724 Solutions Announces Second Quarter 2004 Results.SANTA BARBARA Santa Barbara (săn'tə bär`brə, –bərə), city (1990 pop. 85,571), seat of Santa Barbara co., S Calif., on the Pacific Ocean; inc. 1850. , Calif. -- 724 Solutions (Nasdaq:SVNX) (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :SVN SVN Subversion (version control system) SVN Slovenia (international traffic code) SVN Social Venture Network SVN South Vietnam SVN Secure Virtual Network SVN Supervised Visitation Network ), a leading provider of next-generation IP-based network and data services, today reported results for its second quarter ended June 30, 2004 (all figures are in U.S. dollars). 724 Solutions' total revenue in the second quarter was $3.0 million, unchanged from the previous quarter and the same period last year. Revenue from the sale of products was $1.9 million and revenue from the sale of services was $1.1 million. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net loss for the second quarter was $1.6 million, or $0.27 per share, compared to $2.8 million, or $0.47 per share, in the previous quarter and $2.9 million, or $0.49 per share, in the same period last year. The Company's pro forma net operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $4.6 million in the second quarter compared to $5.8 million in the previous quarter and $5.9 million in the same period a year ago. The net loss for the second quarter of 2004, computed using United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), was $1.1 million (which included a $0.9 million reversal of previously recorded restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. ), or $0.19 per share. The GAAP loss was $5.1 million or $0.85 per share in the previous quarter and $6.8 million or $1.14 per share in the same period a year ago. The Company said that it expected third quarter pro forma costs to be in the range of $4.6 to $4.8 million. During the quarter the Company completed a private placement of convertible promissory notes promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. with Austin Ventures for a total of $8.0 million, ending the quarter with $15.9 million in cash and cash equivalents, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments and restricted cash. "The conversion of pipeline opportunities to in-service in-service In-service training adjective Referring to any form of on-the-job training noun In-service training of an employee deployments is our primary focus and will keep us on track for quarterly pro forma profitability by the end of 2004," says John Sims John Sims (1749–1831) was a taxonomist who classified various species of plants. He was the first editor of The Botanical Magazine after the founder, William Curtis.[1] References 1. ^ John Sims, 1749–1831. Darwin Project. , Chief Executive Officer of 724 Solutions. "We are pleased with the results of our cost management initiatives, which have led to the lowest pro forma quarterly loss in the company's history," says Sims. Key accomplishments in the second quarter: --A first customer agreement for the X-treme MMS (Multimedia Messaging Service) An enhanced transmission service that enables graphics, video clips and sound files to be transmitted via cellphones. Developed as part of the 3GPP project, MMS phones are generally backward compatible with SMS and EMS. Accelerator accelerator: see particle accelerator. (1) A key combination such as Alt-G or Ctrl-Shift H that is used to activate a task. (2) An incubator that expects to develop the company considerably faster than normal. See incubator. (XMA XMA Xtreme Martial Arts XMA X-Ray Micro Analyser XMA Extended Memory Area ); a purpose-built application-to-person Bulk MMS Messaging Gateway Hardware and/or software that converts one messaging protocol to another. It provides an interface between two store and forward nodes, or message transfer agents (MTAs). See messaging middleware. that enables new revenues for mobile operators via large volumes of perishable per·ish·a·ble adj. Subject to decay, spoilage, or destruction. n. Something, especially foodstuff, subject to decay or spoilage. Often used in the plural. MMS messages. --The asset acquisition of the Multimedia Application Gateway (AGW AGW Anthropogenic Global Warming AGW Anti-Global Warming AGW Access Gateway AGW Art Gallery of Windsor (Ontario, Canada) AGW All Going Well AGW Atmospheric Gravity Waves AGW Accelerated Global Warming AGW Actual Gold Weight ) product from Nokia and a separate OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and agreement with Nokia for AGW. AGW is a leading multimedia service platform deployed in over 50 mobile operator networks globally and extends the reach of MMS. Conference Call Information The Company will host a conference call to discuss the results on July 28, 2004 at 5:00 pm EST EST electroshock therapy. EST abbr. electroshock therapy . The conference call will be available over the Internet through the company's web site at www.724.com or by telephone at 416-641-6652. A replay will be available for 48 hours following the conference call and can be accessed by dialing 800-633-8284, pass code 21180737. About 724 Solutions 724 Solutions (Nasdaq:SVNX) (TSX:SVN) delivers reliable, scalable technology and solutions that allow mobile network operators to rapidly deploy flexible and open next generation IP-based network and data services. Additionally, in conjunction with mobile operator partners, the company provides a series of actionable Giving sufficient legal grounds for a lawsuit; giving rise to a Cause of Action. An act, event, or occurrence is said to be actionable when there are legal grounds for basing a lawsuit on it. alerting solutions to enterprises to assist them in lowering operating costs operating costs npl → gastos mpl operacionales and improving customer relationship management. 724 Solutions is a global company with development operations in Canada and Switzerland with its corporate office in Santa Barbara, California Santa Barbara is a city in California, United States. It is the county seat of Santa Barbara County, California. As of the 2000 census, the city had a total population of 92,325. . For more information, visit www.724.com. This press release contains statements of a forward-looking nature. These statements are made under the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements include the statements herein regarding: the services and products that will be offered by 724 Solutions, the benefits that businesses will obtain from these services and products, future demand for these services and products, our future operating and cash performance, our plans and prospects and the sufficiency of our cash resources. The accuracy of these statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including the risk that 724 Solutions will be unable to deploy its solutions and products, the risk that the demand for these solutions and products, or for 2.5G and 3G networks, will not increase as presently anticipated, the risk that general economic conditions will not improve or deteriorate de·te·ri·o·rate v. 1. To grow worse in function or condition. 2. To weaken or disintegrate. , and other risks described in 724 Solutions' Securities and Exchange Commission filings, including its annual report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. and its quarterly reports on Form 10-Q Form 10-Q See 10-Q. . These risks are also described in 724 Solutions' filings with the Canadian Securities Administrators Canadian Securities Administrators(CSA) is a forum for the 13 securities regulators of Canada's provinces and territories to coordinate and harmonize regulation of the Canadian capital markets. . 724 Solutions does not undertake any obligation to update this forward-looking information, except as required under applicable law.
724 Solutions Inc. - Summary of Operations
(unaudited)
(In 000's of U.S. dollars, except per
share amounts)
Three months ended Six months ended
-------------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
Revenue:
Product $1,930 $1,761 $1,635 $3,691 $3,645
Services 1,119 1,240 1,375 2,359 2,880
-------------------------- ------------------
Total revenue 3,049 3,001 3,010 6,050 6,525
Cost of revenue (a) 1,537 1,528 1,422 3,065 2,996
-------------------------- ------------------
Gross margin 1,512 1,473 1,588 2,985 3,529
Operating expenses:
Research and
development (a) 1,433 2,089 2,555 3,522 5,505
Sales and marketing (a) 1,197 1,379 2,165 2,576 4,357
General and
administrative (a) 755 833 1,291 1,588 2,236
Depreciation 120 185 203 305 562
Amortization of
intangible assets - - 1,156 - 2,312
Stock-based compensation:
Cost of revenue 3 2 - 5 8
Research and development 9 4 682 13 1,211
Sales and marketing 7 4 170 11 282
General and administrative 14 7 - 21 115
Restructuring costs (900) 2,100 300 1,200 300
-------------------------- ------------------
Total operating expenses 2,638 6,603 8,522 9,241 16,888
-------------------------- ------------------
Loss from operations (1,126) (5,130) (6,934) (6,256) (13,359)
Interest income (expense) (19) 16 85 (3) 178
-------------------------- ------------------
Net loss for the period $(1,145) $(5,114) $(6,849) $(6,259) $(13,181)
-------------------------- ------------------
Basic and diluted net
loss per share $(0.19) $(0.85) $(1.14) $(1.05) $(2.20)
Weighted-average number
of shares used in
computing basic and
diluted net loss per
share (in thousands) 5,983 5,983 5,983 5,983 5,983
-------------------------- ------------------
724 Solutions Inc. - Summary of Pro Forma
Adjustments (unaudited)
(In 000's of U.S. dollars, except per
share amounts)
Three months ended Six months ended
-------------------------- ------------------
June 30, March 31, June 30, June 30, June 30,
2004 2004 2003 2004 2003
GAAP net loss for the
period $(1,145) $(5,114) $(6,849) $(6,259) $(13,181)
Depreciation 120 185 203 305 562
Amortization of
intangible assets - - 1,156 - 2,312
Stock- based compensation 33 17 852 50 1,616
Interest Income 19 (16) (85) 3 (178)
Restructuring costs (900) 2,100 300 1,200 300
Non-recurring and
acquisition charges (b) 282 30 1,521 312 1,801
-------------------------- ------------------
Pro forma net loss for
the period $(1,591) $(2,798) $(2,902) $(4,389) $(6,768)
-------------------------- ------------------
Pro forma net loss per
share $(0.27) $(0.47) $(0.49) $(0.73) $(1.13)
(a) The proforma numbers are as follows:
Cost of revenue $1,537 $1,528 $1,411 $3,065 $2,965
Research and development 1,279 2,089 1,967 3,368 4,716
Sales and marketing 1,112 1,379 1,471 2,491 3,619
General and administrative 712 803 1,063 1,515 1,993
-------------------------- ------------------
Total pro forma costs $4,640 $5,799 $5,912 $10,439 $13,293
-------------------------- ------------------
(b) Non-recurring and acquisition charges include direct costs related
to terminated employees and direct costs related to historic
acquisitions
724 Solutions Inc. - Cash Reconciliation (unaudited)
(In millions of U.S. dollars)
Cash and cash equivalents, short-term investments and restricted
cash:
Balance at March 31, 2004 $11.3
Cash flows from financing activities:
Debt issuance 8.0
Less: balance at June 30, 2004 15.9
------
Total cash used in quarter ended June 30, 2004 3.4
Less: non-recurring payments
Severance and transition $(1.2)
Hosting exit and rent restructuring (0.6)
------
Operating cash used in quarter ended June 30, 2004 $1.6
------
724 Solutions Inc.
Consolidated Balance Sheets
(In thousands of US dollars)
June 30, 2004 and December 31, 2003
----------------------------------------------------------------------
2004 2003
----------------------------------------------------------------------
Unaudited
Assets
Current assets:
Cash and cash equivalents $14,174 $13,436
Short-term investments 1,500 1,748
Restricted cash 190 198
Accounts receivable - trade, net of allowance of
$31
(December 31, 2003 - $60) 2,505 2,297
Prepaid expenses and other receivables 734 648
----------------------------------------------------------------------
Total current assets 19,103 18,327
Deferred charges 345 -
Fixed assets 891 612
----------------------------------------------------------------------
Total assets $20,339 $18,939
----------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $541 $411
Accrued liabilities 2,691 3,402
Deferred revenue 344 410
----------------------------------------------------------------------
Total current liabilities 3,576 4,223
Long-term liabilities 188 -
Notes payable 8,000 -
----------------------------------------------------------------------
Total liabilities 11,764 4,223
Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares
Unlimited preferred shares
Issued and outstanding:
5,983,349 common shares
(December 31, 2003 - 5,983,349) 764,508 764,508
Contributed Surplus 112 62
Accumulated deficit (756,146) (749,887)
Other accumulated comprehensive income 101 33
----------------------------------------------------------------------
Total shareholders' equity 8,575 14,716
----------------------------------------------------------------------
Contingent liabilities (a)
----------------------------------------------------------------------
Total liabilities and shareholders' equity $20,339 $18,939
----------------------------------------------------------------------
(a) See note 8 to our consolidated financial statements set forth in
our first quarter 2004 interim report
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