Add
USAT to Portfolio
Set Alert
Email to a
Friend
| |||
|
|
Quotes & Info
|
| USAT > SEC Filings for USAT > Form 10-Q on 5-Nov-2008 | All Recent SEC Filings |
5-Nov-2008
Quarterly Report
Forward Looking Statements
This Form 10-Q contains certain forward looking statements regarding, among other things, the anticipated financial and operating results of the Company. For this purpose, forward looking statements are any statements contained herein that are not statements of historical fact and include, but are not limited to, those preceded by or that include the words, "believes," "expects," "anticipates," or similar expressions. Those statements are subject to known and unknown risks, uncertainties and other factors that could cause the actual results to differ materially from those contemplated by the statements. The forward looking information is based on various factors and was derived using numerous assumptions. Important factors that could cause the Company's actual results to differ materially from those projected, include, for example (i) the ability of the Company to generate sufficient sales to generate operating profits, or to sell products at a profit, (ii) the ability of the Company to raise funds in the future through sales of securities, (iii) whether the Company is able to enter into binding agreements with third parties to assist in product or network development, (iv) the ability of the Company to commercialize its developmental products, or if actually commercialized, to obtain commercial acceptance thereof, (v) the ability of the Company to compete with its competitors to obtain market share, (vi) the ability of the Company to obtain sufficient funds through operations or otherwise to repay its debt obligations or to fund development and marketing of its products, (vii) the ability of the Company to obtain approval of its pending patent applications or the risk that its technologies would infringe patents owned by others, (viii) the ability of the Company to satisfy its trade obligations included in accounts payable and accrued liabilities, (ix) the ability of the Company to predict or estimate its future quarterly or annual revenues given the developing and unpredictable market for its products and the lack of established revenues, (x) the ability of the Company to retain key customers as a significant portion of its revenues is derived from a limited number of key customers, and (xi) the ability of a key customer to reduce or delay purchasing products from the Company. Although the Company believes that the forward looking statements contained herein are reasonable, it can give no assurance that the Company's expectations will be met.
Results of Operations
Three months ended September 30, 2008
Revenues for the three months ended September 30, 2008 were $3,394,879 compared to $3,355,656 for the corresponding three-month period in the previous fiscal year. This $39,223 or 1% increase was due to a decrease in equipment sales of $611,349 and an increase in license and transaction fees of $650,572. The decrease in equipment sales was due to a decrease in sales of approximately $517,000 in e-Port vending equipment sales, primarily related to the significant number of e-Port units installed in the prior period under the November 2007 agreement with MasterCard Worldwide as compared to sales during the current period, a decrease in sales of approximately $122,000 in energy conservation equipment, and a slight increase in other equipment sales of approximately $28,000. The increase in license and transaction fees was due to the increase in the number of e-Port units on our USALiveŽ network, primarily as a result of the recurring revenues being generated by the e-Port units deployed in the prior fiscal year under the MasterCard PayPass Participation Agreement entered into by the Company, Coca-Cola Enterprises and MasterCard Worldwide (the "CCE/MasterCard Agreement"), as well as first time volume purchases following the MasterCard seeding initiative.
In regards to license fees, as of September 30, 2008, the Company had approximately 42,000 devices connected to our USALiveŽ network as compared to approximately 24,000 devices as of September 30, 2007.
In regards to transaction fees, during the quarter ended September 30, 2008, the Company processed approximately 4.7 million transactions totaling over $11.6 million as compared to approximately 1.8 million transactions totaling over $7.3 million during the quarter ended September 30, 2007, an increase of 161% in transaction volume and 59% in dollars processed.
Cost of sales for the period consisted of equipment costs of $1,433,844 and network and transaction services related costs of $1,057,626. The decrease in total cost of sales of $345,010 or 12% over the same period in the prior year was due to a decrease in equipment costs of $838,648 and an increase in network and transaction services related costs of $493,638.
Gross profit for the three months ended September 30, 2008 was $903,409, compared to a gross profit of $519,176 for the corresponding three-month period in the previous fiscal year. This $384,233 or 74% increase is primarily due to an increase in the profit margins of both the energy equipment sales as well as the e-Port vending equipment sales as a result of producing the products at a lower cost as well as selling both of the products at higher average sales prices.
Selling, general and administrative expense of $4,439,533 decreased by $952,501 or 18% primarily due to a decrease in compensation expense of approximately $980,000, and a decrease in professional and consulting services of approximately $44,000, offset by an increase in product development costs of approximately $80,000. The overall decrease was due to focused cost reduction measures taken by the Company during the third and fourth quarters of fiscal year 2008.
Compensation expense decreased by approximately $980,000 primarily due to a decrease of approximately $1.3 million in non-cash charges related to the Long-Term Equity Incentive Program for fiscal year 2008 as compared to 2007, offset by an increase in salaries expense of approximately $286,000 for non-cash charges for restricted stock granted to officers and an increase in benefit expenses of approximately $29,000.
Depreciation and amortization expense of $418,779 decreased by $81,848 or 16% primarily due to completion of amortization of a non-compete agreement during the current quarter.
The quarter ended September 30, 2008 resulted in a net loss of $3,853,895 (approximately $1.1 million of non-cash charges) compared to a net loss of $5,262,989 (approximately $2.1 million of non-cash charges) for the quarter ended September 30, 2007.
Three months ended September 30, 2007
Revenues for the three months ended September 30, 2007 were $3,355,656 compared to $2,008,897 for the corresponding three-month period in the previous fiscal year. This $1,346,759 or 67% increase was primarily due to an increase in equipment sales of approximately $979,000 and license and transaction fees of approximately $367,000. The increase in equipment sales was due to an increase in sales of approximately $1,109,000 in e-Port vending equipment sales, primarily related to the CCE/MasterCard Agreement, offset by a decrease of approximately $131,000 in business center sales. The increase in license and transaction fees was due to the increase in the number of e-Port units on our USALiveŽ network, primarily as a result of the CCE/MasterCard Agreement.
In regards to license fees, as of September 30, 2007, the Company had approximately 19,000 devices connected to our USALiveŽ network as compared to approximately 9,000 devices as of September 30, 2006. During the month of October 2007, the Company added approximately 5,000 devices for a total of approximately 24,000 connected devices as of October 30, 2007.
In regards to transaction fees, during the quarter ended September 30, 2007, the Company processed approximately 1.8 million transactions totaling over $7.3 million as compared to approximately 650 thousand transactions totaling over $4.3 million during the quarter ended September 30, 2006, an increase of 177% in transaction volume and 70% in dollars processed.
Cost of equipment for the period was $2,272,492, compared to $1,131,159 for the corresponding period in the prior fiscal year. The increase of $1,141,333 was primarily due to an increase in vending equipment sales relating primarily to our seeding initiative under the CCE/MasterCard Agreement.
Cost of services for the period was $563,988, compared to $262,202 for the corresponding period in the prior fiscal year. The increase of $301,786 was primarily due to the increase in the number of e-Ports connected to our USALive network relating primarily to our seeding initiative under the CCE/MasterCard Agreement.
Gross profit for the three months ended September 30, 2007 was $519,176, compared to gross profit of $615,536 for the corresponding three-month period in the previous fiscal year. This 16% decrease is primarily due to an increase in sales of our vending products as part of a seeding program. Specifically, we lowered the price of our e-Ports at or near cost pursuant to our seeding program under the CCE/MasterCard Agreement that had the effect of reducing our margins. Product pricing under this program does not reflect the Company's current retail pricing.
Selling, general and administrative expense of $5,392,034 increased by $2,044,978 or 61% primarily due to an increase in compensation expense of approximately $1,757,000 and an increase in consulting and outside service fees of approximately $289,000. The increase in compensation expense is primarily comprised of an increase in salaries expense of approximately $342,000 due to an increase in the number of employees and an increase in bonus expense of approximately $1,403,000 primarily due to non-cash charges from our Long-term Equity Incentive Program. Specifically, the Company recorded $1,170,443 in the three months ended September 30, 2007 attributable to 139,671 of the shares earned by our executive officers under this program on account of fiscal year 2007 as well as $320,988 attributable to the vesting of shares for the 2008 fiscal year.
Interest expense of $38,396 decreased by $515,969 or 93% due to the repayment of all senior notes during fiscal year 2007.
The quarter ended September 30, 2007 resulted in a net loss of $5,262,989 (approximately $2.1 million of non-cash charges) compared to a net loss of $3,680,314 (approximately $1.0 million of non-cash charges) for the quarter ended September 30, 2006.
Liquidity and Capital Resources
For the three months ended September 30, 2008, net cash of $1,761,131 was used by operating activities, primarily due to the net loss of $3,853,895 offset by non-cash charges totaling $1,120,562 for transactions involving the vesting and issuance of common stock to employees, the vesting of stock options, bad debt expense and the depreciation and amortization of assets. In addition to these non-cash charges, the Company's net operating assets increased by $972,202 primarily due to an increase in prepaid expenses and decreases in accounts payable and accrued expenses, partially offset by decreases in accounts and finance receivables.
The Company used $226,985 in financing activities for the three months ended September 30, 2008 due to the repayment of $197,785 of long-term debt and the retirement of $29,200 in Common Stock.
The Company has incurred losses since inception. Our accumulated deficit through September 30, 2008 is composed of cumulative losses amounting to approximately $166,000,000 and preferred dividends converted to common stock of approximately $2,700,000. The Company has continued to raise capital through equity offerings to fund operations.
As of September 30, 2008 the Company had $7,967,980 of cash and cash equivalents on hand and $6,875,000 of available-for-sale securities, of which $1,425,000 are classified as current assets due to their redemption by the issuer on October 22, 2008. These available-for-sale securities consist of $6,875,000 par value of auction rate securities that were purchased during January 2008 from a broker-dealer. On August 21, 2008 the broker-dealer who sold us the auction rate securities announced a settlement with state regulators and an agreement in principle with the Securities and Exchange Commission pursuant to which, among other things, the broker-dealer will purchase all of our remaining auction rate securities at par upon our request at any time from January 2, 2009 through January 15, 2010. We intend to sell all of our auction rate securities to the broker-dealer on January 2, 2009, if the securities have not already been redeemed by the issuer.
In order to attempt to improve our operating results, we took appropriate actions during the third and fourth quarters of fiscal year 2008 to reduce our cash-based selling, general and administrative expenses. These actions consisted of staff reductions and related costs and reductions in our controllable costs. As a result, our cash-based selling, general and administrative expenses decreased from approximately $4,753,000 during the second quarter of fiscal year 2008 to approximately $4,445,000 during the third quarter of fiscal year 2008, approximately $4,000,000 during the fourth quarter of fiscal year 2008 and further decreased to approximately $3,758,000 during the first quarter of fiscal year 2009. The full benefit of these cash-based cost reductions is reflected starting in the first quarter of the 2009 fiscal year. We also believe that these cost reductions will not materially adversely affect our planned revenue growth for the foreseeable future.
During the 2008 fiscal year, the Company's monthly cash requirement, including requirements for capital expenditures and net repayments of long-term debt, was approximately $1,200,000 per month. Assuming that the Company's monthly cash requirement for each of the twelve months during fiscal year 2009 is $1,200,000, the Company's cash requirements, including capital expenditures and repayment of long-term debt, during fiscal year 2009 would be approximately $14,400,000.
Funding sources in place to meet the Company's cash requirements are comprised of approximately $8,000,000 of cash and cash equivalents on hand and $6,875,000 of available-for-sale securities as of September 30, 2008, for a total of approximately $14,875,000. Based upon the assumptions described above, the Company believes these existing sources will provide sufficient funds to meet its cash requirements, including capital expenditures and repayment of long-term debt, through not only July 1, 2009 (the end of our current fiscal year plus one day) but through at least October 1, 2009.
|
|