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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 March 31, 2001
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
Former name, former address and former fiscal year, if changed
since last report: N/A
--------------
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 May 15, 2001, 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 March 31, 2001 (unaudited) and
December 31, 2000...................................... 2
Unaudited Statements of Operations for the Three Months
Ended March 31, 2001 and 2000.......................... 3
Unaudited Statements of Cash Flows for the Three Months
Ended March 31, 2001 and 2000.......................... 4
Notes to Financial Statements........................... 5
1
USARadio.com, Inc.
BALANCE SHEETS
ASSETS
March 31, December 31,
2001 2000
------------ ------------
CURRENT ASSETS (unaudited)
Cash $ -- $ 17,120
Accounts receivable, net of
allowance for doubtful
accounts of $52,788 in 2001
and 2000 395,474 470,308
Prepaid expenses 31,604 20,867
-------- --------
Total current assets 427,078 508,295
PROPERTY AND EQUIPMENT - AT COST
Equipment 574,033 574,033
Automobiles 47,718 47,718
Furniture and fixtures 20,984 18,952
Software 23,906 23,906
--------- ---------
666,641 664,609
Less accumulated depreciation (516,065) (498,545)
--------- ---------
150,576 166,064
--------- ---------
$ 577,654 $ 674,359
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, December 31,
2001 2000
------------- ------------
CURRENT LIABILITIES
Bank overdraft $ 6,375 $ --
Current maturities of long-
term debt 20,108 22,083
Notes payable-bank 125,000 125,000
Accounts payable and accrued
liabilities 604,167 581,458
--------- --------
Total current liabilities 755,650 728,541
LONG-TERM DEBT, net of current
maturities 198,573 202,128
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock 2,673 2,673
Additional paid-in capital 211,327 211,327
Accumulated deficit (590,569) (470,310)
--------- ---------
(376,569) (256,310)
--------- ---------
$ 577,654 $ 674,359
========= =========
See accompanying notes.
2
USARadio.com, Inc.
STATEMENTS OF OPERATIONS
Three months ended March 31,
(unaudited)
2001 2000
------------ -------------
NET SALES $ 813,067 $ 872,190
OPERATING EXPENSES
Sales expenses 242,791 212,370
Programming and news service 268,694 267,204
Administrative and engineering 393,296 402,689
Depreciation 17,521 15,135
----------- -----------
922,302 897,398
----------- -----------
Operating loss (109,235) (25,208)
OTHER EXPENSE
Interest expense (11,024) (15,336)
----------- -----------
Net loss $ (120,259) $ (40,544)
=========== ===========
LOSS PER COMMON SHARE - BASIC AND
DILUTED $ 0.01 $ Nil
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 13,516,720 13,516,720
=========== ===========
See accompanying notes.
3
USARadio.com, Inc.
STATEMENTS OF CASH FLOWS
Three months ended March 31,
(unaudited)
2001 2000
------------ -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (120,259) $ (40,544)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities
Depreciation and amortization 17,521 15,135
Changes in operating assets and liabilities:
Accounts receivable 74,834 151,812
Prepaid expenses (10,737) 4,700
Accounts payable and accrued liabilities 22,709 (90,909)
---------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (15,932) 40,194
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (2,033) (3,334)
---------- ---------
NET CASH USED IN INVESTING ACTIVITIES (2,033) (3,334)
CASH FLOWS FROM FINANCING ACTIVITIES
Bank overdraft 6,375 --
Payments on notes (5,530) (12,447)
---------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 845 (12,447)
NET INCREASE (DECREASE) IN CASH (17,120) 24,413
CASH - BEGINNING OF PERIOD 17,120 9,225
---------- ---------
CASH - END OF PERIOD $ -- $ 33,638
========== =========
See accompanying notes.
4
USARadio.com, Inc.
NOTES TO FINANCIAL STATEMENTS
March 31, 2001
1. Basis of presentation
The accompanying unaudited financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America 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 accounting principles generally accepted in
the United States of America for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered
necessary for a fair presentation have been included.
Operating results for the quarter ended March 31, 2001 are
not necessarily indicative of the results that may be
expected for the year ending December 31, 2001. 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, 2000.
5
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, 2000 .
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 May 15,
2001, our network was comprised of approximately 1,200 affiliated
radio stations across the nation, including affiliates in 46 of
the top 50 Dominant Market Areas (DMAs). Our network includes
affiliates in markets that represent approximately 92% 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.
For the quarter ended March 31, 2001, the following
percentage of our revenues were derived from the following
sources:
% of Revenues
During Quarter
Ended
Revenue Source March 31, 2001
------------------------ ----------------
News and sports
programming............ 72%
Talk programming........ 20%
Satellite time.......... 5%
Other revenue........... 3%
TOTAL......... 100%
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.
6
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.
Revenues. Our revenues decreased by approximately 7% to
$813,000 for the three months ended March 31, 2001 from $872,000
for the three months ended March 31, 2000. This decrease in
revenue was primarily related to a decrease in the rate at which
we sell our commercial airtime.
Operating Expenses. Overall operating expenses increased by
approximately $25,000, or 3%, to approximately $922,000 for the
three months ended March 31, 2001 from approximately $897,000 for
the first three months of 2000. Approximately $31,000 of this
increase resulted from an increase in sales expenses due to an
increase in sales commissions paid resulting from adding two new
affiliate sales personnel. This increase was partially offset by
a decrease in administrative and engineering expense of
approximately $10,000 due to a reduction in compensation and
related expense associated with a reduction in employees.
Income Tax Benefit. No income tax benefit was recorded for
the three months ended March 31, 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 March 31, 2001, our
net loss was approximately $120,000 compared with a net loss of
approximately $41,000 for the three months ended March 31, 2000.
Liquidity and Capital Resources
Since inception, we have financed our business principally
from operations. Such funds have historically been supplemented
with bank debt and stockholder loans. At March 31, 2001, we had a
working capital deficit of approximately $329,000 as compared
with a working capital deficit of $221,000 at December 31, 2000.
Net cash used in operating activities for the quarter ended
March 31, 2001 was $16,000 and net cash provided by operating
activities for the like period of 2000 was $40,000 representing a
decrease of $56,000 in the 2001 period. The decrease was due
principally to the increase in net loss.
As of March 31, 2001, certain of our vendors had granted
extended payment terms to us relating to an aggregate of
approximately $165,000 in payables. At December 31, 2000, we owed
approximately $175,000 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. Management expects to be fully current with all of
its accounts payable by December 31, 2001.
During the year ended December 31, 1999, Marlin Maddoux, our
Chief Executive Officer and President, advanced $80,000 to us. At
March 31, 2001, the outstanding amount of this advance was
$60,039. 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.
7
Mr. Marlin Maddoux also has advanced an additional $118,057
to us as of March 31, 2001. This advance bears interest at 12%
per annum, with a maturity date of June 1, 2002. These funds were
used by us for operating and advertising expenses.
We also 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 9% at March 31, 2001. At
March 31, 2001, 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
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 11.625% at March 31,
2001). Borrowings under this bank line are also payable on
demand. At March 31, 2000, our outstanding debt under this
facility was approximately $37,000.
Management believes that operating revenues and other
available funds will be adequate to meet its operating
requirements for the immediate term.
During 2001, we intend to seek additional financing through
the issuance of debt, equity, other securities or a contribution
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.
8
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
9
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 May 15, 2001.
USARadio.com, Inc.
By: /s/ Mark R. Maddoux
-------------------------------
Mark R. Maddoux
Vice President and Chief
Financial Officer
10