================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________
FORM 10-QSB
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTON 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-27053
USARadio.com, Inc.
(Exact name of small business issuer as specified in its
charter)
DELAWARE 52-2234827
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2290 Springlake Road, Suite 107, Dallas, Texas 75234
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 972.484.3900
________________
Former name, former address and former fiscal year, if changed
since last report: N/A
________________
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 [ ]
At August 10, 2000, 13,516,720 shares of common stock were
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
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<PAGE>
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
USARadio.com, Inc.
Balance Sheets as of June 30, 2000 (unaudited) and
December 31, 1999 ................................. 2
Unaudited Statements of Operations for the Three
Months Ended June 30, 2000 and 1999................ 3
Unaudited Statements of Operations for the Six Months
Ended June 30, 2000 and 1999 ...................... 4
Unaudited Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 ...................... 5
Notes to Financial Statements........................ 6
1
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USARadio.com, Inc.
BALANCE SHEETS
ASSETS
<TABLE>
June 30, December 31,
CURRENT ASSETS 2000 1999
------------ ------------
(unaudited)
<S> <C> <C>
Cash ........................................ $ 34,283 $ 9,225
Accounts receivable, net of allowance for
doubtful accounts of $5,475 and $11,909
in 2000 and 1999.......................... 558,593 611,598
Prepaid expenses............................. 34,900 45,639
---------- -----------
Total current assets 627,776 666,462
PROPERTY AND EQUIPMENT-AT COST
Equipment.................................... 619,956 570,699
Furniture and fixtures....................... 18,952 18,952
Software..................................... 23,906 23,906
---------- ----------
662,814 613,557
Less accumulated depreciation................ (464,891) (434,826)
---------- ----------
.................................... 197,923 178,731
---------- ----------
.................................... $ 825,699 $ 845,193
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
June 30, December 31,
CURRENT LIABILITIES 2000 1999
------------ ------------
Current maturities of long-term debt........... $ 20,645 $ 34,461
Notes payable-bank............................. 125,000 125,000
Accounts payable and accrued liabilities....... 675,997 631,277
----------- ----------
Total current liabilities.............. 821,642 790,738
LONG-TERM DEBT, net of current maturities...... 190,995 139,651
STOCKHOLDERS' DEFICIT
Common stock .................................. 2,673 2,673
Additional paid-in capital..................... 211,327 211,327
Retained earnings (accumulated deficit)........ (400,938) (299,196)
----------- ----------
Total stockholders' deficit............ (186,938) (85,196)
----------- ----------
$ 825,699 $ 845,193
=========== ==========
</TABLE>
See accompanying notes.
2
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USARadio.com, Inc.
STATEMENTS OF OPERATIONS
Three months ended June 30,
(unaudited)
2000 1999
------------- -----------
NET SALES................... $ 1,035,676 $ 933,756
OPERATING EXPENSES
Sales expenses............ 234,400 227,667
Programming and news
service................. 324,845 347,867
Administrative and
engineering............. 499,404 418,636
Depreciation.............. 16,726 16,072
----------- ----------
1,075,375 1,010,242
----------- ----------
Operating loss........ (39,699) (76,486)
OTHER EXPENSE
Interest expense.......... (4,199) (13,243)
----------- ----------
Loss before income
taxes............. (43,898) (89,729)
INCOME TAX
Income tax benefit........ - 10,359
----------- ----------
Net loss.............. $ (43,898) $ (79,370)
=========== ==========
LOSS PER COMMON SHARE-BASIC
AND DILUTED............... Nil $ (0.01)
=========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING............... 13,516,720 13,516,720
=========== ==========
See accompanying notes.
3
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USARadio.com, Inc.
STATEMENTS OF OPERATIONS
Six months ended June 30,
(unaudited)
2000 1999
------------ -----------
NET SALES......................... $1,907,866 $1,766,156
OPERATING EXPENSES
Sales expenses.................. 464,070 451,246
Programming and news service.... 592,049 669,328
Administrative and engineering.. 902,093 851,480
Depreciation.................... 31,861 32,144
---------- ----------
.................... 1,990,073 2,004,198
---------- ----------
Operating loss............ (82,207) (238,042)
OTHER EXPENSE
Interest expense................ (19,535) (26,475)
---------- ----------
Loss before income taxes.. (101,742) (264,517)
INCOME TAX
Income tax benefit.............. - 30,538
---------- ----------
Net loss.................. $ (101,742) $ (233,979)
========== ==========
LOSS PER COMMON SHARE-BASIC AND
DILUTED........................ $ (0.01) $ (0.02)
========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING ................... 13,516,720 13,516,720
========== ==========
See accompanying notes.
4
<PAGE>
USARadio.com, Inc.
STATEMENTS OF CASH FLOWS
Six months ended June 30,
(unaudited)
2000 1999
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................. $ (101,742) $(233,979)
Adjustments to reconcile net loss to
net cash provided by operating
activities
Depreciation and amortization......... 31,861 32,144
Provision for deferred income taxes... - (30,538)
Decrease in:
Accounts receivable................... 53,005 58,980
Prepaid expenses...................... 10,739 3,783
Increase in:
Accounts payable and accrued
liabilities ......................... 44,720 258,952
NET CASH PROVIDED BY ---------- ---------
OPERATING ACTIVITIES........... 38,583 89,342
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment....... (3,334) (87,262)
NET CASH REQUIRED BY ---------- ---------
INVESTING ACTIVITIES........... (3,334) (87,262)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes....................... 15,000 125,000
Payments on notes......................... (25,191) 108,038
NET CASH PROVIDED (REQUIRED) BY ---------- ---------
FINANCING ACTIVITIES........... (10,191) 16,962
NET INCREASE IN CASH............ 25,058 19,042
CASH-BEGINNING OF PERIOD.................... 9,225 30,226
---------- ---------
CASH-END OF PERIOD.......................... $ 34,283 $ 49,268
========== =========
See accompanying notes.
5
<PAGE>
USARadio.com, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
1. Basis of presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Item 310 of Regulation S-B.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
six months ended June 30, 2000 are not necessarily
indicative of the results that might be expected for the
year ending December 31, 2000. For further information,
refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-KSB for
the year ended December 31, 1999.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Except for the historical information contained herein, the
matters discussed below contain forward-looking statements which
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements
of the company, or industry results, to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. The company expressly
disclaims any obligation to update this information or publicly
release any revision or reflect events or circumstances after the
date of this report. Such factors include among others: our
ability to obtain additional capital to implement our business
plan; our history of losses and negative cash flow; our
dependence on the continued demand for radio airtime; our
potential inability to manage our airtime inventory; our
dependence on the continued popularity of our programs,
particularly "Point of View;" the need to maintain and expand our
affiliate base; business conditions in the radio industry
generally; the impact of market competitors; and such other
factors as are more fully described in our Form 10-KSB for the
year ended December 31, 1999.
The Company
USARadio.com, Inc. (also known as USA Radio Network) is a
Delaware corporation with principal executive offices located at
2290 Springlake Road, Suite 107, Dallas, Texas 75234. The
company's telephone number is 972.484.3900.
We held our Annual Meeting of Shareholders on May 26, 2000.
At this meeting, the stockholders approved both the election of
Robert Marlin Maddoux and Mark R. Maddoux as directors to serve a
one-year term ending with the 2001 Annual Meeting of
Stockholders, and the redomestication of the Company under the
laws of the State of Delaware.
An Information Statement, together with the company's Annual
Report for the year ended December 31, 1999, were sent to each of
the company's stockholders of record as of March 31, 2000 on
May 9, 2000 describing in detail both the election of directors
and the proposed merger to be submitted to a vote of the
stockholders. A Current Report on Form 8-K was filed on June 14,
2000 describing in detail the merger and change of the Company's
state of incorporation.
Overview
USARadio.com, Inc. is a satellite-delivered radio broadcast
network that offers a broad line of programming content to
independent radio stations. Our programming includes news,
sports, music, and general interest talk programs. Our target
market consists of independent radio stations, both AM and FM,
that choose not to become affiliated with the 3 major radio
networks (ABC Radio, NBC, and CBS Radio Networks). As of August
10, 2000, our network was comprised of approximately 1,200
affiliated radio stations across the nation, including affiliates
in 49 of the top 50 Dominant Market Areas (DMAs). Our network
includes affiliates in markets that represent approximately 95%
of the U.S. population. We simultaneously broadcast select
programming over the Internet.
We do not derive revenues from the sale of our programs to
affiliate stations. Instead, we barter with our affiliated radio
stations for commercial airtime which is exchanged for our
programming content. This commercial airtime is then resold to
advertisers with whom we have relationships. We derive additional
revenue, although to a much lesser extent, from the sale of our
programming to non-commercial radio stations and the rental of
time on our channels. We price our advertising time based on a
variety of factors including the time of day the advertisement
will air, the size of the potential listening audience, the
length of the ad and the number of times the advertisement will
run. Our revenues are recognized in the accounting period which
corresponds with the broadcast of the advertisement. Amounts
received in advance of a broadcast are recorded as deferred
revenue until the broadcast is aired. Our advertisers and
advertising agencies are generally billed monthly.
7
<PAGE>
For the three months and six months ended June 30, 2000,
respectively, the following percentage of our revenues were
derived from the following sources:
% of Revenues % of Revenues
During Three During Six
Months Ended Months Ended
Revenue Source June 30, 2000 June 30, 2000
-------------------------- ------------- ---------------
News and sports
programming............ 65% 64%
Talk programming......... 23% 24%
Satellite time........... 5% 5%
Other revenue............ 7% 7%
------------- ---------------
TOTAL.......... 100% 100%
============= ===============
Other revenue is derived from a fee charged to non-
commercial radio stations unable to air commercial advertising
and a fee charged for syndicating services of select network
programming.
Our expenses are comprised of:
* sales expenses, which consists primarily of
compensation and related expenses for our sales and
marketing group, together with commission expense,
including commissions payable to sales staff;
* programming costs, which consists primarily of
compensation and related expenses for "on air"
personalities, production staff and related personnel
as well as the actual costs associated with developing
programming content;
* news services, which consists primarily of the variable
costs of independent reporters and operational expenses
including subscription fees to news services and
satellite time;
* administrative and engineering, which consists
primarily of compensation and related expenses for our
administrative, accounting and engineering staff,
occupancy costs and legal and consulting fees; and
* depreciation.
Three Months Ended June 30, 2000 Compared to Three Months Ended
June 30, 1999
Revenues. Our revenues increased by approximately 10% to
approximately $1,036,000 for the three months ended June 30, 2000
from approximately $934,000 for the three months ended June 30,
1999. This increase in revenue was primarily related to an
increase in the rate at which we sell our commercial airtime.
This increase took effect in the third quarter of 1999. In
addition, revenues were positively affected by a slight increase
in our available inventory of commercial spots which occurred as
a result of additional programming added in February 2000.
Operating Expenses. Overall operating expenses increased by
approximately $65,000, or 6%, to approximately $1,075,000 for the
three months ended June 30, 2000 from approximately $1,014,000
for the comparable period of 1999. This increase resulted
primarily from increased administrative and engineering expenses
of approximately $81,000 from increases in compensation and
related expense associated with the addition of employees. Sales
expenses increased modestly by approximately $6,000
(approximately 3%) resulting from increased sales commissions
paid as a consequence of additional available inventory. The
increase in overall operating expenses was partially offset by a
decrease (approximately 7%) in programming and news service
expense to approximately $325,000 from approximately $348,000 in
the three months ended June 30, 2000 and 1999, respectively,
stemming from the elimination of one talk-style program expenses.
Income Tax Benefit. No income tax benefit was recorded for
the three months ended June 30, 2000, because, at that date,
realization of deferred tax assets is dependent on future taxable
income which is uncertain.
8
<PAGE>
Net Loss. For the three months ended June 30, 2000, our net
loss was approximately $44,000 compared with a net loss of
approximately $79,000 for the three months ended June 30, 1999.
Six Months Ended June 30, 2000 Compared to Six Months Ended June
30, 1999
Revenues. Our revenues increased by approximately 7% to
approximately $1,908,000 for the six months ended June 30, 2000
from approximately $1,766,000 for the six months ended June 30,
1999. This increase in revenue was primarily related to an
increase in the rate at which we sell our commercial airtime.
This increase took effect in the third quarter of 1999. In
addition, revenues were positively affected by a slight increase
in our available inventory of commercial spots which occurred as
a result of additional programming added in February 2000.
Operating Expenses. Overall operating expenses decreased
modestly by approximately $14,000 to approximately $1,990,000 for
the six months ended June 30, 2000 from approximately $2,004,000
for the comparable period of 1999. This decrease resulted from
reduced programming and news service expense stemming from the
elimination of one talk-style program of approximately $77,000 to
approximately $592,000 in the six months ended June 30, 2000 from
approximately $669,000 for the comparable period of 1999. The
decrease in overall operating expenses was partially offset by an
increase (approximately 6%) in administrative and engineering
expenses to approximately $902,000 from $851,000 in the six
months ended June 30, 2000 and 1999, respectively, resulting from
increases in compensation and related expense associated with
additional employees. The decrease in overall operating expenses
was also partially offset by an increase (approximately 3%) in
sales expenses to approximately $464,000 from $451,000 in the six
months ended June 30, 2000 and 1999, respectively. This increase
resulted from an increase in the sales commissions paid as a
consequence of additional available inventory.
Income Tax Benefit. No income tax benefit was recorded for
the six months ended June 30, 2000, because, at that date,
realization of deferred tax assets is dependent on future taxable
income which is uncertain.
Net Loss. For the six months ended June 30, 2000, our net
loss was approximately $102,000 compared with a net loss of
approximately $234,000 for the six months ended June 30, 1999.
Liquidity and Capital Resources
Since inception, we have financed our operations principally
from operations. Such funds have historically been supplemented
with bank debt and stockholder loans. At June 30, 2000, we had a
working capital deficit of approximately $194,000 as compared
with a working capital deficit of $124,000 at December 31, 1999.
Net cash provided by operating activities for the six months
ended June 30, 2000 was approximately $39,000 and net cash
provided by operating activities for the like period of 1999 was
$89,000 representing a decrease of approximately $50,000 in the
2000 period. The decrease was due principally to the timing of
payments to vendors, which mitigated the cash impact of the net
loss of approximately $233,000 in the 1999 period.
As of June 30, 2000, certain of our vendors had granted
extended payment terms to us relating to an aggregate of
approximately $225,000 in payables. At December 31, 1999, we owed
approximately $250,000 under extended payment terms. Although we
expect that we will be able to remain current with each of these
vendors, including with respect to those portions for which we
have been granted extended payment terms, no assurances can be
made that we will be able to fulfill our obligations under these
terms. Failure to repay our obligations to these vendors
according to the arranged terms could have a material adverse
effect on our business, prospects, financial condition or results
of operations. Management expects to be fully current with all of
its accounts payable by December 31, 2000.
During the year ended December 31, 1999, Marlin Maddoux, our
Chief Executive Officer and President, advanced $80,000 to us. At
June 30, 2000, the outstanding amount of this advance was
$76,877. This advance bears interest at 10% per annum with a
maturity date of September 1, 2004. These funds were used by us
to acquire certain equipment and technology necessary in
connection with the upgrade of our command and control center.
Specifically, this equipment upgraded our satellite transmission
technology from analog to digital.
Mr. Marlin Maddoux also has advanced a total of $91,057 to
us as of June 30, 2000. This advance includes an advance of
$15,000 made to us by Mr. Marlin Maddoux on June 16, 2000. This
advance bears interest at 12% per annum, with a maturity date of
June 1, 2001. These funds were used by us for operating and
advertising expenses.
9
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We maintain a note payable to Bank of America which, at June
30, 2000, represented a debt of $15,745. The proceeds from this
note were used to develop new talk programming. This note bears
interest at the rate of 10% per annum and matures in September
2000. We have secured repayment of this note by substantially all
of our assets. Further, Mr. Marlin Maddoux has personally
guaranteed this note on our behalf, although we did not provide
Mr. Maddoux a guarantee fee for doing so.
We also maintain a credit facility with Bank of America.
This credit line is payable upon demand and borrowings are
limited to $100,000. Borrowings under this facility bear
interest at prime plus 1%, which was 9.75% at June 30, 2000. At
June 30, 2000, our outstanding debt under the credit facility was
approximately $88,000. The borrowings under this credit facility
are collateralized by our assets. We intend to pursue increasing
our line of credit with Bank of America during the remainder of
2000.
In addition to the line of credit referenced above, we also
maintain an additional bank line with Bank of America. Borrowings
under this bank line are limited to $40,000 and bear interest at
prime plus 3.625% (which was approximately 11.125% at June 30,
2000). Borrowings under this bank line are also payable on
demand. At June 30, 2000, our outstanding debt under this
facility was approximately $37,000.
Management believes that its available cash, together with
operating revenues and other available funds, will be adequate to
meet its operating requirements for the immediate term.
During the remainder of 2000, we intend to seek additional
financing through the issuance of debt, equity, other securities
or a contribution thereof. Although there can be no assurances
that any additional capital will be raised, any such financing
which involves the issuance of equity securities would result in
dilution to existing stockholders and the issuance of debt
securities would subject us to the risks associated therewith,
including the risks that interest rates may fluctuate and our
cash flows may be insufficient to pay interest and principal on
such indebtedness. There can be no assurances that we will be
able to obtain additional financing on terms which are acceptable
to us. Our inability to obtain additional acceptable financing
could have a significant negative impact on our operations or
growth plans.
10
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PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to, nor are our properties the subject
of, any pending legal proceedings and no such proceedings are
known to us to be threatened or contemplated against us.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) We held our Annual Meeting of Stockholders on May 26,
2000. An Information Statement, together with the
company's Annual Report for the year ended December 31,
1999, were sent to each of the company's stockholders
of record as of March 31, 2000 on May 9, 2000
describing in detail both the election of directors and
the proposed merger to be submitted to a vote of the
stockholders.
(b) The following two directors were elected to serve a one-
year term ending with the 2001 Annual Meeting of
Stockholders:
* Robert Marlin Maddoux
* Mark R. Maddoux
(c) The two directors elected received the following votes:
For 13,136,720
Against 0
Abstain 0
Our proposal to approve the merger of the Company into
a wholly owned subsidiary organized under the laws of the
State of Delaware received the following votes:
For 13,136,720
Against 0
Abstain 0
Broker nonvotes 0
(d) Not applicable.
ITEM 5. OTHER INFORMATION
None
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed on the accompanying Index to
Exhibits immediately following the signature page are
filed as part of, or incorporated by reference into,
this Quarterly Report on Form 10-QSB.
(b) Reports on form 8-K
On June 14, 2000, the Company filed a report on Form 8-
K relating to the merger of the Company into a wholly
owned subsidiary organized under the laws of the State
of Delaware.
12
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on August 14, 2000.
USARadio.com, Inc.
By: /s/ MARK R. MADDOUX
-----------------------------
Mark R. Maddoux
Vice President and Chief
Financial Officer
13
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INDEX TO EXHIBITS
2.1 Agreement and Plan of Merger, dated April 10,
2000, by and between USARadio.com, Inc., a
Colorado corporation and USARadio.com, Inc.,
a Delaware corporation. (Exhibit 2.1)(1)
3.1 Certificate of Incorporation of USARadio.com,
Inc. (Exhibit 3.1)(1)
3.2 Bylaws of USARadio.com, Inc. (Exhibit 3.2)(1)
27.1 Financial Data Schedule
____________
(1) Incorporated by reference to the exhibit shown in
parenthesis in our report on Form 8-K, filed June 14, 2000.
14
