Vsource (NASDAQ:VSCE)
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Vsource(R) Announces Results for Third Quarter Ending October 31,
2004
LA JOLLA, Calif., Dec. 13 /PRNewswire-FirstCall/ -- Vsource, Inc. (OTC:VSCE)
(BULLETIN BOARD: VSCE) today announced its financial results for its third
quarter ending October 31, 2004.
Revenue for Q3 2004 totaled $4.24 million, compared to $4.73 million for Q3
2003. The company reported a net loss available to common shareholders of $5.35
million or $2.64 per basic share for Q3 2004. Net loss available to common
shareholders during the period included non-cash charges of $3.85 million from
deemed non-cash dividends to preferred shareholders. Excluding the deemed
dividend, Vsource's net loss was $1.50 million in Q3 2004, or $0.74 per basic
share in Q3 2004. The company recorded a deemed dividend of $3.03 million in
Q3 2003, when it reported a net loss available to common shareholders of $7.80
million or $3.97 per basic share.
The company's earnings before interest, taxes, depreciation and amortization,
adjusted to exclude deemed non-cash dividends to preferred shareholders of
$3.85 million ("Adjusted EBITDA") was a loss of $0.93 million for Q3 2004,
compared with Adjusted EBITDA loss of $4.25 million, adjusted to exclude deemed
non-cash dividends to preferred shareholders of $3.03 million for Q3 2003.
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. Net cash at the end of Q3 2004 totaled
$2.81 million, compared to $1.32 million as of the end of the last fiscal year,
showing the addition of proceeds of approximately $9.5 million from the
disposal of 39% of the equity interest in Vsource Asia to Symphony House Berhad
and other investors in Q1 2004 and the cash used in operations in the first
nine months ending October 31, 2004.
Vsource Chairman and Chief Executive Officer, Dennis Smith commented, "In Q3
2004, we focused on the completion of an exchange offer to holders of our
preferred stock. The exchange offer was successfully completed and announced
on November 22, 2004. The exchange offer greatly simplified our cumbersome and
complex capital structure by largely reducing, and in the case of our Series
4-A preferred stock even eliminating, Vsource's preferred stocks' liquidation
preference and removing the put right held by holders of our Series 4-A
preferred stock."
Mr. Smith continued, "As a result of the exchange offer, Vsource no longer has
an ownership interest in Vsource Asia Berhad, its former operating subsidiary.
In addition, 92.8% of Vsource's Series 1-A Preferred Stock, 98.8% of the Series
2-A Preferred Stock and 100% of the outstanding Series 4-A Preferred Stock were
exchanged and are no longer outstanding. At present, 67,600 shares of Series
1-A Preferred Stock and 3,900 shares of Series 2-A Preferred Stock remain
outstanding. We will now to turn our attention to decisions relating to future
activities of the Company, which were deferred pending completion of the
exchange offer and related transactions."
Vsource, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
Three months ending October 31,
2004 2003
Revenues $ 4,240 $ 4,730
Operating Expenses
Cost of revenue 3,113 3,334
Selling, general and administrative 2,937 4,700
Expenses related to terminated merger
with TEAM America -- 1,467
Total expenses 6,050 9,501
Operating loss (1,810) (4,771)
Interest income, net (6) 5
Minority interest in loss of a subsidiary 313 --
Net loss from continuing operations before
taxation $(1,503) $(4,766)
Taxation -- --
Net loss from continuing operations after
taxation $(1,503) $(4,766)
Discontinued operations:
Loss from discontinued operations $ -- $ --
Net loss $(1,503) $(4,766)
Non-cash deemed dividend to preferred
shareholders (1) $(3,849) $(3,029)
Net loss available to common shareholders $(5,352) $(7,795)
Loss per share available to common
shareholders:
Basic loss per share from continuing
operations $ (2.64) $ (3.97)
Basic loss per share from discontinuing
operations $ -- $ --
$ (2.64) $ (3.97)
Weighted average number of common shares
outstanding
Basic 2,026 1,964
Earnings before interest, taxes, depreciation
& amortization excluding non-cash stock
compensation expense (" Adjusted EBITDA") (2) $ (931) $(4,249)
Adjusted EBITDA margin (3) % (22.0) % (89.8)
(1) Non-cash deemed dividend for preferred shareholders associated with
the exchange of Series 2-A convertible preferred stock and warrants
for Series 4-A convertible preferred stock; and amortization of
beneficial conversion feature and accretion of redemption value of
Series 4-A convertible preferred stock
(2) Reconciliation of Net loss to Adjusted EBITDA
Three months ended October 31,
2004 2003
Net loss $(1,503) $(4,766)
Add:
Interest income, net 6 (5)
Depreciation and amortization 566 522
Amortization of stock-based compensation expense -- --
Taxes -- --
Adjusted EBITDA $(931) $(4,249)
(3) Adjusted EBITDA margin is Adjusted EBITDA divided by Revenues
Vsource, Inc.
Consolidated Balance Sheets
(in thousands)
October 31, January 31,
2004 2004
Assets
Current assets:
Cash $2,814 $1,322
Restricted cash 205 473
Accounts receivable, net 2,272 1,062
Inventories 150 207
Prepaid expenses 286 475
Other current assets 2,028 2,129
Promissory note receivable 35 --
Current assets - discontinued operations -- 149
Total current assets 7,790 5,817
Property and equipment, net 2,965 4,348
Restricted cash, non current 599 599
Non current assets - discontinued operations -- 70
Total assets $11,354 $10,834
Liabilities, Preferred stock and Shareholders'
deficit
Current liabilities:
Accounts payable $1,991 $2,256
Accrued expenses 3,240 5,090
Advance from customers 14 906
Current liabilities - discontinued operations -- 298
Total current liabilities 5,245 8,550
Minority interest 1,079 --
Preferred stock 29,758 18,875
Shareholders' deficit (24,728) (16,591)
Total Liabilities, Preferred stock and
Shareholders' deficit $11,354 $10,834
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-operating expenses and non-cash charges such as beneficial conversion
feature expense, stock-based compensation and depreciation and amortization.
Management reviews this form of measurement monthly. Vsource has consistently
provided this measurement in previous releases and therefore has provided a
consistent basis for comparison between quarters, which the company believes is
useful to investors and other interested persons.
Statements in this earnings release regarding Vsource's business that are not
historical facts may be "forward-looking statements" that involve risks and
uncertainties, that are detailed from time to time in the Company's reports
filed with the Securities and Exchange Commission, including the Company's most
recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.
Vsource is a registered trademark of Vsource, Inc.
DATASOURCE: Vsource, Inc.
CONTACT: Jim Higham, Vice President of Vsource, Inc., +1-858-551-2917
Web site: http://www.vsource.com/