Intertainment Media Inc (fka ITMTF)

[AAAIRMAX]

Intertainment Media Inc. President’s Message – Q3 Results
May 31, 2011
Corporate Updates



President’s Message – Q3

The quarter ended March 31, 2011 was a good quarter for Intertainment Media Inc. In previous quarters we had discussed the emergence from development to commercialization, but in this quarter we had the resources to fully enable our programs to impact growth. The focus for the quarter was investing in our program platforms to create user engagement for future financial benefit and as such we intensified our efforts to deliver shareholder value through the continued monetization of our growing user base.

This quarter began with a private placement that was required to provide capital for the Company to allow for a full implementation of the commercialization of Ortsbo, itiBiti and Ad Taffy.

Management and its Board held a continued and unwavering belief in the platforms and programs even in light of the Canadian investment marketplace’s pension for slower adoption of social media initiatives compared to the US where the value and power of social media is realized at a much quicker pace. As such, the financing prospects in early and mid-January were limited and, as CEO, I believed that it was my duty to show my certainty in the Company and its direction by leading orders for the first round of the private placement. We closed the first tranche of our CDN $3,000,000 private placement in mid-January.

The first round closing of the private placement allowed us to continue to support those early positive results that were being realized by the Ortsbo performance. In late January, the Globe and Mail published an article in which Intertainment Media was selected by a leading hedge fund manager as one of the top technology picks for 2011. The same day, we released our current numbers for Ortsbo comparing growth between Facebook and Ortsbo and that Ortsbo was outpacing Facebook’s early years’ growth. This combined with the Globe and Mail article gave us a high level of visibility to the investment community and by the end of January, our second tranche of our $3 MM financing was oversubscribed.

This private placement allowed the Company to settle outstanding accounts payable, accrued interest, and other items that had been delayed due to the working capital deficit. With continued positive market momentum on the Ortsbo results, the company realized an additional injection of capital through the execution of outstanding options and warrants from previous capital raises.

Our objective was very simple – growth! As with all social media platforms whether it’s Facebook, Twitter, YouTube, LinkedIn or others, the first step is to build critical mass and to do that, you need to invest to drive consumers to your site, increase branding activities and overall marketing to increase share of voice. This is an expensive endeavour, but when done correctly, it can result in key organic and viral growth. This growth and investment in building a solid user base has been tantamount in our success in attracting top tier advertisers, agencies and brands Agencies, networks and advertisers who have been testing the system and we have seen positive results and new business opportunities arise. While the initial quarterly financial results are not significant, the ability to provide a proven stable environment for advertisers showcases the value that Ortsbo and itiBiti offer as communication distribution mechanisms and will result in greater economic performance for these divisions.

It is important to note that most major social media programs have taken years to achieve the current levels of our programs. Facebook is almost 7 years old, Twitter almost 5 years old while Ortsbo, by the end of this quarter, was only 8 months old. Ortsbo has accelerated swiftly having passed our first year estimates and second year estimates very quickly. This accelerated success did not go without challenges; the pace of growth did put a strain on our technology, support and development cycles. As such, investment was required to bolster the development and technology environment and allow us to stay in step with the growth.

As we analysed the market for language on the Internet, we found that the majority of users on the Internet did not speak English. This provided an opportunity and a challenge, as the growth opportunities were exceptional globally, but the revenue opportunities would need to be cultivated as international advertising is much more difficult to engage than North American advertising alone. These areas would also need significant investment to manage and grow.

At the same time as we were growing Ortsbo, itiBiti was preparing to launch our own “house brand” KNCTR (pronounced “connector”) and Ad Taffy was beginning to commercialize and agency feedback required additional capital investment in the platform.

Throughout the quarter, Intertainment had received the capital to begin to fully execute on its mandate of growing the business without the pressures of raising capital. With the need to move quickly and effectively we undertook a series of initiatives to accelerate the pace of our divisional growth including bringing in the right people internally and exploring outside consultants to build brand and user value. We are working to turn years of marketing, brand and market acceptance into months, and we believe the initial results were worth the efforts and investment.

This quarter also saw a dramatic turnaround in our balance sheet, as we made significant strides in reducing debt and liabilities while increasing assets. Our Current Ratio since year end (June 30, 2010) has improved from 0.2:1 to 1.85:1, showing a healthy increase in assets and lessening of liabilities. This also required investment, as we had spent the past few years without the required working capital to move the programs forward.

By virtue of the investments we’ve made into our marketing, technology and development, we have seen significant increases in user traction in our programs, brand recognition, advertising testing and continued interest by the investment community, all leading to the key mandate of the management team which is to build shareholder value.

While some may comment that this was an extraordinarily expensive quarter, we will know that it was a time of great beginnings, allowing us to create a stronger balance sheet, accelerate growth, increase branding and program usage and increase overall shareholder value. We believe that this process of corporate stabilization with increased working capital and high growth will allow us to move forward with new investment, merger and acquisition opportunities, create new and long-term revenue opportunities and bring Intertainment Media to the world stage through the delivery of innovative and exciting products and services.