-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VHn2CjlyAu8eWvPNfu3M4TM0r9VqBDpcloiBWlcd7MXqzC4b/AtjoZ/fnHKpFJGo WNVvTuNKSG7MY5dBiLHoUg== 0001005477-01-003066.txt : 20010510 0001005477-01-003066.hdr.sgml : 20010510 ACCESSION NUMBER: 0001005477-01-003066 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DAG MEDIA INC CENTRAL INDEX KEY: 0001080340 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PUBLISHING [2741] IRS NUMBER: 113474831 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-25991 FILM NUMBER: 1626241 BUSINESS ADDRESS: STREET 1: 125 QUEENS BLVD., SUITE 14 CITY: KEW GARDENS STATE: NY ZIP: 11415 MAIL ADDRESS: STREET 1: 125 QUEENS BLVD., SUITE 14 CITY: KEW GARDENS STATE: NY ZIP: 11415 10QSB 1 0001.txt FORM 10-QSB 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 March 31, 2001 Commission File Number 000-25991 DAG MEDIA, INC. (Exact name of small business issuer as specified in its charter) New York 13-3474831 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 125-10 Queens Boulevard Kew Gardens, NY 11415 (Address of principal executive offices) (Zip Code) (718) 263-8454 (Issuer's telephone number, including area code) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| As of May 8, 2001, there were outstanding 2,907,460 shares of the issuer's common shares, $.001 par value. DAG MEDIA, INC. QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 TABLE OF CONTENTS Part I - FINANCIAL INFORMATION Page Number ----------- Item 1. Financial Statements (unaudited) Balance Sheet at March 31, 2001 (unaudited).............. 2 Statements of Operations for the Three Months Ended March 31, 2001 and 2000 (unaudited)......... 3 Statements of Cash Flows for the Three Months Ended March 31, 2001 and 2000 (unaudited)... 4 Notes to Financial Statements (unaudited)................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............ 7 Part II - OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds................. 11 Item 6. Exhibits and Reports...................................... 12 SIGNATURES .......................................................... 13 DAG MEDIA, INC. BALANCE SHEET MARCH 31, 2001 (unaudited)
Assets Current assets: Cash and cash equivalents $ 7,154,030 Trade accounts receivable, net of allowance for doubtful accounts of $475,157 2,280,328 Directories in progress 1,386,367 Deferred tax asset 162,859 Other current assets 153,732 ------------ Total current assets 11,137,316 ------------ Fixed assets, net of accumulated depreciation of $78,683 212,822 Goodwill and trademarks, net of accumulated amortization of $101,324 1,249,657 Other assets 14,196 ------------ Total assets $ 12,613,991 ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses $ 123,320 Accrued commissions and commissions payable 544,616 Advanced billing for unpublished directories 3,351,648 Income tax payable 380,745 ------------ Total current liabilities 4,400,329 ------------ Shareholders' equity: Preferred shares - $.01 par value; 5,000,000 shares authorized; -- no shares issued Common shares - $.001 par value; 25,000,000 authorized; 2,976 2,976,190 issued and 2,907,460 outstanding Additional paid-in capital 7,916,701 Treasury stock, at cost- 68,730 shares (231,113) Deferred compensation (72,724) Retained earnings 597,822 ------------ Total shareholders' equity 8,213,662 ------------ Total liabilities and shareholders' equity $ 12,613,991 ============
The accompanying notes are an integral part of this balance sheet. 2 DAG MEDIA, INC. STATEMENTS OF OPERATIONS (unaudited)
Three Months Three Months Ended Ended March 31, 2001 March 31, 2000* -------------- -------------- Advertising revenues $ 1,503,199 $ 2,633,454 Publishing costs 189,307 500,816 ----------- ----------- Gross profit 1,313,892 2,132,638 Operating costs and expenses: Selling expenses 585,603 859,898 General and administrative 675,086 678,681 ----------- ----------- Total operating costs and expenses 1,260,689 1,538,579 ----------- ----------- Income from operations 53,203 594,059 Interest income 82,180 79,999 ----------- ----------- Earnings from operations before provision for income taxes 135,383 674,058 Provision for income taxes 69,000 310,066 Cumulative effect of change in accounting principle, net of tax benefit of $435,356 -- (511,071) ----------- ----------- Net income (loss) available to common shareholders $ 66,383 $ (147,079) =========== =========== Earnings (loss) per common share: Basic - Income before cumulative effect of change in $ .02 $ .13 accounting principle Cumulative effect of change in accounting principle -- (.18) ----------- ----------- Net income (loss) $ .02 $ (.05) =========== =========== Diluted - Income before cumulative effect of change in $ .02 $ .13 accounting principle Cumulative effect of change in accounting -- (.18) principle ----------- ----------- Net income (loss) $ .02 $ (.05) =========== =========== Weighted average number of common shares outstanding - Basic 2,907,460 2,907,460 =========== =========== - Diluted 2,909,846 2,912,621 =========== ===========
The accompanying notes are an integral part of these financial statements. *See Note 2 3 DAG MEDIA, INC. STATEMENTS OF CASH FLOWS (unaudited)
Three months Three months Ended Ended March 31, 2001 March 31, 2000 -------------- -------------- Cash flows from operating activities: Net income $ 66,383 $ (147,079) Adjustment to reconcile net income to net cash provided by by operating activities-- Cumulative effect of change in accounting principle -- 511,071 Depreciation and amortization 24,564 22,025 Amortization of deferred compensation 4,337 -- Bad debt expense 234,000 318,652 Deferred taxes 24,199 (234,180) Changes in operating assets and liabilities-- Accounts receivable (215,061) (475,393) Directories in progress 82,815 223,093 Other current and non current assets (105,063) (29,417) Accounts payable and accrued expenses 47,567 588,912 Accrued commissions and commissions payable (8,500) (44,509) Advance billing for unpublished directories (193,563) (1,072,661) Income taxes payable 44,800 536,827 ----------- ----------- Net cash provided by operating activities 6,478 197,341 ----------- ----------- Cash flows from investing activities: Purchase of fixed assets (1,112) (80,272) ----------- ----------- Net cash used in investing activities (1,112) (80,272) ----------- ----------- Net increase in cash 5,366 117,069 Cash and cash equivalents, beginning of period 7,148,664 7,200,857 ----------- ----------- Cash and cash equivalents, end of period $ 7,154,030 $ 7,317,926 =========== ===========
The accompanying notes are an integral part of these financial statements. 4 DAG MEDIA, INC. NOTES TO FINANCIAL STATEMENTS March 31, 2001 1. BASIS OF PRESENTATION The accompanying unaudited financial statements of DAG Media, Inc. ("DAG" or the "Company") included herein have been prepared by the Company in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying unaudited financial statements should be read in conjunction with the Company's audited financial statements for the years ended December 31, 2000 and 1999 and the notes thereto included in the Company's 10KSB. Results of operations for the interim period are not necessarily indicative of the operating results to be attained in the entire fiscal year. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. 2. NEW ACCOUNTING PRONOUNCEMENTS In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements SAB No. 101" expresses the views of the SEC staff in applying generally accepted accounting principles to certain revenue recognition issues. The Company adopted SAB 101 effective January 1, 2000. The effect of the adoption of SAB 101 in the prior year was reflected as cumulative effect of change in accounting principle. 3. EARNINGS PER SHARE ("EPS") OF COMMON STOCK The Company has applied Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share" in its calculation and presentation of earnings per share - "basic" and "diluted". Under this standard, basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share includes the potential dilution from the exercise of stock options and warrants for common shares using the treasury stock method. The following table reconciles the number of weighted average common shares outstanding for basic and diluted earning per share: Period ended March 31, - -------------------------------------------------------------------------------- 2001 2000 - -------------------------------------------------------------------------------- Basic 2,907,460 2,907,460 Incremental shares for assumed conversion of options 2,386 5,161 ================================================================================ Diluted 2,909,846 2,912,621 ================================================================================ The difference between basic and diluted weighted average common shares resulted from the assumption that the dilutive stock options outstanding were exercised. There were 154,884, and 65,324 convertible securities that were not included in the diluted earnings per share calculation for three-month period-ended March 31, 2001 and 2000 respectively, as their effect would have been anti-dilutive. 4. SUBSEQUENT EVENTS In April, 2001, the Company made a strategic investment in an advertising solution provider, AdStar.Com (nasdaq: ADST). In consideration for a $250,000 payment to AdStar.Com ("AdStar"), the company received 250,000 units of AdStar; a unit consists of two shares of AdStar common stock and one warrant to purchase an additional share. AdStar is a leading provider of remote ad entry solutions for newspapers and advertisers. AdStar's products and services enable newspapers to increase advertising received directly from advertisers, thereby improving newspaper profitability. 6 DAG MEDIA, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management's discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and notes thereto contained elsewhere in this report. This discussion contains forward-looking statements based on current expectations that involve risks and uncertainties. Actual results and the timing of certain events may differ significantly from those projected in such forward-looking statements. We currently publish and distribute yellow page directories in print and on the worldwide web. Our directories target the mainstream yellow page market in New York City as well as niche markets in the New York metropolitan area. We sell yellow page advertisements as part of an overall media package that includes print advertising, on-line advertising and other added value services such as our referral service and consumer discount club. We operate three internet portals, a mainstream general portal NewYellow.com, targeting the general population, JewishYellow.com, targeting worldwide Jewish communities and JewishMasterguide.com, targeting the ultra-orthodox Hasidic communities. Our principal source of revenue derives from the sale of ads in our print and on-line directories. Advertising fees, whether collected in cash or evidenced by a receivable, generated in advance of publication dates, are recorded as "Advanced billings for unpublished directories" on our balance sheet. Many of our advertisers pay the ad fee over a period of time. In that case, the entire amount of the deferred payment is booked as a receivable. Revenues are recognized at the time the directory in which the ad appears is published. Thus, costs directly related to the publication of a directory in advance of publication are recorded as "Directories in progress" on our balance sheet and are recognized when the directory to which they relate is published. All other costs are expensed as incurred. The principal operating costs incurred in connection with publishing the directories are commissions payable to sales representatives and costs for paper and printing. Generally, advertising commissions are paid as advertising revenue is collected. However, in connection with New Yellow we pay commissions to our sales representatives even before we collect the related advertising revenue. We do not have any long-term agreements with paper suppliers or printers. Since ads are sold before we purchase paper and print a particular directory, a substantial increase in the cost of paper or printing costs would reduce our profitability. Administrative and general expenses include expenditures for marketing, insurance, rent, sales and local franchise taxes, licensing fees, office overhead and wages and fees paid to employees and contract workers (other than sales representatives). 7 Results of Operations Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000 Net advertising revenues Net advertising revenues for three months ended March 31, 2001 were $1,503,000 compared to $2,633,000 for the three months ended March 31, 2000, a decrease of 42.9%. The decrease was primarily attributable to a change in the Company's publication schedule. Effective 2001, the Company chose to publish only one of its major publications in the first quarter of the fiscal year as opposed to publishing two major directories in the first quarter of fiscal year 2000. The change in publication dates was a part of the Company's operational plans implemented in order to employ the company's abilities and resources to publish and distribute its directories at the most optimal level possible. Publication costs Publication costs for the three months ended March 31, 2001 were $189,000 compared to $501,000, for the corresponding period in 2000, a decrease of 62.3%. As a percentage of net advertising revenues, publication costs were 12.6% in the period ending March 31, 2001 compared to 19.0 % in the corresponding 2000 period. This decrease primarily reflects the results of publishing one directory in the first quarter of fiscal 2001 compared with the two publications published in the first quarter of fiscal 2000. Selling expenses Selling expenses for the three months ended March 31, 2001 were $586,000 compared to $860,000 for the corresponding period in 2000, an decrease of 31.9%. As a percentage of net advertising revenues, selling expenses were 39.0% in the period ending March 31, 2001 compared to 32.7% in the corresponding 2000 period. This increase is reflective of an increase in our commission structure as well as the change in composition of the sales derivation, i.e. whether the sale was derived "in-house" from our own offices or from one of our Agency offices. General and administrative costs General and administrative expenses for the quarter ended March 31, 2001 were $675,000 compared to $679,000 for the same period in 2000. This consistency in costs is primarily attributable to careful monitoring of our overhead and the fact that in the first quarter of fiscal year 2001, there were no unusual occurrences or projects. Interest income For the quarter ended March 31, 2001, we had interest income of $82,000 compared to interest income of $80,000 for the quarter ended March 31, 2000. This interest is 8 reflective of earnings on the investment of the net proceeds from our initial public offering in May 2000. Provision for income taxes Provision for income taxes for the three months ended March 31, 2001 and March 31, 2000 were $69,000 and $310,000, respectively. This represents a 46 % income tax rate compared with the rate used in the prior year 2000. Net income (loss) Net income for the quarter ended March 31, 2001 was $66,000 compared to a net loss of $147,000 for the corresponding period in 2000. This increase was primarily the result of the application of SAB101 in the first quarter of fiscal year 2000. As a percentage of net advertising revenues, net income for the three-month period ended March 31, 2001, increased to 4.4 % from (5.6 %) in the corresponding period in 2000. Liquidity and Capital Resources At March 31, 2001 we had cash and cash equivalents of $7,154,000 and working capital of $6,737,000 as compared to cash and cash equivalents of $7,318,000 and working capital of $6,853,000 at March 31,2000. The decreases primarily reflect the use of our proceeds for expanding and operating the Company. Net cash provided by operating activities was $6,000 for the three-months ended March 31, 2001. For the comparable 2000 period, net cash operating activities was $197,000. The decrease in net cash provided by operating activities reflects the decreased sales resulting from the publication of one directory as compared with the publication of two directories in the three-month period ending March 31, 2001 and 2000, respectively. Net cash used in investing activities was $1,000 for the three-months ended March 31, 2001. Net cash used by investing activities in the quarter ended March 31, 2001 was used for the purchase of equipment. For the comparable 2000 period, $80,000 was used in investing activities. Net cash used by investing activities in the quarter ended March 31, 2000 was primarily used for the purchase of improved accounting and data information systems. There was no cash provided by financing activities for the three-months ended March 31, 2001 nor for the comparable 2000 period. We anticipate that our current cash balances together with our cash flows from operations will be sufficient to fund the production of our directories and the maintenance of our web site as well as increases in our marketing and promotional activities for the next 12 months. However, we expect our working capital requirements to increase significantly over the next 12 months as we continue to market our directories and expand our on-line services, in particular for NewYellow. 9 Forward Looking Statements This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are typically identified by the words "believe", "expect", "intend", "estimate" and similar expressions. Those statements appear in a number of places in this report and include statements regarding our intent, belief or current expectations or those of our directors or officers with respect to, among other things, trends affecting our financial conditions and results of operations and our business and growth strategies. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected, expressed or implied in the forward-looking statements as a result of various factors (such factors are referred to herein as "Cautionary Statements"), including but not limited to the following: (i) our limited operating history, (ii) potential fluctuations in our quarterly operating results, (iii) challenges facing us relating to our rapid growth and (iv) our dependence on a limited number of suppliers. The accompanying information contained in this report, including the information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations", identifies important factors that could cause such differences. These forward-looking statements speak only as of the date of this report, and we caution potential investors not to place undue reliance on such statements. We undertake no obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements. 10 DAG MEDIA, INC. PART II-OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds In May 1999, we completed an initial public offering of 1,325,000 common shares (the "IPO"), of which we sold 1,250,000 common shares and Assaf Ran, our president, chief executive officer and principal shareholder, sold 75,000 common shares. The common shares were sold for $6.50 each. Net proceeds, after expenses of the IPO, were $6,423,763. We have not previously filed an initial report of sales of securities and use of proceeds. We will report the following information in our quarterly and annual filings until the proceeds have been fully used. (a) Effective date of Registration Statement: May 13, 1999 (File No. 333-74203). (b) The offering was declared effective May 13, 1999 and was consummated on May 18, 1999. (c) The managing underwriters were Paulson Investment Company, Inc. and Redwine & Company, Inc. (d) Securities Sold: (i) Common shares - common shares par value $.001 per share (ii) Representatives' warrants - warrants convertible into 132,500 common shares at a price of $7.80 per share. The representatives' warrants are exercisable over the four year period beginning on the first anniversary of the offering. These warrants were issued to the underwriters in connection with the offering. (e) Amount registered and sold: (i) Common shares - 1,523,750 common shares were registered; 1,250,000 common shares were sold for the account of the issuer and 75,000 common shares were sold for the account of Assaf Ran, our president, chief executive officer and principal shareholder. (ii) Representatives' warrants - 132,500 warrants registered and issued to the underwriters in connection with the IPO. (iii) Common shares issuable upon exercise of representatives' warrants - 132,500 common shares registered. 11 (f) Gross proceeds to issuer: $8,125,000. (g) Expenses incurred in connection with issuance of securities: Underwriting discounts and commissions $ 731,250 Expenses paid to the underwriters $ 252,455 Other expenses $ 717,532 ----------- $ 1,701,237 (h) Net proceeds: $6,423,763. (i) Amount of net offering proceeds used for the purposes listed below: Temporary investments with maturities of three months or less: $ 5,688,536 =========== New Yellow printing and distribution costs $ 735,227 =========== Item 6. Exhibits and Reports on Form 8-K (a) Reports on Form 8-K - none 12 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. DAG Media, Inc. (Registrant) Date: May 8, 2001 By /s/ Assaf Ran ------------------------------- Assaf Ran, Chief Executive Officer and President Date: May 8, 2001 By: /s/ Orna Kirsh ---------------------------------------- Orna Kirsh, Chief Financial and Accounting Officer 13 -----END PRIVACY-ENHANCED MESSAGE-----