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Information Technology and Business Process Outsourcing Company Narrows Loss NEWPORT BEACH, CA--(MARKET WIRE)--Aug 19, 2008 -- Caneum, Inc. (OTC BB:CANME.OB - News), a global
provider of business process and information technology
outsourcing
services, today announced financial results for the three
months ended June
30, 2008.
"Our pro forma loss from operations for the quarter ended June 30, 2008 was $.135M, which is slightly less than the quarterly loss for the prior year period. We are pleased that our cost cutting efforts have started to take effect and I am confident of more significant improvements in results for the rest of the year. It is noteworthy that our revenues also increased slightly in spite of the current economic slowdown," said Suki Mudan, President and Principal Executive Officer of Caneum. Financial Summary for Three Months Ended June 30, 2008 The Company reports operating income, net income and earnings per share (EPS) on a GAAP and non-GAAP basis. The non-GAAP measures are described below and are reconciled to the corresponding GAAP measures in the accompanying financial tables. Non-GAAP operating income, non-GAAP net income and non-GAAP EPS are computed net of stock-based compensation, bad debt allowances, imputed interest, depreciation/amortization, minority interest and foreign exchange charges. Reconciliations of non-GAAP measures to GAAP operating income, net income and EPS are included at the end of this release. Financial Highlights for Three Months ended June 30, 2008 Revenues -- The Company reported revenues of $3.28M for Q2 2008, representing a $0.04M increase over Q2 2007 revenues of $3.24M. Cost of Revenues -- The Company reported cost of revenues of $2.74M for Q2 2008, representing an $0.20M increase over Q2 2007 cost of revenues of $2.54M. Operating Expenses -- The Company reported operating expenses of $1.12M for Q2 2008, representing a $0.07M decrease over Q2 2007 operating expenses of $1.19M. Stock-Based Compensation -- The Company reported stock-based compensation expenses of $0.37M for Q2 2008, representing a $0.09M increase over Q2 2007 stock-based compensation expenses of $0.28M. Operating Loss -- The Company reported GAAP operating loss of $0.58M for Q2 2008, compared to GAAP operating Loss of $0.49M for Q2 2007. The Company reported non-GAAP operating loss of $0.135M for Q2 2008, compared to Q2 2007 non-GAAP operating loss of $0.138M. Net Loss -- The Company reported GAAP net loss of $0.60M for both Q2 2008 and Q2 2007. The Company reported non-GAAP net loss of $0.205M for Q2 2008, Q2 2007 non-GAAP net loss of $0.198M. EPS -- The Company reported GAAP EPS loss of $0.06 for Q2 2008 compared to Q2 2007 GAAP EPS loss of $0.07. The Company reported non-GAAP EPS loss of $0.02 for both Q2 2008 and Q2 2007. About Caneum, Inc.: Caneum, Inc. is a global provider of business process and information technology outsourcing services across vertical industries including technology, energy, government, transportation, financial services, education and healthcare. The Company provides a suite of business strategy and planning capabilities to assist companies with their "make versus buy" decisions in the areas of data, network, product development, product maintenance and customer support, and fulfills its services in-house, on-shore, near-shore and off-shore, depending on the business goals and objectives of its global customers. In parallel, the Company is opportunistically pursuing accretive acquisitions within its core outsourcing product and service suite in order to broaden its core capabilities, expand its customer base and supplement its organic growth. For more information, please visit the Company's web site at www.caneum.com. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: With the exception of historical information, the statements set forth above include forward-looking statements that involve risk and uncertainties. The Company wishes to caution readers that a number of important factors could cause actual results to differ materially from those in the forward-looking statements. Those factors include, but are not limited to, the risk factors noted in the Company's filings with the United States Securities and Exchange Commission, such as the rapidly changing nature of technology, evolving industry standards and frequent introductions of new products, services and enhancements by competitors; the competitive nature of the markets for the Company's products and services; the Company's ability to gain market acceptance for its products and services; the Company's ability to fund its operational growth; the Company's ability to attract and retain skilled personnel; the Company's ability to diversify its revenue streams and customer concentrations; and the Company's reliance on third-party suppliers. ABOUT NON-GAAP FINANCIAL MEASURES To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: non-GAAP operating income, non-GAAP net income and non-GAAP EPS. The presentation of this financial information is not intended to be considered in isolation, or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables included at the end of this release. We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses and expenditures that may not be indicative of our "recurring core business operating results," meaning our operating performance excluding not only non-cash charges such as stock-based compensation and non-cash consulting expenses that may occur opportunistically from time to time. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance, as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional and retail investors and the analyst community to help them analyze the health of our business. Non-GAAP Operating Income. We define non-GAAP operating income as operating income minus stock-based compensation, non-cash consulting expenses, bad debt allowances and depreciation/amortization. The Company considers these non-GAAP financial measures to be useful metrics for management and investors because they exclude items that cloud the ability of the Company's management and investors to compare the Company's recurring core business operating results over multiple periods. There are a number of limitations related to the use of non-GAAP operating income versus operating income calculated in accordance with GAAP. First, non-GAAP operating income excludes some costs, namely, stock-based compensation, that are recurring. Stock-based compensation has been and will continue to be for the foreseeable future a significant recurring expense in the Company's business. Second, stock-based compensation is an important part of our employees' compensation and impacts their performance. Third, the components of the costs that we exclude in our calculation of non-GAAP operating income may differ from the components that our peer companies exclude when they report their results of operations. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP operating income and evaluating non-GAAP operating income together with operating income calculated in accordance with GAAP. Non-GAAP Net Income and Non-GAAP EPS. We define non-GAAP net income as net income minus stock-based compensation, bad debt allowances, non-cash consulting expenses, unpaid interest, depreciation/amortization, minority interest and foreign exchange loss. We define non-GAAP EPS as non-GAAP net income divided by the weighted average shares, on a basic and fully diluted basis, outstanding as of the end of the period. We consider these non-GAAP financial measures to be a useful metric for management and investors for the same reasons that the Company uses non-GAAP operating income. The same limitations described above regarding the Company's use of non-GAAP operating income apply to our use of non-GAAP net income and non-GAAP EPS. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from non-GAAP net income and non-GAAP EPS and evaluating non-GAAP net income and non-GAAP EPS together with net income and EPS calculated in accordance with GAAP. CANEUM, INC. SUMMARY FINANCIAL TABLES The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
Caneum, Inc.
Condensed Consolidated Statements of Operations
And Comprehensive Income (Loss)
For the Three and Six Months Ended June 30, 2008 and 2007
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
Unaudited Unaudited Unaudited Unaudited
----------- ----------- ----------- -----------
Revenue $ 3,282,784 $ 3,241,315 $ 6,519,408 $ 5,991,688
Cost of revenue 2,742,409 2,541,978 5,469,496 4,730,190
----------- ----------- ----------- -----------
Gross profit 540,375 699,337 1,049,912 1,261,498
Operating expenses 1,124,476 1,187,839 2,203,847 2,297,794
----------- ----------- ----------- -----------
Loss from operations (584,101) (488,502) (1,153,935) (1,036,296)
----------- ----------- ----------- -----------
Other income (expense)
Interest expense, net (57,363) (51,531) (112,669) (104,023)
Gain (loss) on
foreign exchange 53,308 (38,745) 63,146 (53,048)
----------- ----------- ----------- -----------
Total other income
(expense) (4,055) (90,276) (49,523) (157,071)
Minority Interest - (11,974) - (80,352)
----------- ----------- ----------- -----------
Loss before income tax (588,156) (590,752) (1,203,458) (1,273,719)
Income tax expense (13,174) (10,748) (14,814) (13,732)
----------- ----------- ----------- -----------
Net loss $ (601,330) $ (601,500) $(1,218,272) $(1,287,451)
=========== =========== =========== ===========
Basic and diluted net
loss per common share $ (0.06) $ (0.07) $ (0.13) $ (0.16)
=========== =========== =========== ===========
Weighted average number
of Common Shares
outstanding used in
the calculation 9,534,667 8,045,480 9,293,810 7,996,050
=========== =========== =========== ===========
Net loss $ (601,330) $ (601,500) $(1,218,272) $(1,287,451)
Comprehensive Income:
Foreign currency
translation
adjustment (Note 2) (23,712) 55,869 (33,119) 69,925
----------- ----------- ----------- -----------
Comprehensive Loss $ (625,042) $ (545,631) $(1,251,391) $(1,217,526)
=========== =========== =========== ===========
Caneum, Inc.
Condensed Consolidated Balance Sheets
As of June 30, 2008 and December 31, 2007
June 30, December 31,
2008 2007
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 50,070 $ 46,280
Accounts receivable, net of allowance of
$394,258 and $392,157, respectively 1,406,009 1,559,352
Accounts receivable from related parties, net
of allowance of $153,852 47,240 111,010
Prepaid assets 82,969 134,764
Other current assets 32,180 33,202
----------- -----------
Total current assets 1,618,468 1,884,608
LONG TERM ASSETS
Property & equipment, net 150,281 193,843
Intangibles, net 579,001 643,555
Goodwill 1,464,805 1,464,805
Other 34,060 32,264
----------- -----------
TOTAL ASSETS $ 3,846,615 $ 4,219,075
=========== ===========
CURRENT LIABILITIES
Accounts payable $ 1,705,198 $ 1,552,870
Accrued expenses 48,313 25,975
Credit lines 1,190,450 1,231,694
Accrued payroll and related expenses 152,257 248,287
Deferred revenue 34,839 22,880
Current portion of installment loans 259,225 734,974
Other current liabilities 318,989 90,992
----------- -----------
Total current liabilities 3,709,271 3,907,672
LONG TERM LIABILITIES
Current portion of installment loan
reclassifed to non-current - 200,000
Promissory notes - related party 625,000 -
Promissory notes 75,000 -
Installment loans, less current portion 433,672 17,894
Other non current liabilities 63,820 61,058
----------- -----------
Total liabilities 4,906,763 4,186,624
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value 20,000,000
shares authorized, 0 and 3,332,500 shares
issued and outstanding - 3,332
Common stock, $0.001 par value 100,000,000
shares authorized, 10,463,513 and 8,896,368
shares issued and outstanding 10,452 8,895
Additional paid-in capital 8,869,394 8,708,827
Accumulated other comprehensive income 54,297 87,416
Accumulated deficit (9,994,291) (8,776,019)
----------- -----------
Total shareholders' equity (deficit) (1,060,148) 32,451
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,846,615 $ 4,219,075
=========== ===========
Caneum, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2008 and 2007
For the Six Months Ended
--------------------------
June 30, June 30,
2008 2007
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,218,272) $ (1,287,451)
Adjustments to reconcile net loss to net
cash used in operating activities
Stock option compensation expense 241,864 299,212
Expenses paid by common stock issuances
or committed issuances 292,070 317,003
Interest accreted to TierOne installment
loans - 34,538
Depreciation and amortization 49,789 33,946
Amortization of acquired intangibles 91,326 122,354
Bad debt expense 35,000 -
Minority interest - 80,352
(Increase) decrease in
Accounts receivable 109,286 (1,070,247)
Prepaid assets and other current
assets 43,549 (58,584)
Increase in
Accounts payable and accrued expenses 201,467 698,495
Accrued payroll and related expenses (37,910) 6,514
Deferred revenue 11,959 -
Other current liabilities 4,519 -
------------ ------------
Net cash used in operating activities (175,353) (823,868)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisition of remaining
interest of Continuum - (89,286)
Purchase of property & equipment (17,185) (36,802)
Sale of property & equipment 1,050 -
------------ ------------
Net cash used in investing activities (16,135) (126,088)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Promissory Notes 500,000 -
Payment of debt (76,896) (543,857)
Addition to debt 18,750 24,225
Repurchase of common and Preferred shares (200,000) -
Decrease in credit lines (41,244) 1,232,671
------------ ------------
Net cash provided by (used in) financing
activities 200,610 713,039
------------ ------------
Effect of changes in foreign currency
exchange rates on cash (5,332) 19,028
Net increase (decrease) in cash and cash
equivalents 3,790 (217,889)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 46,280 335,202
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 50,070 $ 117,313
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid $ 106,451 $ 72,745
Income taxes paid $ 14,814 $ 13,732
Caneum, Inc.
Pro Forma Condensed Consolidated Statements of Operations
And Comprehensive Income (Loss)
For the Three and Six Months ended June 30, 2008 and 2007
Three Months Ended Six Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2008 2007 2008 2007
Unaudited Unaudited Unaudited Unaudited
Revenue $ 3,283,000 $ 3,241,000 $ 6,519,000 $ 5,992,000
Cost of revenue 2,742,000 2,542,000 5,469,000 4,730,000
----------- ----------- ----------- -----------
Gross profit 541,000 699,000 1,050,000 1,262,000
Operating expenses 1,124,000 1,188,000 2,204,000 2,298,000
Adjustments to operating
expenses:
Stock-based
compensation (371,000) (280,000) (534,000) (616,000)
Depreciation and
amortization (62,000) (71,000) (141,000) (156,000)
Bad debt (15,000) - (35,000) -
----------- ----------- ----------- -----------
Pro forma operating
expenses 676,000 837,000 1,494,000 1,526,000
----------- ----------- ----------- -----------
Pro forma loss from
operations (135,000) (138,000) (444,000) (264,000)
----------- ----------- ----------- -----------
Other income expense (17,000) (113,000) (64,000) (251,000)
Adjustments to
non-operating expenses:
Minority interest - 12,000 - 80,000
Interest expense
accreted to notes - 2,000 - 35,000
Loss (gain) on
foreign exchange (53,000) 39,000 (63,000) 53,000
----------- ----------- ----------- -----------
Pro forma net loss $ (205,000) $ (198,000) $ (571,000) $ (347,000)
=========== =========== =========== ===========
Basic and diluted net
loss per common share $ (0.02) $ (0.02) $ (0.06) $ (0.04)
=========== =========== =========== ===========
Weighted average number
of Common Shares
outstanding used in
the calculation 9,534,667 8,045,480 9,293,810 7,996,050
=========== =========== =========== ===========Contact: Contact:
Caneum, Inc.
Suki Mudan
President
(949) 273-4000
Source: Caneum, Inc.
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