SOURCE: American TonerServ

August 15, 2008 15:08 ET

American TonerServ Reports Second-Quarter Results, Recent Highlights

Revenue More Than Doubles to $2,762,547 From $1,098,630 in Second Quarter, 2007; Company States Intention to Acquire Operators in Florida, Indiana and California

SANTA ROSA, CA--(Marketwire - August 15, 2008) - American TonerServ Corp. (OTCBB: ASVP) ("ATS"), a strategic consolidator in the more than $6.0 billion highly fragmented independent segment of the printer supplies and services industry and a leading recycler of toner cartridges, today announced financial results for the quarter ended June 30, 2008.

Second-Quarter 2008 Financial Results

ATS reported revenue of $2,762,547 for the quarter ended June 30, 2008, compared to $1,098,630 for the quarter ended June 30, 2007, a 151% increase.

ATS reported a net loss from operations for the quarter ended June 30, 2008 of $614,488, compared to a net loss from operations of $836,700 in the quarter ended June 30, 2007. ATS reported a net loss from operations of approximately $0.01 per share for the quarter ended June 30, 2008 compared to a net loss from operations of $0.04 per share in the quarter ended June 30, 2007.

On a GAAP basis, ATS reported a net loss for the quarter ended June 30, 2008 of $1.25 million, compared to a net loss of $876,809 for the quarter ended June 30, 2007. ATS reported a net loss of approximately $0.02 per share for the quarter ended June 30, 2008 compared to $0.04 per share for the quarter ended June 30, 2007.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense and other non-cash expenditures (adjusted EBITDA) was a loss of $344,547, or less than $0.01 per share, in the second quarter of 2008, compared to a loss of $581,780, or approximately $0.02 per share, in the second quarter of 2007. This is an improvement of approximately 41 percent year over year.

"We are pleased to report that our top line continues to grow organically and from contributions made by the businesses we have acquired to date. Furthermore, since our last quarterly report, we have announced three additional letters of intent to acquire strong businesses in Florida, Indiana and California," said Dan Brinker, Chief Executive Officer. "The ATS strategy continues to be finding and consolidating regional operators of toner service and cartridge recycling and providing these operators the leverage and benefits associated with a national brand name."

Mr. Brinker added, "During the second quarter, we began rolling out the GreenSmart recycling program, which diverts waste from landfills and creates an effortless channel for spent toner cartridges to be re-used and recycled. At ATS we are committed to lowering the staggering number of toner cartridges that go directly into solid waste landfills in the United States. Our customers appreciate the help in minimizing their carbon footprint and we appreciate the opportunity to broaden the portfolio of compatible cartridges we offer at economical prices."

Recent Highlights

In June, ATS announced that the company had signed a letter of intent to acquire the retail business of Imaging Technology Products ("IT Products"), headquartered in Longwood, Florida. IT Products would function as a satellite for the business of Tonertype in Tampa, which was acquired in January of 2008. The founder of IT Products, Joe Cody, said, "The customer-oriented programs that ATS has pioneered would help us develop business for ATS in our market."

In July, ATS announced that a letter of intent for acquisition was executed with Mid-America Environmental, LLC, of Evansville, Indiana. Mid-America serves its customers' printers and copiers, creating broad opportunities for service and product sales.

Additionally during July ATS announced that iPrint Technologies was its next targeted acquisition, executing a letter of intent to acquire certain assets of the business based in Chatsworth and Larkspur, California. iPrint serves Fortune 1000 customers in California and throughout the country, with an emphasis on reducing overall printing costs and minimizing waste and inefficiency.

Due diligence and negotiations of acquisition agreements are underway.

Mr. Brinker addressed the Southern California investment Association on August 9, highlighting the acquisition activities and the growth attained both organically and through acquisitions to date. Later in August, both Mr. Brinker and ATS Senior Vice President Andrew Beaurline will make presentations at the Recharger Magazine World Expo, one of the document printing industry's leading events.

Outlook

"Our bottom line this quarter demonstrates that we are increasing efficiency and carefully controlling costs even as the organization grows to support higher revenue," said Mr. Brinker. "Our team remains focused on identifying the most attractive targets for acquisition, while we emphasize organic growth initiatives within the businesses we have on board to date. Our customers benefit from bulk purchasing power, technology solutions, operational expertise and efficiency as well as our recycling programs. The owners of independent businesses we talk to are excited about the opportunity to grow and develop under the umbrella of a national brand," Mr. Brinker concluded.

Presentation of Non-GAAP Information

This press release contains non-GAAP financial measures, including EBITDA (earnings before interest, income taxes, depreciation and amortization) and Adjusted EBITDA (earnings before interest, income taxes, depreciation, amortization and other non-cash related expenditures). The Company believes these non-GAAP financial measures are useful to investors in evaluating the Company's results. These measures are not a measurement of our financial performance under GAAP and should not be considered as alternatives to net income, income from operations, or any other performance measures derived in accordance with GAAP or as an alternative to cash flow from operating, investing or financing activities as a measure of our liquidity. In addition, because EBITDA and Adjusted EBITDA may not be calculated identically by all companies, the presentation here may not be comparable to other similarly titled measures of other companies. For a reconciliation of these non-GAAP financial measures to the most comparable GAAP equivalent, see the Non-GAAP Reconciliation - EBITDA and Adjusted EBITDA, along with related footnotes, below.

AMERICAN TONERSERV CORP. AND SUBSIDIARIES

Results of Operations


                        Three months ended          Six months ended
                             June 30,                    June 30,
                        2008          2007          2008         2007
                    ------------  ------------  ------------  ------------
Revenues:
  Toner and
   supplies         $  2,284,076  $    957,743  $  4,538,965  $  1,327,527
  Service                478,471       140,887       913,261       161,671
                    ------------  ------------  ------------  ------------

Total revenues         2,762,547     1,098,630     5,452,226     1,489,198
                    ------------  ------------  ------------  ------------

Cost of sales:
  Toner                1,424,389       602,576     2,877,603       818,540
  Service                275,193       133,231       616,569       150,080
                    ------------  ------------  ------------  ------------
Total cost of sales    1,699,582       735,807     3,494,172       968,620

Gross profit           1,062,965       362,823     1,958,054       520,578

Operating expenses:
  Salaries and
   wages                 682,724       410,358     1,356,660       719,222
  Professional fees
   and services          146,244       218,621       731,126       730,520
  Sales and
   marketing             286,986        60,966       480,207       210,987
  General and
   administrative        407,270       408,548       742,511       487,824
  Amortization of
   customer lists        154,229       101,030       306,206       134,241
                    ------------  ------------  ------------  ------------
Total operating
 expenses              1,677,453     1,199,523     3,616,710     2,282,794
                    ------------  ------------  ------------  ------------

Loss from
 operations             (614,488)     (836,700)   (1,658,656)   (1,762,216)

Other income
 (expense):
  Change in fair
   value of
   warrant
   liability              (1,053)        5,555         1,874         5,662
  Gain on claims
   settlement                  -             -            66         1,301
  Fair value of
   convertible debt     (375,000)       16,667      (362,500)        4,167
  Interest expense      (264,268)      (62,331)     (432,709)      (94,888)
                    ------------  ------------  ------------  ------------
Net loss            $ (1,254,809) $   (876,809) $ (2,451,925) $ (1,845,974)
                    ============  ============  ============  ============

EBITDA              $   (803,672) $   (703,314) $ (1,648,172) $ (1,603,259)
Adjusted EBITDA     $   (344,547) $   (581,780) $   (761,137) $ (1,102,347)

Net Loss Per Share:
  Basic and
   diluted          $      (0.02) $      (0.04) $      (0.04) $      (0.08)
                    ============  ============  ============  ============

Weighted average
 number of shares
 outstanding:
  Basic and
   diluted            64,542,512    23,631,639    63,233,698    23,293,352
                    ============  ============  ============  ============


Balance Sheet Data

                                                 June 30,   December 31,
ASSETS                                             2008         2007
                                                -----------  -----------
  Current assets:
    Cash and cash equivalents                   $    21,603  $    60,196
    Accounts receivable, net                      1,368,271    1,326,891
    Inventory                                       882,610      715,328
    Prepaid expenses and other current assets        51,368       33,127
    Deferred compensation                            43,469      471,298
    Deferred acquisition costs                       22,957            -
                                                -----------  -----------
      Total current assets                        2,390,278    2,606,840

    Customer lists, net                           3,697,156    4,002,862
    Goodwill                                      1,801,895    1,801,895
    Property and equipment, net                     358,542      394,745
    Other assets                                     31,522       29,959

                                                -----------  -----------
      Total Assets                              $ 8,279,393  $ 8,836,301
                                                ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
  Current liabilities:
    Cash overdraft                              $    15,463  $         -
    Accounts payable and accrued expenses         1,552,984    1,767,997
    Shareholder advances                            142,345      431,095
    Revolving line of credit                        584,608            -
    Notes payable - current portion
      (net of unamortized discount of $128,614)     709,571    2,068,033
    Convertible notes payable, related parties
    - current portion
      (net of unamortized discount of $3,667)       152,583       31,250
    Convertible notes payable - current portion
      (net of unamortized discount of $49,453)    1,950,547      187,500
    Notes payable, related parties - current
     portion                                              -      150,000
    Deferred revenue                                217,394       92,589

                                                -----------  -----------
      Total current liabilities                   5,325,495    4,728,464
                                                -----------  -----------

Long-term liabilities:
  Notes payable (net of unamortized discount
   of $270,881)                                   1,018,084    1,281,400
  Convertible notes payable                         800,000      925,000
  Warrant liabilities                               176,176      119,700

                                                -----------  -----------
      Total long-term liabilities                 1,994,260    2,326,100
                                                -----------  -----------
      Total liabilities                           7,319,755    7,054,564
                                                -----------  -----------

Commitments and contingencies

Stockholders' equity
  Common stock
   64,640,572 shares issued and outstanding          64,640       60,391
  Additional paid-in capital                     20,925,763   19,300,186
  Accumulated deficit                           (20,030,765) (17,578,840)
                                                -----------  -----------

      Total stockholders' equity                    959,638    1,781,737

                                                -----------  -----------
      Total Liabilities and Stockholders'
       Equity                                   $ 8,279,393  $ 8,836,301
                                                ===========  ===========



The following is a reconciliation of cash flows provided by operating
activities to EBIT, EBITDA, and net loss:

                        Three Months Ended           Six Months Ended
                             June 30,                     June 30,
                    --------------------------  --------------------------
                        2008          2007          2008          2007
                    ------------  ------------  ------------  ------------
Cash flows
 provided by
 operating
 activities         $   (690,878) $   (629,417) $ (1,326,103) $ (1,246,331)
  Changes in
   operating assets
   and liabilities       202,514        16,418       304,950        96,979

  Non-cash
   (expenses)
   income,
   including
   depreciation and
   amortization         (766,445)     (263,810)   (1,430,772)     (696,622)

  Interest expense,
   net                   264,268        62,331       432,709        94,888
                    ------------  ------------  ------------  ------------

EBIT                    (990,541)     (814,478)   (2,019,216)   (1,751,086)
  Depreciation and
   amortization          186,869       111,164       371,044       147,827
                    ------------  ------------  ------------  ------------

EBITDA                  (803,672)     (703,314)   (1,648,172)   (1,603,259)

  Interest expense      (264,268)      (62,331)     (432,709)      (94,888)

  Depreciation and
   amortization         (186,869)     (111,164)     (371,044)     (147,827)
                    ------------  ------------  ------------  ------------

Net loss            $ (1,254,809) $   (876,809) $ (2,451,925) $ (1,845,974)
                    ============  ============  ============  ============


The following is a reconciliation of net loss to EBITDA:

                        Three Months Ended          Six Months Ended
                             June 30,                    June 30,
                    --------------------------  --------------------------
                        2008          2007          2008          2007
                    ------------  ------------  ------------  ------------
Net loss            $ (1,254,809) $   (876,809) $ (2,451,925) $ (1,845,974)

  Interest expense,
   net                   264,268        62,331       432,709        94,888

                    ------------  ------------  ------------  ------------

EBIT                    (990,541)     (814,478)   (2,019,216)   (1,751,086)
  Depreciation and
   amortization          186,869       111,164       371,044       147,827
                    ------------  ------------  ------------  ------------

EBITDA              $   (803,672) $   (703,314) $ (1,648,172) $ (1,603,259)
                    ============  ============  ============  ============


The following is a reconciliation of net EBITDA to adjusted EBITDA, which
excludes all noncash items, one time expenditures and stock related
compensation:

                        Three Months Ended          Six Months Ended
                             June 30,                    June 30,
                    --------------------------  --------------------------
                        2008          2007          2008          2007
                    ------------  ------------  ------------  ------------
EBITDA              $   (803,672) $   (703,314) $ (1,648,172) $ (1,603,259)

Stock related
 compensation             88,926       143,970       493,909       510,741

Fair value of
 conversion feature
 of  convertible
 debt                    375,000       (16,667)      362,500        (4,167)

Fair value of
 warrant
 liabilities              (4,801)       (5,769)       (1,874)       (5,662)

Bad debt allowance
 for new entitities            -             -        32,500             -

                    ------------  ------------  ------------  ------------
ADJUSTED EBITDA     $   (344,547) $   (581,780) $   (761,137) $ (1,102,347)
                    ============  ============  ============  ============

About American TonerServ

American TonerServ Corp. ("ATS"), a leading recycler of toner cartridges, is building a nationwide organization to efficiently serve the printing needs of small- and medium-sized businesses by consolidating best-in-class independent operators in the more than $6.0 billion recycled printer cartridge and printer services industry, offering top-quality, environmentally-friendly products and local service teams. Please see www.AmericanTonerServ.com for more information.

Forward-Looking Statements

Except for historical information contained herein, the matters set forth above may be forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ from those in the forward-looking statements. Words such as "anticipate," "believe," "estimate," "expect," "intend" and similar expressions, as they relate to the Company or its management, identify forward-looking statements. Such forward-looking statements are based on the current beliefs of management, as well as assumptions made by and information currently available to management. Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors such as the level of business and consumer spending, the amount of sales of the Company's products, the competitive environment within the industry, the ability of the Company to continue to expand its operations, the level of costs incurred in connection with the Company's expansion efforts, economic conditions in the industry and the financial strength of the Company's customers and suppliers. The Company does not undertake any obligation to update such forward-looking statements. Investors are also directed to consider all other risks and uncertainties.

Contact Information

  • Contact:

    American TonerServ Corp.
    Phone: 800-736-3515

    Jordan Goldstein
    Stakeholder Communications
    Phone: 415-369-9000
    E-mail: Email Contact