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: 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.)
incorporation or organization)
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 12,273,828 shares
outstanding as of October 7, 2000.
Transitional Small Business Issuer Disclosure Format (check one):
Yes [ ] No [X].
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NBG RADIO NETWORK, INC.
BALANCE SHEETS
ASSETS
August 31 August 31 November 30
(Unaudited) (Unaudited) (Audited)
------------------------- --------------------- ------------------
2000 1999 1999
------------------------- --------------------- ------------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 565,956 $ 1,695,949 $ 892,092
Marketable equity securities, at fair - 500,000 468,750
value
Barter exchange receivables 109,074 212,914 148,136
Accounts receivable, net of allowance for
doubtful accounts of $1,200 in 2000 and 1999 4,071,176 1,049,588 2,121,207
Loan receivable 167,200 167,200 -
Related-party receivable 107,674 14,462 47,462
Supplies inventory 26,557 29,628 29,278
Sales representation agreements, net of 1,168,566 748,750 1,155,689
accumulated amortization
------------------------- ------------------ ------------------
Total current assets 6,216,203 4,418,491 4,862,614
------------------------- ------------------ ------------------
PROPERTY AND EQUIPMENT, net of accumulated 201,426 197,507 202,713
depreciation
DEPOSITS 1,000 3,050 1,000
INTANGIBLE ASSETS, net of amortization 1,349,171 1,842,309 1,634,897
------------------------- ------------------ ------------------
Total assets $ 7,767,800 $ 6,461,357 $ 6,701,224
========================= ================= ==================
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 302,958 $ 193,070 $ 179,649
Accrued liabilities 9,831 9,171 31,615
Deferred programming revenue - 500,000 500,000
Sales representation agreement liabilities 749,121 510,167 1,155,689
Current portion of long-term debt 50,000 1,171 -
------------------------- ----------------- ------------------
Total current liabilities 1,111,910 1,213,579 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
Common stock, $.001 par value; 50,000,000
shares authorized 12,273,828 and
12,148,293 shares issued and outstanding 12,273 12,148 12,160
at August 31, 2000 and August 31, 1999,
respectively
Additional paid-in-capital 6,769,799 6,699,214 6,708,412
Retained deficit (111,116) (1,299,714) (1,749,038)
Stock subscription receivable (15,066) (173,659) (106,013)
Unrealized loss on marketable equity - - (31,250)
securities, net of tax ------------------------- ----------------- ------------------
Total stockholders' equity 6,655,890 5,237,989 4,834,271
------------------------- ----------------- ------------------
Total liabilities and stockholders' $ 7,767,800 $6,461,357 $6,701,224
equity
========================= ================= ==================
</TABLE>
See Accompanying Notes
<PAGE>
<TABLE>
<CAPTION>
NBG RADIO NETWORK, INC.
TATEMENTS OF OPERATIONS
THREE MONTHS ENDED August 31 NINE MONTHS ENDED August 31
(Unaudited) (Unaudited)
------------------------------------------ ------------------------------------------
2000 1999 2000 1999
------------------ -------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
REVENUES
Advertising income $ 2,806,192 $ 651,768 $ 8,069,426 $ 1,578,980
Kiosk income 300,800 107,503 419,146 291,848
Interest income 140 770 5,432 11,045
------------------ -------------------- ------------------ -----------------
Total revenues 3,107,132 760,041 8,494,004 1,881,873
2,933,556
COST OF GOODS SOLD 1,229,084 362,850 717,461
------------------ -------------------- ------------------ -----------------
GROSS MARGIN 1,878,048 397,191 5,560,448 1,164,412
------------------ -------------------- ------------------ -----------------
GENERAL AND ADMINISTRATIVE EXPENSES
Wages and employee benefits 520,056 371,011 1,284,694 769,976
Travel and entertainment 58,132 41,679 146,746 121,687
Consulting and professional 135,142 87,768 343,847 246,219
Advertising 24,933 22,785 47,444 57,182
Depreciation and amortization 573,300 60,226 1,667,219 154,488
Postage and printing 52,298 101,383 122,493 156,777
Rent 26,465 25,792 75,501 61,905
Interest 1,487 990 2,977 2,641
Office supplies 18,562 29,372 45,905 69,110
Telephone 26,649 21,595 66,726 56,883
Other expenses 31,414 59,787 118,974 282,495
------------------ -------------------- ------------------ -----------------
Total general and 1,468,438 822,388 3,922,526 1,979,363
administrative expenses ------------------ -------------------- ------------------ -----------------
Net income (loss) before provision for 409,610 (425,197) 1,637,922 (814,951)
income taxes
Provision for income taxes - - - -
------------------ -------------------- ------------------ -----------------
Net income (loss) $ 409,610 $ (425,197) $ 1,637,922 $ (814,951)
================== ==================== ================== =================
Basic income (loss) per share of $ 0.04 $ (0.04) $ 0.14 $ (0.07)
common stock ================== ==================== ================== =================
Weighted average number of shares 12,262,190 11,272,205 12,208,138 10,907,535
outstanding ================== ==================== ================== =================
</TABLE>
See Accompanying Notes
<PAGE>
<TABLE>
<CAPTION>
NBG RADIO NETWORK, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
ADDITIONAL STOCK OTHER
PAID-IN RETAINED SUBSCRIPTION COMPREHENSIVE
COMMON STOCK CAPITAL DEFICIT RECEIVABLE INCOME TOTAL
--------------------------- ------------- ------------ ------------ ------------- ----------
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 provide for
payment of subscribed - - - - 74,744 - 74,744
shares
Net loss for the year - - - - - -
Change in unrealized
loss on marketable - - - - - (31,250) (31,250)
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
payment of subscribed - - - - 90,947 - 90,947
shares
Change in unrealized - - - - - 31,250 31,250
loss on marketable
securities
Exercise of options 113,535 113 61,387 - - - 61,500
Net income - - - 1,637,922 - - 1,637,922
------------ ----------- ------------- ------------ ------------ ------------ ----------
BALANCE, August 31, 12,273,828 $ 12,273 $ 6,769,799 $ (111,116) $ (15,066) $ - $6,655,890
2000 ============ =========== ============= ============ ============ ============ ==========
</TABLE>
See Accompanying Notes
<PAGE>
<TABLE>
<CAPTION>
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED AUGUST 31
(Unaudited)
------------------------------------------
2000 1999
--------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/Loss $ 1,637,922 $ (814,951)
Adjustments to reconcile net income/loss to cash from
operating activities: 154,488
Depreciation and amortization 1,667,219
Services provided in payment of subscribed shares 90,947 7,098
Changes in assets and liabilities:
Barter exchange receivables 39,062 28,764
Accounts receivable (1,949,969) 125,742
Loan receivable (167,200) (167,200)
Related party receivables (60,212) -
Supplies inventory 2,721 (29,628)
Sales representation agreements 1,354,994 -
Securities available for sale 468,750 (500,000)
Deferred programming revenue (500,000) 500,000
Deposits - 200
Payments on programming contract liabilities (1,761,562) 510,167
Accounts payable 123,309 16,868
Accrued liabilities (21,784) (58,715)
--------------------- ----------------
Net cash from operating activities 924,197 (227,167)
--------------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of common stock $ 61,500 $ 2,770,660
Unrealized gain on investment securities 31,250
Goodwill from subsidiary acquisition - (656,027)
Covenant not to compete from subsidiary acquisition - (721,093)
Acquisition of programming rights (1,354,994) (748,750)
Acquisition of property and equipment (38,089) (93,263)
--------------------- ----------------
Net cash from investing activities (1,300,333) 551,527
--------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line of Credit 50,000 -
Payments on long-term debt - (484,077)
--------------------- ----------------
Net cash from financing activities 50,000 (484,077)
--------------------- ----------------
<PAGE>
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (326,136) (159,717)
CASH, beginning of year 892,092 1,855,666
--------------------- ----------------
CASH, end of year $ 565,956 $ 1,695,949
===================== ================
</TABLE>
<TABLE>
<CAPTION>
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED AUGUST 31
(Unaudited)
-------------------------------------------
2000 1999
----------------------- ----------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 2,977 $ 2,641
======================= ================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Capitalization of programming contract assets and
recognition of related liabilities $ 1,354,994 $ -
====================== ================
Issuance of common stock for subsidiary acquisition $ - $ 1,267,000
====================== ================
Issuance of common stock for services, net of stock
subscription receivable ($15,066 and $173,659) $ 90,947 $ 22,323
====================== ================
</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, 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. 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
nine months ended August 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.
<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 August 31, 2000 and August 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 nine-month periods ended
August 31, 2000, compared to the results of operations for the three-month and
nine-month periods ended August 31, 1999, and to changes in the Company's
financial condition from November 30, 1999 to August 31, 2000.
REVENUES. Total revenues for the three months ended August 31, 2000 were
$3,107,132 compared to total revenues of $760,041 for the same period in 1999,
representing an increase of $2,347,091, or 309%. Total revenues for the nine
months ended August 31, 2000 were $8,494,004 compared to total revenues of
$1,881,873 for the same period in 1999, representing an increase of $6,612,131,
or 351%. 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. In addition, the Company has been able to charge higher advertising
spot rates due to an increase in the number and quality of the stations airing
the Company's programs.
COSTS OF GOODS SOLD. Costs of goods sold for the three months ended August
31, 2000 and 1999 were $1,229,084 and $362,850, respectively, representing an
increase of $866,234, or 239%. Cost of goods sold for the nine months ended
August 31, 2000 and 1999 were $2,933,556 and $717,461, respectively,
representing an increase of $2,216,095, or 309%. These increases are due
primarily to the increased production costs of long-form programs.
<PAGE>
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 40% for the three months ended August 31,
2000 and 48% for the same period in 1999. The decrease is due mainly to the
Company eliminating the production of less profitable programs. As a percentage
of total revenues, costs of goods sold were 35% for the nine months ended August
31, 2000 and 38% for the same period in 1999.
GROSS MARGIN. Gross margin for the three months ended August 31, 2000 was
$1,878,048, an increase of $1,480,857, or 373%, compared to the same period
1999. Gross margin for the nine months ended August 31, 2000 was $5,560,448, an
increase of $4,396,036, or 378%, compared to the same period in 1999. These
increases in gross margin are principally due to the Company's significant
increase in total revenues from long-form programming and higher advertising
spot rates for the first nine months of 2000.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended August 31, 2000 was $1,468,438, representing an
increase of $646,050, or 79%, over the same period in 1999. The increase is
principally due to an increase in depreciation and amortization expense of
$513,074, from $60,226 in 1999 to $573,300 for the same period in 2000, due to
amortization of goodwill associated with business and programming acquisitions
by the Company.
General and administrative expenses for the nine months ended August 31,
2000 were $3,922,526, representing an increase of $1,943,163, or 99% over the
same period in 1999. The increase is principally due to an increase in
depreciation and amortization expense and an increase in wages and employee
benefits. Depreciation and amortization expense for the nine months ended August
31, 2000 increased $1,512,731 from $154,488 in 1999 to $1,667,219 in 2000, 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.
Wages and employee benefits expense increased $514,718, or 67%, from
$769,976 for the nine months ended August 31, 1999 to $1,284,694, for the same
period in 2000 principally due to an increase in staff size necessary to support
the growth of the Company. The Company grew from 20 full-time employees in the
second quarter of 1999 to 34 full-time employees in the third quarter of 2000.
Wages and employee benefits expense increased in absolute dollars but decreased
as a percentage of total revenues. For the nine months ended August 31, 2000
wages and employee benefits expense were $1,284,694, or 16% of total revenues as
compared to $769,976, or 41% of total revenues for the same period in 1999.
Total general and administrative expenses for the nine months ended August 31,
2000 was $3,922,526, or 47% of total revenues as compared to $1,979,363, or 106%
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 carry-forwards, there was no provision for
income taxes during the nine months ended August 31, 2000 and August 31, 1999.
NET LOSS AND EARNINGS PER SHARE. Net income for the three months ended
August 31, 2000 was $409,610, or $.04 per share compared to a net loss for the
three months ended August 31, 1999 of $425,197, or $.04 per share. Net income
for the nine months ended
<PAGE>
August 31, 2000 was $1,637,922, or $.14 per share compared to a net loss for the
nine months ended August 31, 1999 of $814,951, or $.07 per share. The net loss
for 1999 was principally due to reduced revenues as the Company transitioned
from barter transactions to predominantly cash clients.
Earnings per share are based upon the weighted average of 12,273,828 and
12,148,293 shares outstanding on August 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 August 31, 2000 was $5,100,000 compared to $3,200,000 at
August 31, 1999. The increase in working capital was primarily due to an
increase in accounts receivable caused by an increase in total revenues.
The Company has no long-term debt. Currently the Company has a line of
credit of up to $500,000 from Western Bank, which is secured by the Company's
accounts receivable. The line of credit terminates on July 31, 2001. Interest at
prime plus one-half percent is due on outstanding amounts. As of August 31,
2000, $50,000 was outstanding under the line of credit.
Management believes that its available cash together with operating
revenues will be sufficient to fund the Company's working capital requirements
through November 30, 2001. 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
August 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: October 13, 2000 By: /s/
--------------------------------------------
John J. Brumfield, Chief Financial Officer
Vice President, Finance
(Principal Financial and Accounting Officer)
