True North Corporation - The Return On Ideas Company(TM) (TSX VENTURE:TN) ("True
North" or the "Company") - today announced that it has released its results for
the three and six months ended June 30, 2007.
Second Quarter 2007 Results
True North Corporation, with the successful integration of C3 Online Marketing
has re-branded itself as Empirical and is aggressively shifting its marketing
solutions to produce revenue growth from channels that deliver higher margins
such as interactive and online marketing services, with particular emphasis on
the emerging Web 2.0 and mobile markets. Revenue for the quarter ended June 30,
2007 was $2,111,055 compared to $3,103,650 during the second quarter of 2006 and
during the first six months of 2007 was $5,223,040 compared to $6,249,238 in
2006. Revenue from the provision of interactive marketing services, which the
Company did not provide until late 2006, represented 35% of total Revenue in the
latest quarter and 30% of total Revenue in the first six months of 2007. As
noted below, in the latest quarter, margins for the Company improved from 43.5%
to 73.9% on a year over year basis. Rick Camilleri, CEO for Empirical commented,
"We are making significant progress in the re-positioning of our Company and the
revitalization of the traditional marketing services operation. Our next
generation solutions are resonating with clients and laying the foundation for
the future of the Company. We still have work to do on the revitalization of our
traditional business, but we are focused and committed to successfully
completing same."
Revenues generated by the base traditional marketing services business were
approximately $1.7 million lower in the second quarter and $2.6 million lower
during the first six months of 2007 compared to similar periods in 2006, due to
two large, non-recurring one-off projects completed during the second quarter of
2006 as well as a major client loss during 2006. While down in the traditional
base business, the new online and interactive marketing services are creating a
foundation for profitable growth.
EBITDA for the quarter ended June 30, 2007 was $(299,053) compared to $(574,359)
in the second quarter of 2006 and ($507,627) for the first six months of 2007
compared to ($784,963) in 2006. The improvement in EBITDA in both the second
quarter and first six months of 2007 was achieved despite a decline in Revenue
in the base traditional marketing services business.
As a result of a stronger mix, Gross Profit in the second quarter of 2007
increased by $210,155 to $1,559,771 from $1,349,616 in the second quarter of
2006 and as a percent of Revenue was 73.9% compared to 43.5% in the second
quarter of 2006. Gross Profit in the first six months of 2007, increased by
$700,669 to $1,559,771 from $1,349,616 in the first six months of 2006 and as a
percent of Revenue was 65.8% compared to 43.8% in the first six months of 2006.
For the quarter ended June 30, 2007, SG&A expenses of $1,858,824 were $225,396
lower than in the first quarter of 2007 and were also $65,151 lower than the
$1,923,975 of SG&A expenses incurred in the second quarter of 2006, prior to the
acquisition of the Company's online marketing services business in November
2006. For the six months ended June 30, 2007 SG&A expenses at $3,943,044 were
$423,333 higher than SG&A expenses of $3,519,711 in 2006. The reduction in SG&A
expenses in the second quarter of 2007 results from cost savings achieved as a
result of integrating the Company's sales, marketing, project delivery and
administrative teams following the acquisition of its online marketing services
business.
"As part of the turnaround of our traditional marketing services business and
the refocusing of our sales and marketing teams to ensure the integration of
next generation marketing solutions, we have appointed Larry Klopot, as
Executive Vice President. Larry has extensive experience in business
repositionings and in all phases of million-dollar revenue growth and corporate
development and we are thrilled to have him leading our innovative changes."
added Rick Camilleri, CEO, True North Corporation.
Amortization of property, equipment and intangibles was $555,212 in the second
quarter of 2007 compared to $46,231 in the second quarter of 2006 and during the
first six months of 2006, was $1,053,541 compared to $90,593 in the first six
months of 2006. These higher non-cash expenses reflect a decision of the Company
following the acquisition of its online marketing services business, to be
conservative and to amortize the intangible assets acquired over a two year
period.
Interest and Finance Charges including interest on long-term debt for the
quarter ended June 30, 2007 were $400,783 compared to $106,949 during the second
quarter of 2006. For the six month period ended June 30, 2006, these charges
were $678,693 compared to $200,404 in 2006. For the three and six-month periods
ended June 30, 2007, $36,987 and $61,395 of non-cash accretion interest and
$163,320 and $288,558 of transaction costs respectively, related to the issue of
a $1.7 million convertible secured debenture on May 22, 2007 and the arrangement
of a new operating credit facility provided by Greenfield Commercial Credit were
included in Interest and Finance Charges.
Other Expenses for the three months ended June 30, 2007 were $468,457 compared
to $400,000 in 2006, and for the six month period ended June 30, 2007 were
$882,086 compared to $400,000 in 2006. During the second quarter of 2007, the
Company recorded a non-cash loss on extinguishment of debt of $468,457 in
connection with its $1.7 million issue of a new convertible secured debenture
and the concurrent amendment of terms of its previously issued debentures. Other
Expenses for the six month period ended June 30, 2007 also include a charge of
$413,629 recorded in the first quarter for severance costs.
The Net Loss for the quarter ended June 30, 2007 was $1,743,552 compared to a
Net Loss of $1,585,164 in the same period of 2006. For the first six months of
2007, the Net Loss was $3,206,188 compared to $1,933,585 in 2006. Cash used in
operating activities during the quarter ended June 30, 2007 was $893,390
compared to $200,139 in 2006. During the first six months of 2007, cash used in
operating activities was $1,101,487 compared to $215,965.
As previously announced, on May 24, 2007, the Company completed a Financing and
received net proceeds of approximately $1.2 million (after transaction fees,
professional fees, and payments of prepaid and overdue interest) following the
issue of a $1.7 million convertible secured debenture, maturing May 22, 2011, to
Quorum Investment Pool Limited Partnership ("QIP"). The Financing also included
amendments to the terms of its three existing debentures including the amendment
of certain financial covenants and the adjustment of conversion prices on its
$1,435,185 convertible secured debenture issued to Quorum Secured Equity Trust
("QSET") and its $1,388,889 convertible debenture issued to Quorum Investment
Pool Limited Partnership. The maturity date on the Company's $1,225,926
convertible debenture issued to Ontario SME Capital Corporation ("SME") was
advanced from February 28, 2008 to January 4, 2008 and the Company provided SME
with a $500,000 Secured Promissory Note, due on April 30, 2008 and payable in
either cash or shares of the Company, at the holder's option. In connection with
the Financing, the Company also issued 6,022,804 common share purchase warrants
to QIP, who has agreed to transfer the warrants to three officers of the
Company.
The net proceeds from the Financing were invested in short term guaranteed
investment certificates of a major Chartered Bank. These short term investments
together with the Company's cash reserves and operating line of credit have been
used to fund the Company's negative cash flow from operations while the Company
restructures, and executes its strategy to deliver improved operating and
financial results.
On joining the True North Corporation in May 2007 Larry Klopot has refocused the
sales and marketing teams as well as emphasizing cost savings. Klopot has over
20 years of Senior Executive experience in the financial and travel service
sectors. Klopot's experience includes Management Restructuring, Operational
Streamlining, Sales and Marketing Management, Business Development, Strategic
Planning, Crisis Management, P&L Management, and Profitability Improvements. His
expertise and unique focus has played a key role in refocusing the Company.
Summary of Results
Three months ended Six months ended
June 30, June 30, June 30, June 30,
2007 2007 2007 2006
Revenue $ 2,111,055 $ 3,103,650 $ 5,223,040 $ 6,249,238
EBITDA (299,053) (574,359) (507,627) (784,963)
Amortization 555,212 46,231 1,053,541 90,593
Interest and Finance
Charges(1) 400,783 106,949 678,693 200,404
Other Expenses 468,457 400,000 882,086 400,000
Stock Based Compensation 20,047 - 84,241 -
Write-down of intangible
assets - 457,625 - 457,625
---------------------------------------------------
Net Loss $(1,743,552) $(1,585,164) $(3,206,188) $(1,933,585)
---------------------------------------------------
---------------------------------------------------
Loss per Share - Basic $ (0.03) $ (0.08) $ (0.06) $ (0.10)
Loss Per Share -
Diluted n.a.(2) n.a.(2) n.a.(2) n.a.(2)
Notes
-----
1 Interest & finance charges include interest and finance charges and
interest on long-term debt.
2 Not applicable where anti-dilutive.
This news release contains certain forward-looking information and statements.
Forward-looking information typically contains statements with words such as
"consider", "anticipate", "believe", "expect", "plan", "intend", "may", "will",
"likely" or similar words suggesting future outcomes or statements regarding an
outlook for, or future changes in, the Company's financial performance, results
of operations or other expectations future events or performance. Although the
Company believes that the expectations reflected in these forward-looking
statements are reasonable, readers should not place undue reliance on
forward-looking information and should be aware that forward looking statements
are subject to known and unknown risks, uncertainties and other factors that
could cause actual results, performance or achievements of the Company to differ
materially from those suggested by the forward-looking statements. These factors
include but are not limited to, uncertainty in connection with the Company's
ability to continue as a going concern, the possible failure of the Company to
receive the continued support of its lenders and other creditors and to obtain
additional financing and successfully plan and execute business improvement
strategies that will generate future positive cash flows, restrictions and
covenants contained in the Company's agreements with its lenders including
holders of its convertible secured debentures and promissory notes, high levels
of interest-bearing debt and resultant debt services costs, downturns in general
economic conditions and resulting changes in client business and marketing
budgets, the highly competitive nature of the marketing services industry
including providers of online marketing services, the greater resources
available to larger and better financed competitors, low barriers to entry for
new competitors, dependence upon a limited number of clients contributing a
significant percentage of revenues, inability to acquire new clients or new
assignments from existing clients, ability to successfully integrate the recent
acquisition of C3 Online Marketing Inc. ("C3"), ability to continue to enhance
and improve the responsiveness, functionality and features of its online
marketing suite of promotions products and the retention of key management,
sales and marketing and technical personnel.
The above list of factors affecting forward-looking information is not
exhaustive, and reference should be made in the MD&A under "Risk" and
Uncertainties" and in the Company's filings with Canadian securities regulatory
authorities. The Company undertakes no obligation, except as required by law, to
update publicly or otherwise any forward-looking information, whether as a
result of new information, future events or otherwise, or the above list of
factors affecting this information.
Except as outlined below financial information has been prepared in accordance
with generally accepted accounting principles applicable to a going concern
which assumes the Company will realize on its assets and satisfy its obligations
as they become due in the normal course of operations. Accordingly, they do not
give effect to adjustments that would be necessary should the Company be unable
to continue as a going concern. In other than in the normal course of business,
the Company may be required to realize its assets and liquidate its liabilities
and commitments at amounts different from those in the accompanying consolidated
financial statements. The application of the going concern concept is dependent
upon the Company receiving the continued support of its lenders and other
creditors, its ability to secure additional financing and its ability to
generate future positive cash flow. The Company is pursuing additional capital
resources; however it is not possible to predict whether financing efforts shall
be successful or if the Company will attain profitable levels of operations. If
the going concern assumption was not appropriate for these financial statements,
adjustments would be necessary in the carrying value of assets and liabilities,
reported income and expenses and in the balance sheet classifications used.
As used herein, "EBITDA" refers to earnings before amortization of property and
equipment, amortization of intangible assets, interest including interest on
long-term debt and finance charges, write down of intangible assets, stock-based
compensation and other non-recurring expenses including loss on extinguishment
of debt, provision for loan receivable and loss on sublet of warehouse and
office space. The Company cautions that EBITDA is not a recognized measure under
GAAP and that measures adjusted to a basis other than GAAP do not have a
standardized meaning and are unlikely to be comparable to similar measures used
by other companies. EBITDA is presented as a supplemental measure to net income
(loss) as management believes it provides useful information regarding operating
performance and is commonly used by investors, financial analysts and lenders to
value the Company and assess the Company's ability to service debt. The items
required to reconcile between EBITDA and net income (loss) are amortization of
property and equipment, amortization of intangible assets, interest including
interest on long-term debt and finance charges, write down of intangibles
assets, stock-based compensation and other non-recurring expenses including loss
on extinguishment of debt, provision for loan receivable and loss on sublet of
warehouse and office space.
True North Corporation's Second Quarter Unaudited Interim Consolidated Financial
Statements and Management's Discussion and Analysis are available on SEDAR at
www.sedar.com.
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