valuation allowance for the entire $106,000. Thus, no tax assets have
been recorded in the financial statements as of March 31, 1996. A change
in the control of the Company could result in limitations on the Company's
ability to utilize the loss carryovers.

(12) DELINQUENT PAYROLL TAXES
-----------------------
As of March 31, 1996 the Company had payroll taxes payable of $73,121
which were delinquent. Management anticipates utilizing the proceeds from
certain asset sale transactions to retire this obligation.

<PAGE>
<PAGE>
KHSL AM-FM

FINANCIAL STATEMENTS

and

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

For the Six and One-half Months
Ended February 15, 1995 and for the
Year Ended July 31, 1994

<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-18

Financial Statements:

Statements of Operations F-19

Statement of Changes in Stockholder's
Equity F-20

Statements of Cash Flows F-21

Notes to Financial Statements F-22

</TABLE>

<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Intelligent Financial Holding Corporation

We have audited the statements of operations, cash flows and changes in
stockholders' equity of KHSL AM-FM Radio for the year ended July 31, 1994 and
the six and one half month period ended February 15, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations, cash flows and changes in
stockholders' equity of KHSL AM-FM Radio for the year ended July 31, 1994 and
the six and one half month period ended February 15, 1995 in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, and has a net working capital deficiency, that raise
substantial doubt about its ability to continue as a going concern. Note 2 also
discusses management's plan regarding these matters. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
December 4, 1995

<PAGE>
<PAGE>
<TABLE>
KHSL AM-FM

STATEMENTS OF OPERATIONS

<CAPTION>
Six and
One-Half
Months Year
Ended Ended
February 15, July 31,
1995 1994
------------ -----------
<S> <C> <C>
Revenues $ 448,044 $ 788,541
Less agency commissions (41,902) (45,811)
----------- ----------
Net revenues 406,142 742,730

Operating expenses:
Station operating expenses excluding
depreciation and amortization 547,997 1,141,419
Depreciation and amortization 5,262 31,572
Corporate general and administrative
expenses 7,431 5,936
----------- ----------
Total operating expenses 560,690 1,178,927
----------- ----------
Net (loss) $ (154,548) $ (436,197)
=========== ===========
Net (loss) per share $ (628) $ (1,773)
=========== ===========
Weighted average shares
outstanding 246 246
=== ===
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
KHSL AM-FM

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Year Ended July 31, 1994 and Six and One-half
Months Ended February 15, 1995

<CAPTION>
Common Stock Additional
------------------------ Paid-In Accumulated
No./Shares Amount Capital (Deficit) Total
---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1993 246 $ 52,729 $ 25,113 $ 420,792 $ 498,634

Capital contribution - - 384,575 - 384,575

Net (loss) for the year ended July 31, 1994 - - - (436,197) (436,197)
---- -------- --------- ---------- ----------
Balance at July 31, 1994 246 $ 52,729 $ 409,688 $ (15,405) $ 447,012

Capital contribution - - 149,867 - 149,867
---- -------- --------- ---------- ----------
Net (loss) for the six and one-half
months ended February 15, 1995 - - - (154,548) (154,548)
---- -------- --------- ---------- ----------
Balance at February 15, 1995 246 $ 52,729 $ 559,555 $(169,953) $ 442,331
=== ======== ========= ========== =========

</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
KHSL AM-FM

STATEMENTS OF CASH FLOWS

Six and
One-Half Year
Months Ended Ended
February 15, July 31,
1995 1994
------------ -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $ (154,548) $ (436,197)
Adjustments to reconcile net
income to net cash (used in)
operating activities
Depreciation 5,262 31,572
(Decrease) in accounts payable and
accrued expenses (18,109) (3,521)
Decrease in accounts receivable 8,314 12,837
Other, net 12,275 9,885
----------- -----------
Net Cash (Used in) Operating Activities (146,806) (385,424)
----------- -----------
Cash Flows from Investing Activities:
(Acquisition) disposition of property
and equipment and other (3,061) 849
----------- -----------
Net Cash Provided by (Used in)
Investing Activities (3,061) 849
----------- -----------
Cash Flows from Financing Activities:
Capital contributed 149,867 384,575
----------- -----------
Net Cash Provided by Financing Activities 149,867 384,575
----------- -----------
Increase in cash - -

Cash, beginning of year - -
----------- -----------
Cash, end of year $ - $ -
=========== ===========
Interest paid $ - $ -
=========== ===========
Income taxes paid $ - $ -
=========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
KHSL AM-FM

NOTES TO FINANCIAL STATEMENTS

(1) SUMMARY OF ACCOUNTING POLICIES
------------------------------
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:

(a) GENERAL
-------
The KHSL AM-FM radio stations were part of a group of businesses
which also included a TV station. KHSL AM-FM and the TV station
were owned and operated by a California Corporation. Certain
operating expenses have been allocated between the radio and TV
operations. As such, future costs to operate the radio stations by
themselves may be more than historical costs due to the inability to
benefit from the allocation and sharing of certain expenses.

In June, 1994, Alta California Broadcasting, Inc. (Alta) entered
into as asset purchase agreement to acquire radio stations KHSL AM-
FM in Chico, California, for $1,150,000.

On February 15, 1995, Alta commenced operating KHSL AM-FM under a
Local Management Agreement (LMA). On June 19, 1995 Alta completed
the acquisition of KHSL AM-FM resulting in the termination of the
LMA. The accompanying financial statements present the results of
operations, cash flows and changes in stockholder's equity of the
KHSL AM-FM division for the year ended July 31, 1994 and the six and
on half month period ended February 15, 1995.

KHSL-FM has a country format and is located at 103.5 on the FM band.
All programming for KHSL-FM originates at its studios in Chico,
California. Subsequent to its acquisition by Alta, KHSL-AM changed
its call letters to KNSN-AM. Located at 1290 on the AM band, KNSN-
AM's programming is primarily originated through satellite delivery
companies.

Financial statements prepared in accordance with generally accepted
accounting principles require managements estimates and assumptions.
Significant assumptions in the accompanying financial statements
relate to the Company's ability to continue as a going concern as
described in note 2, and estimated useful lives of property and
equipment as disclosed in note 1(c). The ultimate resolution of the
reasonableness of the related assumptions cannot presently be
determined.

(b) BAD DEBTS
---------
An allowance for uncollectible accounts has been provided based on
the Company's past collection history.

(c) DEPRECIATION
------------
Property and equipment depreciation is provided on a straight-line
basis over estimated lives ranging from three to twenty years.

(e) ADVERTISING COSTS
-----------------
Advertising costs are expensed as incurred.

(2) BASIS OF PRESENTATION - GOING CONCERN
-------------------------------------
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company has
sustained operating losses since its inception and has an accumulated
deficit. Management is attempting to raise additional capital through a
public securities offering, and hire and retain qualified personnel and
increase operating efficiencies.

In view of these matters, realization of certain of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet
its financial requirements, raise additional capital, and the success of
its future operations. Management believes that its ability to raise
additional capital provide the opportunity for the Company to continue as
a going concern.

<PAGE>
<PAGE>
QUALITY BROADCASTERS OF CALIFORNIA, L.P.

FINANCIAL STATEMENTS

and

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

March 31, 1996 and 1995

<PAGE>
<PAGE>
QUALITY BROADCASTERS OF CALIFORNIA, L.P.

March 31, 1996 and 1995

<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-26

Financial Statements:

Balance Sheet F-27

Statements of Operations and Changes in Partners'
Capital (Deficiency) F-28

Statements of Cash Flows F-29

Notes to Financial Statements F-30

</TABLE>

<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors
Quality Broadcasters of California, L.P.

We have audited the balance sheet of Quality Broadcasters of California, L.P.
as of March 31, 1996 and the related statements of operations and partners'
capital (deficiency) and cash flows for the two years ended March 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Quality Broadcasters of
California, L.P. as of March 31, 1996 and the results of its operations and
changes in partners' capital (deficiency) and its cash flows for the two years
ended March 31, 1996 in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has a net capital deficiency as of March 31,
1996 and has incurred recurring losses from operations. These factors raise
substantial doubt about its ability to continue as a going concern.
Management's plan in regard to these matters is also described in Note 1. The
financial statements do not include any adjustments that may result from the
outcome of this uncertainty.

Schumacher & Associates, Inc.
Certified Public Accountants
12835 E. Arapahoe Road
Tower II, Suite 110
Englewood, CO 80112
June 1, 1996

<PAGE>
<PAGE>
<TABLE>
QUALITY BROADCASTERS OF CALIFORNIA, L.P.

BALANCE SHEET
March 31, 1996

<S> <C>
ASSETS
------
Current Assets
Accounts receivable, net of allowance for
doubtful accounts of $23,846 (Note 2) $ 90,028
Other 6,725
----------
Total Current Assets 96,753

Furniture and equipment, net of accumulated
depreciation of $311,587 (Note 4) 31,134
License and goodwill, net of accumulated
amortization of $118,019 249,831
Other assets 12,280
----------
Total Assets $ 389,998
=========

LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
----------------------------------------------
Current Liabilities
Outstanding checks in excess of amounts
reported by banks $ 458
Notes, advances and accrued interest
payable, related parties (Note 3) 585,653
Accounts payable and accrued expenses (Note 2) 85,136
----------
Total Current Liabilities 671,247
----------
Total Liabilities 671,247
----------
Commitments and contingencies (Notes 2,3,5 and 6) -

Partners' Capital (Deficiency) (281,249)
----------
Total Liabilities and Partners' Capital
(Deficiency) $ 389,998
=========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
QUALITY BROADCASTERS OF CALIFORNIA, L.P.

STATEMENTS OF OPERATIONS
AND CHANGES IN PARTNERS' CAPITAL (DEFICIENCY)
For the Years Ended March 31,

<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Revenues $ 561,613 $ 660,672
Barter revenue 213,911 213,613
Agency commissions (50,361) (70,436)
---------- -----------
Net revenue 725,163 803,849

Operating expenses:
Station operation expenses excluding
depreciation and amortization 587,575 636,926
Barter expense 201,759 224,833
Depreciation and amortization 38,179 73,849
---------- -----------
Total operating expenses 827,513 935,607
---------- -----------
Net operating (loss) (102,350) (131,758)
---------- -----------
Other income (expense):
Interest income 1,608 547
Interest expense (34,636) (44,843)
---------- -----------
Total other (33,028) (44,297)
---------- -----------
Net (loss) (135,378) (176,055)

Partners' capital (deficiency),
beginning of year (145,871) 30,184
---------- -----------
Partners' capital (deficiency),
end of year $ (281,249) $ (145,871)
=========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
QUALITY BROADCASTERS OF CALIFORNIA, L.P.

STATEMENTS OF CASH FLOWS
For the Years Ended March 31

<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $ (135,378) $ (176,055)
Adjustments to reconcile net
income to net cash provided by
operating activities
Depreciation and amortization 38,179 73,849
Increase (decrease) in accounts
payable and accrued expenses 20,742 (4,713)
(Increase) decrease in
accounts receivable (123) 3,567
Other, net (887) (6,341)
----------- -----------
Net Cash Provided by Operating Activities (77,467) (109,693)
----------- -----------
Cash Flows from Investing Activities:
(Acquisition of) furniture and equipment (30,283) (1,542)
----------- -----------
Net Cash (Used in) Investing Activities (30,283) (1,542)
----------- -----------
Cash Flows from Financing Activities:
Repayment of notes payable - (152,183)
Proceeds from advances from related parties 100,526 264,898
----------- -----------
Net Cash Provided by (Used in) Financing
Activities 100,526 112,715
----------- -----------
Increase (decrease) in cash (7,224) 1,480

Cash, beginning of year 7,224 5,744
----------- -----------
Cash, end of year $ - $ 7,224
=========== ===========
Interest paid $ - $ -
=========== ===========
Income taxes paid $ - $ -
=========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
QUALITY BROADCASTERS OF CALIFORNIA, L.P.

NOTES TO FINANCIAL STATEMENTS
March 31, 1996 and 1995

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:

(a) GENERAL
-------
Quality Broadcasters of California, L.P., a California limited
partnership (the Company) was organized under the laws of the State
of California in 1989 for the purpose of acquiring and operating
radio stations.

(b) INCOME TAXES
------------
Since the Company is a partnership, taxable income and losses flow
through to the partners. The Company, therefore, does not incur
income tax expense.

(c) REVENUE RECOGNITION
-------------------
Revenues from radio advertising are recognized in the period that the
advertising is broadcast.

(d) BAD DEBTS
---------
An allowance for uncollectible accounts has been provided based on
the Company's past collection history.

(e) FURNITURE AND EQUIPMENT
-----------------------
Furniture and equipment are carried at cost, net of accumulated
depreciation. Depreciation is provided on a straight-line basis over
estimated lives ranging from five to seven years.

(f) CONCENTRATION OF CREDIT RISK
----------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts
receivable. The Company grants credit to various businesses, and
individuals, principally in Northern California.

(g) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
-----------------------------------------------------------
The preparation of financial statements in conformity with 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 financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.

(h) GEOGRAPHIC AREA OF OPERATIONS
-----------------------------
The Company operates Radio stations in the Redding, California area.
The potential for severe financial impact can result from negative
effects of economic conditions within the market or geographic area.
Since the Company's business is principally in one area, this
concentration of operations results in an associated risk and
uncertainty.

(i) LICENSE AND GOODWILL
--------------------
The Company acquired its FM radio station in 1989 at a total cost of
$475,000. Of this amount $367,850 was allocated to the license and
goodwill attributable to the business. The carrying value of this
asset is being amortized on a straight-line basis over a twenty year
period. It is management's policy to review the carrying value of
intangible assets on a periodic basis (at least annually) to
determine if there is any impairment of value. As of March 31, 1996,
management does not believe that there is any impairment in the
carrying value of its intangible assets.

(j) GOING CONCERN
-------------
As of March 31, 1996, the Company has a net capital deficiency and
has incurred recurring losses from operations. Cash flow shortages
have principally been financed through loans from related parties.
If the Company is unable to continue borrowing from related parties
or is unable to obtain additional financing, it may be unable to
continue as a going concern. The financial statements do not include
any adjustments that may result from the outcome of this uncertainty.
The Company has entered into a business sale agreement as described
in Note 6.

(k) ADVERTISING EXPENSES
--------------------
Advertising costs are expensed as incurred.

(2) BARTER TRANSACTIONS/TRADE ACCOUNTS
----------------------------------
Included in sales revenue for the years ended March 31, 1996 and 1995,
respectively, are $213,911 and $213,613 of advertising revenues related to
barter transactions/trade accounts. Also, included in operating expenses
for the years ended March 31, 1996 and 1995, respectively, are $201,758
and $224,832 of barter expenses. As of March 31, 1996 accounts payable
includes a net amount of $13,276 which will not be paid in cash, but
offset by future barter/trade radio advertising.

(3) RELATED PARTY TRANSACTIONS
--------------------------
As of March 31, 1996 the Company had $585,653 of notes, advances and
accrued interest payable to related parties. The amounts are payable upon
demand. The notes bear interest principally at 10% per annum and the
advances bear no interest and are uncollateralized.

(4) FURNITURE AND EQUIPMENT
-----------------------
The Company's furniture and equipment at March 31, 1996 is summarized as
follows:

<TABLE>
<S> <C>
Furniture and fixtures $ 21,198
Studio and production equipment 263,824
Leasehold improvements 57,699
---------
342,721
Accumulated amortization (311,587)
---------
$ 31,134
========
</TABLE>

(5) LEASES
------
The Company leases its office and studio facilities through operating
leases. The Company does not have any material lease commitments with
terms exceeding one year past March 31, 1996.

Rent expense was $20,472 and $20,462 for the years ended March 31, 1996
and 1995, respectively.

(6) SUBSEQUENT EVENTS
-----------------
The Company entered into a business sale agreement whereby certain assets
and the business operations are being sold to an unrelated entity, subject
to certain regulatory approval.

<PAGE>
<PAGE>
Index to Pro Forma Financial Statements

REDWOOD BROADCASTING, INC. (RBI)
KHSL AM-FM (KHSL)

Pro Forma Combined Financial Statements (Unaudited)

<TABLE>
<CAPTION>
Page

----
<S> <C>
Pro Forma Financial Statements:

Pro Forma Balance Sheet March 31, 1996 F-34

Pro Forma Statement of Operations, Eight Months
Ended March 31, 1996 F-36

Notes to Pro Forma Financial Statements F-37

</TABLE>

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.

PRO FORMA BALANCE SHEET
March 31, 1996
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
(RBI) Adjustments Combined
------------ ----------- ------------
<S> <C> <C> <C>
ASSETS
------
Current Assets:
Cash $ - $ $ 481,000
821,000 (2)
(325,000) (3)
( 15,000) (4)
Accounts receivable, net of
allowance for doubtful accounts 86,834 86,834
Other 73,893 73,893
------------ ----------- ------------
Total Current Assets 160,727 481,000 641,727

Property and equipment, net of
accumulated depreciation 749,560 (236,653) (2) 137,907
75,000 (3)
(450,000) (1)
License, net of accumulated
amortization 489,833 (489,833) (2) 920,000
750,000 (3)
170,000 (4)
Notes receivable - 200,000 (2) 200,000
Other assets 144,985 144,985
------------ ----------- ------------
Total Assets $ 1,545,105 $ 499,514 $ 2,044,619
=========== ========== ===========

LIABILITIES
-----------
Current Liabilities:
Outstanding checks in excess of
amounts reported by banks $ 23,188 $ $ 23,188
Accounts payable and accrued expenses 273,431 (35,896) (1) 237,535
Notes payable, current portion 728,174 (375,000) (2) 118,174
(335,000) (1)
100,000 (3)
<PAGE>
Common stock subject to mandatory
redemption 304,512 304,512
Accounts payable, related parties 232,730 (70,000) (2) 162,730
Unearned income, current portion 23,333 23,333
----------- ----------- ------------
Total Current Liabilities 1,585,368 (715,896) 869,472

Unearned income, net of current portion 9,722 9,722
155,000 (4)
Notes payable, net of current portion 11,994 400,000 (3) 566,994
------------ ----------- ------------
Total Liabilities 1,607,084 (160,896) 1,446,188
------------ ----------- ------------
Stockholders' Equity:
Common stock 3,122 3,122

Additional paid-in capital 467,123 467,123
(79,104) (1)
Retained earnings, accumulated (deficit) (532,224) 739,514 (2) 128,186
------------ ----------- -------------
Total Stockholders' Equity (Deficit) (61,979) 660,410 598,431
------------ ----------- -------------
Total Liabilities and Stockholders'
Equity (Deficit) $ 1,545,105 $ 499,514 $ 2,044,619
=========== ========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.

PRO FORMA STATEMENT OF OPERATIONS
EIGHT MONTHS ENDED MARCH 31, 1996
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
(RBI) (KNNN) (KHSL) Adjustments Combined
---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
REVENUE:
Total revenues $ 440,457 $ 374,411 $ (397,775) $ $ 417,093
Barter revenue - 142,608 - 142,608
Less agency commissions (11,071) (33,574) 11,071 (33,574)
---------- ---------- ---------- --------- -----------
Net revenues 429,386 483,445 (386,704) 526,127
---------- ---------- ---------- --------- -----------
OPERATING EXPENSES:
Station operating expenses excluding
depreciation and amortization 656,394 391,719 (504,825) 543,288
Depreciation and amortization 77,649 134,507 (77,649) 40,889 (5) 175,396
Corporate general and administrative
expenses 58,464 25,453 - 83,917
---------- ---------- ---------- --------- -----------
Total Operating Expenses 792,507 551,679 (582,474) 40,889 802,601
---------- ---------- ---------- --------- -----------
Operating Income (Loss) (363,121) (68,234) 195,770 (40,889) (276,474)
---------- ---------- ---------- --------- -----------
Other Income (Expense):
Other income 16,898 1,072 - - 17,970
Interest expense (22,436) (23,091) - - (45,527)
---------- ---------- ---------- --------- -----------
Total Other Income (Expense) (5,538) (22,019) - - (27,557)
---------- ---------- ---------- --------- -----------
Net (Loss) $(368,659) $ (90,253) $ 195,770 $(40,889) $ (304,031)
========== ========== ========= ========= ===========
Net (Loss) per Common Share $ (.44)
===========
Total Number of Common Shares Outstanding 690,258
=======
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.

NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)

(A) GENERAL
-------
The Company, subsequent to March 31, 1996, has entered into several agreements
and transactions that have (will have) a material effect on the financial
statements. The pro forma financial statements give effect to these
transactions and are summarized as follows:

1. The Company has sold its investment in land located in Chico California.
The sales price was $450,000 from which the Company made a charitable
contribution to the non-profit entity that acquired the property in the
amount of $80,000.

2. The Company entered into a contract to sell radio station KHSL AM-FM for
$1,266,000 cash and a note receivable of $200,000. From the sale proceeds
$445,000 of notes payable are expected to be paid. Closing of this
transaction is pending regulatory approval.

3. The Company has entered into an agreement, subject to regulatory approval,
to acquire the assets and business of Quality Broadcasters of California,
L.P. (Quality) operating under the call letters of KNNN. The purchase
price is $825,000 including cash of $325,000 and notes payable of
$500,000.

4. The Company has agreed to pay $170,000 to an individual for the rights to
operate KHZL. Of this amount, $15,000 was paid in cash in July, 1996 with
the balance due being in the form of a note payable.

(B) PRO FORMA INFORMATION
---------------------
The proforma balance sheet as of March 31, 1996 gives effect to the above
transactions.

The pro forma statement of operations gives effect to the operations of KHSL,
AM-FM being excluded and the operations of KNNN being included.

(2) To record the sale of KHSL AM-FM radio.

(3) To record the purchase of Quality Broadcasting of California, L.P.
(KNNN).

(4) To record purchase of KHZL radio.

(5) To record the amortization of the purchased license cost of KNNN.

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

FINANCIAL STATEMENTS

2ND QUARTER ENDED SEPTEMBER 30, 1996

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
Financial Statements:

Consolidated Balance Sheets-
September 30, 1996 and March 31, 1996 F-40

Consolidated Statements of Operations-
Six Months Ended September 30, 1996 and 1995 F-41

Consolidated Statements of Changes in
Stockholders' Equity-
Six Months Ended September 30, 1996, Eight
Months Ended March 31, 1996 and the Two
Years Ended July 31, 1995 F-42

Consolidated Statements of Cash Flows-
Six Months Ended September 30, 1996 and 1995 F-43

Notes to Consolidated Financial Statements F-44

</TABLE>

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

BALANCE SHEETS
<CAPTION>
September 30 March 31
1996 1996
----------- -----------
<S> <C> <C>
ASSETS
------
Current Assets
Accounts Receivable, net of allowance
for doubtful accounts of $16,400 at
September 30, 1996 and March, 1996 $ 49,041 $ 86,834
Other current assets 70,851 73,893
----------- -----------
Total Current Assets 119,892 160,727

Property and equipment, net of accumulated
depreciation of $122,302 at September 30,
1996 and $74,855 at March 31, 1996 1,320,813 749,560

License, net of accumulated amortization
of $22,917 at September 30, 1996 and
$16,667 at March 31, 1996 470,833 489,833

Other assets 243,874 144,985
----------- -----------
Total Assets $ 2,155,412 $ 1,545,105
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current Liabilities
Outstanding checks in excess of amounts
reported by banks $ 12,306 $ 23,188
Accounts payable and accrued expenses 248,380 273,431
Notes payable, current portion 826,339 728,174
Common stock subject to mandatory
redemption 304,512 304,512
Accounts payable, related parties 346,382 232,730
Unearned income, current portion 10,260 23,333
----------- -----------
Total Current Liabilities 1,748,179 1,585,368

Unearned income, net of current portion - 9,722
Notes payable, net of current portion 665,222 11,994
----------- -----------
Total Liabilities 2,413,401 1,607,084
----------- -----------
<PAGE>
Commitments and contingencies - -
Stockholders' Equity
Preferred stock - $.04 par value,
2,500,000 shares authorized,
none issued and outstanding - -
Common stock - $.004 par value,
12,500,000 shares authorized;
805,508 and 780,508 shares
issued and outstanding as of
September 30, 1996 and March 31,
1996, respectively 3,222 3,122
Additional paid-in capital 497,023 467,123
Accumulated deficit (758,234) (532,224)
----------- -----------
Total Stockholders' Equity (257,989) (61,979)
----------- -----------
Total Liabilities and Stockholders' Equity $2,155,412 $1,545,105
========== ==========
</TABLE>

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

STATEMENTS OF OPERATIONS

<CAPTION>
Six Months Six Months
Ended Ended
September 30 September 30
1996 1995
----------- -----------
<S> <C> <C>
Total Revenues 139,392 375,282
Less agency commission 8,545 33,723
----------- -----------
Net Revenues 130,847 341,559

Operating Expenses:
Station operating expenses
excluding depreciation
and amortization 229,099 437,159
Depreciation and
amortization 47,447 -
Corporate general and
administrative expenses 22,804 34,681
----------- -----------
Total operating expenses 299,350 471,840

Operating loss (168,503) (130,281)

Other expense
Other expense 45,432 -
Interest expense 12,075 17,357
----------- -----------
Total other expense 57,507 17,357
----------- -----------
Net loss (226,010) (147,638)
=========== ===========
Net loss per share (0.29) (0.25)
=========== ===========
Weighted average shares
outstanding 793,008 600,008
=========== ===========

</TABLE>

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AS OF SEPTEMBER 30, 1996

<CAPTION>
Common Stock
--------------------------- Paid-In Accumulated
No./Shares Amount Capital Deficit Total
------------ ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1993 - - - - -

Common stock issued 300,000 1,200 2,300 - 3,500

Net (loss) for the year ended July 31, 1994 - - - (3,112) (3,112)
------- ------- --------- ---------- ----------
Balance at July 31, 1994 300,000 1,200 2,300 (3,112) 388

Capital contribution - - 241,798 - 241,798

Reorganization (Note 1) 300,008 1,200 10,447 - 11,647

Net (loss) for the year ended July 31, 1995 - - - (160,453) (160,453)
------- ------- --------- ---------- ----------
Balance at July 31, 1995 600,008 2,400 254,545 (163,565) 93,380

Common stock issued in private placement 25,000 100 29,900 - 30,000

Common stock issued in debt conversion 150,000 600 179,400 - 180,000

Common stock issued for services 5,500 22 3,278 - 3,300

Common stock issued in private placement 25,000 100 29,900 - 30,000

Net loss for the six month period
ended September 30, 1996 - - - (226,010) (226,010)
------- ------- --------- ---------- ----------
Balance at September 30, 1996 805,508 3,222 497,023 (758,234) (257,989)
======= ======= ========= ========== ==========
/TABLE
<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

STATEMENTS OF CASH FLOWS

<CAPTION>
Six Six
Months Months
Ended Ended
September 30 September 30
1996 1995
------------ ------------
<S> <C> <C>

Cash Flows from operating activities:
Net (loss) (226,010) (147,638)
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation 47,447 -
Decrease in Deferred Reserve 22,795 -
(Increase) decrease in accounts
receivable 37,793 (112,249)
(Increase) decrease in other
current assets 3,042 (58,365)
Increase (decrease) in accounts
payable and accrued expenses (25,051) 72,393
Increase (decrease) in other
current liabilities 113,652 29,263
----------- -----------
Net cash provided (used) by operating
activities (26,335) (216,596)

Cash flows from investing activities:
(Acquisition) disposition of property
and equipment (744,176) (1,262,566)
----------- -----------
Net cash provided (used) by investing
activities (744,176) (1,262,566)

Cash flows from financing activities:
Proceeds from (repayment) of notes
payable 751,393 1,449,605
Proceeds from common stock issuance 30,000 11,647
----------- -----------
Net cash provided (used) by financing
activities 781,393 1,461,252
----------- -----------
Increase (decrease) in cash 10,882 (17,910)

Cash, beginning of period (23,188) 10,895
----------- -----------
Cash, end of period (12,306) (7,015)
=========== ===========

</TABLE>

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION
---------------------
The consolidated balance sheet as of September 30, 1996, the consolidated
statements of operations for the six months ended September 30, 1996 and 1995,
the consolidated statements of changes in stockholders' equity for the six
months ended September 30, 1996, the eight months ended March 31, 1996 and the
two years ended July 31, 1995, and the consolidated statement of cash flows for
the six months ended September 30, 1996 and 1995 have been prepared by the
Company and are unaudited. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations, changes in equity and cash flows
at September 30, 1996, and for all periods presented, have been made.

Financial statements prepared in accordance with generally accepted
accounting principles require management's estimates and assumptions.
Significant assumptions in the accompanying financial statements relate to the
Company's ability to continue as a going concern as described in
Note 9, and estimated useful lives of property and equipment as disclosed in
Note 5. The ultimate resolution of the reasonableness of the related
assumptions cannot presently be determined. Actual results could differ from
the Company's estimates.

All intercompany accounts and transactions have been eliminated in the
consolidated financial statements. All references to "the Company" refer to
RBI and consolidated subsidiaries.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:

(a) GENERAL DEVELOPMENT OF THE BUSINESS
-----------------------------------
Redwood Broadcasting, Inc. (RBI) was organized under the laws of the
State of Colorado. Pursuant to a spin-off agreement, certain assets of
its parent company were contributed to RBI in exchange for 300,008 shares
of RBI, $.004 par value common stock. Pursuant to the terms of the
agreement, the 300,008 shares were issued in escrow with the provision
that upon the effective date of a registration statement the shares would
be distributed to the shareholders of record as of December 16, 1994 of
RBI's parent.

By agreement dated June 16, 1995, RBI issued 300,000 shares of its
common stock for one hundred percent of the issued and outstanding common
stock of Redwood Broadcasting, Inc. (RBI). The shareholders of RBI and
affiliates acquired 97,000 shares of the outstanding shares of RBI from
RBI shareholders and as disclosed in Note 3 entered into a put arrangement
on the remaining 203,008 shares of RBI outstanding. Subsequent to the RBI
business combination, and effective September 30, 1995 RBI agreed to issue
150,000 shares of RBI common stock to Redwood MicroCap Fund, Inc.
(MicroCap) in lieu of cash or money payment of an obligation to MicroCap
totalling $180,000. MicroCap was the former controlling shareholder of
RBI. This business combination with RBI was accounted for as a reverse
acquisition since the controlling shareholder of RBI controlled RBI after
the business combination. The results of operations of RBI prior to June
16, 1995 have been excluded from the consolidated results of operations
since the transaction was recorded as a reverse acquisition.

Prior to RBI's business combination with RBI, RBI acquired a ninety
percent (90%) ownership interest in Solo Yolo Broadcasting (Solo Yolo), a
California general partnership, from MicroCap. Solo Yolo's only business
activity was filing an application for an FM construction permit for
Esparto, California. Solo Yolo was one of only two applicants to file for
the same permit. Solo Yolo was paid $18,000 in cash in exchange for
withdrawing its application.

Also prior to the business combination, RBI formed a wholly-owned
subsidiary, Alta California Broadcasting, Inc. (Alta), to pursue radio
acquisition opportunities in northern California.

In June, 1994, Alta entered into as asset purchase agreement to
acquire radio stations KHSL AM-FM located in Chico, California for
$1,150,000.

The $1,150,000 purchase price was allocated as follows:

<TABLE>
<S> <C> <C>
Land $ 600,000
License 350,000
Station Assets 200,000
----------
$1,150,000
==========
</TABLE>

The allocation was based on management's estimate of the current
values of the assets. The land was appraised as of November, 1995 at
$600,000. However, the appraisal failed to take into account a long term
ground lease for use of space by a third party on the radio tower located
on the property. This lease diminished the value of the property. In
addition, the land was sold in April, 1995 for $450,000. Management
determined that the sale price of the land at that time represented a more
accurate value of the land. In light of these facts, the allocation of
the purchase price was retroactively changed to reclassify the difference
between the sale price of the land and the original cost allocation to
land to the value of the license in the amount of $150,000.

On February 15, 1995, Alta commenced operating KHSL AM-FM under a
Local Management Agreement (LMA). On June 19, 1995 Alta completed the
acquisition of KHSL AM-FM resulting in the termination of the LMA. The
acquisition of KHSL AM-FM by Alta was accounted for as a purchase
effective June 19, 1995. The results of operations of KHSL AM-FM have
been included in the consolidated financial statements of RBI since
February 15, 1995, the effective date of the LMA which transferred control
to Alta.

In March, 1995 Alta entered into a LMA with an option to purchase
radio station KCFM FM (KCFM) licensed to Shingletown, California and
advanced funds under a purchase option agreement to the license holder of
KCFM to build the station. In August 1995, KCFM began commercial
broadcasting. In September, 1995 KCFM changed its call letters to KHZL FM
(KHZL). As of June 30, 1996 Alta had advanced $50,000 to the license
holder which were to be fully credited against the purchase price. On
July 31, 1996 Alta completed the acquisition of KHZL by paying $15,000 in
cash (in addition to monies previously advanced) and issuing a note
payable for $155,000. On September 27, 1996, Alta changed KHZL call
letters to KRDG-FM ("KRDG").

In December, 1995, Alta executed a Letter of Intent regarding the
acquisition by Alta's wholly-owned subsidiary, Northern California
Broadcasting, Inc., of radio station KNNN licensed to Central Valley,
California, for a total purchase price of $825,000. $325,000 of the
Purchase Price was paid in certified funds at closing, and the balance,
$500,000, in the form of a promissory note. The acquisition of KNNN was
consummated in September, 1996.

(b) BAD DEBTS
---------
An allowance for doubtful accounts receivable has been provided based
on the Company's past collection history.

(d) CONCENTRATION OF CREDIT RISK
----------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable.
The Company grants credit to various businesses principally in California.

(e) ADVERTISING COSTS
-----------------
Advertising costs are expensed as incurred.

(f) GEOGRAPHIC AREA OF OPERATIONS AND INTEREST RATES
-------------------------------------------------
The Company's radio stations broadcast principally in northern
California. The potential for severe financial impact can result from
negative effects of economic conditions within a market or geographic
area. Since the Company's business is principally in one area, this
concentration of operations results in an associated risk and uncertainty.

(g) REVENUE RECOGNITION
-------------------
Revenues are recognized when advertisements are aired.

(h) LOSS PER SHARE
--------------
Loss per share is based on the weighted average number of common
shares and common equivalent shares (where inclusion of such equivalent
shares would not be anti-dilutive) outstanding during the year.

(i) INTANGIBLE ASSETS
-----------------
Intangible assets, including licenses and goodwill, are being
amortized over their estimated useful lives. No amortization period
exceeds 40 years. The Company periodically evaluates the value of its
intangible assets and if the cost of such assets are in excess of
associated expected operating cash flows, the related assets are written
down to fair value.

3.) NOTES PAYABLE
-------------
Notes payable as of September 30, 1996 is comprised of the following:

<TABLE>
<S> <C>
Note payable to seller of KMNN-FM radio
(corporation), interest payable @ 8.5% per
annum. The note is due September, 2006.
The note is collateralized by the assets
of the station 498,228

Note payable to seller of KRDG-FM radio
(individual), interest accrues @ 8.25%
per annum. The note plus accrued interest
is due in July, 2001. The note is collater-
alized by the assets of the station 155,000

Note payable to a related party (corporation),
interest accrues @ 14% per annum. The note
plus accrued interest is due in March, 1997 100,000

Other notes payable, various interest rates
ranging from 10%-18%. The notes are due at
different times through September, 1997.
Certain notes are guaranteed by MicroCap. 738,833
--------
Total 1,491,561

Current portion 826,339

Long term portion 665,222

</TABLE>

(4) PROPOSED SECURITIES OFFERING
----------------------------
RBI is proposing to offer securities to the public through a Registration
Statement Form SB-2, pursuant to the Securities Act of 1933. The proposal
includes four offerings as follows:

(a) The first proposed offering relates to the distribution of up to
300,008 shares of common stock to shareholders of RBI's former parent of
record as of December 16, 1994. RBI will not receive any proceeds from
the distribution of the shares.

(b) The second proposed offering relates to the distribution by RBI
of up to 203,008 common stock put options (puts) pursuant to the terms of
the RBI business combination agreement. The puts will require RBI to
purchase and redeem any and all shares tendered at a price of $1.50 per
share. The puts will be exercisable for a period of ninety days following
the effective date of the Registration Statement. RBI will not receive
any proceeds from the distribution of the puts. Since RBI agreed to
redeem up to 203,008 of the shares outstanding at $1.50 per share as part
of the RBI business combination agreement, RBI has shown this commitment
as a liability in the financial statements under the caption, securities
subject to mandatory redemption.

(c) The third proposed offering relates to the offer and sale of
305,058 shares of common stock by certain shareholders of RBI. RBI will
not receive any proceeds from the sale of the common stock by the selling
shareholders.

(d) The final proposed offering relates to selling up to 400,000
shares of RBI common stock at $2.00 per share.

RBI will bear the cost of the proposed offering. If the offering is
successful, the offering costs will be offset against the proceeds of the
offering. If the offering is not successful, the costs will be charged to
operations as a period expense. As of September 30, 1996, RBI had
incurred $68,500 in offering costs. These costs are included in Other
Assets.

(5) PROPERTY AND EQUIPMENT
----------------------

The Company's property and equipment as of September 30, 1996 is
summarized as follows:

<TABLE>
<S> <C>
Land $ -
Building and improvements 24,671
Furniture and equipment 9,159
Radio broadcasting equipment 1,367,284
Computer equipment 42,001
----------
1,443,115
Accumulated depreciation 122,302
----------
Total 1,320,813
==========
</TABLE>

(7) PREFERRED STOCK
---------------
The Company has 2,500,000 shares of $.04 par value preferred stock
authorized. Preferences may be determined by the Company's Board of
Directors. As of September 30, 1996 there were no preferred shares
issued.

(8) UNEARNED INCOME
---------------
RBI was formed in 1993 to pursue the acquisition of radio station KNBA
licensed in Vallejo, California. RBI entered into a joint venture to
acquire KNBA and in October, 1993 completed the acquisition of the
station. Effective November 1994, RBI sold its 50% interest in the joint
venture. In addition to receiving $180,000 in cash for this 50% interest,
RBI received $70,000 cash for a three-year covenant not to compete. This
covenant is being amortized into income on a straight-line basis over a
three-year term.

(9) BASIS OF PRESENTATION
---------------------
The accompanying financial statements have been prepared in conformity
with generally-accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company has
sustained operating losses since its inception and has a net working
capital deficiency.

Since September 30, 1996, the Company has taken several steps in an effort
to improve its working capital. The sale of KHSL will, subject to FCC
approval, generate approximately $1,200,000 in cash at closing, which is
expected to occur during the last quarter of fiscal 1997. The Company
plans to use the proceeds of the sale to significantly reduce its
outstanding notes payable.

In addition, in April 1996, the Company sold the Chico Property for a
purchase price of $450,000. In August 1996, the Company completed a
private placement of Common Stock in which it sold 37,750 shares of Common
Stock to four investors for an aggregate purchase price of $45,300, or
$1.20 per share. In addition, in December 1996, the Company completed a
private placement to one affiliated investor consisting of 100,000 shares
of Common Stock at $1.20 per share. Finally, the Company is registering
for sale an aggregate of 400,000 shares of Common Stock which it intends
to offer to the public at a price of $2.00 per share upon the effective
date of a Registration Statement. While the proposed public offering will
be offered and sold through the Company's officers and directors without a
firm commitment from an underwriter, the Company is optimistic that the
public offering can be consummated and that the net proceeds, estimated to
be $670,000, will be made available during the fourth quarter of fiscal
1997 for working capital.

Finally, the Company's principal shareholder, Redwood Microcap, has agreed
to provide working capital to complete the radio station construction in
Payson, Arizona and to cover the first three months of operating expenses
for that new station.

Management believes that the foregoing measures will provide sufficient
liquidity and capital resources for the Company to continue its current
operations and complete pending development opportunities, all of which
have been calculated to improve the Company's results of operations over
the next 12 months.

(10) LEASE COMMITMENTS
-----------------
Effective December 18, 1994, Alta entered into a five-year lease for
studio space for radio station KHZL located in Redding, California. The
monthly rental payments under the terms of the lease are as follows:

<TABLE>
<S> <C>
$ 800 per month in 1995
900 per month in 1996
950 per month in 1997
990 per month in 1998
1,040 per month in 1999
</TABLE>

Future minimum rental payments under operating leases with terms greater
than one year are summarized as follows:

<TABLE>
<S> <C>
Year ended March 31, 1997 $ 8,250
Year ended March 31, 1998 11,520
Year ended March 31, 1999 12,030
Year ended March 31, 2000 9,360
</TABLE>

(11) DELINQUENT PAYROLL TAXES
------------------------
As of September 30, 1996 the Company had payroll taxes payable of $83,221
which were delinquent. Management anticipates utilizing the proceeds from
certain asset sale transactions to retire this obligation. The Company is
currently remitting payroll tax withholdings on a timely basis.

<PAGE>
<PAGE>
Index to Pro Forma Financial Statements

REDWOOD BROADCASTING, INC. (RBI)
KHSL AM-FM (KHSL)

Pro Forma Combined Financial Statements (Unaudited)

<TABLE>
<CAPTION>
Page
----
<S> <C>
Pro Forma Financial Statements:

Pro Forma Balance Sheet September 30, 1996 F-52

Pro Forma Statement of Operations, Six Months
Ended September 30, 1996 F-53

Notes to Pro Forma Financial Statements F-54

</TABLE>

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.

PRO FORMA BALANCE SHEET
September 30, 1996
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
(RBI) Adjustments Combined
------------ ------------------ ------------
<S> <C> <C> <C>
ASSETS
------
Current Assets:
Cash $ - $339,661 (1) $ 339,661
Accounts receivable, net of
allowance for doubtful accounts 49,041 49,041
Other 70,851 70,851
------------ ----------- ------------
Total Current Assets 119,892 339,661 459,553

Property and equipment, net of
accumulated depreciation 1,320,813 (213,308) (1) 1,107,505
License, net of accumulated
amortization 470,833 (470,833) (1) -
Notes receivable - 200,000 (1) 200,000
Other assets 243,874 243,874
------------ ------------ ------------
Total Assets $ 2,155,412 $ (144,480) $ 2,010,932
============ ============= ============

LIABILITIES
-----------
Current Liabilities:
Outstanding checks in excess of
amounts reported by banks $ 12,306 $ $ 12,306
Accounts payable and accrued expenses 248,380 (100,000) (1) 148,380
Notes payable, current portion 826,339 (826,339) (1) -
Common stock subject to mandatory
redemption 304,512 304,512
Accounts payable, related parties 346,382 346,382
Unearned income, current portion 10,260 10,260
----------- ----------- ------------
Total Current Liabilities 1,748,179 (926,339) 821,840

Unearned income, net of current portion - -
Notes payable, net of current portion 665,222 665,222
------------ ----------- ------------
Total Liabilities 2,413,401 (926,339) 1,487,062
------------ ----------- ------------

Stockholders' Equity:
Common stock 3,222 3,222

Additional paid-in capital 497,023 497,023

Retained earnings, accumulated (deficit) (758,234) 781,859 (1) 23,625
------------ ------------ -------------
Total Stockholders' Equity (Deficit) (257,989) 781,859 523,870
------------ ------------ -------------
Total Liabilities and Stockholders'
Equity (Deficit) $ 2,155,412 $ (144,480) $ 2,010,932
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.

PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
(RBI) (KHSL) (KNNN) Adjustments Combined

<S> <C> <C> <C> <C> <C>
REVENUE:
Total revenues $ 139,392 $ (24,170) $ 224,651 $ $ 339,873
Less agency commissions 8,545 - 23,228 31,773
---------- ---------- ---------- --------- -----------
Net revenues 130,847 (24,170) 201,423 308,100
---------- ---------- ---------- --------- -----------
OPERATING EXPENSES:
Station operating expenses exclud-
ing depreciation and amortization 229,099 (67,641) 208,153 369,611
Depreciation and amortization 47,447 (35,744) 4,308 40,889 (2) 56,900
Corporate general and
administrative expenses 22,804 - - - 22,804
---------- ---------- ---------- --------- -----------
Total Operating Expenses 299,350 (103,385) 212,461 40,889 449,315
---------- ---------- ---------- --------- -----------
Operating Income (Loss) (168,503) 79,215 (11,038) (40,889) (141,215)
---------- ---------- ---------- --------- -----------
Other Income (Expense):
Other income (expense) (45,432) 80,000 (7,761) 26,807
Interest expense (12,075) - (13,877) - (25,752)
---------- ---------- ---------- --------- -----------
Total Other Income (Expense) (57,507) 80,000 (21,638) - 855
---------- ---------- ---------- --------- -----------
Net (Loss) $(226,010) $ 159,215 $ (32,676) $(40,889) $(140,360)
========== ========= ========== ========= ==========
Net (Loss) per Common Share $ (0.29) $ (0.14)
========== ==========
Total Number of Common
Shares Outstanding 793,008 793,008
======= =======
</TABLE>

The accompanying notes are an integral part of the financial statements.

<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC.

NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)

(A) GENERAL
-------
The Company entered into a contract to sell radio station KHSL AM-FM for
$1,266,000 cash and a note receivable of $200,000. From the sale proceeds
$826,339 of notes payable are expected to be paid. Since execution of the sale
agreement, the radio station has been operated by the prospective purchaser
under a LMA. Closing of this transaction is pending regulatory approval.

(B) PRO FORMA INFORMATION
---------------------
The proforma balance sheet as of September 30, 1996 gives effect to the above
transaction.

The pro forma statement of operations gives effect to the operations of KHSL-
AM/FM for the six months ended September 30, 1996 being excluded and the
operations of KNNN-FM for the six months ended September 30, 1996 being
included.

(2) To record the amortization of the purchased license cost of KNNN.

<PAGE>
<PAGE>
REDWOOD MICROCAP FUND, INC.

FINANCIAL STATEMENTS
<PAGE>
<PAGE>
REDWOOD MICROCAP FUND, INC.
and CONSOLIDATED SUBSIDIARIES

FINANCIAL STATEMENTS

As of and for the Six Months Ended September 30, 1995

TABLE OF CONTENTS
-----------------
Page

Financial Statements:

Statement of Investments in Unaffiliated Issuers
as of September 30, 1995 F-57

Statement of Investments in Affiliated Issuers
as of September 30, 1995 F-58

Assets and Liabilities as of September 30, 1995 F-59

Capital Stock and Accumulated Gain as of
September 30, 1995 F-60

Statement of Operations for Six Months Ended
September 30, 1995 F-61

Statement of Cash Flows for the Six Months Ended
September 30, 1995 F-62

Statements of Changes in Net Assets for the Years
Ended March 31, 1995, 1994 and the Six Months
Ended September 30, 1995 Unaudited F-63

Notes to Financial Statements F-63

Financial Highlights F-66

<PAGE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS IN UNAFFILIATED ISSUERS AS OF SEPTEMBER 30, 1995
- -----------------------------------------------------------------------------
<CAPTION>
UNITS,
SHARES OR
WARRANTS COMMON STOCKS AND PREFERRED STOCKS - 20.19%(d) VALUE(a)
- ------------ ---------------------------------------------- ------------

COMMON STOCKS
-------------
<S> <C> <C>
Communications -.00%
12,110 Discovery Technologies, Inc. (class "C" warrants) 0
------------
Entertainment - .35%
22,360 Global Casinos, Inc. (b) 6,987
------------
Medical Services & Research - 5.58%
50,000 Immucell, Inc. 112,500
------------

Retail - 00%
65,800 Bali Jewelry Ltd. 0
------------

PREFERRED STOCKS
----------------
Entertainment - 9.92%
125,000 Global Casinos, Inc. (b)
(Convertible Preferred) 200,000
------------

Manufacturing - 4.34%
171,569 Optek Music Systems, Inc.
Series A Convertible Non-voting (b) 87,500
------------

TOTAL COMMON AND PREFERRED STOCKS (COST $533,283) $ 406,987
------------

/TABLE
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS AS OF SEPTEMBER 30, 1995
- -----------------------------------------------------------------------------
<CAPTION>
SHARES Common Stocks - 61.86% (c)(d) VALUE(a)
- ---------- ---------------------------------------------- ------------
<S> <C> <C>
696,617 Airsoft, Inc. (b) $ 81,435
650,000 California Progressions, Inc. (b) 65,000
68,000 Intelligent Financial Holdings Corporation (b) 81,600
172,500 Premier Concepts, Inc. (b) 160,418
47,360 Premier Concepts, Inc. 35,520
76,250 Premier Concepts, Inc. - warrants (b) 0
195,370 Redwood Broadcasting, Inc. (b) 160,997
500,000 Redwood Energy, Inc.- Escrow (b) 3,676
530,919 Redwood Energy, Inc.-Seed (b) 98,100
50 Redwood Properties, Inc. (b) 10,037
501 TDP Energy Company (b) 550,000
------------
1,246,783
------------
PRINCIPAL Corporate Notes - 14.91%
- --------- ------------------------
$ 150,447 Buttes Energy Company, 6% quarterly,
due on demand (b) 150,477

85,944 Northpark Office Building, 50% of cash flow,
payable monthly, due on demand 150,000
------------
300,477
------------
Other Investments - 4.22%(d)
----------------------------
14,384 Los Molinos Broadcasting 60,000
14,851 Northern California Broadcasting 14,851
10,250 Palo Verde Group 10,250
------------
85,101
------------

Total Investments in Securities, Corporate Notes and Other
Investments of Affiliated Issuers (cost $1,139,761) $ 1,632,361
------------
Total Investments In Securities of Unaffiliated
Issuers (cost $533,283) 20.19 % $ 406,987
Total Investments In Securities of Affiliated
Issuers (cost $1,139,761) 80.99 % 1,632,361
-------- ------------
Total Investments In Securities 101.18 % 2,039,348
Other Liabilities, Net of Assets (1.18)% (23,879)
-------- ------------
TOTAL NET ASSETS 100.00 % $ 2,015,469
======== ===========

(a) See Note 1 of notes to financial statements.
(b) Restricted security, see Note 2 of notes to financial statements.
(c) See Note 3 of notes to financial statements.
(d) Non-income producing securities

/TABLE
<PAGE>
<PAGE>
<TABLE>
ASSETS AND LIABILITIES AS OF SEPTEMBER 30, 1995
- -----------------------------------------------------------------------------
<CAPTION>
NOTES
ASSETS -----
- ------
<S> <C> <C>
Investments in Securities:
- -------------------------
Investments in securities of unaffiliated
issuers (identified cost $533,283) 2,3,4 $ 406,987
Investments in securities of affiliated
issuers (identified cost $1,139,761) 2,3,4 1,632,361
------------
Total 2,039,348
------------
Cash and Equivalents 28,132

Other Receivables 6 232,938

Other Assets 5,881
------------
Total Assets 2,306,299
------------

LIABILITIES
- -----------
Payables:
- --------
Accounts payable 42,035
Payable to officers & affiliates 6 77,076
Other payables 19,091
Deferred tax liability 5 108,000
Income tax payable 5 19,628
Note payable 7 25,000
------------
Total Liabilities 290,830
------------

Net Assets $ 2,015,469
===========
Net Asset Value Per Share $ .916
===========

</TABLE>
<PAGE>
<PAGE>
<TABLE>
CAPITAL STOCK AND ACCUMULATED GAIN AS OF SEPTEMBER 30, 1995
- -----------------------------------------------------------------------------
<CAPTION>

NOTES
-----
<S> <C>
Common Stock, $.001 par value, 500,000,000
shares authorized, 2,337,219 issued;
2,200,000 outstanding $ 2,200
------------
Treasury stock - at cost, 137,219 shares (25,439)
------------
Additional paid-in capital 1,865,545
------------
Net Accumulated Gain:
- --------------------
Net Investment loss (1,775,146)
Accumulated net realized gain 1,582,005
Net unrealized appreciation of investments 4 366,304
------------
Net Accumulated Gain 173,163
------------

Total Capital Stock and Accumulated Gain $ 2,015,469
============

</TABLE>
See notes to financial statements

<PAGE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995
- -----------------------------------------------------------------------------

<S> <C>
Investment Income:
- -----------------
Interest income from affiliated companies $ 7,354
Interest income from nonaffiliated companies 6
Consulting income 33,000
Other Income 5,850
------------
Total Income 46,210
------------
Expenses:
- --------
Salaries 76,812
Professional fees 26,027
Office expense 20,071
Reports to shareholders 1,814
Insurance 8,921
Interest 4,276
Custodian fees 792
Travel 5,262
Other 2,680
------------
Total expenses 146,655
------------
Net Investment Loss (100,445)
------------

Net Realized Gain and Unrealized Appreciation on Investments:
- ------------------------------------------------------------
Net realized gain from investment transactions 21,258
Unrealized appreciation of investments 130,909
------------

Net Realized Gain and Unrealized Appreciation on Investments 152,167
------------
Net Increase in Net Assets From Operations Before Tax 51,722

Income Tax Provision 0
------------
Net Increase in Net Assets From Operations $ 51,722
===========

</TABLE>
See notes to financial statements

<PAGE>
<PAGE>
<TABLE>
CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1995
- -----------------------------------------------------------------------------

<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
Net increase in Net Assets from Operations $ 51,722
Adjustments to reconcile net increase in
net assets to cash used in operations:
Unrealized appreciation of investments (130,909)
Net realized gain from investment transactions (21,258)

Change in:
Other assets 69
Accounts Payable 13,180
Other Receivables (201,525)
Other Payables (7,041)
Income Tax Payable (2,645)
------------
Cash used in Operating Activities (298,407)

CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Purchase of Investments (103,815)
Proceeds from Sale of Investments 191,712
Proceeds from Note Receivable 110,196
------------
Cash Provided by Investing Activities 198,093

CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Principle payment on Note Payable (50,000)
Proceeds from Loans with Affiliates & Officers 51,980
Proceeds from sale of common stock 201,650
Principal payments on loans with Affiliates & Officers (81,983)
------------
Cash Provided by Financing Activities 121,647

NET INCREASE IN CASH AND CASH EQUIVALENTS 21,333

CASH AND CASH EQUIVALENT AT BEGINNING OF PERIOD 6,799
------------
CASH AND CASH EQUIVALENT AT END OF PERIOD $ 28,132
===========

Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for interest was $ 4,276
=======

</TABLE>
<PAGE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED MARCH 31, 1995, 1994
AND THE SIX MONTHS ENDED SEPTEMBER 30, 1995 UNAUDITED
- -----------------------------------------------------------------------------
<CAPTION>
(Unaudited)
For the
Six Months Ended
NOTES September 30, 1995 1995 1994
----- ------------------ ------------ ------------
From Operations:
- ---------------
<S> <C> <C> <C> <C>
Net investment income/(loss) (100,445) $ (53,465) $ 82,849
Net realized gain/(loss) from
investment transactions 21,258 (20,313) 1,120,938
Net change in unrealized
appreciation/(depreciation)
of investments 130,909 348,014 (459,854)

Income tax provision 5 0 (100,849) (26,500)
------------ ------------ ------------
Net increase in net assets from
operations 51,722 173,387 717,433
Capital Stock issuance 201,650

Net Assets-beginning of period 1,762,097 1,588,710 871,277
------------ ------------ ------------
Net Assets-end of period $ 2,015,469 $ 1,762,097 $ 1,588,710
=========== =========== ===========
</TABLE>

See notes to financial statements.

<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Redwood MicroCap Fund, Inc., (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a closed-end investment company. The Fund
invests in a broad range of small speculative stocks traded in the
over-the-counter market, real estate, radio broadcasting, and the petroleum
industry. The following is a summary of significant accounting policies
followed by the Fund in the preparation of its financial statements.

Investment Valuation -
--------------------
Investments in securities traded in the over-the-counter market are valued
at the reported sales prices as obtained from NASDAQ, or at the bid prices from
the brokers that make markets in such securities, on the last business day of
the year. Investments in securities traded on national exchanges are valued at
last reported sales prices. Investments in restricted securities, corporate
notes, other investments, and in securities which are thinly traded totaling
$1,845,248 are valued at their fair value as determined in good faith under
procedures established by and under the direction of the Fund's Board of
Directors.

Federal Income Taxes -
--------------------
The Fund has not elected to be treated for Federal tax purposes as a
"regulated investment company" under Subchapter M of the Internal Revenue Code.
Consequently, investment income and realized capital gains are taxed to the
Fund at the tax rates applicable to corporations.

On April 1, 1993, the Fund adopted SFAS No. 109, "Accounting for Income
Taxes." Under SFAS 109, a current or deferred income tax liability or asset is
recognized for timing differences which exist in the recognition of certain
income and expense items for financial statement reporting purposes in periods
different than for tax reporting purposes. The provision for income taxes is
based on the amount of current and deferred income taxes payable or refundable
at the date of the financial statements as measured by the provisions of
current tax laws.

Other -
-----
Investment transactions are accounted for on the date the investments are
purchased or sold (trade date). Realized gains and losses from investment
transactions and unrealized appreciation and depreciation of investments are
reported on a first-in, first-out basis.

Statement of Cash Flows -
-----------------------
The Fund considers all highly liquid investments with maturities of three
months or less to be cash equivalents.

<PAGE>
<PAGE>
2. RESTRICTED SECURITIES
---------------------
Restricted securities are those securities which have been acquired from an
issuer without registration under the Securities Act of 1933. Restricted
securities generally cannot be sold by the Fund except pursuant to an effective
registration or in compliance with Rule 144 of the Securities Act of 1933.
Valuations for such securities, as well as certain thinly-traded securities and
corporate notes, have been determined in good faith by the Fund's Board of
Directors. The following schedule provides certain information with respect to
restricted securities held by the Fund as of September 30, 1995, which
securities comprised 82.18% of the Fund's net assets at such time:

<TABLE>
<CAPTION>
Date of Fair
Description Acquisition Cost Value
- ----------- ----------------- ----------- ------------
<S> <C> <C> <C>
Airsoft, Inc. February 1, 1993 $ 81,435 $ 81,435
Buttes Energy Company December 22, 1993 150,477 150,477
California Progressions, Inc. November 21, 1994 65,000 65,000
Global Casinos, Inc. March 15, 1994 0 6,987
Global Casinos
(Convertible preferred) May 17, 1994 250,000 200,000
Intelligent Financial
Holding Corp. July 7, 1995 81,600 81,600
Optek Music Systems August 27, 1993 178,383 87,500
Premier Concepts, Inc. February 28, 1994 160,418 160,418
Premier Concepts, Inc. -
warrants September 1, 1994 0 0
Redwood Broadcasting, Inc. June 15, 1993 160,997 160,997
Redwood Energy, Inc. -Escrow June 29, 1994 3,676 3,676
Redwood Energy, Inc. -Seed June 29, 1994 98,100 98,100
Redwood Properties, Inc. April 16, 1992 40,494 10,037
TDP Energy Company December 22, 1993 84,429 550,000
----------- -----------
Total $ 1,355,009 $ 1,656,227
=========== ===========
</TABLE>

With the exception of Global Casinos, Inc. and Premier Concepts, Inc., the
Fund has no right to require registration of the above restricted securities.
As of September 30, 1995, the Fund's investments in restricted securities
comprised approximately 71.81% of the value of its total assets.

3. INVESTMENTS IN SECURITIES OF AFFILIATED ISSUERS
-----------------------------------------------
For the six months ended September 30, 1995, the Fund holds either an indirect
or direct ownership of 5 percent or more of the following securities:

<TABLE>
<CAPTION>
Fair
Description Cost Value Purchases
- ---------------- ------------ ----------- ----------
<S> <C> <C> <C>
Common Stock:
- ------------
Airsoft, Inc. $ 81,435 $ 81,435 $ -
California Progressions, Inc. 65,000 65,000
Intelligent Financial Holding Corp. 81,600 81,600 19,320
Premier Concepts, Inc. 248,125 195,938 5,000
Redwood Broadcasting, Inc. 160,997 160,997
Redwood Energy, Inc. 101,776 101,776 2,250
Redwood Properties, Inc. 40,494 10,037
TDP Energy Company 84,429 550,000
----------- -----------
863,856 1,246,783
------------ -----------
Corporate Notes:
- ---------------
Buttes Energy Company 150,477 150,477
Northpark Office Building 85,944 150,000
------------ -----------
236,421 300,477
------------ -----------
Other Investments:
- -----------------
Los Molinos Broadcasting 14,383 60,000 116
Northern California Broadcasting 14,851 14,851 14,851
Palo Verde Group 10,250 10,250
--------- ---------
$ 39,484 $ 85,101
========== ==========
</TABLE>

4. UNREALIZED GAINS AND LOSSES
---------------------------
At September 30, 1995 the net unrealized appreciation of investments of
$366,304 was comprised of gross appreciation of $600,902 for those investments
having an excess of value over cost and gross depreciation of $234,598 for
those investments having an excess of cost over value.

5. INCOME TAX
----------
The Fund adopted Statement of Financial Accounting Standards No. 109,
"Accounting For Income Taxes," as of April 1, 1993. The Fund had previously
utilized SFAS No. 96. Adoption of SFAS No. 109 on April 1, 1993, had no
cumulative effect.

The temporary differences, tax effected, which give rise to the company's net
deferred tax assets as of September 30, 1995 are as follows:

<TABLE>
<S> <C>
Deferred Tax Assets:
- -------------------
State Net Operating Loss $ 11,000
Federal Net Operating Loss 30,000

Deferred Tax Liabilities:
- ------------------------
Accretion of discount on investment 69,000
Unrealized Gain 80,000
---------
Net Deferred Tax Liability $ 108,000
=========
</TABLE>

6. TRANSACTIONS WITH OFFICERS AND AFFILIATES
-----------------------------------------
At September 30, 1995 the Chief Financial Officer owes the Fund $7,723 for
moving expenses which were paid by the Fund.

As of September 30, 1995 the fund had advanced $183,092 to Redwood Broadcasting
Inc. an affiliated Company.

In addition, several affiliated companies which are included in the Fund's
investment portfolio at September 30, 1995, have advanced the Fund cash during
the current year and the balance at September 30, 1995 is $47,751.

At September 30, 1995, the Fund owes $29,325 to the President of the Fund for
advances made to the Fund during the six months ended September 30, 1995.

7. NOTE PAYABLE
------------
Note Payable at September 30, 1995, consists of borrowings from a bank of
$25,000 bearing interest at a rate of 11.5%. This note was retired on October
18, 1995.

<PAGE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
<CAPTION>
(Unaudited)
For the Six
Months Ended
September 30, ----For the Years Ended March 31----
1995 1995 1994 1993 1992
------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share:
- ---------
Income from investments $ .021 $ .105 $ .158 $ .005 $ .001
Expenses (.067) (.183) .129 .074 .052
------- ------- ------ ------ ------
Net investment income (loss) (.046) (.078) .029 .069 .051
Net realized gain and net change in
unrealized appreciation of investments .069 .166 .335 .136 .255
Purchase of treasury stock 0 .000 .000 .000 .002
------- ------- ------ ------ ------
.069 .166 .335 .136 .257

Net increase in net asset value .023 .088 .364 .067 .206
Net asset value:
Beginning of period .893 .805 .441 .374 .168
------- ------- ------ ------ ------
End of period $ .916 $ .893 $ .805 $ .441 $ .374
======= ====== ====== ====== ======

Total investment return (1) 2.58% 10.91% 86.25% 36.87% 96.53%

Ratios:
Expenses to average net assets 8.10% 14.07% 20.26% 19.41% 19.00%
Expenses to income 317.37% 125.95% 73.38% 1409.00% 6130.00%
Net investment income/loss to
average net assets (5.55)% (2.90)% 7.35% (18.03)% (19.00)%

Portfolio turnover rate (2) 5.11% 29.88% 329.91% 149.73% 579.42%

- ------------------------------

(1) Based on the change in net asset value since there has been no
distributions during the period presented. The Fund does not believe that
a presentation based on changes in the market value of the Funds' common
stock is appropriate considering the limited market for its stock.

(2) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended September 30, 1995, were
$103,815 and $280,651, respectively.

</TABLE>
See notes to financial statements

<PAGE>
<PAGE>
REDWOOD MICROCAP FUND, INC.
and CONSOLIDATED SUBSIDIARIES

FINANCIAL STATEMENTS

and

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As of and for the Year Ended March 31, 1996

TABLE OF CONTENTS
-----------------
Page
----

Report of Independent Certified Public
Accountants F-68

Financial Statements:

Statement of Investments in Unaffiliated
Issuers as of March 31, 1996 F-69

Statement of Investments in Affiliated
Issuers as of March 31, 1996 F-69

Assets and Liabilities as of
March 31, 1996 F-71

Capital Stock and Accumulated Gain
as of March 31, 1996 F-71

Statement of Operations for
Year Ended March 31, 1996 F-72

Statement of Cash Flows for
the Year Ended March 31, 1996 F-73

Statements of Changes in
Net Assets for the Years
Ended March 31, 1996 and 1995 F-74

Notes to Financial Statements F-74

Financial Highlights F-77
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders,
Redwood MicroCap Fund, Inc.

We have audited the accompanying statement of assets and liabilities, including
the statements of investments in affiliated and unaffiliated issuers, and of
capital stock and accumulated gain of Redwood MicroCap Fund, Inc. (the Fund) as
of March 31, 1996, and the related statements of operations, cash flows and
changes in net assets for the year then ended, and the financial highlights for
the year ended March 31, 1996. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and the financial
highlights based on our audit. The statement changes in net assets of Redwood
MicroCap Fund, Inc. for the year ended March 31, 1995 and the financial
highlights for each of the four years in the period ended March 31, 1995 were
audited by other auditors whose report dated May 12, 1995, on those statements
included an explanatory paragraph that described the estimation of values of
securities without readily ascertainable market values discussed in Note 1 to
the financial statements.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned at March 31, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by the management, as well as the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the 1996 financial statements and financial highlights present
fairly, in all material respects, the financial position of Redwood MicroCap
Fund, Inc. at March 31, 1996, the results of its operations and its cash flows,
the changes in its net assets, and the financial highlights for the year then
ended in conformity with generally accepted accounting principles.

As explained in Note 1, the financial statements include securities valued at
$2,410,472 at March 31, 1996, representing 115% of net assets, whose values
have been estimated by the Board of Directors in the absence of readily
ascertainable market values. We have reviewed the procedures used by the Board
of Directors in arriving at their estimate of value of such securities and have
inspected underlying documentation, and in the circumstances, we believe the
procedures are reasonable and the documentation appropriate. However, because
of the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market for
the securities existed, and the differences could be material.

STOCKMAN KAST RYAN & SCRUGGS, P.C.

Colorado Springs, Colorado
May 24, 1996<PAGE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS IN UNAFFILIATED ISSUERS AS OF MARCH 31, 1996
- -----------------------------------------------------------------------------
<CAPTION>
SHARES
OR
UNITS VALUE(a)
- ----------- -------------
COMMON STOCK - .37%
-------------------
<S> <C> <C>
Entertainment - .37%
22,360 Global Casinos, Inc. $ 7,686
-------------

PREFERRED STOCKS - 11 .37%
--------------------------
Entertainment - 7.18%
125,000 Global Casinos, Inc. (b)
(Convertible Preferred) 150,000

Manufacturing - 4.19%
171,569 Optek Music Systems, Inc.
Series A Convertible Non-voting (b) 87,500
-------------

TOTAL PREFERRED STOCKS 237,500
-------------

OPTIONS - .37%
--------------
Medical - .37%
10,000 Immucell Corporation - options 7,774
-------------

TOTAL INVESTMENTS IN SECURITIES OF UNAFFILIATED
ISSUERS (COST $428,833) $ 252,960
-------------
</TABLE>

<PAGE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS AS OF MARCH 31, 1996 (c)
- -----------------------------------------------------------------------

COMMON STOCKS - 76.86%
----------------------
<S> <C> <C>
Communications - 25.07%
846,617 AirSoft, Inc. (b) $ 81,435
429,270 Redwood Broadcasting, Inc. (b) 442,397
-------------
523,832
-------------
Oil & Gas - 41.34%
500,000 Redwood Energy, Inc. - Escrow (b) 3,676
838,746 Redwood Energy, Inc. - Seed (b) 185,111
501 TDP Energy Co. (b) 675,000
-------------
863,787
-------------
Retail - 10.45%
650,000 California Progression, Inc. (b) 65,000
42,360 Premier Concepts, Inc. 21,180
352,500 Premier Concepts, Inc. (b) 132,187
-------------
218,367
-------------
TOTAL COMMON STOCKS 1,605,986
-------------

MISCELLANEOUS INVESTMENTS - 27.77%
----------------------------------
<S> <C> <C> <C>
PRINCIPAL Corporate Notes - 11.63%
- --------- ------------------------
$ 93,014 Buttes Energy Company, 6% quarterly,
due on demand (d) 93,014

85,944 Northpark Office Building, 50% of cash flow,
payable monthly, due on demand (d) 150,000
-------------
243,014
-------------
Other Investments - 3.36%
-------------------------
14,614 Los Molinos Broadcasting 60,000
22,706 Northern California Broadcasting 0
10,250 Palo Verde Group 10,250
-------------
70,250
-------------
Advances to Affiliates - 12.78%
-------------------------------
202,238 Redwood Broadcasting, Inc. 202,238
64,890 Palo Verde Group 64,890
-------------
267,128
-------------
Total Investments in Securities, Corporate Notes and Other
Investments of Affiliated Issuers (cost $1,627,015) $ 2,186,378
-------------

Total Investments In Securities of Unaffiliated
Issuers (cost $428,833) 12.11% $ 252,960
Total Investments In Securities of Affiliated
Issuers (cost $1,627,015) 104.63% 2,186,378
--------- ------------
Total Investments 116.74% 2,439,338
Other Liabilities, Net of Assets (16.74)% (349,729)
--------- ------------
TOTAL NET ASSETS 100.00% $ 2,089,609
======= ===========
- --------------------------

(a) See Note 1 of notes to financial statements and report of independent
auditors.
(b) Restricted security, see Note 2 of notes to financial statements.
(c) See Note 3 of notes to financial statements.
(d) Income producing securities

/TABLE
<PAGE>
<PAGE>
<TABLE>
ASSETS AND LIABILITIES AS OF MARCH 31, 1996
- -----------------------------------------------------------------------------
<CAPTION>
NOTES
ASSETS -----
- ------
<S> <C> <C>
Investments in Securities:
Investments in securities of unaffiliated
issuers (identified cost $428,833) 2,4 $ 252,960
Investments in securities of affiliated
issuers (identified cost $1,359,887) 2,3,4 1,919,250
Advances to affiliates 6 267,128
-------------
Total 2,439,338
-------------

Cash and equivalents 14,392

Other receivables 16,000

Other assets 5,971
-------------
Total 2,475,701
-------------

LIABILITIES
- -----------
Accounts payable 41,414
Payable to officers & directors 6 138,241
Investment securities purchased 22,325
Other payables 30,385
Deferred income tax liability 5 90,000
Income tax payable 5 3,727
Note payable 7 60,000
-------------
Total 386,092
-------------
Net Assets $ 2,089,609
============
Net Asset Value Per Share $ .858
============
</TABLE>
<PAGE>
<PAGE>
<TABLE>
CAPITAL STOCK AND ACCUMULATED GAIN AS OF MARCH 31, 1996
- -----------------------------------------------------------------------------
<CAPTION>
NOTES
-----
<S> <C> <C>
Common Stock, $.001 par value, 500,000,000
shares authorized, 2,436,448 issued
and outstanding 8 $ 2,436
-------------
Additional paid-in capital 2,047,791
-------------

Net Accumulated Gain:
Net investment loss (1,861,935)
Accumulated net realized gain 1,517,827
Net unrealized appreciation of investments 4 383,490
-------------
Net accumulated gain 39,382
-------------
Total Capital Stock and Accumulated Gain $ 2,089,609
============
</TABLE>

See notes to financial statements and report of independent auditors.<PAGE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 1996
- -----------------------------------------------------------------------------
<CAPTION>
NOTES
Investment Income: -----
- -----------------
<S> <C> <C>
Consulting income from affiliated companies $ 44,000
Interest income from affiliated companies 11,012
Consulting income from nonaffiliated companies 9 8,333
Option income 5,850
Other income 4,950
Interest income from nonaffiliated companies 11
-------------
Total 74,156
-------------
Expenses:
- --------
Salaries 160,938
Office expense 20,516
Legal fees 19,536
Insurance 16,233
Telephone and telefax 15,313
Audit and accounting fees 14,400
Travel 10,402
Loan fees 6,934
Reports to shareholders 3,511
Outside services 2,879
Custodian fees 1,534
Other 7,194
-------------
Total 279,390
-------------
Net Investment Loss (205,234)
-------------

Net Realized Loss and Unrealized Appreciation on Investments:
- ------------------------------------------------------------
Net realized loss from investment transactions in
investments in affiliated issuers (51,552)
Net realized gain from investment transactions in
investments in unaffiliated issuers 8,632
Unrealized appreciation of investments 148,095
-------------
Net Realized Loss and Unrealized Appreciation
on Investments 105,175
-------------
Net Decrease in Net Assets From Operations
Before Income Tax (100,059)

Deferred Income Tax Benefit 5 18,000
-------------
Net Decrease in Net Assets From Operations $ (82,059)
=============
</TABLE>

See notes to financial statements and report of independent auditors.<PAGE>
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 1996
- -----------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
<S> <C>
Net decrease in net assets from operations $ (82,059)
Adjustments to reconcile net decrease in net
assets to cash used in operations:
Unrealized appreciation of investments (148,095)
Net realized loss from investment transactions 42,920
Decrease in deferred tax liability (18,000)

Change in:
Other receivables 15,413
Other assets (21)
Accounts payable and other liabilities 39,137
Income tax payable (18,546)
-------------
Net cash used in operating activities (169,251)

CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Purchase of investments (268,154)
Proceeds from sale of investments 298,734
Principal payments on note receivable 167,659
Advances to affiliates (763,816)
Repayments of advances to affiliates 316,688
-------------
Net cash used in investing activities (248,889)

CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Proceeds of borrowings from banks 435,000
Principal repayments of borrowings from banks (450,000)
Advances from officers and affiliates 745,211
Repayment of advances from officers and affiliates (696,124)
Issuance of common stock 391,646
-------------
Cash provided by financing activities 425,733

NET INCREASE IN CASH AND CASH EQUIVALENTS 7,593

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 6,799
-------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 14,392
============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest was $ 6,684
=============
Cash paid during the period for income taxes was $ 18,546
=============
Non-Cash Investing Activity:
Redwood Broadcasting, Inc. stock received in
exchange for forgiveness of receivable $ 180,000
=============
Non-Cash Financing Activity:
Common stock issued in exchange for forgiveness
of payable $ 17,925
=============
</TABLE>
See notes to financial statements and report of independent auditors. <PAGE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED MARCH 31, 1996 & 1995
- -----------------------------------------------------------------------------
<CAPTION>
NOTES 1996 1995
----- ------------ ------------
From Operations:
- ---------------
<S> <C> <C> <C>
Net investment loss $ (205,234) $ (53,465)
Net realized loss from investment
transactions (42,920) (20,313)
Net change in unrealized
appreciation/(depreciation)
of investments 148,095 348,014
Income tax benefit/(provision) 5 18,000 (100,849)
------------- ------------
Net increase in net assets
from operations (82,059) 173,387

Capital share transactions 409,571

Net Assets-beginning of period 1,762,097 1,588,710
------------- ------------
Net Assets-end of period $ 2,089,609 $ 1,762,097
============ ===========
</TABLE>

See notes to financial statements and report of independent auditors.

<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

Investment Valuation -
--------------------
Investments in securities traded in the over-the-counter market are valued
at the reported sales prices as obtained from NASDAQ, or at the bid prices from
the brokers that make markets in such securities, on the last business day of
the year. Investments in securities traded on national exchanges are valued at
last reported sales prices. Investments in restricted securities, corporate
notes, other investments, and in securities which are thinly traded totaling
$2,410,472 are valued at their fair value as determined in good faith under
procedures established by and under the direction of the Fund's Board of
Directors.

The Fund accounts for income taxes in accordance with the Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, a current or deferred income tax liability or asset is
recognized for timing differences which exist in the recognition of certain
income and expense items for financial statement reporting purposes in periods
different than for tax reporting purposes. The provision for income taxes is
based on the amount of current and deferred income taxes payable or refundable
at the date of the financial statements as measured by the provisions of
current tax laws.

Statement of Cash Flows -
-----------------------
The Fund considers all highly liquid investments with maturities of three
months or less to be cash equivalents.

2. RESTRICTED SECURITIES
---------------------
Restricted securities are those securities which have been acquired from an
issuer without registration under the Securities Act of 1933. Restricted
securities generally cannot be sold by the Fund except pursuant to an effective
registration or in compliance with Rule 144 of the Securities Act of 1933.
Valuations for such securities, as well as certain thinly-traded securities and
corporate notes, have been determined in good faith by the Fund's Board of
Directors. The following schedule provides certain information with respect to
restricted securities held by the Fund as of March 31, 1996, which securities
comprised 87.21% of the Fund's net assets at such time:
<PAGE>
<TABLE>
<CAPTION>
Date of Fair
Description Acquisition Cost Value
- ----------- ---------------- ----------- -----------
<S> <C> <C> <C>
AirSoft, Inc. February 1, 1993 $ 81,435 $ 81,435
California Progressions, Inc. November 21, 1994 65,000 65,000
Global Casinos
(Convertible preferred) May 17, 1994 250,000 150,000
Optek Music Systems August 27, 1993 178,833 87,500
Premier Concepts, Inc. February 28, 1994 205,418 132,187
Redwood Broadcasting, Inc. June 15, 1993 442,397 442,397
Redwood Energy, Inc. -
Escrow June 29, 1994 3,676 3,676
Redwood Energy, Inc. - Seed June 29, 1994 176,953 185,111
TDP Energy Company December 22, 1993 84,429 675,000
----------- -----------
Total $ 1,488,141 $ 1,822,306
=========== ===========
</TABLE>

With the exception of Global Casinos, Inc. and Premier Concepts, Inc., the
Fund has no right to require registration of the above restricted securities.
As of March 31, 1996, the Fund's investments in restricted securities comprised
approximately 73.61% of the value of its total assets.

3. INVESTMENTS IN SECURITIES OF AFFILIATED ISSUERS
-----------------------------------------------
As of March 31, 1996, the Fund holds either an indirect or direct ownership of
5 percent or more of the following securities:

<TABLE>
<CAPTION>
Purchases
During the
Fair Year Ended
Description Cost Value March 31, 1996
- ---------------- ------------ ----------- --------------

Common Stock:
- ------------
<S> <C> <C> <C>
AirSoft, Inc. $ 81,435 $ 81,435
California Progressions, Inc. 65,000 65,000
Premier Concepts, Inc. 279,469 153,367 $ 62,600
Redwood Broadcasting, Inc. 442,397 442,397 281,400
Redwood Energy, Inc. 180,629 188,787 100,450
TDP Energy Company 84,429 675,000
----------- -----------
1,133,359 1,605,986
----------- -----------
Corporate Notes:
- ---------------
Buttes Energy Company 93,014 93,014
Northpark Office Building 85,944 150,000
----------- -----------
178,958 243,014
----------- -----------
<PAGE>
<PAGE>
Other Investments:
- -----------------
Los Molinos Broadcasting 14,614 60,000 346
Northern California Broadcasting 22,706 0 22,706
Palo Verde Group 10,250 10,250
----------- -----------
47,570 70,250
----------- -----------
Advances to Affiliates:
- ----------------------
Redwood Broadcasting, Inc. 202,238 202,238 202,238
Palo Verde Group 64,890 64,890 64,890
----------- -----------
$ 267,128 $ 267,128
----------- -----------
Total $ 1,627,015 $ 2,186,378
----------- -----------
</TABLE>

4. UNREALIZED GAINS AND LOSSES
---------------------------
At March 31, 1996 the net unrealized appreciation of investments of $383,490
was comprised of gross appreciation of $723,631 for those investments having an
excess of value over cost and gross depreciation of $340,141 for those
investments having an excess of cost over value.

5. INCOME TAX
----------
The temporary differences, tax effected, which give rise to the company's net
deferred tax liability as of March 31, 1996 are as follows:

<TABLE>
<CAPTION>
Deferred Tax Assets:
- -------------------
<S> <C>
Federal and state net operating loss $(88,000)

Deferred Tax Liabilities:
- ------------------------
Accretion of discount on investment 35,000
Unrealized Gain 143,000
---------
Net Deferred Tax Liability $ 90,000
========
</TABLE>

The Fund has net operating loss carryforwards of $187,000 and capital loss
carryforwards of $43,000 which begin expiring in 2010 and 2001, respectively.

6. TRANSACTIONS WITH OFFICERS AND AFFILIATES
-----------------------------------------
During 1996 the fund made advances to affiliated companies. At March 31, 1996,
the Fund had outstanding advances of $202,238 to Redwood Broadcasting Inc. and
$64,890 to Palo Verde Group.

At March 31, 1996, the Fund owed $92,337 to the President of the Fund and
$45,904 to a company owned by the President of the Fund for advances made to
the Fund during the year ended March 31, 1996.

7. NOTE PAYABLE
------------
At March 31, 1996, the Fund has a note payable to a bank with an outstanding
balance of $60,000. The note bears interest at 11.25% with interest payments
due monthly. Principal payments of $15,000 are due quarterly, commencing April
6, 1996, with all principal and interest due on January 6, 1997.

8. COMMON STOCK
------------
During the year ended March 31, 1996, the Fund issued 462,547 shares of common
stock in a private placement offering in exchange for $391,646 cash and
forgiveness of debt of $17,925.

9. CONSULTING AGREEMENT
--------------------
The Fund has a consulting agreement with an unrelated third party in which the
Fund is to be paid a minimum amount for consulting services to be performed by
the Fund's President. The Fund received $8,333 under the agreement during
fiscal 1996 and is to receive an additional $41,667 in fiscal 1997.

<PAGE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------
<CAPTION>
----For the Years Ended March 31----
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share:
- ---------
Income from investments $ .029 $ .105 $ .158 $ .005 $ .001
Expenses (.107) (.183) (.129) (.074) (.052)
------- ------- ------- ------- -------
Net investment income (loss) (.078) (.078) .029 (.069) (.051)
Net realized gain (loss) and net
change in unrealized appreciation
of investments .043 .166 .335 .136 .255
Purchase of treasury stock 000 .000 .000 .000 .002
------- ------- ------- ------- -------
.043 .166 .335 .136 .257
Net decrease in net asset
value (.035) .088 .364 .067 .206
Net asset value:
Beginning of period .893 .805 .441 .374 .168
------- ------- ------- ------- -------
End of period $ .858 $ .893 $ .805 $ .441 $ .374
======= ======= ======= ======= =======

Total investment return (1) (3.52)% 10.91% 86.25% 36.87% 96.53%

Ratios:
- ------
Expenses to average net assets 14.57% 14.07% 20.26% 19.41% 19.00%
Expenses to income 376.76% 125.95% 73.38% 1409.00% 6130.00%
Net investment income/(loss) to
average net assets (10.70)% (2.90)% 7.35% (18.03)% (19.00)%

Portfolio turnover rate (2) 21.63% 29.88% 329.91% 149.73% 579.42%

- ------------------------------

(2) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the year ended March 31, 1996, were $448,154
and $509,313, respectively.

</TABLE>

See notes to financial statements and report of independent auditors.

<PAGE>
<PAGE>
REDWOOD MICROCAP FUND, INC.
and CONSOLIDATED SUBSIDIARIES

FINANCIAL STATEMENTS

As of and for the Six Months Ended September 30, 1996

TABLE OF CONTENTS
-----------------
Page
----

Financial Statements:

Statement of Investments in Unaffiliated Issuers
as of September 30, 1996 F-79

Statement of Investments in Affiliated Issuers
as of September 30, 1996 F-79

Assets and Liabilities as of September 30, 1996 F-81

Capital Stock and Accumulated Gain as of
September 30, 1996 F-81

Statement of Operations for Six Months Ended
September 30, 1996 F-82

Statement of Cash Flows for the Six Months Ended
September 30, 1996 F-83

Statements of Changes in Net Assets for the Years
Ended March 31, 1996, 1995 and the Six Months
Ended September 30, 1996 Unaudited F-84

Notes to Financial Statements F-84

Financial Highlights F-88

<PAGE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS IN UNAFFILIATED ISSUERS AS OF SEPTEMBER 30, 1996
- -----------------------------------------------------------------------------
<CAPTION>
SHARES
OR
UNITS VALUE (a)
- ---------- ------------
COMMON STOCK - 51.95%
---------------------
<S> <C> <C>
Communications - 50.24%
36,895 Shiva Corporation (b) $ 1,587,592
4,099 Shiva Corporation - Escrow (b) 176,380
------------
1,763,972
------------
Entertainment - 1.71%
137,200 Global Casinos, Inc. (b) 60,025
------------
TOTAL COMMON STOCK 1,823,997
------------

PREFERRED STOCKS - 2.49%
------------------------
Manufacturing - 2.49%
171,569 Optek Music Systems, Inc.
Series A Convertible Non-voting (b) 87,500
------------
TOTAL PREFERRED STOCKS 87,500
------------

OPTIONS - .12%
--------------
Medical - .12%
10,000 Immucell Corporation - options 4,180
------------

TOTAL INVESTMENTS IN SECURITIES OF UNAFFILIATED
ISSUERS (COST $383,368) $ 1,915,677
------------

</TABLE>
<PAGE>
<PAGE>
<TABLE>
STATEMENT OF INVESTMENTS IN AFFILIATED ISSUERS AS OF SEPTEMBER 30, 1996
- -----------------------------------------------------------------------------

COMMON STOCKS - 60.58%
----------------------
<S> <C> <C>
Communications - 16.88%
475,441 Redwood Broadcasting, Inc. (b) $ 512,778
1,000 Los Molinos Broadcasting (b) 80,000
------------
592,778
------------
Oil & Gas - 35.84%
500,000 Redwood Energy, Inc. - Escrow (b) 3,676
838,746 Redwood Energy, Inc. - Seed (b) 204,444
501 TDP Energy Co. (b) 1,050,000
------------
1,258,120
------------
Retail - 7.86%
650,000 California Progressions, Inc. (b) 65,000
42,360 Premier Concepts, Inc. 29,123
352,500 Premier Concepts, Inc. (b) 181,749
------------
275,872
------------
TOTAL COMMON STOCKS 2,126,770
------------

MISCELLANEOUS INVESTMENTS - 14.24%
----------------------------------

PRINCIPAL Corporate Notes - 1.43%
- --------- -----------------------
$50,231 Buttes Energy Company, 6% quarterly,
due on demand (d) 50,231
------------

Other Investments - .54%
------------------------
22,706 Northern California Broadcasting 0
18,900 Palo Verde Group 18,900
-----------
18,900
------------
Advances to Affiliates - 12.27%
-------------------------------
326,999 Redwood Broadcasting, Inc. 326,999
78,890 Palo Verde Group 78,890
25,000 Northern California Broadcasting 25,000
------------
430,889
------------
Total Investments in Securities, Corporate Notes and Other
Investments of Affiliated Issuers (cost $1,652,582) $ 2,626,790
------------

Total Investments In Securities of Unaffiliated
Issuers (cost $383,368) 54.56% $ 1,915,677
Total Investments In Securities of Affiliated
Issuers (cost $1,652,582) 74.82% 2,626,790
--------- ------------
Total Investments 129.38% 4,542,467
Other Liabilities, Net of Assets (29.38)% (1,031,531)
--------- ------------
TOTAL NET ASSETS 100.00% $ 3,510,936
======= ===========

(a) See Note 1 of notes to financial statements
(b) Restricted security, see Note 2 of notes to financial statements
(c) See Note 3 of notes to financial statements
(d) Income producing securities

</TABLE>
<PAGE>
<PAGE>
<TABLE>
ASSETS AND LIABILITIES AS OF SEPTEMBER 30, 1996
- -----------------------------------------------------------------------------
<CAPTION>

ASSETS
- ------
Investments in Securities:
- -------------------------
<S> <C>
Investments in securities of unaffiliated
issuers (identified cost $383,368) $ 1,915,677
Investments in securities of affiliated
issuers (identified cost $1,221,693) 2,195,901
Advances to affiliates 430,889
------------
Total 4,542,467
------------
Cash and equivalents 44,760

Other receivables 25,518

Other assets 5,128
------------
Total 4,617,873
------------

LIABILITIES
- -----------
Accounts payable 56,062
Payable to officers & directors 27,317
Other payables 236,788
Deferred income tax liability 756,770
Note payable 30,000
------------
Total 1,106,937
------------
Commitments and Contingencies (Note 10)

Net Assets $ 3,510,936
===========
Net Asset Value Per Share $ 1.40
===========

/TABLE
<PAGE>
<PAGE>
<TABLE>
CAPITAL STOCK AND ACCUMULATED GAIN AS OF SEPTEMBER 30, 1996
- -----------------------------------------------------------------------------

<S> <C>
Common Stock, $.001 par value, 500,000,000
shares authorized, 2,500,000 issued
and outstanding $ 2,500
------------
Additional paid-in capital 2,103,083
------------
Net Accumulated Gain:
- --------------------
Net investment loss (2,631,942)
Accumulated net realized gain 1,530,778
Net unrealized appreciation of investments 2,506,517
------------
Net accumulated gain 1,405,353
------------

Total Capital Stock and Accumulated Gain $ 3,510,936
===========

</TABLE>
See notes to financial statements

<PAGE>
<PAGE>
<TABLE>
STATEMENT OF OPERATIONS FOR SIX MONTHS ENDED SEPTEMBER 30, 1996
- -----------------------------------------------------------------------------

Investment Income:
- -----------------
<S> <C>
Consulting income from affiliated companies $ 3,000
Interest income from affiliated companies 2,306
Consulting income from nonaffiliated companies 19,192
Option income 10,000
Interest income from nonaffiliated companies 1,667
------------
Total 36,165
------------
Expenses:
- --------
Salaries 71,250
Office expense 8,426
Legal fees 683
Insurance 6,798
Telephone and telefax 7,098
Audit and accounting fees 16,329
Travel 1,690
Reports to shareholders 1,730
Custodian fees 1,861
Other 23,537
------------
Total 139,402
------------

Net Investment Loss (103,237)
------------

Net Realized Loss and Unrealized Appreciation on Investments:
- ------------------------------------------------------------
Net realized loss from investment transactions in
investments in affiliated issuers (61,587)
Net realized gain from investment transactions in
investments in unaffiliated issuers 74,538
Unrealized appreciation of investments 2,123,026
------------
Net Realized Loss and Unrealized Appreciation
on Investments 2,135,977
------------
Net Increase in Net Assets From Operations
Before Income Tax 2,032,740

Deferred Income Tax Provision (666,770)
------------
Net Increase in Net Assets From Operations $ 1,365,970
===========

</TABLE>

See notes to financial statements

<PAGE>
<PAGE>
<TABLE>
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
- -----------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
- ------------------------------------
<S> <C>
Net increase in net assets from operations $ 1,365,970
Adjustments to reconcile net decrease in
net assets to cash used in operations:
Unrealized appreciation of investments (2,123,026)
Net realized gain from investment transactions (12,951)
Increase in deferred tax liability 666,770

Change in:
Other receivables (9,518)
Other assets 843
Accounts payable and other liabilities 221,051
Income tax payable (3,727)
------------

Net cash used in operating activities 105,412

CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Purchase of investments (22,325)
Proceeds from sale of investments 140,875
Principal payments on note receivable 48,784
Advances to affiliates 294,294
Repayments of advances to affiliates (459,470)
------------
Net cash used in investing activities 2,158

CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Principal repayments of borrowings from banks (30,000)
Repayment of advances from officers and affiliates (47,202)
------------
Cash provided by financing activities (77,202)

NET INCREASE IN CASH AND CASH EQUIVALENTS 30,368

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 14,392
------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 44,760
===========

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest was $ 2,635
===========
Cash paid during the period for income taxes was $ 3,727
===========
Non-Cash Financing Activity:
Common stock issued in exchange for
forgiveness of payable $ 55,357
===========
</TABLE>

See notes to financial statements<PAGE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEARS ENDED MARCH 31,1996, 1995
AND THE SIX MONTHS ENDED SEPTEMBER 30, 1996 UNAUDITED
- -----------------------------------------------------------------------------
<CAPTION>
(Unaudited)
For the
Six Months Ended
NOTES September 30, 1996 1996 1995
----- ------------------ ------------ ------------
From Operations:
- ---------------
<S> <C> <C> <C> <C>
Net investment loss $ (103,237) $ (205,234) $ (53,465)
Net realized gain/loss from
investment transactions 12,951 (42,920) (20,313)
Net change in unrealized
appreciation/(depreciation)
of investments 2,123,026 148,095 348,014

Income tax benefit/(provision) 5 (666,770) 18,000 (100,849)
------------ ------------ ------------
Net increase in net assets
from operations 1,365,970 (82,059) 173,387

Capital share transactions 55,357 409,571

Net Assets-beginning of period 2,089,609 1,762,097 1,588,710
------------ ------------ ------------

Net Assets-end of period $ 3,510,936 $ 2,089,609 $ 1,762,097
=========== =========== ==========
</TABLE>
See notes to financial statements

<PAGE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------

Investment Valuation -
--------------------
Investments in securities traded in the over-the-counter market are valued
at the reported sales prices as obtained from NASDAQ, or at the bid prices from
the brokers that make markets in such securities, on the last business day of
the year. Investments in securities traded on national exchanges are valued at
last reported sales prices. Investments in restricted securities, corporate
notes, other investments, and in securities which are thinly traded are valued
at their fair value as determined in good faith under procedures established by
and under the direction of the Fund's Board of Directors.

The Fund accounts for income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes."
Under SFAS No. 109, a current or deferred income tax liability or asset is
recognized for timing differences which exist in the recognition of certain
income and expense items for financial statement reporting purposes in periods
different than for tax reporting purposes. The provision for income taxes is
based on the amount of current and deferred income taxes payable or refundable
at the date of the financial statements as measured by the provisions of
current tax laws.

Statement of Cash Flows -
-----------------------
The Fund considers all highly liquid investments with maturities of three
months or less to be cash equivalents.

<PAGE>
<PAGE>
2. RESTRICTED SECURITIES
---------------------
Restricted securities are those securities which have been acquired from an
issuer without registration under the Securities Act of 1933. Restricted
securities generally cannot be sold by the Fund except pursuant to an effective
registration or in compliance with Rule 144 of the Securities Act of 1933.
Valuations for such securities, as well as certain thinly-traded securities and
corporate notes, have been determined in good faith by the Fund's Board of
Directors. The following schedule provides certain information with respect to
restricted securities held by the Fund as of September 30, 1996, which
securities comprised 114.19% of the Fund's net assets at such time:

<TABLE>
<CAPTION>
Date of Fair
Description Acquisition Cost Value
- ----------- ---------------- ----------- -----------
<S> <C> <C> <C>
California Progressions, Inc. November 21, 1994 $ 65,000 $ 65,000
Global Casinos, Inc. May 17, 1994 123,100 60,025
Optek Music Systems August 27, 1993 178,833 87,500
Premier Concepts, Inc. February 28, 1994 205,418 181,749
Redwood Broadcasting, Inc. June 15, 1993 512,778 512,778
Redwood Energy, Inc. - Escrow June 29, 1994 3,676 3,676
Redwood Energy, Inc. -Seed June 29, 1994 176,953 204,444
Shiva Corporation June 6, 1996 73,292 1,587,592
Shiva Corporation - Escrow June 6, 1996 8,143 176,380
Los Molinos Broadcasting February 22, 1994 7,551 80,000
TDP Energy Company December 22, 1993 84,429 1,050,000
----------- -----------
Total $ 1,439,173 $ 4,009,144
=========== ===========
</TABLE>

With the exception of Global Casinos, Inc. and Premier Concepts, Inc., the
Fund has no right to require registration of the above restricted securities.
As of September 30, 1996, the Fund's investments in restricted securities
comprised approximately 86.82% of the value of its total assets.

3. INVESTMENTS IN SECURITIES OF AFFILIATED ISSUERS
-----------------------------------------------
As of September 30, 1996, the Fund holds either an indirect or direct ownership
of 5 percent or more of the following securities:

<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Purchases
During the Six
Months Ended
Fair September 30,
Description Cost Value 1996
- ---------------- ------------ ----------- --------------
Common Stock:
- ------------
<S> <C> <C> <C>
California Progressions, Inc. $ 65,000 $ 65,000
Premier Concepts, Inc. 279,469 210,872
Redwood Broadcasting, Inc. 512,778 512,778 $ 70,382
Redwood Energy, Inc. 180,629 208,120
TDP Energy Company 84,429 1,050,000
Los Molinos 7,551 80,000
----------- -----------
1,129,856 2,126,770
----------- -----------
Corporate Notes:
- ---------------
Buttes Energy Company 50,231 50,231
----------- -----------
50,231 50,231
----------- -----------
Other Investments:
- -----------------
Northern California Broadcasting 22,706 0
Palo Verde Group 18,900 18,900 8,650
----------- -----------
41,606 18,900
----------- -----------
Advances to Affiliates:
Redwood Broadcasting, Inc. 326,999 326,999 124,761
Palo Verde Group 78,890 78,890 14,000
Northern California Broadcasting 25,000 25,000 25,000
----------- -----------
$ 430,889 $ 430,889
----------- -----------

Total $ 1,652,582 $ 2,626,790
=========== ===========
</TABLE>

<PAGE>
<PAGE>
4. UNREALIZED GAINS AND LOSSES
---------------------------
At September 30, 1996 the net unrealized appreciation of investments of
$2,506,517 was comprised of gross appreciation of $2,752,228 for those
investments having an excess of value over cost and gross depreciation of
$245,711 for those investments having an excess of cost over value.

5. INCOME TAX
----------
The temporary differences, tax effected, which give rise to the company's net
deferred tax liability as of September 30, 1996 are as follows:

<TABLE>
<S> <C>
Deferred Tax Liability 3/31/96 $ 90,000

Deferred Tax Liabilities 9/30/96:
Unrealized Gain on Investment 666,770
---------
Net Deferred Tax Liability 9/30/96 $ 756,770
=========
</TABLE>

The Fund has net operating loss carryforwards of $289,000 and capital loss
carryforwards of $30,000 which begin expiring in 2010 and 2001, respectively.

6. TRANSACTIONS WITH OFFICERS AND AFFILIATES
-----------------------------------------
During 1996 the fund made advances to affiliated companies. At September 30,
1996, the Fund had outstanding advances of $326,999 to Redwood Broadcasting
Inc., $78,890 to Palo Verde Group., and $25,000 to Northern California
Broadcasting.

At September 30, 1996, the Fund owed $27,317 to the President of the Fund for
advances made to the Fund during the six months ended September 30, 1996.

7. NOTE PAYABLE
------------
At September 30, 1996, the Fund has a note payable to a bank with an
outstanding balance of $30,000. The note bears interest at 11.25% with
interest payments due monthly. Principal payments of $15,000 are due
quarterly, commencing April 6, 1996, with all principal and interest due on
January 6, 1997.

8. COMMON STOCK
------------
During the six months ended September 30, 1996, the Fund issued 63,552 shares
of common stock in a private placement offering to the President, a related
party, in exchange for forgiveness of debt of $55,357.

<PAGE>
<PAGE>
9. CONSULTING AGREEMENT
--------------------
The Fund has a consulting agreement with California Progressions, Inc., a
related third party, in which the Fund is to be paid a minimum amount for
consulting services to be performed by the Fund's President. The Fund received
$16,666 under the agreement during the six months ended September 30, 1996.

10. COMMITMENTS AND CONTINGENCIES
-----------------------------
In connection with the filing of a registration statement with the Securities
and Exchange Commission, Redwood Broadcasting intends to register approximately
800,000 shares of its currently outstanding common stock and to issue and sell
an additional 200,000 shares of its common stock to the public. Redwood
Broadcasting also intends to register put options it has given to certain
shareholders who own 203,008 shares of Redwood Broadcasting common stock.
Redwood Broadcasting is committed to purchase the related shares for $1.50 per
share. The put options will expire 90 days after the effective date of the
registration statement. The Fund has agreed to guarantee Redwood
Broadcasting's obligation under the put options. The Fund has also pledged
195,371 shares of its Redwood Broadcasting common stock as security for the
guarantee.

In July 1996, Redwood Broadcasting completed the acquisition of a radio
station. In connection with the acquisition the Fund guaranteed Redwood
Broadcasting's obligation of a note to the seller in the amount of $155,000.
The note bears interest at the prime rate and matures in July 2001.

Redwood Broadcasting has filed with the Federal Communications Commission an
application for a construction permit to build a radio station in Arizona.
Should the permit be granted, the Fund has agreed to provide working capital
necessary to complete the station construction and to cover operating expenses
for the first three months of operations.
<PAGE>
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
<CAPTION>
(Unaudited)
For the Six
Months Ended
September 30, ----For the Years Ended March 31----
1996 1996 1995 1994 1993
------------- ------- ------- ------- -------
Per Share:
- ---------
<S> <C> <C> <C> <C> <C>
Income from investments $ .014 $ .029 $ .105 $ .158 $ .005
Expenses (.056) (.107) (.183) (.129) (.074)
------- ------- ------- ------- -------
Net investment income (loss) (.042) (.078) (.078) .029 (.069)
Net realized gain (loss) and
net change in unrealized
appreciation of investments .588 .043 .166 .335 .136
Purchase of treasury stock .000 .000 .000 .000 .000
------- ------- ------- ------- -------
.588 .043 .166 .335 .136
Net decrease/increase in
net asset value .546 (.035) .088 .364 .067
Net asset value:
Beginning of period .858 .893 .805 .441 .374
------- ------- ------- ------- -------
End of period $1.404 $ .858 $ .893 $ .805 $ .441
====== ====== ====== ====== ======

Total investment return (1) 63.64% (3.52)% 10.91% 86.25% 36.87%

Ratios:
- ------
Expenses to average net assets 4.69% 14.57% 14.07% 20.26% 19.41%
Expenses to income 385.46% 376.76% 125.95% 73.38% 1409.00%
Net investment income/(loss) to
average net assets 3.47% (10.70)% (2.90)% 7.35% (18.03)%

Portfolio turnover rate (2) 2.25% 21.63% 29.88% 329.91% 149.73%

- --------------------------

(2) The lesser of purchases or sales of portfolio securities for a period,
divided by the monthly average of the market value of portfolio securities
owned during the period. Securities with a maturity or expiration date at
the time of acquisition of one year or less are excluded from the
calculation. Purchases and sales of investment securities (excluding
short-term securities) for the six months ended September 30, 1996, were
$70,382 and $126,900, respectively.

</TABLE>

See notes to financial statements

<PAGE>
- ----------------------------------- ----------------------------
No person is authorized to give any
information or to make any represen-
tation other than those contained in
this Prospectus, and if made such
information or representation must
not be relied upon as having been
given or authorized by the Company. REDWOOD BROADCASTING, INC.
This Prospectus does not constitute
an offer to sell or a solicitation 1,200,437 shares of
of an offer to buy any securities $.004 par value
other than the Securities offered by Common Stock
this Prospectus or an offer to sell
or a solicitation of an offer to buy
the said Securities in any jurisdic- 203,008 Common Stock
tion to any person to whom it is Put Options
unlawful to make such offer or solici-
tation in such jurisdiction.

The delivery of this Prospectus shall
not, under any circumstances, create
any implication that there has been
no changes in the affairs of the
Company since the date of this
Prospectus. However, in the event
of a material change, this Prospectus
will be amended or supplemented
accordingly.

TABLE OF CONTENTS
Page
----
Prospectus Summary 9
Risk Factors 16
Use of Proceeds 22
Dilution 24 ----------------
Management's Discussion
and Analysis or Plan of PROSPECTUS
Operation 25
Business 34 ----------------
Redwood Microcap Fund, Inc. 46
Management 47
Executive Compensation 49
Security Ownership of
Certain Beneficial
Owners and Management 51
Description of Securities 53 ------------, 1997
Terms of Offerings 55
Certain Transactions 61
Indemnification 63
Legal Matters 63
Experts 63
Financial Statements F-1 -- F-88

- ----------------------------------- ----------------------------

<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officers of the Registrant is
insured or indemnified in any manner against any liability which he may incur
in his capacity as such, is as follows:

Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code
provide as follows:

7-109-101. DEFINITIONS. As used in this article:

(1) "Corporation" includes any domestic or foreign entity that is a
predecessor of a corporation by reason of a merger or other
transaction in which the predecessor's existence ceased upon
consummation of the transaction.

(2) "Director" means an individual who is or was a director of a
corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan. A director is considered to be serving an employee
benefit plan at the corporation's request if his or her duties to the
corporation also impose duties on, or otherwise involve services by,
the director to the plan or to participants in or beneficiaries of
the plan. "Director" includes, unless the context requires
otherwise, the estate or personal representative of a director.

(3) "Expenses" includes counsel fees.

(4) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an
excise tax assessed with respect to an employee benefit plan, or
reasonable expenses.

(5) "Official capacity" means, when used with respect to a director,
the office of director in a corporation and, when used with respect
to a person other than a director as contemplated in section 7-109-
107, the office in a corporation held by the officer or the
employment, fiduciary, or agency relationship undertaken by the
employee, fiduciary, or agent on behalf of the corporation.
"Official capacity" does not include service for any other domestic
or foreign corporation or other person or employee benefit plan.

(6) "Party" includes a person who was, is, or is threatened to be
made a named defendant or respondent in a proceeding.

(7) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.

7-109-102. AUTHORITY TO INDEMNIFY DIRECTORS.

(1) Except as provided in subsection (4) of this section, a
corporation may indemnify a person made a party to a proceeding
because the person is or was a director against liability incurred in
the proceeding if:

(a) The person conducted himself or herself in good faith; and

(b) The person reasonable believed:

(I) In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation's best
interests; and

(II) In all other cases, that his or her conduct was at least not
opposed to the corporation's best interests; and

(c) In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was unlawful.

(2) A director's conduct with respect to an employee benefit plan
for a purpose the director reasonably believed to be in the interests
of the participants in or beneficiaries of the plan is conduct that
satisfies the requirement of subparagraph (II) of paragraph (b) of
subsection (1) of this section. A director's conduct with respect to
an employee benefit plan for a purpose that the director did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the
requirements of paragraph (a) of subsection (1) of this section.

(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is
not, of itself, determinative that the director did not meet the
standard of conduct described in this section.

(4) A corporation may not indemnify a director under this section:

(a) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or

(b) In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in an official capacity, in which proceeding the
director was adjudged liable on the basis that he or she derived an
improper personal benefit.

(5) Indemnification permitted under this section in connection with
a proceeding by or in the right of the corporation is limited to
reasonable expenses incurred in connection with the proceeding.

7-109-103. MANDATORY INDEMNIFICATION OF DIRECTORS. Unless limited
by its articles of incorporation, a corporation shall indemnify a
person who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which the person was a party because the
person is or was a director, against reasonable expenses incurred by
him or her in connection with the proceeding.

7-109-104. ADVANCE OF EXPENSES TO DIRECTORS.

(1) A corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of
final disposition of the proceeding if:

<PAGE>
(a) The director furnishes to the corporation a written
affirmation of the director's good faith belief that he or she has
met the standard of conduct described in section 7-109-102;

(b) The director furnishes to the corporation a written
undertaking, executed personally or on the director's behalf, to
repay the advance if it is ultimately determined that he or she did
not meet the standard of conduct; and

(c) A determination is made that the facts then known to those
making the determination would not preclude indemnification under
this article.

(2) The undertaking required by paragraph (b) of subsection (1) of
this section shall be an unlimited general obligation of the director
but need not be secured and may be accepted without reference to
financial ability to make repayment.

(3) Determinations and authorizations of payments under this section
shall be made in the manner specified in section 7-109-106.

7-109-105. COURT-ORDERED INDEMNIFICATION OF DIRECTORS.

(1) Unless otherwise provided in the articles of incorporation, a
director who is or was a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to another
court of competent jurisdiction. On receipt of an application, the
court, after giving any notice the court considers necessary, may
order indemnification in the following manner:

(a) If it determines that the director is entitled to mandatory
indemnification under section 7-109-103, the court shall order
indemnification, in which case the court shall also order the
corporation to pay the director's reasonable expenses incurred to
obtain court-ordered indemnification.

(b) If it determines that the director is fairly and reasonable
entitled to indemnification in view of all the relevant
circumstances, whether or not the director met the standard of
conduct set forth in section 7-109-102 (1) or was adjudged liable in
the circumstances described in section 7-109-102 (4), the court may
order such indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability
shall have been adjudged in the circumstances described in section 7-
109-102 (4) is limited to reasonable expenses incurred in connection
with the proceeding and reasonable expenses incurred to obtain court-
ordered indemnification.

7-109-106. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION OF
DIRECTORS.

(1) A corporation may not indemnify a director under section 7-109-
102 unless authorized in the specific case after a determination has
been made that indemnification of the director is permissible in the
circumstances because the director has met the standard of conduct
set forth in section 7-109-102. A corporation shall not advance
expenses to a director under section 7-109-104 unless authorized in
the specific case after the written affirmation and undertaking
required by section 7-109-104 (1) (a) and (1) (b) are received and
the determination required by section 7-109-104 (1) (c) has been
made.

(2) The determinations required by subsection (1) of this section
shall be made:

(a) By the board of directors by a majority vote of those present
at a meeting at which a quorum is present, and only those directors
not parties to the proceeding shall be counted in satisfying the
quorum; or

(b) If a quorum cannot be obtained, by a majority vote of a
committee of the board of directors designated by the board of
directors, which committee shall consist of two or more directors not
parties to the proceeding; except that directors who are parties to
the proceeding may participate in the designation of directors for
the committee.

(3) If a quorum cannot be obtained as contemplated in paragraph (a)
of subsection (2) of this section, and a committee cannot be
established under paragraph (b) of subsection (2) of this section,
or, even if a quorum is obtained or a committee is designated, if a
majority of the directors constituting such quorum or such committee
so directs, the determination required to be made by subsection (1)
of this section shall be made:

(a) By independent legal counsel selected by a vote of the board
of directors or the committee in the manner specified in paragraph
(a) or (b) of subsection (2) of this section or, if a quorum of the
full board cannot be obtained and a committee cannot be established,
by independent legal counsel selected by a majority vote of the full
board of directors; or

(b) By the shareholders.

(4) Authorization of indemnification and advance of expenses shall
be made in the same manner as the determination that indemnification
or advance of expenses is permissible; except that, if the
determination that indemnification or advance of expenses is
permissible is made by independent legal counsel, authorization of
indemnification and advance of expenses shall be made by the body
that selected such counsel.

7-109-107. INDEMNIFICATION OF OFFICERS, EMPLOYEES, FIDUCIARIES, AND
AGENTS.

(1) Unless otherwise provided in the articles of incorporation:

(a) An officer is entitled to mandatory indemnification under
section 7-109-103, and is entitled to apply for court-ordered
indemnification under section 7-109-105, in each case to the same
extent as a director;

(b) A corporation may indemnify and advance expenses to an
officer, employee, fiduciary, or agent of the corporation to the same
extent as to a director; and

(c) A corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a
greater extent, if not inconsistent with public policy, and if
provided for by its bylaws, general or specific action of its board
of directors or shareholders, or contract.

<PAGE>
7-109-108. INSURANCE. A corporation may purchase and maintain
insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation, or who, while a
director, officer, employee, fiduciary, or agent of the corporation,
is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, fiduciary, or agent of another
domestic or foreign corporation or other person or of an employee
benefit plan, against liability asserted against or incurred by the
person in that capacity or arising from his or her status as a
director, officer, employee, fiduciary, or agent, whether or not the
corporation would have power to indemnify the person against the same
liability under section 7-109-102, 7-109-103, or 7-109-107. Any such
insurance may be procured from any insurance company designated by
the board of directors, whether such insurance company is formed
under the laws of this state or any other jurisdiction of the United
States or elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock
ownership or otherwise.

7-109-109. LIMITATION OF INDEMNIFICATION OF DIRECTORS.

(1) A provision treating a corporation's indemnification of, or
advance of expenses to, directors that is contained in its articles
of incorporation or bylaws, in a resolution of its shareholders or
board of directors, or in a contract, except an insurance policy, or
otherwise, is valid only to the extent the provision is not
inconsistent with sections 7-109-101 to 7-109-108. If the article of
incorporation limit indemnification or advance of expenses,
indemnification and advance of expenses are valid only to the extent
not inconsistent with the articles of incorporation.

(2) Sections 7-109-101 to 7-109-108 do not limit a corporation's
power to pay or reimburse expenses incurred by a director in
connection with an appearance as a witness in a proceeding at a time
when he or she has not been made a named defendant or respondent in
the proceeding.

7-109-110. NOTICE TO SHAREHOLDER OF INDEMNIFICATION OF DIRECTOR. If
a corporation indemnifies or advances expenses to a director under
this article in connection with a proceeding by or in the right of
the corporation, the corporation shall give written notice of the
indemnification or advance to the shareholders with or before the
notice of the next shareholders' meeting. If the next shareholder
action is taken without a meeting at the instigation of the board of
directors, such notice shall be given to the shareholders at or
before the time the first shareholder signs a writing consenting to
such action.

* * *

Article XIII of the By-Laws of the Company also tracks the language
Sections 7-109-101 through 7-109-110 of the Colorado Corporation Code.

Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The estimated expenses of the offering are to be borne by the Company, are
as follows:

<PAGE>
<TABLE>
<S> <C>
SEC Filing Fee $ 562
Printing Expenses* 1,500
Accounting Fees and Expenses* 6,000
Legal Fees and Expenses* 30,000
Blue Sky Fees and Expenses* 10,000
Miscellaneous* 1,938

Total $50,000
- -----------------------------------
* Estimated
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
---------------------------------------
1. In February, 1995, the Company was formed and organized as a
reorganization by CRI in which it issued 300,008 shares of its Common Stock to
CRI in exchange for one hundred percent (100%) of CRI's real and personal
property, subject to certain liabilities, saving and excepting cash, cash
equivalents or marketable securities having an aggregate fair market value of
not less than $250,000. The shares of Common Stock were acquired for
investment purposes and were subject to appropriate transfer restrictions. The
shares were not registered under the Securities Act in reliance upon Section
4(2) thereof.

2. In June, 1995, the Company issued 300,000 shares of its Common Stock
to seven (7) accredited investors in exchange for one hundred percent (100%) of
the issued and outstanding shares of common stock of Redwood Broadcasting, Inc.
The shares of Common Stock were acquired for investment purposes and were
subject to appropriate transfer restrictions. the shares were not registered
under the Securities Act in reliance upon Section 4(2) thereof.

3. In October, 1995, the Company sold 25,000 shares of Common Stock to
one (1) accredited investor for a price of $1.20 per share or a total of
$30,000. The shares of Common Stock were acquired for investment purposes and
were subject to appropriate transfer restrictions. The shares were not
registered under the Securities Act in reliance upon Section 4(2) thereof.

4. In September, 1995, the Company issued to MicroCap, an accredited
investor, 150,000 shares of Common Stock in lieu of cash or money payment of
indebtedness of the Company to MicroCap totaling $180,000. The shares of
Common Stock were acquired for investment purposes and were subject to
appropriate transfer restrictions. The shares were not registered under the
Securities Act in reliance upon Section 4(2) thereof.

5. In August, 1996, the Company sold and issued an aggregate of 37,550
shares of Common Stock to four accredited investors at a price of $1.20 per
share. The shares of Common Stock were acquired for investment purposes and
were subject to appropriate transfer restrictions. The shares were not
registered under the Securities Act in reliance upon Section 4(2) thereof.

6. In December 1996, the Company sold and issued to Power Curve, Inc.,
an accredited investor and a controlled corporation of John C. Power, the
Company's President and Director, 100,000 shares of Common Stock at a price of
$1.20 per share. The shares of Common Stock were acquired for investment
purposes and were subject to appropriate transfer restrictions. The shares
were not registered under the Securities Act in reliance upon Section 4(2)
thereof.

ITEM 27. EXHIBITS.
--------
a. The following Exhibits are filed as part of this Registration
Statement pursuant to Item 601 of Regulation S-B:
<TABLE>
<CAPTION>
Exhibit No. Title
- ---------- -----
<S> <C> <C>
* 2.0 Agreement and Plan or Reorganization Dated as of December 5,
1994, between and among Cell Robotics, Inc., Intelligent
Financial Corporation, Micel, Inc., Bridgeworks Investors I,
LLC, and Ronald K. Lohrding

* 2.1 Agreement and Plan of Reorganization Date as of June 16,
1995, between and among Intelligent Financial Holding
Corporation, Redwood MicroCap Fund, Inc., and Redwood
Broadcasting, Inc.

* 3.0(i) Articles of Incorporation of Intelligent Financial Holding
Corporation

* 3.0(ii) By-laws of Intelligent Financial Holding Corporation

* 4.1 Specimen Certificate of Common Stock

*** 4.2 Specimen Put Option Certificate

*** 4.3 Redwood Broadcasting, Inc. 1995 Incentive Stock Option Plan

**** 5.0 Opinion of Neuman & Cobb regarding the legality of the
securities being registered

* 10.0 KHSL AM/FM Asset Purchase Agreement dated February 3, 1995

**** 10.1 KHSL Local Management Agreement

*** 10.3 Agreement to Convert Debt dated September 30, 1995, between
Intelligent Financial Holding Corporation and Redwood
MicroCap Fund, Inc.

* 10.4 KNNN Letter of Intent

**** 10.5 KNNN Asset Purchase Agreement

** 10.6 KNSN-AM and KHSL-FM Asset Purchase Agreement dated March 12,
1996

**** 10.7 Redwood MicroCap Fund, Inc. Consultation Agreement

*** 10.8 Selected Dealer Agreement

16.0 Letter on Change in Certifying Accountant

* 21.0 Subsidiaries

23.1 Consent of Neuman & Cobb

23.2 Consent of Schumacher & Associates, Inc., Certified Public
Accountants

23.3 Consent of Stockman, Kast, Ryan & Scruggs, P.C.

* Incorporated by referenced from Registrant's Registration
Statement on Form SB-2, S.E.C. File No. 33-80321, as filed
with the Commission on December 12, 1995.

** Incorporated by referenced from Registrant's Pre-Effective
Amendment No. 1 to Registration Statement on Form SB-2,
S.E.C. File No. 33-80321, as filed with the Commission on
October 3, 1996.

*** Incorporated by referenced from Registrant's Pre-Effective
Amendment No. 2 to Registration Statement on Form SB-2,
S.E.C. File No. 33-80321, as filed with the Commission on
January 2, 1997.

**** Incorporated by referenced from Registrant's Pre-Effective
Amendment No. 3 to Registration Statement on Form SB-2,
S.E.C. File No. 33-80321, as filed with the Commission on
January 29, 1997.

</TABLE>

ITEM 28. UNDERTAKINGS.
------------
The undersigned Registrant hereby undertakes:

1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement.

2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.

4. To provide, upon effectiveness, certificates in such
denominations and registered in such names as are required to permit prompt
delivery to each purchaser.

<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form SB-2 and has duly caused this
Amendment No. 4 to the Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Carefree, Arizona on the
12th day of Feburary, 1997.

REDWOOD BROADCASTING, INC.

By: /s/ John C. Power
---------------------------
John C. Power, President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 4 to the Registration Statement has been signed by the
following persons in the capacities with Redwood Broadcasting, Inc. and on the
dates indicated.

Signature Position Date
- --------- -------- ----

/s/ John C. Power Chairman of the Board, 2/12/97
- ------------------------------President, Chief Executive Officer----------
John C. Power

/s/ J. Andrew Moorer Chief Financial Officer, 2/12/97
- ------------------------------ Chief Accounting Officer, ----------
J. Andrew Moorer Secretary, Treasurer, Director

/s/ Donald P. Griffin Chief Operating Officer, Director 2/12/97
- ------------------------------ ----------
Donald P. Griffin

<PAGE>
SIGNATURES

REDWOOD MICROCAP FUND, INC.

By: /s/ John C. Power
---------------------------
John C. Power, President

Signature Position Date
- --------- -------- ----

/s/ John C. Power Chairman of the Board, 2/12/97
- ------------------------------President, Chief Executive Officer----------
John C. Power

/s/ J. Andrew Moorer Chief Financial Officer, 2/12/97
- ------------------------------ Chief Accounting Officer, ----------
J. Andrew Moorer Treasurer, Director

/s/ Joseph O. Smith Director 2/12/97
- ------------------------------ ----------
Joseph O. Smith

EXHIBIT 16.0

February 12, 1997

Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street N.W.
Washington, DC 20549

Dear Sirs/Madams:

We have read and agree with the comments contained in the section "Redwood
Microcap Fund, Inc. - Changes in Independent Public Accountant" included in
Pre-Effective Amendment No. 4 to the Registration Statement on Form SB-2, SEC
file number 33-80321, of Redwood Broadcasting, Inc. and Redwood Microcap Fund,
Inc. dated February 13, 1997.

Yours truly,

DELOITTE & TOUCHE, LLP

EXHIBIT 23.1

February 12, 1997

Redwood Broadcasting, Inc. Redwood Microcap Fund, Inc.
7518 Elbow Bend Rd., Bldg. A, Ste. I 7518 Elbow Bend Rd., Bldg. A, Ste. I
P.O. Box 3458 P.O. Box 3458
Carefree, Arizona 85377 Carefree, Arizona 85377

Re: Pre-Effective Amendment No. 4 to S.E.C. Registration Statement on
Form SB-2

Ladies and Gentlemen:

We hereby consent to the inclusion of our opinion regarding the legality
of the securities being registered by the Form SB-2 Registration Statement to
be filed with the United States Securities and Exchange Commission, Washington,
D.C., pursuant to the Securities Act of 1933, as amended, by Redwood
Broadcasting, Inc., a Colorado corporation (the "Company"), in connection with
the offering by the Company and certain Selling Shareholders described therein
of up to 1,200,437 shares of its Common Stock and up to 203,008 Common Stock
Put Options, and the offering by Redwood MicroCap Fund, Inc. of 203,008 Put
Option Guarantees as proposed and more fully described in such Registration
Statement.

We further consent to the reference in such Registration Statement to our
having given such opinions.

Sincerely,

Clifford L. Neuman

CLN:at

EXHIBIT 23.2

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We have issued our report dated June 6, 1996 accompanying the financial
statements of Redwood Broadcasting, Inc. and Consolidated subsidiaries. We
have also issued our report dated December 4, 1995 accompanying the financial
statements of KHSL-AM/FM. In addition we have issued our report dated June 1,
1996 accompanying the financial statements of Quality Broadcasters of
California, L.P. We consent to the use of the aforementioned reports in
registration statement and prospectus of Redwood Broadcasting, Inc. and to the
reference of our firm as experts in the filing and prospectus.

SCHUMACHER & ASSOCIATES, INC.
12835 East Arapahoe Road
Tower II, Suite #110
Englewood, Colorado 80112

February 12, 1997

EXHIBIT 23.3

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 4 to Registration Statement No.
33-80321 of Redwood Broadcasting, Inc. and Redwood MicroCap Fund, Inc. of our
report dated May 24, 1996, related to the March 31, 1996 financial statements
of Redwood MicroCap Fund, Inc., appearing in the Prospectus, which is part of
this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.

STOCKMAN KAST RYAN & SCRUGGS, P.C.
Colorado Springs, Colorado

February 12, 1997