Onstream Media Corporation Announces First Quarter Fiscal 2013 Financial Results - Company Reports Higher Audio and Web Conferencing Revenues along with Continued Reduction in Operating Expenses -

- Management to Hold Conference Call for Investment Community on Wednesday, February 20, 2013 at 4:00pm ET -

POMPANO BEACH, Fla., Feb. 20, 2013 /PRNewswire/ -- Onstream Media Corporation (OTCQB: ONSM), a leading online service provider of live and on-demand corporate audio and web communications and virtual event technology with integrated social media marketing tools, announced today its financial results for the first quarter ended December 31, 2012.

Highlights

  • Revenues for the first quarter of fiscal 2013 were approximately $4.3 million as compared to approximately $4.5 million for the comparable quarter of fiscal 2012. This decrease was primarily the result of the loss of a single customer that we were providing streaming services to at very little margin, as part of a larger business relationship that is still in place. Therefore, the loss of this customer and the related revenues did not have a material impact on our net operating results.
  • Audio and Web Conferencing Services Group revenues were approximately $2.6 million for the three months ended December 31, 2012, an increase of approximately $104,000 (4.2%) from the corresponding period of the prior fiscal year. This increase included only one month of revenues from the Intella2 Inc. assets and operations of Intella2, a San Diego-based communications company, which Onstream acquired on November 30, 2012.
  • Onstream's EBITDA, as adjusted, for the three months ended December 31, 2012 was negative ($38,997), a $97,536 improvement as compared to EBITDA, as adjusted, of negative ($136,533) for the first quarter of fiscal 2012. EBITDA for the current year quarter was adversely affected by a one-time expense for fees related to the Intella2 acquisition.
  • Consolidated gross margin percentage was 70.3% for the three months ended December 31, 2012, versus 65.7% for the corresponding period of the prior fiscal year. This improvement was due to reductions in Infinite cost of sales as well as the discontinuance of a single low margin DMSP and hosting customer as noted above.
  • Consolidated operating expenses were approximately $3.3 million for the three months ended December 31, 2012, a decrease of approximately $133,000 (3.8%) from the corresponding period of the prior fiscal year, primarily due to an approximately $200,000, or 33.0%, decrease in professional fees expense as compared to the corresponding period of the prior fiscal year.
  • Cash flow from operating activities (before changes in current assets and liabilities other than cash) for the three months ended December 31, 2012 was negative ($10,425), compared to net cash provided by operating activities of $110,259 for the three months ended December 31, 2011. Cash used in operations for the current year quarter included a one time expense of $85,000 for broker's fees related to the  Intella2 acquisition, an approximately $65,000 cost of a funding commitment letter as well as an increase in interest expense arising from the debt financing used to acquire Intella2 and without the full benefit of the Intella2 revenues for the first quarter.

Management Commentary

Randy Selman, President and Chief Executive Officer of Onstream Media, stated, "The impact of the changes we've made over the past couple of years is starting to reveal itself, especially in the lower cost structure as well as the much improved gross profit margin as we have focused on more profitable business. While operations did use some cash during the quarter, that usage included a few expense items that were of a one-time or unusual nature, including items from our acquisition of Intella2 that will not recur. Also, the current quarter only had one month of revenue from our newly acquired Intella2 operations."

Mr. Selman continued, "We believe that our webcasting division revenues will be favorably impacted during the remainder of fiscal 2013 by a comprehensive update to our webcasting platform (V4), which we released in January 2013. We also expect to eventually see increased webcasting sales as a result of a recently introduced MP365 pricing model that includes a fixed monthly fee to us as well as establishes MP365 as a value-added platform to assist the customer in using our webcasting services and more particularly, our webinar services."

Mr. Selman concluded, "We believe that fiscal 2013 is off to a good start although it was affected by the one-time or unusual expenses previously discussed. Also, as a result of a major storm system affecting the northeastern United States on October 29, 2012, our Infinite division's primary operating office location in New Jersey was closed and/or impaired for a few weeks. Although it is difficult to quantify the financial impact of this event, particularly with respect to lost revenue opportunities, we have estimated the impact to be at least $70,000. Looking at the remainder of the year we believe we are on track to show improved results. We continue to maintain our expectations that consolidated fiscal 2013 revenues will exceed the respective corresponding fiscal 2012 amounts for the year as a whole, as well as consolidated gross margin (in dollars) for fiscal year 2013 to exceed the corresponding fiscal 2012 and remain confident in showing improved top and bottom lines for fiscal 2013."

Financial Discussion

Consolidated operating revenue was approximately $4.3 million for the three months ended December 31, 2012, a decrease of approximately $234,000 (5.2%) from the corresponding period of prior fiscal year, due to decreased revenues of the Digital Media Services Group.

Digital Media Services Group revenues were approximately $1.7 million for the three months ended December 31, 2012, a decrease of approximately $339,000 (16.8%) from the corresponding period of the prior fiscal year, primarily due to a decrease in DMSP and hosting division revenues. This decrease was primarily the result of the loss of a single customer that we were providing streaming services to at very little margin, as part of a larger business relationship that is still in place. Therefore, the loss of this customer and the related revenues did not have a material impact on our net operating results.

Audio and Web Conferencing Services Group revenues were approximately $2.6 million for the three months ended December 31, 2012, an increase of approximately $104,000 (4.2%) from the corresponding period of the prior fiscal year. This increase was a result of the first month of revenues of approximately $111,000 arising from the operations of Intella2, which we acquired on November 30, 2012.

Consolidated gross margin was approximately $3.0 million for the three months ended December 31, 2012, an increase of approximately $43,000 (1.5%) from the corresponding period of the prior fiscal year. Our consolidated gross margin percentage was 70.3% for the three months ended December 31, 2012, versus 65.7% for the corresponding period of the prior fiscal year. This was due to reductions in Infinite cost of sales as well as the discontinuance of a single low margin DMSP and hosting customer, as discussed above. During the third quarter of fiscal 2012, we renegotiated certain supplier contracts which reduced our Infinite division cost of sales by approximately $55,000 for the three months ended December 31, 2012 and that we expect will reduce our Infinite division cost of sales by another approximately $116,000 for the remainder of fiscal 2013, as compared to the corresponding period of fiscal 2012.

Consolidated operating expenses were approximately $3.3 million for the three months ended December 31, 2012, a decrease of approximately $133,000 (3.8%) from the corresponding period of the prior fiscal year, primarily due to an approximately $200,000, or 33.0%, decrease in professional fees expense as compared to the corresponding period of the prior fiscal year. The decrease in professional fees is primarily due to an approximately $141,000 decrease in the expense associated with compensation in shares and options for financial consulting and advisory services. In addition, during the second quarter of fiscal 2012, we terminated a consulting contract, which termination reduced our professional fee expenses by approximately $82,000 for the three months ended December 31, 2012 and that we expect will reduce our professional fees expense by another approximately $230,000 for the remainder of fiscal 2013, as compared to the corresponding period of fiscal 2012.

Onstream's first quarter fiscal 2013 net loss of approximately $0.7 million, or $(0.05) per share, was based on approximately 13.3 million weighted average shares outstanding, as compared to net loss of approximately $0.7 million, or $(0.06) per share, which was based on approximately 11.9 million weighted average shares outstanding. As discussed above, the current quarter loss includes a one time expense of $85,000 for broker's fees related to the Intella2 acquisition, an approximately $65,000 cost of a funding commitment letter and an approximately $58,000 increase in interest expense arising from the debt financing used to acquire Intella2. The current quarter net loss also includes a non-cash debt extinguishment loss of approximately $69,000.

Onstream's EBITDA, as adjusted, for the three months ended December 31, 2012 was negative ($38,997) an approximately $97,536 improvement as compared to EBITDA, as adjusted, of negative ($136,533) for the first quarter of fiscal 2012. EBITDA for the current year quarter was adversely affected by a one-time expense of $85,000 for brokers fees related to the Intella2 acquisition.

Cash flow from operating activities (before changes in current assets and liabilities other than cash) for the three months ended December 31, 2012 was negative ($10,425), compared to net cash provided by operating activities of $110,259 for the three months ended December 31, 2011. Cash used in the quarter for operations included a one time expense for $85,000 for broker's fees  related to the Intella2 acquisition, an approximately $65,000 cost of a funding commitment letter as well as an increase in interest expense arising from the debt financing used to acquire Intella2.

Teleconference

Onstream's leadership team will conduct a conference call on Wednesday, February 20th at 4:00 p.m. ET to discuss those financial results. During this teleconference, Mr. Randy Selman, President and Chief Executive Officer of Onstream and Mr. Robert Tomlinson, the company's Chief Financial Officer, will also discuss the integration of the Company's recent acquisition of Intella2 as well as provide an outlook for the remainder of fiscal 2013. The discussion will be followed by an open Q&A session. Interested parties may listen to the presentation live online at http://www.visualwebcaster.com/event.asp?id=92268 or by calling 1-888-645-4404 or 201-604-0169. It is recommended to dial in approximately 10 to 15 minutes prior to the scheduled start time. An audio rebroadcast of the conference call will be archived for one year online at http://www.visualwebcaster.com/event.asp?id=92268.


About Onstream Media:

Onstream Media Corporation (OTCQB: ONSM), is a leading online service provider of live and on-demand corporate audio and web communications and  virtual event technology with integrated social media marketing tools. Onstream Media's innovative Digital Media Services Platform (DMSP) provides customers with cost effective tools for encoding, managing, indexing, and publishing content via the Internet. The company's MarketPlace365® solution enables publishers, associations, tradeshow promoters and entrepreneurs to rapidly and cost effectively self-deploy their own online virtual marketplaces. In addition, Onstream Media provides live and on-demand webcastingwebinars, web and audio conferencing services. To date, almost half of the Fortune 1000 companies and 78% of the Fortune 100 CEOs and CFOs have used Onstream Media's services. Select Onstream Media customers include AAA, Dell, Disney, Georgetown University, National Press Club, PR Newswire, Shareholder.com (NASDAQ), Sony Pictures, and the U.S. Government. Onstream Media's strategic relationships include Akamai, BT Conferencing, and Trade Show News Network (TSNN). For more information, visit Onstream Media at http://www.onstreammedia.com or call 954-917-6655.

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this document and elsewhere by Onstream Media are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such information includes, without limitation, the business outlook, assessment of market conditions, anticipated financial and operating results, strategies, future plans, contingencies and contemplated transactions of the company. Such forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties and other factors which may cause or contribute to actual results of company operations, or the performance or achievements of the company or industry results, to differ materially from those expressed, or implied by the forward-looking statements. In addition to any such risks, uncertainties and other factors discussed elsewhere herein, risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied for the forward- looking statements include, but are not limited to fluctuations in demand; changes to economic growth in the U.S. economy; government policies and regulations, including, but not limited to those affecting the Internet. Onstream Media undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Actual results, performance or achievements could differ materially from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in Onstream Media Corporation's filings with the Securities and Exchange Commission.

Financial Tables Follow


 

ONSTREAM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)




Three Months Ended
December 31,


2012

2011

REVENUE:



    Audio and web conferencing

$    2,042,083

$      2,011,701

    Webcasting

1,378,312

1,499,954

    DMSP and hosting

241,984

472,957

    Network usage

527,367

479,445

    Other

89,971

50,060

Total revenue

4,279,717

4,514,117




COSTS OF REVENUE:



    Audio and web conferencing

574,486

645,511

    Webcasting

389,795

431,997

    DMSP and hosting

32,579

239,794

    Network usage

253,346

216,345

    Other

19,053

13,441

Total costs of revenue

1,269,259

1,547,088




GROSS MARGIN

3,010,458

2,967,029




OPERATING EXPENSES:



   General and administrative:



         Compensation

1,983,170

1,995,876

         Professional fees

406,013

606,235

        Other      

628,536

521,735

    Depreciation and amortization

329,225

356,508

Total operating expenses

3,346,944

3,480,354




Loss from operations

(336,486)

(513,325)




OTHER EXPENSE, NET:



    Interest expense

(306,026)

(182,848)

    Debt extinguishment loss

(68,600)

-

    Gain from adjustment of derivative liability to fair value

27,480

23,051

    Other (expense) income, net

(31,736)

20,284




Total other expense, net

(378,882)

(139,513)




Net loss

$     (715,368)

$     (652,838)




Loss per share – basic and diluted:






Net loss per share

$           (0.05)

$            (0.06)




Weighted average shares of common stock outstanding – basic and diluted

13,273,714

11,852,414




 


ONSTREAM MEDIA CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO EBITDA AND EBITDA, AS ADJUSTED




Three months ended


December 31,


2012

2011


           (unaudited)

Net loss

$(715,368)

$(652,838)

Add: Depreciation and amortization

329,225

356,508

Add: Interest expense

306,026

182,848

EBITDA

$  (80,117)

$(113,482)




EBITDA

$ (80,117)

$(113,482)

Add: Debt extinguishment loss

68,600

-

Less: Gain from adjustment of derivative liability to fair value

(27,480)

(23,051)

EBITDA, as adjusted

$ (38,997)

$(136,533)

 

EBITDA is defined as earnings (loss) before interest expense, depreciation, income taxes and amortization.

 

EBITDA, as adjusted, represents EBITDA, as defined above, adjusted for debt extinguishment loss and for gain from adjustment of derivative liability to fair value.

 

EBITDA and EBITDA, as adjusted, are non-U.S. GAAP financial measures.

 

Management believes EBITDA and EBITDA, as adjusted, to be meaningful indicators of our performance that provides useful information to investors regarding our financial condition and results of operations. Presentation of EBITDA and EBITDA, as adjusted, is commonly used by financial analysts and others who follow our industry to measure operating performance. While management considers EBITDA and EBITDA, as adjusted, to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with U.S. Generally Accepted Accounting Principles (GAAP). EBITDA and EBITDA, as adjusted, do not reflect cash available to fund cash requirements. Not all companies calculate EBITDA or EBITDA, as adjusted, in the same manner and the measure as presented may not be comparable to similarly-titled measures presented by other companies.

 


 

ONSTREAM MEDIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS





December 31,

2012

September 30,

2012


                                                                               ASSETS

 (unaudited)


CURRENT ASSETS:



   Cash and cash equivalents

$          196,026

$           359,795

   Accounts receivable, net of allowance for doubtful accounts

of $209,648 and $195,737, respectively

 

2,237,434

 

2,357,726

   Prepaid expenses

280,291

293,294

   Inventories and other current assets

138,699

146,159

Total current assets

2,852,450

3,156,974

PROPERTY AND EQUIPMENT, net

3,160,393

2,841,115

INTANGIBLE ASSETS, net

797,483

277,579

GOODWILL, net

10,610,548

10,146,948

OTHER NON-CURRENT ASSETS

146,215

146,215

Total assets

$     17,567,089

$    16,568,831

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:



   Accounts payable

$      1,555,913

$        1,634,110

    Accrued liabilities

1,441,679

1,398,668

    Amounts due to directors and officers

700,441

669,697

   Deferred revenue

94,117

138,856

   Notes and leases payable –  current portion, net of discount

2,215,550

1,650,985

   Convertible debentures – current portion,  net of discount

678,292

407,384

Total current liabilities

6,685,992

5,899,700

Accrued liabilities – non-current portion

548,594

-

Notes and leases payable, net of current portion and discount

549,603

189,857

Convertible debentures, net of current portion and discount

325,232

801,844

Detachable warrant, associated with sale of common/preferred shares

-

81,374

Total liabilities

8,109,421

6,972,775

COMMITMENTS AND CONTINGENCIES



STOCKHOLDERS' EQUITY:



Series A-13 Convertible Preferred stock, par value $.0001 per share, authorized 170,000 shares, zero and 17,500 issued and outstanding,  respectively

 

 

-

 

 

2

Series A-14 Convertible Preferred stock, par value $.0001 per share, authorized 420,000 shares, zero and 160,000 issued and outstanding, respectively

 

 

-

 

 

16

Common stock, par value $.0001 per share; authorized 75,000,000 shares, 14,430,467 and 12,902,217 issued and outstanding, respectively

 

1,443

 

1,289

Additional paid-in capital

141,765,183

141,199,626

Accumulated deficit

(132,308,958)

(131,604,877)

Total stockholders' equity

9,457,668

9,596,056

Total liabilities and stockholders' equity

$   17,567,089

$   16,568,831

 

Media Relations: 

Investor Relations:



FastLane Communications

Wolfe Axelrod Weinberger Associates, LLC

Chris Faust

 Donald C. Weinberger; Adam Lowensteiner

(973) 582-3498

 (212) 370-4500; (212) 370-4505

cfaust@fast-lane.net 

don@wolfeaxelrod.com


adam@wolfeaxelrod.com

SOURCE Onstream Media Corporation



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