Add
DBTB.OB to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| DBTB.OB > SEC Filings for DBTB.OB > Form 10-Q on 13-Nov-2009 | All Recent SEC Filings |
13-Nov-2009
Quarterly Report
Forward-Looking Statements
Certain statements contained in this report may not be based on historical facts and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements may be identified by reference to a future-period(s) or by the use of forward-looking terminology, such as "anticipate," "believe," "estimate," "expect," "foresee," "may," "might," "will," "intend," "could," "would," or "plan" or future or conditional verb tenses, and variations or negatives of such terms.
These forward-looking statements include, without limitation, the basis of presentation of our financial statements, charges to consulting clients, the impact of recent accounting pronouncements, the impact of radio station acquisitions, radio advertising growth, pending acquisitions, the future use of Black-Scholes method of valuation, market trends, our need for additional capital, our ability to raise capital through debt and equity financing, the terms of any financing the we may obtain, the incurrence of accounting and legal fees in connection with acquisitions and the effectiveness of our disclosure controls and procedures.
We caution you not to place undue reliance on the forward-looking statements contained in this report, in that actual results could differ materially from those indicated in such forward-looking statements as a result of a variety of factors. These factors include, but are not limited to, our ability to provide and market competitive service and products, our ability to diversify revenue, our ability to attract, train and retain qualified personnel, our ability to operate and integrate new technology, changes in consumer preference, changes in our operating or expansion strategy, changes in economic conditions, fluctuation in prevailing interest rates, our ability to identify and effectively integrate potential acquisitions, FCC and government approval of potential acquisition, our inability to renew one or more of our broadcast licenses, our ability to manage growth and effectively serve an expanding customer and market base, geographic concentrations of our assets and susceptibility to economic downturns in that area, availability of and costs associated with maintaining and/or obtaining adequate and timely sources of capital and liquidity, our ability to compete with other companies that produce and distribute syndicated radio programs and/or own radio stations, shifts in populations and other demographics, changes in governmental regulations, laws and regulations as the affect companies that produce and distribute syndicated radio programs and/or own radio stations, industry conditions, the popularity of radio as a broadcasting and advertising medium, cancellation, disruption or postponements of advertising schedules in response to national or world events, possible adverse ruling, judgments, settlements, and other outcomes of pending or threatened litigation, other factors generally understood to affect the financial condition or results of companies that produce and distribute syndicated radio programs and/or own radio stations and other factors detailed from time to time in our press releases and filings with the Securities and Exchange Commission. We undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date of this report.
Overview
A Radio Advertising Bureau report issued in January of 2009 indicated that local advertisers, the largest advertisers which are served in small markets, decreased their overall advertising by 10% in 2008. Analysts are projecting that overall revenue will continue to be lower year over year in 2009 with a return to 2008 levels in 2010. We have been affected by this decline with a decrease in sales from advertisers in key groups of casino and automotive. Management believes that the small markets will recover with more speed than the broader national markets, but that has not left the small markets immune to recession. Non-broadcast radio revenue ("non-spot revenue") remained steady during the second quarter of 2009. Our small market focus allows us to capitalize on the growth in local markets and non-spot revenue as we participate as active members in the communities in which we operate. For the nine months ended September 30, 2009, combined net revenue from radio, multi-media, media purchasing and syndication decreased 10.1% compared to the same period in 2008.
Our management team remains focused on our strategy of pursuing growth through acquisition. However, acquisitions are closely evaluated to ensure that they will generate stockholder value and our management is committed to completing only those acquisitions that it believes will increase our share price.
Results of Operations
For the Three Months Ended September 30, 2009 and 2008
We generated $525,802 in net revenue for the quarter ended September 30, 2009, a decrease of $215,272 or 29.04%, compared to $741,074 for the quarter ended September 30, 2008. Approximately $354,000 of this decrease relates to the syndication business. Revenue increased in the Mississippi radio station markets, offsetting the overall loss for the quarter ended September 30, 2009 compared to the quarter ended September 30, 2008.
Advertising expense was $3,052 for the quarter ended September 30, 2009, a decrease of 18,699 or 85.9%, compared to $21,751 for the quarter ended September 30, 2008. This decrease is partially attributable to the expiration of a public relations contract that we entered into with Politis Communications. Additionally contributing to the decrease were the expiration of contracts that we entered into with Agoracom for investor relations services, as well as discontinued public relations contracts with Dutton Associates and Rubicon Capital Partners.
Operating expense was $601,581 for the quarter ended September 30, 2009, a decrease of $170.148 or 22.04%, compared to $771,729 for the quarter ended September 30, 2008. Of the total decrease in operating expenses, approximately $340,539 related to a gain on settlement of debt with Citadel Broadcasting. Approximately $170,000 relates to company wide staffing and salary reductions implemented in the first quarter of 2009, and a decrease in legal and regulatory spending.
On August 22, 2002, the company signed an unsecured promissory note with Citadel Broadcasting to alleviate pass through bad debt due to the temporary collapse of the national advertising market in late 2001. Over the life of the agreement, the company made principle and interest payments to Citadel Broadcasting totaling $350,467. During the three months ended September 30, 2009 the company settled the agreement, resulting in a one time gain on settlement of $340,539.
Depreciation and amortization expense was $52,668 for the quarter ended September 30, 2009, an increase of $23,779, or 82%, compared to $28,889 for the quarter ended September 30, 2008. The primary reason for the increase relates to the assets acquired as part of the WBBV FM acquisition.
Interest expense was $53,499 for the quarter ended September 30, 2009, an increase of $7,299 or 13.6% compared to $46,200 for the quarter ended September 30, 2008. The primary source of the interest expenditures were interest payments associated with the two term loans from Remington Partners, Inc, the Regions Bank loans, and the SunTrust Bank loan.
As a result of the foregoing revenue and expenses, our overall net income or
(loss) for the three-month period ending September 30, 2009 and September 30,
2008 was $166,510 and ($70,767), respectively.
For the Nine Months Ended September 30, 2009 and 2008
We generated $1,056,916 in net revenue for the nine months ended September 30, 2009, a decrease of $861,939, or 44.9%, compared to $1,918,857 for the nine months ended September 30, 2008. Approximately $1,009,889 of this decrease relates to the syndication business. Revenue increased in the Mississippi radio station markets, offsetting the overall loss for the nine months ended September 30, 2009 compared to the nine months ended September 30, 2008
Advertising expense was $12,722 for the nine months ended September 30, 2009 a decrease of $161,769 or 92.7% compared to $174,491 for the nine months ended September 30, 2008. This decrease is partially attributable to the expiration of a public relations contract that we entered into with Politis Communications. Additionally contributing to the decrease were the expiration of contracts that we entered into with Agoracom for investor relations services, as well as discontinued public relations contracts with Dutton Associates and Rubicon Capital Partners.
Operating expense was $1,763,193 for the nine months ended September 30, 2009, a decrease of $325,711 or 15.59%, compared to $2,088,904 for the nine months ended September 30, 2008. Of the total decrease in operating expenses, approximately $83,000 related to company wide staffing and salary reductions implemented in the first quarter of 2009. Additional reasons for the decrease in operating expenses relate to a decrease in legal and regulatory spending of approximately $149,800, and a decrease and travel and entertainment expenditures of approximately $44,500.
On August 22, 2002, the company signed an unsecured promissory note with Citadel Broadcasting to alleviate pass through bad debt due to the temporary collapse of the national advertising market in late 2001. Over the life of the agreement, the company made principle and interest payments to Citadel Broadcasting totaling $350,467. During the nine months ended September 30, 2009 the company settled the agreement, resulting in a one time gain on settlement of $340,539.
Depreciation and amortization expense was $157,442 for the nine months ended September 30, 2009, an increase of $21,406 or 32.5% compared to $65,868 for the nine months ended September 30, 2008. The primary reason for the increase relates to the assets acquired as part of the WBBV FM acquisition.
Interest expense was $152,911 for the nine months ended September 30, 2009, an increase of $58,154 or 38% compared to $94,757 for the nine months ended September 30, 2008. The primary source of the increase was interest payments associated with the two term loans from Remington Partners, Inc. An additional increase in interest expense was attributable to the vehicles which have been financed for the radio station operations.
As a result of the foregoing revenue and expenses, our overall net loss for the nine month period ending September 30, 2009 and September 30, 2008 was $206,154 and $594,848, respectively.
Financial Condition
Accounts receivable, net of allowance for doubtful accounts was $1,056,916 at September 30, 2009, a decrease of $36,400 or 3.3% compared to $1,096,316 at December 31, 2008. The drop in sales revenue from the syndication business is largely attributable to the decrease in the accounts receivable balance.
Unexercised Stock warrants was $447,836 at September 30, 2009, a decrease of $6,822 compared to $454,658 at December 31, 2008. In accordance with FAS 133, we record an associated asset and liability for the issuance of warrants, which is adjusted quarterly using the Black-Scholes method of derivative valuation.
In the second quarter of 2009, we disposed of a Dodge Magnum and a Nissan Xterra through sales to third parties for $12,000 and $13,300 respectively. As a result of these disposals and accumulated depreciation on our existing assets, our property and equipment, net of depreciation, fell to $632,525 compared to $749,416 at December 31, 2008.
Accounts payable at September 30, 2009 was $761,971, an increase of $231,179 or 30.3% compared to $530,792 at December 31, 2008. We decreased our accounts payable balance in the third quarter as compared to the quarter ended June 30, 2009, utilizing funds from the Riverfalls loan. However, the increase in accounts payable is attributable to a slower collections cycle and increases in bad debt among automotive advertisers nationally and locally, limiting our ability to maintain a normal payables cycle.
Accrued expenses and taxes at September 30, 2009 were $336,548, a decrease of $113,333 from December 31, 2008. This decrease is attributable to payments of accrued audit and legal fees, as well as accrued contracts for radio programming that have been fully satisfied.
In January and February of 2008, we exercised two loans with Remington Partners, Inc. for a total of $750,000 in notes payable to stockholders. As a result, our notes payable to stockholders were $750,000 at September 30, 2009 and December 31, 2008.
Liquidity and Capital Resources
As of September 30, 2009, our current assets in the amount of $1,576,619, consisted of $35,040 in cash and cash equivalents, $1,056,916 in accounts receivable, $85 in stock warrants receivable, $21,624 in prepaid expenses and $454,657 in unexercised stock warrants. As of September 30, 2009, our current liabilities in the amount of $3,122,561, consisted of $761,971 in accounts payable, $336,548 in accrued expenses and taxes, $750,000 in notes payable to stockholders, $731,860 in lines of credit and $56,659 in current portion of long term debt, and $485,523 in unexercised stock warrant loss. This combination of assets and liabilities resulted in a working capital deficit in the amount of $1,540,941.
In the third quarter of 2009 we signed an agreement with Riverfalls Capital Partners that we anticipate will meet our funding needs to acquire additional radio stations while subsequently correcting our arrearages on accounts payable.
Recent Events
Pending Acquisitions
During the fourth quarter of 2007, we signed letters of intent to purchase seven additional radio stations in two markets. Two of these stations, WBBV FM, and KLSM FM were placed under a local marketing agreement on March 16, 2008. We signed an asset purchase agreement and filed for FCC License transfer for WBBV during the first quarter of 2008. We received approval from the FCC to proceed with the acquisition during the second quarter of 2008. We finalized the acquisition of WBBV during the third quarter of 2008. We anticipate placing additional stations under local marketing agreements and filing asset purchase agreements during the fourth quarter of 2009 and first quarter of 2010.
These markets complement the geography of our existing radio stations and will create a super-regional cluster™ resulting in an anticipated reduction in operating costs of up to 17% incrementally. We anticipate signing asset purchase agreements, and filing for FCC license transfers for the 6 additional stations during the fourth quarter of 2009 and first quarter of 2010. These acquisitions will represent overall growth in radio operations of 140% year over year.
Off Balance Sheet Arrangements
As of September 30, 2009, there were no off balance sheet arrangements.
Critical Accounting Policies
Revenue and Cost Recognition
We recognize advertising and programming revenues when our radio programs air with our contracted radio station affiliates. Generally, we are paid by a national advertising agency, which sells the commercial time provided by the affiliate.
We earn revenue from the national advertising agency, we also recognize any amounts attributable to the individual radio programs, which are based on the audience level generated by the specific program. Expenses are accrued at the time the radio programs are run.
Consulting projects are generally negotiated at a fixed price per project; however, if we utilize our advertising capacity as part of the consulting project, we will charge the consulting client in the same manner as the affiliated stations described more fully above. Consulting fee income is recognized as time is incurred under the terms of the contract.
Advertising
We expense advertising costs as they are incurred.
New Accounting Pronouncements
We adopted the provisions of Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN 48"), on May 17, 2007. This interpretation increases the relevancy and comparability of financial reporting by clarifying the way companies account for uncertainty in income taxes. FIN 48 prescribes a consistent recognition threshold and measurement attribute, as well as clear criteria for subsequently recognizing, derecognizing and measuring such tax positions for financial statement purposes. The interpretation also requires expanded disclosure with respect to the uncertainty in income taxes.
|
|