The Company’s gross margin was 24.5 percent in the second quarter of 2007 compared to 33.5 percent in the first quarter of 2007 and 26.9 percent during the second quarter of 2006. The decrease in gross margin in the second quarter from the prior quarter was due to the completion of higher margin projects and lower utilization of billable professionals. For the six month period ended June 30, 2007 gross margin increased to 29.5 percent from 27.1 percent for the same period in the previous year. Selling, general and administrative costs (“SG&A”) were $1.7 million in the second quarter, a decrease of $60,000 or 3 percent from the prior quarter and compares to $2.0 million (excluding the $881,000 proceeds received by the Company in
connection with the release of claims relating to the terminated Vanguard transaction) in the second quarter of 2006. SG&A for the first six months of 2007 was $3.5 million, a decrease of $212,000 or 6 percent when compared to the comparable prior year period costs of $3.7 million (excluding the $881,000 proceeds received).
“In the second quarter, we continued to experience a decline in consulting revenue that began in the first quarter. We also completed a high margin fixed price project in the first quarter that has yet to be replaced. This, coupled with a larger mix of lower margin time and material engagements, contributed to lower revenue and gross margin,” commented Shmuel BenTov, Helios & Matheson’s president and CEO. “As we work our way through the sales cycle process to replace projects that have been completed, we are also working diligently to expand our revenue base by capitalizing on our on-shore/off-shore value proposition.”
Helios & Matheson has scheduled a conference call to present its second quarter financial results today, Wednesday, August 8, 2007, at 4:15 pm (EDT). Interested parties may access the conference call by dialing 800-926-5093 and providing the following reservation number: 21345675. The live conference call and a replay of the conference call in its entirety will be available via the Internet through MarketWire at http://www.visualwebcaster.com/event.asp?id=41588. A copy of this press release is also available at the Company’s website at http://www.easyir.com/easyir/prss.do?easyirid=F1550FDE4659A723.
About Helios & Matheson North America
Helios & Matheson has built a reputation for cutting-edge IT and BPO solutions that is exemplified by its impressive roster of Fortune 1000 customers and other large organizations. The Company focuses on a business-oriented, value-added approach to its end-to-end, IT services and business process outsourcing solutions, which include staffing, projects and outsourcing. For over 20 years, the Company has provided complete project life-cycle services in the areas of business intelligence, custom application development, support and maintenance, data supply chain, collaboration, quality assurance, project and application portfolio management, and other specific vertical solutions. The Company has offices in New York City, Clark, New Jersey, and Bangalore, India. More information about the Company can be found at its web site at www.hmna.com.
“Safe Harbor” Statements under the Private Securities Litigation Reform Act of 1995: Statements made in this press release which are not historical facts, including those that refer to Helios & Matheson North America’s plans, beliefs and intentions, are “forward-looking statements” that involve risks and uncertainties. These risks and uncertainties could cause actual results to differ materially from the forward-looking statements, and include, but are not limited to, Helios & Matheson North America’s ability to scale its existing and any new businesses. For a more complete description of the risks that apply to the Company’s business, please refer to the Company’s filings with the Securities and Exchange Commission. The Company’s actual results may differ materially from the results anticipated in these forward-looking statements as a result of certain factors set forth under Risk Factors and elsewhere in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2007.
* * * * * Financial Statements Follow * * * * *
HELIOS & MATHESON NORTH AMERICA INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
| | Six Months Ended
June 30, | | Three Months Ended
June 30, | |
| | 2007 | | 2006 | | 2007 | | 2006 | |
| | (unaudited) | | (unaudited) | | (unaudited) | | (unaudited) | |
| | | | | | | | | | | | | |
Revenues | | $ | 10,609,764 | | $ | 12,648,493 | | $ | 4,733,370 | | $ | 6,737,842 | |
Cost of revenues | | | 7,480,251 | | | 9,223,831 | | | 3,574,608 | | | 4,925,055 | |
Gross profit | | | 3,129,513 | | | 3,424,662 | | | 1,158,762 | | | 1,812,787 | |
Operating expenses: | | | | | | | | | | | | | |
Selling, general & administrative | | | 3,472,664 | | | 2,804,240 | | | 1,706,205 | | | 1,088,695 | |
Depreciation & amortization | | | 94,157 | | | 77,482 | | | 49,246 | | | 40,798 | |
| | | 3,566,821 | | | 2,881,722 | | | 1,755,451 | | | 1,129,493 | |
(Loss)/Income from operations | | | (437,308 | ) | | 542,940 | | | (596,689 | ) | | 683,294 | |
Other income(expense): | | | | | | | | | | | | | |
Interest income-net | | | 92,911 | | | 17,060 | | | 37,992 | | | 11,276 | |
| | | 92,911 | | | 17,060 | | | 37,992 | | | 11,276 | |
(Loss)/Income before income taxes | | | (344,397 | ) | | 560,000 | | | (558,697 | ) | | 694,570 | |
Provision for income taxes | | | 11,832 | | | 17,500 | | | 9,000 | | | 12,800 | |
| | | | | | | | | | | | | |
Net (loss)/income | | | (356,229 | ) | | 542,500 | | | (567,697 | ) | | 681,770 | |
Other comprehensive income/(loss) - foreign currency adjustment | | | 5,227 | | | (4,486 | ) | | 6,214 | | | (2,321 | ) |
Comprehensive (loss)/income | | $ | (351,002 | ) | $ | 538,014 | | $ | (561,483 | ) | $ | 679,449 | |
| | | | | | | | | | | | | |
Net (loss)/income per share | | | | | | | | | | | | | |
Basic | | $ | (0.15 | ) | $ | 0.23 | | $ | (0.24 | ) | $ | 0.29 | |
Diluted | | $ | (0.15 | ) | $ | 0.23 | | $ | (0.24 | ) | $ | 0.28 | |
HELIOS & MATHESON NORTH AMERICA INC.
CONSOLIDATED BALANCE SHEETS
| | June 30,
2007 | | December 31,
2006 | |
| | (unaudited) | | | |
ASSETS | | | | | | | |
Current Assets: | | | | | | | |
Cash and cash equivalents | | $ | 3,363,789 | | $ | 3,849,056 | |
Accounts receivable- less allowance for doubtful accounts of $215,103 at June 30, 2007, and $225,741 at December 31, 2006 | | | 3,388,705 | | | 3,676,869 | |
Unbilled receivables | | | 92,388 | | | 316,156 | |
Prepaid expenses and other current assets | | | 209,461 | | | 159,398 | |
Total current assets | | | 7,054,343 | | | 8,001,479 | |
Property and equipment, net | | | 416,708 | | | 457,223 | |
Goodwill | | | 1,140,964 | | | 1,140,964 | |
Deposits and other assets | | | 141,002 | | | 189,620 | |
Total assets | | $ | 8,753,017 | | $ | 9,789,286 | |
| | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | |
Current Liabilities: | | | | | | | |
Accounts payable and accrued expenses | | $ | 1,785,960 | | $ | 2,294,929 | |
Deferred revenue | | | 37,260 | | | 285,227 | |
Total current liabilities | | | 1,823,220 | | | 2,580,156 | |
| | | | | | | | |
Shareholders’ equity: | | | | | | | |
Preferred stock, $.01 par value; 2,000,000 shares authorized; no shares issued and outstanding as of June 30, 2007, and December 31, 2006. | | | — | | | — | |
Common stock, $.01 par value; 30,000,000 shares authorized; 2,388,795 issued and outstanding as of June 30, 2007; 2,382,801 issued and outstanding as of December 31, 2006. | | | 23,888 | | | 23,828 | |
Paid-in capital | | | 34,679,260 | | | 34,607,651 | |
Accumulated other comprehensive income - foreign currency translation | | | 9,176 | | | 3,949 | |
Accumulated deficit | | | (27,782,527 | ) | | (27,426,298 | ) |
Total shareholders’ equity | | | 6,929,797 | | | 7,209,130 | |
Total liabilities and shareholders’ equity | | $ | 8,753,017 | | $ | 9,789,286 | |
