Notify Technology Reports Results for the Fiscal Year
Ended September 30, 2006
For Immediate Release
San Jose, CA, November 27, 2006 -- Notify Technology Corporation (OTC: NTFY) today announced financial results for its fiscal year ended September 30, 2006.
The Company showed a net loss for the fiscal year ended September 30, 2006, of $314,893, or a net loss per share of $0.02, compared to a net loss of $557,452, or a net loss per share of $0.04, reported for fiscal 2005. Improved operational performance was overshadowed by an unfavorable non-cash accounting adjustment during the fiscal year of $470,073 relating to warrant liability, which is described in further detail below. The $4,356,362 of total revenue reported in the fiscal year ended September 30, 2006 compares to $5,018,464 of total revenue for fiscal 2005.
The decrease in total revenue consisted of a 49% decrease in our legacy Visual Got Mail revenue partly offset by a 34% increase in NotifyLink revenue. Due to the favorable disparity in gross margin between the product lines, the gross margin actually improved to $3,799,946 in the twelve-month period ended September 30, 2006 from $3,734,673 in the twelve-month period ended September 30, 2005 despite lower gross sales. Gross margin as a percentage of revenue for the twelve-month period ended September 30, 2006 was 87.2% compared to 74.4% in the twelve three month period ended September 30, 2005.
The Company’s NotifyLink wireless product line revenue improved to $2,869,480 for the fiscal year ended September 30, 2006 from $2,147,452 for the prior fiscal year. Revenue for the service portion of the Visual Got Mail Solution product line was $809,300 in the twelve-month period ended September 30, 2006 compared to $1,377,267 in the 2005 fiscal year. The level of Visual Got Mail service revenue is expected to continue to decrease in future periods, or cease altogether, as the installed base of Visual Got Mail product services declines due to our customer’s discontinued marketing of the service. Influencing the twelve-month performance of the Company were two non-operating events. The largest event was a $479,073 unfavorable non-cash adjustment due to the interpretation of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, A Company’s Own Stock” that required a warrant liability to be created. The terms of the outstanding warrants that triggered the EITF 00-19 interpretation were modified by the warrant holders in September 2006, which allowed the Company to reclassify the warrant liability as equity.
Unfortunately, as required under generally accepted accounting principles, the expense remained on the income statement and negated what would have been an otherwise profitable performance. The second event was an assignment of certain patents relating to obsolete legacy products for $250,000 cash. The results of this transaction had a favorable impact on the Company’s revenue. “The 34% growth in NotifyLink revenue this year over last year plus the sales of selected legacy wireline patents was overshadowed by the negative EITF 00-19 adjustment. Had the EITF adjustment not occurred, Notify would have shown a $155,181 profit for our fiscal year,” said Paul DePond, President of Notify Technology. “We believe that any future negative EITF-00-19 accounting adjustments relating to our currently outstanding warrants have been eliminated with the execution of the warrant amendments signed in September 2006. Now we can focus on the improving performance of our wireless products, which we believe is the true indicator of the Company’s business.” Use of Non-GAAP Financial InformationThe foregoing portions of this press release make statements concerning our financial results that are not based on generally accepted accounting principles.
To supplement our reported results, we use a non-GAAP measure of net loss/profit which excludes an unfavorable non-cash accounting adjustment relating to warrant liability to allow for a better comparison of results to those in periods prior to fiscal 2006 that did not include such unfavorable accounting adjustment. We believe that because the unfavorable accounting adjustment was a non-cash charge that we do not currently anticipate will recur in future periods, the non-GAAP measure that excludes this unfavorable accounting adjustment enhances the comparability of results against prior periods and provides investors additional information about the operating performance of our business.
In addition, we use this non-GAAP financial measure for internal management purposes and as a means to evaluate period-to-period comparisons. This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, or superior to, the financial measure prepared in accordance with GAAP. RECONCILIATION OF GAAP NET LOSS TO NON-GAAP
(unaudited)
|
Fiscal Year
ended September 30,
2006 |
|
GAAP |
NON-GAAP |
Net loss |
$ (314,892) |
$ (314,892) |
Excluded loss on fair value of warrants |
--- |
470,073 |
Gain (loss) on operations |
$ (314,892) |
$ 155,181 |
About Notify Technology Corporation
Founded in 1994, Notify Technology Corporation, (OTC: NTFY) is an innovative software company developing mobility products for organizations of all sizes. Notify’s wireless solutions provide secure synchronized email and PIM access and management to any size organization on a variety of wireless 2-way devices and networks. Notify sells its wireless products directly and through authorized resellers internationally. The company is headquartered in San Jose, California. For more information, visit http://www.notifycorp.com or contact 408-777-7920.
Forward-Looking Statements: This press release contains forward-looking statements related to Notify Technology that involve risks and uncertainties, including, but not limited to, statements regarding the improving performance of our wireless products, the absence of future negative accounting adjustments and the service revenue on the Visual Got Mail Solution. Those statements are based on current information and expectations and there are important factors that could cause actual results to differ materially from those anticipated by such statements. These risks include, but are not limited to, our ability to deliver products and manage growth, the continuance of certain customer voice mail programs, the expectation that the revenue from the service portion of the Visual Got Mail Solution will decline due to customer decisions to withdraw from the consumer market that the Notify product supports, the acceptance of our wireline products in the market, our ability to continue to improve our existing products or develop new products or technologies, as well as other risks. In particular, we cannot predict future NotifyLink revenues with any accuracy and do not know whether NotifyLink revenues will continue to grow at the rates we have recently experienced. Increasing NotifyLink revenues will require, among other things, continued investments in our sales and marketing organization, and we have limited available cash resources to make these investments. In addition, although we have amended outstanding warrants to address a penalty provision that triggered adverse accounting treatment, we have outstanding certain unit options that contain a similar provision that has not been amended and that could result in adverse accounting charges in future periods in the event of increases in our stock price. These forward-looking statements are made in reliance on the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. For further information about these factors that could affect Notify Technology's future results, please see the Company’s filings with the Securities and Exchange Commission. Prospective investors are cautioned that forward-looking statements are not guarantees of performance. Actual results may differ materially from management’s expectations. (Financial Tables Follow)
NOTIFY TECHNOLOGY CORPORATIONCONDENSED UNAUDITED STATEMENTS OF OPERATIONS
|
Three-Months |
Fiscal Years |
|
Ended September 30, |
Ended September 30, |
|
|
2006 |
2005 |
|
2006 |
2005 |
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
Product revenue |
$ 705,868 |
|
$ 534,545 |
|
$ 3,105,463 |
|
$ 3,527,343 |
Service revenue |
305,215 |
|
302,978 |
|
1,250,899 |
|
1,491,121 |
Total revenue |
1,011,083 |
|
837,523 |
|
4,356,362 |
|
5,018,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue: |
|
|
|
|
|
|
|
Product cost |
996 |
|
38,325 |
|
460,813 |
|
1,216,865 |
Service cost |
-- |
|
9,091 |
|
15,374 |
|
66,926 |
Royalty payments |
23,476 |
|
-- |
|
80,229 |
|
-- |
Total cost of revenue |
24,472 |
|
29,234 |
|
556,416 |
|
1,283,791 |
Gross profit |
986,611 |
|
866,757 |
|
3,799,946 |
|
3,734,673 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Research and development |
262,577 |
|
260,380 |
|
975,611 |
|
1,040,197 |
|
Sales and marketing |
413,122 |
|
462,283 |
|
1,634,729 |
|
1,702,454 |
|
General and administrative |
315,445 |
|
366,561 |
|
1,286,191 |
|
1,552,351 |
Total operating expenses |
|
|
|
|
|
|
4,295,002 |
|
|
|
|
|
|
|
|
|
Loss from operations |
(4,533) |
|
(222,467) |
|
(96,585)
|
|
(560,329) |
|
|
|
|
|
|
|
|
|
Other interest (expense), net |
823 |
|
704 |
|
(1,766) |
|
2,877 |
Proceeds from sale of patents |
-- |
|
-- |
|
250,000 |
|
-- |
Loss on fair value of warrants |
(12,154) |
|
-- |
|
(470,073) |
|
-- |
|
|
|
|
|
|
|
|
|
Net loss |
$ (16,458)
|
|
$ (221,644) |
|
$ (314,892)
|
|
$ (557,452) |
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
$ (0.00) |
|
$ (0.02) |
|
$ (0.02) |
|
$ (0.04) |
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average shares outstanding |
13,968,995
|
|
13,968,995
|
|
13,968,995
|
|
13,933,461
|
|
|
|
|
|
|
|
|
Notify Technology Corporation |
|
Condensed Balance Sheets |
|
|
|
|
|
Sept. 30, |
|
Sept. 30, |
|
|
|
|
|
2006 |
|
2005 |
|
|
|
|
|
(Unaudited) |
|
|
|
Assets: |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
$ 829,406 |
|
$ 424,228 |
|
|
Accounts receivable, net |
|
|
436,509 |
|
472,942 |
|
|
Other assets |
|
|
53,135 |
|
58,751 |
|
Total current assets |
|
|
1,319,050 |
|
955,921 |
|
|
Property and equipment, net |
|
|
99,623 |
|
144,418 |
|
|
Total assets |
|
|
$ 1,418,673 |
|
$ 1,100,339 |
|
Liabilities and shareholders’ deficit |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Current portion of capital lease obligation |
|
|
18,219 |
|
22,609 |
|
|
Accounts payable |
|
|
37,722 |
|
47,650 |
|
|
Accrued payroll and related liabilities |
|
|
231,200 |
|
328,535 |
|
|
Deferred revenue |
|
|
1,623,606 |
|
1,287,866 |
|
|
Customer advances |
|
|
------ |
|
30,039 |
|
|
Other accrued liabilities |
|
|
122,432 |
|
139,484 |
|
|
Warrant liability |
|
|
------ |
|
----- |
|
Total current liabilities |
|
|
2,033,179 |
|
1,856,183 |
|
|
Long-term capital lease obligations |
|
|
9,201 |
|
23,044 |
|
Total liabilities |
|
|
2,042,380 |
|
1,879,227 |
|
Shareholders' deficit: |
|
|
|
|
|
|
|
Common stock |
|
|
13,969 |
|
13,969 |
|
|
Additional paid-in capital |
|
|
23,310,902 |
|
22,840,830 |
|
|
Accumulated deficit |
|
|
(23,948,578) |
|
(23,633,687) |
|
Total shareholders’ deficit |
|
|
(623,707) |
|
(778,888) |
|
|
Total liabilities and shareholders' deficit |
|
$ 1,418,673 |
|
$ 1,100,339 |
|
Contacts:
At Notify Technology Corporation:
Jerry Rice, Chief Financial Officer
Phone: 408-777-7927
jerry.rice@notifycorp.com
# # #
|
