ARTISTdirect Reports Results for Second Quarter 2002.Business Editors LOS LOS Length of stay, see there ANGELES--(BUSINESS WIRE)--July 31, 2002 ARTISTdirect Founded in 1994, Artistdirect, Inc. is an online digital media entertainment company. It owns several websites including Artistdirect.com, UBL.com, Loserkids.com and the Artistdirect Network. , Inc. (Nasdaq:ARTD) today announced financial results for its second quarter ended June 30, 2002. In addition, the Company's Board of Directors has approved an agreement to increase funding of ARTISTdirect Records ("ADR ADR - Astra Digital Radio "). Ted Field, ARTISTdirect Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. , commented, "Results for the second quarter reflect continuing weak conditions both in the music industry and the overall economy. However, I remain very enthusiastic about our opportunity at ARTISTdirect Records and believe that our current roster of thirteen artists will produce the hits necessary to demonstrate the value of our investment in the label." Financial Results Net revenue for the second quarter of 2002 decreased 48% to $1.4 million, compared with $2.7 million in the first quarter of 2001, excluding for both periods the Company's former talent agency business which is shown separately as a discontinued operation discontinued operation A segment of a business that has been abandoned or sold or for which plans for one or another of these actions have been approved. See also continuing operations. . Net loss for the quarter was $15.2 million, compared with a net loss of $11.1 million for the second quarter of 2001. Basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. loss per share for the quarter was $4.40, compared to $3.07 for the prior year period, in each case based upon weighted average shares outstanding for the period adjusted for the one-for-ten reverse split in July 2001. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become loss for the second quarter of 2002 was $2.6 million, compared with $6.2 million in the prior year period and $2.6 million in the first quarter of 2002. As of June 30, 2002, the Company had unrestricted cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments totaling $25.9 million. Revenue from e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. in the second quarter of 2002 decreased 34% to $1.1 million from $1.7 million during the same period in 2001. Media revenue for the first quarter was $323,000, a decrease of 69% from the same period in 2001. The Company experienced continued weakness in the overall advertising market and expects this condition to persist. In the second quarter of 2002, the Company recognized a loss of $9.6 million associated with its investment in and advances to ADR and has recognized losses Recognized Loss The amount of loss reported for income tax purposes. Notes: You can defer recognizing some losses and then deduct the losses for the following year(s). of $27.0 million since the inception of ADR in 2001. Funding of ARTISTdirect Records Advances from the Company to ADR during the second quarter totaled $3.0 million. ADR also received certain advances under agreements with BMG BMG Bundesministerium für Gesundheit (Germand: Federal Ministry for Health) BMG Be My Girl BMG Blue Man Group BMG Bertelsmann Music Group BMG Be My Guest BMG Browning Machine Gun BMG Bulk Metallic Glass Entertainment. Through June 30, 2002, the Company had advanced a total of $11.5 million to ADR during 2002 and $16.75 million from ADR's inception to date. Under the Company's previously disclosed agreement to fund ADR, the Company is committed to fund up to $15 million in 2002, approximately $12.75 million in 2003, and approximately $12 million in 2004. As of June 30, 2002, ARTISTdirect had unrestricted cash and short-term investments totaling $25.9 million. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma for advances up to the 2002 funding commitment of $15 million, the Company's advances to ADR would total $20.25 million and the Company's unrestricted cash and short-term investments would be $22.4 million. The Company's Board of Directors is considering a proposal to accelerate a portion of its 2003 funding commitment into the second half of 2002, though there can be no assurance that funding will be approved by the Board. If such funding is approved, the Company believes that ADR will have sufficient cash resources to meet anticipated needs for working capital and capital expenditures at least for the remainder of 2002. However, it is currently anticipated that ADR will require additional funding in 2003 beyond that which the Company may provide. The Company currently believes that available cash resources, including short-term investments, will be sufficient to meet its anticipated needs for working capital and capital expenditures for at least twelve months, including proposed advances to ADR during 2002. However, the Company expects that it will require additional capital to fully meet its remaining commitment to fund ADR. There can be no assurance that additional capital can be obtained by either the Company or by ADR on reasonable terms or at all. Failure to accelerate a portion of the Company's 2003 funding commitment or to raise additional capital to meet the ongoing needs of ADR could seriously harm the business of ADR and impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. the value of the Company's investment in ADR. If additional funds were raised through the issuance of equity securities of either the Company or ADR, the percentage ownership of the Company's current stockholders in the Company and/or ADR would be reduced. ARTISTdirect Records ARTISTdirect Records is a co-venture between the Company and Ted Field. As of June 30, 2002, ADR had thirteen artists on its roster: four rock acts (Badly Drawn Boy Damon Gough (nicknamed Badly Drawn Boy), was born 2 October 1969, in Dunstable, Bedfordshire. He grew up in the Breightmet area of Bolton, Lancashire, England. He is a Mercury Prize-winning indie singer/songwriter. , Blood Brothers, Custom, and Mad at Gravity) and nine urban acts (Curtains, Sharli McQueen, NAAM Naam (nā`ăm), in the Bible, son of Caleb. Brigade brigade Military unit commanded by a brigadier general or a colonel and composed of two or more subordinate units, such as regiments or battalions. Two or more brigades make up a division. , No Good, Phats Bossi, Pokafase, Poverty, Smilez N' Southstar, and Ericka Smith). ADR has a worldwide distribution agreement with BMG Entertainment, the global music business of media conglomerate conglomerate, in business conglomerate, corporation whose asset growth, often very rapid, comes largely through the acquisition of, or merger with, other firms whose products are largely unrelated to each other or to that of the parent company. Bertelsmann. ABOUT ARTISTdirect, Inc. ARTISTdirect Inc. (Nasdaq:ARTD) is a music entertainment company that combines an online music network, a traditional record label and entertainment marketing services to provide an integrated solution for music fans, artists and marketing partners. The ARTISTdirect Network (www.artistdirect.com) offers multi-media content, music news and information, online fan communities, music related commerce and digital music services. The Company also provides entertainment marketing solutions using artists, live events and online media to deliver targeted audiences to brand advertisers. Through its co-venture, ARTISTdirect Records, the Company operates an independent record label specializing in rock and urban music. The Company has its headquarters in Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. . Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995: This news release may contain projections or other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. regarding future events or the future financial performance of ARTISTdirect. These projections and statements involve risks and uncertainties. Readers are cautioned that these statements are based on information currently available to management and are only predictions. These predictions may differ materially from the Company's actual future events or results. Potential risks and uncertainties that may affect future events and the Company's business, financial status and operating results include, among others, the Company's ability to increase revenue, the ability of ARTISTdirect and Mr. Field to successfully implement and operate the Company's record label co-venture, the ability of ARTISTdirect or Mr. Field to accurately budget and forecast the record label operations, including the costs associated with signing artists, the timing and number of record releases, the revenue from and costs associated with such releases, the availability of sufficient capital to fund the Company's operations and its record label co-venture, uncertainties related to the effects of piracy piracy, robbery committed or attempted on the high seas. It is distinguished from privateering in that the pirate holds no commission from and receives the protection of no nation but usually attacks vessels of all nations. on sales of recorded music recorded music n → música grabada , general uncertainties related to amounts spent on online advertising and e-commerce, competition in its industry, ability to enter into new strategic relationships and leverage existing strategic relationships, ability to increase revenue from online product sales, advertising and other revenue streams, and to generate revenue from digital distribution, ability to increase visits to ARTISTdirect's network of sites, ability to offer compelling content, and ability to protect and/or obtain intellectual property rights. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, ARTISTdirect cannot assure the public that future results will meet these expectations. Moreover, neither the Company nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. ARTISTdirect is under no duty to update any of the forward-looking statements after the date of this release to conform those statements to actual results or to changes in the Company's expectations. More information about potential factors that could affect the Company's business and financial results is included in the documents filed by ARTISTdirect with the SEC, including its most recent Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , Quarterly Report on Form 10-Q Form 10-Q See 10-Q. , current reports on Form 8-K Form 8-K The form required by the SEC when a publicly held company incurs any event that might affect its financial situation or the share value of its stock. Form 8-K See 8-K. and its Registration Statements on Form S-1 and all amendments thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. .
ARTISTdirect, Inc. and Subsidiaries
Consolidated Balance Sheets
(amounts in thousands)
June 30, December 31,
2002 2001
Assets
Current assets:
Cash and cash equivalents $ 11,511 $ 25,766
Restricted cash 2,557 2,258
Short term investments 14,363 18,518
Accounts receivable, net 52 346
Prepaid stock based compensation 1,509 4,645
Other prepaid expenses and current assets 2,191 1,390
Total current assets 32,183 52,923
Property and equipment, net 4,583 6,077
Investments in affiliated companies 74 80
Goodwill and intangibles, net - 788
Other assets, net 6 5
$ 36,846 $ 59,873
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 160 251
Accrued expenses 2,533 4,018
Loans and notes payable - 254
Deferred revenue 89 36
Total current liabilities 2,782 4,559
Investment in record label joint venture 9,967 3,027
Long term liabilities 910 903
Total liabilities 13,659 8,489
Stockholders' equity:
Common stock 379 379
Treasury stock (3,442) (3,442)
Additional paid-in-capital 207,899 207,832
Unearned compensation (586) (745)
Accumulated deficit (181,163) (152,786)
Unrealized gain on available for sale
investments 100 146
Total stockholders' equity 23,187 51,384
$ 36,846 $ 59,873
ARTISTdirect, Inc. and Subsidiaries
Consolidated Statements of Operations
(amounts in thousands, except for share data)
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Net revenue:
E-Commerce $ 1,118 $ 1,688 $ 2,368 $ 4,082
Media 323 1,051 404 1,785
Total net revenue 1,441 2,739 2,772 5,867
Cost of revenue:
Direct cost of product
sales 862 1,306 1,825 3,419
Other cost of revenue 895 1,440 1,803 3,058
Stock-based
compensation 954 1,550 1,904 3,099
Total cost of revenue 2,711 4,296 5,532 9,576
Gross loss (1,270) (1,557) (2,760) (3,709)
Operating expenses:
Website development 11 1,166 20 2,813
Sales and marketing 455 1,482 1,096 3,908
General and
administrative 1,816 3,550 3,395 7,682
Stock-based
compensation 740 1,607 1,454 3,290
Depreciation and
amortization 709 1,624 1,496 3,620
Loss from impairment
of goodwill 788 - 788 4,458
Loss from operations (5,789) (10,986) (11,009) (29,480)
Income (loss) from
equity investments (9,612) (778) (18,010) (723)
Interest income, net 200 856 495 2,199
Loss from continuing
operations before
taxes (15,201) (10,908) (28,524) (28,004)
Income taxes - - - -
Loss from continuing
operations $(15,201) $(10,908) $(28,524) $ (28,004)
Income (loss) from
discontinued
operations (11) (42) 147 (28)
Net loss $(15,212) $(10,950) $(28,377) $ (28,032)
Interest on rescission
offer - 173 - 337
Net loss attributable to
common shareholders $(15,212) $(11,123) $(28,377) $ (28,369)
Basic and diluted loss
per share from
continuing operations $(4.40) $ (3.06) $ (8.24) $ (7.66)
Basic and diluted income
per share from
discontinued operations - (0.01) 0.04 (0.01)
Basic and diluted loss
per share $ (4.40) $ (3.07) $ (8.20) $ (7.67)
Weighted average common
shares outstanding 3,460,948 3,623,154 3,460,774 3,700,949(a)
EBITDA loss $ (2,609) $(6,247) $ (5,220) $(14,902)(b)
Adjusted gross loss $ (316) $ (7) $ (856) $(471)(c)
(a) On July 5, 2001, the Company declared a 1 for 10 reverse stock split. The outstanding common shares have been retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adjusted to reflect the reverse stock split. (b) EBITDA excludes income/(loss) from equity investments, net interest income, depreciation and amortization, stock-based compensation, loss on impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of goodwill and amortization of vendor prepaid pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. , included in other cost of revenue. We have included EBITDA data
because management believes that this measure is useful to an investor
to evaluate our operations. However, you should not consider this data
in isolation or as a substitute for net income, cash flows from
operating activities or other statement of operations See Income statement. or cash flow data
prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[]As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting . (c) Adjusted gross loss excludes stock based compensation and amortization of vendor prepaid. |
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