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Thu, May 14, 2009 Atlantis Systems Corp.: Atlantis Reports First Quarter 2009 Financial Results
TORONTO, ONTARIO--(Marketwire - May 14, 2009) -
This news release may contain forward-looking statements. Reference should be made to "Forward-looking Statements" at the end of this news release. All amounts are stated in thousands of Canadian dollars except where otherwise noted.
Atlantis Systems Corp. (TSX:AIQ), a globally recognized training integrator in the military, commercial aviation and energy markets, today announced its financial and operating results for the first quarter and fiscal year ended March 31, 2009.
First Quarter 2009 Operational & Financial Summary
- Ontario Media Development Corporation ("OMDC") refundable tax credits eligibility of approximately $1.475 million, net of applicable fees with partial payment of approximately $1.3 million, net of applicable fees received in April.
- Cost reduction plans on track to deliver cost savings of approximately $1.5 million expected in 2009.
- $1.3 million contract with the DND to design, develop and deliver a professional development training package for aircraft maintenance workers who are preparing to assume supervisory positions.
- Commitment letter from a major Canadian customer for up to $240 to begin preliminary work for a major Canadian integrated military training program. The contract is valued at over $300 million which will be shared by the various team members including Atlantis. The contract calls for the delivery of a comprehensive aircrew training equipment and services solution. Atlantis expects to contribute both flight training devices and courseware to this program.
- Qualified by the U.S. Army Program Executive Office for Simulation, Training and Instrumentation (through ASA, Atlantis wholly-owned U.S. subsidiary) as a contractor under STOC II indefinite-delivery/indefinite-quantity contracting vehicle which was created to quickly procure the next generation of simulation and training products and services for use by the U.S. and coalition service members.
- Four new e-learning projects awarded to ASE division for approximately $307 in total.
- Upgrade contracts awarded to ASI was to upgrade CPT for RDAF valued at $376.
- $2.0 million e-learning contract with L-3 MAPPS to be a subcontractor for a project with the Canadian Navy announced subsequent to the first quarter
- Revenue for the three months ended March 31, 2009 was $3.9 million, a 9.3% decrease from the revenue of $4.3 million in the first quarter of the prior year.
- Net loss was $0.1 million, compared to a net loss of $2.3 million in the same period in 2008. The net loss in the first quarter of 2009 was reduced by approximately $1.3 million for OMDC refundable tax credits, net of applicable fees, and other one time reconfigured project cost estimates. Atlantis intends to take advantage of the Ontario and other jurisdiction refundable media tax credits as long as the programs are available.
"This past quarter we were pleased to secure approximately $4.5 million in new business across several of our key areas of focus" said Henrik Noesgaard, CEO of Atlantis Systems. "We will continue with our narrow but deep approach to account management to ensure we translate this new business to top line growth."
"We are nine months into the turnaround of Atlantis and the new direction has been set" said Mark Rivers, Chairman of Atlantis Systems Corp. "The efforts of the entire team have resulted in Atlantis closing a significant amount of new business in the quarter. These results are reflective of the increased effort around execution and demonstrate restored confidence in our customer base. This reinforces confidence in our management team and underscores the growing reputation that Atlantis has in the industry. The new business combined with improved contract and program management, will help to ensure that Atlantis meets its objectives for the balance of 2009."
First Quarter 2009 Results
Revenue was $3.9 million, a decrease of $405 or 9.3% year-over-year. The decrease was primarily due to the maturing of the CFTS program and the completion of the RDAF program in the third quarter of 2008. Revenue in the first quarter of 2009 includes net revenues of $921 due to reconfigured cost estimates to complete the SMHP and the CFTS program and from increases in forecasted support billings from the application of escalation clauses in the CFTS contract.
Order backlog at March 31, 2009 was $29.1 million which included $19.4 million from the CFTS program (with approximately $17.7 million for future support services), $7.0 million from the SMHP and $2.7 million from all other contracts. The order backlog at March 31, 2009 was unchanged from the December 31, 2008 amount (which included $17.4 million in future support services).
Gross margin was $2,388, or 60.7% compared to $147, or 3.4% of revenue year-over-year. The most significant factors for the increase in gross margin were the reduction in the cost of revenue due to the recognition of $1,306 (2008: nil), net of applicable fees, from OMDC refundable tax credits, and a foreign exchange loss of $248 (2008: $37). In addition, the first quarter gross margin reflects the net increase in revenue of $921 due to reconfigured cost estimates to complete the SMHP and CFTS program and the increases in forecasted support billings from the application of escalation clauses in the CFTS contract. Excluding for both periods the effect of refundable tax credits, foreign exchange and the update of program costs and support billings, the adjusted gross margin percentages for the first quarters of 2009 and 2008 would have been 13.6% and 11.4%, respectively.
The Company initiated a cost reduction plan in the fourth quarter of 2007 in order to reduce costs and overall operating expenses by approximately 15% annually. Workforce reductions and other cost cutting measures were expected to result in annualized savings of approximately $6.4 million. Through March 31, 2009 the cost reductions we have achieved as a result of the initial plan are consistent with the original estimates.
Net loss was $0.1 million, or $0.0 per share, compared to a net loss of $2.3 million for the prior year period. The net loss in the first quarter of 2009 was reduced by approximately $1.3 million for OMDC refundable tax credits, net of applicable fees.
Atlantis ended the quarter with bank indebtedness, net of cash, of $4,930 as compared to bank indebtedness, net of cash, of $62 at March 31, 2008.
As at March 31, 2009, the Company was not in compliance with the covenant included in the ComVest Agreement related to the requirement of a minimum EBITDA to Fixed Charges ratio of 1.25 to 1.0 for the last four quarters and, the Company had exceeded the maximum borrowing limit per the terms of the ComVest Agreement by approximately U.S. $1,398. On March 25, 2009, the Company's board of directors agreed to re-price, subject to regulatory approval, the ComVest Warrants from $0.09 to $0.03 per share. The Company received TSX approval for the re-pricing on April 9, 2009. The warrants were re-priced in lieu of covenant waiver fees that would have been otherwise charged by ComVest for covenant waivers as of December 31, 2008 and March 31, 2009. ComVest had previously agreed to provide waivers without charge for all reporting periods prior to December 31, 2008.
The Company has been advised by ComVest that effective April 1, 2009, ComVest will begin charging additional default interest of 5% per annum on both the Line of Credit and the Term Loan. The floor interest rate for the Line of Credit and the paid-monthly interest rate for the Term Debt would be 13%.per annum and 17.5% per annum, respectively, for periods that the Company is in default. The deferred interest rate of 5% per annum for the Term Debt has not been changed.
On December 15, 2008, it was announced that the TSX had placed the Company under a delisting review as result of a decline in the market value of the Company's shares and concerns regarding the Company's financial condition. The Company is being reviewed under the TSX's remedial review process and was originally granted 120 days to comply with all requirements for continued listing. After reviewing the Company's submission dated April 5, 2009, the Listing Committee of the TSX informed the Company on April 9, 2009 that the TSX has determined to defer its delisting decision until July 3, 2009. The Company will be permitted to make further submissions to the TSX regarding this matter on or before June 29, 2009. The Company will continue to work on remedying its continued listing deficiencies but there can be no assurances that it will be able to do so by July 3, 2009. The Company is investigating alternatives if its common shares are de-listed from the TSX.
Additional Information
For more information about the Company's first quarter results, please refer to the First Quarter 2009 Management's Discussion and Analysis filed on SEDAR ([ www.sedar.com ]).
About Atlantis Systems Corp.
Atlantis Systems (TSX:AIQ) uses its core capabilities in simulation-aided design and engineering and e-learning, combined with various technology tools, to help customers in military aviation, civil aviation and nuclear energy ensure the feasibility, capability, and effective utilization of their complex assets. In more than 30 years of operation, Atlantis has developed a solid reputation for its creative workforce and innovative solutions in supporting global OEM customers and defence organizations. To learn more, please visit the Company's web site at [ www.atlantissi.com ].
Forward-Looking Statements
Certain statements in this release are considered "forward-looking". These forward-looking statements are based on current expectations and various estimates, factors and assumptions and involve known and unknown risks, uncertainties and other factors. The material factors and assumptions that were applied in making the forward-looking statements in this release include but are not limited to assumptions regarding: our ability to obtain financing to fund our losses and continue to operate as a going concern; our ability to retain our current banking relationship; our ability to win new projects and to successfully complete ongoing negotiations with new and existing customers for new work and to accurately forecast the timing of such wins; our current order backlog and the timing of its recognition; our ability to secure spinoff programs to the CFTS program; the stability and growth of military markets and expenditures worldwide and expected developments in the energy and aerospace industries; the stability and growth of markets for simulation-based training products; the ability to retain our TSX listing or find a suitable alternate market for our shares; the availability of skilled personnel and that our cost reduction plan will not affect this availability; the level of spending on the Company's direct U.S. market initiative; our ability to meet contractual obligations under the CFTS and SMHP programs or any other major program; our ability to complete new and existing projects on time and on budget; the performance of subcontractors; our ability to protect and exploit our intellectual property; the value of the Canadian dollar relative to foreign currencies, in particular, the U.S. dollar; the level of capital programs to be completed and the accuracy of our projections of infrastructure spending at our facilities; and ASA's capability to deliver e-learning and other programs on time and on budget. Material factors that could cause Atlantis' actual results to differ materially from the forward-looking statements in this release include risks and uncertainties relating to:
our ability to meet debt obligations as required by our lending arrangements or secure waivers; our ability to source capital to fund our operations; our ability to continue to operate as a going concern; our ability to convert sales, negotiations and marketing pursuits into actual awards and order backlog; our inability to repay bank debt on demand; the current global financial crisis; the level of military expenditures and developments in the energy and aerospace industries; our continued reliance on key customers for existing and new work including our ability to leverage off the CFTS program; the availability of skilled personnel to ramp up new programs and complete existing programs; our reliance on subcontractors; our ability to protect the ownership of our technology and intellectual property; and the volatility of foreign exchange rates. Atlantis cannot provide any assurance that the predictions of forward-looking statements will materialize. Atlantis assumes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or any other reason. Additional information regarding risks and uncertainties that could affect Atlantis' business is contained in the Business Risk Factors section of Atlantis's Annual MD&A and the Description of the Business - Risk Factors section in Atlantis' Annual Information Form, both of which are available on SEDAR at [ www.sedar.com ].
ATLANTIS SYSTEMS CORP.
Consolidated Statements of Operations, Comprehensive Loss and Deficit
For the three months ended March 31, 2009 and 2008
(Expressed in thousands of Canadian dollars except per share amounts)
(unaudited)
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2009 2008
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Revenue (notes 5, 14 and 15) $ 3,934 $ 4,339
Cost of revenue (note 5) 1,546 4,192
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Gross margin 2,388 147
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Expenses
General and administrative 1,240 1,438
Selling and marketing 460 367
Stock options 53 36
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1,753 1,841
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Operating income (loss) before the undernoted items 635 (1,694)
Depreciation and amortization 392 530
Interest and financing costs, net (note 8) 354 78
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Net loss and comprehensive loss (111) (2,302)
Deficit, beginning of period (102,380) (78,963)
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Deficit, end of period $ (102,491) $ (81,265)
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Net loss per share (note 12)
Basic and diluted $ - $ (0.04)
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Weighted average number of shares
Basic and diluted 55 ,993,929 55,993,929
The accompanying notes are an integral part of these consolidated
statements.
ATLANTIS SYSTEMS CORP.
Consolidated Balance Sheets
As at March 31, 2009 and December 31, 2008
(Expressed in thousands of Canadian dollars)
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2009 2008
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(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 89 $ 1,100
Trade and other receivables (note 5) 2,873 575
Unbilled revenue (note 5) 2,834 1,571
Inventory 288 315
Prepaid expenses 292 302
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6,376 3,863
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Capital assets, net 1,006 1,120
Long-term prepaid expenses 81 81
Other long-term assets 77 77
Mortgage receivable (note 6) 166 164
Deferred development costs and core technology, net
(note 7) 1,594 1,859
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2,924 3,301
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$ 9,300 $ 7,164
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LIABILITIES
Current liabilities
Operating line of credit (note 9) $ 5,019 $ 3,258
Accounts payable and accrued liabilities 3,809 3,371
Accrued costs on percentage completion 413 409
Deferred revenue 1,317 1,219
Term debt (notes 9, 11, 13 and 14) 2,074 2,197
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12,632 10,454
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SHAREHOLDERS' (DEFICIENCY) EQUITY
Share capital and warrants (notes 10 and 11) 89,907 89,890
Contributed surplus 9,252 9,200
Deficit (102,491) (102,380)
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(3,332) (3,290)
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$ 9,300 $ 7,164
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The accompanying notes are an integral part of these consolidated
statements.
ATLANTIS SYSTEMS CORP.
Consolidated Statements of Cash Flows
For the three months ended March 31, 2009 and 2008
(Expressed in thousands of Canadian dollars)
(unaudited)
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2009 2008
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Cash flows provided by (used in):
Operating activities:
Net loss $ (111) $ (2,302)
Items not affecting cash:
Depreciation and amortization 392 530
Stock options expensed 53 36
Accretion on term debt 125 -
Financing costs related to re-pricing of common share
purchase warrants 16 -
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475 (1,736)
Interest on mortgage receivable (2) (4)
Long-term prepaid expenses - (2)
Net change in non-cash working capital (note 16) (2,983) (1,880)
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(2,510) (3,622)
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Investing activities:
Investment in capital assets (14) (20)
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(14) (20)
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Financing activities:
Term debt repayment -
Principal payment on term debt (321) (140)
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(321) (140)
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Net cash provided by foreign exchange loss on term debt 73 -
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Net decrease in cash (2,772) (3,782)
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(2,158) 3,720
(Bank indebtedness, net) cash and cash equivalents,
beginning of period
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(Bank indebtedness, net), end of period $ (4,930) $ (62)
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SUPPLEMENTAL INFORMATION
(Bank indebtedness, net) is comprised of:
Cash $ 89 $ 34
Bank operating line of credit (5,019) (96)
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$ (4,930) $ (62)
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Interest paid $ 211 $ 48
Income taxes paid $ - $ -
The accompanying notes are an integral part of these consolidated
statements.
