AdSouth Partners - ASPR - Announces Financial Results for Second Quarter of 2005
and Updates Guidance for Second Half of 2005
BOCA RATON, Fla.--(BUSINESS WIRE)--Aug. 16, 2005--AdSouth Partners, Inc.
(OTCBB:ASPR), today announced financial results for the second quarter and first
half of June 30, 2005. Since we did not introduce any products until June 2004,
our product revenue for the three and six months ended June 30, 2004 were
nominal. As a result, substantially all of our revenue from last year is from
the advertising sector. During the second half of 2004 and the first half of
2005 we introduced new products the revenue from which is reflected in our
products segment in the three and six months ended June 30, 2005. All share
information and per share amounts presented in these consolidated financial
statements are presented as if the Company's 1-for-15 reverse stock split, which
became effective on March 25, 2005, was effective for all periods presented.
The Company reported consolidated revenue for the second quarter of 2005 of $1.4
million compared to $1.5 million for the second quarter last year. Consolidated
revenue for the first half of 2005 was $3.2 million compared to $1.9 million for
the first half of last year. The Company reported a consolidated operating loss
for the second quarter of 2005 of $630,000 compared to $251,000 of operating
income for the second quarter of last year. The consolidated operating loss for
the first half of 2005 was $454,000 compared to $3.7 million for the first half
of last year. Operating expenses during the first half of 2004 included $3.9
million of non-cash stock-based compensation expense which resulted from the
issuance to the Company's officers and other key employees of common stock
pursuant to stock grants, and stock options that were granted to consultants.
The net loss for the Company was $1.3 million for the second quarter of 2005
compared to net income of $251,000 for the second quarter of last year. Net loss
for the first half of 2005 was $1.2 million compared to a loss of $3.6 million
for the first half of 2004. The net loss for the second quarter and first half
of 2005 includes $536,000 of loss on the early extinguishment of the convertible
notes that were issued in February and May of 2005.
The net loss attributable to common stockholders for the second quarter of 2005
was $2.7 million, or $(0.33) per basic and fully diluted share compared to net
income available to common stockholders of $251,000, or $.04 per basic and fully
diluted share, for the second quarter of 2004. The net loss attributable to
common stockholders for the first half of 2005 was $2.6 million, or $(0.34) per
basic and fully diluted share compared to $3.6 million, or $(0.70) per basic and
fully diluted share, for the first half of 2004. In connection with a private
placement completed on June 17, 2005, the fair value of the securities issued
(including the preferred stock and warrants to purchase common stock) when
compared to the net proceeds resulted in a beneficial conversion feature that
approximated $1.34 million. For purposes of calculating the net loss
attributable to common stockholders, such beneficial conversion feature is
considered a deemed dividend and is deducted from the net loss for purposes of
calculating basic and fully diluted loss per share.
Products Sector:
AdSouth's products sector include all activities related to the sale of the
DermaFresh product line, including the Instant Lip Solution product, which the
Company sells pursuant to an exclusive distribution agreement with Simon
Cosmetics, and the sale of other products for which the Company has obtained
distribution rights. The products sector reported revenue of $757,000 for the
second quarter of 2005 compared to $1,000 for the second quarter of last year
and revenue of $1.1 million for the first half of 2005 compared to $1,000 for
the first half of 2004. The products sector reported an operating loss of
$255,000 for the second quarter of 2005 compared to a loss of $218,000 for the
second quarter of 2004. The product sectors operating loss for the first half of
2005 was $482,000 compared to a loss of $811,000 for the first half of 2004. The
net loss for the products sector was $726,000 for the second quarter of 2005
compared to $218,000 for the second quarter of last year. The product sectors
net loss for the first half of 2005 was $482,000 compared to $811,000 for the
first half of 2004. The product sectors net loss for the second quarter and
first half of 2005 includes $357,000 of loss from the early extinguishment of
convertible notes that were issued in February and May 2005.
Advertising Sector:
The Company's advertising sector, which consists of the placement of
advertising, the production of advertising and creative advertising consulting,
reported revenue of $277,000 for the second quarter of 2005 compared to $1.1
million for the second quarter of last year. The advertising sectors revenue for
the first half of 2005 was $692,000 compared to $1.9 million for the first half
of last year. The advertising sector reported an operating loss of $375,000 for
the second quarter of 2005 compared to operating income of $469,000 for the
second quarter of last year. The advertising sectors operating loss for the
first half of 2005 was $504,000 compared to $2.8 million during the first half
of last year, which included $3.3 million in expenses related to stock option
grants. The net loss for the advertising sector was $596,000 for the second
quarter of 2005 compared to net income of $469,000 for the second quarter of
last year. The advertising sector net loss for the first half of 2005 was
$749,000 compared to $2.8 million for the first half of last year. The
advertising sectors net loss for the second quarter and first half of 2005
includes $179,000 of loss from the early extinguishment of convertible notes
that were issued in February and May 2005.
Balance Sheet:
On March 14, 2005, the Company's board of directors approved a 1-for-15 share
reverse split of the Company's common stock and a proportionate reduction of the
authorized shares outstanding. On March 25, 2005, the effective date of the
reverse split, the numbers of authorized shares of common stock, par value
$0.0001 per share was reduced to 33.3 million.
In February, May and June the Company received net proceeds, after payment of
brokerage and legal fees, of approximately $3.3 million from the sale of its
securities. Inclusive of the private placements, the Company completed the first
half of 2005 with available working capital of approximately $1.4 compared to a
working capital deficiency of $916,000 at December 31, 2004. Cash as of the end
of the quarter was $659,000, with a current ratio of 2.1 to 1.
Guidance and Outlook
Providing long-term future guidance continues to be challenging. The economy is
improving, but it remains difficult to forecast the long-term effects. While we
anticipate the Company's second half of calendar 2005 to be strong, we are
decreasing our previously issued guidance for revenues of $22 million to
revenues of at least $12 million and suspending our projected net income
guidance until further strengthening of visibility across all business segments.
The Company remains very optimistic regarding the remainder of the year and
long-term outlook. Revenues for the first six months of 2005 have increased by
more than 69% over last year and our product portfolio continues to increase
with diversified high margin consumer products. AdSouth is actively introducing
new brands and products, fortifying sales and marketing infrastructure to
address new sales channels and exploring a variety of strategic opportunities
including acquisitions and distribution agreements.
The decline in previously issued guidance is primarily attributable to the
following factors:
o delays in anticipated product introductions, which is reflected in
both a lower level of revenues and expenses incurred in connection
with the new product lines that are not absorbed by revenue;
o delays in expanding our advertising customer base;
o changes in management and sales personnel, including the sudden
death of our vice-president of sales
o an increase in actual product shipments that are made pursuant to
terms which result in revenue not being recognized by us until the
products have been sold by the retailer to its consumers. We believe
that it is important to establish a presence for our products in
such markets and that the ultimate sell through by the retailers
will help us establish new accounts and expand our existing
relationships in the retail market place.
o Non-cash charges resulting from the terms of our private placements
during the first half of 2005, which are reflected in our financial
statements for the first half of 2005 and may have an impact in
subsequent quarters.
Since we are a small but growing company, the effect of any of these factors on
our operations may be magnified, since we do not have a sustained base of
revenue and earnings.
About AdSouth Partners, Inc.
AdSouth Partners is a vertically integrated direct response marketing company
that generates revenues from the placement of advertising, the production of
advertisements, creative advertising and public relations consulting services.
Since mid 2004, it has expanded its activities as it obtained the rights to
products that it markets and sells to retail outlets. AdSouth Partners, through
its product division DermaFresh, has previously announced shipments to several
of the largest retailers in the country. A complete list is available on our
website at http://www.adsouthinc.com and a preview of the products offered is
available at http://www.dermafresh.com.
Certain statements in this news release may contain forward-looking information
within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6
under the Securities Exchange Act of 1934, and are subject to the Safe Harbor
created by those rules. All statements, other than statements of fact, included
in this release, including, without limitation, statements regarding potential
future plans and objectives of the company, are forward-looking statements that
involve risks and uncertainties. There can be no assurance that such statements
will prove to be accurate and actual results and future events could differ
materially from those anticipated in such statements. Technical complications
that may arise could prevent the prompt implementation of any strategically
significant plan(s) outlined above. The Company cautions that these
forward-looking statements are further qualified by other factors including, but
not limited to, those set forth in the Company's Form 10-KSB filing, its
registration statements and other filings with the United States Securities and
Exchange Commission (available at www.sec.gov). The Company undertakes no
obligation to publicly update or revise any statements in this release, whether
as a result of new information, future events or otherwise.
Tables Follow
Selected financial information of our operating segments is presented in the
following tables.
Advertising Products Total
- -------------------------------------------------------------------------------
Three Months Ended June 30,
2005:
Revenues $ 277,000 $ 1,163,000 $ 1,440,000
Costs and expenses (excluding
non cash stock based
compensation expense and non-
recurring payments) (532,000) (1,355,000) (1,887,000)
- -------------------------------------------------------------------------------
(255,000) (192,000) (447,000)
Payments to settle arbitration
and litigation matters (100,000) (25,000) (125,000)
Non cash stock based
compensation (20,000) (38,000) (58,000)
- -------------------------------------------------------------------------------
Operating loss (375,000) (255,000) (630,000)
Interest expense and factor
discounts (42,000) (114,000) (156,000)
Loss on early debt
extinguishment (179,000) (357,000) (536,000)
- -------------------------------------------------------------------------------
Net loss $ (596,000) $ (726,000) $ (1,322,000)
===============================================================================
Three Months Ended June 30,
2004:
Revenues $ 1,481,000 $ 6,000 $ 1,487,000
Costs and expenses (excluding
non cash stock based
compensation) (870,000) (153,000) (1,023,000)
- -------------------------------------------------------------------------------
611,000 (147,000) 464,000
Non cash stock based
compensation (142,000) (71,000) (213,000)
Net income (loss) $ 469,000 $ (218,000) $ 251,000
===============================================================================
Advertising Products Total
- -------------------------------------------------------------------------------
Six Months Ended June 30, 2005:
Revenues $ 692,000 $ 2,469,000 $ 3,161,000
Costs and expenses (excluding
non cash stock based
compensation expense and non-
recurring payments) (1,053,000) (2,309,000) (3,362,000)
- -------------------------------------------------------------------------------
(361,000) 160,000 (201,000)
Payments to settle arbitration
and litigation matters (100,000) (25,000) (125,000)
Non cash stock based
compensation (43,000) (85,000) (128,000)
- -------------------------------------------------------------------------------
Operating (loss) income (504,000) 50,000 (454,000)
Interest expense and factor
discounts (66,000) (175,000) (241,000)
Loss on early debt
extinguishment (179,000) (357,000) (536,000)
- -------------------------------------------------------------------------------
Net loss $ (749,000) $ (482,000) $ (1,231,000)
===============================================================================
Six Months Ended June 30, 2004:
Revenues $ 1,856,000 $ 6,000 $ 1,862,000
Costs and expenses (excluding
non cash stock based
compensation expense) (1,341,000) (242,000) (1,583,000)
- -------------------------------------------------------------------------------
515,000 (236,000) 279,000
Non cash stock based
compensation (3,328,000) (575,000) (3,903,000)
- -------------------------------------------------------------------------------
Operating loss (2,813,000) (811,000) (3,624,000)
Loss on sale of marketable
securities (10,000) -- (10,000)
- -------------------------------------------------------------------------------
Net loss $ (2,823,000) $ (811,000) $ (3,634,000)
===============================================================================
June 30, December 31,
2005 2004 Change
------------ ------------ ------------
Cash $ 659,000 $ 38,000 $ 621,000
Certificate of
deposit (restricted) 102,000 100,000 2,000
Accounts receivable -
net 767,000 36,000 731,000
Due from factor 101,000 -- 101,000
Inventory 619,000 186,000 433,000
Marketable securities 76,000 -- 76,000
Other current assets 294,000 34,000 260,000
Accounts payable (910,000) (475,000) (435,000)
Accrued salaries and
payroll taxes (146,000) (261,000) 115,000
Current debt (110,000) (354,000) 244,000
Other current
liabilities (78,000) (220,000) 142,000
- -------------------------------------------------------------------------------
Working capital
(deficiency) $ 1,374,000 $ (916,000) $ 2,290,000
===============================================================================
CONTACT: AdSouth Partners, Inc., Boca Raton
John Cammarano, 561-750-0410
or
Investor Relations:
Alliance Advisors
Alan Sheinwald, 914-244-0062
http://www.allianceadvisors.net
SOURCE: AdSouth Partners, Inc.