724 Solutions Announces Third Quarter 2003 Results.Business Editors 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.--(BUSINESS WIRE)--Oct. 29, 2003 724 Solutions (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : 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 third quarter ended September September: see month. 30, 2003 (all figures are in U.S. dollars). 724 Solutions' total revenue in the third quarter was $3.1 million compared to $3.0 million in the previous quarter and $5.6 million for the same period last year. Revenue from the sale of products was $1.7 million and revenue from the sale of services was $1.4 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 third quarter was $2.6 million, or $0.43 per share, compared to $2.9 million, or $0.49 per share, in the previous quarter and $2.6 million, or $0.43 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 $5.7 million in the third quarter compared to $5.9 million in the previous quarter and $8.1 million in the same period a year ago. The net loss for the third quarter of 2003, computed using 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 $3.9 million or $0.64 per share, compared to $6.8 million or $1.14 per share in the previous quarter and $21.5 million or $3.60 per share in the same period a year ago. The Company ended the quarter with $18.9 million in cash, 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 total cash used in the third quarter was $6.4 million, including an operating cash use of $2.7 million and cash restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and non-recurring payments of $3.7 million. "The focus of our X-treme Mobility Suite is to enable mobile operators to differentiate their data services offerings," said 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, 724 Solutions. "The selection of our X-treme Service Activity Manager (XSAM XSAM X-Treme Service Activity Manager ) by the leading Malaysian operator, Digi Telecommunications DiGi Telecommunications is a mobile phone service provider in Malaysia using the dialling codes of "016, 014-32, 014-35, 014-30, 014-31 and 014-6". It is owned in majority by Telenor ASA of Norway with 61%. , validates the value of our offering for premium messaging data services." XSAM is powering Digi's Content Provider Access service, which is a critical strategy for Digi to open its network to independent content providers to offer premium SMS (1) (Storage Management System) Software used to routinely back up and archive files. See HSM. (2) (Systems Management Server) Systems management software from Microsoft that runs on Windows NT Server. and 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. content and services directly to mobile subscribers. "In addition to our deployment at Digi and our continued subscriber adoption growth from our WAP (1) (Wireless Access Point) See access point. (2) (Wireless Application Protocol) A standard for providing cellular phones, pagers and other handheld devices with secure access to e-mail and text-based Web pages. 2.0 gateway business, we are focused on the execution of our go to market strategy," said Sims. "We've strengthened our presence in Asia Pacific with the creation of a 724/ZTE Competency COMPETENCY, evidence. The legal fitness or ability of a witness to be heard on the trial of a cause. This term is also applied to written or other evidence which may be legally given on such trial, as, depositions, letters, account-books, and the like. 2. Center in Nanjing, China, and established ourselves in the value chain for opening up the traditional walled garden Refers to a network or service that restricts its users to its own content. Cable TV and satellite TV are walled gardens, offering a finite number of channels and programs to its subscribers. of content for premium data services in the Asian market." Conference Call Information The company will host a conference call to discuss the results on October 30, 2003 at 8:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The conference call will be available over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the through the company's web site at www.724.com or by telephone at 415-908-4701. A replay will be available for 48 hours following the conference call and can be accessed by dialing 800-558-5253, pass code 21162910. 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 North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Switzerland and Germany with headquarters in Toronto, Canada. 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 cash performance 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 the solutions and products stated herein, 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, 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 Nine Months Ended
September June September September September
30, 30, 30, 30, 30,
2003 2003 2002 2003 2002
Revenue:
Product $1,676 $1,635 $1,743 $5,321 $5,870
Services 1,437 1,375 3,809 4,317 9,203
Total Revenue 3,113 3,010 5,552 9,638 15,073
Cost of revenue (a) 1,458 1,422 1,625 4,454 5,997
Gross Margin 1,655 1,588 3,927 5,184 9,076
Operating expenses:
Research and
development(a) 2,008 2,555 3,761 7,513 13,619
Sales and
marketing(a) 1,370 2,165 3,419 5,727 14,137
General and
administrative (a) 846 1,291 1,708 3,082 5,654
Depreciation 178 203 1,334 740 4,494
Amortization of
intangibles 1,156 1,156 1,011 3,468 3,175
Stock-based
compensation
Cost of revenue - - 54 8 254
Research and
development - 682 1,879 1,211 8,876
Sales and marketing - 170 662 282 3,129
General and
administrative - - 482 115 2,275
Restructuring costs - 300 3,662 300 20,649
Write down of fixed
assets, goodwill
and other
intangible assets - - 2,205 - 6,339
Total operating
expenses 5,558 8,522 20,177 22,446 82,601
Loss from
operations (3,903)(6,934) (16,250) (17,262)(73,525)
Interest income 44 85 60 222 585
Write-down of long-
term investments,
net - - (5,280) - (5,280)
Net loss for the
period $(3,859)$(6,849) $(21,470) $(17,040)$(78,220)
Basic and diluted
net loss per share $(0.64) $(1.14) $(3.60) $(2.85) $(13.19)
Weighted-average
number of shares
used in computing
basic and diluted
net loss per share
(in thousands) 5,983 5,983 5,965 5,983 5,930
724 Solutions Inc. - Summary of Pro Forma Adjustments (unaudited)
(In 000's of U.S. dollars, except per share amounts)
Three Months Ended Nine Months Ended
September June September September September
30, 30, 30, 30, 30,
2003 2003 2002 2003 2002
GAAP net loss for
the period $(3,859)$(6,849) $(21,470) $(17,040)$(78,220)
Depreciation 178 203 1,334 740 4,494
Amortization of
intangibles 1,156 1,156 1,011 3,468 3,175
Stock-based
compensation - 852 3,077 1,616 14,534
Interest income (44) (85) (60) (222) (585)
Restructuring costs - 300 3,662 300 20,649
Write down of fixed
assets, goodwill
and other
intangible assets - - 2,205 - 6,339
Write-down of
long-term
investments, net - - 5,280 - 5,280
Non-recurring and
acquisition
charges (b) - 1,521 2,396 1,801 7,039
Pro forma net loss
for the period $(2,569)$(2,902) $(2,565) $(9,337)$(17,295)
Pro forma net loss
per share $(0.43) $(0.49) $(0.43) $(1.56) $(2.92)
(a) The pro forma
numbers are as
follows:
Cost of revenue 1,419 1,411 1,625 4,384 5,530
Research and
development 1,961 1,967 2,655 6,677 10,579
Sales and marketing 1,335 1,471 2,453 4,954 11,652
General and
administrative 967 1,063 1,384 2,960 4,607
Total pro forma
costs 5,682 5,912 8,117 18,975 32,368
Certain comparative figures for 2002 have been reclassified to conform
with the financial statement presentation adopted in the current year.
(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:
At June 30, 2003 $25.3
At September 30, 2003 18.9
Total cash used in quarter ended September 30, 2003 $6.4
Non-recurring payments
Severance and transition $ 0.8
Acquisition related 2.0
Hosting exit 0.4
Deferred consideration 0.5
Total non-recurring payments 3.7
Operating cash used in quarter ended September
30, 2003 $ 2.7
724 Solutions Inc.
Consolidated Balance Sheets
(in thousands of US dollars)
September 30, December 31,
2003 2002
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 16,973 $ 19,129
Short-term investments 975 18,562
Restricted cash 962 962
Accounts receivable - trade net of
allowance of $60 (December 31, 2002 -
$150) 2,372 2,211
Prepaid expenses and other receivables 810 819
22,092 41,683
Fixed assets 711 1,418
Goodwill 9,097 9,097
Other intangible assets - 3,468
Total assets $ 31,900 $ 55,666
Liabilities and Shareholder's Equity
Current Liabilities:
Accounts payable $ 378 $ 1,253
Accrued liabilities 4,457 9,892
Note payable - 600
Deferred revenue 648 1,217
Deferred consideration 491 1,415
5,974 14,377
Shareholders' equity:
Share capital:
Authorized:
Unlimited common shares
Unlimited preferred shares
Issued and outstanding:
5,983,349 common shares
(December 31, 2002 - 5,983,349) 764,508 764,508
Deferred stock-based compensation - (1,616)
Accumulated deficit (738,600) (721,560)
Cumulative translation adjustment 18 (43)
25,926 41,289
Contingent liabilities(a)
Total liabilities and shareholders' equity $ 31,900 $ 55,666
(a) See note 17 to our audited consolidated financial statements set
forth in our 2002 annual report.
The historic common share numbers have been adjusted to reflect the 10
for 1 share consolidation completed in the second quarter of 2003.
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