Basis100 Reports Second Quarter 2003 Financial Results

Basis100 Inc. Records 39 Percent Increase in Revenues Compared to Q2 2002

Toronto, ON (PRWEB) August 1, 2003 -- Basis100 Inc. (TSX: BAS), a business service provider for the mortgage lending marketplace, announced its operating results for the three months ended June 30, 2003.

In addition, the Company has sold its interests in CanDeal.ca (CanDeal") and Canadian Lending Solutions (CLS") division. The sale and results of operations of these former reporting divisions have been reflected as discontinued operations in the accompanying financial statements.

Revenue from continuing operations in the second quarter of 2003 was $8.4 million, an increase of 39 percent over revenues of $6.0 million reported in the second quarter of 2002. Earnings from continuing operations Before Interest, Taxes, Depreciation, Amortization and other expenses (EBITDA") for the current quarter was $1.8 million ($0.05 per share) as compared to a loss of $0.2 million or $0.005 per share for the quarter ended June 2002. Revenue in 2003 includes sales from Mortgage Risk Assessment Corporation (MRAC"). MRAC was acquired in May 2002 and one month of its activities are included in the second quarter of 2002.

For the quarter ended June 30, 2003, the net loss from continuing operations was $1.9 million or $0.05 per share. Interest, depreciation and amortization costs were $3.7 million including non-cash interest charges of $2.0 million. This compares to a net loss from continuing operations of $2.5 million or $0.07 per share including non-cash interest charges of $0.3 million for the same quarter in 2002. The Company recorded net income of $9.1 million for the quarter or $0.24 per share. The improvement in net income was primarily due to the gain recognized on the sale of the CLS division. This compares with a net loss of $5.2 million or $0.15 per share for the same quarter in fiscal 2002.

The Companys revenues generally reflect the seasonality that exists within the mortgage origination and collateral valuation markets. The improvement in revenue also reflects an expansion in the number of transactions processed and the addition of MRAC revenue of $2.4 million. Gross margin from continuing operations in the second quarter was 96 percent of sales compared to 98 percent for the comparable 2002 period. The decrease is attributable primarily to the variable cost associated with certain of MRAC data acquisition contracts, which were not included in the 2002 period.

Total operating expenses for the June 2003 quarter increased to $6.2 million from $6.1 million in the comparable quarter in 2002. Included in the June 2003 costs are the operating expenses of MRAC amounting to $1.0 million. MRAC was acquired on May 31, 2002, and its activities include one month of operating expenses amounting to $0.3 million in the 2002 period. Research and development costs for the June 2003 quarter were $1.1 million as compared to $1.2 million in June 2002.

The reduction of $0.1 million is a continuation of the effort to support products and services that provide an immediate benefit and a lesser emphasis on research and development. Projects requiring extensive research and development are evaluated on the basis of cost and related return.

Selling and marketing expense was $0.8 million for June 2003 and $1.4 million for the June 2002 quarter. The decline of $0.6 million represents primarily a reduction in advertising and promotion expense.

General and administrative expenses for the three months ending June 2003 were $2.3 million, an increase of $0.3 million from the June 2002 quarter. The increase was attributable primarily to salaries and benefits, data processing and bad debt expense. Approximately $0.3 million of the increase relates to foreign exchange loss adjustments incurred during the second quarter of 2003.

Customer support services in the June 2003 quarter were $1.6 million as compared to $1.5 million. The increase of $0.1 million was principally related to costs for storage and back-up facilities, as well as additional expenses related to MRAC.

On June 19, 2003, the Company completed the sale of the CLS business. Concurrent with the sale of CLS, the Company initiated a restructuring program to restructure employee positions that were no longer required to support strategic initiatives. The Company incurred approximately $0.4 million in costs related to the restructuring for the quarter ended June 30, 2002.

At June 30, 2003, current assets were $21.5 million, which included $15.1 million of cash and short-term investments. Included in these amounts is $7.5 million of restricted cash related to the impending MRAC earn-out ($3.7 million) and a substantial issuer bid ($3.8 million) for the Companys convertible debenture. Current liabilities were $18.3 million, including discontinued operations liabilities of $7.8 million. Long-term debt included capital lease obligations of $0.3 million and the liability portion of the convertible debenture of $17.3 million. The number of shares outstanding at June 30, 2003 was 37.3 million; the number of fully diluted shares outstanding was 57.9 million.

Discontinued Operations

Capital Market Solutions
On April 11, 2003, the Company sold its ownership interest in CanDeal. The proceeds received approximately equaled the carrying value of the investment. In connection with this transaction, the Company received payment in full for the $0.2 million subordinated promissory note issued to CanDeal. There was no gain or loss on sale. The results of operations and balance sheet amounts have been reclassified as discontinued operations for the periods presented herein.

Lending Solutions
On June 19, 2003, the Company completed the sale of its CLS business. Under the terms of the transaction, the Company disposed of substantially all of the assets of the CLS division, as well as the rights to Basis100's mortgage technology, including MortgageBASE, MortgageBASE Plus, HomeBASE, ConsumerBASE and LenderBASE.

A separate agreement also gives the purchaser exclusive usage rights to BasisXpress in the Canadian market and non-exclusive rights to all areas outside of Canada. The sale price was approximately $16.6 million, including certain adjustments. The resulting gain on sale of $10.3 million and the results of operations and balance sheet amounts have been reclassified as discontinued operations for the periods presented herein. See Note 8 in the attached financial statements for further information related to the sale of CLS.

Other Events

Substantial Issuer Bid
Pursuant to an Offer to Purchase circular to be dated July 31, 2003, the Company is initiating a substantial issuer bid ("SIB") to purchase from Debentureholders its 6.00 percent Convertible Unsecured Debentures due December 30, 2006 (the Debentures"). The Company has agreed to purchase and cancel up to a maximum of $5,000,000 aggregate principal amount of the Debentures.

Debentureholders can tender their Debentures for a price of $750 for each $1,000 principal amount of Debentures upon the terms and subject to the conditions set forth in the Offer to Purchase. The offer will expire on September 8, 2003, unless extended. In July 2003, the Company had escrowed $3,750,000 with an escrow agent to effect transactions under the Offer to Purchase. The escrowed amount is reflected in Restricted Cash on the accompanying balance sheet.

Normal Course Issuer Bids
The Company is also planning to file with the TSX a Notice of Intention to Make a Normal Course Issuer Bid permitting the Company to purchase, for cancellation, through the facilities of the TSX, (i) its Debentures and (ii) its common shares (collectively the "NCIBs"). All purchases under the NCIBs will be made in accordance with the policy statement of the TSX on normal course issuer bids, as amended or modified from time to time (the Policy Statement"). The Policy Statement restricts the aggregate annual purchases under the bid to a maximum in a 12-month period of the greater of 5 percent of the outstanding securities, or 10 percent of the public float; and restricts purchases under the bid to 2 percent of the outstanding class of securities in any given 30-day period.

2003 Outlook
Basis100 is focused on delivering shareholder value over the long term. As previously announced, the Company will not provide forward revenue or earnings guidance. Instead, the Company will provide its outlook on certain key components influencing financial results and will continue to communicate its strategies, and priorities throughout the year via quarterly conference calls and its Annual General Meeting of Shareholders.

General Information
Please see the financial information (posted on www.basis100.com), which should be read in conjunction with the most recent annual consolidated financial statements. Non-Generally Accepted Accounting Principles earnings measures, specifically, EBITDA, do not have any standardized meaning prescribed by Generally Accepted Accounting Principles and, as a result, EBITDA may not be precisely comparable to other companies.

All amounts are expressed in Canadian dollars unless otherwise noted.

Conference Call
Joseph J. Murin, President and CEO; Robert J. Smith, CFO; and Brian Thompson, Interim-CFO of Basis100 Inc. will review the Companys 2003 second quarter financial results via a conference call at 11:00 a.m. (EST) today (Wednesday, July 30, 2003).

All interested parties can access the conference call (listen-only mode) by calling in to the live call at 1-800-814-4861 or over the Web by connecting through Basis100s Web site, www.Basis100.com, and clicking on Investors/Conference Calls" to access the link.

A replay of the conference call will be available until 11:59 p.m. (EST) August 13, 2003 by dialing 1-877-289-8525 and entering the reservation number 21010293 followed by the pound" key. Interested parties can also reach the replay by visiting the corporate Web site at www.Basis100.com and clicking on Investors/Conference Calls."

To automatically be notified of new press releases, quarterly reports or the annual report, go to www.Basis100.com, and click on the Keep Me Informed" button on the left side. All contact information is kept confidential.

About Basis100 Inc.
Basis100 (TSX: BAS) provides information and process solutions, which leverage technology and intelligent processes to deliver a complete spectrum of business processes and actionable information -- enabling our customers to achieve excellent corporate results.

For more information about Basis100, visit www.Basis100.com.

Forward-looking (safe harbour) statement
Statements made in this news release that relate to future plans, events or performances are forward-looking statements. Any statement containing words such as believes," plans," expects" or intends" and other statements which are not historical facts contained in this release are forward-looking, and these statements involve risks and uncertainties and are based on current expectations. Consequently, actual results could differ materially from the expectations expressed in these forward-looking statements.

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For additional information, contact:

INVESTOR RELATIONS
Joseph J. Murin
President and CEO
Basis100 Inc.
Toronto: (416) 364-6085 Ext 300
Pittsburgh: (412) 922-9181
jmurin@Basis100.com

MEDIA RELATIONS
Lee Kaplan
Vice President, Corporate Development
Basis100 Inc.
(412) 922-9181
lkaplan@Basis100.com

Sandy Koeppl
Public Relations and Communications Director
Basis100 Inc.
(412) 922-9181
skoeppl@Basis100.com