SureFire Commerce Inc. announced second-quarter results for fiscal year 2003. The operating loss for the quarter was $2.0 million compared to $4.2 million in the prior quarter and earnings of $1.6 million in the same period of the prior fiscal year. The Company reported a second-quarter net loss of $21.8 million, which includes two one-time, non-cash items totaling $17.0 million. This compares to net earnings of $1.0 million in the second quarter of the previous fiscal year, and a net loss of $4.9 million in the previous quarter.
Revenue for the second quarter was $10.4 million, compared to $11.7 million for the quarter ended June 30, 2002 and $19.3 million for the comparable period of the previous fiscal year.
Operating expenses totaled $12.4 million for the second quarter and $17.7 million for the comparable period of the previous fiscal year. Compared to the quarter ended June 30, 2002, expenses decreased by 22% or $3.6 million. This decrease in expenses of 22% exceeds the decrease in revenue of 11% over the same period.
Due to the restructuring plan implemented in April 2002, operating expenses, excluding transaction processing costs, decreased by $3.5 million on a quarterly basis or 34%, or approximately $14.0 million annually, compared to the quarter ended March 31, 2002 (prior to the restructuring).
On October 1, 2002, the Company signed a merger agreement with privately held ebs Electronic Billing Systems AG (EBS), a European payment processor. Upon completion of the transaction, SureFire Commerce will acquire 100% of EBS in exchange for SureFire Commerce’s common shares representing approximately 63% of SureFire Commerce’s common shares on a fully diluted basis.
The transaction, considered for accounting purposes to be a reverse takeover, will take place in two phases and is expected to close in early 2003. SureFire Commerce and EBS have commenced integration planning in order to realize the benefits of the transaction in a timely manner.
As a result of the agreement with EBS, SureFire Commerce was required to review the value of goodwill and intangibles resulting in a write-off of goodwill and intangible of $15.8 million.
On October 1, 2002, SureFire Commerce sold substantially all of the assets of SiteSell.com Inc. to a third party in exchange for an interest-free note receivable of $3.8 million. As a result of the disposal of assets, SureFire Commerce has recorded a write-down of $1.2 million to reflect the discounted fair value of the note to be received as consideration for the sale of these assets.
Total assets at the end of the quarter were $91.4 million compared to $108.1 million at June 30, 2002. Free cash, defined as total cash less customer reserves and security deposits, as at September 30, 2002 was $0.4 million, compared to $0.9 million at June 30, 2002. This reduction in free cash of $0.5 million is significantly lower than the reduction of $8.0 million incurred in the prior quarter and can be attributed to the restructuring plan implemented in April 2002.
“These results are in line with our expectations and with our restructuring plan,” said Mitch Garber, President and CEO of SureFire Commerce. “We remain focused on two main priorities: the completion of our restructuring in order to return to profitability on a stand-alone basis, and the closing of the merger with EBS, both goals are precisely on track. On a stand-alone basis, we expect to be break-even on an operating profit level in the third quarter and we expect to close the EBS merger in early 2003.”
Mr. Garber, formerly the Company’s Executive Vice President of Business Development, was appointed President, CEO and Director of SureFire Commerce on October 1, 2002. He played a major role in starting SureFire Commerce’s core business of credit card processing and is responsible for negotiating the merger with EBS. Mr. Garber has replaced Rory Olson, former President and CEO, who resigned on November 20, 2002 as Director of SureFire Commerce.
CONSOLIDATED FINANCIAL RESULTS
Readers should consult the enclosed unaudited comparative consolidated financial results and accompanying notes for the second quarter of the fiscal year.
ABOUT SUREFIRE COMMERCE INC.
SureFire Commerce Inc. (TSX: FIR) is a global provider of proprietary payment processing services. The Company provides technology and services that businesses require to accept credit card and check payments. SureFire Commerce processes credit card payments for Internet, mail-order/telephone-order, and bill payment transactions, as well as processing checks online and by phone. Transactions are processed through SureFire Commerce’s own secure transaction- processing engine located in the Company’s exclusively controlled and managed data centre. Headquartered in Montreal (Quebec), SureFire Commerce has offices in Hull (Quebec) and London (England).
For more details on SureFire’s 3Q/02 results visit CardData ([www.carddata.com]).