Notify Technology Reports Results for the Fiscal Year
Ended September 30, 2006

For Immediate Release

San Jose, CA, November 27, 2006 -- Notify Technology Corporation (OTC: NTFY) today announced financial results for its fiscal year ended September 30, 2006. The Company showed a net loss for the fiscal year ended September 30, 2006, of $314,893, or a net loss per share of $0.02, compared to a net loss of $557,452, or a net loss per share of $0.04, reported for fiscal 2005.  Improved operational performance was overshadowed by an unfavorable non-cash accounting adjustment during the fiscal year of $470,073 relating to warrant liability, which is described in further detail below. The $4,356,362 of total revenue reported in the fiscal year ended September 30, 2006 compares to $5,018,464 of total revenue for fiscal 2005.

The decrease in total revenue consisted of a 49% decrease in our legacy Visual Got Mail revenue partly offset by a 34% increase in NotifyLink revenue.  Due to the favorable disparity in gross margin between the product lines, the gross margin actually improved to $3,799,946 in the twelve-month period ended September 30, 2006 from $3,734,673 in the twelve-month period ended September 30, 2005 despite lower gross sales.  Gross margin as a percentage of revenue for the twelve-month period ended September 30, 2006 was 87.2% compared to 74.4% in the twelve three month period ended September 30, 2005.

The Company’s NotifyLink wireless product line revenue improved to $2,869,480 for the fiscal year ended September 30, 2006 from $2,147,452 for the prior fiscal year.  Revenue for the service portion of the Visual Got Mail Solution product line was $809,300 in the twelve-month period ended September 30, 2006 compared to $1,377,267 in the 2005 fiscal year. The level of Visual Got Mail service revenue is expected to continue to decrease in future periods, or cease altogether, as the installed base of Visual Got Mail product services declines due to our customer’s discontinued marketing of the service. Influencing the twelve-month performance of the Company were two non-operating events.  The largest event was a $479,073 unfavorable non-cash adjustment due to the interpretation of EITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, A Company’s Own Stock” that required a warrant liability to be created.  The terms of the outstanding warrants that triggered the EITF 00-19 interpretation were modified by the warrant holders in September 2006, which allowed the Company to reclassify the warrant liability as equity.

Unfortunately, as required under generally accepted accounting principles, the expense remained on the income statement and negated what would have been an otherwise profitable performance.  The second event was an assignment of certain patents relating to obsolete legacy products for $250,000 cash.  The results of this transaction had a favorable impact on the Company’s revenue. “The 34% growth in NotifyLink revenue this year over last year plus the sales of selected legacy wireline patents was overshadowed by the negative EITF 00-19 adjustment. Had the EITF adjustment not occurred, Notify would have shown a $155,181 profit for our fiscal year,” said Paul DePond, President of Notify Technology. “We believe that any future negative EITF-00-19 accounting adjustments relating to our currently outstanding warrants have been eliminated with the execution of the warrant amendments signed in September 2006. Now we can focus on the improving performance of our wireless products, which we believe is the true indicator of the Company’s business.” Use of Non-GAAP Financial InformationThe foregoing portions of this press release make statements concerning our financial results that are not based on generally accepted accounting principles.

To supplement our reported results, we use a non-GAAP measure of net loss/profit which excludes an unfavorable non-cash accounting adjustment relating to warrant liability to allow for a better comparison of results to those in periods prior to fiscal 2006 that did not include such unfavorable accounting adjustment. We believe that because the unfavorable accounting adjustment was a non-cash charge that we do not currently anticipate will recur in future periods, the non-GAAP measure that excludes this unfavorable accounting adjustment enhances the comparability of results against prior periods and provides investors additional information about the operating performance of our business.

In addition, we use this non-GAAP financial measure for internal management purposes and as a means to evaluate period-to-period comparisons. This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, or superior to, the financial measure prepared in accordance with GAAP. RECONCILIATION OF GAAP NET LOSS TO NON-GAAP
(unaudited)

 

Fiscal Year
ended September 30,
2006

 

GAAP

NON-GAAP

Net loss

$ (314,892)

$ (314,892)

Excluded loss on fair value of warrants

                        ---

   470,073

Gain (loss) on operations

$   (314,892)

$   155,181
 About Notify Technology Corporation
Founded in 1994, Notify Technology Corporation, (OTC: NTFY) is an innovative software company developing mobility products for organizations of all sizes. 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 through authorized resellers internationally. 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 improving performance of our wireless products, the absence of future negative accounting adjustments 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, the acceptance of our wireline products in the market, our ability to continue to improve our existing products or develop new products or technologies, 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, among other things, continued investments in our sales and marketing organization, and we have limited available cash resources to make these investments.  In addition, although we have amended outstanding warrants to address a penalty provision that triggered adverse accounting treatment, we have outstanding certain unit options that contain a similar provision that has not been amended and that could result in adverse accounting charges in future periods in the event of increases in our stock price.  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’s expectations. (Financial Tables Follow)
NOTIFY TECHNOLOGY CORPORATIONCONDENSED UNAUDITED STATEMENTS OF OPERATIONS

 

Three-Months

Fiscal Years

 

Ended September 30,

Ended September 30,

 

 

          2006

          2005

 

     2006

      2005

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

   Product revenue

 
$   705,868

 

 
$   534,545

 

 
$ 3,105,463

 

$ 3,527,343

   Service revenue

305,215

 

302,978

 

    1,250,899

 

1,491,121

Total revenue

1,011,083

 

837,523

 

4,356,362

 

5,018,464

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

   Product cost

996

 

38,325

 

460,813

 

1,216,865

   Service cost

--

 

9,091

 

15,374

 

66,926

   Royalty payments

23,476

 

--

 

80,229

 

    --

Total cost of revenue

     24,472

 

     29,234

 

    556,416

 

    1,283,791

Gross profit

     986,611

 

     866,757

 

    3,799,946

 

3,734,673

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

     262,577

 

     260,380

 

     975,611

 

    1,040,197

 

Sales and marketing

     413,122

 

     462,283

 

    1,634,729

 

    1,702,454

 

General and administrative

315,445

 

366,561

 

1,286,191

 

1,552,351

Total operating expenses

991,144

 

1,089,224

 

3,896,531

 

4,295,002

 

 

 

 

 

 

 

 

 

Loss from operations

   
  (4,533)

 

   
(222,467)

 


  (96,585)

 

  (560,329)

 

 

 

 

 

 

 

 

 

Other interest (expense),  net

823

 

704

 

(1,766)

 

      2,877

Proceeds from sale of patents

--

 

--

 

250,000

 

--

Loss on fair value of warrants

   
(12,154)

 

--

 

    (470,073)

 

--

 

 

 

 

 

 

 

 

 

Net loss


 $ (16,458)

 

 
$ (221,644)

 


$ (314,892)

 

$ (557,452)

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 $  (0.00)  

 

 $  (0.02)  

 

 $  (0.02)  

 

$ (0.04)

 

 

 

 

 

 

 

 

 

Basic and diluted weighted average shares outstanding


13,968,995

 


13,968,995

 


13,968,995

 


13,933,461

 

 

 

 

 

 

 

 

Notify Technology Corporation

 

Condensed Balance Sheets

 

 

 

 

 

Sept. 30,

 

Sept. 30,

 

 

 

 

 

2006

 

2005

 

 

 

 

 

(Unaudited)

 

 

 

Assets:

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

$  829,406

 

$  424,228

 

 

Accounts receivable, net

 

 

436,509

 

472,942

 

 

Other assets

 

 

53,135

 

58,751

 

Total current assets

 

 

1,319,050

 

     955,921

 

 

Property and equipment, net

 

 

99,623

 

      144,418

 

 

Total assets

 

 

$ 1,418,673

 

 $  1,100,339

 

Liabilities and shareholders’ deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Current portion of capital lease obligation

 

 

           18,219

 

          22,609

 

 

Accounts payable

 

 

37,722

 

47,650

 

 

Accrued payroll and related liabilities

 

 

231,200

 

328,535

 

 

Deferred revenue

 

 

1,623,606

 

1,287,866

 

 

Customer advances

 

 

------

 

30,039

 

 

Other accrued liabilities

 

 

122,432

 

139,484

 

 

Warrant liability

 

 

------

 

-----

 

Total current liabilities

 

 

2,033,179

 

1,856,183

 

 

Long-term capital lease obligations

 

 

9,201

 

23,044

 

Total liabilities

 

 

2,042,380

 

1,879,227

 

Shareholders' deficit:

 

 

 

 

 

 

 

Common stock

 

 

13,969

 

13,969

 

 

Additional paid-in capital

 

 

23,310,902

 

22,840,830

 

 

Accumulated deficit

 

 

(23,948,578)

 

(23,633,687)

 

Total shareholders’ deficit

 

 

(623,707)

 

(778,888)

 

 

Total liabilities and shareholders' deficit

 

$  1,418,673

 

 $  1,100,339

 
Contacts:
At Notify Technology Corporation:                                          
Jerry Rice, Chief Financial Officer                                
Phone: 408-777-7927                                                 
jerry.rice@notifycorp.com

 

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©2006 Notify Technology Corporation. All Rights Reserved.

 

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