Brainhunter Inc.
TSX : BH

Brainhunter Inc.

August 09, 2007 13:26 ET

Brainhunter Reports Record Third Quarter Results

Third Quarter revenues increase by 34.5% over third quarter last year.

TORONTO, ONTARIO--(Marketwire - Aug. 9, 2007) -

THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION TO CANADIAN INVESTORS ONLY.

Brainhunter Inc. ("Brainhunter" or the "Company") (TSX:BH) is pleased to report record results for the third quarter ending June 30, 2007. Revenues were $56,574,606, up 34.5.0% over revenues of $42,056,200 for the third quarter ending June 30, 2006. Revenues for the three quarters year-to-date were $169,857,549, up 42% over the same period the previous year. EBITDA for the third quarter was $2,027,261, versus a loss of $540,913 for the third quarter in the previous year, (which had included a restructuring allowance of $1,645,000). EBITDA for the three quarters year-to-date was $6,176,877, up over 39% from the same period the previous year. Results are the strongest in Brainhunter's history for the Third Quarter and the three quarters year-to-date.

Brainhunter has grown from $2.80 million for fiscal year September 2001 to where sales have reached an annualized run rate of approximately $225.0 million. The EBITDA annualized run rate exceeds $8.00 million. Backlog plus expected renewals and extensions of contracts and standing offers exceed $400.0 million, with over $200.0 million expected for the 2008 fiscal year. Organic growth for the fiscal year ending September 30, 2007 is expected to exceed 35%.

Continued growth to consolidated EBITDA is expected in the 2008 fiscal year from both organic and acquisition initiatives. Brainhunter is also expecting improvement in consolidated profit margins, attributed to higher margin software and solutions sales, in particular, as results materialize from the Master Vendor Client Relationship Model.

Brainhunter Inc. is publicly traded on the TSX and is a leading global provider of end-to-end HCM Software, Solutions and Services (the "Offerings"). Utilizing ISO 9001/2000 technology, Best Practices and processes, Brainhunter has created Offerings that streamline the recruitment and management of permanent, contract and project based people requirements and provides real time analysis of HR metrics that improves operational decision-making and reduces cost. Brainhunter has over 250 employees, over 1,700 contract personnel with offices across Canada, a presence in select U.S. jurisdictions, offices in India, China and the U.K., servicing over 2,000 clients.

The third quarter results ending June 30, 2007, follow:



Brainhunter Inc.
Consolidated Interim Balance Sheets (Unaudited)

As at June 30, September 30,
2007 2006
$ $
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ASSETS
Current
Restricted short-term investment - 125,000
Accounts receivable 43,366,745 39,596,147
Deposits and prepaid expenses 678,026 762,314
Future income tax asset 939,664 939,664
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Total current assets 44,984,435 41,423,125
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Capital assets, net 6,314,233 6,755,710
Long Term Investments 438,910 -
Investment tax credits recoverable 1,373,122 1,373,122
Deferred financing costs 547,002 1,285,194
Intangible assets, net of amortization 9,521,886 12,447,886
Goodwill 20,581,390 20,232,800
Due from related parties 453,483 190,150
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84,214,461 83,707,987
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable and accrued liabilities 23,919,870 23,518,477
Current portion of deferred lease inducement 39,490 39,490
Current portion of provision for lease
restructuring 261,756 261,756
Current portion of long-term debt 3,328,004 4,139,378
Deferred revenue 483,783 416,714
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Total current liabilities 28,032,903 28,375,815
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Deferred lease inducement 565,474 325,154
Provision for lease restructuring 180,869 377,312
Long-term debt 15,490,303 13,818,884
Term bank facility 22,289,924 21,795,731
Long-term future income tax liabilities 1,179,516 2,437,234
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Total long-term liabilities 39,706,086 38,754,315
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Shareholders' equity
Capital stock 20,649,541 20,309,153
Warrants 1,515,961 1,423,498
Contributed surplus 1,356,569 1,082,508
Equity component of convertible note obligation 1,737,489 1,607,726
Deficit (8,784,088) (7,845,028)
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Total shareholders' equity 16,475,472 16,577,857
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84,214,461 83,707,987
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Brainhunter Inc.
Consolidated Interim Statements of Operations and Loss (Unaudited)

For the three months ended For the nine months ended
--------------------------- --------------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
$ $ $ $
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Revenue 56,574,606 42,056,200 169,857,549 119,253,993
Cost of revenues 48,041,594 34,725,307 144,146,953 99,051,896
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Gross profit 8,533,012 7,330,893 25,710,596 20,202,097
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Expenses
Other staffing costs 4,710,143 5,937,622 14,188,872 13,594,611
Selling, general and
administrative 1,795,608 1,934,184 5,344,847 5,347,220
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6,505,751 7,871,806 19,533,719 18,941,831
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Income before
interest,
amortization
and income taxes 2,027,261 (540,913) 6,176,877 1,260,266
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Interest expense -
cash 735,432 640,169 2,227,761 1,620,396
Interest expense -
accreted 336,922 287,297 975,384 935,905
Amortization of
capital assets 469,733 255,825 1,206,750 793,405
Amortization of
intangibles 975,336 1,187,334 2,926,000 3,153,002
Amortization of
deferred financing
costs 363,849 272,139 996,976 507,551
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Total 2,881,272 2,642,764 8,332,871 7,010,259
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Loss before income
taxes (854,011) (3,183,677) (2,155,994) (5,749,995)
Income taxes (408,697) (721,079) (1,216,934) (866,613)
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Net loss for the
period (445,314) (2,462,598) (939,060) (4,883,380)
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Loss per share
Basic ($0.01) ($0.06) ($0.02) ($0.12)
Diluted ($0.01) ($0.06) ($0.02) ($0.12)
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Brainhunter Inc.
Consolidated Interim Statements of Deficit (Unaudited)

For the three months ended For the nine months ended
June 30, June 30, June 30, June 30,
--------------------------- --------------------------
2007 2006 2007 2006
$ $ $ $
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(Deficit) retained
earnings, beginning
of period (8,338,774) (5,565,438) (7,845,028) (3,144,656)
Net (loss) income
for the period (445,314) (2,462,598) (939,060) (4,883,380)
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(Deficit), end of
period (8,784,088) (8,028,036) (8,784,088) (8,028,036)
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Brainhunter Inc.
Consolidated Interim Statements of Cash Flows (Unaudited)

For the three months ended For the nine months ended
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
2007 2006 2007 2006
$ $ $ $
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OPERATING ACTIVITIES
Net loss for the
period (445,314) (2,462,598) (939,060) (4,883,380)
Add (deduct) items not
affecting cash
Future income taxes (408,697) (721,079) (1,216,934) (866,613)
Amortization of
deferred financing
costs 363,849 272,139 996,976 507,551
Accretion of interest 336,922 287,297 975,384 935,905
Amortization of lease
inducement (10,730) (10,822) (32,430) (32,460)
Amortization of
provision for lease
restructuring (64,515) (40,063) (196,443) (110,458)
Stock-based
compensation expense 130,551 27,191 274,061 81,573
Amortization of
capital assets 469,733 255,825 1,206,750 793,405
Amortization of
intangible assets 975,336 1,187,334 2,926,000 3,153,002
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1,347,135 (1,204,776) 3,994,304 (421,475)
Net change in non-cash
working capital items (1,009,659) 417,460 (3,258,708) 1,544,532
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Cash from (used in)
operating activities 337,476 (787,316) 735,596 1,123,057
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FINANCING ACTIVITIES
Issue of shares on
repayment of debt - - 225,188 -
Exercise of common
share options 115,200 36,681 115,200 60,663
Increase in deferred
financing costs (219,236) - (258,784) -
Increase in lease
inducement (8,774) 73,905 271,283 73,905
Repayment to related
parties (13,333) 76,782 (263,333) 51,215
Share purchase loans - - - (242,000)
Proceeds (repayment
of) bank credit
facility 1,243,060 683,327 494,192 8,797,501
Proceeds from
long-term debt - - 2,586,000 11,758,134
Repayment of long-term
debt (1,045,258) (131,688) (2,354,112) (516,284)
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Cash provided by
financing activities 71,659 739,007 815,634 19,983,134
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INVESTING ACTIVITIES
Additions to capital
assets (38,722) (494,441) (763,730) (1,044,746)
(Increase) decrease in
long term investments (21,823) - (438,910) -
Business acquisitions,
net of cash acquired (348,590) - (348,590) (19,330,765)
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Cash used in investing
activities (409,135) (494,441) (1,551,230) (20,375,511)
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Net increase
(decrease) in cash
during the period - (542,750) - 730,680
(Bank overdraft),
beginning of period - 628,609 - (644,821)
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Cash, end of period - 85,859 - 85,859
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Supplemental cash flow
information
Cash income taxes paid 96,175 - 96,175 -
Cash interest paid 735,432 640,169 2,227,761 1,620,396
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DISCLAIMER

Certain statements in this News Release may constitute "forward-looking" statements, which involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Brainhunter and its subsidiary entities, or the industry, to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this News Release, such statements use words such as "may", "will", "expect", "believe", "plan" and other similar terminology. These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, including those described in Brainhunter's publicly filed documents (which are available on SEDAR at www.sedar.com) and elsewhere in this document. Those risks and uncertainties include: the ability to maintain profitability and manage growth; reliance on and retention of professionals; competition; performance obligations and client satisfaction; fixed price and contingency engagements; collectibility of accounts receivable; general state of the economy; possible acquisitions; possible future litigation; interest rate fluctuations; insurance limits; legislative and regulatory changes; revenue and cash flow volatility; operating risks; residential market risk; protection of intellectual property; appraisal mandates; restrictions on growth. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. These statements reflect management's current expectations regarding future events and operating performance and speak only as of the date of this News Release. Although the forward-looking statements contained in this News Release are based upon what management believes to be reasonable assumptions, Brainhunter cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this News Release, and, except in accordance with applicable law, Brainhunter assumes no obligations to update or revise them to reflect new events or circumstances. Additionally, Brainhunter undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of Brainhunter, its financial or operating results, or its securities.

The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

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