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 December 31, 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.)
First Interstate Bank Plaza
P.O. Box 3463
11 Sundial Circle #17
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 December 31, 1998 was 1,410,000.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet as of
December 31, 1998 .................................... 3
Consolidated Statements of Income for the Three and
Nine months ended December 31, 1998 and 1997 ......... 4,5
Consolidated Statements of Cash Flows for the Nine
months ended December 31, 1998 and 1997 ............. 6
Notes to the Consolidated Financial Statements ....... 7,8
Item 2. Management's Discussion and Analysis or
Plan of Operation .................................... 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .................................... 13
Item 2. Changes in Securities ................................ 13
Item 3. Defaults Under Senior Securities ..................... 13
Item 4. Submission of Matters to a Vote of Security Holders .. 13
Item 5. Other Matters ........................................ 13
Item 6. Exhibits and Reports on Form 8-K ..................... 13
Signatures ........................................... 13
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31,
1998
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 201
Accounts receivable, net 150,000
---------
TOTAL $ 150,201
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Income taxes payable $ 150,000
---------
Total liabilities 150,000
---------
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 202,970
Distribution to stockholders (Note 3) (1,661,915)
---------
Total stockholders' equity 201
---------
TOTAL $ 150,201
=========
See notes to consolidated financial statements.
- 3 -
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Three Months
Ended Ended
December 31, 1998 December 31, 1997
(unaudited) (unaudited)
REVENUE
Broadcast revenue $ 41,609 $ 77,724
Less agency commissions 1,756 6,243
--------- ---------
Net revenue 39,853 71,481
--------- ---------
OPERATING EXPENSE
General and administrative 157,278 88,627
Station operating expenses 57,112 22,130
Depreciation and amortization 3,178 41,187
--------- ---------
Total 217,568 151,944
--------- ---------
INCOME (LOSS) FROM OPERATIONS (177,715) (80,463)
--------- ---------
OTHER INCOME (EXPENSE)
Interest income (expense) 13,644 (27,201)
Other income (expense) 49,544 66,977
Gain (loss) on sale of assets -- --
Gain (loss) on sale of radio stations -- --
--------- ---------
Total other - net 63,188 39,776
--------- ---------
NET INCOME (LOSS) BEFORE INCOME TAXES (114,527) (40,687)
--------- ---------
INCOME TAX PROVISION 150,000 --
--------- ---------
NET INCOME (LOSS) (264,527) (40,687)
NET INCOME (LOSS) PER COMMON SHARE $ (0.18) $ (0.04)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,140,000 1,140,996
========= =========
See notes to consolidated financial statements.
- 4 -
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Nine Months
Ended Ended
December 31, 1998 December 31, 1997
(unaudited) (unaudited)
REVENUE
Broadcast revenue $ 102,450 $ 819,038
Less agency commissions 4,204 74,739
--------- ---------
Net revenue 98,246 744,299
--------- ---------
OPERATING EXPENSE
General and administrative 206,795 391,856
Station operating expenses 152,023 414,270
Depreciation and amortization 33,330 99,647
--------- ---------
Total 392,148 905,773
--------- ---------
INCOME (LOSS) FROM OPERATIONS (293,902) (161,474)
--------- ---------
OTHER INCOME (EXPENSE)
Interest income (expense) (288) (54,022)
Other income (expense) 89,470 166,164
Gain (loss) on sale of assets 83,761 --
Gain (loss) on sale of radio stations 1,173,746 --
--------- ---------
Total other - net 1,346,689 112,142
--------- ---------
NET INCOME (LOSS) BEFORE INCOME TAXES 1,052,787 (49,332)
--------- ---------
INCOME TAX PROVISION 150,000 --
--------- ---------
NET INCOME (LOSS) 902,787 (49,332)
--------- ---------
NET INCOME (LOSS) PER COMMON SHARE $ 0.64 $ (0.04)
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 1,140,000 1,140,996
========= =========
See notes to consolidated financial statements.
- 5 -
<PAGE>
REDWOOD BROADCASTING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Nine Months
Ended Ended
December 31, December 31,
1998 1997
(unaudited) (unaudited)
OPERATING ACTIVITIES
Net Income/(loss) $ 902,787 $ (49,332)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 33,330 99,647
Changes in operating assets and liabilities:
Accounts receivable 48,024 (46,245)
Accounts receivable - related parties 133,839 (46,793)
Other current assets (88,241) 304,993
Other assets 198,348 182,313
Accounts payable and accrued expenses (352,926) (166,785)
Other current liabilities 150,000 (13,520)
-------- --------
Net cash provided by(used in) operating activities 1,025,161 264,278
-------- --------
INVESTING ACTIVITIES
Sale (purchse) of radio station assets 1,070,719 (240,000)
Purchases of equipment (102,348) (34,047)
-------- --------
Net cash provided by (used in)
investing activities 968,371 (274,047)
-------- --------
FINANCING ACTIVITIES
Proceeds from (repayment of)
notes payable (541,311) 64,824
Proceeds from (repayment of) notes
payable - related parties (717,715) (638,610)
Payments on capital lease obligations -- (11,994)
Common stock redemption -- (304,512)
Preffered stock redemption (790,000) --
Proceeds from issuance of preferred stock -- 275,000
Proceeds from issuance of common stock -- 635,511
-------- --------
Net cash provided by (used in)
financing activities (2,049,026) 20,219
-------- --------
NET INCREASE (DECREASE) IN CASH (55,494) 10,450
CASH, Beginning of period 55,695 40,791
-------- --------
CASH, End of period $ 201 51,241
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ -- $ 68,840
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 three and nine months ended
December 31, 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
for $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 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 the 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 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 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 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>
3. Change in Control/Distribution to Stockholders
On December 31, 1998, a change in control of Redwood Broadcasting, Inc. (the
"Company") occurred in connection with the consummation of a certain Stock
Purchase Agreement (the "Agreement").
Under the terms of the Agreement, a third party purchased from the Company's
shareholders an aggregate of 690,000 shares of the Company's common stock for a
total purchase price of $100,000. The 690,000 shares of the Company's common
stock acquired by the third party represented 48.9% of the Company's total
issued and outstanding shares of common stock.
Further, as part of the transactions covered by the Agreement, John C. Power and
J. Andrew Moorer resigned as officers and directors of the Company, and were
replaced by elected representatives of the third party purchaser to fill the
vancancies created by the resignation of Messrs. Power and Moorer.
As part of the transactions provided for in the Agreement, prior to consummation
of the change in control, substantially all of the assets of the Company and
substantially all of its liabilities were transferred to its wholly owned
subsidiary, Alta California Broadcasting, Inc. ("Alta") in consideration to the
issuance to the Company of additional shares of Alta common stock. Under the
terms of the Agreement, the shares of common stock of shareholders of the
Company, pro rata, as of December 10, 1998, the previously announced record date
for the distribution. Following the distribution of the shares of common stock
of Alta, which will be effective as a spin-off, shareholders of the Company will
continue to own shares of the Company's common stock as well as shares of Alta
common stock. It is the intention that Alta will continue to engage in the radio
broadcasting activities previously conducted by the Company.
The Agreement provides that, following the closing, and no later than January
31, 1999, the Company under the supervision of its newly appointed Board of
Directors would enter into a definitive merger agreement with Interactive Radio
Group, Inc. Consummation of the acquistion and merger with Interactive Radio
Group, Inc. is subject to several conditions, including the approval of the
transaction by the shareholders of Interactive Radio Group, Inc. as well as the
preparation, filing and declaration of effectiveness of a Form S-4 Regristration
Statement to be filed by the Company with the Securities and Exchange Commission
as part of the acquistion.
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation
General
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
December 31, 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.
- 9 -
<PAGE>
Liquidity and Capital Resources - December 31, 1998 compared to March 31, 1998
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 will be merged into a wholly-owned
subsidiary of Regent formed for purposes of completing the Merger.
Simultaneously with the companies entering into the Merger, Alta entered into a
Time Brokerage Agreement (TBA) with Regent whereby Regent will operate Alta's
radio stations being merged during the period leading up to the date of closing
of the Merger.
Alta is the owner, operator and licensee of radio station KRDG-FM, Shingletown,
California. Alta, through its wholly-owned subsidiary Northern California
Broadcasting, Inc. (Northern), operates KNNN-FM, Central Valley, California
(licensed to Northern). Alta also holds an option to purchase, prior to the
closing date of the Merger, all of the tangible and intangible assets used or
held by Power Surge, Inc. for use in the operation of KRRX-FM, Burney,
California and KNRO-AM, Redding, California. Alta has been operating these two
stations under a TBA since March 1, 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 Preffered stock. Regent
assumed approximately $1,500,000 of the Company's liabilities.
On December 31, 1998, a change in control of Redwood Broadcasting, Inc. (the
"Company") occurred in connection with the consummation of a certain Stock
Purchase Agreement (the "Agreement").
Under the terms of the Agreement, a third party purchased from the Company's
shareholders an aggregate of 690,000 shares of the Company's common stock for a
total purchase price of $100,000. The 690,000 shares of the Company's common
stock acquired by the third party represented 48.9% of the Company's total
issued and outstanding shares of common stock.
Further, as part of the transactions covered by the Agreement, John C. Power and
J. Andrew Moorer resigned as officers and directors of the Company, and were
replaced by elected representatives of the third party purchaser to fill the
vancancies created by the resignation of Messrs. Power and Moorer.
As part of the transactions provided for in the Agreement, prior to consummation
of the change in control, substantially all of the assets of the Company and
substantially all of its liabilities were transferred to its wholly owned
subsidiary, Alta California Broadcasting, Inc. ("Alta") in consideration to the
issuance to the Company of additional shares of Alta common stock. Under the
terms of the Agreement, the shares of common stock of shareholders of the
Company, pro rata, as of December 10, 1998, the previously announced record date
for the distribution. Following the distribution of the shares of common stock
of Alta, which will be effective as a spin-off, shareholders of the Company will
continue to own shares of the Company's common stock as well as shares of Alta
common stock. It is the intention that Alta will continue to engage in the radio
broadcasting activities previously conducted by the Company.
- 10 -
<PAGE>
Results of Operations - Three months ended December 31, 1998 compared to Three
Months Ended December 31, 1997
Net revenues (gross revenues less agency commissions) for the quarter ended
December 31, 1998 were $39,853 compared to net revenues of $ 71,481 for the same
period a year ago. The decrease in sales is attributed to increase competition
for advertising dollars in the Redding, California market.
Operating expenses for the three months ended December 31, 1998 were $217,568
comprised of station operating expenses of $57,112, general and administrative
expenses of $157,278 and depreciation and amortization of $3,178. Operating
expenses for the three month period ended December 31, 1997 were $151,944
comprised of station operating expenses of $22,130, general and administrative
expenses of $88,627 and depreciation and amortization of $41,187.
The Company incurred net interest expense (interest expense offset by interest
income) for the quarter ended December 31, 1998 of $13,644 comprised primarily
of interest arising from short-term debt.
As a result of the foregoing, the Company sustained a net loss for the three
months ended December 31, 1998 of ($264,527) or ($0.18) per share compared to a
net loss of ($40,687) or ($0.04) per share for the three months ended December
31, 1997
- 11 -
<PAGE>
Results of Operations - Nine Months Ended December 31, 1998 compared to Nine
Months Ended December 31, 1997
Net Revenues (gross revenues less agency commissions) for the nine months ended
December 31, 1998 were $98,246 compared to net revenues for the nine months
ended December 31, 1997 of $744,299. Revenue for the nine months ended December
31, 1997 was comprised of radio advertising sales associated with five radio
stations located in Redding, California that the Company either owns or
operates. In the current year, the Company only operated one radio station in
Redding, California. Due to the sale in June, 1998, to Regent, of four of the
Company's radio stations. Therefore, the decrease in revenue in the current
period is attributable to a decrease in volume of radio advertising sales.
Operating expenses for the nine months ended December 31, 1998 were $392,148
comprised of station operating expenses of $152,023, general and administrative
expenses of $206,795 and depreciation and amortization of $33,330. Operating
expenses for the period were generated by the Company's sole station in Redding,
California. As previously stated, in the prior year comparable period, the
Company operated five radio stations. Thus the Company generated operating
expenses of $905,773 last year comprised of station operating expenses of
$414,270, general and administative expenses of $391,856 and depreciation and
amortization of $99,647.
The Company recorded other income of $1,052,787 for the nine months ended
December 31, 1998 compared to other income of $112,142 for the same period a
year ago. Other income for the current period was comprised primarily of a
$1,173,746 gain recorded on the sale of Alta's radio stations to Regent. The
Company completed the sale of these stations n June 15, 1998. Also during the
nine months ended December 31, 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 filing and prosecuting the construction permit coupled with
legal and engineering fees.
As a result of the foregoing, the Company posted net income of $902,787 for the
nine months ended December 31, 1998 or $0.64 per share compared to a net loss of
$(49,332) or $(0.04) per share for the nine months ended December 31, 1997.
- 12 -
<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
- 13 -
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PERIOD-END> DEC-31-1998
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