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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 |
Hot Features
Premium
TIDMBRST
RNS Number : 7912J
Burst Media Corporation
07 April 2010
7 April 2010
Burst Media Corporation
Preliminary Results for the Year Ended 31 December 2009
Burst Media Corporation ("Burst" or "the Company"), the international online
advertising services and technology business, announces its preliminary results
for the year ended 31 December 2009.
Summary
The Board is pleased to announce 2009 results which are highly satisfactory
despite a poor macroeconomic environment that severely impacted the Company's
first quarter performance. The Company's media sales businesses, Burst Network
and Burst Direct, led the Company's recovery beginning in the second quarter
when, combined, they posted a 23% increase in revenue relative to the same
period in 2008. Modest increases continued in the third quarter before the year
was capped by dramatic year-over-year growth of 77% in media sales for the final
quarter.
For the year ended 31 December 2009:
+-----------------+
| · |
| Total |
| revenue |
| was |
| $31.4 |
| million |
| (2008: |
| $27.3 |
| million) |
+-----------------+
| · |
| Total |
| media |
| business |
| revenue |
| increased |
| 27% to |
| $28.7 |
| million, |
| including |
| a $1.1 |
| million |
| contribution |
| from Giant |
| Realm (2008: |
| $22.6 |
| million) |
+-----------------+
| · |
| Burst |
| adConductor |
| revenue |
| decreased |
| 43% to $2.7 |
| million |
| (2008: $4.7 |
| million) |
+-----------------+
| · |
| Gross |
| profit |
| increased |
| 8% to |
| $14.0 |
| million |
| (2008: |
| $13.0 |
| million) |
+-----------------+
| · |
| Adjusted |
| EBITDA(1) |
| was $0.6 |
| million |
| (2008: |
| $0.5 |
| million) |
+-----------------+
| · |
| Breakeven |
| at the |
| Adjusted |
| net |
| income(1) level |
| (2008: $0.2 |
| million) |
+-----------------+
| · |
| Net |
| loss(1) was |
| $0.8 |
| million |
| (2008: $0.3 |
| million) |
+-----------------+
Cash and cash equivalents at 31 December 2009 were $5.7 million (2008: $10.6
million). Approximately $1.0 million of cash was used during 2009 to fund the
development of the Company's core technology (2008: $1.0 million). These costs
were capitalized and will be amortized over three years following completion of
the technology project, which is now expected to be in mid-2010. In late 2009,
the Company also completed the acquisition of Giant Realm for $2.1 million in
cash and 2.5 million new common Burst shares. Additionally, $1.2 million was
used by the Company in 2009 to purchase and cancel 14.9 million common shares.
Commenting, Jarvis Coffin, Chief Executive Officer, said: "Burst enjoyed a
positive year in 2009 despite negative macroeconomic forces that imperiled many
in the advertising and media business. The past year proved that the Internet
sector is still very much in its ascendancy. Burst's value proposition, to
connect advertisers with the engaged and passionate audiences found on web sites
in the Internet's long tail, remains a source of significant opportunity for the
future."
Reconciliation of Net Loss to Adjusted Net Income(1) and Adjusted EBITDA(1)
(000's):
+---------------+--------+--------+
| | Year ended |
| | December 31, |
+---------------+-----------------+
| | 2009 | 2008 |
+---------------+--------+--------+
| Net | $(798) | $(274) |
| loss | | |
+---------------+--------+--------+
| | | |
+---------------+--------+--------+
| Adjustments: | | |
+---------------+--------+--------+
| Restructuring | 201 | - |
| charge | | |
+---------------+--------+--------+
| Strategic | 319 | 283 |
| alternatives | | |
+---------------+--------+--------+
| Equity-based | 284 | 192 |
| compensation | | |
+---------------+--------+--------+
| Adjusted | 6 | 201 |
| net | | |
| income | | |
| (1) | | |
+---------------+--------+--------+
| Adjustments: | | |
+---------------+--------+--------+
| Interest | (63) | (239) |
| income | | |
+---------------+--------+--------+
| Income | 52 | 73 |
| tax | | |
| expense | | |
+---------------+--------+--------+
| | | |
+---------------+--------+--------+
| Depreciation | 623 | 466 |
| and | | |
| amortization | | |
+---------------+--------+--------+
| Adjusted | $618 | $501 |
| EBITDA | | |
| (1) | | |
+---------------+--------+--------+
(1) "Adjusted net income" (net loss excluding restructuring charges, strategic
alternatives and equity-based compensation) and "Adjusted EBITDA" (Adjusted net
income before interest income, income tax expense, depreciation and
amortization) are non-U.S. GAAP financial measures. The Company believes
Adjusted net income and Adjusted EBITDA provide meaningful insight into the
Company's ongoing economic performance and therefore uses both Adjusted net
income and Adjusted EBITDA internally to assist in evaluating and managing the
Company's operations.
Note concerning forward looking statements
This press release contains "forward-looking" statements that involve risks,
uncertainties and assumptions. If the risks or uncertainties ever materialize or
the assumptions prove incorrect, our results may differ materially from those
expressed or implied by such forward-looking statements. All statements other
than statements of historical fact could be deemed forward-looking, including,
but not limited to, any projections of financial information; any statements
about historical results that may suggest trends for our business; any
statements of the plans, strategies and objectives of management for future
operations; any statements of expectation or belief regarding future events,
technology developments or enforceability of our intellectual property rights;
and any statements of assumptions underlying any of the foregoing.
These statements are based on estimates and information available to us at the
time of this presentation and are not guarantees of future performance. Actual
results could differ materially from our current expectations as a result of
many factors, including but not limited to: the unpredictable nature our rapidly
evolving market and fluctuations in our business; the effects of competition;
and any adverse changes in our customers' business. These and other risks and
uncertainties associated with our business are described in our filings on AIM.
We assume no obligation and do not intend to update these forward-looking
statements.
Enquiries:
+-------------+--------------+
| Burst | |
| Media | |
| Corporation | |
+-------------+--------------+
| Jarvis | +1 |
| Coffin, | 781-852-5271 |
| Chief | |
| Executive | |
| Officer | |
| Steven | |
| Hill, | |
| Chief | |
| Financial | |
| Officer | |
+-------------+--------------+
| | |
+-------------+--------------+
| Hudson | |
| Sandler | |
+-------------+--------------+
| Nick | +44 |
| Lyon | (0) 20 |
| | 7796 4133 |
+-------------+--------------+
| | |
+-------------+--------------+
| Altium | |
+-------------+--------------+
| Tim | +44 |
| Richardson | (0) 20 |
| / Paul | 7484 4040 |
| Chamberlain | |
+-------------+--------------+
Chairman's Statement
The Board is pleased with the Company's 2009 results given the well-documented
macroeconomic uncertainties. Even more pleasing is the fact that the Company's
results demonstrated the strong growth potential that exists in its media
businesses, notably Burst Network, which is dedicated to achieving high-value,
brand advertising sales for its web publishers. We have reported steady progress
in that regard for the past two years, and the Board takes satisfaction in
seeing the progress translated into real growth for the Network in 2009.
Simultaneously the Company continued to develop its Burst Direct franchise by
strengthening its cost per action (CPA) capabilities and by aggressively working
with ad exchanges and developing programs with Feed and Purchased Inventory
partners. Burst Direct now has a product line which is able to meet the needs of
performance advertisers and provide value for web publishers' remnant inventory.
The Company's adConductor unit serves the needs of large web publishers and
media companies that wish to build their own advertising and content networks
underneath their brands. Media companies with substantial offline assets such as
magazines and newspapers were especially vulnerable to the damaging effects of
the global recession. For those reasons our adConductor business suffered the
most in 2009 as these companies retreated from their online business development
agendas. It is notable that, as the advertising market began to stir in the
fourth quarter, the adConductor business captured important new contracts,
including FiLife.com and Ology.com. The Board looks forward, therefore, to
seeing steady improvement in the adConductor unit in 2010.
The Board has remained focused on the development of the Company and creating
shareholder value through the successful execution of its business strategy and
by adding to its critical mass with strategic acquisitions. The Board is
encouraged by the contribution that organic growth made to that agenda in 2009.
Likewise, the Board is pleased with the results so far of the Company's desire
to acquire strategically aligned businesses that propel its offering forward in
important markets. The Giant Realm transaction, completed in October 2009, in
the popular Games vertical reaching the 18-34 year old male marketplace, is a
good example of this intent, as is the acquisition of OTP Media, which is
announced separately today.
The Board believes Burst's strength and competitive position were significantly
enhanced during 2009 and is optimistic about its 2010 prospects.
David J. Hanger
Non-Executive Chairman
Chief Executive's Review
Burst's objective is to provide recognizable value to independent web publishers
that make up the long tail of the Internet. The long tail defines the individual
web publishers that, in aggregate, exemplify the reason for the Internet's
success. The audiences of these special interest web sites are deeply engaged
with their content, and provide value for online advertisers. All four of our
business divisions support the endeavors of long tail web site publishers,
individually and in aggregate, by providing access to major advertisers and
their online media budgets.
Online Reach
Advertising Networks serve campaigns across a wide variety of sites that
represent Internet traffic as measured in individual visitors to a site, or
"unique visitors". This traffic is measured and reported by comScore
MediaMetrix. Burst, along with inventory on some of its adConductor customers,
reached 131.6 million unique monthly Internet visitors in the U.S. in December
2009, up 16.8% from 112.6 million unique visitors in December 2008. This placed
Burst Media as the 26th largest Internet property in the U.S. as of December
2009. Burst reached 15.6 million unique monthly Internet visitors in the U.K. in
December 2009, up from 10.9 million unique monthly visitors in December 2008 and
was the 25th largest U.K. Internet property as of December 2009(2).
Media Business
For the full year, revenue from Burst Network and Burst Direct was up 22% to
$27.6 million (2008: $22.6 million) in 2009. Both divisions benefited from
double-digit percentage increases. Burst Network rebounded from a recessionary
first quarter with strong sales in the second quarter and record performance in
the fourth. Network revenue grew 32% in the last three quarters of 2009 compared
to the same period in the prior year. This growth continued to reflect the
division's success at attracting high-value brand advertising.
Burst Network gives brand advertisers targeted access to tens of millions of
monthly unique visitors across independent web sites that are often referred to
as the long tail of the Internet. Burst Network offers brand advertisers full
disclosure of which special interest web sites will show their advertisements.
There were approximately 5,000 premium web sites as of 31 December 2009 as
compared to over 4,800 as of 31 December 2008(3). Burst Network can provide an
advertiser a custom package of web sites targeted by content, behavior,
demographics, geography and time of day. The inventory of available advertising
impressions for Burst Network was 48.4 billion in 2009 as compared to 47.7
billion in 2008.
In 2009, Burst Network's offering evolved from pre-packaged vertical networks to
custom packages of web sites that meet the unique needs of each advertising
customer. Relying on its stable of many niche publishers, Burst Network
salespeople are able to bundle web sites matching similar demographic
characteristics into a package that advertisers can buy with a single order.
This offering has been at the core of the Burst Network value proposition since
its inception and has become increasingly popular among brand advertising
clients over the course of the year. The Company is encouraged by the growing
demand.
Burst Direct completed its third full year of business by cementing its cost per
action (CPA) capability; launching its Feed business that partners with ad
exchanges and other third parties to increase the advertising fill rates for our
publishers; and expanding its Purchased Inventory program for increased
distribution in support of its performance advertising objectives. The division
grew revenues by 45% during the year thanks to a mix of products catering to the
performance needs of its customers: cost effective CPM advertising, cost per
click (CPC) advertising and CPA, each supported by our adConductor optimization
technology that can help determine which advertising creative units and media
placements are performing the strongest for the advertiser.
Burst Direct was associated with approximately 2,700 web sites as of 31 December
2009 as compared to 3,000 as of 31 December 2008(3). Additionally, Burst Direct
secures inventory from 30 strategic suppliers to support the performance
requirements of their clients' campaigns.
Giant Realm
Giant Realm, Inc., acquired in the fourth quarter of 2009, forms the Company's
third media division. Giant Realm's revenue for the last three months of 2009
was broadly in line with Management's expectations. Giant Realm incurred a small
loss at the operating level and, therefore, had a slightly negative effect on
the overall EBITDA of the Company. This was principally the result of
incremental expenses incurred before the year-end as Management decided to
expand the sales force in order to start 2010 with a full team.
The transition of Giant Realm to new ownership and a new ad management platform
was accomplished on schedule while preserving virtually all publisher
relationships. During the fourth quarter of 2009, the decision was made to
bolster the Giant Realm ad sales effort by installing a new Vice President of
Sales, Ryan Gould, an experienced Burst Network sales manager who had
successfully improved the results of the Network's New York City sales office.
He moved rapidly to install a new Giant Realm team in New York and Los Angeles
in order to start 2010 with a full sales complement.
At year-end, Giant Realm represented 68 publishers in the Entertainment and
Games category reaching a total of 7.9 million unique visitors, according to
comScore. The division provides highly creative, custom advertising solutions to
advertisers that capture significantly higher CPMs than usual ad network
offerings, including those at Burst Network and Burst Direct.
Overall, Management is extremely pleased with the results of the Giant Realm
transaction and its implications for future growth of the Company
adConductor
Revenue for the adConductor business was down 43% to $2.7 million from $4.7
million in 2008. The decrease is attributable in part to the full-year impact
of the loss of the TACODA relationship at the end of 2008, and substantially to
the macroeconomic conditions which we believe impacted large media companies
that are the primary prospects of adConductor's ad network building solution.
Those companies suffered especially in the downturn due to the recession's
effect on their offline media properties, and they responded by postponing
business development initiatives. Supporting this belief, adConductor signed
four new customers in November and December 2009 as economic conditions
improved.
Since its inception 15 years ago, Burst has invested in the technology and
processes necessary to run online advertising networks comprised of unaffiliated
web properties. With the adConductor product offering, we can support other
companies in this activity. For these companies, adConductor provides the
foundation for building advertising networks, namely the end-to-end ad
management workflow and systems, as well as the expertise and business processes
required to manage complex advertiser and publisher relationships. There are two
products offered: multi-site operators use adConductor for Networks; and single
site publishers use adConductor for Publishers.
As of the end of 2009, adConductor contracted with 14 Network customers,
including MTV Networks and its six vertical ad networks (or "Tribes"), Reed
Business Information, BET Networks, Dwell Magazine, ShortTail Media and 12
Publisher customers. During 2009, adConductor introduced enhanced user targeting
capabilities, significantly improved its ad management tools to more effectively
manage advertising campaigns and was awarded its 10th consecutive systems
certification by BPA Worldwide.
2010 Outlook
Indications are that the global economy and the global advertising market are in
the midst of a fragile recovery. Within the Internet sector improvements in
economic conditions may increase the level of potential new business and
likewise introduce new competitive threats.
In this environment, Burst will be looking to move closer to its customers, both
publishers and advertisers. Building on the progress our three media divisions
have made at developing a balanced offering of brand and performance advertising
sales solutions, we will seek more exclusive representation agreements with key
publishers in 2010. Giant Realm makes important contributions to this strategy
given its experience with exclusive publisher relationships and also given that
it has important technical and creative assets that can add value to publishers,
specifically a proprietary video content player. Video is a significant growth
area online, and Giant Realm's capabilities in this area are being rapidly
adopted for the benefit of other sites represented and supported by Burst Media.
We are pleased also to announce today the acquisition of OTP Media for the
initial consideration of GBP1.575 million ($2.38 million) and the issue of one
million new Burst common shares. OTP was founded in 2002 and has grown to become
a leading advertising network in the UK, with a particular focus on premium
advertising. The Burst Board believes that the acquisition of OTP will broaden
Burst's international capabilities and significantly strengthen its position in
the UK market. It is expected that the acquisition will be earnings enhancing
during the current financial year ending 31 December 2010.
With the unique features and benefits of our three media divisions, our
salespeople are becoming stronger consultative sellers capable of providing
custom and integrated packages to advertisers. Indeed, early this year one of
Burst's salespeople was voted the Top Sales Account Executive in the industry in
the U.S. for 2009, one of two Burst employees that appeared among the 20
finalists. Among our goals in 2010 are closer relations with not just the
advertising agency planners and buyers, but with marketers to ensure that
Burst's assets are well known and understood at the highest strategic level
possible.
We look forward to the success that is possible backed by a proven offering and
the industry's leading salespeople.
Jarvis Coffin
Chief Executive Officer
(2) Source: comScore Media Metrix December, 2009
(3) Inclusive of approximately 1,800 and 1,900 web sites that are in both
Burst Network and Burst Direct as of 31 December 2009 and 31 December 2007
respectively
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, 2009 and 2008
(in thousands, except share amounts)
+----------------+------------+--------+------------+
| | 2009 | | 2008 |
+----------------+------------+--------+------------+
| Revenue | $31,412 | | $27,257 |
+----------------+------------+--------+------------+
| Cost | 17,376 | | 14,258 |
| of | | | |
| revenue | | | |
+----------------+------------+--------+------------+
| Gross | 14,036 | | 12,999 |
| profit | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Operating | | | |
| expenses: | | | |
+----------------+------------+--------+------------+
| Sales | 8,127 | | 7,547 |
| and | | | |
| marketing | | | |
+----------------+------------+--------+------------+
| General | 3,827 | | 3,358 |
| and | | | |
| administrative | | | |
+----------------+------------+--------+------------+
| Technology | 2,749 | | 2,471 |
| and | | | |
| product | | | |
| development | | | |
+----------------+------------+--------+------------+
| Restructuring | 201 | | - |
| charge | | | |
+----------------+------------+--------+------------+
| Total | 14,904 | | 13,376 |
| operating | | | |
| expenses | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Loss | (868) | | (377) |
| from | | | |
| operations | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Other | | | |
| income: | | | |
+----------------+------------+--------+------------+
| Interest | 63 | | 239 |
| income | | | |
+----------------+------------+--------+------------+
| Other | 59 | | (63) |
| income | | | |
| (expense), | | | |
| net | | | |
+----------------+------------+--------+------------+
| Total | 122 | | 176 |
| other | | | |
| income | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Loss | (746) | | (201) |
| before | | | |
| income | | | |
| tax | | | |
| expense | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Income | 52 | | 73 |
| tax | | | |
| expense | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Net | $(798) | | $(274) |
| loss | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Basic | $0.00 | | $0.00 |
| and | | | |
| fully | | | |
| diluted | | | |
| loss | | | |
| per | | | |
| share | | | |
+----------------+------------+--------+------------+
| | | | |
+----------------+------------+--------+------------+
| Weighted | | | |
| average | | | |
| shares | | | |
| used in | | | |
| calculating: | | | |
+----------------+------------+--------+------------+
| Basic | 72,014,589 | | 83,028,562 |
| and | | | |
| fully | | | |
| diluted | | | |
| loss | | | |
| per | | | |
| share | | | |
+----------------+------------+--------+------------+
CONSOLIDATED BALANCE SHEETS
December 31, 2009 and 2008
(in thousands, except share amounts)
+---------------------------------------------------+----------+----------+----------+
| | 2009 | | 2008 |
+---------------------------------------------------+----------+----------+----------+
| ASSETS: | | | |
+---------------------------------------------------+----------+----------+----------+
| CURRENT ASSETS | | | |
+---------------------------------------------------+----------+----------+----------+
| Cash and cash equivalents | $5,714 | | $10,599 |
+---------------------------------------------------+----------+----------+----------+
| Accounts receivable, net of allowance for | | | |
| doubtful accounts of $227 in | | | |
+---------------------------------------------------+----------+----------+----------+
| 2009 and $222 in 2008 | 13,048 | | 7,141 |
+---------------------------------------------------+----------+----------+----------+
| Prepaid expenses and other current assets | 635 | | 927 |
+---------------------------------------------------+----------+----------+----------+
| Total current assets | 19,397 | | 18,667 |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| PROPERTY, EQUIPMENT AND SOFTWARE DEVELOPMENT | 2,765 | | 1,638 |
| COSTS, NET | | | |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| INTANGIBLE ASSETS, NET | 2,089 | | - |
+---------------------------------------------------+----------+----------+----------+
| OTHER ASSETS | 233 | | 152 |
+---------------------------------------------------+----------+----------+----------+
| | $24,484 | | $20,457 |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| LIABILITIES AND STOCKHOLDERS' EQUITY: | | | |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| CURRENT LIABILITIES | | | |
+---------------------------------------------------+----------+----------+----------+
| Due to publishers | $6,416 | | $2,370 |
+---------------------------------------------------+----------+----------+----------+
| Other current liabilities | 2,684 | | 1,512 |
+---------------------------------------------------+----------+----------+----------+
| Total current liabilities | 9,100 | | 3,882 |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| OTHER LIABILITIES | 329 | | 175 |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| Total liabilities | 9,429 | | 4,057 |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| COMMITMENTS AND CONTINGENCIES | | | |
+---------------------------------------------------+----------+----------+----------+
| | | | |
+---------------------------------------------------+----------+----------+----------+
| STOCKHOLDERS' EQUITY | | | |
+---------------------------------------------------+----------+----------+----------+
| Common stock, $.01 par value; 150,000,000 shares | | | |
| authorized, | | | |
+---------------------------------------------------+----------+----------+----------+
| 70,628,562 and 83,028,562 shares issued and | 706 | | 830 |
| outstanding at December 31, 2009 and 2008, | | | |
| respectively | | | |
+---------------------------------------------------+----------+----------+----------+
| Additional paid-in capital | 25,235 | | 25,658 |
+---------------------------------------------------+----------+----------+----------+
| Accumulated deficit | (10,886) | | (10,088) |
+---------------------------------------------------+----------+----------+----------+
| Total stockholders' equity | 15,055 | | 16,400 |
+---------------------------------------------------+----------+----------+----------+
| | $24,484 | | $20,457 |
+---------------------------------------------------+----------+----------+----------+
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 2009 and 2008
(in thousands, except for share amounts)
+--------------+---------+--------+---------+
| | 2009 | | 2008 |
+--------------+---------+--------+---------+
| CASH | | | |
| FLOWS | | | |
| FROM | | | |
| OPERATING | | | |
| ACTIVITIES | | | |
+--------------+---------+--------+---------+
| Net | $(798) | | $(274) |
| loss | | | |
+--------------+---------+--------+---------+
| Adjustments | | | |
| to | | | |
| reconcile | | | |
| net loss to | | | |
| net cash | | | |
+--------------+---------+--------+---------+
| | | | |
| used | | | |
| in | | | |
| operating | | | |
| activities: | | | |
+--------------+---------+--------+---------+
| Depreciation | 623 | | 466 |
| and | | | |
| amortization | | | |
+--------------+---------+--------+---------+
| Deferred | 249 | | 280 |
| income | | | |
| taxes | | | |
+--------------+---------+--------+---------+
| Equity-based | 284 | | 192 |
| compensation | | | |
+--------------+---------+--------+---------+
| Unrealized | (10) | | 83 |
| foreign | | | |
| currency | | | |
+--------------+---------+--------+---------+
| Provision | 171 | | 26 |
| for bad | | | |
| debts | | | |
+--------------+---------+--------+---------+
| Deferred | 1 | | 22 |
| rent | | | |
| expense | | | |
+--------------+---------+--------+---------+
| Changes | | | |
| in: | | | |
+--------------+---------+--------+---------+
| Accounts | (5,115) | | (1,398) |
| receivable | | | |
+--------------+---------+--------+---------+
| Prepaid | 196 | | (401) |
| expenses | | | |
| and | | | |
| other | | | |
| current | | | |
| assets | | | |
+--------------+---------+--------+---------+
| Other | - | | 4 |
| assets | | | |
+--------------+---------+--------+---------+
| Due to | 3,355 | | (84) |
| publishers | | | |
+--------------+---------+--------+---------+
| Other | 976 | | 308 |
| current | | | |
| liabilities | | | |
+--------------+---------+--------+---------+
| Net | (68) | | (776) |
| cash | | | |
| used | | | |
| in | | | |
| operating | | | |
| activities | | | |
+--------------+---------+--------+---------+
| | | | |
+--------------+---------+--------+---------+
| CASH | | | |
| FLOWS | | | |
| FROM | | | |
| INVESTING | | | |
| ACTIVITIES | | | |
+--------------+---------+--------+---------+
| Purchase | (2,100) | | - |
| of | | | |
| business | | | |
+--------------+---------+--------+---------+
| Payments | (1,486) | | (1,270) |
| for | | | |
| property, | | | |
| equipment | | | |
| and | | | |
| software | | | |
| development | | | |
| costs | | | |
+--------------+---------+--------+---------+
| Return | - | | 62 |
| of | | | |
| escrow | | | |
+--------------+---------+--------+---------+
| Net | (3,586) | | (1,208) |
| cash | | | |
| used | | | |
| in | | | |
| investing | | | |
| activities | | | |
+--------------+---------+--------+---------+
| | | | |
+--------------+---------+--------+---------+
| CASH | | | |
| FLOWS | | | |
| FROM | | | |
| FINANCING | | | |
| ACTIVITIES | | | |
+--------------+---------+--------+---------+
| Repurchase | (1,231) | | - |
| of common | | | |
| stock | | | |
+--------------+---------+--------+---------+
| Net | (1,231) | | - |
| cash | | | |
| used | | | |
| in | | | |
| financing | | | |
| activities | | | |
+--------------+---------+--------+---------+
| | | | |
+--------------+---------+--------+---------+
| NET | (4,885) | | (1,984) |
| DECREASE | | | |
| IN CASH | | | |
| AND CASH | | | |
| EQUIVALENTS | | | |
+--------------+---------+--------+---------+
| CASH | 10,599 | | 12,583 |
| AND | | | |
| CASH | | | |
| EQUIVALENTS, | | | |
| BEGINNING OF | | | |
| YEAR | | | |
+--------------+---------+--------+---------+
| CASH | $5,714 | | $10,599 |
| AND | | | |
| CASH | | | |
| EQUIVALENTS, | | | |
| END OF YEAR | | | |
+--------------+---------+--------+---------+
+--------------+--------+--------+--------+
| SUPPLEMENTAL | | | |
| DISCLOSURE | | | |
| OF CASH FLOW | | | |
| INFORMATION | | | |
+--------------+--------+--------+--------+
| Cash | $38 | | $67 |
| paid | | | |
| for | | | |
| taxes | | | |
+--------------+--------+--------+--------+
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in thousands, except share amounts)
NOTE 1 - DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of the Company
Burst Media Corporation ("Burst Media" or the "Company") together with its
subsidiary 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 5,900 specialty content web sites. The Company has advertising
servers in three locations in the U.S. (Massachusetts, Virginia, and Colorado)
and one location in Europe (Amsterdam). The corporate headquarters is located
in Burlington, Massachusetts. The Company's wholly-owned subsidiary, BURST!
Media UK Limited, was organized in the United Kingdom as a private limited
company in 2005.
Basis of Presentation
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
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 recorded 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. The cumulative effects of translating the functional
currency into U.S. dollars are insignificant at December 31, 2009 and 2008.
The Company also conducts certain transactions denominated in foreign
currencies. Included in other income (expense), net were realized and
unrealized net foreign currency gains of $20 and $10, respectively for the year
ended December 31, 2009. Included in other income (expense), net were realized
and unrealized net foreign currency losses of $12 and $82, respectively for the
year ended December 31, 2008.
Use of Estimates
The preparation of the 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 financial statements and the reported amounts of revenue and
expenses during the reported periods. Actual results could differ from those
estimates. On an ongoing basis, the Company reviews its estimates to ensure
that these estimates appropriately reflect changes in the business or as new
information becomes available.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents at
December 31, 2009 and 2008 included investments in money market mutual funds and
certificates of deposits totaling $3.5 million and $4.5 million, respectively.
Restricted Cash
Restricted cash was $70 at December 31, 2009 and 2008, and is included in other
assets. This represents funds required to be kept on deposit as collateral
under a letter of credit agreement relating the lease of its corporate
headquarters.
Fair Value of Financial Instruments
The Company has estimated that the carrying amount of cash and cash equivalents,
accounts receivable, prepaid and other current assets, due to publishers and
other current liabilities reflected in the consolidated financial statements
equals or approximates their fair values because of the short-term maturity of
those instruments.
Accounts Receivable, net
Accounts receivable are carried at their original invoice amount net of an
allowance for doubtful accounts. The Company maintains an allowance for doubtful
accounts for estimated credit losses as a result of uncollectible receivables.
Management periodically reviews the allowance based on specific identification
of troubled accounts, customer credit-worthiness and historical collections
trends. Accounts receivable are charged-off to the allowance for doubtful
accounts when deemed uncollectible. Recoveries of accounts receivable previously
written-off are credited to bad debt expense when received.
As a normal part of the business, the Company has receivables that are invoiced
in the month following the completion of the earnings process. All unbilled
receivables are billed within 30 days after the end of each month and are
included in accounts receivable in the consolidated balance sheets.
Concentration of Credit Risk
Financial instruments with potential concentrations of credit risk are cash and
cash equivalents, restricted cash and accounts receivable. To limit its
exposure, the Company maintains its cash and cash equivalents and restricted
cash with well established financial institutions and performs periodic credit
evaluations of its customers. In certain circumstances where specific customer
credit risk is identified, the Company requires prepayment for advertising
campaigns which are included in Other current liabilities in the consolidated
balance sheets. The Company maintains an allowance for doubtful accounts for
estimated credit losses and these losses have generally been within management's
expectations. At December 31, 2009, the Company held accounts receivable from
one customer amounting to $1,116 or 9% of its gross accounts receivable balance.
At December 31, 2008, the Company held accounts receivable from two customers
amounting to $1,449 or 20% and $859 or 12% of its gross accounts receivable
balance.
Property, Equipment and Software Development Costs
Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
related assets. Leasehold improvements are amortized using the straight-line
method over the lesser of the lease term or the useful life of the asset.
The Company capitalizes certain costs related to computer software developed or
obtained for internal use. The Company amortizes internal use software costs
over their estimated useful lives, which typically ranges from two to five
years. The Company capitalized software developments costs of $1,011 and $954
for the year ended December 31, 2009 and 2008, respectively. There was no
amortization expense related to capitalized software costs for the years ended
December 31, 2009 and 2008 as the product has not yet been placed in service.
The Company anticipates placing the asset in service in the second half of 2010.
Long-Lived Assets
The Company reviews the carrying value of long-lived assets for impairment
whenever events or circumstances indicate that the carrying value of an asset
may not be recoverable from the estimated future cash flows expected to result
from its use and eventual disposition. The Company believes there have been no
changes in circumstances that would require it to assess impairment of its
long-lived assets. Accordingly, no impairment loss has been recognized in the
accompanying consolidated financial statements.
Goodwill and Intangible Assets
Goodwill represents the excess of acquisition cost over the fair value of the
net assets of acquired businesses. The Company tests goodwill for impairment on
an annual basis as of its year end. Goodwill of a reporting unit will be tested
for impairment between annual tests if events occur or circumstances change that
would likely reduce the fair value of the reporting units below its carrying
value.
Intangible assets, which consist of technology, advertiser relationships and web
publisher relationships, are amortized over their estimated useful lives ranging
from 3 to 16 years.
Revenue Recognition
Network Advertising Revenue
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 publishers,
which have contracted with the Company to be part of its networks, as
advertising campaigns are delivered. The Company records its obligation to its
network publishers based upon a contractually determined percentage of revenue
in each advertising campaign and these expenses are classified as cost of
revenues.
adConductorApplication Revenue
All of the Company's products and services are enabled by the Company's
proprietary suite of software products called adConductor. In addition, the
Company licenses its adConductor technology to certain customers as an
application service provider. The Company contracts with its adConductor
customers for minimum fees based upon projected usage. Amounts due from these
customers are based on actual usage in the event actual usage exceeds the
minimum fees due. adConductor application revenue is recognized ratably over
the term of the customer contract.
Significant Customers and Web Publishers
The Company had no customers that individually accounted for more than 10% of
revenue for the year ended December 31, 2009. The Company had two customers
that each accounted for approximately 11% of revenue for the year ended December
31, 2008. Management anticipates that customer concentrations percentages may
vary from year to year and that those customers may change in any given year.
The Company's revenue is primarily generated from delivering customers'
advertising campaigns through its network of publishers. In 2009 and 2008,
approximately 10% of network advertising revenue was derived from customers'
advertising campaigns delivered via the five highest volume web publishers
within the publisher network. Web publishers in the Company's network generally
operate under open-ended, non-exclusive agreements.
Equity-Based Compensation
The Company recognized equity-based compensation expense for all share-based
awards made to employee 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 noncurrent 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.
The Company establishes accruals for tax contingencies when, notwithstanding the
reasonable belief that its tax return positions are fully supported, the Company
believes that certain filing positions are likely to be challenged and moreover,
that such filing positions may not be fully sustained. Accordingly, a tax
benefit from an uncertain tax position will only be recognized if it is more
likely than not that the tax position will be sustained on examination by the
taxing authorities based on the technical merits of the position. The Company
continually evaluates its uncertain tax positions and will adjust such amounts
in light of changing facts and circumstances.
Segment Information
The Company operates in one segment, which is the provision of comprehensive
Internet advertising solutions focused on supporting the interests of specialty
content web publishers. The chief operating decision makers review operating
results on an aggregate basis and manage operations as a single operating
segment.
Net Loss 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
net loss share is computed by dividing net loss by the shares used in the
calculation of basic net 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.
NOTE 5 -ACQUISITION OF GIANT REALM
Pursuant to the Asset Purchase Agreement dated October 5, 2009, the Company
acquired substantially all of the assets and specified obligations of the
business of Giant Realm, Inc. ("Giant Realm"), a vertical advertising network
focused on gamers and entertainment enthusiasts, with headquarters located in
New York, New York. As a result of the acquisition, the Company is expected to
expand its portfolio of niche vertical networks into popular gamer and
entertainment web sites.
The total purchase price of the acquisition is as follows:
+-------------------------------------------------+---------+----------+---------+
| | Amount | | |
+-------------------------------------------------+---------+----------+---------+
| Cash | $2,100 | | |
+-------------------------------------------------+---------+----------+---------+
| Equity instruments (2,500,000 shares of common | 400 | | |
| stock) | | | |
+-------------------------------------------------+---------+----------+---------+
| Total | $2,500 | | |
+-------------------------------------------------+---------+----------+---------+
| | | | |
+-------------------------------------------------+---------+----------+---------+
| Acquisition-related costs (included in general | | | |
| and administrative expenses) | $319 | | |
+-------------------------------------------------+---------+----------+---------+
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 | | |
+--------------+--------+--------+--------+
| Accounts | $953 | | |
| receivable | | | |
+--------------+--------+--------+--------+
| Property, | 81 | | |
| plant and | | | |
| equipment | | | |
+--------------+--------+--------+--------+
| Other | 73 | | |
| long | | | |
| term | | | |
| assets | | | |
+--------------+--------+--------+--------+
| Identifiable | 2,269 | | |
| intangible | | | |
| assets | | | |
+--------------+--------+--------+--------+
| Due to | (691) | | |
| web | | | |
| publishers | | | |
+--------------+--------+--------+--------+
| Other | (196) | | |
| current | | | |
| liabilities | | | |
+--------------+--------+--------+--------+
| Total | 2,489 | | |
| identifiable | | | |
| net assets | | | |
+--------------+--------+--------+--------+
| Goodwill | 11 | | |
+--------------+--------+--------+--------+
| Total | $2,500 | | |
+--------------+--------+--------+--------+
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 gross contractual amounts due under the accounts receivable is $1,068, of
which $115 is expected to be uncollectible.
The fair value of the acquired identifiable intangible assets of $2,269 is
provisional pending receipt of the final valuation for those assets.
NOTE 8 -LOSS PER SHARE
Basic and diluted loss per share for the years ending December 31 are calculated
as follows:
+--------------+------------+--------+------------+
| | 2009 | | 2008 |
+--------------+------------+--------+------------+
| Numerator: | | | |
+--------------+------------+--------+------------+
| Net | | | |
| loss | $(798) | | $(274) |
| used | | | |
| in | | | |
| calculating | | | |
| basic and | | | |
| diluted | | | |
| loss per | | | |
| share | | | |
+--------------+------------+--------+------------+
| | | | |
+--------------+------------+--------+------------+
| Denominator: | | | |
+--------------+------------+--------+------------+
| | 72,014,589 | | 83,028,562 |
| Shares | | | |
| used | | | |
| in | | | |
| calculating | | | |
| basic | | | |
| earnings | | | |
| per share - | | | |
| weighted | | | |
| average | | | |
| number of | | | |
| common | | | |
| shares | | | |
| outstanding | | | |
+--------------+------------+--------+------------+
| | - | | - |
| Effect | | | |
| of | | | |
| dilutive | | | |
| securities | | | |
| - stock | | | |
| options | | | |
+--------------+------------+--------+------------+
| | 72,014,589 | | 83,208,562 |
| Shares | | | |
| used | | | |
| in | | | |
| calculating | | | |
| diluted | | | |
| earnings | | | |
| per share | | | |
+--------------+------------+--------+------------+
Antidilutive options outstanding were 4,497,985 and 3,306,705 at December 31,
2009 and 2008, respectively.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAPLKEFAEEFF
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