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MBIS > SEC Filings for MBIS > Form 10-Q on 13-Nov-2013All Recent SEC Filings

Show all filings for MEDIABISTRO INC.

Form 10-Q for MEDIABISTRO INC.


13-Nov-2013

Quarterly Report


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                                   Nine Months Ended
                           September 30,             2013 vs. 2012             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                                       Nine Months Ended
                         September 30,               2013 vs. 2012               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,      December 31,
                                 2013               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 3rd 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 2nd Note Modification Agreement with Mr. Meckler. The 2ndNote 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 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.

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.

. . .

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