UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) December 21, 1999
USA Radio.com, Inc. (fka Ansel Project, Inc.)
(Exact name of Registrant as specified in charter)
|
Colorado |
0-27053 |
84-1493151 |
|
2290 Springlake Road, Suite 107, Dallas, TX |
75234 |
Registrant's telephone number, including area code: (972) 484-3900
7899 West Frost Drive, Littleton, CO 80128
(Former name or former address, if changed, since last report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 21, 1999, Ansel Project, Inc., a Colorado corporation ("Ansel Project"), acquired USARadio.com, a Texas corporation ("USARadio.com (Texas)") pursuant to an Agreement and Plan of Merger between Ansel Project and USARadio.com Texas. Ansel Project was the surviving entity in the merger and in connection with the merger Ansel project changed its name to USA Radio.com, Inc. Pursuant to the terms of the merger, each issued and outstanding share of USA
<PAGE>
the USA Radio Network Trust and as the President of Ansel Project (now USA Radio.com, Inc.) Mr. Robert Marlin Maddoux also served as the President of USA Radio.com (Texas.)
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
In December, 1999, our board of directors approved a change in the company's independent auditors. Previously, the independent auditing firm of Cordovano and Harvey, P.C. had issued reports covering the period from inception (April 8, 1998) to April 30, 1999 on Ansel Project, Inc. None of the reports of Cordovano and Harvey, P.C. on the financial statements of Ansel Project contained any adverse opinion or disclaimer of opinion, or was qualified or modified as
We retained the accounting firm of Grant Thornton LLP to serve as our independent accountants to audit our financial statements beginning with the year ended December 31, 1999. This engagement was effective February 14, 2000. Prior to its engagement as our independent auditors, Grant Thornton LLP had not been consulted by us either with respect to the application of accounting principles to a specific transaction or the type of audit opinion that might be rende
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
The following financial statements and notes thereto are filed herewith beginning at page F-1.
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Page |
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Report of Independent Certified Public Accountants |
F-1 |
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Independent Auditors' Report |
F-2 |
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Balance Sheets as of December 31, 1999 and 1998 |
F-3 |
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Statements of Operations for the Years |
F-4 |
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Statements of Stockholders' Equity (Deficit) |
F-5 |
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Statements of Cash Flows for the Years |
F-6 |
<PAGE>
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Notes to Financial Statements |
F-7 |
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(b) |
Pro forma financial information is not required, as the transaction described in item 2 was a reverse acquisition under applicable accounting literature. |
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(c) |
Exhibits |
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2.1 |
Agreement and Plan of Merger, dated as of November 5, 1999, between Ansel Project, Inc. and USARadio.com, Inc. |
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16.1 |
Letter from Cordavano and Harvey, P.C. regarding Change in Certifying Accountants. |
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ITEM 8. CHANGE IN FISCAL YEAR
In connection with the merger of Ansel Project and USA Radio.com (Texas), Ansel Project adopted the fiscal year end of USA Radio.com, which is December 31.
<PAGE>
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.
Date: April 6, 2000
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USA Radio.com, Inc. |
|
|
By: /s/ Mark Maddoux |
|
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
USARadio.com, Inc.
We have audited the accompanying balance sheet of USARadio.com, Inc. as of December 31, 1999, and the related statements of operations, changes in stockholders' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of USARadio.com, Inc. as of December 31, 1999, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
GRANT THORNTON LLP
Dallas, Texas
March 1, 2000
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders
of USARadio.com, Inc.
Dallas, Texas
We have audited the accompanying balance sheet of USARadio.com, Inc., formerly U.S.A. Radio Network, Inc., as of December 31, 1998, and the related statements of operations, stockholders' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of USARadio.com, Inc. as of December 31, 1998, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
BARRY MORGAN & COMPANY, P.C.
Dallas, Texas
January 29, 1999
F-2
<PAGE>
USARadio.com, Inc.
BALANCE SHEETS
December 31,
|
ASSETS |
1999 |
1998 |
|
CURRENT ASSETS |
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|
Cash |
$ 9,225 |
$ 30,226 |
|
Accounts receivable, net of allowance for doubtful |
|
|
|
Accounts receivable-related party |
122,977 |
137,738 |
|
Prepaid expenses |
45,639 |
43,800 |
|
Total current assets |
666,462 |
647,341 |
|
PROPERTY AND EQUIPMENT - AT COST |
||
|
Equipment |
580,749 |
487,854 |
|
Furniture and fixtures |
8,902 |
6,904 |
|
Software |
23,906 |
23,906 |
|
613,557 |
518,664 |
|
|
Less accumulated depreciation |
(434,826 ) |
(375,784 ) |
|
178,731 |
142,880 |
|
|
$ 845,193 |
$ 790,221 |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |
||
|
CURRENT LIABILITIES |
||
|
Current maturities of long-term debt |
$ 34,461 |
$ 38,798 |
|
Notes payable |
125,000 |
137,057 |
|
Accounts payable |
527,261 |
245,502 |
|
Accrued liabilities |
104,016 |
104,469 |
|
Deferred income taxes |
- |
59,500 |
|
Total current liabilities |
790,738 |
585,326 |
|
LONG-TERM DEBT, net of current maturities |
139,651 |
19,209 |
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STOCKHOLDERS' EQUITY (DEFICIT) |
||
|
Common stock |
2,673 |
29,000 |
|
Additional paid-in capital |
211,327 |
- |
|
Retained earnings (accumulated deficit) |
(299,196 ) |
156,686 |
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Total stockholders' equity (deficit) |
(85,196 ) |
185,686 |
|
$ 845,193 |
$ 790,221 |
F-3
<PAGE>
USARadio.com, Inc.
STATEMENTS OF OPERATIONS
Years ended December 31,
|
1999 |
1998 |
|
|
REVENUE |
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Spot sales, net |
$3,174,050 |
$2,822,938 |
|
Satellite time |
210,541 |
255,308 |
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News services |
127,653 |
456,508 |
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Syndication |
180,000 |
180,000 |
|
3,692,244 |
3,714,754 |
|
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OPERATING EXPENSES |
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Sales expenses |
892,469 |
967,070 |
|
Programming and news services |
1,300,227 |
1,358,545 |
|
Administrative and engineering |
1,716,114 |
1,531,896 |
|
Depreciation |
59,042 |
47,012 |
|
3,967,852 |
3,904,523 |
|
|
Operating loss |
(275,608) |
(189,769) |
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OTHER INCOME (EXPENSE) |
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Interest income |
- |
110 |
|
Interest expense |
(54,774) |
(22,813) |
|
Cost of merger |
(185,000) |
- |
|
Gain on sale of assets |
- |
19,814 |
|
(239,774 ) |
(2,889 ) |
|
|
Loss before income taxes |
(515,382) |
(192,658) |
|
INCOME TAXES |
||
|
Income tax benefit |
59,500 |
64,500 |
|
59,500 |
64,500 |
|
|
Net loss |
$ (455,882) |
$ (128,158) |
|
LOSS PER COMMON SHARE - BASIC AND DILUTED |
$(.03) |
$(.01) |
|
WEIGHTED AVERAGE SHARES OUTSTANDING |
13,516,720 |
13,516,720 |
F-4
<PAGE>
USARadio.com, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
|
|
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Retained |
|
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Balances at January 1, 1998 |
2,900,000 |
$ 29,000 |
$ - |
$ 284,844 |
$ 313,844 |
|
Net loss |
- |
- |
- |
(128,158 ) |
(128,158 ) |
|
Balances at December 31, 1998 |
2,900,000 |
29,000 |
- |
156,686 |
185,686 |
|
Contribution of capital |
- |
- |
185,000 |
- |
185,000 |
|
Merger with USARadio.com, |
|
|
|
|
|
|
Net loss |
- |
- |
- |
(455,882 ) |
(455,882 ) |
|
Balances at December 31, 1999 |
13,516,720 |
$ 2,673 |
$ 211,327 |
$ (299,196) |
$ (85,196) |
F-5
<PAGE>
USARadio.com, Inc.
STATEMENTS OF CASH FLOWS
Years ended December 31,
|
1999 |
1998 |
|
|
CASH FLOWS FROM OPERATING ACTIVITIES |
||
|
Net loss |
$(455,882) |
$(128,158) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
||
|
Depreciation |
59,042 |
47,012 |
|
Provision for doubtful accounts |
- |
(67,585) |
|
Deferred income taxes |
(59,500) |
(64,500) |
|
Gain on disposal of assets |
- |
(19,814) |
|
Merger costs paid by stockholder |
185,000 |
- |
|
Changes in operating assets and liabilities |
||
|
Accounts receivable |
(53,044) |
130,062 |
|
Federal income tax receivable |
14,761 |
(18,442) |
|
Prepaid expenses |
- |
2,400 |
|
Accounts payable |
(1,839) |
(15,221) |
|
Accrued liabilities |
281,759 |
100,730 |
|
(453 ) |
30,364 |
|
|
Net cash used in operating activities |
(30,156) |
(3,152) |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
||
|
Proceeds from sale of property and equipment |
- |
20,000 |
|
Purchases of property and equipment |
(14,893 ) |
(23,135 ) |
|
Net cash used in investing activities |
(14,893) |
(3,135) |
|
CASH FLOWS FROM FINANCING ACTIVITIES |
||
|
Proceeds from issuance of notes payable |
64,000 |
109,000 |
|
Payments on notes payable |
(39,952 ) |
(89,018 ) |
|
Net cash provided by financing activities |
24,048 |
19,982 |
|
Net increase (decrease) in cash |
(21,001) |
13,695 |
|
Cash at beginning of year |
30,226 |
16,531 |
|
Cash at end of year |
$ 9,225 |
$ 30,226 |
|
Supplemental cash flow information: |
|
|
|
Noncash investing and financing activities: |
|
|
F-6
<PAGE>
USARadio.com, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND BASIS OF PRESENTATION
Nature of Business
USARadio.com, Inc. (the Company) is a radio broadcast network that provides news and programming via satellite to radio stations throughout the United States. The Company sells national advertising to corporate brands and direct response advertisers and programming to non-commercial radio stations that do not carry the Company's advertising. The Company also receives revenue for the rental of time on its satellite channels.
Reorganization
On November 5, 1999, the Registrant, formerly known as Ansel Project, Inc. (Ansel), entered into a merger agreement with USARadio.com, Inc., formerly U.S.A. Radio Network, Inc. (Old USA). Pursuant to the agreement, (i) the sole stockholder of Old USA acquired 850,000 shares of Ansel's common stock for $185,000 and (ii) Ansel issued 4.2368 shares of its common stock in exchange for each of the 2,900,000 outstanding shares of Old USA. At the conclusion of the merger, which was effective December 21, 1999, the former stockholder of Old USA owned 13,136,720 shares of the 13,516,720 total outstanding shares of Ansel. Ansel then changed its name to USARadio.com, Inc. Ansel had no operations and insignificant assets at the date of merger.
The merger was accounted for as a recapitalization of Old USA. Accordingly, the accompanying financial statements for periods prior to December 21, 1999, are those of Old USA. The consideration paid by the stockholder of Old USA in the amount of $185,000 has been reflected in the accompanying financial statements as contributed capital and has been charged to expense as a cost of the recapitalization.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using the straight-line method over expected useful lives of five to seven years.
Revenue Recognition
Spot sales revenue is recognized in the accounting period which corresponds with the broadcast of the advertisement. Net revenues represent gross spot sales less direct commissions paid to independent advertising agencies. Amounts received as advance payment of a broadcast are recorded as deferred revenue until the broadcast is aired.
F-7
<PAGE>
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.
Credit Risk
The Company sells commercial airtime to advertisers and advertising agencies and sells satellite time and syndication services to radio stations located throughout the United States. Credit is extended based on an evaluation of each customers financial condition, credit standing and previous history with the Company. Credit losses are provided for as deemed necessary.
Income Taxes
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.
Loss Per Share
Basic and diluted loss per common share are based upon the weighted average number of shares of common stock outstanding, giving retroactive effect to the merger discussed in Note A.
Reclassification
Certain prior year amounts have been reclassified to conform to the current year presentation.
NOTE C - RELATED PARTY TRANSACTIONS
The Company sells satellite time and syndication services to a not-for-profit organization, International Christian Media (ICM). From time to time, the Company and ICM incur expenses on behalf of the other which are subsequently reimbursed by the appropriate party. The Company's primary stockholder is a trust with directors in common with the board of trustees of ICM.
F-8
<PAGE>
NOTE C - RELATED PARTY TRANSACTIONS - Continued
A summary of the transactions with ICM is as follows:
|
Years ended |
||
|
December 31, |
||
|
1999 |
1998 |
|
|
Syndication fees and sale of satellite time to ICM |
$234,000 |
$234,000 |
|
Net expenses paid by the Company and billed to ICM |
32,485 |
_ 9,620 |
|
$266,845 |
$243,620 |
|
|
December 31, |
||
|
1999 |
1998 |
|
|
Accounts receivable from ICM |
$122,977 |
$137,738 |
|
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT |
||
|
Notes payable and long-term debt consist of the following: |
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|
December 31, |
||
|
1999 |
1998 |
|
|
Note payable to bank, interest at 10%, payable in monthly installments of $3,233 including interest, maturing in September 2000; secured by substantially all assets of the Company and is guaranteed by a stockholder of the Company and affiliates of the stockholder. |
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|
|
Line of credit of $100,000 to a bank, interest at bank's prime rate plus 1% (9.5% at December 31, 1999) payable monthly, due upon demand; secured by substantially all assets of the Company. |
|
|
|
Line of credit of $40,000 to bank, interest at bank's reference rate plus 3.625% (10.875% at December 31, 1999) payable monthly, due upon demand. |
|
|
F-9
<PAGE>
NOTE D - NOTES PAYABLE AND LONG-TERM DEBT - Continued
|
December 31, |
||
|
1999 |
1998 |
|
|
Advance from a related party, interest at 10%, payable in monthly installments of $1,703 through September 2004; secured by equipment. |
|
|
|
Advance from a related party, interest at 12%, due June 2001. |
76,057 |
48,057 |
|
299,112 |
195,064 |
|
|
Less current maturities |
159,461 |
175,855 |
|
$ 139,651 |
$ 19,209 |
|
Aggregate maturities of notes payable and long-term debt at December 31, 1999 are as follows:
|
Year ending |
|
|
2000 |
$ 159,461 |
|
2001 |
90,746 |
|
2002 |
16,242 |
|
2003 |
17,960 |
|
2004 |
14,703 |
|
$ 299,112 |
NOTE E - COMMON STOCK
As discussed in Note A, the Company entered into a merger agreement effective December 21, 1999. The merger has been accounted for as a reverse acquisition. Common stock at December 31, 1999 and 1998 was as follows:
|
1999 |
1998 |
|
|
|
USARadio.com, |
|
|
Shares authorized |
20,000,000 |
4,000,000 |
|
Par value per share |
no par |
$.01 |
|
Shares issued and outstanding |
13,516,720 |
2,900,000 |
|
Aggregate value |
$2,673 |
$29,000 |
F-10
<PAGE>
NOTE F - INCOME TAXES
The income tax benefit reconciled to the tax computed at the statutory Federal rate is as follows:
|
Years ended |
||
|
December 31, |
||
|
1999 |
1998 |
|
|
Federal tax benefit at statutory rate |
$(175,230) |
$(65,504) |
|
Nondeductible expenses |
63,292 |
1,004 |
|
Other |
14,892 |
|
|
Change in valuation allowance |
37,546 |
- |
|
$ (59,500) |
$(64,500) |
|
|
Deferred tax assets and liabilities consist of the following: |
||
|
December 31, |
||
|
1999 |
1998 |
|
|
Deferred tax assets |
||
|
Net operating loss carryforwards |
$ 90,905 |
$ 60,609 |
|
Accounts payable |
214,634 |
121,594 |
|
Deferred tax liabilities |
||
|
Accounts receivable |
(238,414) |
(225,255) |
|
Prepaid expenses |
(15,517) |
- |
|
Property and equipment |
(14,062 ) |
(16,448 ) |
|
37,546 |
(59,500) |
|
|
Less valuation allowance |
(37,546 ) |
- |
|
Net deferred tax liability |
$ - |
$ (59,500) |
At December 31, 1999, the Company had net operating loss carryforwards of approximately $267,000 available to offset future taxable income which expire at various dates through 2019. Future tax benefits, such as net operating loss carryforwards, are recognized to the extent that realization of such benefits are more likely than not.
F-11
<PAGE>
NOTE G - COMMITMENTS
The Company leases office space under an operating lease that expires in June 2001. The Company has subleased a portion of these facilities to ICM and others. The net rent expense for these facilities was $131,428 and $104,610 for 1999 and 1998, respectively.
Future minimum rental payments and sublease rental income under these facility lease agreements are as follows:
|
Years ending |
|||
|
2000 |
2001 |
Total |
|
|
Minimum rentals |
$ 288,624 |
$ 144,312 |
$ 432,936 |
|
Less sublease rental income |
(128,498 ) |
(53,112 ) |
(181,610 ) |
|
Net rental expense |
$ 160,126 |
$ 91,200 |
$ 251,326 |
The Company also leases satellite audio transmission services under various agreements which expire through March 2005. Total rent expense for these leases was $416,209 and $423,397 for 1999 and 1998, respectively.
The following is a schedule of minimum rentals due under these satellite agreements:
|
Year ending |
|
|
2000 |
$ 289,041 |
|
2001 |
187,518 |
|
2002 |
169,055 |
|
2003 |
165,660 |
|
2004 |
165,660 |
|
Thereafter |
27,610 |
|
$1,004,544 |
The Company also contracts for news and wire services under short-term agreements.
NOTE H - FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's financial instruments are based on carrying value for short-term items and, in the case of notes payable and long-term debt, incremental borrowing rates currently available on loans with similar terms and maturities. The carrying amounts of the Company's cash, accounts receivable, accounts payable, notes payable and long-term debt approximate fair value.
F-12
<PAGE>
NOTE I - LIQUIDITY MATTERS
The Company had losses in 1998 and 1999, and current liabilities exceeded current assets by $124,276 at December 31, 1999. To improve operations and liquidity, the Company has implemented various measures, including cost reduction programs. Although the effect of the measures is not assured, the Company believes that its liquidity will be sufficient to meet its operating requirements through December 31, 2000.
F-13
<PAGE>
EXHIBITS
|
Exhibit No. |
Description |
|
2.1 |
Agreement and Plan of Merger, dated November 5, 1999, by and between Ansel Project, Inc., a Colorado corporation, and USARadio.com, Inc., a Texas corporation |
|
16.1 |
Letter from Cordavano and Henry, P.C. Re Change in Certifying Accountant |
