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| DSBO.OB > SEC Filings for DSBO.OB > Form 10-K on 20-Mar-2009 | All Recent SEC Filings |
20-Mar-2009
Annual Report
At December 31, 2008, the Company held cash, cash equivalents and short term investments totaling $1,951,676, compared to $6,645,193 at December 31, 2007. During our fiscal years ended December 31, 2008 and December 31, 2007 we generated limited amounts of revenues and cash collections through the sale of various advertising, sponsorship and directory services products from our main website Disaboom.com, and related microsites DisaboomJobs.com and Lovebyrd.com. However, we currently fund our operations primarily through funds raised through private placements completed in March, September, October and December 2007 and March and April 2008. Additionally, in March and April 2008 we received gross proceeds of $2,623,501 upon the exercise of certain warrants the Company issued in September and October 2007. On March 9, 2007 we completed a private placement of our common stock, issuing 6,296,000 shares for aggregate gross proceeds of $3,148,000. The shares were issued at $0.50 per share.
On September 26, 2007 we had a closing of $5,346,000 under a private placement of unregistered securities. A total of 7,128,000 common shares were issued on September 26, 2007 and 5,346,000 warrants to purchase the same number of common shares. On October 9, 2007 we had a final closing of $349,500. A total of 449,333 common shares and 337,000 warrants to purchase the same number of common shares were issued in this final closing. For both the September and October 2007 closings for each $0.75 invested, each purchaser received one common share plus warrants to acquire three-fourths of a share. The warrants are exercisable at $1.00 per share.
On December 10, 2007, we closed a $5,000,000 private placement under the same terms as those of the private placement closed in September and October 2007. On December 10, 2007 we issued a total of 6,666,665 common shares and 5,000,000 warrants to purchase the same number of common shares.
On March 10, 2008 and April 2, 2008 we issued an aggregate of 2,623,501 shares of common stock at $1.00 upon the exercise of warrants that the Company issued in September and October 2007. We received gross proceeds of $2,623,501 upon the exercise of the warrants.
On March 19, 2009, the Company closed on $296,250 in gross proceeds under a private placement. In the closing, the Company issued a total of 1,975,000 shares of common stock at a price of $.15 per share. The shares were issued in reliance on Section 4(2) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder, and the offering was made to accredited investors only.
With our projected sales, operations and expenditures we expect that our current financial resources are sufficient to fund our operations until the fourth calendar quarter of 2009 at which time we anticipate that we will be cash flow positive. However, in the event we fail to achieve our projections during fiscal 2009, we will likely need to raise additional funds during the year through equity or debt financing to continue to fund our planned business operations. Current conditions in the global and financial markets have currently limited the availability of these resources. We cannot assure you that, if necessary, capital will be available on reasonable terms, if at all. Therefore, the inability to raise additional funds, either through equity or debt financing, could materially impair our ability to generate revenues, or continue our current business operations.
Results of Operations:
During 2007 the activities of the Company were primarily organizational in
nature. During the year ended December 31, 2008 our focus changed from
organizational matters and the initial launch of our main website, to
operational matters related to (a) expanding the resources, services, product
offerings and capabilities of our main website and social networking platform,
(b) launching additional resources and services through related microsites and
the Company's marketplace, (c) integrating our main website and related
microsites into the Disaboom Network, (d) driving Internet traffic into our
community, and (e) beginning to generate traditional cost per mille ("CPM")
related advertising and sponsorship revenues, as well as directory services
revenues. Accordingly, during the first six months of 2008, the Company remained
in the "development stage" for financial reporting purposes. However, because of
the Company's financial results and growth during the year, we exited the
"development stage" for financial reporting purposes during the quarter ended
September 30, 2008.
The Company has, and will continue to respond aggressively to changing general economic and internet advertising industry conditions. While the growth of traditional static banner and display advertising has generally slowed in several online advertising market sectors due to pricing declines, advertising agency commitments, budget cutbacks, recessionary economic conditions and other factors, the growth and outlook of niche market, search related, targeted landing page and microsite related, social network related, targeted rich media, and other forms of targeted and niche online advertising remains relatively strong. Beginning in the quarter ended September 30, 2008, and through the filing date of this Form 10-K, the Company aggressively reduced its investment in online media/advertising related expenditures. We also continue to constantly monitor and evaluate our business needs and resources and may scale back in certain areas that are not deemed essential to the Company's near term success.
During the year ended December 31, 2008, the Company experienced a net loss
of $ 10,813,591 or ($.25) per share, compared to a net loss of $7,949,350, or
(.28) per share during the year ended December 31, 2007. During the year ended
December 31, 2008, our operating expenses totaled $11,229,958. Approximately 88%
of the expenditures we incurred related to payroll and stock compensation costs
($ 3,698,857), website development costs ($162,855), marketing and advertising
costs ($5,232,859) and legal and consulting fees ($748,810).
As of December 31, 2007, the Company had 25 full time and 2 part time employees, and outsourced all of its design, development and marketing efforts related to the initial limited and general availability launches of its main website. As of December 31, 2008, the Company had 27 full time and 3 part time employees dedicated to all aspects of the Company's website and content development, sales, and administrative operations, and limited third Party vendor relationships. The Company's online media/advertising related expenditures were reduced by approximately 80% from the quarter ended September 30, 2008 versus the prior quarter, and approximately 90% from the three month period ended December 31, 2008 versus the quarter ended September 30, 2008. Total cash operating expenditures were also reduced approximately 20% during the quarter ended September 30, 2008 versus the previous quarter, and approximately 40% from the three month period ended December 31, 2008 versus the quarter ended September 30, 2008. Total cash operating expenditure reductions included reductions of approximately 60% of the Company's workforce from a high of approximately 45 fulltime personnel during the quarter ended September 30, 2008, to a total of 27 fulltime personnel as of December 31, 2008.
Online media/advertising related expenditures were reduced by approximately 80% from the quarter ended September 30, 2008 versus the prior quarter, and approximately 90% from the three month period ended December 31, 2008 versus the quarter ended September 30, 2008. The purpose of this reduction was to aggressively respond to changing market conditions and to transition the Company to a base of primarily organic traffic. After an initial decline in monthly unique visitors early in the quarter ended September 30, 2008, monthly unique visitors increased 50% during the period from August to September 2008, and increased an additional 57% from September to October 2008, to reach over 656,000 monthly unique visitors. From the quarter ended September 30, 2008 through the three month period ended December 31, 2008, the Company's unique visitors increased approximately 240% to reach over 3.2 million unique visitors. Absolute and relative increases in monthly unique visitors and organic traffic not only reduce the need for advertising and branding campaigns to promote the Disaboom Network via media related expenditures, but also increase the Company's available advertising impression inventory for CPM and directory services sales.
Throughout the year ending December 31, 2008, the Company's CPM advertising impression inventory remained sold out. During the period from September 2008 through December 31, 2008, as the Company's internet traffic increased substantially, the Company's deliveries of CPM advertising commitments and related sponsorship obligations, billings and earned revenue correspondingly grew significantly, enabling the Company to begin to hire, train and re-invest in dedicated CPM and sponsorship sales executives in late December 2008 and into 2009. While early in 2009 the Company has experienced delays in the renewals and implementation of several 2008 advertising campaigns and a generally "softer" market among smaller advertisers, the Company's recently hired CPM and sponsorship sales executives are aggressively proposing on a variety of advertising and sponsorship opportunities for the second calendar quarter of 2009. The Company anticipates continued substantial growth in 2009 as a result of its niche advertising market opportunity, growing base of monthly unique visitors and portfolio of products, continued operating efficiencies, and the further penetration of its community with primarily organic traffic.
As described above, during our fiscal years ended December 31, 2007 and December 31, 2008 we generated limited amounts of revenues and cash collections through the sale of various advertising, sponsorship and directory services products from the Disaboom Network. We currently fund our operations primarily through funds raised in private placements of our common stock completed in March, September, October, and December 2007, and March and April 2008. Additionally, in March and April 2008 we received funds upon the exercise of certain warrants the Company issued in its September and October 2007 private placements. With our projected sales, operations and expenditures we expect that our current financial resources are sufficient to fund our operations until the fourth calendar quarter of 2009 at which time we anticipate that we shall be cash flow positive. However, in the event we fail to achieve our projections during calendar 2009, we expect that during fiscal 2009 we will need to raise additional funds through equity or debt financing to continue to fund our planned business operations. Current conditions in the global and financial markets have currently limited the availability of these resources. We cannot assure you that capital will be available on reasonable terms, if at all. Therefore, the inability to raise additional funds, either through equity or debt financing, could materially impair our ability to generate revenues, or continue our current business operations.
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.
The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (i) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and (ii) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements.
Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increase, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operation and/or financial condition. Our significant accounting policies are disclosed in Note 2 to the Financial Statements included in this prospectus.
While all of the significant accounting policies are important to the Company's financial statements, the following accounting policies and the estimates derived therefrom, have been identified as being critical:
Revenue recognition:
During the year ended December 31, 2008, the Company began receiving of revenue primarily through the sale of various CPM display advertising, sponsorship, and directory services products on the Disaboom Network. CPM display advertising and sponsorship revenue comprised 75% of the Company's total revenue during 2008. CPM display advertising and sponsorship revenue, and directory services revenues, are recognized ratably over the period in which it is delivered and earned through (1) the development and release of sponsor landing pages, microsites and channels on the Company's websites, (2) the delivery of advertising impressions by recognized and independent third party vendors, and (3) the publication and availability of national and local business listings and other directory service products in the Company's marketplace. The Company has agreements ranging in term from one month test agreements to twelve month advertising, sponsorship and directory services agreements.
Website development costs:
The Company has adopted the provisions of Financial Accounting Standards Board ("FASB") Emerging Issues Task Force ("EITF") 00-2, Accounting for Web Site Development Costs, which specifies the appropriate accounting for costs incurred in connection with the development and maintenance of web sites. Under EITF 00-2, costs related to certain web site development activities are expensed as incurred (such as planning and operating stage activities). Costs relating to certain website application and infrastructure development are generally capitalized, and are amortized over their estimated useful life. Based upon the Company's product development process and the constant modification of the Company's website, costs incurred by the Company during the application development stage have been insignificant. Through December 31, 2008, the Company has expensed all significant website development costs, as these costs primarily related to planning and operational activities. For the years ended December 31, 2008 and 2007, website development costs of approximately $162,855 and $475,462, respectively, were expensed.
Short-term investments:
Short-term investments consist of a certificate of deposit with an original maturity of six months and mutual funds. The Company accounts for short-term marketable securities in accordance with SFAS, No. 115, Accounting for Certain Investments in Debt and Equity Securities.
The Company currently maintains a bank account through Cambridge Investment Research Advisors, Inc. Through this account the Company invests a portion of its cash in short term commercial notes that are highly liquid and historically low risk. Subsequent to September 30, 2008, the current credit crisis in the United States has continued and capital market conditions have been highly volatile. The market value of the Company's short term investments have declined and the Company has recorded an unrealized loss of approximately $426,376 for the year ended December 31, 2008, which represents approximately 27% of the Company's short-term investments.
Stock-based compensation:
The Company accounts for stock options and similar equity instruments in accordance with SFAS No. 123(R), "Share-Based Payment". SFAS 123(R) requires the recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements and is measured based on the grant date fair value of the award. SFAS 123(R) also requires the stock option compensation expense to be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period).
Use of estimates in financial statement preparation:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 periods. Actual results could differ from these estimates.
Accounts receivable:
Accounts receivable are recorded at their face amount less an allowance for doubtful accounts. The allowance for doubtful accounts reflects management's best estimate of probable losses in the accounts receivable balance. Management determines the allowance based on known doubtful accounts, historical experience, and other currently available evidence.
Recent pronouncements:
In April 2008, the FASB issued FSP SFAS 142-3, Determination of the Useful Life of Intangible Assets. FSP SFAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. Previously, under the provisions of SFAS No. 142, an entity was precluded from using its own assumptions about renewal or extension of an arrangement where there was likely to be substantial cost or material modifications. FSP SFAS 142-3 removes the requirement of SFAS No. 142 for an entity to consider whether an intangible asset can be renewed without substantial cost or material modification to the existing terms and conditions and requires an entity to consider its own experience in renewing similar arrangements. FSP SFAS 142-3 also increases the disclosure requirements for a recognized intangible asset to enable a user of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity's intent or ability to renew or extend the arrangement. FSP SFAS 142-3 is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset is applied prospectively to intangible assets acquired after the effective date. Accordingly, the Company does not anticipate that the initial application of FSP SFAS No. 142-3 will have an impact on the Company. The disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations, ("SFAS No. 141R"). SFAS No. 141R will change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141R will also change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing GAAP until December 31, 2008. The Company expects SFAS No. 141R will have an impact on accounting for business combinations once adopted and the effect is dependent upon acquisitions at that time.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB 51 ("SFAS 160") which is effective for the Company on January 1, 2009. This statement amends ARB 51 to establish accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. This statement requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure on the face of the consolidated statement of net income, the amounts of consolidated net income attributable to the parent and to the non-controlling interest. In addition, this statement establishes a single method of accounting for changes in a parent's ownership interest in a subsidiary that do not result in deconsolidation and requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. The Company does not expect the adoption of this statement to have a material impact on its financial statements
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