UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x	Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 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 S 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 November 11, 2013 was 6,022,483.

 

 

Mediabistro Inc.

Index

 

		Page
PART I. Financial Information
Item 1.	Financial Statements	3
	Consolidated Condensed Balance Sheets – September 30, 2013 (unaudited) and December 31, 2012	3
	Unaudited Consolidated Condensed Statements of Operations – For the Three and Nine Months Ended September 30, 2013 and 2012	4
	Unaudited Consolidated Condensed Statements of Cash Flows – For the Nine Months Ended September 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

 

 

PART I - FINANCIAL INFORMATION

 

Item 1.

Financial Statements.

 

Mediabistro Inc.

Consolidated Condensed Balance Sheets

September 30, 2013 and December 31, 2012

(in thousands, except share and per share amounts)

 

		September 30, 2013 (unaudited)				December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents		$	876			$	2,210
Accounts receivable, net of allowances of $7 and $16, respectively			554				524
Prepaid expenses and other current assets			799				503
Total current assets			2,229				3,237
Property and equipment, net of accumulated depreciation of $1,486 and $1,475, respectively			489				268
Intangible assets, net			2,172				2,305
Goodwill			9,574				9,574
Investments and other assets			808				687
Total assets		$	15,272			$	16,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	627			$	509
Accrued payroll and related expenses			374				493
Accrued expenses and other current liabilities			1,083				649
Deferred revenues			1,360				1,294
Total current liabilities			3,444				2,945
Loan from related party			7,795				7,647
Deferred revenues			17				17
Deferred income taxes			497				474
Total liabilities			11,753				11,083
Commitments and contingencies (see note 11)
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 September 30, 2013 and December 31, 2012, respectively			61				61
Additional paid-in capital			289,998				289,711
Accumulated deficit			(286,044	)			(284,288	)
Treasury stock, 119,285 shares, at cost			(496	)			(496	)
Total stockholders’ equity			3,519				4,988
Total liabilities and stockholders’ equity		$	15,272			$	16,071

 

See notes to unaudited consolidated condensed financial statements.

 

 

Mediabistro Inc.

Unaudited Consolidated Condensed Statements of Operations

For the Three and Nine Months Ended September 30, 2013 and 2012

(in thousands, except per share amounts)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Revenues		$	2,975			$	2,917			$	9,458			$	10,642
Cost of revenues			1,608				1,678				5,462				5,830
Advertising, promotion and selling			556				614				1,745				1,920
General and administrative			1,162				1,306				3,469				3,938
Depreciation			26				78				131				238
Amortization			112				137				326				409
Total operating expenses			3,464				3,813				11,133				12,335
Operating loss			(489	)			(896	)			(1,675	)			(1,693	)
Other income (loss), net			47				(213	)			51				(216	)
Interest income			1				1				3				3
Interest expense			(84	)			(63	)			(211	)			(209	)
Loss before income taxes			(525	)			(1,171	)			(1,832	)			(2,115	)
Provision (benefit) for income taxes			(99	)			11				(76	)			30
Net loss		$	(426	)		$	(1,182	)		$	(1,756	)		$	(2,145	)
Loss per share:
Basic net loss		$	(0.07	)		$	(0.20	)		$	(0.29	)		$	(0.36	)
Diluted net loss		$	(0.07	)		$	(0.20	)		$	(0.29	)		$	(0.36	)
Weighted average shares used in computing loss per share:
Basic			6,022				6,009				6,023				5,983
Diluted			6,022				6,009				6,023				5,983

 

See notes to unaudited consolidated condensed financial statements.

 

 

Mediabistro Inc.

Unaudited Consolidated Condensed Statements of Cash Flows

For the Nine Months Ended September 30, 2013 and 2012

(in thousands)

 

		Nine Months Ended September 30,
		2013				2012
Cash flows from operating activities:
Net loss		$	(1,756	)		$	(2,145	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			457				647
Stock-based compensation			278				380
Provision for losses on accounts receivable			4				27
Amortization of debt issuance costs			27				27
Other, net			(41	)			210
Deferred income taxes			22				25
Changes in assets and liabilities
Accounts receivable, net			(35	)			(155	)
Prepaid expenses and other assets			(289	)			130
Accounts payable, accrued expenses and other liabilities			141				(195	)
Deferred revenues			66				265
Net cash used in operating activities			(1,126	)			(784	)
Cash flows from investing activities:
Purchases of property and equipment			(68	)			(91	)
Purchases of intangible assets and other development costs			(195	)			(186	)
Proceeds from sale of assets and other			53				–
Net cash used in investing activities			(210	)			(277	)
Cash flows from financing activities:
Debt issuance costs			(153	)			(23	)
Borrowings from related party			148				–
Proceeds from exercise of stock options			7				125
Net cash provided by financing activities			2				102
Net decrease in cash and cash equivalents			(1,334	)			(959	)
Cash and cash equivalents, beginning of period			2,210				3,438
Cash and cash equivalents, end of period		$	876			$	2,479

  

See notes to unaudited consolidated condensed financial statements.

 

 

Mediabistro Inc.

Notes to Unaudited Consolidated Condensed Financial Statements

September 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, Inside Bitcoins, Inside Social Marketing Conference, Inside Mobile Apps Conference & Expo and Social Gambling & Gaming Summit.

 

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, 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.

 

The Company has incurred losses and negative cash flows from operations in recent quarters and expects to continue to incur operating losses until revenues from all sources reach a level sufficient to support its on-going operations. The Company’s liquidity will largely be determined by its ability to raise capital from debt, equity, or other forms of financing, by the success of its product offerings, by developing additional product offerings, and by expenses associated with operations.

 

In the absence of a sufficient increase in revenues, the Company will need to do one or more of the following in the next 12 months to meet its planned level of expenditures: (a) raise additional capital; (b) reduce spending on operations; or (c) restructure its 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 its needs and its view toward its 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 its stockholders or its business.

 

The Company’s liquidity over the next 12 months could be materially affected by, among other things: its ability to increase revenues; costs related to its product development efforts; its 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 its 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 September 30, 2013.

 

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 nine months ended September 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

 

In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Credit Carryforward Exists.” ASU No 2013-11 provides explicit guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The amendments in this update are effective for fiscal years and interim reporting periods beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively for all unrecognized tax benefits that exist as of the effective date. Retrospective application is permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s financial condition or results of operations.

 

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.

5.		ACCOUNTING FOR EMPLOYEE STOCK-BASED COMPENSATION

 

Total employee stock-based compensation is as follows (in thousands):

    

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Stock options for employees		$	119			$	120			$	277			$	381
Restricted stock for employees			–				1				1				(1	)
Total employee stock-based compensation		$	119			$	121			$	278			$	380

 

Total employee stock-based compensation increased additional paid-in capital by $278,000 and $380,000 for the nine months ended September 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:

 

		Nine Months Ended September 30,
		2013				2012
Risk-free interest rate			0.46	%			0.93	%
Expected life (in years)			3.4				6.0
Dividend yield			0	%			0	%
Expected volatility			125	%			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 nine months ended September 30, 2013 and 2012 was $1.23 and $4.20, respectively.

 

 

The following table summarizes stock option activity during the nine months ended September 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			15,100			$	1.63
Exercised			(3,581	)		$	1.82
Forfeited, expired or cancelled			(96,703	)		$	5.87
Outstanding at September 30, 2013			765,517			$	5.81				5.50			$	1,300
Vested and expected to vest at September 30, 2013			736,012			$	5.91				5.37			$	341
Exercisable at September 30, 2013			616,813			$	6.35				4.73			$	–

 

As of September 30, 2013, there was $233,000 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 21 months.

 

The following table summarizes restricted stock activity during the nine months ended September 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 September 30, 2013				–			$	–

 

6.

COMPUTATION OF LOSS PER SHARE

  

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.

 

Computations of basic and diluted loss per share for the periods presented are as follows (in thousands, except per share amounts):

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2013				2012				2013				2012
Net loss		$	(426	)		$	(1,182	)		$	(1,756	)		$	(2,145	)
Basic weighted average number of common shares outstanding			6,022				6,009				6,023				5,983
Effect of dilutive stock options			–				–				–				–
Total basic weighted average number of common shares and dilutive stock options			6,022				6,009				6,023				5,983
Basic and diluted net loss		$	(0.07	)		$	(0.20	)		$	(0.29	)		$	(0.36	)

 

 

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 Nine Months  Ended September 30,
		2013				2012
Number of anti-dilutive stock options			765				871
Weighted average exercise price		$	5.81			$	6.23

  

7.

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):

 

		September 30, 2013
		Cost				Accumulated Amortization				Net Carrying Value
Website and product development costs		$	970			$	(516	)		$	454
Customer relationships			797				(511	)			286
Copyrights and trademarks			540				(277	)			263
Total		$	2,307			$	(1,304	)		$	1,003

 

		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.

 

Amortization expense related to intangible assets subject to amortization was $112,000 and $326,000 for the three and nine months ended September 30, 2013, respectively, and $137,000 and $409,000 for the three and nine months ended September 30, 2012, respectively. Estimated annual amortization expense for the next five years, including the fourth quarter of 2013, is expected to be as follows (in thousands):

 

Years Ending December 31:
2013			$	96
2014				360
2015				311
2016				150
2017				61
Thereafter				25
			$	1,003

 

Unamortized Intangible Assets

 

The following tables set forth the intangible assets that are not subject to amortization (in thousands):

 

		September 30, 2013				December 31, 2012
Domain names		$	1,169			$	1,169

 

 

Goodwill

 

There were no changes in the carrying amount of goodwill for the nine months ended September 30, 2013.

    

8.

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consist of the following (in thousands):

 

		September 30, 2013				December 31, 2012
Deferred rent		$	517			$	120
Accrued trade show expenses			74				23
Accrued professional fees			67				107
Customer overpayments			64				96
Accrued interest			55				–
Accrued property and capital taxes			44				65
Other			262				238
Total		$	1,083			$	649

 

9.

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”).

 

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 2^nd Note Modification Agreement with Mr. Meckler.  The 2^nd Note Modification Agreement amends the 2009 Note, which is described above.  Under the 2^nd 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 2^nd 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 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 “2^nd 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 “2^nd Pledge Agreement”), and together with the 2011 Note, the MBIS Security Agreement and the 2^nd 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 2^nd 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 3^rd 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. 

 

On November 1, 2013, the Company and its wholly-owned subsidiaries, MB Subsidiary and Inside Network entered into an Amended and Restated Promissory Note (the “Restated Note”) with Mr. Meckler. The Restated Note combines, amends, restates and replaces, but does not extinguish, the obligations of the 2009 Note and the 2011 Note.

 

The Restated Note combines the outstanding principal amounts of the 2009 Note and the 2011 Note along with applicable closing costs to $7,794,604 and extends the maturity date to September 1, 2043. Initially, interest accrues from August 27, 2013, at a rate of 5.50% per annum. Beginning September 1, 2018 (“Change Date”), the interest rate will convert to an adjustable rate based on a specified amount above LIBOR, initially not to exceed 7.5% per annum or be less than 5.5% per annum. Thereafter, the adjustable rate will never be increased or decreased on any single Change Date by more than 2% from the rate of interest paid by the Company for the preceding twelve months, and will never be less than 5.50% per annum or greater than 11.50% per annum. Interest only is payable in arrears beginning November 1, 2013 and each month thereafter until September 1, 2023. Beginning October 1, 2023 and continuing each month thereafter, the monthly payment will be in an amount sufficient to repay the principal and interest at the rate determined under the Restated Note in substantially equal installments by the maturity date.

 

Interest expense on the 2009 Meckler Loan, 2011 Meckler Loan and the Restated Note was $77,000 and $185,000 during the three and nine months ended September 30, 2013, respectively. Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $53,000 and $209,000 during the three and nine months ended September 30, 2012, respectively. As of September 30, 2013, the amount of accrued interest included in accrued expenses and other current liabilities in the consolidated condensed balance sheet was $55,000. 

 

10.

INCOME TAXES

 

The Company recorded an income tax benefit of $99,000 and $76,000 during the three and nine months ended September 30, 2013, respectively, and a provision for income taxes of $11,000 and $30,000 during the three and nine months ended September 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 September 30, 2013 and December 31, 2012, all of which would affect the effective tax rate, if recognized, as of September 30, 2013.

 

11.

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 potential need for additional capital; 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, Inside Bitcoins, Inside Social Marketing Conference, Inside Mobile Apps Conference & Expo and Social Gambling & Gaming Summit.

 

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, 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;
	·	advertising on our websites and e-mail newsletters;
	·	attendee registration fees to our trade shows;
	·	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.

 

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 $3.0 million for the three months ended September 30, 2013 and $2.9 million for the three months ended September 30, 2012, representing an increase of 2%. This change was primarily due to an increase in trade show revenues offset by a decrease in advertising and research revenues. We ran three trade shows during the three months ended September 30, 2013 compared to two trade shows during the three months ended September 30, 2012. Most notably, we ran our Inside 3D Printing Conference and Expo trade show in both Chicago and San Jose during the third quarter of 2013.

 

Revenues were $9.5 million for the nine months ended September 30, 2013 and $10.6 million for the nine months ended September 30, 2012, representing a decrease of 11%. This change was primarily due to declines in advertising and research revenues, partially offset by increases in our trade show revenues. We ran eleven trade shows during the nine months ended September 30, 2013 compared to ten trade shows during the nine months ended September 30, 2012. During the nine months ended September 30, 2013, we held the launch event of our Inside 3D Printing Conference and Expo trade show in New York City along with the Chicago and San Jose events mentioned above.

 

The following table sets forth, for the periods indicated, the components of our revenues (in thousands):

 

		Three Months Ended September 30,								2013 vs. 2012								Nine Months Ended September 30,								2013 vs. 2012
		2013				2012				$				%				2013				2012				$				%
Online job postings		$	928				895				33				4	%		$	2,849			$	3,057			$	(208	)			(7	)%
Trade shows			633				112				521				465				2,030				1,798				232				13
Education			379				404				(25	)			(6	)			1,410				1,491				(81	)			(5	)
Advertising			470				785				(315	)			(40	)			1,359				2,150				(791	)			(37	)
Research			281				421				(140	)			(33	)			980				1,314				(334	)			(25	)
Other			284				300				(16	)			5				830				832				(2	)			–
Total		$	2,975			$	2,917			$	58				2	%		$	9,458			$	10,642			$	(1,184	)			(11	)%

 

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 $1.6 million for the three months ended September 30, 2013 and $1.7 million for the three months ended September 30, 2012, representing a decrease of 4%.  This change was primarily due to decreases in employee-related costs of $157,000 and editorial freelance and technology consulting costs of $59,000, offset by an increase in trade show operating costs of $139,000.

 

Cost of revenues was $5.5 million for the nine months ended September 30, 2013 and $5.8 million for the nine months ended September 30, 2012, representing a decrease of 6%.  This change was primarily due to decreases in employee-related costs of $365,000 and editorial freelance and technology consulting costs of $217,000, offset by an increase in trade show operating costs of $165,000.

 

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 $556,000 for the three months ended September 30, 2013 and $614,000 for the three months ended September 30, 2012, representing a decrease of 9%. This decrease was due primarily to a decrease in employee-related costs of $74,000.

 

Advertising, promotion and selling expenses were $1.7 million for the nine months ended September 30, 2013 and $1.9 million for the nine months ended September 30, 2012, representing a decrease of 9%. This decrease was due primarily to a decrease in employee-related costs of $146,000 and a decrease in advertising costs of $17,000.

 

 

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 $1.2 million for the three months ended September 30, 2013 and $1.3 million for the three months ended September 30, 2012, representing a decrease of 11%. This change was due to a decrease in rent expense for our New York City location of $81,000 and a decrease in employee-related costs of $55,000.

 

General and administrative expenses were $3.5 million for the nine months ended September 30, 2013 and $3.9 million for the nine months ended September 30, 2012, representing a decrease of 12%. This change was due to a decrease in rent expense for our New York City location of $260,000, a decrease in employee-related costs of $149,000 and a decrease in stock-based compensation of $73,000. 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 $26,000 for the three months ended September 30, 2013 and $78,000 for the three months ended September 30, 2012, representing a decrease of 67%. Depreciation expense was $131,000 for the nine months ended September 30, 2013 and $238,000 for the nine months ended September 30, 2012, representing a decrease of 45%. These decreases were due primarily to certain assets becoming fully depreciated.

 

Amortization expense was $112,000 for the three months ended September 30, 2013 and $137,000 for the three months ended September 30, 2012, representing a decrease of 18%. Amortization expense was $326,000 for the nine months ended September 30, 2013 and $409,000 for the nine months ended September 30, 2012, representing a decrease of 20%. 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 of $47,000 and $51,000 during the three and nine months ended September 30, 2013, respectively, relates primarily to a gain on the sale of a stock investment. Other loss of $213,000 and $216,000 during the three and nine months ended September 30, 2012, respectively, relates primarily to the sale of our 33% investment in Social.Media.Tracking GmbH.

 

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 September 30,								2013 vs. 2012								Nine Months Ended September 30,								2013 vs. 2012
		2013				2012				$				%				2013				2012				$				%
Interest income		$	1			$	1			$	–				–	%		$	3			$	3			$	–				–	%
Interest expense		$	(84	)		$	(63	)		$	(21	)			(33	)%		$	(211	)		$	(209	)		$	(2	)			(1	)%

  

Interest expense during the three and nine months ended September 30, 2013 and 2012 relates primarily to costs associated with our loans from a related party. The increase in interest expense during the three and nine months ended September 30, 2013 was due to the Restated Note that was entered into on November 1, 2013, but which accrues interest as of August 27, 2013. See “Related Party Transactions” for a description of the loans and Restated Note.

 

Provision for income taxes

 

We recorded an income tax benefit of $99,000 and $76,000 during the three and nine months ended September 30, 2013, respectively, and a provision for income taxes of $11,000 and $30,000 during the three and nine months ended September 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 September 30, 2013 and December 31, 2012, all of which would affect the effective tax rate, if recognized, as of September 30, 2013.

 

 

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):

 

		Nine Months Ended September 30,								2013 vs. 2012
		2013				2012				$				%
Operating cash flows		$	(1,126	)		$	(784	)		$	(342	)			(44	)%
Investing cash flows		$	(210	)		$	(277	)		$	67				24	%
Financing cash flows		$	2			$	102			$	(100	)			(98	)%

   

		As of								2013 vs. 2012
		September 30, 2013				December 31, 2012				$				%
Cash and cash equivalents		$	876			$	2,210			$	(1,334	)			(60	)%
Working capital		$	(1,215	)		$	292			$	(1,507	)			(516	)%
Loan from related party		$	7,795			$	7,647			$	148				2	%

    

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 decreased during the nine months ended September 30, 2013 compared to the same period of 2012 due primarily to reduced 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 nine months ended September 30, 2013 and 2012 related primarily to the purchase of certain intangible assets along with website and product development costs.  

 

Financing activities. Cash provided by financing activities during the nine months ended September 30, 2013 related primarily to proceeds from stock option exercises. Cash provided by financing activities during the nine months ended September 30, 2012 related to proceeds from stock option exercises partially offset by debt issuance costs incurred with the 3^rd Note Modification Agreement entered into on July 27, 2012. See “Related Party Transactions” below.

 

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 ability 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 September 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”).

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 2^nd Note Modification Agreement with Mr. Meckler.  The 2^nd Note Modification Agreement amends the 2009 Note, which is described above.  Under the 2^nd 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 2^nd 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 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 “2^nd 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 “2^nd Pledge Agreement”), and together with the 2011 Note, the MBIS Security Agreement and the 2^nd 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 2^nd 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 3^rd 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.

 

On November 1, 2013, we along with our wholly-owned subsidiaries, MB Subsidiary and Inside Network entered into an Amended and Restated Promissory Note (the “Restated Note”) with Mr. Meckler. The Restated Note combines, amends, restates and replaces, but does not extinguish, the obligations of the 2009 Note and the 2011 Note.

 

The Restated Note combines the outstanding principal amounts of the 2009 Note and the 2011 Note along with applicable closing costs to $7,794,604 and extends the maturity date to September 1, 2043. Initially, interest accrues from August 27, 2013, at a rate of 5.50% per annum. Beginning September 1, 2018 (“Change Date”), the interest rate will convert to an adjustable rate based on a specified amount above LIBOR, initially not to exceed 7.5% per annum or be less than 5.5% per annum. Thereafter, the adjustable rate will never be increased or decreased on any single Change Date by more than 2% from the rate of interest that we paid for the preceding twelve months, and will never be less than 5.50% per annum or greater than 11.50% per annum. Interest only is payable in arrears beginning November 1, 2013 and each month thereafter until September 1, 2023. Beginning October 1, 2023 and continuing each month thereafter, the monthly payment will be in an amount sufficient to repay the principal and interest at the rate determined under the Restated Note in substantially equal installments by the maturity date.

 

Interest expense on the 2009 Meckler Loan, 2011 Meckler Loan and the Restated Note was $77,000 and $185,000 during the three and nine months ended September 30, 2013, respectively. Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $53,000 and $209,000 during the three and nine months ended September 30, 2012, respectively. As of September 30, 2013, the amount of accrued interest included in accrued expenses and other current liabilities in the consolidated condensed balance sheet was $55,000. 

 

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 September 30, 2013 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

 

  

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

 

 

 

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

   

 

 

 

 

 

 

 

 

 

 

 

 

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: November 13, 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)