IceWEB(TM) Reports Fiscal 2008 Second Quarter Results

IceWEB, Inc. (OTCBB:IWEB), www.IceWEB.com, today announced its financial results for the second fiscal quarter, ended March 31, 2008. John R. Signorello, Chairman and Chief Executive Officer of IceWEB, Inc., stated, "As evidenced by a very strong start to our third fiscal quarter -- having achieved more than $2.3 million in sales in the month of April alone, the anticipated challenges we faced during the first half of this year with the integration of our INLINE™ acquisition appear to be giving way to positive, even robust, growth. What’s more, we are very pleased that our decision to invest in the acquisition and in-house development of our own proprietary line of storage offerings and branded on-demand application services is having measurable impact on our blended gross profit margin, which continues to steadily climb.” Signorello further noted, "Managing the demand for our solutions by federal agencies and enterprise companies is proving to be our most pressing challenge at this time. Consequently, IceWEB’s management team must now concentrate on perpetuating the sales momentum we’ve worked so hard to generate, while also strengthening our financial footing through debt refinancing.” Financial highlights for the six months ended March 31, 2008 compared to the six months ended March 31, 2007:   -- Revenues decreased 4% to $8.1 million from $8.5 million. -- Sales of storage, network and security solutions to the Company's government and enterprise customers declined 11% to $7.4 million from $8.4 million. -- IceWEB's on-demand software sales increased 212% to $194,000 from $62,000. -- Gross margin on sales rose 31% to 15.2% from 11.6%. -- Due primarily to costs stemming from non-cash compensation expense and the acquisition of INLINE Corporation on December 31, 2007 and its subsequent integration into IceWEB's business platform, total operating expenses were up 113%, rising to $3.2 million from $1.5 million. -- Research and development expenses increased to $86,000 from $0 due to R&D activities related to the Company's proprietary INLINE storage products. -- Salaries, benefits and taxes increased to $2.0 million from $561,000, which included non-cash incentive compensation of $538,000 for the six months ended March 31, 2008, versus a credit for non-cash incentive stock option expense of $296,000 for the year-ago period, representing a net increase of $834,000 in non-cash expense. Base salary expense for the six month period ended March 31, 2008 totaled $1,150,000 as compared to $683,000 for the same three months in the prior year. $245,000 of this $467,000 increase in salaries is directly related to the acquisition of INLINE, and includes one-time bonuses to INLINE employees of $89,000. -- Marketing and selling costs were $89,000, a 48% decrease from $171,000. The decline was attributable to a decrease in web marketing, advertising and print advertising during the six months ended March 31, 2008. -- Net loss increased to $2.2 million, or $0.10 loss per basic and diluted share, compared to net income of $17,000, or $0.00 per basic and diluted share. Financial highlights for the three months ended March 31, 2008 compared to the three months ended March 31, 2007:   -- Revenues declined 34% to $3.9 million from $5.9 million. Excluding a single, extraordinarily large sale totaling $1.9 million which occurred in the second fiscal quarter of 2007, revenues remained relatively flat on a comparable quarter over quarter basis. -- Network, storage and security solution sales totaled $3.5 million, reflecting a 40% decrease from $5.8 million. -- Sales of IceWEB's on-demand application services rose 198% to $108,000 from $36,000. -- IceWEB's INLINE storage solutions sales were $292,000, which compared to $0 due to the fact that IceWEB did not acquire INLINE until the end of 2007. -- Gross margin on sales increased 38% to 16.4% from 11.8%. On a subsequent quarter-over-quarter basis, gross margins rose 16% when compared to 14.2% reported for the first quarter of fiscal 2008. -- Total operating expenses rose 243% to $2.0 million from $591,000, due largely to the acquisition and integration of INLINE, which occurred on December 31, 2007, and non-cash compensation expense. -- Net loss increased to $2.2 million, or $0.10 loss per basic and diluted share, compared to net income of $17,000, or $0.00 per basic and diluted share. -- EBIDTA for the quarter totaled $(1.3) million. Excluding costs related to the acquisition of inline, non-cash compensation expense, and other one-time charges, the loss for the quarter was $(656,000). As of March 31, 2008, the Company had $2.7 million in cash and accounts receivables; $465,000 in inventory and a working capital deficit of $3,861,000, which was due primarily to approximately $3.0 Million being expended for the acquisition of INLINE Corporation. Total shareholders' deficit was $2.2 million.   IceWEB, Inc. Consolidated Balance Sheet March 31, 2008 (Unaudited)   CURRENT ASSETS: Cash $ 123,399 Accounts receivable, net of allowance of $9,000 2,523,600 Inventory, net of allowance of $106,541 464,577 Other current assets 62,769 Prepaid expenses   71,543   3,245,888   OTHER ASSETS: Property and equipment, net 722,138 Deposits 71,804 Intangible assets, net of accumulated amortization of $220,087 155,392 Goodwill   1,715,450 Total Assets $ 5,910,672   CURRENT LIABILITIES: Accounts payable and accrued liabilities $ 4,605,562 Notes payable 2,483,145 Deferred revenue   18,594   7,107,301   Long-Term Liabilities Notes payable 1,036,261     Total Liabilities   8,143,562   Stockholders’ Deficit Preferred stock ($.001 par value; 10,000,000 shares authorized) Series A convertible preferred stock ($.001 par value; 0 shares issued and outstanding) — Series B convertible preferred stock ($.001 par value; 1,833,334 shares issued and outstanding) 1,833 Common stock ($.001 par value; 1,000,000,000 shares authorized; 15,800,338 shares issued and 15,637,838 shares outstanding) 15,802 Additional paid in capital 13,674,890 Accumulated deficit (15,912,415 ) Treasury stock, at cost, (162,500 shares) (13,000 )     Total stockholders’ deficit   (2,232,890 )   Total liabilities and stockholders’ deficit $ 5,910,672     IceWEB, Inc. Consolidated Statements of Operations (Unaudited)   Three Months EndedMarch 31 Six Months EndedMarch 31 2008   2007 2008   2007   Sales $ 3,902,131 $ 5,877,457 $ 8,114,863 $ 8,459,234   Cost of sales 3,264,075 5,181,233 6,877,890 7,476,642                 Gross profit   638,056   696,224   1,236,973   982,592   Operating expenses: Marketing and selling 59,314 111,013 88,720 171,229 Depreciation and amortization 76,533 65,595 152,364 131,136 Research and development 85,730 — 85,730 — General and administrative 1,811,312 414,518 2,818,260 1,174,883                 Total Operating Expenses   2,032,889   591,126   3,145,074   1,477,248                 Income (loss) From Operations   (1,394,833 )   105,098   (1,908,101 )   (494,656 )   Other income (expenses): Gain/(loss) from sale of assets — 14,733 — 153,319 Interest income 1,661 952 2,584 2,261 Interest expense (187,371 ) (103,880 ) (285,007 ) (234,085 )                 Total other (expenses):   (185,710 )   (88,195 )   (282,423 )   (78,505 )                 Net income (loss) $ (1,580,543 ) $ 16,903 $ (2,190,524 ) $ (573,161 )     Basic loss per common share $ (0.10 ) $ 0.00 $ (0.15 ) $ (0.06 ) Diluted loss per common share $ (0.10 ) $ 0.00 $ (0.15 ) $ (0.06 )   Weighted average common shares outstanding-basic 15,272,865 9,980,389 14,679,343 9,656,498 Weighted average common shares outstanding-diluted 15,272,865 13,210,445 14,679,343 9,656,498   IceWEB, Inc. Consolidated Statements of Cash Flows (Unaudited)   Six Months EndedMarch 31, 2008   2007   NET CASH USED IN OPERATING ACTIVITIES $ (633,426 ) $ (162,352 )   CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (35,691 ) (1,873 ) Net cash received from sale of net assets — 138,000 Cash used in acquisitions, net   (1,311,318 )   (247,000 ) NET CASH USED IN INVESTING ACTIVITIES   (1,347,009 )   (110,873 )   CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of equipment financing (44,136 ) (37,699 ) Proceeds from notes payable - related party — 30,000 Repayment of notes payable - related party (115,767 ) (26,500 ) Net proceeds from related party advances — 11,737 Proceeds from notes payable 6,043,934 254,903 Payments on notes payable (4,872,667 ) (200,000 ) Proceeds from exercise of common stock options — 35,650 Proceeds from exercise of common stock warrants — 287,000         NET CASH PROVIDED BY FINANCING ACTIVITIES   1,011,364   355,091   NET INCREASE (DECREASE) IN CASH (969,071 ) 81,866   CASH - beginning of period 1,092,470 432,885         CASH - end of period $ 123,399 $ 514,751   Supplemental disclosure of cash flow information: Cash paid for:         Interest $ 276,566 $ 224,710 Income taxes   —   —     Acquisition details:         Goodwill $ 1,715,450 $ — Liabilities assumed $ 1,616,814 $ — Common stock issued $ 276,845 $ — Direct costs $ 740,000 $ — Fair value of assets acquired $ 2,229,527 $ — Cash paid $ 1,311,318 $ — About IceWEB, Inc. Headquartered just outside of Washington, D.C., IceWEB manufactures and markets storage solutions and on-line application services. Additionally it is a leading source for best-of-class security products, services and solutions offered in partnership with a wide range of global technology leaders. Its customer base includes U.S. government agencies, enterprise companies and small to medium sized businesses (SMB). For more information, please visit www.IceWEB.com. "Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: Except for the historical information contained herein, the matters discussed in this press release are forward-looking statements that involve risks and uncertainties, including but not limited to business conditions and the amount of growth in the computer industry and general economy, competitive factors, and other risks detailed from time to time in the Company’s SEC reports, including but not limited to its annual report on Form 10-K and its quarterly reports on Forms 10-Q. The Company does not undertake any obligation to update forward-looking statements.