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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTON 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-27053
USARadio.com, Inc.
(Exact name of small business issuer as specified in its
charter)
DELAWARE 52-2234827
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2290 Springlake Road, Suite 107, Dallas, Texas 75234
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 972.484.3900
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Former name, former address and former fiscal year, if changed
since last report: N/A
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Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At November 10, 2000, 13,516,720 shares of common stock were
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes [ ] No [X]
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PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
USARadio.com, Inc.
Balance Sheets as of September 30, 2000 (unaudited)
and December 31, 1999.........................................2
Unaudited Statements of Operations for the Three
Months Ended September 30, 2000 and 1999......................3
Unaudited Statements of Operations for the Nine Months
Ended September 30, 2000 and 1999.............................4
Unaudited Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999.............................5
Notes to Financial Statements...................................6
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USARadio.com, Inc.
BALANCE SHEETS
ASSETS
September 30, December 31,
CURRENT ASSETS 2000 1999
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(unaudited)
Cash................................ $ 50,184 $ 9,225
Accounts receivable, net of
allowance for doubtful accounts
of $5,475 and $11,909 in 2000
and 1999......................... 405,561 611,598
Prepaid expenses.................... 34,900 45,639
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Total current assets.......... 490,645 666,462
PROPERTY AND EQUIPMENT-AT COST
Equipment........................... 619,956 570,699
Furniture and fixtures.............. 18,952 18,952
Software............................ 23,906 23,906
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662,814 613,557
Less accumulated depreciation....... (481,615) (434,826)
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181,199 178,731
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$ 671,844 $ 845,193
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LIABILITIES AND STOCKHOLDERS'
DEFICIT
September 30, December 31,
CURRENT LIABILITIES 2000 1999
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Current maturities of long-term debt $ 22,312 $ 34,461
Notes payable-bank.................. 125,000 125,000
Accounts payable and accrued
liabilities....................... 637,927 695,477
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Total current liabilities... 785,239 854,938
LONG-TERM DEBT, net of current
maturities........................ 207,305 139,651
STOCKHOLDERS' DEFICIT
Common stock........................ 2,673 2,673
Additional paid-in capital.......... 211,327 211,327
Retained earnings (accumulated
deficit)......................... (534,700) (363,396)
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Stockholders' deficit............... (320,700) (149,396)
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$ 671,844 $ 845,193
=========== ==========
See accompanying notes.
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USARadio.com, Inc.
STATEMENTS OF OPERATIONS
Three months ended September 30,
(unaudited)
2000 1999
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NET SALES.......................... $ 797,822 $ 927,819
OPERATING EXPENSES
Sales expenses................... 227,844 234,680
Programming and news service..... 250,483 333,227
Administrative and engineering... 369,226 457,015
Depreciation..................... 16,724 17,426
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864,277 1,042,348
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Operating loss............ (66,455) (114,529)
OTHER EXPENSE
Interest expense................. (10,107) (14,151)
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Loss before income taxes. (76,562) (128,680)
INCOME TAX
Income tax benefit............... - 14,417
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Net loss................. $ (76,562) $ (114,263)
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LOSS PER COMMON SHARE-BASIC AND
DILUTED.......................... $ (0.01) $ (0.01)
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WEIGHTED AVERAGE SHARES OUTSTANDING. 13,516,720 13,516,720
========== ==========
See accompanying notes.
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USARadio.com, Inc.
STATEMENTS OF OPERATIONS
Nine months ended September 30,
(unaudited)
2000 1999
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NET SALES............................ $ 2,705,688 $ 2,693,975
OPERATING EXPENSES
Sales expenses..................... 684,914 681,026
Programming and news service....... 842,532 1,002,555
Administrative and engineering..... 1,271,319 1,308,495
Depreciation....................... 48,585 49,570
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2,847,350 3,041,646
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Operating loss............. (141,662) (347,671)
OTHER EXPENSE
Interest expense................... (29,642) (40,626)
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Loss before income taxes... (171,304) (388,297)
INCOME TAX
Income tax benefit................. - 44,955
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Net loss................... $ (171,304) $ (343,342)
=========== ============
LOSS PER COMMON SHARE-BASIC AND
DILUTED............................ $ (0.01) $ (0.03)
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WEIGHTED AVERAGE SHARES OUTSTANDING... 13,516,720 13,516,720
=========== ============
See accompanying notes.
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USARadio.com, Inc.
STATEMENTS OF CASH FLOWS
Nine months ended September 30,
(unaudited)
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)............................. $ (171,304) $ (343,342)
Adjustments to reconcile net loss to net
net cash provided by operating
activities
Depreciation and amortization........ 48,585 49,570
Provision for deferred income taxes.. - (44,955)
Changes in operating assets and
liabilities
Accounts receivable................... 206,037 (37,837)
Prepaid expenses...................... 10,739 4,075
Accounts payable and accrued
liabilities.......................... (57,550) 336,139
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES.............. 36,507 (36,350)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment... (3,334) (89,770)
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NET CASH USED IN
INVESTING ACTIVITIES.............. (3,334) (89,770)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes................... 42,000 144,000
Payments on notes..................... (34,214) (40,870)
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NET CASH PROVIDED BY
FINANCING ACTIVITIES.............. 7,786 103,130
NET INCREASE (DECREASE) IN CASH.... 40,959 (22,990)
CASH-BEGINNING OF PERIOD................. 9,225 30,226
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CASH-END OF PERIOD....................... $ 50,184 $ 7,236
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See accompanying notes.
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USARadio.com, Inc.
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
1. Basis of presentation
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Item 310 of Regulation S-B.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the
three or nine months ended September 30, 2000 are not
necessarily indicative of the results that might be expected
for the year ending December 31, 2000. For further information,
refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-KSB for
the year ended December 31, 1999.
2. The Company intends to file an Amended Quarterly Report on
Form 10-QSB, for the quarterly periods ended June 30, 2000 and
March 31, 2000, and an Amended Annual Report on Form 10-KSB,
for the year ended December 31, 1999 to reflect the proper
matching of selling expenses with the related revenue during
the periods covered thereby. The statement of operations for
the three months ended September 30, 1999, the statement of
operations for the nine months ended September 30, 1999 and the
balance sheet at December 31, 1999 included herewith have been
adjusted to reflect such proper matching of selling expense with
the related revenue resulting in an increase in net loss for the
three months ended September 30, 1999 of $3,800, a decrease in
net loss for the nine months ended September 30, 1999 of $1,100
and a increase in accumulated deficit at December 31, 1999 of
$64,200 from the respective amounts previously reported for such
periods and at such date.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Except for the historical information contained herein, the
matters discussed below contain forward-looking statements which
involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements
of the company, or industry results, to be materially different
from any future results, performance or achievements expressed or
implied by such forward-looking statements. The company expressly
disclaims any obligation to update this information or publicly
release any revision or reflect events or circumstances after the
date of this report. Such factors include among others: our
ability to obtain additional capital to implement our business
plan; our history of losses and negative cash flow; our
dependence on the continued demand for radio airtime; our
potential inability to manage our airtime inventory; our
dependence on the continued popularity of our programs,
particularly "Point of View;" the need to maintain and expand our
affiliate base; business conditions in the radio industry
generally; the impact of market competitors; and such other
factors as are more fully described in our Form 10-KSB for the
year ended December 31, 1999.
The Company
USARadio.com, Inc. (also known as USA Radio Network) is a
Delaware corporation with principal executive offices located at
2290 Springlake Road, Suite 107, Dallas, Texas 75234. The
company's telephone number is 972.484.3900.
Overview
USARadio.com, Inc. is a satellite-delivered radio broadcast
network that offers a broad line of programming content to
independent radio stations. Our programming includes news,
sports, music, and general interest talk programs. Our target
market consists of independent radio stations, both AM and FM,
that choose not to become affiliated with the 3 major radio
networks (ABC Radio, NBC, and CBS Radio Networks). As of November
10, 2000, our network was comprised of approximately 1,300
affiliated radio stations across the nation, including affiliates
in 49 of the top 50 Dominant Market Areas (DMAs). Our network
includes affiliates in markets that represent approximately 95%
of the U.S. population. We simultaneously broadcast select
programming over the Internet.
We do not derive revenues from the sale of our programs to
affiliate stations. Instead, we barter with our affiliated radio
stations for commercial airtime which is exchanged for our
programming content. This commercial airtime is then resold to
advertisers with whom we have relationships. We derive additional
revenue, although to a much lesser extent, from the sale of our
programming to non-commercial radio stations and the rental of
time on our channels. We price our advertising time based on a
variety of factors including the time of day the advertisement
will air, the size of the potential listening audience, the
length of the ad and the number of times the advertisement will
run. Our revenues are recognized in the accounting period which
corresponds with the broadcast of the advertisement. Amounts
received in advance of a broadcast are recorded as deferred
revenue until the broadcast is aired. Our advertisers and
advertising agencies are generally billed monthly.
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For the three months and nine months ended September 30,
2000, respectively, the following percentage of our revenues were
derived from the following sources:
% of Revenues % of Revenues
During Three During Nine
Months Ended Months Ended
Revenue Source September 30, 2000 September 30, 2000
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News and sports
programming....... 65%
65%
Talk programming.... 23% 23%
Satellite time...... 5% 5%
Other revenue....... 7% 7%
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TOTAL..... 100% 100%
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Other revenue is derived from a fee charged to non-
commercial radio stations unable to air commercial advertising
and a fee charged for syndicating services of select network
programming.
Our expenses are comprised of:
* sales expenses, which consists primarily of compensation
and related expenses for our sales and marketing group,
together with commission expense, including commissions
payable to sales staff;
* programming costs, which consists primarily of
compensation and related expenses for "on air"
personalities, production staff and related personnel as
well as the actual costs associated with developing
programming content;
* news services, which consists primarily of the variable
costs of independent reporters and operational expenses
including subscription fees to news services and
satellite time;
* administrative and engineering, which consists primarily
of compensation and related expenses for our
administrative, accounting and engineering staff,
occupancy costs and legal and consulting fees; and
* depreciation.
Three Months Ended September 30, 2000 Compared to Three Months
Ended September 30, 1999
Revenues. Our revenues decreased by approximately 14% to
approximately $798,000 for the three months ended September 30,
2000 from $928,000 for the three months ended September 30, 1999.
This decrease was primarily related to a decrease in commercial
airtime sold as a result of the elimination of one talk-style
program.
Operating Expenses. Overall operating expenses decreased by
approximately $178,000, or approximately 17%, to $864,000 for
the three months ended September 30, 2000 from approximately
$1,042,000 for the comparable period of 1999. This decrease
resulted primarily from a decrease in administrative and engineering
expense of approximately $88,000 (approximately 19%) resulting
from decreases in compensation and related expense associated
with the reduction of employees, and a decrease in programming
and news service expense of approximately $83,000 (approximately
25%) stemming from the elimination of one talk-style program.
Income Tax Benefit. No income tax benefit was recorded for
the three months ended September 30, 2000, because, at that
date, realization of deferred tax assets is dependent on future
taxable income which is uncertain.
Net Loss. For the three months ended September 30, 2000,
our net loss was approximately $77,000 compared with a net loss
of approximately $114,000 for the three months ended September
30, 1999.
Nine Months Ended September 30, 2000 Compared to Nine Months
Ended September 30, 1999
Revenues. Our revenues increased approximately to
$2,706,000 for the nine months ended September 30, 2000 from
$2,694,000 for the nine months ended September 30, 1999. This
increase in revenue was primarily related to an increase in the
rate at which we sell our commercial airtime. This increase took
effect in the third
-8-
quarter of 1999. In addition, revenues were positively affected
by a slight increase in our available inventory of commercial
spots which occurred as a result of additional programming added
in February 2000. This increase was slightly offset by a
decrease in revenue resulting from a decrease in commercial
airtime sold as a result of the elimination of a talk-style
program.
Operating Expenses. Overall operating expenses decreased
by approximately $194,000, or approximately 6% to approximately
$2,847,000 for the nine months ended September 30, 2000 from
approximately $3,042,000 for the comparable period of 1999. This
decrease resulted primarily from a decrease in administrative and
engineering expenses of approximately $37,000 (approximately 3%)
resulting from decreases in compensation and related expense
associated with a reduction of employees, and a decrease in
programming and news service expense of approximately $160,000
(approximately 16%) stemming from the elimination of one talk-
style program expenses.
Income Tax Benefit. No income tax benefit was recorded for
the nine months ended September 30, 2000, because, at that date,
realization of deferred tax assets is dependent on future taxable
income which is uncertain.
Net Loss. For the nine months ended September 30, 2000, our
net loss was approximately $171,000 compared with a net loss of
approximately $343,000 for the nine months ended September 30,
1999.
Liquidity and Capital Resources
Since inception, we have financed our operations principally
internally. Such funds have historically been supplemented with
bank debt and stockholder loans. At September 30, 2000, we had a
working capital deficit of approximately $295,000 as compared
with a working capital deficit of approximately $188,000 at
December 31, 1999. Net cash provided by operating activities for
the nine months ended September 30, 2000 was approximately
$37,000 and net cash used in operating activities for the like
period of 1999 was approximately $36,000 representing an
increase of approximately $73,000 in the 2000 period. The increase
was due principally to a reduction of the net loss and the timing
of payments to vendors and collection of receivables.
As of September 30, 2000, certain of our vendors had granted
extended payment terms to us relating to an aggregate of
approximately $215,000 in payables. At December 31, 1999, we owed
approximately $250,000 under extended payment terms. Although we
expect that we will be able to remain current with each of these
vendors, including with respect to those portions for which we
have been granted extended payment terms, no assurances can be
made that we will be able to fulfill our obligations under these
terms. Failure to repay our obligations to these vendors
according to the arranged terms could have a material adverse
effect on our business, prospects, financial condition or results
of operations.
During the year ended December 31, 1999, Marlin Maddoux, our
Chief Executive Officer and President, advanced $80,000 to us. At
September 30, 2000, the outstanding amount of this advance was
$53,767. This advance bears interest at 10% per annum with a
maturity date of September 1, 2004. These funds were used by us
to acquire certain equipment and technology necessary in
connection with the upgrade of our command and control center.
Specifically, this equipment upgraded our satellite transmission
technology from analog to digital.
Mr. Marlin Maddoux also has advanced a total of $118,057 to
us as of September 30, 2000. This advance includes an advance of
$27,000 made to us by Mr. Marlin Maddoux in August. This
advance bears interest at 12% per annum, with a maturity date of
June 1, 2001. These funds were used by us for operating and
advertising expenses.
We maintain a credit facility with Bank of America. This
credit line is payable upon demand and borrowings are limited to
$100,000. Borrowings under this facility bear interest at prime
plus 1%, which was 10.50% at September 30, 2000. At September
30, 2000, our outstanding debt under the credit facility was
approximately $88,000. The borrowings under this credit facility
are collateralized by our assets. We intend to pursue increasing
our line of credit with Bank of America during the remainder of
the year 2000.
In addition to the line of credit referenced above, we also
maintain an additional bank line with Bank of America. Borrowings
under this bank line are limited to $40,000 and bear interest at
prime plus 3.625% (which was approximately 12.125% at September
30, 2000). Borrowings under this bank line are also payable on
demand. At September 30, 2000, our outstanding debt under this
facility was approximately $37,000.
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Management believes that its available cash, together with
operating revenues and other available funds, will be adequate to
meet its operating requirements for the immediate term.
We are currently in the process of seeking additional
financing through the issuance of debt, equity, other securities
or a combination thereof. Although there can be no assurances
that any additional capital will be raised, any such financing
which involves the issuance of equity securities would result in
dilution to existing stockholders and the issuance of debt
securities would subject us to the risks associated therewith,
including the risks that interest rates may fluctuate and our
cash flows may be insufficient to pay interest and principal on
such indebtedness. There can be no assurances that we will be
able to obtain additional financing on terms which are acceptable
to us. Our inability to obtain additional acceptable financing
could have a significant negative impact on our operations or
growth plans.
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PART II.
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to, nor are our properties the subject
of, any pending legal proceedings and no such proceedings are
known to us to be threatened or contemplated against us.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on form 8-K
None
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SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on November 20, 2000.
USARadio.com, Inc.
By: /s/ Mark R. Maddoux
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Mark R. Maddoux
Vice President and Chief
Financial Officer
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EXHIBIT INDEX
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No. Description
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27.1 Financial Data Schedule
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