ASPR Adsouth Partners Inc (PK)

Adsouth Partners, Inc. (OTCBB:ASPR): -- Full-Year 2005 consolidated revenue of $13.3 million exceeds $12 million guidance -- Increases first quarter 2006 revenue guidance to be in excess of $5.8 million from previously issued $5.5 million -- Genco Power Solutions subsidiary's total orders almost double since last update on March 1, 2006 Adsouth Partners, Inc. (OTCBB:ASPR), a vertically integrated direct response marketing company that generates revenues from the placement of advertising, the production of advertisements, creative advertising and public relations consulting services announced today financial results for the fourth quarter and full-year ended December 31, 2005. All share information and per share amounts are presented as if the Company's 1-for-15 reverse stock split, which became effective on March 25, 2005, and was effective for all periods presented. The Company reported consolidated revenue for the fourth quarter of 2005 of $3.6 million, compared to $232,000 for the fourth quarter last year. Consolidated operating loss for the fourth quarter of 2005 was $212,000, compared to a loss of $2.3 million for the same period in 2004. Net loss was $254,000 for the fourth quarter of 2005, compared to a loss of $2.3 million for the fourth quarter 2004. The net loss attributable to common stockholders for the fourth quarter of 2005 was $254,000, or $0.03 basic and diluted loss per common share, compared to a net loss available to common stockholders of $2.2 million, or $0.38 basic and diluted loss per common share, for the same period in 2004. During 2005 the Company shipped products to two large national retailers on a pay on scan basis. The fourth quarter of 2005 does not include $947,000 of revenue from those retailers for the items such retailers did not sell to the end use consumers in which gross margins of approximately $300,000 would be realized. The Company believes it was important to establish a presence for our products in such markets and that the ultimate sell through by these retailers will help the Company achieve its long-term sales objectives. For the full-year 2005 consolidated revenue was $13.3 million, compared to $4.0 million for the 2004 fiscal year. Consolidated operating income for the full year of 2005 was $171,000, compared to an operating loss of $5.8 million for the same period in 2004. Operating expenses for the full year of 2004 included $4.5 million of non-cash stock-based compensation expense which resulted from the issuance to the Company's officers and other key employees of common stock pursuant to stock grants, and stock options that were granted to consultants. Net loss for the full year 2005 was $669,000, compared to a loss of $5.8 million in 2004. For 2005, non-cash stock based compensation expense was $264,000. The net loss for the full year 2005 includes $537,000 of loss on the early extinguishment of the convertible notes that were issued in February and May of 2005 and $193,000 of interest expense on the convertible notes that were extinguished in June 2005. The net loss attributable to common stockholders for the full-year 2005 was $2.0 million, or ($0.26) per share, basic and diluted, compared to a net loss of $5.8 million, or ($1.05) per share, basic and diluted, for the full-year 2004. In connection with a private placement completed on June 17, 2005, the fair value of the securities issued (including the preferred stock and warrants to purchase common stock) when compared to the net proceeds resulted in a beneficial conversion feature that approximated $1.34 million. For purposes of calculating per share amounts attributable to common stockholders, such beneficial conversion feature is considered a deemed dividend and is deducted from the net loss for purposes of calculating basic and diluted loss per share for 2005. Excluding the non-recurring items related to the 2005 financings, the Company's pro forma profitability for 2005 would have been $61,000. Recent Corporate Highlights -- Established a new 66% majority-owned subsidiary, Genco Power Solutions which markets, sells, installs and services integrated power generator systems to residential homeowners and commercial businesses throughout Florida. As of March 20, 2006 Genco has entered into contracts for 42 orders for standby generators an increase of 19 orders since the Company's last update on March 1, 2006. Total orders as of March 20, 2006 are $915,000 versus approximately $500,000 on March 1, 2006. Genco finished its first installation and believes it can fully complete 3 to 5 installations during the first quarter 2006. Genco operates as an additional product category of Adsouth's Product Division. -- Launched a new product line Mitsu Products, allowing Adsouth to enter a new fast growing consumer category, personal intimacy. The majority of Mitsu sales will come from a new distribution channel, Convenience Stores also known as C Stores, such as Loves, Travel Centers of America and 7-11, which has a total market potential of approximately 100,000 retail outlets. The product line is scheduled to begin shipping in April 2006. -- Secured retail placement in no less than four major U.S. retailers for StarMaker's first product Pearl Anti-Wrinkle Moisturizing Mist. The national launch of Pearl Anti-Wrinkle Moisturizing Mist is scheduled for approximately 15,000 retail locations throughout the country. Additional StarMaker products will be distributed domestically and internationally under Adsouth's DermaFresh brand. -- Initiated four new internal Direct Response campaigns for Genco, Pearl Anti-Wrinkle Moisturizing, Hercules Hook and E-70 to drive brand awareness and sales. -- Completed new advertising spots for Stacker 2 products and launched them nationally. -- Hired a new VP of Product Sales John Cammarano, Adsouth's Chief Executive Officer commented, "With our financial and operational restructuring behind us, Adsouth's new leadership team is clearly demonstrating the capability of executing the Company's business strategy and positioning Adsouth for sustainable growth and profitability related to its currently existing operations. Our focus is to continue to leverage our business model in order to build the brands of our existing products and advertising clients and drive sales growth. However, we are committed to entering new and exciting product categories, as we have recently accomplished in both power generator systems, through our new Genco subsidiary, and the fast growing personal intimacy category via our Mitsu product line. We believe these new opportunities will provide additional platforms of growth for the Company and not only increase our size, but also add an increased level of predictability to our business." Products Sector Adsouth sells a range of products, both through direct marketing operations and sales to retail stores. Some of the products are not related to the others and have different distribution channels. There is typically a period of several months from the time that Adsouth acquires the right to distribute a product until it generates revenue from that product. During this period, Adsouth is engaged in marketing activities and thus is incurring costs before it can generate any revenue from a product. Before Adsouth sells products to retail accounts, it may use its direct marketing capability to introduce the product to market. For the fourth quarter and full year of 2004, all product revenues were from sales of the DermaFresh line of products. During the fourth quarter of 2005 the product mix as a percentage of product revenue was 26% from Simon Cosmetics, 32% from e70 product line, 15% from the DermaFresh line, 13% from the Extreme Beam and the Cliplight product line, 5% from the Hercules Hook product, 8% from D-Shed and 1% from other products. For the full-year of 2005 the product mix as a percentage of product revenue was 43% from Simon Cosmetics, 26% from e70 product line, 18% from the DermaFresh line, 6% from the Extreme Beam and the Cliplight product line, 4% from the Hercules Hook product, 2% from D-Shed and 1% from other products. The products sector reported revenue of $1.7 million for the fourth quarter of 2005, compared to $191,000 for the fourth quarter of last year. The product sector's operating loss was $324,000 for the fourth quarter of 2005, compared to $732,000 for same period in 2004. The product sector's net loss was $352,000 for the fourth quarter of 2005, compared to $754,000 for the fourth quarter of last year. For the full-year of 2005 the product sector reported revenue of $5.6 million, compared to $1.1 million for the full-year of 2004. The product sector's operating loss for the full-year of 2005 was $88,000, compared to an operating loss of $1.5 million for the same period last year, which included $770,000 in expenses related to stock option grants for 2004 and $123,000 for 2005. The product sector's net loss for the full-year of 2005 was $669,000, compared to $1.5 million for the full-year of 2004. The product sector's net loss for the full-year of 2005 includes $358,000 of loss from the early extinguishment of convertible notes that were issued in February and May 2005 and $130,000 of interest expense on the convertible notes that were extinguished in June 2005. Excluding the non-recurring items related to the 2005 convertible note financings, the product sector's pro forma loss for 2005 would have been $181,000. Advertising Sector The advertising sector includes the placement of advertising in different media, the production of direct marketing commercials, and the planning and implementation of direct marketing programs for our clients. Both revenue and gross margins reflect services in addition to those of a typical advertising agency since the gross margin on advertising revenue is typically a percentage of the amount paid for the advertisement. The advertising sector reported revenue of $1.98 million for the fourth quarter of 2005, compared to $41,000 for the fourth quarter of last year. Advertising's operating income was $112,000 for the fourth quarter of 2005, compared to an operating loss of $1.5 million for the same period last year. Net income for the advertising sector was $98,000 for the fourth quarter of 2005, compared to a net loss of $1.5 million for the fourth quarter of last year. The advertising sector's revenue for the full-year of 2005 was $7.7 million, compared to $2.9 million for the full-year of last year. Operating income for the full-year of 2005 was $259,000, compared to an operating loss of $4.29 million for the full-year of last year, which included $3.7 million in expenses related to stock option grants for 2004 and $141,000 for 2005. Advertising was breakeven for the full-year of 2005 compared to a net loss of $4.3 million for the same period in 2004. Advertising's 2005 results includes $179,000 of loss from the early extinguishment of convertible notes that were issued in February and May 2005 and $63,000 of interest expense on the convertible notes that were extinguished in June 2005. Excluding the non-recurring items related to the 2005 convertible note financings, the advertising sector's pro forma profitability for 2005 would have been $242,000. Balance Sheet At December 31, 2005, we had available working capital of approximately $1.8 million compared to a working capital deficiency of $916,000 at December 31, 2004. The following table details changes in components of working capital during 2005. -0- *T As of December 31, 2005 2004 Change --------------------------------------------------------------------- Cash $1,429,000 $38,000 $1,391,000 Certificate of deposit (restricted) 103,000 100,000 3,000 Accounts receivable - net 967,000 36,000 931,000 Due from factor 154,000 - 154,000 Inventory 1,959,000 186,000 1,773,000 Prepaid media 289,000 - 289,000 Other current assets 234,000 34,000 200,000 Accounts payable (810,000) (475,000) (335,000) Accrued expenses (306,000) (481,000) 175,000 Deferred media revenue (1,029,000) - (1,029,000) Current debt (1,149,000) (354,000) (795,000) --------------------------------------------------------------------- Working capital (deficiency) $1,841,000 ($916,000) $2,757,000 --------------------------------------------------------------------- *T The most significant increases to working capital were inventory, cash and accounts receivable. At December 31, 2005, $644,000 of inventory are the costs of products shipped to two large national retailers on which sales are made on a pay on scan basis, whereby in 2005 we did not recognize sales nor the cost of goods sold, until such retailers sold the items to consumers. The remaining inventory costs are related to inventory items on-hand for products including the DermaFresh line, e-70, Hercules Hook, D-Shed and other products which are actively marketed. During the last three months of 2004 product shipments were not significant and all but $36,000 of the invoices related to 2004 shipments had been collected as of December 31, 2004. During 2005 product shipments were $5,584,000, of which $1,663,000 was shipped in December 2005, a significant portion of which are included in outstanding receivables as of December 31, 2005. The terms that we have with the retailers for our product shipments range from 30 to 60 days from shipment. During January 2006, approximately $551,000 of the December 31, 2005 receivables was sold to our factor. The increase in cash reflects $500,000 of proceeds from the second funding of a demand note made in December 2005 plus the net difference between deferred media revenue received from advertising customers in advance of media airing dates and prepaid media costs paid to networks in advance of the media airing dates. Current debt increased by $795,000. During 2005, we shipped products to two large national retailers on a pay on scan basis. In order to obtain working capital to fund the costs of shipping to these two retailers, on December 20, 2005, we borrowed $1,000,000 from a non-affiliated lender. The loan requires quarterly interest payments and principal payments in an amount equal to collections from the two pay on scan retailers. In addition, during 2005 we repaid a $250,000 promissory note which was issued in July 2004 and we executed three vehicle loans and two machinery and equipment loans of which the current portion is $38,000 as of December 31, 2005. As of December 31, 2005, the outstanding balance on our bank line-of-credit was $100,000. The bank line-of-credit expired on July 8, 2005 and was renewed by the bank until July 8, 2006, and is fully collateralized with a $100,000 certificate of deposit held by the bank. In March 2006 we paid-off the balance on the bank line-of-credit and closed it. First Quarter 2006 Guidance and Outlook On February 9, 2006, Adsouth announced revenue for the first quarter 2006 will be in excess of $5.5 million compared to $1.7 million in the first quarter 2005. At this time Adsouth is raising its revenue guidance for the first quarter 2006 to be in excess of $5.8 million. Conference Call Reminder The conference call will take place at 11:00 a.m. Eastern, on Monday, March 20, 2006. Anyone interested in participating should call 800-565-5442 if calling within the United States or 913-312-1298 if calling internationally approximately 5 to 10 minutes prior to 11:00 a.m. There will be a playback available of the conference until April 20, 2006. To listen to the playback, please call 888-203-1112 within the United States or 719-457-0820 internationally. The pass code is 8432114 for the replay. The call is also being webcast by ViaVid Broadcasting and can be accessed at AdSouth's website at http://www.adsouthpartners.com. The webcast can also be accessed at ViaVid's website at http://www.viavid.net. The webcast may be accessed through June 20, 2006 on either site. About Adsouth Partners, Inc. Adsouth Partners is a vertically integrated direct response marketing company that generates revenues from the placement of advertising, the production of advertisements, creative advertising and public relations consulting services. Since mid 2004, it has expanded its activities as it obtained the rights to products that it markets and sells to retail outlets. Adsouth Partners, through its product division DermaFresh, has previously announced shipments to several of the largest retailers in the country. A complete list is available on our website at http://www.adsouthinc.com and a preview of the products offered is available at http://www.dermafresh.com. Information on our websites and any other websites do not constitute a part of this press release. Certain statements in this news release may contain forward-looking information within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6 under the Securities Exchange Act of 1934, and are subject to the Safe Harbor created by those rules. All statements, other than statements of fact, included in this release, including, without limitation, statements regarding potential future plans and objectives of the company, are forward-looking statements that involve risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Events that may arise could prevent the implementation of any strategically significant plan(s) outlined above. The Company cautions that these forward-looking statements are further qualified by other factors including, but not limited to, those set forth in the Company's Form 10-KSB filing, its registration statements and other filings with the United States Securities and Exchange Commission (available at www.sec.gov). The Company undertakes no obligation to publicly update or revise any statements in this release, whether as a result of new information, future events or otherwise. -0- *T Selected financial information of our operating segments is presented in the following tables. Advertising Products Total --------------------------------------------------------------------- Three Months Ended December 31, 2005: (Unaudited) (Unaudited) Revenues $1,975,000 $1,663,000 $3,638,000 Costs and expenses (excluding non cash stock based compensation expense and non- recurring payments) (1,814,000) (1,968,000) (3,782,000) --------------------------------------------------------------------- 161,000 (305,000) (144,000) Non cash stock based compensation (49,000) (19,000) (68,000) --------------------------------------------------------------------- Operating income (loss) 112,000 (324,000) (212,000) Discount on receivables sold to factor - (17,000) (17,000) Interest expense on line of credit and notes payable (2,000) (14,000) (16,000) Other income (expense), net (12,000) 3,000 (9,000) --------------------------------------------------------------------- Net income (loss) 98,000 ($352,000) ($254,000) --------------------------------------------------------------------- Three Months Ended December 31, 2004: (Unaudited) (Unaudited) (Unaudited) Revenues $41,000 $191,000 $232,000 Costs and expenses (excluding non cash stock based compensation expense) (1,352,000) (816,000) (2,168,000) --------------------------------------------------------------------- (1,311,000) (625,000) (1,936,000) Non cash stock based compensation (215,000) (107,000) (322,000) --------------------------------------------------------------------- Operating loss (1,526,000) (732,000) (2,258,000) Discount on receivables sold to factor - (15,000) (15,000) Interest expense on line of credit and notes payable - (7,000) (7,000) Other income (expense), net (4,000) -- (4,000) --------------------------------------------------------------------- Net loss ($1,530,000) ($754,000) ($2,284,000) --------------------------------------------------------------------- *T -0- *T Advertising Products Total --------------------------------------------------------------------- Year Ended December 31, 2005: Revenues $7,730,000 $5,584,000 $13,314,000 Costs and expenses (excluding non cash stock based compensation expense and non- recurring payments) (7,230,000) (5,524,000) (12,754,000) --------------------------------------------------------------------- 500,000 60,000 560,000 Payments to settle arbitration and litigation matters (100,000) (25,000) (125,000) Non cash stock based compensation (141,000) (123,000) (264,000) --------------------------------------------------------------------- Operating income (loss) 259,000 (88,000) 171,000 Discount on receivables sold to factor - (70,000) (70,000) Interest expense on line of credit and notes payable (6,000) (28,000) (34,000) Other income (expense), net (11,000) 5,000 (6,000) --------------------------------------------------------------------- 242,000 (181,000) 61,000 Interest expense from on the extinguished convertible securities (63,000) (130,000) (193,000) Loss on early debt extinguishment ($179,000) (358,000) (537,000) --------------------------------------------------------------------- Net loss - ($669,000) ($669,000) --------------------------------------------------------------------- Year Ended December 31, 2004: Revenues $2,925,000 $1,119,000 $4,044,000 Costs and expenses (excluding non cash stock based compensation expense) (3,495,000) (1,820,000) (5,315,000) --------------------------------------------------------------------- (570,000) (701,000) (1,271,000) Non cash stock based compensation (3,718,000) (770,000) (4,488,000) --------------------------------------------------------------------- Operating loss (4,288,000) (1,471,000) (5,759,000) Discount on receivables sold to factor - (15,000) (15,000) Interest expense on line of credit and notes payable - (23,000) (23,000) Other income (expense), net (14,000) -- (14,000) --------------------------------------------------------------------- Net loss ($4,302,000) ($1,509,000) ($5,811,000) --------------------------------------------------------------------- *T