US Dataworks Announces Fiscal 2013 First Quarter Results

US DATAWORKS, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended June 30,

2012

2011

 Revenues:

Software transactional and subscription

$

649,900

$

683,319

Software licensing

2,432

91,201

Software maintenance

166,918

141,997

Professional services

392,425

584,018

Software resale

--

72,388

 Total revenues

1,211,675

1,572,923

 Cost of revenues

487,480

560,905

 Gross profit

724,195

1,012,018

 Operating expenses:

Research and development

231,613

253,241

Sales and marketing

278,926

303,451

General and administrative

558,932

558,209

Depreciation and amortization

18,629

24,629

Total operating expense

1,088,100

1,139,530

 Income (loss) from operations

(363,905)

(127,512)

 Other expense:

Interest expense

(21,420)

(20,525)

Interest expense – related party

(149,373)

(124,158)

Total other expense

(170,793)

(144,683)

 Net income (loss)

$

(534,698)

$

(272,195)

Basic earnings (loss) per share

$

(0.02)

$

(0.01)

Diluted earnings (loss) per share

$

(0.02)

$

(0.01)

Basic weighted-average shares outstanding

33,516,961

33,364,574

Diluted weighted-average shares outstanding

33,516,961

33,364,574

US DATAWORKS, INC.

CONDENSED BALANCE SHEETS

ASSETS

June 30, 2012

March 31, 2012

(Unaudited)

Current assets:

Cash and cash equivalents

$

79,222

$

81,985

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

530,969

437,662

Prepaid expenses and other current assets

110,321

200,636

Total current assets

720,512

720,283

Property and equipment, net

174,338

184,387

Goodwill

4,020,698

4,020,698

Other assets

32,110

42,354

Total assets

$

4,947,658

$

4,967,722

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long term debt

$

431,800

$

244,667

Accounts payable

491,800

426,895

Accrued expenses

166,822

138,033

Accrued interest – related parties

467,246

383,592

Deferred revenue

526,114

424,191

Derivative instruments

8,488

--

Total current liabilities

2,092,270

1,617,378

Long term liabilities:

Notes payable, net of unamortized discount at June 30, 2012 and March 31, 2012 of $7,377 and $2,557, respectively

125,876

134,078

Notes payable – related parties, net of unamortized discount  at June 30, 2012 and March 31, 2012 of  $231,220 and $267,689, respectively

2,861,025

2,824,556

Total long term liabilities

2,986,901

2,958,634

Total liabilities

5,079,171

4,576,012

Commitments and contingencies

Stockholders' equity:

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 $469,085 and $458,802 in arrears as of June 30, 2012 and March 31, 2012, respectively

11

11

Common stock, $0.0001 par value, 90,000,000 shares authorized,  33,517,668 and 33,485,835 shares issued and outstanding as of June 30, 2012 and March 31, 2012, respectively

3,351

3,348

Additional paid-in-capital

66,604,632

66,593,160

Accumulated deficit

(66,739,507)

(66,204,809)

Total stockholders' equity

(131,513)

391,710

Total liabilities and stockholders' equity

$

4,947,658

$

4,967,722

US DATAWORKS, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

For the Three Months Ended June 30,

2012

2011

Cash flows from operating activities:

Net loss from operating activities

$

(534,698)

$

(272,195)

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

Depreciation and amortization of property and equipment

18,629

24,629

Bad debt expense

15,581

--

Amortization of discount on notes payable

1,857

--

Amortization of discount on notes payable – related parties

36,469

34,620

Amortization of deferred financing costs – related parties

10,243

5,182

Stock based compensation

13,287

11,537

Changes in operating assets and liabilities:

Accounts receivable

(108,888)

355,465

Prepaid expenses and other current assets

90,315

308,206

Accounts payable

64,905

(200,731)

Accrued expenses

28,789

46,185

Accrued interest – related parties

83,654

67,637

Deferred revenue

101,923

(122,850)

Net cash (used in) provided by operating activities

(177,934)

257,685

Cash flows from investing activities:

Purchase of property and equipment

(8,580)

(3,097)

Net cash used in investing activities

(8,580)

(3,097)

Cash flows from financing activities:

Payments on note payable to bank

--

(41,667)

Payments on asset backed bank loan

(941,927)

(249,093)

Proceeds from asset backed bank loan

1,126,503

102,089

Payment on equipment loan payable

(825)

(551)

Net cash provided by (used in) financing activities

183,751

(189,222)

Net (decrease) increase in cash and cash equivalents

(2,763)

65,366

Cash and cash equivalents, beginning of period

81,985

44,096

Cash and cash equivalents, end of period

$

79,222

$

109,462

Supplemental disclosures of cash flow information:

Interest paid

$

57,735

$

15,342

Income taxes paid

--

--

Supplemental disclosures of non-cash financing activities:

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

Increased derivative warrant instruments

$

8,488

Increased note discount on notes payable

6,676

Decreased additional paid-in-capital

(1,812)

US DATAWORKS, INC.

INCOME STATEMENT DATA

Non GAAP Reconciliations

For the quarters ended June 30, 2012 and 2011

2012

2011

Reconciliation of adjusted EBITDA (See Note 1)

Net income (loss)

$        (534,698)

$        (272,195)

Depreciation and amortization

18,629

24,629

Stock Based compensation expense

13,287

11,537

Interest

170,793

144,683

Adjusted EBITDA (See Note 1)

$        (331,989)

$          (91,346)

Reconciliation of EBITDA margin

Revenue

$      1,211,675

$      1,572,923

Adjusted EBITDA

$       (331,989)

$         (91,346)

Margin %

-27%

-6%

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.

Contacts:

Randy Frapart, CFO

US Dataworks, Inc.

281-504-8026

Ken Dennard, Managing Partner

Dennard Rupp Gray & Lascar, LLC

[email protected]

713-529-6600