WEB NEWS Deal Flow
IDI, Inc.
2,869,190 Shares of Common Stock
Deal Flow
CALCULATION OF REGISTRATION FEE
Title of securities
to be registered
Amount
to be
registered
Proposed
maximum
offering price
per share
Proposed
maximum
aggregate
offering price
Amount of
registration fee
Common Stock, $0.0005 par value per share, underlying outstanding warrants
500,000
$8.00(1)
$4,000,000(1)
$403
Common Stock, $0.0005 par value per share
2,369,190
$4.53(2)
$10,732,431(2)
$1,081
TOTAL
2,869,190
$14,732,431
$1,484
Deal Flow
Item 1.01. Entry into a Material Definitive Agreement.
On June 8, 2016, IDI, Inc., a Delaware corporation (the “Company”), entered into and consummated the transactions contemplated by that certain Membership Interest Purchase Agreement (the “Purchase Agreement”) with Selling Source, LLC, a Delaware limited liability company (“Seller”), pursuant to which Seller sold to the Company all of Seller’s right, title, and interest in all of the issued and outstanding membership interests (the “Membership Interests”) in Q Interactive, LLC, a Delaware limited liability company (the “Target”).
As consideration for the Membership Interests, after adjustment for Target’s working capital at closing, the Company issued to Seller 2,369,190 shares (the “Purchase Shares”) of the Company’s Common Stock, par value $0.0005 per share (the “Common Stock”). Seller may receive additional consideration for the Membership Interests if 2016 gross revenues of Target equal or exceed $25,000,000 (the “Earnout Target”). Such additional consideration, if earned, would be paid in either of the following ways, at Seller’s option, no earlier than the one (1) year anniversary of the closing date (the “Earnout Shares”): (i) 1,200,000 shares of Common Stock (subject to adjustment for certain capital events) or (ii) that number of shares of Common Stock equal to $10,000,000, in the aggregate, as determined by the volume weighted average price of the Common Stock for the 10 trading days immediately preceding Seller’s receipt of a statement prepared by the Company stating the Earnout Target has been achieved. Notwithstanding the foregoing, in no event shall the aggregate number of shares of Common Stock and securities convertible into or exercisable for Common Stock issued under the Purchase Agreement, or Common Stock deemed to be issued in connection with the transactions contemplated by the Purchase Agreement in accordance with the rules and regulations of the NYSE MKT, equal or exceed 19.9% of the Company’s total number of shares of Common Stock outstanding before any such issuance(s), without the prior approval of the stockholders of the Company holding a majority of the Common Stock.
Within 10 business days following the closing date, the Company shall file a registration statement registering the resale of the Purchase Shares and shall use commercially reasonable best efforts to cause such registration statement to become effective no later than 30 days following the closing date.
The Purchase Agreement contains customary representations and warranties about the condition of Target and the Company, respectively, including, among others, representations and warranties with respect to Target’s data collection, privacy, and security policies.
Pursuant to the terms of the Purchase Agreement, Seller shall indemnify the Company and its affiliates and their representatives, subject to a basket of $10,000 for any individual loss and a deductible equal to $100,000, except for certain standard or specified exceptions to which the basket and/or deductible shall not apply. In addition, the aggregate amount of losses for which Seller shall be responsible shall not exceed 25% of the value of the Purchase Shares and the Earnout Shares, in the aggregate, subject to certain standard exceptions. The Purchase Agreement provides for specific indemnities by Seller in favor of the Company for certain pre-closing activities of Target and its subsidiaries.
Like Seller, the Company has certain customary indemnification obligations under the Purchase Agreement, which obligations are subject to the above-described basket, deductible and cap.
The shares of Common Stock to be issued in connection with the Purchase Agreement are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”), in accordance with Section 4(2) of the Act, as a transaction by an issuer not involving a public offering.
The description of the Purchase Agreement in this report does not purport to be complete and is qualified in its entirety by reference to the Purchase Agreement, which is filed as Exhibit 2.1 to this report and is incorporated herein by this reference.
Also on June 8, 2016, Fluent, LLC (“Fluent”), a direct wholly owned subsidiary of the Company entered into a Limited Consent and Amendment No. 1 to Credit Agreement (“Amendment”), among Fluent, as Borrower, the financial institutions party thereto, as lenders, and Whitehorse Finance, Inc., as Administrative Agent (the “Administrative Agent”), amending Fluent’s term loan facility.
The Amendment, among other things, permits certain payments, loans, and distributions from Fluent, and its subsidiaries, on the one hand, to the Company and certain of its subsidiaries, on the other hand. The Amendment further permits the Company and its subsidiaries to implement a credit and merchant services facility with Wells Fargo Bank, National Association, subject to documentation reasonably acceptable to the Administrative Agent.
The description of the Amendment in this report does not purport to be complete and is qualified in its entirety by reference to the Amendment, which is filed as Exhibit 10.1 to this report and is incorporated herein by this reference.
Comments & Business Outlook
BOCA RATON, Fla.--(BUSINESS WIRE )--
IDI, Inc. (NYSE MKT: IDI), a data and analytics company, today announced a business update on the Company’s leading-edge, investigative solution for the risk management industry, idiCORE™.
Market Traction through June 2, 2016
In just 32 days since the commercial release of idiCORE (May 2, 2016), IDI has on-boarded over 2,800 users. These users represent a variety of industries within the risk management space, including law firms, debt recovery companies, investigative companies, process servers, and more.
Derek Dubner, CEO of IDI, stated, “While confident that we would see positive market reaction upon the release of our new technology, the current rate of adoption has exceeded our own expectations for the initial commercial offering of idiCORE. This is especially exciting given that this is only an early phase of the evolution of this product. We know historically that strong market adoption is th
Deal Flow
Item 8.01 Other Events.
This Current Report on Form 8-K is being filed for the sole purpose of filing as an exhibit an opinion (the "Opinion") delivered to IDI, Inc. (the "Company") by Akerman LLP in connection with the previously announced sale by the Company of 1,000,000 shares of the Company's common stock, par value $0.0005 per share, which sale closed today. The Opinion is being filed herewith in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933 and is incorporated by reference into the Company's Registration Statement on Form S-3 (Registration No. 333-205614).
Deal Flow
Per Share
Total(1)
Public offering price
$
5.00
$
5,000,000
Placement agent fee(2)
$
0.20
$
200,000
Proceeds, before expenses, to us
$
4.80
$
4,800,000
CFO Trail
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 29, 2016, the Board of Directors (the "Board") of IDI, Inc. (the "Company") appointed Daniel MacLachlan as the Company’s Chief Financial Officer and Principal Financial Officer, effective immediately.
Daniel MacLachlan, 37, resumed performing services for the Company in February 2016. Mr. MacLachlan served as an Independent Director, Audit and Compensation Committee Chairman for Vapor Corp., a U.S.-based distributor and retailer of vaporizers, e-liquids and electronic cigarettes, since April 2015. From October 2014 until early February 2015, Mr. MacLachlan served as the Chief Financial Officer of The Best One, Inc. ("TBO"), a holding company engaged in the acquisition of operating businesses and the acquisition and development of technology assets across various industries. Prior to TBO, Mr. MacLachlan served in the roles of Director of Finance and Chief Financial Officer for TransUnion Risk and Alternative Data Solutions, Inc., after it acquired substantially all of the assets of TLO, LLC ("TLO"), a leading information solutions provider, through a 363 sale process in December 2013. Mr. MacLachlan was the Chief Financial Officer of TLO since its inception in 2009. From 2005 to 2009, Mr. MacLachlan served as the Chief Financial Officer of JARI Research Corporation ("JARI"), a partnership with the Mayo Clinic advancing proprietary cancer therapeutic technology using targeted radioactive therapy. Prior to JARI, Mr. MacLachlan served as a Special Agent in the Federal Bureau of Investigation (FBI) specializing in the criminal investigation of public corruption and civil rights violations. Mr. MacLachlan holds a B.S. in Business and Finance from Nova Southeastern University, a B.B.A. in Accounting from Florida Atlantic University and an M.B.A. in Finance from Florida Gulf Coast University.
Pursuant to the terms of his employment agreement with TBO effective October 2, 2014, as amended, which was assumed by the Company in the Company’s merger transaction with TBO on March 21, 2015, the Company pays Mr. MacLachlan an annual salary of $185,000 and under the agreement, Mr. MacLachlan is to receive 50,000 restricted stock units (adjusted for the Company’s March 2015 1-for-5 reverse split), which vest in equal quarterly installments during the term of the agreement and are to be delivered at the end of the two year vesting period. The term of the employment agreement is through September 30, 2016. The Company’s Compensation Committee ratified Mr. MacLachlan’s employment agreement on March 29, 2016. A copy of Mr. MacLachlan's agreement is attached as Exhibit 10.1 to this report and is incorporated herein by this reference.
Aaron Solomon, the Company’s former Interim Chief Financial and Principal Financial Officer was appointed as the Company’s Senior Vice President of Finance & Administration.
Auditor trail
Item 4.01 Changes in Registrant’s Certifying Accountant.
Previously, the consolidated financial statements of Company subsidiary IDI Holdings, LLC (“IDI Holdings”), formerly The Best One, Inc., for the year ended December 31, 2014 (the “2014 Financials”) were audited by L.L. Bradford & Company, LLP (“LLB”); however, LLB is no longer PCAOB registered and, as a result, the Company can no longer include LLB’s audit opinion with the Company’s filings, including its Annual Report on Form 10-K for the year ended December 31, 2015. As a result, on March 15, 2016, the Audit Committee of the Board of Directors appointed RBSM LLP (“RBSM”) for the sole purpose of auditing IDI Holdings’ 2014 Financials.
Comments & Business Outlook
BOCA RATON, Fla.--(BUSINESS WIRE)-- IDI, Inc. (NYSE MKT: IDI), a data and analytics company, today reported revenue of $10.8 million for the three months ended December 31, 2015, and $14.1 million for the full year. The 2015 period includes $10.1 million in revenue from Fluent for the period of December 9, 2015, to year end.
“Following management’s formation of the data fusion business, initial capital raise and acquisition of Interactive Data, LLC in late 2014, 2015 proved to be a transformational year for IDI,” commented Derek Dubner, CEO of IDI. “In a year that was strategically focused on investment and development, we have laid the groundwork for a very successful business, while still ending the period with strong cash flow. Our acquisition of Fluent executed our plan to expand into the consumer marketing industry and provided key synergies. We see the momentum continuing for strong growth in 2016 and anticipate north of $170 million in revenue with continued strong earnings.”
IDI Vice Chairman Dr. Philip Frost stated, “We entered 2016 with great enthusiasm, in the enviable position of leveraging world-class, proprietary technology and a proven management team to compete in a rapidly growing market. I believe IDI is building a truly differentiated company in the field of data and analytics.”
Comments & Business Outlook
SAN FRANCISCO--(BUSINESS WIRE)-- Fluent, LLC, an IDI company (IDI) and industry leader in people-based digital marketing and customer acquisition, today announced a partnership with LiveRamp, the leading provider of data onboarding and connectivity services. The partnership will extend the reach of Fluent’s first party data assets and on-the-fly audience creation capability to all channels including display, mobile, social, video, and addressable television.
“We are extremely excited to be announcing our partnership with LiveRamp,” said Ryan Schulke, CEO of Fluent. “Our integration will extend the reach of Fluent’s immensely powerful, real-time audience identification and creation capabilities, and make it easy for marketers across any vertical to target their best customers, with precision, across every device and channel.”
With Fluent’s AudienceNow™ for LiveRamp, for the first time, marketers will be able to build and target any custom audience that they need by tapping into Fluent’s first-party data reservoir of over 120 million U.S. consumers and its proprietary survey platform which surveys over 500,000 American adults and generates over 5.5 million unique survey responses every day. These audiences can be onboarded into any of the hundreds of marketing platforms integrated with LiveRamp for privacy-safe targeting across virtually every channel and device.
AudienceNow offers marketers several key advantages. First, it is designed entirely for new customer acquisition, as opposed to the retargeting of consumers within pre-existing CRM databases. Second, it enables marketers to target audiences using highly dynamic data that is collected and modeled in real-time, rather than targeting based on static offline and online first and third-party datasets. Pilot campaigns have demonstrated substantial lifts in performance compared to standard targeting within DSPs, with an average 123.5% lift in click-through rates, and 144.1% lift in effective-Cost-per-Acquisition.
“Savvy marketers are constantly on the lookout for high value data sources that deliver superior results,” said Travis May, President and GM of LiveRamp. “We are excited to activate Fluent’s data across the digital marketing ecosystem, so more companies can benefit from a people-based approach to marketing that delivers better consumer experiences and higher ROI.”
Comments & Business Outlook
BOCA RATON, Fla.--(BUSINESS WIRE )--
IDI, Inc. (NYSE MKT: IDI) , an information solutions provider, today provided a business update related to the Company�s continued growth as well as in conjunction with certain of the Company�s recent filings with the SEC.
Strong current cash position; operating cash flow positive since the closing of the Fluent acquisition.
Recent insider purchases by members of Board and Management show continued confidence in business strategy and execution.
Establishment of a facility of up to 5 million common shares for additional financial flexibility should the Company choose to exercise it in the future for certain growth initiatives. The Company has no present intention of accessing this facility at current levels.
Rapid development of Company�s risk management platform, idiCORE�, continues through BETA release phase; currently on schedule for full market release in early 2016.
Wholly-owned subsidiary Fluent looks to continue strong YOY revenue growth (previously more than 100% from Q3 2014 to Q3 2015).
Following the recent acquisition of New York-based digital marketing company Fluent, IDI�s next-generation big data analytics are now expected to power industry-leading products and solutions within both the risk management and consumer marketing industries.
Derek Dubner, Co-CEO of IDI, stated, �While 2015 was truly a transformational year for IDI, we are even more excited for the tremendous growth opportunities that lie before us in 2016. We remain confident in our ability to deliver disruptive technology within the risk management industry, while propelling Fluent�s already industry-leading abilities to drive targeted consumers, in scale, to the marketing industry.�
Deal Flow
IDI, Inc.
These shares will be offered at market prices prevailing at the time of sale. Unless we and JonesTrading agree otherwise, we will pay JonesTrading a commission of up to 3.0% of the sales price of all shares sold through it as our agent. The net proceeds, if any, that we receive from the sales of our Common Stock will depend on the number of shares actually sold and the offering price for such shares. The maximum number of shares we can sell under this prospectus supplement and the accompanying prospectus is 5,000,000. We estimate the offering expenses, other than the agent’s commissions, will be approximately $168,000. If we were to sell 5,000,000 shares of Common Stock at the January 14, 2016 closing sales price per share, we would receive $25,950,000 in gross proceeds, or approximately $25,003,500 in net proceeds, although actual net proceeds to us will vary. There is no arrangement for funds to be received in any escrow, trust or similar arrangement.
Our Common Stock is listed for trading on the NYSE MKT under the symbol “IDI.” On January 14, 2016, the last reported sale price of our Common Stock on the NYSE MKT was $5.19 per share.
Deal Flow
Item 1.01. Entry into a Material Definitive Agreement.
At-the Market Issuance Sales Agreement
On January 15, 2016, IDI, Inc. (“IDI”) entered into an Capital on DemandTM Sales Agreement (the “Sales Agreement”) with JonesTrading Institutional Services LLC (the “Agent”) pursuant to which IDI, at its sole discretion, may issue and sell up to 5,000,000 shares of its common stock, par value $0.0005 per share (“Common Stock”), from time to time through the Agent as IDI’s sales agent.
Any sales of shares of Common Stock pursuant to the Sales Agreement will be made under IDI’s previously filed and currently effective shelf registration statement on Form S-3 (File No. 333-205614) (the “Registration Statement”) and the related prospectus supplement dated and filed on January 15, 2016 (the “Prospectus Supplement”). Interested investors should read the Registration Statement and all documents incorporated therein by reference. The Agent may sell Common Stock by any method deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act of 1933, as amended, including directly on the NYSE MKT or in sales made to or through a market maker other than on an exchange. With IDI’s prior written consent, sales may also be made in negotiated transactions and/or any other method permitted by law. If IDI elects to utilize the Sales Agreement, the Agent would be obligated to use its commercially reasonable efforts to sell shares of IDI’s Common Stock subject to the terms and conditions of the Sales Agreement and as instructed by IDI, including with respect to price, time, size limits or other parameters or conditions that IDI may impose. Unless otherwise agreed to by the parties, IDI will pay to the Agent a cash commission equal to up to 3% of the gross proceeds from the sale of any shares of Common Stock by the Agent under the Sales Agreement. IDI and the Agent have also provided each other with customary indemnification rights.
IDI is not obligated to make any sales of Common Stock under the Sales Agreement and no assurance can be given that IDI will sell any shares under the Sales Agreement, or, if it does, as to the price or amount of shares that it will sell, or the dates on which any such sales will take place. The Sales Agreement may be terminated by either party at any time upon 10 days’ notice to the other party, or by the Agent at any time in certain circumstances, including the occurrence of a material adverse change in IDI. In addition, the Sales Agreement will automatically terminate upon the sale of all Common Stock subject to the Sales Agreement.
The foregoing description of the Sales Agreement is not complete and is qualified in its entirety by reference to the full text of the Sales Agreement, a copy of which is filed as Exhibit 1.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The Sales Agreement has been included to provide investors and security holders with information regarding its terms and conditions. The representations, warranties and covenants contained in the Sales Agreement were made only for purposes of that agreement and as of specific dates, and were solely for the benefit of the parties to the Sales Agreement. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of IDI or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Sales Agreement, which subsequent information may or may not be fully reflected in public disclosures by IDI.
The above disclosure shall not constitute an offer to sell or the solicitation of an offer to buy the securities discussed herein, nor shall there be any offer, solicitation, or sale of the securities in any state in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state. Copies of the prospectus supplement and accompanying prospectus relating to the offering may be obtained when available by contacting JonesTrading Institutional Services LLC, Attn: Jeremy Bell, 32133 Lindero Canyon Road, Suite 208, Westlake Village, CA, or by calling JonesTrading Institutional Services LLC toll-free at (800) 423-5933, or by visiting EDGAR on the Commission’s website at www.sec.gov .
The legal opinion of Akerman LLP relating to the Common Stock being offered is filed as Exhibit 5.1 to this Current Report on Form 8-K.
Comments & Business Outlook
NEW YORK--(BUSINESS WIRE
Highlights include:
Revenue Growth. Fluent drove more than 100% year-over-year revenue growth from 2014 to 2015, posting approximately $126 million in revenue and approximately $20 million in EBITDA over the trailing 12 months through Q3 2015.
New Clients and Case Studies. The company added 172 new advertisers to its client roster, bringing its total client list to over 500 top brands and direct marketers. New clients added in 2015 such as Western Union and Shoe Carnival reported strong results using the platform, including industry-leading levels of consumer engagement and campaign ROI.
Massive Audience Data and Reach. Fluent ended the year with substantial first party data assets, including a database of over 120 million U.S. consumers containing detailed demographic, ethnographic, behavioral, and meta-data attributes. In addition, Fluent now surveys over 500,000 Americans and generates over 5.6 million survey responses each day.
Expansion of Corporate Executive Team and Offices. Fluent added new talent to its executive ranks, and opened new offices to support growth. Industry veteran Daryl Colwell joined the company as SVP of Sales, having previously served as SVP of U.S. Sales & Business Development for Matomy Media. Fluent also opened a satellite office in Washington, D.C., in response to surging demand from leading political campaigns and causes, and appointed Jeff Pavelcsyk as GM of Political & Advocacy Solutions.
Industry Thought Leadership. Fluent published over a dozen proprietary studies and research reports, and launched its Fluent Political Pulse web portal � making it the premier advertising technology company in the country that is publishing survey results on a weekly basis related to the 2016 presidential election. Fluent�s research and commentary were featured in over 150 articles throughout the year, including top tier broadcast and print media outlets such as CNBC, The New York Times, NPR, The Hill, The Los Angeles Times , and Market Watch. In addition, Fluent executives were featured presenters and panelists at dozens of national conferences and events throughout the year, including Shop.org, the American Association of Political Consultants (AAPC), and MediaPost�s Email Insider Summit.
Awards and Accolades. Fluent was recognized as one of the best places to work in the nation. Awards included Advertising Age�s �Best Places to Work� (#12), Crain�s New York �Best Places to Work� (#9), and Fortune magazine�s �Best Workplaces for Women� (#7). Fluent�s continued focus on employee development, recognition, and satisfaction programs has enabled it to attract and retain top talent in a competitive technology hiring landscape.
�In an era when marketers are prioritizing the acquisition of first party data and owning the relationship with the customer, Fluent has found itself in a sweet spot that has yielded exceptional performance and growth across virtually every facet of our business,� said Ryan Schulke, CEO and Co-Founder of Fluent. �We are very proud and honored to have become a partner of record for many of the world�s smartest brands, and are equally proud and thankful to our incredible colleague-base for driving forward an ambitious strategic plan. 2015 was truly a banner year for our company, and we are just getting started.�
Comments & Business Outlook
BOCA RATON, Fla.--(BUSINESS WIRE )--
IDI, Inc. (NYSE MKT: IDI), an information solutions provider, today announced that it is in the process of releasing its beta version of idiCORE� to select customers. Built upon a cloud-based infrastructure, advanced systems architecture, a massive data repository, and proprietary linking technology, IDI�s advanced data analytics platform creates actionable intelligence from disparate data.
Designed to be data and industry agnostic, idiCORE�s initial applications will be in support of the risk management industry�s rapidly growing need for fast, accurate, and cost-effective information solutions to power due diligence efforts, risk assessment, fraud detection and prevention, authentication, and more. The release of idiCORE is expected to rapidly accelerate the company�s growth into additional segments of the market, including government, financial services, law enforcement, insurance, and corporate risk. Additionally, IDI�s cross-functional platform ingests and fuses demographic, behavioral, ethnographic and other relevant data in support of the consumer marketing industry.
idiCORE is developed by IDI�s Seattle-based technology team, led by Chief Science Officer and data fusion pioneer Ole Poulsen, representing decades of data engineering and systems architecture experience, hailing from such well known organizations as Microsoft, Boeing, Cray, and Disney.
Derek Dubner, Co-CEO of IDI, stated, �This beta release of idiCORE represents a significant milestone for the company. We believe this early-stage offering already surpasses current industry solutions in terms of speed, efficiency, and raw processing power. As we continue to fuse additional datasets with each phased release, we expect idiCORE to rapidly grow to be the industry standard. We remain committed to providing products that address the core needs of our customers � speed, accuracy, depth of data and insight, and price, regardless of the specific industry in which our technology is applied.�
IDI expects to expand its beta release of idiCORE into 2016, with a full market rollout planned for Q1 2016.
Acquisition Activity
BOCA RATON, FL --(Marketwired - December 09, 2015) - IDI, Inc. (NYSE MKT: IDI), an information solutions provider, today announced that it has completed its acquisition of New York-based Fluent, Inc. The transaction was funded with $100 million in cash and 15,000,000 shares of IDI common stock.
A leader in people-based digital marketing and customer acquisition, Fluent has served over 500 leading brands and direct marketers, experiencing 100% YOY revenue growth from 2014-2015. The combined entity is expected to be cash flow positive from day one, with Fluent posting approximately $126 million in revenue and approximately $20 million in EBITDA over trailing twelve months through Q3 2015.
Derek Dubner, Co-CEO of IDI, stated, "The acquisition of Fluent is transformative, placing IDI in an enviable position of leveraging our advanced data analytics in support of multiple industries. While our team has built the leading organizations within the multi-billion dollar risk management space, our goal has been to apply our technology to consumer marketing, opening up our addressable market by orders of magnitude. Fluent's business, management, and employees are now a vital piece of IDI's growth and we believe this acquisition provides significant value for our shareholders."
Ryan Schulke, CEO of Fluent, added, "While this acquisition serves as further confirmation of Fluent's success in driving exceptional value and ROI within the digital marketing space, we believe joining the IDI family opens up an exciting new chapter for our business. We feel IDI's data fusion and big data analytics will greatly accelerate growth, creating a truly differentiated company within the industry."
IDI also announced the closing of its related debt financing with H.I.G. WhiteHorse and Dr. Phillip Frost's $47 million investment in support of the cash component of the transaction. Additionally, Dr. Frost, current Chairman and CEO of OPKO Health (OPK), has joined IDI's Board of Directors as Vice Chairman. Further, Ryan Schulke will join the IDI Board of Directors, as well as Donald H. Mathis, current CEO and Co-Founder of Kinetic Social, a social data and marketing technology company. Mr. Mathis will serve as an Independent Director of the Board and serve on the Audit Committee and the Compensation Committee.
Dr. Frost stated, "This acquisition is a major milestone for IDI and represents the Company's, and my own, continued commitment to its growth strategy. We are pleased with our new relationship with H.I.G. WhiteHorse. In addition to their support in financing the acquisition, their team lends significant market expertise to further power IDI's growth."
Reverse Merger Activity
Item 1.01. Entry into a Material Definitive Agreement.
Merger Agreement
On November 16, 2015 , IDI, Inc. (the “Company”), Fluent Acquisition I, Inc., a Delaware corporation and a direct wholly-owned subsidiary of the Company (“Merger Sub”), Fluent Acquisition II, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of the Company (“Merger Co.”), Fluent, Inc., a Delaware corporation (“Fluent”), Fluent’s existing stockholders (“Sellers”) and Ryan Schulke, solely in his capacity as representative of Sellers, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which (i) Merger Sub will merge with and into Fluent, with Fluent continuing as the surviving company (the “Initial Merger”) and then, immediately following consummation of the Initial Merger, (ii) the Company will cause Fluent to merge with and into Merger Co., with Merger Co. continuing as the surviving company under the name “Fluent, LLC” (individually, the “Subsequent Merger” and collectively with the Initial Merger, the “Merger”). Subject to the satisfaction of the closing conditions, the Merger is expected to close in the fourth quarter of 2015.
Pursuant to the Merger Agreement, at signing, the Company was required to pay, and paid to Fluent, a non-refundable deposit in the amount of $10.0 million cash (the “Deposit”). At the effective time of the Merger (the “Effective Time”), Sellers shall receive (i) 300,000 shares of the Company’s Series B Non-Voting Convertible Preferred Stock, par value $0.0001 (the “Series B Preferred”), convertible into 15,000,000 shares of the Company’s common stock, par value $0.0005 (the “Common Stock,” and such shares of Common Stock, the “Conversion Shares”) and (ii) $100.0 million in cash, less the Deposit. The number of shares of Series B Preferred and number of Conversion Shares are subject to increase to the extent that the closing price of Common Stock on the trading day immediately prior to the Effective Time is less than $6.67 per share. Also, the cash payable to Sellers at the Effective Time is subject to adjustment for working capital and reduction for indemnification obligations (capped at $2.0 million). In addition, at the Effective Time, the Company will pay from the cash portion of the purchase price otherwise payable to Sellers, any outstanding Fluent indebtedness, the expenses of Sellers’ representative, certain amounts to holders of vested and unvested stock appreciation rights and any change of control payments due to certain Fluent employees and consultants.
The Merger Agreement also contains customary representations and warranties about the condition of the Company and Fluent, respectively, and their respective subsidiaries. The Company has purchased insurance with respect to the representations and warranties of Sellers up to a policy limit of $20.0 million, subject to the terms of the policy, which provides the Company with additional coverage in the event of a breach of Sellers’ representations and warranties. The parties have agreed to escrow $1.0 million of the purchase price in connection with the working capital adjustment and $2.0 million in connection with Sellers’ indemnification obligations.
At the Effective Time, the Company expects to deliver a written consent of Company stockholders representing a majority in voting interest of Common Stock, in accordance with the Company’s governing documents and the General Corporation Law of the State of Delaware approving the issuance of the Conversion Shares. The Series B Preferred will automatically convert into the Conversion Shares on the date that is the twenty first (21st) day following the mailing of an information statement to the Company’s stockholders disclosing the Company’s stockholder approval of the issuance of the Conversion Shares.
Pursuant to the Merger Agreement, either party may terminate the Merger Agreement if a material adverse effect has occurred with respect to the other party or if the other party has failed to deliver its respective closing deliverables. The Company shall have a right to a refund of the Deposit in the event that the Company terminates the Merger Agreement pursuant to the reasons provided in the preceding sentence. In addition, Fluent will have the right to terminate the Merger Agreement if the Merger is not consummated by November 30, 2015, provided that either party may extend the Merger consummation deadline to December 15, 2015 if the Company is diligently pursuing the consummation of the Merger.
At the Effective Time, in connection with the Merger, the Company will enter into a Stockholders’ Agreement (the “Stockholders’ Agreement”), with Sellers and Frost Gamma Investments Trust (“Frost Gamma”), James Reilly, Derek Dubner, and Michael Brauser, solely in their respective capacities as principal stockholders of the Company, pursuant to which the parties thereto agree to vote in a certain manner on specified matters, including but not limited to the agreement to vote in favor of each party’s duly approved nominees for the Company’s board of directors. In addition, the Company must obtain the consent of the Sellers before effecting certain capital transactions of the Company or taking certain compensation action with respect to certain employees of Fluent until such time that the Conversion Shares are issued.
At the Effective Time, in connection with the Merger, the Company will enter into a Registration Rights Agreement (the “Registration Rights Agreement”), with Sellers, as Company stockholders, pursuant to which the Company agrees to register the Conversion Shares for resale and subject to the terms of such Registration Rights Agreement, effect, if requested, an underwritten offering on behalf of Sellers with respect to their shares of Common Stock. Under the terms of the Registration Rights Agreement, the Company shall have the right, in certain circumstances to delay or suspend an underwritten offering undertaken on behalf of Sellers and suspend the use of any prospectus applicable thereto.
At the Effective Time, the Company will increase the board of directors to nine members, and Sellers, by majority vote of such Sellers, will have the right to designate two directors to the Company’s board of directors.
The shares of Series B Preferred to be issued in connection with the Merger are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”), in accordance with Section 4(2) of the Act and Regulation D thereunder, as a transaction by an issuer not involving a public offering.
The description of the proposed Merger in this Form 8-K does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is filed as Exhibit 2.1 to this Form 8-K and is incorporated herein by reference.
On November 17, 2015, the Company issued a press release announcing the execution of the Merger Agreement. A copy of the press release is attached to this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
On November 16, 2015, the Company raised approximately $10.0 million in gross proceeds from the sale of 29,985 shares of the Company’s Series B Preferred and warrants to purchase up to 749,625 shares of the Common Stock (each, a “Warrant,” and collectively, the “Warrants”) pursuant to securities purchase agreements (each, a “Securities Purchase Agreement,” and collectively, the “Securities Purchase Agreements”). Each Warrant is exercisable in whole in part at any time from the date that is the twenty first (21st) day following the mailing of an information statement to the Company’s stockholders disclosing the Company’s stockholder approval of the issuance of the Conversion Shares until November 16, 2025. Approximately $7.0 million of such gross proceeds was raised pursuant to a Securities Purchase Agreement between the Company and Frost Gamma, an affiliate of Phillip Frost, M.D., a greater than 10% owner of the Company, pursuant to which Frost Gamma received (i) 20,990 shares of Series B Preferred and (ii) a Warrant to purchase up to 524,750 shares of Common Stock, with an exercise price of $6.67 per share of Common Stock. The additional $3.0 million of such proceeds was raised pursuant to Securities Purchase Agreements between the Company and other participants in the private placement on the same terms provided to Frost Gamma. In aggregate, such other participants received (i) 8,995 shares of Series B Preferred and (ii) Warrants to purchase up to 224,875 shares of Common Stock. The Series B Preferred and Warrants to be issued in connection with the Securities Purchase Agreements are exempt from the registration requirements of the Act in accordance with Section 4(2) of the Act and Regulation D thereunder, as a transaction by an issuer not involving a public offering. The Frost Gamma Securities Purchase Agreement and Frost Gamma Warrant are attached to this Form 8-K as Exhibit 4.1 and Exhibit 4.2, respectively, and each is incorporated herein by reference.
On November 16, 2015, the Company entered into a Stock Purchase Agreement for the sale of 119,940 shares of Series B Preferred to Frost Gamma in exchange for approximately $40.0 million (the “FGIT Stock Purchase Agreement”). The Series B Preferred to be issued in connection with the FGIT Stock Purchase Agreement are exempt from the registration requirements of the Act, in accordance with Section 4(2) of the Act and Regulation D thereunder, as a transaction by an issuer not involving any public offering. The description of the FGIT Stock Purchase Agreement in this Form 8-K does not purport to be complete and is qualified in its entirety by reference to the FGIT Stock Purchase Agreement, which is filed as Exhibit 4.3 to this Form 8-K and is incorporated herein by reference.
Acquisition Activity
BOCA RATON, Fla.--(BUSINESS WIRE )--
IDI, Inc. (NYSE MKT: IDI) , an information solutions provider, today announced that it has entered into a definitive agreement to acquire New York-based Fluent, Inc. for $100 million in cash and 15,000,000 shares of common stock. Fluent will be a wholly-owned subsidiary of IDI.
Highlights:
Fluent is a leader in people-based digital marketing and customer acquisition
Over 100% YOY revenue growth 2014-2015
IDI�s big data analytics provide immediate synergies to Fluent�s business model
Combined company will be cash flow positive from day one
Dr. Phillip Frost to invest $40 million in preferred stock as financing for the transaction and will join IDI Board of Directors as Vice Chairman at closing
The acquisition is expected to be transformational for IDI, accelerating the Company�s strategy to apply its next generation data fusion technology to not only the risk management industry, but also as an advanced data analytics platform, empowering advertisers to significantly enhance customer targeting and profiling.
Michael Brauser, Executive Chairman of IDI, stated, �We�ve consistently outlined our roadmap of addressing three complementary markets with our proprietary technology; risk management, marketing, and custom analytics. As we advance our development of core solutions for the risk management industry, we believe the timing is right to accelerate our growth plan into the consumer marketing industry.�
Derek Dubner, Co-CEO of IDI added, �We believe that combining IDI�s data fusion technology and experience with Fluent�s proven execution and leadership within the people-based marketing space will accelerate our growth, provide opportunities previously unavailable to each separately, and significantly increase value for our shareholders.�
Fluent is a leader in people-based digital marketing and customer acquisition, serving over 500 leading brands and direct marketers. Leveraging a massive reservoir of proprietary audience data, as well as millions of real-time survey interactions with consumers every day, Fluent enables advertisers to more effectively target and acquire their most valuable customers, with precision, at a massive scale. An early mover in the mobile trend, Fluent is well positioned in the marketplace with more than 70% of consumer interactions occurring on mobile devices.
In addition to real-time targeting and delivery of consumers to advertisers, Fluent has amassed significant owned data assets consisting of over 100 million comprehensive profiles of U.S. consumers. Unique to Fluent, these assets include billions of self-reported consumer preferences and interests.
Ryan Schulke (CEO of Fluent) and Matt Conlin (President of Fluent) co-founded Fluent in 2010, leveraging their extensive experience in digital marketing. Mr. Schulke and Mr. Conlin will remain in their executive roles post-acquisition, with Mr. Schulke joining IDI�s Board of Directors at closing.
�We consider this to be a landmark moment for our company,� said Mr. Schulke. �Fluent has emerged as one of the marketing industry�s most trusted partners to brands who are looking to drive scale and performance from their digital advertising spending. The ability to further bolster our solutions and first party data with the big data analytics and experience of IDI will create a truly differentiated company that drives exceptional value and ROI for brands.�
The combined entity will employ over 110 people with offices in New York, Seattle, Washington D.C., Atlanta, and Boca Raton.
IDI expects to finance the transaction using debt and equity, including Dr. Frost�s $40 million investment and through the issuance of preferred stock to the stockholders of Fluent.
Fluent was exclusively represented by investment bank Petsky Prunier Securities in this transaction.
The transaction is expected to close on or before December 1, 2015, but closing may be extended to December 15, 2015.
Comments & Business Outlook
BOCA RATON, Fla.--(BUSINESS WIRE )--
IDI, Inc. (NYSE MKT: IDI) , an information solutions provider, today announced its financial and operating results for the third quarter ended September 30, 2015. The Company reported revenue of $1.0 million and $3.3 million from data fusion operations for the three and nine months ended September 30, 2015, respectively. The Company reported a net loss of $4.4 million (including $1.5 million of non-cash share-based compensation expenses) from data fusion operations and $0.4 million from discontinued China operations for the three months ended September 30, 2015. Cash and cash equivalents as of September 30, 2015 were $9.1 million, as compared to $6.0 million as of December 31, 2014.
Key highlights for the third quarter of 2015 include:
Successful internal alpha testing of next generation data fusion technology, with expected release of the first phase of idiCORE� in Q4 2015.
Deployment of secure, production ready cloud infrastructure to support product offerings and minimize server related Capex.
Continued acquisition of massive data sets to further fuel current and new offerings.
Rapid customer onboarding continues in anticipation of idiCORE release.
Mr. Derek Dubner, Co-CEO of IDI, Inc. stated, �Great strides continue to be made in the development of our data fusion system. We believe this extremely sophisticated and complex data analytics platform represents next generation technology and will be instrumental in continuing IDI�s transformation into a leading information solutions provider across many industries. We expect the Company�s focus on development during 2016 strongly positions our product offerings and facilitates rapid customer acquisition and revenue growth for years to come.�
IDI is currently developing its full investigative system, idiCORE�, which is expected to begin a phased launch in Q4 2015.
Legal Insights
BOCA RATON, Fla.--(BUSINESS WIRE )--
IDI, Inc. (NYSE MKT: IDI) , an information solutions provider, today announced that on September 10, 2015 the United States District Court for the Southern District of Florida dismissed the securities class action lawsuit [Heim v. IDI, Inc., et al., Case No. 9:15-cv-81019] filed against the Company and certain of its officers. This action was voluntarily dismissed by the plaintiff with no payment made to plaintiff or plaintiff�s attorneys.
Mr. Derek Dubner, Co-CEO of IDI, Inc. stated, �We have maintained that this action was frivolous and that we would defend it, and any like it, vigorously. This lawsuit was premised upon an Internet article, written by an anonymous and admitted short seller of IDI�s stock, which contained certain misrepresentations and factual inaccuracies about the Company and certain members of management. Despite the numerous press releases issued by various law firms, we are pleased to have secured the dismissal of the sole lawsuit upon which they rely.�
Auditor trail
BOCA RATON, Fla.--(BUSINESS WIRE )--
IDI, Inc. (NYSE MKT: IDI), an information solutions provider, today announced the appointment of Grant Thornton as its new principal independent registered public accounting firm, which was effective July 14, 2015. Grant Thornton replaces RBSM LLP. The decision to change auditors was not the result of any disagreement between the Company and RBSM LLP on any matter of accounting principle or practice, financial statement disclosures or auditing scope or procedure.
The change of auditor was made as a part of the Company�s expansion strategy, as it continues to develop new products and add new clients across a broad range of sectors and regions. As its business continues to grow and scale, IDI sought an auditor with a broad presence. Grant Thornton LLP, founded in 1924, is one of the world�s leading independent audit, tax and advisory firms, with revenue in excess of $1.4 billion and 57 offices nationwide.
Mr. Derek Dubner, Co-CEO of IDI, Inc. stated, "We are pleased to be working with Grant Thornton. This change reflects the rapid growth and momentum that our business is enjoying. Their support and experience will be a substantial benefit as we enter our next stage of development.�
IDI filed a Form 8-K related to the change in its certifying accountants on July 15, 2015.
Deal Flow
IDI, Inc.
640,205 Shares of Common Stock
Pump and Dump Watch
Disclosure: GeoInvesting is providing this information for your edification and in no way has any affiliation with any promoters and/or newsletters disseminating information on IDI, nor is GeoInvesting being paid to post this information. At times, the GeoTeam may trade P&D's on a long or short basis, depending on how we feel the momentum of the stocks will be affected by the efforts of stock promoters and any ensuing dumps.
Company Rebuttal
NEW YORK, Aug. 18, 2015 /PRNewswire / -- PRNewswire - IDI Inc. (IDI) an information solutions provider focused on the data-fusion market has recentlybeen subject to negative publicity and as a result has seen its shares fall from a 52 � week high to a 52 � week low. The news came as a combination of poor Q2 financial results and the filing of a lawsuit claiming the company has been partaking in illegal market activity
The company reported revenue of $1.0 million and $2.3 million from data fusion operations for the three and six months ended June 30, 2015, respectively. The company earned additional revenue of $0.2 million from its discontinued China operations (representing revenue from March 22, 2015 on). IDI Inc. reported a net loss of $4.0 million (including $1.9 million of non-cash share-based compensation expenses) from data fusion operations and $41.5 million (including $40.2 million of non-cash charges) from discontinued China operations for the three months ended June 30, 2015. Additionally, the company announced a recent $10 million financing that has strengthened its cash position beyond necessity and will likely allow for expansion, and further revenue growth and bottom line improvement.
Deal Flow
CALCULATION OF REGISTRATION FEE
Title of securities
Amount
to be
registered
Proposed
maximum
offering price
per share
Proposed
Amount of
Common Stock, $0.0005 par value per share
640,205
$7.62(1)
$4,878,362(1)
$567
Total
640,205
$7.62
$4,878,362
$567
Deal Flow
Item 1.01 Entry into a Material Definitive Agreement.
Pursuant to an engagement letter dated July 23, 2015 (the "Placement Agent Agreement") by and between the Company and Chardan Capital Markets, LLC ("Chardan Capital"), Chardan Capital agreed to act as the Company’s placement agent in connection with both the registered direct offering and the concurrent private placement. Pursuant to the Placement Agent Agreement, the Company agreed to pay Chardan Capital a cash fee equal to 6% of the gross proceeds of the offering, or $0.4686 per share, as well as reimburse Chardan Capital for its expenses in connection with the offering in the amount of $25,000.
The net proceeds to the Company from the offering, after deducting placement agent fees and estimated offering expenses, are approximately $9.365 million. The registered direct offering and the concurrent private placement closed on July 28, 2015.
The 1,280,410 shares of common stock were sold, and will be issued, pursuant to the Prospectus Supplement, dated July 24, 2015, to the Prospectus included in the Company’s Registration Statement filed with the Securities and Exchange Commission on July 10, 2015.
Deal Flow
1,280,410 Shares
IDI, Inc.
Common Stock
Our common stock is traded on the NYSE MKT under the symbol “IDI.” On July 23, 2015, the last reported sales price of our common stock on the NYSE MKT was $8.30 per share.
Per Share
Total(1)
Public offering price
$
7.81
$
10,000,002
Placement agent fee
$
0.4686
$
600,000
Proceeds, before expenses, to us
$
7.34
$
9,400,002
Auditor trail
Item 4.01 Changes in Registrant's Certifying Accountant.
During the period May 14, 2015 through July 14, 2015, the Company has not had any disagreements with RBSM on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to RBSM’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s financial statements for such periods. During the period May 14, 2015 through July 14, 2015, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K.
Deal Flow
$160,000,000
IDI, Inc.
Common Stock
Debt Securities
This prospectus describes some of the general terms that apply to the securities. We will provide specific terms of any securities we may offer in supplements to this prospectus. You should read this prospectus and any applicable prospectus supplement carefully before you invest. We also may authorize one or more free writing prospectuses to be provided to you in connection with the offering. The prospectus supplement and any free writing prospectus also may add, update or change information contained or incorporated in this prospectus.
We may offer and sell these securities to or through one or more underwriters, dealers or agents, or directly to purchasers on a continuous or delayed basis. The prospectus supplement for each offering of securities will describe the plan of distribution for that offering. For general information about the distribution of securities offered, see “Plan of Distribution” in this prospectus. The prospectus supplement also will set forth the price to the public of the securities and the net proceeds that we expect to receive from the sale of such securities.
Our common stock is traded on the NYSE MKT under the symbol “IDI.” On July 9, 2015, the last reported sales price of our common stock on the NYSE MKT was $10.48 per share.
Comments & Business Outlook
Item 2.05 Costs Associated with Exit or Disposal Activities.
The Company has been engaged primarily in the data fusion industry and the provision of advertising services in the out-of-home advertising industry in China. Under the plan, as currently contemplated, the Company expects to sell, transfer and/or otherwise dispose of substantially all the assets of Tiger Media Subsidiaries, and the China Operations will cease operations during the 2015 third quarter.
In connection with the plan, the Company expects to incur a charge of approximately $42 million in the second quarter of 2015 as a loss from discontinued operations. Approximately $41 million of this charge is expected to be non-cash related. The final loss from discontinued operations may differ from this estimate depending on the actual or expected proceeds received from the sale of the assets of the China Operations and the actual disposition costs incurred. The Company anticipates incurring minimal charges for employee termination costs in connection with the plan, which charges are part of the above estimate. The Company expects the discontinuation of the operations of the China business to result in net annual cash savings of approximately $1.0 million per year, with initial savings beginning during the third quarter of 2015.
Comments & Business Outlook
First Quarter 2015 Financial Results :
Total Revenue of $1.3 million, which was driven by the new data fusion division.
Net loss was $1.7 million due to increased personnel and development costs.
Mr. Derek Dubner, Co-CEO of IDI, Inc. stated, �We are pleased to report that we have entered 2015 with a team and infrastructure that we believe can drive an entirely new level of growth opportunities for our Company. The strategic acquisition of TBO enabled us to successfully transition our business into the multi-billion dollar data fusion market where we can immediately begin defining IDI as a leading player. We believe that the collective experience of our management team, our established information technology platform and our ability to deliver unparalleled data analytics and linking technology to a number of diverse markets offers an incredible opportunity for growth in the months ahead.�
IDI, Inc. will maintain an advertising services division for established business and new opportunities within the out-of-home advertising industry but will focus future growth on its data fusion division. It has already carved a niche within the Accounts Receivable Management (�ARM�) industry and will now target the entirety of the risk management market to serve today�s growing data fusion needs.
Comments & Business Outlook
ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.
On April 30, 2015, the Certificate of Ownership and Merger, merging IDI, Inc. with and into Tiger Media, Inc., was filed with the Secretary of State of the State of Delaware. The Certificate of Ownership and Merger is attached hereto as Exhibit 3.1 and incorporated herein by reference.
Effective April 30, 2015, the Board amended and restated the By-laws of the Company to replace all references to Tiger Media, Inc. with IDI, Inc. A copy of the Amended and Restated By-laws are attached hereto as Exhibit 3.2 and incorporated herein by reference.
Comments & Business Outlook
BOCA RATON, Fla.--(BUSINESS WIRE
Mr. Peter W. H. Tan, Co-CEO of Tiger Media, commented, "We are pleased to have completed the acquisition of TBO, parent company of U.S.-based data solutions provider Interactive Data, LLC (Interactive Data), in March 2015, strategically positioning Tiger Media into the very scalable data-fusion space. While we continue to drive revenues from a multi-platform business strategy that incorporates both high-end advertising technology and traditional media services, we focused a large part of 2014 towards pursuing strategic business opportunities that would enable us to broaden our distribution approach, diversify our product offerings and drive our expansion into emerging, high-growth markets.
"This represents significant progress for Tiger Media and I�m pleased to work with a management team with over half a century of experience and successes in this industry. Further, by leveraging Interactive Data�s next-generation data analytics and linking technology, we expect to accelerate the evolution of Tiger Media�s business. While our 2014 results represent only our multi-platform media business, we head into the second half of 2015 and 2016 with a stronger management and technology team, a U.S. channel for expansion and an established product portfolio that will provide us with the near-term opportunity to greatly enhance our customer base and increase our margins and sales, thereby delivering greater returns for our shareholders."
Tiger Media completed the acquisition of TBO on March 21, 2015. In October of 2014, TBO acquired Interactive Data and immediately expanded executive management with a team of data fusion industry veterans, including Chief Executive Officer Derek Dubner and Chief Science Officer Ole Poulsen. Both Mr. Dubner and Mr. Poulsen have played key roles in the industry since its infancy. Mr. Dubner has joined Mr. Tan as Co-CEO of Tiger Media.
Mr. Dubner stated, "During the last fifteen years, I have witnessed a tremendous amount of growth within the data-fusion space driven by the rapid and demanding evolution of the underlying technologies. Many larger companies have strongly established themselves in what has become an extremely lucrative market. As the industry continues to develop and legacy systems become dated, the need to innovate is paramount. The completion of our technology team in Seattle, including the addition of new strategic hires, positions us favorably to become a leading player within the multi-billion dollar data-fusion market."
As of December 31, 2014, the number of issued and outstanding common shares was 7,291,200. Following the acquisition of TBO, the number of issued and outstanding shares was 13,888,454 shares, which excludes certain preferred shares and earn-out shares issued. The number of shares outstanding reflect Tiger Media�s 1-for-5 reverse split, which was effective March 19, 2015.
Full Year 2014 Financial Results
Net Revenue & Gross Profit
For the full fiscal year 2014, Tiger Media recognized revenue of $3.0 million, a 5% increase from the prior year period, demonstrating the continued demand for the Company�s iScreen LCD screens and outdoor billboard products in Shanghai.
Net Loss
As a result of the foregoing, Tiger Media reported a net loss of $3.5 million, or $(0.49) per share, compared to a net loss of $3.9 million, or $(0.63) per share for the year ended December 31, 2013.
Reverse Merger Activity
Item 2.01 Completion of Acquisition or Disposition of Assets
Before the Domestication and the Merger on March 19, 2015, Tiger Media effected a one-for-five reverse stock split (the “Reverse Split”). The principal effect of the Reverse Split was to decrease the number of outstanding shares of each of Tiger Media’s ordinary shares. Except for de minimus adjustments that may have resulted from the treatment of fractional shares (fractional shares following the Reverse Split were rounded up to the nearest whole share), the Reverse Split did not have any dilutive effect on Tiger Media shareholders since each shareholder holds the same percentage of ordinary shares outstanding immediately after the Reverse Split as such shareholder held immediately before the Reverse Split. The relative voting and other rights that accompany the ordinary shares were not affected by the Reverse Split. In addition, the proportion of ordinary shares owned by shareholders relative to the number of shares authorized for issuance remains the same because the authorized number Tiger Media ordinary shares were decreased in proportion to the Reverse Split. As a result, the number of ordinary shares authorized decreased from 1,000,000,000 ordinary shares to 200,000,000 ordinary shares. The authorized number of preferred shares were not affected by the Reverse Split and remain at 10,000,000 preferred shares.
Also before the Merger, on March 20, 2015, Tiger Media completed its domestication from the Cayman Islands to Delaware, as a Delaware corporation (the “Domestication”). On March 20, 2014, the Company issued a press release announcing the Reverse Stock Split (described below) and the Domestication. A copy of the Certificate of Domestication is attached to this Form 8-K as Exhibit 3.1 and is incorporated herein by reference. A copy of the press release is attached to this Form 8-K as Exhibit 99.1 and is incorporated herein by reference.
As a result of the Domestication, Tiger Media no longer qualifies as a “foreign private issuer” as that term is defined under the U.S. Federal securities laws. As such, Tiger Media will now file reports as a U.S. domestic reporting company under the U.S. Federal securities laws.
Following the Domestication and the Reverse Stock Split, on March 21, 2015, TBO merged into Merger Sub, with Merger Sub continuing as the surviving company and a wholly-owned subsidiary of Tiger Media. On March 23, 2014, the Company issued a press release announcing completion of the Merger. A copy of the press release is attached to this Form 8-K as Exhibit 99.2 and is incorporated herein by reference.
On the Effective Date, upon the consummation of the Merger:
(1) 4,016,846 shares of TBO common stock, no par value per share (“TBO Common Stock”) converted into 4,016,846 shares of Tiger Media common stock, par value $0.0005 per share (“Company Common Stock”);
(2) 8,000 shares of TBO Series A Convertible Preferred Stock, par value $0.001 per share (“TBO Series A Preferred Stock”) converted into 4,200,511 shares of Company’s Series A Non-Voting Convertible Preferred Stock, par value $0.0001 per share (“Company Preferred Stock”) at closing and 1,800,220 shares of Company Preferred Stock subject to an earn out;
(3) 1,019,600 shares of TBO Series B Convertible Preferred Stock, par value $0.001 per share (“TBO Series B Preferred Stock”) converted into 764,791 shares of Company Preferred Stock;
(4) 640,000 shares of TBO Series C Convertible Preferred Stock, par value $0.001 per share (“TBO Series C Preferred Stock”) converted into 480,057 shares of Company Common Stock; and
(5) 4,000 shares of TBO Series D Convertible Preferred Stock, par value $0.001 per share (“TBO Series D Preferred Stock”) converted into 2,100,252 shares of Company Common Stock at closing and 900,108 shares of Company Common Stock subject to an earn out.
Before the Merger, Marlin Capital Investments, LLC, which is managed by Michael Brauser, a founding shareholder of TBO, held RSUs representing the right to receive 2,000,000 shares of TBO common stock. Tiger Media assumed these RSUs upon closing and the RSUs represent the right to receive 2,000,000 shares of Tiger Media Common Stock. The RSUs vest annually beginning October 13, 2015 only if certain performance goals of Tiger Media are met. The shares underlying such RSUs will not be delivered until October 13, 2018, unless there is a change of control of Tiger Media.
In addition, 960,000 RSUs held by TBO employees were assumed by Tiger Media and represent the right to receive 960,000 shares of Tiger Media Common Stock, subject to vesting and delivery.
In addition, 28,000 outstanding TBO warrants were assumed upon closing and are exercisable for 28,000 shares of Tiger Media Common Stock.
Assuming all Earn-out Shares are earned, all RSUs are vested and the underlying shares of common stock are delivered, and the warrant is exercised, up to an aggregate of 17,250,785 shares of Tiger Media Common Stock (on an as-converted basis) were or will be issued in connection with the Merger.
On the Effective Date, certain founding shareholders of TBO entered into lock-up agreements providing that they may not sell or otherwise transfer any shares of Tiger Media or any other securities convertible into or exercisable or exchangeable for shares of Tiger Media that are beneficially owned and/or acquired by them (or underlying any security acquired by them) as of the date of the Merger Agreement or otherwise in connection with the Merger, subject to certain exceptions, for a period of 12 months after the Effective Date.
Notwithstanding the foregoing, the lock-up agreement does not restrict: (a) transfers of shares as a bona fide gift; (b) transfers of shares to any trust, partnership, limited liability company or other entity for the direct or indirect benefit of the person signing the lock-up agreement or their immediate family; (c) transfers of shares to any beneficiary of the person signing the lock-up agreement pursuant to a will, trust instrument or other testamentary document or applicable laws of descent; (d) transfers of shares to Tiger Media; (e) transfers of shares to any entity directly or indirectly controlled by or under a common control with the person signing the lock-up agreement; provided that, in the case of any transfer or distribution pursuant to clause (a), (b), (c), or (e) above, each donee, distributee or transferee shall sign and deliver to Tiger Media, prior to such transfer, a lock-up agreement. A form of the lock-up agreement is attached to this Form 8-K as Exhibit 10.1 and is incorporated herein by reference.
The Company Common Stock and Company Preferred Stock issued in connection with the Merger are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Act”), in accordance with Section 4(a)(2) of the Act, as a transaction by an issuer not involving any public offering, and Rule 506 thereunder.
The information set forth in Item 2.01 above in this Current Report on Form 8-K is incorporated by reference into this Item 3.02.
As described in Item 2.01, on March 20, 2015, Tiger Media completed the Domestication. Tiger Media discontinued its existence as a Cayman Islands exempted company (“Tiger Media – Cayman”) under the Companies Law of the Cayman Islands and, pursuant to Section 388 of the General Corporation Law of the State of Delaware (the “DGCL”), continued its existence under the DGCL as a corporation incorporated in the State of Delaware (“Tiger Media – Delaware”).
The rights of the holders of the Tiger Media’s stock are now governed by its Delaware Certificate of Incorporation, its Delaware Bylaws and the DGCL. Copies of Tiger Media’s Delaware Certificate of Incorporation and its Delaware Bylaws are filed with this Form 8-K as Exhibit 3.2 and 3.3, respectively, and each is incorporated herein by reference.
A summary of material changes in the rights of the holders of the Tiger Media’s stock resulting from the Domestication is described in the Tiger Media Proxy Statement for Special Meeting of Ordinary Shareholders which is attached as Exhibit 99.1 to Tiger Media’s current report on Form 6-K filed February 13, 2015. The description is incorporated herein by reference.
Acquisition Activity
SHANGHAI & ATLANTA--(BUSINESS WIRE
"The Best One presents a strong opportunity for Tiger Media to enter the scalable data fusion space alongside some of the prominent names in the industry," commented Dr. Phillip Frost, Tiger Media�s largest beneficial owner, and CEO and Chairman of OPKO Health, Inc. (NYSE: OPK). "As a large shareholder of Tiger Media, I am pleased with the direction of the Company and its entrance into potentially lucrative new markets through this acquisition."
In addition to TBO serving as Tiger Media�s U.S. channel for expansion of its China operations, the Company now has an established presence in the data fusion industry through the Acquisition. Interactive Data has successfully brought several data products to market which are realizing substantial growth and adoption as it continues to enhance its offerings. Tiger Media will look to TBO's veteran management team to continue its aggressive growth plan in the multi-billion dollar data fusion industry.
With over half a century of combined industry experience, TBO's leadership is led by its Chairman Michael Brauser. As an investor and operator in the data fusion market since its infancy, Mr. Brauser has built market leading companies with revenues totaling over $2 billion.
"We are pleased to consummate this merger and we are all enthused to join the Tiger Media team," commented Derek Dubner, CEO of TBO. "We believe that the combined entity will capitalize on immediate synergies that shall further facilitate and expedite our growth plans, delivering significant value creation for our shareholders."
Derek Dubner, CEO of TBO, and Peter Tan, CEO of Tiger Media, now serve as Co-CEO's of the combined entity. Robert Fried remains Tiger Media�s Chairman of the Board.
Notable Share Transactions
SHANGHAI--(
BUSINESS WIRE)-- Tiger Media, Inc. (Tiger Media or the Company) (NYSE MKT: IDI), a Shanghai-based multi-platform media company, announced today that the previously approved reverse stock split of the Company's ordinary shares, par value $0.0001 per share, at a ratio of one-for-five (the Stock Split), became effective after the close of business on March 19, 2015. The Company's common stock will begin trading on a split-adjusted basis at the open of business on the morning of March 20, 2015. The Company's common stock will continue to trade on the NYSE MKT under the symbol IDI with a new CUSIP of 88674Y 105. The ability to trade in the Company's common stock should be unaffected by the Stock Split. Also, the Company announced the completion of its domestication as a Delaware corporation (the Domestication), effective before the open of business on March 20, 2015. The Company expects to complete the previously announced acquisition of The Best One, Inc. after the close of business on Friday.
Share Structure
Voting Results of Special Meeting
At the Special Meeting of Ordinary Shareholders of Tiger Media, Inc. (the “Company” or "Tiger Media") held on March 17, 2015, the Company’s ordinary shareholders considered four proposals.
Proposal 1 - To approve a share consolidation or reverse stock split of the Company’s ordinary shares, par value $0.0001 per share, at a ratio of one-for-five , such that the number of the Company’s authorized ordinary shares is decreased and the par value of each ordinary share is increased by that ratio (“Stock Split ”).
For – 25,065,776
Proposal 2 - To approve the domestication of the Company that will result in holders of the Company’s securities holding securities in a Delaware corporation rather than in a Cayman Islands exempted company (the “Domestication”).
For – 18,397,196
Proposal 3 – To approve the issuance of (i) shares of common stock and preferred stock convertible into common stock as consideration for the merger (the "Merger") pursuant to the Merger Agreement and Plan of Reorganization by and among the Company, TBO Acquisition, LLC, The Best One, Inc., and Derek Dubner, solely in his capacity as representative, dated December 14, 2014, as amended, and (ii) shares of common stock underlying restricted stock units and a warrant that will be assumed in the Merger.
For – 18,217,072
Proposal 4 – To approve an adjournment or postponement of the special meeting, if necessary, for the purpose of soliciting additional proxies.
For – 25,162,585
Acquisition Activity
SHANGHAI & ATLANTA--(BUSINESS WIRE )--
Tiger Media, Inc. (Tiger Media or the Company) (NYSE MKT: IDI), a Shanghai-based multi-platform media company, today announced that it has entered into a definitive agreement to acquire The Best One, Inc. (�TBO�), parent company of U.S.-based data solutions provider Interactive Data, LLC (�Interactive Data�) (the Acquisition). Interactive Data is headquartered in Atlanta, GA and has its primary technology office in Seattle, WA.
Interactive Data�s recently expanded management team has been executing on an aggressive growth plan in a multi-billion dollar market of risk management and marketing data solutions. The Acquisition will give the integrated company a strong foothold in the data fusion industry with a management team that has helped mold the entire sector.
"As a founding shareholder of Tiger Media, Inc., I am enthusiastic to enter into the rapidly growing, multi-billion dollar industry of data fusion," said Dr. Phillip Frost, CEO and Chairman of OPKO Health, Inc. (OPK ), and Tiger Media�s largest beneficial owner. "The impressive track record of TBO's management team in building the dominant companies in this industry speaks for itself, and I believe this will be a major player in the space."
Commenting on the Acquisition, Robert Fried, Chairman of Tiger Media stated, "We are excited to acquire TBO. We were looking for a U.S. partner who would also be able to expand our China operations. We believe this Acquisition with TBO will give our shareholders an excellent opportunity to realize increased value on their investment."
TBO's executive leadership represents over half a century of combined experience in the industry and is led by Chairman Michael Brauser. An investor and operator in the data fusion market since its infancy, Mr. Brauser has built market leading companies with revenues totaling over $2 billion.
Chief Scientific Officer of TBO, Ole Poulsen, was primary systems architect of the data fusion industry�s leading products. The products that Mr. Poulsen designed led to the sales of multiple companies totaling over $1 billion in the aggregate.
Under the terms of the merger agreement, current shareholders of Tiger Media and TBO will own approximately 34% and 66% of the combined company, respectively, following the Acquisition. Approximately 65% of the shares to be issued to TBO shareholders in the Acquisition will be non-voting preferred stock, and 30% of those shares will only be issued upon achievement of certain revenue targets. The Acquisition is expected to close in the first quarter of 2015, is subject to customary conditions to closing as detailed in the merger agreement, as well as the affirmative vote of a majority of the outstanding shares of Tiger Media entitled to vote.
In connection with the Acquisition, Tiger Media will be redomesticating as a Delaware company. The affirmative vote of 2/3 of the votes cast at the Tiger Media meeting will be required for domestication in Delaware. The structure of the transaction will be in the form of an acquisition with TBO merging into a wholly-owned subsidiary of Tiger Media, with the Tiger Media subsidiary as the surviving corporation that will now be headquartered in Atlanta, GA.
Following the Acquisition, Derek Dubner, CEO of TBO, will join Tiger Media as Co-CEO along with Peter Tan, current CEO of Tiger Media. Robert Fried will remain Chairman of the Board. Also, following the Acquisition, Derek Dubner and Daniel MacLachlan will join the Tiger Media Board, increasing the Tiger Media Board from five members to seven members.
Cassel Salpeter is acting as financial advisor and Akerman LLP is acting as legal counsel to Tiger Media. Nason Yeager is acting as legal counsel to TBO
Comments & Business Outlook
Third Quarter 2014 Financial Results
Net revenues in the third quarter increased 32% quarter-on-quarter from the second quarter of 2014 to $0.9 million, and increased 10% year-over-year from the third quarter of 2013; while the cost of revenues decreased slightly by 7% quarter-on-quarter and increased 73% year-over-year.
Net loss per basic and diluted share were both $0.02 for the third quarter of 2014, which was consistent with the second quarter of 2014 and corresponding period in 2013.
Peter W. H. Tan, Chief Executive Officer of Tiger Media, commented, �Despite the fact that many advertisers in China have been cutting their outdoor advertising budget during the second half year of 2014, we have seen better performance results, including increased revenue, better gross profit ratio and a decreased net loss, during the third quarter of 2014 as a result of our efforts to optimize our iScreen network value and the increase in the iScreen network utilization rate.
We further implemented our strategy change for our current iScreen advertising business, that is, to optimize and adjust our current network locations in Shanghai, instead of expanding rapidly to other cities. During the 2014 third quarter, we have added a prime location, Shui On Plaza, to our network, and we expect to secure two additional prime locations to be added during the remaining period of 2014.�
"In addition, by utilizing various capabilities on our iScreen in Shanghai, we continue to explore related and complementary projects, like the alliances with DiningCity and 9188.com. We are continuing to adjust the current business and pursue strategic opportunities and acquisitions to expand our business, including opportunities within the United States." Mr. Tan added.
Stephen Zhu, COO of Shanghai operations, said, "The coverage of our iScreen network in Shanghai has been stable during the first nine months in 2014. For the remaining period in 2014, we continue to adjust our sales forces and other support departments, and to reduce related expenses, meanwhile, to renegotiate business agreements with shopping malls or suppliers to further cut our costs. Cosmetics and personal care makes up the largest industry sector of our advertisers and we are expecting increased revenue generated from advertisers in this as well as the consumer products and services industry."
Jacky Wang, Chief Financial Officer of Tiger Media, said, "Following the change of our strategy towards the current iScreen advertising business, the quarter-on-quarter increase in the utilization rate of our iScreen LCD network from 21% to 27% turned our overall gross profit ratio to positive and resulted in better financial results. Additionally, this strategy resulted in a positive cash flow provided by operating activities."
"For the current iScreen business, we continue to expand the advertiser base and increase the average contribution per advertiser. Our advertisers� base continued to expand quarter-on-quarter, together with a renewal rate of 44% during the third quarter," Mr. Wang added.
Comments & Business Outlook
Second Quarter 2014 Financial Results
Advertising service revenues in the second quarter increased 541% year over year to $0.7 million, and increased 33% quarter-on-quarter from the first quarter of 2014
Net loss per basic and diluted share were both $0.02 for the second quarter, as compared to $0.03 during both the second quarter of 2013 and the first quarter of 2014.
Peter W. H. Tan, Chief Executive Officer of Tiger Media, commented, �We have seen better performance results during the second quarter of 2014 as a result of the increase in the active number of advertisers and the average revenue contributed by advertiser, although the revenues during the first six months of 2014 were lower than expected due to the seasonal decline in outdoor advertising coupled with turnover of our sales team. With our efforts to increase the size and quality of our sales force and the forthcoming seasonal increase in outdoor advertising, we expect better financial results for the balance of 2014.
In addition, after signing approximately $4.8 million contracts with leading Chinese brand advertisers and agencies since we launched our iScreen LCD campaign, we added and subtracted iScreens in certain locations in order to improve the effect of our iScreens and optimize the network. We believe these adjustments strengthen iScreen�s competitiveness that will yield positive response from advertisers.�
�We will continue to identify strategic acquisitions or investments in the online advertising business,� Mr. Tan added, �I am pleased that Jacky Wang has joined as our new Chief Financial Officer and expect him to help in the steady and healthy development of the current business, while accelerating the identification of strategic acquisitions and investments.�
Stephen Zhu, COO of Shanghai operations, said, �Following the diversification of our customer base in the second quarter of 2014, we achieved a large increase in revenues as compared to the first quarter of 2014 and became less dependent upon any individual customer.�
"In addition, with the WiFi and 3G capabilities on our iScreen in Shanghai, our clients� advertisements are being delivered to the consumer�s devices and we are obtaining more information on their spending habits and personal preferences. Currently the out-of-home hot-spots service has been well accepted by consumers and advertisers with approximately 93,000 users to date. With better customer experience and the optimizing of our iScreen network, we have gradually established our platform brand in Shanghai.�
Jacky Wang, Chief Financial Officer of Tiger Media, said, �After further evaluation of the different regional market sizes and investment returns, we updated our expansion plan to balance cash flow and iScreens network development by strengthening ourselves in Shanghai first, meanwhile directing our expansion efforts towards working with local partners in each of the other targeted cities rather than through direct acquisition and ownership of the equipment and concessions. Increased utilization rates of our iScreen LCD network will bring better financial results.� �Further, we anticipate that identifying strategic acquisition or investments, especially in online advertising business, will provide more opportunities and bring synergistic effects,� Mr. Wang added.
Comments & Business Outlook
SHANGHAI, China--(BUSINESS WIRE announces the appointment of Jacky Wang as Chief Financial Officer effective August 1, 2014.
Mr. Wang brings to Tiger Media over 13 years of executive financial management and public accounting experience. Prior to joining Tiger Media, Mr. Wang served as the Vice President of Finance of Touchmedia, China�s leading in-taxi touchscreen media provider. Prior to Touchmedia, Mr. Wang served from February 2010 to June 2013 as Finance Director of AdChina Ltd., a leading integrated internet advertising provider in China. Mr. Wang began his career at Ernst & Young, where he worked for the firm's Assurance & Advisory Business Service division in both the Shanghai and Los Angeles (two years) offices from September 2001 to February 2010. Mr. Wang is a Certified Public Accountant in the State of California and a member of the Chinese Institution of Certified Public Accountants, and holds a B.A. in Business Administration from Shanghai International Studies University.
Mr. Peter Tan, Chief Executive Officer of Tiger Media, commented, "I am delighted that Jacky will be joining us as Chief Financial Officer. I believe that Jacky�s role at Touchmedia and AdChina will translate nicely to the expansion and further development of our iScreen Outdoor LCD operations. Additionally, his experience at both a corporate and public accounting level will complement our executive team and will be invaluable as Tiger Media enters its next phase of growth. As we expand our operations, we believe it is critical to have someone with Jacky's skills in leading our expansion and business development opportunities throughout China. I am thrilled that we are able to attract such great talent to our team."
Mr. Wang added, "I am extremely excited to be joining Tiger Media at this specific time in the company's history. I believe the touchscreen media and Internet advertisers I interacted with at Touchmedia and AdChina, respectively, will prove to be beneficial as we grow the iScreen business."
Comments & Business Outlook
First Quarter of 2014 Financial Results
Advertising service revenues for the first quarter of 2014 were US$0.5 million, as compared to $0 for the corresponding period in 2013
Net income per basic and diluted share for the first quarter of 2014 were both US$0.03, as compared to US$0.04 for the corresponding period in 2013
Peter W. H. Tan, Chief Executive Officer of Tiger Media, commented, �While the first quarter of 2014 has seen a steep decline in retail sales affecting the 22 luxury shopping malls with iScreens, we note that restaurant and entertainment venue sales remain upbeat and we have redirected our sales focus towards food and beverage and entertainment advertisements.
Since our launch of our iScreens, we have signed $4.4 million of advertising service contracts with major Chinese and international advertisers. Given the slower than expected sales in Shanghai, we have embarked on an optimization process for our iScreen network by adding and subtracting iScreens in certain locations. Management has adopted a prudent approach to our expansion efforts in other cities and will concurrently develop a smaller number of choice locations in each city this year rather than a full coverage network per city.� Mr. Tan continued, �We continue to identify strategic acquisitions or investments in the traditional and online advertising business which have proven to be a challenging task given the large valuations for domestically listed Chinese media companies. Additionally, we are pleased to announce in this release that we entered into a strategic alliance with DiningCity. As an update to my past comment, we have renewed our search for a permanent Chief Financial Officer candidate as the previously referred to candidate was unable to join us at the end of April 2014 due to unexpected personal reasons. She remains as a consultant to the Company.�
Stephen Zhu, COO of Shanghai operations, said: �We successfully passed the testing of WiFi and 3G capabilities on our iScreen Luxury Mall LCD screen media network in Shanghai. Our media network at high traffic locations in Shanghai is becoming interactive out-of-home hot-spots for our advertising clients with their consumers. Through the testing and development in Shanghai, we expect that the installations in the other cities throughout China this year will be WIFI and interactive ready when erected. As consumers use the WiFi service of our iScreens, our clients� advertisements are being delivered to the consumer�s devices and we are obtaining more information on their spending habits and personal preferences. We intend to use this information and develop more interactive promotions and targeted advertising opportunities for our clients and continue to upgrade the value added functionality on our iScreens.�
Comments & Business Outlook
SHANGHAI--(
BUSINESS WIRE )--Tiger Media, Inc. (�Tiger Media� or the �Company�) (NYSE MKT: IDI), a nationwide Shanghai-based multi-platform media company, today reported audited financial results for the full year ended December 31, 2013. The Company also announced today that it had filed its annual report for the year ended December 31, 2013 on Form 20-F with the U.S. Securities and Exchange Commission.
Adjusted net loss (non-GAAP) was $2.2 million in 2013 compared to an adjusted net loss (non-GAAP) of $8.4 million in 2012.
Net loss was $3.9 million from ordinary operations in 2013, compared to a net profit of $8.7 million in 2012 that was mainly as a result of a $9.4 million net gain from the disposal of subsidiaries.
Raised a total of $4.1 million from proceeds received as a result of the exercise of warrants to purchase 3.3 million of the Company's ordinary shares with an exercise price of $1.25 per share.
Peter W. H. Tan, Chief Executive Officer of Tiger Media, remarked, "Since the launch in late June 2013 of our iScreen Outdoor LCD business at prominent entry points of high end shopping malls and commercial centers in Shanghai, we recorded revenue of $2.4 million through the end of 2013 in advertisement contracts for the network from major domestic and international advertisers. During 2014 and beyond, we hope to expand our network to other Tier I and Tier II cities throughout China, though the pace of expansion will depend on the revenue growth and income from the Shanghai iScreen Outdoor LCD concession. In an effort to mitigate the risks associated with early stage development and conserves the Company�s internal cash resources, we intend to focus our expansion efforts towards working with local partners in each of the targeted cities rather than through direct acquisition and ownership of the equipment and concessions. Many of the iScreen outdoor locations now have Wi-Fi and we are developing interactive client driven content and mobile applications to provide an even wider consumer reach. We currently have developed over 100 screens at over 20 commercial compounds in key CBDs of Shanghai and will continue to increase the network coverage in 2014.
"We have a number of goals and objectives for 2014 including:
Expanding our iScreen Outdoor LCD concessions in Shanghai and other Chinese cities;
Refocusing our efforts at Home Inns locations;
Continuing to be opportunistic and pursue complementary or strategic acquisitions which could provide significant opportunities to diversify and drive our growth; and
Hire a new senior level finance employee expected to begin in April 2014."
Share Structure
On
November 13, 2013 , the Company announced that its Board of Directors
approved a change to its outstanding warrants to reduce the exercise price from $2.50 per share to $1.25 per share (the “Warrant Price Reduction”). The Warrant Price Reduction is applicable to all outstanding warrants of Tiger Media beginning on December 1, 2013 and such Warrant Price Reduction will be effective until December 26, 2013, the expiration date of the warrants. All unexercised warrants will expire in accordance with their terms on December 26, 2013 at 5:00 p.m., New York City time. Except for the reduction in the exercise price as herein provided, all of the terms and conditions contained in the applicable warrant instruments will continue in full force and effect.
Notable Share Transactions
SHANGHAI--(BUSINESS WIRE approved a change to its outstanding warrants to reduce the exercise price from $2.50 per share to $1.25 per share (the �Warrant Price Reduction�). The Warrant Price Reduction is applicable to all outstanding warrants of Tiger Media beginning on December 1, 2013 and such Warrant Price Reduction will be effective until December 26, 2013, the expiration date of the warrants. All unexercised warrants will expire in accordance with their terms on December 26, 2013 at 5:00 p.m., New York City time. Except for the reduction in the exercise price as herein provided, all of the terms and conditions contained in the applicable warrant instruments will continue in full force and effect.
Comments & Business Outlook
Third Quarter 2013 Financial Results
Revenue amounts were $0.8 million for the three months ended September 30, 2013, almost all of which were attributable to the launch, in late June 2013, of our new luxury shopping mall LCD and outdoor billboard businesses in Shanghai, as compared to revenue of $0.1 million for the three months ended June 30, 2013.
Peter W. H. Tan, Chief Executive Officer of Tiger Media, stated, �Since the launch in late June 2013 of our LCD business, we have successfully signed $2.3 million in advertisement contracts for the network from major domestic and international advertisers. Additionally, our Luxury Mall LCD network has received positive responses from a diversified client portfolio that includes, among others, a major international fast food company, an international luxury automobile manufacturer, and a luxury cosmetic brand. Many additional prominent advertisers continue to express interest in joining our proprietary network. We are also pleased to announce that we have entered into a master agreement with Shanghai Film Group which has selected Tiger Media as their preferred outdoor digital media partner to market up to 100 new movie titles it distributes on our LCD screens. We believe our LCD network which is strategically located at prime commercial sites can deliver high reach and effective advertising results for advertisers.�
Tiger Media today also is announcing that Chief Financial Officer, Steve Ye, will resign effective November 10, 2013, to pursue an executive position with another NYSE-listed company. Mr. Tan said, �I have enjoyed working closely with Steve Ye and understand that moving to Beijing is an important career move for him. We thank him for his valuable service and contribution to the company.� Recruitment efforts are underway and Mr. Tan will serve as Interim Chief Financial Officer until a replacement is approved.
Stephen Zhu, COO of Shanghai operations, further remarked, �Our LCD business continues to expand, and we have now commenced testing of WiFi and 3G capabilities on our Luxury Mall LCD screen media network in Shanghai. The rollout is engineered with China Unicom�s bandwidth support and this first phase of the Company�s interactive O2O (online to offline) strategy is expected to expand our interactive capabilities with its expected full deployment by the end of 2013.
The advertising industry has changed rapidly in China due to the incredible growth of internet and mobile users. Purchasing habits of consumers have also changed as the Chinese on-line search market and growth of online sales offer consumers new innovations and choice. According to the MIIT (Ministry of Industry and Information Technology), China has more than 1.2 billion mobile users as of September 2013, more than 65% of which are mobile internet users. According to the National Bureau of Statistics of China 2013, video use (14% increase in 2012), social networking use (20% increase in 2012), and e-commerce purchases (20% annual increase) continue to play dominant roles among users with mobile devices
A recent joint research study by Google with IPSOS Corporation indicated that smartphone users in China have risen from 33% in 2012 to 47% in 2013. Furthermore, the study noted that smartphones connect advertisers with their consumers as 97% of smartphone users show interest in the advertising content.
Mr. Tan added, �By providing free WiFi on our LCD screens, our media network at high traffic locations in Shanghai should become interactive out-of-home hot-spots for our advertising clients with their consumers.�
Comments & Business Outlook
HANGHAI--(BUSINESS WIRE
"Since the launch in late June 2013 of our LCD business, we have successfully signed $2.1 million in advertisement contracts for the network from major domestic and international advertisers, including a significant contract from a leading international beverage company"
Unaudited Financial Results for the Six Months ended June 30, 2013
Revenue amounts were $0.1 million in the first six months of 2013, almost all of which is attributable to the launch, in late June 2013, related to our new luxury shopping mall LCD and outdoor billboard businesses in Shanghai. As noted below, we expect revenue amounts to rise significantly as the build out and implementation of our network continues.
Gross loss was $0.2 million as a result of the expense of advertising space lease costs and depreciation expenses by LCD equipment.
Total operating expenses for the first six months of 2013 were $2.0 million, which is primarily related to business development, promotion of new LCD market opportunities and professional fees, resulting in an operating loss of $2.3 million.
As of June 30, 2013, the Company had $4.0 million in cash and cash equivalents. Stockholder equity was approximately $7.1 million and there were approximately 32.2 million common shares outstanding.
As a result of our disposal of Zhejiang Continental, Shenyang Jingli, Qingdao Kaixiang, Wuxi Ruizhong and the divestiture of SearchMedia International and its subsidiaries in 2012, we have not included comparison periods in the unaudited financial results included in this release, as the comparison periods are not relevant.
Peter W. H. Tan, Chief Executive Officer of Tiger Media, stated, " As a result of earlier than planned divestment of the Company�s legacy business at the end of 2012 for the purpose of elimination of significant liabilities, coupled with one quarter�s delay in the Mall Outdoor LCD installations due to procurement and sourcing disruptions, we unfortunately have a six month gap in recognizing revenue. However, our Mall Outdoor LCD network has had strong results since its official launch at the end of June 2013 and we expect to complete the full installation of our LCD screens in 23 malls in Shanghai by September 2013.
Steve Ye, Chief Financial Officer of Tiger Media added: �Since the launch in late June 2013 of our LCD business, we have successfully signed $2.1 million in advertisement contracts for the network from major domestic and international advertisers, including a significant contract from a leading international beverage company.
Mr. Tan further commented: The $2.1 million in sales contracts achieved within two months of launching this new media concession highlight the attractiveness of our concession and the significant scalability of this new media platform in just Shanghai. We also have a very rich sales pipeline and upcoming contracted campaigns encompass top international consumer brands and numerous luxury brands which include a European automobile manufacturer, a premium clothing line and a leading cosmetic brand.
In anticipation of the completion of the Shanghai Mall Outdoor LCD roll out, we have already embarked on the development of the Beijing and Guangzhou Mall Outdoor LCD network as we expect similar scalability of the Shanghai prototype. In addition, we have several other strategic concessions in progress and will now focus on a more aggressive acquisition strategy that could create additional long-term revenue opportunities, strengthen and diversify our offerings in China's media sector, deepen our national presence and further enhance shareholder value.�
Stephen Zhu, COO of Shanghai operations, further remarked: We are not a traditional media company. We intend to invest heavily into the latest technologies for new and creative media, and intend to revolutionize traditional digital outdoor advertising by incorporating O2O (Online to Offline) business models. Our interactive LCD screens will not only air advertisements but can convert consumers into shoppers with promotions that drive sales and store traffic. In addition, the interactive screens also provide advertisers with vital market intelligence on consumer preference and purchasing behaviors. Our LCD screens can thus provide significant values to both advertisers and consumers. Some interactive features on our LCD screens in consideration include AR (augmented reality), Wechat & Microblog interaction, mobile handset with NFC (near field communication) and other features.�
Comments & Business Outlook
SHANGHAI--(BUSINESS WIRE acquired eight key lease contracts from Symbol Media Corporation (Symbol Media�), which will allow the Company to take 100% control of the eight key Shanghai shopping center locations. As of June 30, 2013, the Company expects to have completed the installation of 77 LCD advertising and media screens in Shanghai at 13 different locations within seven prominent shopping districts. Consideration for the transaction was US$2.2 million which will be paid through the issuance of 2.05 million Tiger Media ordinary shares to Symbol Media. The Company also announced that the U.S. Securities and Exchange Commission (SEC) had notified the Company that it had completed its investigation that formally began in November 2010 and recommended that no enforcement action be taken against the Company.
The Company and Symbol Media had originally entered into a joint venture arrangement for the Luxury Mall LCD media business, with Tiger Media owning 51% and Symbol Media owning 49% of the venture. Given the rapid deployment of these screens and the importance of this growing network to the Companys business objectives of seeking larger advertising contracts with a greater number of advertisers, the Company determined to consolidate cash flow and phase out the joint venture arrangement, with the Company acquiring these assets outright. Symbol Media is majority owned and controlled by Stephen Zhu, the Chief Operating Officer of China Operations for a Company subsidiary with a minority interest held by Peter Tan, the Companys CEO and a member of the Companys Board of Directors.
The LCD screens vary in size and system configuration based upon the location, with a length of between 42-82 inches. The LCD screens are typically installed in high traffic junctions with close proximity to the point of purchase for high end retailers. Our typical ad runs for a 10 second duration between 8am and 11pm. Recent advertising successes have included a campaign in April 2013 for a major international soft drink company, and campaigns in May 2013 for a major international cosmetics company and a leading fast-food retailer. In June 2013, we launched a campaign for a major international tourism authority. Contracted upcoming campaigns encompass numerous luxury advertisers including a European clothing line, liquor, jewelry and a watch manufacturer.
We expect to add two prominent installations from our Home Inns network this summer. The billboards are being installed on Yan An Road, the most trafficked highway in Shanghai. We are also considering adding digital displays within our Hong Kong based billboard network, which includes the largest sports and performance venues in the market including the Hong Kong Coliseum, Hong Kong Stadium and the Queen Elizabeth Stadium.
Peter W. H. Tan, Chief Executive Officer of Tiger Media, remarked, "Our Luxury Mall LCD network has grown significantly in 2013 and we believed it was an optimal time to fully consolidate the economic interest of the eight key leases in Shanghai. As a result of aggressive building out, we can now sell all of our existing locations as a network to increase our revenue. The Digital Display LCD sector is a very attractive sector within the Greater China outdoor industry, with industry revenue growing 35% in 2012 from RMB 5.4 billion in 2011 to RMB 7.3 billion, according to China Outdoor Data Corporation. We are also pleased with the key locations that we expect to launch with our Home Inns concession although we anticipate a slower pace of deployment. In addition, we have several other strategic concessions in progress that could create additional long-term revenue opportunities, strengthen and diversify our offerings in China's media sector, deepen our national presence and further enhance shareholder value."
The Company expects that it will file its half year results for the six months ended June 30, 2013 in a timely manner. In addition, on May 23, 2013, the Company received a letter from the SEC that it had completed its investigation and that it recommended no enforcement action against the Company, ending the investigation that was the subject of our restatement of financial results first announced in August 2010.
Comments & Business Outlook
Full Year 2012 Results
Net profit was $8.7 million compared to a net loss of $13.4 million in 2011 mainly as a result of a $9.4 million net gain from the disposal of subsidiaries.
Adjusted net loss (non-GAAP) was $8.4 million compared to an adjusted net loss (non-GAAP) of $1.9 million in 2011.
Peter W. H. Tan, Chief Executive Officer of Tiger Media, remarked, "We have been able to realize significant progress in the evolution of our business during 2012 and into 2013, transitioning from our legacy operations to strategic transactions with high profile partners. These new concessions possess higher margins, longer terms and greater strategic value. In addition, we have several other strategic concessions and transactions in progress that will create additional long-term revenue opportunities, strengthen and diversify our offerings in China's media sector, deepen our national presence and further enhance shareholder value. We have eliminated nearly all of our remaining earn-out liabilities and we are debt free with sufficient liquidity to build and expand our concessions. Furthermore, as a result of the Company’s improved financial reporting systems we were able to achieve a timely filing of our annual results on Form 20-F prior to the April 30, 2013 deadline.
Our Luxury Mall LCD platform just completed the installation of 16 LCD screens at the prestigious Shanghai Center where we have already completed a high profile advertising campaign with a major international beverage company. We expect the build out of the Shanghai portion of this network to be completed in June 2013 at which point we will focus on expanding the Luxury Mall LCD network to other major cities in China.
Our full December 31, 2012 audited results differ slightly from our preliminary year end results announced on January 16, 2013, as a result of minor adjustments to certain accrued expenses. In addition, certain line items in our preliminary statement of operations were reclassified in our audited financial statements to properly account for the discontinued operations. However, this reclassification had no significant impact on the reported net profit.
Comments & Business Outlook
SHANGHAI--(BUSINESS WIRE
Peter W. H. Tan, Chief Executive Officer of Tiger Media, remarked, "We have been able to realize significant progress in the evolution of our business during 2012, transitioning from our legacy operations to strategic transactions with high profile partners. These concessions possess higher margins, longer terms and greater strategic value. In addition, we have several new strategic concessions and transactions in progress that will create additional long-term revenue opportunities, strengthen and diversify our offerings in China's media sector, deepen our national presence and further enhance shareholder value. We intend to keep our investors up to date and make additional announcements as these endeavors evolve."
Preliminary Unaudited Financial Results for the Twelve Months ended December 31, 2012 and Three Months ended December 31, 2012.
Today, the Company is providing preliminary unaudited financial results for the full year 2012 and Three Months Ended December 31, 2012, which reflect the impact of the recently announced divestiture of Search Media International Holdings and its subsidiaries.
For the full year 2012, the Company anticipates its revenue will be classified as discontinued operations, after giving effect to the aforementioned divestiture of SMIL in the 4th quarter of 2012 including the divestiture of related party revenue from these subsidiaries. The results from these are presented as income from discontinued operations and included in the net profit of the Company. As a result, the Company anticipates net income of $9 million for 2012 mainly due to the gain on divestiture of various subsidiaries within 2012.
For our cash flow statement as of the Year Ended December 31, 2012, net cash used in operating activities totaled approximately $6 million, with net cash used in investing activities of $3 million, offset by $11 million in net cash provided in financing activities.
As explained above, the Company expects its revenue and associated costs will be classified as discontinued operations, and income from these subsidiaries in the Three Months Ended December 31, 2012 will be included in the net profit of the Company. The Company anticipates net income of $3 million in the Three Months Ended December 31, 2012 mainly due to the gain on divestiture of various subsidiaries within the Quarter.
For our cash flow statement for the Three Months Ended December 31, 2012, net cash used in operating activities totaled approximately $1 million, with net cash used in investing activities of $2 million, offset by $3 million in net cash provided in financing activities.
As of December 31, 2012, the Company had approximately $7 million in cash and cash equivalents, $6 million of working capital and $8 million of total assets . Stockholder equity was approximately $6.7 million and there were approximately 30.1 million common shares outstanding. We expect to complete our annual 20-F filing prior to the April 30, 2013 deadline.
Share Structure
SHANGHAI--(BUSINESS WIRE opportunity to exercise up to one-third of the Warrants held by them at a reduced exercise price and to extend the term and reduce the exercise price of certain of their remaining Warrants that are not exercised.
In accordance with the terms of the Warrants and the Warrant Agreement governing the Warrants, SearchMedia will reduce the exercise price for up to one-third of each holder's outstanding Warrants beginning today, December 5, 2012. From December 5, 2012 until December 26, 2012, a holder of Warrants may exercise up to one-third of their outstanding Warrants at a reduced exercise price of $1.25 per share with respect to Public Warrants and Insider Warrants and $1.46 per share with respect to Underwriter Warrants. The exercise of these Warrants and the issuance of the ordinary shares underlying these Warrants is covered by the Company's Registration Statement on Form F-3 (Regis. No. 333-176634) (the "Registration Statement"), which is on file with the Securities and Exchange Commission (the "SEC").
At the expiration date of the Warrants, which is February 19, 2013, the expiration date of a participating holder's remaining Warrants equal to two times the number of Warrants exercised will be extended until December 26, 2013 (the "Extended Warrants") and the exercise price of the Extended Warrants will be reduced to $2.50 per share for Public Warrants and Insider Warrants and $2.92 per share for Underwriter Warrants. From December 26, 2012 until February 19, 2013, the Extended Warrants will be held in escrow and will not trade on the NYSE MKT during this time. On February 20, 2013, the Extended Warrants will be released from escrow for continued trading on the NYSE MKT under the symbol "IDI.WS," subject to the continued listing of the Company's securities.
The offer to exercise Warrants at a reduced price begins on December 5, 2012 for all Warrant holders of record on such date and ends at 5:00 p.m. Eastern Time on December 26, 2012. No exceptions will be made to this deadline, unless the Company extends the deadline. Materials describing the exercise price reduction and procedures for holders to exercise their Warrants have been filed with the SEC and are being mailed to Warrant holders of record on December 5, 2012. The Company encourages you to read these materials and the Registration Statement before you make any decision to exercise your Warrants.
The Company believes certain of its significant ordinary security holders, including Dr. Phillip Frost, intend to exercise up to one-third of their Warrants at the reduced exercise price, however neither the Company nor its Board of Directors makes any recommendation regarding whether or not any Warrant holder should elect to exercise their Warrants.
The Warrants currently trade under the symbol IDI.WS on the NYSE MKT.
Comments & Business Outlook
Audited Financial Results for the Full Year Ended December 31, 2010
Revenue increased 30.0% to $49.0 million in the full year of 2010 from $37.7 million in the full year of 2009 primarily due to the continued expansion of the Company's outdoor billboard, elevator and transit platform, an increase in the amount of contracts and the addition of the Company's newly acquired subsidiary, Zhejiang Continental. The Company grew its number of advertising contracts by 7.6% to 1,509 contracts from 1,403 contracts in the prior year period and witnessed increased average revenue per customer as well. Revenue of $49.0 million in the full year of 2010 differs from revenue of $51.7 million discussed in the Company's preliminary results announced on March 28, 2011, mainly due to a contract modification from one of SearchMedia's subsidiaries as well as incremental sales tax accruals.
Gross profit increased 28.9% to $12.5 million from $9.7 million in the prior year period, reflecting growth proportional to that of revenue. Gross margin remained flat at 25.6% from 25.7% in the prior year period due to changes in the Company's revenue mix as well as costs associated with its network expansion. As the Company grows its occupancy rates and average revenue per contract, gross margins are expected to trend higher as well.
Total operating expenses for the full year of 2010 were $16.7 million compared to $17.2 million for the prior year period. Sales and marketing expenses increased 32.4% to $4.5 million from $3.4 million in the prior year period, primarily due to a proportional increase in sales commissions as well as greater investment in marketing expenses to drive business expansion. General and administrative expenses were $12.2 million compared to $13.8 million in the prior year period, reflecting an increase in salary expense as a result of acquisition activity, higher share-based compensation expense, offset by lower professional fees and other expenses compared to 2009.
Operating loss was $4.2 million compared to a loss of $7.5 million in the prior year period.
Other expenses for the full year of 2010 increased to $41.1 million from $10.8 million in the prior year period, primarily due to a loss on impairment of goodwill and intangible assets of $39.4 million in 2010 compared to $15.7 million in the prior year period. This asset impairment loss was incurred in conjunction with the Company's efforts to revalue historic acquisitions in order to lay a stronger foundation for future growth.
As a result, net loss for the full year of 2010 was $46.6 million compared to a net loss of $22.6 million in the prior year period. Net loss for the full year 2010 includes the impact of the following expenses, which management believes are unique to 2010 and not expected to impact the Company's financials on a normalized basis:
-- $39.4 goodwill impairment which reflects the writedown of goodwill from certain acquisitions completed in 2008; -- and $4.6 million related to restructuring the headquarter elevator business, abandonment of leases and extraordinary corporate expenses related to severance fees, headcount reduction, extraordinary legal and auditing fees and certain bad debt reserves.
Net loss for the full year of 2010 also includes approximately $4.1 million of ESOP and intangible amortization charges.
Excluding these items, the Company would have reported net income of $1.5 million.
Outlook
Paul Conway, Chief Executive Officer of SearchMedia, noted, "For the first quarter of 2011, we are pleased to announce that we expect all subsidiaries as well as the headquarter elevator business to be profitable. Moreover, we are extremely excited about the upcoming opportunities in China's media space and look forward to further building out our network through new concessions and accretive acquisitions."
Comments & Business Outlook
SearchMedia Holdings Limited today provided preliminary unaudited financial results for the year ended December 31, 2010.
For the year 2010, the Company expects net revenue to increase by 37% to approximately $52 million . Excluding the impact of acquisitions, the Company estimates organic revenue growth was approximately 25% for the year 2010. Revenue performance was driven primarily by growth in the Company's existing billboard businesses and high occupancy rates in the elevator business, as well as contributions from the Continental acquisition and a new bus concession. The Company also continued to sign new advertising contracts through the year with various auto, telecom, financial, travel, insurance and electronics clients, and witnessed increased average ad spend per client.
The Company expects 2010 net income from acquired subsidiaries to remain stable on a year over year basis at approximately $9 million . Net income from acquired subsidiaries excludes the Company's headquarter elevator business and corporate expenses. In addition, net income from acquired subsidiaries in 2010 only included seven months of income from the Continental acquisition, which closed in June 2010.
The Company's headquarter elevator business and corporate expenses incurred a net loss for the year 2010 of approximately $8 million . Approximately $3 million of this net loss reflects expenses related to restructuring the headquarter elevator business, and extraordinary corporate expenses related to severance fees, headcount reduction and extraordinary legal and auditing fees. In 2011, management believes the headquarter elevator business to be profitable, and expects recurring corporate expenses to be approximately $3 million for the year.
SearchMedia expects to recognize goodwill impairment of $21 million for the year 2010, which reflects the writedown of goodwill from certain acquisitions completed in 2008. Excluding the impact of this goodwill impairment, the Company would expect to report net income for the year 2010 of approximately $1 million. Excluding the impact of the goodwill impairment and the $3 million related to restructuring the headquarter elevator business and extraordinary charges highlighted above, the Company would expect to report net income for the year 2010 of approximately $4 million .
As of December 31, 2010, cash and cash equivalents totaled approximately $7 million .
Wilfred Chow, Chief Financial Officer of SearchMedia, commented, "We have begun to see visible improvements in our business as a result of the initiatives we have undertaken. Today, our elevator business has reached very high occupancy rates. We believe this achievement is a great testament to both the abilities of our management and the growth potential of our business. We have a comprehensive operation that is strong both locally and nationally in China, and one with excellent growth prospects. For the first quarter in 2011, we expect all of our subsidiaries and our headquarter elevator operation to be profitable. In addition, we continue to reduce costs throughout the Company ."
Comments & Business Outlook
November 1, 2010
Wilfred Chow, Chief Financial Officer of SearchMedia, commented, "We are pleased to have completed our annual report filing for 2009 today, which ends a transition process in which we carefully reviewed the Company's historical results. We are emerging a stronger, better organized company with a more robust finance division. Through this process we identified a number of unanticipated material weaknesses in our internal controls, which we have worked assiduously to correct. In addition to strengthening our procedures, we have hired additional accounting, internal audit and finance professionals, which augment support from external consultants. We believe the actions we have taken will make future financial reports more timely and effective."
Paul Conway, the Company's Chief Executive Officer, stated, "The first ten months of 2010, while extremely challenging , have also been productive. During this time we have bolstered our management team, pursued new concessions, made an accretive acquisition, and strengthened our internal resources to support future growth. Our base billboard business remains strong and we have seen solid growth in our transit and elevator business in 2010. We have also had significant advertising campaigns with certain auto, telecom, financial, insurance and electronics clients in 2010. In June, we successfully completed the acquisition of Zhejiang Continental Advertising Co., Ltd. ('Continental'), a profitable billboard company based in Zhejiang Province with over 10 years of operating history. We believe this was an important strategic transaction that enhanced the appeal of our outdoor media portfolio and strongly improved our ability to pursue additional concession opportunities within the attractive market of Hangzhou. In April 2010, we signed a one-year cooperation agreement to provide bus advertisements and signed a new unipole lease at the Beijing Capital International Airport, all of which began to contribute revenue late in the second quarter."
Chow continued, "This year we also put great emphasis on ensuring we have the best senior management team to lead SearchMedia going forward. This involved bringing in new leadership and it also required us to properly structure subsidiary agreements to ensure that key talent work together to achieve long-term goals. To this end, throughout 2010, we signed multi-year agreements with our seven largest subsidiary management teams aimed at encouraging focus on long-term performance goals. We also continue to evaluate promoting select talent from our subsidiaries to assume more responsibilities for the entire Company."
November 15, 2010
Paul Conway, the Company's Chief Executive Officer, stated, "The third quarter of 2010 was a productive quarter for us. Our billboard business remains strong and we have seen solid growth in our transit and elevator business. We have also signed significant advertising campaigns in the quarter with various auto, telecom, financial, travel, insurance and electronics clients. Furthermore, we are also excited to note that we are seeing a further increase in spending from our clients in the fourth quarter."
Wilfred Chow, Chief Financial Officer of SearchMedia, commented, "We are pleased to report our preliminary financial results for the nine months ended September 30, 2010. Throughout the past months, we have undertaken some key initiatives to strengthen our company and today, SearchMedia has grown into a stronger, better organized company."
Preliminary Unaudited Financial Results $43 million in revenue and net income of $3 million . Non-GAAP net income excluding non-recurring and stock-based compensation charges is expected to be $6 million and net income from the Company's acquired subsidiaries is expected to be $8 million for the first nine months of 2010. These results reflect certain adjustments to the Company's first half preliminary unaudited results, which were made in coordination with its recently completed year end 2009 audit. The Company anticipates that it will recognize sequential quarterly revenue and net income growth throughout the full year of 2010. Further detail will be available upon the filing of the Company's first quarter 2010 financial report, which is expected to be completed by December 15, 2010.
Revenue and net income was driven primarily by growth in the Company's existing billboard and transit businesses and improvement in the elevator business, as well as contribution from the recent Continental acquisition and new bus concession.
Outlook For fiscal year 2010, the Company is targeting revenue of approximately $61 million of revenue and net income from acquired subsidiaries of approximately $11 million . In addition, the Company expects net income excluding non-recurring and stock-based compensation charges to be approximately $8 million . Looking further ahead, based upon the underlying growth opportunities in its base business combined with the concession, acquisition and expansion opportunities that it is actively reviewing, the Company is targeting 2011 net income in the range of $17-20 million .
Investor Alert
Searchmedia Holdings completes restatement :
On August 20, 2010, we announced that as a result of the continued internal analysis of our financial statements for the year ended December 31, 2009, the audit committee of our board of directors, based on management’s recommendation, determined that the historical financial statements of SearchMedia International for the years ended December 31, 2007 and December 31, 2008 should be restated. In reaching its decision to restate the 2007 and 2008 financial statements, the audit committee, among other matters, reviewed management’s analysis of SearchMedia International’s practices relating to the following:
• Disclosure, approval, and documentation of transactions among entities related to prior owners of acquired subsidiaries (which we refer to as “related entity transactions”);
• Proper documentation of transactions;
• Recording of various erroneous transactions by certain employees;
• Recording of certain assets and other accounting irregularities related to acquisitions;
• Procedures related to diligence and approval of transactions; and
• Confirmation of payments related to acquisitions.
As a result of this analysis, we identified an overstatement of approximately $45.7 million in SearchMedia International’s previously reported revenue for the year ended December 31, 2008. On a restated basis, our net loss was $39.8 million in 2008. Restated total assets were $49.7 million in 2008.
