Message from the Chairman
April 17, 2002
As we enter Spring of
2002, we can reflect back on 2001, a year
that brought about many changes in our
industry and many changes within our
company. In 2001 we witnessed the
implosion of the capital markets,
especially in the technology sector.
The market downturn and our limited
revenues forced us to cancel plans for
growth, radically downsize our staff and
completely rethink our market strategy. It
caused us to focus on tightening our
financial belt like never before. While
these changes were not necessarily
pleasant, they resulted in a number of
important lessons learned, and what we
believe will end up being important
benefits to our company and shareholders.
To begin with, we are
still here as a company, having come
through an environment where many much
larger, better-funded companies perished.
So far we have been fortunate to have some
very committed investors willing to help
the company address our most pressing
liabilities and financial challenges. As
our recently filed 2001 form 10K
illustrates, we have been able to
successfully negotiate the settlements of
many liabilities into agreements that bank
on our future success and have required
little or no cash outlay. Many of our
trade creditors have been willing to
accept negotiated settlements. As the
result of these combined actions, we have
so far been able to significantly reduce
our total liabilities from where they were
9 months ago. The highlights of this
reduction of liabilities include the
following:
1.
We successfully negotiated the
elimination of a potential liability of
$1,229,000 to our former landlord (unexpired
lease liability). This was accomplished
for a total of $15,000 of common stock and
a note for $50,000 due in 3 years.
2.
We reduced our trade payables by
approx. $785,000 (53%) through negotiated
settlements that cost us approximately
80,000 shares of common stock.
3.
We eliminated a single creditor for
an amount of $629,000 through negotiated
settlement with no cash, securities or
notes required.
4.
We accomplished further debt
reduction of approx. $750,000 through
negotiated settlements with former
executives of the company, by issuing
common stock valued at $19,696 total, plus
new debt of $106,735, due in 3 years.
A complete detail of
our financial statements and liabilities
reduction can be found in our annual 10K
public filing, which we filed with the SEC
on April 15th.
We plan on continuing
these liability reduction efforts in 2002.
In tandem with
improvements on our balance sheet, our
company’s operations have been
streamlined. We still retain the vital
resources required to operate our company,
but we are doing so primarily on an
independent contractor basis. Services
such as legal, accounting, sales and even
engineering support are now utilized on an
as-needed basis, often on a “bid” or
“project” basis. As a result, our base
operating costs have been reduced
substantially.
While Burst has been
reorganizing internally, important
developments have been taking place in our
industry that we believe may have improved
the environment for our potential success.
To begin with, “real-time streaming”
alternatives to Burst technology for
web-based media delivery have so far been
unable to deliver the high-quality
required for widespread consumer
acceptance of media-on-demand
applications.
Despite the multiple millions of
dollars spent by large and small firms
alike to promote the real-time streaming
approach over the past 4 years, the
industry has now begun to consider
“download” and “next-generation”
streaming approaches. This should bode
well for our company, since the
International portfolio of issued and
pending patents built by us over the last
12 years is focused in these important
areas.
In what we believe to
be validation of our original vision of 12
years ago, broadband networks are
beginning to expand all over the world.
Intelligent set-top boxes with on-board
memory, some of which will be capable of
transmitting video and audio programs in
burst mode, are being introduced as a new
breed of network media appliance. We
believe that the ultra-low cost of digital
storage capability combined with broadband
availability is about to make our original
vision economically feasible. So, can
Burst.com finally benefit from these
developments, given our current size and
limited resources? We believe that it is
possible for this to happen. Here’s why:
1.
The potential applications and uses
of our technology are not limited to PC
media delivery applications. We have begun
developing and implementing other
strategies to expand Burst’s technology
to other potential applications including
video-on-demand servers and multimedia
hardware, such as smart-TVs, network
appliances and set-top boxes, multiplying
the potential markets for Burstware®-based
products.
We have implemented a strategy that
focuses on the licensing of our Burstwareâ
software and underlying intellectual
property to companies that manufacture and
deploy complete video and audio-on-demand
systems. We have revised our pricing model to enable these
potential customers to procure Burst
technology on a “per-client” basis,
thus simplifying the revenue accounting
process and providing customers with a way
to incorporate the costs of Burst
technology as a one-time “fixed cost”
that can be amortized over the life of the
client device.
2.
We plan to establish the value of
our patent portfolio through successful
enforcement, and subsequently to seek
licensing revenues from any companies who
seek to utilize our patented technology in
their products or services. We believe
that our intellectual property will be
attractive to any company that wishes to
deliver digital media over electronic
networks at a quality level high enough to
justify charging end users, content
providers or advertisers. As a result, our
business model involves developing
strategies that will enable us to
successfully enforce our intellectual
property and receive what we believe will
be substantial licensing revenues as a
result, although there can be no assurance
that this will be the case.
When we formed this
company 12 years ago, we had a vision of
our technology becoming an independent and
superior alternative for companies all
over the world to deliver digital media
on-demand to businesses and consumers. We
believe that the consumer and business
on-demand markets we originally
anticipated are finally beginning to
emerge and we believe we have the patents
and technology to address those markets.
The year 2001 proved
that unexpected events can surely change
the best-laid plans. While we recognize
that nothing should be taken for granted,
we plan to continue our commitment and
efforts toward realizing value for our
shareholders.
Thank you for your
continued support of and confidence in our
company. We look forward to a year of
continued progress and accomplishments.
Richard Lang
Co-founder, Chairman
& CEO
Burst.com, Inc.
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