Exhibit 99.1
NOTIFY TECHNOLOGY REPORTS RESULTS FOR THE FISCAL QUARTER ENDED MARCH 31, 2006
The Interpretation of EITF 00-19 Causes a Negative Adjustment to Income
SAN JOSE, Calif., May 16 /PRNewswire-FirstCall/ -- Notify Technology
Corporation (OTC: NTFY) today announced financial results for its fiscal
quarter ended March 31, 2006.
The Company's net loss for the three month period ended March 31, 2006,
was $276,080, or a net loss per share of $0.02, compared to a net gain of
$87,043, or a net gain per share of $0.01, reported for the same period in
fiscal 2005.
The loss from operations for the three month period ended March 31, 2006
was exacerbated by the recognition of a liability representing the valuation
of warrants outstanding. It was determined that the Company's warrants for
common stock issued during the July 2001 Series A Preferred offering qualify
for accounting treatment under EITF 00-19, "Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, A Company's Own
Stock". Under the terms of the warrant agreements, the Company is obligated
to remain current on its required filings with the Securities and Exchange
Commission (SEC). If the Company fails to remain current on its filings, it
is obligated to issue additional warrants equal to 5% of the balance of the
outstanding warrants. Because there is no stated limit to the number of times
this penalty can be triggered and because the SEC's Emerging Issues Task Force
(EITF) has determined that a company is not in control of when its filings are
effective, the warrants are subject to accounting treatment under EITF 00-19.
In accordance with EITF 00-19, due to the potential payment of these
liquidated damages in the event the Company becomes delinquent in its future
SEC filings, the fair value of the warrants issued in the financing must be
accounted for as a liability. The value of these warrants are recalculated
based on their fair market value at the end of each quarterly period, and the
change to the warrant liability and related gain or loss is reflected in the
financial statements of the Company's quarterly report.
On March 31, 2006, the closing day of the second fiscal quarter of 2006,
the fair value of the warrants using the Black-Scholes option-pricing model
was estimated to be $145,252. Consequently, the fair value of the warrants
was recorded as "Loss on fair value of warrants" in the Company's statement of
operations in the three month period ended March 31, 2006, and included in
"Warranty liability" on the Company's balance sheet.
The $886,806 of revenue reported in the fiscal quarter ended March 31,
2006 compares to $2,428,401 of revenue for the same period last year. This
decrease was because the three month period ended March 31, 2005 contained
$1,416,996 of revenue associated with Notify's legacy wireline Customer
Premise Equipment ("CPE") that is no longer sold.
The gross margin for three month period ended March 31, 2006 was 96.8%
compared to 48.7% in the same period last year because the three month period
ended March 31, 2006 contained manufacturing costs for Customer Premise
Equipment ("CPE") sales. The Company's current business consists of software
and service products that do not have the same materials component of
manufacturing costs.
The Company's NotifyLink wireless product line revenue improved to
$670,789 for the three month period ended March 31, 2006 from $519,362 for the
same period of the prior year. The service portion of the Visual Got Mail
Solution product line was $211,023 in the three month period ended March 31,
2006 compared to $452,233 in the same period of the prior year. The level of
Visual Got Mail service revenue is expected to continue to decrease in future
periods as the installed base the Visual Got Mail product services declines
due to our customer's discontinued marketing of the service.
"While the negative but non-operational adjustment to income generated by
following the guidance of EITF 00-19 is appropriate, the continued improvement
in our NotifyLink revenues deserves attention," said Paul DePond, President of
Notify Technology. "Our wireless business has increased by 30% from the same
period last year as our new versions of NotifyLink for IMAP4 are starting to
show traction."
ABOUT NOTIFY TECHNOLOGY CORPORATION
Founded in 1994, Notify Technology Corporation is an innovative software
company developing mobility products for organizations of all sizes. Notify's
wireless solutions provide secure synchronized email and PIM access and
management to any size organization on a variety of wireless 2-way devices and
networks. Notify sells its wireless products directly and through authorized
resellers internationally. The company is headquartered in San Jose,
California. For more information, visit http://www.notifycorp.com or contact
408-777-7920.
Forward-Looking Statements: This press release contains forward-looking
statements related to Notify Technology that involve risks and uncertainties,
including, but not limited to statements regarding the development of
NotifyLink revenue and the service revenue on the Visual Got Mail Solution.
Those statements are based on current information and expectations and there
are important factors that could cause actual results to differ materially
from those anticipated by such statements. These risks include, but are not
limited to, our ability to deliver products and manage growth, the continuance
of certain customer voice mail programs, the expectation that the revenue from
the service portion of the Visual Got Mail Solution will decline due to
customer decisions to withdraw from the consumer market that the Notify
product supports, as well as other risks. In particular, we cannot predict
future NotifyLink revenues with any accuracy and do not know whether
NotifyLink revenues will continue to grow at the rates we have recently
experienced. Increasing NotifyLink revenues will require continued
investments in our sales and marketing organization, and we have limited
available cash resources to make these investments. These forward-looking
statements are made in reliance on the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. For further information about these
factors that could affect Notify Technology's future results, please see the
Company's filings with the Securities and Exchange Commission. Prospective
investors are cautioned that forward-looking statements are not guarantees of
performance. Actual results may differ materially from management
expectations.
CONTACT: Jerry Rice, Chief Financial Officer of Notify Technology
Corporation, 408-777-7927, or jerry.rice@notifycorp.com.
NOTIFY TECHNOLOGY CORPORATION
CONDENSED UNAUDITED STATEMENTS OF OPERATIONS
Three-Month Periods Six-Month Periods
Ended March 31, Ended March 31,
------------------------------ ------------------------------
2006 2005 2006 2005
------------- ------------- ------------- -------------
Revenue:
Product revenue $ 675,783 $ 1,976,168 $ 1,961,890 $ 2,463,138
Service revenue 211,023 452,233 445,874 851,169
Total revenue 886,806 2,428,401 2,407,764 3,314,307
Cost of revenue:
Product cost 2,731 1,233,977 457,396 1,253,326
Service cost 7,277 11,306 15,375 23,937
Royalty payments 18,653 -- 35,898 --
Total cost of revenue 28,661 1,245,283 508,669 1,277,263
Gross profit 858,145 1,183,118 1,899,095 2,037,044
Operating expenses:
Research and development 228,068 266,328 462,446 513,020
Sales and marketing 438,093 428,588 818,286 835,107
General and administrative 324,786 400,156 636,065 773,380
Total operating expenses 990,947 1,095,072 1,916,797 2,121,507
Loss from operations (132,802) 88,046 (17,702) (84,463)
Other interest
(expense), net 1,974 1,003 2,890 (1,349)
Loss on fair value
of warrants (145,252) -- (145,262) --
Net loss $ (276,080) $ 87,043 $ (160,064) $ (83,114)
Basic net loss per share $ (0.02) $ 0.01 $ (0.01) $ (0.10)
Diluted net loss per share $ 0.00
Basic weighted average
shares outstanding 13,968,995 13,968,995 13,968,995 13,821,787
Diluted weighted average
shares outstanding 13,968,995 19,224,313 13,968,995 13,821,787
NOTIFY TECHNOLOGY CORPORATION
Condensed Unaudited Balance Sheets
March 31, Sept. 30,
2006 2005
------------ ------------
Assets:
Current assets:
Cash and cash equivalents $ 490,076 $ 424,228
Accounts receivable, net 617,797 472,942
Other assets 58,481 58,751
Total current assets 1,166,354 955,921
Property and equipment, net 112,243 144,418
Total assets $ 1,278,597 $ 1,100,339
Liabilities and shareholders' deficit
Current liabilities:
Current portion of capital lease obligation 18,192 22,609
Accounts payable 49,252 47,650
Accrued payroll and related liabilities 314,044 328,535
Deferred revenue 1,554,635 1,287,866
Customer advances -- 30,039
Other accrued liabilities 122,382 --
Warrant liability 145,252 139,484
Total current liabilities 2,203,757 1,856,183
Long-term capital lease obligations 13,792 23,044
Total liabilities 2,217,549 1,879,227
Shareholders' deficit:
Common stock 13,969 13,969
Additional paid-in capital 22,840,830 22,840,830
Accumulated deficit (23,793,751) (23,633,687)
Total shareholders' deficit (938,952) (778,888)
Total liabilities and
shareholders' deficit $ 1,278,597 $ 1,100,339
SOURCE Notify Technology Corporation
-0- 05/16/2006
/CONTACT: Jerry Rice, Chief Financial Officer of Notify Technology
Corporation, +1-408-777-7927, or jerry.rice@notifycorp.com/
/Web site: http://www.notifycorp.com/
(NTFY)