SOURCE: Caneum, Inc.

August 21, 2007 22:28 ET

Caneum Announces First Quarter 2007 Financial Results

Information Technology and Business Process Outsourcing Company Continues on Rapid Growth Trajectory With Record 205% Revenue Growth Quarter Over Quarter

NEWPORT BEACH, CA--(Marketwire - August 21, 2007) - Caneum, Inc. (PINKSHEETS: CANM), a global provider of business process and information technology outsourcing services, today announced financial results for the quarter ended March 31, 2007.

"Our management team is very pleased with the continued progress of the Company," said Suki Mudan, President and Principal Executive Officer of Caneum. "We closed the first quarter with strong momentum in our organic sales initiatives and are very excited about the new cross selling opportunities brought about from the addition of our offshore software development capability in December, 2006."

Q1 Financial Summary

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, interest, depreciation/amortization and minority interest. Reconciliations of non-GAAP measures to GAAP operating income, net income and EPS are included at the end of this release.

Q1 Financial Highlights

Revenues - The Company reported revenues of $2.75M for 1 QTR 2007, representing a 205% increase over 1 QTR 2006 revenues of $0.90M.

Cost of Revenues - The Company reported cost of revenues of $2.19M for 1 QTR 2007, representing a 235% increase over 1 QTR 2006 cost of revenues of $0.65M.

Operating Expenses - The Company reported operating expenses of $1.11M for 1 QTR 2007, representing a 95% increase over 1 QTR 2006 operating expenses of $0.57M.

Stock-Based Compensation - The Company reported stock-based compensation expenses of $0.34M for 1 QTR 2007, representing a 143% increase over 1 QTR 2006 stock-based compensation expenses of $0.14M.

Operating Income - The Company reported GAAP operating income of ($0.55M) for 1 QTR 2007, representing a 70% operating loss increase over 1 QTR 2006 GAAP operating income of ($0.32M). The Company reported non-GAAP operating income of ($0.13M) for 1 QTR 2007, improved from 1 QTR 2006 non-GAAP operating income of ($0.17M).

Net Income - The Company reported GAAP net income of ($0.68M) for 1 QTR 2007, representing a 91% net loss increase over 1 QTR 2006 GAAP net income of ($0.32M). The Company reported non-GAAP net income of ($0.17M) for 1 QTR 2007, compared with 1 QTR 2006 non-GAAP net income of ($0.17M).

EPS - The Company reported GAAP EPS of ($0.09) for 1 QTR 2007, representing a 50% EPS loss increase over 1 QTR 2006 GAAP EPS of ($0.06). The Company reported non-GAAP EPS of ($0.02) for 1 QTR 2007 compared to 1 QTR 2006 non-GAAP EPS of ($0.03).

FORWARD-LOOKING STATEMENTS

"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. Actual results may differ materially from the results predicted and reported results should not be considered as an indication of future performance. The Company wishes to caution readers that a number of important factors could cause actual results to differ materially from those provided in the forward-looking statements. The potential risks and uncertainties that could cause actual results to differ from the results predicted include, among others, the risk factors noted in the Company's filings with the United States Securities and Exchange Commission (SEC), 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; the Company's reliance on third-party suppliers; and those risks and uncertainties included under the captions "Forward-Looking Statements" and "Item 2. Management's Discussion and Analysis and Plan of Operation," in our report on Form 10-QSB for the quarter ended March 31, 2007, which is on file with the SEC and is available on both our investor relations web site at www.caneum.com/investor-relations.html and the SEC's web site at www.sec.gov. All information provided in this release and in the related attachments is as of August 21, 2007, and the Company undertakes no duty to update this information.

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.

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 Balance Sheets
                As of March 31, 2007 and December 31, 2006


                                                March 31,     December 31,
                                                   2007           2006
                                                Unaudited
                                               -----------    ------------

 CURRENT ASSETS
    Cash and cash equivalents                  $   544,693    $    335,202
    Accounts receivable, net of allowance of
     $325,017 and $229,626, respectively         2,037,246       1,840,994
    Prepaid assets                                 104,304          57,673
    Other current assets                            15,000          15,000
                                               -----------    ------------

       Total current assets                      2,701,243       2,248,869

 LONG TERM ASSETS
    Property & equipment, net                      198,048         194,373
    Intangibles, net                               874,216         938,587
    Goodwill                                     1,464,805       1,464,805
    Other                                            4,592           4,592
                                               -----------    ------------

 TOTAL ASSETS                                  $ 5,242,904    $  4,851,226
                                               ===========    ============



 CURRENT LIABILITIES
    Accounts payable                           $ 1,037,197    $    830,468
    Accrued expenses                                13,200          67,098
    Credit lines                                   994,021         159,966
    Accrued payroll and related expenses           158,829         119,556
    Deferred revenue                                31,373               -
    Notes payable                                   27,274          61,480
    Current portion of installment loans         1,090,470         785,573
    Other current liabilities                       82,044          84,522
                                               -----------    ------------

       Total current liabilities                 3,434,408       2,108,663

 LONG TERM LIABILITIES
    Installment loans, less current portion              -         665,862
    Other non current liabilities                   50,549          51,127
                                               -----------    ------------

       Total liabilities                         3,484,957       2,825,652
                                               -----------    ------------


 Minority Interest                                 299,604         231,227

 SHAREHOLDERS' EQUITY
    Preferred stock,  $0.001 par value
     20,000,000 shares authorized, 3,332,500
      and 3,332,500 shares issued and
       outstanding (Liquidation preference
       $1,666,250)                             $     3,332    $      3,332
    Common stock,  $0.001 par value
     100,000,000 shares authorized, 7,952,098
      and 7,918,921 shares issued and
       outstanding                                   7,950           7,917
    Common stock committed,                         12,500               -
    Additional paid-in capital                   7,916,060       7,592,702
    Accumulated other comprehensive income          14,056               -
    Accumulated deficit                         (6,495,555)     (5,809,604)
                                               -----------    ------------

       Total shareholders' equity                1,458,343       1,794,347
                                               -----------    ------------

 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $ 5,242,904    $  4,851,226
                                               ===========    ============



                               Caneum, Inc.
              Condensed Consolidated Statements of Operations
                      and Comprehensive Income (Loss)
            For the Three Months ended March 31, 2007 and 2006


                                                   Three Months Ended
                                              ----------------------------
                                                March 31,       March 31,
                                                  2007            2006
                                                Unaudited       Unaudited
                                                              As Restated
                                              ------------    ------------

 Revenue                                      $  2,750,373    $    900,675

 Cost of revenue                                 2,188,212         652,896
                                              ------------    ------------

 Gross profit                                      562,161         247,779

 Operating expenses                              1,109,955         570,562
                                              ------------    ------------

 Loss from operations                             (547,794)       (322,783)
                                              ------------    ------------

 Other income (expense)
    Interest income (expense), net                 (52,492)             31
    Loss on foreign exchange                       (14,303)              -
                                              ------------    ------------
 Total other income (expense)                      (66,795)             31

 Minority Interest                                 (68,378)              -
                                              ------------    ------------

 Loss before income tax                           (682,967)       (322,752)

 Income tax expense                                  2,984             800
                                              ------------    ------------

 Net loss                                     $   (685,951)   $   (323,552)
                                              ============    ============

 Beneficial Conversion Charge upon Issuance
  of Preferred Shares                                    -         755,048
                                              ============    ============

 Net Loss Attributable to Common Stockholders $   (685,951)   $ (1,078,600)
                                              ============    ============


 Basic and diluted net loss per common share  $      (0.09)   $      (0.19)
                                              ============    ============

 Weighted average number of Common Shares
  outstanding used in the calculation            7,946,621       5,820,551
                                              ============    ============


 Net loss                                         (685,951)       (323,552)

 Comprehensive Income:
    Foreign currency translation adjustment
     (Note 2)                                       14,056               -
                                              ------------    ------------

 Comprehensive Loss                               (671,895)       (323,552)
                                              ============    ============



                                Caneum, Inc.
              Condensed Consolidated Statements of Cash Flows
             For the Three Months Ended March 31, 2007 and 2006


                                                For the Three Months Ended
                                                 -------------------------
                                                 March 31,      March 31,
                                                    2007           2006
                                                 Unaudited      Unaudited
                                                               As Restated
                                                 ----------    -----------

CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                      $ (685,951)   $  (323,552)
   Adjustments to reconcile net loss to net cash
    used in operating activities
      Stock-based compensation expense              161,857        129,272
      Expenses paid by stock issuances or
       committed issuances                          174,035         15,000
      Interest accreted to TierOne notes             17,026              -
      Depreciation and amortization                  17,464          3,939
      Amortization of acquired intangibles from
       business combinations                         67,188          1,600
      Bad Debt expense                                    -          2,721
      Minority interest                              68,378              -
      (Increase) decrease in
         Accounts receivable                       (189,980)       (42,553)
         Prepaid expenses and other current
          assets                                    (45,425)        16,380
      Increase (decrease) in
         Accounts payable and accrued expenses      151,020       (100,033)
         Accrued payroll and related expenses        40,258        109,426
         Deferred revenue                            31,373              -
                                                 ----------    -----------

Net cash used in operating activities              (192,756)      (187,800)
                                                 ----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Cash paid for acquisition of TierOne
    Consulting, Inc., net of cash acquired                -     (1,338,627)
   Purchase of property & equipment                 (18,663)          (945)
                                                 ----------    -----------

Net cash used in investing activities               (18,663)    (1,339,572)
                                                 ----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Issuance of common stock and warrants for
    cash                                                  -        350,004
   Issuance of Series A Preferred Shares and
    warrants for cash, net                                -      1,790,000
   Payment of debt                                 (441,381)        (6,231)
   Addition to debt                                  24,225              -
   Exercise of options                                    -        132,250
   Increase in credit line                          834,055              -
                                                 ----------    -----------

Net cash provided by financing activities           416,898      2,266,023
                                                 ----------    -----------

     Effect of changes in foreign currency
      exchange rates on cash                          4,012              -

Net increase in cash and cash equivalents           205,479        738,651

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD      335,202         99,760
                                                 ----------    -----------

CASH AND CASH EQUIVALENTS, END OF PERIOD         $  544,693    $   838,411
                                                 ==========    ===========

 SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION
    Interest paid                                $   38,076    $       430

    Income taxes paid                            $    2,984    $       800



                               Caneum, Inc.
        Pro Forma Condensed Consolidated Statements of Operations
                      and Comprehensive Income (Loss)
            For the Three Months ended March 31, 2007 and 2006



                                                    Three Months Ended
                                                --------------------------
                                                 March 31,      March 31,
                                                    2007           2006
                                                 Unaudited      Unaudited
                                                -----------    -----------

 Revenue                                        $ 2,750,000    $   901,000

 Cost of revenue                                  2,188,000        653,000
                                                -----------    -----------

 Gross profit                                       562,000        248,000

 Operating expenses                               1,110,000        571,000

 Adjustments to operating expenses:
    Stock-based compensation                       (336,000)      (144,000)
    Depreciation and amortization                   (85,000)        (6,000)
    Bad debt                                              -         (3,000)
                                                -----------    -----------
 Pro forma operating expenses                       689,000        418,000
                                                -----------    -----------

 Pro forma loss from operations                    (127,000)      (170,000)
                                                -----------    -----------

 Other income (expense)                            (138,000)        (1,000)
 Adjustments to non-operating expenses:
    Minority interest                                68,000              -
    Interest expense accreted to notes               17,000              -
    Loss on foreign exchange                         14,000              -

                                                -----------    -----------
 Pro forma net loss                             $  (166,000)   $  (171,000)
                                                ===========    ===========

 Basic and diluted net loss per common share    $     (0.02)   $     (0.03)
                                                ===========    ===========

 Weighted average number of Common Shares
  outstanding used in the calculation             7,946,621      5,820,551
                                                ===========    ===========

Contact Information

  • Investor / Press / Media Contact:
    Gary Allhusen
    (949) 273-4000
    Email Contact