U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB /A-1
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 33-80321
REDWOOD BROADCASTING, INC.
----------------------------------------------------------------
(Exact Name of Small Business Issuer as specified in its Charter)
Colorado 84-1295270
---------------------------- -------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
7518 Elbow Bend Rd., Bldg. A, Ste. I, P.O. Box 3463, Carefree, AZ 85377
- ---------------------------------------------------------------------------
(Address of Principal Offices) (Zip Code)
Registrant's telephone number, including area code: (602) 488-2596
____________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the last 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 [ ]
As of February 19, 1997, 943,008 shares of Common Stock of the Registrant were
outstanding.
Transitional Small Business Disclosure Format (check one) Yes [ ]
No [ X ]
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
December 31, 1996 (unaudited) and March 31, 1996
Consolidated Statements of Operations
Three Months and Nine Months Ended December 31, 1996 and
1995 (unaudited)
Consolidated Statements of Changes in Stockholders' Equity
Nine Months Ended December 31, 1996 (unaudited)
Eight Months Ended March 31, 1996 and the
Two Years Ended July 31, 1995
Consolidated Statements of Cash Flows
Nine Months Ended December 31, 1996 and 1995 (unaudited)
Notes to Consolidated Financial Statements
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying Consolidated Balance Sheet at December 31, 1996,
Consolidated Statements of Operations for the Three Months and Nine
Months Ended December 31, 1996 and 1995, Consolidated Statements of Changes in
Stockholders' Equity for the Nine Months Ended December 31, 1996, and
Consolidated Statements of Cash Flows for the Nine Months Ended December 31,
1996 and 1995 are unaudited but reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the financial position
and results of operations for the interim period presented.
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
<CAPTION>
December 31, March 31,
1996 1996
(unaudited)
------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 21,902 $ --
Accounts Receivable,
net of allowance for doubtful accounts of
$17,000 at December 31, 1996 and
March 31, 1996 96,279 86,834
Other current assets 181,862 73,893
------------ -------------
Total current assets $ 300,043 $ 160,727
Property and equipment,
net of accumulated depreciation of
$143,891 at December 31, 1996 and
$74,855 at March 31, 1996 1,311,207 749,560
License,
net of accumulated amortization of
$35,417 at December 31, 196 and
$16,667 at March 31, 1996 464,583 489,833
Other assets 314,196 144,985
------------ -------------
Total Assets $ 2,390,029 $ 1,545,105
============ =============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
BALANCE SHEETS
(continued)
<CAPTION>
December 31, March 31,
1996 1996
(unaudited)
------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Outstanding checks in excess of
amounts reported by banks $ -- $ 23,188
Accounts payable and accrued expenses 287,205 273,431
Notes payable, current portion 1,004,850 728,174
Common stock subject to
mandatory redemption 304,512 304,512
Accounts payable, related parties 382,820 232,730
Unearned income, current portion 21,700 23,333
------------ -------------
Total current liabilities $ 2,001,087 $ 1,585,368
Unearned income, net of current portion -- 9,722
Notes payable, net of current portion 657,193 11,994
------------ -------------
Total liabilities $ 2,658,280 $ 1,607,084
------------ -------------
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,
943,008 and 780,508 shares
issued and outstanding as of
December 31, 1996 and March 31, 1996
respectively 3,452 3,122
Additional paid-in capital 661,793 467,123
Accumulated deficit (933,496) (532,224)
------------ -------------
Total Stockholders' Equity (268,251) (61,979)
------------ -------------
Total liabilities and
stockholders' equity $ 2,390,027 $ 1,545,105
============ =============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
STATEMENTS OF OPERATIONS
<CAPTION> Three Months Ended December 31,
1996 1995
(unaudited) (unaudited)
--------------------------------
<S> <C> <C>
Total Revenues $ 154,601 $ 191,305
Less agency commission 14,410 5,043
------------ -------------
Net Revenues $ 140,191 $ 186,262
Operating Expenses:
Station operating expenses,
excluding depreciation and
amortization $ 221,249 $ 244,529
Depreciation and amortization 21,589 --
Corporate general and
administrative expenses 15,172 34,375
------------ -------------
Total operating expenses $ 258,010 $ 278,904
Operating (loss) (117,819) (92,642)
Other expense
Other expense $ (13,277) --
Interest expense 70,720 172
------------ -------------
Total other expense $ 57,443 $ 172
Net (loss) $ (175,262) $ (92,814)
============ =============
Net (loss) per share (0.20) (0.15)
Weighted average shares outstanding 861,758 600,088
============ =============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
STATEMENTS OF OPERATIONS
<CAPTION> Nine Months Ended December 31,
1996 1995
(unaudited) (unaudited)
--------------------------------
<S> <C> <C>
Total Revenues $ 293,993 $ 566,587
Less agency commission 22,955 38,766
------------ -------------
Net Revenues $ 271,038 $ 527,821
Operating Expenses:
Station operating expenses,
excluding depreciation and
amortization $ 450,348 $ 681,688
Depreciation and amortization 69,036 --
Corporate general and
administrative expenses 37,967 69,056
------------ -------------
Total operating expenses $ 557,360 $ 750,744
Operating (loss) (286,322) (222,923)
Other expense
Other expense $ 32,155 --
Interest expense 82,795 17,529
------------ -------------
Total other expense $ 114,950 $ 17,529
Net (loss) $ (401,272) $ (240,452)
============ =============
Net (loss) per share (0.47) (0.40)
Weighted average shares outstanding 861,758 600,088
============ =============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
<CAPTION>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
AS OF DECEMBER 31, 1996
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)
Common stock issued
in private placement 25,000 100 29,900 30,000
Common stock issued
in exchange for
note receivable 37,500 150 44,850 45,000
Common stock issued in
Private Placement 20,000 80 23,920 24,000
Common stock issued
under subscription agreement 80,000 96,000 96,000
Net (loss) for the
nine month period
ended December 31, 1996 - - - (401,272) (401,272)
---------- ---------- ---------- --------- ---------
943,008 3,452 661,793 (933,496) (268,251)
========== ========== ========== ========= =========
/TABLE
<PAGE>
<TABLE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
<CAPTION>
STATEMENTS OF CASH FLOWS
Nine Months Ended December 31,
1996 1995
(unaudited) (unaudited)
-----------------------------
<S> <C> <C>
Cash Flows from operating activities:
Net (loss) (401,272) --
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation 69,036 --
Decrease in deferred revenue 11,355 --
(Increase) decrease in
accounts receivable (9,445) --
(Increase) decrease in
other current assets (107,969) --
Increase (decrease) in
accounts payable and accrued expenses 13,744 --
Increase (decrease) in
other current liabilities 150,090 --
------------- -------------
Net cash provided (used)
by operating activities (274,461) --
Cash flows from investing activities:
(Acquisition) disposition of
property and equipment (797,324) --
------------- -------------
Net cash provided (used) by
investing activities (797,324) --
Cash flows from financing activities:
Proceeds from (repayment) of
notes payable 921,875 --
Proceeds from common stock issuance 195,000 --
------------- -------------
Net cash provided (used) by
financing activities 1,116,875 --
------------- -------------
Increase (decrease) in cash 45,090 (17,910)
Cash, beginning of period (23,188) 10,895
------------- -------------
Cash, end of period 21,902 (7,015)
============= =============
See accompanying notes.
</TABLE>
<PAGE>
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
---------------------
The consolidated balance sheet as of December 31, 1996, the
consolidated statements of operations for the nine months ended
December 31, 1996 and 1995, the consolidated statements of changes in
stockholders' equity for the nine months ended December 31, 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 nine months ended December 31,
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 December 31, 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.
(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 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 December 31, 1996 is comprised of the following:
<TABLE>
<S> <C> <C>
Note payable to seller of KNNN-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 $ 490,199
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 $ 155,00 0
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. $ 916,844
------------
Total $ 1,662,043
Current portion $ 1,004,850
Long term portion $ 651,183
</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 December 31, 1996,
RBI had incurred $77,000 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> <C>
Land $ --
Building and improvements 24,671
Furniture and equipment 11,158
Radio broadcasting equipment 1,374,024
Computer equipment 45,245
---------------
1,455,098
Accumulated depreciation 143,891
---------------
Total $ 1,311,207
===============
<Table/>
(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 December 31, 1996 there were no preferred shares
issued.
(8) UNEARNED INCOME
---------------
In early 1993, RBI entered into a joint venture to acquire KNBA
licensed to Vallejo, California, 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) DELINQUENT PAYROLL TAXES
------------------------
As of December 31, 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.
(11) 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.
(11) 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.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
LIQUIDITY AND CAPITAL RESOURCES - DECEMBER 31, 1996 COMPARED TO MARCH 31,
1996
At December 31, 1996, the Company had total current assets of
$300,043, consisting primarily of accounts receivable of $96,279, net of an
allowance for doubtful accounts of $17,000, and other current assets of
$181,862. Other current assets is comprised of deposits, prepaids and a
$96,000 stock subscription receivable. Total current liabilities as of
December 31, 1996 were $2,001,117, resulting in a working capital deficit
of $1,701,074. 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 Company's working
capital deficit of $ 276,433 is primarily attributable to increases
in short term borrowings associated with the acquisition of KRDB-FM and
KNNN-FM in July and August, 1996, respectively.
As of December 31, 1996, the Company reported total assets of
$2,390,029, including property and equipment of $ 1,311,207, net of
accumulated depreciation of $143,891. 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 f $567,647 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 December 31, 1996, the Company reported total liabilities of
$2,658,280, including, in addition to the current liabilities referred to
above, the long term portion of notes payable in t he amount
of $657,193. Long term notes payable as of December 31, 1996 is made
u p of acquisition debt associated with KNNN and KRDG in the amount
of $490,199 and $155,000, respectively. This compares with total
liabilities of $1,607,084 as of March 31, 1996, an represents an increase
of $806,317.
As of December 31, 1996, the Company reported an accumulated deficit
of $933,496. This compares with an accumulated deficit at March 31, 1996,
of $532,224. The Company's accumulated deficit at December 31, 1996, when
combined with common stock and additional paid-in capital of $665,245,
resulted in a stockholders' deficit of $268,251. This compares with a
stockholders' deficit as of Match 31, 1996, of $61,979. During the nine
month period ended December 31, 1996, the Company completed two private
placements of its common stock and issued stock in exchange for a note
receivable. The three transactions generated $195,000 in additional equity
for the Company.
RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH
THREE MONTHS ENDED DECEMBER 31, 1995
Sales for the three months ended December 31, 1996, were $154,601
compared to sales of $191,305 for the same period in fiscal 1995. Sales
for the current quarter do not include revenues generated by KHSL-FM and/or
KNSN-AM. Rather, sales for the three months ended December 31, 1996 were
comprised of radio advertising revenues of station KRDG-FM in the amount o
$35,821 and KNNN-FM in the amount of $117,383. Sales in the 1995 quarter
were comprised entirely of advertising revenues associated with the
operation of KHSL-FM.
Station operating expenses for the three months ended December 31,
1996 of $221,249 were slightly below station operating expenses of $244,529
incurred during the three months ended December 31, 1995. The 1996
expenses for the quarter reflect the inclusion of operating costs
associated with KNNN-FM (which were not incurred in the comparable quarter
a year ago), KRDG-FM and certain operating costs for KHSL-FM and KNSN-AM
which must be maintained by the Company, as license holder, by the FCC even
though these two stations were under an LMA contract pending sale to a
third party. During an LMA period, the Company is responsible for certain
employee costs and station maintenance costs without receiving the benefit
of any revenues generated by the stations. Without these costs, the
decrease in station operating costs quarter to quarter would have been
greater.
Depreciation and amortization expenses for the three months ended
December 31, 1996 amounted to $21,589 and represents a 100% increase over
the three months ended December 31, 1995. General and Administrative
expenses for the three months ended December 31, 1996 amounted to $15,172,
a decrease of $19,203 over the three months ended December 31, 1995.
General and administrative expenses are comprised primarily of travel and
related costs.
Other expenses of $57,443 incurred during the quarter ended
December 31, 1996 increased $57,271 over the same period a year ago. The
increase is attributable to interest costs on acquisition debt associated
with the purchase of KRDG-FM and KNNN-FM acquired in July and August 1996,
respectively.
For the three months ended December 31, 1996, the Company reported a
net loss of $175,262 compared to a net loss of $92,814 for the same period
a year ago. The Company attributes the current quarter increase in loss to
maintaining high overhead to support a large station group without the
benefit of increased revenues generated by the larger station group. The
Company expects this trend to turn around in future quarters as revenues of
all stations increase.
RESULTS OF OPERATIONS - NINE MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH
NINE MONTHS ENDED DECEMBER 31, 1995
Sales for the nine months ended December 31, 1996, were $293,993
compared to sales of $566,587 for the same period in fiscal 1995. Sales in
1996 do not include revenues generated by KHSL-FM and/or KNSN-AM. Rather,
sales for this nine month period are comprised primarily of
LMA fee income (associated with KHSL-FM and KNSN-AM) of $27,000, deferred
revenue of $11,667 associated with the amortization of a covenant not to
compete, and radio advertising revenues of stations KRDG-FM (months of
July-December, 1996) in the amount of $51,000 and KNNN-FM (months of
August-December, 1996) in the amount of $200,000. Sales in 1995 were
comprised entirely of advertising revenues associated with the operation of
KHSL-FM.
Station operating expenses for the nine months ended
December 31, 1996 of $450,348 represent a reduction of $231,340
over the same nine month period in fiscal 1995. The 1996
expenses reflect the inclusion of $263,337 in costs associated with
operating KNNN-FM for the period August 1, 1996 through December 31, 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 nine month period ended December 31, 1995.
Depreciation and amortization expenses for the nine
months ended December 31, 1996 amounted to $69,036 and
represents a 100% increase over the nine months ended December 31, 1995.
General and Administrative expenses for the nine months ended December 31,
1996 amounted to $37,976, a decrease of $31,080 over the nine months ended
December 31, 1995. General and administrative expenses are comprised
primarily of travel and related costs.
Other expenses of $114,950 incurred during the nine month period ended
December 31, 1996 increased $97,421 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 nine months ended December 31, 1996, the Company reported a
net loss of $401,272 compared to a net loss of $240,452 for the same nine
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 $321,272 for
the current period, $80,820 greater than the loss sustained a year ago.
The Company attributes the increase in loss over the prvious year to excess
overhead associated wit hthe operation of KHSL-FM and KNSN-AM and only
having had the benefit of revenues associated with KNNN-FM for five months
(August-December, 1996) during the nine month period ended December 31,
1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. Changes in Securities
None
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
three (3) months ended December 31, 1996.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
REDWOOD BROADCASTING, INC.
Date: 2/27/97 By: /s/ John C. Power
------------------- ------------------------------------
John C. Power, President
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