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 May 31, 2000 Commission File Number: 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 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 12,220,293 shares
outstanding as of July 7, 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
May 31 May 31 November 30
(Unaudited) (Unaudited) (Audited)
---------------------------------------------------------------------
2000 1999 1999
------------------------- ----------------- ------------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 480,948 $ 956,843 $ 892,092
Marketable equity securities, at fair value 468,750 - 468,750
Barter exchange receivables 171,494 223,108 148,136
Accounts receivable, net of allowance for
doubtful accounts of $1,200 in 2000 and 1999 3,536,402 993,152 2,121,207
Loan receivable 167,200 55,733 -
Related-party receivable 99,742 14,462 47,462
Supplies inventory 27,724 - 29,278
Sales representation agreements, net of 1,633,670 - 1,155,689
accumulated amortization
------------------------- ----------------- ------------------
Total current assets 6,585,930 2,243,298 4,862,614
------------------------- ----------------- ------------------
PROPERTY AND EQUIPMENT, net of accumulated 209,923 182,350 202,713
depreciation
DEPOSITS 1,000 3,050 1,000
INTANGIBLE ASSETS, net of amortization 1,444,413 2,638,228 1,634,897
------------------------- ----------------- ------------------
Total assets $ 8,241,266 $ 5,066,926 $ 6,701,224
========================= ================= ==================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
May 31 May 31 November 30
(Unaudited) (Unaudited) (Audited)
------------------------- ------------------------ ------------------
2000 1999 1999
------------------------- ----------------- ------------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 252,197 $ 191,305 $ 179,649
Accrued liabilities 10,323 4,146 31,615
Deferred programming revenue 500,000 - 500,000
Sales representation agreement liabilities 1,327,559 699,354 1,155,689
Current portion of long-term debt - 3,036 -
------------------------- ----------------- ------------------
Total current liabilities 2,090,079 897,841 1,866,953
------------------------- ----------------- ------------------
OTHER LIABILITIES
Long-term debt, net of current portion - - -
Deferred income tax liability - 9,789 -
------------------------- ----------------- ------------------
Total other liabilities - 9,789 -
------------------------- ----------------- ------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
5,000,000 shares authorized, none
issued (see note 4)
Common stock, $.001 par value; 50,000,000 12,220 10,840 12,160
shares authorized, 12,220,293 and
10,840,700 shares issued and outstanding
at May 31, 2000 and May 31, 1999,
respectively (see note 4)
Additional paid-in-capital 6,740,852 5,196,862 6,708,412
Retained deficit (520,726) (874,517) (1749038)
Stock subscription receivable (49,909) (173,889) (106,013)
Unrealized loss on marketable equity (31,250) - (31,250)
securities, net of tax
------------------------- ----------------- ------------------
Total stockholders' equity 6,151,187 4,159,296 4,834,271
------------------------- ----------------- ------------------
Total liabilities and stockholders' $ 8,241,266 $5,066,926 $6,701,224
equity
========================= ================= ==================
</TABLE>
See Accompanying Notes
<PAGE>
NBG RADIO NETWORK, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED May 31 SIX MONTHS ENDED May 31
(Unaudited) (Unaudited)
-------------------------------------------------------------------------------------
2000 1999 2000 1999
------------------ -------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
REVENUES
Advertising income $ 3,414,227 $ 776,668 $ 5,263,234 $ 927,212
Kiosk income 42,630 121,480 118,346 184,345
Interest income 32 1,237 5,292 10,275
------------------ -------------------- ------------------ -----------------
Total revenues 3,456,889 899,385 5,386,872 1,121,832
COST OF GOODS SOLD 1,129,974 258,377 1,704,472 354,611
------------------ -------------------- ------------------ -----------------
GROSS MARGIN 2,326,915 641,008 3,682,400 767,221
------------------ -------------------- ------------------ -----------------
GENERAL AND ADMINISTRATIVE EXPENSES
Wages and employee benefits 397,394 237,323 764,638 398,965
Travel and entertainment 52,812 45,448 88,614 80,008
Consulting and professional 114,024 72,000 208,705 158,451
Advertising 12,208 20,793 22,511 34,397
Depreciation and amortization 575,470 57,097 1,093,919 94,262
Postage and printing 41,330 31,909 70,195 55,394
Rent 24,689 17,965 49,036 36,113
Interest 857 1,289 1,490 1,651
Office supplies 14,690 32,814 27,343 39,738
Telephone 28,301 21,460 40,077 35,288
Other expenses 26,613 162,089 87,560 222,708
------------------ -------------------- ------------------ -----------------
Total general and 1,288,388 700,187 2,454,088 1,156,975
administrative expenses ------------------ -------------------- ------------------ -----------------
Net income (loss) before provision for 1,038,527 (59,179) 1,228,312 (389,754)
income taxes
Provision for income taxes - - - -
------------------ -------------------- ------------------ -----------------
Net income (loss) $ 1,038,527 $ (59,179) $ 1,228,312 $ (389,754)
================== ==================== ================== =================
Basic loss per share of common stock $ 0.09 $ (0.01) $ 0.10 $ (0.04)
================== ==================== ================= =================
Weighted average number of shares 12,190,293 10,840,700 12,175,293 10,724,033
outstanding ================== ==================== ================== =================
</TABLE>
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 - - - - 74,744 - 74,744
payment of subscribed
shares
Net loss for the year - - - - - -
Change in unrealized - - - - - (31,250) (31,250)
loss on marketable
securities
------------ ----------- ------------- ------------ ------------ ------------ -----------
------------ ----------- ------------- ------------ ------------ ------------ -----------
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 - - - - 56,104 - 56,104
payment of subscribed
shares
Exercise of options 60,000 60 32,440 - - - 32,500
Net income - - - 1,228,312 - - 1,228,312
------------ ----------- ------------- ------------ ------------ ------------ -----------
BALANCE, May 31, 2000 12,220,293 $ 12,220 $ 6,740,852 $ (520,726) $ (49,909) $ (31,250) $6,151,187
============ =========== ============= ============ ============ ============ ===========
</TABLE>
See Accompanying Notes
<PAGE>
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31
(Unaudited)
------------------------------------------
2000 1999
--------------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/Loss $ 1,228,312 $ (389,754)
Adjustments to reconcile net income/loss to cash from
operating activities: Depreciation and amortization 1,093,919 94,262
Services provided in payment of subscribed shares 56,104 6,868
Changes in assets and liabilities:
Barter exchange receivables (23,358) 18,570
Accounts receivable (1,415,195) 182,178
Loan receivable (167,200) (55,733)
Related party receivables (52,280) -
Supplies inventory 1,554 -
Sales representation agreements (1,354,994) -
Deposits - 200
Payments on programming contract liabilities 171,870 699,354
Accounts payable 72,548 15,103
Accrued liabilities (21,292) (63,740)
--------------------- ----------------
Net cash from operating activities (410,012) 507,308
--------------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of common stock $ 32,500 $ 1,267,000
Goodwill from subsidiary acquisition - (656,027)
Covenant not to compete from subsidiary acquisition - (721,093)
Acquisition of programming rights - (748,750)
Acquisition of property and equipment (33,632) (65,049)
--------------------- ----------------
Net cash from investing activities (1,132) (923,919)
--------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt - (482,212)
--------------------- ----------------
Net cash from financing activities - (482,212)
--------------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (411,144) (898,823)
CASH, beginning of year 892,092 1,855,666
--------------------- ----------------
CASH, end of year $ 480,948 $ 956,843
===================== ================
</TABLE>
<PAGE>
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED MAY 31
(Unaudited)
-------------------------------------------
2000 1999
---------------------- ----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 1,490 $ 1,651
====================== ================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Capitalization of programming contract assets and
recognition of related liabilities $ 1,354,994 $ 748,750
====================== ================
Issuance of common stock for subsidiary acquisition $ - $1,267,000
====================== ================
Issuance of common stock for services, net of stock $ 56,104 $ 22,553
subscription receivable ($55,125 and $177,084) ====================== ================
</TABLE>
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, stockholders
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
six months ended May 31, 2000 are not necessarily indicative of
results to be anticipated for the year ending November 30, 2000.
Certain amounts for 1999 have been restated to conform with the
2000 presentation.
NOTE 3 - EARNINGS PER COMMON SHARE
Earnings per common share is calculated by dividing net income by
the weighted average shares outstanding.
NOTE 4 - AUTHORIZED SHARES
On April 16, 2000 stockholders approved amendments to the Company's
Articles of Incorporation (1) increasing the authorized common
stock to 50,000,000 shares, and (2) authorizing 5,000,000 shares of
preferred stock. Articles of amendment confirming this approval
have not been filed with the Nevada Secretary of State.
<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-Month and Six-Month Periods Ended May 31, 2000 and May 31, 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 and six-month periods ended
May 31, 2000, compared to the results of operations for the three-month and
six-month periods ended May 31, 1999, and to changes in the Company's financial
condition from November 30, 1999 to May 31, 2000.
REVENUES. Total revenues for the three months ended May 31, 2000 were
$3,456,889 compared to total revenues of $899,385 for the same period in 1999,
representing an increase of $2,557,504, or 284%. Total revenues for the six
months ended May 31, 2000 were $5,386,872 compared to total revenues of
$1,121,832 for the same period in 1999, representing an increase of $4,265,040,
or 380%. These increases were 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 May
31, 2000 and 1999 were $1,129,974 and $258,337, respectively, representing an
increase of $871,637, or 337%. Cost of goods sold for the six months ended May
31, 2000 and 1999 were $1,704,472 and $354,611, respectively, representing an
increase of $1,349,861, or 381%. These increases are due
<PAGE>
primarily to the increase costs of producing long-form programs. Long-form
programs are more expensive to produce due to the increased 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 a percentage of total revenues costs of
goods sold were 33% for the three months ended May 31, 2000 and 29% for the same
period in 1999. The increase is due mainly to the higher cost of delivery for
the long form programming. As a percentage of total revenues costs of goods sold
were 32% for the six months ended May 31, 2000 and 32% for the same period in
1999.
GROSS MARGIN. Gross margin for the three months ended May 31, 2000 was
$2,326,915, an increase of $1,685,907, or 263%, compared to the same period
1999. Gross margin for the six months ended May 31, 2000 was $3,682,400, an
increase of $2,915,179, or 380%, compared to the same period in 1999. These
increases in gross margin are principally due to the Company's significant
increase in total revenues for the first six months of 2000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended May 31, 2000 was $1,288,388, representing an increase
of $588,201, or 84% over the same period in 1999. The increase is mainly
attributable to amortization and depreciation (non-cash costs) increasing
$518,373 from $57,097 in 1999 to $575,470 for the same period in 2000. The
increase is due to the amortization of goodwill associated with business and
programming acquisitions by the Company. General and administrative expenses for
the six months ended May 31, 2000 were $2,454,088, representing an increase of
$1,297,113, or 112% over the same period in 1999. The increase is mainly
attributable to two areas. Amortization and depreciation (non-cash costs) for
the six months ended May 31, 2000 increased $999,657 from $94,262 in 1999 to
$1,093,919 in 2000. The increase is 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 $365,673, or 92%, from $398,965 for the six months ended May 31,
1999 to $764,638, 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 20 full-time employees in the second quarter of 1999 to 32
full-time employees in the second quarter of 2000. While there was an increase
in absolute dollars for wages and employee benefits, there was a decrease when
compared to the percentage of total revenues. For the six months ended May 31,
2000 wages and employee benefits were $764,638, or 14% of total revenues as
compared to $398,965, or 36% of total revenues for the same period in 1999.
Total general and administrative expenses for the six months ended May 31, 2000
was $2,454,088, or 46% of total revenues as compared to $1,156,975, or 103% of
total revenues for the same period in 1999. Management expects the absolute
dollars for 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 six months ended May 31, 2000 and May 31, 1999.
NET LOSS AND EARNINGS PER SHARE. Net income for the three months ended May
31, 2000 was $1,038,527, or $.09 per share. Net loss for the three months ended
May 31, 1999 was $59,179, or $.01 per share. Net income for the six months ended
May 31, 2000 was $1,228,312, or $.10 per share. Net loss for the six months
ended May 31, 1999 was $389,754, or $.04 per share. The loss for 1999 was mainly
due to reduced revenues as the Company transitioned to mainly cash clients and
no barter transactions.
<PAGE>
Earnings per share are based upon the weighted average of 12,175,293 and
10,724,033 shares outstanding on May 31, 2000 and 1999, respectively.
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 May 31, 2000 was $4.50 million compared to $1.35 million at
May 31, 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.
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 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
(a) An Annual Meeting of Stockholders was held on May 16, 2000.
(b) John A. Holmes, III, Peter Jacobsen, Dick Versace, Steven R. Sears, and
Christopher J. Miller were re-elected as directors of the Company.
(c) Three matters were voted upon at the 2000 Annual Meeting of Stockholders.
First, there was the election of directors. The results of the election
of directors were as follows:
Nominee Votes For Votes Against Abstentions Broker
------- --------- or Withheld ----------- Nonvotes
----------- --------
John A. Holmes, III 7,549,614 0 0 0
Peter Jacobsen 7,549,614 0 0 0
Dick Versace 7,549,614 0 0 0
Steven R. Sears 7,549,614 0 0 0
Christopher J. Miller 7,533,284 7,200 9,130 0
Second, a proposal to amend the Company's Articles of Incorporation to increase
the number of authorized shares of Common Stock to 50,000,000 shares was
approved by the stockholders. The results of the vote for this proposal were as
follows:
Votes For Votes Against Abstentions Broker
--------- or Withheld ----------- Nonvotes
----------- --------
Proposal to Increase
Authorized Common Stock 7,425,374 95,120 38,250 0
<PAGE>
Third, a proposal to amend the Company's Articles of Incorporation to authorize
5,000,000 shares of preferred stock to be designated by the Board of Directors
was approved by the stockholders. The results of the vote for this proposal were
as follows:
Votes For Votes Against Abstentions Broker
--------- or Withheld ----------- Nonvotes
----------- --------
Proposal to Authorize
Preferred Stock 7,422,024 136,720 9,500 0
(d) None.
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
May 31, 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: July 14, 2000 By: /s/ John J. Brumfield
--------------------------------------------
John J. Brumfield, Chief Financial Officer
Vice President, Finance
(Principal Financial and Accounting Officer)
