Press

Press Releases 2003

Pethealth Inc. announces its eighteenth consecutive quarter of record revenue, and third quarter results for the period ending September 30, 2003.

OAKVILLE, ON, December 1, 2003. Pethealth Inc. ("Pethealth" or "the Company") (TSX Venture Exchange Tier 1: PTZ) today announced record financial results for the quarter ended September 30, 2003.

Highlights

• Total Revenue for Q3 2003 totalled $1,914,860 vs. $1,018,321 for the same period in 2002, representing an 88% increase. For the first nine months the Company achieved total revenue of $5,015,026 vs. $2,447,647 a 105% increase.
• Q3 2003 new policy sales totalled 64,916, consisting of 10,945 new core policy sales, 53,635 new ShelterCare policy sales and 336 new EmergencyCare sales vs. 30,263 new sales for the same period in the prior year, consisting of 7,854 new core policy sales and 22,409 new ShelterCare policy sales, a 115% increase.
• Paid policies in force at the quarter end totalled 98,204, consisting of 61,006 core policies, 36,387 ShelterCare policies and 811 EmergencyCare policies vs. 51,653 policies at September 30, 2002, consisting of 35,981 core policies and 15,672 ShelterCare policies, representing a 90% increase.
• Gross premiums written increased 80% to $4,732,485 in Q3, 2003 over the same period last year.
• Net Loss for Q3 2003 was $425,942 ($0.01 per share) vs. $1,147,256 ($0.01 per share) for the same period in 2002, a 63% decrease. The decrease is partially attributable to a change in accounting practice where certain advertising expenditures are capitalized and amortized over a three-year period.
• In advance of completing a proposed private equity placement of up to $10 million of its securities, the Company, subsequent to the quarter end, raised $4,000,000 of bridge financing.

Pethealth, the parent Company of PetCare Insurance Brokers Ltd., PetCare Insurance Agency, Ltd., Pethealth Services Inc. and Pethealth Services (USA) Inc., achieved record revenue for the eighteenth consecutive quarter of $1,914,860 as compared to $1,018,321 for the same period in 2002, representing an 88% increase. Gross premiums written in Q3 2003 were $4,732,485, up 80% from the same period in 2002. The Company's operating loss for Q3, 2003 was $425,942, a 63% reduction from the $1,147,256 loss reported in Q3, 2002.

Q3 new policy sales totalled 64,916, consisting of 10,945 new core policies, 53,635 new ShelterCare policies and 336 new EmergencyCare policies vs. 30,263 new policy sales in Q3 2002, which consisted of 7,854 core policies and 22,409 ShelterCare policies, a 115% increase. New policy sales consist of new core policy sales, new ShelterCare policy sales, ShelterCare policies converted into new core policies, ShelterCare policies continued past the first 60 days of coverage and new EmergencyCare policies. Renewals of existing policies are not included as new policy sales. EmergencyCare policies are annual policies for Microchipped pets with a premium of $19.95 that provide emergency pre-authorized coverage in the event that the pet is lost, injured, and requires medical attention.

Total paid policies in force at September 30, 2003 totalled 98,204, consisting of 61,006 core policies, 36,387 ShelterCare policies and 811 EmergencyCare policies, an increase of 90% over September 30, 2002 total policies of 51,653, which consisted of 35,981 core policies and 15,672 ShelterCare policies. Petfinder.com pays for the first 60 days of ShelterCare coverage to individuals adopting dogs and cats through its approximately 6,200 member animal shelters and rescue groups.

The significant reduction in the net loss was, in part, the result of a change in the Company's accounting practice with respect to certain advertising costs. Advertising costs incurred in connection with policy acquisitions, formerly expensed as incurred, are now being capitalized and are amortized over the three-year minimum expected life of the policy. The Company's current retention rate on core policies is approximately 76% on first renewal and 84% on second renewal. The costs that have been deferred consist of direct-response advertising expenditures where the related policy sale can be attributed to the marketing cost incurred. All other marketing and acquisition costs that cannot be specifically attributed to a specific direct-response advertisement continue to be expensed in the period incurred. Prior to 2003, many programs were in their infancy and the full recoveries of direct-response marketing costs through future revenue streams were uncertain and as such expensed in the period in which these costs were incurred. Future revenue streams now are more predictable. The change in accounting practice resulted in the Company reducing net marketing expense by $794,422 in the quarter, and increasing deferred acquisition costs by the same amount. The Company has recorded amortization of deferred acquisition costs of $209,543 in the period.

U.S. new core policy sales accounted for 74% of total new core policy sales in Q3 2003 generating increased revenues in U.S. dollars while 79% of employment and administration costs over the quarter were paid in Canadian dollars.

Additionally, the Company, through its wholly owned subsidiary Pethealth Services (USA) Inc., entered the United States pet recovery industry with an initial focus on the animal shelter community. The Company rolled out its manufacturer-neutral pet registry and recovery service in 48 states and began distributing the Allflex microchip technology throughout the state of Wisconsin and Oregon. In Canada, through its wholly owned subsidiary, Pethealth Services Inc., the Company continued to expand the 24PetWatch cross promotion of pet insurance to its customers, which will continue to be a major factor for the Company.

At September 30, 2003, the Company had total assets of $6,481,093 including cash resources of $951,946.

The Company also announced today that it has engaged Loewen & Partners to act as its agent in connection with a proposed private placement equity financing of its securities to accredited investors for gross proceeds to the Company of up to $10 million. The definitive commercial terms of the proposed financing are not yet complete, but the Company currently expects that the private placement financing will be completed by the end of the financial year.

In advance of completing the proposed private placement financing, on November 28, 2003 the Company received commitments for bridge financing for aggregate gross proceeds to be advanced to the Company of up to $4,000,000. The Company is entering into one year unsecured loan agreements in the principal amount of $2,000,000 with each of two existing shareholders of the Company. The loan agreements bear interest at the rate of 6% per annum, compounded and payable quarterly. In consideration of the loan commitments to the Company by the lenders, the Company agreed to issue to the lenders for no additional consideration, subject to TSX Venture Exchange approval, additional common shares of the Company equal to 20% of the total advances made under the loan agreements, divided by the maximum discounted price of the common shares of the Company on the close of markets on the day prior to the date of the applicable advance. The term of the loan agreements may, at the option of the lenders, be extended for an additional one year period. No fees or commissions were payable by the Company in connection with the completion of the bridge financing .

“The release of our third quarter figures underlines Pethealth's position as the fastest growing corporation in a rapidly expanding industry,” said Mark Warren, President & C.E.O. of Pethealth Inc. “Our recent initiatives in 2003, including the development of 24PetWatch and associated new programs, together with the new on-line broker and marketing representative programs, have created significant new distribution channels for PetCare Pet Insurance Programs. This is reflected in the continued high level of growth in both new policy sales and revenue.”

Financial Highlights:
(Unaudited)

*The Company, together with Avalon Risk Management Inc. in the United States, writes Gross Premiums and remits the carriers' portion to its pet insurance carriers. The Company's revenue consists of Commissions, Management Fees, Administrative and Interest Income.

	For the Quarter Ended
	September 30 2003	June 30 2003	Change %
Total Revenue	1,914,860	1,647,178	16
Total Polices Sold	64,916	54,598	19
Total Active Polices	98,204	85,964	14

About Pethealth

Founded in February 1998, Pethealth is Canada's number one provider of pet insurance and is number two in North America, currently offering its PetCare pet insurance programs in 10 provinces, 45 states and Washington, D.C. In addition to the ShelterCare Pet Insurance programs, Pethealth offers its pet insurance programs under a variety of names, including QuickCare, the PetCare Pet Insurance Programs, ShelterCare and Union Plus Pet Insurance. In the United States, the PetCare Pet Insurance Programs are underwritten by Lincoln General Insurance Company, York, PA, through Avalon Risk Management Inc. In Canada, the Company's pet insurance is offered to owners of dogs and cats through its wholly owned subsidiary, PetCare Insurance Brokers Ltd. ING Novex, a member of the ING Group, and Kingsway General Insurance Company underwrite PetCare products in Canada. The PetCare programs also carry the exclusive endorsements of a number of industry leaders, including veterinary medical associations representing approximately four out of five practicing veterinarians in Canada. In addition, Pethealth, through its wholly owned subsidiaries Pethealth Services Inc. and Pethealth Services (USA) Inc., sells and distributes Allflex pet microchip supplies to the companion animal market in North America and operates the related pet recovery registry under the trade name 24PetWatch. Pethealth is based in Oakville, Ontario. Institutional investors include Dynamic Mutual Funds, through its Dynamic Venture Opportunities Fund.

The TSX Venture Exchange Inc. has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Statements contained in this news release, if not historical, are forward-looking statements, which involve risks and uncertainties that could cause actual results to differ materially from the results described in forward-looking statements.

Not for dissemination in the United States of America or to United States news wire services.

For further information contact:
Mark Warren, President and CEO of Pethealth at (905) 842-2615
Glen Tennison, Chief Financial Officer of Pethealth at (905) 842-2615

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