**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C.  20549**

 

**FORM 10-Q**

 
| **ý**                        |   | **Quarterly Report pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934**  |
|-----------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                              |   |                                                                                          |
|                              |   | **For  the Quarterly Period Ended June 30, 2003**                                             |
|                              |   |                                                                                          |
| **OR**                            |
|                              |   |                                                                                          |
| **o**                             |   | **Transition Report Pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934** |
|                              |   |                                                                                          |
| **Commission File No. 001-15151** |

 

**Radio UnicaCommunications Corp.**

(Exact name ofregistrant as specified in its charter)

 

| **Delaware**                                                                        |   | **65-0856900**                             |
|-------------------------------------------------------------------------------------|--------|--------------------------------------------|
| (State of  Incorporation)                                                           |   | (I.R.S. Employer    Identification Number) |
|                                                                                |   |                                       |
| **8400 N.W. 52nd Street,  Suite 101  Miami, FL**                                    |   | **33166**                                  |
| (Address of  principal executive offices)                                           |   | (Zip Code)                                 |
|                                                                                |   |                                       |
|                                                                                |   |                                       |
| **305-463-5000**                                                                    |
| (Registrant’s  telephone number, including area code)                          |
|                                                                                |   |                                       |
| **N/A**                                                                             |
| (Former name,  former address and former fiscal year, if changed since last report) |

 

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. YES ý        NOo

 

Indicate by checkmark whether the registrant is an accelerated filer (as defined in Exchange ActRule 12b-2) YES ý NO o

 

Indicate thenumber of shares outstanding of each of the issuer’s classes of common stock,as of the latest practicable date.

 

As of August 13,2003, 20,941,656 shares of Common Stock, $.01 par value were outstanding.

 

 

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**RADIOUNICA COMMUNICATIONS CORP.**

 

**TABLE OFCONTENTS**

 
| **PART I.**                                                                | **FINANCIAL INFORMATION** |
|----------------------------------------------------------------------------|---------------------------|
|                                                                       |
| Item 1.  Consolidated Financial Statements                            |
| Item 2.   Management’s Discussion and Analysis                   |
| Item  3.  Quantitative and Qualitative Disclosures  about Market Risk |
| Item 4.  Controls and Procedures                                      |
|                                                                       |
| **PART II.**                                                               | **OTHER INFORMATION**     |
|                                                                       |
| Item 1.  Legal Proceedings                                            |
| Item  4.  Submission of Matters to a Vote of  Security Holders        |
| Item 6.  Exhibits and Reports on Form 8-K                             |

 

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**RADIO UNICA COMMUNICATIONS CORP.******

 

**CONSOLIDATED BALANCE SHEETS******

 
|                                                                                                                     |   | **June 30,  2003** |        | **December 31,  2002** |       |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|------------------------|------------|
|                                                                                                                     |   | **(Unaudited)**    |        |                   |       |
| **ASSETS**                                                                                                               |   |               | ** **  |                   | ** ** |
| Current assets:                                                                                                          |   |               |        |                   |       |
| Cash and cash  equivalents                                                                                               |   | $                  | 12,963,577  |                   | $          | 11,054,978 |   |
| Accounts  receivable, net of allowance for doubtful accounts of $1,022,391 and  $1,148,228, respectively                 |   | 8,256,498          |        | 9,494,925              |       |
| Prepaid expenses  and other current assets                                                                               |   | 4,222,300          |        | 2,774,480              |       |
| Assets held for  sale                                                                                                    |   | —             |        | 2,925,554              |       |
| Total current  assets                                                                                                    |   | 25,442,375         |        | 26,249,937             |       |
|                                                                                                                     |   |               |        |                   |       |
| Property and  equipment, net                                                                                             |   | 21,927,423         |        | 23,071,043             |       |
| Broadcast  licenses, net of accumulated amortization of $10,336,623                                                      |   | 96,433,935         |        | 96,433,935             |       |
| Other intangible  assets, net                                                                                            |   | 8,404,017          |        | 8,971,849              |       |
| Other assets                                                                                                             |   | 524,009            |        | 437,085                |       |
|                                                                                                                     |   | $                  | 152,731,759 |                   | $          | 155,163,849 |   |
|                                                                                                                     |   |               |        |                   |       |
| **LIABILITIES  AND STOCKHOLDERS’ DEFICIT**                                                                          |   |               |        |                   |       |
| Current  liabilities:                                                                                                    |   |               |        |                   |       |
| Accounts payable                                                                                                         |   | $                  | 719,722     |                   | $          | 1,295,971 |   |
| Accrued expenses                                                                                                         |   | 2,686,870          |        | 2,905,277              |       |
| Interest payable                                                                                                         |   | 7,746,391          |        | 7,784,537              |       |
| Deferred revenue                                                                                                         |   | 445,553            |        | 608,218                |       |
| Current portion  of notes payable                                                                                        |   | 503,663            |        | 641,741                |       |
| Total current  liabilities                                                                                               |   | 12,102,199         |        | 13,235,744             |       |
|                                                                                                                     |   |               |        |                   |       |
| Other  liabilities                                                                                                       |   | 75,500             |        | 75,000                 |       |
| Notes payable                                                                                                            |   | —             |        | 500,810                |       |
| Deferred taxes                                                                                                           |   | 988,460            |        | 988,460                |       |
| Revolving credit  facility                                                                                               |   | 12,000,000         |        | —                 |       |
| Senior discount  notes                                                                                                   |   | 158,088,000        |        | 158,088,000            |       |
|                                                                                                                     |   |               |        |                   |       |
| Commitments and  contingencies                                                                                           |   |               |        |                   |       |
|                                                                                                                     |   |               |        |                   |       |
| Stockholders’  deficit:                                                                                             |   |               |        |                   |       |
| Preferred stock;  $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding                           |   | —             |        | —                 |       |
| Common stock;  $.01 par value; 40,000,000 shares authorized; 21,420,456 shares issued and  20,941,656 shares outstanding |   | 214,205            |        | 214,205                |       |
| Additional  paid-in capital                                                                                              |   | 161,562,206        |        | 161,562,206            |       |
| Treasury stock  at cost; 478,800 shares                                                                                  |   | (1,315,644         | )           | (1,315,644             | )     |
| Stockholders  notes receivable                                                                                           |   | (789,657           | )           | (789,657               | )     |
| Deferred  compensation expense                                                                                           |   | (31,282            | )           | (96,226                | )     |
| Accumulated  deficit                                                                                                     |   | (190,162,228       | )           | (177,299,049           | )     |
| Total  stockholders’ deficit                                                                                        |   | (30,522,400        | )           | (17,724,165            | )     |
|                                                                                                                     |   | $                  | 152,731,759 |                   | $          | 155,163,849 |   |

 

*Theaccompanying notes are an integral part of these consolidated financialstatements.*

 

2

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**RADIO UNICA COMMUNICATIONS CORP.**

 

**CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)******

 
|                                                                  |   | **Three months ended   June 30,** |       | **Six months ended  June 30,** |   |
|-----------------------------------------------------------------------|--------|-----------------------------------|------------|--------------------------------|--------|
|                                                                  |   | **2003**                          |       | **2002**                       |   | **2003** |   | **2002** |   |
|                                                                  |   |                              |       |                           |   |   |   |   |   |
| Net revenue                                                           |   | $                                 | 12,306,411 |                           | $      | 12,178,532 |   | $ | 21,903,805 |   | $ | 20,340,268 |   |
|                                                                  |   |                              |       |                           |   |   |   |   |   |
| Operating  expenses:                                                  |   |                              |       |                           |   |   |   |   |   |
| Direct operating  (exclusive of  depreciation shown seperately below) |   | 1,493,303                         |       | 1,302,953                      |   | 2,505,838 |   | 2,498,426 |   |
| Selling, general  and administrative                                  |   | 4,249,151                         |       | 4,397,813                      |   | 8,391,911 |   | 8,368,505 |   |
| Network (exclusive of depreciation shown seperately  below)           |   | 3,103,316                         |       | 3,712,702                      |   | 5,903,595 |   | 7,473,748 |   |
| Corporate                                                             |   | 1,000,626                         |       | 1,014,339                      |   | 1,963,495 |   | 1,939,611 |   |
| Cost of  promotion services                                           |   | 2,172,897                         |       | 1,478,502                      |   | 4,681,488 |   | 2,490,859 |   |
| Depreciation and  amortization                                        |   | 822,179                           |       | 752,700                        |   | 1,620,879 |   | 1,491,950 |   |
| Stock option  compensation                                            |   | 43,202                            |       | 151,321                        |   | 64,945 |   | 311,466 |   |
|                                                                  |   | 12,884,674                        |       | 12,810,330                     |   | 25,132,151 |   | 24,574,565 |   |
| Loss from  operations                                                 |   | (578,263                          | )          | (631,798                       | )      | (3,228,346 | ) | (4,234,297 | ) |
|                                                                  |   |                              |       |                           |   |   |   |   |   |
| Other income  (expense):                                              |   |                              |       |                           |   |   |   |   |   |
| Interest expense                                                      |   | (5,021,367                        | )          | (4,602,403                     | )      | (9,982,450 | ) | (9,115,868 | )  |
| Interest income                                                       |   | 58,259                            |       | 88,395                         |   | 97,694 |   | 193,644 |   |
| Other                                                                 |   | 7,003                             |       | (4,437                         | )      | 249,923 |   | (52,920 | )  |
|                                                                  |   | (4,956,105                        | )          | (4,518,445                     | )      | (9,634,833 | ) | (8,975,144 | )  |
| Loss before  income taxes                                             |   | (5,534,368                        | )          | (5,150,243                     | )      | (12,863,179 | ) | (13,209,441 | ) |
| Income tax  benefit                                                   |   | —                            |       | 39,018                         |   | — |   | 78,036 |   |
| Net loss                                                              |   | $                                 | (5,534,368 | )                              | $      | (5,111,225 | ) | $ | (12,863,179 | ) | $ | (13,131,405 | )  |
|                                                                  |   |                              |       |                           |   |   |   |   |   |
| Net loss per  common share - basic and diluted                        |   | $                                 | (0.26      | )                              | $      | (0.24 | ) | $ | (0.61 | ) | $ | (0.63 | )  |
|                                                                  |   |                              |       |                           |   |   |   |   |   |
| Weighted average  common shares outstanding - basic and diluted       |   | 20,941,656                        |       | 20,941,656                     |   | 20,941,656 |   | 20,941,656 |   |

 

*Theaccompanying notes are an integral part of these consolidated financialstatements.*

 

3

 

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**RADIO UNICACOMMUNICATIONS CORP.******

** **

**CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)******

 
|                                                                         |   | **Six months ended June 30,** |        |
|------------------------------------------------------------------------------|--------|-------------------------------|-------------|
|                                                                         |   | **2003**                      |        | **2002** |   |
|                                                                         |   |                          | ** **  |   | ** ** |
| **Operating  activities**                                                    |   |                          |        |   |   |
| Net loss                                                                     |   | $                             | (12,863,179 | ) | $ | (13,131,405 | )  |
| Adjustments to  reconcile net loss to net cash used in operating activities: |   |                          |        |   |   |
| Depreciation and  amortization                                               |   | 1,620,879                     |        | 1,491,950 |   |
| Provision for  bad debts                                                     |   | (126,013                      | )           | 31,939 |   |
| Accretion of  interest on senior discount notes                              |   | —                        |        | 8,691,171 |   |
| Amortization of  deferred financing costs                                    |   | 453,342                       |        | 319,962 |   |
| Stock option  compensation expense                                           |   | 64,945                        |        | 311,466 |   |
| Deferred income  taxes                                                       |   | —                        |        | (78,036 | )  |
| Gain on sale of  radio station assets                                        |   | (225,616                      | )           | — |   |
| Other                                                                        |   | (18,006                       | )           | (118,835 | )  |
| Changes in  assets and liabilities, net of effects of acquisitions:          |   |                          |        |   |   |
| Accounts  receivable                                                         |   | 1,364,440                     |        | (193,093 | )  |
| Prepaid expenses  and other current assets                                   |   | (1,395,346                    | )           | (260,428 | )  |
| Other assets                                                                 |   | (243,059                      | )           | (230,036 | )  |
| Accounts payable                                                             |   | (576,250                      | )           | (1,719,982 | )  |
| Accrued expenses                                                             |   | (258,407                      | )           | 385,721 |   |
| Interest payable                                                             |   | (38,146                       | )           | — |   |
| Deferred revenue                                                             |   | (144,659                      | )           | 107,442 |   |
| Other  liabilities                                                           |   | 500                           |        | 20,000 |   |
| Net cash used in  operating activities                                       |   | (12,384,575                   | )           | (4,372,164 | )  |
|                                                                         |   |                          |        |   |   |
| **Investing  activities**                                                    |   |                          |        |   |   |
| Acquisition of  property and equipment                                       |   | (479,664                      | )           | (2,157,440 | )  |
| Proceeds from  sale of radio station assets                                  |   | 3,411,726                     |        | — |   |
| Net cash  provided by (used in) investing activities                         |   | 2,932,062                     |        | (2,157,440 | )  |
|                                                                         |   |                          |        |   |   |
| **Financing  activities**                                                    |   |                          |        |   |   |
| Borrowings under  revolving credit facility                                  |   | 12,000,000                    |        | — |   |
| Repayment of  notes payable                                                  |   | (638,888                      | )           | (17,878 | )  |
| Deferred  financing costs                                                    |   | —                        |        | (828,307 | )  |
| Net cash  provided by (used in) financing activities                         |   | 11,361,112                    |        | (846,185 | )  |
|                                                                         |   |                          |        |   |   |
| Net increase  (decrease) in cash and cash equivalents                        |   | 1,908,599                     |        | (7,375,789 | )  |
| Cash and cash  equivalents at beginning of period                            |   | 11,054,978                    |        | 19,909,952 |   |
| Cash and cash  equivalents at end of period                                  |   | $                             | 12,963,577  |   | $ | 12,534,163 |   |

 

*Theaccompanying notes are an integral part of these consolidated financialstatements.*

 

4

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**RADIOUNICA COMMUNICATIONS CORP.**

 

**NOTESTO CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)**

 

**1.****                                      Basisof Presentation**

 

The accompanyingunaudited consolidated condensed financial statements of Radio UnicaCommunications Corp. and subsidiaries (the “Company”) for the periods indicatedherein have been prepared pursuant to the rules and regulations of the Securitiesand Exchange Commission and in accordance with generally accepted accountingprinciples (“GAAP”) for interim financial information.  Accordingly, the financial statements do notinclude all of the information and notes required by generally accepted accountingprinciples for complete financial statements. In the opinion of management, all adjustments (consisting of normalrecurring adjustments) considered necessary for a fair presentation have beenincluded.  Operating results for thethree and six months ended June 30, 2003 are not necessarily indicative of theresults that may be expected for the year ending December 31, 2003.  The consolidated condensed financialstatements include the accounts of the Company and all majority ownedsubsidiaries over which the Company has control.  All significant intercompany accounts and transactions have beeneliminated in consolidation.  Forfurther information, refer to the Company’s 2002 consolidated financialstatements and notes thereto.

 

The Company’srevenue and cash flows are typically lowest in the first calendar quarter.Seasonal fluctuations are common in the radio broadcasting industry and are dueprimarily to fluctuations in consumer spending.

 

**2.****                                      SegmentOperating Results**

 

Pursuant to theprovisions of Financial Accounting Standards Board (“FASB”) Statement ofFinancial Accounting Standards (“SFAS”) No. 131, “Disclosure About Segments ofa Business Enterprise and Related Information”, the Company is required toreport segment information. The Company classified its businesses into tworeporting segments: radio broadcasting and promotion services.  The radio broadcasting segment includes theoperations of the Company’s radio network, the operations of all owned and operatedradio stations and corporate expenses. The promotion services segment includes the operations of the Company’smarketing and promotions business.  TheCompany evaluates performance based on several factors, of which the primaryfinancial measures are business segment net revenue, operating income (loss)and earnings (loss) before interest, taxes, depreciation and amortization.(“EBITDA”). 

 

The Companyutilizes a financial measure that is not calculated in accordance with GAAP toassess its financial performance. A non-GAAP financial measure is defined as anumerical measure of a company’s financial performance that (i) excludesamounts, or is subject to adjustments that have the effect of excludingamounts, that are included in the comparable measure calculated and presentedin accordance with GAAP in the statement of income or statement of cash flows;or (ii) includes amounts, or is subject to adjustments that have the effect ofincluding amounts, that are excluded from the comparable measure so calculatedand presented. The Company believes that the presentation of EBITDA providesuseful information to investors regarding the Company’s financial conditionbecause it is a commonly used financial analysis tool for measuring andcomparing media companies. EBITDA should not be considered as an alternative tonet cash provided by (used in) operating activities as a measure of liquidity.This non-GAAP financial measure may not be comparable to similarly titledmeasures used by other companies. 

 

5

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Results by segment are asfollows:

 
|                     |   | **Three  months ended   June 30,** |       | **Six  months ended  June 30,** |       |
|--------------------------|--------|------------------------------------|------------|---------------------------------|------------|
|                     |   | **2003**                           |       | **2002**                        |       | **2003** |   | **2002** |   |
|                     |   | **(Unaudited)**                    | ** ** | **(Unaudited)**                 | ** ** |
| Net revenue              |   |                               |       |                            |       |   |   |   |   |
| Radio  broadcasting      |   | $                                  | 9,732,797  |                            | $          | 9,978,077 |   | $ | 16,571,620 |   | $ | 16,626,974 |   |
| Promotion  services      |   | 2,573,614                          |       | 2,200,455                       |       | 5,332,185 |   | 3,713,294 |   |
| Consolidated             |   | $                                  | 12,306,411 |                            | $          | 12,178,532 |   | $ | 21,903,805 |   | $ | 20,340,268 |   |
|                     |   |                               |       |                            |       |   |   |   |   |
| Operating  income (loss) |   |                               |       |                            |       |   |   |   |   |
| Radio  broadcasting      |   | $                                  | (644,858   | )                               | $          | (898,214 | ) | $ | (3,181,752 | ) | $ | (4,631,881 | ) |
| Promotion  services      |   | 66,595                             |       | 266,416                         |       | (46,594 | ) | 397,585 |   |
| Consolidated             |   | $                                  | (578,263   | )                               | $          | (631,798 | ) | $ | (3,228,346 | ) | $ | (4,234,296 | ) |
|                     |   |                               |       |                            |       |   |   |   |   |
| EBITDA                   |   |                               |       |                            |       |   |   |   |   |
| Radio  broadcasting      |   | $                                  | 120,467    |                            | $          | (199,302 | ) | $ | (1,437,633 | ) | $ | (3,298,253 | ) |
| Promotion  services      |   | 130,452                            |       | 315,767                         |       | 80,089 |   | 502,986 |   |
| Consolidated             |   | $                                  | 250,919    |                            | $          | 116,465 |   | $ | (1,357,544 | ) | $ | (2,795,267 | ) |
|                     |   |                               |       |                            |       |   |   |   |   |
| Total assets             |   |                               |       |                            |       |   |   |   |   |
| Radio  broadcasting      |   |                               |       |                            |       | $ | 147,663,085 |   | $ | 151,772,907 |   |
| Promotion  services      |   |                               |       |                            |       | 5,068,674 |   | 6,011,573 |   |
| Consolidated             |   |                               |       |                            |       | $ | 152,731,759 |   | $ | 157,784,480 |   |

 

Below is a reconciliation of net (loss) income to EBITDA for theCompany’s radio broadcasting and promotion services segments:

 
|                           |   | **Three  Months Ended  June 30,** |       | **Six  months ended  June 30,** |      |
|--------------------------------|--------|-----------------------------------|------------|---------------------------------|-----------|
|                           |   | **2003**                          |       | **2002**                        |      | **2003** |   | **2002** |   |
| **Radio broadcasting:**        |   |                              |       |                            |      |   |   |   |   |
| Net loss                       |   | $                                 | (5,586,288 | )                               | $         | (5,321,840 | ) | $ | (12,777,047 | ) | $ | (13,434,500 | ) |
| Adjustments:                   |   |                              |       |                            |      |   |   |   |   |
| Interest  expense, net         |   | 4,948,219                         |       | $                               | 4,464,505 |   | 9,845,820 |   | 8,832,462 |   |
| Income taxes                   |   | —                            |       | (39,018                         | )         | — |   | (78,036 | ) |
| Depreciation  and amortization |   | 758,536                           |       | 697,051                         |      | 1,493,594 |   | 1,381,821 |   |
| EBITDA                         |   | $                                 | 120,467    |                            | $         | (199,302 | ) | $ | (1,437,633 | ) | $ | (3,298,253 | ) |
|                           |   |                              |       |                            |      |   |   |   |   |
| **Promotion services:**        |   |                              |       |                            |      |   |   |   |   |
| Net income  (loss)             |   | $                                 | 51,920     |                            | $         | 210,615 |   | $ | (86,132 | ) | $ | 303,095 |   |
| Adjustments:                   |   |                              |       |                            |      |   |   |   |   |
| Interest  expense, net         |   | 14,889                            |       | $                               | 49,503    |   | 38,936 |   | 89,762 |   |
| Income taxes                   |   | —                            |       | —                          |      | — |   | — |   |
| Depreciation  and amortization |   | 63,643                            |       | 55,649                          |      | 127,285 |   | 110,129 |   |
| EBITDA                         |   | $                                 | 130,452    |                            | $         | 315,767 |   | $ | 80,089 |   | $ | 502,986 |   |

 

6

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**3.****                                      StockOption Plan**

 

As permissibleunder SFAS No. 123, “Accounting for Stock-Based Compensation”, the Companyaccounts for all stock-based compensation arrangements using the intrinsicvalue method prescribed by Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees”, as interpreted by FASBInterpretation No. 44, “Accounting for Certain Transactions Involving StockCompensation”, and discloses pro forma net loss and loss per share amounts asif the fair value method had been adopted.  Accordingly, no compensationcost is recognized for stock option awards granted to employees at or abovefair market value.

 

The Company’s proforma net loss, pro forma net loss per common share and pro forma weightedaverage fair value of options granted, with related assumptions, assuming theCompany had adopted the fair value method of accounting for all stock-basedcompensation arrangements consistent with the provisions of SFAS No. 123, usingthe Black-Scholes option pricing model for all options granted, are indicatedbelow:

 
|                                                                 |   | **Three  months ended  June 30,** |       | **Six  months ended  June 30,** |       |
|----------------------------------------------------------------------|--------|-----------------------------------|------------|---------------------------------|------------|
|                                                                 |   | **2003**                          |       | **2002**                        |       | **2003** |   | **2002** |   |
|                                                                 |   |                              | ** ** |                            | ** ** |   | ** ** |   | ** ** |
| Net loss, as  reported                                               |   | $                                 | (5,534,368 | )                               | $          | (5,111,225 | ) | $ | (12,863,179 | ) | $ | (13,131,405 | ) |
| Deduct:                                                              |   |                              |       |                            |       |   |   |   |   |
| Stock-based  compensation expense determined under fair value method |   | 618,028                           |       | 699,105                         |       | 1,375,715 |   | 1,347,228 |   |
| Net loss, pro  forma                                                 |   | $                                 | (6,152,396 | )                               | $          | (5,810,330 | ) | $ | (14,238,894 | ) | $ | (14,478,633 | ) |
|                                                                 |   |                              |       |                            |       |   |   |   |   |
| Net loss per  share, basic and diluted                               |   |                              |       |                            |       |   |   |   |   |
| As reported                                                          |   | $                                 | (0.26      | )                               | $          | (0.24 | ) | $ | (0.61 | ) | $ | (0.63 | ) |
| Pro forma                                                            |   | $                                 | (0.29      | )                               | $          | (0.28 | ) | $ | (0.68 | ) | $ | (0.69 | ) |
|                                                                 |   |                              |       |                            |       |   |   |   |   |
| Weighted  average fair value                                         |   | $                                 | —     |                            | $          | — |   | $ | — |   | $ | 1.09 |   |
| Expected life  (in years)                                            |   | 8                                 |       | 10                              |       | 8 |   | 10 |   |
| Risk free  interest rate                                             |   | 4.0                               | %          | 5.0                             | %          | 4.0 | % | 5.0 | % |
| Expected  volatility                                                 |   | 154                               | %          | 136                             | %          | 186 | % | 124 | % |
| Dividend yield                                                       |   | —                            |       | —                          |       | — |   | — |   |

 

7

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**4.**                                      RevolvingCredit Facility

 

At June 30, 2003,the Company was in breach of its Minimum Senior Interest Coverage Ratiocovenant (as defined).  The Company hasreceived a waiver for this breach from the lender.  In addition, the Company has received a waiver for the MinimumSenior Interest Coverage Ratio and the Maximum Senior Secured Debt covenantsthrough December 31, 2004.  Inconnection with the waiver of these covenants, effective August 12, 2003, theCompany's borrowing rate inceases to the Index Rate (as defined) plus 3.75% orLIBOR plus 4.75%.  Also, in connectionwith the waiver, the Company's cash or availability under the Revolving CreditFacility (minus certain accounts payable, as defined) must exceed $2.5 millionimmediately following interest payments on its Senior Discount Notes.  The Company will incur fees of approximately$125,000 associated with the above mentioned waivers.  As of June 30, 2003, the Company had approximately $8.0 millionof availability under the Revolving Credit Facility.

 

The Company issubject to other financial covenants. There is no assurance that the Company will be able to comply with itsother financial covenants or that any future covenant breaches will be waived.Any breach that is not waived could result in an event of default, permittingthe lenders to suspend commitments to make any advance, and to declare amountsoutstanding and interest thereon due and payable, which could have a materialadverse effect on our business, financial condition and results of operations.

 

**5.**                                      NewAccounting Standards

** **

In January 2003,the FASB issued Financial Interpretation No. (“FIN”) 46, Consolidation ofVariable Interest Entities, which addresses the consolidation of variableinterest entities in which an enterprise absorbs a majority of the entity’sexpected losses, receives a majority of the entity’s expected residual returns,or both, as a result of ownership, contractual or other financial interests inthe entity. FIN No. 46 was effective upon issuance for certain disclosurerequirements and for variable interest entities created after January 1, 2003,and in the first fiscal year or interim period beginning after June 15, 2003for all other variable interest entities. The Company does not expect anyimpact on its consolidated financial position, results of operations or cashflows from adoption.

 

In May 2003, theFASB issued SFAS No. 150, “Accounting for Certain Financial Instruments withCharacteristics of both Liabilities and Equity,” effective for financialinstruments entered into or modified after May 31, 2003, and otherwise iseffective at the beginning of the first interim period beginning after June 15,2003. This statement establishes standards for how an issuer classifies andmeasures certain financial instruments with characteristics of both liabilitiesand equity. It requires that an issuer classify a freestanding financialinstrument that is within its scope as a liability (or an asset in somecircumstances). The adoption of SFAS No. 150 will not have an impact on theCompany’s consolidated financial position, results of operations or cash flows.

 

**6.****                                      Litigation**

 

On November 8,2001, a securities class action suit was filed against the Company and thefollowing executive officers and directors: Joaquin F. Blaya, Steven E. Dawson,and Manuel A. Borges, and the following underwriters of our initial publicoffering (“IPO”): Salomon Smith Barney Holdings; The Bear Stearns CompaniesInc.; Credit Suisse First Boston Corp.; CIBC World Markets; FleetBostonRobertson Stephens, Inc; Deutsche Banc Alex Brown Incorporated; Merrill Lynch,Pierce, Fenner & Smith Inc.; Morgan Stanley Dean Witter & Co.; andPrudential Securities Incorporated (collectively the“Underwriters”).  An Amended Complaint, captioned *In re Radio Unica Communications Corp. Initial PublicOffering Securities Litigation*, 01 Civ. 9978 (SAS), was filed onApril 20, 2002 (“Amended Complaint”).  The Amended Complaint was filed inthe United States District Court for the Southern District of New York onbehalf of all persons who acquired our common stock between October 19, 1999and December 6, 2000. The Amended Complaint charges defendants with violationsof Sections 11, 12 and 15 of the Securities Act of 1933 and Section 10(b) and20(a) of the Securities Exchange Act of 1934 (and Rule 10b-5 promulgatedthereunder), for issuing a registration statement and prospectus that containedmaterial misrepresentations and/or omissions.

 

8

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The AmendedComplaint alleges that the prospectus was false and misleading because itfailed to disclose (i) the agreements between the Underwriters and certaininvestors to provide them with significant amounts of restricted Radio UnicaCommunications Corp. shares in the IPO in exchange for excessive andundisclosed commissions; and (ii) the agreements between the Underwriters andcertain customers under which the underwriters would allocate shares in the IPOto those customers in exchange for the customers’ agreement to purchase RadioUnica Communications Corp.’s shares in the after-market at pre-determinedprices.  The Amended Complaint seeks an undisclosed amount ofdamages, as well as attorney fees.

 

In July 2002, theCompany, Joaquin F. Blaya, Steven E. Dawson and Manuel A.Borges joined in an omnibus motion to dismiss challenging the legalsufficiency of plaintiffs’ claims.  The motion was filed on behalf ofhundreds of issuer and individual defendants named in similar lawsuits. Plaintiffs opposed the motion, and the Court heard oral argument on the motionin November 2002.  On February 19, 2003, the Court issued an opinion andorder granting in part and denying in part the motion as to theCompany.  In addition, in October 2002, Joaquin F. Blaya, StevenE. Dawson and Manuel A. Borges were dismissed from this case withoutprejudice.  A special committee of the board of directors hasauthorized the Company to negotiate a settlement of the pending claimssubstantially consistent with a memorandum of understanding negotiated amongclass plaintiffs, all issuer defendants and their insurers.  Any such settlement would be subject toapproval by the Court.

 

We consider thisclaim, as it relates to the Company, to be wholly without merit and we will vigorously defendagainst such claim. Pursuant to the underwriting agreement between the Companyand the Underwriters, webelieve that the Underwriters must indemnify the Company with respect toall written information relating to the Underwriters and furnished by them tothe Company.  Accordingly, the ultimateloss, if any, that may result cannot be reasonably determined and, accordingly,no accrual for this matter has been recorded as of June 30, 2003.

** **

**7.**                                      SubsequentEvents

** **

On August 1, 2003,the Company elected not to pay the interest payment due on such date in theamount of $9,287,670 with respect to its 113⁄4% Senior Discount Notes due 2006 issued under an Indenture dated July 27,1998.  The Company is presently indiscussions with representatives of the holders of the notes.  Under the Indenture pursuant to which thenotes were issued, the Company has until September 2, 2003 to make suchinterest payment before the occurrence of an event of default exists under theIndenture.  If the Company fails to makethe payment on or before that date, then the approximately $158 million principalamount of notes, and accrued interest, may be declared immediately due andpayable.  Subject to the results of thediscussions with representatives of the holders of the notes, the Companyintends to make the interest payment on or prior to September 2, 2003.

** **

**9**

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**RADIO UNICA COMMUNICATIONS CORP.**

 

**MANAGEMENT’S****DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS ANDFINANCIAL CONDITION**

 

This reportcontains forward-looking statements within the meaning of Section 21E of theSecurities Exchange Act of 1934, as amended. These forward-looking statementsinclude, among others, statements concerning the Company’s outlook for 2003 andbeyond, the Company’s expectations, beliefs, future plans and strategies,anticipated events or trends, and similar expressions concerning matters thatare not historical facts.  Theforward-looking statements in this report are subject to risks anduncertainties that could cause actual results to differ materially from thoseexpressed in or implied by the statements.

 

**Overview**

 

We generate radiobroadcasting revenue from sales of network advertising time, and sales of localand national advertising time on radio stations that we own and operate(“O&Os”). Advertising rates are, in large part, based upon the network’sand each station’s ability to attract audiences in demographic groups targetedby advertisers. All radio broadcasting revenue is stated net of any agencycommissions. We recognize radio broadcasting revenue when the commercials arebroadcast.   We also generate revenuefrom our promotion services company, MASS Promotions, Inc. (“MASS”).  We recognize revenue generated by MASS whenthe promotion services are performed.

 

Our operatingexpenses consist of programming expenses, marketing and selling costs,including commissions paid to our sales staff, technical and engineering costs,cost of promotion services and general and administrative expenses.

 

**CriticalAccounting Policies and Estimates**

 

The discussion andanalysis of our financial condition and results of operations are based on ourconsolidated financial statements, which have been prepared in accordance withaccounting principles generally accepted in the United States of America. Thepreparation of these financial statements requires us to make estimates andjudgments that affect the reported amount of assets and liabilities, revenuesand expenses, and related disclosure of contingent assets and liabilities atthe date of our financial statements. In general, we base our estimates onhistorical experience, on information from third party professionals and onvarious other assumptions that we believe are reasonable under the facts andcircumstances. We continually evaluate our accounting policies and estimates weuse to prepare our consolidated financial statements. Actual results may differfrom these estimates under different assumptions or conditions.

 

During the three and six months ended June 30, 2003, our criticalaccounting policies and the nature of our estimates have not changed from thosedisclosed in our annual report on Form 10-K for the year ended December 31,2002.

 

**Resultsof Operations**

 

**ThreeMonths Ended June 30, 2003 Compared to the Three Months Ended June 30, 2002**

 

NET REVENUE.  Net revenue increased by approximately $0.1million or 1% to approximately $12.3 million for the three months ended June30, 2003 from approximately $12.2 million for the comparable period in theprior year.  The increase in net revenuerelated to increased revenue generated by promotional and merchandisingservices associated with MASS of approximately $0.4 million, increased localspot and network revenue of approximately $0.4 million, offset by a decrease innational spot revenue of approximately $0.5 million and decreased barter revenueof approximately $0.2 million.

 

10

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Direct operatingexpenses increased by approximately $0.2 million or 15% to approximately $1.5million for the three months ended June 30, 2003 from approximately $1.3million for the comparable period in the prior year.  The increase in direct operating expenses was primarily due toincreased barter expense, primarily related to advertising, and increased costsassociated with promotional events, offset in part by the sale of assets andtermination of operations at the Denver station as of February 11, 2003.

 

Selling, general and administrative expenses decreased by approximately$0.2 million or 3% to approximately $4.2 million for the three monthsended June 30, 2003 from approximately $4.4 million for the comparable periodin the prior year. The decrease inselling, general and administrative expenses primarily relates to a decrease inheadcount at MASS, and the sale of assets and termination of operationsat the Denver station as of February 11, 2003.

 

Network expenses decreased approximately $0.6 million or 16% toapproximately $3.1 million for the three months ended June 30, 2003 fromapproximately $3.7 million for the comparable period in the prior year.  Thedecrease in network expenses was mainly due to a decrease in the cost ofnetwork programming, decreased personnel costs, and decreased spendingassociated with the promotion and marketing of the network.

 

Corporate expenses remained constant at approximately $1.0 million forthe three months ended June 30, 2003 and 2002. Corporate expenses arecomprised of the cost of corporate management, legal and professional fees and insurance.

 

Cost of promotionservices increased by approximately $0.7 million or 47% to $2.2 million for thethree months ended June 30, 2003 from approximately $1.5 million for thecomparable period in the prior year. The increase in the cost of promotion services was related to thevariable costs associated with the increase in MASS’ revenue, as well as higherout of pocket costs associated with certain client’s marketing programs.

 

Depreciation and amortization increased by approximately  $0.1 million or 9% to approximately $0.8million for the three months ended June 30, 2003 from approximately $0.7million for the comparable period in the prior year.  The increase indepreciation and amortization was due to the additions of fixed assets arisingfrom signal upgrades completed during 2002.

 

Stock optioncompensation expense decreased by approximately $0.1 million or 71% toapproximately $43,000 for the three months ended June 30, 2003 fromapproximately $0.2 million for the comparable period in the prior year.  Stock option compensation expense representsa non-cash charge relating to the vesting of stock options granted to employeesto purchase shares of the Company’s common stock.  The decrease in stock option compensation expense is due to stockoptions granted becoming fully vested during 2002.

 

OTHER INCOME (EXPENSE). Other income (expense) decreased by approximately$0.5 million or 10% to approximately $(5.0) million for the three months endedJune 30, 2003 from approximately $(4.5) million for the comparable period inthe prior year. Other income (expense) for the three months ended June 30, 2003included interest expense of approximately $(5.0) million and interest incomeand other income of approximately $0.1 million primarily.  Interest expense primarily relates to theinterest on the Senior Discount Notes.

 

**11**

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NET LOSS.  Netloss increased by approximately $0.4 million or 8% to approximately $(5.5)million for the three months ended June 30, 2003 from approximately $(5.1)million for the comparable period in the prior year.  The increase in net loss was mainly the result of increasedinterest expense of approximately $0.4 million.

 

EBITDA.  EBITDAincreased by approximately $0.1 million or 115% to approximately $0.3 millionfor the three months ended June 30, 2003 from approximately $0.1 million forthe comparable period in the prior year. The increase in EBITDA was mainly the result of a decrease in radioexpenses, offset in part by an increase in the cost of promotion services forthe three months ended June 30, 2003.

 

**SixMonths Ended June 30, 2003 Compared to the Six Months Ended June 30, 2002**

 

NET REVENUE. Net revenue increased by approximately $1.6 million or 8% toapproximately $21.9 million for the six months ended June 30, 2003 fromapproximately $20.3 million for the comparable period in the prior year.  The increase in net revenue relates toincreased revenue generated by promotional and merchandising servicesassociated with MASS of approximately $1.6 million, increased local spot and networkrevenue of approximately $0.8 million, increased barter revenue ofapproximately $0.1 million, offset by a decrease in national spot revenue ofapproximately $0.9 million.

 

Direct operating expenses remained constant atapproximately $2.5 million for the six months ended June 30, 2003 and 2002.  Direct operating expenses are comprised oftechnical and programming costs at the O&Os.

 

Selling, general andadministrative expenses remained constant at approximately $8.4 millionfor the six months ended June 30, 2003 and 2002.  Selling, general andadministrative expenses for the radio broadcasting business increased byapproximately $0.2 million due to increased local sales cost.  This increase was offset by a decrease ingeneral and administrative costs associated with MASS of approximately $0.2million due to a reduction in headcount.

 

Network expenses decreasedby approximately $1.6 million or 21% to approximately $5.9 million forthe six months ended June 30, 2003 from approximately $7.5 million for thecomparable period in the prior year.  Thedecrease in network expenses is primarily due to decreased cost of networkprogramming, including sports rights for the 2002 Gold Cup soccer event anddecreased advertising spending.

 

Corporate expenses remainedconstant at approximately $2.0 million for the six months ended June 30, 2003and 2002. Corporate expenses are comprised of the cost of corporatemanagement, legal and professionalfees and insurance.

 

Cost of promotion servicesincreased by approximately $2.2 million or 88% to $4.7 million for the sixmonths ended June 30, 2003 from approximately $2.5 million for the comparableperiod in the prior year.  Theincrease in the cost of promotion services was related to the variable costsassociated with the increase in MASS’ revenue, as well as higher out of pocketcosts associated with certain client’s marketing programs.

 

12

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Depreciation andamortization increased by approximately $0.1 million or 9% toapproximately $1.6 million for the six months ended June 30, 2003 fromapproximately $1.5 million for the comparable period in the prior year. The increase in depreciation andamortization was due to the additions of fixed and intangible assets arisingfrom signal upgrades completed during 2002.

 

Stock option compensation expense decreased byapproximately $0.2 million or 79% to approximately $0.1 million for the sixmonths ended June 30, 2003 from approximately $0.3 million for the comparableperiod in the prior year.  Stock optioncompensation expense represents a non-cash charge relating to the vesting ofstock options granted to employees to purchase shares of the Company’s commonstock.   The decrease in stock optioncompensation expense is due to stock options granted becoming fully vestedduring 2002.

 

OTHER INCOME (EXPENSE).Other income (expense) decreased by approximately $0.6 million or 7% toapproximately $(9.6) million for the six months ended June 30, 2003 fromapproximately $(9.0) million for the comparable period in the prior year. Other income (expense) for the sixmonths ended June 30, 2003 is mainlycomprised of interest expense of approximately $(10.0) million and interestincome and other income of approximately $0.3 million primarily related to thegain on the sale of the Denver radio station assets in February 2003.  Interest expense primarily relates to theinterest on the Senior Discount Notes.

 

INCOME TAX BENEFIT. The Company recorded an income taxbenefit of approximately $0.1 million for the six months ended June 30,2002.  The benefit resulted from theCompany’s ability to utilize a portion of its net operating tax losscarryforwards to offset existing deferred tax liabilities.  The Company did not record any benefitduring the six months ended June 30, 2003.

 

NET LOSS.  Netloss decreased by approximately $0.3 million or 2% to approximately $12.8million for the six months ended June 30, 2003 from approximately $13.1 millionfor the comparable period in the prior year. The decrease in net loss is mainly the result of the increase in theCompany’s revenue of approximately $1.6 million offset by an increase inoperating expenses of approximately $0.6 million, increased interest expenserelated to the Senior Discount Notes of approximately $0.9 million andincreased interest income and other income of approximately $0.2 million.

 

EBITDA.  EBITDAincreased by approximately $1.4 million or 51% to approximately $(1.4) millionfor the six months ended June 30, 2003 from approximately $(2.8) million forthe comparable period in the prior year. The increase in EBITDA was mainly theresult of the increase in revenue, decreased network expenses and the gain onthe sale of the Denver radio station assets, offset by the increase in cost ofpromotion services.

 

13

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**Use of Non-GAAP Financial Measures**

 

The Company utilizes a financial measure that is notcalculated in accordance with GAAP to assess its financial performance. Anon-GAAP financial measure is defined as a numerical measure of a company’sfinancial performance that (i) excludes amounts, or is subject to adjustmentsthat have the effect of excluding amounts, that are included in the comparablemeasure calculated and presented in accordance with GAAP in the statement ofoperations or statement of cash flows; or (ii) includes amounts, or is subjectto adjustments that have the effect of including amounts, that are excludedfrom the comparable measure so calculated and presented. EBITDA is defined asearnings (loss) before interest, taxes, depreciation and amortization. TheCompany believes that the presentation of EBITDA provides useful information toinvestors regarding the Company’s financial condition because it is a commonlyused financial analysis tool for measuring and comparing media companies.EBITDA should not be considered as an alternative to net cash provided by (usedin) operating activities as a measure of liquidity. This non-GAAP financialmeasure may not be comparable to similarly titled measures used by othercompanies.  Below is a reconciliation ofnet loss to EBITDA for the three and six months ended June 30, 2003 and 2002:

 
|                           |   | **Consolidated**                   |       |
|--------------------------------|--------|------------------------------------|------------|
|                           |   | **Three  Months Ended   June 30,** |       | **Six Months  Ended  June 30,** |   |
|                           |   | **2003**                           |       | **2002** |   | **2003** |   | **2002** |   |
| Net loss                       |   | $                                  | (5,534,368 | ) | $ | (5,111,225 | ) | $ | (12,863,179 | ) | $ | (13,131,404 | ) |
| Adjustments:                   |   |                               |       |   |   |   |   |   |   |
| Interest  expense, net         |   | 4,963,108                          |       | 4,514,008 |   | 9,884,756 |   | 8,922,224 |   |
| Income  taxes                  |   | —                             |       | (39,018 | ) | — |   | (78,036 | ) |
| Depreciation  and amortization |   | 822,179                            |       | 752,700 |   | 1,620,879 |   | 1,491,950 |   |
| EBITDA                         |   | $                                  | 250,919    |   | $ | 116,465 |   | $ | (1,357,544 | ) | $ | (2,795,266 | ) |

 

**Liquidity and Capital Resources**

 

The Company has had negative cash flows sinceinception. Working capital and financing for the Company’s acquisitions to datehave been provided primarily by the proceeds from the Company’s initial publicoffering, the issuance of the 113⁄4% Senior Discount Notes due August 1, 2006,the issuance of promissory notes, common stock and preferred stock to theCompany’s shareholders and proceeds from the Revolving Credit Facility.

 

Net cash used in operating activities increased byapproximately $8.0 million or 183% to approximately $12.4 million for the sixmonths ended June 30, 2003 from approximately $4.4 million for the comparableperiod in the prior year.   Net cashprovided by (used in) investing activities increased by $5.1 million or 236% to$2.9 million for the six months ended June 30, 2003 from approximately $(2.2)million for the comparable period in the prior year. The increase ofapproximately $5.1 million from 2002 to 2003 was primarily due to the proceedsreceived from the sale of the Denver radio station assets of approximately $3.4million and a decrease in capital expenditures of approximately $1.7million.  Net cash provided by (used in)financing activities increased by approximately $12.2 million to approximately$11.4 million for the six months ended June 30, 2003 from approximately $(1.0)million for the comparable period in the prior year. The increase ofapproximately $12.2 million was due to the Company borrowing $12.0 millionunder its Revolving Credit Facility during the six months ended June 30, 2003.

 

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Capital expenditures primarily relate to the purchaseof broadcast equipment for the network and O&Os, leasehold improvements,computer equipment and telecommunications equipment. Capital expenditures wereapproximately $0.5 million and $2.2 million for the six months ended June 30,2003 and 2002, respectively.  Thedecrease in capital expenditures is primarily due to signal upgrades completedduring 2002.

 

The Company believes that its current cash on hand andits borrowing availability under its Revolving Credit Facility, will at aminimum provide adequate resources to fund the Company’s operating expenses,debt service, working capital requirements and capital expenditures throughJune 30, 2004.

 

On August 1, 2003, the Company elected not to pay theinterest payment due on such date in the amount of $9,287,670 with respect toits 11 3/4% Senior Discount Notes due 2006 issued under an Indenture dated July27, 1998.  The Company is presently indiscussions with representatives of the holders of the notes.  Under the Indenture pursuant to which thenotes were issued, the Company has until September 2, 2003 to make suchinterest payment before the occurrence of an event of default exists under theIndenture.  If the Company fails to makethe payment on or before that date, then the approximately $158 millionprincipal amount of notes, and accrued interest, may be declared immediatelydue and payable.  Subject to the resultsof the discussions with representatives of the holders of the notes, theCompany intends to make the interest payment on or prior to September 2, 2003.

 

The Company through its financial advisor, CIBC WorldMarkets Corp. (“CIBC”) is currently in discussions with representatives of theSenior Discount Notes (the “Notes”) in order to restructure the terms of theNotes. In addition, the Company through CIBC is in discussions with severalpotential investors to secure additional equity financing.  There can be no assurance that the Companywill be able to restructure its Notes or secure additional equity financing. Inconnection with the above mentioned efforts the Company has incurred approximately$1.6 million in fees through June 30, 2003. These fees are included in thebalance sheet at June 30, 2003 in prepaid expenses and other currentsassets.  If the Company is successful inits efforts to restructure its Notes, the fees paid will be capitalized andamortized accordingly.  If the Companyis successful in its efforts to raise equity, the fees paid will be recorded asa reduction of the equity proceeds. If the Company is unsuccessful in itsefforts to restructure its Notes or raise equity, the fees paid will beexpensed.

 

At June 30, 2003, the Company was in breach of itsMinimum Senior Interest Coverage Ratio covenant (as defined).  The Company has received a waiver for thisbreach from the lender.  In addition,the Company has received a waiver for the Minimum Senior Interest CoverageRatio and the Maximum Senior Secured Debt covenants through December 31,2004.  In connection with the waiver ofthese covenants effective August 12, 2003, the Company's borrowing rateinceases to the Index Rate (as defined) plus 3.75% or LIBOR plus 4.75%.  Also, in connection with the waiver, theCompany's cash or availability under the Revolving Credit Facility (minuscertain accounts payable, as defined) must exceed $2.5 million immediatelyfollowing interest payments on its Senior Discount Notes.  The Company will incur fees of approximately$125,000 associated with the above mentioned waivers.  As of June 30, 2003, the Company had approximately $8.0 millionof availability under the Revolving Credit Facility.

 

The Company is subject to other financial covenantsunder its Revolving Credit Facility. There is no assurance that the Company will be able to comply with itsother financial covenants or that any future covenant breaches will be waived.Any breach that is not waived could result in an event of default, permittingthe lenders to suspend commitments to make any advance, and to declare amountsoutstanding and interest thereon due and payable, which could have a materialadverse effect on our business, financial condition and results of operations.

 

If the Company is unable to generate sufficient cashflow, is unable to restructure its Notes, or is unable to secure additionalequity financing, it may have to adopt one or more alternatives after June 30,2004, such as further reducing or restructuring its operating costs, reducingor delaying planned capital expenditures or selling assets. There can be noassurance that any of these financing strategies could be effected onsatisfactory terms, if at all.

 

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**Item3.****           Quantitativeand Qualitative Disclosures about Market Risk**

 

Our exposure to interest rate risk arises principallyfrom the variable rates associated with our Revolving Credit Facility. On June30, 2003, we had borrowings of $12.0 million under our Revolving CreditFacility that were subject to variable rates, based on amounts outstanding asof June 30, 2003, an adverse change of 1.0% in the interest rate on ourRevolving Credit Facility would have caused us to incur an increase in interestexpense of approximately $0.1 million on an annual basis.

 

**Item4.****           Controlsand Procedures**

 

The Company’s Chief Executive Officer and ChiefFinancial Officer, based on their evaluation of the Company’s disclosure controlsand procedures at June 30, 2003, have concluded that such disclosure controlsand procedures were effective to ensure that material information relating tothe Company and required to be disclosed by the Company has been made known tothem and has been recorded, processed, summarized and reported timely.  During the quarter ended June 30, 2003 therehave not been any significant changes in the Company’s internal controls or inother factors that could significantly affect these controls subsequent to thedate of evaluation.

 

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**RADIO UNICA COMMUNICATIONS CORP.******

 

**PART II - OTHER INFORMATION**

 

**Item 1 – Legal Proceedings**

 

On November 8, 2001, a securities class action suitwas filed against the Company and the following executive officers anddirectors: Joaquin F. Blaya, Steven E. Dawson, and Manuel A. Borges, and thefollowing underwriters of our initial public offering (“IPO”): Salomon SmithBarney Holdings; The Bear Stearns Companies Inc.; Credit Suisse First BostonCorp.; CIBC World Markets; FleetBoston Robertson Stephens, Inc; Deutsche BancAlex Brown Incorporated; Merrill Lynch, Pierce, Fenner & Smith Inc.; MorganStanley Dean Witter & Co.; and Prudential Securities Incorporated(collectively the “Underwriters”).  An AmendedComplaint, captioned *In re Radio UnicaCommunications Corp. Initial Public Offering Securities Litigation*,01 Civ. 9978 (SAS), was filed on April 20, 2002 (“Amended Complaint”). The Amended Complaint was filed in the United States District Court for theSouthern District of New York on behalf of all persons who acquired our commonstock between October 19, 1999 and December 6, 2000. The Amended Complaintcharges defendants with violations of Sections 11, 12 and 15 of the SecuritiesAct of 1933 and Section 10(b) and 20(a) of the Securities Exchange Act of 1934(and Rule 10b-5 promulgated thereunder), for issuing a registrationstatement and prospectus that contained material misrepresentations and/oromissions. The Amended Complaint alleges that the prospectus was false andmisleading because it failed to disclose (i) the agreements between theUnderwriters and certain investors to provide them with significant amounts ofrestricted Radio Unica Communications Corp. shares in the IPO in exchange forexcessive and undisclosed commissions; and (ii) the agreements between theUnderwriters and certain customers under which the underwriters would allocateshares in the IPO to those customers in exchange for the customers’ agreementto purchase Radio Unica Communications Corp.’s shares in the after-market atpre-determined prices.  The Amended Complaint seeks an undisclosedamount of damages, as well as attorney fees.

 

In July 2002, the Company, Joaquin F. Blaya,Steven E. Dawson and Manuel A. Borges joined in an omnibus motion todismiss challenging the legal sufficiency of plaintiffs’ claims.  Themotion was filed on behalf of hundreds of issuer and individual defendantsnamed in similar lawsuits.  Plaintiffs opposed the motion, and the Court heardoral argument on the motion in November 2002.  On February 19, 2003, theCourt issued an opinion and order granting in part and denying inpart the motion as to the Company.  In addition, in October2002, Joaquin F. Blaya, Steven E. Dawson and Manuel A. Borges weredismissed from this case without prejudice.  A special committeeof the board of directors has authorized the Company to negotiate a settlementof the pending claims substantially consistent with a memorandum of understandingnegotiated among class plaintiffs, all issuer defendants and theirinsurers.  Any such settlement would besubject to approval by the Court.

 

We consider this claim, as it relates to the Company, to be wholly without merit and wewill vigorously defend against such claim. Pursuant to the underwritingagreement between the Company and the Underwriters, we believe that the Underwriters must indemnify theCompany with respect to all written information relating to the Underwritersand furnished by them to the Company. Accordingly, the ultimate loss, if any, that may result cannot bereasonably determined and, accordingly, no accrual for this matter has beenrecorded as of June 30, 2003.

 

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**Item4 – Submission of Matters to a Vote of Security Holders**

 

The Company held an annual meeting of stockholderson June 6, 2003, at which the following matters were voted upon:

 

1.                                       Election of the eight directors.

2.                                       Approval of appointment of Ernst & Young LLP as independent auditorsfor the fiscal year ending December 31, 2003.

 

The results of the meeting were as follows:

 
| **Directors**     |   | **For**    |   | **Withheld** |   | **Broker  Non-Votes** |   |
|-------------------|--------|------------|--------|--------------|--------|-----------------------|--------|
|              |   |       |   |         |   |                  |   |
| Joaquin F. Blaya  |   | 20,098,907 |   | 197,687      |   | —                |   |
| Jose C. Cancela   |   | 20,098,907 |   | 197,687      |   | —                |   |
| Mark Colodny      |   | 20,098,907 |   | 197,687      |   | —                |   |
| Steven E. Dawson  |   | 20,098,907 |   | 197,687      |   | —                |   |
| Andrew C. Goldman |   | 20,098,907 |   | 197,687      |   | —                |   |
| Sidney Lapidus    |   | 20,098,907 |   | 197,687      |   | —                |   |
| Thomas P. Martin  |   | 20,144,479 |   | 152,115      |   | —                |   |
| Justin Sadrian    |   | 20,144,479 |   | 152,115      |   | —                |   |

 
|       |   | **For**    |   | **Against** |   | **Abstain** |   | **Broker   Non-Votes** |   |
|------------|--------|------------|--------|-------------|--------|-------------|--------|------------------------|--------|
|       |   |       |   |        |   |        |   |                   |   |
| Proposal 2 |   | 20,189,682 |   | 32,706      |   | 74,206      |   | —                 |   |

 

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**Item 6.****           Exhibits and Reports onForm 8-K.**

 

(a)          Exhibitsrequired by Item 601 of Regulation S-K.

 
| **Exhibit  No.** |   | **Description**                                                                                                   |   |
|------------------|--------|-------------------------------------------------------------------------------------------------------------------|--------|
| 31.1             |   | Certification of Chief  Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.  Filed herewith. |   |
|             |   |                                                                                                              |   |
| 31.2             |   | Certification of Chief  Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.  Filed herewith. |   |
|             |   |                                                                                                              |   |
| 32.1             |   | Certification of Chief  Executive Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.  Filed herewith. |   |
|             |   |                                                                                                              |   |
| 32.2             |   | Certification of Chief  Financial Officer pursuant to Section 906 of Sarbanes-Oxley Act of 2002.  Filed herewith. |   |

 

(b)         Reports onForm 8-K

 

None.

 

 

SIGNATURES

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|      | Radio Unica  Communications Corp. |
|-----------|-----------------------------------|
|      |
|      |                              |
|      | By:                               | /s/ Steven E. Dawson |   |
|      |                              | Steven E. Dawson |
|      |                              | Chief Financial Officer |
|      |
|      |
| **Date:** | **August 13, 2003**               |
|           |                                   |  |  |  |

** **

**19**

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