Monday August 14, 4:00 pm ET

Press Release Source: DAG Media, Inc.

 

NEW YORK, -- DAG Media Inc., announced today that net income for the quarter ended June 30, 2006 was $445,000 versus net loss of $16,000 for the same period last year, the net income was attributable to the gain on the sale of the Directories business, as defined below amounting to $766,000.

 

On February 6, 2006, DAG Media, Inc. (the "Company") entered into an asset purchase agreement to sell the assets and liabilities of our two Jewish Directories, The Jewish Israeli Yellow Pages and The Jewish Master Guide, also known as the Kosher Yellow Pages (the "Directories"), to DAG-Jewish Directories, Inc., a buying entity that was established by a group of sales agencies' owners and a few of our employees. The assets were sold for (i) $291,667 paid in cash at the closing; (ii) the delivery of a promissory note with payment totaling $613,333 (which includes interest payments in the rate of 5% per annum) which will be paid in 24 consecutive monthly installments of $25,556; and (iii) the Buyer's assumption of liabilities relating to the Directories business in the amount of approximately $3,197,000. The actual closing of the sale was held on April 20, 2006.

 

The Company has reflected the sale of the Directories business as a discontinued operation in the accompanying financial statements as of June 30, 2006. As a result, revenues, publishing costs and related expenses have been reclassified in the statement of operations and are shown separately as a net amount under the caption loss from discontinued operations for all periods presented. Accordingly, the Company recorded a loss from discontinued operation totaling $113,973 and $97,260 for the three month periods ended June 30, 2006 and 2005, respectively, and a loss from discontinued operations totaling $75,129 and $96,912 for the six month periods ended June 30, 2006 and 2005, respectively. Net revenue from the discontinued operations was $(9,896) (which consists of credits issued to customers) and $713,487, for the three month periods ended June 30, 2006 and 2005, respectively, and net revenue from the discontinued operations was $1,370,242 and $2,393,561, for the six month periods ended June 30, 2006 and 2005, respectively.

 

Loss from operations for the three month period ended June 30, 2006 was $300,000 compared to a loss of $172,000 for the same period in 2005, an increase of $128,000, or 74.4%. This increase is attributable primarily to web development costs of $113,000 associated with the programming of nextyellow.com's website and an increase in compensation expenses of $46,000 due to the adoption of SFAS 123R effective January 1, 2006, offset by a decrease in professional fees of $41,000 mainly due to replacing our legal consultants. We expect general and administrative expenses to increase as a result of the growth related to the operation of nextyellow.com.

 

Net loss from continuing operations for the three month period ended June 30, 2006 was $208,000, or $(0.07) per basic and diluted share (based on 3.157 million shares), compared to a net income of $81,000, or $0.03 per basic and diluted share (based on 3.118 million shares), for the same period in 2005. The net loss was attributable to the increase in loss from operations and decrease in other income which attributable primarily to the fluctuation in performance of the Company's portfolio and marketable securities.

 

Loss from operations for the six month period ended June 30, 2006 was $507,000 compared to a loss of $331,000 for the same period in 2005, an increase of $176,000, or 53.2%. This increase is attributable primarily to web development costs of $113,000 associated with the programming of nextyellow.com's website and an increase in compensation expenses of $79,000 relating to the adoption of SFAS 123R effective January 1, 2006, offset by a decrease in professional fees of $36,000 mainly due to replacing our legal consultants. We expect general and administrative expenses to increase as a result of the growth related to the operation of nextyellow.com.

 

Net loss from continuing operations for the six month period ended June 30, 2006 was $457,000, or $(0.15) per basic and diluted share (based on 3.150 million shares), compared to a net loss of $106,000, or $(0.04) per basic and diluted share (based on 3.113 million shares), for the same period in 2005. The increase was attributable to the increase in loss from operations and decrease in other income which was attributable primarily to the fluctuation in performance of the Company's portfolio and marketable securities.

 

As we began the operation of nextyellow.com through DAG Interactive, Inc., we will seek to acquire a new, potentially larger and more profitable business, more suitable for operation in a publicly traded company that is synergistic with nextyellow.com. However, we cannot assure you that we will acquire a business in this sector and we may use our available cash for other viable acquisitions. We believe that the sale of our Directories business, the commencement of nextyellow.com operation and the acquisition of a new business more suitable for operation in a public company is the best way to enhance shareholder value and optimize asset growth.

 

About DAG Media, Inc.

DAG Media, Inc. (Nasdaq: DAGM - News), through its subsidiary DAG Interactive, Inc. is a provider of an innovative solution to the online yellow pages industry and to local search. A preview of our patent pending technology is now operating at http://www.nextyellow.com and represents a shift in yellow pages approach from 'let your fingers do the walking' to 'let the businesses do the walking'.

 

This release contains forward-looking statements within the meaning section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are typically identified by the words "believe," "expect," "intend," "estimate" and similar expressions. Those statements appear in a number of places in this release and include statements regarding our intent, belief or current expectations or those of our directors or officers with respect to, among other things, trends affecting our financial conditions and results of operations and our business and growth strategies. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those projected, expressed or implied in the forward-looking statements as a result of various factors (such factors are referred to herein as "Cautionary Statements"), including but not limited to the following: (i) the successful consummation of the sale of our directories business; (ii) the success of our new business strategy; (iii) potential acquisitions; (iv) our limited operating history; iv) potential fluctuations in our quarterly operating results; (vi) challenges facing us relating to our growth; and (vii) our dependence on a limited number of suppliers. The accompanying information contained in this release, including the information set forth under "Management's Discussion and Analysis of Financial Condition and Results of Operations," which can be found in our Form 10-Q filed for the quarter ended June 30, 2006, identifies important factors that could cause such differences. These forward-looking statements speak only as of the date of this release, and we caution potential investors not to place undue reliance on such statements. We undertake no obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

 

DAG MEDIA, INC. CONSOLIDATED BALANCE SHEET
(unaudited)

 

Assets	June 30, 2006
Current assets:
Cash and cash equivalents	$3,788,809
Marketable securities	2,205,739
Short term investment - insurance
annuity contract - at fair value	1,100,017
Total cash and cash equivalents, marketable
securities and short term investment	7,094,565
Other current assets	74,565
Due from purchasers	350,548
Total current assets	7,519,678
Property and equipment, net	5,588
Capitalized web development costs	125,602
Other assets	164,945
Due from purchasers	604,426
Total assets	$8,420,239
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses	$131,758
Deferred subscription revenue	1,849
Income tax payable	361,371
Deferred gain from the sale of Jewish Directories	267,362
Current liabilities of discontinued operations	35,000
Total current liabilities	797,340
Long term liabilities:
Deferred gain from the sale of Jewish Directories	$604,426

 

Commitments and contingencies

Shareholders' equity:
Preferred shares - $ .01 par value;
5,000,000 shares authorized; no shares issued	----
Common shares - $ .001 par value;
25,000,000 authorized; 3,235,190 issued
and 3,166,460 outstanding	3,235
Additional paid-in capital	8,838,135
Treasury stock, at cost- 68,730 shares	(231,113)
Deferred compensation	(15,249)
Accumulated other comprehensive loss	(234,631)
Accumulated deficit	(1,341,904)
Total shareholders' equity	7,018,473
Total liabilities and shareholders' equity	$8,420,239

 

DAG MEDIA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

	Three Months Ended June 30,		Six Months Ended June 30,
Operating costs and expenses:	2006	2005	2006	2005
Web development costs	$112,994	$----	$112,994	$----
Marketing expenses	15,529	----	15,529	----
General and administrative expenses	171,681	172,090	378,514	331,008
Total operating costs and expenses	300,204	172,090	507,037	331,008
Loss from operations	(300,204)	(172,090)	(507,037)	(331,008)
Other income	92,368	252,936	49,739	225,501
(Loss) income from continuing operations before benefit for income taxes	(207,836)	80,846	(457,298)	(105,507)

 

Discontinued operations:

Gain on the sale of discontinued operations	766,385	----	607,800	----
Loss from discontinued operations	(113,973)	(97,260)	(75,129)	(96,912)
Income (loss) from discontinued operations	652,412	(97,260)	532,671	(96,912)
Net income (loss)	$444,576	$(16,414)	$75,373	$(202,419)

 

Basic and diluted net gain (loss) per common share outstanding:

Continuing operations	$(0.07)	$0.03	$(0.15)	$(0.04)
Discontinued operations	0.21	(0.04)	0.17	(0.03)
Total net gain (loss) per common share - basic and diluted	$0.14	$(0.01)	$0.02	$(0.07)
Weighted average number of common shares outstanding - basic and diluted	3,157,405	3,118,460	3,149,973	3,112,731

 

DAG MEDIA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

 

	Six Months Ended June 30,
Cash flows from operating activities:	2006	2005
Net income (loss)	$75,373	$(202,419)
Adjustment to reconcile net income to net cash used in operating activities:	6,602	7,428
Amortization of deferred compensation and non cash compensation	166,374	19,220
Gain on the sale of Jewish Directories	(426,107)	--
Tax benefit for stock options	--	15,940
Realized loss (gain) on sale of marketable securities	70,861	(101,073)
Gain on the sale of fixed assets	(14,232)	--

 

Changes in operating assets and liabilities:

Other current assets	(58,563)	(16,367)
Due from purchasers	(58,881)	--
Accounts payable and accrued expenses	85,479	(57,474)
Deferred subscriptions revenues	1,849	--
Assets and liabilities of discontinued operations	(104,249)	(193,487)
Net cash used in operating activities	(255,494)	(528,232)

 

Cash flows from investing activities:

Proceeds from sale of marketable securities	2,541,023	12,728,736
Investment in marketable securities	(2,558,739)	(10,780,895)
Investment in convertible loan	(25,000)	--
Purchase of fixed assets	(5,588)	--
Proceeds from sale of fixed assets	9,213	--
Cash received on sale of Jewish Directories,net of expenses	181,693	--
Assets of discontinued operations Net cash provided by investing activities	--	(6,072)
Net cash provided by investing activities	142,602	1,941,769

 

Cash flows from financing activities:

Dividend paid ($0.4 per share)	(314,246)	(1,490,982)
Proceeds from exercise of stock options	5,520	29,220
Net cash used in financing activities	(308,726)	(1,461,762)
Net decrease in cash	(421,618)	(48,225)
Cash and cash equivalents, beginning of period	4,210,427	3,547,742
Cash and cash equivalents, end of period	$3,788,809	$3,499,517

 

Supplemental Cash Flow Information:

Capitalized software acquired through issuance of stock	$37,920	--
Common stock issued for services performed	$45,000	--
Non cash proceeds from the sale of fixed assets	$33,080	--