Microforum Inc. (ticker: MCF.TO, exchange: Toronto Stock Exchange)
News Release - 29-Jan-2002

Microforum reports third quarter results

Media replication operation sold and additional cost reductions implemented

TORONTO, Jan. 29 /CNW/ - Microforum Inc. (TSE: MCF - news) today announced its financial results for the third quarter ended November 30, 2001. The Company also announced that it has taken further actions to reduce operating costs and that, subsequent to the end of the third quarter, it has concluded an agreement for the sale of its Media Replication Services operation to the management group of the unit.

The Company has entered into discussions regarding strategic alternatives with a number of third parties. Microforum has retained TD Securities Inc. to assist with identifying and evaluating these and other alternatives.

The Company also warned that it has incurred significant operating losses over the past twenty-four months and its ability to continue as a going concern is dependent upon achieving and maintaining profitable operations and upon obtaining additional financing. The outcome of these matters cannot be predicted at this time. The Operating Highlights provided have been prepared on a going concern basis and do not include any adjustments to the amounts that might be necessary should the Company be unable to continue business.

To more accurately compare the continuing operations of the Company to the previous period, the financial results for the fiscal quarter ended November 30, 2000, have been restated to separately disclose discontinued operations. The Company currently operates in one business segment and accordingly, the financial statements do not include any note segmentation.

Continuing Operations

The Company reported a loss from continuing operations of $9.4 million ($0.22 per share) on revenue of $3.2 million for the three month period ended November 30, 2001 compared to a loss from continuing operations of $33.5 million ($0.79 per share) on revenue of $7.1 million for the same period one year prior. Non-cash charges including amortization and write-down of capital assets, amortization and impairment of goodwill amounted to $3.1 million during the quarter compared to $26.2 million for the same period in the previous year and accounted for 33% and 78% of the loss, respectively.

Operating expenses, excluding investment income, amortization and write- down of capital assets and intellectual property, amortization and impairment of goodwill and income taxes, decreased to $5.2 million during the three month period ended November 30, 2001, down from the $7.5 million reported for the same period one year prior.

As at November 30, 2001, the Company had cash and cash equivalents of $9.7 million compared to $10.9 million at August 31, 2001.

"When we reported our second quarter financial results, I indicated that additional actions might need to be taken to align Microforum's operating structure with prevailing market conditions. As a result, during the third quarter fiscal 2002, the Company further reduced its workforce by an additional 44 individuals bringing the total headcount from continuing operations down to 139 people. In addition, to better enable management to focus on our core product, we negotiated an agreement to sell our Media Replication Services operation to that unit's management group," said Steven Schofield, Microforum's chief executive officer.

The Company will not realize any material gain from this sale. These measures are expected to result in a further reduction of approximately $1.5 million in annual operating expenses.

Discontinued Operations

The Company is reporting income of $0.6 million in connection with the discontinued operations of its strategic marketing division (PPL Marketing) and continues to look at opportunities to dispose of this operation and is currently in discussion and negotiation with interested parties. 

	    Operating Highlights
	    (unaudited)

	                      Three months   Nine months  Three months   Nine months
	                             ended         ended         ended         ended
	                       November 30   November 30   November 30   November 30
	                              2001          2001          2000          2000
	                      -------------------------------------------------------

	    Sales             $  3,201,981  $ 15,743,896  $  7,115,590  $ 24,259,397
	    Cost of sales        4,347,937    12,614,161     6,832,698    14,711,227
	                      -------------------------------------------------------
	    Gross profit
	     (loss)           $ (1,145,956) $  3,129,735  $    282,892  $  9,548,170

	    Operating expenses   5,240,061    16,163,780     7,509,909    16,151,594
	                      -------------------------------------------------------

	    Loss from
	     continuing
	     operations (x)   $  6,386,017  $ 13,034,045  $  7,227,017  $  6,603,424
	    Amortization and
	     write-down of
	     capital assets      1,599,778     3,747,597       658,997     1,219,866
	    Amortization and
	     impairment of
	     goodwill            1,562,831     4,375,000    25,553,347    29,751,962
	    Income taxes          (163,371)      106,629        40,000        80,000
	                      -------------------------------------------------------
	    Loss from
	     continuing
	     operations       $  9,385,255  $ 21,263,271  $ 33,479,361  $ 37,655,252
	    Income (loss)
	     from discontinued
	     operations            648,584       648,584   (13,739,222)  (19,723,886)
	                      -------------------------------------------------------
	    Net loss for
	     the period       $  8,736,671  $ 20,614,687  $ 47,218,583  $ 57,379,138

	    Basic loss per
	     share:
	    From continuing
	     operations       $       0.22  $       0.49  $       0.79  $       0.93
	    From discontinued
	     operations       $      (0.01) $      (0.02) $       0.33  $       0.49
	                      -------------------------------------------------------
	    Loss per share
	     for the period   $       0.21  $       0.47  $       1.12  $       1.42

	    Weighted average
	     common shares
	     outstanding for
	     the period         43,393,411    43,210,849    42,229,284    40,466,224

About Microforum

Established in 1987, Microforum sells software solutions to organizations that seek a competitive edge. The company is listed on The Toronto Stock Exchange (TSE: MCF - news). For more information, please visit www.microforum.com.

Forward-Looking Statements

Investors should take note that certain statements in this press release are forward-looking and may not give full weight to all of the potential risks and uncertainties. These forward-looking statements include statements that are subject to risks and uncertainties. Forward-looking statements are subject by their nature to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forward-looking statements. Any forward-looking statements speak only as of the date made. The Company is not undertaking to update any information in the foregoing reports until the effective date of its future reports required by the securities laws.

For further information

Contact Michel Beland, Chief Financial Officer, Microforum Inc., 416-467-4009, 1-866-467-4700, michel.beland@microforum.com or, John Sadler, 416-467-4055, investor.relations@microforum.com