United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarterly Period Ended February 28, 2002 Commission File Number:0-24075
NBG RADIO NETWORK, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0362102
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
520 SW Sixth Avenue, Suite 750
Portland, Oregon 97204
(Address of principal executive offices) (Zip Code)
(503) 802-4624
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The registrant has one class of Common Stock with 14,385,651 shares
outstanding as of April 12, 2002.
Transitional Small Business Issuer Disclosure Format (check one):Yes [ ] No [X].
PART I - FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
----------------------------
NBG RADIO NETWORK, INC.
BALANCE SHEETS
ASSETS
------
February 28 February 28 November 30
(Unaudited) (Unaudited) (Audited)
2002 2001 2001
CURRENT ASSETS
Cash and cash equivalents $ 189,978 $ 238,607 $ 321,402
Receivables:
Accounts receivable, net of allowance for
doubtful accounts of $60,000 in 2002 and in 2001
3,203,428 3,919,712 3,945,803
Unbilled receivable - 172,865 -
Note receivable - 167,200 -
Related-party receivable 224,354 5,790 219,354
Barter exchange receivables - 81,880 -
Sales representation agreements, net of
amortization 309,721 2,972,086 402,637
Prepaid expenses and other current assets
30,295 232,539 31,148
------------ ------------ ------------
Total current assets 3,957,776 7,790,679 4,920,344
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization
176,830 179,373 197,183
GOODWILL, net of amortization 2,704,034 938,354 2,911,187
INTANGIBLE ASSETS, net of amortization
813,327 220,334 957,093
OTHER ASSETS 130,000 - 137,500
------------ ------------ ------------
Total assets $ 7,781,967 $ 9,128,740 $ 9,123,307
============ ============ ============
2
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Line of credit $ - $ 400,000 $ -
Accounts payable 959,710 340,692 1,438,382
Accrued liabilities 1,048,230 3,939 447,531
Barter exchange payables 30,108 - 29,339
Sales representation agreement
liabilities 1,154,370 2,182,049 1,203,095
Current portion of long-term debt 450,000 - 300,000
------------ ----------- -----------
Total current liabilities 3,642,418 2,926,680 3,418,347
LONG-TERM DEBT 3,886,667 - 3,929,167
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value,
5,000,000 authorized and unissued - - -
Common stock, $.001 par value;
50,000,000 common shares authorized
14,385,651, 13,321,831, and 14,385,651
common shares issued and outstanding at
February 28, 2002, February 28, 2001,
and November 30, 2001 respectively 14,386 13,322 14,386
Additional paid-in-capital 11,290,611 7,587,094 11,290,611
Retained deficit (10,832,853) (1,398,816) (9,306,807)
Stock subscription receivable (219,262) 460 (222,397)
------------ ------------ ------------
Total stockholders' equity 252,882 6,202,060 1,775,793
------------ ------------ ------------
Total liabilities and
stockholders' equity $ 7,781,967 $ 9,128,740 $ 9,123,307
============ ============ ============
See Accompanying Notes
3
NBG RADIO NETWORK, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 28,
2002 and 2001
(Unaudited)
---------------------------------
2002 2001
-------------- --------------
REVENUES
Advertising income $ 2,708,553 $ 2,826,898
Kiosk income 342,163 89,500
-------------- --------------
Total revenues 3,050,716 2,916,398
DIRECT COSTS 2,350,291 2,104,854
-------------- --------------
GROSS MARGIN 700,425 811,544
-------------- --------------
GENERAL AND ADMINISTRATIVE EXPENSES
Wages and employee benefits 497,395 625,608
Travel and entertainment 27,816 91,680
Consulting and professional 799,460 109,096
Advertising 15,117 13,909
Depreciation and amortization 381,622 107,516
Postage and printing 33,990 30,311
Rent 45,479 31,059
Office supplies 17,690 22,796
Telephone 12,919 24,899
Other expenses 80,899 92,826
-------------- --------------
Total general and
administrative expenses 1,912,387 1,149,700
-------------- --------------
Net loss before provision for income taxes
(1,211,962) (338,156)
OTHER INCOME (EXPENSE)
Interest income 1,575 3,587
Interest expense (315,659) (16,321)
-------------- --------------
Total other income (expense) (314,084) (12,734)
-------------- --------------
Provision for income taxes - 125,000
-------------- --------------
Net loss $ (1,526,046) $ (475,890)
============== ==============
Basic and diluted loss per share of
common stock $ (0.11) $ (0.04)
============== ==============
Weighted average number of shares
outstanding - basic and diluted 14,385,651 12,955,341
============== ==============
See Accompanying Notes
4
NBG RADIO NETWORK, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
Other
Additional Stock Comprehen-
Common Stock Paid-In Retained Subscription sive
Capital Deficit Receivable Income Total
------------------------ ------------ ------------ ------------ ----------- -----------
Shares Amount
---------- ----------
BALANCE, November 30, 2000
(audited) 12,321,831 $ 12,322 $6,795,719 $ (922,926) $ (14,113) $ - $ 5,871,002
Issuance of common shares 1,351,920 1,352 1,800,568 - - - 1,801,920
Exercise of options 577,900 578 312,458 - - - 313,036
Issuance of common shares and
common share subscription for
services 134,000 134 231,866 - (228,000) - 4,000
Services provided for payment
of subscribed shares - - - - 19,716 - 19,716
Allocated value of warrants
issued in debt financing - - 2,150,000 - - - 2,150,000
Net loss for the year - - - (8,383,881) - - (8,383,881)
---------- ---------- ------------ ------------ ------------ -------- ------------
BALANCE November 30, 2001
(audited) 14,385,651 $ 14,386 $11,290,611 $ (9,306,807) $ (222,397) $ - $ 1,775,793
Service provided for payment
of subscribed shares - - - - 3,135 - 3,135
Net loss for the period - - - (1,526,046) - - (1,526,046)
---------- ---------- ------------ ------------ ------------ -------- ------------
BALANCE February 28, 2002 14,385,651 $ 14,386 $11,290,611 $(10,832,853) $ (219,262) $ - $ 252,882
(unaudited) ========== ========== ============ ============ ============ ======== ============
See Accompanying Notes
5
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 28
(Unaudited)
------------------------------------------
2002 2001
--------------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (1,526,046) $ (475,890)
Adjustments to reconcile net loss to cash from operating
activities:
Depreciation and amortization 381,622 107,516
Amortization of discount on long-term debt 107,500 -
Services provided in payment of subscribed shares 3,135 14,573
Changes in assets and liabilities:
Accounts receivable 742,375 (6,013)
Unbilled receivable - 22,874
Related party receivable (5,000) 76,452
Barter exchange receivable/payable 769 1
Prepaid expenses and other current assets 853 (104,981)
Sales representation agreement amortization 92,916 217,917
Net change in programming contract liabilities (48,725) (857,678)
Accounts payable (478,672) (240,438)
Accrued liabilities 600,699 (159,973)
--------------------- ----------------
Net cash from operating activities (128,574) (1,405,640)
--------------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of common stock $ - $ 547,000
Stock options exercised - 245,375
Acquisition of property and equipment (2,850) (2,751)
--------------------- ----------------
Net cash from investing activities (2,850) 789,624
--------------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash from financing activities - -
--------------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS
(131,424) (616,016)
CASH, beginning of year 321,402 854,623
--------------------- ----------------
CASH, end of year $ 189,978 $ 238,607
===================== ================
6
NBG RADIO NETWORK, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED FEBRUARY 28
(Unaudited)
-------------------------------------------
2002 2001
---------------------- ----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 315,659 $ 16,321
====================== ================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES
Capitalization of programming contract assets and
recognition of related liabilities $ - $ 288,000
====================== ================
Issuance of common stock for services, net of stock
subscription receivable of ($219,262 and $222,397) $ - $ 14,573
====================== ================
See Accompanying Notes
7
NOTE 1 - ORGANIZATION AND BUSINESS ACTIVITY
NBG Radio Network, Inc. ("NBG" or "the Company") was organized under the laws of
the State of Nevada on March 27, 1996, with the name of Nostalgia Broadcasting
Corporation. In January 1998, stockholders approved the Company's name change to
NBG Radio Network, Inc. The Company creates, produces, distributes and is a
sales representative for national radio programs and offers other related
services to the radio industry. The Company offers radio programs to the
industry in exchange for commercial broadcast time, which the Company sells to
national advertisers.
In June 2001, NBG Radio Network, Inc., completed the acquisition of Glenn Fisher
Entertainment Corporation ("GFEC") (see Note 4), which became a wholly owned
subsidiary of the Company involved in the creation, production, and distribution
of national radio programs. The Company also owns and operates NBG Solutions,
Inc. a wholly owned subsidiary involved in providing design, installation, and
support for interactive kiosks. Two additional wholly owned subsidiaries, NBG
Travel Exclusives, Inc., and NBG Interactive, Inc., which had no significant
activity during 2001 and 2000 were disposed of by the Company. All significant
inter-company accounts and transactions have been eliminated in the preparation
of the consolidated financial statements.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The interim consolidated financial statements include the accounts of NBG Radio
Network, Inc. and its wholly owned subsidiaries, NBG Solutions, Inc., and GFEC,
after elimination of inter-company transactions and balances.
The interim financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America for
interim financial information. 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 financial
information included in this interim report has been prepared by management
without audit by independent public accountants. The Company's annual report
contains audited financial statements. In the opinion of management, all
adjustments, including normal recurring accruals necessary for fair presentation
of results of operations for the interim periods included herein have been made.
The results of operations for the three months ended February 28, 2002 are not
necessarily indicative of results to be anticipated for the year ending November
30, 2002.
NOTE 3 - LOSS PER COMMON SHARE
Basic and diluted loss per common share is calculated by dividing net loss by
the weighted average basic and diluted shares outstanding, respectively.
8
NOTE 4 - ACQUISITION OF GLENN FISHER ENTERTAINMENT CORPORATION
On June 29, 2001, the Company acquired all of the common stock of GFEC for
$5,280,425 and, as of the date of the acquisition, GFEC became a wholly owned
subsidiary of the Company.
The acquisition was accounted for as a purchase. Accordingly, the excess of the
fair value of assets acquired over liabilities assumed was recognized as
goodwill, and is being amortized over its expected useful life of five years. In
addition, identifiable intangible assets (sales representation contract rights)
have been recognized and will be amortized over the lives of the underlying
assets, which have a weighted average life of 2.5 years. The following
summarizes the fair value of the assets acquired and liabilities assumed in the
Company's purchase of GFEC.
Goodwill $ 4,332,443
Identifiable intangibles (sales representation contract rights) 1,518,688
Assets acquired 733,287
Liabilities assumed (764,239)
Non-refunded prepayments on contracts with
GFEC terminated at acquisition (539,754)
-------------------
Total cash paid for GFEC $ 5,280,425
===================
Prior to the acquisition transaction, NBG and GFEC entered into a number of
joint business transactions. In its transactions with NBG, GFEC sold to NBG its
rights to employment and syndication agreements with radio program personalities
or producers pursuant to sales representation agreements. The sales
representation agreements were recorded by GFEC as contracts receivable and
deferred revenues when the determinable amount of noncancellable agreements were
identified. In its transactions with GFEC, NBG recognized its liabilities to
GFEC in accordance with the acquired sales representation agreements. The costs
of the sales representation agreements were deferred by NBG until such time that
they were matched with related programming revenues.
At the time of acquisition, the contracts receivable and deferred revenue
balances recognized by GFEC and the unamortized sales representation agreement
costs of $1,653,228 and contract liabilities of $1,113,474 recognized by the
Company were eliminated for consolidation purposes, resulting in the recognition
of an additional $539,754 in goodwill. Accordingly, the total amount of goodwill
recognized by the Company in its acquisition of GFEC was $4,332,443.
As part of the acquisition by NBG, Glenn Fisher, the former president and sole
shareholder of GFEC, entered into a three-year consulting agreement with NBG.
Terms of the consulting agreement provide for monthly payments of $16,667 to
Fisher for the three-year period covered by the agreement.
The following pro forma condensed financial information has been prepared using
the purchase method of accounting and is based on the historical financial
statements of the Company and GFEC assuming the acquisition had been concluded
at the beginning of the periods presented. The pro forma condensed financial
information combines GFEC's statements of operations for the three months ended
March 31, 2001, with the statement of operations of the Company for the three
months ended February 28, 2001, and GFEC's year ended December 31, 2001 with the
statement of operations of the Company for the year ended November 30, 2001.
Certain amounts in the historical financial statements of GFEC have been
reclassified and adjusted to conform
9
with the Company's historical financial presentation. All inter-company
transactions have been eliminated.
Three Months Ended February 28, Year Ended November 30,
---------------------------------------------------------------------------------------------
2001 2001 2001 2001
Historical Pro Forma Historical Pro Forma
--------------------- ---------------------- ---------------------- ---------------------
Revenues $ 2,916,398 $ 2,957,053 $ 13,546,176 $ 13,570,401
Net loss $ (475,890) $ (1,357,857) $ (8,383,881) $ (10,469,355)
Loss per share (diluted) $ (0.04) $ (0.10) $ (0.60) $ (0.75)
Item 2. Management's Discussion and Analysis or Plan of Operation
-----------------------------------------------------------------
Forward Looking Statements
--------------------------
The information set forth below relating to matters that are not
historical facts are "forward looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934 and involve risks and uncertainties
which could cause actual results to differ materially from those contained in
such forward looking statements. Such risks and uncertainties include, but are
not limited to, the following:
o A decline in national and regional advertising
o Preference by customers of other forms of advertising such as newspapers and
magazines, outdoor advertising, network radio advertising, yellow page
directories and point of sale advertising
o Loss of executive management personnel
o Ability to maintain and establish new relations with radio stations to place
its programs
o Ability to maintain relationships with program hosts and ability to attract
new program hosts
o Ability to predict public taste with respect to entertainment programs
Three Months Ended February 28, 2002 and 2001
---------------------------------------------
Reference is made to Item 6, "Management's Discussion and Analysis or Plan
of Operation" included in the Company's annual report on Form 10-KSB for the
year ended November 30, 2001, on file with the Securities and Exchange
Commission. The following discussion and analysis pertains to the Company's
results of operations for the three-month period ended February 28, 2002,
compared to the results of operations for the three-month period ended February
28, 2001, and to changes in the Company's financial condition from November 30,
2001 to February 28, 2002.
REVENUES. Total revenues for the three months ended February 28, 2002 were
$3,050,716 compared to revenues of $2,916,398 for the same period in 2001,
representing an increase of $134,318, or 5%. This increase was due to NBG
Solutions, Inc. increasing its sales from $89,500 in 2001 to $342,163 in 2002.
The primary reason for the increase was the development of new
10
clients and increasing sales with existing clients. Advertising revenues were
slightly lower. The main reason for the decline in advertising revenues is that
advertising rates were lower for the first three months of 2002 compared to the
same period in 2001, mainly attributable to the economic conditions existing at
the end of 2001 and the beginning of 2002. The lower advertising rates were
partially offset by an increase in the volume of advertising available for sale
and sold in the first quarter of 2002.
DIRECT COSTS. Direct costs for the three months ended February 28, 2002 and
2001 were $2,350,291 and $2,104,854, respectively, representing an increase of
$245,437, or 12%. The increase is due primarily to the increase in the number of
programs and services the Company currently provides. The Company is currently
producing seven more programs than it did at the same time last year, which has
lead to an increase in the total cost of producing the Company's programs. The
Company's current focus is on long-form programs, which are more expensive to
produce due to the increased cost of delivery of the program via satellite or
multiple CD distribution and the extra telephone charges incurred for caller
driven programs. However, long-form programs also provide more commercial
broadcast inventory for the Company.
GROSS MARGIN. Gross margin for the three months ended February 28, 2002 was
$700,425, a decrease of $111,119, or 14%, compared to the same period 2001. The
decrease in gross margin resulted from two factors. First, the Company increased
its long-form program lineup and its presence in top media markets which lead to
higher direct costs. Second, advertising rates dropped significantly as the
economy weakened. The combination of these events led to the decrease in gross
margin.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
the three months ended February 28, 2002 were $1,912,387, representing an
increase of $762,687, or 66% over the same period in 2001. The increase is
primarily due to an increase in consulting and professional fees and
depreciation and amortization expense. Consulting and professional fees
increased $690,364 primarily as a result of an amendment fee ($200,000) to amend
its Credit Facility Agreement with its lender and advisory fees ($400,000) paid
to its lender. Depreciation and amortization expense increased $274,106
primarily due to an increase in amortization expense from the acquisition of
GFEC on June 29, 2001. These costs were offset in part by reductions in other
categories of general and administrative expenses.
OTHER INCOME (EXPENSE). Other income (expense) increased $302,070 for the
three months ended February 28, 2002 compared to the same period in 2001. The
increase is primarily due to interest expense increasing $299,338 as a result of
the debt incurred in connection with the GFEC acquisition.
INCOME TAXES. Due to loss carry forwards there was no provision for income
taxes during the three months ended February 28, 2002. The Company paid and
expensed $125,000 in estimated taxes for the same period 2001, which was
subsequently refunded.
NET LOSS AND EARNINGS PER SHARE. Net loss for the three months ended
February 28, 2002 was $1,526,046, or $0.11 per diluted share. Net loss for the
three months ended February 28, 2001 was $475,890, or $0.04 per diluted share.
The $1,050,156 increased loss for 2002 was attributable to a $690,364 increase
in consulting and professional fees, a $274,106 increase in depreciation and
amortization expense, and an increase of $299,338 in interest expense.
11
Basic and diluted earnings per share are based upon a weighted average of
14,385,651 and 12,955,341 shares outstanding on February 28, 2002 and 2001,
respectively.
Liquidity and Capital Resources
-------------------------------
Historically, the Company has financed its cash flow requirements through cash
flows generated from operations and financing activities. The Company's working
capital at February 28, 2002 was $320,000 compared to $1.50 million at February
28, 2001. The $1.18 million decrease in working capital was primarily due to an
increase in accounts payable and accrued liabilities as well as a decrease in
sales representation assets that were eliminated as inter-company transactions
as a result of the acquisition of GFEC on June 29, 2001.
In January 2001 the Company completed a private placement of 547,000 units at
$1.00 per unit. Each unit consisted of one share of common stock and one warrant
to purchase one share of common stock, exercisable immediately. The warrants are
exercisable for $1.50 and expire on January 19, 2003. The Company received
proceeds of $547,000 from the private placement.
In March of 2001, the Company completed another private placement of 204,920
units at $1.00 per unit. Each unit consisted of one share of common stock and
one warrant to purchase one share of common stock, exercisable beginning
September 5, 2001. The warrants are exercisable for $1.50 and expire on March 5,
2003. The Company received proceeds of $204,920 from the private placement.
In March of 2001, the Company completed another private placement of 600,000
units at $1.75 per unit. Each unit consisted of one share of common stock and
one warrant to purchase one share of common stock exercisable immediately. The
warrants are exercisable for $2.00 and expire on March 31, 2003. The Company
received $1,050,000 from the private placement.
On June 29, 2001, the Company acquired GFEC for approximately $5.3 million in
cash. The acquisition was financed through a $6.2 million credit facility with
MCG Finance Corporation ("MCG"). The credit facility was amended February 28,
2002. The surplus funds from the credit facility were used to retire the
Company's $500,000 line of credit with Western Bank, pay various fees and costs
associated with the acquisition, and increase the Company's working capital. The
credit facility is secured by all of the Company's assets, including its
intellectual property and the stock of its subsidiaries. The credit facility is
structured to allow for the possibility of an additional $10 million in future
financing. The interest rate on the amounts outstanding under the credit
facility is comprised of two parts; a deferred fixed rate of 3.0% and a variable
rate. On February 28, 2002, the variable interest rate equaled 9.909% per annum.
The variable portion of the interest rate is due quarterly while the deferred
fixed portion is due upon the termination of the credit facility. The credit
facility terminates in June 2006 unless prepaid earlier by the Company.
The terms of the credit facility require the Company to comply with several
affirmative and negative covenants. These covenants include interest coverage
ratios, total charge coverage ratios, cash flow leverage ratios, maximum
programming obligations and affiliate stations expenses, minimum adjusted
operating cash flow, maximum capital expenditures, restrictions on the issuance
of equity instruments or additional indebtedness, as well as other elements.
These covenants are typically measured on a quarterly basis. If the Company is
not able to meet the
12
covenants on the predetermined measurement dates, the lender may accelerate the
entire balance of the credit facility.
In addition to the financial covenants, the credit facility also places
restrictions on the Company's ability to issue equity instruments, pay
dividends, repurchase its stock, and incur indebtedness. The terms of an Option
and Warrant Agreement between the Company and MCG provide MCG with certain
antidilution provisions, which may further complicate the Company's ability to
issue additional equity securities in the future.
As part of the consideration for the credit facility, the Company issued an
option to acquire warrants to purchase shares of common stock to MCG. To
exercise the option to acquire warrants, MCG must agree to forgo collection of
one-half of the fixed portion of the interest rate. The option to acquire
warrants is exercisable immediately and will expire upon the termination of the
credit facility. If the option to acquire warrants is exercised, MCG will
receive warrants to acquire 4,850,235 shares of the Company's common stock. The
warrants provide that 4,084,408 of these common shares may be acquired at an
exercise price of $1.20 per share and the remaining 765,827 common shares may be
acquired at an exercise price of $3.00 per share. The warrants become
immediately exercisable and will expire on June 30, 2011.
Despite the unfavorable operating results for 2001, management believes that its
operating cash flows will be sufficient to meet its prospective needs for
working capital for the next twelve months. However, if the Company does not
perform as management expects, then it may become necessary to seek additional
or alternative sources of financing. There is no assurance that the Company will
be able to locate a source of financing willing to offer terms satisfactory to
the Company. In addition, the Company's indebtedness presents other risks to
investors, including the possibility that the Company may be unable to generate
cash sufficient to make the principal and interest payments when due or comply
with financial covenants. Should the Company fail to make such a payment or fail
to comply with the financial covenants, then the entire balance of the Company's
credit facility may become due and immediately payable. These actions would
likely have a material adverse effect on the Company.
Recently Issued Accounting Standards
------------------------------------
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 clarifies the accounting for the impairment of long-lived assets and for
long-lived assets to be disposed of, including the disposal of business segments
and major lines of business. SFAS No. 144 will be effective for the Company in
the first quarter of 2002. The Company's management does not expect that the
application of the provisions of this statement will have a material impact on
the Company's consolidated financial statements.
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 addresses the accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 will be effective for the
Company in the first quarter of 2002. The Company's management does not expect
that the application of the provisions of this statement will have a material
impact on the Company's consolidated financial statements.
In July 2001, the FASB also issued SFAS No. 141, "Business Combinations," and
No. 142, "Goodwill and Other Intangible Assets." These standards change the
accounting for business combinations by, among other things, prohibiting the
prospective use of pooling-of-interests
13
accounting and requiring companies to cease amortizing goodwill and certain
intangible assets with an indefinite useful life created by business
combinations accounted for using the purchase method of accounting. Instead,
goodwill and intangible assets deemed to have an indefinite useful life will be
subject to an annual review for impairment. Implementation of SFAS No. 141 had
no affect on the Company's 2001 and 2000 consolidated financial statements. The
new standards of SFAS No. 142 will be effective for the Company in the first
quarter of the fiscal year ending November 30, 2003.
On December 1, 2003, the Company will no longer amortize goodwill. Based on the
current recorded balance of goodwill, this accounting change will reduce annual
amortization expense by approximately $829,000. The impact of ceasing to record
goodwill amortization will be an increase in the Company's annual net income,
after taxes, of approximately $557,000.
Goodwill will, however, be subject to an annual review for impairment upon
adoption of SFAS No. 142. The Company is in the process of determining whether
any such impairment would be required upon adoption of the new accounting
standard. If the Company concludes that a charge for goodwill impairment is
necessary, such a charge would be reported as a cumulative effect of an
accounting change.
In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities - a Replacement
of FASB Statement No. 125." SFAS No. 140 revises the criteria for accounting for
securitizations and other transfers of financial assets and collateral. In
addition, SFAS No. 140 requires certain additional disclosures. Except for the
new disclosure provisions, which were effective for the year ended November 30,
2000, SFAS No. 140 was effective for the transfer of financial assets occurring
after March 31, 2001. The provisions of SFAS No. 140 did not have a significant
effect on the Company's consolidated financial statements.
PART II - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) The following exhibits are attached:
10.1 Amendment to Credit Facility Agreement dated February 28, 2002.
10.2 MCG Capital Corporation Advisory and Assistance Engagement Letter
dated March 7, 2002.
(b) Reports on form 8-K. No reports on Form 8-K were required to be filed during
the quarter ended February 28, 2002.
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NBG RADIO NETWORK, INC.,
a Nevada corporation
Date: April 15, 2002 By: /s/ John J. Brumfield
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John J. Brumfield, Chief Financial Officer
Vice President, Finance
(Principal Financial and Accounting Officer)
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