U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 33-80321
REDWOOD BROADCASTING, INC.
(Name of Small Business Issuer in Its Charter)
Colorado 84-1295270
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
7518 Elbow Bend Road
P.O. Box 3463
Carefree, AZ 85377
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (602) 488-2596
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
COMMON STOCK, $.004 PAR VALUE
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ].
The number of shares of the registrant's .004 par value Common Stock
outstanding as of September 30, 1997 was 1,200,000.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of
September 30, 1997 ................................... 3
Consolidated Statements of Income for the Six and
Three months ended September 30, 1997 and 1996 ....... 4,5
Consolidated Statements of Cash Flows for the Six
months ended September 30, 1997 and 1996 ............. 6
Notes to the Consolidated Financial Statements ....... 7
Item 2. Management's Discussion and Analysis or
Plan of Operation .................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................... 12
Item 2. Changes in Securities ................................ 12
Item 3. Defaults Under Senior Securities ..................... 12
Item 4. Submission of Matters to a Vote of Security Holders .. 12
Item 5. Other Matters ........................................ 12
Item 6. Exhibits and Reports on Form 8-K ..................... 12
Signatures ........................................... 12
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30,
1997
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ --
Accounts receivable, net 194,049
Receivable from related parties 50,700
Receivable from sale of radio station 650,000
Note receivable from sale of radio station 200,000
Other current assets 34,129
---------
Total current assets 1,128,878
PROPERTY AND EQUIPMENT, net 220,814
INTANGIBLE ASSETS, net 956,150
OTHER ASSETS 202,549
---------
TOTAL $2,508,391
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 3,456
Accounts payable and accrued expenses 302,427
Payables to related parties 146,410
Current portion of notes payable 67,624
Current portion of notes payable to related parties 60,979
Capital lease obligation 4,180
---------
Total current liabilities 585,076
NOTES PAYABLE 636,712
NOTES PAYABLE TO RELATED PARTIES 582,000
---------
Total liabilities 1,803,788
---------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.04; 2,500,000 shares authorized;
none issued and outstanding
Common stock, par value $.004; 12,500,000 shares authorized;
1,200,000 shares issued and outstanding 4,800
Additional paid-in capital 1,305,847
Accumulated deficit (561,044)
Note receivable from stockholder (45,000)
---------
Total stockholders' equity 704,603
---------
TOTAL $2,508,391
=========
See notes to consolidated financial statements.
- 3 -
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Six Months
Ended Ended
September 30, 1997 September 30, 1996
(unaudited) (unaudited)
REVENUE
Broadcast revenue $ 741,314 $ 139,392
Less agency commissions 68,496 8,545
--------- ---------
Net revenue 672,818 130,847
--------- ---------
OPERATING EXPENSE
General and administrative 303,229 22,804
Station operating expenses 392,140 229,099
Depreciation and amortization 58,460 47,447
--------- ---------
Total 753,829 299,350
--------- ---------
INCOME/(LOSS) FROM OPERATIONS (81,011) (168,503)
--------- ---------
OTHER INCOME (EXPENSE)
Interest expense (26,821) (45,432)
Other income (expense) 99,187 (12,075)
--------- ---------
Total other - net 72,366 (57,507)
--------- ---------
NET INCOME/(LOSS) (8,645) (226,010)
--------- ---------
NET INCOME (LOSS) PER COMMON SHARE $ (0.01) $ (0.29)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,200,000 793,008
========= =========
See notes to consolidated financial statements.
- 4 -
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
September 30, 1997 September 30, 1996
(unaudited) (unaudited)
REVENUE
Broadcast revenue $ 367,997 $ 89,894
Less agency commissions 35,097 8,545
--------- ---------
Net revenue 332,900 81,349
--------- ---------
OPERATING EXPENSE
General and administrative 183,203 9,082
Station operating expenses 200,838 168,683
Depreciation and amortization 30,000 23,345
--------- ---------
Total 414,041 201,110
--------- ---------
INCOME/(LOSS) FROM OPERATIONS (81,141) (119,761)
--------- ---------
OTHER INCOME (EXPENSE)
Interest expense (15,861) (10,875)
Other income (expense) 56,436 32,075
--------- ---------
Total other - net 40,575 21,200
--------- ---------
NET INCOME/(LOSS) (40,566) (98,561)
--------- ---------
NET INCOME (LOSS) PER COMMON SHARE $ (0.03) $ (0.12)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,200,000 793,008
========= =========
See notes to consolidated financial statements.
- 5 -
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Six Months
Ended Ended
September 30, September 30,
1997 1996
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net Income/(loss) $ (8,645) $(226,010)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 58,460 47,447
Changes in operating assets and liabilities:
Accounts receivable (72,489) 37,793
Other current assets (21,222) 3,042
Other assets (45,586) --
Accounts payable and accrued expenses (86,238) (25,051)
Other current liabilities -- 136,447
-------- --------
Net cash provided by(used in) operating activities (175,720) (26,335)
-------- --------
INVESTING ACTIVITIES
Purchases of equipment (42,368) (744,176)
-------- --------
Net cash provided by (used in)
investing activities (42,368) (744,176)
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowings under
related party notes -- --
Proceeds from borrowings under notes 36,244 751,393
Principal payments on notes to
related parties (47,470) --
Principal payments on notes -- --
Increase in net payable to related parties 10,381 --
Payments on capital lease obligations (7,814) --
Proceeds from issuance of common stock 182,500 30,000
-------- --------
Net cash provided by (used in)
financing activities 173,841 781,393
-------- --------
NET INCREASE (DECREASE) IN CASH (44,247) 10,882
CASH, Beginning of period 40,791 (23,188)
-------- --------
CASH, End of period $ (3,456) $(12,306)
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 33,497 $ 12,075
See notes to consolidated financial statements.
- 6 -
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
The consolidated financial statements for the six and three months ended June
30, 1997 and 1996 are unaudited and reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial position and operating results for the
interim periods. The consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto,
together with management's discussion and analysis of financial condition and
results of operations, contained in the Company's annual report on Form 10-KSB
for the fiscal year ended March 31, 1997. Results of operations for interim
periods are not necessarily indicative of results which may be expected for the
year as a whole.
2. Acquistions
Effective April 1, 1997, the Company acquired an option to purchase radio
stations KNRO-AM and KARZ-FM (KNRO/KARZ) licensed in Redding, California from
Power Surge, Inc. (Power Surge). Power Surge received the licenses from Power
Curve, Inc. (Power Curve) on March 31, 1997. Power Surge and Power Curve are
both controlled by the Company's President. Power Curve acquired KNRO/KARZ on
January 31, 1997 for $480,000 in cash and a $720,000 promissory note. Under the
terms of the option agreement, the Company can either (1) purchase KNRO/KARZ for
$1,200,000 in cash or (2) issue 1,000,000 shares of its common stock in exchange
for all of the issued and outstanding shares of common stock of Power Surge. The
option was due to expire on September 30, 1997. However, by mutual agreement,
the Company and Power Surge have extended the date of the option to March 31,
1998. Concurrently, the Company entered into an LMA with Power Surge for a
period of one year. Under the terms of the LMA, the Company is operating
KNRO/KARZ and is obligated to pay Power Surge a monthly fee of $5,000.
3. Stockholder's Equity
In February 1997, the Company completed the filing of a Registration Statement
Form SB-2 under the Securities Act of 1933. The filing effectively registered
for sale all shares of common stock issued and outstanding at that time, 203,008
common stock put options which were subsequently issued to certain stockholders
and an additional 400,000 shares of the Company's common stock to be offered to
the public. The registration of the outstanding shares and the put options were
required pursuant to an Agreement and Plan of Reorganization dated June 16,
1995.
At March 31, 1997, the 203,008 common stock put options remained outstanding.
The put options granted the optionholders the right to sell to the Company their
shares of common stock at a price of $1.50 per share. The Company's potential
obligation under the put options of $304,512 was classified as redeemable common
stock in the Company's balance sheet at March 31, 1997. The put options expired
June 13, 1997; however, prior to such expiration, 102,946 options were
excercised by the optionholders and, accordingly, these shares were acquired for
$154,419. The remaining put options were forfeited.
In May, 1997 the Company issued 25,000 shares of common stock pursuant to the
Company's public offering (400,000 shares total are registered for this purpose)
at $2.00 per share receiving proceeds of $50,000. In addition, during the
quarter ended June 30, 1997, the Company received a subscription agreement for
an additional 25,000 shares of common stock to be issued pursuant to the
Company's public offering at $2.00 per share. These shares were classified as
"common stock subscribed" at June 30, 1997. During the quarter ended September
30, 1997 these shares were paid for by the subscriber and have been issued by
the Company.
In July, 1997 the Company issued 75,000 shares of common stock in exchange for
the forgiveness of $82,500 in long term notes payable.
- 7 -
<PAGE>
4. Borrowings Under Lines of Credit
During the three month period ended September 30, 1997, the Company negotiated
an increase in its bank line of credit from $25,000 to $50,000. Borrowings under
the line of credit bear interest at a rate of 7.9% per annum. The line of credit
is collateralized by a $25,000 certificate of deposit placed with the bank by a
related party of the Company. As of September 30, 1997, 100% of available funds
had been advanced for working capital purposes. In addition, during the quarter
the Company negotiated a $50,000, 3 year term loan bearing interest at the rate
of 11% per annum. This loan is for capital equipment purchases. As of September
30, 1997, the Company had purchased $31,504 in equipment against this loan.
5. Subsequent Events
On October 10, 1997, Alta California Broadcasting, Inc. ("Alta"), a wholly-owned
subsidiary of the Company entered into an Agreement of Merger (the " MERGER")
with Regent Communications ("REGENT") whereby Alta will be merged into a
wholly-owned subsidiary of REGENT formed for purposes of completing the MERGER.
Simultaneously with the companies entering into the MERGER, Alta entered into a
Time Brokerage Agreement with REGENT whereby REGENT will operate the stations
being merged during the period leading up to the date of closing of the MERGER.
Alta is the owner, operator and licensee of Radio Station KRDG-FM, Shingletown,
California. Alta, through its wholly-owned subsidiary Northern California
Broadcasting, Inc. ("Northern"), operates KNNN-FM, Central Valley, California
(licensed to Northern). Alta also holds an option to purchase, and will purchase
prior to the closing date of the MERGER, all of the tangible and intangible
assets used or held by Power Surge, Inc. for use in the operation of KRRX-FM,
Burney, California and KNRO-AM, Redding, California.
As consideration for Alta entering into the merger with REGENT, the Company will
receive, at closing, $1,000,000 in cash plus 200,000 shares of REGENT Series "E"
Convertible Preferred Stock valued at $5.00 per share. In addition, REGENT is
assuming $1,500,000 in debt of Alta as part of the transaction.
Item 2. Management's Discussion and Analysis or Plan of Operation
Overview
The following is a discussion of the consolidated financial condition and
results of operations of the Company as of and for the two fiscal periods ended
September 30, 1997 and 1996. This discussion should be read in conjunction with
the Consolidated Financial Statements of the Company and the Notes related
thereto included in the Company's Form 10-KSB for the fiscal year ended March
31, 1997.
The forward-looking statements included in Management's Discussion and Analysis
of Financial Condition and Results of Operations, which reflect management's
best judgement based on factors currently known, involve risks and
uncertainties. Actual results could differ materially from those anticipated in
these forward-looking statements as a result of a number of factors, including
but not limited to those discussed herein.
- 8 -
<PAGE>
Liquidity and Capital Resources - September 30, 1997 compared to March 31, 1997
As of September 30, 1997 the Company had total assets of $2,508,391 representing
an increase in assets of approximately $61,568; total liabilities decreased
$112,000 to $1,803,788 and total stockholders equity increased $478,367 from
$226,236 as of March 31, 1997 to $704,603 as of September 30, 1997.
Total current assets as of Septemver 30, 1997 were $1,128,878 and consisted of
net accounts receivable of $194,049, receivables from the sale of two radio
stations of $850,000 and other current current assets of $84,829. Total current
liabilities as of September 30, 1997 were $585,076 (comprised primarily of
accounts payable and accrued expenses of $302,427) payables and notes to related
parties of $207,389 and other current liabilities of $75,260. Working capital as
of September 30, 1997 was $543,802 representing a $309,416 improvement over
working capital of $234,386 as of March 31, 1997.
Contributing to the increase in working capital were the following:
* An increase in net accounts receivable of $72,489
* An increase in receivables from the sale of radio stations of $217,000
* A reduction in accounts payable and accrued expenses of $86,238
As of September 30, 1997 the Company reported total assets of $2,508,391
including net property and equipment of $220,814 net intangibles (radio
broadcast licenses and non-compete agreements) of $956,150 attributable to
KRDG-FM acquired in July, 1996 and KNNN-FM acquired in September, 1996 and
$220,049 in other assets.
Total liabilities of $1,803,788 include, in addition to current liabilities of
$585,076 referred to above, the long term portion of notes payable of
$636,712(comprised of $605,208 in debt associated with the acquisitions of
KRDG-FM and KNNN-FM, and bank debt of $31,504 for equipment financing) and notes
payable to related parties of $582,000. This compares with total liabilities of
$1,916,075 as of March 31, 1997 and represents a decrease of $112,287.
As of September 30, 1997, the Company reported stockholders equity of $704,603.
This compares favorably to stockholders equity of $226,236 as of March 31, 1997.
Contributing to the increase in stockholder's equity of $478,367 were the
following:
* The issuance of 50,000 shares of common stock pursuant to the Company's
public offering at $2.00 per share generated $100,000 of additional
capital.
* The issuance of 75,000 shares of common stock at $1.10 per share
(restricted stock) in exchange for the forgiveness of debt.
* At March 31, 1997, 203,008 common stock put options were outstanding. The
put options granted the optionholders the right to sell to the Company
their shares of common stock at a price of $1.50 per share. The Company's
potential obligation under the put options of $304,512 was classified as
redeemable common stock in the balance sheet at March 31, 1997. The put
options expired June 13, 1997; however, prior to such expiration, 102,946
options were exercised by the optionholders and, accordingly, these shares
have been acquired for $154,419. The remaining unexercised put options were
forfeited. The value of the forfeited options of $150,093 was credited to
additional paid in capital.
- 9 -
<PAGE>
Results of Operations - Six Months Ended September 30, 1997 compared 1996
Net Revenues (gross revenues less agency commissions) for the six months ended
September 30, 1997 were $741,314 compared to net revenues for the six months
ended September 30, 1996 of $130,847. Revenue for the six months ended September
30, 1997 was comprised of radio advertising sales associated with five radio
stations located in Redding, California that the Company either owns or
operates. In the prior year comparable period, the Company only operated two
radio stations in Redding, California; one of these stations was operated from
July through September(KRDG-FM) and a second station for the months of August
and September only (KNNN-FM). Therefore, the increase in revenue is attributable
to an increase in volume of radio advertising sales.
Operating expenses for the six months ended September 30, 1997 were $753,829
comprised of station operating expenses of $392,140, general and administrative
expenses of $303,229 and depreciation and amortization of $58,460. Operating
expenses for the current period were generated by the Company's five Redding,
California radio stations. As previously stated, in the prior year comparable
period, the Company only operated two radio stations in Redding and did not
operate these stations for the entire six month period ended September 30, 1996,
thereby reflecting operating expenses of only $229,350 last year comprised of
station operating expenses of $229,099, general and administative expenses of
$22,804 and depreciation and amotization of $47,447. As a result of the
foregoing, the Company sustained a loss from operations for the six months ended
September 30, 1997 of $81,011 compared to a loss from operations for the six
months ended September 30, 1996 of $168,503. This improvement in profitability
is attributed to increased revenues coupled with more efficient operations.
The Company incurred interest expense for the six months ended September 30,
1997 of $26,821 comprised primarily of financing costs assocaited with the
Company's acquisition of KRDG-FM and KNNN-FM. Offsetting the Company's interest
costs for the period was $99,187 of other income. Other income was comprised of
option income of $72,000 associated with the sale of KNSN-AM, interest income on
notes receivable of $72,000 associated with the sale of KNSN-AM, interest income
on notes receivable of $6,677, and the recognition of deferred revenue of
$9,722.
As a result of the foregoing, the Company produced a nominal loss of ($8,645) or
($0.03) per share based on a weighted average number of shares outstanding of
1,200,000 for the nine months ended September 30, 1997 compared to a net loss of
($226,010) or ($0.29) per share based on a weighted average number of shares
outstanding of 793,000 for the same period a year ago.
- 10 -
<PAGE>
Results of Operations-Three months ended September 30, 1997 compared to 1996
Net revenues for the quarter ended September 30, 1997 were $332,900. This
compares favorable to net revenues of $81,349 forthe same period a year ago. The
increase in revenues of $251,551 is attributed to an increase in volume in radio
advertising sales related to the fact that the Company operated a total of five
radio stations during the current quarter compared to only two radio stations a
year ago.
Operating expenses for the three months ended September 30, 1997 were $414,041
comprised of station operating expenses of $200,838, general and administrative
expenses of $183,203 and depreciation and amortization of $30,000. Operating
expenses for the three month period ended September 30, 1996 were $201,110
comprised of station operating expenses of $168,683, general and administrative
expenses of $9,082 and depreciation of $23,345. Operating expenses compared on a
quarter to quarter basis increased only slightly in the current quarter over
that of the same period last year. This is attributed to the fact that the
Company achieved economies of scale in operating multiple radio properties
within the same facility utilizing the same staff. In accomplishing this task,
the Company only needed to hire an incremental number of new employees, thus
improving the Company's overall efficiency of operations and profitability.
The Company incurred net interest expense (interest expense offset by interest
income) for the quarter ended September 30, 1997 of $15,861 comprised primarily
of interest arising from acquistion debt.
As a result of the foregoing, the Company sustained a net loss for the three
months ended September 30, 1997 of ($40,566) or ($0.03) per share compared to a
net loss of ($98,561) or ($0.12) per share for the three months ended September
30, 1996
- 11 -
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit No. Exhibit Name
27 Financial Data Schedule
(b) The Company filed a Form 8-K on October 14, 1997 in reporting
the disposition of assets. Alta California Broadcasting, Inc.
a wholly-owned subsidiary of the Company is being merged with
Regent Communications, Inc. All required financial statements
were filed at that time.
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/ John C. Power President and Chief Executive Officer 11/14/97
JOHN C. POWER Chairman of the Board of Directors
/s/ J. Andrew Moorer Chief Financial Officer and Director 11/14/97
J. ANDREW MOORER
- 12 -
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