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LiveWorld Reports 84% Year-Over-Year Growth and Record Profits in 2005

Los Gatos, Calif., February 14, 2006 – LiveWorld, Inc. (LVWD.PK), a leading online community agency, today reported 84% year-over-year revenue growth and record profits for the year ending December 31, 2005.

“Online community was established as a major marketing venue for leading brands in 2005 and LiveWorld gained significant momentum as a leader in this rapidly growing sector,” said Peter Friedman, LiveWorld’s Chairman and CEO. “During the year we added important new customers, expanded our revenue, and demonstrated leverage and strength in our business model, as reflected in our profit and cash flow results. Going forward we see numerous growth opportunities and intend to continue investing to grow our business.”

Revenue: Revenues for fiscal year 2005 were $9,652,447 , representing 84% growth over fiscal year 2004 revenues of $5,235,181 . Fourth quarter 2005 revenues were $2,472,754, representing 57% year-over-year growth compared to fourth quarter 2004 revenues of $ 1,572,219, and approximately flat compared to third quarter 2005 revenues of $ 2,513,187 , following typical seasonal patterns.

Net Income Excluding the Impact of Stock Option Expense: Net income for fiscal year 2005, excluding stock option expense, was $1,263,527 , or $0.047 per share, representing 311% growth over fiscal year 2004 net income, excluding stock option expense, of $307,603, or $0.01 per share.  Net income in fiscal year 2005 benefited from a one-time legal settlement net impact of approximately $227,000 in the first quarter of 2005.    

Fourth quarter 2005 net income, excluding stock option expense, was $183,809 , representing approximately an 11% increase compared to fourth quarter 2004 net income, excluding stock option expense, of $165,567, and a 22% decrease compared to third quarter 2005 net income, excluding stock option expense, of $221,878.

Net Income Including the Impact of Stock Option Expense: Net income for fiscal year 2005, including stock option expense, was $750,621 , or $0.028 per share, representing a $1,213,158 increase compared to a fiscal year 2004 net loss, including stock option expense, of ($462,537), or ($0.017) per share. Net income in fiscal year 2005 benefited from a one-time legal settlement net impact of approximately $227,000 in the first quarter of 2005.    

Fourth quarter 2005 net income, including stock option expense, was $376,404, representing a $627,442 increase compared to the prior year quarter’s net loss, including stock option expense, of ($251,038) and a $479,507 increase compared to a third quarter 2005 net loss, including stock option expense, of ( $103,103). 

Cash: The Company ended fiscal year 2005 with approximately $1.4 million in cash, a $400,000 or 40% increase over the $1 million cash at the end of fiscal year 2004.

Stock Option Expense: The impact of stock option expense is a non-cash item. It can vary widely quarter to quarter, causing net income to either increase or decrease significantly, may or may not actually be realized, and is subject to wide changes due to; actual change in the stock’s price, whether or not employees exercise the stock options, changing laws, changing accounting rules, changing IRS guidance and other factors. As a result, management believes the impact of stock option expense does not best reflect the performance and outlook of the Company’s business. As of December 31, 2005, all stock options granted to date have fully vested and have been fully expensed. That is, unless and until the Company grants additional stock options there will be no future stock option expense. For example, as the Company grants options to new hires, then stock option expense will occur.  

A detailed quarterly financial history and additional notes are available at http://www.liveworld.com/company/financials.html

 

Business Outlook:  “As we look ahead to 2006, our goals include diversifying our revenue base by signing new marquee clients and expanding internationally. Additionally, we plan to pursue strategic relationships, which may include joint ventures, to increase our sales and marketing leverage. We believe we will excel by investing in quality and scale of services, moderation tools and infrastructure, research and reporting tools, and deploying new services such as LiveWorld’s unique Community Center,” stated Mr. Friedman.  “We have proven the strength of our business model and it is now time to invest for future growth.”

The Company stated that revenues currently in place for year 2006 are approximately $8.5 million (factoring in booked revenue, expected renewals, deals far along in discussion, and contracts expected to end during the first half of the year).  This figure compares to $7 million of year 2005 revenue that was signed as of February 8, 2005. The Company expects additional revenue growth during year 2006. 

Based on that revenue forecast and the continuation of its investment strategy, the Company expects to be roughly breakeven for year 2006 (excluding the potential impact of stock option expense). The Company may additionally increase investment in its operations and strategic alliances. Such increased investment could reduce profitability.

Revenue Mix: During years 2004 and 2005 revenue was concentrated in the Company’s two largest clients, together representing approximately 80% of revenue. However, revenue from other clients also grew significantly. Revenue from other clients in 2005 was approximately $1.8 million, representing 19% of the total revenue mix and a 75% increase over such revenue in 2004. The above $8.5 million revenue currently in place for in year 2006 includes approximately $2.2 million in revenue from other clients, representing 26% of the total revenue mix and 25% growth already in place compared to such revenue in 2005.

About LiveWorld, Inc. LiveWorld (Pinksheets: LVWD.PK, www.liveworld.com ) is a leading full service online community agency that creates, operates, and manages loyalty marketing, customer support, and business intelligence communities based on the Company’s unique community applications platform and strategic community model. LiveWorld solutions enable Fortune 1000 companies to strengthen customer relationships, increase revenues, and reduce costs. Clients include companies such as America Online, A&E Television Networks, AOL UK, BEA Systems, eBay, The Campbell Soup Company, Discovery Communications, Dove, HBO, Intel, Intuit Inc., MINI Cooper USA , PayPal, QVC, Slim-Fast, Tulane University, The Walt Disney Company, and Warner Brothers. LiveWorld is headquartered in Los Gatos, California and deploys its services in over 30 country-language combinations.

Contact: Peter Friedman, 800-514-2060

Safe Harbor" Statement Under The Private Securities Litigation Reform Act: This press release contains financial results that have not been audited or reviewed by an outside accountant and are subject to change upon such review. This press release also contains forward-looking information concerning LiveWorld’s future expectations, forecasts and prospects. These statements include those regarding LiveWorld’s current or future financial performance including, but not limited to revenue and profit growth, use of cash, investments, relationships and the actual or potential impact of stock option expense. Actual results may differ materially from those expressed in the forward looking statements made by LiveWorld as a result of, among other things, the state of the economy, LiveWorld’s ability to successfully deliver upon its contractual commitments, clients continuing their ongoing relationships with the Company, LiveWorld’s ability to acquire new customers, changing accounting treatments, and other risks applicable to the Company.  (See the Company’s Q3, 2002 10Q filing for a list that includes other possible risk factors.)