Rare Method Interactive of Calgary has announced a 53% drop in both revenues and income for quarter ending Sept. 30.

Revenues fell to $1.5 million from $3.16 million in the same quarter last year, the agency reported Monday. Gross income declined to $1 million from $2.1 million.

Tom Short, the agency's president, blamed the decline on the recession and decisions by clients to reduce or delay expenditures, particularly on traditional advertising, and web development projects that make up much of the agency's business.

"There are a lot of others in this industry in the same position, but as a publicly-traded company, we're one of the ones who have to go public with the numbers."

The revenue and income figures don't reflect the agency's recent loss of client Travel Alberta, which last month switched its online work to Calgary's Karo.

While the company's net cash position fell during the quarter ($198,496 by Sept. 30 from $961,674 in June), that net cash position increased to $721,000 by the end of November, said Short. He added the company has enough working capital and cash to continue operations throughout calendar 2010.

To better match revenues to costs, Rare Method cut its staff from a high of  80 employees two years ago to 35 today, with 22 in Calgary and 11 at its U.S. office in Salt Lake City.

"We have kept our core staff, but instead of running fat we will be moving to an outsourcing model for some services," Short said.

Short said an encouraging sign was a turnaround in its U.S. operations, which have recorded two back-to-back profitable quarters, compared to losses a year ago.

"We see the U.S. uptick as a forward indication that better times are ahead. We have made the necessary adjustments that will enable us to move ahead when things pick up."