Webmediabrands Inc has a market cap of $37.3 million; its shares were traded at around $1.01 with and P/S ratio of 6.1. WEBM is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Cost of revenues primarily consists of payroll and benefits costs for technology and editorial personnel, freelance costs, communications infrastructure and Website hosting. Cost of revenues excludes depreciation and amortization. Cost of revenues was $1.2 million for the three months ended March 31, 2009 and $1.3 million for the three months ended March 31, 2010, representing an increase of 5%. This change was primarily due to increases in employee-related costs of $155,000 and in freelance costs of $67,000. This increase was partially offset by a decrease in trade show costs of $167,000.
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 $604,000 for the three months ended March 31, 2009 and $529,000 for the three months ended March 31, 2010, representing a decrease of 12%. This decrease was primarily due to a decrease in trade show advertising costs of $81,000 because we held fewer trade shows during the first quarter of 2010.
General and administrative expenses consist primarily of payroll and benefit costs for administrative personnel, office-related costs and professional fees. General and administrative expenses were $5.3 million for the three months ended March 31, 2009 and $1.6 million for the three months ended March 31, 2010, representing a decrease of 69%. This decrease was due primarily to a decrease in stock-based compensation of $1.8 million, a decrease in professional fees of $771,000, a decrease in employee-related costs of $673,000, a decrease in office-related costs of $128,000 and a decrease in insurance-related costs of $93,000. The primary reason for the reduction in employee-related costs, professional fees and insurance-related costs was due to cost reduction efforts initiated in conjunction with the sales of our Online images and Internet.com businesses and the decreased size of the continuing business. The decrease in office-related costs was due to the termination of our Darien, Connecticut office lease during the second quarter of 2009.
We recorded a benefit for income taxes of $2.9 million during the three months ended March 31, 2009, which consisted primarily of a net tax benefit of $2.9 million recorded on the reclassification of the fair value adjustments on the interest rate swap from other comprehensive income to loss from continuing operations. We recorded a provision for income taxes of $3,000 during the three months ended March 31, 2010.
The principal amount of the Meckler Loan equals the amount required to pay off and terminate the Swap Agreement between the Company and KeyBank and related transactional expenses. The interest rate of the Note is 4.7% per annum. Interest on the outstanding principal amount is due and payable on the first day of each calendar month for a period of five years. 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, to be paid in full in the two remaining years. The Note is due and payable in full on May 29, 2016, and may be prepaid at any time without penalty or premium. The Company made one principal payment on the Meckler Loan in the amount of $1.0 million during the year ended December 31, 2009. So long as any amount remains outstanding under the Meckler Loan, the Company must pay Mr. Meckler a monthly accommodation fee of $40,000 in order to adjust the effective interest rate of the Note. The effective interest rate on the Note was 12.5% at March 31, 2010. Interest expense on the Note was $0 and $224,000 during the three months ended March 31, 2009 and 2010, respectively.
There are no future minimum payments due under the Meckler Loan for the years ended December 31, 2010 through December 31, 2013. There are future minimum payments due in the amount $191,000 for the year ended December 31, 2014, $396,000 for the year ended December 31, 2015 and $5.6 million for the year ended December 31, 2016.
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