Vsource (NASDAQ:VSCE)
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Vsource(R) Announces Results for First Quarter Ending April 30,
2005
LA JOLLA, Calif., June 13 /PRNewswire-FirstCall/ -- Vsource, Inc. (OTC:VSCE)
(BULLETIN BOARD: VSCE) , today announced its financial results for its first
quarter ending April 30, 2005 ("Q1 2006").
From 2001 to 2004, the Company provided Fortune 500 and Global 500 companies
with customizable and comprehensive business process outsourcing (BPO)
solutions into and across the Asia-Pacific region. As previously announced and
as a result of an exchange offer (the Exchange Offer) and related transactions
completed on November 22, 2004, the Company disposed of its ownership interest
in Vsource Asia Berhad ("Vsource Asia"), its former principal operating
subsidiary, and therefore no longer provides BPO services. Since the completion
of the Exchange Offer, the Company's only active business operations consist of
limited consulting services. Accordingly, the results of the BPO-related
operations conducted by Vsource Asia have been classified as discontinued.
This release presents the Company's results from its limited consulting
services, and excludes revenues and expenses from the discontinued BPO-related
operations.
The Company's only continuing operations consist of limited consulting services
it provides to third parties and for which it received revenue totaling $54,000
during the first quarter ended April 30, 2004 ("Q1 2005"). During Q1 2006,
however, the Company received no revenue from these consulting services. The
Company reported a net loss available to common shareholders of $0.46 million
or $0.22 per basic share for Q1 2006. The Company recorded a gain of $7.6
million on disposal of a partial interest in Vsource Asia, and a deemed
non-cash dividends to preferred shareholders of $3.41 million for Q1 2005 when
it reported a net profit available to common shareholders of $2.48 million or
$1.22 per basic share.
The Company's earnings before interest, taxes, depreciation and amortization,
adjusted to exclude non-cash expenses ("Adjusted EBITDA"), were a loss of $0.45
million for Q1 2006, compared with Adjusted EBITDA gain of $6.53 million, for
Q1 2005. Adjusted EBITDA represents a non-GAAP (Generally Accepted Accounting
Principles) financial measure. A table reconciling this measure to the
appropriate GAAP measure is included in the notes to the consolidated financial
statements included in this release.
As of April 30, 2005, the Company had approximately $0.35 million in cash, cash
equivalents and marketable securities and also had amounts owed to it from
Vsource Asia totaling $1.739 million, against which the Company has made an
estimated discount of $0.795 million and accordingly values the asset at $0.944
million. The Vsource Asia receivable relates to legacy inter-company
obligations when Vsource Asia was a subsidiary of the Company, prior to the
completion of the Exchange Offer in November 2004. As previously announced, on
May 24, 2005, the Company entered into a purchase and sale of obligation
agreement, dated as of May 24, 2005 (the "Sale and Purchase Agreement"), with
Symphony House Berhad ("Symphony House"), the majority owner of Vsource Asia,
providing for the disposal of the Vsource Asia receivable in return for
consideration consisting of $804,250 and all rights, title and interest in a
warrant held by Symphony House to purchase 1,000,000 shares of the Company's
common stock. The $804,250 will be paid to the Company at closing, which is
expected to occur on June 14, 2005 or such other date as may be mutually agreed
to by the parties. The warrant will also be delivered to the Company at
closing. The Company intends to cancel the warrant immediately following the
closing of the transaction. Completion of the Sale and Purchase Agreement and
the June 14, 2005 closing date is subject to the satisfaction of a number of
customary closing conditions set out in the Sale and Purchase Agreement,
including necessary Malaysian regulatory approvals.
The Company continues evaluating a potential sale of the Company; liquidation
and distribution of remaining assets to shareholders; and potential acquisition
opportunities. In respect of potential acquisitions, the Company has not
identified a specific industry on which it intends to focus; however, drawing
on the Company's BPO background, it may consider small- to medium-sized
business service companies in the United States, Europe and Japan that can
benefit from the "productivity arbitrage" derived from the migration of
operations involving high volume transaction processing to Asia and/or business
services companies operating in Asia. In the case of a sale or acquisition,
the Company may pursue additional funding opportunities. The Company has no
present arrangements or understandings with respect to the sale of the Company
or the acquisition of any specific business.
Investors should carefully review the Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 2005 for a more detailed description of the
Company's financial results.
Vsource, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
Three months ended
April 30,
2005 2004
Revenue $0 $54
Operating Expenses
Cost of revenue 0 44
Selling, general and administrative 461 435
Total expenses 461 479
Operating loss (461) (425)
Other interest income 0 4
Income tax expense 0 (5)
Net loss from continuing operations
after taxation $(461) $(426)
Discontinued operations
Income from discontinued operations
before taxation 0 6,437
Income tax expense 0 (122)
Income from discontinued operations
after taxation 0 6,315
Net (loss)/income (461) 5,889
Non-cash deemed dividend to
preferred shareholders (1) 0 (3,411)
Net (loss)/income available to
common shareholders $(461) $2,478
Basic (loss)/earnings per share available to
common shareholders
Continuing operations $(0.22) $(1.89)
Discontinued operations $0 $3.11
Total $(0.22) $1.22
Weighted average number of
common shares outstanding
Basic (2) 2,074,085 2,026,039
Diluted (loss)/earnings per share
available to common shareholders
Continuing operations $n/a $(0.17)
Discontinued operations $n/a $0.28
Total $n/a $0.11
Weighted average number of
common shares outstanding
Diluted n/a 22,463,819
Earnings before interest, taxes,
depreciation & amortization excluding
non-cash stock compensation expense (3) $(453) $6,528
(1) Non-cash deemed dividend for preferred shareholders associated with
the amortization of beneficial conversion feature and accretion of
redemption value of Series 4-A convertible preferred stock
(2) Excludes common shares outstanding on an "as converted basis"
associated with preferred stock, warrants and vested employee
options outstanding
(3) Reconciliation of Net (loss)/income to Adjusted EBITDA
Three months ended
April 30,
2005 2004
Net (loss)/income $(461) $5,889
Add:
Other interest expense 0 1
Depreciation and amortization 8 516
Amortization of stock-based
compensation expense 0 0
Provision for income tax 0 122
Adjusted EBITDA $(453) $6,528
Vsource, Inc.
Consolidated Balance Sheets
(in thousands)
April 30, 2005 January 31, 2005
Assets
Current assets:
Cash $348 $1,064
Receivable from related party 944 956
Restricted cash 250 258
Prepaid expenses 218 308
Current assets 62 88
Total current assets 1,822 2,674
Property and equipment, net 11 40
Total assets $1,833 $2,714
Liabilities, Preferred stock and
Shareholders' equity
Current liabilities:
Accounts payable $140 $497
Accrued expenses 201 262
Staff accruals 12 20
Total current liabilities 353 779
Preferred stock 191 191
Shareholders' equity 1,289 1,744
Total Liabilities, Preferred stock
and Shareholders' equity $1,833 $2,714
Non-GAAP Financial Measures
This release contains non-GAAP financial measures. Pursuant to the requirements
of Regulation G, Vsource has provided reconciliation within this release of the
non-GAAP financial measures to the most directly comparable GAAP financial
measures. Adjusted EBITDA has been presented in this release in order to
assist in the analysis of the operating profitability of the company because
the company believes this form of measurement eliminates the effects of
non-cash charges such as beneficial conversion feature expense, stock-based
compensation and depreciation and amortization. Management reviews this form
of measurement monthly.
Forward Looking Statements
This release contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, Section 21E of the Securities
Exchange Act of 1934, as amended, and the Private Securities Litigation Reform
Act of 1995, including, among others (i) prospective business opportunities and
(ii) our potential strategies for redirecting and financing our business.
Forward-looking statements are statements other than historical information or
statements of current condition. These statements involve risks and
uncertainties that cannot be predicted or quantified, and consequently, actual
results may differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties include the factors
detailed in the Company's Annual Report on Form 10-K filed with the Securities
and Exchange Commission. These statements speak as of the date of this
release, and the Company undertakes no obligation to update these statements in
light of future events or otherwise.
DATASOURCE: Vsource, Inc.
CONTACT: Jim Higham, Vice President of Vsource, Inc., +1-858-551-2917,
or fax, +1-858-456-4878, or efax, +1-858-777-5302,
Web site: http://www.vsource.com/