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 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
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 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> 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
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 (107,869) --
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 91,902 (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
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 int he amount of $657,193. Long
term notes payable as of December 31, 1996 is made u 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 - 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
six-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 six months ended December 31, 1996 of
$450,348 represent a reduction of $331,340 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 six 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
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
REDWOOD BROADCASTING, INC.
Date: 2/19/97 By: /s/ John C. Power
------------------- ------------------------------------
John C. Power, President
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED DECEMBER 31, 1996, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 21,902
<SECURITIES> 0
<RECEIVABLES> 96,279
<ALLOWANCES> 17,000
<INVENTORY> 0
<CURRENT-ASSETS> 300,043
<PP&E> 1,311,207
<DEPRECIATION> 143,891
<TOTAL-ASSETS> 2,390,029
<CURRENT-LIABILITIES> 2,001,087
<BONDS> 657,193
0
0
<COMMON> 665,245
<OTHER-SE> (933,496)
<TOTAL-LIABILITY-AND-EQUITY> 2,390,029
<SALES> 293,993
<TOTAL-REVENUES> 293,993
<CGS> 0
<TOTAL-COSTS> 580,315
<OTHER-EXPENSES> 114,950
<LOSS-PROVISION> 17,000
<INTEREST-EXPENSE> 82,795
<INCOME-PRETAX> (401,272)
<INCOME-TAX> 0
<INCOME-CONTINUING> (401,272)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (401,272)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
