**UNITEDSTATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

 

**FORM 10-Q/A**

 

**Amendment No. 1**

 

| **x**  | **QUARTERLY  REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**                                                                                      |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                         |
|   | **For  the quarterly period ended March 31, 2008**                                                                                                                                      |
|   |                                                                                                                                                                                         |
| **o**  | **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 000-50762**

 

**DEBUT BROADCASTING CORPORATION, INC.**

(Exact name ofregistrant as specified in its charter)

 

| **Nevada**                                                      | ** ** | **88-0417389**                       |
|-----------------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |       | (I.R.S. Employer Identification No.) |

 

| **1209  16th Ave South, Nashville, TN**  | ** ** | **37212**  |
|------------------------------------------|------------|------------|
| (Address of principal executive offices) |       | (Zip Code) |

 

**(615) 866-3001**

*(Registrants telephone number,including area code)*

 

**Not Applicable**

(*Former name, former address, and formal fiscal yearif changed since last report)*

 

Indicate by check mark whether the registrant (1) has filed allreports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorterperiod that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.                                              Yes x  No o

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, a non-accelerated filer, or a smaller reportingcompany.  See definition of “acceleratedfiler”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2of the Exchange Act. (Check one):

 

Large acceleratedfiler o     Accelerated filer o  Non-accelerated filer o  Smaller Reporting Company x

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).         Yes o  No x

 

As of March 31,2008, there were 19,794,360 shares of common stock issued and outstanding.

 

 

 

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**EXPLANATORY NOTE**

 

The registrant is filing thisAmendment No. 1 for the purpose of inserting the signature page tothe Quarterly Report on Form 10-Q for the quarter ended March 31,2008, which was inadvertently omitted from the original filing, and to amendcertain typographical errors in the management certifications filed as Exhibits31.1, 31.2 and 32.1.  Other than thechange referred to above, all other information in the Registrant’s Form 10-Qremains unchanged.

 

2

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TABLE OF CONTENTS

 
| ** ** | ** **                                                                                  | **Page** |
|------------|---------------------------------------------------------------------------------------------|----------|
|       | PART I - FINANCIAL INFORMATION                                                         |     |
| Item 1.    | Financial Statements                                                                        | 4        |
| Item 2.    | Management’s Discussion and  Analysis of Financial Condition and Results of Operations | 14       |
| Item 3.    | Qualitative  and Quantitative Disclosures About Market Risk.                                | 26       |
|       |                                                                                        |     |
|       | PART II - OTHER  INFORMATION                                                           |     |
|       |                                                                                        |     |
| Item 1.    | Legal Proceedings                                                                           | 27       |
| Item 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                                | 27       |
| Item 3.    | Defaults  Upon Senior Securities                                                            | 27       |
| Item 4.    | Submission  of Matters to a Vote of Security Holders                                        | 27       |
| Item 5.    | Other Information                                                                           | 27       |
| Item 6.    | Exhibits                                                                                    | 27       |

 

3

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****PART I - FINANCIAL INFORMATION****

 

****Item 1.**** ****     Financial Statements****

 

Our unaudited financial statements included in this Form 10-Q areas follows:

 

Condensed Consolidated Balance Sheet as ofMarch 31, 2008 and December 31, 2007;

 

Consolidated Statements of Operations and AccumulatedDeficit for the three months ended March 31 2008 and 2007;

 

Consolidated Statements of Cash Flows for the threemonths ended March 31, 2008 and 2007;

 

These unaudited financialstatements have been prepared in accordance with accounting principlesgenerally accepted in the United States of America for interim financialinformation and the SEC instructions to Form 10-Q. In the opinion ofmanagement, all adjustments considered necessary for a fair presentation havebeen included. Operating results for the interim period ended March 31,2008 are not necessarily indicative of the results that can be expected for thefull year.   Balance sheetinformation as of December 31, 2007 was derived from the Company’s auditedfinancial statements for the year ended December 31, 2007.

 

4

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****DEBUT BROADCASTINGCORPORATION, INC.****

****CONDENSEDCONSOLIDATED BALANCE SHEETS****

 
| ** **                                                                                                                                  | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                                  | ** ** | **2008**           | ** ** | **2007(1)**           | ** ** |
| ** **                                                                                                                                  | ** ** | **(Unaudited)**    | ** ** | ** **            | ** ** |
| ASSETS                                                                                                                                      |       |               |       |                  |       |
| Current assets                                                                                                                              |       |               |       |                  |       |
| Cash and cash equivalents                                                                                                                   |       | $                  | 451,096    |                  | $          | 8,643 |   |
| Accounts receivable, net                                                                                                                    |       | 887,047            |       | 650,580               |       |
| Other current assets                                                                                                                        |       | 173,758            |       | 45,723                |       |
| Total current assets                                                                                                                        |       | 1,511,901          |       | 704,946               |       |
|                                                                                                                                        |       |               |       |                  |       |
| Property and equipment,  net                                                                                                                |       | 566,319            |       | 541,159               |       |
| Goodwill                                                                                                                                    |       | 79,280             |       | 79,280                |       |
| FCC licenses                                                                                                                                |       | 1,037,000          |       | 1,037,000             |       |
|                                                                                                                                        |       |               |       |                  |       |
| Other intangible assets,  net                                                                                                               |       | 8,153              |       | 13,925                |       |
|                                                                                                                                        |       |               |       |                  |       |
| Total assets                                                                                                                                |       | $                  | 3,202,653  |                  | $          | 2,376,310 |   |
|                                                                                                                                        |       |               |       |                  |       |
| LIABILITIES  AND STOCKHOLDERS’ EQUITY                                                                                                  |       |               |       |                  |       |
| Current liabilities                                                                                                                         |       |               |       |                  |       |
| Accounts payable                                                                                                                            |       | $                  | 216,587    |                  | $          | 339,734 |   |
| Accrued expenses and taxes                                                                                                                  |       | 573,089            |       | 339,411               |       |
| Notes payable                                                                                                                               |       | —             |       | —                |       |
| Notes payable to shareholders                                                                                                               |       | 750,000            |       | —                |       |
| Lines of credit                                                                                                                             |       | 274,297            |       | 239,297               |       |
| Current portion of long-term debt                                                                                                           |       | 69,753             |       | 85,600                |       |
| Total current liabilities                                                                                                                   |       | 1,883,727          |       | 1,004,072             |       |
|                                                                                                                                        |       |               |       |                  |       |
| Long term liabilities                                                                                                                       |       |               |       |                  |       |
| Long-term debt                                                                                                                              |       | 595,105            |       | 601,374               |       |
| Total long term  liabilities                                                                                                                |       | 595,105            |       | 601,374               |       |
|                                                                                                                                        |       |               |       |                  |       |
| Total liabilities                                                                                                                           |       | 2,478,833          |       | 1,605,446             |       |
|                                                                                                                                        |       |               |       |                  |       |
| Stockholders’ equity                                                                                                                   |       |               |       |                  |       |
| Common stock - $.003 par value, 100,000,000 shares authorized 19,794,360  and 19,794,360 issued and outstanding, respectively. (See Note 4) |       | 30,383             |       | 30,383                |       |
|                                                                                                                                        |       |               |       |                  |       |
| Additional paid in capital                                                                                                                  |       | 3,376,026          |       | 3,162,272             |       |
| Accumulated deficit                                                                                                                         |       | (2,682,588         | )          | (2,421,791            | )          |
| Total stockholders’ equity                                                                                                             |       | 723,820            |       | 770,864               |       |
|                                                                                                                                        |       |               |       |                  |       |
| Total liabilities and  stockholders’ equity                                                                                            |       | $                  | 3,202,653  |                  | $          | 2,376,310 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

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(1) Derived from theCompany’s audited financial statements from the year ended December 31,2007.

 

5

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****DEBUT BROADCASTINGCORPORATION, INC.****

****CONDENSEDCONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT****

 

****(Unaudited)****

 
| ** **                                             | ** ** | **Three months ended March 31,** | ** ** |
|--------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                             | ** ** | **2008**                              | ** ** | **2007** | ** ** |
|                                                   |       |                                  |       |   |   |
| Net Revenue                                            |       | $                                     | 451,345    |   | $ | 263,467 |   |
|                                                   |       |                                  |       |   |   |
| Operating expenses                                     |       |                                  |       |   |   |
| Advertising                                            |       | 39,480                                |       | 17,653 |   |
| Operating expense                                      |       | 604,979                               |       | 239,817 |   |
| Depreciation expense                                   |       | 33,472                                |       | 4,709 |   |
| Merger and acquisition  related expenses               |       | —                                |       | 83,954 |   |
|                                                   |       |                                  |       |   |   |
| Total operating expenses                               |       | 663,996                               |       | 346,032 |   |
|                                                   |       |                                  |       |   |   |
| Operating (loss)                                       |       | (212,300                              | )          | (82,565 | ) |
|                                                   |       |                                  |       |   |   |
| Other income and expense                               |       |                                  |       |   |   |
| Interest expense                                       |       | 36,221                                |       | 26,915 |   |
| Interest income                                        |       | (814                                  | )          | — |   |
|                                                   |       |                                  |       |   |   |
| Total other income and  expenses                       |       | 35,407                                |       | 26,915 |   |
|                                                   |       |                                  |       |   |   |
| Net (loss)                                             |       | $                                     | (260,796   | ) | $ | (109,480 | ) |
|                                                   |       |                                  |       |   |   |
| Accumulated deficit at the  beginning of the period    |       | (2,420,944                            | )          | (725,298 | ) |
|                                                   |       |                                  |       |   |   |
| Accumulated deficit at the  end of the period          |       | $                                     | (2,682,588 | ) | $ | (834,778 | ) |
|                                                   |       |                                  |       |   |   |
| Loss per common share                                  |       |                                  |       |   |   |
| Basic                                                  |       | $                                     | (0.0133    | ) | $ | (0.0056 | ) |
| Diluted                                                |       | (0.0128                               | )          | (0.0056 | ) |
| Weighted average number of shares outstanding, basic   |       | 19,794,360                            |       | 19,794,360 |   |
| Weighted average number of shares outstanding, diluted |       | 20,550,069                            |       | 19,794,360 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

6

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****DEBUT BROADCASTINGCORPORATION, INC. AND SUBSIDIARIES****

****CONDENSEDCONSOLIDATED STATEMENTS OF CASH FLOWS****

****(Unaudited)****

 
| ** **                                                                                 | ** ** | **For the three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-----------------------------------------------|------------|
| ** **                                                                                 | ** ** | **2008**                                      | ** ** | **2007** | ** ** |
| Operating activities:                                                                      |       |                                          |       |   |   |
| Net loss                                                                                   |       | $                                             | (260,796   | ) | $ | (109,480 | ) |
| Adjustments to reconcile net loss to net cash provided by/(used in)  operating activities: |       |                                          |       |   |   |
| Depreciation and amortization                                                              |       | 33,472                                        |       | 4,709 |   |
| Changes in operating assets and liabilities, net of effects of acquisitions:               |       |                                          |       |   |   |
|                                                                                       |       |                                          |       |   |   |
| (Increase) decrease in accounts receivable                                                 |       | (237,136                                      | )          | (1,249 | ) |
| (Increase) decrease in other current assets                                                |       | (129,095                                      | )          | — |   |
| Increase (decrease) in accounts payable                                                    |       | (123,147                                      | )          | 41,071 |   |
| Increase (decrease) in accrued expenses and taxes                                          |       | 233,647                                       |       | 8,025 |   |
|                                                                                       |       |                                          |       |   |   |
| Net cash provided by/(used in) operating activities                                        |       | (222,258                                      | )          | 52,557 |   |
|                                                                                       |       |                                          |       |   |   |
| Investing activities:                                                                      |       |                                          |       |   |   |
| Purchases of property and equipment                                                        |       | (51,132                                       | )          | (1,322 | ) |
|                                                                                       |       |                                          |       |   |   |
| Net cash used in investing activities                                                      |       | (51,132                                       | )          | (1,322 | ) |
|                                                                                       |       |                                          |       |   |   |
| Financing activities:                                                                      |       |                                          |       |   |   |
| Proceeds from issuance of stock warrants                                                   |       | 231,754                                       |       | — |   |
| Proceeds from bank credit facility                                                         |       | 35,000                                        |       | 15,000 |   |
| Proceeds from shareholder notes                                                            |       | 750,000                                       |       | — |   |
| Repayment of long term debt                                                                |       | (22,114                                       | )          | (12,865 | ) |
|                                                                                       |       |                                          |       |   |   |
| Net cash provided by financing activities                                                  |       | 976,637                                       |       | 2,135 |   |
|                                                                                       |       |                                          |       |   |   |
| Net increase in cash and cash equivalents                                                  |       | 442,453                                       |       | (56,109 | ) |
|                                                                                       |       |                                          |       |   |   |
| Cash and cash equivalents at beginning of period                                           |       | 8,643                                         |       | 86,112 |   |
|                                                                                       |       |                                          |       |   |   |
| Cash and cash equivalents at end of period                                                 |       | $                                             | 451,096    |   | $ | 30,003 |   |

 

The accompanyingnotes are an integral part of these financial statements.

 

7

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****Note 1 - Organization****

 

Debut Broadcasting Corporation, Inc.(the “Company”) is located in Nashville, Tennessee and conducts business fromits principal executive office at 1209 16th Avenue South, Nashville, Tennessee37212.  The Company produces anddistributes syndicated radio programs to radio stations across the UnitedStates and Canada.  In addition, theCompany owns and operates five radio stations in Mississippi.

 

The Company maintainsradio syndication in Nashville and produces and distributes 15 radio programs,which are broadcast over approximately 1,400 radio station affiliates.  These radio programs have an estimated 45million U.S. listeners per week. In addition to its syndication services, theCompany owns and operates a multi-media studio with audio, video and on-linecontent production capabilities.  Thisfacility is located on Music Row in Nashville, Tennessee.  The Company also provides marketing,consulting and media buying (advertising) for its radio broadcast stationcustomers in the United States.

 

On May 17, 2007, theCompany consummated a reverse merger with California News Tech, a publiccompany that was organized in Nevada. Media Sentiment, Inc. (“MSI”), a wholly-owned subsidiary ofCalifornia News Tech, held all of the assets and operations of California NewsTech at the date of the merger (see Note 10 — Business Combinations).  Pursuant to a Post-Merger OperatingAgreement, dated as of May 17, 2007, MSI and the Company agreed to operateas separate businesses after the reverse merger, with neither entity exercisingcontrol over the assets or operations of the other.

 

On June 27, 2007,MSI filed a registration statement with the SEC with respect to the issued andoutstanding shares of common stock of MSI for the purpose of completing aspin-off of MSI by transferring all of the shares of common stock of MSI toshareholders of record of California News Tech as of April 20, 2007. Weanticipate completing the spin-off of MSI during the third quarter of 2008.

 

****Note 2 - Basis ofPresentation and Interim Results****

 

The condensed consolidatedfinancial statements include the accounts of the Company, and its subsidiaries.The interim financial statements of the Company. have been prepared withoutaudit.

 

These interim results donot include the assets, liabilities and operations of the non-controlledsubsidiary MSI, which the Company expects to be spun off during the thirdquarter of 2008.

 

Certain information andfootnote disclosures normally included in annual financial statements preparedin accordance with generally accepted accounting principles have been condensedor omitted. We believe that the disclosures are adequate to make the financialinformation presented not misleading. These condensed financial statementsshould be read in conjunction with the audited consolidated financial statementsand the notes thereto for the year ended December 31, 2007. Alladjustments were of a normal recurring nature unless otherwise disclosed. Inthe opinion of management, all adjustments necessary for a fair statement ofthe results of operations for the interim period have been included. Theresults of operations for such interim periods are not necessarily indicativeof the results for the full year.

 

Accounts Receivable

 

We use the allowancemethod for determining the collectability of our accounts receivable.  The allowance method recognizes bad debtexpense following a review of the individual accounts outstanding in light ofthe surrounding facts.  Accountsreceivable are reported at their outstanding unpaid principal balances reducedby an allowance for doubtful accounts based on historical bad debts, factorsrelated to specific customers’ ability to pay and economic trends.  We write off accounts receivable against theallowance when a balance is determined to be uncollectible.  Accounts receivable on the consolidatedbalance sheet is stated net of our allowance for doubtful accounts.  The following table shows activity in ourallowance for doubtful accounts:

 
| December 31, 2005 |   | $ | 0       |   |
|------------------------|--------|---|---------|--------|
| Charged to expense     |   | $ | 300     |   |
| Deductions             |   | $ | (300    | )      |
| December 31, 2006 |   | $ | 0       |   |
| Charged to expense     |   | $ | 89,975  |   |
| Deductions             |   | $ | (69,676 | )      |
| December 31, 2007 |   | $ | 20,299  |   |
| Charged to expense     |   | $ | 24,831  |   |
| Deductions             |   | $ | (19,921 | )      |
| March 31, 2008    |   | $ | 15,389  |   |

 

8

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Revenue and Cost Recognition

 

The Company recognizesits advertising and programming revenues when the Company’s radio shows air onits contracted radio station affiliates. Generally, the Company is paid by a national advertising agency, whichsells the commercial time provided by the affiliate.

 

As the Company earns itsrevenue from the national advertising agency, it also recognizes any amountsdue to the individual shows, which are based on the audience level generated bythe specific program.  Expenses areaccrued at the time the shows are run.

 

Consulting projects aregenerally negotiated at a fixed price per project; however, if the Companyutilizes its advertising capacity as part of the consulting project, it willcharge the consulting client in the same manner as the affiliated stationsdescribed more fully above.  Consultingfee income is recognized as time is incurred under the terms of the contract.

 

Advertising

 

The Company expensesadvertising costs as they are incurred. Total advertising costs of $39,480 and$17,653 are included in the financial statements for the three months ended March 31,2008 and March 31, 2007, respectively.

 

****Note 3 - Initial Adoptionof FIN 48****

 

We adopted the provisionsof Financial Accounting Standards Board (“FASB”) Interpretation No. 48,Accounting for Uncertainty in Income Taxes - an interpretation of FASBStatement No. 109 (“FIN 48”), on May 17, 2007. This interpretationincreases the relevancy and comparability of financial reporting by clarifyingthe way companies account for uncertainty in income taxes. FIN 48 prescribes aconsistent recognition threshold and measurement attribute, as well as clearcriteria for subsequently recognizing, derecognizing and measuring such taxpositions for financial statement purposes. The interpretation also requiresexpanded disclosure with respect to the uncertainty in income taxes.  We do not believe that the timing of theadoption of FIN 46 has created any material differences in comparabilitybetween the three months ended March 31, 2007, and the three months ended March 31,2008.

 

****Note 4 - Loss Per Share****

 

We present basic loss pershare on the face of the consolidated statements of operations.  As provided by SFAS No. 128, EarningsPer Share, basic loss per share is calculated as income available to commonstockholders divided by the weighted average number of shares outstandingduring the period.

 

On January 2, 2008,the Company awarded 342,055 shares through the Debut Broadcasting EmployeeStock Option Plan.  In January of2008, the Company issued a warrant to purchase 62,500 shares of common stock toRemington Capital Partners.  In March of  2008, an additional  warrant to purchase 125,000 of common stockwas issued to Remington Capital Partners in conjunction with a $500,000 bridgeloan to fund acquisitions.  Additionally,during the first quarter of 2008 warrants to purchase 4,666 shares of commonstock were provided to Politis Communications as partial payment for servicesrendered.  Warrants to purchase 21,488shares of common stock were issued to Wolcott Squared as partial payment forservices rendered.  Finally, warrants topurchase 200,000 shares of common stock were issued to Holladay BroadcastingCorporation as non-cash payment toward the local marketing agreement andpurchase of WBBV, FM and KLSM, FM that Debut Broadcasting and HolladayBroadcasting entered into on March 16, 2008.  These 755,709 shares are included in thediluted loss per share as shown.

 

9

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All shares of commonstock and prices have been restated in the accompanying consolidated financialstatements and notes to give effect to the reverse merger of the Company withCalifornia News Tech.  Therefore, thecalculation of loss per share is equal to the number of shares of common stockoutstanding assuming the reverse merger was completed on January 1, 2006.

 

****Note 5 - Property andequipment****

 

Property and equipmentare stated at cost less accumulated depreciation. Depreciation of property andequipment are computed using the straight-line method based upon estimatedlives of assets ranging between three to thirty years. Property and equipmentare summarized as follows:

 
| ** **                           | ** ** | **Estimated  Useful Life** | ** ** | **March 31,  2008** | ** ** | **December  31, 2007** | ** ** |
|--------------------------------------|------------|----------------------------|------------|--------------------------|------------|------------------------|------------|
| Land                                 |       |                       |       | $                        | 49,500     |                   | $          | 49,500 |   |
| Buildings and building  improvements |       | 5  - 10 years              |       | 98,023                   |       | 71,810                 |       |
| Towers and studio  equipment         |       | 5  - 30 years              |       | 324,394                  |       | 314,666                |       |
| Furniture, fixtures and  equipment   |       | 3  - 7 years               |       | 165,705                  |       | 150,515                |       |
| Automotive                           |       | 3  - 5 years               |       | 101,858                  |       | 101,858                |       |
|                                 |       |                       |       |                     |       |                   |       |
| Accumulated depreciation             |       |                       |       | (173,162                 | )          | (147,190               | )          |
| Property and equipment,  net         |       |                       |       | $                        | 566,319    |                   | $          | 541,159 |   |

 

Of the $566,319 in NetProperty and Equipment as of March 31, 2008, $292,947 was added throughthe acquisition of five broadcast radio stations during the second quarter of2007 including equipment purchases to support the acquired stations.

 

****Note 6 - Lines of Credit****

 

On May 3, 2002 andamended on April 26, 2004, the Company entered into an unsecuredpromissory note establishing a revolving line of credit with the Bank ofAmerica for $75,000.  The note requiresmonthly interest payments and the interest rate is based on the bank’s primerate, which was 7.5% at March 31, 2008. The note matures on May 3,2008.  The balance of the line of creditat both March 31, 2008 and 2007 was $75,000.

 

The Company signed apromissory note and established a revolving line of credit on February 27,2004 for $200,000 with Regions Bank to refinance existing debt. The notematures on August 31, 2008, and requires monthly interest paymentsaccruing at an initial rate of 7.58% and a current rate of 5.025% at March 31,2008. The rate is subject to monthly changes based on an independent index plus2.25%.

 

The note is secured bypersonal guarantee of certain officers of the Company and all inventory,chattel paper, accounts, equipment and general intangibles existing orpurchased after the signing of the related agreement. The principal balance at March 31,2008 and 2007 was $199,297 and $135,375, respectively.

 

****Note 7 - Notes Payable toShareholders****

 

Debut BroadcastingShareholder Notes

 

Shareholder loans to theCompany were made under various promissory notes dated May 15, 2003through May 17, 2006. The interest rate for these loans was the primerate.  Principal and interest werepayable upon shareholder demand. The total balance of these loans at March 31,2008 and 2007 was $0 and $162,158, respectively.

 

On June 6, 2005, theCompany entered into an unsecured loan agreement with Rush Capital, LLC for$50,000. Rush Capital is an entity owned and controlled by an officer andshareholder of the Company.  

 

10

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The promissory note, plusinterest accrued at prime, was payable upon demand.  The total balance of these loans at March 31,2008 and 2007 was $0 and $50,000.

 

On June 5, 2006 theCompany entered into a loan agreement with Rush Capital, LLC for $3,000. Thepromissory note, plus interest accrued at prime, was payable upon demand.  The total balance of this loan at March 31,2008 and 2007 was $0 and $3,000.

 

Effective with thereverse merger of the Company on May 17, 2007, the outstanding balances ofprincipal and interest on the Rush Capital and other shareholder notes wereconverted into 430,316 shares of common stock in the Company.   Therefore, the balance of these loans at March 31,2008 was $0.

 

On January 21, 2008the Company entered into a loan agreement with Remington Capital Partners for$250,000.   This loan agreement includedwarrant coverage for 62,500 shares of common stock, a $2,000 loan originationfee and interest of 18% per annum due monthly. The promissory note plus any accrued interest is payable on January 31,2009.

 

On February 26, 2008the Company entered into a loan agreement with Remington Capital Partners for$500,000.   This loan agreement includedwarrant coverage for 125,000 shares of common stock, a $2,000 loan originationfee and interest of 18% per annum due monthly. The promissory note plus any accrued interest is payable on February 28,2009.

 

Total interest expenseassociated with the shareholder loans for the three months ended March 31,2008 and 2007 was $13,808 and $4,438 respectively.  Accrued interest due to shareholders was $0and $32,930 as of March 31, 2008 and 2007, respectively.

 

****Note 8 - Loans Payable****

 

Regions Bank Loan

 

On August 15, 2006,the Company signed a promissory note with Regions Bank for $300,000 with aninitial interest rate of 7.58% and a current rate of  5.11125% as of March 31, 2008. The loan is secured by all inventory, chattelpaper, accounts, equipment and general intangibles of the Company.  The loan matures August 30, 2011 and ispayable in monthly installments of $6,058, including variable interest at 2.25%points per annum over the London Interbank Offered Rate for the applicableindex period.

 

Total interest expense onthe Regions Bank loan for the three months ended March 31, 2008 and 2007was $4,209 and $5,308 respectively. The balance of the loan at March 31,2008 was $221,936 of which $42,945 was classified as current portion oflong-term debt.  The balance of the loanat March 31, 2007 was $275,730, of which $39,820 was classified as currentportion of long-term debt.

 

Citadel CommunicationsLoan

 

On August 28, 2002,the Company signed an unsecured promissory note with Citadel Communications for$430,415.  The loan has no maturity dateand accrues interest at a rate of 12%. The note was amended in April, 2003 requiring interest only paymentsindefinitely.  Total interest expense onthe Citadel Communications loan for the three months ended March 31, 2008and 2007 was $10,428 and $10,428 respectively. The balance of the loan at both March 31, 2008 and 2007 was$347,491.

 

Vehicle Loans

 

On August 28, 2007the Company signed a direct purchase money loan and security agreement withDaimlerChrysler for the purchase of two vehicles for $50,068 with an effectiveinterest rate of 7.3%. The corresponding promissory note is to be paid over afive-year period with a monthly payment of $1,011.

 

On September 25,2007, the Company signed a retail installment sale contract with GMAC for thepurchase of two vehicles for $47,498 with an effective interest rate of5.0%.  The corresponding promissory noteis to be paid over a three-year period with a monthly payment of $1,424. Thepurchased vehicles are used in conjunction with the radio broadcast operations.

 

11

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Total interest expense onthe vehicle loans for the three months ended March 31, 2008 and 2007 was$1,528 and $0, respectively.  Theprincipal balance of the vehicle loans as of March 31, 2008 and 2007 was$87,212 and $0, respectively.  At March 31,2008, $18,032 was classified as the current portion.

 

Capital Lease

 

On December 5, 2007,the Company entered into a capital lease arrangement with National City MediaFinance to acquire studio equipment for $15,009 with a fixed interest rate of7.5%. The lease term is for three years with monthly payments of $464 with a $1buyout option at the end of the lease term.

 

Total interest expense onstudio equipment for the three months ended March 31, 2008 and 2007 was$361 and $0, respectively. The principal balance of the capital lease as of March 31,2008 and 2007 was $13,503 and $0 respectively. At March 31, 2008, $3,530 was classified as the current portion ofthe lease.

 

****Note 9 - Shareholders’Equity****

 

In connection with thereverse merger on May 17, 2007, all shares of common stock of DebutBroadcasting (as hereinafter defined) outstanding prior to the merger wereexchanged for 10,000,000 shares of Company common stock (See Note 10. BusinessCombinations).

 

In addition, inconnection with the reverse merger, the Company completed a private placementof 6,000,000 shares of Company common stock at $0.50 per share.  The transaction was recorded net of financingcosts of $23,502.

 

Finally, in connectionwith the reverse merger, the Company converted notes payable to shareholders inthe amount of $215,158 into 430,316 shares of Company common stock at $0.50 pershare.

 

The pre-mergershareholders of the Company maintained 364,044 shares of Company common stock.

 

On May 21, 2007,$100,000 of convertible debentures issued on May 15, 2007 were convertedinto 3,000,000 shares of Company common stock.

 

****Note 10 - BusinessCombinations****

 

California News Tech

 

On May 17, 2007, theCompany entered into an Agreement and Plan of Merger with California NewsTech.  The merger was accounted for as areverse merger using the purchase method of accounting.  Accordingly, the acquisition has been treatedas an acquisition of California News Tech by the Company.  MSI held all of the assets and operations ofCalifornia News Tech at the date of the merger.

 

As part of the reversemerger, each share of common stock of Debut Broadcasting, Inc., aTennessee Corporation formerly known as The Marketing Group (“DebutBroadcasting”), issued and outstanding immediately prior to the closing of themerger was converted into the right to receive one share of common stock. As aresult, the shareholders of Debut Broadcasting received 10,000,000 newly issuedshares of common stock.

 

Also as part of thereverse merger, the Company issued 6,430,316 shares of Company common stock toinvestors as a result of closing a private offering that was exempt fromregistration under Rule 506 of Regulation D of the Securities Act of 1933.  The shares were issued for a combination ofcash and debt reduction.

 

On June 27, 2007,MSI filed a registration statement with the Securities and Exchange Commissionwith the respect to the issued and outstanding shares of common stock of MSIfor the purpose of completing a spin-off of MSI by transferring all of theshares of common stock of MSI to shareholders of record of California News Techas of April 20, 2007. We anticipate completing the spin-off of MSI duringthe first quarter of 2008.

 

As part of the reversemerger, the Company also entered into a Post-Merger Operating Agreement inwhich the Company and MSI agreed to operate their respective businessesseparately and the Company, 

 

12

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specifically agreed thatit would not interfere in any manner with the operations of MSI, have anyrights to use, acquire or otherwise operate any of the assets or intellectualproperty of MSI or create any liabilities for which MSI would be obligated.  In addition, MSI agreed that it would notinterfere in any manner with the operations of the Company, have any rights touse, acquire or otherwise operate any of the assets or intellectual property ofthe Company or create any liabilities for which the Company would be obligated.

 

Moreover, as part of thisPost-Merger Operating Agreement, the Company agreed that if for any reasonCalifornia News Tech is unable to register the MSI shares, that the Companywould sell its MSI shares to the Company’s former president and director,Marian Munz, for $1.00. As a consequence, MSI has and will continue to operatecompletely separate from the Company effective as of the date of the reversemerger.

 

In addition, at the timeof the reverse merger, the Company was released from certain liabilities to itsformer president and director, Mr. Munz, and his spouse; however, theseliabilities continued as the sole responsibility of MSI in the form of twoseparate convertible promissory notes. These notes remain outstanding but, if converted under their terms intoshares of MSI common stock, would represent over an 80% interest and fullvoting control over MSI.

 

As a result, the Companyconsiders MSI a non-controlled subsidiary and has not included any operatingresults, cash flow analysis or assets and liabilities of MSI in itsconsolidated financial statements.

 

The Company reported thedetails of the Agreement and Plan of Merger and the related transactions on a Form 8-Kfiled May 22, 2007.

 

**ShamrockBroadcasting, Inc.**

 

On June 7, 2007, theCompany acquired two radio broadcast stations identified as WNLA FM 105.5 MHzand WNLA AM 1380 kHz in Indianola, Mississippi, from Shamrock Broadcasting, Inc.,including all of the facilities, equipment, licenses and intellectual propertynecessary to operate these stations, in exchange for $300,000.  In a separate agreement, the Companypurchased the accounts receivable of Shamrock Broadcasting through issuance ofa $10,134 promissory note payable in equal installments made in each of threemonths following completion of the transaction.

 

The purchase price wasallocated as follows:

 
| **Description**          | ** ** | **Amount** | ** ** |
|--------------------------|------------|------------|------------|
|                     |       |       |       |
| Accounts receivable      |       | $          | 10,134     |   |
| Land                     |       | 14,500     |       |
| Buildings and structures |       | 13,500     |       |
| Equipment                |       | 30,000     |       |
| FCC licenses             |       | 237,000    |       |
| Non-compete agreement    |       | 5,000      |       |
| Liabilities assumed      |       | (10,134    | )          |
| Total                    |       | $          | 300,000    |   |

 

**RiverBroadcasting Company**

 

On June 19, 2007,the Company acquired three radio broadcast stations identified as WIQQ FM 102.3MHz in Leland, MS, WBAQ FM 97.9 MHz and WNIX AM 1330 kHz in Greenville, MS,from River Broadcasting Company, including all of the facilities, equipment,licenses and intellectual property necessary to operate these stations, inexchange for $1,037,134.  In September 2007,the Company identified a $14,280 liability that was not recorded as of theclosing date of the transaction.  Thiswas recorded as an adjustment to goodwill.

 

The purchase price wasallocated as follows:

 
| **Description**          | ** ** | **Amount** | ** ** |
|--------------------------|------------|------------|------------|
|                     |       |       |       |
| Accounts receivable      |       | $          | 37,134     |   |
| Land                     |       | 35,000     |       |
| Buildings and structures |       | 50,000     |       |
| Equipment                |       | 25,000     |       |
| FCC licenses             |       | 800,000    |       |
| Non-compete agreement    |       | 25,000     |       |
| Goodwill                 |       | 79,280     |       |
| Liabilities assumed      |       | (14,280    | )          |
| Total                    |       | $          | 1,037,134  |   |

 

13

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We reported ouracquisition of these five radio stations on a Form 8-K filed June 22,2007.

 

**HolladayBroadcasting Company**

 

On March 16, 2008,the Company entered into a Local Marketing Agreement (“LMA”) with two radiobroadcast stations identified as WBBV FM 101.3 MHz in Vicksburg, MS, KLSM FM105.5 MHz in Tallulah, LA with Holladay Broadcasting Company, including all ofthe facilities, equipment, licenses and intellectual property necessary tooperate these stations.  The Companymaintains the station including all revenues and expenses.  Holladay Broadcasting Company has retainedownership of all assets and liabilities of the station that were incurred priorto March 16, 2008.

 

On March 16, 2008,the Company signed an asset purchase agreement and filed with the FCC forownership of WBBV FM 101.3 MHz in Vicksburg, MS including all of thefacilities, equipment, licenses, intellectual property, assets, and liabilitiesof the station.

 

****Item2.     Management’s Discussion and Analysis ofFinancial Condition and Results of Operations****

 

****Forward-Looking Statements****

 

Certain statements, otherthan purely historical information, including estimates, projections,statements relating to our business plans, objectives, and expected operatingresults, and the assumptions upon which those statements are based, are “forward-lookingstatements” within the meaning of the Private Securities Litigation Reform Actof 1995, Section 27A of the Securities Act of 1933 and Section 21E ofthe Securities Exchange Act of 1934. These forward-looking statements generallyare identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,”“intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “willcontinue,” “will likely result,” and similar expressions. We intend suchforward-looking statements to be covered by the safe-harbor provisions forforward-looking statements contained in the Private Securities LitigationReform Act of 1995, and are including this statement for purposes of complyingwith those safe-harbor provisions. Forward-looking statements are based oncurrent expectations and assumptions that are subject to risks anduncertainties which may cause actual results to differ materially from theforward-looking statements. Our ability to predict results or the actual effectof future plans or strategies is inherently uncertain. Factors which could havea material adverse affect on our operations and future prospects on aconsolidated basis include, but are not limited to: changes in economicconditions, legislative/regulatory changes, availability of capital, interestrates, competition, and generally accepted accounting principles. These risksand uncertainties should also be considered in evaluating forward-lookingstatements and undue reliance should not be placed on such statements. Weundertake no obligation to update or revise publicly any forward-lookingstatements, whether as a result of new information, future events or otherwise.Further information concerning our business, including additional factors thatcould materially affect our financial results, is included herein and in ourother filings with the SEC.

 

**CompanyOverview**

 

We are located inNashville, Tennessee and conduct business from our principal executive office,located at 1209 16th Avenue South, Nashville, Tennessee 37212. Weproduce and distribute syndicated radio programs to radio stations across theUnited States and Canada. In addition, we own and operate five radio stationsin Mississippi.

 

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We maintain radiosyndication in Nashville and produce and distribute 15 radio programs, whichare broadcast over approximately 1,400 radio station affiliates. These radioprograms have an estimated 45 million U.S. listeners per week. In addition tosyndication services, we own and operate a multi-media studio with audio, videoand on-line content production capabilities. This facility is located on MusicRow in Nashville, Tennessee. We also provide marketing, consulting and mediabuying (advertising) for our radio broadcast station customers in the UnitedStates.

 

The Company wasoriginally incorporated in Nevada on January 22, 1999 as NewsSurfer.comCorporation (the “Predecessor Company”). In 2001, the Predecessor Company changed its name to California NewsTech and shifted its business plan to focus on providing online access to newsmedia analysis for a subscription fee. On October 31, 2006, thePredecessor Company transferred all of its assets, liabilities, and businessoperations to a new wholly-owned subsidiary, Media Sentiment, Inc. (“MSI”).

 

On May 17, 2007, theCompany issued a control block of its common stock to the former shareholdersof Debut Broadcasting, Inc. (“Debut Broadcasting”), a privately heldTennessee corporation. Through a series of related transactions (the “ReverseMerger”), the Company acquired Debut Broadcasting, which became the Company’swholly-owned subsidiary, and subsequently the Company changed its name to DebutBroadcasting Corporation, Inc.

 

As part of the ReverseMerger, the Company and MSI entered into a Post-Merger Operating Agreement inwhich the two entities agreed to operate their respective businessesseparately, and agreed to not interfere in any manner with their respectiveoperations, have any rights to use, acquire or otherwise operate any of theirrespective assets or intellectual property, or create any liabilities for whichthe other party would be obligated.

 

As part of thisPost-Merger Operating Agreement, the Company agreed that if for any reason theformer president and director of the Predecessor Company, Marian Munz, isunable to register the MSI shares, that the Company would sell our shares toMunz, for $1.00. As a consequence, MSI has and will continue to operatecompletely separate from the Company from the date of the Reverse Merger.

 

In addition, at the timeof the Reverse Merger, the Company was released from certain liabilities to itsformer president and director, Mr. Munz, and his spouse; however, theseliabilities continued as the sole responsibility of MSI in the form of twoseparate convertible promissory notes. These notes remain outstanding but, ifconverted under their terms into shares of MSI common stock, would representover an 80% interest and full voting control over MSI.

 

As a result, the Companyconsiders MSI a non-controlled subsidiary for financial purposes,  and has not included any operating results,cash flow analysis or assets and liabilities of MSI in its consolidatedfinancial statements.

 

On June 27, 2007,MSI filed a registration statement with the SEC with respect to its issued andoutstanding shares of common stock for the purpose of completing a spin-off ofMSI by transferring all its shares of common stock to stockholders of record ofCalifornia News Tech as of April 20, 2007. The Company anticipates the completion of the spin-off of MSI duringthird quarter of 2008.

 

*Our Focus*

 

Our strategicfocus is on small, rural-sized markets in the Southeastern United States. Webelieve that these markets represent attractive operating environments andgenerally exhibit the following:

 

·                                          Below-market purchase prices;

 

·                                          Rising advertising revenues, as the larger nationaland regional retailers expand into these markets;

 

·                                          Small independent operators, many of whom lack thecapital to produce high-quality locally originated programming or to employmore sophisticated research, marketing, management and salestechniques; and

 

·                                          Lower overall susceptibility to economic downturns.

 

*Operating Strategy*

 

                Our operating strategy capitalizes on the synergieswe create between radio syndication and radio station operations.  We have the technology, talent, andfacilities to outsource content for radio stations.  By utilizing this content, we gainaffiliates, increase Arbitron ratings for our affiliates and, therefore,generate 

 

 

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increased revenues inadvertising sales.  We maximize thisstrength by utilizing a strategy of building radio content once, and re-sellingit to new markets over and over.

 

                The strength of our radio operations strategy lies inour ability to buy existing radio stations at prices below market value.  We utilize our extensive radio and managementbackground to successfully increase sales, reduce operating costs and increaseoverall performance.

 

*Acquisition Strategy*

 

Ouracquisition strategy has the following principal components:

 

·                                          assemble leading radio station clusters in small ruralmarkets by taking advantage of their size and fragmented nature of ownership;and

 

·                                          selectively acquire leading stations where we believewe can cost-effectively achieve a leading position in terms of signal coverage,revenue or audience share and acquire under-performing stations where there issignificant potential to apply our management expertise to improve financialand operating performance. 

 

                On March 16, 2008 we signed an asset purchaseagreement for WBBV, FM 101.1 MHz in Vicksburg, MS.  Additionally, we placed KLSM, FM in Tallulah,LA under a local marketing agreement.  We believe these stations conform to our focus and operatingstrategy.  Geographically, we expect tobe able to capitalize on the proximity to Vicksburg to achieve significant costreductions.  Key station roles inengineering, sales management, and business management will be distributedacross the region with anticipated incremental savings for all owned andoperated stations.

 

****Existing BusinessOperations of Debut****

 

All of our currentmaterial business operations are conducted through our wholly-owned subsidiaries,The Marketing Group, Inc., and Debut Broadcasting Mississippi, Inc.

 

*Existing Radio SyndicationBusiness*

 

                Our core business is the production and distributionof syndicated radio programming to radio stations in the U.S. and Canada. Wehave grown from a single radio program in 1999 to approximately 14 distinctprograms and services currently offered to radio stations in the U.S. andCanada. Our customer base of nearly 1,400 radio stations generates an audienceof nearly 45 million listeners each week in the US. Our current programmingfocuses on country, Christian, and urban formats. Our planned expansionincludes adult contemporary and rock formats.

 

                Revenue is generated from advertising and sponsorshipsold in the syndicated radio programs, as well as revenue-sharing agreementswith radio station affiliates. Key advertising relationships include Wal-Mart,Pfizer, GEICO Insurance, Johnson & Johnson, General Mills, and Proctor &Gamble.

 

                During the past decade, rapid consolidation of theradio industry resulted from government de-regulation of ownership limits.Companies that owned the maximum of 24 radio stations prior to 1996 are nowfree to own far more licenses. At the beginning of 2007,  larger companies owned an average of 254stations each and the largest, Clear Channel Communications, owned over 1,100stations (although it is in the process of divesting stations in some smallermarkets).

 

The process ofconsolidation has dramatically reduced staffing levels. Most radio stations nowrely on automation systems and syndicated programming to fill airtime.   Management believes that the average numberof employees dedicated to each on-air radio signal in 1996 was eight; today,that number is below three. We have exploited this need, providing radio stationswith daily features and hourly weekend programming.

 

                We intend to continue our rapid expansion of theprogramming and services we offer to radio stations, including increasedpenetration of larger markets with long-form programming. Specifically, we willfocus on creating a new-generation of long-form, 24-hour programming in thefollowing formats:

 

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·                                          Country;

 

·                                          Rock;

 

·                                          Urban; and

 

·                                          Adult Contemporary

 

Relying on our management’sexperience with 24-hour programming, which has been historically delivered viasatellite to radio station affiliates, we now utilize a more efficient deliverymethod facilitated by the Internet. The result is a more “hands-off” operationon the radio station end of the service, higher-quality, much greaterflexibility, more localized programming for radio station affiliates, and morereliable delivery (eliminating vulnerabilities in the traditionalsatellite-delivery systems).

 

In addition,planned our expansion of program and service offerings includes:

 

·                                          24-hour weather and on-call severeweather coverage;

 

·                                          Format-specific news and sportsreporters; and

 

·                                          Production music and station imaging.

 

By increasing the rate ofthe expansion of our programming and services even further, we acquire a highernumber of radio station affiliates and earn increased ratings, which shouldtranslate into increased revenues.

 

****Diversification****

 

Our business planincludes the acquisition and management of radio stations (“Properties”) in smallto mid-sized radio markets in the U.S.

 

During the first quarterof 2008, we launched a Day Part Personality program which diversifies oursyndicated offerings.  We expect torapidly grow this fledgling program throughout the year.  Additionally, we developed a productionlibrary which is available on a subscription basis for stations to subscribeto.  This new library received its firstsubscription from three stations in the Houston, TX market.  Finally, in the first quarter of 2008, webegan a digital delivery conversion program. We will require all affiliates with 100 average quarter hours or less,to receive their syndicated programming from us through digital delivery, by July 1,2008.  This program should result inmaterial reductions to postage, materials, and other shipping expenses.   As of March 31, 2008 we hadsuccessfully converted 30% of our syndication affiliates to digital delivery.

 

Properties acquired by uswill serve as flagships for the new 24-hour programming and other programs andservices provided by us.  We furtheranticipate that these acquisitions will also increase margins and cash flow forthe Properties and existing syndication operations as we leverage uniquesynergies resulting from our existing lines of business. In furtherance of thisstrategy, during June 2007 we acquired and now own and operate fivebroadcast radio stations identified as WIQQ FM 102.3 MHz in Leland,Mississippi, WBAQ FM 97.9 MHz, WNIX AM 1330 kHz in Greenville, Mississippi, andWNLA FM 105.5 MHz and WNLA AM 1380 kHz in Indianola, Mississippi. We willcontinue to review the potential of additional acquisitions of radio stationsin proximity to this area, although there is no assurance that we will be ableto consummate such acquisitions.

 

We believe that ownershipof Properties has the potential to increase our margins and cash flow. We areuniquely capable of more cost-efficient operation of radio stations than otherowners because of our ability to generate the programming out of our existingsyndication operation in Nashville, overlay national advertising revenues andthen localize the content in each market. Further, this strategy blends elements of the new and old economies todiversify risk in three key ways:

 

*HD Radioand Webcasting*.  The FCC approved digital radio (“HD Radio”)in March 2007. Similar to digital television, HD Radio allows broadcastersto transmit two channels digitally through the equivalent of one analogchannel.

 

We anticipate that theyears 2008 through 2010 will show a rapid proliferation of HD Radio. Many radiostations in the top 50 markets have already converted to the new broadcastformat, and major 

 

17

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retailers, includingRadio Shack, Best Buy and Wal-Mart, carry the receivers, which already competefavorably with hardware prices for satellite radio and should continue to drop.

 

HD Radio provides a widerange of new free listening options to consumers without the monthlysubscription charged by satellite radio. All existing FM license-holders havethe right to convert to HD Radio without further approval from the FCC.

 

Further, the growthpotential offered by the new technologies of HD Radio and webcasting into thefuture provide additional diversification opportunities.

 

*Diversificationof Revenue Streams and the Future Potential of New Technologies. *While revenues from syndication and radio stationoperations are both primarily derived from advertising, budgets and clients arequite separate. By diversifying revenues to include both national syndicationrevenues and local-market revenues, we are less vulnerable to any potentialchanges in future market conditions than companies that operate only radiostations.

 

*Diversificationof Assets.*  Ownership of Properties also adds hard assetsto our balance sheet (such as licenses, real estate, towers, etc.) in additionto the extensive intellectual assets we have in our content and brands.

 

****Strategy for Investing InRadio Stations****

 

Our management andmembers of our Board of Directors have extensive experience in the radioindustry, ranging from programming, sales and management to acquisitions andfinancing. That experience has been key to our success in syndication and isthe genesis of our unique and proprietary radio station acquisition strategy.

 

Radio has typicallyprovided a short turnaround cycle and near-term horizon for return oninvestment for investors who focus on strong operational fundamentals. As thelargest radio companies in the U.S. consolidate into the top 100 markets, pricesin medium and small markets have reached levels where management believes thatstations are greatly undervalued and attractive for investment when certainother conditions exist.

 

The largest radiocompanies (Clear Channel, Cumulus, Citadel, CBS, etc.) are increasingly focusedon larger markets because they have determined that they find the greatestcost-efficiency there. We perceive that there is a virtual absence of and needfor a company with an effective strategy for medium and small markets - a successfuland repeatable business model for radio stations that relies primarily onlocal, direct advertising revenues. We intend to create stockholder value byinvesting in medium and small-market radio stations that we perceive are nottaking advantage of modern operational strategies designed to maximize revenueand minimize cost. It is our view that many such stations are underperformingfinancially because of poor sales strategies and inefficient costs ofoperation.

 

By investing only inProperties that are under-performing, we hope to capture the gap between lowpurchase prices (typically four times net revenue or seven times broadcast cashflow) and the public market for healthy stations (estimated at between nine to15 times broadcast cash flow). A recent article in the trade publication *InsideRadio* reported ona Kagan study that showed the largest transactions in 2006 averaged as high as17 times broadcast cash flow. The worst state for such transactions, Louisiana,averaged 8.2 times broadcast cash flow. Management believes the benchmark ofnine to 15 times multiple is holding up against market trends. Management hasstrong confidence in its strategy to selectively acquire Properties becauseindustry researchers like Kagan continue to report a robust flow of privatecapital into both large and small acquisitions within the radio industry.

 

In broad terms, ourinvestment criteria include:

 

·                                          Consolidation. The opportunity to consolidate multipleProperties in a single market is a key investment criteria because it offersimmediate cost savings.

 

 

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·                                          Dominance. The opportunity to own a substantial majority of theProperties competing for advertising in a single market (the maximum numberallowed by FCC ownership limits or close to it) is a key investment criteriafor competitive reasons. Markets where Clear Channel, Citadel, Cumulus, CBS orother major national competitors are present will be avoided.

               

·                                          Good Infrastructure. Radio stations that are broken, abusedor neglected can be turned around quickly with good management. Others that wedetermine are in particularly poor physical condition will require too muchtime and resources to turn around and, therefore, will not meet our acquisitioncriteria.

               

·                                          Demographics and the Local Economy. High-priority acquisition markets willhave positive growth trends for population, retail sales and other lifestyleand economic factors because the extent of the turnaround can be moreaccurately projected on these bases.

 

Consummation ofour pending acquisitions and any acquisitions in the future are subject tovarious conditions, such as compliance with FCC and regulatory requirementswhich are discussed elsewhere in this report.

 

We cannot becertain that any of these conditions will be satisfied. In addition, the FCChas asserted the authority to review levels of local radio market concentrationas part of its acquisition approval process, even where proposed assignmentswould comply with the numerical limits on local radio station ownership in theFCC’s rules and the Communications Act.

 

Our acquisitionstrategy involves numerous other risks, including risks associated with:

 

·                                          Identifying acquisition candidates and negotiatingdefinitive purchase agreements on satisfactory terms; 

                                                

·                                          Integrating operations and systems and managing alarge and geographically diverse group of stations; and

                                                

·                                          Diverting our management’s attention from otherbusiness concerns. 

                                                

 

We cannot becertain that we will be able to successfully integrate our acquisitions ormanage the resulting business effectively, or that any acquisition will achievethe benefits that we anticipate. In addition, we are not certain that we willbe able to acquire future properties at valuations as favorable as those ofprevious acquisitions.

 

****Sales and ProgrammingStrategies****

 

Management’s experienceis that radio station turn-arounds are achieved most quickly with a combinationof revenue growth and cost-cutting. We believe that we have the potential to accomplishboth in some new, unique ways based on synergies with our existing lines ofbusiness.

 

                Our sales plan for our acquired Properties is toexpand revenue from a single source to three distinct revenue streams:

 

·                                          Local Advertising. This is typically the existing revenuestream for any acquisition. By utilizing tighter structure, ongoing trainingand new technology (i.e. presentation and sales tracking software), we hope tomake account executives more effective. There can be no assurance that we willbe successful in achieving similar increases with Properties we acquire.

                                                

·                                          Event & Promotion Revenues. It has been our management’s experiencethat overall revenues have the potential to increase as much as 20 percent withthe addition of event and promotion revenues. This also has the effect ofgenerating new revenues from non-traditional advertisers, such as employers,professional services companies, and smaller advertisers who are typicallypriced out of standard radio advertising. There can be no assurance that wewill be successful in generating new event and promotion revenues.

 

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·                                          National Advertising. Because we have an existing nationaladvertising sales plan, we anticipate that any acquired Properties willimmediately be able to access this new revenue stream, increasing overall salesby 10-15 percent within 30 days. There can be no assurance that we will besuccessful in implementing our national advertising sales plan at Properties weacquire.

 

Our programming plan forthe acquired Properties has been centered around our expansion into 24-hoursyndicated music programming. Our existing syndication operation in Nashvillenow provides the music, imaging and most of the air talent. This has resultedin a more sophisticated radio station at a reduced expense. Localized staffingat the radio station level now concentrates on localization of the content(i.e. weather, news and information, promotions, remotes and community events).

 

                Taking advantage of the latest technology, weanticipate that approximately 90 percent of each radio station acquired can beprogrammed from a central studio location in Nashville. As a result, the localstaff in each market can concentrate on serving the local audience bylocalizing the content, marketing the radio stations and generating revenuethrough ad sales and promotional events. This represents a more efficient useof resources and is more cost-efficient than current practice.

 

****The Overall Impact of OurAcquisitions****

 

We anticipate that theimpact on margins and cash flow will become even greater as more acquisitionsare made. Fixed costs of programming on a per station basis continue to fall asthe expense is distributed over a larger number of radio stations, and newrevenue streams - particularly “non-traditional” forms of revenue - increase asthe scale of our business increases. Also, as we acquire additional radiostations, the impact on the existing syndication operation also increasesbecause of added revenue potential from the owned and operated radio stations.

 

                Members of management and the Board of Directors haveextensive networks of contacts within the radio industry that we believe willgenerate a consistent and reliable flow of potential deals for evaluation, aswell as extensive experience in radio station operation, acquisition andfinancing.

 

                In June 2007, we completed the initial two radiostation acquisitions consisting of five radio stations in and aroundGreenville, Mississippi, which we are assembling into a station cluster (the “GreenvilleCluster”).

 

| The Market:                                  |   | Greenville, Mississippi            |
|----------------------------------------------|--------|------------------------------------|
| Designated Marketing  Area(“DMA”): |   | Greenville-Greenwood,  Mississippi |
| Rank:                                        |   | 184                                |

 

On June 7, 2007, weacquired two radio broadcast stations identified as WNLA FM 105.5 MHz and WNLAAM 1380 kHz in Indianola, Mississippi, from Shamrock Broadcasting, Inc.,including all of the facilities, equipment, licenses and intellectual propertynecessary to operate these stations, in exchange for $300,000. In a separateagreement, we purchased the accounts receivable of Shamrock Broadcastingthrough issuance of a $10,134 promissory note payable in installments made ineach of three months following completion of the transaction.

 

                The purchase price was allocated as follows:

 
| **Description**          | ** ** | **Amount** | ** ** |
|--------------------------|------------|------------|------------|
| Accounts receivable      |       | $          | 10,134     |   |
| Land                     |       | 14,500     |       |
| Buildings and structures |       | 13,500     |       |
| Equipment                |       | 30,000     |       |
| FCC licenses             |       | 237,000    |       |
| Non-compete agreement    |       | 5,000      |       |
| Liabilities assumed      |       | (10,134    | )          |
| Total                    |       | $          | 300,000    |   |

 

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On June 19, 2007, weacquired three radio broadcast stations identified as WIQQ FM 102.3 MHz inLeland, Mississippi, WBAQ FM 97.9 MHz and WNIX AM 1330 kHz in Greenville,Mississippi, from River Broadcasting Company, including all of the facilities,equipment, licenses and intellectual property necessary to operate thesestations in exchange for $1,037,134. In September 2007, we identified a$14,280 liability that was not recorded as of the closing date of thetransaction. This was recorded as an adjustment to goodwill.

 

                The purchase price was allocated as follows:

 
| **Description**          | ** ** | **Amount** | ** ** |
|--------------------------|------------|------------|------------|
| Accounts receivable      |       | $          | 37,134     |   |
| Land                     |       | 35,000     |       |
| Buildings and structures |       | 50,000     |       |
| Equipment                |       | 25,000     |       |
| FCC licenses             |       | 800,000    |       |
| Non-compete agreement    |       | 25,000     |       |
| Goodwill                 |       | 79,280     |       |
| Liabilities assumed      |       | (14,280    | )          |
| Total                    |       | $          | 1,037,134  |   |

 

Negotiations are ongoingwith a third potential seller for two additional stations within the market,but there is no assurance that any additional acquisitions will be consummatedin the Greenville, Mississippi area.

 

                Greenville, Mississippi falls into theGreenville-Greenwood, Mississippi DMA, which is rated by Arbitron. Althoughthere is no rating book specifically prepared for Greenville, Mississippi, wewill have the option to make Greenville a rated market by entering into asubscription agreement with Arbitron. However, management does not currentlybelieve that this would be beneficial.

 

On March 16, 2008,we entered into a local marketing agreement with Holladay Broadcasting for tworadio stations in and around Vicksburg, Mississippi, which we are assemblinginto a super-regional station cluster (the “Mississippi Super-Regional Cluster”).

 

                We selected these Properties for investment for anumber of reasons. First, they are in close proximity to each other and theyoperate in the same market. Second, each of the stations, each of the threestation groups and the stations collectively have underperformed fiscally inrecent years in terms of revenue generation and operating income.   The third factor in our investment decisionwas the community of Greenville, Mississippi, and the surrounding area. Anestimated 130,000 listeners live within the range of the stations of the GreenvilleCluster. A smaller market would not be able to support the advertisingnecessary to make this a profitable cluster, and a significantly larger marketwould likely already have station clusters owned by competing groups, asopposed to fragmented station ownership by individuals, making our entranceinto the market significantly more difficult.

 

                The final factor in our decision to invest in theGreenville cluster and Mississippi Super-Regional Cluster is the fact that weare able to assemble enough Properties to create a station cluster. By creatinga station cluster, we expect to be able to consolidate the operations of thestations and eliminate redundancies, thereby cutting our per-stationoperational costs. A station cluster also allows us to program multiple,advertiser-friendly formats to reach a cross-section of key demographic andlifestyle groups within the community. By simultaneously selling all thestations as a single offering to advertisers, we anticipate that market shareand overall revenues will increase.

 

 

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                We intend to achieve cost reductions through theelimination of redundant management and administrative positions, consolidationof facilities and the use of technology to reduce programming and technicalexpenses.

 

                We expect to take an aggressive stance on HD Radio asa content provider, and we plan to install HD transmitters as revenue streamsdevelop and as long as current sales trends for HD receivers continue. When weare able to install HD transmitters, we will have at least three additionalterrestrial signals for delivery of content to consumers.

 

While we havesuccessfully acquired five stations, and entered into a local marketingagreement for two stations in our plan for creating the MississippiSuper-Regional cluster, and management anticipates having the ability toconsummate additional acquisitions in the area, there can be no assurance thatany additional acquisitions will be completed or that the resulting stationcluster will be profitable.

 

**Acquisitionsand Dispositions**

 

*Pending Acquisitions*

 

During the fourth quarterof 2007, we signed letters of intent to purchase seven additional radiostations in two markets.   Two of thesestations, WBBV FM, and KLSM FM were placed under a local marketing agreement onMarch 16, 2008.  We signed an assetpurchase agreement and filed for FCC License transfer for these two stationsduring the first quarter of 2008.  Weexpect to close the acquisition during the second quarter of 2008.

 

These markets complementthe geography of our existing radio stations and will create a super-regionalclusterTM resulting in an anticipated reduction in operating costs of up to 17%incrementally.  We anticipate signingasset purchase agreements, and filing for FCC license transfers for the 5 additionalstations during the second and third quarter of 2008.  These acquisitions will represent overallgrowth in radio operations of 140% year over year.

 

****Financing****

 

We will requireadditional capital to execute on our plan to grow through the acquisition ofradio stations and radio station clusters. We do not presently have sufficientcapital to make additional acquisitions. We intend to raise additional capitalover the next twelve months through additional equity offerings.

 

We have made our initial radiostation acquisitions without taking on any additional debt financing. However,debt financing may be advisable and attractive as we contemplate futureadditional acquisitions.

 

Although we are and willbe unable to predict the precise terms of any financing until the time thatsuch financing is actually obtained, it is likely that any such financing willfit within the following parameters:

 

·                                          None of the indebtedness to which theProperties would be subject will be recourse to the shareholders, although someor all of the indebtedness may be recourse to us. However, each obligation willbe secured by a first lien and/or second lien security interest in the financedProperty. It is probable that all of our Properties will be subject tosubstantial security interests.

 

·                                          We expect any indebtedness will be firstrepaid with the operating revenues of the Properties. Operating revenues willfirst be applied to the payment of interest, principal amortization (if any),and principal on primary indebtedness. Next, operating revenues will be appliedto interest on and principal of any subordinate financing.

 

·                                          Each of these financing arrangements maybe subject to acceleration in the event of default, including non-payment,insolvency, or the sale of a Property. Upon an 

 

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acceleration, if we areunable to effect an immediate refinancing, we may lose one or more of ourProperties by foreclosure.

 

While financing mayinitially be available only on a radio station by radio station basis, we mayeventually seek to refinance all of our Properties in one non-recourse loanwhich will, in all likelihood, be secured by all of our Properties.

 

In connection withacquisitions, dispositions and financing, we will incur appropriate accountingand legal fees.

 

****Governmental Regulationof Radio Broadcasting****

 

The following is a briefsummary of certain provisions of the Communications Act, the Telecom Act, andrelated FCC rules and policies (collectively, the “Communications Laws”).This description does not purport to be comprehensive, and reference should bemade to theCommunicationsLaws, public notices, and decisions issued by the FCC for further informationconcerning the nature and extent of federal regulation of radio broadcaststations. Failure to observe the provisions of the Communications Laws canresult in the imposition of various sanctions, including monetary forfeituresand the grant of a “short-term” (less than the maximum term) license renewal.For particularly egregious violations, the FCC may deny a station’s licenserenewal application, revoke a station’s license, or deny applications in whichan applicant seeks to acquire additional broadcast properties.

 

**License Grant andRenewal.**Radiobroadcast licenses are granted and renewed for maximum terms of eight years.Licenses are renewed by filing an application with the FCC. Petitions to denylicense renewal applications may be filed by interested parties, includingmembers of the public.

 

*ServiceAreas.*  Thearea served by AM stations is determined by a combination of frequency,transmitter power, antenna orientation, and soil conductivity. To determine theeffective service area of an AM station, the station’s power, operatingfrequency, antenna patterns and its day/night operating modes are required. Thearea served by an FM station is determined by a combination of transmitterpower and antenna height, with stations divided into classes according to thesetechnical parameters.

 

Class CFM stations operate with the equivalent of 100 kilowatts of effective radiatedpower (“ERP”) at an antenna height of up to 1,968 feet above averageterrain. They are the most powerful FM stations, providing service to a largearea, typically covering one or more counties within a state. Class B FMstations operate with the equivalent of 50 kilowatts ERP at an antenna heightof up to 492 feet above average terrain. Class B FM stationstypically serve large metropolitan areas as well as their associated suburbs. Class AFM stations operate with the equivalent of 6 kilowatts ERP at an antenna heightof up to 328 feet above average terrain, and generally serve smallercities and towns or suburbs of larger cities.

 

Theminimum and maximum facilities requirements for an FM station are determined byits class. FM class designations depend upon the geographic zone in which thetransmitter of the FM station is located. In general, commercial FM stationsare classified as follows, in order of increasing power and antenna height: Class A,B1, C3, B, C2, C1, C0, and C.

 

Thefollowing table sets forth the market, call letters, FCC licenseclassification, antenna elevation above average terrain (for FM stations only),power and frequency of all of our owned and operated stations as of March 31,2008.

 
| **Market**  | ** ** | **Stations** | ** ** | **City of License** | ** ** | **Frequency** | ** ** | **Expiration Date of License** | ** ** | **FCC  Class** | ** ** | **Height Above Average Terrain (in feet)** | ** ** | **Power  (in Watts)** | ** ** |
|-------------|------------|--------------|------------|---------------------|------------|---------------|------------|--------------------------------|------------|----------------|------------|--------------------------------------------|------------|-----------------------|------------|
| Mississippi |       | WNLA  FM     |       | Indianola, MS       |       | 105.5         |       | June 1,  2012             |       | A              |       | 190                                        |       | 4400                  |       |
|        |       | WBAQ  FM     |       | Greenville, MS      |       | 97.9          |       | June 1,  2012             |       | C2             |       | 502                                        |       | 48000                 |       |
|        |       | WIQQ  FM     |       | Leland, MS          |       | 102.3         |       | June 1,  2012             |       | A              |       | 446                                        |       | 1650                  |       |
|        |       | WNLA  AM     |       | Indianola, MS       |       | 1380          |       | June 1,  2012             |       | D              |       | AM                                         |       | 500                   |       |
|        |       | WNIX  AM     |       | Greenville, MS      |       | 1330          |       | June 1,  2012             |       | B              |       | AM                                         |       | 1000                  |       |
|        |       | WBBV  FM     |       | Vicksburg, MS       |       | 101.1         |       | June 1,  2012             |       | C3             |       | 394                                        |       | 13000                 |       |
|        |       | KLSM  FM     |       | Tallulah, LA        |       | 104.9         |       | June 1,  2012             |       | A              |       | 299                                        |       | 3000                  |       |

 

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****Compliance with EnvironmentalLaws****

 

We have not incurred anddo not anticipate incurring any expenses associated with environmental laws.

 

****Results of Operations****

 

****For the three monthsended March 31, 2008 and 2007****

 

On a consolidated basis,we generated $451,345 in net revenue for the quarter ended March 31, 2008,an increase of $187,878 or 41%, compared to $263,467 for the quarter ended March 31,2007.  Approximately $153,000 of thisincrease relates to the Mississippi radio station acquisitions, andapproximately $35,000 in net revenues relates to the core syndication business.

 

Since the merger withCalifornia News Tech occurred during the three months ended June 30, 2007,we did not report corresponding revenue for MSI.

 

On a consolidated basis,advertising expense was $39,480 for the quarter ended March 31, 2008 anincrease of 17,258 or 45%, compared to $17,653 for the quarter ended March 31,2007.  This increase is attributable to apublic relations contract that was entered into between Debut Broadcasting andPolitis Communications.  $4,666 of thisexpense was non-cash expenditure through issuance of warrants to purchasecommon stock.

 

On a consolidated basis,operating expense was $663,996 for the quarter ended March 31, 2008, anincrease of $317,964 or 47%, compared to $346,032 for the quarter ended March 31,2007. Of the total increase in operating expenses, $235,071 relates to theMississippi radio acquisitions which did not have operations recorded in thefirst quarter of 2007. Additional reasons for our increase in operatingexpenses relate to $138,394 in additional costs associated with the company’spublic trading status.

 

On a consolidated basis,depreciation and amortization expense was $33,472 for the quarter ended March 31,2008, an increase of $28,763 or 711%, compared to $4,709 for the quarter ended March 31,2007. The primary reason for the increase relates to the assets acquired aspart of the Shamrock and River acquisitions.

 

During the quarter ended March 31,2007, the Company recorded $83,954 in non-recurring merger and acquisitionrelated expenses.

 

As a result of theforegoing revenue and expenses, our overall net loss for the three month periodending March 31, 2008 and March 31, 2007 was $260,796 and $109,480,respectively.

 

****Liquidity andCapital Resources****

 

As of March 31,2008, we had Current Assets in the amount of $1,511,901 and Current Liabilitiesin the amount of $1,883,727. This resulted in working capital deficit in theamount of $371,826.

 

As of March 31,2008, we had current Assets in the amount of $1,511,901, consisting of$452,545  in Cash and Cash Equivalents,$887,047 in Accounts Receivable, $172,308 in Other Current Assets. As of March 31,2008, we had Current Liabilities in the amount of $1,883,727, consisting of$216,587 in Accounts Payable, $573,089 in Accrued Expenses and Taxes, $750,000in notes payable to shareholders, $274,297 in Lines of Credit and $69753 inCurrent Portion of Long Term Debt. This combination of assets and liabilitiesresulted in a working capital deficit in the amount of $371,826.

 

 

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We will requireadditional capital to execute our plan to grow through the acquisition of radiostations and radio station clusters. We do not presently have sufficientcapital to make additional acquisitions. We intend to raise additional capitalover the next twelve months through equity offerings or by incurring debt.

 

****Recent Events****

 

On January 21, 2008,we entered into a loan agreement with Remington Capital Partners for$250,000.  In conjunction with this loan,we issued Remington Capital Partners a warrant to purchase 62,500 shares of ourcommon stock at an exercise of $1.00 per share.

 

On March 6, 2008, weentered into a loan agreement with Remington Capital Partners for$500,000.  In conjunction with this loan,we issued Remington Capital Partners a warrant to purchase 125,000 shares ofour common stock at an exercise price of $1.00 per share.

 

The essential terms ofthese agreements have been previously disclosed in our filings on Form 8-Kon January 25, 2008 and March 11, 2008 respectively.  The proceeds of these loans were used forworking capital expenditures and to fund acquisition costs related to the assetpurchase agreement with Holladay Broadcasting Corporation of Louisiana, LLC

 

On March 16, 2008,we entered into a local marketing agreement for two radio broadcast stations identified as WBBV FM 101.1 MHz inVicksburg, MS and KLSM FM 104.9 MHz in Tallulah, LA with Holladay Broadcastingof Louisiana, LLC.  We have signed an assetpurchase agreement and filed with the FCC for ownership of these stations.  We reported our purchase of these two radiostations on Form 8-K filed March 19, 2008.

 

****Off Balance SheetArrangements****

 

As of March 31,2008, there were no off balance sheet arrangements.

 

****Critical AccountingPolicies****

 

In December 2001,the SEC requested that all registrants list their most “critical accountingpolices” in the Management Discussion and Analysis. The SEC indicated that a “criticalaccounting policy” is one which is both important to the portrayal of a company’sfinancial condition and results, and requires management’s most difficult,subjective or complex judgments, often as a result of the need to makeestimates about the effect of matters that are inherently uncertain. We believethat the following accounting policies fit this definition.

 

Revenue and CostRecognition

 

The Companyrecognizes its advertising and programming revenues when the Company’s radioshows air on its contracted radio station affiliates.  Generally, the Company is paid by a nationaladvertising agency, which sells the commercial time provided by the affiliate.

 

As the Companyearns its revenue from the national advertising agency, it also recognizes anyamounts due to the individual shows, which are based on the audience levelgenerated by the specific program. Expenses are accrued at the time the shows are run.

 

Consultingprojects are generally negotiated at a fixed price per project; however, if theCompany utilizes its advertising capacity as part of the consulting project, itwill charge the consulting client in the same manner as the affiliated stationsdescribed more fully above.  Consultingfee income is recognized as time is incurred under the terms of the contract.

 

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Advertising

 

The Company expensesadvertising costs as they are incurred. Total advertising costs of $39,490 and$17,653 are included in the financial statements for the quarter ended March 31,2008 and March 31, 2007, respectively.

 

Reclassifications

 

To maintainconsistency and comparability, certain amounts from prior years have beenreclassified and combined, where appropriate, to conform to the current-yearfinancial statement presentation.

 

New AccountingPronouncements

 

The Company adopted theprovisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48,Accounting for Uncertainty in Income Taxes — an interpretation of FASBStatement No. 109 (“FIN 48”), on May 17, 2007.  This interpretation increases the relevancyand comparability of financial reporting by clarifying the way companiesaccount for uncertainty in income taxes. FIN 48 prescribes a consistent recognition threshold and measurementattribute, as well as clear criteria for subsequently recognizing,derecognizing and measuring such tax positions for financial statementpurposes.  The interpretation alsorequires expanded disclosure with respect to the uncertainty in income taxes

 

****Item4.     Qualitative and Quantitative Disclosures AboutMarket Risk.****

 

We carried out anevaluation of the effectiveness of the design and operation of our disclosurecontrols and procedures (as defined in Exchange Act Rules 13a-15(e) and15d-15(e)) as of March 31, 2008. This evaluation was carried out under thesupervision and with the participation of our Chief Executive Officer, Mr. SteveLudwig, and our former Chief Financial Officer, Ms. Shannon Farrington.Based upon that evaluation, our Chief Executive Officer and former ChiefFinancial Officer concluded that, as of March 31, 2008, our disclosurecontrols and procedures are effective. There have been no changes in ourinternal controls over financial reporting during the quarter ended March 31,2008.

 

Disclosure controls andprocedures are controls and other procedures that are designed to ensure thatinformation required to be disclosed in our reports filed or submitted underthe Exchange Act are recorded, processed, summarized and reported, within thetime periods specified in the SEC’s rules and forms. Disclosure controlsand procedures include, without limitation, controls and procedures designed toensure that information required to be disclosed in our reports filed under theExchange Act is accumulated and communicated to management, including our ChiefExecutive Officer and Chief Financial Officer, to allow timely decisionsregarding required disclosure.

 

Limitations on theEffectiveness of Internal Controls

 

Our management does notexpect that our disclosure controls and procedures or our internal control overfinancial reporting will necessarily prevent all fraud and material error. Ourdisclosure controls and procedures are designed to provide reasonable assuranceof achieving our objectives and our Chief Executive Officer and Chief FinancialOfficer concluded that our disclosure controls and procedures are effective atthat reasonable assurance level. Further, the design of a control system mustreflect the fact that there are resource constraints, and the benefits ofcontrols must be considered relative to their costs. Because of the inherentlimitations in all control systems, no evaluation of controls can provideabsolute assurance that all control issues and instances of fraud, if any,within the Company have been detected. These inherent limitations include therealities that judgments in decision-making can be faulty, and that breakdownscan occur because of simple error or mistake. Additionally, controls can becircumvented by the individual acts of some persons, by collusion of two ormore people, or by management override of the internal control. The design ofany system of controls also is based in part upon certain assumptions about thelikelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions.Over time, control may become inadequate because of changes in conditions, orthe degree of compliance with the policies or procedures may deteriorate.

 

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****PART II - OTHER INFORMATION****

 

****Item1.     Legal Proceedings****

 

On March 31, 2008 wewere not party to any pending legal proceeding. On April 16, 2008 webecame party to a legal proceeding with Delta Plaza, LLC a Mississippi LimitedLiability company regarding an alleged breach of a lease contract.  Delta Plaza, LLC is seeking compensation of$65,000.  We are defending our interestsvigorously, and do not anticipate incurring any liability for the compensationand reimbursement sought.

 

****Item2.     Unregistered Sales of Equity Securities and Useof Proceeds****

 

On January 2, 2008,the Company awarded 342,055 shares through the Debut Broadcasting EmployeeStock Option Plan.  In January of2008, the Company issued a warrant to purchase 62,500 shares of common stock toRemington Capital Partners.  In March of  2008, an additional  warrant to purchase 125,000 of common stockwas issued to Remington Capital Partners in conjunction with a $500,000 bridgeloan to fund acquisitions.  Additionally,during the first quarter of 2008 warrants to purchase 4,666 shares of commonstock were provided to Politis Communications as partial payment for servicesrendered.  Warrants to purchase 21,488shares of common stock were issued to Wolcott Squared as partial payment forservices rendered.  Finally, warrants topurchase 200,000 shares of common stock were issued to Holladay BroadcastingCorporation as non-cash payment toward the local marketing agreement andpurchase of WBBV, FM and KLSM, FM that Debut Broadcasting and HolladayBroadcasting entered into on March 16, 2008.  All shares were issued in transactions exemptfrom the registration requirement of the Securities Act of 1933, as amended.

 

****Item3.     Defaults upon Senior Securities****

 

None.

 

****Item4.     Submission of Matters to a Vote of SecurityHolders****

 

No matters have beensubmitted to our security holders for a vote, through the solicitation ofproxies or otherwise, during the quarterly period ended March 31, 2008.

 

****Item5.     Other Information****

 

None.

 

****Item6.      Exhibits****

 
| ****Exhibit  Number**** | **** **** | ****Description of Exhibit****                                                                                                                                               |
|-------------------------|----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1                    |           | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                |
| 31.2                    |           | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                |
| 32.1                    |           | Debut Broadcasting  Corporation, Inc. Certification Pursuant to 18 U.S.C. Section 1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

 

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**SIGNATURES**

 

                Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

**DEBUTBROADCASTING CORPORATION, INC.**

 
| May 15, 2008 | /s/ Sariah Hopkins      |   |
|-------------------|-------------------------|--------|
|              | Sariah Hopkins          |
|              | Chief Financial Officer |

 

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