MBAYD Mediabay (MM)

CEDAR KNOLLS, N.J., Nov. 14 /PRNewswire-FirstCall/ -- MediaBay, Inc. (NASDAQ:MBAYDNASDAQ:theNASDAQ:symbolNASDAQ:willNASDAQ:changeNASDAQ:backNASDAQ:toNASDAQ:MBAYNASDAQ:onNASDAQ:orNASDAQ:aboutNASDAQ:NovemberNASDAQ:22NASDAQ: 2005.), a digital media and publishing company specializing in the marketing of spoken audio entertainment, today announced financial results for the three and nine months ended September 30, 2005. The company reported sales of $1.4 million for the three months ended September 30, 2005, a decrease of 64% from $3.8 million for the three months ended September 30, 2004. Net loss applicable to common shares for the three months ended September 30, 2005 was $2.2 million, or $ 0.25 per fully diluted share compared to a loss of $ 3.8 million, or $ 1.23 per fully diluted share for the three months ended September 30, 2004. Sales for the nine months ended September 30, 2005 were $ 7.0 million, a decrease of 51.1% from $14.3 million for the nine months ended September 30, 2004. Net loss applicable to common shares for the nine months ended September 30, 2005 was $24.4 million or $3.82 per fully diluted share compared to a loss of $12.1 million or $4.40 per fully diluted common share for the nine months ended September 30, 2004. The loss for the nine months ended September 30, 2005 includes a one-time non-cash deemed dividend in the amount of $17.4 million or $2.72 per fully diluted common share to reflect the value of the beneficial conversion feature of convertible preferred stock issued in March 2005 as well as $1.0 million or $0.16 per fully diluted common share to reflect strategic charges and termination costs related to the Company's continued transition to digital distribution. The Company effected a one for six reverse stock split effective October 25, 2005. All references in this release to per share amounts have been restated to reflect the effect of the stock split for all periods presented. "In October we launched our new digital download business with our first major offering, Soundsgood.com. We have begun a national promotion as the exclusive bookseller of the Imus in the Morning program, which airs on approximately 90 radio stations and MSNBC Television across the United States" said Jeff Dittus CEO of MediaBay. "This national radio and television promotion, the beginning of a significant on-line advertising campaign across the major search engines and our other marketing initiatives to convert our 2.9 million customer file to download customers have begun to build traffic on Soundsgood." More significantly, we are on the eve of our launch with MSN music and another large digital retailer with a co-branded audio store offering which we believe will drive significant traffic so we can capture market share. According to the Audio Publishers Association, the billion dollar Audiobook market is the fastest growing segment of the publishing industry, and according to our estimates, only 4% of this industry is through digital distribution. We believe our industry is in its infancy and digital distribution will take a much larger percentage of the retail market in the coming years. The technology that powers the Soundsgood.com download store and subscription service is also the back bone of our private label offering that will run these and other co-branded storefronts. After a significant planning, development and digitization process, we now have a state of the art audiobook download service and a growing backlog of interested partners. These include many of the large windows media retailers of music as well as cell phone carriers that want to offer our spoken word content to their communities." Significant Events Year-to-date, the Company has signed new agreements with forty-six content providers. Most recently we announced new deals with John Wiley to produce a collection of audio cliff notes and the Hindustan Times to produce a global audio newspaper. November 10, 2005 - The Company announced it received a letter from NASDAQ that it is eligible for continued listing based on its compliance with bid price rules. October 24 - The Company announced an agreement with Mobile Streams, a global mobile music and media specialist to deliver its content through Mobile Stream's ringtone distribution channels, including the company's established Website Ringtones.com and carrier partners including Alltel and Nextel. October 17, 2005 - The Company announced it will incorporate its audiobook service into The Imus in the Morning program (flagship station-WFAN-AM) beginning in late October. The award-winning radio host, whose show is broadcast on more than 90 radio stations across the country and simulcast on MSNBC television five days a week, will drive listeners to MediaBay's newly launched Soundgoods.com website where they can purchase audiobook titles. October 5, 2005 - The Company announced it launched SoundsGood.com, a premier audio download and traditional media service providing consumers with an easy way to access thousands of best selling audiobooks, classic radio shows, theater performances and a growing collection of audio newspapers, magazines, lectures, self help and wellness courses, modern day radio shows and other spoken word entertainment. September 29 - The Company announced an agreement for OverDrive to provide digital fulfillment services to MediaBay. Under the terms of the agreement they will cooperate to forge a stronger footing for Microsoft's digital right management (DRM) solution in both the retail and library markets for downloadable audio books. August 16, 2005 - The Company announced it has relaunched its Audio Book Club as a one-of -a-kind digital shopping hub that offers its more than 2.5 million audio book buyers a vast selection of audio book content through either digital downloads or via online catalog orders. July 28, 2005 - The Company announced it signed an agreement with Brilliance Audio, the nation's largest independent audiobook publisher, to offer downloadable audiobook editions of its extensive library of fiction and nonfiction bestsellers. July 7, 2005 - The Company reached an agreement with Time Warner Audio to offer downloadable audiobook editions of titles from the extensive Warner and Little Brown libraries. About MediaBay, Inc. MediaBay Inc. (NASDAQ:MBAYD) is a leading digital media and publishing company specializing in spoken word and premium audio entertainment. The company maintains a library consisting of over 75,000 hours of content, including audio books from best-selling authors and the history of American Radio. Some of MediaBay's digital content partners include BBC, Blackstone, Brilliance Audio, CBS Radio, Harper Collins, Hay House, Oasis, Penguin Audio, Random House, Simon & Schuster, Sound Room, Time Warner Audio and Zondervan. In addition to its popular Audio Book Club, MediaBay distributes its content through proprietary web sites including audiobookclub.com, radiospirits.com and SoundsGood.com as well as through partner channels including Loudeye, MSN Music, Sirius Satellite Radio and XM Satellite Radio. For more information on MediaBay, please visit http://www.soundsgood.com/, http://www.mediabay.com/, http://www.audiobookclub.com/, http://www.radiospirits.com/ and http://www.radioclassics.com/. Certain statements in this press release constitute "forward-looking" statements that involve a number of known and unknown risks, uncertainties and other factors which may cause MediaBay's actual results, performance or achievements to be materially different from any results, performances or achievements express or implied by such forward-looking statements. All statements other than statements of historical facts included in this press release including, without limitation, statements regarding our future financial position, business strategy, budgets, projected costs and plans and objectives of our management for future operations are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "estimate," "anticipate," "believe," or "continue" or the negative thereof or variations thereon or similar terminology. Important factors that could cause actual results to differ materially from our expectations, include, without limitation, our history of losses; the success of our new digital media distribution strategy, our ability to anticipate and respond to changing customer preferences, license and produce desirable content, protect our databases and other intellectual property from unauthorized access, collect receivables; dependence on third-party providers, suppliers and distribution channels; competition; the costs and success of our marketing strategies; product returns; member attrition and other risks detailed in our Annual Report on Form 10-K for the year ended December 31, 2004. Undue reference should not be placed on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update any forward-looking statements. MEDIABAY INC. Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) September 30, December 31, 2005 2004 Assets Current Assets: Cash and cash equivalents $10,362 $ 3,122 Accounts receivable, net of allowances for sales returns and doubtful accounts of $1,638 and $2,708 at September 30, 2005 and December 31, 2004, respectively 696 1,285 Inventory 937 1,530 Prepaid expenses and other current assets 268 199 Royalty advances 382 489 Total current assets 12,646 6,625 Fixed assets, net 1,398 243 Other intangibles 44 50 Goodwill 9,658 9,658 $23,745 $16,576 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 4,334 $5,361 Accounts payable, related party -- 315 Short-term debt, net of original issue discount of $53 at September 30, 2005 and $54 December 31, 2004, respectively 31 29 Preferred dividends payable 319 -- Current portion of long-term debt -- 200 Total current liabilities 4,684 5,905 Long-term debt, net of original issue discount of $126 and $908 at September 30, 2005 and December 31, 2004 615 9,102 Related party long-term debt including accrued interest -- 7,750 Total liabilities 5,299 22,757 Commitments and Contingencies -- -- Preferred stock, no par value, authorized 5,000,000 shares; no shares of Series A outstanding at September 30, 2005 and 25,000 shares of Series A outstanding at December 31, 2004; 200 shares of Series B issued and outstanding at September 30, 2005 and December 31, 2004; no shares of Series C issued and outstanding at September 30, 2005 and 43,527 shares of Series C issued and outstanding at December 31, 2004; and 21,063 shares of Series D issued and outstanding at September 30, 2005 and no shares of Series D issued and outstanding at December 31, 2004 11,502 6,873 Common stock, no par value, authorized 300,000,000, issued and outstanding 10,439,284 as of September 30, 2005; and authorized 150,000,000 shares, issued and outstanding 4,140,663 at December 31, 2004 121,432 101,966 Contributed capital 42,638 17,682 Accumulated deficit (157,126) (132,702) Total stockholders' equity (deficit) 18,446 (6,181) $23,745 $16,576 MEDIABAY INC. Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) (Unaudited) Three months ended Nine months ended September 30, September 30, 2005 2004 2005 2004 Sales, net of returns, discounts and allowances of $124 and $983 and $1,554 and $4,286 for the three and nine months ended September 30, 2005 and 2004, respectively $1,387 $3,849 $7,012 $14,334 Cost of sales 1,002 1,875 4,101 6,672 Cost of sales -- strategic charges -- 2,100 305 2,100 Gross profit 385 (126) 2,606 5,562 Expenses: Advertising and promotion 478 1,131 1,265 3,758 General and administrative 1,708 1,559 5,295 5,301 Termination charges -- -- 697 -- Depreciation and amortization 15 28 58 116 Operating loss (1,816) (2,844) (4,709) (3,343) Interest income 92 -- 167 -- Interest expense 126 741 752 6,808 Loss on early extinguishment of debt -- -- 579 1,532 Loss before income taxes (1,850) (3,585) (5,873) (11,691) Income tax expense -- -- -- -- Net loss (1,850) (3,585) (5,873) (11,691) Dividends on preferred stock 390 199 1,127 378 Deemed dividend on beneficial conversion of Series D Preferred Stock -- -- 17,423 -- Net loss applicable to common shares $(2,240) $(3,784) $(24,423) $(12,061) Basic and diluted loss applicable to common shares per common share: $ (0.25) $(1.23) $(3.82) $(4.40) MEDIABAY, INC. Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) Nine months ended September 30, 2005 2004 Cash flows used in operating activities: Net loss applicable to common shares $(24,423) $ (12,061) Adjustments to reconcile net loss to net cash provided by operating activities: Deemed dividend on beneficial conversion of Series D Preferred Stock 17,423 -- Loss on extinguishment of debt 579 1,532 Non-current accrued interest and dividends payable 306 1,090 Amortization of deferred financing costs and original issue discount 225 1,060 Depreciation and amortization 58 116 Cost of sales -- strategic charges 305 2,100 Payment of accrued dividends through issuance of common stock 85 -- Amortization of deferred member acquisition costs 16 2,203 Non-cash beneficial conversion charge included in interest expense -- 3,991 Expense of inducement to convert -- 391 Non-cash stock compensation -- 82 Changes in asset and liability accounts, net of strategic charges: Decrease in accounts receivable, net 811 1,977 Increase in inventory 593 62 Increase in prepaid expenses (121) (40) Decrease (increase) in royalty advances 108 (790) Increase in deferred member acquisition costs -- (339) Decrease in accounts payable, accrued expenses and preferred dividends payable (1,515) (5,656) Net cash used in operating activities (5,550) (4,282) Cash flows used in investing activities: Acquisition of fixed assets, including website development costs (1,207) (77) Acquisition of intanglible assets -- (20) Net cash used in investing activities (1,207) (97) Cash flows from financing activities: Net proceeds from issuance of preferred stock 31,488 -- Proceeds from issuance of long-term debt -- 13,500 Proceeds from exercise of stock options 40 1 Payment of long-term debt (11,742) (5,988) Redemption of Series A and Series C Preferred Stock (5,789) -- Increase in deferred financing costs -- (2,071) Net cash provided by financing activities 13,997 5,442 Net increase in cash and cash equivalents 7,240 1,063 Cash and cash equivalents at beginning of period 3,122 683 Cash and cash equivalents at end of period $10,362 $1,746 DATASOURCE: MediaBay, Inc. CONTACT: Michael Hope, mPRm Public Relations, +1-323-933-3399, ; Tim Clemensen, Rubenstein Investor Relations, +1-212-843-9337, , both for MediaBay, Inc. Web site: http://www.mediabay.com/ http://www.soundsgood.com/ http://www.audiobookclub.com/ http://www.radiospirits.com/ http://www.radioclassics.com/

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