<PAGE> 1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 333-46435
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 No X
----- -----
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 June 15, 1998.
<PAGE> 2
Part I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On June 15, 1998, a merger was consummated between Regent
Communications, Inc. (the "Company") and Faircom Inc. ("Faircom"), pursuant to
which Faircom became a wholly-owned subsidiary of the Company. This merger was
accounted for as a "reverse acquisition." Pursuant to generally accepted
accounting principles, Faircom was deemed the "accounting acquiror," and the
historical financial statements of Faircom have become the historical financial
statements of the Company. The Form 10-Q of Faircom for the quarter ended March
31, 1998, including all exhibits thereto, as filed with the Securities and
Exchange Commission on May 14, 1998, is incorporated herein by this reference in
satisfaction of the requirements of Items 1 and 2 of Part I of this Form 10-Q of
the Company.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A special joint meeting of the stockholders and directors of the
Company was held on February 16, 1998. The following matters were submitted to
and approved unanimously by the stockholders of the Company at that meeting:
(a) approval of the First Amendment to the Stock Purchase Agreement
between the Company and the stockholders of The Park Lane Group, which extended
the closing date for the consummation of the transactions contemplated by such
Stock Purchase Agreement;
(b) approval of federal and state securities law compliance matters in
connection with consummation of the Agreement of Merger between the Company and
Faircom;
(c) approval of Employment Agreements between the Company and each of
Terry S. Jacobs and William L. Stakelin;
(d) approval of the 1997 Regent Communications, Inc. Management Stock
Option Plan, providing for the issuance of up to 2,000,000 shares of the
Company's common stock to key employees of the Company;
(e) approval of the Regent Communications, Inc. Faircom Conversion
Stock Option Plan, providing for the conversion of outstanding options for the
purchase of Faircom common stock into options to purchase the common stock of
the Company on substantially equivalent terms as part of the merger with
Faircom;
(f) approval of Amended and Restated By-Laws of the Company, amending
the indemnification provisions thereof to be consistent with those contained in
the Company's Certificate of Incorporation; and
(g) designation of 300,000 additional authorized shares of the
Company's Series C Preferred Stock.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 13 Form 10-Q of Faircom Inc. for the quarter ended March 31, 1998,
including all exhibits thereto, as filed with the Securities and Exchange
Commission on May 14, 1998, incorporated by reference into Part I, Items 1 and 2
of this Form 10-Q, is filed as Exhibit 13 hereto.
Exhibit 27 Financial Data Schedule (Incorporated by reference, and filed
herewith as a part of Exhibit 13 hereto).
<PAGE> 3
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 thereunto duly authorized.
REGENT COMMUNICATIONS, INC.
By: /s/ Matthew A. Yeoman
------------------------------
Name: Matthew A. Yeoman
Its: Vice President - Finance
(Chief Accounting Officer)
DATE: June 25, 1998
<PAGE> 4
Exhibit Index
Regent Communications, Inc.
Form 10-Q
For the Quarter Ended March 31, 1998
Exhibit 13 - Form 10-Q of Faircom Inc. for the quarter ended March 31, 1998,
including all exhibits thereto, as filed with the Securities and
Exchange Commission on May 14, 1998.
Exhibit 27 - Financial Data Schedule (Incorporated by reference, and filed
herewith as a part of Exhibit 13 hereto).
<PAGE> 1
Exhibit 13
------------
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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
Faircom Inc.
(Exact name of registrant as specified in its charter)
Delaware 87-0394057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Glen Head Road, Old Brookville, New York 11545
(Address of principal executive offices)
(516) 676-2644
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of May 6, 1998:
Common Stock, par value $.01 7,378,199
- ---------------------------- -----------------
(Title of each class) (Number of Shares)
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1998 March 31, 1997
------------------ ------------------
<S> <C> <C>
Gross broadcasting
revenues $1,613,205 $1,030,277
Less: agency
commissions (148,128) (126,097)
--------- -------
Net broadcasting
revenues 1,465,077 904,180
--------- -------
Operating expenses
Programming and
technical expenses 448,278 293,856
Selling, general and
administrative
expenses 650,633 436,459
Depreciation and
amortization 290,548 78,624
Corporate expenses 113,528 115,534
------- -------
Total operating expenses 1,503,087 924,473
--------- -------
Loss from operations (38,010) (20,293)
Interest expense (503,770) (173,042)
Other income 12,152 1,584
-------- --------
Loss before taxes on income (529,628) (191,751)
Taxes on income (12,000) (16,000)
-------- --------
Net Loss $ (541,628) $ (207,751)
Basic and diluted net loss
per common share $ (.07) $ (.03)
========== ==========
Weighted average share
outstanding 7,378,199 7,378,199
=========== ===========
</TABLE>
-2-
<PAGE> 3
FAIRCOM INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
(UNAUDITED) 1997
----------- -----------
<S> <C> <C>
ASSETS $ 524,181 $ 535,312
Current assets:
Cash and cash equivalents
Accounts receivable, less allowance
of $32,000 for possible losses in
1998 and 1997 1,086,206 1,358,002
Prepaid expenses 59,048 25,918
----------- -----------
Total current assets 1,669,435 1,919,232
----------- -----------
Property and equipment, at cost 7,786,383 7,564,705
Less accumulated depreciation and
amortization (5,487,232) (5,408,461)
----------- -----------
Property and equipment, net 2,299,151 2,156,244
----------- -----------
Intangible assets, net of accumulated
amortization of $891,472 in 1998 and
$784,790 in 1997 8,605,826 7,701,341
Other assets:
Deferred financing costs 841,563 837,411
Escow deposit for purchase of radio stations 0 100,000
Other 469,584 296,326
----------- -----------
9,916,973 8,935,078
----------- -----------
$13,885,559 $13,010,554
=========== ===========
LIABILITIES AND CAPITAL DEFICIT
- -------------------------------
Current liabilities:
Accounts payable $ 102,386 $ 87,280
Accrued expenses and liabilities 354,950 163,805
Taxes payable 88,623 70,150
Current portion of interest payable 104,433 108,391
Current portion of long-term debt 460,012 430,005
----------- -----------
Total current liabilities 1,110,404 859,631
Long-term debt, less current portion 22,886,652 21,911,661
Interest payable, less current portion 552,434 353,063
Deferred rental income 59,485 67,987
----------- -----------
Total liabilities 24,608,975 23,102,342
----------- -----------
Capital deficit:
Common stock-$.01 par value, 35,000,000
shares authorized; 7,378,199 shares
issued and outstanding 73,782 73,782
Additional paid-in capital 2,605,813 2,605,813
Deficit (13,403,011) (12,861,383)
----------- -----------
Total capital deficit (10,723,416) (10,181,788)
----------- -----------
$13,885,559 $13,010,554
=========== ===========
</TABLE>
-3-
<PAGE> 4
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (541,628) $ (207,751)
----------- ----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 290,548 78,625
Amortization of deferred
rental income (8,502) (8,502)
Increase (decrease) in caah flows
from changes in operating
assets and liabilities, net of effects
of purchase of radio station:
Account receivable 271,796 383,039
Prepaid expenses (33,130) (47,869)
Other assets 1,325 0
Account payable 15,106 (8,695)
Accrued expenses and
liabilities 191,145 (6,124)
Taxes payable 18,473 11,318
Interest payable 195,413 (16,972)
----------- ----------
Total adjustments 942,174 384,820
----------- ----------
Net cash provided by
operating activities $ 400,546 $ 177,069
----------- ----------
</TABLE>
-4-
<PAGE> 5
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------
March 31, 1998 March 31, 1997
-------------- --------------
<S> <C> <C>
Cash flows from investing activities:
Assets related to purchase of radio station $ (1,205,000) $ 0
Capital expenditures (46,898) (10,256)
Acquisition of intangible assets (180,946) 0
Escrow deposits for purchase of radio stations 100,000 (400,000)
------------- ------------
Net cash used in
investing activities (1,332,844) (410,256)
------------- ------------
Cash flows from financing activities:
Payments for deferred financing costs (83,831) (52,618)
Principal payments on long-term
debt (95,002) (138,000)
Principal payments under capital
lease obligations 0 (3,547)
Proceeds from aecured note payable 0 400,000
Proceeds from subordinated note payable 1,100,000 0
------------- ------------
Net cash provided by
financing activities 921,167 205,835
------------- ------------
Net decrease in cash and cash
equivalents (11,131) (27,352)
Cash and cash equivalents,
beginning of period 535,312 123,221
------------- ------------
Cash and cash equivalents,
end of period $ 524,181 $ 95,869
============= ============
</TABLE>
-5-
<PAGE> 6
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not include
all the information and footnotes required by generally accepted accounting
principles for completed financial statements. In the opinion of management, the
statements include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. The results of operations for any interim period are not necessarily
indicative of the results for a full year.
It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, as filed with the Commission.
2. Net Loss Per Common Share
The effects of the assumed conversion of the Company's
Convertible Subordinated Promissory Notes and the Company's Subordinated Senior
Convertible Note and the assumed exercise of outstanding options were not
dilutive and, accordingly, have been excluded from the diluted per share
calculations for the three months ended March 31, 1998 and March 31, 1997.
-6-
<PAGE> 7
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 March 31, 1998 compared to the three months ended March 31, 1997 are not
comparable or necessarily indicative of results in the future due to the
significance of acquisitions.
As of June 30, 1997, the Company, 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. The 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 Consolidated
Statements of Operations from their respective acquisition dates. The operating
results of the Shelby Station, as so included in such Consolidated Statements of
Operations for the three months ended March 31, 1998, were not material.
The increase in the Company's net broadcasting revenues in the
three months ended March 31, 1998 as compared with the same period in 1997
resulted principally from the ownership and operation of the Mansfield Stations
during the 1998 period. Net broadcasting revenues increased to $1,465,000 from
$904,000, or 62.0%, in the 1998 period as compared with the 1997 period.
Programming and technical expenses and selling, general and
administrative expenses increased in the three months ended March 31, 1998 as
compared with the same 1997 period, principally as a result of the acquisition
of the Mansfield Stations. Such increases were to $448,000 from $294,000, or
52.6%, and to $651,000 from $436,000, or 49.1%, respectively.
Operating expenses before depreciation, amortization and
corporate expenses consequently increased in the three months ended March 31,
1998 as compared with the comparable period in 1997, primarily as a result of
the acquisition of the Mansfield Stations. Such increase was to $1,099,000 from
$730,000, or 50.5%, in the 1998 period as compared with the same period in 1997.
Net broadcasting revenues in excess of operating expenses
before depreciation, amortization and corporate expenses ("broadcast cash flow")
increased 110.5% to $366,000 in the three months ended March 31, 1998 from
$174,000 in the same period in 1997. This increase resulted from the acquisition
of the Mansfield Stations as described above, offset somewhat by slightly lower
broadcast cash flow from the Company's radio stations in Flint, Michigan.
-7-
<PAGE> 8
Depreciation and amortization and interest expense increased
in the three months ended March 31, 1998, as compared with the same period in
1997, as a result of the addition of assets and debt incurred in connection with
the acquisition of the Mansfield Stations and the Shelby Station.
As a result principally of higher depreciation and
amortization and interest expense in the three months ended March 31, 1998,
offset in part by higher broadcast cash flow, net loss was $542,000 for the
period in 1998 compared to net loss of $208,000 in the comparable 1997 period.
LIQUIDITY AND CAPITAL RESOURCES
In the three months ended March 31, 1998, net cash provided by
operating activities was $401,000 compared with $177,000 provided by operating
activities in the three months ended March 31, 1997. Net decrease in cash and
cash equivalents was $11,000 in the 1998 period compared with a net decrease of
$27,000 in the comparable 1997 period.
Historically, the Company's net cash provided by operating
activities is lower in its first and second quarters, and the Company expects
such net cash to increase for the balance of 1998.
In January 1998, Faircom Mansfield purchased substantially all
of the assets and operations of radio station WSWR-FM in Shelby, Ohio for
$1,125,000 in cash. The acquisition was financed with internal funds and a loan
to the Company of $1,100,000. The loan is in the form of a subordinated note,
matures on the first to occur of April 1, 1999 or the closing of the merger with
Regent Communications, Inc. ("Regent"), discussed below, and bears accrued
interest at 14% per annum, payable at maturity.
Based upon current interest rates, and assuming the merger
with Regent is not consummated, the Company believes its interest payments for
the balance of 1998 will be approximately $909,000. Scheduled debt principal
payments are $335,000. Corporate expenses and capital expenditures for the
remainder of 1998 are estimated to be approximately $296,000 and $153,000,
respectively. The Company expects to be able to meet such interest expense, debt
repayment, corporate expenses and capital expenditures, aggregating $1,693,000,
from net cash provided by operations and current cash balances. For the years
1999 through 2001, currently scheduled debt principal payments average $685,000
yearly. Interest payments, corporate expenses and capital expenditures are
expected to be approximately the same as projected for 1998, adjusted for
inflation. The Company expects to be able to meet such cash requirements from
net cash provided by operations and cash balances. The Company believes its
$1,100,000 loan maturing April 1, 1999, and the balance of its long-term debt in
the amount of $19,858,000, maturing July 1, 2002, will be refinanced at their
respective maturity dates either from its current lenders or from other sources,
if still outstanding.
-8-
<PAGE> 9
The terms of the Securities Purchase Agreement applicable to
the Company's Convertible Subordinated Promissory Class A and Class B Notes (the
"Notes"), as amended, provide that if the Company does not, on or before April
1, 1999, consummate a merger of the Company with another corporation on terms
acceptable to the holders of the Notes, then upon notice from such holders, the
Company shall take all action necessary to liquidate the Company and each of its
subsidiaries on terms and conditions acceptable to such holders, such approval
not to be unreasonably withheld. As indicated below, the Company expects to
complete a merger with Regent in the second quarter of 1998. If, however, such
merger should not occur, the Company believes there are a number of alternatives
available to it which would be acceptable to the holders of the Notes.
On December 5, 1997, the Company announced that it had signed
an agreement to merge with Regent, another group radio broadcaster. The Company
anticipates a closing of the merger in the second quarter of 1998. The closing
of the merger is subject to satisfaction of the conditions of the merger
agreement and the approval of the Company's stockholders. The Company estimates
the fees and expenses of this transaction, for which the Company is responsible,
to be approximately $543,000. Of this amount, approximately $233,000 is payable
only if the merger is consummated. Of the balance of $310,000, the Company
expects to pay such fees and expenses from net cash provided by operations and
current cash balances, and, with respect to the amount payable on consummation
of the merger, from current cash balances at the time of the closing of the
merger.
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 costs of operating radio properties, and changes
-9-
<PAGE> 10
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.
-10-
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
All other items of this Part are inapplicable.
-11-
<PAGE> 12
SIGNATURE
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 thereunto duly authorized.
FAIRCOM INC.
(Registrant)
/s/ Joel M. Fairman
-----------------------
Joel M. Fairman
Chairman of the Board
President and Treasurer
(Principal Executive Officer
and Chief Financial Officer)
Date: May 14, 1998
-12-
<PAGE> 13
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] DEC-31-1998
[PERIOD-END] MAR-31-1998
[CASH] 524,181
[SECURITIES] 0
[RECEIVABLES] 1,118,206
[ALLOWANCES] 32,000
[INVENTORY] 0
[CURRENT-ASSETS] 1,669,435
[PP&E] 7,786,383
[DEPRECIATION] 5,487,232
[TOTAL-ASSETS] 13,885,559
[CURRENT-LIABILITIES] 1,110,404
[BONDS] 22,886,652
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 73,782
[OTHER-SE] (10,797,198)
[TOTAL-LIABILITY-AND-EQUITY] 13,885,559
[SALES] 0
[TOTAL-REVENUES] 1,613,205
[CGS] 0
[TOTAL-COSTS] 596,406
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 503,770
[INCOME-PRETAX] (529,628)
[INCOME-TAX] 12,000
[INCOME-CONTINUING] (541,628)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (541,628)
[EPS-PRIMARY] (.07)
[EPS-DILUTED] (.07)
</TABLE>
