Copernic Inc., (the "Company"), (NASDAQ: CNIC), a leading software
development company in the technology sector, specializing in
internet, desktop and mobile search products, today reported its
financial results for the second quarter ended June 30, 2010 (''Q2
2010''). Unless otherwise stated, all figures in this release are
in US dollars.
Financial Highlights
-- Revenues from continuing operations were $0.41 million for Q2 2010, the
same as for Q2 2009.
-- Gross margin from continuing operations in Q2 2010 was 98% compared to
96% for Q2 2009.
-- Expenses from continuing operations in the second quarter of 2010 were
at $0.87 million compared to 1.2 million in the comparable period in
2009. During Q2 2010, an amount of $0.12 million was spent in relation
with potential business acquisitions. Excluding these fees, expenses for
Q2 2010 amounted to 0.75 million. The Company continues its effort to
reduce its costs and maintains its cost reduction plan.
-- Net loss from continuing operations in Q2 2010 was $0.5 million ($0.22
per share) compared to a net loss of $0.38 million ($0.18 per share) for
the same period in 2009.
-- Liquidities sufficient to meet normal operating requirements until end
of 2010 were at $2.5 million as of June 30, 2010, compared to $4.8
million as of June 30, 2009.
Recent Highlights
-- As announced on March 26, 2010, Copernic Inc. entered into a letter of
intent with Fanotech Manufacturing Group (''Fanotech'') with respect to
the proposed acquisition by Copernic of the assets of Fanotech
Manufacturing Group comprised of Fanotech Enviro Inc., Fanotech Waste
Equipment Inc. and 1099958 Ontario Limited currently operating as
FanoCore. This transaction was conditional amongst other things to the
closing of the Sunbay transaction and the private placement previously
announced on January 29, 2010, which did not closed on April 30, as
previously agreed. Therefore the Company announced on June 3, 2010 that
discussions involving the acquisition of Fanotech, Sunbay Canada and the
private placement were terminated.
-- On June 30, 2009, the Company concluded a $5,000,000 transaction for the
disposal of its search / media segment with Empresario. The payment
terms of this transaction were renegotiated and signed on November 12,
2009 to 36 equal monthly instalments of the greater of $100,000 or 85%
of the revenues at an annual interest rate of 13.6%, compounded monthly,
and calculated on the outstanding balance of sale. During Q1 and Q2
2010, the purchaser was $300,000 short on the $600,000 payments
scheduled for these quarters and was in default in his obligations.
Based on this failure to pay, management renegotiated a new agreement
with the purchaser. On August 10, 2010, Copernic and Empresario signed
an agreement to convert the existing balance of sale into a debenture
which shall mature on August 10, 2011. The debenture will not bear
interest until maturity or upon default and no instalment payments would
be required to be made during its term. Upon maturity, if the
outstanding amounts due under the debenture are not paid in full, the
Company will have the right to require the liquidation of Empresario.
Under the terms of the debenture, Empresario has the right to redeem the
debenture for an amount equal to $2,500,000 if redeemed by February 10,
2011, or for an amount equal to $3,000,000 if redeemed after February
10, 2011 but prior to August 10, 2011 or for an amount of all the
outstanding principal if redeemed thereafter. Interest at the rate of
13.6% will be earned on the outstanding balance from the maturity date
or upon a default. The new debenture has a fair market value of
$2,835,000 while the book value of the balance of sale was $4,273,287. A
write down of $1,438,287 was accounted for in June 2010.
"Unfavorable economic conditions have also impacted on
Empresario's ability to pay, thereby necessitating a change of
payment terms offset by an improvement in our security instruments.
However in the last 12 months, Empresario did manage to pay
$700,000. In addition, our unfavourable sales results continue to
mitigate against our cost improvement programs, leading management
to explore other alternatives to improve shareholder value", stated
Mr. Marc Ferland, President and CEO of Copernic.
About Copernic Inc.
Copernic Inc. specializes in developing, marketing and selling
cutting-edge search technology, providing innovative home and
business software products and solutions for desktop, web and
mobile users, through its online properties www.copernic.com and
www.mycopernic.com. With its award winning Copernic Desktop Search
software search engine product, the Company brings the power of a
sophisticated, yet easy-to-use search engine to the user's PC.
More information can be found at www.copernic.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 Securities and Exchange
Commission and the Ontario Securities Commission. 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.
Copernic Inc.
Condensed Consolidated Balance Sheet
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(expressed in U.S. dollars and in accordance with generally accepted
accounting principles in Canada)
As at As at
June 30, 2010 December 31, 2009
(unaudited) (audited)
$ $
Assets
Current assets
Cash 594,039 465,949
Temporary investments 1,956,330 3,504,930
Accounts receivable 272,831 256,110
Income taxes receivable 213,305 337,802
Balance of sale receivable - 655,131
Prepaid expenses 323,945 118,149
Other assets 2,900,637 -
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6,261,087 5,338,071
Balance of sale receivable - 3,694,060
Property and equipment 93,333 115,110
Intangible assets 165,859 202,597
Goodwill 3,362,003 3,362,003
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9,882,282 12,711,841
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--------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 661,424 1,010,140
Deferred revenue 122,723 103,668
Deferred rent 569 1,534
Current portion of obligations under
capital leases 15,495 50,630
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800,211 1,165,972
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Obligations under capital leases 10,591 7,906
Future income taxes 36,577 45,146
--------------------------------------------------------------------------
Commitments
Shareholders' equity
Capital stock
Authorized
Unlimited number of common shares, no
par value
Issued and outstanding
2,091,913 (2,091,437 as at December
31, 2009) common shares 96,557,218 96,556,485
Contributed Surplus 5,928,600 5,853,737
Accumulated other comprehensive income 561,137 561,137
Accumulated deficit (94,012,052) (91,478,542)
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9,034,903 11,492,817
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9,882,282 12,711,841
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Copernic 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 For the three
months ended months ended
June 30, June 30,
---------------------------------------------------
2010 2009 2010 2009
$ $ $ $
Revenues 724,692 926,790 413,057 413,360
Cost of revenues 17,181 29,443 8,939 16,243
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Gross Margin 707,511 897,347 404,118 397,117
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Expenses
Marketing, sales and
services 298,469 285,150 144,175 120,912
General and
administration 1,170,976 1,146,610 570,164 531,932
Product development and
technical support 461,910 556,941 186,983 280,367
Amortization of
property and equipment 31,247 54,231 13,817 28,235
Amortization of
intangible assets 38,837 355,864 19,534 178,106
Gain on disposal of
property and equipment (2,827) - (2,827) -
Gain on disposal of
intangible assets (9,960) - (9,960) -
Restructuring charges - 25,622 - 5,210
Interest and other
income (223,947) (23,682) (72,785) (9,263)
Gain on disposal of an
investment - (169,239) - -
Loss on foreign
exchange 41,614 10,008 22,479 17,993
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1,806,319 2,241,505 871,580 1,153,492
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Loss from continuing
operations before
income taxes
and discontinued
operations (1,098,808) (1,344,158) (467,462) (756,375)
Current income taxes - 1,498 - -
Future income taxes (8,569) (558,645) (4,284) (379,691)
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(8,569) (557,147) (4,284) (379,691)
--------------------------------------------------------------------------
Loss from continuing
operations (1,090,239) (787,011) (463,178) (376,684)
Results of discontinued
operations, net of
income taxes (1,443,271) 4,424,926 (1,443,271) 4,144,769
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Net income (loss) for
the period (2,533,510) 3,637,915 (1,906,449) 3,768,085
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Basic and diluted loss
/ share - continuing
operations (0.52) (0.38) (0.22) (0.18)
Basic and diluted
earnings (loss) /
share - discontinued
operations (0.69) 2.12 (0.69) 1.98
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Basic and diluted net
earnings (loss) /
share (1.21) 1.74 (0.91) 1.80
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Copernic Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
--------------------------------------------------------------------------
(expressed in U.S. dollars and in accordance with generally accepted
accounting principles in Canada)
For the six For the three
months ended months ended
June 30, June 30,
---------------------------------------------------
2010 2009 2010 2009
$ $ $ $
Cash flows from (used
for)
Operating activities
Loss from continuing
operations (1,090,239) (787,011) (463,178) (376,684)
Adjustments for
Amortization of
property and
equipment 31,247 54,231 13,817 28,235
Amortization of
intangible assets 38,837 355,864 19,534 178,106
Employee stock-based
compensation 74,863 55,226 53,651 29,681
Gain on disposal of
an investment - (169,239) - -
Gain on disposition
of intangible (9,960) - (9,960) -
Future income taxes (8,569) (558,645) (4,284) (379,691)
Accreted interest on
balance of sale
receivable (217,603) - (70,413) -
Unrealized loss
(gain) on foreign
exchange 164 3,706 (955) 5,744
Net change in non-cash
working capital items (428,646) 41,371 (410,316) (165,588)
--------------------------------------------------------------------------
Cash used for operating
activities from
continuing operations (1,609,906) (1,004,497) (872,104) (680,197)
Cash provided by (used
for) discontinued
operations (4,984) 583,704 (4,984) 303,092
--------------------------------------------------------------------------
Cash used for
operations (1,614,890) (420,793) (877,088) (377,105)
--------------------------------------------------------------------------
Investing activities
Increase in other
assets (65,637) - (65,637) -
Proceeds on the
disposal of an
investment - 169,239 - -
Proceeds on the
disposal of an
intangible 9,960 - 9,960 -
Purchase of intangible
assets (2,099) (3,224) (326) (2,622)
Purchase of property
and equipment (3,357) (23,474) (1,007) (12,549)
Net decrease in
temporary investments - 3,005,227 - 4,006,563
--------------------------------------------------------------------------
Cash provided by (used
for) continuing
operations (61,133) 3,147,768 (57,010) 3,991,392
Cash provided by
discontinued
operations 293,507 - 48,390 -
--------------------------------------------------------------------------
Cash provided by (used
for) investing
activities 232,374 3,147,768 (8,620) 3,991,392
--------------------------------------------------------------------------
Financing activities
Issuance of capital
stock 733 - - -
Repayment of
obligations under
capital leases (38,727) (27,543) (20,217) (14,056)
--------------------------------------------------------------------------
Cash used for financing
activities (37,994) (27,543) (20,217) (14,056)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Net change in cash and
cash equivalents
during the period (1,420,510) 2,699,432 (905,925) 3,600,231
Cash and cash
equivalents -
Beginning of period 3,970,879 2,067,705 3,456,294 1,166,906
--------------------------------------------------------------------------
Cash and cash
equivalents - End of
period 2,550,369 4,767,137 2,550,369 4,767,137
--------------------------------------------------------------------------
Cash and cash
equivalents comprise:
Cash 594,039 766,782 594,039 766,782
Temporary investments 1,956,330 4,000,355 1,956,330 4,000,355
--------------------------------------------------------------------------
2,550,369 4,767,137 2,550,369 4,767,137
Supplemental cash flow
information -
continuing operations
Cash paid for interest 3,206 4,999 1,539 2,436
Cash paid for income
taxes - 1,498 - -
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Contacts: Copernic Inc. Jean-Rock Fournier, CA Executive Vice
President and Chief Financial Officer Toll Free: 877-289-4682 or
418-527-0528 ext. 1271 jrfournier@copernic.com www.copernic.com
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