<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Mark One)
AMENDMENT NO. 1 TO
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________________
Commission file number 0-15392
REGENT COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 31-1492857
(State or other jurisdiction of (I.R.S. Employer
in corporation or organization) Identification No.)
50 East RiverCenter Boulevard
Suite 180
Covington, Kentucky 41011
(Address of principal executive offices)
(Zip Code)
(606) 292-0030
(Registrant's telephone number, including area code)
--------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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
----- -----
Indicate the number of shares outstanding of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock - $.01 Par Value - 240,000 shares as of September 21, 1998.
<PAGE> 2
REGENT COMMUNICATIONS, INC.
FORM 10-Q/A
AMENDMENT NO. 1 TO QUARTERLY REPORT
FOR THE QUARTER ENDED JUNE 30, 1998
INDEX
-----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 1998
(unaudited) and June 30, 1997 (unaudited)
Condensed Consolidated Balance Sheets as of
June 30, 1998 (unaudited) and December 31, 1997
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 (unaudited)
and June 30, 1997 (unaudited)
Consolidated Statement of Changes in Shareholders'
Deficit for the six months ended
June 30, 1998 (unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
-2-
<PAGE> 3
Part I - Financial Information
Item 1. Financial Statements
REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- ----------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross broadcast revenues $ 2,866,077 $ 1,424,179 $ 4,479,282 $ 2,454,456
Less agency commissions 267,951 170,100 416,079 296,197
----------- ----------- ----------- -----------
Net broadcast revenues 2,598,126 1,254,079 4,063,203 2,158,259
Station operating expenses 1,599,738 751,105 2,698,649 1,481,420
Depreciation and amortization 396,388 78,624 686,936 157,248
Corporate general and administrative
expenses 734,542 94,680 860,070 210,214
----------- ----------- ----------- -----------
Operating income (loss) (132,542) 329,670 (182,452) 309,377
Interest expense 582,838 177,233 1,086,608 350,275
Other income, net 8,622 380 20,773 1,964
----------- ----------- ----------- -----------
Income (loss) before income taxes
and extraordinary items (706,758) 152,817 (1,248,287) (38,934)
Income tax expense 17,542 33,542
----------- ----------- ----------- -----------
Income (loss) before extraordinary items (706,758) 135,275 (1,248,287) (72,476)
Extraordinary gain from debt
extinguishment, net of taxes 370,060 370,060
Extraordinary loss from debt
extinguishment, net of taxes (1,170,080) (4,703,370) (1,170,080) (4,703,370)
----------- ----------- ----------- -----------
Net loss $(1,876,838) $(4,198,035) $(2,418,367) $(4,405,786)
=========== =========== =========== ===========
Loss applicable to common shares:
Net loss $(1,876,838) $(4,198,035) $(2,418,367) $(4,405,786)
Preferred stock dividend requirements
and accretion (198,770) (477,563)
----------- ----------- ----------- -----------
Loss applicable to common shares $(2,075,608) $(4,198,035) $(2,895,930) $(4,405,786)
=========== =========== =========== ===========
Basic net income (loss) per common share:
Before extraordinary items $ (3.77) $ .56 $ (7.19) $ (.30)
Extraordinary items (4.88) (18.05) (4.88) (18.06)
----------- ----------- ----------- -----------
Net loss per common share $ (8.65) $ (17.49) $ (12.07) $ (18.36)
=========== =========== =========== ===========
Weighted average number of common shares used
in basic calculation 240,000 240,000 240,000 240,000
Diluted net income (loss) per common share:
Before extraordinary items $ (3.77) $ .42 $ (7.19) $ (.30)
Extraordinary items (4.88) (13.99) (4.88) (18.06)
----------- ----------- ----------- -----------
Net loss per common share $ (8.65) $ (13.57) $ (12.07) $ (18.36)
=========== =========== =========== ===========
Weighted average number of common shares used
in diluted calculation 240,000 324,015 240,000 240,000
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-3-
<PAGE> 4
REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
----------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash $ 769,706 $ 535,312
Accounts receivable, less allowance
for doubtful accounts of $171,000
in 1998 and $32,000 in 1997 3,361,806 1,358,002
Other current assets 741,147 25,918
Assets held for sale 7,500,000
----------- -----------
Total current assets 12,372,659 1,919,232
Property and equipment, net 8,835,016 2,156,244
FCC broadcast licenses, net 37,768,013 6,052,764
Other intangibles, net 5,875,955 1,648,577
Other assets, net 1,979,534 1,233,737
----------- -----------
Total assets $66,831,177 $13,010,554
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
- -------------------------------------
Current liabilities:
Accounts payable $ 1,363,223 $ 87,280
Accrued expenses and liabilities 2,641,981 233,955
Notes payable 7,500,000
Current portion of long-term debt 65,000 538,396
----------- -----------
Total current liabilities 11,570,204 859,631
Long-term debt, less current portion 35,065,000 22,264,724
Other long-term liabilities 2,660,583 67,987
----------- -----------
Total liabilities 49,295,787 23,192,342
Redeemable preferred stock:
Series A convertible preferred stock, $5.00 stated value,
620,000 shares authorized; 620,000 shares issued and
outstanding - Liquidation value: $3,323,405 3,115,246
Series B senior convertible preferred stock, $5.00 stated value,
1,000,000 shares authorized; 1,000,000 shares issued
and outstanding - Liquidation value: $5,195,616 4,829,661
Series D convertible preferred stock, $5.00 stated value,
1,000,000 shares authorized; 1,000,000 shares issued and
outstanding - Liquidation value: $5,055,003 4,838,171
Series F convertible preferred stock, $5.00 stated value,
4,100,000 shares authorized; 2,050,000 shares issued and
outstanding - Liquidation value: $10,294,932 6,419,802
------------ ------------
Total redeemable preferred stock 19,202,880 0
Shareholders' deficit:
Preferred stock:
Series C convertible preferred stock, $5.00 stated value,
4,000,000 shares authorized; 3,720,620 shares issued and
outstanding - Liquidation value: $18,660,183 1,618,681
Series E convertible preferred stock, $5.00 stated value,
5,000,000 shares authorized; 447,842 shares issued and
outstanding - Liquidation value: $2,246,081 2,239,210
Common stock, $.01 par value, 30,000,000 shares authorized at June 30,
1998 and December 31, 1997; 240,000 shares issued and outstanding at
June 30, 1998 and December 31, 1997 (Note 1) 2,400 2,400
Additional paid-in capital 9,751,969 2,677,195
Retained deficit (15,279,750) (12,861,383)
------------ ------------
Total shareholders' deficit (1,667,490) (10,181,788)
------------ ------------
Total liabilities and shareholders' deficit $ 66,831,177 $ 13,010,554
============ ============
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-4-
<PAGE> 5
REGENT COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six months ended June 30,
------------------------------
1998 1997
---- ----
<S> <C> <C>
Net cash used in operating activities $ (898,400) $ (70,355)
------------ ------------
Cash flows from investing activities:
Acquisitions of radio stations, net of cash acquired (29,089,991) (7,650,000)
Capital expenditures (62,120) (24,152)
------------ ------------
Net cash used in investing activities (29,152,111) (7,674,152)
------------ ------------
Cash flows from financing activities:
Proceeds from long-term debt 35,500,000 22,500,000
Proceeds from issuance of Series A, B, D & F Convertible Preferred Stock 18,150,000
Principal payments on long-term debt (20,716,660) (12,535,801)
Payments for deferred financing costs (1,292,042) (866,121)
Payment of issuance costs (1,356,393)
Payment of appraisal right liability (1,015,000)
------------ ------------
Net cash provided by financing activities 30,284,905 8,083,078
------------ ------------
Net increase in cash and cash equivalents 234,394 338,571
Cash at beginning of period 535,312 123,221
------------ ------------
Cash at end of period $ 769,706 $ 461,792
============ ============
Supplemental schedule of non-cash investing and financing activities:
Conversion of Faircom Inc.'s convertible subordinated promissory
notes to Faircom Inc. common stock $ 10,000,000
Liabilities assumed in acquisitions 11,680,322
Series E convertible preferred stock issued in conjunction with the
acquisition of Alta California Broadcasting, Inc. and Topaz
Broadcasting, Inc. 2,239,210
Series C convertible preferred stock issued in conjunction with the merger
between Faircom Inc. and the Company 1,618,681
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-5-
<PAGE> 6
REGENT COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
Series C Series E
Convertible Convertible
Preferred Preferred Common
Stock Stock Stock
------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1997 (retroactively restated) $ 2,400
Conversion of Faircom Inc.'s Class A and Class B convertible
subordinated promissory notes in the amount of $10,000,000
Issuance of 3,720,620 shares of Series C convertible preferred stock and
retirement of 26,390,199 shares of Faircom Inc. common stock and
recordation of the effect of recapitalization due to the reverse merger
with Faircom Inc. $1,618,681
Issuance of Faircom Inc. employee stock options immediately converted into
options to purchase 157,727 shares of Series C convertible
preferred stock in conjunction with the merger
Issuance of Series A redeemable preferred stock warrants
Issuance of 205,250 shares of Series E convertible preferred stock in
connection with the acquisition of Alta California Broadcasting, Inc. $1,026,250
Issuance of 242,592 shares of Series E convertible preferred stock in
connection with the acquisition of Topaz Broadcasting, Inc. 1,212,960
Dividends and accretion on Series A, B, D, and F redeemable preferred stock
Net Loss
------------------------------------------
Balance, June 30, 1998 $1,618,681 $2,239,210 $ 2,400
==========================================
</TABLE>
<TABLE>
<CAPTION>
Additional Total
Paid-In Retained Shareholders'
Capital Deficit Deficit
--------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1997 (retroactively restated) $ 2,677,195 $(12,861,383) $(10,181,788)
Conversion of Faircom Inc.'s Class A and Class B convertible
subordinated promissory notes in the amount of $10,000,000 10,000,000 10,000,000
Issuance of 3,720,620 shares of Series C convertible preferred stock and
retirement of 26,390,199 shares of Faircom Inc. common stock and
recordation of the effect of recapitalization due to the reverse merger
with Faircom Inc. (3,000,000) (1,381,319)
Issuance of Faircom Inc. employee stock options immediately converted into
options to purchase 157,727 shares of Series C convertible preferred stock
in conjunction with the merger 530,264 530,264
Issuance of Series A redeemable preferred stock warrants 160,000 160,000
Issuance of 205,250 shares of Series E convertible preferred stock in
connection with the acquisition of Alta California Broadcasting, Inc. 1,026,250
Issuance of 242,592 shares of Series E convertible preferred stock in
connection with the acquisition of Topaz Broadcasting, Inc. 1,212,960
Dividends and accretion on Series A, B, D, and F redeemable preferred stock (615,490) (615,490)
Net Loss (2,418,367) (2,418,367)
--------------------------------------------------
Balance, June 30, 1998 $ 9,751,969 $(15,279,750) $ (1,667,490)
==================================================
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-6-
<PAGE> 7
REGENT COMMUNICATIONS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
On June 15, 1998, Regent Communications, Inc. (including its
wholly-owned subsidiaries, the "Company") acquired, pursuant to an agreement of
merger, all of the outstanding common stock of Faircom Inc. ("Faircom") for
3,720,620 shares of the Company's Series C Convertible Preferred Stock. The
acquisition has been treated for accounting purposes as the acquisition of the
Company by Faircom with Faircom as the accounting acquirer and accounted for as
a reverse acquisition. Consequently, the historical financial statements prior
to June 15, 1998 are those of Faircom. As a result of the Faircom merger,
Faircom's historical shareholder deficit prior to the merger has been
retroactively restated to reflect the number of common shares outstanding
subsequent to the merger, with the difference between the par value of the
Company's and Faircom's common stock recorded as an offset to additional paid-in
capital. In conjunction with the Faircom merger, the Company adopted the Regent
Communications, Inc. Faircom Conversion Stock Option Plan. See Notes 4 and 5.
The condensed consolidated financial statements of the Company have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and, in the opinion of management, include all
adjustments necessary for a fair presentation of the results of operations,
financial position and cash flows for each period shown. All adjustments are of
normal and recurring nature except for those outlined in Notes 2, 3 and 4.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to SEC rules and regulations. Results
for interim periods may not be indicative of results for the full year. The
December 31, 1997 condensed balance sheet was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. It is suggested that these financial statements be read
in conjunction with the financial statements and notes thereto included in
Faircom's 1997 Annual Report on Form 10-K, the Company's Form 10-Q for the three
month period ended March 31, 1998, the Company's Form S-4 effective May 7, 1998
and the Company's Form 8-K/A filed September 3, 1998.
2. CONSUMMATED AND PENDING ACQUISITIONS
On June 30, 1997, Faircom acquired the assets and operations of two
commercial radio stations located in Mansfield, Ohio ("Mansfield"), pursuant to
the terms of an asset purchase agreement dated May 20, 1997, for $7,350,000 in
cash. The acquisition was accounted for under the purchase method of accounting
and was financed with borrowings under the Company's Senior Secured Term and
Time Notes (see Note 3). The excess cost over the fair market value of net
assets acquired and the FCC licenses related to this acquisition will be
amortized over 15- to 40-year periods.
On January 21, 1998, Faircom acquired substantially all of the assets
and operations of radio station WSWR-FM in Shelby, Ohio (the "Shelby Station")
for $1,125,000 in cash. The acquisition was accounted for under the purchase
method of accounting and was financed through the borrowing of $1,100,000
represented by a subordinated promissory note. The excess cost over the fair
market value of net assets acquired and the FCC licenses related to this
acquisition will be amortized over 15- to 40-year periods.
On June 15, 1998 the following acquisitions (the "June 15
Acquisitions") were consummated. The results of operations of the acquired
businesses are included in the Company's financial statements since the date of
acquisition:
The Company acquired all of the outstanding capital stock of The Park
Lane Group ("Park Lane") for approximately $17,525,000 in cash. The acquisition
was accounted for under the purchase method of accounting. The excess cost over
the fair market value of net assets acquired and FCC licenses related to this
acquisition will be amortized over a 40-year period. Park Lane owns 16 radio
stations in California and Arizona. At the time of the acquisition, the Company
entered into a one-year consulting and non-competition agreement with the
President of Park Lane, providing for the payment of a fee of $200,000.
The Company acquired the FCC licenses and related assets used in the
operation of radio stations KIXW (AM) and KZXY (FM) in Apple Valley, California
from Ruby Broadcasting, Inc. ("Ruby"), an affiliate of Topaz Broadcasting, Inc.
("Topaz"), for $5,985,000 in cash. The FCC licenses acquired will be amortized
over a 40-year period.
The Company acquired the FCC licenses and related assets used in the
operation of radio stations KFLG (AM) and KFLG (FM) in Bullhead City, Arizona
from Continental Radio Broadcasting, L.L.C. ("Continental") for approximately
$3,607,000 in cash. The Company separately acquired the accounts receivables of
these stations for an additional purchase price of approximately $130,000. The
FCC licenses acquired will be amortized over a 40-year period.
-7-
<PAGE> 8
The Company acquired all of the outstanding capital stock of Alta
California Broadcasting, Inc. ("Alta") for $1,025,000 in cash and 205,250 shares
of the Company's Series E Convertible Preferred Stock. The acquisition was
accounted for under the purchase method of accounting. The excess cost over the
fair market value of net assets acquired and FCC licenses related to this
acquisition will be amortized over a 40-year period. Alta owns four radio
stations in California.
The Company acquired all of the outstanding capital stock of Topaz for
242,592 shares of the Company's Series E Convertible Preferred Stock.
Immediately following the acquisition of Topaz, the Company acquired the FCC
licenses and operating assets of radio station KIXA (FM) in Lucerne Valley,
California for $275,000 in cash, pursuant to an Asset Purchase Agreement between
Topaz and RASA Communications Corp. The acquisitions were accounted for under
the purchase method of accounting. The excess cost over the fair market value of
net assets acquired and FCC licenses related to these acquisitions will be
amortized over a 40-year period.
The sources for the cash portion of the consideration paid by the
Company for the June 15 Acquisitions, aggregating approximately $53,400,000
(including approximately $21,800,000 of debt assumed and refinanced with
borrowings under the Company's Senior Reducing Revolving Credit Facility and
$3,700,000 of transaction costs) were $34,400,000 borrowed under the Company's
Senior Reducing Revolving Credit Facility (see Note 3), $18,150,000 in
additional equity from the sale of the Company's convertible preferred stock
(see Note 4), and approximately $850,000 of the Company funds.
On July 10, 1998, the Company entered into an asset purchase agreement
with Oasis Radio, Inc. ("Oasis") to acquire substantially all of the assets of
radio station KAVC (FM) located in Lancaster, California for $1,600,000 in cash,
subject to adjustment as defined in the agreement. The closing is conditioned
on, among other things, receipt of FCC approval. The Company has placed a
$160,000 deposit held in escrow pending the closing of the transaction. In
addition, the Company entered into a local programming and marketing agreement
with Oasis, effective August 1, 1998, which will end upon consummation of the
acquisition or termination of the asset purchase agreement.
The following unaudited pro forma data summarizes the combined results
of operations of the Company, Faircom, Mansfield, Park Lane, Ruby, Continental,
Alta and Topaz as though the acquisitions had occurred at the beginning of each
six-month period ended June 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Net broadcast revenues $ 9,107,194 $ 7,956,817
Net loss before extraordinary items $ (1,295,386) $ (948,989)
Net loss $ (2,465,466) $ (5,282,299)
Net loss per common shares before extraordinary items:
Basic and diluted $ (5.40) $ (3.95)
Net loss per common share:
Basic and diluted $ (10.27) $ (22.01)
</TABLE>
These unaudited pro forma amounts do not purport to be indicative of the results
that might have occurred if the foregoing transactions had been consummated on
the indicated dates. The acquisition of the Shelby Station did not have a
material effect on the operating results of the Company.
-8-
<PAGE> 9
3. LONG-TERM DEBT
Long-term debt consists of the following as of:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
Senior secured term and time notes(a) $ 0 $12,803,120
Convertible subordinated promissory notes (b) 0 10,000,000
Senior reducing revolving credit facility (c) 34,400,000 0
Subordinated promissory note (d) 600,000 0
Non-compete Agreements (e) 130,000 0
----------- -----------
35,130,000 22,803,120
Less: Current portion of long-term debt (65,000) (538,396)
----------- -----------
$35,065,000 $22,264,724
=========== ===========
</TABLE>
Repayment of long-term debt, excluding capital leases, required over
the six-month period ended December 31, 1998 and each of the years following
December 31, 1998 consists of:
1998 32,500
1999 65,000
2000 62,500
2001 60,000
2002 6,960,000
Thereafter 27,950,000
-----------
$35,130,000
===========
(a) Senior secured term and time notes
During 1997, Faircom borrowed $12,500,000 under an amended and restated
loan agreement (the "1997 loan agreement"). The term notes under the 1997 loan
agreement would have matured on July 1, 2002. Interest on the term notes was at
the rate of 4.50% over 30-day commercial paper rates. On June 15, 1998, the
Company terminated the 1997 loan agreement using funds obtained from the
Company's Senior Reducing Revolving Credit Facility. As a result of the
extinguishment of debt, the Company recognized an extraordinary loss of
$1,170,060, net of income taxes, consisting of a $366,000 prepayment penalty and
the write-off of $804,060 of related deferred financing costs.
(b) Convertible subordinated promissory notes
During 1997, Faircom completed the sale of $10,000,000 aggregate
principal amount of its convertible subordinated promissory notes due July 1,
2002 (the "Faircom Notes"). The Faircom Notes consisted of Class A and Class B
convertible subordinated promissory notes, each in the aggregate principal
amount of $5,000,000. The Faircom Notes bear interest at 7% per annum,
compounded quarterly. The Faircom Notes were converted into a total of
19,012,000 shares of Faircom common stock immediately preceding the merger
between the Company and Faircom (see Note 1).
(c) Senior reducing revolving credit facility
During 1997, the Company entered into an agreement with a group of
lenders (the "Credit Agreement") which provides for a senior reducing revolving
credit facility with a commitment of up to $55,000,000 expiring in March 2005
(the "Revolver"). In addition, the Company may request from time to time that
the lenders issue Letters of Credit in accordance with the same provisions as
the Revolver. In order to finance the acquisitions consummated on June 15, 1998
(see Note 2), refinance certain existing debt and to provide for additional
working capital, the Company borrowed $34,400,000 under the Credit Agreement. As
of June 30, 1998, approximately $2,100,000 of the unused portion of the Revolver
was available to the Company for its working capital needs.
-9-
<PAGE> 10
The Credit Agreement provides for the reduction of the commitment under
the Revolver for each of the four quarters ending December 31, 1999 and by
increasing quarterly amounts thereafter, and, under certain circumstances,
requires mandatory prepayments of any outstanding loans and further commitment
reductions. The indebtedness of the Company under the Credit Agreement is
collateralized by liens on substantially all of the assets of the Company and
its operating and license subsidiaries and by a pledge of the operating and
license subsidiaries' stock, and is guaranteed by those subsidiaries. The Credit
Agreement contains restrictions pertaining to the maintenance of financial
ratios, capital expenditures, payment of dividends or distributions of capital
stock and incurrence of additional indebtedness.
Interest under the Credit Agreement is payable, at the option of the
Company, at alternative rates equal to the LIBOR rate (5.66% at June 30, 1998)
plus 1.25% to 2.75% or the base rate announced by the Bank of Montreal (8.50% at
June 30, 1998) plus 0% to 1.50%. The spreads over the LIBOR rate and such base
rate vary from time to time, depending upon the Company's financial leverage.
The Company must pay quarterly commitment fees equal to 3/8% to 1/2% per annum,
depending upon the Company's financial leverage, on the unused portion of the
commitment under the Credit Agreement. The Company also is required to pay
certain other fees to the agent and the lenders for the administration of the
facilities and the use of the credit facility. At June 30, 1998, the Company had
paid non-refundable fees totaling approximately $1,548,000 which are classified
as other assets in the accompanying Condensed Consolidated Balance Sheet and
will be amortized over the initial seven-year term of the Revolver.
As a condition of the Credit Agreement, the Company entered into a
two-year collar agreement (the "Collar Agreement") with the Bank of Montreal on
August 17, 1998 for a notional amount of $34,400,000. The Collar Agreement is
based on the three-month LIBOR rate, provides for a CAP Rate, as defined, of
6.50% and a Floor Rate, as defined, of 5.28% plus, in each case, the additional
spread stipulated under the Credit Agreement. The Collar Agreement terminates on
August 17, 2000.
(d) Subordinated promissory note of McNulty Broadcasting, Inc.
During 1995, Park Lane issued a subordinated promissory note (the
"McNulty Note") to McNulty Broadcasting, Inc. ("McNulty") which provided Park
Lane with $600,000. The McNulty Note was assumed by the Company as part of the
acquisition of Park Lane (see Note 2). The McNulty Note provides for quarterly
principal payments of $15,000 beginning on August 1, 2000. The remaining
principal is due May 1, 2005. Interest on the McNulty Note is payable quarterly
at a rate of 8%.
(e) Non-compete agreements
During 1995, Park Lane entered into five year non-compete agreements
with McNulty and Island Broadcasting Associates, L.P. ("Island Broadcasting") in
the amounts of $125,000 and $200,000, respectively (the "Non-Compete
Agreements"). The Non-compete Agreements were assumed by the Company as part of
the acquisition of Park Lane (see Note 2). The Non-Compete Agreements bear no
interest, expire in May, 2000 and call for quarterly payments of $16,250.
-10-
<PAGE> 11
4. CAPITAL STOCK
The Company's Amended and Restated Certificate of Incorporation
authorizes 30,000,000 shares of common stock and 20,000,000 shares of preferred
stock and designates 620,000 shares as Series A Convertible Preferred Stock
("Series A"), 1,000,000 shares as Series B Senior Convertible Preferred Stock
("Series B"), 4,000,000 shares as Series C Convertible Preferred Stock ("Series
C"), 1,000,000 shares as Series D Convertible Preferred Stock ("Series D"),
5,000,000 shares as Series E Convertible Preferred Stock ("Series E"), and
4,100,000 shares as Series F Convertible Preferred Stock ("Series F"). The
stated value of all series of preferred stock is $5.00 per share.
Series A, Series C, Series E, and Series F have the same voting rights
as common stock and may be converted at the option of the holder into one share
of common stock, subject to adjustment, as defined. Series B and D have no
voting power except for specific events, as defined. Series D may be converted
at the option of the holder only when certain conditions, as defined, have been
met. The Company's Board of Directors also has the right to require conversion
of all shares of Series A, B, C, D, E, and F upon the occurrence of certain
events, as defined. Series A, Series C, Series D, Series E, and Series F have
equal rights for the payment of dividends and the distribution of assets and
rights upon liquidation, dissolution or winding up of the Company. Series B
ranks senior to all other series of preferred stock and may be converted at the
option of the holder into one-half share of common stock, subject to adjustment,
as defined.
Upon liquidation of the Company, no distribution shall be made (a) to
holders of stock ranking junior to the Series B unless the holders of the Series
B have received the stated value per share, plus an amount equal to all unpaid
dividends or (b) to the holders of stock ranking on a parity with the Series B,
except distributions made ratably on the Series B and all other such parity
stock. Dividends accrue cumulatively on all series of preferred stock, except
Series F, at an annual rate of $0.35 per share. Dividends accrue cumulatively on
Series F at an annual rate of $0.50 per share and, to the extent not paid in
cash, are compounded quarterly at a rate of 10% per annum. The Company may
redeem Series A, B, and D at the stated value, plus an amount equal to all
unpaid dividends to the date of redemption, whether or not declared. Undeclared
dividends in arrears on all outstanding series of preferred stock amounted to
approximately $616,000 at June 30, 1998.
In conjunction with the closing of the Faircom merger, and under the
terms of a stock purchase agreement dated December 8, 1997, BMO Financial, Inc.,
an existing shareholder of the Company, purchased 780,000 shares of Series D for
$3,900,000. In addition, General Electric Capital Corporation ("GE Capital")
paid $3,900,000 to complete its purchase of 1,000,000 shares of Series B,
pursuant to the terms of its stock purchase agreement and promissory note dated
December 8, 1997.
In connection with the closing of the Park Lane acquisition, and under
the terms of a stock purchase agreement dated December 1, 1997, the Chief
Operating Officer of the Company purchased 20,000 shares of Series A for
$100,000.
On June 15, 1998, pursuant to a stock purchase agreement, Waller-Sutton
Media Partners, L.P. ("Waller-Sutton") purchased 1,000,000 shares of Series F
for $5,000,000. Also on that date, Weiss, Peck & Greer and Weiss, Peck, & Greer
International, purchased a total of 650,000 shares of Series F for $3,250,000;
the Chairman of Waller-Sutton Management Group, which manages Waller-Sutton,
purchased 50,000 shares of Series F for $250,000; GE Capital purchased 250,000
shares of Series F for $1,250,000; and River Cities Capital Fund Limited
Partnership ("River Cities") purchased 100,000 shares of Series F for $500,000.
In connection with these purchases, the purchasers acquired 10-year warrants to
purchase an aggregate of 860,000 shares of the Company's common stock for $5.00
per share. Such warrants can be "put" back to the Company after five years. In
addition, these purchasers agreed, subject to certain conditions, to purchase an
additional 2,050,000 shares of Series F at $5.00 per share to finance future
acquisitions.
The 860,000 warrants issued in conjunction with the Series F have been
assigned a fair value of $2,459,600 and have been classified as a long-term
liability due to the associated "put" rights.
The stock purchase agreement described above provides that the terms of
the Series F include the right of the holders to require the Company to
repurchase the Series F at any time after five years at a price equal to the
greater of its fair market value or the sum of its stated value of $5.00 per
share and all accrued but unpaid dividends thereon, as well as any warrants held
by such holders at a price equal to the fair market value of the Company's
common stock less the exercise price of such warrants. Holders of the Series A,
Series B, and Series D would have similar "put" rights only if the holders of
the Series F were to exercise their "put" rights. Series A, Series B, Series D,
and Series F (but not Series C and Series E) have been reclassified and excluded
from equity to reflect such anticipated "put" rights. Issuance costs of
approximately $1,900,000 for these reclassified shares have been netted against
the proceeds. The shares are being accreted to their respective redemption
values over five years.
-11-
<PAGE> 12
In connection with the closing of the Faircom merger, Waller-Sutton
acquired 400,640 shares of Series C by purchasing an aggregate of $1,500,000
principal amount of Faircom's convertible subordinated promissory notes that
were converted into the common stock of Faircom.
In order to induce River Cities, as a holder of Series A, to approve
the merger with Faircom, the Company issued to River Cities, upon consummation
of the merger, five-year warrants to purchase 80,000 shares of Regent common
stock at an exercise price of $5.00 per share. R. Glen Mayfield, a member of
Regent's Board of Directors, serves as the general partner of River Cities
Management Limited Partnership, which is the general partner of River Cities.
The warrants issued to the holders of Series A have been assigned a value of
$160,000 and have been classified as additional paid-in capital.
In order to induce GE Capital, the holder of Regent's Series B, to
approve the addition of mandatory conversion rights to the terms of the Series B
in conjunction with the issuance of the Series F, Regent issued to GE Capital,
upon issuance of the Series F, five-year warrants to purchase 50,000 shares of
the Company's common stock at an exercise price of $5.00 per share. The warrants
issued to the holders of Series B have been assigned a fair value of $150,000
and have been classified as a long-term liability due to associated "put"
rights. These "put" rights are subject to the prior exercise of the warrants and
the exercise of the "put" rights associated with the warrants issued to the
Series F holders.
5. STOCK-BASED COMPENSATION PLANS
In January 1998, the Board of Directors of the Company adopted the
Regent Communications, Inc. 1998 Management Stock Option Plan (the "1998 Stock
Option Plan"). The 1998 Stock Option Plan provides for the issuance of up to an
aggregate of 2,000,000 common shares in connection with the issuance of
incentive stock options ("ISOs") and non-qualified stock options ("NQSOs").The
Compensation Committee of the Company's Board of Directors determines
eligibility. The exercise price of the options is to be not less than the fair
market value of the underlying common stock at the grant date, except in the
case of ISOs granted to a 10% owner (as defined), for which the option share
price must be at least 110% of the fair market value of the underlying common
stock at the grant date. The options expire no later than 10 years from the date
of grant (five years in the case of ISO's granted to a 10% owner), no later than
10 years and one day in the case of NQSO's, or earlier in either case in the
event a participant ceases to be an employee of the Company.
Effective with the consummation of the Faircom merger, the Board of
Directors authorized a grant of incentive stock options to the Chief Executive
Officer and Chief Operating Officer of the Company. The options provide each of
the holders the right to acquire 608,244 shares of the Company's common stock at
an exercise price per share of $5.00. Of the options granted, the maximum
allowable will be treated as ISOs which vest in equal 10% increments beginning
on the grant date and on each of the following nine anniversary dates of the
grants. The balance of the options will become exercisable in equal one-third
increments at the end of each of the first three years following the grant. All
options expire on June 15, 2008.
Upon consummation of the Faircom merger, the Board of Directors of the
Company adopted the Regent Communications, Inc. Faircom Conversion Stock Option
Plan ("Conversion Stock Option Plan") which applies to those individuals
previously participating in the Faircom Inc. Stock Option Plan ("Faircom Plan").
In exchange for relinquishing their options under the Faircom plan, five former
officers and members of Faircom's Board of Directors were given, in total, the
right to acquire 274,045 shares of the Company's Series C Convertible Preferred
Stock at exercise prices ranging from $0.89 to $3.73 per share and expiring from
May 11, 1999 to July 1, 2002 (the "Converted Options").
-12-
<PAGE> 13
The Company intends to apply the provisions of APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB No. 25"), in accounting for the
1998 Stock Option Plan. Under APB No. 25, no compensation expense is recognized
for options granted to employees at exercise prices that are equal to or greater
than the fair market value of the underlying common stock at the grant date.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") requires the Company to provide, beginning with
1995 grants, pro forma information regarding net income and net income per
common share as if compensation costs for the Company's stock option plans had
been determined in accordance with the fair value based method prescribed in
SFAS No. 123. Such pro forma information for the six months ended June 30, 1998
is as follows:
<TABLE>
<CAPTION>
<S> <C>
Net Loss
As reported $(2,418,367)
Pro forma compensation expense, net of tax benefit (255,202)
------------
Pro forma $(2,673,569)
============
Basic and diluted net loss per common share
As reported $ (12.07)
Pro forma $ (13.13)
</TABLE>
The weighted-average fair value per share for options granted under the
1998 Stock Option Plan was $2.88 for ISOs and $2.00 for NQSOs. The
weighted-average fair value for options granted under the Conversion Stock
Option Plan was approximately $230,000, and such amount was recognized fully and
immediately at the time of conversion since the Converted Options are fully
vested. The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions for
1998 grants:
<TABLE>
<CAPTION>
ISOs NQSOs Converted Options
--------------- --------------- ----------------------
<S> <C> <C> <C>
Dividends None None None
Volatility 35% 35% 35%
Risk-free interest rate 5.55% 5.43% 5.38%
Expected term 10 years 5 years 2 years
</TABLE>
-13-
<PAGE> 14
The following table summarizes the status of Company options
outstanding and exercisable at June 30, 1998, under the 1998 Stock Option Plan
and the Conversion Stock Option Plan:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------- ------------------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Exercise Contractual Exercise Exercise
Price Shares(1) Life (years) Price Shares Price
-------------- -------------- ------------- ------------ ------------- --------------
<S> <C> <C> <C> <C> <C>
$5.00 1,216,488 10 $5.00 40,000 $5.00
$0.89-$3.73 274,045 3.5 $2.73 274,045 $2.73
------- -------
1,490,533 314,045
========= =======
</TABLE>
Of the 1,490,533 options outstanding at June 30, 1998, it is anticipated that no
more than 1,090,533 will be treated as NQSOs and at least 400,000 will be
treated as ISOs.
(1) As of June 30, 1998, the stock options granted under the 1998 Stock Option
Plan entitle the holders to purchase 1,216,488 shares of the Company's common
stock. Stock options granted under the Conversion Stock Option Plan entitle the
holders to purchase 274,045 shares of the Company's Series C Convertible
Preferred Stock.
6. EARNINGS PER SHARE
The Company has adopted the provisions of SFAS 128, "Earnings Per
Share." SFAS 128 calls for the dual presentation of basic and diluted earnings
per share ("EPS"). Basic EPS is based upon the weighted average common shares
outstanding during the period. Diluted EPS reflects the potential dilution that
would occur if common stock equivalents were exercised. Basic EPS and diluted
EPS are the same for all periods presented except for the three month period
ended June 30, 1997, since the effect of the Company's common stock equivalents
would be antidilutive. The following is a reconciliation of the numerator and
denominator of the basic and diluted EPS computations for the three-month period
ended June 30, 1997:
<TABLE>
<CAPTION>
Per Share
Income Shares(1) Amount
--------- -------- -------
<S> <C> <C> <C>
Income before extraordinary items
applicable to common shareholders $135,275
Basic EPS 135,275 240,000 $ 0.56
Effect of dilutive securities:
Stock options 84,015
--------- -------- -------
Diluted EPS $135,275 324,015 $ 0.42
========= ======== =======
</TABLE>
(1) Basic and diluted EPS for all periods presented have been calculated using
the 240,000 common shares that were outstanding subsequent to the merger with
Faircom (see Note 1). The effect of stock options outstanding as of June 30,
1997 has been adjusted to give effect to the Conversion Stock Option Plan (see
Note 5).
-14-
<PAGE> 15
7. INCOME TAXES
The Company recorded no income tax expense or benefit for the three-
and six-month periods ended June 30, 1998. The Company's provision for income
taxes for the six-month period ended June 30, 1997 consists of the following:
<TABLE>
<S> <C>
Current state $ 33,542
----------
Total $ 33,542
==========
</TABLE>
The components of the Company's deferred tax assets and liabilities at
June 30, 1998 and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward $ 3,600,000 $2,448,000
Merger and acquisition related adjustments 7,760,000
Miscellaneous accruals and credits 69,200 35,000
Accounts receivable reserve 68,400
----------- ----------
11,497,600 2,483,000
Valuation allowance (11,272,300) (2,483,000)
----------- ----------
Net deferred tax assets 225,300 0
Deferred tax liabilities:
Property, plant and equipment (225,300)
----------- ----------
Net deferred tax liabilities $ 0 $ 0
=========== ==========
</TABLE>
The Company has cumulative federal and state tax loss carryforwards of
approximately $9,000,000 at June 30, 1998. These loss carryforwards will expire
in years 2011 through 2018. The utilization of the aforementioned operating
losses for federal income tax purposes is limited pursuant to the annual
utilization limitations provided under the provisions of Internal Revenue Code
Section 382.
-15-
<PAGE> 16
8. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of :
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------- -----------
<S> <C> <C>
Equipment $ 10,926,277 $ 4,650,273
Furniture and fixtures 1,365,089 1,043,648
Building and improvements 1,442,799 985,583
Land 717,930 285,000
----------- ------------
14,452,095 7,564,705
Less accumulated depreciation (5,617,079) (5,408,461)
----------- ------------
Net property and equipment $8,835,016 $ 2,156,244
=========== ============
</TABLE>
9. NOTES PAYABLE
Notes payable at June 30, 1998 consist of the following:
Promissory note $6,000,000
Promissory note 1,500,000
----------
$7,500,000
In connection with the acquisition of radio station KCBQ (AM), the
Company issued to the seller a promissory note for $6,000,000, which is
collateralized by the assets of the station. The terms of the promissory note
obligate the Company to pay the lesser of $6,000,000 or the net proceeds from a
commercially reasonable sale of the KCBQ (AM) assets (with any such net sale
proceeds in excess of $6,000,000 to be split between the Company and the holder
of the note in accordance with the terms of the asset purchase agreement) on the
earlier of June 4, 2002 or upon the sale of the KCBQ (AM) assets to an unrelated
third party. The note does not bear interest prior to the maturity date, as
defined. Interest on the unpaid principal of the note after maturity is at the
rate of 10% per annum. The Company is currently seeking a buyer for this
station. As a result, the unpaid principal balance of $6,000,000 has been
classified as a current liability at June 30, 1998 in the accompanying Condensed
Consolidated Balance Sheet.
In connection with the acquisition of an option to acquire radio
station WSSP (FM), the Company issued a five-year term promissory note for
$1,500,000 to a third party. The terms of the promissory note obligate the
Company to pay the lesser of $1,500,000 or the net proceeds from a commercially
reasonable sale of the option or the station's assets (with any such net sale
proceeds in excess of $1,500,000 to be retained by the Company). The note is
collateralized by a security interest in the proceeds of a $1,500,000 note
payable to the Company by the owner of WSSP (FM) and matures on the earlier of
December 3, 2002 or upon the sale of the WSSP (FM) assets to an unrelated third
party. The note does not bear interest prior to the maturity date, as defined.
Interest on the unpaid principal after maturity is at the rate of 10% per annum.
Because the Company is currently searching for a buyer for WSSP (FM), the unpaid
principal balance of $1,500,000 has been classified as a current liability at
June 30, 1998 in the accompanying Condensed Consolidated Balance Sheet.
-16-
<PAGE> 17
10. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standard Board issued SFAS 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards of disclosure
and financial statement display for reporting total comprehensive income and its
individual components. SFAS 130 became effective in fiscal year beginning after
December 31, 1997. Company management has determined that comprehensive income
equals the Company's net loss as of June 30, 1998.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 provides accounting guidance for
reporting information about operating segments in annual financial statements
and requires such enterprises to report selected information about operating
segments in interim financial reports. The statement uses a "management
approach" to identify operating segments and provides specific criteria for
operating segments. SFAS 131 is effective for the year ended December 31, 1998
and will be required for interim periods in 1999. The Company is currently
evaluating the impact SFAS 131 will have on its financial statements, if any.
In June 1998, SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued. SFAS 133 prescribes the accounting treatment
for derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company may
employ financial instruments to manage its exposure to fluctuations in interest
rates (see Note 3(c)). The Company does not hold or issue such financial
instruments for trading purposes. The Company will adopt SFAS No. 133, as
required in the year 2000, and does not expect the impact of adoption to be
material.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is effective
for fiscal years beginning after December 15, 1998. SOP 98-1 requires the
capitalization of certain expenditures for software that is purchased or
internally developed for use in the business. Company management believe that
the prospective implementation of SOP 98-1 in 1999 is likely to result in some
additional capitalization of software expenditures in the future. However, the
amount of such additional capitalized software expenditures can not be
determined at this time.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." The SOP provides guidance on financial reporting of costs
of start-up activities. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The Company believes the implementation of SOP 98-5 in 1999
will not have a material impact on its financial reporting.
-17-
<PAGE> 18
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
- ---------------------
The results of the Company's operations for the three months ended June
30, 1998 compared to the three months ended June 30, 1997 and for the six months
ended June 30, 1998 compared to the six months ended June 30, 1997 are not
comparable or necessarily indicative of results in the future due to the
significance of acquisitions.
On June 15, 1998, the Company consummated a number of mergers,
acquisitions, borrowings and issuances of additional equity. See Notes 1 through
4 to the Condensed Consolidated Financial Statements, above. The historical
financial statements of Faircom, which was deemed the "accounting acquirer" in
one of such mergers, have become the historical financial statements of the
Company, and accordingly, the results of operations of the Company and of the
other entities which merged with or were acquired by the Company on June 15,
1998 (the "June 15 Acquisitions") have been included in the Condensed
Consolidated Statements of Operations from such acquisition date. Consequently,
the results of operations of the Company and the June 15 Acquisitions are
included in the Condensed Consolidated Statements of Operations only for the
period June 15 through June 30, 1998.
As of June 30, 1997, Faircom, through a wholly-owned subsidiary,
Faircom Mansfield Inc. ("Faircom Mansfield"), acquired the assets and operations
of two radio stations, WMAN-AM and WYHT-FM, both located in Mansfield, Ohio
(the "Mansfield Stations") for aggregate cash consideration of $7,650,000. As
of January 21, 1998, Faircom Mansfield purchased substantially all of the
assets and operations of radio station WSWR-FM in Shelby, Ohio (the "Shelby
Station") for $1,125,000 in cash. These acquisitions have been accounted for as
purchases, and accordingly, the operating results of the Mansfield Stations and
the Shelby Station have been included in the Condensed Consolidated Statements
of Operations from their respective acquisition dates. The acquisition of the
Shelby Station did not have a material effect on the operating results of the
Company.
The increase in the Company's net broadcasting revenues in the three
months and the six months ended June 30, 1998 as compared with the same periods
in 1997 resulted primarily from the inclusion of the operations of the Mansfield
Stations during the 1998 periods and to a lesser extent to the inclusion of the
operations of the June 15 Acquisitions during the 1998 periods. Net broadcasting
revenues increased to $2,598,000 from $1,254,000, or 107.2%, in the three months
ended June 30, 1998 as compared with the 1997 period, and to $4,063,000 from
$2,158,000, or 88.3%, in the six months ended June 30, 1998 as compared with the
six months ended June 30, 1997.
Station operating expenses increased in the three months and six months
ended June 30, 1998 as compared with the same periods in 1997. For the
three-month period, this increase was primarily as a result of the inclusion of
the operations of the June 15 Acquisitions and to a lesser extent to the
inclusion of the operations of the Mansfield Stations. For the six-month
period, this increase was primarily as a result of inclusion of the operations
of the Mansfield Stations and to a lesser extent the inclusion of the
operations of the June 15 Acquisitions. Station operating expenses increased to
$1,600,000 from $751,000, or 113.0%, in the 1998 three month period as compared
with the same period in 1997 and to $2,699,000 from $1,481,000, or 82.2%, in
the 1998 six-month period as compared with the same period in 1997.
The performance of a radio station group, such as the Company, is
customarily measured by its ability to generate broadcast cash flow. "Broadcast
cash flow" is defined as net broadcasting revenues less station operating
expenses. Although broadcast cash flow is not a measure of performance
calculated in accordance with generally accepted accounting principles ("GAAP"),
the Company believes that broadcast cash flow is accepted by the broadcasting
industry as a generally recognized measure of performance and is used by
analysts who report publicly on the performance of broadcasting companies.
Nevertheless, this measure should not be considered in isolation or as a
substitute for operating income, net income, net cash provided by operating
activities or any other measure for determining the Company's operating
performance or liquidity that is calculated in accordance with GAAP. Broadcast
cash flow increased in the three months and the six months ended June 30, 1998
as compared with the same periods in 1997. The increase in both periods was a
result primarily of the inclusion of the operations of the Mansfield Stations
and to a lesser extent the inclusion of the operations of the June 15
Acquisitions. Broadcast cash flow increased to $998,000 from $503,000, or 98.5%,
in the 1998 three-month period as compared with the same period in 1997 and to
$1,365,000 from $677,000, or 101.6%, in the 1998 six-month period as compared
with the same period in 1997.
Depreciation and amortization increased in the three months and six
months ended June 30, l998 as compared with the comparable l997 periods
primarily as a result of the addition of assets in connection with the
acquisition of the Mansfield Stations and the Shelby Station and to a much
lesser extent the June 15 Acquisitions.
Corporate general and administrative expenses increased in the three
months and six months ended June 30, 1998 as compared with the same periods in
1997, primarily as a consequence of stock options granted as of June 15, 1998 to
two officers of Faircom pursuant to the terms of the merger agreement between
the Company and Faircom, resulting in the recognition of $530,000 as of such
date of grant as corporate general and administrative expenses. Such expenses
also increased in both 1998 periods as a result of executive compensation and
other expenses of Faircom related to Faircom's merger with the Company.
Interest expense increased in the three months and six months ended
June 30, 1998 as compared with the same l997 periods principally due to debt
incurred in connection with the acquisition of the Mansfield and Shelby Stations
and to a lesser extent to debt incurred in connection with the June 15
Acquisitions.
As a result of lower extraordinary loss from debt extinguishment and
higher broadcast cash flow, offset in part by higher depreciation and
amortization, corporate general and administrative expenses and interest
expense, net loss for the three months and the six months ended June 30, 1998
decreased to $1,877,000 and $2,418,000 from $4,198,000 and $4,406,000,
respectively, in the comparable 1997 periods.
Liquidity and Capital Resources
- -------------------------------
In the six months ended June 30, 1998, net cash used in operating
activities was $898,000 compared with $70,000 used in the six months ended
June 30, 1997. In the 1998 period, proceeds from the issuance of long-term debt
and preferred stock more than offset such use for operating activities, as well
as funds used for the acquisition of radio stations and for principal payments
on long-term debt. As a result, there was a net increase in cash of $234,000 in
the 1998 six-month period compared with a net increase of $339,000 in the
comparable 1997 period.
On November 14, 1997, the Company entered into an agreement with a
group of lenders (the "Credit Agreement") which provides for a senior reducing
revolving credit facility with a commitment of up to $55,000,000 expiring March
31, 2005 (the "Revolver"). The Credit Agreement, as amended, is available for
working capital and acquisitions, including related acquisition expenses. In
addition, the Company may request from time to time that the lenders issue
Letters of Credit in accordance with the same provisions as the Revolver.
The Credit Agreement provides for the quarterly reduction of the
commitment under the Revolver for each of the four quarters during 1999 in the
amount of $687,500 per quarter, and by increasing quarterly amounts thereafter
to $2,750,000 during 2004, with a final payment of $6,875,000 due March 31,
2005, and, under certain circumstances, requires mandatory prepayments of any
outstanding loans and further commitment reductions. Mandatory prepayments and
commitment reductions are required to the extent that, from time to time,
outstanding loans exceed the commitment then in effect, and from certain asset
sales, surplus assets of any pension plans, sales of equity securities and
receipts of insurance proceeds. The indebtedness of the Company under the Credit
Agreement is collateralized by liens on substantially all of the assets of the
Company and its operating and license subsidiaries and by a pledge of the
operating and license subsidiaries' stock, and is guaranteed by those
subsidiaries. The Credit Agreement contains restrictions pertaining to the
maintenance of financial ratios, capital expenditures, payment of dividends or
distributions of capital stock and incurrence of additional indebtedness.
The Company is required to maintain an interest rate coverage ratio
(EBITDA, defined as earnings before interest, taxes, depreciation and
amortization, to annual interest rate cost) of at least 2.0 to 1.0 (except 1.75
to 1.00 prior to September 30, 1998); a fixed charge coverage ratio (EBITDA to
annual fixed charges) of at least 1.10 to 1.00; and a financial leverage ratio
(total debt to Adjusted EBITDA, as defined in the Credit Agreement) starting at
6.5 to 1.0 and decreasing over time to 3.5 to 1.0 as follows:
Time Period Maximum Leverage Ratio
----------- ----------------------
Funding Date through March 31, 1999...........................6.50:1.00
April 1, 1999 through June 30, 1999...........................6.00:1.00
July 1, 1999 through September 30, 1999.......................5.75:1.00
October 1, 1999 through December 31, 1999.....................5.50:1.00
January 1, 2000 through March 31, 2000........................5.25:1.00
April 1, 2000 through June 30, 2000...........................5.00:1.00
July 1, 2000 through September 30, 2000.......................4.75:1.00
October 1, 2000 through December 31, 2000.....................4.50:1.00
January 1, 2001 through March 31, 2001........................4.00:1.00
April 1, 2001 and thereafter..................................3.50:1.00
As of June 30, 1998, the Company is in compliance with all of the
aforementioned debt covenants.
Interest under the Credit Agreement is payable, at the option of the
Company, at alternative rates equal to the LIBOR rate (5.66% at June 30, 1998)
plus 1.25% to 2.75% or the base rate announced by the Bank of Montreal (8.50% at
June 30, 1998) plus 0% to 1.50%. The spreads over the LIBOR rate and such base
rate vary from time to time, depending upon the Company's financial leverage.
The Company will pay quarterly commitment fees equal to 3/8% to 1/2% per annum,
depending upon the Company's financial leverage, on the unused portion of the
commitment under the Credit Agreement. The Company also is required to pay
certain other fees to the agent and the lenders for the administration of the
facilities and the use of the credit facility.
At June 30, 1998, the Company had borrowed $34,400,000 under the Credit
Agreement, and $20,600,000 remained in the unused portion. Of the unused
portion, approximately $2,100,000 was available for borrowing by the Company for
working capital.
In connection with the acquisition of a radio station in San Diego,
California, and an option to acquire a radio station in Charleston, South
Carolina, the Company issued notes in the maximum principal amounts of
$6,000,000 and $1,500,000, respectively. The San Diego note is collateralized
by the assets of the San Diego station, matures on the earlier of June 4, 2002
or the sale of the San Diego station, and bears interest at 10% on any unpaid
principal after maturity. The Charleston note is collateralized by the option,
matures on the earlier of December 3, 2002 or upon the sale of the Charleston
station or of the option, and bears interest at 10% on any unpaid principal
amount after maturity.
The Company is currently attempting to sell both the San Diego station
and its interest in the Charleston station. Consequently, $7,500,000,
representing the principal amount of both notes, has been classified as a
current asset, designated "assets held for sale," and as an offsetting current
liability, designated "notes payable," at June 30, 1998.
In connection with the acquisition of The Park Lane Group, the Company
assumed a $600,000 note, bearing interest at 8% payable quarterly, with the
principal payable in quarterly installments of $15,000 from August 2000 to May
2005, at which time the remaining principal balance is due.
On June 15, 1998, the Company received $18,150,000 in gross proceeds
from the issuance of shares of its Series A, B, D and F Convertible Preferred
Stock at $5.00 per share. In conjunction with these transactions, the Company
also issued warrants to purchase 990,000 shares of the Company's common stock at
$5.00 per share. The purchasers of the Series F Convertible Preferred Stock also
have committed an additional $10,250,000 through the purchase, on a pro rata
basis, of an additional 2,050,000 shares of the Company's Series F Convertible
Preferred Stock at $5.00 per share, to fund future acquisitions by the Company.
Historically, the Company's net cash provided by operating activities
is lower in its first and second quarters, and the Company expects net cash
provided by operations to increase for the balance of 1998.
Based on current interest rates, the Company believes its interest
payments for the balance of 1998 will be approximately $1,520,000. Debt
principal payments are expected to be $32,500 for the balance of 1998.
Corporate general and administrative expenses and capital expenditures for the
remainder of 1998 are estimated to be approximately $600,000 and $625,000,
respectively. In addition, professional fees aggregating approximately
$1,125,000, relating to the June 15 Acquisitions which were consummated June
15, 1998, the payment of which was deferred, are expected to be paid prior to
the end of 1998. The Company expects to be able to meet such principal
payments, interest expense, corporate general and administrative expenses,
capital expenditures and deferred professional fees, aggregating $3,902,500,
from net cash provided by operations, current cash balances and borrowings
under its Credit Agreement. The Company believes its net cash from
operations, current cash balances and available funds under its Credit
Agreement will be sufficient to meet its interest expense, any required
principal payments, corporate expenses and capital expenditures in the
foreseeable future based on its current operations and indebtedness.
The Company is actively pursuing a number of acquisitions of radio
stations in a number of markets. Such acquisitions would be financed from
borrowings against the $20,600,000 unused portion of its Credit Agreement (less
any utilization of such portion for working capital needs) and the $10,250,000
available under its Preferred Stock Purchase Agreement. However, there can be no
assurance that any of such acquisitions will be consummated or that all or any
portion of such financing will be available.
Market Risk
- -----------
The Company is exposed to the impact of interest rate changes. It is
the Company's policy to enter into interest rate transactions only to the extent
considered necessary to meet its objectives and to comply with the requirements
of its Credit Agreement. The Company has not entered into interest rate
transactions for speculative purposes. The Company's exposure to interest rate
risk results from borrowings under its Credit Agreement. At June 30, 1998, the
Company had $34,400,000 outstanding under its credit facility.
To satisfy the requirements of its Credit Agreement, the Company
entered into a two-year collar agreement with the Bank of Montreal on August 17,
1998 to mitigate the risk of increasing interest rates created by the borrowing
under its Credit Agreement. This agreement is based on the three-month LIBOR
rate, has a Cap Rate, as defined, of 6.50% and a Floor Rate, as defined, of
5.28%. These rates are exclusive of additional spreads over the LIBOR rate
depending upon the Company's financial leverage. Based on the $34,400,000
principal amount outstanding under the Company's credit facility at June 30,
1998, the annual interest expense would fluctuate by a maximum of $420,000,
exclusive of leverage spreads over the LIBOR rate.
Year 2000 Computer System Compliance
- ------------------------------------
The Year 2000 issue is the result of computer programs written with
date sensitive codes that contain two digits (rather than four) to define the
year. As the year 2000 approaches, certain computer systems may be unable to
process accurately certain date-based information, as the program may interpret
the year 2000 as 1900. The Company is in the process of completing a Year 2000
assessment of its corporate and broadcast systems and related contingency plan.
The Company has engaged a consultant and is in the process of corresponding
with its vendors. Additionally, the Company has begun upgrading certain of its
broadcast systems and will continue to do so through early 1999.
The Company does not expect the costs of rendering its accounting
systems and the systems at its radio stations Year 2000 compliant to be material
and expects to complete these upgrades on a timely basis. Further, the ability
of third parties with whom the Company transacts business to address adequately
their Year 2000 issues is out of the Company's control. There can be no
assurance that the failure of such third parties to address adequately their
Year 2000 issues will not have a material adverse effect on the Company's
business, financial condition, cash flows and results of operations.
United States Department of Justice Information Request
- -------------------------------------------------------
On July 29, 1998, the United States Department of Justice ("DOJ")
issued a Civil Investigative Demand ("CID") to the Company requesting
information relating to the Company's acquisition of six radio stations in and
around Redding, California ("Redding Stations"). The CID requires the Company to
submit certain information to DOJ so that it may evaluate whether the Company's
acquisition of the Redding Stations was in violation of applicable federal
antitrust laws. The Company is in the process of complying with the CID. The
Company believes that its acquisition of the Redding Stations did not involve a
violation of antitrust laws; however, it can not predict what DOJ will conclude.
Cautionary Statement Concerning Forward-Looking Statements
- ----------------------------------------------------------
This Form 10-Q includes or may include certain forward-looking
statements with respect to the Company that involve risks and uncertainties.
This Form 10-Q contains certain forward-looking statements concerning financial
position, business strategy, budgets, projected costs, and plans and objectives
of management for future operations, as well as other statements including words
such as "anticipate," "believe," "plan," "estimate," "expect," "intend,"
"project" and other similar expressions. Although the Company believes its
expectations reflected in such forward-looking statements are based on
reasonable assumptions, readers are cautioned that no assurance can be given
that such expectations will prove correct and that actual results and
developments may differ materially from those conveyed in such forward-looking
statements. For these statements, the Company claims the protections of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.
Important factors that could cause actual results to differ materially
from the expectations reflected in the forward-looking statements herein include
changes in general economic, business and market conditions, as well as changes
in such conditions that may affect the radio broadcast industry or the markets
in which the Company operates, including, in particular, increased competition
for attractive radio properties and advertising dollars, fluctuations in the
cost of operating radio properties, and changes in the regulatory climate
affecting radio broadcast companies. Such forward-looking statements speak only
as of the date on which they are made, and the Company undertakes no obligation
to update any forward-looking statement to reflect events or circumstances after
the date of this Form 10-Q. If the Company does update or correct one or more
forward-looking statements, readers should not conclude that the Company will
make additional updates or corrections with respect thereto or with respect to
other forward-looking statements.
Recently Issued Accounting Pronouncements
- -----------------------------------------
In June 1997, the Financial Accounting Standard Board issued SFAS 130,
"Reporting Comprehensive Income." SFAS 130 establishes standards of disclosure
and financial statement display for reporting total comprehensive income and its
individual components. SFAS 130 became effective in fiscal year beginning after
December 31, 1997. Company management has determined that comprehensive income
equals the Company's net loss as of June 30, 1998.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 provides accounting guidance for
reporting information about operating segments in annual financial statements
and requires such enterprises to report selected information about operating
segments in interim financial reports. The statement uses a "management
approach" to identify operating segments and provides specific criteria for
operating segments. SFAS 131 is effective for the year ended December 31, 1998
and will be required for interim periods in 1999. The Company is currently
evaluating the impact SFAS 131 will have on its financial statements, if any.
In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," was issued. SFAS 133 prescribes the accounting treatment for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. The Company may
employ financial instruments to manage its exposure to fluctuations in interest
rates (see Note 3(c)). The Company does not hold or issue such financial
instruments for trading purposes. The Company will adopt SFAS No. 133, as
required in the year 2000, and does not expect the impact of adoption to be
material.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use," which is effective for fiscal
years beginning after December 15, 1998. SOP 98-1 requires the capitalization of
certain expenditures for software that is purchased or internally developed for
use in the business. Company management believe that the prospective
implementation of SOP 98-1 in 1999 is likely to result in some additional
capitalization of software expenditures in the future. However, the amount of
such additional capitalized software expenditures can not be determined at this
time.
In April 1998, the AICPA issued SOP-98-1, "Reporting on the Costs of Start-up
Activities." The SOP provides guidance on financial reporting of costs of
start-up activities. SOP 98-5 is effective for fiscal years beginning after
December 15, 1998. The Company believes the implementation of SOP 98-5 in 1999
will not have a material impact on its financial reporting.
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
(c) As a result of the June 15 Acquisitions, the Company acquired
control of 31 radio stations located in California, Arizona, Michigan and
Ohio through acquisitions of assets or stock for cash or by way of merger
transactions. The cash needed for the June 15 Acquisitions was provided by bank
financing from the Company's senior credit facility with Bank of Montreal,
Chicago Branch, General Electric Capital Corporation and Bank One,
Indianapolis, NA, and by the proceeds from the sale of shares of the Company's
convertible preferred stock. Additional shares of the Company's convertible
preferred stock were issued in the merger transactions. In addition to
3,720,620 shares of the Company's Series C Convertible Preferred Stock, and
options for the purchase of 274,045 shares thereof, issued in the merger
transaction with Faircom Inc. pursuant to a registration statement filed under
the Securities Act of 1933, convertible preferred stock was issued by the
Company on June 15, 1998, as follows, and such stock or the proceeds thereof
were used to fund the June 15 Acquisitions:
1. The Company issued to the purchasers set forth below a total of
2,050,000 shares of its Series F Convertible Preferred Stock at a purchase price
of $5.00 per share, and in conjunction therewith, issued to such purchasers
warrants to purchase a total of 860,000 shares of the Company's Common Stock at
an exercise price of $5.00 per share.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF WARRANTS
NAME OF PURCHASER ISSUED ISSUED
<S> <C> <C>
Waller-Sutton Media Partners, L.P. 1,000,000 650,000
WPG Corporate Development
Associates V, L.P. 562,900 112,580
WPG Corporate Development
Associates (Overseas) V, L.P. 87,100 17,420
General Electric Capital Corporation 250,000 50,000
River Cities Capital Fund Limited
Partnership 100,000 20,000
William H. Ingram 50,000 10,000
</TABLE>
-18-
<PAGE> 19
The Series F Convertible Preferred Stock is convertible into shares of the
Company's Common Stock on a 1-for-1 basis at any time at the option of the
holders and under certain circumstances at the option of the Company. The
warrants are exercisable in whole or in part (but unless exercised in full,
only for whole shares of common stock) at any time on or before the tenth
anniversary of the date of issuance of the warrants.
2. General Electric Capital Corporation ("GE Capital") paid
$3,900,000 cash to complete its purchase of shares of the Company's Series B
Senior Convertible Preferred Stock, pursuant to the terms of its Stock Purchase
Agreement and Promissory Note dated December 8, 1997. The Series B Senior
Convertible Preferred Stock is convertible into shares of the Company's Common
Stock on a .5-for-1 basis at any time at the option of the holder and under
certain circumstances at the option of the Company. In addition, the Company
issued to GE Capital a warrant to purchase 50,000 shares of the Company's
Common Stock at an exercise price of $5.00 per share. The warrant is
exercisable in whole or in part (but unless exercised in full, only for whole
shares of common stock) at any time on or before the fifth anniversary of the
date of issuance of the warrant.
3. BMO Financial, Inc. paid $3,900,000 cash for 780,000 shares of
the Company's Series D Convertible Preferred Stock. The Series D Convertible
Preferred Stock is convertible into shares of the Company's Common Stock on a
1-for-1 basis at any time, subject to certain conditions, and under certain
circumstances at the option of the Company.
4. William L. Stakelin, a member of the Company's Board of
Directors, as well as its President, Chief Operating Officer and Secretary,
purchased 20,000 shares of the Company's Series A Convertible Preferred Stock at
a purchase price of $5.00 per share. The Series A Convertible Preferred Stock is
convertible into shares of the Company's Common Stock on a 1-for-1 basis at any
time at the option of the holder and under certain circumstances at the option
of the Company.
5. As part of the Company's acquisition of all of the outstanding
stock of Alta California Broadcasting, Inc. ("Alta") by virtue of a merger of
Alta into a wholly-owned subsidiary of the Company, the Company issued 205,250
shares of its Series E Convertible Preferred Stock (stated value $5.00 per
share) as follows: 194,750 shares were issued to the seller, Redwood
Broadcasting, Inc. (of which 20,000 shares are currently being held in escrow
pursuant to an indemnification agreement between the Company and the seller),
and 10,500 shares were issued to Miller Capital Corp., as partial payment of
commissions payable to it. The Series E Convertible Preferred Stock is
convertible into shares of the Company's Common Stock on a 1-for-1 basis at
the option of the holder at any time and under certain circumstances at the
option of the Company.
6. As part of the Company's acquisition of all of the outstanding
stock of Topaz Broadcasting, Inc. ("Topaz") by virtue of a merger of Topaz into
a wholly-owned subsidiary of the Company, the Company issued 242,592 shares of
the Company's Series E Convertible Preferred Stock to the seller, Thomas Gammon.
7. Effective as of June 15, 1998, the Company granted, under its
1998 Management Stock Option Plan, to each of Terry S. Jacobs (a member of the
Company's Board of Directors, as well as its Chairman, Chief Executive Officer
and Treasurer) and William L. Stakelin (a member of the Company's Board of
Directors, as well as its President, Chief Operating Officer and Secretary)
options to purchase 608,244 shares of the Company's Common Stock at a price of
$5.00 per share. Of the options granted, the maximum allowable will be treated
as incentive stock options, which vest over ten years (10% per year) and are
exercisable in equal one-tenth increments commencing on the date of grant and
continuing on each anniversary of the date of grant. The balance of the options
will be non-qualified stock options, which will vest over three years (33% each
year) and will become exercisable in equal one-third increments commencing at
the end of the first year following the date of the grant.
8. The Company issued to River Cities Capital Fund Limited
Partnership ("River Cities") a warrant to purchase 80,000 shares of the
Company's Common Stock at an exercise price of $5.00 per share. The warrant is
exercisable in whole or in part (but unless exercised in full, only for whole
shares) at any time on or before the fifth anniversary of the issuance of the
warrant. The warrant was issued as an inducement to River Cities, as an
existing holder of the Company's Series A Convertible Preferred Stock, to
approve the acquisition by the Company of all of the outstanding stock of
Faircom Inc. through a merger with the Company's wholly-owned subsidiary,
including the issuance by the Company of shares of its Series C Convertible
Preferred Stock in exchange therefor (one of the June 15 Acquisitions).
The foregoing securities were issued by the Company in privately
negotiated transactions based upon exemptions from registration under the
Securities Act of 1933, as amended (the "1933 Act"), claimed pursuant to Section
4(2) of the 1933 Act and the rules and regulations promulgated thereunder.
Item 4. Submission of Matters to a Vote of Security Holders
On June 15, 1998, the stockholders of the Company unanimously
consented in a writing without a meeting as permitted by the provisions of the
Delaware General Corporation Law to: (i) the issuance of shares of the
Company's Series F Convertible Preferred Stock and warrants to purchase the
Company's Common Stock pursuant to that certain Amended and Restated
Stockholders' Agreement dated as of December 8, 1997 (the "Stockholder's
Agreement"); and (ii) the adoption of the Amended and Restated Certificate of
Incorporation of the Company attached to the Stockholders' Agreement.
-19-
<PAGE> 20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following is filed herewith as an exhibit to Part I of
this Form 10-Q/A:
Exhibit No. 27 Financial Data Schedule
The exhibits identified as Part II Exhibits on the following
Exhibit Index, which is incorporated herein by this reference, are filed or
incorporated by reference as exhibits to Part II of this Form 10-Q/A.
(b) Reports on Form 8-K
On June 30, 1998, the Company filed a report on Form 8-K,
reporting under Items 2 and 5, disclosing the consummation of a series of
transactions on June 15, 1998 pursuant to which the Company acquired control of
31 radio stations through acquisitions of assets or stock for cash or by way of
merger transactions, the financing of said transactions through the Company's
senior credit facility and by the issuance and the proceeds of the sale of
shares of the Company's convertible preferred stock, most of which have full
voting rights, and the resulting change in control of the Company's voting stock
previously held 51.3% by Terry S. Jacobs. The historical financial statements
and the pro forma financial information required to be filed as part of this
Form 8-K were not filed with the initial report. Such financial statements and
information were filed September 3, 1998 on Form 8-K/A as Amendment No. 1 to
the Company's initial Form 8-K.
-20-
<PAGE> 21
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.
REGENT COMMUNICATIONS, INC.
Date: September 24, 1998 By: /s/ TERRY S. JACOBS
------------------------------------------
Terry S. Jacobs, Chairman of the Board and
Chief Executive Officer
Date: September 24, 1998 By: /s/ MATTHEW A. YEOMAN
------------------------------------------
Matthew A. Yeoman,
Vice President - Finance
(Chief Accounting Officer)
S-1
<PAGE> 22
EXHIBIT INDEX
-------------
Part I Exhibits:
- -----------------
The following is filed herewith as an exhibit to Part I of this Form
10-Q/A:
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
27 Financial Data Schedule
Part II Exhibits:
- ----------------
The following exhibits are filed, or incorporated by reference where
indicated, as part of Part II of this Report on Form 10-Q/A:
E-1
<PAGE> 23
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
4(a)* Amended and Restated Certificate of Incorporation of Regent
Communications, Inc. (previously filed as Exhibit 4(a) to the
Registrant's Form 8-K filed June 30, 1998 and incorporated
herein by this reference).
4(b)* Amended and Restated By-Laws of Regent Communications, Inc.
(previously filed as Exhibit 3(b) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(c)* Second Amended and Restated Stockholders' Agreement dated as
of June 15, 1998 among Regent Communications, Inc., Terry S.
Jacobs, William L. Stakelin, Waller-Sutton Media Partners,
L.P., William H. Ingram, WGP Corporate Development Associates
V, L.P., WGP Corporate Development Associates (Overseas) V,
L.P., River Cities Capital Fund Limited Partnership, BMO
Financial, Inc., General Electric Capital Corporation, Joel M.
Fairman, Miami Valley Venture Fund II Limited Partnership, and
Blue Chip Capital Fund II Limited Partnership (excluding
exhibits not deemed material or filed separately in executed
form) (previously filed as Exhibit 4(c) to the Registrant's
Form 8-K filed June 30, 1998 and incorporated herein by this
reference).
E-2
<PAGE> 24
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
4(d)* Stock Purchase Agreement dated June 15, 1998 among Regent
Communications, Inc., Waller-Sutton Media Partners, L.P., WPG
Corporate Development Associates V, L.P., WPG Corporate
Development Associates (Overseas) V, L.P., General Electric
Capital Corporation, River Cites Capital Fund Limited
Partnership and William H. Ingram (excluding exhibits not
deemed material or filed separately in executed form)
(previously filed as Exhibit 4(d) to the Registrant's Form
8-K filed June 30, 1998 and incorporated herein by this
reference).
4(e)* Registration Rights Agreement dated June 15, 1998 among Regent
Communications, Inc., PNC Bank, N.A., Trustee, Waller-Sutton
Media Partners, L.P., WPG Corporate Development Associates V,
L.P., WPG Corporate Development Associates (Overseas) V, L.P.,
BMO Financial, Inc., General Electric Capital Corporation,
River Cites Capital Fund Limited Partnership, Terry S. Jacobs,
William L. Stakelin, William H. Ingram, Blue Chip Capital Fund
II Limited Partnership, Miami Valley Venture Fund L.P. and
Thomas Gammon (excluding exhibits not deemed material or filed
separately in executed form) (previously filed as Exhibit
4(e) to the Registrant's Form 8-K filed June 30, 1998 and
incorporated herein by this reference).
4(f)* Warrant for the Purchase of 650,000 Shares of Common Stock
issued by Regent Communications, Inc. to Waller-Sutton Media
Partners, L.P. dated June 15, 1998 (See Note 1 below)
(previously filed as Exhibit 4(f) to the Registrant's Form
8-K filed June 30, 1998 and incorporated herein by this
reference).
4(g)* Warrant for the Purchase of 50,000 Shares of Common Stock
issued by Regent Communications, Inc. to General Electric
Capital Corporation dated June 15, 1998 (previously filed as
Exhibit 4(g) to the Registrant's Form 8-K filed June 30,
1998 and incorporated herein by this reference).
4(h)* Agreement to Issue Warrant dated as of June 15, 1998 between
Regent Communications, Inc. and General Electric Capital
Corporation (excluding exhibits not deemed material or filed
separately in executed form) (previously filed as Exhibit
4(h) to the Registrant's Form 8-K filed June 30, 1998 and
incorporated herein by this reference).
4(i)# Grant of Incentive Stock Option effective June 15, 1998 in
favor of Terry S. Jacobs.
4(j)# Grant of Incentive Stock Option effective June 15, 1998 in
favor of William S. Stakelin.
4(k)# Warrant for the Purchase of 80,000 Shares of Common Stock
issued by Regent Communications, Inc. to River Cities
Capital Fund Limited Partnership dated June 15, 1998.
4(l)* Stock Purchase Agreement dated as of May 20, 1997 between
Terry S. Jacobs and Regent Communications, Inc. (previously
filed as Exhibit 4(b) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998
and incorporated herein by this reference).
4(m)* Stock Purchase Agreement dated as of May 20, 1997 between
River Cities Capital Fund Limited Partnership and Regent
Communications, Inc. (previously filed as Exhibit 4(c) to the
Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
4(n)* Stock Purchase Agreement dated as of November 26, 1997 and
Terry S. Jacobs and Regent Communications, Inc. (previously
filed as Exhibit 4(d) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998
and incorporated herein by this reference).
E-3
<PAGE> 25
4(o)* Stock Purchase Agreement dated as of December 1, 1997
between William L. Stakelin and Regent Communications,
Inc. (previously filed as Exhibit 4(e) to the Registrant's
Form S-4 Registration Statement No. 333-46435 effective
May 7, 1998 and incorporated herein by this reference).
4(p)* Stock Purchase Agreement dated as of December 8, 1997
between Regent Communications, Inc. and General Electric
Capital Corporation (previously filed as Exhibit 4(f) to
the Registrant's Form S-4 Registration Statement No.
333-46435 effective May 7, 1998 and incorporated herein by
this reference).
4(q)* Stock Purchase Agreement dated as of December 8, 1997
between Regent Communications, Inc. and BMO Financial,
Inc. (previously filed as Exhibit 4(g) to the Registrant's
Form S-4 Registration Statement No. 333-46435 effective
May 7, 1998 and incorporated herein by this reference).
4(r)* Amended and Restated Redemption and Warrant Agreement
dated as of March 31, 1998 among Regent Communications,
Inc., Blue Chip Capital Fund II Limited Partnership,
Miami Valley Venture Fund L.P. and Faircom Inc. (previously
filed as Exhibit 4(i) to the Registrant's Form S-4
Registration Statement No. 333-46435 effective May 7, 1998
and incorporated herein by this reference).
4(s)* Credit Agreement dated as of November 14, 1997 among
Regent Communications, Inc., the lenders listed therein,
as Lenders, General Electric Capital Corporation, as
Documentation Agent and Bank of Montreal, Chicago Branch,
as Agent (excluding exhibits not deemed material or filed
separately in executed form) (previously filed as Exhibit
4(j) to the Registrant's Form S-4 Registration Statement
No. 333-46435 effective May 7, 1998 and incorporated herein
by this reference).
4(t)* Revolving Note issued by Regent Communications, Inc. to
Bank of Montreal, Chicago Branch dated November 14, 1997
in the principal amount of $20,000,000 (See Note 2 below)
(previously filed as Exhibit 4(k) to the Registrant's Form
S-4 Registration Statement No. 333-46435 effective May 7,
1998 and incorporated herein by this reference).
4(u)* Agreement to Issue Warrant dated as of March 25, 1998
between Regent Communications, Inc. and River Cities
Capital Fund Limited Partnership (previously filed as
Exhibit 4(l) to the Registrant's Form S-4 Registration
Statement No. 333-46435 effective May 7, 1998 and
incorporated herein by this reference).
4(v)* Regent Communications, Inc. Faircom Conversion Stock
Option Plan (previously filed as Exhibit 4(m) to the
Registrant's Form S-4 Registration Statement No. 333-46435
effective May 7, 1998 and incorporated herein by this
reference).
4(w)* First Amendment to Credit Agreement dated as of February 16,
1998 among Regent Communications, Inc., the financial
institutions listed therein, as lenders, General Electric
Capital Corporation, as Documentation Agent, and Bank of
Montreal, Chicago Branch as Agent previously filed as Exhibit
4(w) to the Registrant's Form 8-K/A (date of report June 15,
1998) filed September 3, 1998 and incorporated herein by
reference.
4(x)* Second Amendment and Limited Waiver to Credit Agreement dated
as of June 10, 1998 among Regent Communications, Inc. the
financial institutions listed therein, as lenders, General
Electric Capital Corporation, as Documentation Agent, and
Bank of Montreal, Chicago Branch as Agent previously filed as
Exhibit 4(x) to the Registrant's Form 8-K/A (date of report
June 15, 1998) filed September 3, 1998 and incorporated
herein by reference.
10(a)* Executive Employment Agreement dated June 15, 1998 between
Regent Communications, Inc. and Joel M. Fairman (excluding
exhibits not deemed material or filed separately in
executed form) (previously filed as Exhibit 20(c) to the
Registrant's Form 8-K filed June 30, 1998 and incorporated
herein by this reference).
10(b)* Consulting and Non-Competition Agreement between Regent
Communications, Inc. and James H. Levy (previously filed as
Exhibit 20(d) to the Registrant's Form 8-K filed June 30,
1998 and incorporated herein by this reference).
E-4
<PAGE> 26
*Incorporated by reference.
#Previously filed as an exhibit to the initial Form 10-Q for the Quarter Ended
June 30, 1998, which this Form 10-Q/A amends, and incorporated herein by this
reference.
Notes:
1. Six substantially identical Warrants for the purchase of shares of
Registrant's common stock were issued as follows:
Waller-Sutton Media Partners, L.P. 650,000
WPG Corporate Development Associates V, L.P. 112,580
WPG Corporate Development Associates (Overseas) V, L.P. 17,420
General Electric Capital Corporation 50,000
River Cites Capital Fund Limited Partnership 20,000
William H. Ingram 10,000
2. Two substantially identical notes were issued to Bank of Montreal,
Chicago Branch in the principal amounts of $15,000,000 and $20,000,000.
E-5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGENT
COMMUNICATION INC.'S FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000913015
<NAME> REGENT COMMUNICATIONS
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 769,706
<SECURITIES> 0
<RECEIVABLES> 3,532,806
<ALLOWANCES> (171,000)
<INVENTORY> 0
<CURRENT-ASSETS> 12,372,659
<PP&E> 14,452,095
<DEPRECIATION> (5,617,079)
<TOTAL-ASSETS> 66,831,177
<CURRENT-LIABILITIES> 11,570,204
<BONDS> 0
19,202,880
3,857,891
<COMMON> 2,400
<OTHER-SE> (5,527,781)
<TOTAL-LIABILITY-AND-EQUITY> 66,831,177
<SALES> 2,866,077
<TOTAL-REVENUES> 2,598,126
<CGS> 0
<TOTAL-COSTS> 2,730,668
<OTHER-EXPENSES> 8,622
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 582,838
<INCOME-PRETAX> (706,758)
<INCOME-TAX> 0
<INCOME-CONTINUING> (706,758)
<DISCONTINUED> 0
<EXTRAORDINARY> (1,170,080)
<CHANGES> 0
<NET-INCOME> (1,876,838)
<EPS-PRIMARY> (8.65)
<EPS-DILUTED> (8.65)
</TABLE>
