VANCOUVER, Nov. 29 /CNW/ - IP Applications Corp. (TSX-Venture: IPX) today
announced results for the third quarter and the nine-month period ended
September 30, 2006.
Quarterly revenue increased 6% to $2.4 million compared with the same
quarter in 2005. The loss for the quarter was $472,194 or $0.03 per share
(basic) compared with a loss of $835,974 or $0.06 per share for the same
period in 2005. The Company reported an EBITDA loss of $48,538 compared with
an EBITDA loss of $482,162 in the quarter ended September 30, 2005 and
$211,461 in the quarter ended June 30, 2006 (EBITDA is a non-GAAP measure as
explained in detail below).
Revenue for the nine-month period increased by 29% to $7.2 million as
compared to the corresponding period in 2005. The loss for the period was
$1,522,814 or $0.10 per share (basic) compared with a loss of $1,871,126 or
$0.16 per share for the same period in 2005. The EBITDA loss for the period
was $283,938, a substantial improvement over the EBITDA loss of $901,710 in
2005.
John Jacobson, President and CEO said "IP Applications invested in three
acquisitions in 2004 and 2005 which brought new customers and technologies.
During the third quarter of 2006, we began the transition to the next phase of
the company's development. We're stabilizing the monthly recurring revenue
stream and we're developing our own branded products to start generating new
business for the Company in 2007. The recent addition of Vice-President of
Operations, Mr. Thomas Carter, will sustain our focus on operating
efficiencies while we expand our product offerings and markets."
Achievements during the period ended September 30, 2006:
In Q3, because of a substantial increase in demand for network service
from existing customers, the Company began to rationalize its purchasing to
improve costs. The benefit of this rationalization process began to reduce
channel operating costs commencing in October 2006.
Although the revenue through the first three quarters was relatively
stable, the sources of revenue have shifted significantly. To improve
long-term stability, IP Applications has focused its attention on those
customers whose contract revenue produces relatively higher margins and is
growing, while re-structuring or terminating some whose revenue is declining
or whose margins are relatively lower. Since the beginning of the year,
revenue growth from the former has effectively matched declining revenue from
the latter. As of the third quarter of 2006, approximately 65% of quarterly
revenue comes from 25 customers with growing revenues out of a total of 68
active customers. These same customers accounted for only 34% of total revenue
in Q3 2005.
As part of its stability plan, in the third quarter the Company began
negotiating the renewal of two key customer contracts and the termination of a
third. One renewal completed successfully in Q4 while the second is expected
to conclude before the end of the year. The termination of the third contract,
also in Q4, allowed the Company to reassign Help Desk staff to more profitable
opportunities.
New product development plans advanced during the quarter after the
Company gained the support of one of its key customers for two new product
introductions. The first product, an enhanced Help Desk service offering is
entering its pre-release phase in December and will be offered to the
Company's customers early in 2007. The second, a hosted e-commerce engine for
the customer's product site, is expected to come to market later next year.
Both products are intended to build new business based on branded products
delivered through established channels.
Non-GAAP measures
EBITDA is a key measure used by management to evaluate the Company's
performance. Management believes that EBITDA is useful as it provides an
indication of the results generated by the Company's business activities prior
to taking into consideration how those activities are financed and taxed and
also prior to taking into consideration asset depreciation and other non-cash
expenditures. EBITDA is not a recognized measure under Canadian GAAP, and
accordingly, investors are cautioned that EBITDA should not be construed as an
alternative to net earnings or loss determined in accordance with GAAP as an
indicator of the financial performance of the Company or as a measure of the
Company's liquidity and cash flows. EBITDA may not be comparable to similar
measures presented by other issuers. The schedule below details how IP
Applications reconciles its net loss per GAAP to EBITDA for the most recent
four quarters:
<<
September 30 June 30 March 31 December 31
(000's) 2006 2006 2006 2005
-------------------------------------------------------------------------
Operating Loss $(472) $(640) $(411) $(1,580)
Amortization 318 318 312 305
Stock-Based Compensation 88 83 79 269
Write-down of capital
equipment - - - 307
Loss on lease commitment - - 210
Other 17 18 6 -
-------------------------------------------------------------------------
EBITDA $(49) $(221) $(14) $(489)
-------------------------------------------------------------------------
>>
Additional details on the quarterly results, including the unaudited
Consolidated Financial Statements and Management Discussion and Analysis, are
available at www.sedar.com under IP Applications Corp.
IP Applications closes financing
The Company also wishes to announce that it has closed the non-brokered
private placement of convertible debentures (the "Debentures") previously
announced on September 26, 2006, with the Pender Financial Group Corporation
and Pender Growth Fund (VCC) Inc. (together, the "Investors"), raising gross
proceeds of $960,130. The proceeds will be used to roll over the existing
debentures granted to the Investors in December 2005 in the amount of
$500,000 plus accrued interest, and the balance used for operating working
capital.
The Debentures are due in 18 months on March 18, 2008 with an interest
rate of 12% per annum calculated and paid quarterly in cash and are
convertible into units of the Company after April 1, 2007 or on completion of
an equity financing yielding net proceeds in excess of $500,000 before
June 30, 2007 (a "Qualifying Financing"). The Debentures are subject to a four
month hold period, expiring on March 28, 2007. In the event that a Qualifying
Financing is completed and the Investors choose to convert the Debentures, the
securities issued to the Investors on conversion will be subject to any
remainder of the unexpired hold period.
About IP Applications
IP Applications Corp. serves companies bringing online products,
services, content, and internet access to market. IP Applications provides a
flexible combination of technology, systems and expertise for customers who
have channels and products but who lack the delivery and support capabilities.
IP Applications' integrated Operational Support System and contract Help Desk
services dramatically reduce the cost, complexity and time to market for
online products and services.
Forward-Looking Statements
This press release may contain forward-looking statements. Actual events
or results may differ materially from those described in the forward-looking
statements due to a number of risks and uncertainties. Forward-looking
statements are based on management's estimates, beliefs, and opinions. The
company assumes no obligation to update forward-looking statements.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this release.
