<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of Report: September 15, 1998
JACOR COMMUNICATIONS, INC.
DELAWARE
(State or Other Jurisdiction of Incorporation)
0-12404 31-0978313
(Commission File No.) (IRS Employer Identification No.)
50 East RiverCenter Boulevard
12th Floor
Covington, KY 41011
(606) 655-2267
<PAGE>
Item 5. OTHER EVENTS
Subsequent to May 12, 1998, Jacor Communications, Inc. (the "Company")
acquired two new, indirect wholly-owned subsidiaries: Tsunami Communications,
Inc. ("Tsunami"), and M3X, Inc. ("M3X"). The financial statements of these
two new subsidiaries were not required to be filed pursuant to Item 2 or Item
7 of Form 8-K because none of these acquisitions were significant to the
Company. However, as required by the terms of the Company's various
indentures relating to its outstanding senior subordinated notes, Tsunami and
M3X now have become guarantors of such debt. Because audited financial
statements for these subsidiary guarantors have not been previously included
in the Company's consolidated financial statements, the Company is filing the
financial statements included in Item 7 of this Form 8-K so that such
financial statements may be incorporated by reference into any registration
statements filed by the Company and its subsidiaries pursuant to the
Securities Act of 1933, as amended, including without limitation the
Company's Registration Statement on Form S-3 (File No. 333-51489). Tsunami
and M3X will be co-registrants to such Registration Statements.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
(i) Tsunami Communications, Inc.
Report of Independent Accountants
Balance Sheets as of December 31, 1996 and 1997 and June 30, 1998
(unaudited)
Statements of Operations for the years ended December 31, 1995,
1996 and 1997 and the six month periods ended June 30, 1997 and
1998 (unaudited)
Statements of Shareholders' Equity for the years ended December
31, 1995, 1996 and 1997
Statements of Cash Flows for the years ended December 31, 1995,
1996 and 1997 and the six month periods ended June 30, 1997 and
1998 (unaudited)
Notes to Financial Statements
2
<PAGE>
(ii) M3X, Inc.
Report of Independent Accountants
Balance Sheets as of April 30, 1998 and July 31, 1997
Statements of Operations for the nine months ended April 30,
1998 and the years ended July 31, 1997 and 1996
Statements of Changes in Stockholders' Equity for the nine months
ended April 30, 1998 and the years ended July 31, 1997 and 1996
Statements of Cash Flows for the nine months ended April 30,
1998 and the years ended July 31, 1997 and 1996
Notes to Financial Statements
(b) Exhibits
23.1 Consent of PricewaterhouseCoopers LLP
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
JACOR COMMUNICATIONS, INC.
September 15, 1998 By: /s/ R. CHRISTOPHER WEBER
-------------------------------------------
R. Christopher Weber, Senior Vice President
and Chief Financial Officer
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of
Jacor Communications, Inc.
In our opinion, the accompanying balance sheets and the related statements of
income and shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Tsunami Communications, Inc. at
December 31, 1996 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
August 14, 1998
1
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, JUNE 30, 1998
1996 1997 (UNAUDITED)
------------ ----------------------------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash $ 63,657 $ 189,905
Marketable securities 40,663 254,217 $ 185,514
Accounts receivable 104,010 107,223 32,339
Related party notes receivable 210,642 10,642
Other 67,857 3,252
------------ ----------- -----------
Total current assets 486,829 565,239 217,853
Property, plant and equipment, net 1,802,563 1,410,042 1,292,079
Intangible assets, net 2,576,423 2,391,216 2,339,055
------------ ----------- -----------
Total assets $ 4,865,815 $ 4,366,497 $ 3,848,987
------------ ----------- -----------
------------ ----------- -----------
LIABILITIES
Current liabilities:
Accounts payable $ 98,234 $ 42,760 $ 113,583
Accrued expenses 75,754 90,391 43,456
Current portion of notes payable 550,000 1,828,125 1,828,125
------------ ----------- -----------
Total current liabilities 723,988 1,961,276 1,985,164
Deferred revenue 220,833 170,833 145,833
Notes payable 5,350,000 4,046,875 4,021,875
SHAREHOLDER'S EQUITY
Common stock, no par value, 1,000 shares
authorized, 50 shares outstanding 5,000 5,000 5,000
Additional paid in capital 625 625
Accumulated deficit (1,434,006) (1,818,112) (2,309,510)
------------ ----------- -----------
Total shareholder's deficit (1,429,006) (1,812,487) (2,303,885)
------------ ----------- -----------
Total liabilities and shareholder's
deficit $ 4,865,815 $ 4,366,497 $ 3,848,987
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31 JUNE 30, (UNAUDITED)
---------------------------------------- -------------------------
1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Advertising sales agreement income $ 267,985 $1,609,200 $1,500,000 $ 750,000 $ 187,500
Broadcast revenue 706,227 457,942 550,062 244,620 208,687
---------- ---------- ---------- ---------- ----------
Net revenue 974,212 2,067,142 2,050,062 994,620 396,187
Broadcast operating expenses 411,513 836,170 978,420 414,441 232,220
General and administrative 524,314 986,718 527,144 219,877 221,028
Depreciation and amortization 376,639 655,908 599,297 196,398 253,492
---------- ---------- ---------- ---------- ----------
Operating (loss) Income (338,254) (411,654) (54,799) 163,904 (310,553)
Interest expense 317,721 334,438 324,745 161,391 160,192
Other expense, net 3,614 4,562 4,761 20,653
---------- ---------- ---------- ---------- ----------
Net loss $ (655,975) $ (749,706) $ (384,106) $ (2,248) $ (491,398)
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
3
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
---------------- ADDITIONAL
PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 50 $5,000 $ (28,325) $ (23,325)
Net loss (655,975) (655,975)
------ ------ ---------- ------------ -----------
Balance, December 31, 1995 50 5,000 (684,300) (679,300)
Net loss (749,706) (749,706)
------ ------ ---------- ------------ -----------
Balance, December 31, 1996 50 5,000 (1,434,006) (1,429,006)
Capital contribution $ 625 625
Net loss (384,106) (384,106)
------ ------ ---------- ------------ -----------
Balance, December 31, 1997 50 5,000 625 $(1,818,112) (1,812,487)
Net loss (unaudited) (491,398) (491,398)
------ ------ ---------- ------------ -----------
Balance, June 30, 1998 (unaudited) 50 $5,000 $ 625 $ 2,309,510 $ 2,303,885
------ ------ ---------- ------------ -----------
------ ------ ---------- ------------ -----------
The accompanying notes are an integral part of the financial statements.
</TABLE>
4
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTH PERIOD ENDED
YEAR ENDED DECEMBER 31, JUNE 30, (UNAUDITED)
-------------------------------------------- ---------------------------
1995 1996 1997 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities:
Net (loss) $ (655,975) $ (749,706) $ (384,106) $ (2,248) $ (491,398)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 271,154 447,258 386,170 89,841 144,188
Amortization 105,482 208,650 213,127 106,557 109,304
Loss on disposal of assets 85,722
Unrealized (gain) loss on trading securities 4,561 20,632 (13,350) (18,674)
Changes in operating assets and liabilities:
Accounts receivable (202,357) 108,727 (3,213) 11,624 74,884
Other current assets 237,553 (53,242) 64,605 64,702 3,252
Accounts payable 101,445 (3,211) (55,474) (98,234) 70,823
Accrued expenses 93,688 (33,858) 14,637 (8,941) (46,935)
Deferred revenue 220,833 (50,000) (25,000) (25,000)
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities (49,010) 150,012 292,100 124,951 (179,556)
Cash flows from investing activities:
Cash paid for station acquisitions (4,288,982)
Loan to shareholder (50,000)
Repayment of shareholder loan 39,358 10,642
Capital expenditures (458,659) (107,291) (78,821) (83,368)
Loan to related party (200,000)
Repayment of related party loan 200,000 200,000
Purchases of investments (45,224) (234,186) (170,894)
Sales of investments 87,377
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) investing
activities (4,338,982) (664,525) (141,477) (49,715) 14,651
Cash flows from financing activities:
Proceeds from notes payable 4,482,328 475,000
Payment on notes payable (25,000) (25,000) (25,000)
Capital contribution 625
------------ ------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities 4,482,328 475,000 (24,375) (25,000) (25,000)
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in cash 94,336 (39,513) 126,248 50,236 (189,905)
Cash, beginning of period 8,834 103,170 63,657 63,657 189,905
------------ ------------ ------------ ------------ ------------
Cash, end of period $ 103,170 $ 63,657 $ 189,905 $ 113,893 $ 0
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Supplemental disclosures of cash flow information:
Cash paid for interest $ 317,706 $ 334,437 $ 324,692 $ 161,391 $ 160,192
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUBSEQUENT EVENTS:
On February 2, 1998, Anthony A. Galluzzo, owner of Tsunami Communications,
Inc. (the "Company"), entered into an agreement by which Jacor
Communications, Inc. ("Jacor") will purchase all shares of common stock of
the Company for $500,000 cash. The closing of this transaction is expected
to occur during the third quarter of 1998 and is conditioned on, among
other things, receipt of Federal Communications Commission and other
regulatory approvals.
2. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS:
a. ORGANIZATION: Tsunami Communications, Inc. (the Company), a Colorado
corporation, owns and operates radio stations KTCL (FM) and KIIX (AM).
KTCL (FM) is located in Denver, Colorado and KIIX (AM) is located in
Ft. Collins, Colorado. On April 6, 1994, the Company entered into a
joint sales agreement ("JSA") with Jacor, giving Jacor the right to
sell commercial broadcast advertisements for KTCL (FM). In exchange
for this right, the Company receives fees from Jacor established in
accordance with the agreement. On February 2, 1998, the Company
terminated the JSA and entered into a time brokerage agreement ("TBA")
with Jacor for the right to sell commercial broadcast advertisements
for both KTCL (FM) and KIIX (AM). Collectively, the JSA and TBA are
referred to as advertising sales agreements.
b. REVENUE RECOGNITION: Broadcast revenue includes revenue earned for
the sale of commercial advertisements and rental of broadcast tower
space. Broadcast revenue for commercial broadcasting advertisements
is recognized when the commercials are broadcast. Revenue from
advertising sales agreements and tower rental fees are recognized as
earned in accordance with the contracts.
c. CONSOLIDATED STATEMENTS OF CASH FLOWS: For purposes of the
consolidated statement of cash flows, the Company considers all highly
liquid investments with an original maturity of three months or less,
when purchased, to be cash equivalents.
d. CONCENTRATIONS OF CREDIT RISK: Financial instruments which
potentially subject the Company to concentrations of credit risk
consist principally of the concentration of revenues from one major
broadcast group. The Company's revenues from advertising sales
agreement fees originate from Jacor.
6
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS, CONTINUED:
e. PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost.
Depreciation is provided using accelerated methods based upon the
following estimated useful lives:
<TABLE>
<CAPTION>
<S> <C>
Land improvements 7 years
Buildings 39 years
Equipment 5-7 years
Furniture and fixtures 7 years
Automobiles 5 years
</TABLE>
When assets are retired or otherwise disposed of, the cost of the
asset and the related accumulated depreciation are removed from their
respective accounts and any resulting gain or loss is recognized.
f. INTANGIBLE ASSETS: Intangible assets are stated at cost and amortized
on the straight-line basis over the following lives:
<TABLE>
<CAPTION>
<S> <C>
Broadcast intangibles and goodwill 15
Other intangible 5
</TABLE>
The carrying value of intangible assets is reviewed by the Company
when events or circumstances indicate that the recoverability of an
asset may be impaired. If this review indicates that recorded value
of goodwill and FCC licenses will not be recoverable, as determined
based on the undiscounted cash flows of the entity over the remaining
amortization period, the carrying value of the goodwill and FCC
licenses will be reduced accordingly.
g. MARKETABLE SECURITIES: Marketable securities consist of mutual funds.
Marketable securities are recorded in the balance sheet at market
value. All marketable securities are defined as trading securities
under the provision of Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115) and unrealized holding gains and losses are
reflected in earnings. Market value is determined by the most
recently traded price of the security at the balance sheet date. Net
realized gains or losses are determined on the first-in first-out cost
method. The changes in net unrealized holding gains or losses on
trading securities are $4,561, $20,633, $13,350, and $18,674 for the
years ended December 31, 1996, 1997 and for the six month periods
ended June 30, 1997 and 1998, respectively.
h. USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
7
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
2. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS, CONTINUED:
i. INCOME TAXES: Income taxes are provided based on the asset and
liability method of accounting pursuant to Statement of Financial
Accounting Standards (SFAS) 109, "Accounting for Income Taxes".
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
j. INTERIM FINANCIAL DATA: The balance sheet as of June 30, 1998 and the
statement of operations and statement of cash flows for the six month
periods ended June 30, 1997 and 1998, included herein, have been
prepared by the Company, without audit. The Company believes that the
disclosures presented herein with respect to the unaudited period are
adequate to make the information presented not misleading and reflect
all adjustments (consisting only of normal recurring adjustments)
which are necessary for fair presentation of results of operations for
such periods.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1996 and 1997 consisted of the
following:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Land and land improvements $ 50,883 $ 50,883
Buildings 98,876 98,876
Tower and antenna 1,847,957 1,884,489
Equipment 467,849 360,698
Furniture and fixtures 55,410 27,453
Automobiles 12,854
------------ ------------
2,520,975 2,435,253
Less accumulated depreciation (718,412) (1,025,211)
------------ ------------
$ 1,802,563 $ 1,410,042
------------ ------------
------------ ------------
</TABLE>
8
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
4. INTANGIBLE ASSETS:
Intangible Assets at December 31, 1996 and 1997 consisted of the following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Broadcast intangibles $2,542,245 $2,542,245
Goodwill 178,671 178,671
Other intellectual assets 169,638 197,558
---------- ----------
2,890,554 2,918,474
Less accumulated amortization (314,131) (527,258)
---------- ----------
$2,576,423 $2,391,216
---------- ----------
---------- ----------
</TABLE>
5. NOTES PAYABLE:
At December 31, 1997, the Company has $5,875,000 of outstanding borrowings
payable to a subsidiary of Jacor. The loans were made to the Company for
the purpose of acquiring radio stations and other related broadcast assets.
The notes are collateralized by substantially all the assets of the
Company.
<TABLE>
<CAPTION>
NOTE MATURITIES
OUTSTANDING ------------------------------------------------------------------
BORROWINGS 1998 1999 2000 2001 2002
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Acquisition and Antenna term notes,
12.5% interest payable quarterly $ 4,625,000 $ 578,125 $ 578,125 $ 578,125 $ 578,125 $ 578,125
Revolving notes, 6% interest,
principal and interest payable on
demand 1,250,000 1,250,000
-------------- ---------- ---------- ---------- ---------- ----------
$ 5,875,000 $1,828,125 $ 578,125 $ 578,125 $ 578,125 $ 578,125
-------------- ---------- ---------- ---------- ---------- ----------
-------------- ---------- ---------- ---------- ---------- ----------
</TABLE>
9
<PAGE>
TSUNAMI COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
6. INCOME TAXES:
The Company recorded no income tax expense or benefit for the years ended
December 31, 1996 and 1997. The Company has cumulative tax loss carry
forwards of approximately $1,313,000 at December 31, 1997. The loss carry
forwards will expire in the years 2009-2012. The Company has recorded a
valuation allowance of $593,500 against the entire deferred tax asset
related to the operating loss carry forwards and the other immaterial
temporary differences.
7. RELATED PARTY TRANSACTIONS:
During 1995, the Company loaned $50,000 to the Company's shareholder.
Repayment of the note was made in 1996 and 1998 in the amounts of $39,358
and $10,642, respectively.
During 1996, the Company loaned $200,000 to Tsunami Communications of
Northern Colorado, a corporation owned by the Company's shareholder. In
1997 the loan was paid in full.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Jacor Communications, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations and changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of M3X, Inc. at
April 30, 1998 and July 31, 1997 and the results of their operations and
their cash flows for the nine months ended April 30, 1998 and the years ended
July 31, 1997 and 1996 in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statements presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
July 30, 1998
1
<PAGE>
M3X, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS APRIL 30, JULY 31,
1998 1997
------------ -----------
<S> <C> <C>
Current assets:
Cash $ 149,144 $ 195,118
Trade account receivable, net 213,848 206,951
Other current assets 378,705 165,750
------------ -----------
Total current assets 741,697 567,819
Property and equipment, net 405,149 229,012
Other assets 32,151 33,759
------------ -----------
Total assets $ 1,178,997 $ 830,590
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 92,366 $ 52,187
Accrued expenses 67,027 66,684
Notes payable 265,000
Deferred income taxes 93,000 93,000
------------ -----------
Total current liabilities 517,393 211,871
Stockholders' equity:
Common stock - no par value; authorized 50,000
shares; issued and outstanding 50,000 shares 6,624 6,624
Additional paid in capital 20,599 20,599
Retained earnings 634,381 591,496
------------ -----------
Total stockholders' equity 661,604 618,719
------------ -----------
Total liabilities and stockholders' equity $ 1,178,997 $ 830,590
------------ -----------
------------ -----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
2
<PAGE>
M3X, INC.
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED APRIL 30, 1998 AND THE YEARS ENDED JULY 31, 1997
AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
Broadcast revenue $ 1,313,653 $ 1,624,696 $ 1,506,990
Less agency commissions 71,911 101,861 98,955
------------ ----------- ------------
Net revenue 1,241,742 1,522,835 1,408,035
Broadcast operating expenses 676,971 778,199 692,784
General and administrative expenses 543,997 728,975 695,632
Depreciation and amortization 15,497 26,839 21,039
------------ ----------- ------------
Operating income (loss) 5,277 (11,178) (1,420)
Other income 59,608 51,922 91,877
------------ ----------- ------------
Income before income taxes 64,885 40,744 90,457
Income tax expense 22,000 13,200 20,309
------------ ----------- ------------
Net income $ 42,885 $ 27,544 $ 70,148
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
3
<PAGE>
M3X, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED APRIL 30, 1998 AND THE YEARS ENDED JULY 31, 1997 AND
1996
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year $ 618,719 $ 595,175 $ 529,027
Net income 42,885 27,544 70,148
Dividends - $.08 per share - (4,000) (4,000)
---------- ---------- ----------
Balance at end of year $ 661,604 $ 618,719 $ 595,175
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
4
<PAGE>
M3X, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED APRIL 30, 1998 AND THE YEARS ENDED JULY 31, 1997 AND
1996
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 42,885 $ 27,544 $ 70,148
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation 13,892 24,696 18,896
Amortization 1,605 2,143 2,143
Gain on sale of equipment - (500) -
Changes in operating assets and
liabilities:
Trade accounts receivable (6,897) (1,916) (85,115)
Other assets (212,955) 34,085 (42,528)
Accounts payable 40,179 (7,973) 41,323
Accrued expenses 346 17,459 (9,105)
--------- --------- ---------
Net cash provided from (used in)
operating activities (120,945) 95,538 (4,238)
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures (190,029) (34,319) (51,587)
Proceeds from the sale of equipment - 500 -
--------- --------- ---------
Net cash provided by (used in) investing
activities (190,029) (33,819) (51,587)
Cash flows from financing activities:
Line-of credit borrowings 265,000
Dividends paid - (4,000) (4,000)
--------- --------- ---------
Net cash provided by (used in) financing
activities 265,000 (4,000) (4,000)
--------- --------- ---------
Net increase (decrease) in cash (45,974) 57,719 (59,825)
--------- --------- ---------
Cash, beginning of period 195,118 137,399 197,224
--------- --------- ---------
Cash, end of period $ 149,144 $ 195,118 $ 137,399
--------- --------- ---------
--------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
5
<PAGE>
M3X, INC.
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES AND DESCRIPTION OF BUSINESS:
a. ORGANIZATION: M3X, Inc. (the "Company"), owns and operates radio
stations KRKT AM/FM (the "Stations") located in Albany, Oregon.
b. BROADCAST REVENUE: Broadcast revenue for commercial broadcasting
advertisements is recognized when the commercial is broadcast.
c. PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost.
Depreciation is provided using the straight line method based upon the
estimated useful lives of the respective assets, ranging from 5 to 20
years. When assets are retired or otherwise disposed of, the cost of
the asset and the related accumulated depreciation are removed from
their respective accounts and any resulting gain or loss is
recognized.
d. USE OF ESTIMATES: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
e. INCOME TAXES: Income taxes are provided based on the asset and
liability method of accounting pursuant to Statement of Financial
Accounting Standards (SFAS) 109, "Accounting for Income Taxes".
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes.
The deferred tax liability at April 30, 1998 relates primarily to
depreciation and amortization temporary differences for property and
equipment and intangible assets. The Company's effective tax rate
for each of the years presented approximates statutory rates.
2. SUBSEQUENT EVENT:
On June 24, 1998, the Company entered into an agreement to sell all of the
outstanding common stock of M3X, Inc. to Jacor Communications Company (a
wholly-owned subsidiary of Jacor Communications, Inc.) for approximately
$3,825,000 in cash, subject to certain adjustments. The closing is
conditioned on, among other things, receipt of FCC and other regulatory
approvals.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED:
3. PROPERTY AND EQUIPMENT:
Property and equipment at April 30, 1998 and December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
04/30/98 7/31/97
---------- ----------
<S> <C> <C>
Land $ 33,669 $ 33,669
Office and computer equipment 141,284 130,488
Broadcast equipment 396,956 386,592
Vehicles 28,915 28,915
Leasehold improvements 203,487 34,619
---------- ----------
804,311 614,283
Less accumulated depreciation (399,162) (385,271)
---------- ----------
$ 405,149 $ 229,012
---------- ----------
---------- ----------
</TABLE>
4. OTHER CURRENT ASSETS:
<TABLE>
<CAPTION>
04/30/98 07/31/97
---------- ----------
<S> <C> <C>
Notes receivable-related party (note 5) $ 345,337 $ 134,387
Other 33,368 31,363
---------- ----------
$ 378,705 $ 165,750
---------- ----------
---------- ----------
</TABLE>
5. RELATED PARTY TRANSACTIONS:
In 1991, the Company loaned $157,000 to a stockholder. The note
receivable bears interest at the prime rate plus 1.625% until paid. The
outstanding balance of approximately $80,000 at April 30, 1998 will be
repaid to the Company upon completion of the sale of M3X, Inc. to Jacor.
In 1997, the Company borrowed $265,000 under their line-of credit with a
bank and loaned the proceeds to a stockholder. The bank borrowings bear
interest at 10% and are due on October 31, 1998. The outstanding balance of
the note receivable in the amount of $265,000 as of April 30, 1998 will be
repaid to the Company upon completion of the sale of M3X, Inc. to Jacor.
A partnership owned by the stockholders of M3X, Inc. owns studio properly
which is leased to M3X, Inc. for $3,500 per month. The lease is scheduled
to expire on March 31, 2001.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS, CONTINUED:
6. LEASES:
The company leases certain equipment and facilities used in their
operations. Future minimum rentals under all noncancelable operating
leases for the three months in the fiscal year ending July 31, 1998 and
subsequent fiscal years are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 (three months) $ 11,925
1999 48,400
2000 34,200
2001 4,800
</TABLE>
Rental expense was approximately $33,100, $42,500, and $42,200 for the
nine months ended April 30, 1998 and the years ended July 31, 1997 and
1996, respectively.
8
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Jacor Communications, Inc. on Forms S-8 (File No.'s 33-65126,
33-10329, 33-56385, 33-61719, 333-28587, 333-28371, 333-28399, 333-28401, and
333-28363) and on Forms S-3 (File No.'s 333-21419, 333-06639 and 333-51489)
of our report dated August 14, 1998 on our audits of the financial statements
of Tsunami Communications, Inc. as of December 31, 1996 and 1997 and for each
of the three years in the period ended December 31, 1997; and of our report
dated July 30, 1998 on our audits of the financial statements of M3X, Inc. as
of April 30, 1998 and July 31, 1997 and for the nine month period ended
April 30, 1998 and the years ended July 31, 1997 and 1996, which reports are
included in this Current Report on Form 8-K.
PricewaterhouseCoopers LLP
Cincinnati, Ohio
September 14, 1998
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