10KSB. Service agreement with CC ends in March 2006.
(here is part of it).
During the first three quarters in 2005, our monthly subscriber base remained at approximately 3,000 subscribers. During the last quarter of 2005, our subscriber base began to grow reaching approximately 6,000 subscribers by the end of 2005. We anticipate this growth to continue to a monthly basis ranging from 1,500 to 2,500 new subscribers per month to our overall subscriber base. The overall growth has been caused primarily through more awareness of the Company from ad campaigns.
Part of this public awareness of the Company resulted from a service agreement we entered into with Circuit City Stores, Inc. in October 2005, which commenced in November 2005 and ends in March 2006. The agreement with Circuit City provided for a pilot program to be run in 27 retail stores and on the Circuit City website to promote services offered by us. On December 28, 2005, we entered into an amendment of the service agreement extending the pilot program until March 15, 2006. Although the overall number of subscribers obtained from the Circuit City service agreement was not considered significant in relation to the number of new subscribers added during the last quarter of 2005, we believe that our relationship with Circuit City brought more prominence and recognition to the Company. We will continue to seek similar relationships with nationally known companies or agencies to further brand the Company name.
Our growth will require us in the future to make more significant capital investments in library content, distribution infrastructure and technology. Our current capacity will allow us to service approximately 15,000 monthly subscribers before significant investment as mentioned previously would be required. We currently monitor our monthly growth rate to ensure we properly anticipate the timing of making additional investment in our library content, distribution infrastructure and technology. We currently have four distribution centers located in Southern California, Colorado, Kentucky and Pennsylvania. As our subscriber base grows, we may seek to open additional distribution centers.
We have evaluated and continue to evaluate our operations and operational needs. During 2005, we were able to favorably negotiate a new mailer envelope with the United States Postal Office that reduced our overall postage cost and increased the delivery turnaround time from seven to two days.
We believe that our planned growth and profitability will depend in large part on our ability to promote our services, gain subscribers and expand our relationship with current subscribers. Accordingly, we intend to focus our attention and investment of resources in marketing, strategic partnerships and development of our subscriber base. If we are not successful in promoting our services and expanding our subscriber base, this may have a material adverse effect on our financial condition and the ability to continue to operate the business. |
