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Absolute Software Reports Fiscal 2010 Year-End Results
Aug 23, 2010 (04:08 PM EDT)


VANCOUVER, Aug. 23 /PRNewswire-FirstCall/ - Absolute(R) Software (TSX: ABT), the leading provider of firmware-based, patented, computer theft recovery, data protection and secure computer lifecycle management solutions, announces its financial results for the three- and 12-month periods ended June 30, 2010. All figures are in Canadian dollars unless otherwise stated.

    Key Financial Metrics
    (in millions, except    Q4       Q4       %                          %
     per share amounts)   F2010    F2009   change    F2010    F2009   change
    -------------------------------------------------------------------------
    Cash from Operating
     Activities(1.a)       $0.3     $2.1     -88%     $6.4    $17.4     -63%
    Operating cash per
     share(1.a)
      Basic               $0.01    $0.05     -80%    $0.14    $0.37     -62%
      Diluted             $0.01    $0.05     -80%    $0.13    $0.36     -64%
    -------------------------------------------------------------------------
    Sales Contracts
     reported(1.a)        $19.3    $20.2      -4%    $69.7    $71.9      -3%
    Sales Contracts
     in constant
     currency(1.b)        $21.7    $20.2      +7%    $76.7    $71.9      +7%
    -------------------------------------------------------------------------
    Revenue               $16.6    $14.3     +16%    $64.1    $53.2     +20%
    -------------------------------------------------------------------------
    Net Income (loss)     $(3.8)   $16.5      nmf    $(8.2)   $(2.3)   -261%
    (Loss) income per
     share (diluted)     $(0.08)   $0.35      nmf   $(0.18)  $(0.05)   -260%
    Subscriptions under
     contract                                          5.9      4.1


    F2010 Highlights:

    -   Closed the year with a subscription base of 5.9 million computers, up
        43% from 4.1 million at June 30, 2009.
    -   Generated Sales Contracts of $51.0 million from existing commercial
        customers, or $56.2 million in constant currency, up 7% in constant
        currency from $52.5 million last year.
    -   Deferred revenue was $102.8 million at June 30, 2010, up 7% from
        $95.9 million at June 30, 2009.
    -   Cash, cash equivalents & investments (including long-term) were
        $58.0 million at June 30, 2010, compared to $68.9 million at June 30,
        2009, reflecting cash used for the acquisition of LANrev, FailSafe(R)
        and Freeze(TM) and the Company's share buyback program.
    -   Acquired LANrev, a comprehensive computer lifecycle management
        product (subsequently re-branded as Absolute Manage), and purchased
        the technology assets of FailSafe and Freeze from Phoenix(R)
        Technologies.
    -   Announced the University of Texas' selection of Absolute Manage for
        deployment on all of their Mac(R) computers in December 2009, and a
        $1.0 million new Absolute Manage customer sale in April 2010.
    -   Expanded international operations, growing international sales 41% to
        $4.3 million in fiscal 2010, and opened a regional office in Japan.
    -   Expanded availability of Computrace(R) solutions for HP Care Pack
        Services, and introduced Lenovo Lost & Found for ThinkPad laptops,
        both of which were instrumental in generating growth at these OEM
        partners.
    -   Added Intel(R) Anti-Theft Technology, geolocation, device freeze and
        self-serve remote data delete functionality to Computrace LoJack for
        Laptops for the consumer market.
    -   Purchased 400,300 common shares to date under the Company's current
        normal course issuer bid (covering the period November 4, 2009 to
        November 4, 2010), at a total cost of $1.7 million.
    -   Completed the prior normal course issuer bid which ended November 3,
        2009, with a total of 3,257,000 shares purchased, at a total cost of
        $10.7 million.

"In fiscal 2010, despite a lag in the PC refresh cycle and a challenging overall economic environment, our Sales Contracts in constant currency increased 7% year-over-year," said John Livingston, Chairman and CEO of Absolute. "Small acquisitions were a key part of our strategy during the year, as we repositioned ourselves as a broader player in the device and data management and security market. So far, sales of Absolute Manage have exceeded our internal targets, and now our sales team is able to lead with Computrace or Absolute Manage when pursuing new business, thus expanding our overall addressable market. We have already seen Absolute Manage win contracts against industry leaders in computer lifecycle management. Based on our results and the impact of these acquisitions, we are cautiously optimistic as we look ahead to fiscal 2011."

Financial Review

Sales Contracts for F2010 were $69.7 million ($76.7 million in constant currency) compared to $71.9 million in F2009, and for Q4-F2010 were $19.3 million ($21.7 million in constant currency) compared to $20.2 million in Q4-F2009. The results were in line with Absolute's revised guidance range of $68-72 million. A majority of Absolute's sales are denominated in U.S. dollars, and therefore were negatively impacted as the U.S. dollar declined from CDN$1.16 in F2009 to CDN$1.05 in F2010. In constant currency, Sales Contracts increased 7% in F2010 compared to F2009, and also increased 7% compared to Q4-F2009.

Existing commercial customers continued to produce a majority of Absolute's sales, generating 73% of F2010 Sales Contracts (70% in fiscal 2009) and 77% of Sales Contracts in Q4-F2010 (80% in Q4-F2009). In addition, international sales increased to 6% of F2010 sales up from 4% of sales in F2009, and represented 5% of Q4-F2010 sales, compared to 6% of sales in Q4-F2009.

While sales growth has been slowed by the economy and timing of computer refresh cycles, Absolute has continued to expand its customer base, and now has 1.2 million commercial subscriptions and 1.8 million consumer subscriptions coming up for renewal in fiscal 2011.

"This existing customer base gives us a good level of confidence in our ability to continue our Sales Contract growth trend in fiscal 2011," said Rob Chase, COO. "However, readers are cautioned that our commercial expiring subscription ratio will likely decline due to the fact that our existing customers are more penetrated on average than they were last year. In addition, we expect the average selling price for our existing customer sales to decline as the expiring subscriptions have a higher weighting toward our lower priced non-theft recovery products."

Absolute's cash from Operating Activities for F2010 was in line with our guidance range at $6.4 million compared to $17.4 million in F2009, and for Q4-F2010 totaled $0.3 million compared to $2.1 million in Q4-F2009. The reduction reflects management's investment strategy, the impact of the economic downturn on sales and the weakened U.S. dollar.

Revenue for F2010 was $64.1 million, an increase of 20% from $53.2 million in F2009. Revenue for Q4-F2010 was $16.6 million, an increase of 16% from $14.3 million in Q4-F2009. Revenue is typically a lagging performance indicator as it is a function of deferred revenue as opposed to invoiced sales in the quarter. The majority of the revenue from Q4-F2010 Sales Contracts is included in deferred revenue on the balance sheet at June 30, 2010, which was $102.8 million, compared to $95.9 million at June 30, 2009.

Absolute generated an operating loss of $4.4 million in F2010, compared to an operating loss of $16.6 million in F2009, and an operating loss of $2.7 million in Q4-F2010 compared to operating income of $1.7 million in Q4-F2009. The year-over-year changes reflect a significant stock-based compensation charge recorded in F2009 as well as a $4.5 million positive adjustment related to warranty accruals and investment tax credits recorded in Q4-F2009.

The operating results adjusted for stock-based compensation and amortization of intangible assets (or the adjusted operating income or loss, a non-GAAP measure) was an adjusted operating income of $0.4 million for fiscal 2010, compared to a loss of $0.6 million in the prior year. The increased income in F2010 is due to revenue growth in excess of the rate of the cost increases associated with the Company's expansion strategies.

For Q4-F2010, the adjusted operating loss was $0.8 million, compared to an adjusted operating income of $2.4 million in Q4-F2009. The loss in Q4-FY2010 compared to income in Q4-F2009 was primarily due to the previously mentioned non-cash adjustments in Q4-F2009.

GAAP net loss was $8.2 million in F2010 ($0.18 per share), compared to $2.3 million ($0.05 per share) in F2009, and was $3.8 million in Q4-F2010 ($0.08 per share) compared to net income of $16.5 million ($0.35 per share) in Q4-F2009. Net income results for F2009 and Q4-F2009 were affected by a one-time $16.7 million non-cash income tax recovery. The additional year-over-year variances in net loss reflect the changes in operating loss, interest income and foreign exchange losses.

Absolute is in a strong financial position, with no debt and the financial resources necessary to fund its operating and capital requirements and to execute on its growth strategies. At June 30, 2010, Absolute's cash, cash equivalents, short-term investments and investments were $58.0 million compared to $68.9 million at June 30, 2009. The reduction in cash position from June 30, 2009 is primarily due to the use of $17.5 million for the purchase of LANrev and certain assets from Phoenix Technologies, which was offset in part by cash generated from operations.

F2011 Guidance

Absolute is providing guidance that it expects to continue its Sales Contracts growth trend in F2011, increasing beyond the $69.7 million achieved in F2010. In addition, Absolute expects to grow Cash from Operating Activities in F2011 beyond the $6.4 million achieved in F2010. However, Absolute is not providing specific guidance for the growth targets. Due to the unpredictable economic climate, Absolute believes that it is not practical to provide specific guidance with an acceptable degree of reliability.

Annual Filings

Management's discussion and analysis ("MD&A"), consolidated financial statements and notes thereto for fiscal 2010 can be obtained today from Absolute's corporate website at www.absolute.com. The documents will also be available at www.sedar.com.

Notice of Conference Call

Absolute Software will hold a conference call to discuss the contents of this release on Monday, August 23, 2010 at 2:00 p.m. PT (5:00 p.m. ET). All interested parties can join the call by dialing 647-427-7450 or 1-888-231-8191. Please dial-in 15 minutes prior to the call to secure a line. The conference call will be archived for replay until Monday, August 30, 2010 at midnight.

A live audio webcast of the conference call will be available at www.absolute.com and www.newswire.ca. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

An archived replay of the webcast will be available for 365 days at www.newswire.ca.

To access the archived conference call, please dial 416-849-0833 or 1-800-642-1687 and enter the reservation code 89951179.

    (1.a) "Sales Contracts" (invoiced sales) is used as a Non-GAAP measure of
          sales performance and an indicator for future cash flow and
          revenue, "Cash from Operating Activities" as a profitability
          measure, and "Basic and Diluted Operating Cash per Share" (Cash
          from Operating Activities divided by the average shares outstanding
          for the period; diluted calculated using the treasury stock method)
          as an earnings per share measure. With the exception of Cash from
          Operating Activities, these are non-standard measures under
          Canadian Generally Accepted Accounting Principles. Absolute
          considers these measures to be key performance metrics as
          substantially all Sales Contracts in each quarter are deferred on
          the balance sheet, while the related costs are expensed in that
          same quarter. Refer to the Business Model section in our Management
          Discussion and Analysis for more details.

    (1.b) Sales Contracts in constant currency refers to the Canadian dollar
          sales that would have been reported had the U.S. dollar exchange
          rate been unchanged from the rate in the prior year. With
          approximately 95% of Sales Contracts in U.S. dollars management
          believes this to be a more meaningful evaluation of the underlying
          sales performance of the business.

About Absolute

Absolute Software Corporation (TSX: ABT) is the leader in tracking, managing and protecting computers and mobile devices. The Company's Computrace, Absolute Manage and LoJack(R) for Laptops solutions provide theft recovery, data protection and computer lifecycle management capabilities to organizations and consumers. The Company's software agent is embedded in the firmware of computers by global leaders, including Acer, ASUS, Dell, Fujitsu, General Dynamics Itronix, HP, Lenovo, Motion, Panasonic and Toshiba, and the Company has reselling partnerships with these OEMs and others, including Apple. For more information about Absolute Software, visit www.absolute.com and http://blog.absolute.com

Forward-Looking Statements

This press release contains certain forward-looking statements, which relate to future events or the Company's future performance, that include terms such as "will", "intend", "anticipate", "could", "should", "may", "might", "expect", "estimate", "forecast", "plan", "potential", "project", "assume", "contemplate", "believe", "shall" and similar terms. These statements involve known and unknown risks, uncertainties and other factors that are beyond the Company's control, which may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Absolute believes the expectations reflected in these forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in, or incorporated by reference into, this press release should not be unduly relied upon. These statements speak only as of the date of this press release or as of the date specified in the documents incorporated by reference into this press release.

This press release, and the documents incorporated by reference, contain forward-looking statements pertaining to expectations which include, but are not limited to: (a) a continuing need for laptop data protection, theft recovery services and computer lifecycle management solutions in difficult economic times; (b) the continued successful integration of recently-acquired products and technologies; (c) an increase in computer refresh/replacement cycles; (d) the attainment of certain sales and cash flow targets and company performance; (e) increased adoption, or attach, rates of the Company's lifecycle management, computer tracking, and computer theft recovery solutions; (f) the ability of the Company to successfully execute on its growth strategies, including attracting new distribution partners; (g) continuation of embedded firmware support from its current and anticipated PC OEM partners; (h) the demand for its products continuing to increase; (i) stable currency valuations and a sufficiently stable and healthy global economic and business environment; (j) the ability of the Company to access and gain traction in international markets and that such markets are growing as anticipated; and (j) other expectations, intentions and plans contained in this document that are not historical fact.

With respect to forward-looking statements contained in this press release, the Company has made a number of assumptions. The key assumptions underlying the aforementioned forward-looking statements are that: (a) the data security and endpoint lifecycle management markets will converge, and Absolute will be able to capitalize on this shift as a result of its recent acquisitions and an expanded product and feature set; (b) worldwide computer shipments will continue to grow, and Absolute will benefit from this trend through increased sales as a result of our investments in global sales and marketing and PC OEM partnerships; (c) our expiring subscription ratio will improve as a result of an increase in computer shipments; (d) our investments in future growth of the business will generate returns as the worldwide computer market rebounds; (e) Absolute will be able to continue to add new products and features on a global scale; and (f) Absolute will expand its portfolio of intellectual property, including patents. Certain or all of the forgoing assumptions may prove to be incorrect which could negatively impact the Company's business and the anticipated results discussed herein.

The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of substantial known and unknown risks and uncertainties, certain of which are beyond the Company's control. Such risks and uncertainties include, without limitation: risks associated with increased competition from other producers; the impact of general, economic conditions in Canada, the United States and overseas; industry conditions, changes in technology, changes in laws and regulations (including the adoption of new privacy and data collection laws and regulations) and changes in how they are interpreted and enforced; changes in federal and provincial tax laws and legislation; the lack of availability of qualified personnel or management; fluctuations in foreign exchange or interest rates; stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof; and obtaining required approvals of regulatory authorities. Readers are cautioned that the foregoing list of risks to the Company's performance is not exhaustive and reference is made to the items under "Risk Factors" in the MD&A and the Company's Annual Information Form for the year ended June 30, 2010. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this press release are made as at the date hereof and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

(C)2010 Absolute Software Corporation. All rights reserved. Computrace and Absolute are registered trademarks of Absolute Software Corporation. LoJack is a registered trademark of LoJack Corporation, used under license by Absolute Software Corporation. LoJack Corporation is not responsible for any content herein. All other trademarks are property of their respective owners. Computrace U.S. patents # 5,715,174, # 5,764,892, # 5,802,280, # 5,896,497, # 6,244,758, # 6,269,392, # 6,300,863, and # 6,507,914. Canadian patents # 2,284,806 and # 2,205,370. U.K. patents # EP793823 and # GB2338101. German patent # 695 125 34.6-08. Australian patent # 699045. Japan patent # JP4067035. The Toronto Stock Exchange has neither approved nor disapproved of the information contained in this news release.

    ABSOLUTE SOFTWARE CORPORATION
    Consolidated Balance Sheets
    June 30, 2010 and 2009
    (Expressed in Canadian dollars)
    -------------------------------------------------------------------------

                                                      June 30,       June 30,
                                                         2010           2009
                                                -----------------------------
    ASSETS

    CURRENT
      Cash and cash equivalents                  $ 28,078,851   $ 56,078,004
      Short-term investments                        6,420,210      8,743,861
      Accounts receivable, net of allowance
       for doubtful accounts of $1,935,000
       (2009 - $2,387,000)                         13,888,239     15,570,780
      Prepaid expenses and other                    1,149,428        974,564
      Current portion of deferred
       contract costs                               4,038,159      3,609,944
      Current portion of future income
       tax assets                                   9,904,709     10,646,521
                                                -----------------------------
                                                   63,479,596     95,623,674
    INVESTMENTS                                    23,527,677      4,076,211
    DEFERRED CONTRACT COSTS                         3,744,051      3,765,717
    PROPERTY AND EQUIPMENT                          2,754,271      2,644,275
    FUTURE INCOME TAX ASSETS                       10,308,983     11,081,073
    INTANGIBLE ASSETS                              20,477,801        127,775
                                                -----------------------------
                                                 $124,292,379   $117,318,725
                                                -----------------------------
                                                -----------------------------

    LIABILITIES

    CURRENT
    Accounts payable and accrued liabilities     $  8,183,219   $  6,775,466
    Income tax payable                              1,575,000      1,575,000
    Current portion of acquisition payable          1,728,607              -
    Current portion of accrued warranty             4,702,888      5,288,520
    Current portion of deferred revenue, net       52,411,595     46,577,880
                                                -----------------------------
                                                   68,601,309     60,216,866
    ACQUISITION PAYABLE                             3,457,214              -
    ACCRUED WARRANTY                                4,518,461      5,963,650
    DEFERRED REVENUE, NET                          50,346,988     49,278,726
                                                -----------------------------
                                                  126,923,972    115,459,242

    SHAREHOLDERS' (DEFICIENCY) EQUITY
    Share Capital                                  44,888,407     41,988,977
    Contributed Surplus                            28,393,491     26,822,975
    Deficit                                       (75,913,491)   (66,952,469)
                                                -----------------------------
                                                   (2,631,593)     1,859,483
                                                -----------------------------
                                                -----------------------------
                                                 $124,292,379   $117,318,725
                                                -----------------------------
                                                -----------------------------



    ABSOLUTE SOFTWARE CORPORATION
    Consolidated Statements of Operations and Comprehensive Loss
    Three and twelve months ended June 30, 2010 and 2009
    (Expressed in Canadian dollars)
    -------------------------------------------------------------------------

                           Three months ended         Twelve months ended
                                 June 30,                    June 30,
                     --------------------------------------------------------
                           2010          2009          2010          2009
                     --------------------------------------------------------

    REVENUE           $ 16,599,880  $ 14,330,961  $ 64,075,789  $ 53,218,894

    COST OF REVENUE      4,629,530     1,278,594    15,709,686    11,733,139
                     --------------------------------------------------------

    GROSS MARGIN        11,970,350    13,052,367    48,366,103    41,485,755

    OPERATING EXPENSES
      Sales and
       marketing        10,877,604     7,479,674    36,205,179    29,039,585
      Research and
       development       2,276,465     2,014,294     8,032,503     7,259,803
      General and
       administration    1,608,982     3,457,514     7,707,016     8,951,743
      Investment tax
       credits            (505,000)   (2,225,000)   (1,255,000)   (3,000,000)
      Stock-based
       compensation        422,552       642,213     2,085,977    15,792,738
                     --------------------------------------------------------
                        14,680,603    11,368,695    52,775,675    58,043,869
                     --------------------------------------------------------
                     --------------------------------------------------------

    OPERATING (LOSS)
     INCOME             (2,710,253)    1,683,672    (4,409,572)  (16,558,114)

    OTHER (EXPENSE)
     INCOME
      Interest
       income, net         174,294       151,317       699,239     1,384,195
      Foreign exchange
       (loss) gain         598,084      (888,443)   (1,772,780)    1,407,946
      Loss on foreign
       exchange
       contracts                 -       663,000             -      (849,500)
      Restructuring
       charges                   -             -             -      (989,132)
      Gain (loss) on
       investments         257,397      (197,569)       98,134      (952,023)
                     --------------------------------------------------------
                         1,029,775      (271,695)     (975,407)        1,486
                     --------------------------------------------------------
                     --------------------------------------------------------

    NET (LOSS) INCOME
     BEFORE INCOME
     TAXES              (1,680,478)    1,411,977    (5,384,979)  (16,556,628)

    INCOME TAX
     (EXPENSE)
     RECOVERY           (2,128,902)   15,072,933    (2,768,902)   14,297,933
                     --------------------------------------------------------

    NET (LOSS) INCOME
     AND COMPREHENSIVE
     (LOSS) INCOME    $ (3,809,380) $ 16,484,910  $ (8,153,881) $ (2,258,695)
                     --------------------------------------------------------
                     --------------------------------------------------------

    BASIC AND DILUTED
     (LOSS) EARNINGS
     PER SHARE        $      (0.08) $       0.36  $      (0.18) $      (0.05)
                     --------------------------------------------------------
                     --------------------------------------------------------

    WEIGHTED AVERAGE
     NUMBER OF
     COMMON SHARES
     OUTSTANDING,
     BASIC AND
     DILUTED            46,714,398    45,477,754    46,346,964    47,057,386
                     --------------------------------------------------------
                     --------------------------------------------------------



    ABSOLUTE SOFTWARE CORPORATION
    Consolidated Statements of Changes in Shareholders' Deficiency
    Years ended June 30, 2010 and 2009
    (Expressed in Canadian dollars)
    -------------------------------------------------------------------------

                  Share Capital
            -------------------------
              Number of
                Common                Contributed
                shares      Amount      Surplus       Deficit        Total
             ----------------------------------------------------------------

    BALANCE,
     JUNE 30,
     2008    47,811,570  $41,915,225  $11,938,462  $(56,752,618) $(2,898,931)
    Shares
     issued on
     options
     exercised  762,683    1,755,488     (780,450)            -      975,038
    Shares
     issued
     under
     Employee
     Share
     Purchase
     Plan       177,097      784,416            -             -      784,416
    Shares
     repurchased
     and
     cancelled
     under the
     Normal
     Course
     Issuer
     Bid     (3,257,000)  (2,793,927)           -    (7,941,156) (10,735,083)
    Shares
     issued on
     warrants
     exercised  200,000      327,775     (127,775)            -      200,000
    Stock-based
     compensation
     expense
     recorded on
     Option and
     Purchase
     Plans            -            -   15,792,738             -   15,792,738
    Net loss          -            -            -    (2,258,695)  (2,258,695)
             ----------------------------------------------------------------
    BALANCE,
     JUNE 30,
     2009    45,694,350  $41,988,977  $26,822,975  $(66,952,469)  $1,859,483
             ----------------------------------------------------------------
             ----------------------------------------------------------------
    Shares
     issued on
     options
     exercised  741,552    1,659,071     (259,911)            -    1,399,160
    Shares
     issued
     under
     Employee
     Share
     Purchase
     Plan       231,188      786,895            -             -      786,895
    Shares
     repurchased
     and
     cancelled
     under the
     Normal
     Course
     Issuer
     Bid       (238,000)    (202,086)           -      (807,141)  (1,009,227)
    Shares
     issued on
     warrants
     exercised  400,000      655,550     (255,550)            -      400,000
    Stock-based
     compensation
     expense
     recorded on
     Option and
     Purchase
     Plans            -            -    2,085,977             -    2,085,977
    Net loss          -            -            -    (8,153,881)  (8,153,881)
             ----------------------------------------------------------------
    BALANCE,
     JUNE 30,
     2010    46,829,090  $44,888,407  $28,393,491  $(75,913,491) $(2,631,593)
             ----------------------------------------------------------------
             ----------------------------------------------------------------



    ABSOLUTE SOFTWARE CORPORATION
    Consolidated Statements of Cash Flows
    Three and twelve months ended June 30, 2010 and 2009
    (Expressed in Canadian dollars)
    -------------------------------------------------------------------------

                           Three months ended         Twelve months ended
                                 June 30,                    June 30,
                     --------------------------------------------------------
                           2010          2009          2010          2009
                     --------------------------------------------------------
    OPERATING
     ACTIVITIES

      Net loss        $ (3,809,380) $ 16,484,910  $ (8,153,881) $ (2,258,695)
      Items not
       involving cash
        Amortization
         of property
         and equipment     374,170       446,333     1,366,800     1,238,642
        Amortization
         of intangible
         assets          1,493,931        31,943     2,737,602       127,774
        Stock-based
         compensation      422,552       642,213     2,085,977    15,792,738
        Future income
         taxes           3,573,902   (16,772,933)    1,513,902   (18,872,933)
        (Gain) loss on
         investments      (257,397)      197,569       (98,134)      952,023
        (Gain) loss on
         foreign
         exchange
         contract                -       (38,000)            -       849,500
      Change in non-cash
       working capital
        Accounts
         receivable     (2,956,756)   (2,145,301)    1,682,541     2,825,951
        Prepaid
         expenses and
         other              96,301      (165,111)     (174,864)      (67,772)
        Deferred
         contract costs   (177,631)     (292,675)     (406,549)   (1,076,001)
        Accounts payable
         and accrued
         liabilities     1,291,916       133,709     1,380,952       534,525
        Income tax
         payable        (1,950,000)     (525,000)            -     1,575,000
        Accrued
         warranty         (997,955)   (2,806,810)   (2,030,821)     (592,423)
        Deferred
         revenue         3,151,818     6,959,134     6,521,658    16,394,273
                     --------------------------------------------------------
    CASH FROM
     OPERATING
     ACTIVITIES            255,471     2,149,981     6,425,183    17,422,602

    INVESTING
     ACTIVITIES

      Purchase of
       property and
       equipment          (354,839)     (670,343)   (1,459,797)   (1,911,915)
      Acquisition of
       LANrev               (4,144)            -   (10,288,400)            -
      Purchase of
       intangible
       assets           (7,223,287)            -    (7,223,287)            -
      Realized loss
       on foreign
       exchange
       contract                  -        38,000             -      (849,500)
      Proceeds from
       maturities of
       short-term
       investments       2,615,227     5,590,000     9,926,691    15,570,571
      Purchase of
       short-term
       investments               -    (5,646,510)   (7,504,905)  (14,778,288)
      Proceeds from
       maturities of
       investments       1,304,228        38,061     1,304,228     8,375,000
      Purchase of
       investments        (439,288)            -   (20,755,694)   (5,435,137)
                     --------------------------------------------------------
    CASH (USED IN)
     FROM INVESTING
     ACTIVITIES         (4,102,103)     (650,792)  (36,001,164)      970,731

    FINANCING
     ACTIVITIES

      Repurchase of
       common shares
       for cancellation   (900,288)            -    (1,009,227)  (10,637,373)
      Issuance of
       common shares       520,261       355,324     2,586,055     1,861,745
                     --------------------------------------------------------
    CASH FROM (USED
     IN) FINANCING
     ACTIVITIES           (380,027)      355,324     1,576,828    (8,775,628)
                     --------------------------------------------------------
                     --------------------------------------------------------
    (DECREASE)
     INCREASE IN
     CASH AND CASH
     EQUIVALENTS        (4,226,659)    1,854,513   (27,999,153)    9,617,705
    CASH AND CASH
     EQUIVALENTS,
     BEGINNING
     OF YEAR            32,305,510    54,223,491    56,078,004    46,460,299
                     --------------------------------------------------------
    CASH AND CASH
     EQUIVALENTS,
     END OF YEAR      $ 28,078,851  $ 56,078,004  $ 28,078,851  $ 56,078,004
                     --------------------------------------------------------
                     --------------------------------------------------------

SOURCE Absolute Software Corporation