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Usaradio Com Inc – ‘8-K’ for 12/21/99

On:  Friday, 4/7/00   ·   As of:  4/10/00   ·   For:  12/21/99   ·   Accession #:  909143-0-76   ·   File #:  0-27053

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 4/10/00  Usaradio Com Inc                  8-K:2,4,7,812/21/99    3:89K                                    Andrews & Kurth LLP/FA

Current Report   —   Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                      HTML     78K 
 2: EX-2.1      Plan of Acquisition, Reorganization, Arrangement,   HTML     11K 
                          Liquidation or Succession                              
 3: EX-16.1     Letter re: Change in Certifying Accountant          HTML      6K 


8-K   —   Current Report


This is an HTML Document rendered as filed.  [ Alternative Formats ]



  UNITED STATES  

UNITED STATES
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) December 21, 1999

USA Radio.com, Inc. (fka Ansel Project, Inc.)
(Exact name of Registrant as specified in charter)

Colorado
(State or other jurisdiction
of incorporation)

0-27053
(Commission
File Number)

84-1493151
(I.R.S. Employer
Identification)

 

2290 Springlake Road, Suite 107, Dallas, TX
(Address of principal executive offices)

75234
(Zip Code)

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


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.

 

Page

Report of Independent Certified Public Accountants

F-1

Independent Auditors' Report

F-2

Balance Sheets as of December 31, 1999 and 1998

F-3

Statements of Operations for the Years
Ended December 31, 1999 and 1998

F-4

Statements of Stockholders' Equity (Deficit)
for the Years Ended December 31, 1999 and 1998

F-5

Statements of Cash Flows for the Years
Ended December 31, 1999 and 1998

F-6


Notes to Financial Statements

F-7

(b)

Pro forma financial information is not required, as the transaction described in item 2 was a reverse acquisition under applicable accounting literature.

(c)

Exhibits

   

2.1

Agreement and Plan of Merger, dated as of November 5, 1999, between Ansel Project, Inc. and USARadio.com, Inc.

16.1

Letter from Cordavano and Harvey, P.C. regarding Change in Certifying Accountants.

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.


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

 

USA Radio.com, Inc.
(fka Ansel Project, Inc.)

 
   
 

By:  /s/  Mark Maddoux                   
     Mark Maddoux, Vice President

 


 

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


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


USARadio.com, Inc.

BALANCE SHEETS

December 31,

ASSETS

    1999    

    1998    

     

CURRENT ASSETS

   

  Cash

$     9,225 

$   30,226 

  Accounts receivable, net of allowance for doubtful
   doubtful accounts of $11,909 in 1999 and 1998


488,621 


435,577 

  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 

     

STOCKHOLDERS' EQUITY (DEFICIT)

   

  Common stock

2,673 

29,000 

  Additional paid-in capital

211,327 

-  

  Retained earnings (accumulated deficit)

(299,196)

 156,686 

              Total stockholders' equity (deficit)

  (85,196)

 185,686 

 

$ 845,193 
======== 

$ 790,221 
======= 

F-3


USARadio.com, Inc.

STATEMENTS OF OPERATIONS

Years ended December 31,

 

     1999   

     1998    

REVENUE

   

  Spot sales, net

$3,174,050 

$2,822,938 

  Satellite time

210,541 

255,308 

  News services

127,653 

456,508 

  Syndication

   180,000 

   180,000 

 

3,692,244 

3,714,754 

     

OPERATING EXPENSES

   

  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)

     

OTHER INCOME (EXPENSE)

   

  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


USARadio.com, Inc.

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

 

 



      Common Stock      
      Shares 
     Amount 



Additional  
paid-in capital

Retained    
earnings    
(accumulated   
     deficit)     




    Total    

 

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,
    Inc. (a Texas corporation),
   accounted for as a
    recapitalization (Note A)




10,616,720




(26,327)




26,327




-  




-  

           

Net loss

             - 

       -  

         -  

(455,882)

(455,882)

           

Balances at December 31, 1999

13,516,720
=========

$ 2,673 
======

$  211,327 
=========

$ (299,196)
=========

$  (85,196)
========

F-5


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:
  Interest paid


$   54,774 
======== 


$   22,813 
======== 

     

Noncash investing and financing activities:
  Acquisition of equipment financed by debt


$   80,000 
======== 


$          -  
========= 

F-6


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


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


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:

   
     
 

           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.





$  21,178  





$  58,007  

     

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.



88,000  



57,000  

     

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.



37,000  



32,000  

F-9


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.


$   76,877


$          -  

     

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
December 31,

 
 

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, 
Inc., formerly   
Ansel Project, Inc.

USARadio.com, 
Inc., formerly  
U.S.A. Radio,   
   Network, Inc.  

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


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


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               
             December 31,              

 
 
 

      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
December 31,

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


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


 

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


Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘8-K’ Filing    Date    Other Filings
12/31/0010KSB,  10KSB/A
Filed as of:4/10/00
Filed on:4/7/00
4/6/00
3/1/00
2/14/00
12/31/9910KSB,  10KSB/A,  5,  NT 10-K
For Period End:12/21/99
11/5/993,  3/A
4/30/99
1/29/99
12/31/98
4/8/98
1/1/98
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