XFRA:ICM1 Quarterly Report 10-Q Filing - 3/31/2012

Effective Date 3/31/2012



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
   
x
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 
For the quarterly period ended March 31, 2012.
 
or
 
¨
Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 
For the transition period from __________ to __________
 
Commission file number: 000-26393
 
WebMediaBrands Inc.
(Exact name of Registrant as specified in its charter)
  
Delaware
06-1542480
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
   
50 Washington Street, Suite 912
Norwalk, Connecticut
06854
(Address of principal executive offices)
(Zip Code)
 
(203) 662-2800
(Registrant’s telephone number, including area code)
  
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x     No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x     No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act: (Check one):
  
Large accelerated filer   ¨
Accelerated filer   ¨
Non-accelerated filer   ¨
Smaller reporting company   x
(Do not check if a smaller reporting company)
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):  Yes ¨     No x
 
The number of outstanding shares the Registrant’s common stock, par value $.01 per share, as of May 2, 2012 was 41,812,099.


 
 
 
 
WebMediaBrands Inc.
Index
 
   
 Page
PART I. Financial Information
 
     
Item 1.
Financial Statements
3
     
 
Consolidated Condensed Balance Sheets – March  31, 2012 (unaudited) and December 31, 2011
3
     
 
Unaudited Consolidated Condensed Statements of Operations – For the Three Months Ended March 31, 2012 and 2011
4
     
 
Unaudited Consolidated Condensed Statements of Cash Flows – For the Three Months Ended March 31, 2012 and 2011
5
     
 
Notes to Unaudited Consolidated Condensed Financial Statements
6
     
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
13
     
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
18
     
Item 4.
Controls and Procedures
18
     
PART II. Other Information
 
     
Item 1.
Legal Proceedings
19
     
Item 1A.
Risk Factors
19
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
19
     
Item 3.
Defaults Upon Senior Securities
19
     
Item 4.
Mine Safety Disclosures
19
     
Item 5.
Other Information
19
     
Item 6.
Exhibits
19
     
Signatures
 
20
    
 
2

 
 
WebMediaBrands Inc.
Consolidated Condensed Balance Sheets
March 31, 2012 and December 31, 2011
(in thousands, except share and per share amounts)
 
   
March 31,
2012
   
December 31,
2011
 
 
 
(unaudited)
       
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
3,291
   
$
3,438
 
Accounts receivable, net of allowances of $21 and $11, respectively
   
618
     
489
 
Prepaid expenses and other current assets
   
566
     
575
 
Total current assets
   
4,475
     
4,502
 
                 
Property and equipment, net of accumulated depreciation of $1,426 and $1,350, respectively
   
438
     
477
 
Intangible assets, net
   
2,525
     
2,626
 
Goodwill
   
15,116
     
15,116
 
Investments and other assets
   
1,139
     
1,146
 
Total assets
 
$
23,693
   
$
23,867
 
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Accounts payable
 
$
370
   
$
367
 
Accrued payroll and related expenses
   
344
     
391
 
Accrued expenses and other current liabilities
   
656
     
662
 
Deferred revenues
   
1,595
     
1,288
 
Total current liabilities
   
2,965
     
2,708
 
                 
Loan from related party
   
7,647
     
7,647
 
Deferred revenues
   
22
     
22
 
Deferred income taxes
   
454
     
444
 
Other long-term liabilities
   
61
     
60
 
Total liabilities
   
11,149
     
10,881
 
                 
Commitments and contingencies (see note 11)
               
                 
Stockholders’ equity:
               
Preferred stock, $.01 par value, 4,000,000 shares authorized, no shares issued and outstanding
   
     
 
Common stock, $.01 par value, 75,000,000 shares authorized, 42,595,099 and 42,545,702 shares issued and 41,760,099 and 41,710,702 shares outstanding at March 31, 2012 and December 31, 2011, respectively
   
426
     
425
 
Additional paid-in capital
   
288,846
     
288,672
 
Accumulated deficit
   
(276,232)
 
   
(275,615)
 
Treasury stock, 835,000 shares, at cost
   
(496)
 
   
(496)
 
Total stockholders’ equity
   
12,544
     
12,986
 
Total liabilities and stockholders’ equity
 
$
23,693
   
$
23,867
 
 
See notes to unaudited consolidated condensed financial statements.
   
 
3

 
 
WebMediaBrands Inc.
Unaudited Consolidated Condensed Statements of Operations
For the Three Months Ended March 31, 2012 and 2011
(in thousands, except per share amounts)

   
Three Months Ended
March 31,
 
   
2012
   
2011
 
Revenues
 
$
3,685
   
$
2,246
 
                 
Cost of revenues
   
2,043
     
1,448
 
Advertising, promotion and selling
   
641
     
432
 
General and administrative
   
1,319
     
1,355
 
Depreciation
   
80
     
84
 
Amortization
   
136
     
118
 
Total operating expenses
   
4,219
     
3,437
 
                 
Operating loss
   
(534)
     
(1,191)
 
Other loss, net
   
     
(4)
 
Interest income
   
1
     
35
 
Interest expense
   
(73)
 
   
(179)
 
                 
Loss before income taxes
   
(606)
 
   
(1,339)
 
Provision for income taxes
   
11
     
10
 
                 
Net loss
 
$
(617)
 
 
$
(1,349)
 
                 
Loss per share:
               
Basic net loss
 
$
(0.01)
 
 
$
(0.04)
 
Diluted net loss
 
$
(0.01)
 
 
$
(0.04)
 
Weighted average shares used in computing loss per share:
               
Basic
   
41,693
     
37,977
 
Diluted
   
41,693
     
37,977
 
  
See notes to unaudited consolidated condensed financial statements.
  
 
4

 
 
WebMediaBrands Inc.
Unaudited Consolidated Condensed Statements of Cash Flows
For the Three Months Ended March 31, 2012 and 2011
(in thousands)
 
   
Three Months Ended
March 31,
 
   
2012
   
2011
 
Cash flows from operating activities:
           
Net loss
 
$
(617)
 
 
$
(1,349)
 
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation and amortization
   
216
     
202
 
Stock-based compensation
   
122
     
84
 
Provision for losses on accounts receivable
   
9
     
 
Other, net
   
8
     
(4)
 
Amortization of debt issuance costs
   
9
     
8
 
Deferred income taxes
   
9
     
8
 
Changes in assets and liabilities (net of businesses acquired):
               
Accounts receivable, net
   
(139)
 
   
(145)
 
Prepaid expenses and other assets
   
7
     
132
 
Accounts payable, accrued expenses and other liabilities
   
(55)
 
   
(688)
 
Deferred revenues
   
307
     
569
 
Net cash used in operating activities
   
(124)
 
   
(1,183)
 
Cash flows from investing activities:
               
Purchases of property and equipment
   
(32)
 
   
(24)
 
Acquisitions of businesses, assets and other
   
(35)
 
   
(652)
 
Net cash used in investing activities
   
(67)
 
   
(676)
 
Cash flows from financing activities:
               
Repayment of borrowings from related party
   
     
(50)
 
Proceeds from exercise of stock options
   
44
     
39
 
Net cash provided by (used in) financing activities
   
44
     
(11)
 
Net decrease in cash and cash equivalents
   
(147)
 
   
(1,870)
 
Cash and cash equivalents, beginning of period
   
3,438
     
12,970
 
Cash and cash equivalents, end of period
 
$
3,291
   
$
11,100
 
  
See notes to unaudited consolidated condensed financial statements.
  
 
5

 
 
WebMediaBrands Inc.
Notes to Unaudited Consolidated Condensed Financial Statements
March 31, 2012
 
1. THE COMPANY
 
WebMediaBrands Inc. (“WebMediaBrands” or the “Company”) is an Internet media company that provides content, education and career services to social media, traditional media and creative professionals through a portfolio of vertical online properties, communities and trade shows.  The Company’s online business includes:

 
·
mediabistro.com, a blog network providing content, education, community and career resources about major media industry verticals including new media, social media, Facebook, TV news, advertising, public relations, publishing, design, mobile and the Semantic Web that includes the following:
 
10,000Words
AllTwitter
FishbowlLA
MediaJobsDaily
TVNewser
AgencySpy
AppNewser
FishbowlNY
PRNewser
TVSpy
AllFacebook
FishbowlDC
GalleyCat
SocialTimes
UnBeige

 
·
The mediabistro.com business also includes an industry-leading job board for media and creative professionals focusing on job categories such as social media, online/new media, publishing, public relations/marketing, advertising, sales, design, web development, television and more;
     
   
InsideNetwork.com, a network of online properties dedicated to providing original market research, data services, news, events and job listings on the Facebook platform, on social gaming and on mobile applications ecosystems that includes the following:
  
AppData
Inside Social Games
PageData
Inside Facebook
Inside Virtual Goods
The Facebook Marketing Bible
Inside Mobile Apps    
  
 
·
SemanticWeb.com, a blog providing content, education, community resources and career resources on the commercialization and application of Semantic Technologies, Linked Data and Big Data.
     
 
·
Community, membership and e-commerce offerings including a freelance listing service, a marketplace for designing and purchasing logos (stocklogos.com), and premium membership services.
  
The Company’s education business features online and in-person courses and online conferences for social media and traditional media professionals.  Online education conferences combine the concepts of a large-scale event and a small group educational workshop that offers attendees the opportunity to learn in a dynamic online setting with live weekly instruction via webcast, discussion forums, homework assignments, and small group interaction where students receive one-on-one guidance and instruction from an advisor.
 
The Company’s trade shows include, among others, the Semantic Tech and Business Conference, Inside Social Apps, Social Gaming Summit and AllFacebook Marketing Conference.

The Company’s online business also includes AllCreativeWorld.com, a network of online properties providing content, education, community, career and other resources for creative and design professionals.

2. BASIS OF PRESENTATION
 
The accompanying unaudited consolidated condensed financial statements have been prepared from the books and records of WebMediaBrands in accordance with accounting principles generally accepted in the United States of America and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The consolidated condensed statements of operations for the three months ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year or any future interim period.  These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in WebMediaBrands’s Annual Report on Form 10-K for the year ended December 31, 2011.  Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.  In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the interim periods presented have been reflected in such consolidated condensed financial statements.
 
The consolidated condensed financial statements include the accounts of WebMediaBrands and its wholly-owned subsidiaries: Mediabistro.com Inc., a Delaware corporation, and Inside Network, Inc., a California corporation.  All significant intercompany balances and transactions have been eliminated in consolidation.
    
 
6

 
  
3. RECENT ACCOUNTING PRONOUNCEMENTS

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS". The amendments in ASU No. 2011-04 generally represent clarification of Topic No. 820, but also include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed.  ASU No. 2011-04 results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards. The amendments are effective for interim and annual periods beginning after December 15, 2011 and are to be applied prospectively.  This pronouncement did not have a material effect on the Company’s consolidated condensed financial statements.

In September 2011, the FASB issued ASU No. 2011-08: “Intangibles — Goodwill and Other (Topic 350):  Testing Goodwill for Impairment.”   The objective of ASU 2011-08 is to simplify how entities test goodwill for impairment.  The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.  The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent.  ASU No. 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.  Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued.  The Company has elected early adoption of ASU No. 2011-08.  This pronouncement did not have a material effect on the Company’s consolidated condensed financial statements.

4. SEGMENT INFORMATION
 
Segment information is presented in accordance with Accounting Standards Codification (“ASC”) Topic 280, “Segment Reporting”. ASC Topic 280 is typically based on a management approach that designates the internal organization used for making operating decisions and assessing performance. Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision-makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business. The Company operates in one reportable segment. The Company is affected by seasonality as customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which together with fluctuations in online job postings, directly affect our business. The Company’s results will also be impacted by the number and type of education courses offered and by the number and size of trade shows held in each quarter. In addition, there may be fluctuations as trade shows held in one period in the current year may be held in a different period in future years.

5. ACCOUNTING FOR EMPLOYEE STOCK-BASED COMPENSATION
 
Total employee stock-based compensation is as follows (in thousands):
   
   
 
Three Months Ended
 March 31,
 
   
2012
   
2011
 
Stock options for employees
 
$
124
   
$
84
 
Restricted stock for employees
   
(2)
 
   
 
Total employee stock-based compensation
 
$
122
   
$
84
 
   
Total employee stock-based compensation increased additional paid-in capital by $122,000 and $84,000 for the three months ended March 31, 2012 and 2011, respectively.
  
 
7

 
   
The fair value of each stock option grant is estimated using the Black-Scholes option pricing model to estimate the fair value of stock-based awards with the following assumptions used for grants during the periods presented:
 
   
Three Months Ended
March 31,
 
   
2012
   
2011
 
Risk-free interest rate
   
1.10%
     
2.57%
 
Expected life (in years)
   
6.0
     
6.0
 
Dividend yield
   
0%
     
0%
 
Expected volatility
   
97 %
     
93%
 
 
The expected stock price volatility is based on the historical volatility of WebMediaBrands’s common stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term.  WebMediaBrands had previously issued stock options with a five-year life.  The Company calculated the expected life for these stock options using historical data.   However, during the third quarter of 2010, the Company began issuing stock options with a ten-year life and, as a result, calculated the expected life using the simplified method.
 
The weighted-average grant date fair value of stock options granted during the three months ended March 31, 2012 and 2011 was $0.64 and $1.07, respectively.
 
The following table summarizes stock option activity during the three months ended March 31, 2012:
 
   
Shares
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Term (years)
   
Aggregate
Intrinsic
Value
(in thousands)
 
Outstanding at December 31, 2011
 
6,994,169
 
$0.92
           
Granted
 
76,000
 
$0.99
           
Exercised
 
(168,292)
 
$0.26
           
Forfeited, expired or cancelled
 
(137,627)
 
$1.19
           
Outstanding at March 31, 2012
 
6,764,250
 
$0.93
   
5.82
     
2,657
 
Vested and expected to vest at March 31, 2012
 
6,523,216
 
$0.94
   
5.70
     
2,585
 
Exercisable at March 31, 2012
 
4,227,296
 
$1.04
   
4.32
     
1,935
 
 
The aggregate intrinsic value in the table above is before income taxes, based on WebMediaBrands’s closing stock price of $1.04 as of March 30, 2012.    During the three months ended March 31, 2012 and 2011, the total intrinsic value of stock options exercised was $105,000 and $125,000, respectively.
 
As of March 31, 2012, there was $1.1 million of total unrecognized compensation cost related to nonvested stock-based compensation arrangements granted under the Company’s stock incentive plan. The Company expects to amortize that cost over a weighted-average period of 17 months.

The following table summarizes restricted stock activity during the three months ended March 31, 2012:
  
   
Shares
   
Weighted Average
Grant Date Fair Value
 
Outstanding  nonvested shares at December 31, 2011
   
132,645
   
$
1.67
 
Granted
   
     
 
Vested
   
(6,471)
 
 
$
1.67
 
Forfeited
   
(118,895)
 
 
$
1.67
 
Outstanding nonvested shares at March 31, 2012
   
7,279
   
$
1.67
 
      
 
8

 
   
6. COMPUTATION OF LOSS PER SHARE
 
The Company computes basic loss per share using the weighted average number of common shares outstanding during the period. The Company computes diluted loss per share using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options. Common equivalent shares are excluded from the calculation if their effect is anti-dilutive.
 
Computations of basic and diluted loss per share for the periods presented are as follows (in thousands, except per share amounts):

   
Three Months Ended
March 31,
 
   
2012
   
2011
 
Net loss
 
$
(617)
   
$
(1,349)
 
Basic weighted average number of common shares outstanding
   
41,693
     
37,977
 
Effect of dilutive stock options
   
     
 
Total basic weighted average number of common shares and dilutive stock options
   
41,693
     
37,977
 
Loss per share:
               
Basic net loss
 
$
(0.01)
   
$
(0.04)
 
Diluted net loss
 
$
(0.01)
   
$
(0.04)
 
 
The following table summarizes the number of outstanding stock options excluded from the calculation of diluted loss per share for the periods presented because the result would have been anti-dilutive (in thousands, except weighted average exercise price):
  
   
Three Months Ended
March 31,
 
   
2012
   
2011
 
Number of anti-dilutive stock options
   
6,764
     
5,012
 
Weighted average exercise price
 
$
0.93
   
$
1.02
 
  
 7. INTANGIBLE ASSETS AND GOODWILL
 
Amortized Intangible Assets
 
The following tables set forth the intangible assets that are subject to amortization, including the related accumulated amortization (in thousands):

   
March 31, 2012
 
   
Cost
   
Accumulated
Amortization
   
Net
Carrying
Value
 
Customer relationships
 
$
804
   
$
(285)
   
$
519
 
Copyrights and trademarks
   
536
     
(108)
     
428
 
Website development costs
   
599
     
(217)
     
382
 
Content development costs
   
165
     
(152)
     
13
 
Non-compete agreements
   
97
     
(83)
     
14
 
Total
 
$
2,201
   
$
(845)
   
$
1,356
 
   
 
9

 
  
   
December 31, 2011
 
   
Cost
   
Accumulated
Amortization
   
Net
Carrying
Value
 
Customer relationships
 
$
804
   
$
(239)
   
$
565
 
Copyrights and trademarks
   
534
     
(79)
     
455
 
Website development costs
   
567
     
(174)
     
393
 
Content development costs
   
165
     
(142)
     
23
 
Non-compete agreements
   
109
     
(88)
     
21
 
Total
 
$
2,179
   
$
(722)
   
$
1,457
 

The Company amortizes intangible assets that are subject to amortization on a straight-line basis over their expected useful lives. The Company amortizes website development costs, copyrights and trademarks and customer relationships over three to seven years and content development costs over two years.  The Company amortizes non-compete agreements over the period of the agreements, typically from one to three years.  
 
            Amortization expense related to intangible assets subject to amortization was $136,000 and $118,000 for the three months ended March 31, 2012 and 2011, respectively. Estimated annual amortization expense for the next five years, including the remainder of 2012, is expected to be as follows (in thousands):
 
Years Ending December 31:
 
2012
 
$
385
 
2013
   
324
 
2014
   
235
 
2015
   
205
 
2016
   
121
 
Thereafter
   
86
 
   
$
1,356
 
 
 Unamortized Intangible Assets

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

   
March 31,
2012
   
December 31,
2011
 
                 
Domain names
 
$
1,169
   
$
1,169
 

Goodwill
 
The changes in the carrying amount of goodwill for the three months ended March 31, 2012 are as follows (in thousands):

Balance as of December 31, 2011
  
$
15,116
  
Goodwill acquired during the year
   
 
Purchase accounting adjustments
   
 
Balance as of March 31, 2012
 
$
15,116
 
    
 
10

 
  
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

   
March 31,
2012
   
December 31,
2011
 
Customer overpayments
 
$
211
   
$
211
 
Accrued professional fees
   
168
     
151
 
Accrued property and capital taxes
   
38
     
48
 
Other
   
239
     
252
 
Total
 
$
656
   
$
662
 
 
9. DEBT
 
 On May 29, 2009, WebMediaBrands entered into a loan agreement in the amount of $7.2 million with the Company’s Chief Executive Officer, Alan M. Meckler (the “2009 Meckler Loan”).
 
In conjunction with the 2009 Meckler Loan, the Company (1) entered into a promissory note jointly and severally payable by the Company and its subsidiary, Mediabistro, to Mr. Meckler (the “2009 Note”), (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s assets, (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the “IP Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s intellectual property, (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the “Pledge Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in and an assignment of all of the shares of stock or other equity interest of Mediabistro owned by the Company, and (5) agreed to enter into a Blocked Account Control Agreement by and among the Company, Mr. Meckler and a depositary bank, to further secure the Note (the “Control Agreement,” and together with the 2009 Note, the Security Agreement, the IP Security Agreement and the Pledge Agreement, the “Company Loan Documents”).
 
Simultaneously, Mediabistro (1) entered into a Security Agreement by and between Mediabistro and Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s assets (the “Mediabistro Security Agreement”), (2) entered into an Intellectual Property Security Agreement by and between Mediabistro and Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s intellectual property (the “Mediabistro IP Security Agreement”), and (3) agreed to enter into a Blocked Account Control Agreement by and among Mediabistro, Mr. Meckler and a depositary bank, to further secure the 2009 Note (the “Mediabistro Control Agreement” and, together with the Mediabistro Security Agreement and the Mediabistro IP Security Agreement, the “Mediabistro Documents”).
 
To fund the 2009 Meckler Loan, Mr. Meckler used a portion of the proceeds of a residential mortgage loan that Bank of America, N.A. (“BOA”) granted to Mr. Meckler and Mrs. Ellen L. Meckler (the “BOA Loan”). Pursuant to a Collateral Assignment of the 2009 Note dated May 29, 2009, by Mr. Meckler to BOA, Mr. Meckler collaterally assigned the Note to BOA as additional collateral for the BOA Loan. Payment terms of the 2009 Meckler Loan reflect pass through of the BOA Loan payment terms (excluding those funds borrowed pursuant to the BOA Loan for Mr. Meckler’s personal use). As a result, the interest rate, amortization schedule and maturity date of each loan are identical.
  
  The original principal amount of the 2009 Meckler Loan equaled the amount that was required to pay off and terminate an interest rate swap agreement between the Company and KeyBank and related transactional expenses. On September 1, 2010, WebMediaBrands entered into a Note Modification Agreement with Mr. Meckler.  The Note Modification Agreement reduced the interest rate of the 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.  Although there are no future minimum principal payments due under the 2009 Meckler Loan for the years ended December 31, 2011 through December 31, 2013, the Company had repaid approximately $1.3 million of the 2009 Meckler Loan as of March 31, 2012.  The 2009 Note is due and payable in full on May 29, 2016, and may be prepaid at any time without penalty or premium. WebMediaBrands made no principal payments on the 2009 Meckler Loan during the three months ended March 31, 2012, and one principal payment in the amount of $50,000 during the three months ended March 31, 2011.

On November 14, 2011, the Company and Mediabistro entered into a 2nd Note Modification Agreement with Mr. Meckler.  The 2nd Note Modification Agreement amends the 2009 Note, which is described above.  Under the 2nd Note Modification Agreement, the parties agreed to terminate the Company’s obligation to make a monthly accommodation fee of $40,000 to Mr. Meckler.  As a result, the 2nd Note Modification Agreement reduces the effective interest payable on the 2009 Meckler Loan by $480,000 per year.  The Company granted Mr. Meckler a fully vested stock option to purchase 1,000,000 shares of the Company’s common stock pursuant to the terms of the 2008 WebMediaBrands Stock Option Plan.  All other terms of the 2009 Meckler Loan remain unchanged.
  
 
11

 
  
Also on November 14, 2011, WebMediaBrands  and its wholly owned subsidiaries, Mediabistro and Inside Network: (1) entered into a promissory note jointly and severally payable by the Company, Mediabistro and Inside Network to Mr. Meckler (the “2011 Note”); (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “WEBM 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 WEBM 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 Mediabistro and Inside Network owned by the Company.

In the 2011 Note, Mr. Meckler loaned the Company $1,750,000 (the “2011 Meckler Loan”).  The interest rate of the 2011 Note is 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 the Inside Network Security Agreement contain customary terms for a loan transaction of this type.  If 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 Mediabistro, Inside Network, or the Company.

Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $64,000 and $170,000 during the three months ended March 31, 2012 and 2011, respectively. There are no future minimum principal payments due under the 2009 Meckler Loan and the 2011 Meckler Loan for the years ended December 31, 2012 and 2013.  There are future minimum payments due to Mr. Meckler for the 2009 Meckler Loan and the 2011 Meckler Loan in the amount of $189,000 for the year ended December 31, 2014; $419,000 for the year ended December 31, 2015; and $7.0 million for the year ended December 31, 2016.     
  
10. INCOME TAXES
 
The Company recorded a provision for income taxes of $11,000 and $10,000 during the three months ended March 31, 2012 and 2011, respectively.
 
Based on current projections, management believes that it is more likely than not that WebMediaBrands will have insufficient taxable income to allow recognition of its deferred tax assets. Accordingly, a valuation allowance has been established against deferred tax assets to the extent that deductible temporary differences cannot be offset by taxable temporary differences. To the extent that the net book value of indefinite lived assets exceeds the net tax value of indefinite lived assets, an additional tax provision will be incurred as the assets are amortized.

The total amount of unrecognized tax benefits was $85,000 as of March 31, 2012 and December 31, 2011, all of which would affect the effective tax rate, if recognized, as of March 31, 2012.

11. COMMITMENTS AND CONTINGENCIES
 
WebMediaBrands is subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions should not materially affect the financial statements of WebMediaBrands.
  
 
12

 
 
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 WebMediaBrands competes; the unpredictability of WebMediaBrands’s future revenues, expenses, cash flows and stock price; WebMediaBrands’s ability to integrate acquired businesses, products and personnel into its existing businesses; WebMediaBrands’s dependence on a limited number of advertisers; and WebMediaBrands’s ability to protect its intellectual property. For a more detailed discussion of these risks and uncertainties, refer to WebMediaBrands’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
 
WebMediaBrands is an Internet media company that provides content, education and career services to media and creative professionals through a portfolio of vertical online properties, communities and trade shows. Our online business includes:
 
 
·
mediabistro.com, a blog network providing content, education, community and career resources about major media industry verticals including new media, social media, Facebook, TV news, advertising, public relations, publishing, design, mobile and the Semantic Web that includes the following:
 
10,000Words
AllTwitter
FishbowlLA
MediaJobsDaily
TVNewser
AgencySpy
AppNewser
FishbowlNY
PRNewser
TVSpy
AllFacebook
FishbowlDC
GalleyCat
SocialTimes
UnBeige
   
Our mediabistro.com business also includes an industry-leading job board for media and business professionals focusing on job categories such as social media, online/new media, publishing, public relations/marketing, advertising, sales, design, web development, television  and more;

 
·
 
InsideNetwork.com, a network of online properties dedicated to providing original market research, data services, news, events and job listings on the Facebook platform, social gaming and mobile applications ecosystems that includes the following:
 
AppData
Inside Social Games
PageData
Inside Facebook
Inside Virtual Goods
The Facebook Marketing Bible
Inside Mobile Apps    
 
  
·
SemanticWeb.com, a blog providing content, education, community resources and career resources on the commercialization and application of Semantic Technologies, Linked Data and Big Data.
     
  
·
Community, membership and e-commerce offerings including a freelance listing service, a marketplace for designing and purchasing logos (stocklogos.com) and premium membership services.
 
Our education business features online and in-person courses and online conferences (including our Facebook Marketing and Social Media Marketing Boot Camps) 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.
 
Our trade shows include, among others, the Semantic Tech and Business Conference, Inside Social Apps, Social Gaming Summit and AllFacebook Marketing Conference.

Our online business also includes AllCreativeWorld.com, a network of online properties providing content, education, community, career and other resources for creative and design professionals.

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.
       
 
13

 
  
We generate our revenues from:

 
·
fees charged for online job postings;

 
·
advertising on our Websites and e-mail newsletters;
     
 
·
attendee registration fees for our online and in-person courses and conferences;
 
 
·
attendee registration fees to our trade shows;
  
 
·
fees for social media-related  market research and data services products;
 
 
·
exhibition space fees and vendor sponsorships to our trade shows; and
  
 
·
subscription sales from our paid membership services.
       
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 $3.7 million for the three months ended March 31, 2012 and $2.2 million for the three months ended March 31, 2011, representing an increase of 64%. This change was primarily due to the acquisition of Inside Network Inc. (“Inside Network”), which we acquired in May 2011, along with continued organic growth of our advertising and education revenues.  Our acquisition of Inside Network contributed $1.1 million to our revenues during the three months ended March 31, 2012, primarily from the (i) Inside Social Apps conference held in February, (ii) research and (iii) advertising. Research revenue relates to Inside Network’s original market research and data services including AppData, Inside Virtual Goods and the Facebook Marketing Bible.

The organic growth in advertising revenues was primarily due to the growth in both page views and in the number of unique visitors to our Websites, specifically on our social media-related properties. In addition, the increase in education revenue was primarily due to the growth of our online conferences.
 
The following table sets forth, for the periods indicated, the components of our revenues (in thousands):

   
Three Months Ended
March 31,
   
2012 vs. 2011
 
   
2012
   
2011
   
$
     
%
 
Online job postings
 
$
1,153
   
$
1,149
   
$
4
     
      0%
 
Advertising
   
651
     
356
     
295
     
83
 
Trade shows
   
640
     
34
     
606
     
1,783
 
Education
   
542
     
460
     
82
     
18
 
Research
   
438
     
     
438
     
100
 
Other
   
261
     
247
     
14
     
6
 
Total
 
$
3,685
   
$
2,246
   
$
1,439
     
64%
 
  
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 $2.0 million for the three months ended March 31, 2012 and $1.4 million for the three months ended March 31, 2011, representing an increase of 41%.  This change was primarily due to the acquisition of Inside Network, which added $517,000 to cost of revenues during the first quarter of 2012, including $299,000 in trade show costs for the Inside Social Apps conference.
   
We intend to make investments through internal development and, where appropriate opportunities arise, through 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 or offerings.
  
 
14

 
 
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 $641,000 and $432,000 for the three months ended March 31, 2012 and 2011, respectively, representing an increase of 48%.  This increase was primarily due to the acquisition of Inside Network, which added $154,000 to advertising, promotion and selling during the first quarter of 2012.

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 $1.3 million and $1.4 million for the three months ended March 31, 2012 and 2011, respectively, representing a decrease of 3%.  This decrease was due primarily to a reduction in employee-related costs of $35,000.
 
Depreciation and amortization

Depreciation expense was $80,000 for the three months ended March 31, 2012 and $84,000 for the three months ended March 31, 2011, representing a decrease of 5%. This decrease was due primarily to a decrease in capital expenditures.

Amortization expense was $136,000 for the three months ended March 31, 2012 and $118,000 for the three months ended March 31, 2011, representing an increase of 15%.  This increase was primarily due to the acquisition of Inside Network in May 2011.   
 
Our depreciation and amortization expenses might vary in future periods based upon a change in our capital expenditure levels or any future acquisitions.
  
Other loss, net
 
Other loss was $0 and $4,000 during the three months ended March 31, 2012 and 2011, respectively.  Other loss for the three months ended March 31, 2011 was primarily related to translation loss on foreign currency and additional costs related to the sale of our building and land in Peoria, Illinois in December 2010.
    
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
March 31,
   
2012 vs. 2011
 
   
2012
   
2011
   
$
       
%
 
Interest income
 
$
1
   
$
35
   
$
(34)
 
   
(97)%
 
Interest expense
 
$
(73)
 
 
$
(179)
 
 
$
106
     
59%
 
 
Interest expense during the three months ended March 31, 2012 and 2011 relates primarily to costs associated with our loans from a related party. See “Related Party Transactions” for a description of the loans.
  
Provision for income taxes
 
We recorded a provision for income taxes of $11,000 and $10,000 during the three months ended March 31, 2012 and 2011, 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 $85,000 as of March 31, 2012 and December 31, 2011, all of which would affect the effective tax rate, if recognized, as of March 31, 2012.
  
 
15

 
   
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):
    
   
Three Months Ended
March 31,
   
2012 vs. 2011
 
   
2012
   
2011
   
$
     
%
 
Operating cash flows
 
$
 (124)
 
 
$
(1,183)
 
 
$
1,059
     
90%
 
Investing cash flows
   
(67)
 
   
(676)
 
   
609
     
90
 
Financing cash flows
   
44
     
(11)
 
   
55
     
500
 
   
   
As of
   
2012 vs. 2011
 
   
March 31,
2012
   
December 31,
2011
   
$
     
%
 
Cash and cash equivalents
 
$
3,291
   
$
3,438
   
$
(147)
     
(4)%
 
Working capital
   
1,510
     
1,794
     
(284)
     
(16)
 
Loan from related party
   
7,647
     
 7,647
  
   
     
 
    
Since inception, we have funded operations through various means, including public offerings of our common stock, the sales of our Events, Research, Online images and Internet.com businesses, credit agreements and cash flows from operating activities.
 
Operating activities. Cash used by operating activities decreased during the three months ended March 31, 2012 compared to the same period of 2011 due primarily to a reduction in operating losses that was driven by an increase in our revenues.
 
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 three months ended March 31, 2012, related primarily to the purchase of certain assets.  Net cash used in investing activities during the three months ended March 31, 2011, related primarily to the acquisition of businesses.
 
Financing activities. Cash provided by financing activities during the three months ended March 31, 2012 related to stock option exercises. Cash used in financing activities during the three months ended March 31, 2011 related primarily to loan repayments to a related party, partially offset by stock option exercises.
 
We expect to continue our investing activities on a limited basis for the foreseeable future, which includes the potential to strategically acquire companies and content that are complementary to our business. We expect to finance any near-term acquisitions with cash on hand.
 
Our existing cash balances might decline during the remainder of 2012 in the event of a downturn in the general economy or changes in our planned cash outlay. However, we believe the remaining cash flow together with our existing cash balances and our current business plan and revenue prospects will be sufficient to meet the working capital and operating resource expenditure requirements of our business for the next 12 months.
  
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.
  
 
16

 
 
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, 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 Mediabistro 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, Mediabistro (1) entered into a Security Agreement with Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s assets (the “Mediabistro Security Agreement”), (2) entered into an Intellectual Property Security Agreement with Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s intellectual property (the “Mediabistro 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 “Mediabistro Control Agreement” and, together with the Mediabistro Security Agreement and the Mediabistro IP Security Agreement, the “Mediabistro Documents”).
 
To fund the 2009 Meckler Loan, Mr. Meckler used a portion of the proceeds of a residential mortgage loan that Bank of America, N.A. (“BOA”) granted to Mr. Meckler and Mrs. Ellen L. Meckler (the “BOA Loan”). Pursuant to a Collateral Assignment of the 2009 Note dated May 29, 2009, by Mr. Meckler to BOA, Mr. Meckler collaterally assigned the Note to BOA as additional collateral for the BOA Loan. Payment terms of the 2009 Meckler Loan reflect pass through of the BOA Loan payment terms (excluding those funds borrowed pursuant to the BOA Loan for Mr. Meckler’s personal use). As a result, the interest rate, amortization schedule and maturity date of each loan are identical.
 
The original principal amount of the 2009 Meckler Loan equaled the amount required to pay off and terminate an interest rate swap agreement between us and KeyBank and related transactional expenses. On September 1, 2010, we entered into a note modification agreement with Mr. Meckler.  The Note Modification Agreement reduced the interest rate of the 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.  Although there are no future minimum principal payments due under the 2009 Meckler Loan for the years ended December 31, 2011 through December 31, 2013, we had repaid approximately $1.3 million of the 2009 Meckler Loan as of March 31, 2012.  The 2009 Note is due and payable in full on May 29, 2016, and may be prepaid at any time without penalty or premium. We made no principal payments during the three months ended March 31, 2012 and one principal payment on the 2009 Meckler Loan totaling $50,000 during the three months ended March 31, 2011.

On November 14, 2011, we along with Mediabistro, entered into a 2nd Note Modification Agreement with Mr. Meckler.  The 2nd Note 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 1,000,000 shares of our common stock pursuant to the terms of the 2008 WebMediaBrands 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, Mediabistro and Inside Network: (1) entered into a promissory note jointly and severally payable by the Company, Mediabistro and Inside Network to Mr. Meckler (the “2011 Note”); (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “WEBM 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 WEBM 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 Mediabistro 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 is 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.
  
 
17

 
   
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 Mediabistro, Inside Network, or the Company.

Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $64,000 and $170,000 during the three months ended March 31, 2012 and 2011, respectively. There are no future minimum principal payments due under the 2009 Meckler Loan and the 2011 Meckler Loan for the years ended December 31, 2012 and 2013.  There are future minimum principal payments due to Mr. Meckler for the 2009 Meckler Loan and the 2011 Meckler Loan in the amount of $189,000 for the year ended December 31, 2014; $419,000 for the year ended December 31, 2015; and $7.0 million for the year ended December 31, 2016.

Critical Accounting Policies
 
There have been no changes to our critical accounting policies from those included in our most recent Form 10-K for the year ended December 31, 2011.
 
Item 3.
Quantitative & Qualitative Disclosures about Market Risk
 
As a smaller reporting company as defined by Item 10(f)(1) of Regulation S-K, we are not required to provide the information required by this Item.
   
Item 4.
Controls and Procedures
 
Disclosure Controls and Procedures. The Company conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) under the supervision and with the participation of its management including the Company’s  Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
 
Disclosure controls and procedures are designed only to provide reasonable assurance that (i) information required to be disclosed in an issuer’s reports filed under the Exchange Act is recorded, processed, summarized and reported within the time period specified in the SEC rules and forms and (ii) information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.
 
As a result of this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to provide the reasonable assurance discussed above.
 
Management’s Report on Internal Control over Financial Reporting.   Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.  A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met.   Management applied its judgment in assessing the benefits of controls relative to their cost.   Because of the inherent limitations in control systems, no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within the company have been detected.  Because of its inherent limitations, internal control over financial reporting might not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that controls might become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures might deteriorate.  The Company’s management, with the participation of the CEO and CFO, assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2012.  Based on the Company’s evaluation, management concluded that our internal control over financial reporting was effective as of March 31, 2012 based on criteria in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
 
Changes in Internal Control over Financial Reporting.  There were no changes in our internal control over financial reporting during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.
  
 
18

 

PART II - OTHER INFORMATION
    
Item 1.
LEGAL PROCEEDINGS
 
None.
 
Item 1A.
RISK FACTORS
 
The primary risk factors affecting our business have not changed materially from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2011.
 
Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
Not Applicable
 
Item 3.
DEFAULTS UPON SENIOR SECURITIES
 
Not Applicable
 
Item 4.
MINE SAFETY DISCLOSURES
  
Not Applicable

 Item 5.
OTHER INFORMATION
 
Not Applicable
  
Item 6.
EXHIBITS
 
The following is a list of exhibits filed as part of this Report on Form 10-Q.
 
Exhibit Number
  
Description
   
31.1
  
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
31.2
  
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
32.1
  
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
32.2
  
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
     
101.INS
 
XBRL Instance Document
     
101.SCH
 
XBRL Schema Document
     
101.CAL
 
XBRL Calculations Linkbase Document
     
101.DEF
 
XBRL Definition Linkbase Document
     
101.LAB
 
XBRL Label Linkbase Document
     
101.PRE
 
XBRL Presentation Linkbase Document
   
 
19

 
 
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.
 
   
WebMediaBrands Inc.
 
 
 
     
Dated: May 7, 2012
  /s/ Alan M. Meckler
   
Alan M. Meckler
Chairman and Chief Executive Officer
     
     
    /s/ Donald J. O’Neill
   
Donald J. O’Neill
Vice President and Chief Financial Officer
(Principal Financial Officer and Chief Accounting Officer)
 
 
 
 
 
 
 
 
20

XFRA:ICM1 Quarterly Report 10-Q Filling

XFRA:ICM1 Stock - Get Quarterly Report SEC Filing of XFRA:ICM1 stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XFRA:ICM1 Quarterly Report 10-Q Filing - 3/31/2012
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