MAMA Mamas Creations Inc

Mamma.com Inc. (NASDAQ:MAMA) -0- *T - Q2 2005 revenue decrease by 35% to $2.6 million due to a decline in business with a major customer from $1.4 million to $0.146 million partially offset by other Search and Ad Network revenue increases - Write down and restructuring charges of $0.92 million related to Digital Arrow - Additional expenses of $0.8 million for the purported securities class action lawsuits and the SEC investigation. - Net Loss of $2.5 million ($0.20/share). - Cash and cash equivalents still remain strong at $24 million. *T Mamma.com Inc., (the "Company"), (NASDAQ:MAMA), reported its financial results for the second quarter ended June 30, 2005. Unless otherwise stated, all figures in this release are in US dollars. The Company's Q2 2005 net loss was $2,499,253 ($0.20 per share) compared to net earnings of $108,387 ($0.01 per share) for the same period in 2004. Revenue in the second quarter of 2005 was $2,590,220, 35% below the $3,957,428 revenue for the same period in 2004. The reduction in revenue reflects the decline in business with a major customer from over $1.4 million to $146,000. This is partially offset by revenue growth in the Company's Search and Ad Network revenue streams. Significant cost variances were: professional fees related to the purported securities class action lawsuits and SEC investigation of $784,000, increased directors and officers insurance of $165,000, $794,092 write-down of assets and restructuring charges of $127,874 related to Digital Arrow due to the poor performance of its opt-in e-mail business unit. Payout costs over revenues decreased to 41% compared to 44.9% for the same quarter of 2004 due to a decrease in the percentage paid to partners combined with an increase in revenue generated from our meta search engine for which no payout costs are incurred. Cash and cash equivalents still remained strong at $23,999,936 after the redemption of 304,665 common shares for $1,053,155, payments of directors and officers' insurance and additional fees related to the purported securities class action lawsuits and SEC investigation. Guy Faure, the Company's President and CEO stated: "Revenues in the current second quarter were below Q2 2004 due to a revenue decline of a major customer and as we reduced distribution of paid advertising in the search and Ad networks offering our advertisers only high demand traffic. The Opt-in email operations have not delivered management expected results and we are now taking action to reduce operational expenses and transfer most of the sales and operations to our Montreal head office." Guy Faure continued: "On June 20th Mamma announced the launch of its Mammahealth.com initiative. This specialised search application is the first in a series that will offer Internet users a unique search tool that queries "on-line & real-time"specialized data bases. The application provides search results from various specialized sources, and aggregates and presents content to the user in a consistent fashion. We have also recently announced an agreement with InfoSpace where they will provide distributed search results to be placed on the Mamma.com search engine beginning August 1, 2005. In the terms of the deal, InfoSpace will supply search results from some of the leading search engines on the Web. Also, as part of the agreement, the distribution of InfoSpace paid links on Mamma.com is expected to increase the number of paid clicks to InfoSpace's paid search distribution network and increase search revenues for both companies. Our ability to compete should be strengthened as we increase distribution and develop premium services, which should allow Mamma to increase its average selling price. The unaudited financial statements for the second quarter ended June 30, 2005 will shortly be available on SEDAR and EDGAR and on our Web site www.mammainc.com . About Mamma.com Inc. Mamma Media Solutions(TM) is focused on providing quality information retrieval on the Internet through its metasearch engine and is a leading provider of integrated marketing solutions to online advertisers. For more information, visit www.mammamediasolutions.com . Statements contained in this press release, which are not historical facts, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from estimated results. Such risks and uncertainties are detailed in the Company's filings with the United States Securities and Exchange Commission and the Ontario Securities Commission and include but are not limited to the extent to which the results of the SEC investigation or the purported securities class action law suits negatively affect the Company. The Company expressly disclaims any intent or obligation to update any description of the scope, focus or subject matter of the statements in this press release. -0- *T Mamma.com Inc. Condensed Consolidated Balance Sheets (Unaudited) (expressed in U.S. dollars and in accordance with generally accepted accounting principles in Canada) As at As at June 30, December 31, 2005 2004 $ $ Assets Current assets Cash and cash equivalents 23,999,936 20,609,089 Restricted cash - 148,000 Temporary investments - 6,874,155 Accounts receivable 2,232,084 2,689,540 Income taxes receivable 71,920 120,590 Prepaid expenses 663,392 135,110 Assets of discontinued operations 35,180 82,045 --------------------------------------------------------------------- 27,002,512 30,658,529 Investments 720,000 720,000 Property, plant and equipment 373,619 374,819 Intangible assets 1,390,242 2,010,244 Goodwill 1,008,868 1,402,506 --------------------------------------------------------------------- 30,495,241 35,166,098 --------------------------------------------------------------------- --------------------------------------------------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities 2,542,710 2,646,316 Deferred revenue 289,466 256,984 Liabilities of discontinued operations 88,582 227,226 --------------------------------------------------------------------- 2,920,758 3,130,526 --------------------------------------------------------------------- Shareholders' Equity Capital stock Authorized Unlimited common shares, no par value Issued and outstanding 11,958,364 common shares (12,263,029 in 2004) 88,247,786 90,496,088 Additional paid-in capital 5,495,206 5,255,249 Deferred stock-based compensation (396,112) (1,333,443) Cumulative translation adjustment 360,884 360,884 Accumulated deficit (66,133,281) (62,743,206) --------------------------------------------------------------------- 27,574,483 32,035,572 --------------------------------------------------------------------- 30,495,241 35,166,098 --------------------------------------------------------------------- --------------------------------------------------------------------- Mamma.com Inc. Condensed Consolidated Statements of Operations (Unaudited) (expressed in U.S. dollars and in accordance with generally accepted accounting principles in Canada) For the six months ended For the three months ended June 30 June 30 --------------------------------------------------------------------- 2005 2004 2005 2004 $ $ $ $ Revenue 5,835,534 8,169,908 2,590,220 3,957,428 --------------------------------------------------------------------- Expenses Search, graphic ad and email serving 138,545 104,954 64,050 50,399 Marketing, sales and services 3,828,433 4,698,891 1,811,514 2,318,989 General and administration 3,612,071 1,760,315 1,915,227 1,109,280 Product development and technical support 698,997 380,871 370,196 159,527 Amortization of property, plant and equipment 59,734 62,681 29,627 32,722 Amortization of intangible assets 276,743 116,952 139,697 69,172 Interest income (311,156) (29,218) (160,385) (21,486) Loss (gain) on foreign exchange 276 (7,240) (2,419) 1,491 Restructuring charges 127,874 - 127,874 - Write-down of property, plant and equipment, intangible assets and goodwill 794,092 - 794,092 - --------------------------------------------------------------------- 9,225,609 7,088,206 5,089,473 3,720,094 --------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes (3,390,075) 1,081,702 (2,499,253) 237,334 Provision for (recovery of) current income taxes - 168,299 - (138,244) Provision for future income taxes - 388,200 - 259,484 --------------------------------------------------------------------- Earnings (loss) from continuing operations (3,390,075) 525,203 (2,499,253) 116,094 Results of discontinued operations - 966,862 - (7,707) --------------------------------------------------------------------- Net earnings (loss) for the period (3,390,075) 1,492,065 (2,499,253) 108,387 --------------------------------------------------------------------- --------------------------------------------------------------------- Net earnings (loss) per common share - basic Earnings (loss) from continuing operations (0.28) 0.06 (0.20) 0.01 Results of discontinued operations - 0.10 - 0.00 --------------------------------------------------------------------- Net earnings (loss) per common share - basic (0.28) 0.16 (0.20) 0.01 Net earnings (loss) per common share - diluted Earnings (loss) from continuing operations (0.28) 0.05 (0.20) 0.01 Results of discontinued operations - 0.09 - 0.00 --------------------------------------------------------------------- Net earnings (loss) per common share - diluted (0.28) 0.14 (0.20) 0.01 Weighted average number of shares outstanding - basic 12,261,346 9,275,229 12,259,681 10,542,582 Additions to reflect the impact of: Exercise of stock options - 195,791 - 126,630 Exercise of warrants - 885,330 - 84,525 --------------------------------------------------------------------- Weighted average number of shares outstanding - diluted 12,261,346 10,356,350 12,259,681 10,753,737 --------------------------------------------------------------------- --------------------------------------------------------------------- Mamma.com Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (expressed in U.S. and dollars in accordance with generally accepted accounting principles in Canada) For the six months ended For the three months ended June 30 June 30 --------------------------------------------------------------------- 2005 2004 2005 2004 $ $ $ $ Cash flows from Operating activities Earnings (loss) from continuing operations (3,390,075) 525,203 (2,499,253) 116,094 Adjustments for Amortization of property, plant and equipment 59,734 62,681 29,627 32,722 Amortization of intangible assets 276,743 116,952 139,697 69,172 Employee stock-based compensation (17,859) 71,486 74,649 35,743 Tax credits - 81,505 - 91,379 Future income taxes - 388,200 - 259,484 Unrealized loss on foreign exchange - 13,362 - 6,095 Financial fees paid by issuance of capital stock and warrants - 210,392 - 210,392 Write-down of property, plant and equipment, intangible assets and goodwill 794,092 - 794,092 - Net change in non-cash working capital items (93,280) 333,233 (886,525) 551,074 --------------------------------------------------------------------- Cash from (used for) operating activities from continuing operations (2,370,645) 1,803,014 (2,347,713) 1,372,155 Cash from (used for) operating activities from discontinued operations (91,779) (869,119) (30,280) 5,383 --------------------------------------------------------------------- (2,462,424) 933,895 (2,377,993) 1,377,538 --------------------------------------------------------------------- Investing activities Business combination, net of cash acquired - (1,264,210) - (1,264,210) Purchase of property, plant and equipment (73,534) (31,990) (24,684) (12,722) Purchase of intangible assets (42,195) (1,511) (32,717) (1,511) Net decrease in temporary investments 6,874,155 - 6,912,561 - --------------------------------------------------------------------- Cash from (used for) investing activities from continuing operations 6,758,426 (1,297,711) 6,855,160 (1,278,443) Cash from investing activities from discontinued operations - 1,744,185 - 287,228 --------------------------------------------------------------------- 6,758,426 446,474 6,855,160 (991,215) --------------------------------------------------------------------- Financing activities Issuance of capital stock and warrants - 22,493,871 - 16,735,575 Share issue costs - (1,034,999) - (1,034,999) Redemption of common shares (1,053,155) - (1,053,155) - --------------------------------------------------------------------- Cash from (used for) financing activities (1,053,155) 21,458,872 (1,053,155) 15,700,576 --------------------------------------------------------------------- Effect of foreign exchange rate changes on cash and cash equivalents - 79,375 - - --------------------------------------------------------------------- Net change in cash and cash equivalents and restricted cash during the period 3,242,847 22,873,616 3,424,012 16,086,899 Cash and cash equivalents and restricted cash - Beginning of period 20,757,089 4,489,077 20,575,924 11,275,794 --------------------------------------------------------------------- Cash and cash equivalents and restricted cash - End of period 23,999,936 27,362,693 23,999,936 27,362,693 --------------------------------------------------------------------- --------------------------------------------------------------------- Cash and cash equivalents comprise: Cash 1,494,165 27,193,347 1,494,165 27,193,347 Short-term investments 22,505,771 21,346 22,505,771 21,346 --------------------------------------------------------------------- 23,999,936 27,214,693 23,999,936 27,214,693 Restricted cash - 148,000 - 148,000 --------------------------------------------------------------------- 23,999,936 27,362,693 23,999,936 27,362,693 --------------------------------------------------------------------- --------------------------------------------------------------------- *T Mamma.com Inc. (NASDAQ:MAMA)