Press Release
GREENWICH, Conn.--HALO Technology Holdings (OTCBB: HALO) today announced results for the three and six months ended December 31, 2006.
For the second quarter of fiscal 2007, the Company reported revenue of $6.8 million, an increase of $4.3 million over the $2.5 million reported in the second quarter of fiscal 2006. Results for the current quarter reflect the acquisitions of the following: Tesseract, DAVID Corporation, Process Software, and ProfitKey International, all of which were acquired October 26, 2005; Empagio, Inc, which was acquired January 13, 2006; Executive Consultants, Inc., acquired March 1, 2006; Tenebril, purchased on August 24, 2006; and RevCast, acquired September 15, 2006. For the second quarter of fiscal 2007, the Company posted a loss before interest expense and fair value gain on warrants of $3.4 million, which included a loss on extinguishment of debt of $2.0 million and $443,000 of depreciation and amortization expense. For the same period last year, the Company posted a loss before interest expense and fair value gain on warrants of $2.1 million, which included $283,000 of depreciation and amortization expense. In the quarter ended December 2006, HALO reported a net loss attributable to common stockholders of $4.6 million, or $(0.15) per diluted share, versus income of $2.4 million, or $0.10 per diluted share, for the same period last year. The second quarter of fiscal 2007 included $1.9 million in gains on warrants, due to the application of the fair value accounting treatment, compared to a gain $7.9 million in the second quarter of fiscal year 2006. Excluding the impact of warrants, the company had a loss of $6.5 million compared to a loss of $5.5 million last year. Results for the second quarters of fiscal 2007 and 2006 exclude HALO's subsidiary Gupta Technologies, LLC., accounted for as discontinued operations and sold November 20, 2006.
For the six months ended December 31, 2006, the Company posted revenue of $13.3 million, as compared with $2.8 million for the first six months of fiscal 2006. For the six months ended December 31, 2006, the Company posted a loss before interest expense and fair value gain on warrants of $4.5 million, which included a loss on extinguishment of debt of $2.0 million and $847,000 of depreciation and amortization expense. For the same period last year, the Company posted a loss before interest expense and fair value gain on warrants of $2.7 million, which included $327,000 of depreciation and amortization expense. The Company reported a net loss attributable to common stockholders of $7.9 million, or $(0.26) per diluted share, versus income of $22.5 million, or $0.94 per diluted share, for the same period last year. The six months of fiscal 2007 included $4.6 million in gains on warrants, compared to $31.7 million for the first half of fiscal 2006. Excluding the impact of warrants, the Company had a loss of $12.5 million compared to a loss of $9.1 million last year.
"We made considerable progress strengthening HALO's balance sheet this quarter," stated Ron Bienvenu, chairman and chief executive officer. "After selling Gupta to Unify on November 20, we utilized a portion of the $6.1 million in cash received to prepay $4.6 million of debt as part of an agreement with Fortress Credit Corp. We also renegotiated the terms of the remaining debt and will pay an additional $2.0 million in three installments during the third fiscal quarter of 2007, the first of which was completed in January.
"These transactions, combined with the issuance of subordinated debt, have allowed the Company to move forward with its strategic plans, and we are pleased with the progress being made by our portfolio companies on an operational front. In particular, we remain confident that the recent acquisitions of IRM, Tenebril and RevCast will spur meaningful revenue and EBITDA growth at DAVID, Process and Kenosia, respectively. IRM has already proven to be a great complement to our DAVID platform, having closed its first new sale earlier this month.
"We have continued to cut costs at the HALO level and remain focused on stabilizing the balance sheet by monetizing assets and restructuring our debt obligations. The Company anticipates further growth in our core operations and improving margins during the remainder of fiscal 2007."
Conference Call
HALO will host a conference call today at 11:00 a.m. Eastern. During the call, Ron Bienvenu, chairman and chief executive officer, and Mark Finkel, chief financial officer, will discuss the Company's performance and financial results. The telephone number for the conference call is 800-399-7503.
A live webcast of the call will also be available on the Company's website www.haloholdings.com. To listen to the live call online, please visit the site at least 10 minutes early to register, download and install any necessary audio software. The webcast will be archived on the site, and a telephone replay of the call will be available for seven days beginning at 2:00 PM Eastern time, February 15, at 706-645-9291, using conference ID #8901190.
About HALO Technology Holdings
HALO Technology Holdings, Inc. is a global provider of a diversified range of standards-based enterprise software applications and on-demand solutions. HALO's strategy is to acquire and operate enterprise software companies with a commitment to sustainable growth. HALO portfolio companies focus on customer service, product quality and profitability to build long term customer relationships and ensure customer satisfaction today and into the future. Everyday, thousands of corporations and institutions from across the globe rely on our portfolio companies to deliver high quality, enterprise class software and services. For more information, please see our website at www.haloholdings.com.
Certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. (the "Reform Act"). These forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise. The safe harbors for forward-looking statements provided by the Reform Act are unavailable to issuers of "penny stock". Our shares may be considered a penny stock and, as a result, the safe harbors may not be available to us. Such forward-looking statements include those relating to future opportunities, the outlook of customers, the reception of new products and technologies, and the success of new initiatives. In particular, statements contained in this press release that concern future operating results or other statements using words such as "anticipate," "believe," "could," "estimate," "intend," "may," "plan," "project," "should" "will," or "set our sights on" constitute forward-looking statements and are made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Such factors include: (i) demand for the Company's products; (ii) the actions of current and potential new competitors; (iii) changes in technology; (iv) the nature and amount of the Company's revenues and expenses; and (v) overall economic conditions and other risks detailed from time to time in the Company's periodic earnings releases and reports filed with the Securities and Exchange Commission, as well as the risks and uncertainties discussed in the Company's Annual Report on Form 10-KSB , and the Company's Quarterly Reports on Form 10-QSB.
HALO Holdings
Consolidated Balance Sheets
December 31, 2006 June 30, 2006
----------------- ----------------
(unaudited) (audited)
Assets
Current Assets:
Cash and cash equivalents $ 774,334 $ 853,901
Marketable securities -- 9,750
Accounts receivable, net of
allowance for doubtful accounts
of $190,875 and $105,812
respectively 3,222,239 2,053,676
Due from Platinum Equity, LLC 330,000 302,500
Prepaid expenses and other current
assets 577,168 315,444
Assets held for sale -- 18,313,168
----------------- ----------------
Total current assets 4,903,741 21,848,439
Property and equipment, net 641,775 320,027
Deferred financing costs, net 910,283 1,492,096
Intangible assets, net of
accumulated amortization of
$1,710,276 and $980,458
respectively 9,513,107 9,679,925
Goodwill 36,089,724 26,283,132
Other assets 98,781 79,919
----------------- ----------------
Total assets $ 52,157,411 $ 59,703,538
================= ================
Liabilities and stockholders'
equity
Current liabilities:
Current portion of senior note
payable $ 4,885,314 $ 1,333,126
Note payable to Tenebril sellers 3,529,412 --
Note payable to Platinum Equity,
LLC 1,750,000 1,750,000
Notes payable 588,901 3,275,000
Accounts payable 2,348,665 1,609,575
Accrued expenses 6,525,665 5,062,252
Deferred revenue 8,582,543 9,477,722
Due to ISIS 1,243,718 1,243,864
Liabilities of discontinued
operations -- 5,945,227
----------------- ----------------
Total current liabilities 29,454,218 29,696,766
Subordinate notes payable 2,349,358 1,770,833
Senior notes payable 12,752,480 20,752,493
Other long term liabilities 1,197,839 453,974
Series C warrants liabilities 1,146,223 3,720,893
Senior and Sub warrants
liabilities 1,748,131 1,333,942
Other warrants liabilities 2,023,735 2,566,319
----------------- ----------------
Total liabilities 50,671,984 60,295,220
Commitments and contingencies -- --
Mandatory redeemable Series D
Preferred Stock: $.00001 par
value; 8,863,636 shares
authorized, 7,045,454 issued and
outstanding (Liquidation value -
$7,750,000) 7,750,000 7,750,000
Stockholders' equity (deficit):
Preferred stock (Canadian
subsidiary) 2 2
Shares of Common Stock to be
issued for accrued interest on
subordinated debt 296,340 41,667
Common stock: $.00001 par value;
150,000,000 shares authorized;
31,231,101 and 26,723,247 shares
issued and outstanding,
respectively 314 267
Additional paid-in-capital 97,224,773 86,265,258
Treasury stock (1,250,000) --
Accumulated other comprehensive
loss (16,973) (43,528)
Accumulated deficit (102,519,029) (94,605,348)
----------------- ----------------
Total stockholders' equity
(deficit) (6,264,573) (8,341,682)
----------------- ----------------
Total liabilities and
stockholders' equity (deficit) $ 52,157,411 $ 59,703,538
================= ================
Halo Technology Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2006 2005 2006 2005
------------ ------------ ------------ ------------
Revenue
Licenses $ 707,320 $ 422,335 $ 1,344,805 $ 507,336
Services 6,073,247 2,112,138 11,922,908 2,314,917
------------ ------------ ------------ ------------
Total revenues 6,780,567 2,534,473 13,267,713 2,822,253
Cost of revenue
Cost of license 290,564 204,444 502,525 211,304
Cost of services 1,765,948 580,348 3,269,956 637,874
------------ ------------ ------------ ------------
Total cost of
revenues 2,056,512 784,792 3,772,481 849,178
------------ ------------ ------------ ------------
Gross Profit 4,724,055 1,749,681 9,495,232 1,973,075
Product development 1,461,934 767,257 2,677,218 853,333
Sales, marketing
and business
development 1,158,207 630,529 2,179,078 761,122
General and
administrative 3,532,594 2,440,529 7,187,025 3,074,515
Loss on
extinguishment of
debt 1,957,709 -- 1,957,709 --
------------ ------------ ------------ ------------
Loss before
interest and fair
value gain on
warrants (3,386,389) (2,088,634) (4,505,798) (2,715,895)
Fair value gain on
warrants 1,911,881 7,864,701 4,580,222 31,671,485
Interest expense
and other, net (2,910,888) (2,195,871) (7,683,679) (4,301,982)
------------ ------------ ------------ ------------
(Loss) income from
continuing
operations before
income taxes (4,385,396) 3,580,196 (7,609,255) 24,653,608
Income taxes 6,335 1,012 15,393 2,230
------------ ------------ ------------ ------------
(Loss) income from
continuing
operations (4,391,731) 3,579,184 (7,624,648) 24,651,378
Income (loss) from
discontinued
operations, net of
taxes 93,685 (827,999) 220,288 (1,510,547)
------------ ------------ ------------ ------------
Net (loss)
income $(4,298,046) $ 2,751,185 $(7,404,360) $23,140,831
------------ ------------ ------------ ------------
Computation of
(loss) income
applicable to
common
shareholders
Net (loss) income
before preferred
dividends $(4,298,046) $ 2,751,185 $(7,404,360) $23,140,831
Preferred dividends (254,674) (373,379) (509,348) (593,558)
------------ ------------ ------------ ------------
(Loss) income
attributable to
common
stockholders $(4,552,720) $ 2,377,806 $(7,913,708) $22,547,273
============ ============ ============ ============
Basis income (loss)
per share
attributable to
common stock:
(Loss) income
from continuing
operations $ (0.15) $ 0.88 $ (0.27) $ 7.02
Income (loss)
from
discontinued
operations $ 0.00 $ (0.22) $ 0.01 $ (0.44)
Net (loss) income$ (0.15) $ 0.66 $ (0.26) $ 6.58
Diluted income
(loss) per share
attributable to
common stock:
(Loss) income
from continuing
operations $ (0.15) $ 0.13 $ (0.27) $ 0.99
Income (loss)
from
discontinued
operations $ 0.00 $ (0.03) $ 0.01 $ (0.05)
Net (loss) income$ (0.15) $ 0.10 $ (0.26) $ 0.94
Weighted-average
number common
shares - basic 30,062,671 3,624,747 29,732,998 3,425,127
Weighted-average
number common
shares - diluted 30,062,671 26,834,698 29,732,998 24,775,324
Halo Technology Holdings, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
December 31,
2006 2005
------------ -------------
Operating Activities
Net (loss) income $(7,404,360) $ 23,140,827
(Income) loss from discontinued operations (220,288) 1,510,547
------------ -------------
(Loss) income from continuing operations (7,624,648) 24,651,374
Adjustments to reconcile (loss) income from
continuing operations to net cash used in
operating activities of continuing
operations:
Depreciation and amortization 846,909 326,655
Provision for doubtful accounts 23,799 --
Loss on extinguishment of debt 1,957,709 --
Fair value gain on warrants revaluation (4,580,222) (31,671,485)
Loss on sales of marketable securities 28,429 --
(Gain) loss on disposal of property and
equipment (381) 3,270
Non cash compensation 975,757 273,226
Non cash interest expense 4,743,207 3,176,968
Changes in operating assets and
liabilities of continuing operations
Accounts receivable (789,852) 178,671
Prepaid expenses and other current
assets 134,278 601,463
Accounts payable and accrued expenses 2,313,186 3,073,517
Deferred revenue (2,185,023) (1,387,168)
------------ -------------
Net cash used in operating activities of
continuing operations (4,156,852) (773,509)
Investing activities
Purchase of property and equipment (198,707) (24,661)
Tesseract, Process and Affiliates
acquisition, net of cash acquired of
$632,899 -- (15,867,102)
Kenosia acquisition, net of cash acquired of
$6,125 -- (507,145)
Cash acquired in acquisition of Tenebril,
Inc. 622,683 --
Cash acquired in acquisition of RevCast,
Inc. 500 --
Cash included on sale of Gupta Technologies,
LLC (1,009) --
Proceeds from sale of Gupta Technologies,
LLC 6,100,000 --
Proceeds from sale of marketable securities 12,149 --
Proceeds from sales of property and
equipment 960 --
------------ -------------
Net cash provided by (used in) investing
activities of continuing operations 6,536,576 (16,398,908)
Financing activities
Repayment of Fortress debt (5,140,000) --
Repayment of capital lease (2,307) --
Repayment of subordinated notes -- (1,500,000)
Repayment of Senior notes -- (6,825,000)
Proceeds from new Senior notes, net of
issuance cost of $1,426,486 -- 23,573,514
Proceeds from promissory note 1,900,000 1,700,000
------------ -------------
Net cash (used in) provided by financing
activities of continuing operations (3,242,307) 16,948,514
Effects of exchange rates on cash (5,023) 39,204
Cash flows of discontinued operations
Net cash provided by operating activities 788,039 508,079
Net cash used in investing activities -- (27,020)
------------ -------------
788,039 481,059
Net (decrease) increase in cash and cash
equivalents (79,567) 296,360
Cash and cash equivalents--beginning of
period 853,901 1,548,013
------------ -------------
Cash and cash equivalents--end of period $ 774,334 $ 1,844,373