For Immediate Release
Notify Technology Reports Results for the First Fiscal
Quarter Ended December 31, 2004
Major product shift improves gross margins and Notify’s wireless
revenue achieves six fold increase over the previous year’s first quarter
San Jose, CA, February 10, 2005 -- – Notify Technology Corporation (OTC: NTFY) today announced financial results for the quarter ended December 31, 2004.
A major shift in product concentration between the three-month periods ended December 31, 2004 and the corresponding period in 2003 increased revenue to $885,906 with a gross margin of 96.4% from $801,749 with a gross margin of 68.1%, respectively. Revenue in the first fiscal quarter of 2005 was primarily generated from software and service sales whereas revenue in the fiscal quarter of 2004 contained a significant concentration of wireline device sales. The Company’s net loss for the three month period ended December 31, 2004, was $170,157 or a net loss per share of $0.01, compared to a net loss of $134,177, or a net loss per share of $0.03, reported for the corresponding period of fiscal 2004.
The NotifyLink product line revenue improved significantly to $486,247 in the three-month period ended December 31, 2004 from $75,282 in the three-month period ended December 31, 2003. Partially offsetting this increase was the absence of shipments of the Visual Got Mail Solution Customer Premise Equipment (CPE) for voice messaging in the three-month period ended December 31, 2004 compared to $260,674 in the three-month period ended December 31, 2003. The service portion of the Visual Got Mail Solution was still significant but decreased to $366,300 in the three-month period ended December 31, 2004 compared to $397,191 in the comparable period of fiscal 2004. This decrease in the Visual Got Mail Solution service revenue is expected to continue as our customer has made the decision to reduce its marketing commitment in the local service telephone market. The customer has also recently decided to dispose of its inventory of CPE and the event will result in Notify recognizing approximately $1,400,000 in gross revenue, of which approximately $243,000 is included in deferred revenue at December 31, 2004.
Although our gross margin has improved greatly, the product shift has increased our operating expenses, specifically our sales and marketing expense, at the same time it has reduced our cost of revenue. This is because the acquisition of customers is the major cost of the NotifyLink product requiring additional inside direct sales personnel and an expansion of the technical support department needed to support the growing wireless business. Sales and marketing expense increased to $406,519 for the three-month period ended December 31, 2004 from $142,931 in the corresponding period of fiscal 2004.
Over the past year, the Company has focused a major portion of its research and development and sales on its NotifyLink wireless products and services. The NotifyLink wireless products contributed 55% of the total revenue for the three-month period ended December 31, 2004 compared to less than 9% in the same period in fiscal 2004. Notify continues to design new NotifyLink products with the current release of a hosted version targeted at those customers who wish to avoid installing an on-premise solution and still service the wireless needs of employees using a variety of wireless devices on multiple networks.
“We are pleased with the improvement in sales of NotifyLink in the first quarter. We have committed most of our resources in a product area that we believe has the most future potential for Notify. The wireless product line is already contributing greatly to our overall performance and has improved our cash flow since most of the wireless contracts are on a prepaid annual basis.” said Paul DePond, Chief Executive Officer. “The sales of our wireline products have proven valuable in the past but wireless products expand our markets and increase the number of customers we service.”
About Notify Technology Corporation
Founded in 1994, Notify Technology Corporation, (OTC: NTFY) is an innovative communications company offering wireless and service products. Notify’s wireless solutions provide secure synchronized email and PIM access and management to any size organization on a variety of wireless 2-way devices and networks. Notify sells its wireless products directly and sells its wireline products through CLECs. The company is headquartered in San Jose, California. For more information, visit http://www.notifycorp.com or contact 408-777-7920.
Forward-Looking Statements: This press release contains forward-looking statements related to Notify Technology that involve risks and uncertainties, including, but not limited to statements regarding the development of NotifyLink revenue sales and the service revenue on the Visual Got Mail Solution. Those statements are based on current information and expectations and there are important factors that could cause actual results to differ materially from those anticipated by such statements. These risks include, but are not limited to, our ability to deliver products and manage growth, the continuance of certain customer voice mail programs, the expectation that the revenue from the service portion of the Visual Got Mail Solution will decline due to customer decisions to withdraw from the consumer market that the Notify product supports, and the percentage contribution to revenue of NotifyLink, as well as other risks. In particular, we cannot predict future NotifyLink revenues with any accuracy and do not know whether NotifyLink revenues will continue to grow at the rates we have recently experienced. Increasing NotifyLink revenues will require continued investments in our sales and marketing organization, and we have limited available cash resources to make these investments. These forward-looking statements are made in reliance on the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. For further information about these factors that could affect Notify Technology's future results, please see the Company’s filings with the Securities and Exchange Commission. Prospective investors are cautioned that forward-looking statements are not guarantees of performance. Actual results may differ materially from management expectations.
(Financial Tables Follow)
NOTIFY TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS
Three-Month Periods |
|||||
Ended December 31, |
|||||
2004 |
2003 |
||||
(Unaudited) |
|||||
Revenue: |
|||||
Product sales |
$ 486,970 |
$ 331,996 |
|||
Service revenue |
398,936 |
421,718 |
|||
Royalty revenue |
-- |
48,035 |
|||
Total revenue |
885,906 |
801,749 |
|||
Cost of revenue: |
|||||
Product cost |
19,349 |
205,319 |
|||
Service cost |
12,631 |
50,719 |
|||
Total cost of revenue |
31,980 |
256,038 |
|||
Gross profit |
853,926 |
545,711 |
|||
Operating expenses: |
|||||
Research and development |
246,692 |
220,993 |
|||
Sales and marketing |
406,519 |
142,931 |
|||
General and administrative |
373,224 |
307,078 |
|||
Total operating expenses |
1,026,435 |
671,002 |
|||
Loss from operations |
(172,509) |
(125,291) |
|||
Interest income (expense) and other, net |
2,352 |
(8,886) |
|||
Net loss |
$ (170,157) |
$ (134,177) |
|||
Basic and diluted net loss per share |
$ (0.01) |
$ (0.03) |
|||
Weighted average shares outstanding |
13,828,017 |
4,599,800 |
|||
Notify Technology CORPORATION |
||||||||
Balance Sheets |
||||||||
Dec. 31, |
Sep. 30, |
|||||||
2004 |
2004 |
|||||||
(unaudited) |
||||||||
Assets: |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ 758,527 |
$ 1,026,121 |
||||||
Accounts receivable |
523,625 |
485,425 |
||||||
Other assets |
56,720 |
56,598 |
||||||
Total current assets |
1,338,872 |
1,568,144 |
||||||
Property and equipment, net |
157,986 |
170,391 |
||||||
Total assets |
$ 1,496,858 |
$ 1,738,535 |
||||||
Liabilities and shareholders’ deficit |
||||||||
Current liabilities: |
||||||||
Current portion of capital lease obligations |
|
|
||||||
Accounts payable |
24,780 |
64,012 |
||||||
Accrued payroll and related liabilities |
257,532 |
378,057 |
||||||
Deferred revenue |
1,181,055 |
1,081,175 |
||||||
Customer advances |
226,098 |
271,114 |
||||||
Other accrued liabilities |
171,352 |
173,168 |
||||||
Total current liabilities |
1,875,608 |
1,982,097 |
||||||
Long-term capital lease obligations |
12,842 |
16,623 |
||||||
Total liabilities |
1,888,450 |
1,998,720 |
||||||
Shareholders' deficit: |
||||||||
Common stock |
13,969 |
13,814 |
||||||
Additional paid-in capital |
22,840,831 |
22,802,236 |
||||||
Accumulated deficit |
(23,246,392) |
(23,076,235) |
||||||
Total shareholders’ deficit |
(391,592) |
(260,185) |
||||||
Total liabilities and shareholders' deficit |
$ 1,496,858 |
$ 1,738,535 |
||||||
Contacts:
At Notify Technology:
Jerry Rice, Chief Financial Officer
Phone: 408-777-7927
jerry .rice@notifycorp.com
#
©2005 Notify Technology Corporation. All Rights Reserved.
