UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1998 COMMISSION FILE NUMBER: 0-24075
NBG RADIO NETWORK, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 88-0362102
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
520 SW SIXTH AVENUE, SUITE 750
PORTLAND, OREGON 97204
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 802-4624
SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
None
SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
Common Stock, par value $.001 per share
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-KSB. / /
The issuer's revenues for its most recent fiscal year were $2,208,599.
Based on the closing sales price of the Common Stock on February 25, 1999,
the aggregate market value of the voting stock of registrant held by
non-affiliates was $33,863,097.
The registrant has one class of Common Stock with 10,490,700 shares
outstanding as of February 25, 1999.
Documents Incorporated By Reference: None
Transitional Small Business Issuer Disclosure Format (check one):
YES / / NO /X/.
<PAGE>
NBG RADIO NETWORK, INC.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business.................................. 1
Item 2. Description of Property.................................. 4
Item 3. Legal Proceedings........................................ 5
Item 4. Submission of Matters to a Vote of Security Holders...... 5
PART II
Item 5. Market for Common Equity and Related Stockholder
Matters .............................................. 5
Item 6. Management's Discussion and Analysis or Plan of
Operation............................................. 7
Item 7. Financial Statements..................................... 12
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 13
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of
the Exchange Act...................................... 13
Item 10. Executive Compensation................................... 16
Item 11. Security Ownership of Certain Beneficial Owners
and Management........................................ 18
Item 12. Certain Relationships and Related Transactions........... 18
Item 13. Exhibits and Reports on Form 8-K......................... 19
<PAGE>
PART I
------
ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------
GENERAL
- -------
Nostalgia Broadcasting Corporation was incorporated in March 1996 under the
laws of the State of Nevada. In January 1998, Nostalgia Broadcasting
Corporation changed its name to NBG Radio Network, Inc. (the "Company"). The
Company's principal executive offices are located at 520 SW 6th, Suite 750,
Portland, OR 97204, and its telephone number is (503) 802-4624.
The Company creates, produces, and distributes national radio programs and
other services to the radio industry. The Company offers radio programs to the
industry in exchange for commercial broadcast time, which the Company sells to
national advertisers. The Company has grown from two programs and 150 radio
station affiliates at its inception in 1996 to currently offering 31 programs to
over 1,700 radio station affiliates. The group of radio stations which contract
with the Company to broadcast a particular program constitutes a radio network.
The Company derives a significant part of its revenue from selling the
commercial broadcast time on its radio networks to advertisers desiring national
coverage. The Company also derives a portion of its revenues from selling its
marketing, promotion, and software services. These services are sold throughout
the radio industry to enhance current radio station affiliates' revenues and to
add to the growing radio station network of the Company.
The Company currently produces 31 network programs targeting the most
popular radio formats, including Adult Contemporary, Album Oriented Rock,
Contemporary Hit Radio, Country, News/Talk, and Oldies. The Company produces
both short form and long form programs. Short form features, such as SLICE OF
LIFE WITH RICHARD SIMMONS AND TEEIN' IT UP WITH PETER JACOBSEN, are daily two to
three minute vignettes. Long form programs, such as ABSOLUTELY 80'S WITH NINA
BLACKWOOD AND WORLD ATOMIC RHYTHM PARTY WITH SHADOE STEVENS, are weekend
programs that range from one to four hours in length. The Company sells the
commercial broadcast time inside of these programs.
The Company intends to aggressively expand its operations over the next
twelve months. Beginning with radio syndication, the Company's number one goal
is to enhance the value of its current network. In order to do this, the Company
will increase its marketing efforts to radio station across the United States.
The Company currently has a network of over 1,700 radio station affiliates and
with over 10,000 radio stations in the United States the Company anticipates
significantly expanding its network. There can be no assurances that the
Company will be able to expand its operations.
Another integral part of expanding the Company's network over the next
twelve months will be the addition of new programming. Radio stations rely on
network radio programming and distributors, such as the Company, to provide
national quality programming and other services to enhance their existing
programming and ratings. Limited financial and creative resources, among other
matters, typically prevent most radio stations from producing their own national
quality programming. The Company intends to offer additional programming over
the next twelve months through internal development as well as the acquisition
of businesses or assets that complement the Company's operations.
The creation of a radio network allows the Company to sell the acquired
commercial broadcast inventory to advertisers desiring national coverage. Rates
for the sale of network advertising are
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established on the basis of audience delivery or ratings and the demographic
composition of the listening audience. Thus, if the Company expands its network,
as previously discussed, it will be able to charge more for broadcast commercial
time on the network. The Company sells commercial broadcast time by guaranteeing
certain ratings and demographics. There can be no assurance that the guarantee
will be achieved. If the radio network on which the commercial broadcast time is
sold does not achieve the guarantee, the Company may be obligated to offer the
advertiser additional advertising time on the same radio network or on an
alternate radio network. These "make goods" or "bonus spots" are the predominant
means whereby the Company satisfies such obligations to advertisers.
Alternatively, the Company could be obligated to refund or credit a portion of
the advertising revenue derived from such sales. Historically the Company has
not had to refund any cash.
According to the National Association of Broadcasters (NAB) there are
approximately 10,000 commercial radio stations in the United States. The Company
currently has broadcast commercial time on over 1,700 of these radio stations.
Radio is one of the most cost effective forms of advertising given its wide
reach and low cost in comparison to print and television media and in 1998 over
$15 billion was spent on radio, an increase of 12% over 1997. Radio advertising
is attractive to advertisers for a variety of reasons: short lead time between
commercial production and broadcast time, low cost of commercial production, and
most importantly the fact that most radio listening occurs away from home,
closer to the point of purchase.
Radio stations attempt to develop formats, such as news/talk, music, or
other types of entertainment programming, in order to appeal to a target
listening audience that will attract local, regional, and national advertisers
to their station. However, due to consolidation in the industry, most radio
stations do not have the creative and financial resources to produce nationally
accepted programming. As a result, radio stations look to syndicators, such as
the Company, to enhance their existing local programming. As a national network
the Company licenses radio stations to air the Company's program in exchange for
commercial broadcast time on the station. The Company then resells the
advertising time to advertisers requiring national coverage. The commercial
broadcast time may vary from market to market within a specified time period
depending on the requirements of the particular radio station. The advertising
rates are based upon audience ratings for the specific demographic the
advertiser is trying to reach. These ratings are determined by Arbitron Research
Company who periodically measures the percentage of the radio audience in a
market area listening to a specific radio station during a specific time period.
In January 1999 the Company's wholly owned subsidiary, NBG Solutions, Inc.
("Subsidiary"), acquired the assets of MTek Technical Services, Inc. in order to
combine the product and service offerings of MTek Technical Services, Inc. with
the Company's CustomLink division. The Subsidiary offers flexible and
customizable kiosk platform solutions to a broad range of customers. Directly
and throughout a network of strategic partnerships, the Subsidiary offers
customers a single master arrangement to design, program, integrate, and service
installed kiosks. Kiosk, on a stand alone or connected basis (through internet
or phone lines), allows sponsors and advertisers to cost effectively distribute
timely information and can facilitate direct interaction with consumers
including E-commerce through credit or smart cards. In addition, the Subsidiary
is evaluating and developing ancillary technological marketing services to
complement and support radio entertainment clients. These services include a
"Preferred Listener" consumer data tracking system and certain developing web
based systems including custom site hosting/development and audio streaming.
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NEW PRODUCTS
- ------------
The Company's newest long form program, World Atomic Rhythm Party,
featuring Shadoe Stevens, is developing quickly. The program is projected to hit
the airwaves in April 1999. The recording and production studio in Los Angeles
has been completed as well as the production for all of the demos for the
program. Creative and directional discussions are complete, and the staff is
focusing on content development. Besides targeting the new program to 1,500
radio station formats in over 270 U.S. metro markets, the Company also plans to
expand into international radio markets, internationally distributed satellite
radio, and broadcasting over the World Wide Web.
Beginning in 1999 the Company kicked off another new product aimed toward
helping radio stations increase their bottom line. The new product, RESPEC
(Ready Engineered Speculative Spots), is a compact disc with 20 plus fully
produced commercial donuts which contain production elements (music and copy)
that are customized at the local level by the station's staff. The radio station
sales team can present RESPEC spots to the prospective client and assist the
client in selecting the spot that works best for the prospective product or
service. At that point, the station will then use local voice talent to input
the client's customized information within the RESPEC copy and music bed. The
process allows the station to afford a high quality commercial with quick
turnaround time. Recent consolidation in the industry has placed a strong demand
on radio station sales departments to generate more revenue than ever before. At
the same time, staff downsizing has created a demand on the productivity of in
house creative departments. The Company has responded by providing a product
which it believes responds to this new market reality. The product is issued
once a quarter with the next compact disc scheduled to ship in March 1999.
To complement its radio advertising revenue the Company intends to publish
a travel magazine, "Travel Exclusive" (the "Publication"), highlighting four and
five star destinations. The complement of radio and print advertising is very
attractive to advertisers. In addition, the Publication is attractive to the
Hotel destinations because it is offered on a barter basis. In exchange for
a listing in the Publication the Company receives room nights at these
destinations. These room nights are placed in the Company's inventory and sold
for cash or used internally to reduce Company travel costs. The Company intends
to publish the magazine on a quarterly basis.
COMPETITION
- -----------
Competition for radio advertising is very intense. The industry is made up
of a variety of competitive forces. There are ownership groups, which own blocks
of radio stations across the industry, syndicators, like the Company, that offer
programming and marketing services to radio stations, and independent producers
and distributors that offer programs or services. Several of the Company's
syndicating competitors are also associated with major radio station group
owners. In addition to this, they have recognized brand names and will pay
compensation to the radio station to broadcast the network's commercials. The
Company's largest competitors, which are all also associated with ownership
groups, are AM/FM Radio Networks, Premiere Radio Networks, CBS Radio Networks,
and ABC Radio. The Company estimates that these competitors account for about
80% of the network advertising revenues. The Company is a leader of the
syndication companies not associated with an ownership group. The principal
competitive factors in the radio industry are the quality and creativity of
programming with the ability to provide advertisers with a cost-effective method
of reaching the target
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<PAGE>
demographic. In this respect, the Company has positioned itself by adding top
entertainment and sports stars like Richard Simmons, Shadoe Stevens, Nina
Blackwood, Peter Jacobsen, and Steve Jones to its lineup of program hosts. The
Company's principal operating strategy is to continue to provide high quality
programming to the most popular formats. The Company has developed and expanded
its network through internal operations and will look to continue this in the
future as well as acquire assets and businesses that complement the Company's
operations.
GOVERNMENT REGULATION
- ---------------------
Radio broadcasting and station ownership are regulated by the Federal
Communication Commission (FCC). The Company, as a producer and distributor of
radio programs, is generally not subject to regulation by the FCC.
SIGNIFICANT CUSTOMERS
- ---------------------
The Company's customers are located throughout the United States. Three of
the Company's customers represented 10% or more of the Company's revenue -
Associated Reciprocal Traders, Inc. accounted for $654,520, or 30% of the
Company's revenues, ITEX Corporation accounted for $244,595, or 11% of the
Company's revenues, and Ogilvy & Mather accounted for $267,453, or 12% of the
Company's revenues.
EMPLOYEES
- ---------
As of February 18, 1999, the Company had 21 full time employees. In
addition, the Company maintains continuing relationships with over 40
independent hosts, writers, and producers. The Company is not party to any
collective bargaining agreements. The Company believes its relationship with its
employees and independent contractors is good.
ITEM 2. DESCRIPTION OF PROPERTY
- --------------------------------
The Company leases approximately 6,500 square feet of office space in
Portland, Oregon in which its corporate headquarters, programming and Subsidiary
are located. The lease expires on March 31, 2003 and the annual base rent is
approximately $76,000. The Company also has a sales office in New York which it
rents in exchange for advertising time on the network.
The Company anticipates that it may require expansion of its current
facilities in the coming year. As a result, the Company has obtained an option
to lease an additional 3,000 square feet of space in its current building.
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<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
From time to time, the Company may be party to various legal actions and
complaints arising in the ordinary course of business. At the present time, the
Company is not a party any such legal actions or complaints which, if adversely
determined, would have a material adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
During the fourth quarter of 1998, no matters were submitted to a vote of
security holders.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- -----------------------------------------------------------------
The Company's Common Stock has been quoted on the OTC Bulletin Board since
January 23, 1998. Prior to that there was no market for the Common Stock. The
following table sets forth the range of high and low bid prices of the Company's
Common Stock for the quarters indicated through the fourth quarter of 1998:
<TABLE>
<CAPTION>
Calendar Year High Bid Low Bid
- ------------- -------- -------
1997:
- ----
<S> <C> <C>
First quarter N/A N/A
Second quarter N/A N/A
Third quarter N/A N/A
Fourth quarter N/A N/A
1998*:
- ----
First quarter** .21 .15
Second quarter .25 .17
Third quarter 2.06 .31
Fourth quarter 1.38 .56
* The prices have been adjusted for a 3-for-1 stock split effective on July 31,
1998.
** No quotations available prior to January 23, 1998.
</TABLE>
The quotations reflect inter-dealer prices, without retail markups, markdowns,
or commissions and do not necessarily represent actual transactions. The
quotations were derived from the OTCBB quotation system. The Company estimates
that as of January 30, 1999 there were approximately 300 holders of record of
the Common Stock.
DIVIDENDS
- ---------
The Company has never declared or paid a cash dividend on their Common
Stock. The Company currently intends to retain all earnings to finance growth of
the Company's business and does not anticipate paying any cash dividends in the
foreseeable future on its Common Stock. There are no restrictions on dividend
payments.
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<PAGE>
UNREGISTERED SECURITIES
- -----------------------
The following unregistered securities have been issued by the Company
during the last three fiscal years:
<TABLE>
<CAPTION>
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Name of
Principal
Title and Amount of Underwriter/
Securities Underwriting Name or Class of
Granted/Exercise Price Discounts or Persons who Consideration
Date of Grant if Applicable Commissions Received Securities Received
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
<S> <C> <C> <C> <C>
March 1996 500,000/Common None/None Investor/Officer $150,000
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
September 1996 600,000/Common None/None Private Placement $300,000
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
September 1996 10,000/Common None/None Acquisition $5,000*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Employees and
January 1998 600,000/Options None/None board members $ -0-
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued for
hosting and
January 1998 60,750/Common None/None producing services $36,450*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued for
January 1998 65,000/Common None/None printing services $50,000*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued for
January 1998 3,000/Common None/None consulting services $6,000*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued for
investor relation
January 1998 9,000/Common None/None services $9,000*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued in
exchange for
January 1998 20,260/Common None/None outstanding notes $20,260
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued in
exchange for
January 1998 199,960/Common None/None outstanding notes $99,980
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued for
hosting and
June 1998 34,000/Common None/None writing services $55,250*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
July 1998 250,000/Units(1) None/None Private Placement $500,000
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
July 1998 500,000/Units(1) None/None Private Placement $1,500,000
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued for
July 1998 48,000/Common None/None printing services $144,000*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
Shares issued for
hosting and
July 1998 12,700/Common None/None producing services $38,100*
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
July 1998 584,230/Common None/None Warrants exercised $584,230
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
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July 1998 6,993,800/Common None/None Shareholders -
3-for-1 stock split $ -0-
- ------------------------------ ------------------------ ------------------ -------------------- ---------------------
* Value of consideration estimated.
<FN>
<F1> Units consist of one share of Common Stock and a warrant to purchase one share of Common Stock at prices ranging from
$2.25 per share to $3.50 per share.
</FN>
</TABLE>
The above unregistered securities were sold or granted in reliance on an
exemption from the registration requirements of the Securities Act of 1933, as
amended ("Act") under Section 4 (2) of the Act and/or Regulation D promulgated
under the Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------------------------------------------------------------------
FORWARD LOOKING STATEMENTS
- --------------------------
The information set forth below relating to matters that are not historical
facts are "forward looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934 and involve risks and uncertainties which could
cause actual results to differ materially from those contained in such forward
looking statements. Such risks and uncertainties include, but are not limited
to, the following:
o A decline in national and regional advertising
o Preference by customers of other forms of advertising such as newspapers
and magazines, outdoor advertising, network radio advertising, yellow page
directories and point of sale advertising
o Loss of executive management personnel
o Ability to maintain and establish new relations with radio stations to
place its programs
o Ability to predict public taste with respect to entertainment programs
YEARS ENDED NOVEMBER 30, 1998 AND 1997
- --------------------------------------
The following discussion should be read in conjunction with the audited
financial statements for the years ended November 30, 1998 and 1997 and the
related notes thereto.
REVENUES. Total revenues for 1998 were $2.20 million compared to revenues
of $.80 million for 1997, representing an increase of $1.4 million, or 175%.
This increase was principally due to increased advertising sales from the
internal development of new programs and partnering with other radio programmers
to expand the Company network. In addition, the Company doubled the number of
radio station affiliates on its network, which allowed the Company to sell more
broadcast commercial time at a higher spot rate.
DIRECT COSTS. Direct costs for 1998 and 1997 were $.37 million and $.18
mllion, respectively, representing an increase of $.19 million, or 106%. As a
percentage of total revenues, direct costs were 16.7% and 22.0% for 1998 and
1997, respectively, representing a decrease of 5.3%. Direct costs consist
primarily of commissions paid to advertising agencies. The increase in absolute
dollars in 1998 resulted from the increase in advertising revenues. The decrease
in direct costs in 1998 as a percentage of total
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revenues resulted from the Company increasing the number of clients that do not
charge an advertising agency commission.
GROSS MARGIN. Gross margin for 1998 was $1.84 million, an increase of $1.21
million, or 192%, over 1997. The increased operating income was principally due
to increased net advertising revenues resulting from the internal development of
new radio programs and the partnering with other radio programmers to expand the
Company network. In addition, lower overall direct costs relative to total
revenues contributed to the higher gross margin.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expense in
1998 was $2.04 million, representing an increase of $1.21 million, or 146%, over
1997. A portion of this increase was due to wages and employee benefit expense
increasing $.35 million in 1998. The increase in absolute dollars is a result of
the staff size doubling over the fiscal year and the costs associated with
increasing the number of programs the Company syndicates. As a percentage of
total revenues, general and administrative expense was 92% and 104% for 1998 and
1997, respectively. The decrease as a percentage of total revenues was due to
more effective marketing and promotion campaigns leading to a significant
increase in total revenue.
INCOME TAXES. Provision for income taxes for 1997 was $.004 million. Due to
loss carryforwards, there was no provision for income taxes in 1998.
NET LOSS AND EARNINGS PER SHARE. Net loss for 1998 and 1997 was $.20
million or $.03 per share, and $.13 million or $.06 per share, respectively. The
loss for 1998 was mainly due to increased depreciation and amortization expense.
In 1998 management analyzed certain inventory items acquired from ITEX
Media Services, Inc. consisting of old time radio programs and music production
libraries, and determined that the items should be reclassified from inventory
to goodwill. At the time the items were acquired, management intended to market
and sell these products to radio stations and the listening public. However,
management later determined to use the items as bonus and promotional items for
the radio station affiliates carrying the Company's programs instead of selling
the items. As a result, management reclassified the items from inventory to
goodwill. This reclassification resulted in additional depreciation and
amortization expense of $75,000.
Earnings per share, which includes the dilutive effects of options and
warrants to purchase common stock, are based upon 7,222,359 and 3,330,000 shares
outstanding on November 30, 1998 and 1997, respectively. The Company declared a
three for one stock split in June of 1998 payable to all shareholders of record
as of July 31, 1998. Per share earnings for 1997 were adjusted to reflect the
stock split.
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Historically, the Company has financed its cash flow requirements through
cash flows generated from operations and financing activities. The Company's
working capital at November 30, 1998 was $1.86 million compared to $.11 million
at November 30, 1997. The increase in working capital was primarily due to an
increase in cash and cash equivalents resulting from the proceeds received in
connection with the sale of common stock.
In June 1998 the Company completed a private placement of 250,000 units at
$2.00 per unit. Each unit consisted of one share of common stock and one warrant
to purchase one share of common stock, exercisable immediately. The warrants are
exercisable for $2.25 from June 1998 to January 31, 2000. The warrants then
become exercisable for $2.50 after February 1, 2000 and expire on July 31, 2001.
The Company received proceeds of $500,000 from the private placement.
In July 1998 the Company completed a second private placement of 500,000
units at $3.00 per unit. Each unit consisted of one share of common stock and
one warrant to purchase one share of common stock, exercisable immediately. The
warrants are exercisable at $3.50 and expire on July 31, 1999. The Company
received proceeds of $1,500,000 from the private placement.
The Company declared a three for one stock split in June of 1998 payable to
all shareholders of record as of July 31, 1998. The offerings discussed above
and the warrant prices indicated do not reflect the stock split.
The Company has a long term note payable to ITEX Corporation with an
outstanding balance of $478,596 as of November 30, 1998. The original balance of
the note was $600,000. The terms of the note require the Company to pay $120,000
per annum plus interest calculated at 6%. The term of the note is five years and
the last payment is scheduled to be made on May 5, 2001. The note is secured by
the Company's equipment and accounts receivable.
Management believes that its available cash together with operating
revenues will be sufficient to fund the Company's working capital requirements
through November 30, 2000. The Company's management further believes it has
sufficient liquidity to implement its expansion and acquisition strategies.
YEAR 2000
- ---------
The Year 2000 issue exists because many computer programs use two digit
date fields to define the applicable year rather than four digit date fields.
Because of this, computer equipment and software (sometimes referred to as
"information technology" or "IT") and devices with embedded technology
(sometimes referred to as "non-IT") that are time-sensitive may recognize a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, production delays or breakdowns, a temporary inability to
process transactions, send invoices, or engage in other normal business
activity. Incomplete or untimely resolution of the Year 2000 issue by the
Company or important suppliers or customers of the Company could have a
materially adverse effect on the Company's business, financial condition or
results of operations.
The Company's approach to the Year 2000 issue is discussed below. In
discussing the Year 2000 issue, the Company necessarily makes certain
forward-looking statements. There can be no assurance
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<PAGE>
that actual results will not differ materially from the projections contained in
the forward-looking statements. Factors which may cause actual results to differ
materially include, but are not limited to:
o failure of Company personnel and outside consultants to properly assess and
address the Company's Year 2000 issues,
o inaccurate or incomplete responses to questionnaires sent to third parties
or inaccurate disclosure by third parties regarding the Year 2000 issue,
o failure to address Year 2000 issue with all vendors, including utility
vendors, and customers,
o infrastructure failures, such as disruptions in the supply of electricity,
gas, water or communications services, or major institutions, such as the
government and banking systems, and
o failure of the Company to accurately predict the costs to address the Year
2000 issue or the lost revenues related to interruption in the Company's or
its customers' businesses.
State of Readiness. The Company, in conjunction with outside consultants,
has made an assessment of the effect of the Year 2000 issue on its IT systems.
The Company does not have any non-IT systems. The Company has identified certain
modifications to its IT systems which are necessary to address the Year 2000
issue and has fully implemented those modifications. Based on this assessment
and implementation of the modifications discussed above, the Company believes
its IT systems will properly recognize calendar dates beginning in the year
2000. The Company has not evaluated its customer's or supplier's Year 2000
readiness.
Costs to Address Year 2000 Issue. To date, the Company has incurred costs
of approximately $5,000 and the Company estimates its total cost to become Year
2000 compliant will be approximately $10,000. Accordingly, the Company expects
the costs to address the Year 2000 issue will not have a material adverse
financial impact on the Company's financial condition or results of operations.
However, there can be no assurance that additional remediation and costs will
not be identified.
Risks of the Company's Year 2000 Issue. The most reasonably likely worst
case scenario for the Company would involve an inability of radio stations to
broadcast advertising spots or the Company's programs. The Company is unable to
quantify the effect of such scenario.
Company's Contingency Plan. Based on the Company's assessment of the Year
2000 issue, the Company has not developed and does not intend to develop a
contingency plan to address the reasonably likely worst case scenario.
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ITEM 7. FINANCIAL STATEMENTS
NBG RADIO NETWORK, INC.
(FORMERLY NOSTALGIA BROADCASTING CORPORATION)
INDEPENDENT AUDITORS' REPORTS
AND
FINANCIAL STATEMENTS
NOVEMBER 30, 1998 AND 1997
CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITOR'S REPORT, NOVEMBER 30, 1998 F-1
INDEPENDENT AUDITOR'S REPORT, NOVEMBER 30, 1997 F-2
FINANCIAL STATEMENTS
Balance sheets F-3
Statements of operations F-4
Statement of stockholders' equity F-5
Statements of cash flows F-6
Notes to financial statements F-8
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<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
NBG Radio Network, Inc.
We have audited the accompanying balance sheet of NBG Radio Network, Inc.
(formerly Nostalgia Broadcasting Corporation) as of November 30, 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit. The financial statements of the
Company as of November 30, 1997, were audited by other auditors whose report
dated March 26, 1998, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of November 30,
1998, and the results of its operations and cash flows for the year then ended
in conformity with generally accepted accounting principles.
As discussed in Note 3 to the financial statements, the amortization of
purchased goodwill had not been recorded for the year ended November 30, 1997.
In 1998, an adjustment was made to reflect the proper amortization of goodwill
for the year ended November 30, 1997.
/s/Moss Adams, LLP
Portland, Oregon
January 25, 1999
F-1
<PAGE>
ANDERSEN ANDERSEN & STRONG, L.C. 941 East 3300 South, Suite 202
Salt Lake City, Utah 84106
Telephone 801-486-0096
Fax 801-486-0098
E-mail [email protected]
CERTIFIED PUBLIC ACCOUNTANTS AND BUSINESS CONSULTANTS
- -----------------------------------------------------
Member SEC Practice Section of the AICPA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Nostalgia Broadcasting Corporation
Portland, Oregon
We have audited the accompanying consolidated balance sheets of Nostalgia
Broadcasting Corporation and subsidiary as of November 30, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the year ended November 30, 1997 and the period March 27, 1996 (date
of inception) to November 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Nostalgia
Broadcasting Corporation and subsidiary as of November 30, 1997 and 1996, and
the results of their operations and cash flows for the year ended November 30,
1997 and the period March 27, 1996 (date of inception) to November 30, 1996, in
conformity with generally accepted accounting principles.
/s/Andersen Andersen & Strong, L.C.
March 26, 1998
Salt Lake City, Utah
F-2
<PAGE>
NBG RADIO NETWORK, INC.
(FORMERLY NOSTALGIA BROADCASTING CORPORATION)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
NOVEMBER 30,
-----------------------------------------
1998 1997
------------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,855,666 $ 112,693
Barter exchange receivables 241,678 -
Accounts receivable, net of allowance for doubtful accounts
of $1,200 in 1998 and 1997 1,175,330 213,885
Related-party receivable 14,462 14,340
Deferred tax asset - 468
------------------- -----------------
Total current assets 3,287,136 341,386
------------------- -----------------
PROPERTY AND EQUIPMENT, net of accumulated depreciation 136,171 92,278
DEPOSITS 3,250 -
GOODWILL, net of amortization 587,750 677,191
------------------- -----------------
Total assets $ 4,014,307 $ 1,110,855
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable $ 176,202 $ 144,142
Accrued liabilities 67,886 108,412
Current portion of long-term debt 245,248 251,433
------------------- -----------------
Total current liabilities 489,336 503,987
------------------- -----------------
OTHER LIABILITIES
Long-term debt, net of current portion 240,000 387,808
Deferred income tax liability 9,789 10,327
------------------- -----------------
Total other liabilities 249,789 398,135
------------------- -----------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 20,000,000 shares authorized;
10,490,700 and 1,110,000 shares issued and outstanding at
November 30, 1998 and 1997, respectively 10,490 1,110
Additional paid-in-capital 3,930,212 493,363
Retained deficit (484,763) (285,740)
Stock subscription receivable (180,757) -
------------------- -----------------
Total stockholders' equity 3,275,182 208,733
------------------- -----------------
Total liabilities and stockholders' equity $ 4,014,307 $ 1,110,855
=================== =================
</TABLE>
See accompanying notes.
F-3
<PAGE>
NBG RADIO NETWORK, INC.
(FORMERLY NOSTALGIA BROADCASTING CORPORATION)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-----------------------------------------
1998 1997
------------------- ------------------
<S> <C> <C>
REVENUES
Advertising income $ 2,188,056 $ 802,695
Interest income 20,543 -
------------------- ------------------
Total revenues 2,208,599 802,695
DIRECT COSTS 369,155 176,650
------------------- ------------------
GROSS MARGIN 1,839,444 626,045
------------------- ------------------
GENERAL AND ADMINISTRATIVE EXPENSES
Wages and employee benefits 648,026 295,587
Talent fees 343,994 53,218
Travel and entertainment 201,262 39,691
Consulting and professional 170,194 72,854
Advertising 127,848 26,348
Depreciation and amortization 118,265 94,161
Postage and printing 94,463 39,825
Rent 68,696 47,206
Interest 40,205 26,075
Office supplies 40,732 22,582
Telephone 34,314 9,456
Other expenses 150,468 103,132
------------------- ------------------
Total general and administrative expenses 2,038,467 830,135
------------------- ------------------
Net loss before provision for income taxes (199,023) (204,090)
Provision for income taxes - (4,413)
------------------- ------------------
Net loss $ (199,023) $ (208,503)
=================== ==================
Basic loss per share of common stock $ (0.03) $ (0.06)
=================== ==================
Weighted average number of shares outstanding 7,222,359 3,330,000
=================== ==================
</TABLE>
See accompanying notes.
F-4
<PAGE>
NBG RADIO NETWORK, INC.
(FORMERLY NOSTALGIA BROADCASTING CORPORATION)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL STOCK
PAID-IN RETAINED SUBSCRIPTION
COMMON STOCK CAPITAL DEFICIT RECEIVABLE TOTAL
------------------------ ---------- ------------ -------------- -----------
SHARES AMOUNT
----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, November 30, 1996 1,110,000 $ 1,110 $ 493,363 $ (77,237) $ - $ 417,236
Net loss for the - - - (208,503) - (208,503)
----------- --------- ------------- ------------- ------------- -------------
BALANCE, November 30, 1997 1,110,000 1,110 493,363 (285,740) - 208,733
Issuance of common shares for
services 232,250 232 337,968 - (180,757) 157,443
Issuance of common shares for
cancellation of notes payable 220,220 220 120,020 - - 120,240
Private placement of common
Stock 750,000 750 1,999,250 - - 2,000,000
Exercise of options and warrants 1,184,430 1,184 986,605 - - 987,789
3 for 1 stock split 6,993,800 6,994 (6,994) - - -
Net loss for the year - - - (199,023) - (199,023)
----------- --------- ------------- ------------- ------------- -------------
BALANCE, November 30, 1998 10,490,700 $ 10,490 $ 3,930,212 $ (484,763) $ (180,757) $ 3,275,182
=========== ========= ============= ============= ============= ==============
</TABLE>
See accompanying notes.
F-5
<PAGE>
NBG RADIO NETWORK, INC.
(FORMERLY NOSTALGIA BROADCASTING CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
-----------------------------------------
1998 1997
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (199,023) $ (208,503)
Adjustments to reconcile net loss to cash from operating activities:
Depreciation and amortization 118,265 94,161
Common stock shares issued for services 157,443 -
Deferred tax liability (70) 4,413
Changes in assets and liabilities:
Barter exchange receivables (241,678) -
Accounts receivable (961,445) (140,421)
Related-party receivables (122) (14,340)
Deposits (3,250) -
Accounts payable 32,060 61,724
Accrued liabilities (40,526) 81,348
------------------- ------------------
Net cash from operating activities (1,138,346) (121,618)
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of common stock $ 2,987,789 $ -
Acquisition of property and equipment (72,717) (70,498)
------------------- ------------------
Net cash from investing activities 2,915,072 (70,498)
------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term debt - 99,980
Payments on long-term debt (33,753) (70,631)
------------------- ------------------
Net cash from financing activities (33,753) 29,349
------------------- ------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,742,973 (162,767)
CASH, beginning of year 112,693 275,460
------------------- ------------------
CASH, end of year $ 1,855,666 $ 112,693
=================== ==================
</TABLE>
See accompanying notes.
F-6
<PAGE>
NBG RADIO NETWORK, INC.
(FORMERLY NOSTALGIA BROADCASTING CORPORATION)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30,
1998 1997
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 43,176 $ 5,819
=================== ==================
Cash paid for income taxes $ 70 $ -
=================== ==================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for cancellation of long term debt $ 120,240 $ -
=================== ==================
Issuance of common stock for services, net of stock
subscription receivable $ 157,443 $ -
=================== ==================
Payment of long term debt and acquisition of goodwill in
barter exchange transactions $ - $ 194,177
=================== ==================
Acquisition of fixed assets with barter exchange funds $ - $ 4,154
</TABLE>
See accompanying notes.
F-7
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND BUSINESS ACTIVITY
Nostalgia Broadcasting Corporation was organized under the laws of
the State of Nevada on March 27, 1996. In January 1998,
shareholders of Nostalgia Broadcasting Corporation approved its
name change to NBG Radio Network, Inc. (the Company). The Company
is involved in the acquisition, creation, and syndication of
national radio programming and music production and distribution.
Substantially all operations are conducted from the Company's
headquarters in Portland, Oregon.
The Company's customers are located throughout the United States.
Five customers accounted for approximately $1,438,000 or 66% of
sales for the year ended November 30, 1998, and approximately
$936,400 or 80% of accounts receivable as of November 30, 1998.
Seven customers accounted for approximately $624,000 or 78% of
sales for the year ended November 30, 1997, and approximately
$212,000 or 99% of accounts receivable as of November 30, 1997.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
instruments purchased with original maturities of less than three
months to be cash equivalents.
At November 30, 1998, the Company held $988,741 in time
certificates of deposit in foreign bank accounts. These accounts
are not insured by the Federal Deposit Insurance Corporation.
BARTER EXCHANGE RECEIVABLES - The Company holds barter exchange
accounts with ITEX Corporation, International Barter Corporation,
and Illinois Trade Association, enterprises specializing in the
development and maintenance of a barter network for its
participating members. The Company also holds limited occupancy
rights for available rooms at vacation and resort hotels for which
it provides advertising services in exchange. Revenues and expenses
from these barter exchange transactions are recognized when
services are received or provided. Receivables are recognized at
fair value when services are provided before exchange merchandise
or services are received or used. Liabilities are recognized when
exchange merchandise or services are received or used before
services are provided.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets which range from 7 to 31
years. Maintenance and repairs are charged to operations when
incurred. Betterments and renewals are capitalized.
F-8
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
GOODWILL - Purchased goodwill represents the excess of cost over
the fair value of net assets acquired by the Company from ITEX
Media Services, Inc., in 1996. Goodwill is being amortized over a
ten-year period using the straight-line method.
REVENUE RECOGNITION - The Company recognizes revenue from the sale
of advertising, music and radio programs when the buyer has made an
unconditional commitment to secure air time through the Company's
national network and the Company has fulfilled its commitment to
provide radio advertising during the secured time.
INCOME TAXES - The Company follows the asset and liability method
of accounting for income taxes whereby deferred tax assets and
liabilities are recognized for the future tax consequences of
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
MARKETING AND ADVERTISING COSTS - All costs relating to marketing
and advertising are expensed in the year incurred. Amounts expensed
for the years ended November 30, 1998 and 1997, were $127,848 and
$26,348, respectively.
STOCK OPTION PLAN - The Company applies Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees," and
related interpretations in accounting for its stock option plan.
Accordingly, no compensation expense has been recognized for its
stock-based incentive plan. Had compensation cost for the Company's
stock option plan been determined based upon the fair value at
grant date for awards under the plan consistent with methodology
prescribed under Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," there would have
been no material impact upon the financial statements.
LOSS PER SHARE OF COMMON STOCK - Basic loss per share of common
stock is based upon the weighted average number of shares
outstanding during the period adjusted by the 3-for-1 stock split
in July 1998. Diluted losses per share are not provided as the
common stock equivalents would be antidilutive in the computation.
ESTIMATES AND ASSUMPTIONS - Management uses estimates and
assumptions in preparing financial statements in accordance with
generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of assets and liabilities,
the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were assumed in preparing the financial statements.
F-9
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (continued)
RECLASSIFICATION - Certain 1997 amounts have been reclassified for
consistency with the current year presentation.
NOTE 3 - RECOGNITION OF PRIOR YEAR GOODWILL AMORTIZATION
An adjustment has been made to the Company's previously issued
financial statements for the year ended November 30, 1997. This
adjustment was made to properly recognize the amortization of
purchased goodwill in 1997.
Ending retained deficit at November 30, 1996 $ (77,237)
------------------
Net loss for the year ended November 30, 1997,
as previously stated (133,503)
Adjustments to net loss:
Amortization of purchased goodwill (75,000)
------------------
Net loss for the year ended November 30, 1997,
as restated (208,503)
------------------
Ending retained deficit at November 30, 1997,
as restated $ (285,740)
==================
NOTE 4 - BARTER EXCHANGE RECEIVABLES
As of November 30, 1998,barter exchange receivables consisted of
the following:
Resort room occupancy rights exchanged for
advertising services $ 153,970
Barter exchange transaction account balances 87,708
------------------
$ 241,678
==================
F-10
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at November 30,
1998 and 1997:
1998 1997
------------------- ------------------
Office equipment $ 16,158 $ 15,017
Studio equipment 139,540 93,036
Office furniture 34,127 11,499
Leasehold improvement 11,310 8,866
------------------- ------------------
201,135 128,418
Less accumulated depreciation (64,964) (36,140)
=================== ==================
Total $ 136,171 $ 92,278
=================== ==================
Depreciation expense for the year ended November 30, 1998 and 1997,
was $28,824 and $19,161, respectively.
NOTE 6 - LONG-TERM DEBT
At November 30, 1998 and 1997, long-term debt consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
------------------- ------------------
<S> <C> <C>
Note payable in annual installments of $120,000, including
interest at 6% per annum, collateralized by equipment and
accounts receivable $ 478,596 $ 480,000
Notes payable to shareholders at $588 per month, ($2,359 in 1997) including
interest at 8.25% per annum, collateralized by
equipment and accounts receivable 6,652 53,954
Notes payable, due January 14, 1998, including interest at
9% per annum. The notes were converted to common stock
in the Company during 1998 - 99,980
F-11
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT - (continued)
<CAPTION>
1998 1997
------------------- ------------------
<S> <C> <C>
Note payable at $378 per month, including
interest at 10.5% per annum, collaterized
by equipment $ - $ 5,307
------------------- ------------------
485,248 639,241
Less current portion (245,248) (251,433)
------------------- ------------------
$ 240,000 $ 387,808
=================== ==================
</TABLE>
The annual maturities of long-term debt for the succeeding three
years are as follows:
YEAR ENDING NOVEMBER 30,
1999 $ 245,248
2000 120,000
2001 120,000
--------------------
$ 485,248
====================
NOTE 7 - COMMON STOCK TRANSACTIONS
PRIVATE PLACEMENT OFFERINGS - In July 1998, the Company raised
$2,000,000 through two private placement transactions. In the first
transaction, the Company raised $500,000 through the issuance of
250,000 common shares at $2 per share. In the second private
placement, the Company raised $1,500,000 with the issuance of
500,000 common shares at $3 per share.
STOCK WARRANTS - Attached to each share purchased through the 1998
private placement offerings were warrants providing the right to
acquire one additional share for each share purchased in the
private placement. Warrants from the initial private placement
expire in July 2001. If exercised within 18 months following the
private placement offering, these warrants can be exercised for
additional shares at $2.25 per share; if exercised after 18 months
from the private placement date, warrants can be exercised for
additional shares at $2.50 per share. Warrants issued in
conjunction with the second private placement may be used to
acquire additional shares of common stock at $3.50 per share and
expire July 1999. All warrants became exercisable upon issuance.
F-12
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - COMMON STOCK TRANSACTIONS - (continued)
The following summarizes shareholder warrant transactions in 1998
and 1997:
<TABLE>
<CAPTION>
PRICE
PER
SHARES SHARE
---------- --------------
<S> <C> <C>
Warrants outstanding, November 30, 1996 600,000 $ 1.00
Warrants exercised in 1997 - $ -
----------
Warrants outstanding, November 30, 1997 600,000 $ 1.00
Warrants granted in 1998:
First private placement 250,000 $ 2.25 - 2.50
Second private placement 500,000 3.50
Warrants exercised in 1998 (584,230) (1.00)
Warrants expired in 1998 (15,770) (1.00)
------------
750,000 $ 2.25 - 3.50
Adjustment for 3 for 1 split, July 31, 1998 1,500,000
------------
Warrants outstanding, November 30, 1998 2,250,000 $ .75 - 1.17
============
</TABLE>
STOCK OPTION PLAN - In January 1998, the Company granted options to
employees, officers, directors, and selected third parties to
acquire up to 600,000 shares of common stock for $.60 per share.
These options expired in March 1998. In June 1998, the Company
granted additional options to employees, officers, directors, and
selected third parties to acquire up to 520,000 shares of common
stock for $1.63 per share. These options expire in June 2000, if
not exercised earlier. All stock options became exercisable upon
the date of grant.
F-13
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7 - COMMON STOCK TRANSACTIONS - (continued)
The following table summarizes stock option transactions in 1998.
There were no outstanding stock options during 1997:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES OPTION PRICE
------------------- ------------------
<S> <C> <C>
Stock options granted 1,120,000 1.08
Stock options exercised (600,000) (0.60)
$ - $ -
-------------------
Stock options expired 520,000 1.63
Adjustment for 3-for-1 split, July 31, 1998 1,040,000
-------------------
Stock options outstanding, November 30, 1998 1,560,000 $ 0.54
=================== ==================
</TABLE>
NOTE 8 - LEASE COMMITMENTS
The Company rents its office space and certain office equipment
under operating lease agreements. The following summarizes the
Company's lease commitments for succeeding years:
YEARS ENDING NOVEMBER 30,
1999 $ 47,069
2000 $ 49,301
2001 $ 48,938
2002 $ 51,222
2003 $ 16,956
Rental expense was $68,696 in 1998 and $47,206 in 1997.
F-14
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9 - EMPLOYEE BENEFIT PLAN
The Company maintains a SARSEP savings plan for its employees.
Under this plan employees may elect to make contributions pursuant
to a salary reduction agreement upon meeting age and length of
service requirements. The Company currently has no policy to match
employee contributions.
NOTE 10 - INCOME TAXES
The provision for income taxes consisted of the following at
November 30, 1998 and 1997:
1998 1997
------------------- ------------------
Current $ - $ -
Deferred tax (benefit) expense (74,670) 4,413
Change in valuation allowance 74,670 -
------------------- ------------------
Total income tax expense $ - $ 4,413
=================== ==================
Deferred tax liabilities (assets) are comprised of the following at
November 30, 1998 and 1997:
1998 1997
------------------- -------------------
Deferred tax assets
Allowance for doubtful accounts $ 408 $ 468
Net operating loss carryforward 136,264 70,502
Contribution carryforward 4,764 4,764
Amortization of goodwill 17,000 8,500
------------------- ------------------
158,436 84,234
Deferred tax liabilities
Book tax depreciation differences (9,789) (10,327)
Valuation allowance (158,436) (83,766)
------------------ ------------------
Net deferred tax liability $ (9,789) $ (9,859)
================== ==================
F-15
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10 - INCOME TAXES - (continued)
The net deferred tax liability has been classified as follows:
1998 1997
------------------ ------------------
Current deferred tax benefit $ - 468
Long-term deferred tax liability (9,789) (10,327)
------------------ ------------------
Net deferred tax liability $ (9,789) $ (9,859)
================== ==================
The Company has net operating loss and contribution carryforwards
of $141,028 available to offset future income tax liabilities.
These carryforwards will expire in 2013 if not utilized earlier to
offset taxable income.
Management of the Company has provided a valuation allowance to
offset existing deferred tax assets as of November 30, 1998. The
valuation allowance is provided because it is uncertain, based on
historical operating results, if the carryforwards will be utilized
prior to their expiration.
NOTE 11 - SUBSEQUENT EVENT
On January 25, 1999, the Company completed its acquisition of M-Tek
Technical Services, Inc. (M-Tek Technical), a kiosk integration
company providing customized technical solutions, bar coding, and
distribution channels. In the acquisition, the Company acquired
assets and assumed certain liabilities of M-Tek Technical for a
purchase price of $1,367,000. The acquisition was completed through
payment of $100,000 in cash and distribution of 350,000 shares in
Company common stock valued at $1,267,000.
F-16
<PAGE>
NBG RADIO NETWORK, INC.
(Formerly Nostalgia Broadcasting Corporation)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11 - SUBSEQUENT EVENT - (continued)
The acquisition will be accounted for as a purchase. Accordingly,
the excess of the fair value of net assets acquired over
liabilities assumed will be recognized as intangible assets and be
amortized over their expected useful lives. The following
summarized the fair value of the assets acquired and liabilities
assumed in the Company's purchase of M-Tek Technical.
Assets acquired:
Cash $ 200
Accounts receivable 66,875
Intangible assets:
Covenant not-to-compete 721,093
Goodwill 656,027
Liabilities assumed (77,195)
------------------
Net assets acquired $ 1,367,000
==================
F-17
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------
In December 1998 the Company's management, with the knowledge of the Board
of Directors, dismissed the auditors Andersen, Andersen & Strong, L.C. and hired
the public accounting firm of Moss Adams, LLP to act as the Company's new
auditor. The principal accountant's report for the financial statements from the
past two years, performed by Andersen, Andersen & Strong, L.C. does not contain
an adverse opinion or disclaimer of opinion, and was not modified as to
uncertainty, audit scope, or accounting principles. There were no disagreements
with the former accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedures.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
- --------------------------------------------------------------------------------
Set forth below is certain information concerning each person who served as
an executive officer during the year ended November 30, 1998 or is presently a
director of the Company. All officers and directors hold office until their
respective successors are elected and qualified, or until their earlier
resignation or removal.
DIRECTORS
- ---------
NAME POSITION AGE
John A. Holmes, III President, Chief Executive Officer,
and Chairman of the Board 28
Peter Jacobsen Director 45
Dick Versace Director 44
Steven R. Sears Director 32
Christopher J. Miller Director 40
The Directors are elected annually at the shareholders meeting and serve
until re-elected at the next annual shareholders meeting. With the exception of
Christopher J. Miller, all of the Directors were elected to office on January
30, 1998. Mr. Schilling resigned as a Director on January 27, 1999 for personal
reasons. Mr. Miller was appointed to fill the vacancy created by
Mr. Schilling's resignation.
John A. Holmes, age 28, has been President, CEO, and Chairman of the Board
since January 30, 1998. Prior to that, Mr. Holmes served as the General Manager
of the Company since its inception in March of 1996. Before joining the Company,
Mr. Holmes worked in radio syndication with ITEX Media Services, Inc. from
August 1993 until May 1996. Previously, he worked for KMOV-CBS TV as a sports
producer from January 1991 through May 1993. From June of 1990 until December of
1990 Mr. Holmes worked for Radio Personalities, Inc. where he was Executive
Producer for the following short form radio programs - "Offsides with Dan
Dierdorf" and "Talkin' Roundball with Dick Vitale."
Peter Jacobsen, age 45, has been a director with the Company since January
30, 1998. He is currently the host of one of the Company's short form features,
"Teein' It Up with Peter Jacobsen." Mr. Jacobsen, a member of the PGA Tour, has
multiple PGA Tour wins and has participated on two Ryder Cup teams. He has also
been an on course commentator for ABC and ESPN.
Dick Versace, age 44, has been a director with the Company since 1997. Mr.
Versace has coached basketball at all levels, high school, college, and the NBA.
Most recently he coached in the NBA with
12
<PAGE>
the Milwaukee Bucks. Prior to taking the position with the Bucks, Mr. Versace
was a television studio host and color analyst for TNT on the Turner
Broadcasting Network.
Steven R. Sears, age 32, has been a director of the Company since January
30, 1998. He is originally from Long Beach, California where he was President of
the family owned construction business, Sears Roofing Service, Inc. He also
served as Vice President for Robert Kerr & Associates, a real estate
construction company in Portland, Oregon.
Chris Miller, age 40, has been a director of the Company since January
27, 1999. The Board of Directors appointed Mr. Miller to the position after the
resignation of Jim Schilling. Mr. Miller is also the Chief Operating Officer of
NBG Solutions, Inc. Prior to joining the Company, Mr. Miller worked for US Bank
in Portland, Oregon as Vice President and manager of its West Region Client
Services Group and Institutional Financial Services. While at US Bank Mr. Miller
also worked as Senior Project Manager of Institutional Financial Services and
the Project Manager and Consultant for US Bank Trust Division. Prior to working
for US Bank Mr. Miller worked for Bank of America as Vice President and Regional
Manager of Global Securities Services. While at Bank of America, Mr. Miller
also worked as Vice President and Manager of Southern California Institutional
Client Administration and Global Securities Services.
EXECUTIVE OFFICERS
- ------------------
NAME POSITION AGE
John A. Holmes, III * President, Chief Executive Officer, and
Chairman of the Board 28
John J. Brumfield Vice President/Finance and
Chief Financial Officer 31
Oliver J. Holmes Vice President/Affiliate Relations 26
Dean R. Gavoni Vice President/Sales 29
Lee A. Morgan Secretary 33
* See description of Mr. Holmes' background under "Directors" above.
John J. Brumfield, age 31, has been Vice President/Finance and CFO since
January 30, 1998. From December 1996 to January 1998 he was the Controller for
the Company. From February 1996 to September 1996 he was a staff accountant for
ITEX Corporation. From September of 1994 until February 1996 Mr. Brumfield was a
professional golfer. Prior to that, he worked for the public accounting firm of
Bogumil, Holzgang & Associates as a staff accountant from July 1991 for
September 1994.
Oliver J. Holmes, age 26, has been Vice President of Affiliate Relations
for the Company since January 30, 1998. Mr. Holmes has been manager of the
Affiliate Relations department since July 1996. Prior to working for the
Company, Mr. Holmes managed Underwater Safari's dive shop in the Virgin Islands.
Prior to that, he worked in affiliate relations for Radio Personalities, Inc.,
an independent radio syndicator.
Dean R. Gavoni, age 29, has been Vice President of Sales for the Company
since January 30, 1998. Mr. Gavoni has been the national sales manager since
July 1996. Prior to working for the Company, Mr. Gavoni worked in radio
syndication with IMS. Before that, he worked in marketing and sales for
Anheiser-Busch and on many political campaigns in the state of Illinois.
13
<PAGE>
Lee Morgan, age 33, has been the Secretary of the Company since its
inception in March of 1996. He is currently the General Manager for Neal &
Associates, a business-consulting firm. Prior to that, he was the National
Recruitment Director for ITEX Corporation.
FAMILY RELATIONSHIPS
- --------------------
John A. Holmes, III, President and CEO is the older brother of the Vice
President of Affiliate Relations, Oliver J. Holmes.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on written representations made to the Company and the Company's
review of Forms 3, 4, and 5 furnished to the Company pursuant to Section 16 of
the Securities Exchange Act of 1934, as amended, the following forms were filed
late:
1. Form 3 for Mr. John A. Holmes, III.
2. Form 4 for Mr. John A. Holmes, III; relating to one transaction.
3. Form 3 for Mr. Brumfield.
4. Two Form 4's for Mr. Brumfield; relating to one transaction.
5. Form 3 for Mr. Oliver Holmes.
6. Form 4 for Mr. Oliver Holmes; relating to one transaction.
7. Form 3 for Mr. Gavoni.
8. Form 4 for Mr. Gavoni; relating to one transaction.
9. Form 3 for Mr. Morgan.
10. Form 4 for Mr. Morgan; relating to one transaction.
11. Form 3 for Mr. Jacobsen.
12. Form 4 for Mr. Jacobsen; relating to one transaction.
13. Form 3 for Mr. Versace.
14. Form 4 for Mr. Versace; relating to one transaction.
15. Form 3 for Mr. Sears.
16. Two Form 4's for Mr. Sears; relating to one transaction each.
14
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------
The following table sets forth all cash compensation, including bonuses and
deferred compensation, paid for the years ended November 30, 1998, 1997 and 1996
by the Company to its President and Chief Executive Officer. No disclosure is
provided with respect to other executive officers because no other executive
officer's annual salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
--------------------------------------- --------------------------------------------
Awards Payouts
------------------------------- ------------
Name and Securities
Principal Other Annual Restricted Underlying LTIP All Other
Position Year Salary Bonus Compensation Stock Options/SARs Payouts Compensation
($) ($) ($) Award(s) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- -------------- -------- ---------- ---------- ----------------- ------------- ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John A.
Holmes, III, 1998 $53,840 $ -0- $ -0- -0- 480,000 $ -0- $ -0-
President 1997 $44,655 $ -0- $ -0- -0- -0- $ -0- $ -0-
and CEO 1996 $18,272 $ -0- $ -0- 25,000 (1) -0- $ -0- $ -0-
- -------------- -------- ---------- ---------- ----------------- ------------- ----------------- ------------ -----------------
<FN>
<F1> The fair market value at time of issuance was $0.38 per share with a total value of $9,473. The shares have no vesting or
performance restrictions and there are no restrictions on dividends.
</FN>
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
- ---------------------------------- -------------------- -------------------- ------------------- --------------------
Number Of Percent Of Total
Securities Options/SARs
Underlying Granted To
Options/SARs Employees In Exercise or Base
Name Granted (#) Fiscal Year Price ($/Sh) Expiration Date
(a) (b) (c) (d) (e)
- ---------------------------------- -------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
John A. Holmes, III, President
and CEO 480,000 (1) 31% $0.54/share June 12, 2000
- ---------------------------------- -------------------- -------------------- ------------------- --------------------
<FN>
<F1> The options became exercisable on June 12, 1998 and are not subject to any performance or vesting restrictions.
</FN>
</TABLE>
15
<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
<TABLE>
<CAPTION>
- ---------------------------------- -------------------- -------------------- ------------------- --------------------
Number Of
Unexercised Value Of
Securities Unexercised
Underlying In-The-Money
Options/SARs At Option/SARs At
Shares Acquired On FY-End (#) FY-End ($)
Exercise Value Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- ---------------------------------- -------------------- -------------------- ------------------- --------------------
<S> <C> <C> <C> <C>
John A. Holmes, III, President
and CEO 50,000 $30,000 480,000/0 $540,000/$-0-
- ---------------------------------- -------------------- -------------------- ------------------- --------------------
</TABLE>
EMPLOYMENT AGREEMENT WITH PRESIDENT AND CEO
- -------------------------------------------
Effective November 1, 1998, the Company entered into a five year employment
agreement with John A Holmes, III, President and CEO. The employment agreement
provides for a base salary of $86,400 per annum, which will be increased
annually at the rate of the Consumer Price Index (CPI) plus 15%. In addition,
the employment agreement provides that Mr. Holmes will be paid a minimum of 10%
more than the next highest paid employee of the Company and its subsidiaries.
Mr. Holmes has the right to terminate the agreement upon three months' prior
written notice. The Company, at its discretion, has the right to terminate the
employment agreement at any time without reason upon three months' prior written
notice or payment in lieu of notice equaling three months' compensation. The
Company may also terminate Mr. Holmes for cause without prior written notice.
The employment agreement also provides that in the event Mr. Holmes is
terminated or resigns following a "change in control" (as defined in the
employment agreement) of the Company, the Company will pay to Mr. Holmes an
amount equal to three times his base salary at the time of his termination or
resignation.
DIRECTOR COMPENSATION
- ---------------------
Directors of the Company are not currently compensated for their services.
However, Directors are reimbursed for all reasonable expenses incurred on behalf
of the Company.
16
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of February 15, 1999 as to (i) each
person who is known by the Company to own beneficially 5% or more of the
outstanding shares of the Company's Common Stock, (ii) each named executive
officer and (iii) all Directors and officers as a group. The persons named in
the table have sole voting and investment power with respect to all shares shown
as beneficially owned by them, subject to community property laws where
applicable and to the information contained in the footnotes to the table.
<TABLE>
<CAPTION>
- ------------------------- -------------------------- ------------------------------- ------------------------
(1) (2) (3) (4)
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------- -------------------------- ------------------------------- ------------------------
<S> <C> <C> <C>
Common Stock John A. Holmes 705,900 (1) 5%
3728 SW Hillsdale Drive
Portland, OR 97221
Common Stock Peter Jacobsen 147,000 (2) 1%
8700 SW Nimbus Avenue #B
Beaverton, OR 97008
Common Stock Dick Versace 102,000 (3) Less than 1%
733 East Maywood
Peoria, IL 61603
Common Stock Steven R. Sears 331,650 (4) 2%
13800 Stampher
Lake Oswego, OR 97034
Common Stock Christopher J. Miller 350,000 (5) 2%
11888 SW Breyman Avenue
Portland, OR 97219
Common Stock Gary Henin 801,000 (6) 6%
600 SE 55th
Portland, OR 97215
Directors and Executive Officers as a group (9 persons) 2,632,156 (7) 18%
<FN>
<F1> Represents 225,000 common shares and 480,000 options without performance or vesting restrictions.
<F2> Represents 87,000 common shares and 60,000 options without performance or vesting restrictions.
<F3> Represents 42,000 common shares and 60,000 options without performance or vesting restrictions.
<F4> Represents 223,650 common shares and 90,000 options without performance or vesting restrictions. Also
includes 18,000 immediately exercisable warrants.
<F5> Represents 175,000 common shares and 175,000 options without performance or vesting restrictions.
<F6> Represents 570,000 common shares and 231,000 immediately exercisable warrants.
<F7> Represents 1,149,156 common shares and 1,405,000 options without performance or vesting restrictions. Also
includes 78,000 immediately exercisable warrants.
</FN>
</TABLE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
None.
17
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) The following exhibits are filed as part of this report:
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation, as amended(1)
3.2 Bylaws of the Company(2)
4.1 Form of Common Stock Certificate(2)
4.2 Form of Warrants - Private Placement #1
4.3 Form of Warrants - Private Placement #2
10.1 Employee Agreement of John A. Holmes, III dated November 1, 1998*(2)
10.2 Employee Agreement of John J. Brumfield dated November 1, 1998*(2)
10.3 Employee Agreement of Oliver J. Holmes dated November 1, 1998*(2)
10.4 Employee Agreement of Dean R. Gavoni dated November 1, 1998*(2)
21 Subsidiaries of the Registrant(2)
22 Financial Data Schedule(2)
* Management contract or compensatory plan.
(1) Filed as exhibit to Form 10-SB filed April 16, 1998.
(2) Filed as exhibit to Form 10-KSB filed March 2, 1999.
(b) No reports on Form 8-K were required to be filed during the last
quarter of the period covered by this report.
18
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NBG RADIO NETWORK, INC.,
a Nevada corporation
Date: May ___, 1999 By: /s/ John A. Holmes, III
------------------------------------
John A. Holmes, III, Chief Executive
Officer and President
19
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
3.1 Articles of Incorporation, as amended(1)
3.2 Bylaws of the Company(2)
4.1 Form of Common Stock Certificate(2)
4.2 Form of Warrants - Private Placement #1
4.3 Form of Warrants - Private Placement #2
10.1 Employee Agreement of John A. Holmes, III dated
November 1, 1998*(2)
10.2 Employee Agreement of John J. Brumfield dated November 1, 1998*(2)
10.3 Employee Agreement of Oliver J. Holmes dated November 1, 1998*(2)
10.4 Employee Agreement of Dean R. Gavoni dated November 1, 1998*(2)
21 Subsidiaries of the Registrant(2)
22 Financial Data Schedule(2)
* Management contract or compensatory plan.
(1) Filed as exhibit to Form 10-SB filed April 16, 1998.
(2) Filed as exhibit to Form 10-KSB filed March 2, 1999.
20
EXHIBIT 4.2
Form of Warrant - Private Placement #1
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF
A REGISTRATION STATEMENT COVERING SAID WARRANTS OR AN OPINION OF COUNSEL TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
COMMON STOCK PURCHASE WARRANT
(Non-Transferable)
For the Purchase of Common Stock, Par Value $0.001 per share
Of NBG Radio Network, Inc.
(Incorporated Under the Laws of the State of Nevada)
Name of Registered Owner: _________________________________________
No. of Warrants _______________________ (_______) Warrant to Purchase ________
______________________ (___________) shares of Common Stock.
THIS IS TO CERTIFY that, for value received,
_________________________________ (the "Holder"), is entitled, subject to the
terms and conditions hereinafter set forth, on or after date of issuance hereof
and at any time prior to 5:00 P.M. Pacific Standard Time, _______________, 1998
but not thereafter, to purchase such number of shares (the "Shares") of NBG
Radio Network, Inc., a Nevada corporation (the "Corporation"), from the
Corporation as stated above and upon payment to the Corporation of _____ Dollars
and _____ Cents ($_____) per shares (the "Purchase Price") if and to the extent
this Warrant is exercised, in whole or in part, during the period this Warrant
remains in force, subject in all cases to adjustment as provided in Article II
hereof, and to receive a certificate or certificates representing the Shares so
purchased, upon presentation and surrender to the Corporation of this Warrant,
with the form of subscription attached hereto duly executed, and accompanied by
payment of the Purchase Price of each Share purchased.
ARTICLE 1 - TERMS OF THE WARRANT
Section 1.01
------------ Subject to the provisions of Section 1.04 hereof, this
Warrant may be exercised at any time and from time to time after the day after
the date of issuance hereof (the "Exercise Commencement Date"), but no later
than 5:00 P.M. Pacific Standard Time, _____________, 1998 (the "Expiration
Time") at which it shall become void, and all rights hereunder shall thereupon
cease. Any rights to purchase the Company's Common Stock subject to the Warrants
will be forfeited to the extent such Warrants are not exercised prior to the
Expiration Time.
Section 1.02
------------ (1) the holder of this Warrant (the "Holder") may exercise
this Warrant, in whole or in part, upon surrender of this Warrant with the form
of subscription attached hereto duly executed, to the Corporation at its
corporate office in Portland, Oregon, together with the full Purchase Price for
each share to be purchased in lawful money of the United States, or by certified
check, bank draft or postal or express money order payable in United States
dollars to the order of the Corporation, and upon compliance with and subject to
the conditions set forth herein.
(2) Upon receipt of this Warrant with the form of subscription duly
executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is being exercised, the Corporation shall cause to
be issued certificates for the total number of whole Shares for which this
Warrant is being exercised in such denominations as are required for delivery to
the Holder, and the Corporation shall thereupon deliver such certificates to the
Holder or its nominees.
(3) In case the Holder shall exercise this Warrant with respect to less
than all of the Shares that may be purchased under this Warrant, the Corporation
shall execute a new Warrant for the balance of the Shares that be purchased upon
exercise of this Warrant and deliver such new Warrant to Holder.
(4) The Corporation covenants and agrees that it will pay when due any
and all taxes which may be payable in respect to the issue of this Warrant, or
the issue of any shares upon the exercise of this Warrant. The Corporation shall
not, however, be
<PAGE>
required to pay any tax which may be payable in respect of any transfer involved
in the issuance or delivery of the Shares in a name other than that of the
Holder at the time of surrender, and until the payment of such tax the
Corporation shall not be required to issue such Shares.
Section 1.03
------------ This Warrant is not and shall not be transferable by the
registered holder hereof.
Section 1.04
------------ Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent to receive notice as
a stockholder in respect of any meetings of stockholders for the election of
directors or any other matters, or as having any rights whatsoever as a
stockholder of the Corporation. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
The Corporation shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Corporation; or
The Corporation shall offer to the holders of its Common Stock any additional
shares of capital stock of the Corporation or securities convertible into or
exchangeable for shares of capital stock of the Corporation, or any opinion,
right or warrant to subscribe therefor; or
There shall be proposed any capital reorganization or reclassification of the
Common Stock, or a sale of all or substantially all of the assets of the
Corporation, or a consolidation or merger of the Corporation with another
entity; or
There shall be proposed a voluntary or involuntary dissolution, liquidation
or winding up of the Corporation; then, in any one or more of said cases, the
Corporation shall cause to be mailed to the Holder, at the earliest practicable
time (and, in any event, not less than thirty (30) days before any record date
or other date set for definite action), written notice of the date on which the
books of the Corporation shall close or a record shall be taken to determine the
stock holders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be. Such notice shall also set forth
such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Purchase Price and the
kind and amount of the Common Stock of record shall participate in said
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the right to exercise this Warrant shall terminate).
Without limiting the obligation of the Corporation to provide notice to
the holder of actions hereunder, it is agreed that failure of the Corporation to
give notice shall not invalidate such action of the Corporation.
Section 1.05
------------ If this Warrant is lost, stolen, mutilated or destroyed,
the Corporation shall, on such reasonable terms as to indemnity or otherwise as
it may impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant, which shall thereupon become void. Any such
new Warrant shall constitute an additional contractual obligation of the
Corporation, whether or not the Warrant so lost, stolen, destroyed or mutilated
shall be at any time enforceable by anyone.
Section 1.06
------------ (1) The Corporation covenants and agrees that at all times
it shall reserve and keep available for the exercise of this Warrant such
numbers of authorized Shares as are sufficient to permit the exercise in full of
this Warrant.
(2) The Corporation covenants that all Shares when issued upon the
exercise of this Warrant will be validly issued, fully paid, non-assessable and
free of preemptive rights.
ARTICLE II - ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES PURCHASED UPON EXERCISE
Section 2.01
------------ In case the Corporation shall, while this Warrant remains
unexercised, in whole or in part, and in force effect a recapitalization of such
character that the Shares purchasable hereunder shall be changed into or become
exchangeable for a larger or smaller number of shares, then after the date of
record for effecting such recapitalization, the number of Shares of Common Stock
which the Holder hereof shall be entitled to purchase hereunder shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease. The number of shares of Common Stock shall in the case of an
increase in the number of such Shares be proportionately reduced, and the case
of a decrease in the number of such Shares shall be proportionately increased.
For the purposes of this Section 2.01, a Stock dividend, stock split-up or
reverse split shall be considered as a recapitalization and as an exchange for a
larger or smaller number of shares, as the case may be.
<PAGE>
Section 2.02
------------ In case of any consolidation of the Corporation with, or
merger of the Corporation into, any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
as a condition of such consolidation, merger, or sale or conveyance, adequate
provision shall be made whereby the Holder shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of Shares of Common Stock immediately theretofore
purchasable and received upon the exercise of the rights represented hereby,
such shares of stock or securities as may be issued in connection with such
consolidation, merger or sale or conveyance, with respect or in exchange for the
number of outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore purchasable or and receivable upon the
exercise of the rights represented hereby had such consolidation, merger or
sale, or conveyance, not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of the Holders of this
Warrant to the end that the provisions hereof shall be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise hereof.
Section 2.03
------------ (a) In case the Corporation shall, while this Warrant
remains unexercised, in whole or in part, and in force, issue (otherwise than by
stock dividend or split-up or reverse split) or sells shares of its Common Stock
(hereinafter referred to as "Additional Shares") for a consideration per share
(before deduction of expenses or commissions or underwriting discounts or
allowances in connection therewith) which shall be less than the Purchase Price,
per share, in effect immediately prior to the time of the issuance or sale of
such Additional Shares, then after the date of such issuance or sale, the
Purchase Price per share shall be reduced to a price determined by dividing (1)
an amount equal to (a) the total amount of shares of Common Stock outstanding
immediately prior to the time of the issuance or sale of such Additional Shares
plus (b) the consideration (before deduction of expenses or commission or
underwriting discounts or allowances in connection therewith), if any, received
by the Corporation upon such issuance or sale of such Additional Shares, by (2)
the total number of shares of Common Stock outstanding after the date of the
issuance or sale of such Additional Shares.
(b) For the purpose of subsection (a) above, in case the Corporation
shall issue or sell Additional Shares, issue or grant any rights to subscribe
for or to purchase, or any options for the purchase of Common Stock, or issue or
sell for a consideration other than cash or a consideration part of which shall
be other than cash, the amount of the consideration received by the Corporation
plus the fair value of the consideration other than cash, as determined by the
Board of Directors of the Corporation in good faith, before deduction of
commissions, underwriting discounts or allowances or other expenses paid or
incurred by the Corporation for any underwriting of, or otherwise in connection
with such issuance, grant or sale.
Section 2.04
------------ Subject to the provisions of Section 2.05 below, in case
the Corporation shall, while this Warrant remains unexercised, in whole or in
part, and in force, declare to make any distribution of its assets to holders of
Common Stock as a partial liquidation dividend, by way of return of capital or
otherwise, then, after the date of record for determining stock holders entitled
to such distribution, but prior to the date of distribution, the Holder shall be
entitled upon exercise of this Warrant and purchase of any or all of the Shares
of Common Stock subject hereto, to receive the amount of such assets (or, at the
option of the Corporation, a sum equal to the value thereof at the time if such
distribution to the holders of Common Stock as such value is determined by the
Board of Directors of the Corporation in good faith) which would have been
payable to the Holder had he been the holder of such Shares of Common Stock on
the record date for the determined of stockholders entitled to such
distribution.
Section 2.05
------------ Except as otherwise provided in Section 2.02 above, in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation in connection with a plan of complete liquidation of the
Corporation, in the case of the dissolution, liquidation or winding-up of the
Corporation, all rights under this Warrant shall terminate on a date fixed by
the Corporation of such date of dissolution, liquidation or winding-up and not
later than thirty (30) days after such commencement date. Notice of such
termination of purchase rights shall be given to the Holder at least thirty (30)
days prior to such termination date.
Section 2.06
------------ Any adjustment pursuant to the provisions of this Article
II shall be made on the basis of the number of Shares of Common Stock the Holder
would have been entitled to acquire by exercise of this Warrant immediately
prior to the event giving rise to such adjustment and, as to the Purchase Price
per share in effect immediately prior to such adjustment. Whenever any such
adjustment is required to be made, the Corporation shall upon the exercise and
receipt of the Purchase Price, issue the largest number of whole Shares
purchasable upon exercise of this Warrant. The Corporation shall not be required
to make any cash or other adjustment in respect of such fraction of a Share to
which the Holder would otherwise be entitled. The Holder, by the acceptance of
this Warrant, expressly waives his right to receive a certificate for any
fraction of a Share upon exercise hereof.
Section 2.07
------------ Anything contained herein to the contrary notwithstanding,
the Corporation shall not be required to issue any fraction of a Share in
connection with the exercise of this Warrant, and in any case where the Holder
would, except for the provisions of this Section 2.07 be entitled under the
terms of this Warrant to receive a fraction of a Share upon such exercise, the
Company shall upon the exercise of this and receipt of the Purchase Price, issue
the largest number of whole Shares purchasable upon exercise of this Warrant.
The Corporation shall not be required to make any cash or other adjustment in
respect of such
<PAGE>
fraction of a Share to which the Holder would otherwise be entitled. The Holder,
by the acceptance of this Warrant, expressly waives his right to receive a
certificate for any fraction of a Share to which he is entitled upon exercise
hereof.
Section 2.08
------------ The form of Warrant need not be changed because of any
change pursuant to this Article II in the Purchase Price or in the number of
Shares of Common Stock purchasable upon the exercise of a Warrant, and Common
Stock Purchase Warrants issued after such change may state the same Purchase
Price and the same of Common Stock as are stated in the Warrants initially
issued pursuant to the Agreement.
ARTICLE III
REGISTRATION UNDER THE ACT OF 1933
Section 3.01
------------ This Warrant and Share of Common Stock issuable upon
exercise of this Warrant has not been registered under the Act of 1933, as
amended (the "Act"). Any Shares of Common Stock issued upon exercise of this
Warrant shall be bear the following legend:
"The Shares represented by this Certificate have not been registered
under the Act of 1933, as amended, and may not be transferred in the
absence of a registration statement covering said Shares or an opinion
of Counsel to the Corporation that such registration is not required."
Section 3.02
------------ The Holder of this Warrant shall have the right to include
any Shares of Common Stock issuable upon exercise of this Warrant in any
registration statement filed by the Corporation under the Securities Act of
1933, as amended. The Holder shall pay Holders proportionate share of all costs,
fees and expense in connection with the filing of any registration for the
Shares issuable upon exercise of this Warrant. The Corporation shall take all
necessary action, which may be required in qualifying and registering the Shares
issuable upon exercise of this Warrant.
ARTICLE IV - OTHER MATTERS
Section 4.01
------------ All the covenants and provisions of this Warrant by or
for the benefits of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder.
Section 4.02
------------ Notice or demands pursuant to this Warrant to be given by
the Holder to or on the Corporation shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid and
addressed, until another address is designated in writing by the Corporation, as
follows:
NBG Radio Network, Inc.
The Cascade Building
520 S.W. 6th, Suite 750
Portland, OR 97204
Notices to the Holder provided for in this Warrant shall be deemed
given or made by the Corporation if sent by certified or registered mail, return
receipt requested, postage prepaid and addressed to the Holder at his last known
address as it shall appear on the books of the Corporation.
Section 4.03
------------ The laws of the State of Nevada shall govern the validity,
interpretation and performance of this Warrant.
Section 4.04
------------ Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Corporation
and the Holder any right, remedy or claim under promise or agreement hereof, and
all covenants, conditions, stipulations, promises and agreements contained in
this Warrant shall be for the sole and exclusive benefit of the Corporation and
its successors and of the Holder and his heirs, personal representatives and
administrators.
Section 4.05
------------ The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF this Warrant has been duly executed by the
Corporation under its corporate seal as of the ___ day of __________________,
199_.
NBG RADIO NETWORK, INC.
By: ___________________________________ (corporate seal)
President
By: ___________________________________
Secretary
<PAGE>
Subscription Form
COMMON STOCK PURCHASE WARRANT
NBG Radio Network, Inc.
The Cascade Building
520 S.W. 6th, Suite 750
Portland, OR 97204
The undersigned hereby irrevocably subscribes for the purchase of
shares of your Common Stock pursuant to and in accordance with the terms and
conditions of this Warrant, and herewith makes payment, covering such shares of
Common Stock which should be delivered to the undersigned at the address stated
below, and, if said number of shares shall not be all of the shares purchasable
hereunder, that a new Warrant of like tenor for the balance of the remaining
shares purchasable hereunder be delivered to the undersigned at the address
stated below. The undersigned agrees that (1) the undersigned will not offer,
sell, transfer or otherwise dispose of any such shares of Common Stock unless
either (a) a registration statement, or post-effective amendment thereto,
covering such shares of Common Stock has been filed with the Exchange Commission
pursuant to the Act of 1933, as amended (the "Act"), and such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering the
shares of Common Stock to be so sold, transferred or otherwise disposed of, or
(b) counsel to the undersigned and satisfactory to NBG Radio Network, Inc. has
rendered an opinion in writing and addressed to NBG Radio Network, Inc. that
such proposed offer, sale, transfer or other disposition of the shares of Common
Stock is exempt from the provisions of Section 5 of the Act in view of the
circumstances of such proposed offer, sale, transfer or other disposition; (2)
NBG Radio Network, Inc. may notify the transfer agent for its Common Stock that
the certificates for the Common Stock acquired by the agent acquired by the
undersigned are not to be transferred unless the transfer agent receives advice
from NBG Radio Network, Inc. that one or both of the conditions referred to in
(1)(a) and (1)(b) above have been satisfied; and (3) NBG Radio Network, Inc. may
affix the legend set forth in Section 3.01 of this Warrant to the certificates
for shares of Common Stock hereby subscribed for, if such legend is applicable.
Dated: ___________________ Signed _________________________________
Signature guaranteed:
Address: _______________________________
________________________________________
EXHIBIT 4.3
Form of Warrant - Private Placement #2
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF
A REGISTRATION STATEMENT COVERING SAID WARRANTS OR AN OPINION OF COUNSEL TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
COMMON STOCK PURCHASE WARRANT
(Non-Transferable)
For the Purchase of Common Stock, Par Value $0.001 per share
Of NBG Radio Network, Inc.
(Incorporated Under the Laws of the State of Nevada)
Name of Registered Owner: _________________________________________
No. of Warrants _______________________ (_______) Warrant to Purchase ________
______________________ (___________) shares of Common Stock.
THIS IS TO CERTIFY that, for value received,
_________________________________ (the "Holder"), is entitled, subject to the
terms and conditions hereinafter set forth, on or after date of issuance hereof
and at any time prior to 5:00 P.M. Pacific Standard Time, _______________, 1998
but not thereafter, to purchase such number of shares (the "Shares") of NBG
Radio Network, Inc., a Nevada corporation (the "Corporation"), from the
Corporation as stated above and upon payment to the Corporation of _____ Dollars
and _____ Cents ($_____) per shares (the "Purchase Price") if and to the extent
this Warrant is exercised, in whole or in part, during the period this Warrant
remains in force, subject in all cases to adjustment as provided in Article II
hereof, and to receive a certificate or certificates representing the Shares so
purchased, upon presentation and surrender to the Corporation of this Warrant,
with the form of subscription attached hereto duly executed, and accompanied by
payment of the Purchase Price of each Share purchased.
ARTICLE 1 - TERMS OF THE WARRANT
Section 1.01
------------ Subject to the provisions of Section 1.04 hereof, this
Warrant may be exercised at any time and from time to time after the day after
the date of issuance hereof (the "Exercise Commencement Date"), but no later
than 5:00 P.M. Pacific Standard Time, _____________, 1998 (the "Expiration
Time") at which it shall become void, and all rights hereunder shall thereupon
cease. Any rights to purchase the Company's Common Stock subject to the Warrants
will be forfeited to the extent such Warrants are not exercised prior to the
Expiration Time.
Section 1.02
------------ (1) the holder of this Warrant (the "Holder") may exercise
this Warrant, in whole or in part, upon surrender of this Warrant with the form
of subscription attached hereto duly executed, to the Corporation at its
corporate office in Portland, Oregon, together with the full Purchase Price for
each share to be purchased in lawful money of the United States, or by certified
check, bank draft or postal or express money order payable in United States
dollars to the order of the Corporation, and upon compliance with and subject to
the conditions set forth herein.
(2) Upon receipt of this Warrant with the form of subscription duly
executed and accompanied by payment of the aggregate Purchase Price for the
Shares for which this Warrant is being exercised, the Corporation shall cause to
be issued certificates for the total number of whole Shares for which this
Warrant is being exercised in such denominations as are required for delivery to
the Holder, and the Corporation shall thereupon deliver such certificates to the
Holder or its nominees.
(3) In case the Holder shall exercise this Warrant with respect to less
than all of the Shares that may be purchased under this Warrant, the Corporation
shall execute a new Warrant for the balance of the Shares that be purchased upon
exercise of this Warrant and deliver such new Warrant to Holder.
(4) The Corporation covenants and agrees that it will pay when due any
and all taxes which may be payable in respect to the issue of this Warrant, or
the issue of any shares upon the exercise of this Warrant. The Corporation shall
not, however, be required to pay any tax which may be payable in respect of any
transfer involved in the issuance or delivery of the Shares in a
<PAGE>
name other than that of the Holder at the time of surrender, and until the
payment of such tax the Corporation shall not be required to issue such Shares.
Section 1.03
------------ This Warrant is not and shall not be transferable by the
registered holder hereof.
Section 1.04
------------ Nothing contained in this Warrant shall be construed as
conferring upon the Holder the right to vote or to consent to receive notice as
a stockholder in respect of any meetings of stockholders for the election of
directors or any other matters, or as having any rights whatsoever as a
stockholder of the Corporation. If, however, at any time prior to the expiration
of this Warrant and prior to its exercise, any of the following shall occur:
The Corporation shall take a record of the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Corporation; or
The Corporation shall offer to the holders of its Common Stock any additional
shares of capital stock of the Corporation or securities convertible into or
exchangeable for shares of capital stock of the Corporation, or any opinion,
right or warrant to subscribe therefor; or
There shall be proposed any capital reorganization or reclassification of the
Common Stock, or a sale of all or substantially all of the assets of the
Corporation, or a consolidation or merger of the Corporation with another
entity; or
There shall be proposed a voluntary or involuntary dissolution, liquidation
or winding up of the Corporation; then, in any one or more of said cases, the
Corporation shall cause to be mailed to the Holder, at the earliest practicable
time (and, in any event, not less than thirty (30) days before any record date
or other date set for definite action), written notice of the date on which the
books of the Corporation shall close or a record shall be taken to determine the
stock holders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, or entitled to vote on such
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be. Such notice shall also set forth
such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Purchase Price and the
kind and amount of the Common Stock of record shall participate in said
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale consolidation, merger, dissolution,
liquidation or winding up, as the case may be (on which date, in the event of
voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, the right to exercise this Warrant shall terminate).
Without limiting the obligation of the Corporation to provide notice to
the holder of actions hereunder, it is agreed that failure of the Corporation to
give notice shall not invalidate such action of the Corporation.
Section 1.05
------------ If this Warrant is lost, stolen, mutilated or destroyed,
the Corporation shall, on such reasonable terms as to indemnity or otherwise as
it may impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and tenor as, and
in substitution for, this Warrant, which shall thereupon become void. Any such
new Warrant shall constitute an additional contractual obligation of the
Corporation, whether or not the Warrant so lost, stolen, destroyed or mutilated
shall be at any time enforceable by anyone.
Section 1.06
------------ (1) The Corporation covenants and agrees that at all times
it shall reserve and keep available for the exercise of this Warrant such
numbers of authorized Shares as are sufficient to permit the exercise in full of
this Warrant.
(2) The Corporation covenants that all Shares when issued upon the
exercise of this Warrant will be validly issued, fully paid, non-assessable and
free of preemptive rights.
ARTICLE II - ADJUSTMENT OF PURCHASE PRICE
AND NUMBER OF SHARES PURCHASED UPON EXERCISE
Section 2.01
------------ In case the Corporation shall, while this Warrant remains
unexercised, in whole or in part, and in force effect a recapitalization of such
character that the Shares purchasable hereunder shall be changed into or become
exchangeable for a larger or smaller number of shares, then after the date of
record for effecting such recapitalization, the number of Shares of Common Stock
which the Holder hereof shall be entitled to purchase hereunder shall be
increased or decreased, as the case may be, in direct proportion to the increase
or decrease. The number of shares of Common Stock shall in the case of an
increase in the number of such Shares be proportionately reduced, and the case
of a decrease in the number of such Shares shall be proportionately increased.
For the purposes of this Section 2.01, a Stock dividend, stock split-up or
reverse split shall be considered as a recapitalization and as an exchange for a
larger or smaller number of shares, as the case may be.
<PAGE>
Section 2.02
------------ In case of any consolidation of the Corporation with, or
merger of the Corporation into, any other corporation, or in case of any sale or
conveyance of all or substantially all of the assets of the Corporation other
than in connection with a plan of complete liquidation of the Corporation, then
as a condition of such consolidation, merger, or sale or conveyance, adequate
provision shall be made whereby the Holder shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of Shares of Common Stock immediately theretofore
purchasable and received upon the exercise of the rights represented hereby,
such shares of stock or securities as may be issued in connection with such
consolidation, merger or sale or conveyance, with respect or in exchange for the
number of outstanding shares of Common Stock equal to the number of shares of
Common Stock immediately theretofore purchasable or and receivable upon the
exercise of the rights represented hereby had such consolidation, merger or
sale, or conveyance, not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of the Holders of this
Warrant to the end that the provisions hereof shall be applicable as nearly as
may be in relation to any shares of stock or securities thereafter deliverable
upon the exercise hereof.
Section 2.03
------------ (a) In case the Corporation shall, while this Warrant
remains unexercised, in whole or in part, and in force, issue (otherwise than by
stock dividend or split-up or reverse split) or sells shares of its Common Stock
(hereinafter referred to as "Additional Shares") for a consideration per share
(before deduction of expenses or commissions or underwriting discounts or
allowances in connection therewith) which shall be less than the Purchase Price,
per share, in effect immediately prior to the time of the issuance or sale of
such Additional Shares, then after the date of such issuance or sale, the
Purchase Price per share shall be reduced to a price determined by dividing (1)
an amount equal to (a) the total amount of shares of Common Stock outstanding
immediately prior to the time of the issuance or sale of such Additional Shares
plus (b) the consideration (before deduction of expenses or commission or
underwriting discounts or allowances in connection therewith), if any, received
by the Corporation upon such issuance or sale of such Additional Shares, by (2)
the total number of shares of Common Stock outstanding after the date of the
issuance or sale of such Additional Shares.
(b) For the purpose of subsection (a) above, in case the Corporation
shall issue or sell Additional Shares, issue or grant any rights to subscribe
for or to purchase, or any options for the purchase of Common Stock, or issue or
sell for a consideration other than cash or a consideration part of which shall
be other than cash, the amount of the consideration received by the Corporation
plus the fair value of the consideration other than cash, as determined by the
Board of Directors of the Corporation in good faith, before deduction of
commissions, underwriting discounts or allowances or other expenses paid or
incurred by the Corporation for any underwriting of, or otherwise in connection
with such issuance, grant or sale.
Section 2.04
------------ Subject to the provisions of Section 2.05 below, in case
the Corporation shall, while this Warrant remains unexercised, in whole or in
part, and in force, declare to make any distribution of its assets to holders of
Common Stock as a partial liquidation dividend, by way of return of capital or
otherwise, then, after the date of record for determining stock holders entitled
to such distribution, but prior to the date of distribution, the Holder shall be
entitled upon exercise of this Warrant and purchase of any or all of the Shares
of Common Stock subject hereto, to receive the amount of such assets (or, at the
option of the Corporation, a sum equal to the value thereof at the time if such
distribution to the holders of Common Stock as such value is determined by the
Board of Directors of the Corporation in good faith) which would have been
payable to the Holder had he been the holder of such Shares of Common Stock on
the record date for the determined of stockholders entitled to such
distribution.
Section 2.05
------------ Except as otherwise provided in Section 2.02 above, in
case of any sale or conveyance of all or substantially all of the assets of the
Corporation in connection with a plan of complete liquidation of the
Corporation, in the case of the dissolution, liquidation or winding-up of the
Corporation, all rights under this Warrant shall terminate on a date fixed by
the Corporation of such date of dissolution, liquidation or winding-up and not
later than thirty (30) days after such commencement date. Notice of such
termination of purchase rights shall be given to the Holder at least thirty (30)
days prior to such termination date.
Section 2.06
------------ Any adjustment pursuant to the provisions of this Article
II shall be made on the basis of the number of Shares of Common Stock the Holder
would have been entitled to acquire by exercise of this Warrant immediately
prior to the event giving rise to such adjustment and, as to the Purchase Price
per share in effect immediately prior to such adjustment. Whenever any such
adjustment is required to be made, the Corporation shall upon the exercise and
receipt of the Purchase Price, issue the largest number of whole Shares
purchasable upon exercise of this Warrant. The Corporation shall not be required
to make any cash or other adjustment in respect of such fraction of a Share to
which the Holder would otherwise be entitled. The Holder, by the acceptance of
this Warrant, expressly waives his right to receive a certificate for any
fraction of a Share upon exercise hereof.
Section 2.07
------------ Anything contained herein to the contrary notwithstanding,
the Corporation shall not be required to issue any fraction of a Share in
connection with the exercise of this Warrant, and in any case where the Holder
would, except for the provisions of this Section 2.07 be entitled under the
terms of this Warrant to receive a fraction of a Share upon such exercise, the
Company shall upon the exercise of this and receipt of the Purchase Price, issue
the largest number of whole Shares purchasable upon exercise of this Warrant.
The Corporation shall not be required to make any cash or other adjustment in
respect of such
<PAGE>
fraction of a Share to which the Holder would otherwise be entitled. The Holder,
by the acceptance of this Warrant, expressly waives his right to receive a
certificate for any fraction of a Share to which he is entitled upon exercise
hereof.
Section 2.08
------------ The form of Warrant need not be changed because of any
change pursuant to this Article II in the Purchase Price or in the number of
Shares of Common Stock purchasable upon the exercise of a Warrant, and Common
Stock Purchase Warrants issued after such change may state the same Purchase
Price and the same of Common Stock as are stated in the Warrants initially
issued pursuant to the Agreement.
ARTICLE III
REGISTRATION UNDER THE ACT OF 1933
Section 3.01
------------ This Warrant and Share of Common Stock issuable upon
exercise of this Warrant has not been registered under the Act of 1933, as
amended (the "Act"). Any Shares of Common Stock issued upon exercise of this
Warrant shall be bear the following legend:
"The Shares represented by this Certificate have not been registered
under the Act of 1933, as amended, and may not be transferred in the
absence of a registration statement covering said Shares or an opinion
of Counsel to the Corporation that such registration is not required."
Section 3.02
------------ The Holder of this Warrant shall have the right to include
any Shares of Common Stock issuable upon exercise of this Warrant in any
registration statement filed by the Corporation under the Securities Act of
1933, as amended. The Holder shall pay Holders proportionate share of all costs,
fees and expense in connection with the filing of any registration for the
Shares issuable upon exercise of this Warrant. The Corporation shall take all
necessary action, which may be required in qualifying and registering the Shares
issuable upon exercise of this Warrant.
ARTICLE IV - OTHER MATTERS
Section 4.01 All the covenants and provisions of this Warrant by or
------------
for the benefits of the Corporation shall bind and inure to the benefit of its
successors and assigns hereunder.
Section 4.02
------------ Notice or demands pursuant to this Warrant to be given by
the Holder to or on the Corporation shall be sufficiently given or made if sent
by certified or registered mail, return receipt requested, postage prepaid and
addressed, until another address is designated in writing by the Corporation, as
follows:
NBG Radio Network, Inc.
The Cascade Building
520 S.W. 6th, Suite 750
Portland, OR 97204
Notices to the Holder provided for in this Warrant shall be deemed
given or made by the Corporation if sent by certified or registered mail, return
receipt requested, postage prepaid and addressed to the Holder at his last known
address as it shall appear on the books of the Corporation.
Section 4.03
------------ The laws of the State of Nevada shall govern the validity,
interpretation and performance of this Warrant.
Section 4.04
------------ Nothing in this Warrant expressed and nothing that may be
implied from any of the provisions hereof is intended, or shall be construed, to
confer upon, or give to, any person or corporation other than the Corporation
and the Holder any right, remedy or claim under promise or agreement hereof, and
all covenants, conditions, stipulations, promises and agreements contained in
this Warrant shall be for the sole and exclusive benefit of the Corporation and
its successors and of the Holder and his heirs, personal representatives and
administrators.
Section 4.05
------------ The Article headings herein are for convenience only and
are not part of this Warrant and shall not affect the interpretation thereof.
IN WITNESS WHEREOF this Warrant has been duly executed by the
Corporation under its corporate seal as of the ___ day of __________________,
199_.
NBG RADIO NETWORK, INC.
By: ___________________________________ (corporate seal)
President
By: ___________________________________
Secretary
<PAGE>
Subscription Form
COMMON STOCK PURCHASE WARRANT
NBG Radio Network, Inc.
The Cascade Building
520 S.W. 6th, Suite 750
Portland, OR 97204
The undersigned hereby irrevocably subscribes for the purchase of
shares of your Common Stock pursuant to and in accordance with the terms and
conditions of this Warrant, and herewith makes payment, covering such shares of
Common Stock which should be delivered to the undersigned at the address stated
below, and, if said number of shares shall not be all of the shares purchasable
hereunder, that a new Warrant of like tenor for the balance of the remaining
shares purchasable hereunder be delivered to the undersigned at the address
stated below. The undersigned agrees that (1) the undersigned will not offer,
sell, transfer or otherwise dispose of any such shares of Common Stock unless
either (a) a registration statement, or post-effective amendment thereto,
covering such shares of Common Stock has been filed with the Exchange Commission
pursuant to the Act of 1933, as amended (the "Act"), and such sale, transfer or
other disposition is accompanied by a prospectus meeting the requirements of
Section 10 of the Act forming a part of such registration statement, or
post-effective amendment thereto, which is in effect under the Act covering the
shares of Common Stock to be so sold, transferred or otherwise disposed of, or
(b) counsel to the undersigned and satisfactory to NBG Radio Network, Inc. has
rendered an opinion in writing and addressed to NBG Radio Network, Inc. that
such proposed offer, sale, transfer or other disposition of the shares of Common
Stock is exempt from the provisions of Section 5 of the Act in view of the
circumstances of such proposed offer, sale, transfer or other disposition; (2)
NBG Radio Network, Inc. may notify the transfer agent for its Common Stock that
the certificates for the Common Stock acquired by the agent acquired by the
undersigned are not to be transferred unless the transfer agent receives advice
from NBG Radio Network, Inc. that one or both of the conditions referred to in
(1)(a) and (1)(b) above have been satisfied; and (3) NBG Radio Network, Inc. may
affix the legend set forth in Section 3.01 of this Warrant to the certificates
for shares of Common Stock hereby subscribed for, if such legend is applicable.
Dated: ___________________ Signed _________________________________
Signature guaranteed:
Address: _______________________________
________________________________________
