**SECURITIES AND 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 September 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 Unica Communications Corp.**

 

(Exact name of registrant 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 bycheck mark whether the registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.   YES ý         NO o

 

Indicate bycheck mark whether the registrant is an accelerated filer (as defined in ExchangeAct Rule 12b-2) Yes o No ý

 

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

 

As of November 14, 2003, 20,941,656 shares of Common Stock, $.01par value were outstanding.

 

 

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**RADIO UNICA COMMUNICATIONS CORP.**

 

**TABLE OF CONTENTS**

 

 
| **  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 6.   Exhibits and Reports on Form 8-K                           |                      |

 

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**RADIOUNICA COMMUNICATIONS CORP.**

 

**CONSOLIDATEDBALANCE SHEETS**

 
|                                                                                                                     |   | **September 30,  2003** |        | **December 31,  2002** |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|-------------|-----------------------------|--------|
|                                                                                                                     |   | **(Unaudited)**              |        |                        |   |
| **ASSETS**                                                                                                               |   |                         |        |                        |   |
| Current assets:                                                                                                          |   |                         |        |                        |   |
| Cash and cash equivalents                                                                                                |   | $                            | 11,048,837  |                        | $      | 11,054,978 |   |
| Accounts receivable, net of  allowance for doubtful accounts of $1,053,098 and $1,148,228, respectively                  |   | 10,179,912                   |        | 9,494,925                   |   |
| Prepaid expenses and other  current assets                                                                               |   | 1,421,530                    |        | 2,774,480                   |   |
| Assets held for sale                                                                                                     |   | —                       |        | 2,925,554                   |   |
| Total current assets                                                                                                     |   | 22,650,279                   |        | 26,249,937                  |   |
|                                                                                                                     |   |                         |        |                        |   |
| Property and equipment, net                                                                                              |   | 21,194,168                   |        | 23,071,043                  |   |
| Broadcast licenses, net of  accumulated amortization of $10,336,623                                                      |   | 96,433,935                   |        | 96,433,935                  |   |
| Other intangible assets,  net                                                                                            |   | 8,136,775                    |        | 8,971,849                   |   |
| Other assets                                                                                                             |   | 490,955                      |        | 437,085                     |   |
|                                                                                                                     |   | $                            | 148,906,112 |                        | $      | 155,163,849 |   |
|                                                                                                                     |   |                         |        |                        |   |
| **LIABILITIES  AND STOCKHOLDERS’ DEFICIT**                                                                          |   |                         |        |                        |   |
| Current liabilities:                                                                                                     |   |                         |        |                        |   |
| Accounts payable                                                                                                         |   | $                            | 495,689     |                        | $      | 1,295,971 |   |
| Accrued expenses                                                                                                         |   | 3,924,301                    |        | 2,905,277                   |   |
| Interest payable                                                                                                         |   | 3,112,690                    |        | 7,784,537                   |   |
| Deferred revenue                                                                                                         |   | 324,910                      |        | 608,218                     |   |
| Current portion of notes  payable                                                                                        |   | 502,014                      |        | 641,741                     |   |
| Total current liabilities                                                                                                |   | 8,359,604                    |        | 13,235,744                  |   |
|                                                                                                                     |   |                         |        |                        |   |
| Other liabilities                                                                                                        |   | 84,000                       |        | 75,000                      |   |
| Notes payable                                                                                                            |   | —                       |        | 500,810                     |   |
| Deferred taxes                                                                                                           |   | 988,460                      |        | 988,460                     |   |
| Revolving credit facility                                                                                                |   | 19,996,120                   |        | —                      |   |
| 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                                                                                           |   | (15,512                      | )           | (96,226                     | )      |
| Accumulated deficit                                                                                                      |   | (198,265,670                 | )           | (177,299,049                | )      |
| Total stockholders’ deficit                                                                                         |   | (38,610,072                  | )           | (17,724,165                 | )      |
|                                                                                                                     |   | $                            | 148,906,112 |                        | $      | 155,163,849 |   |

 

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

 

2

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**RADIOUNICA COMMUNICATIONS CORP.**

 

**CONSOLIDATEDSTATEMENTS OF OPERATIONS (Unaudited)**

 
|                                                                 |   | **Three  months ended  September 30,** |       | **Nine months  ended  September 30,** |   |
|----------------------------------------------------------------------|--------|---------------------------------------------|------------|--------------------------------------------|--------|
|                                                                 |   | **2003**                                    |       | **2002**                                   |   | **2003** |   | **2002** |   |
|                                                                 |   |                                        |       |                                       |   |   |   |   |   |
| Net revenue                                                          |   | $                                           | 13,328,224 |                                       | $      | 12,015,508 |   | $ | 35,232,029 |   | $ | 32,355,776 |   |
| Operating expenses:                                                  |   |                                        |       |                                       |   |   |   |   |   |
| Direct operating (exclusive of depreciation shown seperately  below) |   | 1,343,223                                   |       | 1,390,475                                  |   | 3,849,061 |   | 3,888,901 |   |
| Selling, general and  administrative                                 |   | 4,238,343                                   |       | 4,329,911                                  |   | 12,630,254 |   | 12,671,762 |   |
| Network (exclusive of depreciation shown seperately  below)          |   | 3,885,305                                   |       | 3,054,998                                  |   | 9,788,900 |   | 10,528,746 |   |
| Corporate                                                            |   | 971,339                                     |       | 919,216                                    |   | 2,934,834 |   | 2,858,827 |   |
| Financial advisory, legal  and restructuring fees                    |   | 3,060,057                                   |       | —                                     |   | 3,060,057 |   | — |   |
| Cost of promotion services                                           |   | 1,908,325                                   |       | 2,191,942                                  |   | 6,589,813 |   | 4,709,455 |   |
| Depreciation and  amortization                                       |   | 828,093                                     |       | 768,192                                    |   | 2,448,972 |   | 2,260,142 |   |
| Stock option compensation                                            |   | 15,772                                      |       | 86,191                                     |   | 80,717 |   | 397,657 |   |
|                                                                 |   | 16,250,457                                  |       | 12,740,925                                 |   | 41,382,608 |   | 37,315,490 |   |
| Loss from operations                                                 |   | (2,922,233                                  | )          | (725,417                                   | )      | (6,150,579 | ) | (4,959,714 | ) |
| Other income (expense):                                              |   |                                        |       |                                       |   |   |   |   |   |
| Interest expense                                                     |   | (5,236,903                                  | )          | (4,847,932                                 | )      | (15,219,353 | ) | (13,963,800 | ) |
| Interest income                                                      |   | 49,787                                      |       | 75,342                                     |   | 147,481 |   | 268,986 |   |
| Other                                                                |   | 5,907                                       |       | (1,734                                     | )      | 255,830 |   | (54,654 | ) |
|                                                                 |   | (5,181,209                                  | )          | (4,774,324                                 | )      | (14,816,042 | ) | (13,749,468 | ) |
| Loss before income taxes                                             |   | (8,103,442                                  | )          | (5,499,741                                 | )      | (20,966,621 | ) | (18,709,182 | ) |
| Income tax benefit                                                   |   | —                                      |       | 39,018                                     |   | — |   | 117,054 |   |
| Net loss                                                             |   | $                                           | (8,103,442 | )                                          | $      | (5,460,723 | ) | $ | (20,966,621 | ) | $ | (18,592,128 | ) |
|                                                                 |   |                                        |       |                                       |   |   |   |   |   |
| Net loss per common share -  basic and diluted                       |   | $                                           | (0.39      | )                                          | $      | (0.26 | ) | $ | (1.00 | ) | $ | (0.89 | ) |
|                                                                 |   |                                        |       |                                       |   |   |   |   |   |
| 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.**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS (Unaudited)**

 
|                                                                         |   | **Nine months  ended September 30,** |        |
|------------------------------------------------------------------------------|--------|-------------------------------------------|-------------|
|                                                                         |   | **2003**                                  |        | **2002** |   |
|                                                                         |   |                                      |        |   |   |
| **Operating  activities**                                                    |   |                                      |        |   |   |
| Net loss                                                                     |   | $                                         | (20,966,621 | ) | $ | (18,592,128 | ) |
| Adjustments to reconcile  net loss to net cash used in operating activities: |   |                                      |        |   |   |
| Depreciation and  amortization                                               |   | 2,448,972                                 |        | 2,260,142 |   |
| Provision for bad debts                                                      |   | (87,100                                   | )           | 14,411 |   |
| Accretion of interest on  senior discount notes                              |   | —                                    |        | 10,153,218 |   |
| Amortization of deferred  financing costs                                    |   | 680,014                                   |        | 550,815 |   |
| Stock option compensation  expense                                           |   | 80,717                                    |        | 397,657 |   |
| Deferred income taxes                                                        |   | —                                    |        | (117,054 | ) |
| Gain on sale of radio  station assets                                        |   | (225,616                                  | )           | — |   |
| Other                                                                        |   | (24,556                                   | )           | (118,835 | ) |
| Changes in assets and  liabilities, net of effects of acquisitions:          |   |                                      |        |   |   |
| Accounts receivable                                                          |   | (597,887                                  | )           | 244,813 |   |
| Prepaid expenses and other  current assets                                   |   | 1,421,178                                 |        | 81,364 |   |
| Other assets                                                                 |   | (226,978                                  | )           | (712,700 | ) |
| Accounts payable                                                             |   | (800,282                                  | )           | (1,478,805 | ) |
| Accrued expenses                                                             |   | 979,024                                   |        | (744,783 | ) |
| Interest payable                                                             |   | (4,671,847                                | )           | 3,095,890 |   |
| Deferred revenue                                                             |   | (258,751                                  | )           | 203,054 |   |
| Other liabilities                                                            |   | 9,000                                     |        | 20,000 |   |
| Net cash used in operating  activities                                       |   | (22,240,733                               | )           | (4,742,941 | ) |
|                                                                         |   |                                      |        |   |   |
| **Investing  activities**                                                    |   |                                      |        |   |   |
| Acquisition of property and  equipment                                       |   | (532,718                                  | )           | (2,858,524 | ) |
| Proceeds from sale of radio  station assets                                  |   | 3,411,726                                 |        | — |   |
| Net cash provided by (used  in) investing activities                         |   | 2,879,008                                 |        | (2,858,524 | ) |
|                                                                         |   |                                      |        |   |   |
| **Financing  activities**                                                    |   |                                      |        |   |   |
| Borrowings under revolving  credit facility                                  |   | 19,996,120                                |        | — |   |
| Repayment of notes payable                                                   |   | (640,536                                  | )           | (976,597 | ) |
| Deferred financing costs                                                     |   | —                                    |        | (948,703 | ) |
| Net cash provided by (used  in) financing activities                         |   | 19,355,584                                |        | (1,925,300 | ) |
|                                                                         |   |                                      |        |   |   |
| Net decrease in cash and  cash equivalents                                   |   | (6,141                                    | )           | (9,526,765 | ) |
| Cash and cash equivalents  at beginning of period                            |   | 11,054,978                                |        | 19,909,952 |   |
| Cash and cash equivalents  at end of period                                  |   | $                                         | 11,048,837  |   | $ | 10,383,187 |   |

 

*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**

 

Theaccompanying unaudited consolidated condensed financial statements of RadioUnica Communications Corp. and subsidiaries (the “Company”) for the periodsindicated herein have been prepared pursuant to the rules and regulations ofthe Securities and Exchange Commission and in accordance with generallyaccepted accounting principles (“GAAP”) for interim financial information.  Accordingly, the financial statements do notinclude all of the information and notes required by generally acceptedaccounting principles for complete financial statements.  In the opinion of management, alladjustments (consisting of normal recurring adjustments) considered necessaryfor a fair presentation have been included. Operating results for the three and nine months ended September 30,2003 are not necessarily indicative of the results that may be expected for theyear ending December 31, 2003.  Theconsolidated condensed financial statements include the accounts of the Companyand all majority owned subsidiaries over which the Company has control.  All significant intercompany accounts andtransactions have been eliminated in consolidation.  For further information, refer to the Company’s 2002 consolidatedfinancial statements 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.             Segment Operating Results**

 

Pursuant tothe provisions 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 andoperated radio stations and corporate expenses.  The promotion services segment includes the operations of theCompany’s marketing and promotions business. The Company evaluates performance based on several factors, of which theprimary financial measures are business segment net revenue, operating income(loss) and earnings (loss) before interest, taxes, depreciation andamortization. (“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 operations or statement of cashflows; or (ii) includes amounts, or is subject to adjustments that have theeffect of including amounts, that are excluded from the comparable measure socalculated and presented. The Company believes that the presentation of EBITDAprovides useful information to investors regarding the Company’s financialcondition because it is a commonly used financial analysis tool for measuringand comparing media companies. EBITDA should not be considered as analternative to net cash provided by (used in) operating activities as a measureof liquidity. This non-GAAP financial measure may not be comparable tosimilarly titled measures used by other companies.

 

5

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Results by segment are asfollows:
|                    |   | **Three  months ended  September 30,** |       | **Nine months  ended  September 30,** |   |
|-------------------------|--------|---------------------------------------------|------------|--------------------------------------------|--------|
|                    |   | **2003**                                    |       | **2002**                                   |   | **2003** |   | **2002** |   |
|                    |   | **(Unaudited)**                             |       | **(Unaudited)**                            |   |
| Net revenue             |   |                                        |       |                                       |   |   |   |   |   |
| Radio broadcasting      |   | $                                           | 10,951,013 |                                       | $      | 9,255,185 |   | $ | 27,522,633 |   | $ | 25,882,159 |   |
| Promotion services      |   | 2,377,211                                   |       | 2,760,323                                  |   | 7,709,396 |   | 6,473,617 |   |
| Consolidated            |   | $                                           | 13,328,224 |                                       | $      | 12,015,508 |   | $ | 35,232,029 |   | $ | 32,355,776 |   |
|                    |   |                                        |       |                                       |   |   |   |   |   |
| Operating income (loss) |   |                                        |       |                                       |   |   |   |   |   |
| Radio broadcasting      |   | $                                           | (3,081,467 | )                                          | $      | (942,837 | ) | $ | (6,263,218 | ) | $ | (5,574,717 | ) |
| Promotion services      |   | 159,234                                     |       | 217,420                                    |   | 112,639 |   | 615,003 |   |
| Consolidated            |   | $                                           | (2,922,233 | )                                          | $      | (725,417 | ) | $ | (6,150,579 | ) | $ | (4,959,714 | ) |
|                    |   |                                        |       |                                       |   |   |   |   |   |
| EBITDA                  |   |                                        |       |                                       |   |   |   |   |   |
| Radio broadcasting      |   | $                                           | (2,311,803 | )                                          | $      | (233,963 | ) | $ | (3,749,436 | ) | $ | (3,532,215 | ) |
| Promotion services      |   | 223,570                                     |       | 275,004                                    |   | 303,659 |   | 777,989 |   |
| Consolidated            |   | $                                           | (2,088,233 | )                                          | $      | 41,041 |   | $ | (3,445,777 | ) | $ | (2,754,226 | ) |
|                    |   |                                        |       |                                       |   |   |   |   |   |
| Total assets            |   |                                        |       |                                       |   |   |   |   |   |
| Radio broadcasting      |   |                                        |       |                                       |   | $ | 143,648,241 |   | $ | 148,675,979 |   |
| Promotion services      |   |                                        |       |                                       |   | 5,257,871 |   | 6,500,454 |   |
| Consolidated            |   |                                        |       |                                       |   | $ | 148,906,112 |   | $ | 155,176,433 |   |

 

Below is a reconciliation of net (loss) income to EBITDA for theCompany’s radio broadcasting and promotion services segments:
|                           |   | **Three  Months Ended  September 30,** |       | **Nine months  ended  September 30,** |      |
|--------------------------------|--------|---------------------------------------------|------------|--------------------------------------------|-----------|
|                           |   | **2003**                                    |       | **2002**                                   |      | **2003** |   | **2002** |   |
| **Radio  broadcasting:**       |   |                                        |       |                                       |      |   |   |   |   |
| Net loss                       |   | $                                           | (8,252,228 | )                                          | $         | (5,662,798 | ) | $ | (21,029,275 | ) | $ | (19,097,297 | ) |
| Adjustments:                   |   |                                        |       |                                       |      |   |   |   |   |
| Interest expense, net          |   | 5,176,350                                   |       | $                                          | 4,756,864 |   | 15,022,170 |   | 13,589,326 |   |
| Income taxes                   |   | —                                      |       | (39,018                                    | )         | — |   | (117,054 | ) |
| Depreciation and  amortization |   | 764,075                                     |       | 710,989                                    |      | 2,257,669 |   | 2,092,810 |   |
| EBITDA                         |   | $                                           | (2,311,803 | )                                          | $         | (233,963 | ) | $ | (3,749,436 | ) | $ | (3,532,215 | ) |
|                           |   |                                        |       |                                       |      |   |   |   |   |
| **Promotion  services:**       |   |                                        |       |                                       |      |   |   |   |   |
| Net income (loss)              |   | $                                           | 148,786    |                                       | $         | 202,075 |   | $ | 62,654 |   | $ | 505,169 |   |
| Adjustments:                   |   |                                        |       |                                       |      |   |   |   |   |
| Interest expense, net          |   | 10,766                                      |       | $                                          | 15,726    |   | 49,702 |   | 105,488 |   |
| Income taxes                   |   | —                                      |       | —                                     |      | — |   | — |   |
| Depreciation and  amortization |   | 64,018                                      |       | 57,203                                     |      | 191,303 |   | 167,332 |   |
| EBITDA                         |   | $                                           | 223,570    |                                       | $         | 275,004 |   | $ | 303,659 |   | $ | 777,989 |   |

 

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 compensation cost isrecognized for stock option awards granted to employees at or above fair marketvalue.

 

The Company’spro forma 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  September 30,** |       | **Nine months ended  September 30,** |       |
|----------------------------------------------------------------------|--------|--------------------------------------------|------------|-------------------------------------------|------------|
|                                                                 |   | **2003**                                   |       | **2002**                                  |       | **2003** |   | **2002** |   |
|                                                                 |   |                                       | ** ** |                                      | ** ** |   | ** ** |   | ** ** |
| Net loss, as reported                                                |   | $                                          | (8,103,442 | )                                         | $          | (5,460,723 | ) | $ | (20,966,621 | ) | $ | (18,592,128 | ) |
| Deduct:                                                              |   |                                       |       |                                      |       |   |   |   |   |
| Stock-based compensation  expense determined under fair value method |   | 698,814                                    |       | 720,153                                   |       | 2,072,622 |   | 2,067,381 |   |
| Net loss, pro forma                                                  |   | $                                          | (8,802,256 | )                                         | $          | (6,180,876 | ) | $ | (23,039,243 | ) | $ | (20,659,509 | ) |
| Net loss per share, basic  and diluted                               |   |                                       |       |                                      |       |   |   |   |   |
| As reported                                                          |   | $                                          | (0.39      | )                                         | $          | (0.26 | ) | $ | (1.00 | ) | $ | (0.89 | ) |
| Pro forma                                                            |   | $                                          | (0.42      | )                                         | $          | (0.30 | ) | $ | (1.10 | ) | $ | (0.99 | ) |
|                                                                 |   |                                       |       |                                      |       |   |   |   |   |
| Weighted average fair value                                          |   | $                                          | —     |                                      | $          | — |   | $ | — |   | $ | 1.09 |   |
| Expected life (in years)                                             |   | 3                                          |       | 10                                        |       | 3 |   | 10 |   |
| Risk free interest rate                                              |   | 4.0                                        | %          | 5.0                                       | %          | 4.0 | % | 5.0 | % |
| Expected volatility                                                  |   | 126                                        | %          | 153                                       | %          | 167 | % | 134 | % |
| Dividend yield                                                       |   | —                                     |       | —                                    |       | — |   | — |   |

 

7

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**4.****                                      SubsequentEvents**

 

OnOctober 3, 2003, the Company announced that it had entered into adefinitive asset purchase agreement to sell its station group to MulticulturalRadio Broadcasting, Inc., (“Multicultural”) a privately held company. TheCompany also announced that it is in discussions with third parties to sell itsradio network, as well as its promotions company, Mass Promotions,Inc.  The Company will continue to broadcast its Spanish languageprogramming and otherwise operate its business in the normal course through theclosing of the Multicultural transaction.

 

OnOctober 31, 2003, the Company and all its subsidiaries (except MassPromotions, Inc.) filed voluntary petitions for relief under Chapter 11 of theU.S. Bankruptcy Code. The filing was made in the U.S. Bankruptcy Court for theSouthern District of New York in order to implement the previously announcedsale of its station group and related assets to Multicultural and its plan toseparately sell its radio network and promotions company.

 

Under theMulticultural agreement the Company will receive approximately $150million in cash for its radio stations. Completion of the transaction issubject to bankruptcy court approval, regulatory approvals and other conditions.It is expected that the transaction will be completed by the second quarter of2004. The transaction will be effected as part of a prepackaged bankruptcy inwhich holders of the Company’s 11 3⁄4% Senior Discount Notes would receiveapproximately $700 in cash per $1,000 principal amount, all secured,priority, administrative and other general unsecured claims (with exception ofsubordinated claims related to securities litigation) would receive 100% oftheir claims, and stockholders would receive the remainder currently estimatedto be between $0.47 and $1.03 per share.    Holders of 100%of the Company’s outstanding Senior Discount Notes have agreed to support thetransaction and vote in favor of the prepackaged bankruptcy.

 

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**MANAGEMENT’S DISCUSSION AND ANALYSIS OFRESULTS OF OPERATIONS AND FINANCIAL 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 that arenot 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 generateradio broadcasting revenue from sales of network advertising time, and sales oflocal and 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 discussionand analysis of our financial condition and results of operations are based onour consolidated financial statements, which have been prepared in accordancewith accounting principles generally accepted in the United States of America.The preparation 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 nine months ended September 30, 2003, ourcritical accounting policies and the nature of our estimates have not changedfrom those disclosed in our annual report on Form 10-K for the year endedDecember 31, 2002.

 

**Results of Operations**

 

**Three Months Ended September 30, 2003Compared to the Three Months Ended September 30, 2002**

 

NETREVENUE.  Net revenue increased byapproximately $1.3 million or 11% to approximately $13.3 million for the threemonths ended September 30, 2003 from approximately $12.0 million for thecomparable period in the prior year. The increase in net revenue related to increased local spot, nationalspot and network revenue of approximately $1.7 million, offset by a decrease inpromotional and merchandising services revenue associated with MASS ofapproximately $0.4 million.

 

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Directoperating expenses decreased by approximately $0.1 million or 3% to approximately$1.3 million for the three months ended September 30, 2003 fromapproximately $1.4 million for the comparable period in the prior year.  The decrease in direct operating expenseswas primarily due to the sale of assets and termination of operations at theDenver station as of February 11, 2003.

 

Selling, general and administrative expenses decreased by approximately$0.1 million or 2% to approximately $4.2 million for the threemonths ended September 30, 2003 from approximately $4.3 million for thecomparable period in the prior year. Thedecrease in selling, general and administrative expenses primarily relates to adecrease in headcount at MASS, and the sale of assets and termination ofoperations at the Denver station as of February 11, 2003.

 

Network expenses increased approximately $0.8 million or27% to approximately $3.9 million for the three months ended September 30,2003 from approximately $3.1 million for the comparable period in the prioryear.  The increase in network expenses was mainly due to an increase the costof sports rights for the 2003 Gold Cup soccer event duringJuly 2003.

 

Corporate expenses increased approximately $0.1 million or 6% toapproximately $1.0 million for the three months ended September 30, 2003from approximately $0.9 million for the comparable period in the prior year.The increase in corporate expenses was mainly due to increased insurance cost.

 

Financialadvisory, legal and restructuring fees of approximately $3.1 million relate tocosts incurred in connection with the pending transaction with Multiculturaland the bankruptcy filing.

 

Cost ofpromotion services decreased by approximately $0.3 million or 13% to $1.9million for the three months ended September 30, 2003 from approximately$2.2 million for the comparable period in the prior year.  The decrease in the cost of promotionservices was related to the variable costs associated with the decrease inMASS’ revenue.

 

Depreciation and amortization remained constant at approximately$0.8 million for the three months ended September 30, 2003 and 2002.

 

Stock optioncompensation expense decreased by approximately $0.1 million or 82% toapproximately $16,000 for the three months ended September 30, 2003 fromapproximately $0.1 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 byapproximately $0.4 million or 9% to approximately $(5.2) million for the threemonths ended September 30, 2003 from approximately $(4.8) million for thecomparable period in the prior year. Other income (expense) for the threemonths ended September 30, 2003 included interest expense of approximately$(5.3) million and interest income and other income of approximately $0.1million.  Interest expense primarilyrelates to the interest on the Senior Discount Notes.

 

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NET LOSS.  Net loss increased by approximately $2.6million or 48% to approximately $(8.1) million for the three months endedSeptember 30, 2003 from approximately $(5.5) million for the comparableperiod in the prior year.  The increasein net loss was primarily the result of financial advisory, legal andrestructuring fees of approximately $3.1 million related to costs incurred inconnection with the pending transaction with Multicultural and the bankruptcyfiling, increased operating expense of approximately $0.4 million and increasedinterest expense of approximately $0.4 million, offset by increased revenue ofapproximately $1.3 million.

 

EBITDA.  EBITDA decreased by approximately $2.1million to approximately $(2.1) million for the three months endedSeptember 30, 2003 from approximately $40,000 for the comparable period inthe prior year.  The decrease in EBITDAwas mainly the result of the financial advisory, legal and restructuring feesof approximately $3.1 million related to costs incurred in connection with thepending transaction with Multicultural and the bankruptcy filing, increasedoperating expenses (excluding depreciation and amortization) of approximately$0.3 million, offset by increased revenue of approximately $1.3 million.

 

**Nine Months Ended September 30, 2003Compared to the Nine Months Ended September 30, 2002**

 

NETREVENUE.  Net revenue increased byapproximately $2.9 million or 9% to approximately $35.3 million for the ninemonths ended September 30, 2003 from approximately $32.4 million for thecomparable period in the prior year. The increase in net revenue relates to increased revenue generated bypromotional and merchandising services associated with MASS of approximately$1.2 million, increased local spot and network revenue of approximately $2.4million, offset by a decrease in national spot revenue of approximately $0.7million.

 

Directoperating expenses remained constant at approximately $3.9 million for the ninemonths ended September 30, 2003 and 2002. Direct operating expenses are comprised of technical and programmingcosts at the O&Os.

 

Selling, general and administrative expenses remained constant atapproximately $12.6 million for the nine months endedSeptember 30, 2003 and 2002.  Selling, general and administrative expensesfor the radio broadcasting business increased by approximately $0.2 million dueto increased local sales cost.  Thisincrease was offset by a decrease in general and administrative costsassociated with MASS of approximately $0.2 million due to a reduction inheadcount.

 

Network expenses decreased by approximately $0.7 millionor 7% to approximately $9.8 million for the nine months endedSeptember 30, 2003 from approximately $10.5 million for the comparableperiod in the prior year.  The decreasein network expenses is primarily due to decreased cost of network programmingand decreased advertising spending.

 

Corporate expenses remained constant at approximately $2.9 million forthe nine months ended September 30, 2003 and 2002. Corporateexpenses are comprised of the cost of corporate management, legal and professional fees and insurance.

 

Financialadvisory, legal and restructuring fees of approximately $3.1 million relate tocosts incurred in connection with the pending transaction with Multiculturaland the bankruptcy filling.

 

Cost of promotion services increased by approximately $1.9 million or40% to $6.6 million for the nine months ended September 30, 2003 fromapproximately $4.7 million for the comparable period in the prior year.  The increase in the cost ofpromotion services was related to the variable costs associated with theincrease in MASS’ revenue, as well as higher out of pocket costs associatedwith certain client’s marketing programs.

 

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Depreciation and amortization increased by approximately $0.2million or 8% to approximately $2.5 million for the nine months endedSeptember 30, 2003 from approximately $2.3 million for the comparableperiod in the prior year. The increasein depreciation and amortization was due to the additions of fixed andintangible assets arising from signal upgrades completed during 2002.

 

Stock optioncompensation expense decreased by approximately $0.3 million or 80% toapproximately $0.1 million for the nine months ended September 30, 2003from approximately $0.4 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 byapproximately $1.1 million or 8% to approximately $(14.8) millionfor the nine months ended September 30, 2003 from approximately $(13.7)million for the comparable period in the prior year. Other income (expense) for the nine months endedSeptember 30, 2003 is mainlycomprised of interest expense of approximately $(15.2) million and interestincome and other income of approximately $0.4 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 TAXBENEFIT. The Company recorded an income tax benefit of approximately $0.1million for the nine months ended September 30, 2002.  The benefit resulted from the Company’sability to utilize a portion of its net operating tax loss carryforwards tooffset existing deferred tax liabilities. The Company did not record any benefit during the nine months endedSeptember 30, 2003.

 

NET LOSS.  Net loss increased by approximately $2.4million or 13% to approximately $21.0 million for the nine months endedSeptember 30, 2003 from approximately $18.6 million for the comparableperiod in the prior year.  The increasein net loss is mainly the result of financial advisory, legal and restructuringfees of approximately $3.1 million related to costs incurred in connection withthe pending transaction with Multicultural and the bankruptcy filing, increasedoperating expense of approximately $1.0 million, increased interest expenserelated to the Senior Discount Notes of approximately $1.3 million, decreasedincome tax benefit of approximately $0.1 million, offset by increased revenueof approximately $2.9 million and increased interest income and other income ofapproximately $0.2 million.

 

EBITDA.  EBITDA decreased by approximately $0.7million or 25% to approximately $(3.5) million for the nine months endedSeptember 30, 2003 from approximately $(2.8) million for the comparableperiod in the prior year. The decrease in EBITDA was mainly the result offinancial advisory, legal and restructuring fees of approximately $3.1 millionrelated to costs incurred in connection with the pending transaction withMulticultural and the bankruptcy filing, increased operating expenses(excluding depreciation) of approximately $0.8 million, offset by increasedrevenue of approximately $2.9 million and the gain on the sale of the Denverradio station assets of approximately $0.3 million.

 

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**Use of Non-GAAP Financial Measures**

 

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 operations or statement of cashflows; or (ii) includes amounts, or is subject to adjustments that have theeffect of including amounts, that are excluded from the comparable measure socalculated and presented. EBITDA is defined as earnings (loss) before interest,taxes, depreciation and amortization. The Company believes that thepresentation of EBITDA provides useful information to investors regarding theCompany’s financial condition because it is a commonly used financial analysistool for measuring and comparing media companies. EBITDA should not beconsidered as an alternative to net cash provided by (used in) operatingactivities as a measure of liquidity. This non-GAAP financial measure may notbe comparable to similarly titled measures used by other companies. Below is areconciliation of net loss to EBITDA for the three and nine months endedSeptember 30, 2003 and 2002:

 
|                           |   | **Consolidated**                            |       |
|--------------------------------|--------|---------------------------------------------|------------|
|                           |   | **Three  Months Ended  September 30,** |       | **Nine Months  Ended  September 30,** |   |
|                           |   | **2003**                                    |       | **2002** |   | **2003** |   | **2002** |   |
| Net loss                       |   | $                                           | (8,103,442 | ) | $ | (5,460,723 | ) | $ | (20,966,621 | ) | $ | (18,592,128 | ) |
| Adjustments:                   |   |                                        |       |   |   |   |   |   |   |
| Interest expense, net          |   | 5,187,116                                   |       | 4,772,590 |   | 15,071,872 |   | 13,694,814 |   |
| Income taxes                   |   | —                                      |       | (39,018 | ) | — |   | (117,054 | ) |
| Depreciation and  amortization |   | 828,093                                     |       | 768,192 |   | 2,448,972 |   | 2,260,142 |   |
| EBITDA                         |   | $                                           | (2,088,233 | ) | $ | 41,041 |   | $ | (3,445,777 | ) | $ | (2,754,226 | ) |

 

**Liquidityand Capital Resources**

 

The Companyhas had negative cash flows since inception. Working capital and financing forthe Company’s acquisitions to date have been provided primarily by the proceedsfrom the Company’s initial public offering, the issuance of the 113⁄4% SeniorDiscount Notes due August 1, 2006, the issuance of promissory notes,common stock and preferred stock to the Company’s shareholders and proceedsfrom the Revolving Credit Facility.

 

Net cash usedin operating activities increased by approximately $17.5 million or 369% toapproximately $22.2 million for the nine months ended September 30, 2003from approximately $4.7 million for the comparable period in the prioryear.  Net cash provided by (used in)investing activities increased by $5.8 million or 201% to $2.9 million for thenine months ended September 30, 2003 from approximately $(2.9) million forthe comparable period in the prior year. The increase of approximately $5.8million from 2002 to 2003 was primarily due to the proceeds received from thesale of the Denver radio station assets of approximately $3.4 million and adecrease in capital expenditures of approximately $2.4 million.  Net cash provided by (used in) financingactivities increased by approximately $21.3 million to approximately $19.4million for the nine months ended September 30, 2003 from approximately$(1.9) million for the comparable period in the prior year. The increase ofapproximately $21.3 million was primarily due to the Company borrowingapproximately $20.0 million under its Revolving Credit Facility during the ninemonths ended September 30, 2003, lower repayment of notes payable during2003 of approximately $0.3 million and deferred financing costs incurred during2002 of approximately $1.0 million.

 

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Capitalexpenditures primarily relate to the purchase of broadcast equipment for thenetwork and O&Os, leasehold improvements, computer equipment andtelecommunications equipment. Capital expenditures were approximately $0.5million and $2.9 million for the nine months ended September 30, 2003 and2002, respectively.  The decrease incapital expenditures is primarily due to signal upgrades completed during 2002.

 

OnOctober 3, 2003, the Company announced that it had entered into adefinitive asset purchase agreement to sell its station group to MulticulturalRadio Broadcasting, Inc., (“Multicultural”) a privately held company. TheCompany also announced that it is in discussions with third parties to sell itsradio network, as well as its promotions company, Mass Promotions,Inc.  The Company will continue to broadcast its Spanish languageprogramming and otherwise operate its business in the normal course through theclosing of the Multicultural transaction.

 

OnOctober 31, 2003, the Company and all its subsidiaries (except MassPromotions, Inc) announced that it filed voluntary petitions for relief underChapter 11 of the U.S. Bankruptcy Code. The filing was made in the U.S.Bankruptcy Court for the Southern District of New York in order to implementthe previously announced sale of its station group and related assets toMulticultural and its plan to separately sell its radio network and promotionscompany.

 

Under theMulticultural agreement the Company will receive approximately $150million in cash for its radio stations. Completion of the transaction issubject to bankruptcy court approval, regulatory approvals and otherconditions. It is expected that the transaction will be completed by the secondquarter of 2004. The transaction will be effected as part of a prepackagedbankruptcy in which holders of the Company’s 11 3⁄4% Senior Discount Notes wouldreceive approximately $700 in cash per $1,000 principal amount, allsecured, priority, administrative and other general unsecured claims (withexception of subordinated claims related to securities litigation) wouldreceive 100% of their claims, and stockholders would receive the remaindercurrently estimated to be between $0.47 and $1.03 per share.   Holders of 100% of the Company’soutstanding Senior Discount Notes have agreed to support the transaction andvote in favor of the prepackaged bankruptcy.

 

The Companywill continue operations in the normal course during the bankruptcy periodusing cash on hand and available working capital.  If the Company is unable to successfully obtain bankruptcy courtapproval and/or regulatory approvals to complete the transaction with Multicultural,it may have to adopt one or more alternatives such as selling assets. There canbe no assurance that this financing strategy could be effected on satisfactoryterms, if at all.

 

The bankruptcyfiling on October 31, 2003 constitutes an event of default under theRevolving Credit Facility.  In addition,the Company is subject to financial covenants under its Revolving CreditFacility.  There is no assurance thatthe Company will be able to comply with its financial covenants or that anyfuture covenant breaches will be waived. Any breach that is not waived couldresult in an event of default, permitting the lenders to declare amountsoutstanding and interest thereon due and payable.

 

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**Item3****.****           Quantitative andQualitative Disclosures about Market Risk**

 

Our exposure to interestrate risk arises principally from the variable rates associated with ourRevolving Credit Facility. On September 30, 2003, we had borrowings ofapproximately $20.0 million under our Revolving Credit Facility that weresubject to variable rates. Based on amounts outstanding as ofSeptember 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 $0.2 million on an annual basis.

 

**Item4****.****           Controls and Procedures**

 

The Company’sChief Executive Officer and Chief Financial Officer, based on their evaluationof the Company’s disclosure controls and procedures at September 30, 2003,have concluded that such disclosure controls and procedures were effective toensure that material information relating to the Company and required to bedisclosed by the Company has been made known to them and has been recorded,processed, summarized and reported timely. During the quarter endedSeptember 30, 2003, there have not been any significant changes in theCompany’s internal controls or in other factors that could significantly affectthese controls subsequent to the date of evaluation.

 

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**PARTII****- OTHER INFORMATION**

 

**Item 6****.****             Exhibits and Reports on Form 8-K.**

 

(a) Exhibits required 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)         Reportson Form 8-K

 

OnAugust 4, 2003, the Company filed a report on Form 8-K reporting on Item5.

 

OnAugust 18, 2003, the Company filed a report on Form 8-K reporting on Item5.

 

OnAugust 29, 2003, the Company filed a report on Form 8-K reporting on Item5.

 

SIGNATURES

 

Pursuant to the requirements ofthe Securities Exchange Act of 1934, the Registrant has duly caused this reportto be signed on its behalf by the undersigned thereunto duly authorized.

 

 
|                                                       | Radio Unica  Communications Corp. |
|------------------------------------------------------------|-----------------------------------|
|                                                       |                              |
|                                                       | By:                               |   | /s/ Steven  E. Dawson |   |
|                                                       |                              | Steven E.  Dawson |   |
|                                                       |                              | Chief  Financial Officer |   |
|                                                       |                              |
|                                                       |                              |
| Date:     November 14,  2003 |

 

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