Tuesday November 21, 6:46 pm Eastern Time
Press Release
SOURCE: Net Shepherd Inc.
via BCE Emergis e-News Services
Net Shepherd Announces Q3 Financial Results
Calgary, Alberta
"Restructuring Complete And Strong Progress In
Building The Asset Value Of Our Us Based Investments"
Net Shepherd Inc. (CDNX: WEB) today reviewed its operational and financial performance for the third quarter of 2000.
``During the third quarter we made progress in building the asset value of our investments and in restructuring the go forward cost base of the company overall. Our approach has been to address the issues that we can impact regardless of market conditions,'' stated Don Sandford, President and CEO of Net Shepherd Inc.
``NSI has evolved as planned into an asset company with a portfolio of market focused technology companies. We intend in the future to fully leverage the experience and expertise within the Vanenburg Group, our major shareholder, to build value and accelerate our investments through commercialization and potential liquidity events in 2001 and 2002.
As part of the approach of seeking strategic alliances and business combinations to strengthen the position of our investment companies in their industry categories, Answers.com has signed an agreement to acquire KnowItAll, Inc. of Austin, Texas in Q3 2000. The deal is expected to close upon the securing of the current financing round of $5 million. The two companies are leveraging their technologies and offerings to create rapid growth and category leadership in the self-help customer service space. Answers.com is growing rapidly and added several new clients in Q3 2000. We estimate that Answers.com has grown from a valuation of $1.2 million when it was acquired by NSI in August 1999 to approximately $75 million ($50 million US) today, the rate at which the current funding is taking place. This increase in value is attracting direct financing into Answers.com making it less dependent on NSI for financial support. NSI currently owns 72% of Answers.com. Answers.com is currently raising $5 million US in financing.
Our business intelligence company, ktopia in New Jersey, is developing commercial relationships with many new clients including Hoovers and everywoman.co.uk. ClickChoice has been focused on content relevancy solutions for corporations and organizations. NSI continues to hold a minority interest in FinTech Solutions, Inc. of Calgary who acquired Strategy Bridge from NSI in Q3 2000.
We announced at our AGM our plan to utilize our expertise to incubate and accelerate market led, customer driven, ideas or concept technology companies. The Board is currently considering various plans and will advise the shareholders of its overall direction shortly. As part of this strategy, NSI has established a minority interest in KinetiQ Inc., an Internet business acceleration company operating out of Calgary, Canada that was launched on October 11, 2000 and staffed by former NSI employees.
The financial results for the nine months ending September 30, 2000, reflect the operations of the consolidated group of companies but with the results of Strategy Bridge shown as loss from discontinued operations on the Statement of Loss. The Internet consulting business of Strategy Bridge began in 2000 through the reorganization of various personnel previously embedded in NSI's operations. This business did not previously exist during 1999 and consequently, there are no comparative numbers in the results from discontinued operations for the period ended September 30, 1999.
As a result of the above financial statement presentation, $1.3 million of revenue relating to the Internet consulting business of Strategy Bridge has been reflected in the results from discontinued operations. Revenue from continuing operations of $993,975 decreased from $2.9 million in the same period of 1999. This is due to the wind down of the systems integration services previously offered by NSI. In addition, the nature of certain commercial agreements in 2000 has restricted the revenue recognition of some transaction-based contracts.
Selling, general and administrative costs of the company grew from $2.3 million in the nine months ending September 30, 1999 to $20 million for the corresponding period in 2000. This $20 million excludes $1 million in G&A associated with Strategy Bridge, which has been reflected in the results from discontinued operations. G&A costs in through the first nine months of 2000 consisted of $4 million from ClickChoice in Atlanta, $9 million from Answers.com in Pasadena, $1 million from ktopia in New Jersey, $2.4 million from the corporate operations of NSI in Atlanta and $3.3 million from the corporate operations of NSI in Calgary. Included in these amounts is $531,000 of one-time charges associated with severance and reorganization costs.
Goodwill amortization of $7.4 million in 2000 increased significantly from $173,000 in 1999. In addition, capital assets depreciation increased from $167,000 in 1999 to $2.8 million in 2000. These increases reflect the goodwill and purchased intangible assets associated with the acquisition of ClickChoice in March 2000.
We are currently financing operations from cash flow and a $10 million standby line of credit. At September 30, 2000, $3.9 million was still available on this line of credit. NSI has now effectively reduced operating costs and focused all capital into customer driven revenue-producing operations within its investments. I am pleased to report that the result is a dramatic reduction to the burn rate of the company with a clear strategic focus on building Answers.com and ktopia. Beginning in the fourth quarter, the burn rate of the consolidated company is approximately $1.5 million per month. The direct financing being raised in Answers.com will fund its operations well into 2001 without the need to rely upon any portion of the line of credit. Thus, the remaining $3.9 million line of credit will be available to fund the operations of NSI and its other investment companies such as ktopia and ClickChoice into 2001.
The Board is committed to making continuous improvements in the business and to clearly communicate these to shareholders. Direct third party strategic investment is being sought for our investments in addition to the ongoing financial support being provided by the Vanenburg Group.``
Full details of the figures for the first nine months are given in the following Financial Statements.
NET SHEPHERD INC.
Consolidated Statements of Loss and Deficit
Nine Months Ended September 30,
(Unaudited)
2000 1999
$ $
------- --------
REVENUE 993,975 2,925,736
COST OF SALES 460,238 2,596,347
-------- ----------
533,737 329,389
--------- ----------
EXPENSES
Selling, general and administrative 19,817,933 2,288,571
Research and development costs 5,965,543 -
Capital and intangible
assets depreciation 2,763,769 166,634
Interest on long-term debt 71,435 -
Gain on dilution of interests in
consolidated subsidiaries (20,682) -
Non-controlling interests in loss
of consolidated subsidiaries (35,104) -
------------ ----------
28,562,894 2,455,205
------------ -----------
LOSS BEFORE GOODWILL AMORTIZATION (28,029,157) (2,125,816)
GOODWILL AMORTIZATION (7,360,876) (172,189)
------------------------
LOSS FROM CONTINUING OPERATIONS (35,390,033) (2,298,005)
LOSS FROM DISCONTINUED OPERATIONS (36,178) -
--------------------------
NET LOSS FOR THE PERIOD (35,426,211) (2,298,005)
DEFICIT, BEGINNING OF PERIOD (10,008,614) (5,041,313)
-------------------------
DEFICIT, END OF PERIOD (45,434,825) (7,339,318)
==========================
LOSS PER SHARE BEFORE GOODWILL
AMORTIZATION (0.46) (0.06)
GOODWILL AMORTIZATION PER SHARE (0.12) (0.01)
LOSS FROM DISCONTINUED
OPERATIONS PER SHARE (0.00) (0.00)
---------------------------
NET LOSS PER SHARE (0.58) (0.07)
===========================
NET SHEPHERD INC.
Consolidated Balance Sheets
(Interim Numbers Unaudited)
September December September
30, 2000 31,1999 30,1999
$ $ $
--------- -------- ---------
ASSETS
CURRENT
Cash and cash equivalents 1,322,113 6,029,542 340,123
Short-term investments 605,461 152,959 1,083,370
Accounts receivable 917,503 1,224,573 1,428,165
Prepaid expenses 488,297 120,309 74,752
--------- ---------- ----------
3,333,374 7,527,383 2,926,410
Long-term investments 2,076,305 - -
Capital assets 3,572,322 614,789 407,648
Prepaid software development
costs 6,937,528 - -
Purchased intangible assets 17,126,449 - -
Goodwill 60,806,437 1,921,776 2,001,868
Deferred acquisition costs - 262,771 -
----------- ---------- ----------
93,852,415 10,326,719 5,335,926
=========== ========== ==========
LIABILITIES
CURRENT
Accounts payable and
accrued liabilities 5,507,736 729,735 342,360
Note payable 166,162 - -
Deferred revenue - 46,421 -
--------- -------- --------
5,673,898 776,156 342,360
Long-term debt 11,125,900 - -
Non-controlling interests
in consolidated
Subsidiaries 2,559,958 - -
---------- --------- --------
19,359,756 776,156 342,360
----------- --------- --------
SHAREHOLDERS' EQUITY
Convertible debt - 7,216,500 -
Share capital 119,927,484 12,342,677 12,332,884
Deficit (45,434,825)(10,008,614)(7,339,318)
-----------------------------------
74,492,659 9,550,563 4,993,566
-----------------------------------
93,852,415 10,326,719 5,335,926
====================================
NET SHEPHERD INC.
Consolidated Statements of Cash Flows
Nine Months Ended September 30,
(Unaudited)
2000 1999
$ $
------ -------
CASH FLOWS RELATED TO THE
FOLLOWING ACTIVITIES:
OPERATING
Net loss (35,426,211) (2,298,005)
Adjustments for:
Recognition of prepaid software
development costs 412,972 -
Capital and intangible assets
depreciation 2,763,769 166,634
Goodwill amortization 7,360,876 172,189
Gain on dilution of interests in
consolidated subsidiaries (20,682) -
Non-controlling interests in loss of
consolidated subsidiaries (35,104) -
Gain on disposition of subsidiary (409,675) -
-------------------------
(25,354,055) (1,959,182)
Changes in non-cash working capital 1,802,756 (598,201)
-------------------------
(23,551,299) (2,557,383)
FINANCING -------------------------
Issuance of note payable, net of
repayments 166,162 -
Proceeds from long-term debt 11,125,900 -
Issuance of non-controlling interests
in consolidated subsidiaries 2,732,120 -
Issuance of share capital, net of
issue costs 7,031,949 5,259,318
------------------------
21,056,131 5,259,318
------------------------
INVESTING
Sale of short-term investments 19,728 -
Purchase of long-term investment (150,000) -
Purchase of capital assets (2,377,768) (287,452)
Net cash acquired on acquisition
of subsidiary 680,981 (1,359,992)
Net cash used in disposition of
subsidiary (385,202) -
-------------------------
(2,212,261) (1,647,444)
-------------------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (4,707,429) 1,054,491
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 6,029,542 369,002
-------------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD 1,322,113 1,423,493
=========================
Background Notes:
Net Shepherd Inc (NSI) is an Internet-based technology management company that accelerates the development of the companies in which it has an interest. NSI currently has five investments: Answers.com, Clickchoice.com Fintech, KinetiQ Inc., and ktopia,. NSI builds up the assets and valuations of the investments and then takes them through liquidity events, such as mergers, sales or IPOs, subsequently distributing a portion of the holdings as dividends to shareholders.
NSI is traded on the Canadian Venture Exchange under the symbol WEB.
Information and statements in this document, other than historical information, should be considered forward-looking and reflect management's current views of future events and financial performance that involve a number of risks and uncertainties. Factors that could cause actual results to differ materially include, but are not limited to, the following: general economic conditions and developments within the Internet and Intranet industries; product development and technology changes; competition and pricing pressures; length of the sales cycle; variability of sale order flow and the management of growth.
``THE CANADIAN VENTURE EXCHANGE HAS NEITHER APPROVED NOR DISAPPROVED THE INFORMATION CONTAINED HEREIN.''
For further information contact:
Don Sandford President & CEO Net Shepherd Inc 1324, 17th Avenue SW Calgary, Alberta T2T 5S8, Canada Phone: (403) 218 8913 Fax: (403) 232 6711 E-mail: don.sandford@netshepherd.com Website: www.netshepherd.com
SOURCE: Net Shepherd Inc. |
