PHRM.L Regulatory News (PHRM)

21 Apr 2005 06:00

21 April 2005 121Media, Inc Preliminary results for the year ended 31 December 2004 121Media, Inc. ("121Media"), the AIM listed online contextual advertisingcompany, announces its preliminary results for the financial year ended 31December 2004.Results highlights * Rapid growth in revenue, to $4.17 million (2003: $222,129); * Operating losses significantly reduced, to $116,543 (2003 loss: $1.10 million); * Pre-tax loss of $45,230 (2003 loss: $1.10 million); * Balance sheet net assets of $3.7 million including cash and share calls of $2.9 million; * Significant increase in the number and quality of advertisers, from 86 to over 500 at the year end, as technologies further improved; * Margin on sales significantly improved by year-end, as a result of dissolution of advertising sales joint venture with Conducive LLC; * Flotation on AIM achieved on 23 December 2004; placing raised ‚£1.72 million (net of expenses) ($3.8 million), to fund future growth opportunities; Strategic investment post-admission to AIM * US activities expanded, following opening of New York office in September 2004; * Appointment today of Ahmet Can to the Board, responsible for US operations; Ahmet joins from WhenU.com, the US-based online advertising company; * Investment in people and infrastructure across the company, with focus on sales capability, in order to fully capitalise on growing opportunities; * Investment in technology - specifically the PageSense Javascript application - to ensure readiness for commercial launch in Q2 2005; * Discussions at an advanced stage regarding PageSense Javascript deployment with Internet Service Providers and other potential partners. Kent Ertugrul, Chief Executive of 121Media, said:"2004 was a very important year for the company, and the substantial progressmade has created a very sound platform from which to take the business forwardin 2005."With robust technologies and a much strengthened senior management team, ourfocus is now to ensure that we maximise the opportunities open to us and thatwe have in place the infrastructure to do this. In particular, we are confidentthat PageSense Javascript has the potential to transform our business and wecontinue to develop a number of possible routes to market for this solution,both in partnership with ISPs and in ways that eliminate any dependency on anythird parties."Against a background of rapidly increasing recognition of the value oftargeted online advertising, we are pleased with the progress and investmentsmade in the first quarter and are encouraged by the outlook for 2005 andbeyond."Full Chairman's statement attached.For further information please contact:121Media 0870 405 7727 Kent Ertugrul, Chief Executive Hogarth Partnership 020 7357 9477 John Olsen / Barnaby Fry / Ed Westropp 121Media, Inc Preliminary results for the year ended 31 December 2004 Chairman's StatementIntroduction2004 was a very important year for the company, during which 121Media'sbusiness model was proven, exponential growth in revenues achieved, lossesnarrowed substantially and the company's flotation on AIM successfullyachieved.As a result of this progress, the company now has a very sound platform fromwhich to take the business forward in 2005.ResultsThe company generated turnover for the financial year ended 31 December 2004 of$4.17 million (2003: $222,129).This top line growth led to a significant reduction in operating losses, to$116,543 (2003 loss: $1.10 million), and in pre-tax losses narrowing to $45,230(2003 loss: $1.10 million).At the year end, at which time the proceeds of the placing connected withadmission to AIM had not been received in full, the company had net assets of$3.7 million including cash and share calls of $2.9 million; the share callsrelated to part of our IPO proceeds which were delayed due to the Christmasholidays. These monies were received in cash shortly after the year end.No dividend is proposed for the year to 31 December 2004.Strategic developmentsThe results for 2004 include commissions paid to Conducive LLC, a US on-linemedia agency, of $1.3 million (2003: $82,383), under a joint venturearrangement through which they acted as our sales office in the US andfacilitated the receipt of revenue, in exchange for a proportion of the incomegenerated. This was a necessary expedient, but had a major adverse effect onour net margins. It was clear to the directors, however, that operating our ownUS sales and marketing team would materially improve margins but would requiremore working capital.Following completion of the placing, the joint venture was dissolved at theyear-end, allowing us to focus instead on establishing our own sales andmarketing presence in the US. To this end, an office was opened in New York inSeptember 2004, and since then we have invested in expanding our UK and USsales teams.We have also invested, in the latter part of 2004 and early 2005, in ourtechnologies and particularly the PageSense Javascript application. TheJavascript approach is able to replicate the functionality and revenues of thedesktop application, without being installed on an end user's computer. In thatrespect, it removes many of the general challenges associated with the desktopsolutions while opening up substantial new areas of partnership. These includeInternet Service Providers, Web Publishers and Ad Networks. Our efforts at thestart of this year have been to ensure that the application is sufficientlyrobust and scaleable, ahead of a full commercial launch.Ongoing, our focus therefore is on progressing discussions with potentialpartners about embedding the PageSense Javascript application within theirsolutions, and on progressing direct routes to market for the application.Given the potential scale and value of the opportunity that the applicationrepresents to 121Media, we need to take care to ensure that the appropriateinfrastructure is in place at all levels within the company.Board changesIn order to capitalise fully on the opportunity in the US, we have announcedtoday that Ahmet Can has joined the company and has been appointed to the Boardwith immediate effect. Ahmet joins 121Media from WhenU.com, the US-basedcontextual online advertising company, and will be responsible for our USoperations, an important new role for which he has directly relevantexperience.Jordan Mitchell has stepped down from the Board with effect from today and hasleft the company to pursue other business opportunities. Jordan has played avaluable role in developing 121Media to the point it has reached today, and weare very grateful to him.As a result of this appointment and others made in 2004, the Board nowcomprises two Executive Directors, Kent Ertugrul and Ahmet Can, with detailedknowledge of our industry, and three non-executive Directors -Gerard Baz andDavid Mattey and myself - with many years' experience of business managementgenerally and the software and Internet industries specifically. We expect tostrengthen the Board further as the company develops and, specifically, weintend to appoint a full-time Finance Director during the course of the currentyear.Current trading and outlookWith robust technologies and a strengthened senior management team, we are nowclearly focused to ensure that we maximise the opportunities open to us, andthat we have in place the infrastructure to achieve this.The results for the early part of 2005 have inevitably been impacted by theinvestment in both people and infrastructure. Furthermore, whilst it is inpre-launch phase, the potential of our Javascript application has yet to bereflected in our results. However, there are signs that the investment ininfrastructure is already starting to pay off both in terms of growth in theuser base of the desktop application and revenue per user. Given the progressmade with the Javascript application in the first quarter, both in terms oftechnical and commercial developments, we believe that it has the potential totransform our business.Against this background, and the rapidly increasing recognition of the value oftargeted online advertising, we are pleased with the progress and investmentsmade in the first quarter and encouraged by the outlook for 2005 and beyond.121MEDIA, INCCONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2004 Notes 31/12/04 31/12/03 $ $ TURNOVER 4,165,203 222,129 Cost of distribution partners (912,559) (74,574) Commissions paid to Conducive 3 (1,305,339) (82,383)LLC __________ __________ GROSS PROFIT 1,947,305 65,172 Administrative expenses (2,063,848) (1,166,573) __________ __________ OPERATING LOSS (116,543) (1,101,401) Interest receivable and similar 82,274 -income __________ __________ (34,269) (1,101,401) Interest payable and similar (10,961) (369)charges __________ __________ LOSS ON ORDINARY ACTIVITIES (45,230) (1,101,770) BEFORE TAXATION Tax on loss on ordinary (130) -activities __________ __________ LOSS FOR THE FINANCIAL YEAR (45,360) (1,101,770)AFTER TAXATION __________ __________ DEFICIT FOR THE YEAR FOR THE (45,360) (1,101,770)GROUP ========= ========= Loss per share 4 - Basic ($0.01) ($0.25) - Diluted ($0.01) ($0.20) CONTINUING OPERATIONSNone of the group's activities were acquired or discontinued during the currentand previous years.TOTAL RECOGNISED GAINS AND LOSSESThe group has no recognised gains or losses other than those passing throughthe profit and loss account.121MEDIA, INCCONSOLIDATED BALANCE SHEET31 DECEMBER 2004 31/12/04 31/12/03 $ $ FIXED ASSETS Tangible assets 676,591 8,745 __________ __________ CURRENT ASSETS Debtors 2,641,929 83,334 Cash at bank and in hand 878,327 15,641 __________ __________ 3,520,256 98,975 CREDITORS Amounts falling due within one year (508,000) (614,165) __________ __________ NET CURRENT ASSETS/(LIABILITIES) 3,012,256 (515,190) __________ __________ TOTAL ASSETS LESS CURRENT 3,688,847 (506,445) LIABILITIES ========= ========= CAPITAL AND RESERVES Called up share capital 7,104 4,925 Share premium 4,731,608 1,229,318 Warrants 769,392 33,209 Profit and loss account (1,819,257) (1,773,897) __________ __________ SHAREHOLDERS' FUNDS 3,688,847 (506,445) ========= =========121MEDIA, INCCASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER 2004 31/12/04 31/12/03 $ $ Net cash outflow (1,923,196) (765,347) from operating activities Returns on investments and (10,949) (369) servicing of finance Taxation (130) - Capital expenditure (898,349) (8,141) __________ __________ (2,832,624) (773,857) Financing 3,695,310 790,510 __________ __________ Increase in cash in the period 862,686 16,653 ========= ========= ______________________________________________________________________________ Reconciliation of net cash flow to movement in net debt Increase in cash in the period 862,686 16,653 Cash outflow/(inflow) from decrease/ 100,000 (100,000)(increase) in debt __________ __________ Change in net debt resulting 962,686 (83,347) from cash flows __________ __________ Movement in net debt in the period 962,686 (83,347) Net debt at 1 January (84,359) (1,012) __________ __________ Net funds/(debt) at 31 December 878,327 (84,359) ========= =========121MEDIA, INCNotes to the cash flow statement for the year ended 31 December 2004a. Reconciliation of operating loss to net cash outflow from operating activities 31/12/04 31/12/03 $ $ Operating loss (116,543) (1,101,401) Depreciation charges 230,503 5,655 Issue of warrants 527,604 32,210 Increase in debtors (2,558,595) (79,933) (Decrease)/Increase in creditors (6,165) 378,122 __________ __________ Net cash outflow from operating (1,923,196) (765,347) activities ========= ========= b. Analysis of cash flows for headings netted in the cash flow statement 31/12/04 31/12/03 $ $ Returns on investments and servicing of finance Interest received 12 - Interest paid (10,961) (369) __________ __________ Net cash outflow for returns on (10,949) (369) investments and servicing of finance ========= ========= Capital expenditure Purchase of tangible fixed assets (898,349) (8,141) __________ __________ Net cash outflow for capital expenditure (898,349) (8,141) ========= ========= Financing Other short term loans (100,000) 100,000 Share issue 3,795,310 690,510 __________ __________ Net cash inflow from financing 3,695,310 790,510 ========= ========= c. Analysis of changes in net debt At At 1.1.04 Cash flow 31.12.04 $ $ $ Net cash: Cash at bank and in hand 15,641 862,686 878,327 __________ __________ __________ 15,641 862,686 878,327 __________ __________ __________ Debt: Debts falling due within one year (100,000) 100,000 - __________ __________ __________ (100,000) 100,000 - __________ __________ __________ Total (84,359) 962,686 878,327 ========= ========= ========= Notes to the Unaudited Preliminary Results for the year ended 31 December, 2004 1. Accounting policies The accounting policies adopted by the Group include:Accounting conventionThe financial statements have been prepared under the historical costconvention and in accordance with United Kingdom accounting standards.Basis of consolidationThe group financial statements consolidate the financial statements of121Media, Inc and its subsidiary undertaking drawn up to 31 December 2004. Noprofit and loss account is presented for 121Media,Inc as permitted by UnitedKingdom generally accepted accounting practice. The results of subsidiariessold or acquired are included in the profit and loss account up to, or from,the date control passes. Intra-group sales and profits are eliminated fully onconsolidation.Tangible fixed assetsDepreciation is provided at the following annual rates in order to write offeach asset over its estimated useful life. Computer - 50% on cost Hardware Software Development - 50% on cost costs Fixtures and - 50% on cost fittings Plant & - 50% on cost Machinery Research and developmentExpenditure up to 31 December 2004 on research and development is capitalisedin the year in which it is incurred, if it relates to software development.Product maintenance and support is written off as incurred.Foreign currenciesAssets and liabilities in foreign currencies are translated into US dollar atthe rates of exchange ruling at the balance sheet date. Transactions in foreigncurrencies are translated into sterling at the rate of exchange ruling at thedate of transaction. Exchange differences are taken into account in arriving atthe operating result. 2. Publication of non-statutory accounts The financial information set out in this preliminary announcement does notconstitute statutory accounts as defined in Section 240 of the Companies Act1985.The Company is incorporated in the US state of Delaware and is not subject tothe requirements of the Companies Act 1985, however accounts have been preparedin accordance with United Kingdom generally accepted accounting practice.The consolidated balance sheet as at 31 December 2004 and the consolidatedprofit and loss account, consolidated cash flow statement and associated notesfor the year have been extracted from the Group's audited financial statementson which the auditors provided an unqualified report. 3. Commissions paid to Conducive LLC Turnover includes an amount of $2,023,961 (2003: $215,775) for the provision ofcontextual advertising services received under an agreement with Conducive LLC.During the period, commissions totalling $1,305,339 (2003: $82,383) were paidto Conducive LLC under the agreement. These costs were included within cost ofsales.The agreement to which these revenues and costs relate was dissolved on 30thJune 2004. The dissolution agreement allowed for a transitional period of 180days subsequent to this date. 4. Loss per share The calculation of the basic earnings per share and diluted earnings per shareis based on the loss attributable to ordinary shareholders of $45,360 (2003:$1,101,770) divided by the weighted average number of shares in issue duringthe year.The weighted average number of shares used in the calculations are set outbelow: Year ended Year ended 31 December 2004 31 December 2003 Number of shares Number of shares 5,400,638 4,450,063 5. DividendsThe Directors are not proposing the payment of a dividend in respect of theyear ended 31 December 2004.6. Copies of the annual report and accounts will be sent to shareholdersshortly and will also be available at the Company's UK principal office, GoldenCross House, 8 Duncannon Street, London WC2N 4JF.END121 MEDIA INC