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For Immediate Release EXHIBIT 99.1
Catuity CEO Updates Shareholders
Shareholders Urged To Approve Capital Raise in Jan. 25 Meeting
Charlottesville, VA (January 18, 2007) -- Catuity Inc. (Nasdaq: CTTY; ASX: CAT,
CATN), a loyalty and gift card processor today issued the following statement
from John Racine, the company's President and CEO.
To Our Fellow Shareholders,
What a difference a year makes. One year ago in the U.S., our processing
platform was not market ready; our client support infrastructure was in design;
our sales pipeline was only a concept; and we lacked critical client references
essential to closing deals. In Australia, we were in the thick of restructuring
our operations in Melbourne to eliminate unprofitable custom development work;
improving our staffing in key positions and making necessary investments in
development and integration of our stored value solution so that we are now
positioned to capitalize on the emerging gift card opportunity. To be sure, 2006
was a difficult transitional year in which we made long-term decisions for the
company at the expense of the short-term outlook. We were pleased with the
progress of our business but disappointed at its lack of reflection in the stock
performance.
We enter 2007 with a clear vision to ramp up our business in the U.S. and to
accelerate the expansion of our Australian business. Here is what we have done
to lay the groundwork for success in the quarters ahead:
- - As of today, we have over 2,000 potentially deployable stores in the U.S. We
had zero one year ago. A potentially deployable store includes signed clients,
franchise groups where we have won the right to market to independent
franchises, ongoing pilots and merchant groups in which we have referral
agreements. As always, we caution investors that deployment schedules are
uncertain in our business and that Catuity has limited control over when a
client executes a store-level deployment.
- - After struggling early in the year with the reseller market, we believe we
finally "got it right." Beginning in October, we began to manage a consistent
flow of deployments that has grown steadily. We currently have resellers who
have access to over 7,000 merchants who could potentially buy a processing
package through our resellers.
- - We have added a new inside sales team to multiply the effectiveness of our
relationship-selling model. As part of this effort, we have just added our
first-ever marketing team to help us manage the more than 2,000 chains and
merchant groups
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AUSTRALIA NORTH AMERICA
Level 5, 140 Bourke Street 300 Preston Blvd., Suite 302
Melbourne, VIC 3000 Australia Charlottesville, VA 22901
Phone +61 3.8663.3200 Phone +1 (434) 979-0724
ASX: CAT, CATN Nasdaq: CTTY
www.catuity.com
Catuity Inc. is a Delaware Corporation
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that we have prospected. Simply put, our goal is to shorten the sales cycle by
helping the curious identify which of our three core products best fit their
needs. Our core products include member-based loyalty programs; gift card and
credit and debit card processing.
- - In Australia, we enter 2007 with direct access for our gift card solution to
over 50% of the Australian retail market, twice where we began in 2006.
Management believes we will further increase our market penetration in 2007.
- - We have expanded the depth of our team with the addition of Debra Hoopes as
Senior Vice President and Chief Financial Officer. Her experience in both
managing recurring revenue businesses and managing strategic development are
critically important to our efforts to make the next turn in the company's
strategy.
In the U.S., our focus very much remains on chain retailers, franchise companies
and merchant groups with 75-250 locations and aggressive growth strategies. We
have referred to this as our sweet spot client. We continue to find this market
very underserved and in need of a hosted solution. In the second half of 2006,
we signed a number of new clients and we plan to announce (key) client
additions. However, to reduce the potential for future disappointment in the
market we have adopted a new approach in which we will wait until the client is
ready for deployment before making an announcement. It also reflects the reality
that Catuity has little direct control over timing between signing a client and
realizing revenue.
As you know, we closed a capital raise for USD $2.25 million in late November.
The market for micro-cap PIPE financings grew very challenging in the second
half of the year as investors expressed concern over the SEC's new approach to
reviewing such financings. Ultimately, regulatory uncertainty -- not issues
specific to Catuity -- caused the capital raising process to drag on; the cost
of capital to rise; and, ultimately, reduced the amount of capital that we were
able to raise.
On Thursday, January 25 at 4:30pm EST, we are hosting a special shareholder
meeting seeking approval of the terms of that capital raise. The board
unanimously has asked shareholders to approve the raise. We invite and encourage
you to participate in the meeting, which will be held at our offices at 300
Preston Blvd., Suite 302 in Charlottesville, Virginia. You may also participate
by phone. Call in information will be posted on the Catuity website at
www.catuity.com under the Investors tab 24 hours prior to the call.
We want to be clear that the company will require additional capital in the near
term to get to break-even profitability. Management will be seeking additional
investment of at least $3 million which may be combined with an acquisition and
hopes to secure the financing in time to seek approval at our annual general
meeting tentatively schedule for May.
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We appreciate your support and patience. We look forward to a year of positive
progress.
Best regards,
/s/ John Racine /s/ Debra Hoopes
John Racine Debra Hoopes
President & CEO SVP & Chief Financial Officer
Catuity Inc. Catuity Inc.
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This letter includes "forward-looking" statements within the meaning of the
Private Securities Litigation Act of 1995. This Act provides a "safe harbor" for
forward-looking statements to encourage companies to provide prospective
information so long as they identify these statements as forward-looking and
provide meaningful cautionary statements identifying important factors that
could cause actual results to differ from the expected results. All statements
other than statements of historical fact made in this letter are forward
looking. In some cases, they can be identified by terminology such as "may,"
"will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential," or "continue," the negative of such terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
consider various factors that may cause actual results to differ materially from
any forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee our future results, levels of
activity, performance or achievement. Moreover, neither we nor any other person
assumes liability for the accuracy and completeness of the forward-looking
statements. Actual results may differ materially from those projected as a
result of certain risks and uncertainties, including but not limited to: changes
in currency exchange rates from period to period, inflation rates in the United
States and Australia, recession, and other external economic factors over which
the Company has no control; the timing and speed with which our major customers
and prospects execute their plans for the use of our loyalty software and
services; continued development of the Company's software products; competitive
product and pricing pressures; use of internally developed software
applications; patent and other litigation risks; the risk of key staff leaving
the Company; the risk that major customers of the Company's products and
services reduce their requirements or terminate their arrangements with the
Company; as well as other risks and uncertainties, including but not limited to
those detailed from time to time in the Company's Securities and Exchange
Commission filings. These forward-looking statements are made only as of the
date hereof, and the Company undertakes no obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise.
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