MindArrow Reports Record Revenues for Fiscal 2002 Third Quarter; Company Benefits From Larger Transactions and Lower Operating Costs.Business Editors HUNTINGTON BEACH Huntington Beach, city (1990 pop. 181,519), Orange co., S Calif., on the Pacific coast, across from Santa Catalina Island, in an oil-producing area; inc. 1909. It manufactures aerospace vehicles, aircraft parts, optical instruments, and heat transfer equipment. , Calif.--(BUSINESS WIRE)--August 8, 2002 MindArrow Systems Inc. (Nasdaq: ARRW ARRW Australian Rural and Remote Workforce Agencies Group ), an enterprise messaging software and services provider, today announced financial results for the three months ended June June: see month. 30, 2002. The company reported record revenues for its third fiscal quarter totaling $1.24 million, representing a 50% increase over the corresponding period in the prior fiscal year, and a 62% increase over the prior quarter ended March 31, 2002. The net loss for the quarter ended June 30, 2002 was $1.8 million, an improvement of 45% from the same quarter in the prior fiscal year, and an improvement of 38% over the quarter ended March 31, 2002. Significant highlights from the third fiscal quarter and recent weeks include:
-- The announcement of an agreement to merge with Category 5 Technologies, Inc., which the company believes will provide additional scale and the ability to offer a broader and more complete range of products and services. Category 5 had approximately $24.8 million in revenues and $4.3 million in net income for the twelve months ended March 31, 2002.
-- The announcement of a $3 million financing commitment led by East-West Capital Associates, Inc., with the right to call an additional $1 million in funding as determined by the company's board of directors. In connection with this financing, Merv Adelson, the chairman of East-West Capital, and the former Vice Chairman of Time Warner, joined the company's board of directors.
-- The launch of several new products and services, including the company's Messenger for Outlook content management tool, MindArrow Amplify(TM) marketing automation software, and MindArrow OnTarget(TM) email append and list services.
-- Several new customer wins, including Mazda, Cendant, and Champions of Hope, and contract renewals or extensions with several existing clients, including Ceridian, AIG, the Economist, and the National Basketball Association ("NBA").
-- The conversion and exchange of all of the company's outstanding preferred stock into common shares, thus eliminating existing preferences and liquidation rights vis-a-vis common shareholders.
"Despite a challenging external environment, we continue to make significant progress," commented Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. Webber Web´ber n. 1. One who forms webs; a weaver; a webster. , MindArrow Systems' president and chief executive officer. "We were able to secure necessary financing, improve our capital structure and enter a merger agreement with Category 5. A couple of large transactions kicked off during the quarter, which helped lead to record revenues. Monthly recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. operating costs operating costs npl → gastos mpl operacionales were the lowest since the company commenced significant operations. We also saw an increase in demand for our products and services during the quarter, as the month of June represented the best new bookings month in the company's history with more than $1.4 million in contracts and purchase orders signed in that month alone. "In the months ahead, we look forward to the added scope and scale from our proposed business combination with Category 5. We believe this merger will provide the combined company with strategic cross-selling, marketing and distribution opportunities, economies of vertical integration Economies of vertical integration Produced by achieving lower operating costs by owning all components of production and sometimes sales outlets rather than contracting with companies in the outside marketplace. and cost savings through operational synergies, and, ultimately, potentially greater visibility and access to capital markets." The revenue increase during the quarter was primarily due to the initial recognition of revenue from large transactions that launched during the quarter, including a custom software development engagement. The company's operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. was offset by an $806,000 recovery, representing additional cash recovered from the perpetrators of a fraud on the company by a former transfer agent in 1999 and early 2000. Absent this non-operating gain, the company would have recorded a net loss for the quarter of approximately $2.6 million, or $0.13 per share. For the quarter ended June 30, 2002, total 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. of $3.7 million included non-cash charges Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. of $842,000 and non-recurring expenses of $1.13 million, including amounts to write-off Write-Off A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. tenant improvements, etc. at the company's former headquarters. The company's recurring, cash-based expenses were $1.77 million for the quarter, or approximately $589,000 per month, on average monthly revenues during the quarter of $412,000 per month, which represented a significant reduction in cash needed for operations.
STATEMENT OF OPERATIONS DATA
For the For the
Quarter Ended Quarter Ended
June 30, June 30,
2001 2002
(unaudited) (unaudited)
------------- --------------
Revenues............................... $ 822,729 $ 1,236,345
Operating loss......................... (3,156,309) (2,489,304)
Recovery (loss) on transfer agent fraud (169,957) 806,232
Interest and other income (expense).... 33,634 (130,247)
Net income (loss)...................... $(3,292,632) $ (1,813,319)
Value of non-cash stock dividend on
preferred stock...................... --- 584,145
Net loss per common share outstanding.. $ (0.30) $ (0.12)
Shares used in computation of basic
loss per share....................... 10,867,313 20,557,451
BALANCE SHEET DATA
September 30, June 30,
2001 2002
(unaudited)
------------- --------------
Cash and cash equivalents.............. $ 1,345,376 $1,206,988
Working capital........................ (3,868,143) (2,062,219)
Total assets........................... 11,455,212 8,933,109
Total liabilities...................... 7,134,462 4,867,907
Stockholders' equity................... 4,320,750 4,065,202
About MindArrow Systems MindArrow Systems Inc., with headquarters in Southern California Southern California, also colloquially known as SoCal, is the southern portion of the U.S. state of California. Centered on the cities of Los Angeles and San Diego, Southern California is home to nearly 24 million people and is the nation's second most populated region, and offices in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of and Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. , provides enterprise messaging software and services that automate To turn a set of manual steps into an operation that goes by itself. See automation. and enhance sales and marketing communications Marketing communications (or marcom) are messages and related media used to communicate with a market. Those who practice advertising, branding, direct marketing, graphic design, marketing, packaging, promotion, publicity, sponsorship, public relations, sales, sales . MindArrow's patented and patent-pending technologies allow its clients to create, manage, deliver and track email marketing campaigns as well as individual 1-to-1 communications. The company's products and services can be deployed on a stand-alone basis, or used to augment aug·ment v. aug·ment·ed, aug·ment·ing, aug·ments v.tr. 1. To make (something already developed or well under way) greater, as in size, extent, or quantity: existing customer relationship management ("CRM (Customer Relationship Management) An integrated information system that is used to plan, schedule and control the presales and postsales activities in an organization. ") software. The company's customer base includes over 100 leading companies including Mazda, Johnson & Johnson, Ceridian, Avaya, Cendant and the NBA NBA abbr. 1. National Basketball Association 2. National Boxing Association NBA (US) n abbr (= National Basketball Association) → Basketball-Dachverband (= (National Basketball Association National Basketball Association (NBA) U.S. professional basketball league. It was formed in 1949 by the merger of two rival organizations, the National Basketball League (founded 1937) and the Basketball Association of America (1946). ). MindArrow's solutions are designed to establish a more effective line of communication between a company and its customers -- using the right media to deliver the right message at the right time. MindArrow urges investors and security holders to read the following documents, when they become available, regarding the proposed merger transaction with Category 5 Technologies, because they will contain important information: The joint proxy statement/prospectus of MindArrow and Category 5, and MindArrow's Registration Statement on Form S-4 containing or incorporating by reference the joint proxy statement/prospectus and other information. When these and other documents are filed with the SEC, they may be obtained for free at the SEC's Web site at www.sec.gov. You may also obtain for free each of these documents, when available, from MindArrow by telephoning 714/536-6200 or by fax at 714/536-6280. Certain statements contained in this press release may be deemed to be forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. under federal securities laws, and the company intends that such forward-looking statements be subject to the safe-harbor created thereby. The company cautions that these statements are qualified by important factors that could cause actual results to differ materially from those reflected by the forward-looking statements. Such factors include, but are not limited to (i) the company's limited operating history and its ability to sustain and manage its growth, (ii) the risk that the company will not be able to obtain additional financing to support the company's operations, (iii) the uncertainty of the company's business pipeline and future acceptance of the company's products and services, and (iv) general market conditions. The historical results achieved are not necessarily indicative of future prospects of the company. Information on these and additional factors that could affect MindArrow Systems and its financial results is included in the company's 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. for the year ended September 30, 2001 and its other periodic filings with the Securities and Exchange Commission. MindArrow Systems undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This press release also contains forward-looking statements concerning the Company's pending merger with Category 5 Technologies, including (i) the expectation that the proposed merger would successfully present new benefits to the Company such as cross-selling opportunities, economies of vertical integration and cost savings, (ii) the expectation that the merger would provide critical mass and stronger financial viability, and (iii) the expectation that the merger will be completed. These statements are qualified by important factors that could cause actual results to differ materially from those reflected in such forward-looking statements, including without limitation (i) the possible failure to occur of any of the conditions to closing set forth in the merger agreement, (ii) the possible failure or refusal by the majority of shareholders of either company to approve the transaction, (iii) the possible failure of the companies to successfully integrate their product offerings and operations, and (iv) potential difficulties of marketing combined product and service solutions in the large enterprise and SME markets See SMB. . Information on additional factors that could affect MindArrow and Category 5 and their respective financial results are included in each company's periodic filings with the Securities and Exchange Commission, and will be included in the joint proxy statement/prospectus of MindArrow and Category 5, when filed with the SEC. |
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