US Dataworks Announces Fiscal 2013 Third Quarter Results

Contacts:

Randy Frapart, CFO

US Dataworks, Inc.

281-504-8026

Ken Dennard, Managing Partner

Dennard - Lascar Associates, LLC

[email protected]

713-529-6600

US DATAWORKS, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended  December 31,

For the Nine Months Ended December 31,

2012

2011

2012

2011

 Revenues:

Software transactional and subscription revenues

$

616,144

$

688,341

$

1,899,838

$

2,056,567

Software licensing revenues

8,587

29,483

18,161

127,953

Software maintenance revenues

164,210

213,203

506,172

518,837

Professional services revenues

984,100

856,323

2,261,272

2,266,838

Software resale revenues

37,686

36,027

46,617

112,716

 Total revenues

1,810,727

1,823,377

4,732,060

5,082,911

 Cost of revenues

510,465

548,574

1,532,635

1,652,211

 Gross profit

1,300,262

1,274,803

3,199,425

3,430,700

 Operating expenses:

Research and development

196,187

172,280

636,651

631,887

Sales and marketing

283,926

303,401

787,449

992,258

General and administrative

877,020

542,002

2,031,007

1,738,340

Depreciation and amortization

13,745

19,586

47,479

67,064

Total operating expense

1,370,878

1,037,269

3,502,586

3,429,549

 Income (loss) from operations

(70,616)

237,534

(303,161)

1,151

 Other expense:

Interest expense

(32,630)

(28,378)

(76,170)

(71,913)

Interest expense – related party

(142,077)

(125,438)

(432,565)

(374,566)

Unrealized gain on fair value of derivative instruments

14,458

2,699

Total other expenses

(160,249)

(153,816)

(506,036)

(446,479)

 Net income (loss)

$

(230,865)

$

83,718

$

(809,197)

$

(445,328)

Basic earnings (loss) per share

$

(0.01)

(0.02)

$

(0.01)

Diluted earnings (loss) per share

$

(0.01)

(0.02)

$

(0.01)

Basic weighted-average shares outstanding

33,583,606

33,425,606

33,550,662

33,397,300

Diluted weighted-average shares outstanding

33,583,606

33,430,151

33,550,662

33,397,300

US DATAWORKS, INC.

UNAUDITED CONDENSED BALANCE SHEETS

ASSETS

December 31, 2012

March 31, 2012

(Unaudited)

Current assets:

Cash and cash equivalents

$

57,527

81,985

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

698,638

437,662

Prepaid expenses and other current assets

173,208

200,636

Total current assets

929,373

720,283

Property and equipment, net

152,060

184,387

Goodwill

4,020,698

4,020,698

Other assets

29,751

42,354

Total assets

$

5,131,882

$

4,967,722

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long term debt, net of unamortized discount at December 31, 2012 and March 31, 2012 of $3,264 and $0, respectively

$

346,095

$

244,667

Current portion of long term debt – related party, net of unamortized discount at December 31, 2012 and March 31, 2012 of $812 and $0, respectively

24,188

--

Accounts payable

435,895

426,895

Accrued expenses

324,436

138,033

Accrued interest – related parties

525,737

383,592

Deferred revenue

483,185

424,191

Derivative instruments

10,701

--

Total current liabilities

2,150,237

1,617,378

Long term liabilities:

Notes payable, net of unamortized discount at December 31, 2012 and March 31, 2012 of $3,371 and $2,557, respectively

103,231

109,078

Notes payable – related parties, net of unamortized discount  at December 31, 2012 and March 31, 2012 of  $156,862 and $267,689, respectively

2,960,383

2,849,556

Total long term liabilities

3,063,614

2,958,634

Total liabilities

5,213,851

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 $489,878 and $458,802 in arrears as of December 31, 2012 and March 31, 2012, respectively

11

11

Common stock, $0.0001 par value, 90,000,000 shares authorized,  33,583,606 and 33,485,835 shares issued and outstanding as of December 31, 2012 and March 31, 2012, respectively

3,358

3,348

Additional paid-in-capital

66,928,668

66,593,160

Accumulated deficit

(67,014,006)

(66,204,809)

Total stockholders' equity (deficit)

(81,969)

391,710

Total liabilities and stockholders' equity (deficit)

$

5,131,882

$

4,967,722

US DATAWORKS, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended December 31,

2012

2011

Cash flows from operating activities:

Net loss from operating activities

$

(809,197)

$

(445,328)

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

Depreciation and amortization of property and equipment

47,479

67,064

Bad debt expense

15,581

--

Amortization of discount on notes payable

5,854

2,792

Amortization of discount on notes payable – related parties

111,670

106,006

Amortization of deferred financing costs – related parties

12,603

17,513

Stock based compensation

337,330

27,199

Unrealized loss on fair value of derivative instruments

(2,699)

--

Changes in operating assets and liabilities:

Accounts receivable

(276,557)

311,154

Prepaid expenses and other current assets

27,428

190,714

Accounts payable

9,000

(172,301)

Accrued expenses

186,403

135,095

Accrued interest – related parties

142,145

238,664

Deferred revenue

58,994

(142,272)

Net cash (used in) provided by operating activities

(133,966)

336,300

Cash flows from investing activities:

Purchase of property and equipment

(15,152)

(23,015)

Net cash used in investing activities

(15,152)

(23,015)

Cash flows from financing activities:

Payments on note payable to bank

--

(808,562)

Payments on secured line of credit

(1,751,383)

---

Proceeds from secured line of credit

1,507,331

445,902

Payments on factoring facility

(1,960,051)

--

Proceeds from factoring facility

2,206,238

--

Proceeds from issuance of notes payables and detachable stock warrants

125,000

125,000

Payments on equipment loan payable

(2,475)

(2,476)

Net cash provided by (used in) financing activities

124,660

(240,136)

Net decrease in cash and cash equivalents

(24,458)

73,149

Cash and cash equivalents, beginning of period

81,985

44,096

Cash and cash equivalents, end of period

$

57,527

$

117,245

Supplemental disclosures of cash flow information:

Interest paid

$

243,447

$

44,036

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

Non GAAP Reconciliations

For the three months and nine months ended December 31, 2012 and 2011

For the Three Months Ended

For the Nine Months Ended

December 31,

December 31,

2012

2011

2012

2011

Reconciliation of Adjusted EBITDA (Note 1)

Net income (loss)

$ (203,865)

$ 83,718

$ (809,197)

$ (445,328)

Depreciation and amortization

13,745

19,586

47,479

67,064

Stock based compensation expense

286,791

7,313

337,330

27,199

Interest expense

174,707

153,816

508,735

446,479

Unrealized gain on fair value of derivative instruments

(14,458)

-

(2,699)

-

Adjusted EBITDA (See Note 1)

$ 229,920

$ 264,433

$ 81,648

$ 95,414

Reconciliation of EBITDA margin

Revenue

$ 1,810,727

$ 1,823,377

$ 4,732,060

$ 5,082,911

Adjusted EBITDA

$ 229,920

$ 264,433

$ 81,648

$ 95,414

Margin %

13%

15%

2%

2%

Note 1:

Adjusted EBITDA is a non-GAAP measure we define as earnings before interest, taxes, depreciation and amortization, equity compensation expense and unrealized gain on fair value of derivative instruments. 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.