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VIDA > SEC Filings for VIDA > Form 10-Q on 20-Nov-2012All Recent SEC Filings

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Form 10-Q for VIDAROO CORP


Quarterly Report


Vidaroo is a full service provider of a proprietary digital media network and related online digital strategies for leading media and entertainment companies. Vidaroo engages audiences on digital platforms through provision of media content either directly or through collaboration with channel partners. Through a combination of original and acquired programming and other entertainment content, Vidaroo is focused on providing content that appeals to key demographics attractive to advertisers and distributors or radio, printed news, cable television, satellite, mobile and digital media platforms, and consumer products.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. References in this section to "Vidaroo Corporation," "Vidaroo," the "Entity," "we," "us," and "our" refer to Vidaroo Corporation and our direct and indirect subsidiaries on a consolidated basis unless the context indicates otherwise.

This quarterly report contains forward looking statements relating to our Entity's future economic performance, plans and objectives of management for future operations, projections of revenue mix and other financial items that are based on the beliefs of, as well as assumptions made by and information currently known to, our management. The words "expects," "intends," "believes," "anticipates," "may," "could," "should" and similar expressions and variations thereof are intended to identify forward-looking statements. The cautionary statements set forth in this section are intended to emphasize that actual results may differ materially from those contained in any forward looking statement.

The following discussion and analysis should be read in conjunction with the consolidated financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.


You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.


SEPTEMBER 30, 2011. Our fiscal year runs from July 1 to June 30.


Revenue decreased $59,419 to $248,871 in the quarter ended September 30, 2012 as compared to 2011. While there is an overall decrease in Revenue, SaaS revenue increased from $119,000 to $127,000. While the increase in revenue is 7%, we have seen a shift in the number of clients served with a 60% growth in the number of on-demand accounts on a year over year basis. The year over year revenue decrease was predominantly driven by slower demand for our Production services. The episodic nature of these of these services caused lower revenue with a smaller number of engagements than in the prior year.

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Cost of Sales

During the quarter the Entity incurred cost of sales in conjunction with the direct provision of services to our clients. These expenses consist of bandwidth to deliver licensing of the online video platform, sales commissions, and production personnel as well as equipment to facilitate the provision of our production services. Cost of sales increased by $42,119 to $84,076 in the quarter ended September 30, 2012 as compared to 2011. The increase was due predominantly to a higher cost structure required for the current year production services, which included additional professional services of $22,000 and incentive compensation of $16,000 which was not incurred in the prior year.

Operating Margin

The operating margin generated by the services and technologies provided during the quarter ended September 30, 2012 decreased by $101,538 to $164,795 in comparison to the quarter ended September 30, 2011. The operating margin on the services and technologies produced an Operating Margin of 66% in comparison to 86% in the prior year. The decrease in Margin was predominantly driven by the increased cost related to production services as the Software licensing service remained stable.

Selling General and Administrative

Selling General and Administrative costs generally consist of salaries, professional fees, office expenses and other administrative costs. These costs decreased by $18,405 to $300,308 for the quarter ended September 30, 2012 as compared to 2011. This decrease relates primarily to reduced professional fees from the prior year, specifically related to legal fees in the prior year as well as lower occupancy costs as we completed our move to a lower cost facility in the prior year. These decreases were offset somewhat by additional advertising expense associated with the promotion of our OVP.

Stock based Compensation

Stock based compensation decreased by $20,722 to $5,079. The expense associated with stock based compensation in the prior year quarter had higher amounts of vesting related to awards for recruitment of certain officers whereas the current year quarter relates to ongoing recognition of vesting at a lower level. This was due to the renegotiation of Executive Officer contracts in the fourth quarter of the year ended June 30, 2012.

Loss from Operations

Loss from Operations increased by $59,310 to $143,887. The increase in the loss was driven by the lower Operating Margin, offset somewhat by the decreased Operating Expenses.

Interest expense

Interest expense decreased by $42,381 to $15,509. The decrease is due to the conversion of a significant portion of the outstanding indebtedness into Equity during the fourth quarter of the year ended June 30, 2012.

Nonoperating Gains

The realized gain on troubled debt restructuring did not exist in the prior year as the debt was converted into Equity on the fourth quarter of the year ended June 30, 2012 with continuation of a portion of the settlement into the three months ended September 30, 2012.

Unrealized gain on adjustment to the fair market value of financial instruments decreased by $519,265 to $25,312. The decrease relates to the nature of the troubled debt restructuring. While ongoing negotiations caused the larger gain on the prior year, the significant reduction in the outstanding balance of our debt during the year ended June 30, 2012 caused the current year adjustment to be much lower.

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Liquidity and Capital Resources

The Entity had net working capital of $(738,382) at September 30, 2012, a degradation of $143,979 compared to June 30, 2012. The degradation is due to the Operating losses sustain during the three months ended September 30, 2012

The Entity has incurred operating losses since its inception. The Entity's auditor has emphasized uncertainty regarding our ability to continue as a going concern in his audit report for the year ended June 30, 2012. As shown in the accompanying financial statements, the Entity has an accumulated deficit of $8,311,164 as of September 30, 2012.

Other components of the Entity's working capital and changes therein are discussed as follows:

Cash and Cash Equivalents. For the three month period ended September 30, 2012, cash and cash equivalents decreased to $52,344 from $67,911 at June 30, 2012.

Cash Flows from Operating Activities. Net cash used by operating activities was $15,086 for the three months ended September 30, 2012, a decrease of $16,899 over the first quarter of the prior year. The change in cash flows from operating activities is primarily attributable to the use of working capital assets and liabilities to support our Operating Losses.

Cash Flows from Financing Activities. Net cash used by financing activities was $481 for the three months ended September 30, 2012, and consisted solely of the repayment of a small amount of our outstanding debt.

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