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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 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)
COLORADO 84-1493151
(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 April 30, 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 March 31, 2000 (unaudited) and December 31,
1999 .............................................. 2
Unaudited Statements of Operations for the Three Months Ended
March 31, 2000 and 1999 ........................... 3
Unaudited Statements of Cash Flows for the Three Months Ended
March 31, 2000 and 1999............................ 4
Notes to Financial Statements................................ 5
1
<PAGE>
USARadio.com, Inc.
BALANCE SHEETS
ASSETS
March 31, December 31,
2000 1999
------------ ------------
CURRENT ASSETS (unaudited)
Cash $ 33,638 $ 9,225
Accounts receivable, net of
allowance for 459,786 611,598
doubtful accounts of $11,909 in
1999 and 2000
Prepaid expenses 40,939 45,639
-------- --------
Total current assets 534,363 666,462
PROPERTY AND EQUIPMENT - AT COST
Equipment 572,237 570,699
Furniture and fixtures 18,952 18,952
Software 23,906 23,906
-------- --------
615,095 613,557
Less accumulated depreciation (448,165) (434,826)
-------- --------
166,930 178,731
-------- --------
$701,293 $845,193
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, December 31,
2000 1999
------------ ------------
CURRENT LIABILITIES
Current maturities of long-term
debt $ 25,569 $ 34,461
Notes payable-bank 125,000 125,000
Accounts payable and accrued 557,668 631,277
liabilities -------- --------
Total current liabilities 708,237 790,738
LONG-TERM DEBT, net of current
maturities 136,096 139,651
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 2,673 2,673
Additional paid-in capital 211,327 211,327
Accumulated deficit (357,040) (299,196)
--------- ----------
(143,040) (85,196)
--------- ----------
$ 701,293 $ 845,193
========= ==========
See accompanying notes.
2
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USARadio.com, Inc.
STATEMENTS OF OPERATIONS
Three months ended March 31,
(unaudited)
2000 1999
------------- -------------
NET SALES $872,190 $832,400
OPERATING EXPENSES
Sales expenses 229,670 223,579
Programming and news service 267,204 321,461
Administrative and engineering 402,689 432,844
Depreciation 15,135 16,072
----------- ----------
914,698 993,956
----------- -----------
Operating loss (42,508) (161,556)
OTHER EXPENSE
Interest expense (15,336) (13,232)
----------- ----------
(15,336) (13,232)
----------- ----------
Loss before income taxes (57,844) (174,788)
INCOME TAX
Income tax benefit -- 20,179
---------- ----------
-- 20,179
---------- ----------
Net loss $ (57,844) $ (154,609)
========== ==========
LOSS PER COMMON SHARE - BASIC AND
DILUTED Nil $ 0.01
=========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 13,516,720 13,516,720
========== ==========
See accompanying notes.
3
<PAGE>
USARadio.com, Inc.
STATEMENTS OF CASH FLOWS
Three months ended March 31,
(unaudited)
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss $ (57,844) $ (154,609)
Adjustments to reconcile net loss
to net cash provided by (used
in) operating activities
Depreciation and amortization 15,135 16,072
Provision for deferred income
taxes -- (20,179)
Decrease in:
Accounts receivable 151,812 62,676
Prepaid expenses 4,700 3,344
Increase (decrease) in:
Accounts payable and accrued
Liabilities (73,609) 65,709
---------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 40,194 (26,987)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of property and
equipment (3,334) (2,967)
---------- ---------
NET CASH USED IN INVESTING (2,967)
ACTIVITIES (3,334)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from notes -- 88,000
Payments on notes (12,447) (61,520)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (12,447) 26,480
NET INCREASE (DECREASE) 24,413 (3,474)
IN CASH
CASH - BEGINNING OF PERIOD 9,225 30,226
--------- ---------
CASH - END OF PERIOD $ 33,638 $ 26,752
========= =========
See accompanying notes.
4
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USARadio.com, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 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
quarter ended March 31, 2000 are not necessarily indicative
of the results that may 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.
5
<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
Colorado corporation with principal executive offices located at
2290 Springlake Road, Suite 107, Dallas, Texas 75234. The
company's telephone number is 972.484.3900.
The company will hold its Annual Meeting of Shareholders on
May 26, 2000 at the company's principal executive offices. At the
meeting, the shareholders of the company will:
* elect two directors to serve until the 2001 Annual
Meeting of Shareholders and until their respective
successors shall be elected and qualified; and
* consider and potentially approve the merger of the
company into a wholly-owned subsidiary organized under
the laws of the State of Delaware in order to effect
the change of the company's state of incorporation from
Colorado to 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 of these proposals.
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 May 15,
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.
6
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For the quarter ended March 31, 2000, the following percentage of
our revenues were derived from the following sources:
% of Revenues
During Quarter
Ended March 31,
Revenue Source 2000
------------------------- ----------------
News and sports
programming............. 63%
Talk programming........ 25%
Satellite time ......... 5%
Other revenue .......... 7%
----------------
TOTAL......... 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.
Revenues. Our revenues increased by approximately 5% to
$872,000 for the three months ended March 31, 2000 from $832,000
for the three months ended March 31, 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 by
approximately $79,000, or 8%, to $915,000 for the three months
ended March 31, 2000 from approximately $994,000 for the first
three months of 1999. Approximately $54,000 of this decrease
resulted from reduced programming and news service expense
stemming from the elimination of one talk-style program. In
addition, we experienced a decrease in administrative and
engineering expense of approximately $30,000 from a reduction in
compensation and related expense associated with redundant
employees. The decrease in overall operating expenses was
partially offset by a modest increase (approximately 3%) in sales
expenses to approximately $230,000 from $224,000 in the three
months ended March 31, 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 three months ended March 31, 2000, because, at that date,
realization of deferred tax assets is dependent on future taxable
income which is uncertain.
7
<PAGE>
Net Loss. For the three months ended March 31, 2000, our
net loss was approximately $58,000 compared with a net loss of
approximately $155,000 for the three months ended March 31, 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 March 31, 2000, we had a
working capital deficit of approximately $174,000 as compared
with a working capital deficit of $124,000 at December 31, 1999.
Net cash provided by operating activities for the quarter ended
March 31, 2000 was $40,000 and net cash used in operating
activities for the like period of 1999 was $27,000 representing
an increase of $67,000 in the 2000 period. The increase was due
principally to the reduced net loss and reductions in accounts
receivables, offset in part by reductions in accounts payable.
As of March 31, 2000, certain of our vendors had granted
extended payment terms to us relating to an aggregate of
approximately $240,000 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
December 31, 1999, 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 $76,057 to
us as of December 31, 1999. 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.
We maintain a note payable to Bank of America which, at
March 31, 2000, represented a debt of $22,000. 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, 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 March 31, 2000. At
March 31, 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
year 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 March 31,
2000). Borrowings under this bank line are also payable on
demand. At March 31, 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 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
8
<PAGE>
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.
9
<PAGE>
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
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on form 8-K
None
10
<PAGE>
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 May 15, 2000.
USARadio.com, Inc.
By: /s/ MARK R. MADDOUX
------------------------------
Mark R. Maddoux
Vice President and Chief
Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF USARADIO.COM, INC. FOR THE QUARTER ENDED
MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 33,638
<SECURITIES> 0
<RECEIVABLES> 459,786
<ALLOWANCES> 11,809
<INVENTORY> 0
<CURRENT-ASSETS> 534,363
<PP&E> 615,095
<DEPRECIATION> 15,135
<TOTAL-ASSETS> 701,293
<CURRENT-LIABILITIES> 708,237
<BONDS> 0
0
0
<COMMON> 2,673
<OTHER-SE> (143,040)
<TOTAL-LIABILITY-AND-EQUITY> 701,293
<SALES> 752,579
<TOTAL-REVENUES> 872,190
<CGS> 0
<TOTAL-COSTS> 914,698
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (15,336)
<INCOME-PRETAX> (57,844)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,844)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
