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Prophecy Looks to a Brighter Future
Released 11 September 2001

Prophecy International Holdings Limited has announced revenues for 2000/1 of nearly $11 million. In common with many IT vendors, the company attributes the downturn in revenue to a general slow down in the IT marketplace and the deferral of purchasing decisions in a number of the company's major sales opportunities.

The board has reviewed the balance sheet and taken a number of conservative judgements that have produced a one-off result in the year just completed. These include:

1. a change in Foreign Exchange recognition policy resulting in a negative effect of over $400,000,
2. the reversal of a Future Income Tax Benefit in respect of tax losses resulting in a negative impact of almost $2,300,000 and
3. a doubtful debt provision related to an overseas debtor that appears unable to meet its obligations resulting in a negative impact of almost $1,500,000.

As a result of these judgements an after tax loss of $4.9m was recorded for the full year.

Brighter Prospects

The company is well positioned to take advantage of expected improved trading conditions in the 2001/2002 year with cash reserves of $8.5m as at the reporting date (and over $9m as at today's date).

For the 2000/1 year the company has reported a positive net operating cash flow of over $0.5 million.

The positive operational cashflow together with tight operational expenditure controls positions the company for a return to profit in this year.

Since joining the company in April, CEO Bruce Lakin has implemented a number of functional organisation changes which will focus the company on its strategic direction of provider of unique rapid software solutions in its target markets.

In addition Bruce has implemented a plan to reduce the expense base of the company.
These actions included a redundancy program of a number of non-critical positions which reduced the headcount by over 10% with effect from July 2001, a reduction in executive salaries and moving toward a more indirect model in Asia.

The Board believes that the North American market in particular will provide major growth opportunities and Bruce is now based in the USA to drive the expansion in this region and in Europe.

The recent signing of an order l with global IT services provider EDS to utilize e-Foundation to rapidly develop a solution for a major US Federal Government client is evidence of the potential that can be achieved in this market. Our technology is particularly attractive in the climate of reducing costs being faced by business today and this, along with our next generation of technology is expected to dramatically improve this year's revenue.

New Direction

In addition Prophecy has undergone a strategic change of direction from that of an ERP vendor to software solutions provider with e-Foundation, its rapid application assembly technology. Prophecy has also made a considerable investment in its future during the year by producing a world-class replacement to its existing Framework technology.

The company will launch its new rapid software solution technology shortly.

Written in Java, the world's most accepted software development language, this new technology will be targeted at the rapidly growing Java based software development industry. Java's wide acceptance has in itself caused a problem to business with a scarcity of Java programmers and high costs for those who are experienced. Our new technology is perfectly positioned for this market as it will allow the rapid assembly of 100% Java based software solutions without the need for Java programmers and database experts.

Our new technology is capable of saving millions of dollars and many months of elapsed time in large software development projects. As an example, a major customer recently reported a productivity increase of a factor of ten resulting in considerable savings of dollars and time for our client.

With the current focus on reduction of costs and efficiency of operations by business worldwide, we expect this new product to rapidly stimulate demand for our technology during this year.

Return to Profits Predicted

The Board consider the current market price to be well undervalued when compared to the company's asset backing and the expected substantial increase in revenue and return to profits this year.

Prophecy has unique intellectual property that is very relevant to major business operations today that are searching for competitiveness in slowing economies.



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