<PAGE>
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 June 30, 1998
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
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(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 June 30, 1998 was 1,410,000.
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<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of June 30, 1998 . . . . . . . . 3
Consolidated Statements of Operations for the
Three months ended June 30, 1998 and 1997 . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the
Three months ended June 30, 1998 and 1997 . . . . . . . . . . 5
Notes to the Consolidated Financial Statements . . . . . . . . 6
Item 2. Management's Discussion and Analysis or
Plan of Operation . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 8
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . 8
Item 3. Defaults Under Senior Securities . . . . . . . . . . . . . . . 8
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 8
Item 5. Other Matters . . . . . . . . . . . . . . . . . . . . . . . . 8
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 9
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<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, 1998
(unaudited)
-------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 188,801
Accounts receivable, net 72,153
Receivable from related parties 321,893
Notes receivable 141,500
Other current assets 43,736
-------------
Total current assets 768,083
PROPERTY AND EQUIPMENT, net 14,535
INTANGIBLE ASSETS, net 99,166
INVESTMENTS 1,000,000
OTHER ASSETS 203,427
-------------
TOTAL $ 2,085,211
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 44,756
Payables to related parties 3,290
Current portion of notes payable 62,063
Other current liabilities 12,235
-------------
Total current liabilities 122,344
Total liabilities 122,344
-------------
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; 1,410,000 shares issued and outstanding 5,640
Additional paid-in capital 1,453,506
Retained earnings 548,721
Note receivable from stockholder (45,000)
-------------
Total stockholders' equity 1,962,867
-------------
TOTAL $ 2,085,211
=============
</TABLE>
See notes to consolidated financial statements.
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REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1998 June 30, 1997
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
REVENUE
Broadcast revenue $ 25,316 $ 373,317
Less agency commissions 1,162 33,399
------------- -------------
Net revenue 24,154 339,918
------------- -------------
OPERATING EXPENSE
General and administrative 21,645 120,026
Station operating expenses 46,968 191,302
Depreciation and amortization 27,731 28,460
------------- -------------
Total 96,344 339,788
------------- -------------
INCOME/(LOSS) FROM OPERATIONS (72,190) 130
------------- -------------
OTHER INCOME (EXPENSE)
Interest expense 7,798 10,960
Other income 6,889 42,751
Gain on sale of assets 83,761 --
Gain on sale of radio stations 1,237,876 --
------------- -------------
Total other - net 1,320,728 31,791
------------- -------------
NET INCOME 1,248,538 31,921
------------- -------------
NET INCOME PER COMMON SHARE $ 0.89 $ 0.03
============= =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,410,000 934,523
============= =============
</TABLE>
See notes to consolidated financial statements.
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REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
June 30, 1998 June 30, 1997
------------- -------------
(unaudited) (unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 1,248,538 $ 31,921
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 27,731 28,460
Changes in operating assets and
liabilities:
Accounts receivable (24,129) (70,506)
Accounts receivable - affiliates (188,054) --
Other current assets (123,477) (2,452)
Accounts payable and accrued expenses (143,130) (43,810)
Accounts payable - affiliates (149,515) --
Other assets (5,079) (66,038)
------------- -------------
Net cash provided by(used in) operating
activities 642,885 (122,425)
------------- -------------
INVESTING ACTIVITIES
Purchase of radio station assets (100,000) (26,299)
Sale of radio station assets 1,074,533 --
------------- -------------
Net cash provided by (used in)
investing activities 974,533 (26,299)
------------- -------------
FINANCING ACTIVITIES
Proceeds from borrowings under
related party notes -- 45,030
Proceeds from borrowings under notes -- 25,000
Principal payments on notes (694,312) (39,550)
Increase in net payable to related parties -- 50,883
Preferred stock redemption (790,000) --
Payments on capital lease obligations -- (3,819)
Proceeds from issuance of common stock -- 50,000
------------- -------------
Net cash provided by (used in)
financing activities (1,484,312) 127,544
------------- -------------
NET INCREASE (DECREASE) IN CASH 133,106 (21,180)
CASH, Beginning of period 55,695 40,791
------------- -------------
CASH, End of period $ 188,801 $ 19,611
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 7,798 $ 10,960
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
-------
The consolidated financial statements for the three months ended June 30,
1998 and 1997 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, 1998.
Results of operations for interim periods are not necessarily indicative of
results which may be expected for the year as a whole.
2. Disposition of Assets
---------------------
During April, 1998, the Company received $90,000 for 497 of its 1,000
shares of Channel 31, Inc., a company founded to acquire a construction
permit to build a television station in Pocatello, Idaho. The Company has
also granted an option to the acquirer of these shares to purchase the
Company's remaining 503 shares of $10,000. The Company recorded a gain of
$83,761 associated with this transaction. The gain was net of certain
deferred acquisition costs for filing and prosecuting the construction
permit application coupled with legal and engineering fees.
On October 10, 1997, the Company's wholly-owned subsidiary, Alta California
Broadcasting, Inc. ("Alta") entered into an Agreement of Merger (the
"Merger") with Regent Communications ("Regent") whereby Alta would 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 (TBA) with Regent
whereby Regent would operate Alta's radio stations being merged during the
period leading up to the date of closing of the Merger.
Alta was the owner, operator and licensee of radio station KRDG-FM,
Shingletown, California. Alta, through its wholly-owned subsidiary
Northern California Broadcasting, Inc ("Northern"), operated KNNN-FM,
Central Valley, California. Alta also held an option to purchase, prior to
the closing date of the Merger, all of the tangible and intangible assets
used held by Power Surge, Inc. for use in the operation of KRRX-FM, Burney,
California and KNRO-AM, Redding, California. Alta had been operating these
two stations under a TBA since March 1997.
On June 15, 1998, Alta exercised its option with Power Surge, Inc. and
acquired radio stations KRRX-FM and KNRO_AM. Simultaneously with this
transaction, Alta sold radio stations KRDG-FM, KNNN-FM, KNRO-AM and KRRX-FM
to Regent and received $950,000 in cash and 200,000 shares of Regent's
Series B preferred stock. Regent also assumed approximately $1,500,000 of
the Company's liabilities.
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<PAGE>
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 June 30, 1998 and 1997. 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, 1998.
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.
Introduction
- ------------
On October 10, 1997, the Company's wholly-owned subsidiary, Alta California
Broadcasting, Inc. ("Alta") entered into an Agreement of Merger (the
"Merger") with Regent Communications ("Regent") whereby Alta would 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 (TBA) with Regent
whereby Regent would operate Alta's radio stations being merged during the
period leading up to the date of closing of the Merger.
Alta was the owner, operator and licensee of radio station KRDG-FM,
Shingletown, California. Alta, through its wholly-owned subsidiary
Northern California Broadcasting, Inc ("Northern"), operated KNNN-FM,
Central Valley, California. Alta also held an option to purchase, prior to
the closing date of the Merger, all of the tangible and intangible assets
used held by Power Surge, Inc. for use in the operation of KRRX-FM, Burney,
California and KNRO-AM, Redding, California. Alta had been operating these
two stations under a TBA since March 1997.
On June 15, 1998, Alta exercised its option with Power Surge, Inc. and
acquired radio stations KRRX-FM and KNRO-AM. Simultaneously with this
transaction, Alta sold radio stations KRDG-FM, KNNN-FM, KNRO-AM and KRRX-FM
to Regent and received $950,000 in cash and 200,000 shares of Regent's
Series B preferred stock. Regent also assumed approximately $1,500,000 of
the Company's liabilities.
Liquidity and Capital Resources - June 30, 1998 compared to March 31, 1998
- --------------------------------------------------------------------------
At June 30, 1998 the Company had total assets of $2,085,211 representing a
decrease in total assets of $528,419 over total assets at March 31, 1998.
Total liabilities decreased significantly from $1,109,301 at March 31, 1998
to $122,344 at June 30, 1998. Total stockholders equity increased
$1,248,538 to $1,962,867 at June 30, 1998.
Total current assets at June 30, 1998 were $768,083 and consisted of cash
of $188,801, net accounts receivable of $72,153, receivables from related
parties of $321,893, notes receivable of $141,500 and other current assets
of $43,736. Total current liabilities at June 30, 1998 were $122,344
comprised of vendor accounts payable and accrued expenses of $44,756,
payables to related parties $3,290, the current portion of notes payable to
third parties of $62,063 and other current liabilities of $12,235. Working
capital at June 30, 1998 was $645,739 compared to a working capital
deficiency at March 31, 1998 of $316,613. This represents an improvement
in the Company's working capital position of $962,352.
At June 30, 1998 the Company reported total assets of $2,085,211 including
property and equipment of $14,535, net intangibles (radio broadcast
licenses and non-compete agreements net of related accumulated
amortization) of $99,166 attributable to radio station KLXR-AM acquired by
the Company in April, 1998, other assets of $203,427 and investments in
preferred stock of $1,000,000 attributable to the Company's sale, in June,
of a group of four radio stations located in Redding, California to Regent
Communications, Inc.
Total liabilities at June 30, 1998 are comprised entirely of the current
liabilities described above.
At June 30, 1998 the Company reported stockholders equity of $1,962,867.
This represents an increase of $1,248,538 over March 31, 1998 stockholders
equity of $714,329. The increase in stockholders equity is attributable to
the earnings posted for the period which was comprised primarily of the
gain on sale of the Company's four radio stations located in Redding,
California of $1,237,876.
Results of Operations - Three Months Ended June 30, 1998 compared to the
Three Months Ended June 30, 1997
- ---------------------------------------------------------------------------
Net revenues for the three months ended June 30, 1998 were $24,154 compared
to net revenues of $339,918 for the same period a year ago. The decrease
in revenue for the quarter is attributed to the TBA that Alta entered into
with Regent on October 10, 1997. From that date until the closing on June
15, 1998 the Company's advertising revenue inured to the benefit of Regent
pursuant to the terms of the TBA. In the prior year comparable period, the
Company operated four radio stations providing advertising revenues during
the entire quarter.
Operating expenses for the three months ended June 30, 1998 were $96,344
comprised of station operating expenses of $46,968, general and
administrative expenses of $21,645 and depreciation and amortization of
$27,731. Operating expenses for the three month period ended June 30, 1997
were $339,788 comprised of station operating expenses of $191,302, general
and administrative expenses of $120,026 and depreciation and amortization
of $28,460.
The Company recorded other income of $1,237,876 for the three months ended
June 30, 1998 compared to other income of $31,791 for the same period a
year ago. Other income for the current period was comprised of net
interest expense (interest expense offset by interest income) of $7,798 for
the quarter ended June 30, 1998 comprised primarily of interest associated
with short term notes payable. Offsetting the net interest expense was
income associated with a gain on the sale of a portion of the Company's
interest in Channel 31, Inc., a company founded to acquire a construction
permit to build a television station in Pocatello, Idaho. The Company sold
497 of its 1,000 shares of Channel 31, Inc. for $90,000. The resultant
gain is net of deferred acquisition costs associated with filing and
prosecuting the construction permit application coupled with legal and
engineering fees. Also during the quarter, the Company recorded a gain on
the sale of a group of four radio stations in Redding, California of
$1,237,876. The Company completed the sale of these stations to Regent
Communications on June 15, 1998.
As a result of the foregoing, the Company posted net income of $1,248,538
for the three months ended June 30, 1998 or $0.89 per share compared to net
income of $31,921 or $0.03 per share for the three months ended
June 30, 1997.
<PAGE>
<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) None
<PAGE>
<PAGE>
SIGNATURES
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, Chief Executive 8/19/98
- ---------------------- Officer, Chairman of the ----------
JOHN C. POWER Board of Directors
/s/ J. Andrew Moorer Chief Financial Officer 8/19/98
- ---------------------- and Director ----------
J. ANDREW MOORER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 188,801
<SECURITIES> 0
<RECEIVABLES> 72,153
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 768,083
<PP&E> 14,535
<DEPRECIATION> 1,068
<TOTAL-ASSETS> 2,085,211
<CURRENT-LIABILITIES> 122,344
<BONDS> 0
0
0
<COMMON> 5,640
<OTHER-SE> 1,453,506
<TOTAL-LIABILITY-AND-EQUITY> 2,085,211
<SALES> 25,316
<TOTAL-REVENUES> 25,316
<CGS> 1,162
<TOTAL-COSTS> 96,344
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,798
<INCOME-PRETAX> 1,248,538
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,248,538
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,248,538
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
