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Mamma.com Releases Q3 2006 Results
Mamma.com Inc. (NASDAQ: MAMA)
- Q3 net loss of $2.55 million ($0.18 per share) including write-downs of $0.983 million, class action lawsuit settlement and other costs of $0.70 million compared to loss of $1.51 million ($0.13 per share) in Q3 2005
- In November, Company enters into an agreement to settle the class action lawsuit for which it has made a provision in Q3 of 2006. The agreement is subject to court approval.
- Q3 revenues of $1.9 million compared to the same level in Q2 2006 and to $2.4 million in Q3 2005
- Operating activities provided cash of $69,000 compared to $45,000 in Q3 2005. Cash, cash equivalents and temporary investments remained at $8.5 million
Mamma.com Inc., (the "Company"), (NASDAQ: MAMA), reported its financial results for the third quarter ended September 30, 2006. Unless otherwise stated, all figures in this release are in US dollars.
The Company's Q3 2006 net loss was $2,548,274 ($0.18 per share) compared to a net loss of $1,505,688 ($0.13 per share) for the same period in 2005. Net loss for the nine months ended September 30, 2006, was $4,689,554 ($0.33 per share) compared to $4,895,763 ($0.40 per share) for the same period in 2005. In Q3 2006, the Company recorded a $700,000 provision for the settlement and closure of the class action case and non-recurring non-cash expenses of $983,238 for write-downs due to significant decreases in the carrying values of certain assets such as the LTRIM investment due to delays in commercialization of its technology and assets related to graphic ads due to a significant decrease revenue in this area.
Revenues in the third quarter of 2006 were $1,891,068, 21% below the $2,390,634 revenues for the same period in 2005. The decrease of $499,566 was exclusively due to a significant reduction in business in graphic advertising where revenues declined by $987,161 from $1,136,580 in Q3 2005 compared to $149,419 in Q3 2006. Search advertising revenues increased by $303,244 from $1,254,054 in Q3 2005 compared to $1,557,298 in Q3 2006 due to general improvement of this revenue type and Copernic's contribution. Software licensing and customized development and maintenance support increased by $184,351 due to Copernic's contribution.
Revenues for the nine months ended September 30, 2006 were $6,029,981, 23% below the $7,805,543 revenues for the same period in 2005. The decrease of $1,775,562 was exclusively due to a reduction in the graphic advertising revenues of $3,213,524 offset by increases from other types of revenues: search advertising $797,548, software licensing $256,306 and customized development and maintenance support $384,108.
Loss from continuing operations in Q3 2006 was $2,553,202, including non-recurring expenses of $1,683,238 explained above, compared to $574,314 in Q3 2005. Payout costs in Q3 2006 over search and graphic advertising revenues were at 25%, compared with 44% in Q3 2005 mainly due to product mix between search and graphic, where search has an average payout cost lower than graphic, and due to the fact that for most of Copernic search revenues no payouts are incurred. General and administration expenses decreased by $214,408 mainly due to a reduction of $280,000 of professional fees related to the SEC investigation. Product development and technical support increased by $310,136 in Q3 2006 compared to Q3 2005 mainly due to the acquisition of Copernic. In Q3 2006 the amortization of intangible assets reflected the impact of the acquisition of Copernic.
Cash, cash equivalents and temporary investments at September 30, 2006 were $8,524,613 an increase of $101,446 compared with Q2 2006.
Guy Faure, the Company's President and CEO stated: "During the third quarter we have concentrated our efforts on two objectives: the first was to develop our funnel for the Copernic Desktop Search (CDS) product and second was to continue to control costs. We released version 2.0 of our CDS offering and have had many favourable reviews about the product. Its new interface significantly improves user experience and we have enhanced the product in consideration of the private labelled program. Our search network business has delivered its best quarterly results yet this year. In order to recapture significant revenues for our Ad network, we continue to focus on premium advertisers that would potentially generate contracts with larger buys, higher CPM's and therefore higher margins. The CDS business development plan remains a high priority for the future of our company. Finally, our cost controlling measures have also resulted in maintaining a solid cash position. We will continue to closely monitor our expense level and take action when necessary." Mr. Faure added: "We are also pleased with the endorsements that we have had lately, where AOL announced the release of their OpenRide suite of products which include Copernic's Desktop Search and the recent release by Pixsy, where through a partnership with them, Mamma will soon be releasing a video meta-search service that will enable users to search through multiple video data bases such as YouTube, Revver and many others."
As announced on November 9 2006, the Company has entered into an agreement to settle the class action lawsuit currently pending in the U.S. District Court for the Southern District of New York. The settlement, which must be approved by the Court, would resolve all claims asserted against the Company and the individual officer defendants. Under the terms of the settlement agreement, plaintiffs would receive US$3.15 million, $2.5 million of which would be paid by the Company's insurance carrier and $0.65 million from the Company. The settlement contains no admission of wrongdoing by the Company or the officers of the Company who are individual defendants. The Company has always maintained and continues to believe that neither the Company nor any of the individual officers named committed any wrongdoing. However, given the potential cost and uncertainty of continued litigation, the Company believes that the settlement is in the Company's best interests. Third quarter 2006 results include a provision of $0.7 million for this pending settlement and related costs.
The unaudited financial statements for the third quarter ended September 30, 2006 will soon be available on SEDAR and EDGAR and on www.mammainc.com.
About Mamma.com Inc.
Mamma Media Solutions (TM) is a leading provider of award winning search technology for both the Web and desktop space, delivered through its properties, www.mamma.com and www.copernic.com respectively. The Company is also a top provider of online marketing solutions to advertisers, providing keyword and graphic ad placement on its large publisher network.
Mamma.com The Mother of All Search Engines® (www.mamma.com) is one of the most popular metasearch engines on the Internet, as it makes it easier and faster for people to find information by gathering the most relevant results from the best search engines on the Internet.
Through its award winning Copernic Desktop Search product, the Company develops cutting edge search solutions bringing the power of a sophisticated, yet easy-to-use search engine right to the user's PC. It allows for instant searching of files, emails, and email attachments stored anywhere on a PC hard drive. Its desktop search application won the CNET Editors' Choice Award as well as the PC World "World Class award" in 2005.
More information can be found at www.mammamediasolutions.com and www.copernic.com.
Statements contained in this press release, which are not historical facts, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from estimated results. Such risks and uncertainties are detailed in the Company's filings with the United States Securities and Exchange Commission and the Ontario Securities Commission and include but are not limited to the extent to which the results of the SEC investigation or the purported securities class action lawsuits negatively impact the Company. The Company expressly disclaims any intent or obligation to update any description of the scope, focus or subject matter of the statements in this press release.
Mamma.com Inc.
Condensed Consolidated Balance Sheets
--------------------------------------------------
(unaudited) (expressed in U.S. dollars and in accordance
with generally accepted accounting principles
in Canada)
As at As at
September 30, December 31,
2006 2005
$ $
Assets
Current assets
Cash and cash equivalents 5,490,292 4,501,201
Temporary investments 3,034,321 4,013,312
Accounts receivable 1,220,606 2,623,940
Income taxes receivable 261,501 606,226
Prepaid expenses 448,991 295,288
Future income taxes 35,063 33,505
Assets of discontinued
operations - 9,694
--------------------------------------------------
10,490,774 12,083,166
Future income taxes 14,110 13,483
Income tax credit 57,466 54,912
Investments 150,000 720,000
Property and equipment 526,283 598,758
Intangible assets 6,669,840 8,601,848
Goodwill 15,417,844 16,255,031
--------------------------------------------------
33,326,317 38,327,198
--------------------------------------------------
--------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 2,413,525 2,690,943
Deferred revenue 220,978 249,953
Deferred rent 11,249 -
Income tax payable 8,100 8,062
Liabilities of discontinued
operations 70,477 189,223
--------------------------------------------------
2,724,329 3,138,181
--------------------------------------------------
Future income taxes 2,194,215 2,672,036
--------------------------------------------------
Shareholders' Equity
Capital stock
Authorized
Unlimited common shares,
no par value
Issued and outstanding 14,340,864
common shares 95,298,234 95,298,234
Additional paid-in capital 5,639,480 5,249,902
Cumulative translation
adjustment 561,137 370,369
Accumulated deficit (73,091,078) (68,401,524)
--------------------------------------------------
28,407,773 32,516,981
--------------------------------------------------
33,326,317 38,327,198
--------------------------------------------------
--------------------------------------------------
Mamma.com Inc.
Condensed Consolidated Statements of Operations
--------------------------------------------------
(unaudited) (expressed in U.S. dollars and in accordance
with generally accepted accounting principles in Canada)
For the nine months For the three months
ended September 30 ended September 30
--------------------------------------------------
2006 2005 2006 2005
$ $ $ $
Revenues 6,029,981 7,805,543 1,891,068 2,390,634
Cost of revenues 1,785,181 3,464,755 530,729 1,138,280
--------------------------------------------------
4,244,800 4,340,788 1,360,339 1,252,354
--------------------------------------------------
Expenses
Marketing, sales and
services 1,347,760 1,702,384 430,849 494,116
General and
administration 2,967,084 4,546,230 892,428 1,106,836
Product development and
technical support 1,924,527 940,938 615,926 305,790
Amortization of property
and equipment 129,224 75,141 45,198 26,066
Amortization of
intangible assets 1,579,095 147,714 528,538 51,325
Interest and other
income (312,972) (504,277) (116,853) (193,119)
Loss (gain) on foreign
exchange 133,595 23,203 (1,633) 22,927
Write-downs and
settlement costs 1,683,238 - 1,683,238 -
--------------------------------------------------
9,451,551 6,931,333 4,077,691 1,813,941
--------------------------------------------------
Loss from continuing
operations before
income taxes (5,206,751) (2,590,545) (2,717,352) (561,587)
Current (recovery of)
income taxes (4,876) 12,727 (4,876) 12,727
Recovery of future
income taxes (477,821) - (159,274) -
--------------------------------------------------
Loss from continuing
operations (4,724,054) (2,603,272) (2,553,202) (574,314)
Results of discontinued
operations 34,500 (2,292,491) 4,928 (931,374)
--------------------------------------------------
Net loss for the period (4,689,554) (4,895,763) (2,548,274)(1,505,688)
--------------------------------------------------
Basic and diluted
loss per share from
continuing operations (0.33) (0.21) (0.18) (0.05)
Basic and diluted loss
per share from
discontinued operations 0.00 (0.19) 0.00 (0.08)
--------------------------------------------------
Basic and diluted net
loss per share (0.33) (0.40) (0.18) (0.13)
--------------------------------------------------
--------------------------------------------------
Weighted average number
of shares outstanding
- basic and diluted 14,340,864 12,159,498 14,340,864 11,959,125
--------------------------------------------------
--------------------------------------------------
Mamma.com Inc.
Condensed Consolidated Statements of Cash Flows
--------------------------------------------------
(unaudited) (expressed in U.S. dollars and in accordance
with generally accepted accounting principles in Canada)
For the nine months For the three months
ended September 30 ended September 30
--------------------------------------------------
2006 2005 2006 2005
$ $ $ $
Cash flows from (used for)
Operating activities
Loss from continuing
operations (4,724,054) (2,603,272) (2,553,202) (574,314)
Adjustments for
Amortization of
property and equipment 129,224 75,141 45,198 26,066
Amortization of
intangible assets 1,579,095 147,714 528,538 51,325
Employee stock-based
compensation 389,578 54,344 124,333 72,203
Future income taxes (477,821) - (159,274) -
Write-down of property
and equipment 9,813 - 9,813 -
Write-down of intangible
assets 403,425 - 403,425 -
Write-down of investment 570,000 - 570,000 -
Unrealized loss on
foreign exchange 1,151 - (571) -
Net change in non-cash
working capital items 1,806,717 353,236 1,100,337 469,207
--------------------------------------------------
Cash from (used for)
operating activities
from continuing
operations (312,872) (1,972,837) 68,597 44,487
Cash from (used for)
operating activities
from discontinued
operations (74,552) (600,694) 644 (155,594)
--------------------------------------------------
(387,424) (2,573,531) 69,241 (111,107)
--------------------------------------------------
Investing
activities
Reimbursement related to
Copernic business
acquisition 379,382 - 63,839 -
Purchase of property and
equipment (49,591) (85,115) (13,250) (11,581)
Purchase of
intangible assets (43,027) (47,971) (18,384) (5,776)
Net decrease (increase)
in temporary investments 978,991 6,874,155 (3,034,321) -
--------------------------------------------------
Cash from (used for)
investing activities 1,265,755 6,741,069 (3,002,116) (17,357)
--------------------------------------------------
Financing activities
Issuance of
capital stock - 6,425 - 6,425
Redemption of common
shares - (1,053,155) - -
--------------------------------------------------
Cash from (used for)
financing activities - (1,046,730) - 6,425
--------------------------------------------------
Effect of foreign exchange
rate changes on cash
and cash equivalents 110,760 - - -
--------------------------------------------------
Net change in cash and
cash equivalents during
the period 989,091 3,120,808 (2,932,875) (122,039)
Cash and cash equivalents
-Beginning of period 4,501,201 20,757,089 8,423,167 23,999,936
--------------------------------------------------
Cash and cash
equivalents - End of
period 5,490,292 23,877,897 5,490,292 23,877,897
--------------------------------------------------
--------------------------------------------------
Cash and cash equivalents
comprise:
Cash 376,800 1,363,506 376,800 1,363,506
Short-term investments 5,113,492 22,514,391 5,113,492 22,514,391
--------------------------------------------------
5,490,292 23,877,897 5,490,292 23,877,897
--------------------------------------------------
