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MGI Reports Q4 Fiscal 2001 Results; Completes Year with $47.1 Million

Press release from the issuing company

TORONTO, ONT--March 29, 2001--MGI (TSE:MGI) today reported financial results for the fourth quarter of fiscal year 2001. Revenue for the three months ended January 31, 2001 were $11.1 million compared to $12.0 million in the same period last year. For the year ended January 31, 2001, revenue increased 52.6% to $47.1 million compared to $30.8 million in the comparable period last year. The quarterly results reflect the effects of a difficult quarter for North American sales particularly for photo products, while Asian and European revenues grew 208% and 75% respectively. E-imaging revenue, which represented 66% of total revenue, declined 10.5% to $7.4 million compared to the prior year due to softer than expected server sales in the fourth quarter and a downturn in the North American retail environment that has continued into the first quarter and therefore impacted the Company's required reserve levels at the end of the fourth quarter. This required the Company to review in detail based on the subsequent facts the adequacy of the reserve level for the fourth quarter. Digital video revenue of $3.7 million was flat compared to the prior year where strong OEM demand for video and DVD solutions was offset by the softening North American retail. Gross margins dropped to 60.3% due to increased third party licensing. "While we are disappointed with the overall outcome of the quarter primarily due to continued weakness in the marketplace we remain committed to product leadership but with profitability," said Anthony DeCristofaro, MGI president and chief executive officer. "Our focus this year is on operational quality and profitability that will further strengthen our position to grow future revenues at a time when our technology acceptance and industry partnerships continue to get deeper." The Company's reported cash loss, which reflects net loss adjusted for amortization of intangibles and one-time charges, for the three months ended January 31, 2001 was $11.5 million or $0.29 per share compared to $3.4 million or $0.10 per share for the same period last year. For the year, the cash net loss adjusted for amortization and one-time charges was $21.8 million or $0.58 per share compared to $9.8 million or $0.33 per share for the same period last year. The one-time charges were $3.9 million, which included expenses mainly from the Company's delayed NASDAQ listing, costs related to the restructuring of its U.S. operations, and the write down of goodwill related to our 50.1% owned subsidiary Live Picture Japan. During the quarter, the Company also incurred $142K in foreign exchange losses as a result of a stronger Canadian dollar in the period. As at January 31, 2001 the Company had cash and short-term investments amounting to $36.3 million including net proceeds of $21.3 million from an equity financing completed in the Canadian public markets in January. "Despite market weakness MGI management remains committed to meeting its previously stated objectives of achieving a profitable operating run rate by the end of fiscal 2002," said Rodney Davis, MGI chief financial officer. "We recognize that this will require a restructuring of our current operations and are currently implementing that course of action." To date MGI has taken steps to consolidate its image server operations at its head office initiating the elimination of 20 positions in San Francisco and France. Management is considering a number of other cost savings initiatives as part of its overall restructuring plan to be concluded this quarter.