  |
|
|||||||||
 |
|
|
|
|||||||||
|
PhotoChannel Interim Financials
VANCOUVER, BC – August 25, 2004 – PhotoChannel Networks Inc. (TSX – V: PNI; OTCBB: PHCHF) (“PhotoChannel” or the “Company”), one of North America’s leading digital imaging technology providers, today reported its third quarter fiscal 2004 financial statements for the nine-month period ended June 30, 2004. During the quarter, the Company also saw certain of its large retail partners continue an aggressive marketing campaign of their online service and the Company believes that this will continue in their attempt to maintain and increase market share. “PhotoChannel is pleased to report another strong quarter of revenues,” stated Peter Scarth, PhotoChannel CEO. “During the quarter our development engineers were focused on building a grid network and moving our Network solution to TELUS’ co-location facility. Although these activities will benefit PhotoChannel over the long-term, they did result in scheduled downtime, which negatively affected website and transactional fees during the quarter. Notwithstanding these extraordinary items, the number of orders processed during this quarter increased by 56.5% over the prior quarter of 2004. Moving forward, the Company anticipates certain of its retailers will increase their digital imaging infrastructure and begin printing directly in-store, resulting in a significant monthly increase in PhotoChannel’s network fees. The Company is also encouraged by the exponential growth in the number of orders processed by stores that have adopted the one hour model of printing in-store. Third Quarter Financials The largest increase in revenue has resulted from the retailer’s customer’s acceptance and usage of an online solution for the purchasing of prints and gifting items from their digital images. This increase has resulted in the Company’s transactional revenues during the first nine months of fiscal 2004 growing to $283,953 from $55,117 for the corresponding period during fiscal 2003, a 415% increase. For the nine months ended June 30, 2004 website fees were $170,120 (subsequent to the deferral below), compared to $150,301 for the first nine months of fiscal 2003, an increase of $19,819. The Company now defers revenue from website fees earned for the initial set-up of a customer and recognizes it as income over the estimated term of the customer relationship period. At June 30, 2004, the Company had deferred revenue of $138,629 of which $108,629 has resulted from work performed in fiscal 2004. For comparative purposes, had the Company not adopted this deferral policy at the end of fiscal 2003, website revenue would have been $78,629 higher for the nine months ended June 30, 2004. The Company’s revenue for installation fees increased by $65,608 from $8,460 for the nine months ended June 30, 2003 to $74,068 for this corresponding period of fiscal 2004. This 776% increase is the result of the Company’s customers starting to print in-store thereby offering the consumer the equivalent of one-hour digital photofinishing. During the nine months ended June 30, 2004, the Company reported a gross profit of $420,981 versus $228,644 for the comparable period of 2003, an increase of 84%. The gross margin, as a percentage of revenue, was partially reduced due to lower gross margins associated with the one time initial physical setup of retailer locations for in-store printing, along with the printing and sale of the physical prepaid cards. The subsequent usage of the prepaid cards by customers will result in the Company recording transactional revenue with the same gross margins as those received with similar online orders at the time of use. The Company recorded a nine-month net loss attributable to common
shareholders of $1,791,283 or $0.01 per share compared to $1,853,492
or $0.02 per share in the same period last year. Losses incurred by
the Limited Partnership in fiscal 2003 were allocated first to the
Limited Partnership units to the extent of their equity investment
and thereafter to the Company. The Company previously attributed all
losses to the Company. Accordingly, the loss for fiscal 2003 has been
restated for comparative purposes to allocate losses to the Limited
Partnership units to the extent of the equity. This restatement has
had the effect of reducing fiscal 2003’s net loss for the nine-month
period attributed to the Company’s common shareholders by $127,410.
Certain statements in this announcement, including statements concerning
our plans, intentions and expectations, contain "forward-looking
statements" within the meaning of the Securities Act of 1933
as amended. Forward-looking statements are based on the opinions and
estimates of management at the time the statements are made and are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those anticipated in the forward-looking
statements. These statements are not guaranties of future performance
and are subject to certain risks, uncertainties and assumptions that
are difficult to predict. Readers are cautioned not to place undue
reliance on these forward-looking statements that speak only as of
the date of this announcement. Factors that could affect our actual
results, include, among others, Photochannel’s recent change
in business focus, anticipated losses, unpredictability of future
revenues, potential fluctuations in quarterly operating results, unproven
business model, ability to make additional acquisitions, risks related
to acquisitions, achieving adequate market share, brand awareness,
competition, risks of maintaining and creating new business relationships,
management of potential growth, risks of system interruption and risks
of international operations. More information about factors that could
potentially affect our actual results is included in Photochannel’s
filings with the Securities and Exchange Commission including the
Form 20-F related to Photochannel. We undertake no obligation to update
publicly any forward-looking statements to reflect new information,
events or circumstances after the date of this release or to reflect
the occurrence of unanticipated events. |
|
Copyright © 2006 PhotoChannel
Networks, Inc. All Rights
Reserved. 
