Today's third quarter results confirm the slow down in revenue growth
and appear to postpone the prospect for profiability indefinitely. As
a result the share price continues to drop, last trading at $3.00.
MGI Software Announces Third Quarter Financial Results
Achieves Eighth Consecutive Period of Revenue Growth
DECEMBER 15, 1997
TORONTO, ONTARIO--MGI Software Corp. (TSE - MGI) today announced its
financial results for the third quarter ended October 31, 1997.
Revenues for the period were $3,602,351 (Cdn) as compared to
$1,282,677 for the comparable quarter ended October 31, 1996, an
increase of 181 per cent. The report represents the eighth
consecutive period of quarter-over-quarter sales growth, an increase
of 16 per cent over the second quarter ended July 31, 1997.
In the quarter, the company continued its aggressive funding of R&D
which increased 196 per cent to $1,363,939 as compared to $460,385
expensed in the comparable quarter ended October 31, 1996. Net loss
for the third quarter was $1,365,871 or $0.07 per share based on a
weighted average of 19,570,236 common shares outstanding. As at
October 31, 1997, MGI Software had $21,108,048 in current assets which
included $15,072,662 in cash and short term deposits and $4,327,996 in
accounts receivable.
Nine Months Three Months
Ended October 31, 1997 Ended October 31, 1997
Revenues $9,079,400 $3,602,351
Gross profit $7,184,624 $2,717,213
Expenses $11,395,853 $4,131,112
Interest income $88,272 $48,028
Net loss per share $0.21 $0.07
For the nine months ended October 31, 1997, the company achieved
revenues of $9,079,400 as compared to $2,942,689 for the nine months
ended October 31, 1996, an increase of 209 per cent. Net loss for the
nine months was $4,122,957 or $0.21 per share versus$3,282,006 or
$0.22 per share for the comparable period in 1996.
"Sales performance, industry awards, strategic partnerships,
financing, and listing on the Toronto Stock Exchange, have combined
to create our most exciting and successful quarter ever," said Anthony
DeCristofaro, president and CEO, MGI Software. "Undoubtedly, the
highlight is the equity placement and related product agreement we
signed with industry giant, Intel Corp., which recognizes MGI as a
leader in visual computing software."
During the quarter MGI products continued to garner user accolades and
important industry awards. MGI VideoWave received an unprecedented
second PC Magazine's Editor's Choice Award in the same year for entry-
level video editing. Reviewers indicated "VideoWave's biggest
advantage is a well-designed storyboard interface that makes video
editing remarkably easy." MGI PhotoSuite was awarded Best Buy by Home
Office Computing and Small Business Computing Magazines, while MGI
Sport Cards received an Editor's Pick award from PC Photo Magazine.
Since introducing its first product, MGI has captured 25 awards and
recommendations for excellence from computer publications around the
world.
PC Photography continues to grow as more users experiment with photos
on their computers. The availability of low cost image scanning
services by photo specialty retailers is making it convenient for
picture takers to put their photos on their PCs. MGI has been among
the first to recognize this trend and has committed to helping photo
retailers grow their imaging business by providing a unique software
line for the photo retail channel. These products also support online
photo finishing services offered by photo chains, allowing users to
store, use, save and share their photographs over the Internet.
Manufacturers have been quick to seize the new digital opportunity.
Lower-priced and better quality, digital cameras, scanners, video
capture devices, storage devices, and colour printers, matched by
dropping computer prices, are making it easier than ever for existing
users to upgrade systems and for first time buyers to get into
digital photography and video. MGI is working with many manufacturers
to combine its software with their products and some of the world's
best brands, including Sony, Packard Bell NEC, Iomega, and Canon, now
license MGI's products. To date, more than 30 manufacturers have
joined with MGI Software to promote PC Photography and Video
Publishing.
In the quarter, MGI Software and Intel Corp. (Nasdaq - INTC) entered
into a business relationship involving equity financing, product and
market development. Both companies are actively working together to
advance MGI's PC imaging, video editing and 3-D graphics
technologies. MGI also completed the sale of 3.5 million Special
Warrants to support the company's next stage of development and
coincident with the financing, various operations were reorganized to
manage MGI's expansion and growing customer base more efficiently.
Since February, MGI has been investing to find new ways to work with
its customers via the Internet. A new Web site now incorporates a
number of technologically advanced features that allow users to locate
the closest store carrying MGI products, test-drive products without
download, purchase products online, and automatically receive
messages from MGI and its partners. Investors also can use the MGI Web
site to obtain live stock feeds from Dow Jones and MGI's 90-day
trading history, among other financial information. Looking forward,
the Internet will play an increasingly pivotal role in expanding the
markets in which MGI participates.
About MGI Software
Copyright(c) MGI Software Corp.,1997. MGI, MGI PhotoSuite, MGI
VideoWave are trademarks or registered trademarks of MGI Software
Corp. All other company and/or product names are trademarks and/or
registered trademarks of their respective manufacturers.
MGI SOFTWARE CORP.
BALANCE SHEETS
(unaudited)
(in thousands of dollars)
October 31 October 31
1997 1996
Assets
Current assets
Cash and short-term deposits $ 15,073 $ 2,764
Accounts receivable 4,328 1,761
Prepaids and other assets 1,203 257
Inventories 477 263
Investment tax credits receivable 27 398
------ ------
21,108 5,443
Capital assets (Note 4) 1,506 4,893
Goodwill - 237
------ ------
$ 22,614 $ 10,573
------ ------
------ ------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities $ 3,171 $ 1,518
Deferred revenue 27 -
------ ------
3,198 1,518
Shareholders' Equity
Capital stock (Note 5) 18,063 13,014
Special warrants (Note 5(a)) 13,875 -
Deficit (12,522) (3,959)
------ ------
19,416 9,055
------ ------
$ 22,614 $ 10,573
------ ------
------ ------
MGI SOFTWARE CORP.
STATEMENTS OF OPERATIONS AND DEFICIT
(unaudited)
(in thousands of dollars, except per share amounts)
Three months Three months Nine months
ended ended ended
October 31 October 31 October 31
1997 1996 1997
Revenue $ 3,602 $ 1,283 $ 9,079
Cost of sales 885 336 1,894
-----------------------------------------
2,717 947 7,185
Expenses
Marketing and selling 2,422 1,098 7,131
Administration 215 380 663
Research and development
(Note 6) 1,364 461 3,275
Amortization of capital
assets 130 455 327
-----------------------------------------
4,131 2,394 11,396
-----------------------------------------
Loss before undernoted
item (1,414) (1,447) (4,211)
Interest income 48 37 88
-----------------------------------------
Loss for the period (1,366) (1,410) (4,123)
Deficit, beginning of
period (11,156) (2,549) (8,399)
-----------------------------------------
Deficit, end of period $(12,522) $ (3,959) $(12,522)
-----------------------------------------
-----------------------------------------
Loss per share $ (0.07) $ (0.08) $ (0.21)
-----------------------------------------
-----------------------------------------
Weighted average number
of common shares
outstanding 19,570,236 16,652,382 19,289,218
-----------------------------------------
-----------------------------------------
MGI SOFTWARE CORP.
STATEMENTS OF CHANGES IN FINANCIAL POSITION
(unaudited)
(in thousands of dollars)
Three months Three months Nine months
ended ended ended
October 31 October 31 October 31
1997 1996 1997
Cash provided by
(used in)
Operating activities
Loss for the period $ (1,366) $ (1,410) $ (4,123)
Items not affecting
cash
Amortization 130 455 327
Net change in noncash
working capital
amounts (1,210) (233) (1,744)
-----------------------------------------
(2,446) (1,188) (5,540)
-----------------------------------------
Financing activities
Issue of common shares 3,169 5,882 3,207
Issue of special warrants 13,875 (4,314) 13,875
-----------------------------------------
17,044 1,568 17,082
-----------------------------------------
Investing activities
Purchase of capital assets (364) (1,807) (882)
-----------------------------------------
(364) (1,807) (882)
-----------------------------------------
Increase (decrease) in
cash resources during
the period 14,234 (1,427) 10,660
Cash and short-term
deposits, beginning of
period 839 4,191 4,413
-----------------------------------------
Cash and short-term
deposits, end of period $15,073 $ 2,764 $ 15,073
----------------------------------------- |
