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EXCEL - IDEA: XBRL DOCUMENT - Mecklermedia Corp | Financial_Report.xls |
EX-31.1 - CERTIFICATION - Mecklermedia Corp | mediabistro_10q-ex3101.htm |
EX-32.1 - CERTIFICATION - Mecklermedia Corp | mediabistro_10q-ex3201.htm |
EX-31.2 - CERTIFICATION - Mecklermedia Corp | mediabistro_10q-ex3102.htm |
EX-32.2 - CERTIFICATION - Mecklermedia Corp | mediabistro_10q-ex3202.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
S | Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2013. |
or
£ | 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: 000-26393
Mediabistro Inc.
(Exact name of Registrant as specified in its charter)
Delaware | 06-1542480 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
50 Washington Street, Suite 912 Norwalk, Connecticut |
06854 |
(Address of principal executive offices) | (Zip Code) |
(203) 662-2800
(Registrant’s telephone number, including area code)
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act: (Check one):
Large accelerated filer ¨ | Accelerated filer ¨ |
Non-accelerated filer ¨ | Smaller reporting company x |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨ No x
The number of outstanding shares the Registrant’s common stock, par value $.01 per share, as of August 8, 2013 was 6,022,483.
Mediabistro Inc.
Index
Page | ||
PART I. Financial Information | ||
Item 1. | Financial Statements | 3 |
Consolidated Condensed Balance Sheets – June 30, 2013 (unaudited) and December 31, 2012 | 3 | |
Unaudited Consolidated Condensed Statements of Operations – For the Three and Six Months Ended June 30, 2013 and 2012 | 4 | |
Unaudited Consolidated Condensed Statements of Cash Flows – For the Six Months Ended June 30, 2013 and 2012 | 5 | |
Notes to Unaudited Consolidated Condensed Financial Statements | 6 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 18 |
Item 4. | Controls and Procedures | 18 |
PART II. Other Information | ||
Item 1. | Legal Proceedings | 19 |
Item 1A. | Risk Factors | 19 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 19 |
Item 3. | Defaults Upon Senior Securities | 19 |
Item 4. | Mine Safety Disclosures | 19 |
Item 5. | Other Information | 19 |
Item 6. | Exhibits | 20 |
Signatures | 21 |
2 |
PART I - FINANCIAL INFORMATION
Item 1. | Financial Statements. |
Mediabistro Inc.
Consolidated Condensed Balance Sheets
June 30, 2013 and December 31, 2012
(in thousands, except share and per share amounts)
June 30, 2013 (unaudited) | December 31, 2012
| |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,672 | $ | 2,210 | ||||
Accounts receivable, net of allowances of $8 and $16, respectively | 633 | 524 | ||||||
Prepaid expenses and other current assets | 522 | 503 | ||||||
Total current assets | 2,827 | 3,237 | ||||||
Property and equipment, net of accumulated depreciation of $1,461 and $1,475, respectively | 191 | 268 | ||||||
Intangible assets, net | 2,249 | 2,305 | ||||||
Goodwill | 9,574 | 9,574 | ||||||
Investments and other assets | 666 | 687 | ||||||
Total assets | $ | 15,507 | $ | 16,071 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 538 | $ | 509 | ||||
Accrued payroll and related expenses | 500 | 493 | ||||||
Accrued expenses and other current liabilities | 993 | 649 | ||||||
Deferred revenues | 1,493 | 1,294 | ||||||
Total current liabilities | 3,524 | 2,945 | ||||||
Loan from related party | 7,647 | 7,647 | ||||||
Deferred revenues | 18 | 17 | ||||||
Deferred income taxes | 493 | 474 | ||||||
Total liabilities | 11,682 | 11,083 | ||||||
Commitments and contingencies (see note 12) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $.01 par value, 4,000,000 shares authorized, no shares issued and outstanding | – | – | ||||||
Common stock, $.01 par value, 18,750,000 shares authorized, 6,141,768 and 6,138,879 shares issued and 6,022,483 and 6,019,594 shares outstanding at June 30, 2013 and December 31, 2012, respectively | 61 | 61 | ||||||
Additional paid-in capital | 289,878 | 289,711 | ||||||
Accumulated deficit | (285,618 | ) | (284,288 | ) | ||||
Treasury stock, 119,285 shares, at cost | (496 | ) | (496 | ) | ||||
Total stockholders’ equity | 3,825 | 4,988 | ||||||
Total liabilities and stockholders’ equity | $ | 15,507 | $ | 16,071 |
See notes to unaudited consolidated condensed financial statements.
3 |
Mediabistro Inc.
Unaudited Consolidated Condensed Statements of Operations
For the Three and Six Months Ended June 30, 2013 and 2012
(in thousands, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Revenues | $ | 3,963 | $ | 4,040 | $ | 6,483 | $ | 7,725 | ||||||||
Cost of revenues | 2,297 | 2,109 | 3,854 | 4,152 | ||||||||||||
Advertising, promotion and selling | 713 | 665 | 1,189 | 1,306 | ||||||||||||
General and administrative | 1,147 | 1,313 | 2,307 | 2,632 | ||||||||||||
Depreciation | 41 | 80 | 105 | 160 | ||||||||||||
Amortization | 105 | 136 | 214 | 272 | ||||||||||||
Total operating expenses | 4,303 | 4,303 | 7,669 | 8,522 | ||||||||||||
Operating loss | (340 | ) | (263 | ) | (1,186 | ) | (797 | ) | ||||||||
Other income (loss), net | 8 | (3 | ) | 4 | (3 | ) | ||||||||||
Interest income | 1 | 1 | 2 | 2 | ||||||||||||
Interest expense | (64 | ) | (73 | ) | (127 | ) | (146 | ) | ||||||||
Loss before income taxes | (395 | ) | (338 | ) | (1,307 | ) | (944 | ) | ||||||||
Provision for income taxes | 11 | 8 | 23 | 19 | ||||||||||||
Net loss | $ | (406 | ) | $ | (346 | ) | $ | (1,330 | ) | $ | (963 | ) | ||||
Loss per share: | ||||||||||||||||
Basic net loss | $ | (0.07 | ) | $ | (0.06 | ) | $ | (0.22 | ) | $ | (0.16 | ) | ||||
Diluted net loss | $ | (0.07 | ) | $ | (0.06 | ) | $ | (0.22 | ) | $ | (0.16 | ) | ||||
Weighted average shares used in computing loss per share: | ||||||||||||||||
Basic | 6,022 | 5,983 | 6,023 | 5,969 | ||||||||||||
Diluted | 6,022 | 5,983 | 6,023 | 5,969 |
See notes to unaudited consolidated condensed financial statements.
Shares outstanding and per share data have been adjusted to give effect to the one-for-seven stock split implemented on August 16, 2012 as described in note 5 to the consolidated condensed financial statements.
4 |
Mediabistro Inc.
Unaudited Consolidated Condensed Statements of Cash Flows
For the Six Months Ended June 30, 2013 and 2012
(in thousands)
Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (1,330 | ) | $ | (963 | ) | ||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
Depreciation and amortization | 319 | 432 | ||||||
Stock-based compensation | 159 | 259 | ||||||
Provision for losses on accounts receivable | 4 | 20 | ||||||
Amortization of debt issuance costs | 19 | 17 | ||||||
Other, net | 12 | – | ||||||
Deferred income taxes | 18 | 16 | ||||||
Changes in assets and liabilities | ||||||||
Accounts receivable, net | (113 | ) | (106 | ) | ||||
Prepaid expenses and other assets | (18 | ) | 200 | |||||
Accounts payable, accrued expenses and other liabilities | 379 | 99 | ||||||
Deferred revenues | 200 | 150 | ||||||
Net cash provided by (used in) operating activities | (351 | ) | 124 | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (33 | ) | (47 | ) | ||||
Purchases of intangible assets and other development costs | (161 | ) | (77 | ) | ||||
Net cash used in investing activities | (194 | ) | (124 | ) | ||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of stock options | 7 | 119 | ||||||
Net cash provided by financing activities | 7 | 119 | ||||||
Net increase (decrease) in cash and cash equivalents | (538 | ) | 119 | |||||
Cash and cash equivalents, beginning of period | 2,210 | 3,438 | ||||||
Cash and cash equivalents, end of period | $ | 1,672 | $ | 3,557 |
See notes to unaudited consolidated condensed financial statements.
5 |
Mediabistro Inc.
Notes to Unaudited Consolidated Condensed Financial Statements
June 30, 2013
1. | THE COMPANY |
Mediabistro Inc. (f/k/a WebMediaBrands Inc.) (“Mediabistro” or the “Company”) is an Internet media company that provides services for social media, traditional media and creative professionals, as well as for innovators in the 3D printing and mobile app industries. The Company’s service offerings include an online job board, news and analysis, trade shows and events, online and in-person courses, and research and data services products.
The Company’s online job board, a leader in the media industry, has an audience of social media, gaming, mobile, publishing, public relations, journalism, advertising, graphic design, web development and television professionals.
The Company’s trade shows include, among others, Inside 3D Printing Conference & Expo, Semantic Technology and Business Conference, Inside Mobile Apps Conference & Expo, Social Gambling & Gaming Summit, Inside Social Marketing Conference and Inside Bitcoins.
Mediabistro’s education business features online and in-person courses and online conferences for social media and traditional media professionals. Online education conferences combine the concepts of a large-scale event and a small-group, educational workshop that offers attendees the opportunity to learn in a dynamic online setting with live weekly instruction via webcast, discussion forums, homework assignments, and small-group interaction where students receive one-on-one guidance and instruction from an advisor.
The Company also provides original and in-depth daily coverage of the latest developments in social media, advertising and public relations, television and video, mobile apps, 3D printing, semantic technology, publishing and design. The Company’s research products and services, including AppData, provide key data, insights and resources for app and social media professionals. In addition, Mediabistro features a marketplace for designing and purchasing logos through Stocklogos.com.
2. | BASIS OF PRESENTATION |
The accompanying unaudited consolidated condensed financial statements have been prepared from the books and records of Mediabistro in accordance with accounting principles generally accepted in the United States of America and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The consolidated condensed statements of operations for the three and six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full year or any future interim period. These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated condensed financial statements and notes thereto included in Mediabistro’s Annual Report on Form 10-K for the year ended December 31, 2012. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the interim periods presented have been reflected in such consolidated condensed financial statements.
The consolidated condensed financial statements include the accounts of Mediabistro and its wholly-owned subsidiaries: Mediabistro.com Subsidiary Inc., a Delaware corporation, and Inside Network, Inc., a California corporation. All significant intercompany balances and transactions have been eliminated in consolidation.
3. | RECENT ACCOUNTING PRONOUNCEMENTS |
Management has considered all recent accounting pronouncements, and no pronouncements were determined to have a significant impact on the financial statements that have not been disclosed in prior reporting periods.
4. | SEGMENT INFORMATION |
Segment information is presented in accordance with Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting”. ASC Topic 280 is typically based on a management approach that designates the internal organization used for making operating decisions and assessing performance. Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision-makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business. The Company operates in one reportable segment. The Company is affected by seasonality as customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which together with fluctuations in online job postings, directly affects the Company’s business. The Company’s results will also be impacted by the number and type of education courses offered and by the number and size of trade shows held in each quarter. In addition, there may be fluctuations as trade shows held in one period in the current year may be held in a different period in future years.
6 |
5. | REVERSE STOCK SPLIT AND AUTHORIZED COMMON STOCK |
On August 16, 2012 (“Effective Date”), the Company amended its Amended and Restated Certificate of Incorporation to reduce the number of shares of common stock the Company is authorized to issue and to effect a one-for-seven reverse stock split of the Company's issued common stock. On the Effective Date, the number of shares of common stock, par value $0.01 per share, the Company is authorized to issue decreased to 18,750,000 shares from 75,000,000 shares. As a result of the reverse stock split, each seven shares of common stock issued on the Effective Date were combined and converted into one share of common stock, par value $0.01 per share. Any stockholder who otherwise would have been entitled to receive a fractional share as a result of the reverse stock split became entitled to receive a cash payment in lieu of such fractional share. Each stockholder's percentage ownership in the Company and proportional voting power remained unchanged after the reverse stock split, except for minor changes and adjustments resulting from the treatment of fractional shares. Immediately prior to the effectiveness of the reverse stock split, 42,902,316 shares of common stock were issued. Immediately after the reverse stock split, 6,128,879 shares of common stock were issued. Trading of Mediabistro's common stock on The Nasdaq Capital Market began on a split-adjusted basis at the open of trading on August 17, 2012.
6. | ACCOUNTING FOR EMPLOYEE STOCK-BASED COMPENSATION |
Shares outstanding and per share data below have been adjusted to give effect to the one-for-seven reverse stock split implemented on August 16, 2012 as described in note 5 above.
Total employee stock-based compensation is as follows (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Stock options for employees | $ | 78 | $ | 137 | $ | 158 | $ | 261 | ||||||||
Restricted stock for employees | – | – | 1 | (2 | ) | |||||||||||
Total employee stock-based compensation | $ | 78 | $ | 137 | $ | 159 | $ | 259 |
Total employee stock-based compensation increased additional paid-in capital by $159,000 and $259,000 for the six months ended June 30, 2013 and 2012, respectively.
The fair value of each stock option grant is estimated using the Black-Scholes option pricing model with the following assumptions used for grants during the periods presented:
Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
Risk-free interest rate | 0.38 | % | 0.97 | % | ||||
Expected life (in years) | 3.4 | 6.0 | ||||||
Dividend yield | 0 | % | 0 | % | ||||
Expected volatility | 124 | % | 99 | % |
The expected stock price volatility is based on the historical volatility of Mediabistro’s common stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The Company calculated the expected term using the simplified method for options issued through the third quarter of 2012. Since then, the Company has calculated the expected term for stock options issued using historical data. In 2010, the Company began issuing stock options with a 10-year life. As a result, the Company did not have enough historical data to calculate the expected term and therefore relied on the simplified method for the calculation of the expected life until the fourth quarter of 2012.
The weighted-average grant date fair value of stock options granted during the six months ended June 30, 2013 and 2012 was $1.24 and $4.41, respectively.
7 |
The following table summarizes stock option activity during the six months ended June 30, 2013:
Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value | |||||||||||||
Outstanding at December 31, 2012 | 850,701 | $ | 5.88 | |||||||||||||
Granted | 11,000 | $ | 1.65 | |||||||||||||
Exercised | (3,581 | ) | $ | 1.82 | ||||||||||||
Forfeited, expired or cancelled | (70,711 | ) | $ | 6.96 | ||||||||||||
Outstanding at June 30, 2013 | 787,409 | $ | 5.74 | 5.70 | $ | 2,152 | ||||||||||
Vested and expected to vest at June 30, 2013 | 744,966 | $ | 5.83 | 5.57 | $ | 564 | ||||||||||
Exercisable at June 30, 2013 | 571,045 | $ | 6.30 | 4.62 | $ | – |
The aggregate intrinsic value in the table above is before income taxes, based on Mediabistro’s closing stock price of $1.65 on June 28, 2013, the last trading day of the quarter. During the three months ended June 30, 2013 and 2012, the total intrinsic value of stock options exercised was $0 and $133,000, respectively. During the six months ended June 30, 2013 and 2012, the total intrinsic value of stock options exercised was $2,000 and $238,000, respectively.
As of June 30, 2013, there was $315,000 of unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the Company’s stock incentive plan. The Company expects to amortize that cost over a weighted-average period of 1.8 years.
The following table summarizes restricted stock activity during the six months ended June 30, 2013:
Shares | Weighted Average Grant Date Fair Value | |||||||||
Outstanding nonvested shares at December 31, 2012 | 779 | $ | 11.69 | |||||||
Vested | (87 | ) | $ | 11.69 | ||||||
Forfeited | (692 | ) | $ | 11.69 | ||||||
Outstanding nonvested shares at June 30, 2013 | – | $ | – | |||||||
7. | COMPUTATION OF LOSS PER SHARE |
Shares outstanding and per share data have been adjusted to give effect to the one-for-seven reverse stock split implemented on August 16, 2012 as described in note 5 above.
The Company computes basic loss per share using the weighted average number of common shares outstanding during the period. The Company computes diluted loss per share using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options. Common equivalent shares are excluded from the calculation if their effect is anti-dilutive.
8 |
Computations of basic and diluted loss per share for the periods presented are as follows (in thousands, except per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Net loss | $ | (406 | ) | $ | (346 | ) | $ | (1,330 | ) | $ | (963 | ) | ||||
Basic weighted average number of common shares outstanding | 6,022 | 5,983 | 6,023 | 5,969 | ||||||||||||
Effect of dilutive stock options | – | – | – | – | ||||||||||||
Total basic weighted average number of common shares and dilutive stock options | 6,022 | 5,983 | 6,023 | 5,969 | ||||||||||||
Basic and diluted net loss | $ | (0.07 | ) | $ | (0.06 | ) | $ | (0.22 | ) | $ | (0.16 | ) |
The following table summarizes the number of outstanding stock options excluded from the calculation of diluted loss per share for the periods presented because the result would have been anti-dilutive (in thousands, except weighted average exercise price):
Three and Six Months Ended June 30, | ||||||||
2013 | 2012 | |||||||
Number of anti-dilutive stock options | 787 | 916 | ||||||
Weighted average exercise price | $ | 5.74 | $ | 6.16 |
8. | INTANGIBLE ASSETS AND GOODWILL |
Amortized Intangible Assets
The following tables set forth the intangible assets that are subject to amortization, including the related accumulated amortization (in thousands):
June 30, 2013 | ||||||||||||
Cost | Accumulated Amortization | Net Carrying Value | ||||||||||
Website and product development costs | $ | 936 | $ | (462 | ) | $ | 474 | |||||
Customer relationships | 797 | (480 | ) | 317 | ||||||||
Copyrights and trademarks | 540 | (251 | ) | 289 | ||||||||
Total | $ | 2,273 | $ | (1,193 | ) | $ | 1,080 |
December 31, 2012 | ||||||||||||
Cost | Accumulated Amortization | Net Carrying Value | ||||||||||
Website and product development costs | $ | 780 | $ | (369 | ) | $ | 411 | |||||
Customer relationships | 804 | (425 | ) | 379 | ||||||||
Copyrights and trademarks | 540 | (194 | ) | 346 | ||||||||
Content development costs | 156 | (156 | ) | – | ||||||||
Total | $ | 2,280 | $ | (1,144 | ) | $ | 1,136 |
The Company amortizes intangible assets that are subject to amortization on a straight-line basis over their expected useful lives. The Company amortizes website and product development costs, customer relationships and copyrights and trademarks over three to seven years and content development costs over two years.
9 |
Amortization expense related to intangible assets subject to amortization was $105,000 and $214,000 for the three and six months ended June 30, 2013, respectively, and $136,000 and $272,000 for the three and six months ended June 30, 2012, respectively. Estimated annual amortization expense for the next five years, including the remainder of 2013, is expected to be as follows (in thousands):
Years Ending December 31: | ||||||
2013 | $ | 204 | ||||
2014 | 348 | |||||
2015 | 300 | |||||
2016 | 142 | |||||
2017 | 61 | |||||
Thereafter | 25 | |||||
$ | 1,080 |
Unamortized Intangible Assets
The following tables set forth the intangible assets that are not subject to amortization (in thousands):
June 30, 2013 | December 31, 2012 | |||||||
Domain names | $ | 1,169 | $ | 1,169 |
Goodwill
There were no changes in the carrying amount of goodwill for the six months ended June 30, 2013.
9. | ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES |
Accrued expenses and other current liabilities consist of the following (in thousands):
June 30, 2013 | December 31, 2012 | |||||||
Deferred rent | $ | 257 | $ | 120 | ||||
Accrued trade show expenses | 240 | 23 | ||||||
Accrued professional fees | 109 | 107 | ||||||
Customer overpayments | 63 | 96 | ||||||
Accrued property and capital taxes | 46 | 65 | ||||||
Other | 278 | 238 | ||||||
Total | $ | 993 | $ | 649 |
10. | DEBT |
On May 29, 2009, Mediabistro entered into a loan agreement in the amount of $7.2 million with the Company’s Chief Executive Officer, Alan M. Meckler (the “2009 Meckler Loan”).
In conjunction with the 2009 Meckler Loan, the Company (1) entered into a promissory note jointly and severally payable by the Company and its subsidiary, Mediabistro.com Subsidiary Inc. (“MB Subsidiary”), to Mr. Meckler (the “2009 Note”), (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s assets, (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the “IP Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s intellectual property, (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the “Pledge Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in and an assignment of all of the shares of stock or other equity interest of MB Subsidiary owned by the Company, and (5) agreed to enter into a Blocked Account Control Agreement by and among the Company, Mr. Meckler and a depositary bank, to further secure the Note (the “Control Agreement” and together with the 2009 Note, the Security Agreement, the IP Security Agreement and the Pledge Agreement, the “Company Loan Documents”).
Simultaneously, MB Subsidiary (1) entered into a Security Agreement by and between MB Subsidiary and Mr. Meckler pursuant to which MB Subsidiary granted to Mr. Meckler a security interest in MB Subsidiary’s assets (the “MB Subsidiary Security Agreement”), (2) entered into an Intellectual Property Security Agreement by and between MB Subsidiary and Mr. Meckler pursuant to which MB Subsidiary granted to Mr. Meckler a security interest in MB Subsidiary’s intellectual property (the “MB Subsidiary IP Security Agreement”), and (3) agreed to enter into a Blocked Account Control Agreement by and among MB Subsidiary, Mr. Meckler and a depositary bank, to further secure the 2009 Note (the “MB Subsidiary Control Agreement” and, together with the MB Subsidiary Security Agreement and the MB Subsidiary IP Security Agreement, the “MB Subsidiary Documents”).
10 |
To fund the 2009 Meckler Loan, Mr. Meckler used a portion of the proceeds of a residential mortgage loan that Bank of America, N.A. (“BOA”) granted to Mr. Meckler and Mrs. Ellen L. Meckler (the “BOA Loan”). Pursuant to a Collateral Assignment of the 2009 Note dated May 29, 2009, by Mr. Meckler to BOA, Mr. Meckler collaterally assigned the Note to BOA as additional collateral for the BOA Loan. Payment terms of the 2009 Meckler Loan reflect pass through of the BOA Loan payment terms (excluding those funds borrowed pursuant to the BOA Loan for Mr. Meckler’s personal use). As a result, the interest rate, amortization schedule and maturity date of each loan are identical.
On September 1, 2010, Mediabistro entered into a Note Modification Agreement with Mr. Meckler. The Note Modification Agreement reduced the interest rate of the 2009 Note from 4.7% to 3.4% per annum. Interest on the outstanding principal amount is due and payable on the first day of each calendar month through June 2014. Thereafter, principal and interest is due and payable in equal monthly payments in an amount sufficient to pay the loan in full based on an amortization term of 15 years. In addition to the interest rate reduction noted above, the Note Modification Agreement also reduced the required minimum monthly principal and interest payments that commence on July 1, 2014.
On November 14, 2011, the Company and MB Subsidiary entered into a 2nd Note Modification Agreement with Mr. Meckler. The 2nd Note Modification Agreement amends the 2009 Note, which is described above. Under the 2nd Note Modification Agreement, the parties agreed to terminate the Company’s obligation to make a monthly accommodation fee of $40,000 to Mr. Meckler. As a result, the 2nd Note Modification Agreement reduces the effective interest payable on the 2009 Meckler Loan by $480,000 per year. The Company granted Mr. Meckler a fully vested stock option to purchase 142,858 shares of the Company’s common stock (after giving effect to the August 16, 2012 one-for-seven reverse stock split) pursuant to the terms of the 2008 Mediabistro Stock Option Plan. All other terms of the 2009 Meckler Loan remain unchanged.
Also on November 14, 2011, Mediabistro and its wholly owned subsidiaries, MB Subsidiary and Inside Network: (1) entered into a promissory note jointly and severally payable by the Company, MB Subsidiary and Inside Network to Mr. Meckler (the “2011 Note”); (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “MBIS Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s assets; (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the “2nd IP Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s intellectual property; and (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the “2nd Pledge Agreement”), and together with the 2011 Note, the MBIS Security Agreement and the 2nd IP Security Agreement, (the “2011 Company Loan Documents”) pursuant to which the Company granted to Mr. Meckler a security interest in and assignment of all of the shares of stock or other equity interest of MB Subsidiary and Inside Network owned by the Company.
In the 2011 Note, Mr. Meckler loaned the Company $1,750,000 (the “2011 Meckler Loan”). The interest rate of the 2011 Note at the time of the loan was 3.10% per annum. Interest on the outstanding principal amount is due and payable monthly until August 2014. Thereafter, principal and interest is due and payable in equal monthly installments, with the outstanding principal amount, together with all accrued interest thereon, due and payable on August 18, 2016. The 2011 Note may be prepaid at any time without penalty or premium.
In partial consideration of the 2011 Note and the 2nd Note Modification Agreement, Inside Network entered into a Security Agreement by and between Inside Network and Mr. Meckler pursuant to which Inside Network granted to Mr. Meckler a security interest in Inside Network’s assets (the “Inside Network Security Agreement”) to secure Inside Network’s obligations under the 2011 Note and the 2009 Note.
The 2011 Company Loan Documents and the Inside Network Security Agreement contain customary terms for a loan transaction of this type. In an Event of Default (as defined in the 2011 Note) occurs and is continuing beyond a specified cure period, Mr. Meckler may declare the 2011 Meckler Loan immediately due and payable. The 2011 Meckler Loan also will become immediately due and payable upon certain events of bankruptcy or insolvency or in the event of a Change of Control (as defined in the 2011 Note) of MB Subsidiary, Inside Network, or the Company.
On July 27, 2012, the Company entered into a 3rd Note Modification Agreement with Mr. Meckler that reduces the interest rate (i) of the 2009 Note to 2.975% from 3.40% effective June 1, 2012, and (ii) of the 2011 Note to 2.40% from 3.10% effective on June 18, 2012. All other terms of the promissory notes remain unchanged.
Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $54,000 and $108,000 during the three and six months ended June 30, 2013, respectively, and $64,000 and $127,000 during the three and six months ended June 30, 2012, respectively. There are no future minimum principal payments due under the 2009 Meckler Loan and the 2011 Meckler Loan for the year ended December 31, 2013. There are future minimum payments due to Mr. Meckler for the 2009 Meckler Loan and the 2011 Meckler Loan in the amount of $189,000 for the year ended December 31, 2014; $419,000 for the year ended December 31, 2015; and $7.0 million for the year ended December 31, 2016.
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11. | INCOME TAXES |
The Company recorded a provision for income taxes of $11,000 and $23,000 during the three and six months ended June 30, 2013, respectively, and $8,000 and $19,000 during the three and six months ended June 30, 2012, respectively.
Based on current projections, management believes that it is more likely than not that Mediabistro will have insufficient taxable income to allow recognition of its deferred tax assets. Accordingly, a valuation allowance has been established against deferred tax assets to the extent that deductible temporary differences cannot be offset by taxable temporary differences. To the extent that the net book value of indefinite lived assets exceeds the net tax value of indefinite lived assets, an additional tax provision will be incurred as the assets are amortized.
The total amount of unrecognized tax benefits was $100,000 as of June 30, 2013 and December 31, 2012, all of which would affect the effective tax rate, if recognized, as of June 30, 2013.
12. | COMMITMENTS AND CONTINGENCIES |
Mediabistro is subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions should not materially affect the financial statements of Mediabistro.
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Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion should be read in conjunction with our unaudited consolidated condensed financial statements and the accompanying notes that appear elsewhere in this filing. Statements in this Form 10-Q that are not historical facts are “forward-looking statements” under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described. The potential risks and uncertainties address a variety of subjects including, for example: general economic conditions; the competitive environment in which Mediabistro competes; the unpredictability of Mediabistro’s future revenues, expenses, cash flows and stock price; Mediabistro’s ability to integrate acquired businesses products and personnel into its existing businesses; Mediabistro’s dependence on a limited number of advertisers; and Mediabistro’s ability to protect its intellectual property. For a more detailed discussion of these risks and uncertainties, refer to Mediabistro’s other reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. The forward-looking statements included herein are made as of the date of this Form 10-Q, and we are under no obligation to update the forward-looking statements after the date hereof, except as required by law.
Overview
Mediabistro Inc. (f/k/a WebMediaBrands Inc.) (“Mediabistro” or the “Company”) is an Internet media company that provides services for social media, traditional media and creative professionals, as well as for innovators in the 3D printing and mobile app industries. Our service offerings include an online job board, news and analysis, trade shows and events, online and in-person courses, and research and data services products.
Our online job board, a leader in the media industry, has an audience of social media, gaming, mobile, publishing, public relations, journalism, advertising, graphic design, web development and television professionals.
Our trade shows include, among others, Inside 3D Printing Conference & Expo, Semantic Technology and Business Conference, Inside Mobile Apps Conference & Expo, Social Gambling & Gaming Summit, Inside Social Marketing Conference and Inside Bitcoins.
Our education business features online and in-person courses and online conferences for social media and traditional media professionals. Online education conferences combine the concepts of a large-scale event and a small-group, educational workshop that offers attendees the opportunity to learn in a dynamic online setting with live weekly instruction via webcast, discussion forums, homework assignments, and small-group interaction where students receive one-on-one guidance and instruction from an advisor.
We also provide original and in-depth daily coverage of the latest developments in social media, advertising and public relations, television and video, mobile apps, 3D printing, semantic technology, publishing and design. Our research products and services, including AppData, provide key data, insights and resources for app and social media professionals. In addition, we feature a marketplace for designing and purchasing logos through Stocklogos.com.
Our businesses cross-leverage and cross-promote our content, product and service offerings. For example, users of our websites read our content, search for jobs on our job boards, attend our trade shows, subscribe to and purchase products and services and take courses.
We generate our revenues from:
· | fees charged for online job postings; | |
· | attendee registration fees for our online and in-person education courses and conferences; | |
· | attendee registration fees to our trade shows; | |
· | advertising on our websites and e-mail newsletters; | |
· | fees for social media and mobile-related market research and data services products; | |
· | exhibition space fees and vendor sponsorships to our trade shows; | |
· | subscription sales from our paid membership services; and | |
· | granting rights to use logos that are downloaded from our stocklogos.com website. |
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Customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which, together with fluctuations in online job postings, directly affect our business. Our results will also be impacted by the number and type of education courses we offer and by the number and size of trade shows we hold in each quarter. In addition, there may be fluctuations as trade shows held in one period in the current year may be held in a different period in future years.
The principal costs of our business relate to: payroll and benefits costs for our personnel; technology-related costs; facilities and equipment; and venue, speaker and advertising expenses for our trade shows and courses.
Results of Operations
Revenues
Revenues were $4.0 million for the three months ended June 30, 2013, representing a decrease of less than 2% compared to the same period of 2012. This change was primarily due to a decrease in advertising and research revenues that was mostly offset by an increase in trade show revenues. We ran eight trade shows during the three months ended June 30, 2013 compared to five trade shows during the three months ended June 30, 2012. Most notably, we held the launch event of our newest trade show, Inside 3D Printing Conference and Expo, during the second quarter of 2013.
Revenues were $6.5 million for the six months ended June 30, 2013 and $7.7 million for the six months ended June 30, 2012, representing a decrease of 16%. This change was primarily due to declines in our principal revenue sources, particularly during the three months ended March 31, 2013.
The following table sets forth, for the periods indicated, the components of our revenues (in thousands):
Three Months Ended June 30, | 2013 vs. 2012 | Six Months Ended June 30, | 2013 vs. 2012 | |||||||||||||||||||||||||||||
2013 | 2012 | $ | % | 2013 | 2012 | $ | % | |||||||||||||||||||||||||
Online job postings | $ | 980 | 1,009 | (29 | ) | (3 | )% | $ | 1,921 | $ | 2,162 | $ | (241 | ) | (11 | )% | ||||||||||||||||
Trade shows | 1,390 | 1,046 | 344 | 33 | 1,397 | 1,686 | (289 | ) | (17 | ) | ||||||||||||||||||||||
Education | 496 | 545 | (49 | ) | (9 | ) | 1,031 | 1,087 | (56 | ) | (5 | ) | ||||||||||||||||||||
Advertising | 503 | 714 | (211 | ) | (30 | ) | 889 | 1,365 | (476 | ) | (35 | ) | ||||||||||||||||||||
Research | 316 | 455 | (139 | ) | (31 | ) | 699 | 893 | (194 | ) | (22 | ) | ||||||||||||||||||||
Other | 278 | 271 | 7 | 3 | 546 | 532 | 14 | 3 | ||||||||||||||||||||||||
Total | $ | 3,963 | $ | 4,040 | $ | (77 | ) | (2 | )% | $ | 6,483 | $ | 7,725 | $ | (1,242 | ) | (16 | )% |
Other revenues include subscription sales from our paid membership services and sales of logos through stocklogos.com.
Cost of revenues
Cost of revenues primarily consists of payroll and benefits costs for technology and editorial personnel, freelance costs, communications infrastructure and trade show and education operations. Cost of revenues excludes depreciation and amortization. Cost of revenues was $2.3 million for the three months ended June 30, 2013 and $2.1 million for the three months ended June 30, 2012, representing an increase of 9%. This change was primarily due to an increase in trade show operating costs of $398,000, offset by decreases in employee-related costs of $115,000 and editorial freelance and technology consulting costs of $78,000.
Cost of revenues was $3.9 million for the six months ended June 30, 2013 and $4.2 million for the six months ended June 30, 2012, representing a decrease of 7%. This change was primarily due to a decrease in employee-related costs of $208,000, as well as a decrease in editorial freelance and technology consulting costs of $158,000.
We intend to make investments through internal development and, where appropriate opportunities arise, through targeted asset acquisitions to continue to expand our content offerings. We might need to increase our spending in order to create additional content related to new topics, trade shows or offerings.
Advertising, promotion and selling
Advertising, promotion and selling expenses primarily consist of payroll and benefits costs for sales and marketing personnel, sales commissions and promotion costs. Advertising, promotion and selling expenses were $713,000 for the three months ended June 30, 2013 and $665,000 for the three months ended June 30, 2012, representing an increase of 7%. This increase was due primarily to an increase in trade show marketing costs of $26,000 and an increase in employee-related costs of $18,000.
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Advertising, promotion and selling expenses were $1.2 million for the six months ended June 30, 2013 and $1.3 million for the six months ended June 30, 2012, representing a decrease of 9%. This decrease was due primarily to a decrease in employee-related costs of $72,000, a decrease in trade show marketing costs of $21,000 and a decrease in consulting costs of $10,000.
General and administrative
General and administrative expenses consist primarily of payroll and benefits costs for administrative personnel, office-related costs and professional fees. General and administrative expenses were $1.1 million for the three months ended June 30, 2013 and $1.3 million for the three months ended June 30, 2012, representing a decrease of 13%. This change was due to a decrease in rent expense for our New York City location of $99,000, a decrease in stock-based compensation of $39,000 and a decrease in employee-related costs of $15,000.
General and administrative expenses were $2.3 million for the six months ended June 30, 2013 and $2.6 million for the six months ended June 30, 2012, representing a decrease of 12%. This change was due to a decrease in rent expense for our New York City location of $180,000, a decrease in employee-related costs of $94,000 and a decrease in stock-based compensation of $82,000, which was partially offset by an increase in professional fees of $27,000. The decrease in rent expense related to our New York City office was due to a modification of the terms of our office lease, which resulted in a reduction in the office space we occupy.
Depreciation and amortization
Depreciation expense was $41,000 for the three months ended June 30, 2013 and $80,000 for the three months ended June 30, 2012, representing a decrease of 49%. Depreciation expense was $105,000 for the six months ended June 30, 2013 and $160,000 for the six months ended June 30, 2012, representing a decrease of 34%. These decreases were due primarily to certain assets becoming fully depreciated.
Amortization expense was $105,000 for the three months ended June 30, 2013 and $136,000 for the three months ended June 30, 2012, representing a decrease of 23%. Amortization expense was $214,000 for the six months ended June 30, 2013 and $272,000 for the six months ended June 30, 2012, representing a decrease of 21%. These decreases were due primarily to certain intangibles becoming fully amortized.
Our depreciation and amortization expenses might vary in future periods based upon a change in our capital expenditure levels or any future acquisitions.
Other income (loss), net
Other income was $8,000 during the three months ended June 30, 2013 and $4,000 during the six months ended June 30, 2013. Other loss was $3,000 during the three and six months ended June 30, 2012.
Interest income and interest expense
The following table sets forth, for the periods indicated, a comparison of our interest income and interest expense (dollars in thousands):
Three Months Ended June 30, | 2013 vs. 2012 | Six Months Ended June 30, | 2013 vs. 2012 | |||||||||||||||||||||||||||||
2013 | 2012 | $ | % | 2013 | 2012 | $ | % | |||||||||||||||||||||||||
Interest income | $ | 1 | $ | 1 | $ | – | – | % | $ | 2 | $ | 2 | $ | – | – | % | ||||||||||||||||
Interest expense | $ | (64 | ) | (73 | ) | $ | 9 | 12 | $ | (127 | ) | (146 | ) | $ | 19 | 13 |
Interest expense during the three and six months ended June 30, 2013 and 2012 relates primarily to costs associated with our loans from a related party. The reduction in interest expense during the three and six months ended June 30, 2013 was due to the 3rd Note Modification Agreement that we entered into on July 27, 2012. See “Related Party Transactions” for a description of the loans and 3rd Note Modification Agreement.
Provision for income taxes
We recorded a provision for income taxes of $11,000 and $23,000 during the three and six months ended June 30, 2013, respectively, and $8,000 and $19,000 during the three and six months ended June 30, 2012, respectively.
Based on current projections, management believes that it is more likely than not that we will have insufficient taxable income to allow recognition of our deferred tax assets. Accordingly, we have established a valuation allowance against deferred tax assets to the extent that deductible temporary differences cannot be offset by taxable temporary differences. To the extent that the net book value of indefinite lived assets exceeds the net tax value of indefinite lived assets, we will incur an additional tax provision as the assets are amortized.
The total amount of unrecognized tax benefits was $100,000 as of June 30, 2013 and December 31, 2012, all of which would affect the effective tax rate, if recognized, as of June 30, 2013.
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Liquidity and Capital Resources
The following table sets forth, for the periods indicated, a comparison of the key components of our liquidity and capital resources (dollars in thousands):
Six Months Ended June 30, | 2013 vs. 2012 | |||||||||||||||
2013 | 2012 | $ | % | |||||||||||||
Operating cash flows | $ | (351 | ) | $ | 124 | $ | (475 | ) | (383 | )% | ||||||
Investing cash flows | (194 | ) | (124 | ) | (70 | ) | (56 | ) | ||||||||
Financing cash flows | 7 | 119 | (112 | ) | (94 | ) |
As of | 2013 vs. 2012 | |||||||||||||||
June 30, 2013 | December 31, 2012 | $ | % | |||||||||||||
Cash and cash equivalents | $ | 1,672 | $ | 2,210 | $ | (538 | ) | (24 | )% | |||||||
Working capital | (697 | ) | 292 | (989 | ) | (339 | ) | |||||||||
Loan from related party | 7,647 | 7,647 | – | – |
Since inception, we have funded operations through various means, including public offerings of our common stock, the sales of certain of our businesses, including our Jupiterimages and Internet.com businesses in 2009, as well as credit agreements and cash flows from operating activities.
Operating activities. Cash used in operating activities increased during the six months ended June 30, 2013 compared to the same period of 2012 due primarily to increased losses from operations.
Investing activities. The amounts of cash used in investing activities vary in correlation to the number and cost of the acquisitions we complete. Net cash used in investing activities during the six months ended June 30, 2013 and 2012 related primarily to the purchase of certain intangible assets and website and product development costs.
Financing activities. Cash provided by financing activities during the six months ended June 30, 2013 and 2012 related to proceeds from stock option exercises.
We have incurred losses and negative cash flows from operations in recent quarters and expect to continue to incur operating losses until revenues from all sources reach a level sufficient to support our on-going operations. Our liquidity will largely be determined by our ability to raise capital from debt, equity, or other forms of financing, by the success of our product offerings, by developing additional product offerings, and by expenses associated with operations.
In the absence of a sufficient increase in revenues, we will need to do one or more of the following in the next 12 months to meet our planned level of expenditures: (a) raise additional capital; (b) reduce spending on operations; or (c) restructure our operations. A capital raise could take any number of forms including but not limited to: additional debt, additional equity, asset sales, or other forms of financing as dictated by our needs and our view toward our overall capital structure. However, additional financing might not be available on acceptable terms, if at all, and such financing might only be available on terms dilutive or otherwise detrimental to our stockholders or our business.
Our liquidity over the next 12 months could be materially affected by, among other things: our inability to increase revenues; costs related to our product development efforts; our ability to raise additional funds through debt, equity, or other financing alternatives; the strength of the United States job market, or other factors described under the risk factors set forth in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2012 and in “Item 1A. Risk Factors” in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013.
Off-Balance Sheet Arrangements
We have not entered into off-balance sheet arrangements or issued guarantees to third parties.
Recent Accounting Pronouncements
We are required to adopt certain new accounting pronouncements. See note 3 to the consolidated condensed financial statements included in Item 1 of this Form 10-Q.
Related Party Transactions
On May 29, 2009, we entered into a loan agreement in the amount of $7.2 million with our Chief Executive Officer, Alan M. Meckler (the “2009 Meckler Loan”).
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In conjunction with the 2009 Meckler Loan, we (1) entered into a promissory note jointly and severally payable by us and our subsidiary, Mediabistro.com Subsidiary Inc. (“MB Subsidiary”), to Mr. Meckler (the “2009 Note”), (2) entered into a Security Agreement with Mr. Meckler (the “Security Agreement”) pursuant to which we granted to Mr. Meckler a security interest in the our assets, (3) entered into an Intellectual Property Security Agreement with Mr. Meckler (the “IP Security Agreement”) pursuant to which the we granted to Mr. Meckler a security interest in the our intellectual property, (4) entered into a Pledge Agreement by us in favor of Mr. Meckler (the “Pledge Agreement”) pursuant to which we granted to Mr. Meckler a security interest in and an assignment of all of the shares of stock or other equity interest of MB Subsidiary owned by us, and (5) agreed to enter into a Blocked Account Control Agreement with Mr. Meckler and a depositary bank, to further secure the Note (the “Control Agreement” and, together with the 2009 Note, the Security Agreement, the IP Security Agreement and the Pledge Agreement, the “Company Loan Documents”).
Simultaneously, MB Subsidiary (1) entered into a Security Agreement with Mr. Meckler pursuant to which MB Subsidiary granted to Mr. Meckler a security interest in MB Subsidiary’s assets (the “MB Subsidiary Security Agreement”), (2) entered into an Intellectual Property Security Agreement with Mr. Meckler pursuant to which MB Subsidiary granted to Mr. Meckler a security interest in MB Subsidiary’s intellectual property (the “MB Subsidiary IP Security Agreement”), and (3) agreed to enter into a Blocked Account Control Agreement with Mr. Meckler and a depositary bank, to further secure the 2009 Note (the “MB Subsidiary Control Agreement” and, together with the MB Subsidiary Security Agreement and the MB Subsidiary IP Security Agreement, the “MB Subsidiary Documents”).
To fund the 2009 Meckler Loan, Mr. Meckler used a portion of the proceeds of a residential mortgage loan that Bank of America, N.A. (“BOA”) granted to Mr. Meckler and Mrs. Ellen L. Meckler (the “BOA Loan”). Pursuant to a Collateral Assignment of the 2009 Note dated May 29, 2009, by Mr. Meckler to BOA, Mr. Meckler collaterally assigned the 2009 Note to BOA as additional collateral for the BOA Loan. Payment terms of the 2009 Meckler Loan reflect pass through of the BOA Loan payment terms (excluding those funds borrowed pursuant to the BOA Loan for Mr. Meckler’s personal use). As a result, the interest rate, amortization schedule and maturity date of each loan are identical.
On September 1, 2010, we entered into a note modification agreement with Mr. Meckler. The Note Modification Agreement reduced the interest rate of the 2009 Note from 4.7% to 3.4% per annum. Interest on the outstanding principal amount is due and payable on the first day of each calendar month through June 2014. Thereafter, principal and interest is due and payable in equal monthly payments in an amount sufficient to pay the loan in full based on an amortization term of 15 years. In addition to the interest rate reduction noted above, the note modification agreement also reduced the required minimum monthly principal and interest payments that commence on July 1, 2014
On November 14, 2011, we along with MB Subsidiary, entered into a 2nd Note Modification Agreement with Mr. Meckler. The 2nd Note Modification Agreement amends the 2009 Note, which is described above. Under the 2nd Note Modification Agreement, the parties agreed to terminate our obligation to make a monthly accommodation fee of $40,000 to Mr. Meckler. As a result, the 2nd Note Modification Agreement reduces the effective interest payable on the 2009 Meckler Loan by $480,000 per year. We granted Mr. Meckler a fully vested stock option to purchase 142,858 shares of our common stock (after giving effect to the August 16, 2012 one-for-seven reverse stock split) pursuant to the terms of the 2008 Mediabistro Stock Option Plan. All other terms of the 2009 Meckler Loan remain unchanged.
Also on November 14, 2011, we, along with our wholly owned subsidiaries, MB Subsidiary and Inside Network: (1) entered into a promissory note jointly and severally payable by the Company, MB Subsidiary and Inside Network to Mr. Meckler (the “2011 Note”); (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “MBIS Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s assets; (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the “2nd IP Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s intellectual property; and (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the “2nd Pledge Agreement”), and together with the 2011 Note, the MBIS Security Agreement and the 2nd IP Security Agreement, (the “2011 Company Loan Documents”) pursuant to which the Company granted to Mr. Meckler a security interest in and assignment of all of the shares of stock or other equity interest of MB Subsidiary and Inside Network owned by the Company.
In the 2011 Note, Mr. Meckler loaned us $1,750,000 (the “2011 Meckler Loan”). The interest rate of the 2011 Note at the time of the loan was 3.10% per annum. Interest on the outstanding principal amount is due and payable monthly until August 2014. Thereafter, principal and interest is due and payable in equal monthly installments, with the outstanding principal amount, together with all accrued interest thereon, due and payable on August 18, 2016. The 2011 Note may be prepaid at any time without penalty or premium.
In partial consideration of the 2011 Note and the 2nd Note Modification Agreement, Inside Network entered into a Security Agreement by and between Inside Network and Mr. Meckler pursuant to which Inside Network granted to Mr. Meckler a security interest in Inside Network’s assets (the “Inside Network Security Agreement”) to secure Inside Network’s obligations under the 2011 Note and the 2009 Note.
The 2011 Company Loan Documents and Inside Network Security Agreement contain customary terms for a loan transaction of this type. In an Event of Default (as defined in the 2011 Note) occurs and is continuing beyond a specified cure period, Mr. Meckler may declare the 2011 Meckler Loan immediately due and payable. The 2011 Meckler Loan also will become immediately due and payable upon certain events of bankruptcy or insolvency or in the event of a Change of Control (as defined in the 2011 Note) of MB Subsidiary, Inside Network, or the Company.
On July 27, 2012, we entered into a 3rd Note Modification Agreement with Mr. Meckler that reduces the interest rate (i) of the 2009 Note to 2.975% from 3.40% effective June 1, 2012, and (ii) of the 2011 Note to 2.40% from 3.10% effective on June 18, 2012. All other terms of the promissory notes remain unchanged.
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Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $54,000 and $108,000 during the three and six months ended June 30, 2013, respectively, and $64,000 and $127,000 during the three and six months ended 2012, respectively. There are no future minimum principal payments due under the 2009 Meckler Loan and the 2011 Meckler Loan for the year ended December 31, 2013. There are future minimum principal payments due to Mr. Meckler for the 2009 Meckler Loan and the 2011 Meckler Loan in the amount of $189,000 for the year ended December 31, 2014; $419,000 for the year ended December 31, 2015; and $7.0 million for the year ended December 31, 2016.
Critical Accounting Policies
There have been no changes to our critical accounting policies from those included in our most recent Form 10-K for the year ended December 31, 2012.
Item 3. | Quantitative & Qualitative Disclosures about Market Risk |
As a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K, we are not required to provide the information required by this Item.
Item 4. | Controls and Procedures |
Disclosure Controls and Procedures. The Company conducted an evaluation of the effectiveness of the design and operation of its disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) under the supervision and with the participation of its management including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Disclosure controls and procedures are designed only to provide reasonable assurance that (i) information required to be disclosed in an issuer’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC rules and forms and (ii) information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.
As a result of this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to provide the reasonable assurance discussed above.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2013 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. | Legal Proceedings |
None.
Item 1A. | Risk Factors |
The primary risk factors affecting our business have not changed materially from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2012, with the exception of the following additional risk factor:
Antitakeover provisions could discourage a takeover that stockholders consider to be in their best interests or prevent the removal of our current directors and management.
We have adopted a number of provisions that could have antitakeover effects or prevent the removal of our current directors and management. We have adopted a stockholder rights plan, commonly referred to as a poison pill. The rights plan is intended to deter an attempt to acquire us in a manner or on terms not approved by our board of directors. The rights plan will not prevent an acquisition that is approved by our board of directors. Additionally, our charter, bylaws and the Delaware General Corporation Law could make it more difficult for a third party to acquire us, even if a change in control would be beneficial to our stockholders. Our charter allows our board of directors to issue preferred stock with rights and preferences that are superior to those of our common stock. The issuance of preferred stock could make it more difficult for a third party to acquire, or discourage a third party from acquiring, voting control in order to remove our current directors and management. Our bylaws also eliminate the ability of the stockholders to act by written consent without a meeting or make proposals at stockholder meetings without giving us advance written notice, which could hinder the ability of stockholders to quickly take action that might be opposed by management. Our bylaws also provide that a special meeting of stockholders may only be called by our Board, Chairman of the Board, Chief Executive Officer or President or at the request of the holders of a majority of the outstanding shares of our common stock, which could deter a potential acquirer or delay a vote on a potentially beneficial change in control transaction until the annual meeting of stockholders. These provisions could make more difficult the removal of current directors and management or a takeover of Mediabistro, even if these events could be beneficial to stockholders. These provisions could also limit the price that investors might be willing to pay for our common stock.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Not Applicable
Item 3. | Defaults upon senior securities |
Not Applicable
Item 4. | Mine Safety Disclosures |
Not Applicable
Item 5. | Other Information |
Not Applicable
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Item 6. | Exhibits |
The following is a list of exhibits filed as part of this Report on Form 10-Q.
Exhibit Number | Description | |
31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32.1 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2 | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Schema Document | |
101.CAL | XBRL Calculations Linkbase Document | |
101.DEF | XBRL Definition Linkbase Document | |
101.LAB | XBRL Label Linkbase Document | |
101.PRE | XBRL Presentation Linkbase Document |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Mediabistro Inc. | ||
Dated: August 12, 2013 | /s/ Alan M. Meckler | |
Alan M. Meckler Chairman and Chief Executive Officer | ||
/s/ Donald J. O’Neill | ||
Donald J. O’Neill Vice President and Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer) |
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