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, 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
(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, 1998 was 1,410,000.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of
September 30, 1998 ................................... 3
Consolidated Statements of Income for the Six and
Three months ended September 30, 1998 and 1997 ....... 4,5
Consolidated Statements of Cash Flows for the Six
months ended September 30, 1998 and 1997 ............. 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,
1998
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ --
Accounts receivable, net 13,984
Receivable from related parties 417,201
Notes receivable 274,630
Other current assets 34,107
---------
Total current assets 739,922
PROPERTY AND EQUIPMENT, net 36,376
INTANGIBLE ASSETS, net 102,348
INVESTMENTS 1,000,000
OTHER ASSETS 245,520
---------
TOTAL $2,124,166
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 93,176
Payables to related parties 21,248
Notes payable, current portion 31,823
Other current liabilities 21,276
---------
Total current liabilities 167,523
Notes payable, long term portion 75,000
---------
Total liabilities 242,523
---------
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 467,497
Note receivable from stockholder (45,000)
---------
Total stockholders' equity 1,881,643
---------
TOTAL $2,124,166
=========
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, 1998 September 30, 1997
(unaudited) (unaudited)
REVENUE
Broadcast revenue $ 60,841 $ 741,314
Less agency commissions 2,448 68,496
--------- ---------
Net revenue 58,393 672,818
--------- ---------
OPERATING EXPENSE
General and administrative 49,517 303,229
Station operating expenses 94,911 392,140
Depreciation and amortization 30,152 58,460
--------- ---------
Total 174,580 753,829
--------- ---------
INCOME (LOSS) FROM OPERATIONS (116,187) (81,011)
--------- ---------
OTHER INCOME (EXPENSE)
Interest expense 13,932 26,821
Other income 13,676 99,187
Gain on sale of assets 83,761 --
Gain on sale of radio stations 1,199,996 --
--------- ---------
Total other - net 1,283,501 72,366
--------- ---------
NET INCOME (LOSS) 1,167,314 (8,645)
--------- ---------
NET INCOME (LOSS) PER COMMON SHARE $ 0.83 $ (0.01)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,410,000 1,200,000
========= =========
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, 1998 September 30, 1997
(unaudited) (unaudited)
REVENUE
Broadcast revenue $ 35,525 $ 367,997
Less agency commissions (1,286) 35,097
--------- ---------
Net revenue 34,239 332,900
--------- ---------
OPERATING EXPENSE
General and administrative 27,872 183,203
Station operating expenses 47,943 200,838
Depreciation and amortization 2,421 30,000
--------- ---------
Total 78,236 414,041
--------- ---------
INCOME (LOSS) FROM OPERATIONS (43,997) (81,141)
--------- ---------
OTHER INCOME (EXPENSE)
Interest expense 6,134 15,861
Other income 6,787 56,436
Gain on sale of assets -- --
Loss on sale of radio stations 37,880 --
--------- ---------
Total other - net (37,227) 40,575
--------- ---------
NET INCOME (LOSS) (81,224) (40,566)
--------- ---------
NET INCOME (LOSS) PER COMMON SHARE $ (0.06) $ (0.03)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,410,000 1,200,000
========= =========
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,
1998 1997
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net Income (loss) $ 1,167,314 $ (8,645)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 30,152 58,460
Changes in operating assets and liabilities:
Accounts receivable 34,040 (72,489)
Accounts receivable - affiliates (283,362) --
Other current assets (246,984) (21,222)
Accounts payable and accrued expenses (106,945) (86,238)
Accounts payable - affiliates (131,557) --
Other assets (47,172) (45,586)
-------- --------
Net cash provided by(used in) operating activities 415,486 (175,720)
-------- --------
INVESTING ACTIVITIES
Purchases of equipment (102,348) (42,368)
Sale of radio station assets 1,070,719 --
-------- --------
Net cash provided by (used in)
investing activities 968,371 (42,368)
-------- --------
FINANCING ACTIVITIES
Proceeds from borrowings under
related party notes -- --
Proceeds from borrowings under notes 75,000 36,244
Principal payments on notes to
related parties (215,064) (47,470)
Principal payments on notes (509,488) --
Preferred stock redemption (790,000) --
Increase in net payable to related parties -- 10,381
Payments on capital lease obligations -- (7,814)
Proceeds from issuance of common stock -- 182,500
-------- --------
Net cash provided by (used in)
financing activities (1,439,552) 173,841
-------- --------
NET INCREASE (DECREASE) IN CASH (55,695) (44,247)
CASH, Beginning of period 55,695 40,791
-------- --------
CASH, End of period $ 0 $ (3,456)
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 13,932 $ 33,497
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
September 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 acquistion costs for filing
and procecuting 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 companied 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
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, prioir 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 cash and 200,000 shares of Regent's Series B preferred stock. Regent
also assumed approximately $1,500,000 of the Company's liabilities.
- 7 -
<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
September 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.
- 8 -
<PAGE>
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 Communication ("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 leading up to the date of closing of the
Merger.
Alta was the owner, operator and licensee of radio statin KRDG-FM, Shingletown,
California. Alta, through its wholly-owned subsidiary Northern California
Broadcasting, Inc. ("Norther"), 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 snd KRRX-FM to Regent and received
$950,000 in cash and 200,000 shares of Regent's Series B Preferred stock. Regent
assumed approximately $1,500,000 of the Company's liabilities.
Liquidity and Capital Resources - September 30, 1998 compared to March 31, 1998
At September 30, 1998 the Company had total assets of $2,124,166 representing a
decrease in total assets of approximately $487,464 over total assets at March
31, 1998. Total liabilities decreased significantly from $1,109,301 at March 31,
1998 to $242,523 at September 30, 1998. Total stockholders equity increased
$1,167,314 to $1,881,643 at September 30, 1998.
Total current assets at September 30, 1998 were $739,922 and consisted of net
accounts receivable of $13,984, receivables from related parties of $417,201,
notes receivable of $274,630 and other current assets of $34,107. Total current
liabilities at September 30, 1998 were $167,523 comprised of vendor accounts
payable and accrued expenses of $93,176, payables to related parties of $21,248,
the current portion of notes payable of $31,823 and other current liabilities of
$21,276. Working capital at September 30, 1998 was $572,399 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 $889,012. Contributing
significantly to the increase in working capital was the receipt of
approximately $1,000,000 from the sale of Alta's radio stations to Regent. These
proceeds were used to reduce short term obligations of the Company and also
loaned to affiliates (presented in the financial statements as receivables) and
also to third parties (presented in the financial statements as notes
receivable).
At September 30, 1998 the Company had total assets of $2,124,166 including net
property and equipment of $36,376, net intangibles (radio broadcast licenses net
of related accumulated amortization) of $102,348 attributable to radio station
KLXR-AM acquired by the Company in April 1998, other assets of $245,520 and an
investment in preferred stock of $1,000,000 attributable to the sale of Alta's
radio stations to Regent.
Total liabilities at September 30, 1998 of $242,523 include, in addition to
current liabilities of $167,523 referred to above, the long term portion of
notes payable of $75,000. This compares favorably with total liabilities of
$1,109,301 as of March 31, 1998 and represents a decrease in total liabilities
of $866,778.
At September 30, 1998, the Company reported stockholders equity of
$1,881,643. This represents an increase of $1,167,314 over March 31, 1998
stockholders equity of $714,329. The increase in stockholders equity is
attributable to earnings posted for the period which was comprised primarily of
a $1,199,996 gain on the sale of Alta's four radio stations to Regent.
- 9 -
<PAGE>
Results of Operations - Six Months Ended September 30, 1998 compared 1997
Net Revenues (gross revenues less agency commissions) for the six months ended
September 30, 1998 were $58,393 compared to net revenues of $672,818 for the
same period a year ago. The decrease in revenue for the quarter is attributable
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
unured 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 6 month period ended September 30, 1997.
Operating expenses for the six months ended September 30, 1998 were $174,580
comprised of station operating expenses of $94,911, general and administrative
expenses of $49,517 and depreciation and amortization of $30,152. Operating
expenses for the six month period 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. Under the
TBA, as with advertising revenue, operating Alta's radio station were borne by
Regent.
The Company recorded other income of $1,283,501 for the six months ended
September 30, 1998 compared to other income of $72,366 for the same period a
year ago. Other income for the current period was comprised primarily of a
$1,199,966 gain recored on the sale of Alta's four radio stations to Regent. The
Company completed the sale of these stations on June 15, 1998. Also during the
six months ended September 30, 1998, the Company recorded an additional 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 of $83,761 is net of deferred acquistion costs
associated with the filing and prosecuting the construction permit application
coupled with legal and engineering fees. The company incurred interest expense
during the period of $13,932 attributable to interest on notes payable.
As a result of the foregoing, the Company posted net income of $1,167,314 for
the six months ended September 30, 1998 or $0.83 per share compared to a net
loss of $8,645 or ($0.01) per share for the six months ended September 30, 1997.
- 10 -
<PAGE>
Results of Operations-Three months ended September 30, 1998 compared to 1997
Net revenues for the three months ended September 30, 1998 were $34,239 compared
to net revenues of $332,900 for the same period a year ago. The decrease in
revenue for the quarter is attributable 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 unured to the benefit of Regent pursuant to
the terms of the TBA. In prior year comparable quarter, the Company operated
four radio stations providing advertising revenue during the entire quarter.
Operating expenses for the three months ended September 30, 1998 were $78,236
comprised of station operating expenses of $47,943, general and administrative
expenses of $27,872 and depreciation and amortization of $2,421. Operating
expenses for the three month period ended September 30, 1997 were $414,041
comprised of station operating expenses of $200,838, general and administrative
expenses of $183,203 and depreciation of $30,000. Under the TBA, as with
advertising revenue, operating Alta's radio station were borne by Regent.
The Company recorded other expense of $37,227 for the three months ended
September 30, 1998 compared to other income of $40,575 for the same period a
year ago. Other expense for the quarter was comprised of an adjustment to the
gain recognized in the first quarter of 1998 associated with the sale of Alta's
radio stations to Regent. The adjustment was for additional legal fees
attributed to the transaction. The Company also incurred interest expense on
notes payable of $6,134 during the quarter compared to $15,861 last year.
As a result of the foregoing, the Company posted a net loss for the three months
ended September 30, 1998 of $81,224 or ($0.06) per share compared to a net loss
of $40,566 or ($0.03) per share for the three months ended September 30, 1997.
- 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 11/19/98
JOHN C. POWER Chairman of the Board of Directors
/s/ J. Andrew Moorer Chief Financial Officer and Director 11/19/98
J. ANDREW MOORER
- 12 -
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-START> JUL-01-1998
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