SoftQuad International Inc. Announces Results for 1998 Q2
TORONTO, ONTARIO--(Canadian Corp News, AUGUST 14, 1998)--
Significant Progress Is Made in Changing Company Focus From Web Tools
and Structured Documents to Children's Video Games and PC Entertainment and Lifestyle Company.
SoftQuad International Inc. ("SoftQuad" or the "Company") today
announced consolidated results for the second quarter ended June 30,
1998. For the three months ended June 30, 1998, the Company recorded
sales of $2.5 million, which represents a 55 percent decrease from
the $5.5 million achieved in the comparable period last year. Year to
date sales amounted to $6.5 million as compared to $10.9 million for
the previous year, representing a 40 percent decrease in year to date
sales. The sales decline is largely due to minimal sales of voice
products from the Alpha Software subsidiary and soft corporate sales
at SoftQuad Inc., the companies structured document and web-tools
subsidiary.
In accordance with Canadian GAAP, the net loss for the quarter ended
June 30, 1998, amounted to $4.0 million or 31 cents per share, as
compared to a net loss of $8.6 million or 66 cents per share for the
comparable quarter last year. Under U.S. GAAP, the net loss for the
quarter ended June 30, 1998, was $5.3 million or 40 cents per share,
as compared to a net loss of $2.7 million or 21 cents per share for
the comparable quarter last year. The main difference between Canadian
GAAP and U.S. GAAP is the accounting treatment of the June 1998
acquisition of the majority interest in NewKidCo, LLC ("NewKidCo") and
the acquisition of Alpha Software Corporation in December 1996. Under
U.S. GAAP the Company has recorded an additional liability, of
approximately $.76 million, for estimated future consideration payable
under the terms of the NewKidCo Joint Venture Formation Agreement. No
such liability was recorded under Canadian GAAP. Further, under U.S.
GAAP the cost of these acquisitions was allocated to development
software-in-process and was written off in full in the period of
acquisition. For Canadian GAAP, these amounts were allocated to
acquired software products and were subject to amortization over
periods to a maximum of three years. The NewKidCo acquisition will be
amortized over the first six months of the 1998 fiscal year. The
NewKidCo charge was $1.7 million of which $.76 million had no impact
on cash flow. Reflected in these numbers is the impact of the
arbitration ruling that was issued by the American Arbitration
Association (see release dated August 13th, 1998).
The Company has been notified by the NASDAQ Stock Market that its
common shares are not in compliance with the new bid price
requirements. As a result, the Company's common shares are subject to
delisting. The Company requested a written review by the NASDAQ
Hearings Department to stay its delisting. This hearing will be held
August 20th 1998. If the Company's request to keep its listing is
denied, the Company will be delisted from NASDAQ, but its securities
will remain listed on The Toronto Stock Exchange.
"During the quarter we made significant progress in our mission to
transform the company from a structured document and web-tools
company into a company focused on Video Games for young children and
PC based entertainment and lifestyle software," stated Richard
Rabins, CEO of SoftQuad.
Specifically, during the quarter a number of objectives were
achieved:
1. SoftQuad finalized its joint venture with NewKidCo.
2. Progress has been made on preparing for the launch of NewKidCo
products in the upcoming fourth quarter and positioning the company
to be a leader in video games aimed at young children. Based on the
reactions from retailers and the press, the Company feels it is on
track to meet previously announced objectives of achieving $9
million US of revenue with a strong contribution to earnings from
NewKidCo for the fourth quarter. In a recent article in Computer
Retail Weekly, it stated that "sales of video-game systems have
nearly doubled in the two months since the Nintendo 64 and Sony's
PlayStation 5000 series assumed a lower price. According to figures
from The NPD Group, Port Washington,N.Y., unit sales of Sony and
Nintendo's video-game systems increased almost 100 percent..."
3. Several new entertainment and lifestyle products from the Alpha
Software subsidiary were shipped, including three add-ons for
Microsoft Flight Simulator: Air Force One, DC3 and the Planes of
Airbus. Preliminary feedback from the retail channel indicates
favorable acceptance of these products.
4. SoftQuad announced that it is pursuing the sale or spin off of
SoftQuad Inc., its structured document and web tools subsidiary. The
Company has hired Taurus Capital as an investment bank to assist in
this process and is optimistic that a transaction will take place.
Through this strategy the company will be in a much better position
to focus its time and financial resources on creating a strong
position in the children's video game market.
About SoftQuad International Inc.
Alpha Software Corporation (Alpha, Alpha Software), based in
Burlington, Mass., and SoftQuad Inc. (SoftQuad), based in Toronto,
Canada, are wholly-owned operating companies of SoftQuad International Inc.
The mission of Alpha Software Corporation is two-fold. Expanding on
its tradition of providing solution-based software, Alpha now
develops and publishes a diverse array of leading products in the
utility, business and consumer software categories. These products
are sold nationwide through the retail channel. Additionally, in a
move to influence the direction of the Internet, Alpha Software is
developing "thin-client" end-user Web database products under the
WebFiler(TM) DB brand (http://www.webfiler.com/).
SoftQuad Inc. provides a broad range of multi-platform, standards-
based software tools that help information creators, gatherers and
providers create and publish information. SoftQuad is a founding
member and active participant in the World Wide Web Consortium, the
Internet Engineering Task Force and Editorial Review Boards.
SoftQuad International Inc.'s European operations are based in
London. 6 SoftQuad International's press material can be accessed
at softquadintl.com
Summary of Results:
SOFTQUAD INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (unaudited in thousands of Canadian dollars)
Canadian GAAP U.S. GAAP(a)
Six Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
REVENUE
Sales $6,514 $10,924 $6,514 $10,924
Interest Income 200 432 200 432
Total Revenue 6,714 11,356 6,714 11,356
COST OF SALES 2,776 4,781 2,776 4,781
NET REVENUE 3,938 6,575 3,938 6,575
EXPENSES
Amortization 728 1,332 444 733
General and
administrative 2,058 3,144 2,058 3,144
Research and
development 1,347 1,742 1,347 2,174
Selling and
marketing 5,482 7,986 5,482 7,986
Amortization of
acquired software
products 320 11,744 - -
Write-off of
development software-
in-process - - 1,733 -
Reorganization Costs - 3,993 - 3,993
Total Expenses 9,935 29,941 11,064 18,030
Net Loss Before
Non-Controlling
Interest ($5,997) ($23,366) ($7,126) ($11,455)
Non-Controlling
Interest 176 - 234 -
Net Loss ($5,821) ($23,366) ($6,892) ($11,455)
Loss per Share ($.44) ($1.79) ($0.53) ($0.88)
SOFTQUAD INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (unaudited in thousands of Canadian dollars)
Canadian GAAP U.S. GAAP(a)
Three Months Ended Three Months Ended
June 30 June 30
1998 1997 1998 1997
REVENUE
Sales $2,501 $5,552 $2,501 $5,552
Interest Income - 209 - 209
Total Revenue 2,501 5,761 2,501 5,761
COST OF SALES 1,410 2,539 1,410 2,539
NET REVENUE 1,091 3,222 1,091 3,222
EXPENSES
Amortization 377 711 235 376
General and
administrative 1,175 942 1,175 942
Research and
development 699 409 699 600
Selling and
marketing 2,767 3,985 2,767 3,985
Amortization of
acquired software
products 320 5,773 - -
Write-off of
development software-
in-process - - 1,733 -
Reorganization costs - - - -
Total Expenses 5,338 11,820 6,609 5,903
Net Loss Before Non-
Controlling
Interest ($4,247) ($8,598) ($5,518) ($2,681)
Non-Controlling
Interest 176 - 234 -
Net Loss ($4,071) ($8,598) ($5,284) ($2,681)
Loss per Share ($.31) ($.66) ($0.40) ($0.21)
SOFTQUAD INTERNATIONAL INC. CONSOLIDATED BALANCE SHEETS (unaudited in thousands of Canadian dollars)
Canadian GAAP U.S. GAAP(a)
June 30 June 30
1998 1997 1998 1997
ASSETS CURRENT ASSETS Cash and
short-term deposits $4,783 $15,901 $4,783 $15,901 Accounts
receivable 1,595 7,157 1,595 7,157
Inventory 1,149 779 1,149 779
Prepaid expenses &
deposits 1,005 376 1,005 376
Total Current
Assets 8,532 24,213 8,532 24,213
Capital Assets 2,100 2,958 2,100 2,958
Deferred Development
Costs - 440 - -
Acquired Software
Products 653 - - -
Goodwill - 281 - 281
Organization costs 202 - 202 -
Total Assets $11,487 27,892 10,834 27,452
LIABILITIES
CURRENT LIABILITIES
Accounts payable $5,411 8,697 6,171 8,697
Deferred revenue 68 118 68 118
------ ------ ------ ------
5,479 8,815 6,239 8,815
NON-CONTROLLING
INTEREST 58 - - -
Total Liabilities 5,537 8,815 6,239 8,815
SHAREHOLDERS'
EQUITY
Share Capital 70,167 71,008 101,136 101,977
Deficit (64,217) (51,931) (96,541) (83,340)
Total Shareholders'
Equity 5,950 19,077 4,595 18,637
Total Liabilities/
Equity $11,487 $27,892 $10,834 $27,452
(a) The consolidated balance sheets and statements of loss and deficit
are prepared in accordance with generally accepted accounting
principles in the United States (U.S. GAAP) and have been presented as
supplemental information for the convenience of U.S. readers.
Forward-looking statements in this release are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. Investors are cautioned that all forward-looking statements
involve risk and uncertainties, including without limitation risks of
intellectual property rights and litigation, risks in technology
development and commercialization, risks in product development and
market acceptance of and demand for the Company's products, risks of
downturns in economic conditions generally, risks associated with
competition and competitive pricing pressures, risks associated with
foreign sales, risks associates with the sell-through of products in
the sales channels, risks associated with customer concentration and
other risks detailed in the Company's filings with the Securities and
Exchange Commission.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
SoftQuad International Inc. Steven Schneider Chief Financial Officer (781) 229-2924 investor@softquad.com |
