“A symptom of a pre-bankruptcy state”: Meduza's audience and revenue fell by a quarter, debts exceeded assets

The Latvian company Medusa Project SIA *, which manages the activities of the eponymous publication, submitted its report for the last year on July 30.

According to these data, media revenue fell by € 0.5 million: from € 2.03 million in 2019 to € 1.57 million in 2020. 

In this situation, representatives of the publication blame external factors. 

“At the end of 2020, the audience decreased by 26%, and the revenue - by 23% compared to the previous year,” comments the general director of the publication Galina Timchenko in the narrative part of the report.

“The drop was due to uncontrolled traffic sources - a drop in search results, first on Yandex.ru, and then on Google.com”. 

• Galina Timchenko

• Reuters

• © Ints Kalnins

Despite the decline in revenue, the publication closed 2020 with a net profit.

It amounted to € 78 thousand against € 61 thousand in 2019.

It is possible that the profit was provided at the price of cost reduction.

The production costs of the company's main product (Meduza itself) turned out to be € 400,000 less than the year before.

Downtrend

The decline in financial indicators has been going on for several years.

At the end of 2019, Medusa Project SIA's revenue fell by a quarter, the tax debt amounted to € 64 thousand, and expenses had to be cut by € 1.69 million, RT wrote.

On July 1, 2021, external auditors commissioned by Medusa Project reviewed the company's financial statements.

Although the year ended with a positive financial result, the findings of the reviewers are disappointing.

Due to the significant difference between debt and receipts, there is a possibility of business discontinuance. 

“As of December 31, 2020, the company's current debt liabilities exceed its current assets by € 1,500,603,” says the auditor's report attached to the report.

"These circumstances, together with other circumstances ... indicate significant uncertainty that could raise serious doubts about the company's ability to continue in the future." 

"Current liabilities" refers to debts that mature within 12 months.

Most of all, Meduza owes "other creditors".

The amount outstanding on this line of the balance sheet was € 2,219 million.

For comparison: in 2019, the amount of debt for the same line was € 2.371 million.Thus, in 2020, the publication paid off only € 152 thousand.

By “other circumstances” mentioned by the auditors, it is meant that the publication is recognized by a foreign agent in Russia.

Meduza cites foreign agent status as the main reason for the churn of advertisers. 

“In April 2021, the Ministry of Justice of the Russian Federation recognized the company as a foreign agent — the media, which led to the flow of advertisers to the Russian Federation,” the documents indicate.

"The company has a plan in case revenues continue to decline and full autonomy cannot be restored."

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In addition, it follows from the report that the company did not even half of its advertising sales target.  

"Advertising sales amounted to € 1.6 million (the plan for 2020 is € 3.3 million), the plan is 48% fulfilled," the documents say. 

Problems with attracting advertisers are caused by the self-isolation regime and the depreciation of the ruble against the euro, the compilers of the report explain. 

At the same time, reporting to the state authorities of Latvia, Meduza is inclined to explain its financial problems by uncertain factors: the COVID-19 pandemic and politics, again hinting at the status of a foreign agent. 

“The company believes that the main risks and obstacles that may affect the achievement of financial plans are the spread of COVID-19 in Russia and Europe ... and political risks from the Russian Federation, in particular the ban on access to independent media from the territory of the Russian Federation. Federation, ”the document says.

“The company's management is taking steps to improve the situation,” Galina Timchenko wrote in the notes to the report.

To "improve the situation" the editorial office plans to focus on the youth audience. 

“In 2021, the company plans to attract new customers ... and continue the course of publications aimed at creating unique content that would be of interest to young people as well,” the document says.

"The priority area is the development of video formats, especially the development and size of the audience of Telegram, YouTube and lnstagram channels."

Signs of a crisis

The wording of the auditors about the "significant uncertainty" of Medusa Project SIA was explained by the chairman of the All-Russian Trade Union of Arbitration Managers Mikhail Vasilega.

According to him, the company faces the risk of not fulfilling its obligations, and in the future there is also the likelihood of bankruptcy.

"This means that the company has more debts than it can service," the bankruptcy trustee explained in an interview with RT. 

Uncertainty indicates that the organization does not have an inflow of funds in the required amount, he noted. 

“If the company does not have enough funds for regular expenses, for example, for salary payments or rent payments, then it will simply stop its activities,” the expert explained.  

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The presence of profit in this case is not an indicator, he added, because if there is uncertainty, then the income is not constant, and the company spends more than it earns guaranteed.

“The question is how to calculate profit,” notes Vasilega.

- The company has obligations.

The loan provides for regular payments.

In addition, you need to regularly pay salaries, taxes, and rent.

Yes, today there is something to pay, but about tomorrow, it means there is uncertainty. "

This is one of the signs of impending bankruptcy, the expert summarizes. 

“Yes, this is one of the symptoms of a pre-bankruptcy state,” concluded the arbitration manager.

- The likelihood of bankruptcy is quite high, since bankruptcy is one of the forms of removing uncertainty with the fulfillment of obligations. "

Permutation of terms

In such cases, the owners are looking for ways to postpone the fulfillment of obligations or restructure them: they agree with creditors on a deferral, attract investments in the company's capital, Vasilega says.

Indeed, in a report, the Medusa Project says it is negotiating with creditors for a deferral. 

“The management of the company has reached an agreement with the lender that in 2021 the lender will not demand repayment of the loan,” reads the notes to the financial statements.

"At the time of signing the annual report, negotiations are underway to extend the loan repayment period by three years." 

Now, not only the director and co-owner of Medusa Project Galina Timchenko is responsible for solving strategic financial problems, but also the editor-in-chief of the publication Ivan Kolpakov.

As RT found out from the registry documents, Kolpakov became a co-owner of 35% of the Latvian company. 

Also on russian.rt.com Meduza's editor-in-chief Ivan Kolpakov owns 35% of the publication

The transfer of a share of the authorized capital to Kolpakov took place on October 14, 2020, according to an extract from the register of legal entities of Latvia.

Previously, Timchenko was the sole owner of the company.

Now she has 65% left.

In October 2018, Kolpakov resigned from his post as editor-in-chief of Meduza due to suspicions of “inappropriate behavior” towards the wife of one of his subordinates.

A few months later, Timchenko reinstated him in office. 

In June 2020, four months before receiving a stake in Medusa Project, Kolpakov published a personal opinion about his indecent behavior. 

“I tried to forgive myself for that stupid joke,” he wrote on the social network.

Currency issue

After being entered into the register of foreign media agents, Meduza began collecting donations from readers, including in cryptocurrency.

Having collected 9.84 million rubles in cryptocurrency in the first month, the publication lost 2.74 million rubles in a week on exchange rate volatility, RT wrote. 

Since that time, the flow of donations has dwindled.

Over the past almost three months, the publication has received only 0.047 BTC (bitcoin) and 3.13 ETH (ethereum).

In ruble terms, this amounts to 135.4 thousand and 576.7 thousand rubles, respectively.

It is noteworthy that for the entire period since the beginning of accepting donations, the editorial board has never withdrawn these funds.

The main sources of funding for Meduza were not disclosed.

RT in 2018 found out that the publication was supported by the partners of the George Soros Foundation - the American non-profit organization OAK Foundation and the Swedish International Cooperation Agency (SIDA).

* Media recognized as a foreign agent by the decision of the Ministry of Justice of the Russian Federation dated 04/23/2021.