BRILLIANT SEES GAINS ON WEB.

Byline: Jesse Hiestand Staff Writer

WOODLAND HILLS - Although it continues to lose money, animation and software developer Brilliant Digital Entertainment Inc. said Tuesday that a shift from retail sales to the Internet has signaled a turnaround.

First-quarter revenue rose 109 percent to $390,000 over the same period a year ago as the company shifted the syndication of its 3D animations to the Web instead of CD-ROMS sold through retail outlets.

The company has also stepped up efforts to license the software used to make these animations to artists and advertisers, who are said to get better response from the eye-catching 3D ads than static banner ads.

``We're optimistic these are going to generate the revenues we need,'' said Anthony Neumann, vice president for business development. ``As a company we are now focused on these distinct revenue streams whereas before we'd only syndicate our content and hope for advertising revenue to come to us.''

Losses continue to mount despite an unspecified number of layoffs in the past six months, most in its Australia-based animation team, and the sale of the Auction Channel to MetroChannels LLC, a division of cable programming company Rainbow Media Holdings Inc.

In the first quarter, Brilliant Digital reported a net loss of $2.13 million, or 13 cents per share, compared with a net loss of $4.21 million, or 31 cents per share, the year before.

Also Tuesday, the company announced the signing of an agreement to raise $2.26 million in private financing consisting of convertible debt and common stock purchase warrants. Among the investors are the company's chairman and chief executive, Mark Dyne, and its president, Kevin Bermeister.

``We are pleased that in this difficult market environment we have reached agreement to raise the funding that we targeted for this round,'' Dyne said. ``We see this as an endorsement of our strategy moving forward.''

The company's ``b3d Studio'' software is used by studios, production houses and Web content suppliers to make entertainment, advertising and music videos for the Internet.

Its animated interactive titles feature popular characters such as Superman and Xena, as well as music artists including KISS, Ja Rule and Ludacris.

The content is syndicated to partners including Yahoo! Inc., Warner Bros. online and VH1.com.

Licensing deals include a partnership with Hong Kong-based e-New Media on jointly produced content for the Asian market.