Preliminary Results

8 April 2011

Burst Media Corporation

Preliminary Results for the Year Ended 31 December 2010

Burst Media Corporation ("Burst" or "the Company"), the international online advertising services and technology business, is pleased to announce its preliminary results for the year ended 31 December 2010.

Summary

The Company posted a 20% revenue increase over 2009, the highest percentage increase in more than five years. Because of challenges and costs related to integrating the Company's two recent acquisitions, Giant Realm and Burst Media UK, the adjusted EBITDA(1)loss was $1.4 million.

For the year ended 31 December 2010:

Cash and cash equivalents at 31 December 2010 were $0.4 million (31 December 2009: $5.7 million). In April 2010, the Company completed the acquisition of Burst Media UK for $2.4 million in cash and 1.0 million new Burst common shares.

Reconciliation of Net Loss to Adjusted Net Income (loss)(1) and Adjusted EBITDA(1) (000's):

(1) "Adjusted net income (loss)" (net income (loss) excluding restructuring charges, acquisition related expenses and equity-based compensation) and "Adjusted EBITDA" (Adjusted net income (loss) before interest income, income tax expense, depreciation and amortization) are non-U.S. GAAP financial measures. The Company believes Adjusted net income (loss) and Adjusted EBITDA provide meaningful insight into the Company's ongoing economic performance and therefore uses both Adjusted net income (loss) and Adjusted EBITDA internally to assist in evaluating and managing the Company's operations.

Enquiries:

Acquisition of Burst

It is also being announced today that the Boards of Burst and Blinkx PLC, a UK company whose shares are also admitted to trading on AIM have entered into a definitive agreement, whereby Blinkx will acquire the entire issued and to be issued shares of common stock of Burst for an aggregate consideration of $30 million (£18.5 million) to be satisfied in cash and by the issue of new Blinkx shares.

Further information on and details of the acquisition can be found in the announcement of the acquisition.

BURST MEDIA CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2010 and 2009

(in thousands, except share amounts)

BURST MEDIA CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31, 2010 and 2009

(in thousands, except share amounts)

BURST MEDIA CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2010 and 2009

(in thousands, except for share amounts)

BURST MEDIA CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share amounts)

NOTE: DESCRIPTION OF THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of the Company

Burst Media Corporation ("Burst Media" or the "Company") together with its subsidiary is a provider of comprehensive Internet advertising solutions focused on supporting the interests of specialty content web publishers and advertisers. The Company delivers advertising campaigns for its customers through a network of approximately 4,200 specialty content web publishers. The Company has advertising servers in three locations in the U.S. (Massachusetts, Virginia, and California) and one location in Europe (Amsterdam). The corporate headquarters is located in Burlington, Massachusetts.

The Company's products and services utilize adConductor™, a comprehensive ad management solution, developed by the Company. adConductor is a leading partner for media companies to connect marketers with audiences and grow their business beyond existing boundaries. adConductor offers online media properties with an end-to-end ad network building and management solution that provides a consolidated system to manage web sites and affiliates. The Company provides its adConductor technology to customers as an application service provider.

The corporate headquarters is located in Burlington, Massachusetts. In April 2010, the Company purchased OTP Media Ltd, a UK advertising network, and changed its name to Burst Media UK Limited. Burst Media UK Limited is located in the United Kingdom

Basis of Presentation

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of Burst Media UK Limited, the Company's wholly-owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassifications

Certain previously recorded amounts have been reclassified to conform to the current period presentation.

Foreign Currency

The financial accounts of Burst Media UK Limited are measured using the local currency as its functional currency. The assets and liabilities of this subsidiary are translated into U.S. dollars at the current exchange rates as of the balance sheet dates and revenues and expenses are translated at average exchange rates each month.

The Company also conducts certain transactions denominated in foreign currencies. Included in other income (expense), net were realized and unrealized net foreign currency losses of $29 and $26, respectively for the year ended December 31, 2010. Included in other income (expense), net were realized and unrealized net foreign currency gains of $20 and $10, respectively for the year ended December 31, 2009.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders' equity, except stockholders' investments and distributions, repurchases of common stock and stock-based compensation.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results could differ from those estimates. On an ongoing basis, the Company reviews its estimates to ensure that these estimates appropriately reflect changes in the business or as new information becomes available.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. There were no investments in money market mutual funds and certificates of deposit at December 31, 2010. As of December 31, 2009, cash and cash equivalents included investments in money market mutual funds and certificates of deposit totaling $3.5 million.

Restricted Cash

The Company had no restricted cash as December 31, 2010. Restricted cash was $70 at December 31, 2009, and is included in other assets. This represents funds required to be kept on deposit as collateral under a letter of credit agreement relating the lease of its corporate headquarters.

Fair Value Measurments

The Company has estimated that the carrying amount of cash and cash equivalents, accounts receivable, prepaid and other current assets, due to publishers and other current liabilities reflected in the consolidated financial statements equals or approximates their fair values because of the short-term maturity of those instruments.

Accounts Receivable, net

Accounts receivable are carried at their original invoice amount net of an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for estimated credit losses as a result of uncollectible receivables. Management periodically reviews the allowance based on specific identification of troubled accounts, customer credit-worthiness and historical collections trends. Accounts receivable are charged-off to the allowance for doubtful accounts when deemed uncollectible. Recoveries of accounts receivable previously written-off are credited to bad debt expense when received.

As a normal part of the business, the Company has receivables that are invoiced in the month following the completion of the earnings process. All unbilled receivables are billed within 30 days after the end of each month and are included in accounts receivable in the consolidated balance sheets.

Concentration of Credit Risk

Financial instruments with potential concentrations of credit risk are cash and cash equivalents, restricted cash and accounts receivable. To limit its exposure, the Company maintains its cash and cash equivalents and restricted cash with well established financial institutions and performs periodic credit evaluations of its customers. In certain circumstances where specific customer credit risk is identified, the Company requires prepayment for advertising campaigns which are included in Other current liabilities in the consolidated balance sheets. The Company maintains an allowance for doubtful accounts for estimated credit losses and these losses have generally been within management's expectations. At December 31, 2010, the Company held accounts receivable from one customer amounting to $1,897 or 16% of its gross accounts receivable balance. At December 31, 2009, the Company held accounts receivable from one customer amounting to $1,116 or 9% of its gross accounts receivable balance.

Property, Equipment and Software Development Costs

Property and equipment are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the lesser of the lease term or the useful life of the asset.

Internal Use Software Development Costs

Included in property and equipment are certain costs related to computer software developed or obtained for internal use that are capitalized in accordance with American Institute of Certified Public Accountants standards on Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. The Company amortizes internal use software costs over their estimated useful lives, which typically range from two to five years. The Company capitalized software development costs of $692 and $1,011 for the years ended December 31, 2010 and 2009, respectively. Amortization expense related to capitalized software for the year ended December 31, 2010 was $71. There was no amortization expense related to capitalized software costs for the year ended December 31, 2009 as the product was not placed in service until November 2010.

Long-Lived Assets

The Company reviews the carrying value of long-lived assets for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. The Company believes there have been no changes in circumstances that would require it to assess impairment of its long-lived assets. Accordingly, no impairment loss has been recognized in the accompanying consolidated financial statements.

Goodwill and Intangible Assets

Goodwill represents the excess of acquisition cost over the fair value of the net assets of acquired businesses. The Company tests goodwill for impairment on an annual basis as of its year end. Goodwill of a reporting unit will be tested for impairment between annual tests if events occur or circumstances change that would likely reduce the fair value of the reporting units below its carrying value.

Intangible assets, which consist of technology, advertiser relationships and web publisher relationships, are amortized over their estimated useful lives ranging from 3 to 16 years.

Revenue Recognition

Network Advertising Revenue

Revenues are primarily generated by delivering its customers' advertising impressions or "click-throughs" for agreed upon fees to specified third-party publishers comprising the Company's advertising networks. Customer advertising campaign agreements are generally short term in nature (less than 60 days) and revenue is recognized as campaigns are delivered, which is typically based upon the number of impressions or "click-throughs" delivered.

Additionally, the Company incurs expenses relating to third-party publishers, which have contracted with the Company to be part of its networks, as advertising campaigns are delivered. The Company records its obligation to its network publishers based upon a contractually determined percentage of revenue in each advertising campaign and these expenses are classified as cost of revenues.

adConductor Application Revenue

All of the Company's products and services are enabled by the Company's proprietary suite of software products. The Company provides its adConductor technology to certain customers as an application service provider. The Company contracts with its adConductor customers for minimum fees based upon projected usage. Amounts due from customers are based on actual usage in the event usage exceeds the minimum fees due. Revenue from adConductor application agreements is recognized ratably over the term of the customer contract.

Significant Customers and Web Publishers

The Company had no customers that individually accounted for more than 10% of revenue for the years ended December 31, 2010 and 2009. Management anticipates that customer concentrations percentages may vary from year to year and that those customers may change in any given year.

The Company's revenue is primarily generated from delivering customers' advertising campaigns through its network of publishers. In 2010 and 2009, approximately 10% of network advertising revenue was derived from customers' advertising campaigns delivered via the five highest volume web publishers within the publisher network. Web publishers in the Company's network generally operate under open-ended, non-exclusive agreements.

Equity-Based Compensation

The Company recognized equity-based compensation expense for all share-based awards made to employee and directors. Equity-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the applicable vesting period of the stock award (generally four years) using the straight-line method.

Income Taxes

Income taxes are provided for the effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related to the differences between the basis of certain assets and liabilities for financial and income tax reporting. Deferred taxes are classified as current or noncurrent depending on the classification of the assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non current depending on the periods in which the temporary differences are expected to reverse.

The Company establishes accruals for tax contingencies when, notwithstanding the reasonable belief that its tax return positions are fully supported, the Company believes that certain filing positions are likely to be challenged and moreover, that such filing positions may not be fully sustained. Accordingly, a tax benefit from an uncertain tax position will only be recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. The Company continually evaluates its uncertain tax positions and will adjust such amounts in light of changing facts and circumstances.

Segment Information

The Company operates in one segment, which is the provision of comprehensive Internet advertising solutions focused on supporting the interests of specialty content web publishers. The chief operating decision makers review operating results on an aggregate basis and manage operations as a single operating segment.

Net Loss per Share

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the shares used in the calculation of basic net loss per share plus the dilutive effect of common stock equivalents, such as stock options, using the treasury stock method. Common stock equivalents are excluded from the computation of diluted net loss per share if their effect is antidilutive.

NOTE: ACQUISITIONS

OTP Media Ltd.

Pursuant to the Share Purchase Agreement dated April 6, 2010, the Company acquired 100% of the shares outstanding of OTP Media Ltd., an advertising network with headquarters located in London, England. As a result of the acquisition, the Company is expected to expand its portfolio of networks into the United Kingdom. 

The total purchase price of the acquisition is as follows:

The fair value of the shares of common stock used in determining the purchase price was based upon the closing market price of the Company's common shares on the acquisition date.

The Company recorded a contingent consideration liability of $525 upon consummation of the acquisition of which $115 of this liability was recorded in other current liabilities and $410 was recorded in other liabilities. The company paid $115 of the contingent consideration liability in November 2010. The remaining contingent consideration liability of $410 was based on achieving certain revenue and profit targets estimated at the time of acquisition. The Company reevaluated the likelihood of achieving these revenue and profit targets as of December 31, 2010 and determined the likelihood of achieving these targets was remote. The Company recorded the change in estimate of $410 as of December 31, 2010 as part of other income (expense), net.

The purchase price has been allocated to each major class of identifiable assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The allocation to identifiable assets and liabilities is summarized as follows:

The purchase price allocation for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values.

Giant Realm

Pursuant to the Asset Purchase Agreement dated October 5, 2009, the Company acquired substantially all of the assets and specified obligations of the business of Giant Realm, Inc. ("Giant Realm"), a vertical advertising network focused on gamers and entertainment enthusiasts, with headquarters located in New York, New York. As a result of the acquisition, the Company expanded its portfolio of niche vertical networks into popular gamer and entertainment web sites. 

The total purchase price of the acquisition is as follows:

The fair value of the shares of common stock used in determining the purchase price was based upon the closing market price of the Company's common shares on the acquisition date.

The purchase price has been allocated to each major class of identifiable assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. The allocation to identifiable assets and liabilities is summarized as follows:

The purchase price allocation for acquisitions requires extensive use of accounting estimates and judgments to allocate the purchase price to the identifiable tangible and intangible assets acquired and liabilities assumed based on their respective fair values.

The gross contractual amounts due under the accounts receivable is $1,068, of which $115 is expected to be uncollectible.

NOTE: LOSS PER SHARE

Basic and diluted loss per share for the years ending December 31 are calculated as follows:

Antidilutive options outstanding were 6,071,115 and 4,497,985 at December 31, 2010 and 2009, respectively.