Debut Broadcasting Corporation, Inc. - FORM 10-Q

Attached files

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EX-31.2 - Debut Broadcasting Corporation, Inc.	v222928_ex31-2.htm
EX-25.1 - Debut Broadcasting Corporation, Inc.	v222928_ex25-1.htm
EX-31.1 - Debut Broadcasting Corporation, Inc.	v222928_ex31-1.htm
EX-32.1 - Debut Broadcasting Corporation, Inc.	v222928_ex32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended March 31, 2011

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission file number 0001254371

DEBUT BROADCASTING CORPORATION, INC.

(Exact name of registrant as specified in its charter)

Nevada		88-0417389
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1011 Cherry Avenue, Nashville, TN		37203
(Address of principal executive offices)		(Zip Code)

(615) 301-0001

(Registrants telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, par value $0.003 per share

(Former name, former address, and formal fiscal year if changed since last report)

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, pr a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of May 13, 2011, there were 30,429,407 shares of common stock issued and outstanding.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis or Plan of Operation	4
Item 3.	Qualitative and Quantitative Disclosures About Market Risk.	7

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	7
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3.	Defaults Upon Senior Securities	7
Item 4.	Submission of Matters to a Vote of Security Holders	7
Item 5.	Other Information	8
Item 6.	Exhibits	9

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Our financial statements included in this Form 10-Q are as follows:

F-1		Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010 (audited);

F-2		Consolidated Statements of Operations (unaudited) for the three months ended March 31 2011 and 2010;

F-3		Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2011 and 2010;

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended March 31, 2011 are not necessarily indicative of the results that can be expected for the full year. Balance sheet information as of December 31, 2010 was derived from the Company’s audited financial statements for the year ended December 31, 2010.

DEBUT BROADCASTING CORPORATION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2011				December 31, 2011
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	195,515		$	45,388
Accounts receivable, net			377,295			720,608
Prepaid expenses			813			6,606
Unexercised stock warrants			1,004,658			1,004,658
Total current assets			1,578,281			1,777,260

Property and equipment, net			585,358			607,002
Deposits			9,638			9,273
Goodwill			459,280			459,280
FCC licenses			1,509,500			1,509,500
Other intangible assets, net			1,978,418			1,978,053

Total assets		$	4,142,057		$	4,362,315

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable		$	1,084,997		$	895,300
Accrued expenses and taxes			134,280			249,195
Notes payable to shareholders			1,055,462			1,081,888
Lines of credit			449,175			437,242
Current portion of long-term debt			7,653			13,639
Unrecognized stock warrant loss			1,035,523			1,035,523
Total current liabilities			3,767,090			3,712,787

Long term liabilities
Leases payable			-			-
Long-term debt			728,807			749,917
Total long term liabilities			728,807			749,917

Total liabilities			4,495,897			4,462,704

Stockholders' deficit
Common stock - $.003 par value, 100,000,000 shares authorized			92,038			81,538
Additional paid in capital			3,492,871			3,496,871
Accumulated deficit			(3,683,298	)		(3,678,798	)
Total stockholders' deficit			(255,451	)		(100,389	)
Total liabilities and stockholders' deficit		$	4,142,057		$	4,362,315

1 Derived from the Company’s audited financial statements from the year ended December 31, 2010.

The accompanying notes are an integral part of these financial statements.

F-1

DEBUT BROADCASTING CORPORATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended March 31,
	2011			2010
Net Revenue	$	245,439		$	409,256

Operating expenses
Advertising		5,450			14,040
Operating expense		426,546			632,848
Depreciation expense		37,076			15,031
Merger and acquisition related expenses		-			-

Total operating expenses		469,072			661,919

Operating (loss)		(223,633	)		(252,663	)

Other income and expense
Interest expense		34,661			31,218
Interest income		3,313			3,500

Total other income and expenses		(31,348	)		(27,718	)

Net (loss)	$	(254,981	)	$	(280,381	)

The accompanying notes are an integral part of these consolidated financial statements

F-2

DEBUT BROADCASTING CORPORATION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the three Months Ended March 31,
	2011			2010
Operating activities:
Net loss	$	(254,981	)	$	(279,880	)
Adjustments to reconcile net loss to net cash provided by /(used in) operating activities:

Depreciation and amortization		37,076			15,031
Changes in operating assets and liabilities, net of effects of acquisitions:
Loss on disposal of assets		1,169
Stock issued for debt restructuring					375,000
(Increase) decrease in accounts receivable		343,313			(57,115	)
(Increase) decrease in other current assets		5,792			(40,610	)
(Increase) in deposits		-365
Increase (decrease) in accounts payable		189,696			153,691
Increase (decrease) in accrued expenses and taxes		(115,385	)		84,474

Net cash provided by/(used in) operating activities		206,315			250,591

Investing activities:
Purchases of property and equipment		(24,600	)		(4,135	)
Proceeds from sale of property and equipment		8,000
Net cash used in investing activities		(16,600	)		(4,135	)

Financing activities:
Proceeds from private placement of commom stock		2,000			-
Proceeds from bank credit facility					106,567
Proceeds from shareholder notes		(26,426	)		(375,000	)
Repayment of short term debt		5,946
Repayment of long term debt		(21,109	)		(15,362	)

Net cash provided by/(used in) financing activities		(39,589	)		(283,795	)

Net increase/(decrease) in cash and cash equivalents		150,127			(37,339	)

Cash and cash equivalents at beginning of period		45,388			62,471

Cash and cash equivalents at end of period	$	195,515		$	25,132

The accompanying notes are an integral part of these financial statements.

F-3

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

Note 1 - Organization

Debut Broadcasting Corporation, Inc. (the “Company”) is located in Nashville, Tennessee and conducts business from its principal executive office at 1011 Cherry Avenue, Nashville, Tennessee 37203. The Company relocated to the current office location on May 1, 2010. The Company produces and distributes syndicated radio programs to radio stations across the United States and Canada. In addition, the Company owns and operates seven radio stations in Mississippi.

The Company maintains radio syndication in Nashville and produces and distributes 14 radio programs, which are broadcast over approximately 1,400 radio station affiliates. These radio programs have an estimated 30 million U.S. listeners per week. In addition to its syndication services, the Company owns and operates a multi-media studio with audio, video and on-line content production capabilities. This facility is located in Nashville, Tennessee. The Company also provides marketing, consulting and media buying (advertising) for its radio broadcast station customers in the United States.

Note 2 - Basis of Presentation and Interim Results

The condensed consolidated financial statements include the accounts of the Company, and its subsidiaries. The interim financial statements of the Company have been prepared without audit.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. We believe that the disclosures are adequate to make the financial information presented not misleading. These condensed financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2010. All adjustments were of a normal recurring nature unless otherwise disclosed. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.

Accounts Receivable

We use the allowance method for determining the collectability of our accounts receivable. The allowance method recognizes bad debt expense following a review of the individual accounts outstanding in light of the surrounding facts. Accounts receivable are reported at their outstanding unpaid principal balances reduced by an allowance for doubtful accounts based on historical bad debts, factors related to specific customers’ ability to pay and economic trends. We write off accounts receivable against the allowance when a balance is determined to be uncollectible. Accounts receivable on the consolidated balance sheet is stated net of our allowance for doubtful accounts.

Revenue and Cost Recognition

The Company recognizes its advertising and programming revenues for syndicated programming when the Company’s radio shows air on its contracted radio station affiliates. Generally, the Company is paid by a national advertising agency, which sells the commercial time provided by the affiliate.

As the Company earns its revenue from the national advertising agency, it also recognizes any amounts due to the individual shows, which are based on the audience level generated by the specific program. Expenses are accrued at the time the shows are run.

Consulting projects are generally negotiated at a fixed price per project; however, if the Company utilizes its advertising capacity as part of the consulting project, it 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.

F-4

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

Note 2 - Basis of Presentation and Interim Results (continued)

The Company recognizes its advertising and programming revenues for its owned and operated radio broadcast stations when the advertising airs. Generally, the Company is paid by the local advertiser for advertising coordinated and contracted through a local employee sales representative or sales manager.

Advertising

The Company expenses advertising costs as they are incurred. Total advertising costs of $5,450and $14,039 are included in the financial statements for the three months ended March 31, 2011 and March 31, 2010, respectively.

Financing

We will require additional capital to execute on our plan to grow through the acquisition of radio stations and radio station clusters. We do not presently have sufficient capital to make additional acquisitions. We intend to raise additional capital over the next twelve months through additional equity offerings.

We have made our initial radio station acquisitions without taking on any additional debt financing. However, debt financing may be advisable and attractive as we contemplate future additional acquisitions.

Although we are and will be unable to predict the precise terms of any financing until the time that such financing is actually obtained, it is likely that any such financing will fit within the following parameters:

· None of the indebtedness to which the Properties would be subject will be recourse to the shareholders, although some or all of the indebtedness may be recourse to us. However, each obligation will be secured by a first lien and/or second lien security interest in the financed Property. It is probable that all of our Properties will be subject to substantial security interests.

· We expect any indebtedness will be first repaid with the operating revenues of the Properties. Operating revenues will first be applied to the payment of interest, principal amortization (if any), and principal on primary indebtedness. Next, operating revenues will be applied to interest on and principal of any subordinate financing.

· Each of these financing arrangements may be subject to acceleration in the event of default, including non-payment, insolvency, or the sale of a Property. Upon an acceleration, if we are unable to effect an immediate refinancing, we may lose one or more of our Properties by foreclosure.

While financing may initially be available only on a radio station by radio station basis, we may eventually seek to refinance all of our Properties in one non-recourse loan which will, in all likelihood, be secured by all of our Properties.

In connection with acquisitions, dispositions and financing, we will incur appropriate accounting and legal fees.

F-5

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2009

Note 2 - Basis of Presentation and Interim Results (continued)

Governmental Regulation of Radio Broadcasting

The following is a brief summary of certain provisions of the Communications Act, the Telecom Act, and related FCC rules and policies (collectively, the "Communications Laws"). This description does not purport to be comprehensive, and reference should be made to the Communications Laws, public notices, and decisions issued by the FCC for further information concerning the nature and extent of federal regulation of radio broadcast stations. Failure to observe the provisions of the Communications Laws can result in the imposition of various sanctions, including monetary forfeitures and the grant of a "short-term" (less than the maximum term) license renewal. For particularly egregious violations, the FCC may deny a station's license renewal application, revoke a station's license, or deny applications in which an applicant seeks to acquire additional broadcast properties.

License Grant and Renewal. Radio broadcast licenses are granted and renewed for maximum terms of eight years. Licenses are renewed by filing an application with the FCC. Petitions to deny license renewal applications may be filed by interested parties, including members of the public.

Service Areas. The area served by AM stations is determined by a combination of frequency, transmitter power, antenna orientation, and soil conductivity. To determine the effective service area of an AM station, the station’s power, operating frequency, antenna patterns and its day/night operating modes are required. The area served by an FM station is determined by a combination of transmitter power and antenna height, with stations divided into classes according to these technical parameters.

Class C FM stations operate with the equivalent of 100 kilowatts of effective radiated power (“ERP”) at an antenna height of up to 1,968 feet above average terrain. They are the most powerful FM stations, providing service to a large area, typically covering one or more counties within a state. Class B FM stations operate with the equivalent of 50 kilowatts ERP at an antenna height of up to 492 feet above average terrain. Class B FM stations typically serve large metropolitan areas as well as their associated suburbs. Class A FM stations operate with the equivalent of 6 kilowatts ERP at an antenna height of up to 328 feet above average terrain, and generally serve smaller cities and towns or suburbs of larger cities.

The minimum and maximum facilities requirements for an FM station are determined by its class. FM class designations depend upon the geographic zone in which the transmitter of the FM station is located. In general, commercial FM stations are classified as follows, in order of increasing power and antenna height: Class A, B1, C3, B, C2, C1, C0, and C.

The following table sets forth the market, call letters, FCC license classification, antenna elevation above average terrain (for FM stations only), power and frequency of all of our owned and operated stations as of March 31, 2009.

Market

Stations

City of License

Frequency

Expiration Date of License

FCC Class

Height Above Average Terrain (in feet)

Power (in Watts)

G Mississippi

WNLA FM

Indianola, MS

105.5

June 1, 2012

190

4400

WBAQ FM

Greenville, MS

97.9

June 1, 2012

502

48000

WIQQ FM

Leland, MS

102.3

June 1, 2012

446

1650

WNLA AM

Indianola, MS

1380

June 1, 2012

500

WNIX AM

Greenville, MS

1330

June 1, 2012

1000

WBBV FM

Vicksburg, MS

101.1

June 1, 2012

394

13000

KLSM FM

Tallulah, LA

104.9

June 1, 2012

299

3000

F-6

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

Note 2 - Basis of Presentation and Interim Results (continued)

Compliance with Environmental Laws

We have not incurred and do not anticipate incurring any expenses associated with environmental laws.

Note 3 – New Accounting Pronouncements

We believe we are compliant with all new accounting pronouncements

Note 4 - Loss Per Share

We follow the provisions of Accounting Standards Codification (ASC) 260-10, Earnings per Share. ASC 260-10 Earnings Per Share, basic loss per share is calculated as income available to common stockholders divided by the weighted average number of shares outstanding during the period. As of December 31, 2010, the Company was operating at a net loss; therefore, no diluted loss per share is shown.

All shares of common stock and prices have been restated in the accompanying consolidated financial statements and notes to give effect to the reverse merger of the Company with California News Tech. Therefore, the calculation of loss per share is equal to the number of shares of common stock outstanding assuming the reverse merger was completed on January 1, 2006.

On June 18, 2008, we issued to Wolcott Squared a warrant to purchase 18,408 shares of our common stock at an exercise price of $0.3925 per share, with an expiration date of December 17, 2017. The consideration received for this warrant was services rendered in December of 2007 valued at $7,225.

On June 18, 2008, we issued to Wolcott Squared a warrant to purchase 22,279 shares of our common stock at an exercise price of $0.51 per share with an expiration date of January 31, 2018. The consideration received for this warrant was services rendered in January of 2008 valued at $11,362.

On June 18, 2008, we issued to Wolcott Squared a warrant to purchase 5,686 shares of our common stock at an exercise price of $0.51 per share with an expiration date of February 29, 2018. The consideration received for this warrant was services rendered in February of 2008 valued at $2,899.

On June 30, 2008, we issued to Politis Communications a warrant to purchase 10,254 shares of our common stock at an exercise price of $0.01 per share, with an expiration date of June 29, 2018. The consideration received for this warrant was services rendered by Politis Communications.

On September 22, 2008, we issued to Stephen Ross, a third party, a warrant to purchase 18,000 shares of Company common stock at an exercise price of $0.50 per share, with an expiration date of January 31, 2011. The consideration we received for this warrant was legal services rendered by Stephen Ross, Esq,

On September 22, 2008, we issued to Stephen Ross, a third party, a warrant to purchase 27,000 shares of Company common stock at an exercise price of $0.50 per share, with an expiration date of September 30, 2011. The consideration we received for this warrant was legal services rendered by Stephen Ross, Esq,

On September 30, 2008, we issued to Politis Communications a warrant to purchase 5,495 shares of Company common stock at an exercise price of $0.01 per share, with an expiration date of September 29, 2018. The consideration received for this warrant was public relations services rendered by Politis Communications.

On December 31, 2008, we issued to Stephen Ross, a third party, a warrant to purchase 27,000 shares of Company common stock at an exercise price of $0.50 per share, with an expiration date of

F-7

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

December 31, 2011. The consideration we received for this warrant was legal services rendered by Stephen Ross, Esq,

On December 31, 2008, we issued to Politis Communications a warrant to purchase 5,495 shares of Company common stock at an exercise price of $0.01 per share, with an expiration date December 31, 2018. The consideration received for this warrant was public relations services rendered by Politis Communications.

On April 1, 2009, the Company issued to Stephen Ross, a third party, a warrant to purchase 27,000 shares of Company common stock at an exercise price of $0.50 per share, with an expiration date of April 1, 2012. The consideration we received for this warrant was legal services rendered by Stephen Ross, Esq.

On June 30, 2009, the Company issued to Stephen Ross, a third party, a warrant to purchase 27,000 shares of Company common stock at an exercise price of $0.50 per share, with an expiration date of June 30, 2012. The consideration we received for this warrant was legal services rendered by Stephen Ross, Esq.

On September 30, 2009, the Company issued to Stephen Ross, a third party, a warrant to purchase 27,000 shares of Company common stock at an exercise price of $0.50 per share, with an expiration date of April 1, 2012. The consideration we received for this warrant was legal services rendered by Stephen Ross, Esq.

On December 31, 2009, the Company issued to Stephen Ross, a third party, a warrant to purchase 27,000 shares of Company common stock at an exercise price of $0.50 per share, with an expiration date of June 30, 2012. The consideration we received for this warrant was legal services rendered by Stephen Ross, Esq.

On September 21, 2009, the Company issued to Riverfalls Financial Partners, LLC, an option to purchase 30,000,000 shares of Company common stock at an exercise price of $0.05 per share, with an expiration date of July 31, 2011. This option was excluded from valuation as the volatility associated with the stock price and the percentage of ownership this option represents prevented an accurate valuation. Should Riverfalls Financial Partners, LLC execute this option their ownership would represent a 60% controlling interest in the company for an investment of $1,500,000.

We revalue warrants quarterly utilizing the Black-Scholes method.

All of these warrants and options were issued in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), as set forth in Section 4(2) under the Securities Act and Rule 506 of Regulation D promulgated thereunder relating to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required.

On December 5, 2008, Politis Communications exercised a warrant to purchase 8,500 shares of our common stock at $0.01 per share. The shares were authorized by Politis Communications as compensatory gifts to a number of employees of Politis Communications. No underwriters were involved in this warrant exercise. The underlying shares are restricted and carry piggy-back registration rights.

On December 5, 2008, we issued a stock certificate to Mohammed Rahman for 22,026 shares of our common stock at $0.07 per share. We issued the shares of common stock to Mohammed Rahman in exchange for services rendered. No underwriters were involved in this sale of securities. Outside of the existing vendor client relationship, the investor has no prior relationship to the company. The underlying shares are restricted and carry piggy-back registration rights.

On December 3, 2008, we issued a stock certificate to an officer for 42,000 shares of our common stock at $0.07 per share. We issued the shares of common stock to the officer as a compensatory bonus for services rendered. The underlying shares are restricted and carry piggy-back registration rights.

F-8

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

On December 31, 2009, we issued a stock certificate to an officer for 500,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for his personal guaranties of company debt according to the terms of his executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On December 31, 2009, we issued a stock certificate to an officer for 500,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for her personal guaranties of company debt according to the terms of her executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On March, 31, 2010 we issued a stock certificate to an officer for 250,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for his personal guaranties of company debt according to the terms of his executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On March 31, 2010, we issued a stock certificate to an officer for 250,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for her personal guaranties of company debt according to the terms of her executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On March 31, 2010, we issued a stock certificate to an officer for 62,500 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for his personal guaranties of company debt according to the terms of his executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On March 31, 2010, we issued a stock certificate to an officer for 62,500 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as compensation for his services as Chief Executive Officer. The underlying shares are restricted and carry piggy-back registration rights

On June 30, 2010 we issued a stock certificate to an officer for 250,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for his personal guaranties of company debt according to the terms of his executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On June 30, 2010, we issued a stock certificate to an officer for 250,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for her personal guaranties of company debt according to the terms of her executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On September 30, 2010 we issued a stock certificate to an officer for 250,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for his personal guaranties of company debt according to the terms of his executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On September 30, 2010, we issued a stock certificate to an officer for 250,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as consideration for her personal guaranties of company debt according to the terms of her executive employment agreement dated May 7, 2009. The underlying shares are restricted and carry piggy-back registration rights.

On September 30, 2010, we issued a stock certificate to an officer for 250,000 shares of common stock at $0.003 per share. We issued the shares of common stock to the officer as compensation for his services as Chief Executive Officer. The underlying shares are restricted and carry piggy-back registration rights

We issued the above-described shares of our common stock in reliance upon the exemption from the registration requirements of the Securities Act of 1933, as amended, as set forth in Section 4(2) under the Securities Act and Rule 506 of Regulation D promulgated thereunder relating to sales by an issuer not involving any public offering, to the extent an exemption from such registration was required. The purchasers represented to us that they were accredited investors as defined in Rule 501(a) of the Securities Act and that the securities issued pursuant thereto were being acquired for investment purposes. The sales of these securities were made without general solicitation or advertising.

F-9

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

Note 5 - Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment are computed using the straight-line method based upon estimated lives of assets ranging between three to thirty years. Property and equipment are summarized as follows:

	Estimated Useful Life	March 31, 2011			December 31, 2010
Land		$	49,500		$	49,500
Buildings and building improvements	5 – 10 years		155,689			155,689
Towers and studio equipment	5 - 30 years		441,540			441,540
Furniture, fixtures and equipment	3 – 7 years		375,909			351,309
Automotive	3 - 5 years		134,280			153,383

Accumulated depreciation			(531,470	)		(544,219	)
Property and equipment, net		$	585,358		$	607,002

Of the $585,358 in Net Property and Equipment as of March 31, 2011, $24,600 was added from website software development. A reduction of $19,303 in Automotive was taken due to the sale of a 2009 Kia Optima.

Note 6 - Lines of Credit

On December 18, 2009, the Company signed a promissory note with Crestmark Bank for $400,000. The loan is secured by all inventory, chattel paper, accounts, equipment and general intangibles of the Company. The loan matures August 30, 2011 and is payable in variable monthly installments at a rate of prime plus 2.75% for the applicable index period. The Company paid the balance if full at the end of January 2011 and closed the line of credit with Crestmark. The balance of the line of credit at March 31, 2011 and 2010 was $0 and $297,704 respectively

The note is secured by personal guarantee of certain officers of the Company and all inventory, chattel paper, accounts, equipment and general intangibles existing or purchased by the wholly-owned subsidiary entity, The Marketing Group, after the signing of the related agreement.

F-10

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

Note 7 - Notes Payable to Shareholders

Debut Broadcasting Shareholder Notes

On January 21, 2008 the Company entered into a loan agreement with Remington Capital Partners for $250,000. This loan agreement included warrant coverage for 62,500 shares of common stock, a $2,000 loan origination fee and interest of 18% per annum due monthly. The promissory note plus any accrued interest was payable on July 31, 2009.

On February 26, 2008 the Company entered into a loan agreement with Remington Capital Partners for $500,000. This loan agreement included warrant coverage for 125,000 shares of common stock, a $2,000 loan origination fee and interest of 18% per annum due monthly. The promissory note plus any accrued interest was payable on July 31, 2009.

On January 7, 2010 the company converted $375,000 of the outstanding balance of the Remington Capital Partners loan to shares of common stock of the company. The remaining $375,000 balance is to be paid interest only at a rate of 12% per year through 2010, at which time it will automatically convert to a term loan.

Total interest expense associated with the shareholder loans for the three months ended March 31, 2011 and 2010 was $11,250 and $12,123 respectively. Accrued interest due to shareholders was $0 and $0 as of March 31, 2011 and 2010, respectively.

Note 8 - Loans Payable

SunTrust Bank Loan

On August 28, 2009, the company converted an existing line of credit with SunTrust Bank into a new term loan. The note requires monthly interest payment accruing at an initial rate of 6.0% and a current rate of 6.0% at March 31, 2011. The rate is subject to monthly changes based on an independent index plus 1.00%, and matures on August 28, 2011. The note is secured by personal guarantee of certain officers of the Company and all inventory, chattel paper, accounts, equipment and general intangibles existing or purchased by the wholly-owned subsidiary entity, Debut Broadcasting Mississippi, after the signing of the related agreement. The principal balance at March 31, 2011 and 2010 was $444,119 and $481,945 respectively.

Riverfalls Financial Services LLC

On September 21, 2009, the Company signed an unsecured convertible promissory note with Riverfalls Financial for $1,500,000. The loan matured on July 31, 2010 and requires interest to be paid on maturity at a rate of 12%. On September 15, 2010 the Note was modified. River Falls Financial Services issued a Promissory note to Diversified Support Systems, Inc., an Ohio Corporation for the benefit of River Falls Financial Services for the 50% of the balance of the matured River Falls Financial Services note, with an interest rate of 3% per annum. In conjunction with this Promissory note, River Falls Financial Services, Debut Broadcasting Corporation and Diversified Support Systems negotiated a participation agreement whereby the parties agree to share in the loan to Debut Broadcasting Corporation with a 50% participation percentage.

The balance of the loan at March 31, 2011 and 2010 was $689,647 and $600,000. The Riverfalls Financial loan additionally guaranties options to purchase 30,000,000 shares of common stock of the company on or before July 31, 2011 at a strike price of $0.05 per share.

F-11

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

Note 8 - Loans Payable - Continued

Vehicle Loans

On September 25, 2007, the Company signed a retail installment sale contract with GMAC for the purchase of two vehicles for $47,498 with an effective interest rate of 5.0%. The corresponding promissory note is to be paid over a three-year period with a monthly payment of $1,424. The purchased vehicles will be used in conjunction with the radio broadcast operations.

On May 1, 2008, the Company signed a retail installment sale contract with Daimler Chrysler Financial Services for the purchase of a vehicle for $23,137 with an effective interest rate of 7.49%. The corresponding promissory note is to be paid over a five-year period with a monthly payment of $463. The purchased vehicle is used in conjunction with the radio broadcast operations.

On May 15, 2008, the Company signed a retail installment sale contract with Daimler Chrysler Financial Services for the purchase of a vehicle for $19,303 with an effective interest rate of 11.25%. The corresponding promissory

note is to be paid over a five-year period with a monthly payment of $367. The purchased vehicle is used in conjunction with the radio broadcast operations. In January 2011, this vehicle was sold to a third party for the sum of $8,000. The remaining balance due on the note was paid in full and the security interest held by Daimler Chrysler Financial in the vehicle was released.

On May 30, 2008, the Company signed a retail installment sale contract with GMAC for the purchase of a vehicle for $25,256 with an effective interest rate of 9.5%. The corresponding promissory note is to be paid over a five-year period with a monthly payment of $530. The purchased vehicle is used in conjunction with the radio broadcast operations.

Total interest expense on the vehicle loans for the three months ended March 31, 2011 and 2010 was $681 and $1,313 respectively. The principal balance of the vehicle loans as of March 31, 2011 and 2010 was $23,513 and $59,091 respectively. At March 31, 2011, $7,653 was classified as the current portion

Capital Lease

On December 5, 2007, the Company entered into a capital lease arrangement with National City Media Finance to acquire studio equipment for $15,009 with a fixed interest rate of 7.5%. The lease term is for three years with monthly payments of $464 with a $1 buyout option at the end of the lease term.

Total interest expense on studio equipment for the three months ended March 31, 2011 and 2010 was $0 and $0, respectively. The principal balance of the capital lease as of March 31, 2011 and 2010 was $0 and $7,439 respectively. The equipment was purchased for $1.00 at the fulfillment of the lease term in 2010.

Note 9 - Shareholders’ Equity

In connection with the investor relations agreement with Strategic Global Advisors, 2,000,000 shares of company common stock were issued to the principal partners of the firm in exchange for $2,000.

F-12

DEBUT BROADCASTING CORPORATION, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2011

Note 10 - Business Combinations

The company has entered into an Asset Purchase Agreement to purchase the assets of KLSM FM in Vicksburg, MS for $326,000 to be recorded as follows

KLSM FM

Land	$	38,835
Tower	$	87,165
FCC License	$	200,000
	$	326,000

The company has entered into an Asset Purchase Agreement to purchase the construction permit for KSBU in Vicksburg, MS for $125,000. The full purchase price of this permit is attributable to FCC Licenses.

F-13

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

Radio Advertising Bureau reports indicate continual growth in radio station advertising sales and acquisition multiples in 2011. Our management has found that our owned and operated stations have mirrored the macro growth in the industry.

During the fourth quarter of 2010 and the first quarter of 2011 large scale reform has taken place in the national advertising representation firms which represent syndication and bundled network advertising. Large network representation firms such as ABC/Citadel and Cumulus have merged, and top down restructuring has occurred with firms such as Dial Global. Smaller representation firms such as United Stations Radio Networks have been gaining strength in the highly competitive national advertising representation marketplace.

Our management team remains focused solidifying our representation agreement to maximize syndication and bundled network advertising revenue. Management continues to focus 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 March 31, 2011 and 2010

On a consolidated basis, we generated $245,439 in net revenue for the quarter ended March 31, 2011, a decrease of $163,817 or 40.0%, compared to $409,256 for the quarter ended March 31, 2010. The company believes that this decrease is primarily due to the damages incurred, more fully referenced by the pending litigation against Radio Nectar, LLC, Nectar Media, and Marcus Rowe. In addition to the lawsuit, revenue has decreased marginally due to restructuring in the national advertising representation industry.

On a consolidated basis, advertising expense was $5,450 for the quarter ended March 31, 2011 a decrease of $8,590 or 61.2%, compared to $14,040 for the quarter ended March 31, 2010. This decrease is attributable to a non-recurring event in 2010 of an investor relations contract between Debut Broadcasting and Agoracom, Inc. This contract is now expired.

On a consolidated basis, operating expense was $426,546 for the quarter ended March 31, 2011, a decrease of $206,302 or 32.6%, compared to $632,848 for the quarter ended March 31, 2010. This decrease in operating expenses is due primarily to the leasing arrangement for Greenville, MS stations WBAQ, WNIX, WIQQ that went into effect April 1, 2010. Reduced expenses include salaries, building and equipment rental, taxes and licenses, and bad debt expense.

On a consolidated basis, depreciation and amortization expense was $37,076 for the quarter ended March 31, 2011, an increase of $22,045 or 146%, compared to $15,031 for the quarter ended March 31, 2010. The primary reason for the increase relates to an understatement of depreciation expense in the first quarter of 2010 which was corrected at year end 2010. Depreciation expense for 2011 is reported at its appropriate dollar amount.

As a result of the foregoing revenue and expenses, our overall net loss for the three month period ending March 31, 2011 and March 31, 2010 was $254,981 and $280,381 respectively.

Liquidity and Capital Resources

As of March 31, 2011, we had Current Assets in the amount of $1,578,281, consisting of $195,515 in Cash and Cash Equivalents, $377,295 in Accounts Receivable, $1,004,658 in unexercised stock warrants, and $813 in prepaid expenses. As of March 31, 2011, we had Current Liabilities in the amount of $3,767,090, consisting of $1,084,997 in Accounts Payable, $134,280 in Accrued Expenses and Taxes, $1,055,462 in notes payable to shareholders, $449,175 in Lines of Credit, $7,653 in Current Portion of Long Term Debt, and $1,035,523 in other current liabilities. This combination of assets and liabilities resulted in a working capital deficit of $2,188,809. The working capital deficit is largely attributable to the macro economic industry recession that occurred in 2009, and the alleged conversion of customers from the subsidiary entity, The Marketing Group, Inc., to Radio Nectar, LLC.

We will require additional capital to execute our plan to grow through the acquisition of radio stations and radio station clusters. We do not presently have sufficient capital to make acquisitions or to guarantee our continued long-term operations. We intend to raise additional capital over the next twelve months through equity raises.

Recent Events

We are currently negotiating a contract with Fillmore Integrated Technical Services to become the exclusive management and content distributor for FITS Media Management Software. This software package will include modules for regional spot copy splitting, automation of affidavit fulfillment, full service and self-service programming automation, as well as full service and self-service billing and traffic management to meet the needs of small radio stations and small and large providers and distributors of syndicated programming and related advertising. We expect to finalize the agreement with Fillmore Integrated Technical Services during the second quarter of 2011, and anticipate realizing the revenue associated with this distribution contract in the third quarter of 2011.

The company has entered into an asset purchase agreement to purchase the construction permit for KSBU FM in Vicksburg, MS. Consummation of this agreement will give the company dominance in the Vicksburg, MS marketplace.

Off Balance Sheet Arrangements

As of March 31, 2011, there were no off balance sheet arrangements.

Critical Accounting Policies

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that the following accounting policies fit this definition.

Revenue and Cost Recognition

The Company recognizes its advertising and programming revenues when the Company’s radio shows air on its contracted radio station affiliates. Generally, the Company is paid by a national advertising agency, which sells the commercial time provided by the affiliate.

Advertising

The Company expenses advertising costs as they are incurred. Total advertising costs of $5,450 and $14,039 are included in the financial statements for the quarter ended March 31, 2011 and March 31, 2010, respectively.

Reclassifications

To maintain consistency and comparability, certain amounts from prior years have been reclassified and combined, where appropriate, to conform to the current-year financial statement presentation.

New Accounting Pronouncements

The Company believes it is compliant with all new accounting pronouncements.

Item 4. Qualitative and Quantitative Disclosures About Market Risk.

None

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The company has entered into litigation against Marcus Rowe and Nectar Media, LLC. A copy of the lawsuit is available on the website www.impactradionetworks.com. The Amended Verified Complaint was filed and received by the court on May 6, 2011, a copy of which is attached to this quarterly report on form 10Q as exhibit 25.09.

Townsquare Media filed suit against The Marketing Group, Inc alleging that The Marketing Group was in default of an agreement to pay the former Regent Broadcasting for advertisements aired. The case was successfully transferred from New York to Tennessee. The company is defending itself against the allegations vigorously.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 19, 2011 we issued 2,000,000 shares to the principles of Strategic Global Advisors in exchange for $2,000 pursuant to the terms of the investor relations agreement executed with the company.

Item 3. Defaults upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

No matters have been submitted to our security holders for a vote, through the solicitation of proxies or otherwise, during the quarterly period ended March 31, 2011.

Item 4T. Controls and Procedures

As required by Rule 13a-15 of the Securities Exchange Act of 1934, our principal executive officer and principal financial officer evaluated our company's disclosure controls and procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of the end of the period covered by this report, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission and to ensure that such information is accumulated and communicated to our company's management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. The conclusion that our disclosure controls and procedures were not effective was due to the presence of the following material weaknesses in internal control over financial reporting which are indicative of many small companies with small staff: inadequate segregation of duties and effective risk assessment. Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated.

We plan to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2011: (i) appoint additional qualified personnel to address inadequate segregation of duties and ineffective risk management. The remediation effort set out above is in process. During the fourth quarter of 2010 we added one additional person to our accounting staff, and we are actively seeking qualified personnel to appoint to our staff, and will add qualified staff as budget constraints permit.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.

Changes in Internal Control over Financial Reporting

There has been no change in the internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of ss.240.13a -15 or ss.240.15d -15 of the Exchange Act that occurred during the Company's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit Number		Description of Exhibit
25.1		Amended Verified Complaint of Debut Broadcasting Corporation, Inc. vs Nectar Media and Marcus Rowe

31.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Debut Broadcasting Corporation, Inc. - FORM 10-Q - May 16, 2011

Attached files

Debut Broadcasting Corporation, Inc. Reports