US Dataworks Announces Fiscal 2013 Second Quarter Results

Contacts:

Randy Frapart, CFO

US Dataworks, Inc.

281-504-8026

Ken Dennard, Managing Partner

DRG&L

[email protected]

713-529-6600

US DATAWORKS, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended        September 30,

For the Six Months Ended        September 30,

2012

2011

2012

2011

 Revenues:

Software transactional and subscription

$

633,794

$

684,908

$

1,283,693

$

1,368,226

Software licensing

7,143

7,268

9,575

98,470

Software maintenance

175,043

163,637

341,962

305,634

Professional services

884,747

826,497

1,277,172

1,410,515

Software resale

8,932

4,301

8,932

76,689

 Total revenues

1,709,659

1,686,611

2,921,334

3,259,534

 Cost of revenues

534,692

542,733

1,022,171

1,103,638

 Gross profit

1,174,967

1,143,878

1,899,163

2,155,896

 Operating expenses:

Research and development

208,849

206,366

440,463

459,607

Sales and marketing

224,598

385,405

503,523

688,856

General and administrative

595,055

638,129

1,153,987

1,196,338

Depreciation and amortization

15,106

22,849

33,735

47,478

Total operating expenses

1,043,608

1,252,749

2,131,708

2,392,279

 Net income (loss) from operations

131,359

(108,871)

(232,545)

(236,383)

 Other expense:

Interest expense

(22,119)

(23,011)

(43,540)

(43,535)

Interest expense – related parties

(141,115)

(124,970)

(290,488)

(249,127)

Unrealized loss on fair value of derivative instruments

(11,760)

--

(11,760)

--

Total other expense

(174,994)

(147,981)

(345,788)

(292,662)

 Net income (loss)

$

(43,635)

$

(256,852)

$

(578,333)

$

(529,045)

Basic earnings (loss) per share

$

(0.00)

$

(0.01)

$

(0.02)

$

(0.02)

Diluted earnings (loss) per share

$

(0.00)

$

(0.01)

$

(0.02)

$

(0.02)

Basic weighted-average shares outstanding

33,551,398

33,401,485

33,534,183

33,382,931

Diluted weighted-average shares outstanding

33,551,398

33,401,485

33,534,183

33,382,931

US DATAWORKS, INC.

UNAUDITED CONDENSED BALANCE SHEETS

ASSETS

September 30, 2012

March 31, 2012

(Unaudited)

Current assets:

Cash and cash equivalents

$

71,966

$

81,985

Accounts receivable, trade, net of allowance for doubtful accounts at September 30, 2012 and March 31, 2012 of $10,500 and $0, respectively

914,637

437,662

Prepaid expenses and other current assets

223,451

200,636

Total current assets

1,210,054

720,283

Property and equipment, net

161,765

184,387

Goodwill

4,020,698

4,020,698

Other assets

32,111

42,354

Total assets

$

5,424,628

$

4,967,722

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long term debt, net of unamortized discount at September 30, 2012 and March 31, 2012 of $4,610 and $0, respectively

$

718,207

$

244,667

Current portion of long term debt – related party, net of unamortized discount at September 30, 2012 and March 31, 2012 of $1,152 and $0, respectively

23,848

--

Accounts payable

538,867

426,895

Accrued expenses

303,067

138,033

Accrued interest – related parties

490,508

383,592

Deferred revenue

436,824

424,191

Derivative instruments

25,160

--

Total current liabilities

2,536,481

1,617,378

Long term liabilities:

Notes payable, net of unamortized discount at September 30, 2012 and March 31, 2012 of $3,810 and $2,557, respectively

103,617

109,078

Notes payable – related parties, net of unamortized discount  at September 30, 2012 and March 31, 2012 of  $194,819 and $267,689, respectively

2,922,426

2,849,556

Total long term liabilities

3,026,043

2,958,634

Total liabilities

5,562,524

4,576,012

Commitments and contingencies

Stockholders' equity (deficit):

Convertible Series B preferred stock, $0.0001 par value, 700,000 shares authorized, 109,933 shares issued and outstanding, $3.75 liquidation preference, dividends of $479,481 and $458,802 in arrears as of September 30, 2012 and March 31, 2012, respectively

11

11

Common stock, $0.0001 par value, 90,000,000 shares authorized,  33,551,773 and 33,485,835 shares issued and outstanding as of September 30, 2012 and March 31, 2012, respectively

3,355

3,348

Additional paid-in-capital

66,641,880

66,593,160

Accumulated deficit

(66,783,142)

(66,204,809)

Total stockholders' equity (deficit)

(137,896)

391,710

Total liabilities and stockholders' equity

$

5,424,628

$

4,967,722

US DATAWORKS, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

For the Six Months Ended September 30,

2012

2011

Cash flows from operating activities:

Net loss from operating activities

$

(578,333)

$

(529,045)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization of property and equipment

33,735

47,478

Bad debt expense

15,581

--

Amortization of discount on notes payable

3,618

--

Amortization of discount on notes payable – related parties

73,823

70,075

Amortization of deferred financing costs – related parties

10,243

7,269

Stock based compensation

50,539

19,886

Unrealized loss on fair value of derivative instruments

11,760

--

Changes in operating assets and liabilities:

Accounts receivable

(492,556)

183,010

Prepaid expenses and other current assets

(22,815)

161,940

Accounts payable

111,972

50,231

Accrued expenses

165,034

194,460

Accrued interest – related parties

106,916

149,153

Deferred revenue

12,633

(223,875)

Net cash (used in) provided by operating activities

(497,850)

130,582

Cash flows from investing activities:

Purchase of property and equipment

(11,113)

(20,758)

Net cash used in investing activities

(11,113)

(20,758)

Cash flows from financing activities:

Payments on note payable to bank

--

(174,294)

Payments on secured line of credit

(1,751,383)

(312,690)

Proceeds from secured line of credit

1,507,331

209,714

Payments on factoring facility

(475,214)

--

Proceeds from factoring facility

1,094,860

--

Proceeds from issuance of notes payables and detachable stock warrants

125,000

125,000

Payments on equipment loan payable

(1,650)

(1,650)

Net cash provided by (used in) financing activities

498,944

(153,920)

Net decrease in cash and cash equivalents

(10,019)

(44,096)

Cash and cash equivalents, beginning of period

81,985

44,096

Cash and cash equivalents, end of period

$

71,966

$

--

Supplemental disclosures of cash flow information:

Interest paid

$

151,138

$

28,110

Income taxes paid

--

--

Supplemental disclosures of non-cash financing activities:

In conjunction with the extension of certain existing notes payable and the issuance of new notes payable, the Company issued additional common stock warrants and modified the existing notes to add a common stock conversion feature. As a result, the following balance sheet accounts were affected as follows:

Increased derivative warrant instruments

$

13,400

$

--

Increased note discount on notes payable

11,588

--

Decreased additional paid-in-capital

(1,812)

--

US DATAWORKS, INC.

INCOME STATEMENT DATA

UNAUDITED Non GAAP Reconciliations

For the Three Months ended
September 30,

For the Six Months ended
September 30,

2012

2011

2012

2011

Reconciliation of adjusted EBITDA (See Note 1)

Net income (loss)

$           (43,635)

$           (256,852)

$      (578,333)

$      (529,045)

Depreciation and amortization

15,106

22,849

33,735

47,478

Stock based compensation expense

49,012

8,349

50,539

19,886

Interest

163,234

147,981

334,028

292,662

Adjusted EBITDA (See Note 1)

$          183,717

$            (77,673)

$      (160,031)

$      (169,019)

Reconciliation of EBITDA margin

Revenue

$        1,709,659

$        1,686,611

$     2,921,334

$     3,259,534

Adjusted EBITDA

$           183,717

$            (77,673)

$       (160,031)

$      (169,019)

Margin %

11%

-5%

-5%

-5%

Note 1:

Adjusted EBITDA is a non-GAAP measure we define as earnings before interest, taxes, depreciation and amortization, and equity compensation expense. We use Adjusted EBITDA as a supplemental financial measure to assess (i) our operating and financial performance without regard to the structure of our financing or the historical cost basis in our assets and (ii) our ability to generate cash flow to cover our interest payments.  Adjusted EBITDA has limitations as an analytical tool and should not be used as a substitute for financial measures presented in accordance with GAAP, including net income, operating income and cash flow from operating activities.  Such limitations include the fact that Adjusted EBITDA does not reflect (i) cash requirements to service interest and principal payments on our debt, (ii) capital expenditure requirements or (iii) income tax payment requirements and income tax accruals.  In addition, companies in our industry may define Adjusted EBITDA differently than we do, thereby limiting its usefulness as a comparative measure.