This Quarterly Report on Form 10-Q includes forward-looking statements. These
forward-looking statements are based on our current expectations and beliefs
concerning future developments and their potential effects on us. There can be
no assurance that future developments affecting us will be those that we have
anticipated. These forward-looking statements involve a number of risks,
uncertainties (some of which are beyond our control) or other assumptions that
may cause actual results or performance to be materially different from those
expressed or implied by these forward-looking statements. Our forward-looking
statements include, but are not limited to, statements regarding our or our
management team's expectations, hopes, beliefs, intentions or strategies
regarding the future. In addition, any statements that refer to projections,
forecasts or other characterizations of future events or circumstances,
including any underlying assumptions, are forward-looking statements. The words
"anticipate," "believe," "continue," "could," "estimate," "expect," "intends,"
"may," "might," "plan," "possible," "potential," "predict," "project," "should,"
"would" and similar expressions may identify forward-looking statements, but the
absence of these words does not mean that a statement is not forward-looking.
Factors that might cause or contribute to such forward-looking statements
include, but are not limited to, those set forth in the Risk Factors section of
the Company's Annual Report on Form 10-K filed with the SEC on April 15, 2021.
The following discussion should be read in conjunction with our financial
statements and related notes thereto included elsewhere in this report.
GENERAL
Overview
We, through our wholly-owned subsidiary, Sovryn Holdings, Inc. ("Sovryn"), have
embarked on an acquisition strategy, rolling-up un-affiliated Class A/LPTV TV
stations in the top 100 DMA's (Designated Market Areas) with a goal of building
out a nationwide platform through one or more station acquisitions per DMA. Each
licensed TV station can broadcast between 10 and 12 or channels creating more
revenue "streams" over-the-air, 24 hours per day/7 days per week. Management's
strategy is to stage the acquisitions focusing on DMA's 1-30 and expanding
thereafter on DMA's 31-100, acquiring one station per DMA and building a
portfolio of 100 stations within 18-24 months. Management has currently
identified and held discussions with a number stations owners, has received FCC
approval for three stations which have been acquired: (i) KNLA/KNET, a Class A
television station in Los Angeles, and (ii) KVVV, a low power television station
in Houston and has entered into asset purchase agreements for the following
television stations: (iii) KYMU-LD, a low power television station in Seattle;
three stations in which we anticipate closing in Janauary 2022 (i) W27EB, a
Class A television station in Chicago (ii) KPHE-LB, a low power television
station in Phoenix and (iii) KVSD-LD, a low power station in San Diego. We have
also entered into purchase agreements for operating stations in New York and
Atlanta and Construction Permits ("CP") in San Juan Puerto Rico, Boise, ID and
Bakersfield, CA. In addition, Sovryn has entered into non-binding letters of
intent to acquire stations in Miami, Tampa and St. Louis and has also entered
into a binding LOI to acquire Top Dog Productions, Inc., a television production
company d/b/a "The Jay & Tony Show", which produces content for third party
networks.
Madison's objective is to not only create one the largest, most comprehensive,
state of the art, broadcast Over-The-Air ("OTA") content distribution platforms
to capitalize on the changing media and distribution landscape and on the
growing OTA viewership in the U.S. but also embark on unique content development
and network creation for distribution over its platform. The over-the-air
programming carried on these stations is initially expected to include
entertainment, shopping, weather, sports as well as religious networks and
networks targeting select ethnic groups with lease agreements as the prime
source of revenue. Pricing of lease agreements is in part determined by market
rank, signal contour and number of OTA TV households in a given market, as well
as supply and demand.
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As the platform is built out, management not only anticipates substantial
operational synergies from the roll-up but also an expansion in the revenue base
with greater channel utilization, the addition of high-quality third-party
content providers that are currently not reaching the "OTA" viewers, which now
stands at an estimated 20mm households (44mm people) out of 108mm TV HH's
nationwide as well as revenue generated via the acquisition of "The Jay & Tony
Show"
Station Operations
Madison's plan is to acquire 50 independent TV stations in the top 30 DMA's over
the next 8-12 months. In addition, Madison expects to grow the station base to
100 tv stations nationwide through additional acquisitions targeting the top 100
DMA's across the nation, ultimately covering 80% of the population of the U.S.
over the next 18-24 months.
Each licensed TV station has the capability of delivering 10+ different revenue
"streams" (channels) of content Over-the-Air, 24 hours per day/7 days per week .
If converted to the new FCC approved ATSC 3.0 technology, the streaming capacity
will increase to 25+ channels or more, giving Sovryn the potential to stream
content upon completion of the roll-up to over 2500 channels aggregated over
expected 100 stations.
Madison will operate the stations remotely and centrally, eliminating the need
for in-market personnel or a studio facility. Remote operations of stations
results in significant cost efficiencies. Recent FCC deregulation in TV
broadcasting has eliminated the need for full time employees and studio
facilities operating Class A and Low Power stations allowing for greater cost
efficiency.
Recent Developments
On February 16, 2021, we entered into a Share Exchange Agreement (the "Share
Exchange Agreement") with Sovryn Holdings, Inc. ("Sovryn") and the holders (the
"Sovryn Shareholders") of Sovryn's issued and outstanding shares of common
stock, par value $0.0001 per share ("Sovryn Common Shares"), pursuant to which
the Shareholders exchanged 100% of the outstanding Sovryn Common Shares, for (i)
100 shares of series B preferred stock, par value $0.001 per share ("Series B
Preferred Stock"), of the Company which was transferred by Jeffrey Canouse, the
Company's controlling shareholder and existing Chief Executive Officer (the
"Controlling Shareholder"), to the designee of Sovryn and (ii) 1,000 shares of
series E convertible preferred stock, par value $0.001 per share of Sovryn
("Series E Preferred Stock," and together with Series B Preferred Stock, the
"Preferred Exchange Shares," and the foregoing exchange of Sovryn Common Shares
for Preferred Exchange Shares being the "Equity Exchange").
Upon the effectiveness of an amendment to our Articles of Incorporation to
increase the Company's authorized common stock, par value $0.0001 per share,
from 500,000,000 shares to 6,000,000,000 shares, all shares of Series E
Preferred Stock issued to the Shareholders shall automatically convert into
approximately 2,305,000,000 shares of common stock of the Company ("Shareholder
Approval"). The Series E Convertible Preferred Stock votes on an as-converted
basis with the common stock prior to their conversion. The Series E Preferred
Stock shall represent approximately 57% of the fully-diluted shares of common
stock of the Company after the closing of the transactions contemplated by the
Securities Purchase Agreement (as defined below).
Immediately prior to the closing of, and as a condition to, the Share Exchange
Agreement, the Company entered into a Share Transfer Agreement (the "Share
Transfer Agreement"), pursuant to which the Controlling Shareholder transferred
all of the shares of Series B Preferred Stock held by him to an entity
controlled by Philip Falcone, the Company's new chief executive officer. The
Series B Preferred Stock entitles the holder thereof to majority voting control
of the Company by virtue of the 51% super voting rights attributed to the holder
of the Series B Preferred Stock. The Controlling Shareholder owned all 100
Shares of Series B Preferred Stock, entitling him to 51% of the aggregate votes
taken by shareholders of any class on all matters being voted upon.
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Immediately prior to the closing of the Share Exchange Agreement, we entered
into Exchange Agreements (the "Convertible Note Exchange Agreements") with the
holders of our outstanding convertible promissory notes (the "Convertible
Notes"). Pursuant to Convertible Note Exchange Agreements, the holders of the
Convertible Notes were issued, in exchange for their Convertible Notes, a total
of 230,000 shares of our newly-designated Series D Convertible Preferred Stock.
Our new Series D Convertible Preferred Stock is convertible into common stock at
a ratio of 1,000 shares of common stock for each share of preferred stock held.
Immediately prior to the closing of the Share Exchange Agreement, we entered
into Exchange Agreements (the "Preferred Stock Exchange Agreements" and together
with the Convertible Note Exchange Agreements, the "Exchange Agreements") with
the holders of our outstanding series A convertible preferred stock (the "Series
A Preferred Stock"). Pursuant to the Preferred Stock Exchange Agreements, the
holders of the Series A Convertible Preferred Stock were issued, in exchange for
their Series A Preferred Stock, options to purchase a majority of the
outstanding shares of common stock of a newly to be formed wholly owned
subsidiary of the Company to be called CZJ License, Inc.
On February 17, 2021, we entered into a securities purchase agreement with funds
affiliated with Arena Investors LP (the "Investors") pursuant to which the
company issued convertible notes in an aggregate principal amount of $16.5
million for an aggregate purchase price of $15 million (collectively, the
"Notes"). In connection with the issuance of the Notes, we issued to the
Investors warrants to purchase an aggregate of 192,073,017 shares of Common
Stock (collectively, the "Warrants") and 1,000 shares of series F convertible
preferred stock (the "Series F Preferred Stock").
The Notes each have a term of thirty-six months and mature on February 17, 2023,
unless earlier converted. The Notes accrue interest at a rate of 11% per annum,
subject to increase to 20% per annum upon and during the occurrence of an event
of default. Interest is payable in cash on a quarterly basis beginning on March
31, 2021. Notwithstanding the above, at the Company's election, any interest
payable on an applicable payment date may be paid in registered Common Stock of
the Company (rather than cash) in an amount equal (A) the amount of the interest
payment due on such date, divided by (B) an amount equal to 80% of the average
VWAP of the Common Stock for the five (5) days immediately preceding the date of
conversion.
On September 24, 2021, the Company and the Investors amended the Notes. The
Notes are convertible at any time, at the holder's option, into shares of our
common stock equal to $0.02 per share subject to adjustment. Notwithstanding the
foregoing, at any time during the continuance of any Event of Default, the
Conversion price in effect shall be equal to the alternate conversion price. If
at any time the conversion price as determined hereunder for any conversion
would be less than the par value of the Common Stock, then at the sole
discretion of the Holder, the conversion price hereunder may equal such par
value for such conversion and the conversion amount for such conversion may be
increased to include Additional Principal, where Additional Principal means such
additional amount to be added to the principal amount of this Note to the extent
necessary to cause the number of conversion shares issuable upon such conversion
to equal the same number of conversion shares as would have been issued had the
conversion price not been adjusted by the Holder to the par value price, subject
to certain beneficial ownership limitations (with a maximum ownership limit of
9.99%). The conversion price is also subject to adjustment due to certain
events, including stock dividends, stock splits and in connection with the
issuance by the Company of common stock or common stock equivalents at an
effective price per share lower than the conversion price then in effect. The
Notes may not be redeemed by the Company
As part of the agreement with the Investors, the Company issued 192,073,016
warrants. On September 24, 2021, the Company and the Investor amended the
warrant agreement such that each Warrant is exercisable for a period of five (5)
years from the date of issuance at an initial exercise price equal to $0.025 per
share, subject to adjustment herein, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 9.99%). The exercise price is
also subject to adjustment due to certain events, including stock dividends,
stock splits and recapitalizations. The Holder may be eligible for cashless
exercise.
The Series F Preferred Stock have no voting rights and shall convert into
approximately 192,073,017 shares of common stock upon Shareholder Approval.
Subsequent to the period ended September 30, 2021, the 1,000 Series F Preferred
Stock were converted to 192,073,017 common shares. On November 8, 2021, the
Series F Preferred Shareholders entered into an Exchange Agreement to exchange
39,895,000 common shares for 39,895 Series H Preferred Shares. Each of the
Series H Preferred Shares converts to 1,000 common shares. A total of 39,895
Series H Preferred Shares were issued.
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On February 17, 2021, Sovryn, entered into an asset purchase agreement (the
"Asset Purchase Agreement") with with NRJ TV II CA OPCO, LLC, a Delaware limited
liability company ("OpCo") and NRJ TV III CA License Co., LLC, a Delaware
limited liability company (together with OpCo, "Sellers"). Upon the terms and
subject to the satisfaction of the conditions described in the Asset Purchase
Agreement, Sovryn will acquire the licenses and Federal Communications
Commission ("FCC") authorizations to the KNET-CD and KNLA-CD Class A television
stations owned by the Sellers (the "Acquired Stations"), certain tangible
personal property, real property, contracts, intangible property, files, claims
and prepaid items together with certain assumed liablities in connection with
the Acquired Stations (the "Asset Sale Transaction"). As consideration for the
Asset Sale Transaction, Sovryn has agreed to pay the Sellers $10,000,000,
$2,000,000 of which was paid to Sellers upon execution of the Asset Purchase
Agreement, as follows: (i) an escrow deposit of $1,000,000 to be held in escrow
pursuant to the terms of an escrow agreement entered into between Sovryn and the
Sellers (the "Escrow Fee") and (ii) a non-refundable option fee of $1,000,000
(the "Option Fee"). The closing of the Asset Sale Transaction took place on
April 19, 2021.
On March 14, 2021, Sovryn entered into an asset purchase agreement (the "KVVV
Asset Purchase Agreement") with Abraham Telecasting Company, LLC, a Texas
limited liability company (the "Houston Seller"). Upon the terms and subject to
the satisfaction of the conditions described in the KVVV Asset Purchase
Agreement, Sovryn agreed to acquire the licenses and Federal Communications
Commission ("FCC") authorizations to the KVVV-LD low power television station
owned by the Houston Seller (the "Houston Acquired Station"), certain tangible
personal property, certain real property leases, contracts, intangible property,
files, claims and prepaid items together with certain assumed liabilities in
connection with the Houston Acquired Station (the "KVVV Asset Sale
Transaction"). As consideration for the KVVV Asset Sale Transaction, Sovryn has
agreed to pay the Houston Seller $1,500,000 in cash, $87,500 of which was paid
to the Houston Seller and to be held in escrow pursuant to the terms of an
escrow agreement entered into between Sovryn and the Houston Seller (the "KVVV
Escrow Fee"). The closing of the KVVV Asset Sale Transaction (the "KVVV
Closing") is subject to, among other things, consent by the FCC to the
assignment of the FCC authorizations pertaining to the Houston Acquired Station,
from the Houston Seller to Sovryn (the "Houston FCC Consent"). The KVVV Closing
shall occur no more than ten (10) business days following the later to occur of
(i) the date on which the Houston FCC Consent has been granted and (ii) the
other conditions to the KVVV Closing set forth in the KVVV Asset Purchase
Agreement. The closing of the KVVV Asset Sale Transaction took place on June 1,
2021.
On March 29, 2021, Sovryn, entered into an asset purchase agreement (the "KYMU
Asset Purchase Agreement") with Seattle 6 Broadcasting Company, LLC, a
Washington limited liability company (the "Seattle Seller"). Upon the terms and
subject to the satisfaction of the conditions described in the KYMU Asset
Purchase Agreement, Sovryn agreed to acquire the licenses and FCC authorizations
to the KYMU-LD low power television station owned by the Seattle Seller (the
"Seattle Acquired Station"), certain tangible personal property, certain real
property leases, contracts, intangible property, files, claims and prepaid items
together with certain assumed liabilities in connection with the Seattle
Acquired Station (the "KYMU Asset Sale Transaction"). As consideration for the
Seattle Asset Sale Transaction, Sovryn has agreed to pay the Seattle Seller
$1,750,000, $87,500 of which was paid to the Seattle Seller and to be held in
escrow pursuant to the terms of an escrow agreement entered into between Sovryn
and the Seattle Seller (the "Seattle Escrow Fee"). The closing of the KYMU Asset
Sale Transaction (the "KMYU Closing") is subject to, among other things, consent
by the FCC to the assignment of the FCC authorizations pertaining to the Seattle
Acquired Station, from Seattle Seller to Sovryn (the "Seattle FCC Consent"). The
Seattle Closing occurred at the end of September 2021.
On June 9, 2021, Sovryn, entered into an asset purchase agreement (the
"W27EBAsset Purchase Agreement") with Local Media TV Chicago, LLC, a Delaware
limited liability company (the "Chicago Seller"). Upon the terms and subject to
the satisfaction of the conditions described in the W27EB Asset Purchase
Agreement, Sovryn agreed to acquire the licenses and FCC authorizations to the
W27EB-D Class A television station owned by the Chicago Seller (the "Chicago
Acquired Station"), certain tangible personal property, certain real property
leases, contracts, intangible property, files, claims and prepaid items together
with certain assumed liabilities in connection with the Chicago Acquired Station
(the "W27EBAsset Sale Transaction"). As consideration for the Chicago Asset Sale
Transaction, Sovryn has agreed to pay the Chicago Seller an amended price of
$6,000,000, $300,000 of which was paid to the Chicago Seller and to be held in
escrow pursuant to the terms of an escrow agreement entered into between Sovryn
and the Chicago Seller (the "Chicago Escrow Fee"). The assignment has been
approved for transfer by the FCC , The company has since amended the closing of
the W27EB Asset Sale Transaction (the "W27EB Closing") to December 28th, 2021.
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On July 13, 2021, Sovryn, entered into an asset purchase agreement (the "KPHE
Asset Purchase Agreement") with Lotus TV of Phoenix LLC, an Arizona limited
liability company (the "Arizona Seller"). Upon the terms and subject to the
satisfaction of the conditions described in the KPHE Asset Purchase Agreement,
Sovryn agreed to acquire the licenses and FCC authorizations to the KPHE-LD low
power television station owned by the Arizona Seller (the "Arizona Acquired
Station"), certain tangible personal property, certain real property leases,
contracts, intangible property, files, claims and prepaid items together with
certain assumed liabilities in connection with the Arizona Acquired Station (the
"Arizona Asset Sale Transaction"). As consideration for the Arizona Asset Sale
Transaction, Sovryn agreed to pay the Arizona Seller $2,000,000, $100,000 of
which was paid to the Arizona Seller to be held in escrow pursuant to the terms
of an escrow agreement entered into between Sovryn and the Arizona Seller (the
"Arizona Escrow Fee").The FCC has since consented to the transfer and Sovryn,
which is currently in discussions to amend the closing date to January 14th, has
increased the escrowed amount to $450,000 as a result.
On August 31, 2021, Sovryn entered into an asset purchase agreement (the "KVSD
Asset Purchase Agreement") with D'Amico Brothers Broadcasting Corp., a
California company (the "San Diego Seller"). Upon the terms and subject to the
satisfaction of the conditions described in the KVSD Asset Purchase Agreement,
Sovryn agreed to acquire the licenses and Federal Communications Commission
("FCC") authorizations to the KVSD-LD low power television station owned by the
San Diego Seller (the "San Diego Acquired Station"), certain tangible personal
property, certain real property leases, contracts, intangible property, files,
claims and prepaid items together with certain assumed liabilities in connection
with the San Diego Acquired Station (the "KVSD Asset Sale Transaction"). As
consideration for the KVSD Asset Sale Transaction, Sovryn has agreed to pay the
San Diego Seller $1,500,000 in cash, $75,000 of which was paid to the San Diego
Seller (subsequent to the period end) and to be held in escrow pursuant to the
terms of an escrow agreement entered into between Sovryn and the San Diego
Seller (the "KVSD Escrow Fee"). The FCC has since consented to the transfer, and
Sovryn, which is currently in discussions to amend the closing date to January
14th, has increased the escrowed amounts to $275,000.
Sovryn, entered into an asset purchase agreements (the "WXNY and WANN Asset
Purchase Agreements") with New York Spectrum Holdings Corp. ("WXNY New York
Seller") and Prism Broadcasting (the "WANN Atlanta Seller"). The FCC has
consented to the transfer of the WXNY license and Sovryn is currently in the
process of scheduling a closing date. Purchase price for the New York station in
total is $5.4mm. Upon the terms and subject to the satisfaction of the
conditions described in the WANN Agreement Asset Purchase Agreement, Sovryn
agreed to acquire the licenses and FCC authorizations to the WANN-CD, a Class A
low power television station owned by the Prism Broadcasting (the "Atlanta
Station"), certain tangible personal property, certain real property leases,
contracts, intangible property, files, claims and prepaid items together with
certain assumed liabilities in connection with the Atlanta Station (the "WANN
Asset Sale Transaction"). As consideration for the Atlanta Asset Sale
Transaction, Sovryn has agreed to pay the Atlanta Seller $5,250,000, $200,000 of
which was paid and is held in escrow pursuant to the terms of an escrow
agreement entered into between Sovryn and the Atlanta seller. The closing of the
WANN Asset Sale Transaction (the "WANN Closing") is subject to, among other
things, consent by the FCC to the assignment of the FCC authorizations
pertaining to the Atlanta Acquired Station, from Atlanta Seller to Sovryn (the "
Atlanta FCC Consent"). The Atlanta Closing shall occur no more than ten (10)
business days following the later to occur of (i) the date on which the Atlanta
FCC Consent has been granted and (ii) the other conditions to the WANN Closing
set forth in the WANN Asset Purchase Agreement.
In addition, Sovryn entered into an Asset Purchase Agreement (the "San Juan,
Boise and Bakersfield Construction Permits) with Mako Communications ("the CP
Seller"). Purchase price for the three CP's is $115,000, $10,000 of which has
been paid and held in Escrow. The FCC has consented to the transfer and Sovryn
is in discussions with Mako to schedule a closing date.
RESULTS OF OPERATIONS
Our financial statements have been prepared assuming that we will continue as a
going concern and, accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should we be unable to continue in operation. We expect we
will require additional capital to meet our long term operating requirements. We
expect to raise additional capital through, among other things, the sale of
equity or debt securities.
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Nine months ended September 30, 2021 and September 30, 2020
Sales
Net Sales increased to $760,053 for the nine months ended September 30, 2021
from $401 for the nine months ended September 30, 2020. The increase resulted
from the acquisition of KNLA/KNET, KVVV and KYMU television stations and the
revenues associated with the existing lease agreements held by those stations.
Amortization
Amortization increased to $140,826 for the nine months ended September 30, 2021
from $20,884 for the nine months ended September 30, 2020. The increase resulted
from the acquisition of tangible and intangible assets of KNLA/KNET, KVVV and
KYMU television stations.
Consulting Fees
Consulting Fees increased to $348,500 for the nine months ended September 30,
2021 from $40,000 for the nine months ended September 2021. The increase was
primarily the result of agreements put in place by the company for sales,
finance and general consulting purposes.
General and administrative fees
General and Administrative fees increased to $149,905 for the nine months ended
September 30,2021 from $18, 009 for the nine months ended September 20, 2020.
The increase was primarily the result expenses for associated administrative and
salary expenses related to headcount.
Lender Fees
Arena Capital Lender Fees increased to $1,606,275 for the nine months ended
September 30,2021 from $0 for the nine months ended September 30, 2020. The
increase was primarily the result of various expenses associated with the
covenant and regulatory filings and financing documentation.
Management Fees
Management Fees increased to $360,462 for the nine months ended September 30,
2021 from $10,000 for the nine months ended September 30, 2020. The increase was
primarily the result of management agreements put in place up on the acquisition
of Sovryn, its television stations and associated financings.
Marketing and Product Development Fees
Marketing and Product Development Fees increased to $207,325 for the nine months
ended September 30, 2021 from $0 for the nine months ended September 30, 2020.
The increase resulted from fee arrangements put in place for marketing related
activities.
Professional Fees
Professional Fees increased to $1,041,630 for the nine months ended September
30, 2021 from $31,519 for the nine months ended September 30, 2020. The increase
was primarily the result of an increase in the legal and accounting expense
associated with the acquisitions of Sovryn, KNLA/KNET, KVVV and KYMU television
stations, the financing associated with those acquisitions , the expense
associated with the Asset Purchase Agreements for WXNY and WANN and, the expense
associated with regulatory filings for the SEC, including the Form S1
Registration.
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Royalty Expense
Royalty expense decreased to $35,323 for the nine months ended September 30,
2021 from $41,667 for the nine months ended September 30, 2020. The decrease
resulted from amended terms in the agreement with CZJ products.
Amortized Interest
Amortized Interest increased by to $372,177 for the nine months ended September
30, 2021 from $0 for the nine months ended September 30, 2020. The increase
resulted from financing associated with the acquisition of KNLA/KNET, KVVV and
KYMU television stations.
Interest
Interest increased to $1,151,531, the nine months ended September 30, 2021 from
$7,592 for the nine months ended September 30, 2020. The increase was the result
of financing put in place for working capital and the acquisition of KNLA/KNET,
KVVV and KYMU television stations.
Net Loss
Net Loss increased to $4,961,892 for the nine months ended September 30, 2021
from $183,902 for the nine months ended September 30, 2020. The increase was
primarily the result of an increase in expenses associated with the build-out
and roll-out of the Sovryn Holdings business plan, notably, expenses associated
with the professional fees incurred with the acquisitions and other necessary
regulatory filings as well as interest expense from the Arena Capital credit
facility.
Three months ended September 30, 2021 and September 30, 2020
Sales
Net sales increased to $464,028 for the three months ended September 30, 2021
from $179 for the three months ended September 30, 2020. The increase was the
result of the acquisition of KNLA/KNET , KVVV and KYMU television stations and
the revenues associated with the existing lease agreements held by those
stations.
Amortization
Amortization decreased to ($74,276) for the three months ended September 30,
2021 from $20,884 for the three months ended September 30, 2020. The decrease
resulted from a change in allocation of capitalized purchased costs arising from
updated valuation reports.
Consulting Fees
Consulting Fees increased to $69,000 for the three months ended September 30,
2021 from $40,000 for the three months ended September 30, 2020. The increase
was primarily the result of agreements put in place by the company for sales,
finance and general consulting purposes
General and administrative fees
General and Administrative fees increased to $110,936 for the 3 months ended
September 30, 2021 from $6,320 for the three months ended September 30, 2020.
The increase was primarily the result of expenses for associated administrative
and salary expenses related to headcount.
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Lender Fees
Lender Fees increased to $1,320,692 for the three months ended September 30,
2021 from $0 for the three months ended September 30, 2020. The increase
resulted from various expenses associated with the Arena Capital financing.
Management Fees
Management Fees increased to $154,385for the three months ended September 30,
2021 from $10,000 for the three months ended September 30, 2020. The increase
was primarily the result of management agreements put in place up on the
acquisition of Sovryn and the television stations and associated financings.
Marketing and Product Development Fees
Marketing and Product Development Fees increased to $28,790 for the three months
ended September 30, 2021 from $0 for the three months ended June 30, 2020. The
increase was primarily the result of fee arrangements put in place for marketing
related activities.
Professional Fees
Professional Fees increased to $517,911 for the three months ended September 30,
2021 from $27,870 for the three months ended September 30, 2020. The increase
was primarily the result of an increase in legal and accounting expense
associated with the acquisitions of Sovryn, KNLA/KNET, KVVV and KYMU television
stations and the financing associated with those acquisitions.
Royalties
Royalty expense decreased for the three months ended September 30, 2021 from
$41,667 for the three months ended September 30, 2020. The decrease was
primarily the result of the amended terms of the agreement with CZJ products.
Amortized Interest
Amortized Interest increased by to $135,855 for the three months ended September
30, 2021 from $14,633 for the three months ended September 30, 2020. The
increase was primarily the result of financing associated with the acquisition
of KNLA/KNET, KVVV and KYMU television stations.
Interest
Interest increased 471,033 $453,750 for the three months ended September 30,
2021 from $4,519 for the three months ended September 30, 2020. The increase was
primarily the result of the financing put in place for working capital and the
acquisition of KNLA/KNET, KVVV and KYMU television stations.
Net Loss
Net Loss increased to $2,405,292 for the three months ended September 30, 2021
from $165,714 for the 3 months ended September 30, 2020. The increase was
primarily the result of an increase in expenses associated with the build-out
and roll-out of the Sovryn business plan and expenses associated with the
financing and Sovryn acquisitions.
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Liquidity and Capital Resources
Cash and Working Capital
As at September 30, 2021, Madison had cash of $2,194,562 and a working capital
surplus of $1,721,845, compared to cash of $9,491 and working capital deficit of
$100,141 as at December 31, 2020.
We will require additional capital to meet our long-term operating requirements.
We expect to raise additional capital through the sale of equity and/or debt
securities; however, there is no assurance that we will be successful at raising
additional capital in the future. If our plans are not achieved and/or if
significant unanticipated events occur, we may have to further modify our
business plan, which may require us to raise additional capital. As of September
30, 2021, our principal source of liquidity was our cash, which totaled
$2,194,562 .Historically, our principal sources of cash have included proceeds
from the sale of common stock and preferred stock and related party loans. Our
principal uses of cash have included cash used in operations and acquisitions.
We expect that the principal uses of cash in the future will be for continuing
operations, acquisitions and expenses associated with rolling out the business
plan.
Net Cash Used in Operating Activities
Madison used cash of $4,182,399 in operating activities during the first nine
months of fiscal 2021 compared to cash used of $33,851 in operating activities
during the same period in the previous fiscal year. The increase was primarily
the result of increase in expenses associated with the build out and roll out of
Sovryn's business plan.
Net Cash Provided (Used in) Investing Activities
Madison used cash of $14,462,531 in investing activities during the first nine
months of fiscal 2021 compared to cash used of $0 in investing activities during
the same period in the previous fiscal year. The increase was the result of
acquisitions and expenses associated with KNLA/KNET, KVVV , KYMU television
stations, deposits associated with signed purchase agreements and loans made to
Top Dog Productions Inc.
Net Cash Provided by Financing Activities
Net cash flows provided by financing activities of $20,830,001 for the first
nine months of fiscal 2021, were from the proceeds of the Arena financing in
February 2021 and Share subscriptions received but not issued for our Series G
preferred stock and proceeds from subordinated loans, compared to cash used of
$209,000 in financing activities during the same period in the previous fiscal
year.
Off-balance Sheet Arrangements
Madison has no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on its financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that is material to
stockholders.
Going Concern
Madison has not attained profitable operations and is dependent upon obtaining
financing to pursue any extensive business activities. For these reasons,
Madison's auditors stated in their report that they have substantial doubt
Madison will be able to continue as a going concern.
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Tabular Disclosure of Contractual Obligations
Madison is a smaller reporting company as defined by Rule 12b-2 of the Exchange
Act and is not required to provide the information required under this item.
Critical Accounting Policies
Madison's financial statements and accompanying notes are prepared in accordance
with generally accepted accounting principles in the United States. Preparing
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue, and expenses. These
estimates and assumptions are affected by management's application of accounting
policies. Management believes that understanding the basis and nature of the
estimates and assumptions involved with the following aspects of Madison's
financial statements is critical to an understanding of Madison's financial
statements.
Use of estimates
The preparation of the consolidated interim 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 revenue and expenses during
the reporting period. Management makes its best estimate of the ultimate outcome
for these items based on historical trends and other information available when
the financial statements are prepared. Changes in estimates are recognized in
accordance with the accounting rules for the estimate, which is typically in the
period when new information becomes available to management. Actual results
could differ from those estimates.
Change in significant accounting policies
There has been no change in the accounting policies from those disclosed in the
notes to the audited financial statements for the year ended December 31, 2020.
Recently Issued Accounting Pronouncements
The Company adopts new pronouncements relating to generally accepted accounting
principles applicable to the Company as they are issued, which may be in advance
of their effective date. On August 5, 2020, the FASB issued a new standard (ASU
2020-06) to reduce the complexity of accounting for convertible debt. The
standard is effective for Smaller Reporting Companies for fiscal years beginning
after December 15, 2023. Management is reviewing this standard as it believes
this may impact on its financial reporting Management does not believe that
other any pronouncement not yet effective but recently issued would, if adopted,
have a material effect on the accompanying financial statements.
© Edgar Online, source Glimpses
MADISON TECHNOLOGIES INC. 
