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Jerrick Media Holdings, Inc. Reports First Quarter 2017 Financial Results

4 months ago

NEW YORK, May 15, 2017 /PRNewswire/ — Jerrick Media Holdings, Inc., (JMDA) (the “Company” or “Jerrick”), a digital media and technology company, today reported financial results for its first quarter ended March 31, 2017, which marks Jerrick’s first full quarter of its commercial launch of the Vocal platform.

Key First Quarter 2017 Financial Results Summary / Business Highlights:

  • Dashboard statistics:

March 31, 2017

April 30, 2017

May 14, 2017

Verticals (Web Communities)

12

12

12

Unique Visitors per Month

1,072,649

1,378,278

1,882,613*

Page Views per Month

1,769,870

1,888,409

2,370,203*

Total Bloggers Signed Up

3,031

4,310

4,949

Average # of Submissions /Day

25

31

33

Average # of Published Articles /Day

20

23

27

    *(estimated monthly run-rate)

CURRENT BUSINESS METRICS

User Device:

76% Mobile/18% Desktop

Traffic Source:

55% Search/28% Social

Geographic:

53% U.S./28% Europe

  • Since inception, the Company’s revenue has been insignificant, generated predominately through the monetization of non-core assets to support working capital. Jerrick’s ownership of the Guccione library is experiencing rising sale prices at auction, the largest component of which is a collection of over 200,000 digital images from Penthouse circa 1969 – 1988 and OMNI Magazine (1978 to early 1990s).

Guccione Library Auction Results:

DIGITAL IMAGES

December 2016

March 2017

April 2017

May 2017

(First 2 weeks)

Average Sale Price/image

$20.00

$37.50

$60.00

$75.00

# of Items Sold in Auction

252

15

97

110

# of Auctions/Month

1

4

2

2

  • Successfully Beta-tested 4 of 7 projected revenue sources to formally launch with Vocal 2.0: Native Advertising; Micropayments; Premium Digital Downloads (including Kindle, Vimeo, and print-to-order); Affiliate Network Sales;
  • Monthly cash burn for the first three months of 2017 averaged approximately $307,000 compared to the average monthly cash burn during first and fourth quarters of 2016 totaling approximately $195,000. The increase is due to $150,000 in one-time accounting, legal and consulting fees;
  • Operating expenses totaled $1.1 million in the first quarter of 2017, an increase of $365,000 over first quarter of 2016, and a decrease of $77,000 over fourth quarter 2016. Expenses are trending higher in preparation for the release of Vocal platform version 2.0;
  • Operating loss for the first quarter of 2017 totaled $(1,000,000), compared to an operating loss in the first quarter of 2016 of $(619,000) and an operating loss of $(1,100,000) for the fourth quarter 2016;
  • Introduced power-to-mine previous content libraries and contemporize for today’s audience: Maven Pictures and Jerrick intend to produce a scripted TV series on the Life of Bob Guccione. Jerrick will contribute access and use of its Guccione library and experience as executive producers. In return, the Company will receive revenue from a production fee, a percentage revenue-share and rights to the series post debut. As an ancillary benefit, Jerrick anticipates a positive impact to its brand, library value and the potential increase in unique visitors to its community sites;
  • Launched 4 additional community sites, bringing the current total to 12: Proof (January), Swamp (January), Humans (March) and Wander (March). Jerrick plans to add another 40+ community sites during 2017;
  • Updated provisional Patents (filed April 25, 2017) concurrent with technology advancements – System and Method for Creating, Editing, Managing and Serving Web-Based Content (application number 62404735). Increased the number of trademarks and the size of its content library; and,
  • Secured funding totaling approximately $1,100,000 during first quarter 2017, primarily through convertible notes and promissory notes. Subsequent to quarter-end, secured additional $80,000 short term notes and a $130,000 one year revolving line of credit.

“Since the launch of Vocal on November 30, 2016, our staff has been intently focused on offering interesting, unique and well written content, attracting active and knowledgeable content creators and influencers, as well as increasing the number of monthly visitors to our community sites.  We have made material progress in all three fronts in a short period of time. Jerrick Media has grown from the initial 20 beta content providers in November 2016 to nearly 4,500 registered writers with over 7,000 published pieces of content. This extraordinary reception has attracted nearly 2,000,000 monthly visitors to our site, generating a sizable increase in monthly page views.  Now, with the launch of Vocal 2.0 imminent, we will allocate resources towards building revenue from our core business,” commented Jeremy Frommer, co-founder and CEO of Jerrick Media.

“We believe we have developed an interesting proposition to advertisers and brands – we provide the means to efficiently target market the most appropriate audience for their goods and services within our growing list of community sites, and provide precise feedback and returns-on advertising spending. We also have the in-house means to create branded content for advertisers and brands spearheaded by an accomplished Hollywood producer and are already receiving significant interest in this capability. As I mentioned at year-end, we believe we have created a highly profitable business model based upon digital arbitrage that is capable of supporting multiple revenue sources.  While the commercialization of our Vocal platform has only just started, given the level of early interest we are receiving, we expect to scale revenue in 2017, and we continue to anticipate crossing over into profitable growth during 2018.”

Jerrick reported net revenues for the three months ended March 31, 2017 of approximately $42,000 compared to $121,000 for the same period of the previous year and $23,000 in the fourth quarter of 2016.  The year-over-year quarterly decrease in net revenue is primarily attributable to the Company’s transitioning its ecommerce business from direct sale of products and Company owned memorabilia (Guccione Library) that provided support to working capital (accounting for over 80% of first quarter 2016 revenues), to redirecting its internal resources towards launch of its core business and commercialization of the Vocal platform.  Both first quarter 2017 and fourth quarter 2016 revenues reflected early days of outsourcing the monetization of the Guiccione library to premier digital auction house, Everything But The House (EBTH), as well as the beta testing of advertising and ecommerce revenue components (representing approximately 40% of revenues) due to launch during the roll out of Vocal Platform version 2.0.

Jerrick’s Guccione Collection includes several content libraries consisting of hundreds of thousands of digital images, artwork and written works, including items from iconic brands such as OMNI and Longevity Magazines.  Jerrick plans to continue to supplement working capital by monetizing this library, while maintaining all copyrights, via periodic auctions during the year through EBTH.  With the initial sales price of items sold through EBTH averaged over $30 per item in early first quarter 2016, year-to-date 2017 has witnessed monthly increases and as of the first 2 auctions in May the average price has risen to $75 per digital image.  Over the next 5 to 10 years, Jerrick intends to progressively monetize this extensive library of more than 250,000 items with the most valuable of properties to be sold in the final years.

During the second quarter of 2017, Jerrick plans to release its Vocal 2.0, essentially launching the Company’s core revenue opportunities.  Since November 30, 2016, introduction of the Vocal platform, Jerrick’s resources have been directed towards curating creative content providers and building unique monthly visitors.  Today, the Company is rapidly approaching an important milestone, crossing over 2,000,000 unique monthly visitors. With the launching of Vocal version 2.0, Jerrick is in a strong position to redirect much of its resources to revenue production going forward.  Vocal 2.0 includes an internal, self-serving, native ad server; expedited vertical creation; and accelerated search engine optimization. The Company believes these capabilities will significantly increase revenue creation beginning in the second half of 2017 as it implements support for several additional revenue streams including affiliate advertising, branded content (in-house produced videos and articles), tipping, data mining, film development and e-commerce.

The Company incurred a loss from operations of $(1,000,000) for the three months ended March 31, 2017 versus a loss from operations of $(619,000) in the same period of the prior year and a loss from operations of $(1,100,000) in the fourth quarter 2016. The Company reported a net loss of $(1,600,000) ($0.04 per basic share) for the three months ended March 31, 2017. This compares to the previous year’s first quarter net loss of $(652,000) ($0.02 per basic share) and $(304,000) for the fourth quarter 2016.  The increase in net loss from operations is primarily attributable to the decrease in revenue and the increase in operating expenses associated with the development of its Vocal platform.

Jerrick’s gross profit on revenue totaled approximately $42,000 in the first quarter of 2017, yielding a 100% gross margin as it had in the prior fourth quarter 2016.  This compares to a gross margin of 72% in the prior year first quarter.    The Company anticipates gross margin in excess of 70% as revenue from its core media platform progresses.

Operating expenses for the three months ended March 31, 2017 totaled $1.1 million, an increase of approximately $365,000 (52%) over the prior year first quarter due primarily to approximately $174,000 increase in general and administrative expenses related to the development and launch of its Vocal platform, a $22,000 increase in employee compensation as Jerrick increased its staff by 3, a $31,000 increase in consulting fees predominately related to Vocal 2.0 research and development efforts, and a $139,000 increase in stock-based compensation related to the accretion of vesting terms for employee and director stock and option grants.  As Jerrick includes additional functionalities to further automate the Vocal platform, it plans to gradually install infrastructure, including personnel, that will support significant scalability. Accordingly, the Company anticipates research and development costs in the second quarter to roughly equal first quarter expenses of approximately $200,000, which is approximately twice the quarterly expense levels expected for the remainder of the year.

The Company incurred other expenses of $530,000 in the first quarter 2017 compared to $33,000 in the first quarter 2016. The increase in other expenses was due to a $610,000 increase in interest expense resulting from a $331,000 non-cash debt discount and a derivative expense of $254,000 related to the Company’s $1 million convertible note financing, and a $110,000 loss on settlement of debt, partially offset by a change in fair value of derivative liabilities of $224,000.  Excluding debt discount and derivative expense items related to financing, interest expense was $57,000 in the first quarter 2017 compared to $33,000 in the first quarter 2016.

At March 31, 2017, the Company reported cash and cash equivalents of $54,000 and total assets of $238,000, which assesses no value for the Guccione library discussed earlier.  At March 31, 2017, the Company had current liabilities of $4.7 million of which, $1,300,000 accounts for a non-cash derivative liability.  Jerrick’s short term debt totals approximately $2,400,000 compared to year-end 2016 short term debt of $2,100,000 million.  The Company holds no long-term debt. Subsequent to year-end 2016, the Company raised approximately $150,000 through the sale of additional promissory notes.

On March 31, 2017, Jerrick had approximately 37.7 million shares of Common Stock outstanding, an increase of approximately 3.8 million shares during the quarter due to primarily to satisfy vendor payments totaling $354,000 and placement agent services.  On a fully diluted basis, Jerrick had convertible preferred stock, stock options, warrants, and additional Common Stock reserved for issuance that would result in the issuance of an additional 55.4 million, shares of Common Stock, generating approximately $5,200,000 in additional capital for the Company.  As of March 31, 2017, the Company had federal and state tax loss carry forwards of approximately $7,200,000 million, which expire through the fiscal year ending December 31, 2035.

About Jerrick

Jerrick is a digital media content publishing house.  Core to Jerrick’s unique capabilities is Vocal, a proprietary technology and content distribution platform, programmed to deliver a robust long-form, digital publishing platform organized into highly engaged niche-communities capable of hosting all forms of rich media content.  Vocal maximizes scalability, speed, simplicity, and adaptability to create an unparalleled user experience – algorithmically designed to bridge media-rich long-form creative content with effective monetization.  Each niche-community site is overseen by a dedicated team and culture, whose primary focus is on revenue conversion of all published material via digital arbitrage. All content is meant to challenge, inspire, and enlighten. For more information please visit https://jerrick.media.

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