United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File Number:
February 29, 2000 0-24075
NBG RADIO NETWORK, INC.
(Exact name of small business issuer as specified 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)
(503) 802-4624
(Issuer's telephone number, including area code)
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 [ ]
The registrant has one class of Common Stock with 12,160,293 shares
outstanding as of April 12, 2000.
Transitional Small Business Issuer Disclosure Format (check one):
Yes [ ] No [X].
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NBG RADIO NETWORK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
February 29 February 28 November 30
(Unaudited) (Unaudited) (Audited)
------------------------- ----------------- ------------------
2000 1999 1999
------------------------- ----------------- ------------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 340,742 $1,377,094 $ 892,092
Marketable equity securities, at fair value 468,750 - 468,750
Barter exchange receivables 144,934 232,850 148,136
Accounts receivable, net of allowance for
doubtful accounts of $1,200 in 1998 and 1997 2,691,601 1,280,275 2,121,207
Related-party receivable 47,462 14,462 47,462
Supplies inventory 26,557 - 29,278
Sales representation agreements, net of 2,098,774 - 1,155,689
accumulated amortization
-------------------- ----------------- ------------------
Total current assets 5,818,820 2,904,681 4,862,614
-------------------- ----------------- ------------------
PROPERTY AND EQUIPMENT, net of accumulated 192,853 167,205 202,713
depreciation
DEPOSITS 1,000 3,250 1,000
INTANGIBLE ASSETS, net of amortization 1,539,655 1,936,647 1,634,897
-------------------- ----------------- ------------------
Total assets $ 7,552,328 $5,011,783 $ 6,701,224
==================== ================= ==================
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C> <C>
Accounts payable $ 129,376 $ 272,514 $ 179,649
Accrued liabilities 10,762 30,741 31,615
Deferred programming revenue 500,000 - 500,000
Sales representation agreement liabilities 1,837,246 1,155,689
Current portion of long-term debt - 243,459 -
-------------------- ----------------- ------------------
Total current liabilities 2,477,384 546,714 1,866,953
-------------------- ----------------- ------------------
OTHER LIABILITIES
Long-term debt, net of current portion - 240,000 -
Deferred income tax liability - 9,789 -
-------------------- ----------------- ------------------
Total other liabilities - 249,789 -
-------------------- ----------------- ------------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value; 20,000,000
shares authorized 12,160,293 and 10,840,700
shares issued and outstanding at February 29,
2000 and February 28, 1999, respectively 12,160 10,840 12,160
Additional paid-in-capital 6,708,412 5,196,862 6,708,412
Retained deficit (1,559,253) (815,338) (1749038)
Stock subscription receivable (55,125) (177,084) (106,013)
Unrealized loss on marketable equity
securities, net of tax (31,250) - (31,250)
------------------------- ----------------- ------------------
Total stockholders' equity 5,074,944 4,215,280 4,834,271
------------------------- ----------------- ------------------
Total liabilities and stockholders' $ 7,552,328 $5,011,783 $6,701,224
equity
========================= ================= ==================
</TABLE>
See Accompanying Notes
<PAGE>
NBG RADIO NETWORK, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 29,
2000 and FEBRUARY 28, 1999
(Unaudited)
-------------------- --------------------
2000 1999
-------------------- --------------------
REVENUES
Advertising income $ 1,849,007 $ 150,544
Kiosk income 75,716 62,865
Interest income 5,260 9,038
-------------------- --------------------
Total revenues 1,929,983 222,447
COST OF GOODS SOLD 574,498 99,008
-------------------- --------------------
GROSS MARGIN 1,355,485 123,439
-------------------- --------------------
GENERAL AND ADMINISTRATIVE
EXPENSES
Wages and employee benefits 367,244 161,642
Travel and entertainment 35,802 34,560
Consulting and professional 94,681 86,451
Advertising 10,303 13,604
Depreciation and amortization 518,449 37,165
Postage and printing 28,865 21,290
Rent 24,347 18,148
Interest 633 362
Office supplies 12,653 6,924
Telephone 11,776 13,249
Other expenses 60,947 60,619
-------------------- --------------------
Total general and 1,165,700 454,014
administrative expenses -------------------- --------------------
Net income (loss) before 189,785 (330,575)
provision for income taxes
Provision for income taxes - -
-------------------- --------------------
Net income (loss) $ 189,785 $ (330,575)
==================== ====================
Basic loss per share of common stock $ 0.02 $ (0.03)
==================== ====================
Weighted average number of shares 12,160,293 10,606,200
outstanding
==================== ====================
See Accompanying Notes
<PAGE>
NBG RADIO NETWORK, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
STOCK
ADDITIONAL RETAINED SUBSCRIP-TION OTHER
COMMON STOCK PAID-IN DEFICIT RECEIVABLE COMPREHEN-SIVE TOTAL
CAPITAL INCOME
--------------------------- ------------- ------------ ------------ ------------ -----------
SHARES AMOUNT
------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, November 30, 1,110,000 1,110 493,363 (285,740) - - 208,733
1997
Issuance of common 232,250 232 337,968 - (180,757) - 157,443
shares for services
Issuance of common 220,220 220 120,020 - - - 120,240
shares for cancellation
of notes payable
Private placement of 750,000 750 1,999,250 - - - 2,000,000
common stock
Exercise of options 1,184,430 1,184 986,605 - - - 987,789
and warrants
3 for 1 stock split 6,993,800 6,994 (6,994) - - - -
Net loss for the year - - - (199,023) - - (199,023)
------------ ----------- ------------- ------------ ------------ ------------ -----------
BALANCE, November 30, 10,490,700 $ 10,490 $ 3,930,212 $ (484,763) $ (180,757) $ - $3,275,182
1998
Issuance of common 350,000 350 1,266,650 - - - 1,267,000
shares for business
acquisition
Exercise of options 1,319,593 1,320 1,511,550 - - - 1,512,870
and warrants
Services provided for
payment of subscribed - - - - 74,744 - 74,744
shares
Net loss for the year - - - - - -
Change in unrealized
loss on marketable
securities - - - - - (31,250) (31,250)
------------ ----------- ------------- ------------ ------------ ------------ -----------
BALANCE, November 30, 12,160,293 $ 12,160 $ 6,708,412 $(1,749,038) $ (106,013) $ (31,250) $4,834,271
1999
============ =========== ============= ============ ============ ============ ===========
Services provided for
payment of subscribed - - - - 50,888 - 50,888
shares
Net income - - - 189,785 - 189,785
------------ ----------- ------------- ------------ ------------ ------------ -----------
BALANCE, February 29, 12,160,293 $ 12,160 $ 6,708,412 $(1,559,253) $ (55,125) $ (31,250) $5,074,944
2000
============ =========== ============= ============ ============ ============ ===========
</TABLE>
See Accompanying Notes
<PAGE>
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED FEBRUARY 29,
2000 and FEBRUARY 28, 1999
(Unaudited)
------------------------------------------
2000 1999
--------------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/Loss $ 189,785 $ (330,575)
Adjustments to reconcile net income/loss to
cash from operating activities:
Depreciation and amortization 518,449 37,165
Services provided in payment of subscribed shares 50,888 3,673
Changes in assets and liabilities:
Barter exchange receivables 3,202 8,828
Accounts receivable (570,394) (104,945)
Supplies inventory 2,721 -
Sales representation agreements (1,354,994) -
Payments on programming contract liabilities 681,557 -
Accounts payable (50,273) 96,312
Accrued liabilities (20,853) (37,145)
--------------------- ----------------
Net cash from operating activities (549,912) (326,687)
--------------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of common stock $ - $ 1,267,000
Goodwill from subsidiary acquisition - (656,027)
Covenant not to compete from subsidiary acquisition - (721,093)
Acquisition of property and equipment (1,438) (39,976)
--------------------- ----------------
Net cash from investing activities (1,438) (150,096)
--------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt - (1,789)
--------------------- ----------------
Net cash from financing activities - (1,789)
--------------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (551,350) (478,572)
CASH, beginning of year 892,092 1,855,666
--------------------- ----------------
CASH, end of year $ 340,742 $ 1,377,094
===================== ================
</TABLE>
<PAGE>
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 29,
2000 and FEBRUARY 28, 1999
(Unaudited)
--------------------------------------------
2000 1999
--------------------- ---------------------
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid for interest $ 633 $ 362
===================== =====================
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Capitalization of programming
contract assets and
recognition of related
liabilities $ 1,138,996 $ -
===================== =====================
Issuance of common stock
for subsidiary acquisition $ - $ 1,267,000
===================== =====================
Issuance of common stock for
services, net of stock
subscription $ 50,888 $ 16,916
===================== =====================
Receivable $ 55,125 $ 177,084
===================== =====================
See Accompanying Notes
<PAGE>
NOTE 1 - ORGANIZATION AND BUSINESS ACTIVITY
NBG Radio Network, Inc. (the Company) was organized under the laws
of the State of Nevada on March 27, 1996, with the name of
Nostalgia Broadcasting Corporation. In January 1998, shareholders
approved the Company's name change to NBG Radio Network, Inc. The
Company has been involved in the acquisition, creation and
syndication of national radio programming and music production and
distribution. In January 1999, NBG Radio Network, Inc. completed
the acquisition of M-Tek Technical Services, Inc., which became NBG
Solutions, Inc., a wholly owned subsidiary of the Company involved
in providing design, installation, and support for interactive
kiosks and card-based customer loyalty programs.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The interim consolidated financial statements include the accounts
NBG Radio Network, Inc. and its wholly owned subsidiaries, NBG
Solutions, Inc. and NBG Travel Exclusives, Inc., after elimination
of intercompany transactions and balances.
The interim financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. The financial
information included in this interim report has been prepared by
management without audit by independent public accountants who do
not express an opinion thereon. The Company's annual report will
contain audited financial statements. In the opinion of management,
all adjustments, including normal recurring accruals necessary for
fair presentation of results of operations for the interim periods
included herein have been made. The results of operations for the
three months ended February 29, 2000 are not necessarily indicative
of results to be anticipated for the year ending November 30, 2000.
Certain amounts for 1998 have been restated to conform with the
1999 presentation.
NOTE 3 - EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing net income by
the weighted average shares outstanding. The weighted average
number of shares and common share equivalents have been adjusted to
give retroactive effect to the 3 for 1 stock split in July 1998.
<PAGE>
Item 2. 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
o Ability to predict public taste with respect to entertainment programs
Three Months Ended February 29, 2000 and February 28, 1999
- ----------------------------------------------------------
Reference is made to Item 6, "Management's Discussion and Analysis or Plan
of Operation" included in the Company's annual report on Form 10-KSB for the
year ended November 30, 1999, as amended, on file with the Securities and
Exchange Commission. The following discussion and analysis pertains to the
Company's results of operations for the three-month period ended February 29,
2000, compared to the results of operations for the three-month period ended
February 28, 1999, and to changes in the Company's financial condition from
November 30, 1999 to February 29, 2000.
REVENUES. Total revenues for the three months ended February 29, 2000 were
$1,929,983 compared to revenues of $222,447 for the same period in 1999,
representing an increase of $1,707,536, or 768%. This increase was principally
due to the Company's acquisition of programming over the past year. The Company
acquired multiple long-form programs to complement its current list of short
form programs. The long form programming offers the Company significantly more
commercial broadcast inventory available for sale. The increase in inventory has
resulted in significant revenue growth. In addition to this, the continued
growth of the Company's network affiliates airing their programs has provided
the Company the opportunity to charge higher spot rates for their commercial
broadcast time resulting in higher revenues.
COSTS OF GOODS SOLD. Costs of goods sold for the three months ended
February 29, 2000 and 1999 were $574,498 and $99,008, respectively, representing
an increase of $475,490, or 480%. The increase is due primarily to the increase
costs of producing long-form programs. Long-form programs are more expensive to
produce due to the increase cost of delivery of the program via satellite and
the extra telephone charges incurred for caller driven programs. Short-form
programs are distributed on CD via the mail, a much less expensive form of
distribution. As
<PAGE>
a percentage of total revenues costs of goods sold were 30% for the three months
ended February 29, 2000 and 45% for the same period in 1999. The decrease is due
mainly to the significant increase in revenues afforded the Company by the new
long-form programs acquired.
GROSS MARGIN. Gross margin for the three months ended February 29, 2000
was $1,355,485, an increase of $1,232,046, or 998%, compared to the same period
1999. The increase in gross margin during the first quarter of 2000 was
principally due to the Company's significant increase in total revenues for the
first three months of 2000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended February 29, 2000 was $1,165,700, representing an
increase of $711,686, or 157% over the same period in 1999. The increase is
mainly attributable to two main areas. First of all, amortization and
depreciation (non-cash costs) increased $481,284 from $37,165 in 1999 to
$518,449 for the same period in 2000. The increase is mainly due to the
amortization of goodwill associated with business and programming acquisitions
by the Company. This goodwill is being amortized over a period of time ranging
from three to ten years. The second area of increase is from wages and employee
benefits. The increase of $205,602, or 127%, from $161,642 for the three months
ended February 28, 1999 to $367,244 for the same period in 2000 is mainly due to
the increase in staff size and infrastructure necessary to support the growth of
the Company. The Company grew from 18 full-time employees in the first quarter
of 1999 to 32 full-time employees in the the first quarter of 2000. Management
expects general and administrative expenses to continue to grow as the Company
attempts to acquire new programming and continues to develop existing programs.
INCOME TAXES. Due to loss carryforwards, there was no provision for income
taxes during the three months ended February 29, 2000 and February 28, 1999.
NET LOSS AND EARNINGS PER SHARE. Net income for the three months ended
February 29, 2000 was $189,785, or $.02 per share. Net loss for the three months
ended February 28, 1999 was $330,575, or $.03 per share. The loss for 1999 was
mainly due to reduced revenues as the Company transitioned to mainly cash
clients and no barter transactions.
Earnings per share are based upon 12,160,293 and 10,606,200 shares
outstanding on February 29, 2000 and 1999, 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 the first quarter of 1998 were
adjusted to reflect the stock split.
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 February 29, 2000 was $3.34 million compared to $2.36 million
at February 28, 1999. The increase in working capital was primarily due to an
increase in accounts receivable in connection with the growth in total revenues
of the Company.
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
were exercisable for $2.25 from June 1998 to January 31, 2000. The warrants then
became 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.
<PAGE>
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 no long term debt.
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.
PART II - OTHER INFORMATION
- ---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as part of this report:
Exhibit Number Description of Exhibit
27 Financial Data Schedule
(b) No reports on form 8-K were required to be filed during the quarter
ended February 29,2000.
<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: April 14, 2000 By: /s/ John J. Brumfield
--------------------------------------------
John J. Brumfield, Chief Financial Officer
Vice President, Finance
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001059366
<NAME> NBG Radio Network, Inc.
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-2000
<PERIOD-START> DEC-01-1999
<PERIOD-END> FEB-29-2000
<EXCHANGE-RATE> 1
<CASH> 340,742
<SECURITIES> 468,750
<RECEIVABLES> 2,691,601
<ALLOWANCES> 1,200
<INVENTORY> 26,557
<CURRENT-ASSETS> 5,818,820
<PP&E> 312,266
<DEPRECIATION> 119,413
<TOTAL-ASSETS> 7,552,328
<CURRENT-LIABILITIES> 2,477,384
<BONDS> 0
0
0
<COMMON> 12,160
<OTHER-SE> 6,708,412
<TOTAL-LIABILITY-AND-EQUITY> 7,552,328
<SALES> 1,924,732
<TOTAL-REVENUES> 1,929,983
<CGS> 574,498
<TOTAL-COSTS> 1,165,700
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 633
<INCOME-PRETAX> 189,785
<INCOME-TAX> 0
<INCOME-CONTINUING> 189,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189,785
<EPS-BASIC> (.02)
<EPS-DILUTED> (.01)
</TABLE>
