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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Burst Med Reg S | LSE:BRST | London | Ordinary Share | COM SHS USD0.01 (REGS) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 31.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number : 0800T
Burst Media Corporation
22 September 2010
22 September 2010
Burst Media Corporation
Results for the six-month period ended 30 June 2010
Burst Media Corporation ("Burst" or the "Company"), the international online
advertising services and technology business, announces its results for the
six-month period ended 30 June 2010.
Financial Summary
- Total revenue was $17.3 million (2009: $12.1 million)
o Media revenue was $16.1 million (2009: $10.8 million), boosted by Giant Realm
and Burst Media UK acquisitions
o adConductor revenue was $1.2 million (2009: $1.3 million)
- Gross profit was $7.3 million (2009: $5.8 million)
- Net loss was $2.3 million (2009: $0.7 million)
- Adjusted net loss was $0.7 million (2009: $0.5 million)
- Adjusted LBITDA was $1.5 million (2009: $0.6 million)
- Cash and cash equivalents at 30 June 2010 was $2.4 million (2009: $9.4
million)
(1) See Reconciliation of Net Loss to Adjusted Net Income (Loss) and Adjusted
EBITDA (LBITDA) below.
Operational Summary
- Made further investments in the creative resources of core Burst Network
business, recruiting additional "Brand Solution" and "Creative Services" people
to work alongside sales personnel in order to enrich the innovation and quality
of proposals to brand advertisers
- Acquired OTP Media (subsequently renamed Burst Media UK) to substantially
boost presence in the growing UK market
- Launched the Burst "Spotlight" program to further the development of
exclusive web publisher relationships, beginning with the Moms Network
- Introduced a new licensing initiative for adConductor sales offering full
service support, including ad sales, to media brands interested in building a
vertical network
- Substantially completed two year project to upgrade adConductor campaign
management tools and user interfaces, benefiting productivity
- Loss of business momentum at Giant Realm impacted first half
profitability
Forward Looking Guidance
- Overall sales growth slowed in the opening two months of the second half
but current sales pipelines are strong and there has been evidence of a pick-up
in orders in September
- Giant Realm's performance is improving into the second half, benefitting
from its upgraded sales team
- The Company is pleased to announce that it has signed an agreement with
Fox Sports Inc. to develop and serve as the exclusive sales representative of
the Fox Sports Ad Network in the U.S.
- Despite evidence of a pickup in sales orders, visibility remains limited
and the achievement of current guidance for the full year is dependent on a
strong performance in the final quarter
Commenting, Jarvis Coffin, Chief Executive Officer, said:
"Growth in our Burst Network business over the period continued the trend begun
in Q1 of 2009 following the low point of the global recession. Burst Network
revenues were up 34% against the same period last year with a strong mix of
premium brand advertising business. Burst Direct grew 35% during the period
despite a shifting emphasis from traditional low cost "cost per thousand" (CPM)
business to the rapidly evolving third-party exchange model that is becoming the
preferred platform for remnant, fill inventory. Overall, media revenues were up
49% year-on-year, boosted by sales at Burst Media UK and Giant Realm."
"As previously reported, the required investment in the Giant Realm sales team
early in the year resulted in a loss of momentum in that business which has
impacted significantly upon the Company's losses for the period. Following its
acquisition, Burst Media UK also experienced some sales staff turnover but the
impact here was less severe and the business unit remained profitable.
Performance is improving in the second half, notably at Giant Realm, and current
sales run-rates indicate a positive 2011 as the units benefit from their
improved and more stable sales forces. Management believes that over time Giant
Realm and Burst Media UK will be strong contributors and add significantly to
growth in the core media business."
Reconciliation of Net Loss to Adjusted Net Income (Loss)(1) and Adjusted EBITDA
(LBITDA)(1)
(in thousands, except share amounts)
+--------------------------------+-------------+----------+-------------+----------+----------+
| | Six Months Ended | | Year |
| | | | Ended |
+--------------------------------+--------------------------------------+----------+----------+
| | June 30 | | June 30 | | December |
| | | | | | 31 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Net loss | $ | | $ | | $ |
| | (2,343) | | (745) | | (798) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Adjustments: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Acquisition related expenses | 390 | | 47 | | 319 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Equity-based compensation | 261 | | 159 | | 284 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Restructuring charges | 23 | | ? | | 201 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Adjusted net income (loss)(1) | (1,669) | | (539) | | 6 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Adjustments: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Interest income | (2) | | (40) | | (63) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Provision for income tax | (631) | | (246) | | 52 |
| expense (benefit) | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Depreciation and amortization | 778 | | 227 | | 623 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Adjusted EBITDA (LBITDA)(1) | $ | | $ | | $ |
| | (1,524) | | (598) | | 618 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Adjusted EBITDA (LBITDA)(1) as | (9%) | | (5%) | | 2% |
| % of revenue | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
(1) "Adjusted net income (loss)" loss excluding acquisition related expenses,
equity-based compensation and restructuring charges) and "Adjusted EBITDA
(LBITDA)" (Adjusted net income (loss) before interest income, provision for
income taxes expense (benefit), depreciation and amortization) are non-U.S.GAAP
financial measures. The Company believes Adjusted net income (loss) and
Adjusted EBITDA (LBITDA) provide meaningful insight into the Company's ongoing
economic performance and therefore uses both metrics internally to assist in
evaluating and managing the Company's operations.
Any statements in this press release about future expectations, plans, and
prospects for the Company, including statements about the estimated revenue of
the Company, and other statements containing the words "estimates", "believes",
"anticipates", "plans", "expects", "will", and similar expressions, constitute
forward-looking statements. Actual results may differ materially from those
indicated by such forward-looking statements as a result of various important
factors, including the unpredictable nature of our rapidly evolving market and
fluctuations in our business; the effects of competition; any adverse changes in
our customers' business, and other factors discussed in our latest annual report
and other filings. In addition, the forward-looking statements included in this
press release represent our views as of 22 September 2010. Unanticipated
subsequent events and developments may cause our views to change. However, while
we may elect to update these forward-looking statements at some point in the
future, we specifically disclaim any obligation to do so except insofar as may
be required of the Company by the AIM Rules. These forward-looking statements
should not be relied upon as representing our views as of any date subsequent to
22 September 2010.
A copy of this interim report will be circulated to all registered shareholders
of the Company and copies will be available for members of the public by
submitting a request to the Company's Registered Office or on the Company's
website at www.burstmedia.com.
Enquiries:
+------------------------------+------------------------------+
| Burst Media Corporation | |
+------------------------------+------------------------------+
| Jarvis Coffin, Chief | +1 781-852-5271 |
| Executive Officer | |
| Steven Hill, Chief Financial | |
| Officer | |
+------------------------------+------------------------------+
| | |
+------------------------------+------------------------------+
| Hudson Sandler | |
+------------------------------+------------------------------+
| Nick Lyon | +44 (0) 20 7796 4133 |
+------------------------------+------------------------------+
| | |
+------------------------------+------------------------------+
| Altium | |
+------------------------------+------------------------------+
| Tim Richardson / Paul | +44 (0) 20 7484 4040 |
| Chamberlain | |
+------------------------------+------------------------------+
Chairman's Statement
The top line growth over the period under review has been pleasing, particularly
over the second quarter when combined sales at Burst Network and Burst Direct
increased by 34% over 2009. Including the contributions from our acquired
businesses, Giant Realm and Burst Media UK, the Company increased overall sales
by 43% in the first half of 2010, its highest growth rate since 2005.
The Board believes the Company's growth is a result of its unique and
increasingly favorable market position representing the interests of long tail
web publishers. In addition to our successes at Burst Network, further evidence
of this strong position is provided by the Company's new agreement to develop
and represent, exclusively, the Fox Sports Ad Network, and by our "Spotlight
Publisher" initiative which is succeeding at converting some of Burst's highest
quality publishers to exclusive sales relationships.
In light of our sales growth successes, we were disappointed to announce on 26
July 2010 that the Company's full year profitability would be significantly
impacted by the underperformance of its Giant Realm business. After completing
the acquisition of Giant Realm last year, the Company revamped its advertising
sales force, bringing in new leadership from Burst Network and making further
investments in New York. Results from these investments took longer to
materialize than expected.
The foundation of the Giant Realm business, its publishers, has remained strong,
allowing the new advertising sales team to steadily renew customer relationships
and grow the business. The new team has been in place for nine months and the
results of their efforts are beginning to appear. The Board is confident that
Giant Realm will exhibit monthly revenues more in line with its original
expectations by the year-end, and that it is poised to make a strong
contribution to the Group in 2011 and beyond.
OTP Media - renamed Burst Media UK - acquired by the Company in early April 2010
has fared substantially better, although, whilst profitable, its performance to
date is behind our initial expectations due to some post acquisition sales force
disruption. Burst Media UK has hired a new Head of Sales and is working to
stabilize the sales force and minimize further disruption.
Whilst the overall performance for the current year will be disappointing when
compared to expectations at the beginning of the year, the Board believes Giant
Realm and Burst Media UK add substantially to the momentum and competitive
position of the core businesses and will help make possible the Company's
profitable growth.
David Hanger
Non-Executive Chairman
22 September 2010
Chief Executive Officer's Review
Burst has three ways to serve independent, long tail web publishers: transparent
brand advertising representation (Burst Network, Giant Realm and Burst Media
UK); performance-based advertising to fill unsold inventory (Burst Direct); and
a robust technology platform to help large and small websites and ad networks
manage their ad operations (adConductor).
Online Reach
Ad networks serve campaigns across a wide variety of sites that represent
Internet traffic measured by "unique visitors." In the U.S. in June 2010, Burst
reached 127 million unique monthly Internet visitors (June 2009: 114 million)
according to comScore MediaMetrix. This placed Burst as the 32nd largest
advertising-supported Internet property in the U.S. in June 2010.
In June 2010 Burst Media's legacy networks reached 9.6 million unique monthly
Internet visitors in the UK (June 2009: 11 million), according to comScore
MediaMetrix. This placed Burst as the 32nd largest advertising-supported
Internet property in the UK in June 2010. The addition of Burst Media UK sites
to the Burst Media total would have increased Burst's presence in the UK by an
estimated 6 million unduplicated unique visitors in June 2010. This reach will
provide a significant and critical platform on which profitable growth can be
achieved
Business Review
Media business
Burst's media business now includes its legacy Network and Direct units as well
as Giant Realm and Burst Media UK (formerly, OTP Media).
A. Burst Network
Burst Network continues to make advances as a vehicle for brand advertisers. The
Company's largest offering gives advertisers targeted access to tens of millions
of monthly unique visitors. Advertisers are guaranteed full disclosure as to
which premium niche websites will carry their advertisements. There were
approximately 5,000 premium websites in the Burst Network as of 30 June 2010,
compared to 4,700 as of 30 June 2009. Burst Network allows advertisers to
target their chosen audiences by content, behavior, demographics, geography and
time of day. The inventory of available advertising impressions from websites in
Burst Network was 25 billion for the six months ended 30 June 2010 (2009: 23
billion).
In the first half of 2010 the Company added to the size of its Brand Solutions
team. In addition the Company added to the creative resources of its Marketing
department. Both of these initiatives have helped increase the close rate of the
sales pipeline and improve the image of the Company's offering.
Also in the first half the Company launched an important new initiative called
the "Spotlight Publisher" program. The Spotlight program invites certain high
quality Burst publishers into a more exclusive relationship with the Company in
exchange for certain revenue or rate guarantees. To date, there are 29 Spotlight
Publishers, all from the important Moms Network. Combined, the 29 Spotlight
Publishers reach 2.1 million unique visitors in the U.S according to comScore.
The Company will continue to expand the Spotlight offering within the Moms
Network and to other successful verticals as a way to fully differentiate its
publisher offering in the market.
Sales force staffing in Burst Network remained stable in the first half and the
Company believes it continues to benefit from a seasoned team with strong
customer relationships in its markets.
B. Burst Direct
Burst Direct has been in the path of one of the hottest sectors of the Internet
advertising market this year, Demand Side Platforms (DSPs). DSPs offer
advertisers automated planning and buying solutions relying on audience data
through ad exchanges such as Yahoo!'s Right Media Exchange and Google's Ad
Exchange.
It is encouraging to note that Burst's remnant ad sales solution, Burst Direct,
is closest to the changes being driven by DSPs and DSNs. Direct has seen its
so-called "Feeds" business, which refers to trading done through third-party ad
exchanges, surge as DSPs and DSNs have looked to access Burst's quality, long
tail inventory on a remnant basis through the exchanges. The Company has been
adding to its Feed resources in terms of people, technology and reporting in an
effort to keep up with developments. Burst Direct's CPM and CPA business did not
enjoy a similar surge in performance in the first half. CPM was, in fact, below
expectations for the period. Management believes that the Demand Platforms may
be substantially to blame for the slower pace. The presence of CPM, CPA and the
Feeds businesses within the Direct franchise, however, ensure that the Company
has a balanced portfolio of performance-driven sales solutions to meet the
overall needs of the market.
Burst Direct was associated with approximately 2,400 websites as of 30 June 2010
(30 June 2009: 2,900)(1). This decline in the number of websites was due to our
decision to inactivate sites not sending sufficient traffic to the network to
warrant a continued relationship. Additionally, through its purchased inventory
program Burst Direct secures additional inventory from 52 strategic suppliers to
support the performance requirements of its clients' campaigns.
C. Giant Realm
Giant Realm was acquired in order to bolster the Company's reach amongst males
aged 12 - 34 years old, an important demographic sector which is traditionally
difficult to access, and balance the Company's strength and reputation for
reaching women and families. Following the acquisition the Company made a number
of upfront changes and additions to the sales force to spur growth in the first
year of ownership. Expectations were substantially back-loaded, but Management
concluded at the end of the first half that the expected results would not
materialize before year-end.
In response, the Company has made substantial cuts in the Giant Realm
infrastructure, particularly in the technology and operations areas. It has
maintained investment in sales, and Management is confident that results will
continue to improve through the balance of the year.
While substantially below expectations in volume, the quality of Giant Realm
orders has not disappointed. Rates are significantly higher for Giant Realm
business (CPMs of $10 - $15 vs. $3 - $5 on Burst Network) which is indicative of
the level of creative integration that frequently exists between the advertising
and the content of the websites, and Giant Realm's exclusive publisher
relations. At 30 June 2010, Giant Realm represented 68 publishers in the
Entertainment and Games category reaching a total of 7.9 million unique
visitors, according to comScore.
D. Burst Media UK
First half results include full, Q2 activity from OTP Media which was acquired
as of April 6, 2010, and renamed Burst Media UK. Overall results were hampered
in the first quarter by distractions associated with the acquisition and by a
soft UK advertising market. This showed particularly in the month of April.
Forward looking statements in this report indicate that Management believes
softness will continue in the Burst Media UK business through to the end of this
year as the team deals with changes in sales management and people. Most of
these changes have taken place, and the current Head of Sales now enjoys the
benefit of a team that is substantially his own. The division expects to be
profitable at year-end.
In addition to representing its stable of exclusive web publishers, Burst Media
UK is also tasked with representing all Burst Media inventory in the UK where
the publisher has not signed a separate UK sales agreement. UK inventory from
the Company's U.S. domiciled websites adds substantially to the amount of
inventory Burst Media UK has to sell and provides it with additional
opportunities to close business, notably lower-cost performance business.
At 30 June 2010 Burst Media UK had 47 publishers on an exclusive basis,
primarily focused in the Family and Parenting, Entertainment, Maps and Travel
and Automotive categories.
adConductor
A. Sales
adConductor provides customers with comprehensive, cutting-edge tools for the
management of complex ad networks. In the first half of 2010, the unit added six
new customers, including Inc. Digital Network, Starz Digital Media Network,
MediaClicks Network (owned by the national cinema theatre operator, Cinedigm),
and remnants of Reed Business Information that were sold to Sandow Media.
Contract losses in the first half were FiLife, the personal finance web
publishing joint venture that came to an end between the Wall Street Journal and
IAC Corp, and Reed Business Information, following the decision in 2009 by
parent, Reed Elsevier, to sell the company.
Despite several new customers the adConductor SaaS business was down in overall
revenue in the first half as a result of the loss of Reed Business, as well as
the slow ramp of many of its customers that are behind expectations building
their networks. In that regard, Management continues to assess its adConductor
strategy and target market. The emphasis is on facilitating the network-building
needs of larger media companies looking to extend the reach of their brand
online. Increasingly, Burst desires to play a greater role in building and
marketing those branded networks where it has the special expertise to help
brands succeed with the long tail. Licensing agreements such as the Fox Sports
Ad Network highlighted in the Forward Looking Guidance section at the beginning
of this report are examples of the hands-on role the Company is looking to have
supporting its brand media customers.
Outlook
In the U.S. economic worry has returned in the second half after an absence
beginning last fall. This concern tempers the Company's outlook for the balance
of the year primarily in regard to its Burst Network business given the
sensitivity of the Network's primary customers, brand advertisers, to economic
conditions.
Burst Direct is supported by momentum in the Demand Side Platform sector. The
Company's two acquisitions, Giant Realm and Burst Media UK, have upside that
will be internally driven and less affected by broader economic conditions.
Management expects Giant Realm's second half performance in particular to
significantly outpace its first half performance. adConductor's business, which
is relatively small, is expected to finish the year without growth.
Overall, visibility remains limited and the achievement of current guidance for
the full year is dependent on a strong performance in the final quarter.
Burst Media revenues grew at a faster rate in the first half than at any time
since 2005. However its performance was held back by Giant Realm and Burst Media
UK. Nevertheless, with the expectation that economic gloom and uncertainty will
slowly dissipate over the next several months the Company believes that its top
line growth over the last two years, along with its mix of businesses and
position as the leading representative of quality long tail web publishers,
signals a very strong 2011 with a much improved bottom line.
Jarvis Coffin
Chief Executive Officer
22 September 2010
(1) Inclusive of approximately 1,500 and 1,850 websites that are in both Burst
Network and Burst Direct as of 30 June 2010 and 30 June 2009 respectively
Burst Media Corporation and Subsidiary
Consolidated Balance Sheets
(in thousands, except share amounts)
+--------------------------------+-------------+----------+-------------+----------+----------+
| | June 30, | | June 30, | | December |
| | | | | | 31, |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| ASSETS | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| CURRENT ASSETS | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Cash and cash equivalents | $ | | $ | | $ |
| | 2,410 | | 9,425 | | 5,714 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Accounts receivable, less | | | | | |
| allowance for | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| doubtful accounts of $276, | | | | | |
| $174 and $227, | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Respectively | 11,049 | | 6,998 | | 13,048 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Prepaid expenses and other | 970 | | 1,395 | | 635 |
| current assets | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Total current assets | 14,429 | | 17,818 | | 19,397 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| PROPERTY AND EQUIPMENT, NET | 2,884 | | 2,148 | | 2,765 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| INTANGIBLE ASSETS, NET | 3,803 | | ? | | 2,089 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| OTHER ASSETS | 675 | | 150 | | 233 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | $ | | $ | | $ |
| | 21,791 | | 20,116 | | 24,484 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| LIABILITIES AND STOCKHOLDERS' | | | | | |
| EQUITY | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| CURRENT LIABILITIES | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Due to publishers | $ | | $ | | $ |
| | 4,490 | | 2,989 | | 6,416 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Other current liabilities | 3,611 | | 1,651 | | 2,684 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Total current liabilities | 8,101 | | 4,640 | | 9,100 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| OTHER LONG TERM LIABILITIES | 607 | | 411 | | 329 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Total liabilities | 8,708 | | 5,051 | | 9,429 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| STOCKHOLDERS' EQUITY | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Common stock, $0.01 par value: | | | | | |
| 150,000,000 | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| shares authorized; 71,628,562 | | | | | |
| shares at | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| June 30, 2010 and 70,628,562 | | | | | |
| shares at | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| June 30, 2009 and December 31, | 716 | | 706 | | 706 |
| 2009 | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Additional paid-in capital | 25,606 | | 25,192 | | 25,235 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Accumulated deficit | (13,229) | | (10,833) | | (10,886) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Accumulated other | (10) | | ? | | ? |
| comprehensive loss | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Total stockholders' equity | 13,083 | | 15,065 | | 15,055 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | $ | | $ | | $ |
| | 21,791 | | 20,116 | | 24,484 |
+--------------------------------+-------------+----------+-------------+----------+----------+
See notes to consolidated interim financial statements.
Burst Media Corporation and Subsidiary
Consolidated Statements of Operations
(in thousands, except share amounts)
+--------------------------------+-------------+----------+-------------+----------+------------+
| | Six Months Ended | | Year |
| | | | Ended |
+--------------------------------+--------------------------------------+----------+------------+
| | June 30 | | June 30 | | December |
| | | | | | 31 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Revenue | $ | | $ | | $ |
| | 17,313 | | 12,100 | | 31,412 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Cost of revenue | 10,049 | | 6,294 | | 17,376 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Gross profit | 7,264 | | 5,806 | | 14,036 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Operating expenses: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Sales and marketing | 5,427 | | 3,874 | | 8,127 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| General and administrative | 3,034 | | 1,665 | | 3,827 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Technology and product | 1,799 | | 1,337 | | 2,749 |
| development | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Restructuring charges | 23 | | - | | 201 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Total operating expenses | 10,283 | | 6,876 | | 14,904 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Loss from operations | (3,019) | | (1,070) | | (868) |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Other income: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Interest income (expense), net | 2 | | 40 | | 63 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Other income (expense), net | 43 | | 39 | | 59 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Total other income | 45 | | 79 | | 122 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Net loss before income tax | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| expense (benefit) | (2,974) | | (991) | | (746) |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Provision for Income tax | (631) | | (246) | | 52 |
| expense (benefit) | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Net loss | $ | | $ | | $ |
| | (2,343) | | (745) | | (798) |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Basic and diluted loss per | $ | | $ | | $ |
| share | (0.03) | | (0.01) | | (0.01) |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Weighted average shares used | | | | | |
| in calculating: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Basic and fully diluted loss | 71,098,175 | | 73,790,993 | | 72,014,589 |
| per share | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
See notes to consolidated interim financial statements.
Burst Media Corporation and Subsidiary
Consolidated Statements of Stockholders' Equity
(in thousands, except share amounts)
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| | | | | | | | | | | Accumulated | | |
| | | | |Additional | | | | | | other | | Total |
| | | Common stock | | paid-in | |Accumulated | |Comprehensive | |comprehensive | |stockholders' |
+---------------------+----------+----------------------------------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| | | Shares | | Amount | | capital | | deficit | | loss | | loss | | equity |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Balance at December | | | | | | | | | | | | | | |
| 31, 2008 | | 83,028,562 | | $ | | $ | | $ | | | | $ | | $ |
| | | | | 830 | | 25,658 | | (10,088) | | | | - | | 16,400 |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Comprehensive loss: | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Foreign translation | | | | | | | | | | | | | | |
| adjustments | | - | | - | | - | | - | | $ | | - | | - |
| | | | | | | | | | | - | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Net loss | | - | | - | | - | | (745) | | (745) | | - | | (745) |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Comprehensive loss | | | | | | | | | | $ | | | | |
| | | | | | | | | | | (745) | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Repurchase and | | | | | | | | | | | | | | |
| cancellation of | | (14,900,000) | | (149) | | (1,082) | | - | | | | - | | (1,231) |
| common stock | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Issuance of shares | | | | | | | | | | | | | | |
| for business | | 2,500,000 | | 25 | | 375 | | - | | | | - | | 400 |
| combination | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Amortization of | | | | | | | | | | | | | | |
| equity-based | | - | | - | | 284 | | - | | | | - | | 284 |
| compensation | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Balance at December | | 70,628,562 | | 706 | | 25,235 | | (10,886) | | | | - | | 15,055 |
| 31, 2009 | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Comprehensive loss: | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Foreign translation | | | | | | | | | | | | | | |
| adjustments | | - | | - | | - | | - | | $ | | (10) | | (10) |
| | | | | | | | | | | (10) | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Net loss | | - | | - | | - | | (2,343) | | (2,343) | | - | | (2,343) |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Comprehensive loss | | | | | | | | | | $ | | | | |
| | | | | | | | | | | (2,353) | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Issuance of shares | | | | | | | | | | | | | | |
| for business | | 1,000,000 | | 10 | | 110 | | - | | | | - | | 120 |
| combination | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Amortization of | | | | | | | | | | | | | | |
| equity-based | | - | | - | | 261 | | - | | | | - | | 261 |
| compensation | | | | | | | | | | | | | | |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
| Balance at June 30, | | | | | | | | | | | | | | |
| 2010 (unaudited) | | 71,628,562 | | $ | | $ | | $ | | | | $ | | $ |
| | | | | 716 | | 25,606 | | (13,229) | | | | (10) | | 13,083 |
+---------------------+----------+--------------+----------+--------+----------+------------+----------+-------------+----------+---------------+----------+---------------+----------+---------------+
See notes to consolidated interim financial statements.
Burst Media Corporation and Subsidiary
Consolidated Statements of Cash Flows
(in thousands, except share amounts)
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| | Six Months Ended | | Year |
| | | | Ended |
+----------------------------------+--------------------------------------------------+----------+---------------------+
| | June | | June | | December |
| | 30, | | 30, | | 31, |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| | 2010 | | 2009 | | 2009 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| | (Unaudited) | | (Unaudited) | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| CASH FLOWS FROM OPERATING | | | | | |
| ACTIVITIES | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Net loss | $ | | $ | | $ |
| | (2,343) | | (745) | | (798) |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Adjustments to reconcile net | | | | | |
| loss to net | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| cash provided by (used in) | | | | | |
| operating activities: | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Depreciation and amortization | 778 | | 227 | | 623 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Deferred income taxes | (647) | | (263) | | 249 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Equity-based compensation | 261 | | 159 | | 284 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Unrealized foreign currency | (54) | | 3 | | (10) |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Provision for bad debts | 50 | | 32 | | 171 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Deferred rent expense | (9) | | 3 | | 1 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Changes in: | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Accounts receivable | 2,816 | | 108 | | (5,115) |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Prepaid expenses and other | (281) | | 28 | | 196 |
| current assets | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Due to publishers | (1,926) | | 619 | | 3,355 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Other current liabilities | 236 | | 139 | | 976 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Net cash provided by (used in) | | | | | |
| operating | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| activities | (1,119) | | 310 | | (68) |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| CASH FLOWS FROM INVESTING | | | | | |
| ACTIVITIES | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Payments for property, equipment | (337) | | (735) | | (1,486) |
| and software development costs | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Purchase of business, net of | (1,848) | | ? | | (2,100) |
| cash acquired | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Net cash used in investing | (2,185) | | (735) | | (3,586) |
| activities | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| CASH FLOWS FROM FINANCING | | | | | |
| ACTIVITIES | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Repurchase common stock | ? | | (749) | | (1,231) |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| Net cash used in financing | ? | | (749) | | (1,231) |
| activities | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| NET DECREASE IN CASH AND CASH | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| EQUIVALENTS | | | | | |
| | | | | | |
| | (3,304) | | (1,174) | | (4,885) |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| CASH AND CASH EQUIVALENTS, | | | | | |
| BEGINNING | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| OF PERIOD | | | | | |
| | 5,714 | | 10,599 | | 10,599 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| CASH AND CASH EQUIVALENTS, END | | | | | |
| OF | | | | | |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
| PERIOD | | | | | |
| | $ | | $ | | $ |
| | 2,410 | | 9,425 | | 5,714 |
+----------------------------------+-------------------+----------+-------------------+----------+---------------------+
+----------------------------------+---------+----------+---------+----------+----------+
| SUPPLEMENTAL DISCLOSURE OF CASH | | | | | |
+----------------------------------+---------+----------+---------+----------+----------+
| FLOW INFORMATION | | | | | |
+----------------------------------+---------+----------+---------+----------+----------+
| Cash paid for income taxes | | | | | |
| | $ | | $ | | $ |
| | 13 | | 24 | | 38 |
+----------------------------------+---------+----------+---------+----------+----------+
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
Purchase of business :
+----------------------------------+---------+----------+
| Fair value of assets acquired | | |
| | $ | |
| | 3,722 | |
+----------------------------------+---------+----------+
| Equity shares issued | | |
| | (120) | |
+----------------------------------+---------+----------+
| Contingent cash payment | | |
| obligation | (543) | |
+----------------------------------+---------+----------+
| Contingent shares obligation | | |
| | (61) | |
+----------------------------------+---------+----------+
| Cash | | |
| | (2,422) | |
+----------------------------------+---------+----------+
| Liabilities assumed | | |
| | $ | |
| | (576) | |
+----------------------------------+---------+----------+
See notes to consolidated interim financial statements.
Burst Media Corporation and Subsidiary
Notes to Consolidated Interim Financial Statements (unaudited)
(in thousands except share amounts and web sites)
1. Description of the Company and Significant Accounting Policies
Description of the Company
Burst Media Corporation together with its subsidiaries ("Burst" or "the
Company") is a provider of comprehensive Internet advertising solutions focused
on supporting the interests of specialty content web publishers and advertisers.
The Company delivers advertising campaigns for its customers through a network
of approximately 6,000 specialty content web sites at June 30, 2010. The Company
has advertising servers in three locations in the U.S. (Massachusetts, Virginia,
and Colorado) and one location in Europe (Amsterdam).
The Company's products and services utilize adConductor(TM), a comprehensive ad
management solution, developed by the Company. adConductor is a leading partner
for media companies to connect marketers with audiences and grow their business
beyond existing boundaries. adConductor offers online media properties with an
end-to-end ad network building and management solution that provides a
consolidated system to manage web sites and affiliates. The Company provides its
adConductor technology to customers as an application service provider.
The corporate headquarters is located in Burlington, Massachusetts. In April
2010, the Company purchased OTP Media Ltd, a UK advertising network, and changed
its name to Burst Media UK Limited. Burst Media UK Limited is located in the
United Kingdom.
Basis of Presentation
These financial statements have been prepared, without audit, in accordance with
generally accepted accounting principles in the United States of America for
interim financial information. Accordingly, certain information and note
disclosures normally included in annual financial statements have been omitted
pursuant to such rules and regulations. These financial statements should be
read in conjunction with the Company's annual report for the year ended December
31, 2009.
The consolidated financial statements include the accounts of Burst Media UK
Limited, the Company's wholly-owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.
Reclassifications
Certain previously reported amounts have been reclassified to conform to the
current period presentation.
Foreign Currency
The financial accounts of Burst Media UK Limited are measured using the local
currency as its functional currency. The assets and liabilities of this
subsidiary are translated into U.S. dollars at the current exchange rates as of
the balance sheet dates and revenues and expenses are translated at average
exchange rates each month. Translation adjustments have no effect on net loss
and are included in accumulated other comprehensive loss in Stockholders equity.
The Company also conducts certain transactions denominated in foreign
currencies. Included in other income (expense), net were realized foreign
currency gains (losses) of $(41), $22 and $20, for the six month periods ended
June 30, 2010 and 2009 and for the year ended December 31, 2009, respectively.
Also included in other income (expense), net were unrealized foreign currency
gains (losses) of $54, $3 and ($12), for the six-month periods ended June 30,
2010 and 2009 and for the year ended December 31, 2009, respectively.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders'
equity, except stockholders' investments and distributions, repurchases of
common stock and deferred stock-based compensation.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reported periods. Actual
results could differ from those estimates.
Revenue Recognition
Advertising
Revenues are primarily generated by delivering its customers' advertising
impressions or "click-throughs" for agreed upon fees to specified third-party
publishers comprising the Company's advertising networks. Customer advertising
campaign agreements are generally short term in nature (less than 60 days) and
revenue is recognized as campaigns are delivered, which is typically based upon
the number of impressions or click-throughs delivered.
Additionally, the Company incurs expenses relating to third-party web
publishers, which have contracted with the Company to be part of its networks,
as advertising campaigns are delivered. The Company records its obligation to
web publishers based upon a contractually determined percentage of revenue in
each advertising campaign and these expenses are classified as cost of revenues.
AdConductor(TM) Application Revenue
All of the Company's products and services are enabled by the Company's
proprietary suite of software products. The Company provides its adConductor
technology to customers as an application service provider. The Company
contracts with its customers for minimum fees based upon projected usage.
Amounts due from customers are based on actual usage in the event usage exceeds
the minimum fees due. Revenue from adConductor application agreements is
recognized on a subscription basis ratably over the term of the customer
contract.
Internal Use Software Development Costs
Included in property and equipment are certain costs related to computer
software developed or obtained for internal use that are capitalized in
accordance with American Institute of Certified Public Accountants standards on
Accounting for the Costs of Computer Software Developed or Obtained for Internal
Use. The Company amortizes internal use software costs over their estimated
useful lives, which typically range from two to five years. The Company
capitalized software development costs of $243, $602, and $1,011 for the six
month periods ended June 30, 2010, 2009 and for the year ended December 31,
2009, respectively. There was no amortization expense related to internal use
software development costs for the six month periods ended June 30, 2010 and
2009 and for the year ended December 31, 2009 as the product has not yet been
placed in service. The Company anticipates placing the asset in service in the
second half of 2010.
Equity-Based Compensation
The company accounts for equity-based compensation in accordance with the
Financial Accounting Standards Board's standard on share-based payments. The
Company recognized equity-based compensation expense for all share-based awards
made to employees and directors. Equity-based compensation cost is measured at
the grant date based on the fair value of the award and is recognized as expense
over the applicable vesting period of the stock award (generally four years)
using the straight-line method.
Income Taxes
Income taxes are provided for the effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes
related to the differences between the basis of certain assets and liabilities
for financial and income tax reporting. Deferred taxes are classified as current
or non-current depending on the classification of the assets and liabilities to
which they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current
depending on the periods in which the temporary differences are expected to
reverse. Valuation allowances are recorded to reduce deferred tax assets to the
amount that will more likely than not be realized.
Earnings per Share
Basic net loss per share is computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period. Diluted
loss per share is computed by dividing net loss by the shares used in the
calculation of basic loss per share plus the dilutive effect of common stock
equivalents, such as stock options, using the treasury stock method. Common
stock equivalents are excluded from the computation of diluted net loss per
share if their effect is antidilutive.
2. Acquisition of OTP Media
Pursuant to the Share Purchase Agreement dated April 6, 2010, the Company
acquired 100% of the shares outstanding of OTP Media Ltd., an advertising
network with headquarters located in London, England. As a result of the
acquisition, the Company is expected to expand its portfolio of networks into
the United Kingdom.
The total purchase price of the acquisition is as follows:
+-------------------------------------------------+---------+----------+---------+
| | Amount | | |
+-------------------------------------------------+---------+----------+---------+
| Cash | $ | | |
| | 2,422 | | |
+-------------------------------------------------+---------+----------+---------+
| Equity instruments (1,000,000 shares of common | 120 | | |
| stock) | | | |
+-------------------------------------------------+---------+----------+---------+
| Contingent cash payment obligation | 543 | | |
+-------------------------------------------------+---------+----------+---------+
| Contingent share obligation (510,000 potential | | | |
| shares of common stock) | 61 | | |
+-------------------------------------------------+---------+----------+---------+
| Total | $ | | |
| | 3,146 | | |
+-------------------------------------------------+---------+----------+---------+
| | | | |
+-------------------------------------------------+---------+----------+---------+
| Acquisition-related costs (included in general | | | |
| and administrative expenses) | $ | | |
| | 390 | | |
+-------------------------------------------------+---------+----------+---------+
The fair value of the shares of common stock used in determining the purchase
price was based upon the closing market price of the Company's common shares on
the acquisition date.
The purchase price has been allocated to each major class of identifiable assets
acquired and liabilities assumed based upon their estimated fair values at the
date of acquisition. The allocation to identifiable assets and liabilities is
summarized as follows:
+-------------------------------------------------+---------+----------+---------+
| | Amount | | |
+-------------------------------------------------+---------+----------+---------+
| Cash | $ | | |
| | 574 | | |
+-------------------------------------------------+---------+----------+---------+
| Accounts receivable | 823 | | |
+-------------------------------------------------+---------+----------+---------+
| Prepaid and other current assets | 50 | | |
+-------------------------------------------------+---------+----------+---------+
| Property, plant and equipment | 8 | | |
+-------------------------------------------------+---------+----------+---------+
| Identifiable intangible assets | 2,248 | | |
+-------------------------------------------------+---------+----------+---------+
| Other current liabilities | (576) | | |
+-------------------------------------------------+---------+----------+---------+
| Total identifiable net assets | 3,127 | | |
+-------------------------------------------------+---------+----------+---------+
| Goodwill | 19 | | |
+-------------------------------------------------+---------+----------+---------+
| Total | $ | | |
| | 3,146 | | |
+-------------------------------------------------+---------+----------+---------+
The purchase price allocation for acquisitions requires extensive use of
accounting estimates and judgments to allocate the purchase price to the
identifiable tangible and intangible assets acquired and liabilities assumed
based on their respective fair values.
The fair value of the acquired identifiable intangible assets of $2,248 is
provisional pending receipt of the final valuation for those assets
3. Repurchase of Common Stock
On January 20, 2009, the Board of Directors authorized the Company to repurchase
and cancel common stock ("Burst shares") with an aggregate market value of up to
approximately $500. On January 21, 2009 the Company purchased and cancelled a
total of 9,800,000 Burst Shares at a price of 3.6 pence (approximately US$0.05)
per share at a total cost of $507. Upon repurchase, all Burst shares were
immediately cancelled.
On April 29, 2009, the Board of Directors authorized the Company to repurchase
and cancel Burst shares with an aggregate market value of up to approximately
$500. On May 6, 2009, the Company purchased and cancelled a total of 2,600,000
Burst Shares at a price of 5.9 pence (approximately US$0.09) per share at a
total cost of $241. Upon repurchase, all Burst shares were immediately
cancelled.
On September 22, 2009, the Board of Directors authorized the Company to
repurchase and cancel Burst shares with an aggregate market value of up to
approximately $500. On September 24, 2009, the Company purchased and cancelled
a total of 2,500,000 Burst Shares at a price of 12.0 pence (approximately
US$0.19) per share at a total cost of $483. Upon repurchase, all Burst shares
were immediately cancelled.
4. Equity-Based Compensation
The Company has two stock option plans. The first is known as the "IPO Plan".
Under the IPO Plan, employees were granted certain options as of the date of the
Company's initial public offering in 2006. These option grants included
conversion of former promissory options that were provided to individuals prior
to the Company's incorporation as a C Corporation. The second Plan is the Burst
Media Corporation 2006 Stock Option Plan (the "2006 Plan"). The 2006 Plan was
established on April 11, 2006. Both Plans were designed to encourage select key
employees, consultants and non-employee Directors of the Company to have a
vested interest in the future growth and performance of the Company.
Under the IPO Plan, stock option grants have various vesting schedules typically
over a five year contractual term. Options under the 2006 Plan generally vest
annually over a four year term and have a 10 year contractual term. Both plans
generally require an employee to remain continuously employed at the Company for
vesting to occur. The estimated fair value of options in both Plans, including
the effect of estimated forfeitures, is recognized over the options' vesting
periods.
Stock option activity for the six month periods ended June 30 2010 and 2009 and
for the year ended December 31, 2009 is summarized as follows:
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| | Six months ended | | Six months ended | | Year ended |
+-------------------+---------------------------------+----------+---------------------------------+----------+---------------------------------+
| | June 30, 2010 | | June 30, 2009 | | December 31, 2009 |
+-------------------+---------------------------------+----------+---------------------------------+----------+---------------------------------+
| | (Unaudited) | | (Unaudited) | | |
+-------------------+---------------------------------+----------+---------------------------------+----------+---------------------------------+
| | | | Weighted | | | | Weighted | | | | Weighted |
| | | | Average | | | | Average | | | | Average |
| | Number | | Exercise | | Number | | Exercise | | Number | | Exercise |
| | of | | Price | | of | | Price | | of | | Price |
| | Shares | | | | Shares | | | | Shares | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| Beginning | 4,497,985 | | $0.38 | | | | $0.51 | | | | $0.51 |
| balance | | | | | 3,306,705 | | | | 3,306,705 | | |
| outstanding | | | | | | | | | | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| Granted | 2,196,750 | | $0.10 | | 1,367,750 | | $0.11 | | 1,660,750 | | $0.12 |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| | (86,250) | | $0.25 | | (217,500) | | $0.38 | | (469,470) | | $0.37 |
| Cancelled/expired | | | | | | | | | | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| Ending | | | $0.29 | | | | $0.40 | | 4,497,985 | | $0.38 |
| balance | 6,608,485 | | | | 4,456,955 | | | | | | |
| outstanding | | | | | | | | | | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| | | | | | | | | | | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| Options | 1,977,939 | | $0.57 | | 1,161,256 | | $0.72 | | 1,071,409 | | $0.71 |
| exercisable | | | | | | | | | | | |
| at end of | | | | | | | | | | | |
| period | | | | | | | | | | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| Options | 2,481,441 | | | | 4,782,441 | | | | 4,591,941 | | |
| available | | | | | | | | | | | |
| for grant | | | | | | | | | | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
| Weighted | 7.8 | | | | 7.3 | | | | 7.3 | | |
| average | | | | | | | | | | | |
| remaining | | | | | | | | | | | |
| contractual | | | | | | | | | | | |
| life | | | | | | | | | | | |
+-------------------+-----------+----------+----------+----------+-----------+----------+----------+----------+-----------+----------+----------+
There were no remaining options available for future grants under the IPO Plan
at June 30, 2010, June 30, 2009 and December 31, 2009. The weighted average
grant date fair value of options granted during the six month periods ended June
30, 2010 and 2009 and during the year ended December 31, 2009 were $0.06, $0.07
and $0.07, respectively.
New shares of Common stock are issued as required to meet option exercises.
There were no options exercised during the six-month periods ended June 30, 2010
and 2009 or during the year ended December 31, 2009. The aggregate intrinsic
value of options outstanding at June 30, 2010 and June 30, 2009 and December 31,
2009 were $9, $1, and $36 respectively.
The fair value of the stock option grants awarded was estimated as of the date
of grant using a Black-Scholes option valuation model that used the following
assumptions:
+--------------------------------+-------------+----------+-------------+----------+----------+
| | Six Months Ended | | Year |
| | | | Ended |
+--------------------------------+--------------------------------------+----------+----------+
| | June 30 | | June 30 | | December |
| | | | | | 31 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Expected dividend yield | 0% | | 0% | | 0% |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Expected forfeiture rate | 10% | | 10% | | 10% |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Expected stock price | 65% | | 65% | | 65% |
| volatility | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Risk-free interest rate | 1.98% | | 2.53% | | 2.50% |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Expected option life in years | 6.25 | | 6.25 | | 6.25 |
+--------------------------------+-------------+----------+-------------+----------+----------+
No dividend yield is expected since the Company has never paid cash dividends
and has no present intention to pay cash dividends. The expected forfeiture rate
was based on the Company's historical experience with pre-vesting option
cancellations. The expected stock price volatility is based on a review of the
Company's historical volatility and a review of peer companies' volatility
coupled with future expectations of movement in the Company's stock price over
the period commensurate with the expected life of the options. The risk-free
interest rate is derived from U.S. Treasury discount notes with maturities
comparable to the remaining expected life of the options. The expected option
life is based on observed and expected time to post-vesting exercise and
forfeitures of options by the Company'semployees.
At June 30, 2010, June 30, 2009 and December 31, 2009, unrecognized compensation
costs relating to unvested equity-based compensation was $201, $363 and $257,
respectively. The Company expects to recognize the cost of these unvested
awards over a weighted-average period of 1.8 years.
The following summarizes the categorization of equity-based compensation expense
for the six-month periods ended June 30, 2010 and 2009 and for the year ended
December 31, 2009:
+--------------------------------+-------------+----------+-------------+----------+----------+
| | Six Months Ended | | Year |
| | | | Ended |
+--------------------------------+--------------------------------------+----------+----------+
| | June 30 | | June 30 | | December |
| | | | | | 31 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Sales and marketing | $ | | $ | | $ |
| | 77 | | 38 | | 74 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| General and administrative | 83 | | 62 | | 110 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Technology and product | 101 | | 59 | | 100 |
| development | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Total | $ | | $ | | $ |
| | 261 | | 159 | | 284 |
+--------------------------------+-------------+----------+-------------+----------+----------+
5. Loss Per Share
Basic and diluted loss per share were calculated as follows:
+--------------------------------+-------------+----------+-------------+----------+------------+
| | Six Months Ended | | Year |
| | | | Ended |
+--------------------------------+--------------------------------------+----------+------------+
| | June 30 | | June 30 | | December |
| | | | | | 31 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Numerator: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Net loss used in calculating | | | | | |
| basic | $ | | $ | | $ |
| and diluted loss per share | (2,343) | | (745) | | (798) |
+--------------------------------+-------------+----------+-------------+----------+------------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Denominator: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Weighted average number of | | | | | |
| common | 71,098,175 | | 73,790,993 | | 72,014,589 |
| Shares outstanding - basic | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Effect of dilutive securities | - | | - | | - |
| - stock options | | | | | |
+--------------------------------+-------------+----------+-------------+----------+------------+
| Shares used in calculating | | | | | |
| fully diluted loss per share | 71,098,175 | | 73,790,993 | | 72,014,589 |
+--------------------------------+-------------+----------+-------------+----------+------------+
Antidilutive stock options outstanding were 6,608,485, 4,456,955 and 4,497,985
at June 30, 2010, June 30, 2009 and December 31, 2009, respectively.
6. Commitments and Contingencies
In January 2009, the Company terminated its financial advisory and investment
banking services agreement with Portico Capital Securities ("Portico"). Portico
had been hired in December 2007 to evaluate strategic alternatives. The
agreement with Portico provides that should the Company execute a definitive
agreement, within twelve months of the termination date, to sell the Company,
the Company would be required to pay a transaction fee to Portico of $1 million
plus an escalating transaction fee for any transaction value received above $45
million. The Company did not execute a definitive agreement to sell the Company
within twelve months of the termination date.
7. Line of Credit Agreement
In June 2010, the Company and Silicon Valley Bank entered into a secured
revolving credit facility for up to $2.0 million. The revolving credit facility
matures on June 24, 2011. The Company may borrow, repay and re-borrow under the
revolving credit facility at any time. As of June 30, 2010, the revolving credit
facility bears interest at 4% per annum. Monthly, the Company is required to pay
a fee of 0.375% on any undrawn amounts under the revolving credit facility. In
June 2010, the Company paid a $10 commitment fee to the lender.
The revolving credit facility requires a monthly borrowing base calculation to
determine the amount of the revolving credit facility available for the Company
to borrow ("Borrowing Base"). The Borrowing Base calculation is 80% of accounts
receivables defined as eligible in the credit agreement. As of June 30, 2010,
the Borrowing Base was $2.0 million and the total available for the Company to
borrow on the revolving credit facility was $2.0 million.
The revolving credit line is secured by a blanket lien on all of the Company's
assets and contains certain financial and reporting covenants customary to these
types of credit facilities agreements which the Company is required to satisfy
as a condition of the agreement. In particular, the revolving credit facility
requires that the Company meet a monthly minimum adjusted quick asset ratio and
minimum tangible net worth. In addition, the revolving credit facility requires
the Company to provide to the bank annual financial projections, promptly report
any material legal actions, and timely pay material taxes and file all required
tax returns and reports. Further, without the bank's consent, the Company cannot
take certain material actions, such as change any material line of business,
sell the Company's business, acquire other entities, incur liens, make capital
expenditures beyond a certain threshold, or engage in transactions with
affiliates. As of June 30, 2010, the Company was in compliance with all debt
covenants. There were no borrowings outstanding as of June 30, 2010.
8. Income Taxes
The components of net loss before income tax expense (benefit) and of income tax
expense (benefit) for the six month periods ended June 30, 2010 and 2009 and for
the year ended December 31, 2009 were as follows:
+--------------------------------+-------------+----------+-------------+----------+----------+
| | Six Months Ended | | Year |
| | | | Ended |
+--------------------------------+--------------------------------------+----------+----------+
| | June 30 | | June 30 | | December |
| | | | | | 31 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Net loss before income tax | | | | | |
| expense (benefit): | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Domestic | $ | | $ | | $ |
| | (2,922) | | (1,004) | | (758) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Foreign | (52) | | 13 | | 12 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Net loss before income tax | | | | | |
| expense (benefit) | $ | | $ | | $ |
| | (2,974) | | (991) | | (746) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Income tax expense (benefit): | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Current: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Federal | $ | | $ | | $ |
| | - | | - | | (231) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| State | 17 | | 17 | | 34 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Foreign | - | | - | | - |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Subtotal | 17 | | 17 | | (197) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Deferred: | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Federal | (628) | | (245) | | 282 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| State | (20) | | (18) | | (33) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Subtotal | (648) | | (263) | | 249 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Total income tax expense | $ | | $ | | $ |
| (benefit) | (631) | | (246) | | 52 |
+--------------------------------+-------------+----------+-------------+----------+----------+
Deferred tax assets and liabilities:
Deferred tax assets and liabilities are comprised of the following:
+--------------------------------+-------------+----------+-------------+----------+----------+
| | Six Months Ended | | Year |
| | | | Ended |
+--------------------------------+--------------------------------------+----------+----------+
| | June 30 | | June 30 | | December |
| | | | | | 31 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | 2010 | | 2009 | | 2009 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | (Unaudited) | | (Unaudited) | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Current deferred tax assets | | | | | |
| (liabilities): | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Allowance for doubtful | $ | | $ | | $ |
| accounts | 116 | | 73 | | 95 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Federal and state NOL | - | | 567 | | - |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Vacation accrual | 48 | | 90 | | 47 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Unrealized foreign currency | (22) | | (1) | | (4) |
| gains | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Net current deferred tax | 142 | | 729 | | 138 |
| assets | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Non-current deferred tax | | | | | |
| assets (liabilities): | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Equity-based compensation | $ | | $ | | $ |
| | 434 | | 369 | | 391 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Federal and state NOL | 1,445 | | - | | 384 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Deferred rent | 49 | | 54 | | 53 |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Internal use software | (927) | | (653) | | (825) |
| development costs | | | | | |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Depreciation and amortization | 145 | | (51) | | (20) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Subtotal | 1,146 | | (281) | | (17) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Less valuation allowance | (705) | | - | | (185) |
+--------------------------------+-------------+----------+-------------+----------+----------+
| Net non-current deferred tax | | | | | |
| assets (liabilities) | $ | | $ | | $ |
| | 441 | | (281) | | (202) |
+--------------------------------+-------------+----------+-------------+----------+----------+
In assessing the realizability of the Company's deferred tax assets, the
Company considered whether it was more likely than not that some portion or all
of the deferred tax assets would not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible. In
making this determination, under the applicable financial reporting standards,
the Company considered the scheduled reversal of its deferred tax liabilities,
projected future taxable income and tax planning strategies. The Company's
estimates of future taxable income take into consideration, among other items,
estimates of future income tax deductions related to the exercise of stock
options. Based upon the level of historical taxable income and income tax
liability and projections for future taxable income over the periods in which
the deferred tax assets are utilizable, it is more likely than not that the
Company will not realize the benefits of its entire deferred tax asset. In the
event that actual results differ from estimates or estimates in future periods
are revised, the Company may need to establish an additional valuation
allowance, which could materially impact its financial position and results of
operations.
9. Subsequent Events
The Company has evaluated events occurring after the balance sheet date included
in the interim report for possible disclosure as a subsequent event. As of
September 22, 2010 there have been not material subsequent events.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UAURRRWAKUUR
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