Momentum Advanced Solutions Inc.
TSX : WWW

Momentum Advanced Solutions Inc.

December 11, 2007 18:11 ET

Momentum Announces Q2 Results

Achieves Quarterly Profit on Improved Revenue

TORONTO, ONTARIO--(Marketwire - Dec. 11, 2007) - Momentum Advanced Solutions Inc. (TSX:WWW), ("Momentum" or the "Company"), a leader in the emerging world of Web outsourcing services, today announced results for the second quarter of fiscal 2008 ended October 31, 2007.

Q2 FY 08 vs. Q2 FY 07 Highlights

- Total revenue increased 15% to $4,183,866 vs. $3,648,000

- Web Solutions and Services ("WSS") revenue increased 6% to $2,675,215 vs. $2,535,000

- Managed Services ("MS") revenue increased 36% to $1,508,651 vs. $1,113,000

- Total gross profit was up 24% to $1,808,494 vs. $1,453,000

- EBITDA(1) improved to $376,376 up $708,376 from a loss of $332,000

- Net income from continuing operations was $74,117 vs. a loss of $615,000

- Net income after discontinued operations was $74,117 vs. $461,000

"I am pleased that we continued to grow our overall business while remaining diligent on cost management. This effort resulted in our first quarterly profit under the restructured and re-branded Momentum", stated Sheldon Pollack, CEO of Momentum. "Given some recent contract awards, I believe the company is well positioned to demonstrate continued growth over the upcoming quarters".

Q2 FY 08 vs. Q2 FY 07

Total revenue for the second quarter of fiscal 2008 increased by 15% or $535,866 to $4,183,866 from $3,648,000 recorded in the second quarter of fiscal 2007. WSS and MS revenue increased by 6% and 36% respectively over the same quarter of the prior year.

Total gross profit for the second quarter of fiscal 2008 quarter was $1,808,494 up 24% from $1,453,000 recorded in the second quarter of fiscal 2007. This was primarily a result of the increase in MS revenue and improved utilization of WSS resources. Gross profit as a percentage of sales increased to 43.2% vs. 39.8% in the second quarter of fiscal 2007.

Selling and administrative expenses were $1,602,796 in the second quarter of fiscal 2008 compared with $1,879,000 recorded in the second quarter of fiscal 2007. Selling costs were higher due to increased pre-sales efforts and investments in marketing activities. Administrative costs declined due to a reduction in staff and the recovery of facility lease and shared service costs from a sub-tenant.

The above resulted in EBITDA of $376,376 for the second quarter of fiscal 2008, an improvement of $708,376 from an EBITDA loss of $332,000 recorded in the second quarter of fiscal 2007.

Net income from continuing operations improved by $689,117 to $74,117 in the second quarter of fiscal 2008 compared with a loss of $615,000 recorded in the second quarter of fiscal 2007.

Net income after discontinued operations was $74,117 in the second quarter of fiscal 2008 compared with $461,000 recorded in the second quarter of fiscal 2007. Certain indirect operating expenses from the prior year have not been allocated to discontinued operations as the method of allocating these expenses is not objectively determinable.

Liquidity and Capital Resources

The Company ended the second quarter of fiscal 2008 with cash, cash equivalents and short-term investments of $3,689,810 and maintained a fully available credit facility of $2,000,000. In addition, the Company s balance sheet remained strong with a current ratio of 4.8:1 and shareholders equity of $11,019,680.

Normal Course Issuer Bid

On September 14, 2007, Momentum announced the commencement of a normal course issuer bid. As of December 11, 2007, the Company has repurchased 724,300 common shares at an average purchase price of $0.167. Common shares repurchased have been or will be cancelled.

EBITDA

1) EBITDA is defined as income (loss) from continuing operations, adding back amortization interest and other. The Company uses EBITDA amongst other measures to assess the operating performance of its ongoing business. The Company believes that EBITDA is useful supplemental information as it provides an indication of the results generated by the Company s continuing business activities prior to taking into consideration financing costs and capital asset amortization costs. Similarly, readers may find this non-GAAP financial measure useful although the term EBITDA does not have a recognized meaning under Canadian generally accepted accounting principles and therefore may not be comparable to similarly titled measures presented by other companies. EBITDA should not be construed as the equivalent to cash flow from operations. The most comparable GAAP measurement for EBITDA is net income (loss) from continuing operations. A reconciliation between net income (loss) from continuing operations and EBITDA is provided below.



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Three Months Ended October 31 2007 2006
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Net income (loss) from continuing operations $ 74,117 $ (615,000)
Amortization of capital assets, net of amounts
charged to cost of sales 140,547 186,000
Amortization of capital assets included in
Managed Services cost of sales 170,678 94,000
Interest and other (8,966) 3,000
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EBITDA $ 376,376 $ (332,000)
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Momentum Advanced Solutions Inc.
Consolidated Balance Sheets
As at October 31 and April 30, 2007

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October 31, 2007 April 30, 2007
(unaudited)
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Assets
Current assets:
Cash and cash equivalents $ 700,538 $ 2,758,000
Short-term investments 2,989,272 -
Accounts receivable 3,406,469 3,012,000
Proceeds receivable from
sale of business - 2,300,000
Prepaid expenses and other assets 773,201 631,000
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7,869,480 8,701,000

Restricted cash - 250,000
Deferred costs 88,333 97,000
Capital assets 4,784,590 4,380,000
Goodwill 550,277 550,277

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$ 13,292,680 $ 13,978,277
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 1,106,782 $ 1,850,346
Deferred revenue 252,468 214,000
Current portion of obligations under
capital leases 287,821 207,000
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1,647,071 2,271,346

Obligations under capital leases 348,293 257,000
Long-term facility lease inducement
and accrual 277,694 144,000

Shareholders' equity 11,019,622 11,305,931

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$ 13,292,680 $ 13,978,277
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Momentum Advanced Solutions Inc.
Consolidated Statements of Operations and Retained Earnings (unaudited)
For the three and six months ended October 31, 2007 and 2006


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Three months ended Six months ended
October 31 October 31
2007 2006 2007 2006
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Sales
Web solutions
and services $ 2,675,215 $ 2,535,000 $ 5,121,214 $ 4,756,000
Managed services 1,508,651 1,113,000 2,867,188 2,151,000
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Sales 4,183,866 3,648,000 7,988,402 6,907,000

Cost of Sales
Web solutions
and services 1,613,772 1,670,000 3,267,844 3,169,000
Managed services 761,600 525,000 1,485,536 1,117,000
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Cost of Sales 2,375,372 2,195,000 4,753,380 4,286,000

Gross Profit
Web solutions
and services 1,061,443 865,000 1,853,370 1,587,000
Managed services 747,051 588,000 1,381,652 1,034,000
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Gross Profit 1,808,494 1,453,000 3,235,022 2,621,000

Expenses:
Selling 655,008 620,000 1,350,443 1,095,000
Administrative 947,788 1,259,000 1,896,334 2,485,000
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1,602,796 1,879,000 3,246,777 3,580,000

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Income (loss) before
the undernoted 205,698 (426,000) (11,755) (959,000)

Amortization of
capital assets,
net of amounts
charged to cost
of sales 140,547 186,000 276,552 377,000
Interest and other (8,966) 3,000 (6,523) 3,000
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131,581 189,000 270,029 380,000

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Net income (loss)
from continuing
operations $ 74,117 $ (615,000) $ (281,784) $ (1,339,000)

Net income (loss)
from discontinued
operations - 1,076,000 (38,238) 1,510,000
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Net income (loss)
and comprehensive
income (loss) $ 74,117 $ 461,000 $ (320,022) $ 171,000
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Retained earnings,
beginning of period $ 3,762,362 $ 311,000 $ 4,156,501 $ 601,000
Repurchase of
shares (14,028) - (14,028) -
Earnings (loss) for
the period 74,117 461,000 (320,022) 171,000
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Retained earnings,
end of period $ 3,822,451 $ 772,000 $ 3,822,451 $ 772,000
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Basic and diluted
earnings (loss)
per share
Continuing
operations $ - $ (0.01) $ - $ (0.02)

Discontinued
operations - 0.02 - 0.02
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Basic and diluted
earnings per share $ - $ 0.01 $ - $ -
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Basic weighted
average common
shares outstanding 65,611,447 65,625,077 65,618,262 65,625,077
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Diluted weighted
average common
shares outstanding 65,900,306 65,856,760 65,815,513 65,682,998
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Momentum Advanced Solutions Inc.
Consolidated Statements of Cash Flows (unaudited)
For the three and six months ended October 31, 2007 and 2006


---------------------------------------------------------------------------
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Three months ended Six months ended
October 31 October 31
2007 2006 2007 2006
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Cash provided by (used in):
Operations:
Net earnings (loss) $ 74,117 $ 461,000 $ (320,022) $ 171,000
Items not involving
cash:
Amortization of
capital assets 311,225 280,000 593,746 566,000
Amortization of
deferred costs 4,417 - 8,667 -
Amortization of
leasehold inducement (2,149) - (2,149) -
Increase in long-
term facility
lease inducement
and accrual 144,223 - 144,223 -
Unrealized gain on
short-term
investments (33,685) - (39,272) -
Stock based
compensation 16,341 15,000 58,443 30,000
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514,489 756,000 443,636 767,000

Changes in non-cash
operating working
capital (305,421) (1,828,000) 1,058,234 (4,655,000)
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Cash provided by
(used in)
operations 209,068 (3,034) 1,501,870 (3,034)
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209,068 (1,072,000) 1,501,870 (3,888,000)
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Financing:
Increase in bank
indebtedness - 1,196,000 - 1,196,000
Addition to obligation
under capital lease 300,740 332,000 300,740 332,000
Payments on
obligations
under capital leases (77,730) (58,000) (128,626) (105,000)
Repayment of long-term
debt and note payable - (22,000) - (45,000)
Repurchase of shares (24,730) - (24,730) -
Long-term facility
lease inducement
and accrual (14,217) (16,000) (28,380) (33,000)
Increase in long-term
facility lease
inducement and accrual 20,000 - 20,000 -
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204,063 1,432,000 139,004 1,345,000
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Investments:
Purchase of
capital assets (570,539) (311,000) (998,336) (689,000)
Purchase of short-term
investments - - (3,300,000) -
Sale of short-term
investments 350,000 - 350,000 -
Decrease in
restricted cash - - 250,000 -
Purchase of
Indigo27 Inc. - (125,000) - (125,000)
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(220,539) (436,000) (3,698,336) (814,000)
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Increase (decrease)
in cash 192,592 (76,000) (2,057,462) (3,357,000)
Cash and cash
equivalents
beginning of period 507,946 76,000 2,758,000 3,357,000
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Cash and cash
equivalents
end of period $ 700,538 $ - $ 700,538 $ -
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Forward Looking Statement

Readers should take note that certain statements in this press release are forward-looking and may not give full weight to all of the potential risks and uncertainties. These forward-looking statements include statements that are subject to risks and uncertainties. Forward-looking statements are subject by their nature to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forward-looking statements. Any forward-looking statements speak only as of the date made. The company is not undertaking to update any information in the foregoing reports until the effective date of its future reports required by the securities laws.

About Momentum Advanced Solutions Inc.

Momentum is a leader in Web outsourcing services. Its solutions provide customers with the innovation, integration, and operational expertise needed to reduce costs and/or improve productivity by outsourcing their mission critical, web-based applications and infrastructure to Momentum. Headquartered in Markham, Ontario, Momentum has offices in Ottawa, Windsor, and Toronto. Momentum Advanced Solutions is publicly traded on the Toronto Stock Exchange and trades under the symbol WWW.

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