Internet Commerce Corporation Announces Financial Results for Second Quarter Fiscal 2006

Internet Commerce Corporation (ICC) (NASDAQ: ICCA), a leader in business-to-business e-commerce solutions, todayannounced financial results for its fiscal second quarter ended January 31,2006.

"We are pleased with our results for the first half of fiscal year 2006,"said Thomas J. Stallings, chief executive officer of ICC. "We realizedexcellent earnings-per-share improvements in the first six months of theyear as a result of our vigilant management of the business. With a strongearnings and a solid balance sheet, we are in a position to invest indevelopment, marketing and sales with targeted initiatives aimed at gaininga stronger foothold in the market and increasing our profitability. Whileinvesting in the business, however, we will continue with our constant andcareful expense reviews and capitalize on opportunities to improvelong-term financial health."

"With the Kodiak Group, Inc. acquisition in November 2005, we developed andbegan to execute a plan for streamlining expenses and optimizingefficiencies," said Glen Shipley, chief financial officer for ICC. "Somecost-cutting measures, including one time charges, were incurred duringthis quarter. Others will occur during the second half of the fiscal year."

Shipley added that the cost-cutting plan focuses on long-term financialstrength and is vital to an improved cost structure going forward.

Second Quarter Fiscal 2006 Results

Second quarter revenue from continuing operations in fiscal 2006 was $5.01million, up 43.5% compared with the second quarter of fiscal 2005 revenuesof $3.49 million. Net income was $372 thousand compared with net loss of$288 thousand a year ago, an increase of $660 thousand. Basic and dilutedincome per common share of $0.01 and $0.02, respectively from continuingoperations compared with basic and diluted loss of $0.02 per common sharein the same period of fiscal 2005, an increase of $0.03 and $0.04,respectively.

The Company further reported that it achieved Earnings Before Interest,non-cash compensation, Taxes, Depreciation and Amortization (Adjusted"EBITDA") of $895 thousand in the second quarter of fiscal 2006 as comparedto Adjusted EBITDA during the second quarter of fiscal 2005 of $257thousand. Adjusted EBITDA is not a financial measure within generallyaccepted accounting principles (GAAP). The Company believes that thispresentation of Adjusted EBITDA provides useful information to investorsregarding certain additional financial and business trends relating to itsfinancial condition and results of operations. A reconciliation of thisnon-GAAP financial measure to net income for all periods presented isattached.

The Company reported one-time charges of $360 thousand in the secondquarter of fiscal 2006 including severance and other employment relatedexpenses payments and costs for facilities restructuring.

Second quarter revenue growth of 43.5% from second quarter fiscal 2005 tosecond quarter fiscal 2006 was driven by both business segments. In theICC.NET™ segment, second quarter revenues from continuing operationswere $3.12 million, up 13.8% from $2.74 million in the fiscal 2005 period.This revenue represented 62.3% of consolidated revenue in the secondquarter compared to 78.5% of consolidated revenue in the year ago period.Revenues from the Service Bureau segment were $1.9 million, an increase of151.6% compared $752 thousand in the second quarter of fiscal 2005. Thisrevenue represented 37.7% of consolidated revenue in the second quartercompared to 21.5% of consolidated revenue in the year ago period.

The Company's total gross profit margin from continuing operations improvedto 65.1% in second quarter fiscal 2006 from 61.6% in the second quarter oflast fiscal year. Total expenses from continuing operations increased 21.8%in second quarter fiscal 2006 from the prior-year period to $4.61 millionfrom $3.79 million principally as a result of the additional costs from theKodiak Group Inc.'s operations.

Six Month Fiscal 2006 Results

For the six months ended January 31, 2006, revenues from continuingoperations totaled $10.03 million, up 38.5% compared with first half fiscal2005 revenues of $7.24 million. Net income was $1.09 million compared to anet loss of $690 thousand for the same period in fiscal 2005, an increaseof $1.78 million. Basic and diluted income per common share fromcontinuing operations was $0.05 compared with a loss of $0.05 per basic anddiluted common share for the fiscal 2005 period, an increase of $0.10.

The Company further reported that it achieved Adjusted EBITDA of $2.2million in the first six months of fiscal 2006 as compared to $445 thousandof Adjusted EBITDA during the first six months of fiscal 2005. The Companybelieves that this presentation of Adjusted EBITDA provides usefulinformation to investors regarding certain additional financial andbusiness trends relating to its financial condition and results ofoperations. A reconciliation of this non-GAAP financial measure to netincome for all periods presented is attached.

Six month revenue growth of 38.5% was driven by both business segments. Inthe ICC.NET(™) segment, six month revenues from continuing operationswere $6.15 million, up 10.6% from $5.57 million the same fiscal 2005period. This revenue represented 61.4% of consolidated revenue in the firsthalf of fiscal 2006 compared to 76.9% of consolidated revenue in the yearago period. Revenues from the Service Bureau segment were $3.88 million, anincrease of 131.6% compared with $1.67 million in the first six months offiscal 2005. This revenue represented 38.6% of consolidated revenuecompared to 23.1% of consolidated revenue in the year ago period.

The Company's total gross profit margin from continuing operations improvedto 63.6% in the first six months of fiscal 2006 from 61.9% in the first sixmonths of last fiscal year. Total expenses from continuing operationsincreased 12.0% in first half of fiscal 2006 from the prior-year period to$8.9 million from $7.94 million principally as a result of the additionalcosts from the Kodiak Group Inc.'s operations.

The company ended the first six months of fiscal 2006 with over $4 millionof cash on hand. The balance sheet remains strong, and the company is wellpositioned to take advantage of opportunities.

Forward-Looking and Cautionary Statements

Except for the historical information and discussion contained herein,statements contained in this release may constitute forward-lookingstatements within the meaning of the Private Securities Litigation ReformAct of 1995. These statements involve a number of risks, uncertainties andother factors that could cause actual results to differ materially, asdiscussed in the company's filing with the U.S. Securities and ExchangeCommission (SEC).

About Internet Commerce Corporation (ICC)

Internet Commerce Corporation (ICC), headquartered in Norcross, GA, is aleader in business-to-business e-commerce solutions. Thousands of customersrely on ICC's comprehensive line of solutions, in-depth expertise, andunmatched customer service to help balance cost, fit, and function requiredto meet unique requirements for trading partner compliance, coordination,and collaboration. With its software solutions, network services, hostedweb applications, managed services, and consulting services, ICC is thetrusted provider of solutions for businesses, regardless of size and levelof technical sophistication, to connect with their trading communities.For more information, visit www.icc.net.

INTERNET COMMERCE CORPORATION

Consolidated Statements of Operations (unaudited)(in thousands, except for share and per share amounts)

Three Months Ended Six Months Ended January 31, January 31, -------------------------- -------------------------- 2006 2005 2006 2005 ------------ ------------ ------------ ------------

Service revenues $ 5,012 $ 3,493 $ 10,030 $ 7,240 ------------ ------------ ------------ ------------

Expenses: Cost of services (including non-cash compensation of $5 and $11 for the three and six months ended January 31, 2006 respectively, and of $1 and $3 for the three and six months ended January 31, 2005 respectively) 1,750 1,341 3,655 2,761 Product development and enhancement (including non-cash compensation of $5 and $8 for the three and six months ended January 31, 2006 respectively, and of $7 and $15 for the three and six months ended January 31, 2005 respectively) 207 249 310 479 Selling and marketing (including non-cash compensation of $18 and $24 for the three and six months ended January 31, 2006 respectively, and of $8 and $11 for the three and six months ended January 31, 2005 respectively) 577 710 993 1,551 General and administrative (including non-cash compensation of $259 and $432 for the three and six months ended January 31, 2006 respectively, and of $177 and $375 for the three and six months ended January 31, 2005 respectively) 2,081 1,488 3,935 3,149 ------------ ------------ ------------ ------------

4,615 3,788 8,893 7,940 ------------ ------------ ------------ ------------

Operating income (loss) 397 (295) 1,137 (700) ------------ ------------ ------------ ------------

Other income and (expense): Interest and investment income 35 8 60 14 Interest expense (77) (1) (113) (4) Other income (expense) 10 - 27 - ------------ ------------ ------------ ------------ (32) 7 (26) 10 ------------ ------------ ------------ ------------Net income (loss) before provision for income taxes 365 (288) 1,111 (690)

Provision for income taxes, current (7) - 17 - ------------ ------------ ------------ ------------

Net Income (loss) 372 (288) 1,094 (690) ------------ ------------ ------------ ------------

Dividends on preferred stock (102) (101) (201) (201) ------------ ------------ ------------ ------------

Net income (loss) attributable to common stockholders $ 270 $ (389) $ 893 $ (891) ============ ============ ============ ============

Basic income/(loss) per common share $ 0.01 $ (0.02) $ 0.05 $ (0.05) ============ ============ ============ ============Diluted income/ (loss) per common share $ 0.02 $ (0.02) $ 0.05 $ (0.05) ============ ============ ============ ============Anti-dilutive stock options and warrants outstanding 1,652,695 7,514,464 2,527,457 7,814,464Weighted average number of common shares outstanding - basic 19,462,025 19,130,186 19,560,428 19,094,325

============ ============ ============ ============Weighted average number of common shares outstanding - diluted 22,124,182 19,932,294 21,865,940 19,730,300 ============ ============ ============ ============

INTERNET COMMERCE CORPORATION

Consolidated Balance Sheets(in thousands)

January 31, July 31, 2006 2005 -------- -------- (unaudited)ASSETSCurrent assets: Cash and cash equivalents $ 4,294 $ 3,983 Accounts receivable, net of allowance for doubtful accounts and allowance for sales returns and allowances of $569 and $582, respectively 3,623 3,476 Prepaid expenses and other current assets 520 404 -------- -------- Total current assets 8,437 7,863

Restricted cash 417 417Property and equipment, net 683 630Goodwill 3,884 3,843Other intangible assets, net 1,755 1,773Other assets 45 32 -------- -------- Total assets $ 15,221 $ 14,558 ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities: Accounts payable $ 510 $ 226 Accrued expenses 626 1,491 Accrued dividends - preferred stock 34 232 Deferred revenue 142 152 Capital lease obligation - 4 Other current liabilities 418 894 -------- -------- Total current liabilities 1,730 2,999

Long-term lease liability from acquisition 1,087 1,217 -------- -------- Total liabilities 2,817 4,216 -------- --------

Stockholders' Equity:Preferred stock * *Common stock 198 194Additional paid-in capital 96,777 95,814Accumulated deficit (84,571) (85,666) -------- -------- Total stockholders' equity 12,404 10,342 -------- --------

Total liabilities and stockholders' equity $ 15,221 $ 14,558 ======== ========

* less than 1,000

INTERNET COMMERCE CORPORATION

Supplemental Financial Data (Unaudited)

Reconciliation of Net Income (Loss) to Adjusted EBITDA - Consolidated Three Three Six Six Months Ended Months Ended Months Ended Months Ended January 31, January 31, January 31, January 31,(in thousands) 2006 2005 2006 2005 ------------ ------------ ------------ ------------Net income (loss) $ 372 $ (288) $ 1,094 $ (690)Less: Net interest and investment(income) expense 32 (7) 26 (10) Depreciation and amortization 211 359 615 741 Income taxes (7) - 17 - Non-cash charges for stock-based compensation 287 193 475 404 ------------ ------------ ------------ ------------Adjusted EBITDA $ 895 $ 257 $ 2,227 $ 445 ============ ============ ============ ============

Media Contact:Terri DeuelInternet Commerce Corporation678-533-8003

SOURCE:  Internet Commerce Corporation

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