SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 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): March 31, 1997
REDWOOD BROADCASTING, INC.
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(Exact name of registrant as specified in its charter)
Colorado 33-00321 84-0928022
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(State or other juris- (Commission file (IRS Employer
diction of incorporation number) Identification No.)
or organization)
P.O. Box 3463, 7518 Elbow Bend Rd., Bldg. A, Suite I, Carefree, Arizona 85377
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 488-2596
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(Former name or former address, if changed since last report)
ITEM 2: ACQUISITION AND DISPOSITION OF ASSETS
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DISPOSITION OF ASSETS
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On March 31, 1997, having obtained the approval of the Federal
Communications Commission ("FCC"), Redwood Broadcasting, Inc. (the "Company")
consummated the sale of substantially all of the assets owned and utilized in
connection with radio stations KHSL-FM and KNSN-AM.
The sale of the radio stations was effected through two separate but
concurrent transactions: the sale of a 1947 back-up transmitter and broadcast
tower system used in the operation of Station KNSN-AM to Pacific FM, Inc., a
California corporation ("Pacific FM"), and the sale of the remaining tangible
and intangible assets utilized in connection with both radio stations to McCoy
Broadcasting Company ("McCoy").
In consideration of the assets of radio stations KNSN-AM and KHSL-FM,
McCoy paid to the Company a total consideration of $833,000, of which $633,000
was paid in cash at closing. The balance of $200,000 was evidenced by McCoy's
promissory note issued to the Company which, together with interest at the
rate of 7% per annum, is payable in quarterly installments of $3,500 each,
with the total outstanding balance of principal and unpaid interest due on
March 31, 1999. The obligations of McCoy under the Promissory Note are
secured by a Security Agreement and Financing Statement covering the assets of
KHSL-FM and KNSN-AM, excluding the applicable FCC licenses.
In the concurrent closing, Pacific FM purchased the transmitter and tower
system for a total purchase price of $633,000, of which $10,000 was paid at
closing, subject to the following adjustments: if the balance of the purchase
price is paid on or before April 30, 1997, the balance due is $633,000; if the
balance of the purchase price is not paid on or before April 30, 1997, then on
April 30, 1997 an additional $10,000 payment shall be due and the purchase
price shall be increased to $650,000. Thereafter the purchase price of
$650,000 is due on or before the last day of each successive month provided
that Pacific FM may extend the due date for an additional period of one month
by the payment to the Company of $10,000 for each such one-month extension
period, until August 31, 1997. If the balance of the purchase price is not
paid on or before August 31, 1997, Pacific FM shall be obligated to pay the
Company an additional extension fee of $15,000 for each month or fraction of a
month between August 31, 1997 and the date the balance of the purchase price
is paid in full.
Prior to the foregoing transactions, there existed no material
relationship or affiliation between the Company, or its affiliates, on the one
hand, or either Pacific FM or McCoy, or their respective affiliates, on the
other.
ACQUISITION OF ASSETS
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Effective April 1, 1997, the Company acquired from Power Surge, Inc., a
Delaware corporation ("Power Surge") an option to purchase radio broadcast
stations KNRO-AM, Redding, California, and KARZ-FM, Burney, California (the
"Power Surge Stations"). Under the terms of the Option, the Company can
purchase the Power Surge Stations at any time for a period of six (6) months,
or until September 30, 1997 ("Option Period"), for a purchase price of
$1,200,000. If the Company elects to exercise its option to purchase the
Power Surge Stations, it can pay the purchase price either in cash at closing
or through the issuance of 1,000,000 shares of its common stock, valued at
$1.20 per share.
Power Surge is a controlled corporation of John C. Power, the Company's
President, Director and principal shareholder through his affiliation with
Redwood Microcap Fund, Inc. ("Microcap"). The Power Surge Stations were
purchased by Mr. Power through another controlled corporation, Power Curve,
Inc. ("Power Curve"), from non-affiliated third parties on January 31, 1997.
Power Curve purchased the Power Surge Stations for a total purchase price of
$1,200,000, the same as the option price granted to the Company by Power
Surge. Under the terms of the acquisition, Power Curve paid to the seller of
the Power Surge Stations $480,000 in cash at closing and executed a 10-year
promissory note in the principal amount of $720,000. The promissory note
issued to the Seller by Power Curve, Inc. is secured by other assets and
securities owned by Power Curve.
Power Curve transferred the Power Surge Stations to Power Surge effective
March 31, 1997 in order to facilitate the Option being granted to the Company
more fully described herein.
The Company's ability to exercise the Option to purchase the Power Surge
Stations is subject to FCC approval and other customary conditions to closing.
Effective April 1, 1997, Power Surge and the Company entered into a Time
Brokerage Agreement (Local Management Agreement) ("LMA") pursuant to which
during the Option Period the Company will provide programming for the Power
Surge Stations in conformity with rules and policies of the FCC. Under the
terms of the LMA, the Company will pay Power Surge an LMA fee of $5,000 per
month. Further, under the terms of the LMA, the Company will be responsible
for operating the Power Surge Stations and will effectively bear the economic
risk and benefit of owning the Power Surge Stations during the LMA and Option
Period. Power Surge shall be responsible for maintaining in effect the FCC
licenses covering the Power Surge Stations.
When the Company's management learned of the opportunity to purchase the
Power Surge Stations, it recognized that those stations represented a
potential opportunity for the company. However, at the time the Company
lacked sufficient working capital to take advantage of the opportunity. In
order to preserve that opportunity on behalf of the Company, Mr. Power through
Power Curve purchased the Power Surge Stations with the intent to give the
Company the opportunity to acquire the Power Surge Stations at a later date
when it had the capital necessary to do so. Through Power Surge, Mr. Power
has made available to the Company the opportunity to acquire the Power Surge
Stations upon terms no less favorable than the terms upon which Mr. Power
initially acquired those assets through Power Curve in January 1997.
ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS
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a. FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
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Pursuant to Item 7(a)(4) of Form 8-K, the Company represents that it
is impracticable to provide the required financial statements for
the Power Surge Stations at the time this Report on Form 8-K is
filed and undertakes to file such required financial statements as
an amendment to this Form as soon as practicable, but not later than
60 days after this Report on Form 8-K must be filed with the
Commission.
b. PROFORMA FINANCIAL INFORMATION
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(1) Filed herewith are the Company's Proforma Balance Sheet as of
December 31, 1996 (unaudited) and the Company's Proforma
Statement of Operations for the Nine Months Ended December 31,
1996 and December 31, 1995 (unaudited) giving effect to the
sale of broadcast radio stations KHSL-FM and KNSN-AM.
(2) Pursuant to Item 7(b) of Form 8-K, the Company represents that
it is impracticable to provide the required proforma financial
information for the Power Surge Stations at the time this
Report on Form 8-K is filed and undertakes to file such
required proforma financial information as an amendment to this
Form as soon as practicable, but not later than 60 days after
this Report on Form 8-K must be filed with the Commission.
c. EXHIBITS
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Exhibit No. Title
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10.1 KNSN-AN and KHSL-FM Asset Purchase Agreement dated March 12,
1996, incorporated by reference from the Company's Registration
Statement on Form SB-2, Registration No. 33-080321, as filed
with the Commission on February 13, 1997
10.2 Amendment to Asset Purchase Agreement with Pacific FM, Inc.
dated March 28, 1997
10.3 Time Brokerage Agreement (Local Management Agreement) dated
April 1, 1997
10.4 Option Agreement
REDWOOD BROADCASTING, INC.
PRO FORMA BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
PRO FORMA PRO FORMA
(RBI) ADJUSTMENTS COMBINED
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ASSETS
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Current assets:
Cash $ 21,902 $ -- $ 21,902
Accounts Receivable,
net of allowance for
doubtful accounts 96,279 -- 96,279
Other 181,862 -- 181,862
__________ __________ __________
Total current assets $ 300,043 $ -- $ 300,043
Property and equipment,
net of accumulated
depreciation $1,311,207 $ (213,308) (1) $ 1,097,899
License,
net of accumulated
amortization 464,583 (464,583) (1) --
Notes receivable -- 833,000 (1) 833,000
Other assets 314,196 -- 314,196
__________ __________ __________
Total Assets $2,390,029 $ 155,109 $ 2,545,138
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LIABILITIES
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Current liabilities:
Accounts payable and
accrued expenses $ 287,205 -- (1) $ 287,205
Notes payable,
current portion 1,004,850 (633,000) (1) 371,850
Common stock subject to
mandatory redemption 304,512 -- 304,512
Accounts payable,
related parties 382,820 -- 382,820
Unearned income,
current portion 21,700 -- 21,700
__________ __________ __________
Total current
liabilities $2,001,087 $ (633,000) $ 1,368,087
Notes payable,
net of current
portion 657,193 -- 657,193
__________ __________ __________
Total liabilities $2,658,280 $ -- $ 2,025,280
__________ __________ __________
Stockholders' Equity:
Common stock 3,452 -- 3,452
Additional paid-in
capital 661,793 -- 661,793
Retained earnings,
accumulated
(deficit) (933,496) 788,109 (1) (145,387)
__________ __________ __________
Total Stockholders'
Equity (Deficit) $ (268,251) $ 788,109 $ 519,858
Total Liabilities and
Stockholders' Equity
(Deficit) $2,390,027 $ 155,109 $ 2,545,138
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The accompanying notes are an integral part of the financial statements.
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
PRO-FORMA
STATEMENTS OF OPERATIONS
DECEMBER 31, 1996
(UNAUDITED)
NINE MONTHS ENDED DECEMBER 31,
1996 1995
(UNAUDITED) (UNAUDITED)
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Total Revenues $ 293,993 $ 566,587
Less agency commission 22,955 38,766
___________ ___________
Net Revenues $ 271,038 $ 527,821
Operating Expenses:
Station operating expenses,
excluding depreciation
and amortization $ 450,348 $ 681,688
Depreciation and amortization 69,036 --
Corporate general and
administrative expenses 37,976 69,056
___________ ___________
Total operating expenses $ 557,360 $ 750,744
Operating (loss) (286,322) (222,923)
Other expense
Other expense $ 32,155 --
Interest expense 82,795 17,529
___________ ___________
Total other expense $ 114,950 $ 17,529
Net (loss) $ (401,272) $ (240,452)
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Net (loss) per share (0.47) (0.40)
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Weighted average shares outstanding 861,758 600,088
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SEE ACCOMPANYING NOTES.
REDWOOD BROADCASTING, INC.
and CONSOLIDATED SUBSIDIARIES
PRO-FORMA
STATEMENTS OF OPERATIONS
December 31, 1996
(Unaudited)
RBI KHSL RBI-PRO RBI KHSL RBI-PRO
Nine Nine Nine Nine Nine Nine
Months Months Months Months Months Months
Ended Ended Ended Ended Ended Ended
12/31/96 12/31/96 12/31/96 12/31/95 12/31/95 12/31/95
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Total Revenues 293,993 (27,233) 266,760 566,587 (555,029) 11,558
Less Agency
Commissions 22,955 -- 22,955 38,766 (38,766) --
___________ __________ __________ __________ __________ __________
Net Revenues 271,038 (27,233) 243,805 527,821 (516,263) 11,558
Operating Expenses
Station Operating
Expenses,
Excluding
Depreciation
and Amortization 450,348 (96,071) 354,277 681,688 (613,923) 67,765
Depreciation and
Amortization 69,036 -- 69,036 -- - 69,056
Corporate General and
Administrative
Expenses 37,976 -- 37,976 69,056 - 69,056
___________ __________ __________ __________ __________ __________
Total Operating Expenses 557,360 (96,071) 461,289 750,744 (613,923) 136,821
Operating Loss (286,322) 68,838 (217,484) (222,923) 97,660 (125,263)
Other Expense
Other Expense 32,155 (77,584) (45,429) - -- --
Interest Expense 82,795 (1,236) 81,559 17,529 -- 17,529
___________ __________ __________ __________ __________ __________
Total Other Expense 114,950 (78,820) 36,130 17,529 - 17,529
Net Loss (401,272) 147,658 (253,614) (240,452) 97,660 (142,792)
Net Loss Per Share $ (0.47) $ 0.17 $ (0.29) $ (0.40) $ 0.16 $ (0.24)
Weighted Average
Shares Outstanding 861,758 861,785 861,758 600,088 600,008 600,008
REDWOOD BROADCASTING, INC.
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(1) GENERAL
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On March 31, 1997, the Company sold radio stations KHSL-AM/FM for
$633,000 in cash and a promissory note in the principal amount of $200,000.
Concurrently, the Company sold certain other assets for $633,000 payable in
future installments. Effective April 1, 1997, the Company acquired an option
to purchase KNRO-AM and KARZ-FM for a purchase price of $1,200,000 (Power
Surge Stations). During the option period, the stations will be operated by
the Company under a Time Brokerage Agreement (Broker Management Agreement).
The Company pro forma balance sheet as of December 3, 1996 gives effect
to the sale of KHSL and the proposed purchase of the Power Surge Stations as
of the transactions had been consummated on December 31, 1996. The Company
pro forma statement of operations for the nine-month ended December 31, 1996
and December 31, 1995 give effect to the sale of KHSL and the purchase of the
Power Surge Stations as if the transactions had been consummated on April 1,
1996.
The unaudited pro forma financial statements should be read in
conjunction with the history financial statements of the Company. The
unaudited pro forma financial statements do not purport to be indicative of
the financial position of the Company had the transactions occurred on
December 31, 1996. Nor do the unaudited pro forma statements of operations
purport to be indicative of the results of operations that actually would have
occurred had the transactions occurred on April 1, 1996, or to project the
Company's financial position or results of operations for any future period.
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 hereunto duly authorized.
REDWOOD BROADCASTING, INC.
Date: 4/14/97 By: /s/ John C. Power
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John C. Power