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    Stock Alert for Atrinsic Inc. (ATRN)

    Atrinsic Inc. (ATRN) is a marketer of direct-to-consumer subscription products, including Kazaa, and an Internet search-marketing agency. Kazaa is a subscription-based digital music service that gives users unlimited access to millions of CD-quality tracks. Unlike other music services that charge you every time a song is downloaded, Kazaa allows users to listen to and explore as much music as they want for one monthly fee, without having to pay for every track or album. Royalties are paid to the rights’ holders for licenses to the music utilized by this digital service. ATRN and Brilliant Digital Entertainment Inc. jointly offer the Kazaa digital music service pursuant to a marketing services agreement and a master services agreement between the two companies.

    Share Statistics (20-Sept-11)   FY












    Symbol ATRN Revenue, $Mn 69.09 40.03 -42.1% 10.81 6.27 -42.0%
    Current price $3.14 Gross marg. 37.3% 43.7% 17.2% 44.4% 53.0% 19.4%
    52wk Range: $1.16-$7.68 Oper. margin -55.7% -80.1%
    Avg Vol (3m): 258,823 Net margin -42.7% -49.3% -15.5% -41.5% -98.1% 136.4%
    Market Cap. 19.87M              
    Shares Outstanding 6.33M EPS, $ -3.53 -3.04 -15.9% -0.86 -0.97 12.8%

    Source:, SEC Filings.

    Investment Highlights

    Shares of ATRN have gained 35.7% in the last five days; 15.2% in the last month; and 132.9% year to date.

    New York-based digital media solutions provider Atrinsic yesterday announced that its Kazaa mobile music application is now available for download through Apple’s App Store, sending its stock price jumping nearly 40% to close at $3.14. Approximately 1.7 million shares traded hands during the session, versus the 10-day average volume of just 30.84K.

    According to the Company, the streaming music application for its subscription-based digital music service would be available for free download on Apple’s iPhone and iPad products.

    “Our goal is to allow our subscribers to access whatever music they want, whenever and wherever they want it in the easiest way possible with the highest quality service, ATRN president and CEO Stuart Goldfarb commented in the press release.  “The launch of our app today makes it even simpler for our users with Apple devices to do this. This marks another important step forward in Kazaa’s product development.”

    ATRN also intends to make Kazaa mobile available on more and more devices in the future.


    Financial Summary

    ATRN reported revenues of $6.3 million for the second quarter of 2011, down 42% compared to $10.8 million reported for the second quarter of 2010.  Its Subscription revenue, which is dominated by revenue generated from its core Kazaa digital music subscription service, decreased by $1.5 million, or 29%, to $3.5 million for the second quarter 2011, compared to $5.0 million for the second quarter 2010, which is attributable to a reduction in total subscribers compared to the year-ago period, with most of the decrease coming from its legacy products, reflecting its primary focus on Kazaa and the reduction or de-emphasis of its non-core legacy subscription products. Additionally, Transactional Services revenue decreased by $3.0 million, or 53%, to $2.8 million for the second quarter 2011, compared to $5.8 million for the second quarter 2010. This decrease was due to lower sales volume from existing clients. The Transactional Services sales decline, on a year-over-year basis, was also due to the Company’s proactive elimination of unprofitable revenue lines and elimination of certain lead generation activities during 2010 – which has had the effect of reducing Transaction revenue, but has also resulted in an improvement in gross margins for this segment.

    Operating expenses for the second quarter of 2011 were $11.3 million, compared with $15.3 million for the second quarter of 2010, a decrease of $4.0 million. The decrease is primarily attributable to a decrease in cost of third party media expense, which in turn was mostly due to lower Transactional Services revenue. Transactional Services Cost of Media moves proportionately to Transactional Services revenue. As a result of the Company’s efforts to continue to streamline and eliminate certain activities, it also achieved a 21% reduction in general, administrative and other operating expense compared to the year ago period, which contributed to the decrease in overall operating expenses in the second quarter of 2011.

    Adjusted EBITDA for the second quarter of 2011 was a loss of ($4.8) million compared with a loss of ($3.9) million for the second quarter of 2010.

    Net loss for the second quarter of 2011 was ($6.2) million, or ($0.97) loss per basic and diluted share, compared with net loss of ($4.5) million for the second quarter of 2010, or ($0.86) loss per basic and diluted share.

    As of June 30, 2011, ATRN had $2.3 million of cash and cash equivalents, compared to $6.3 million as of December 31, 2010, a decrease of $4.0 million.

    For the six months ended June 30, 2011, the Company experienced a net loss of $9.7 million, which was offset by non cash interest expense of $1.2 million and non cash depreciation, amortization and stock compensation expense of $0.7 million. Year to date, the Company spent $0.7 million on capitalized application and software development for Kazaa and Atrinsic Interactive. This is in addition to approximately $2.2 million of Kazaa product development expenditure incurred since the beginning of the year. In May, ATRN issued $5.8 million of 12-month original issue discount convertible notes, along with warrants, at conversion or strike prices between $2.90 and $2.97, subject to adjustment under certain conditions. This offering generated proceeds before financing costs and adjustments, of $5.3 million.


    Financial Strength (20-Sept-2011)




    S&P 500

    Quick Ratio (MRQ) 2.18 2.08 0.77
    Current Ratio (MRQ) 0.56 2.83 2.67 1.13
    LT Debt to Equity (MRQ) 10.72 12.29 110.33
    Total Debt to Equity (MRQ) 17.22 20.74 148.04
    Interest Coverage (TTM) 0.87 1.00 23.39

    Swece:, SEC Filings.

    Analyst Consensus

    No consensus analysis data available.

    Technical Analysis


    Comparative Analysis

    Company Name Ticker Price per Mrkt. Cap. P/E P/S
    Sept20-2011 symbol Share, $ $ Mn 2011 2012 2011 2012
    Marchex Inc. MCHX 9.84 329.86M 32.80 28.11 2.23 1.87
    AOL Inc. AOL 14.05 1.50B 200.71 46.83 0.69 0.72
    Vertro Inc. VTRO 1.87 13.29M n/a 11.00 0.40 0.39
    ValueClick Inc. VCLK 16.84 1.33B 18.30 14.90 2.36 1.83
    Internet Information Providers Median       16.80 n/a 1.58 n/a
    Atrinsic Inc. ATRN 3.20 20.25M n/a n/a n/a n/a

    Source: Thomson Financial

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