Momentum Business Applications, Inc. Announces Fourth Quarter and 1999 Fiscal Year End Financial Results
PLEASANTON, Calif.--(BUSINESS WIRE)--June 10, 1999--Momentum
Business Applications, Inc. (Nasdaq:MMTM), today announced a net loss
of $206,000 or $0.04 per share for the fourth quarter ended April 30,
1999, and net income of $503,000 or $0.15 per share for the period
from November 9, 1998 (the date Momentum was incorporated) through
April 30, 1999.
Revenues, consisting of interest and investment income earned on
invested funds, were $3.08 million for the quarter ended April 30,
1999, and $3.91 million for the period from November 9, 1998 through
April 30, 1999.
During the quarter ended April 30, 1999, Momentum and PeopleSoft,
Inc. executed amendments to their Development and License Agreement
under which the two companies will collaborate on eight different
product development projects with an aggregate budget of nearly $140
million. Certain of these projects had not been initiated as of the
Fiscal Year end, and actual funding of the remainder of the projects
commenced on or after the middle of March. Accordingly, Momentum's
product development expenses effectively reflect less than half a
quarter of project development activity. The aggregate product
development expenses under the aforementioned Development and License
Agreement with PeopleSoft were $2.60 million for both the quarter
ended April 30, 1999 and for the period from November 9, 1998 through
April 30, 1999.
Momentum's third quarter report included no provision for income
taxes because the Company expected to incur a loss on operations for
the period from inception through April 30, 1999. As a result of the
slower than expected ramp in development spending, Momentum actually
realized pre-tax income for this stub period. Consequently, the
results for the quarter ended April 30, 1999 include an adjustment to
the Fiscal 1999 effective tax rate resulting in the apparently high
effective income tax rate for the fourth quarter of Fiscal 1999. For
the foreseeable future, Momentum expects that its development
expenditures will exceed revenues on a quarterly basis, resulting in
ongoing net operating losses.
Special Note
To the extent any statements made in this release pertain to
information that is not historical, these statements are necessarily
forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995. The reader is cautioned not to rely on
these forward-looking statements. Momentum expressly disclaims any
intent or obligation to update these forward-looking statements. These
forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those
anticipated. Such risks and uncertainties include, but are not limited
to the following:
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-- Momentum may not successfully select or develop products. The
development projects referenced herein are characterized by many
inherent risks, including but not limited to 1) it may be
difficult to staff such projects with qualified development
personnel who have sufficient domain expertise, 2) existing
PeopleSoft technology may not be suitable as a foundation for the
application software functionality, 3) development efforts in
general are complex, and such complexities create a risk that the
products may not be technologically feasible, and 4) constantly
changing and evolving customer demands for products and product
functionality may cause products to meet with limited market
acceptance. Consequently, such development efforts may not be
successful or result in a product that is accepted by the market.
-- Demand for Momentum's products may be highly sensitive to time to
market and/or first mover advantages. Any material delays in the
development project schedule may adversely affect demand for the
product, even if the development project is otherwise
successfully completed. Furthermore, competitors of PeopleSoft,
and even PeopleSoft, may offer products that compete directly
with Momentum's products. Weakness in demand for a product will
translate into limited royalty income to Momentum, associated
limited product payment buy out proceeds, if any, and may
ultimately reduce PeopleSoft's interest in exercising its
purchase option.
-- Momentum and PeopleSoft are parties to various agreements which
limit Momentum's ability to take certain actions, establish
alternate channels of distribution for its products, and use
funds for other than designated product development and
administrative activities. Consequently, Momentum has few degrees
of freedom with which to generate revenues or otherwise
commercialize developed technology or products should PeopleSoft
elect not to utilize some or all of the developed products.
-- Momentum or PeopleSoft may cancel a development project at
anytime and for any reason or no reason at all. Accordingly, it
is possible that Momentum could incur significant expenditures
toward the development of a particular product, only to have the
project cancelled in the later stages of the schedule. There is
no recourse to PeopleSoft in the event of this occurrence.
-- If Momentum were not successful with a number of development
projects, PeopleSoft would be unlikely to exercise its option to
purchase the stock of Momentum. Even if Momentum is successful in
developing certain products, PeopleSoft may not exercise its
option to purchase the Common Stock of Momentum. For example,
PeopleSoft has the right to buy out the ownership of selected
products under its product royalty buy out rights. Consequently,
it could purchase the rights to certain products, without the
need to exercise the purchase option on the Company's Common
Stock.
-- Other risks which are detailed in the Company's filings with the
Securities and Exchange Commission, including, but not limited
to, the December 31, 1998 Second Amendment to the Information
Statement (Form 10) and the 1999 third quarter Report to
Shareholders (Form 10-Q) filed March 15, 1999.
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About Momentum
Momentum Business Applications, Inc. was created by PeopleSoft,
Inc. in 1998 to select, develop and commercialize software products in
the following three areas: 1) Analytic applications, 2) Industry
specific applications, and 3) E-Business applications. PeopleSoft
initially contributed $250 million in capital to Momentum, and under
the development and licensing agreement between Momentum and
PeopleSoft, these funds are specifically restricted to certain product
development and administrative activities. Upon the completion of a
development project, PeopleSoft has an option to license and
exclusively distribute the resulting application products through its
worldwide sales and marketing group. In addition, PeopleSoft has an
option to purchase all of the Momentum Class A Common Stock at a price
set according to a predetermined formula. Momentum's offices are
located in Pleasanton.
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MOMENTUM BUSINESS APPLICATIONS, INC.
(a development stage company)
CONDENSED FINANCIAL INFORMATION
(Unaudited)
THREE MONTHS ENDED PERIOD FROM
APRIL 30, 1999 NOVEMBER 9, 1998
TO APRIL 30, 1999
Revenues:
Net interest revenue $ 3,081,864 $ 3,907,585
Total revenues 3,081,864 3,907,585
Costs and expenses:
Product development 2,568,925 2,568,925
General and administrative 291,102 407,458
Total costs and expenses 2,860,027 2,976,383
Income before income taxes 221,837 931,202
Provision for income taxes 427,800 427,800
Net Income (loss) $ (205,963) $ 503,402
Basic and diluted income (loss)
per share $ (0.04) $ 0.15
Shares used in basic and diluted
per share computation 4,694,826 3,312,047
APRIL 30, NOVEMBER 10,
1999 1998
ASSETS
Current assets:
Cash and cash equivalents $253,867,039 $ 1,000
Deferred income taxes 34,502 --
------------ ------------
Total current assets 253,901,541 1,000
Deferred income taxes 29,477 --
------------ ------------
$253,931,018 $ 1,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Payable to PeopleSoft, Inc. $ 2,811,427 $ --
Accounts payable 18,028 --
Accrued liabilities 71,000 --
Accrued compensation and related
expenses 34,382 --
Income taxes payable 491,779 --
------------ ------------
Total current liabilities 3,426,616 --
Stockholders' equity:
Class A Common stock 4,694 1
Class B Common stock 1 --
Additional paid-in capital 249,996,305 999
Retained earnings 503,402 --
------------ ------------
250,504,402 1,000
$253,931,018 $ 1,000
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CONTACT:
Momentum Business Applications, Inc.
Ronald E.F. Codd, 925/469-6129
ron-codd@mmtm.com |
