M-Brain Oy Semi-Annual Report - Financial Arrangements Enable the Growth Strategy Implementation

M-Brain Oy, Semi-Annual Report 5.9.2014 02:00 pm

SEMI-ANNUAL REPORT January 1 - June 30, 2014 (unaudited)

"FINANCIAL ARRANGEMENTS ENABLE THE GROWTH STRATEGY IMPLEMENTATION; THE
TRANSITION IN THE FINNISH OPERATIONS CONTINUED"

M-Brain Oy, Semi-annual Report 1-6 2014

January - June 2014:

    -  Revenue EUR 9,502 (January 1 - June 30, 2013: 9,928) thousand - decrease
    of 4.3% from the corresponding period in 2013
    -  EBITDA EUR 895 (January 1 - June 30, 2013: 1,278) thousand - decrease of
    30% from the corresponding period in 2013
    -  Balance sheet total as of June 30, 2014 EUR 32,901 (as of June
    30, 2013: 16,963) thousand



EXECUTIVE CHAIRMAN KIM NYBERG'S COMMENTS

M-Brain is a European based information services company with offices in seven
countries. Our services are based on a unique combination of our own proprietary
big data technology and human intelligence. We offer media and business
intelligence solutions, analytics and consultation services, as well as online
intelligence tools and technology to bring true insight into our clients'
business environment. Our solutions and services are tailored to serve varying
business needs regardless of function, industry type or language barriers.

M-Brain's industry is undergoing a drastic renewal phase driven by the rapid
increase in especially social media related information and the overall
globalization. As the globalization of companies continues its growth, the
provider of information solutions has to be able to respond to the challenges
brought about by these two developments. In future, success oriented companies
operating in M-Brain's field of business will have to be able to act fast and
provide their clients with such relevant information for their business
operations that can be converted into knowledge and thereby growth.

The pressures on M-Brain's revenue have mainly been due to the challenging
economic situation in Finland and the impact of the media revolution on the
traditional media monitoring services. A total of 60% of the decline in revenue
in Finland is due to the gradual decrease in the traditional clipping business.
Forty

percent of the decline is due to a decrease in the average purchases within
certain client groups in the transfer from the purchase of services to the use
of tools.

In the second quarter, M-Brain started adjustment and efficiency enhancement
measures in services production. Their annual effect will show gradually in H2,
during which the cost effect is estimated at about EUR 300 thousand.

During the review period, M-Brain significantly strengthened its financial
position: the balance sheet total doubled from the corresponding period in 2013
and was EUR 32,901 thousand (as of June 30, 2013: 16,962) thousand at the end of
the review period. A bond of EUR 15 million issued by the Company was listed on
First North Bond Market Finland. As part of the financial arrangements, the
Company successfully implemented a share issue in which a total of 2,622 new
shares were subscribed for. The Company stated that it would use the funds
acquired in the bond issue for new company acquisitions.

The H1 cash flow was weakened by the non-recurring costs of about EUR 400
thousand related to the financial arrangements and by the reorganization costs
abroad amounting to about EUR 100 thousand.

REVENUE AND RESULT DEVELOPMENT

In the first half-year period 2014, M-Brain's revenue amounted to EUR 9,502
(January 1 - June 30, 2013: 9,929) thousand, a decrease of 4.3% from the prior
year 2013. The main reason for the decrease in revenue was the decline in the
traditional business caused by the media revolution in Finland as well as the
decrease in the average purchase price paid by the client due to the general
economic situation in the domestic market. The sales of the new technology
products that the company had launched did not fully cover the lost revenue
caused by the decline in the traditional clipping business. In the review
period, revenue of the Group's international units stayed at the previous year's
level.

The investments made in the coverage of the source material and social media and
the adoption of new subcontracting models increased M-Brain's subcontracting
costs in the review period. The cost of outsourced and subcontracted services
amounted to EUR 911 (January 1 - June 30, 2013: 772) thousand.

During the review period, M-Brain's operational efficiency was improved and the
number of personnel was adjusted to the changes in the services offering and the
market situation. In the review period, the personnel expenses of the Company
amounted to EUR 5,936 (January 1 - June 30, 2013: 6,068) thousand. The average
number of personnel was 298 (January 1 - June 30, 2013: 305).

EBITDA was EUR 895 (January 1 - June 30, 2013: 1,278) thousand, i.e. 9.4% of the
net sales (12.9%). The decline in EBITDA is mainly due to the faster than
expected impact of the media revolution on the Company's print media based
business operations. Depreciation/amortization in the review period was at the
2013 level, and the operating profit was EUR 515 (January 1 - June
30, 2013: 890) thousand.

FINANCING AND INVESTMENTS

On June 25, 2014, M-Brain listed a bond on First North Bond Market Finland. The
15 million unsecured bond is subject to a fixed interest rate of 8 percent and
its due date is June 17, 2017. The Company stated that it would use the funds
for new acquisitions.

M-Brain's investments, EUR 347 thousand, are mainly related to the internal
product development. The intangible assets resulting from the internal
development activities will be recognized in the balance sheet once the expenses
of the development phase can be calculated reliably, once the completion of the
product can be implemented technically, once the Group can use or sell the
product, once the Group can prove how the product will generate likely future
financial benefit, and once the Group has both the intention and the resources
to complete the development work and to sell the product. After initial
recognition, capitalized development costs are measured at cost less accumulated
depreciation/amortization and impairment losses. Depreciation/amortization is
recognized from the date the asset is ready for use.

SHARES

At December 31, 2013, the number of the Company's shares was 20,971 (registered
on March 8, 2013). On June 3, 2014, the shareholders of M-Brain Oy unanimously
decided to authorize the Board of Directors to make a decision on a directed
share issue of a maximum of 2,622 new shares. In the share issue, the shares
were fully subscribed. The new shares were not registered by the end of the
review period.

On June 30, 2014, the Company had a total of nine shareholders.

On June 24, 2014, the Company's shareholders unanimously decided to authorize
the Board of Directors to purchase 100 of M-Brain Oy shares.

PERSONNEL, MANAGEMENT AND ADMINISTRATION

The average number of personnel in the review period was 298 (January 1 -June
30, 2013: 305), including both full-time and part-time employees.

The Annual General Meeting of the Company was held on June 17, 2014. The
following persons were elected by the meeting as members of the Board of
Directors: Kim Nyberg, Robert Ingman, Petri Laine, Tage Lindberg, Pirjo Ståhle
and Marjukka Nyberg. On June 30, 2014, the shareholders of the Company
unanimously elected Matti Rusanen as a member of the Board of Directors. In the
review period, CEO was Tuomo Räsänen.

The Annual General Meeting decided on the adoption of the financial statements
and the discharge of liability to the members of the Board of Directors and the
CEO. The Annual General Meeting decided that the result for the fiscal year
January 1 - December 31, 2013 be recorded in the profit and loss account and
that no dividends be distributed. The Annual General Meeting decided that no
change be made to the fees of the members of the Board of Directors. The fee of
the Board members is EUR 1200 per month. The Annual General Meeting decided to
elect Authorized Public Accountants Deloitte & Touche Oy to continue as the
Company's auditors.

MAJOR RISKS AND UNCERTAINTIES

The operations of the Group expose it to the following financial risks: market
risk (including currency exchange risk and interest rate risk), credit risk and
liquidity risk. The Company's operative management implements risk management in
accordance with the policies approved by the Board of Directors. The management
identifies and assesses financial risks in cooperation with the operative
functions. The aim of the Group's risk management is to minimize possible
harmful effects on the Company's financial performance.

Technological development in the Company's field of business is extremely fast.
In accordance with its strategy, the Company has made significant investments in
its own product development to improve its competitiveness compared with its
competitors.

The core operations of the Company are insured against accidental damages and
interruptions.

The Group's loan financing involves special terms concerning its key figures and
balance sheet structure that the Company is committed to on the basis of an
agreement with the finance provider.

ESSENTIAL EVENTS AFTER THE REVIEW PERIOD

CEO Tuomo Räsänen left his position on July 1, 2014. CTO Kimmo Valtonen was
appointed acting interim CEO.

M-Brain Media Oy, which belongs to the M-Brain Group, is in the process of
merging with M-Brain Insight Oy. The merger is expected to take place on
December 31, 2014.

On July 1, 2014, the Company acquired 100 pieces of its own shares.

By virtue of a purchase agreement signed yesterday, M-Brain has purchased the
entire share capital of Global Intelligence Alliance Group Oy (GIA). The sellers
are funds managed by CapMan Oyj, as well as GIA:s management and other
individual shareholders.

OUTLOOK FOR THE REST OF THE YEAR

As the result of the acquisition of Global Intelligence Alliance Group Ltd
announced by the Company yesterday, the outlook for the rest of 2014 is updated
as follows: The revenue for 2014 is estimated at EUR 24 million and EBITDA at
the level announced previously, i.e. approximately EUR 3.3 million.

In 2013, revenue of Global Intelligence Alliance amounted to EUR 14.2 million
and EBITDA to EUR 0.9 million. The average number of the company's employees was
146.

The company previously estimated the net sales at the level of fiscal year
2013, i.e. EUR 19.8 million and EBITDA at about EUR 3.3 million.

The Company's business involves various risks and uncertainties, and the
statements in this release, other than statements of historical facts, are
forward looking statements. These statements are based on the management's best
judgment and belief in light of the information currently available to it. As
such statements involve risks and uncertainties, the actual results may differ
materially from those we expect at the moment.

FINANCIAL INFORMATION FOR 2014

M-Brain Oy's financial statements for 2014 will be published on Tuesday, March
31, 2015.

M-Brain Oy

Board of Directors

Further Information:

Kim Nyberg, Executive Chairman Email: kim.nyberg@m-brain.com Telephone number
+358-400-430538

Jere Peiponen, CFO
Email: jere.peiponen@m-brain.com Telephone number +358-50-5982248

Certified Adviser Evli Bank Plc / Petteri Nurminen Telephone number
+358-40-5095665


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