Infowave Software Inc.
TSX : IW

Infowave Software Inc.

March 29, 2007 18:24 ET

Infowave Reports 2006 Results

Company Doubles Revenues to $4.2 Million

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - March 29, 2007) - Infowave Software (TSX:IW), a leading provider of enterprise mobile applications, today released results for the fourth quarter and year ended December 31, 2006 (all financial information is expressed in U.S. dollars and Canadian GAAP).

2006 Highlights

- Increased revenue 117% to $4.2 million in 2006.

- Improved gross margin to 72% in 2006 from 66% in 2005.

- Decreased cash operating expenses by 10% from 2005.

- Grew order backlog to $1.1 million at year end 2006 from nil a year earlier.

- Increased Deferred Revenue to $1.2 million from $0.1 million the previous year.

- Appointed new senior managers to enhance sales and operating performance.

- Launched new software product upgrades to offer customers expanded functionality.

"I am very pleased with our accomplishments on all fronts in 2006," said James Suttie, President and Chief Executive Officer. "They establish a solid foundation and strong momentum for achieving our 2007 growth objectives."

Infowave more than doubled its revenue as the Company continued to build upon its existing customer base delivering additional licenses and support services together with several major professional services projects to enhance previously installed mobile applications. Contributing to this success was the sale of $1.2 million in additional licenses and support services to an existing major telecom customer in the United States.

The Company also signed a contract to provide additional licenses and support services to Agfa Healthcare to facilitate their global rollout of Infowave's mobile solution previously deployed with Agfa Healthcare in the US. This work will be executed throughout 2007.

Significant revenue improvement combined with higher gross margins and lower operating costs resulted in a substantial reduction in the Company's loss in 2006 compared with the prior year.

New senior management appointed mid-year significantly improved our sales processes and professional services delivery capabilities. Claudia Ng joined Infowave in June and is presently Senior VP, Products and Services, with responsibility for all product development and service delivery functions at Infowave. Richard Hoy joined Infowave in July as Executive VP, Sales, with responsibility for all sales and marketing activities for the Company.

Contributing to the Company's sales success was the release of echo Solutions v3.1 software in the second quarter. This release adds the following important functionality to an already proven product:

- Integrated work flow allowing inspections within a work order

- Enhanced configuration and user-defined fields for more intuitive user interface

Financial Results

Revenue

Infowave recorded revenue of $4.2 million in 2006, a $2.3 million increase over 2005 primarily due to significant license and support services sales to existing customers and the delivery of several major professional services projects to enhance existing customer applications. The revenue mix in 2006 was comprised of 28% software license fees, 24% maintenance and support fees, and 49% professional services fees.

Revenues for the fourth quarter ended December 31, 2006 increased by 533% to $1.1 million from $0.2 million compared to the corresponding period in 2005 reflecting completion of a number of new professional services projects this year. The revenue mix in the fourth quarter was comprised of 6% software license fees, 21% maintenance and support fees and 73% professional service fees.

Gross Margins

Gross margins in 2006 were 72%, compared to 66% in 2005. The increase in gross margins was attributable to an increase in billable projects during 2006, better utilization of resources on those projects, as well as the significant sale of licenses which have a higher contribution margin compared to professional services.

Gross margins for the three months ended December 31, 2006 were 58% compared to 89% in the same period of 2005, as a result of changes in revenue mix. In 2006, professional services accounted for 73% of revenue compared to 2% in 2005.

Expenses

Expenses for 2006 were $6.2 million, a decrease of 52% or $6.7 million compared to the prior year. The decrease was primarily due to the $4.7 million impairment of the carrying value of the Company's intangible assets recorded in December 2005 and a $1.4 million reduction in depreciation and amortization expenses in 2006 reflecting the lower carrying value of these intangible assets. Excluding these non-cash items, operating expenses of $5.9 million were down 10% from 2005. The decrease in research and development expenses reflects more productive utilization of development resources on billable projects. The Company also lowered its administration expenses by reducing overhead costs.

Expenses for the fourth quarter, 2006 were $1.7 million, a decrease of 74% from $6.5 million in the same period of 2005, due primarily to the $4.7 million impairment of the carrying value of the Company's intangible assets recorded in December 2005.

Loss

The loss for 2006 was $3.1 million compared to a loss in the prior year of $8.3 million.

In the fourth quarter of 2006 the Company incurred a loss of $0.9 million compared to a loss of $6.3 million in the comparable period last year.

About Infowave

Infowave's (TSX:IW) enterprise mobile application suite is designed to streamline and integrate business operations by empowering mobile workers. The solution provides scalable, secure, and reliable mobile business applications for improving operational efficiency and increasing productivity. Some of the world's most innovative organizations in energy & utilities, defense, communications, and medical instrumentation use Infowave solutions to increase the efficiency of their mobile workforces. For more information, please email info@infowave.com or visit www.infowave.com.



INFOWAVE SOFTWARE, INC.
Consolidated Balance Sheets
(Expressed in U.S. dollars)

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December 31, December 31,
2006 2005
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Assets
Current assets:
Cash and cash equivalents $ 2,117,042 $ 4,313,406
Accounts receivable 1,575,352 26,691
Technology Partnership Canada ("TPC")
receivable 144,608 144,658
Prepaid expenses 125,193 203,105
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3,962,195 4,687,860

Fixed assets 127,783 166,376
Intellectual property assets held for sale - 75,000
Other intangible assets 948,272 1,185,745
Goodwill 3,539,373 3,540,587
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$ 8,577,623 $ 9,655,568
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 941,607 $ 470,653
Convertible promissory notes - 95,210
Financial instruments 544,146 544,333
Deferred revenue 1,201,378 105,825
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2,687,131 1,216,021

Convertible promissory note - -

Shareholders' equity
Share capital
Authorized: Unlimited voting common shares
without par value
Issued: 12,326,950 (2005 - 12,165,148)
common shares 18,955,001 18,814,147
Contributed surplus 2,962,443 487,413
Other equity instruments 1,108,528 3,259,039
Deficit (18,605,760) (15,554,576)
Cumulative translation account 1,470,280 1,433,524
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5,890,492 8,439,547
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$ 8,577,623 $ 9,655,568
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INFOWAVE SOFTWARE, INC.
Consolidated Statements of Operations and Deficit
(Expressed in U.S. dollars)

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Three months ended Year ended
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December 31, December 31,
2006 2005 December 31, December 31,
(Unaudited) (Unaudited) 2006 2005
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Revenue
Sales $ 1,141,434 $ 180,430 $ 4,178,911 $ 1,927,291
Cost of sales 476,360 19,557 1,181,878 663,563
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665,074 160,873 2,997,033 1,263,728
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Expenses
Research and
development 207,627 460,976 1,476,677 2,024,869
Sales and marketing 945,551 529,816 2,721,446 2,107,608
Administration 469,662 479,203 1,671,474 2,372,030
Impairment charge - 4,651,792 - 4,651,792
Depreciation and
amortization 76,909 440,201 340,100 1,771,741
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1,699,749 6,561,988 6,209,697 12,928,040
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Income (Loss) before
undernoted items (1,034,675) (6,401,115) (3,212,664) (11,664,312)

Other income
(expenses)
Interest income
and other income 14,530 39,031 94,892 123,956
Interest expense (1,361) (698) (5,117) (4,933)
Foreign exchange
gain (loss) 82,536 14,430 71,705 319
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95,705 52,763 161,480 119,342
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Income (Loss) for the
period, before gain
from corporate
reorganization (938,970) (6,348,352) (3,051,184) (11,544,970)

Gain from corporate
reorganization - - - 3,239,343
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Loss for the period (938,970) (6,348,352) (3,051,184) (8,305,627)
Deficit, beginning
of period $(17,666,790) $(9,206,224) $(15,554,576) $(70,936,761)
Deficit reduction
from corporate
reorganization - - - 63,687,812
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Deficit, end of
period $(18,605,760) $(15,554,576)$(18,605,760) $(15,554,576)
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Loss per share,
basic and diluted ($0.08) ($0.53) ($0.25) ($0.69)
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Weighted average
number of shares
outstanding 12,326,950 12,069,740 12,238,434 12,006,972
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INFOWAVE SOFTWARE, INC.
Consolidated Statements of Cash Flows
(Expressed in U.S. dollars)

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Three months ended Year ended
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December 31, December 31,
2006 2005 December 31, December 31,
(Unaudited) (Unaudited) 2006 2005
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Cash flows from
operations:
Loss for the
period $ (938,970) $ (6,348,352) $ (3,051,184) $ (8,305,627)
Items not
involving cash:
Depreciation and
amortization 76,909 440,201 340,100 1,771,741
Write down of
fixed assets - 16,197 - 16,197
Amortization of
TPC warrants - 43,741 - 170,317
Impairment charge - 4,651,792 - 4,651,792
Stock-based
compensation 64,972 100,422 354,184 550,776
Gain from
corporate
reorganization - - - (3,239,343)
Interest earned on
intangible assets
held for sale - (6,269) - (6,269)
Non controlling
interest - - - -
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(797,089) (1,102,268) (2,356,900) (4,390,416)
Changes in non-cash
operating working
capital:
Accounts receivable 293,247 432,973 (1,612,426) 553,075
TPC receivables - 383,863 - 954,937
Prepaid expenses (2,112) (11,953) 79,516 (37,277)
Accounts payable
and accrued
liabilities 26,001 (5,254) 487,596 (846,869)
Deferred revenue 865,966 (164,918) 1,100,620 (80,170)
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Net cash (used) in
operations 386,013 (467,557) (2,301,594) (3,846,720)

Cash flows from
investing activities:
Purchase of fixed
assets (25,329) (18,805) (56,721) (42,463)
Extension fee payment - 100,000 75,000 100,000
Restricted cash
released - - - 963,020
Corporate
reorganization,
net proceeds - - - 4,066,370
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(25,329) 81,195 18,279 5,086,927
Cash flows from
financing activities:
Issuance of shares
and warrants for
cash, net of issue
costs - 852 27,598 852

Foreign exchange gain
on cash and cash
equivalents held in
a foreign currency (91,243) 5,183 59,353 161,239
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Increase (decrease)
in cash and cash
equivalents 269,441 (380,327) (2,196,364) 1,402,298

Cash and cash
equivalents,
beginning of period 1,847,601 4,693,733 4,313,406 2,911,108
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Cash and cash
equivalents,
end of period $ 2,117,042 $ 4,313,406 $ 2,117,042 $ 4,313,406
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