SOURCE: American TonerServ

November 17, 2008 08:30 ET

American TonerServ Reports Third-Quarter Results, Reviews Strategy and Outlook

Revenue More than Doubles to $2,653,858 from $1,086,602 in Third Quarter 2007; Company Reiterates Expectation of $25 Million Annual Revenue Run Rate by End of 2008

SANTA ROSA, CA--(Marketwire - November 17, 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 September 30, 2008.

Third-Quarter 2008 Financial Results

ATS reported revenue of $2,653,858 for the quarter ended September 30, 2008, compared to $1,086,602 for the quarter ended September 30, 2007, a 144% increase.

ATS reported a net loss from operations for the quarter ended September 30, 2008 of $709,109, compared to a net loss from operations of $1,088,546 in the quarter ended September 30, 2007. ATS reported a net loss from operations of approximately $0.01 per share for the quarter ended September 30, 2008 compared to a net loss from operations of $0.05 per share in the quarter ended September 30, 2007.

On a GAAP basis, ATS reported a net loss for the quarter ended September 30, 2008 of $956,081, compared to a net loss of $1,234,037 for the quarter ended September 30, 2007. ATS reported a net loss of approximately $0.01 per share for the quarter ended September 30, 2008 compared to a net loss of $0.05 per share for the quarter ended September 30, 2007.

Earnings before interest, taxes, depreciation, amortization, stock-based compensation expense and other non-cash expenditures (adjusted EBITDA) was a loss of $397,765, or $0.01 per share, in the third quarter of 2008, compared to a loss of $656,788, or approximately $0.03 per share, in the third quarter of 2007. This is an improvement of approximately 40 percent year over year.

"We are very pleased with the consistent top line growth we see coming from the successful execution of our strategy," said Dan Brinker, President and Chief Executive Officer of ATS. "We are seeing organic growth from our continuing operations at the same time we are adding the revenue from operations we have integrated into the company over the past 18 months."

In a September presentation to investors, Mr. Brinker projected that ATS will achieve a $25 million annualized revenue run rate by the end of 2008.

Mr. Brinker added, "During the third quarter, our management team made a concerted effort to make presentations at industry events where we identify the independent managers who we believe are running the best toner service and cartridge recycling operations around the country. The key to our continued success will be targeting these operators with attractive offers that allow them to continue to grow their businesses while we provide support with our proven administrative and logistical systems."

Recent Highlights

After the close of the third quarter, in November, ATS announced the closing of its acquisition of certain assets of iPrint Technologies, Inc. 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. According to unaudited financial information provided to ATS by iPrint, the business generated approximately $12.5 million in revenue during the twelve months ended August 31, 2008.

"Four Questions with Dan Brinker" appeared in Recharger Magazine's September, 2008 issue. In this article, Mr. Brinker highlighted his strategic vision and outlook for the company and the industry. Additionally, during September, Mr. Brinker addressed investors at the Merriman Curhan Ford Investor Summit 2008 in San Francisco. The webcast of his presentation is available until December 16, 2008, at the American TonerServ website, www.AmericantonerServ.com, through a link on the Investor Relations page.

Outlook

"We currently have pending Letters of Intent to acquire companies that have demonstrated they fit our criteria of well-managed, growing operations with strong local relationships and branding in the dynamic toner service and cartridge recycling space. We look forward to completing these and other acquisitions and beginning with our integration programs to permit those teams to focus on what they do best, which is customer service," Mr. Brinker concluded. "In these tough financial times, we find that our customers are especially receptive to the opportunities to save money with compatible cartridges instead of brand names, and at the same time to do their part for the environment by recycling spent cartridges."

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.

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.

AMERICAN TONERSERV CORP. AND SUBSIDIARIES

Results of Operations

                          Three months ended         Nine months ended
                             September 30,             September 30,
                           2008         2007         2008         2007
                        -----------  -----------  -----------  -----------
Revenues:
  Toner and supplies    $ 2,355,070  $   964,909  $ 6,894,035  $ 2,292,436
  Service                   298,788      121,693    1,212,049      283,364
                        -----------  -----------  -----------  -----------
Total revenues            2,653,858    1,086,602    8,106,084    2,575,800
                        -----------  -----------  -----------  -----------
Cost of sales:
  Toner                   1,409,625      638,392    4,287,228    1,456,932
  Service                   166,059      119,094      782,628      269,174
  Inventory write-down            -       68,500            -       68,500
                        -----------  -----------  -----------  -----------
Total cost of sales       1,575,684      825,986    5,069,856    1,794,606

Gross profit              1,078,174      260,616    3,036,228      781,194

Operating expenses:
  Salaries and wages        717,517      398,776    2,074,177    1,161,649
  Professional fees and
   services                 217,143      418,965      948,270    1,149,485
  Sales and marketing       237,333       44,327      717,540      211,663
  General and
   administrative           460,065      389,113    1,202,576      876,937
  Amortization of
   intangible assets        155,224       97,981      461,430      232,222
                        -----------  -----------  -----------  -----------
Total operating expenses  1,787,283    1,349,162    5,403,993    3,631,956
                        -----------  -----------  -----------  -----------
Loss from operations       (709,109)  (1,088,546)  (2,367,765)  (2,850,762)

Other (expense) income:
  Change in fair value
   of warrant liability     (98,259)         670      (96,385)       6,332
  Gain on claims
   settlement                     -            -           66        1,301
  Fair value of
   convertible debt          31,250      (50,000)    (331,250)     (45,833)
  Interest expense         (179,963)     (96,161)    (612,672)    (191,049)
                        -----------  -----------  -----------  -----------
Net loss                $  (956,081) $(1,234,037) $(3,408,006) $(3,080,011)
                        ===========  ===========  ===========  ===========
Net Loss Per Share:
  Basic and diluted     $    (0.01)  $     (0.05) $     (0.05) $     (0.13)
                        ===========  ===========  ===========  ===========
Weighted average number
 of shares outstanding:
  Basic and diluted      65,605,456   23,676,336   64,032,972   23,420,257
                        ===========  ===========  ===========  ===========



Balance Sheet Data

                                               September 30,  December 31,
ASSETS                                              2008          2007
Current assets:                                 ------------   -----------
 Cash and cash equivalents                      $      5,421   $    60,196
 Accounts receivable, net                          1,364,452     1,326,891
 Inventory                                           921,866       715,328
 Prepaid expenses and other current assets            79,537        33,127
 Deferred compensation                                47,026       471,298
 Deferred acquisition costs                           94,391             -
                                                 -----------   -----------
     Total current assets                          2,512,693     2,606,840
 Intangible assets, net                            3,541,432     4,002,862
 Goodwill                                          1,801,895     1,801,895
 Property and equipment, net                         397,116       394,745
 Other assets                                         38,941        29,959
                                                 -----------   -----------
     Total assets                                $ 8,292,077   $ 8,836,301
                                                 ===========   ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Cash overdraft                                  $    86,415   $         -
 Accounts payable and accrued expenses             1,861,585     1,767,997
 Shareholder advances                                142,345       431,095
 Revolving line of credit                            622,041             -
 Notes payable - current portion
  (net of unamortized discount of $140,028
  and $223,120 at September 30, 2008 and
  December 31, 2007, respectively)                 1,021,295     2,068,033
 Convertible notes payable, current portion
  (net of unamortized discount of $38,531
  and $0 at September 30, 2008 and
  December 31, 2007, respectively)                 1,861,469       218,750
 Notes payable, related parties -
  current portion                                          -       150,000
 Deferred revenue                                    107,455        92,589
                                                 -----------   -----------
     Total current liabilities                     5,702,605     4,728,464
                                                 -----------   -----------
Long-term liabilities:
 Notes payable (net of unamortized discount
  of $258,210 and $343,815 at September 30, 2008
  and December 31, 2007, respectively)               985,387     1,281,400
 Convertible notes payable                                 -       925,000
 Warrant liabilities                                 301,018       119,700
                                                 -----------   -----------
     Total long-term liabilities                   1,286,405     2,326,100
                                                 -----------   -----------
     Total liabilities                             6,989,010     7,054,564
                                                 -----------   -----------
 Commitments and contingencies
Stockholders' equity:
 Common stock
  69,574,828 and 60,390,956 shares issued and
  outstanding at September 30, 2008 and
  December 31, 2007, respectively                     69,575        60,391
 Additional paid-in capital                       22,220,338    19,300,186
 Accumulated deficit                             (20,986,846)  (17,578,840)
                                                 -----------   -----------
     Total stockholders' equity                    1,303,067     1,781,737
                                                 -----------   -----------
     Total liabilities and stockholders' equity  $ 8,292,077   $ 8,836,301
                                                 ===========   ===========


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

                          Three months ended         Nine months ended
                             September 30,             September 30,
                           2008         2007         2008         2007
                        -----------  -----------  -----------  -----------
Cash flows provided by
 operating activities   $  (381,163) $  (560,487) $(1,707,266) $(1,806,818)
Changes in operating
 assets and liabilities    (150,137)     (92,564)     150,813        4,415
Non-cash (expenses)
 income, including
 depreciation and
 amortization              (424,781)    (580,986)  (1,945,181)  (1,277,608)
Interest expense, net       179,963       96,161      612,672      191,049
                        -----------  -----------  -----------  -----------
EBIT                       (776,118)  (1,137,876)  (2,795,334)  (2,888,962)
Depreciation and
 amortization               191,891      108,434      562,935      256,261
                        -----------  -----------  -----------  -----------
EBITDA                     (584,227)  (1,029,442)  (2,232,399)  (2,632,701)
Interest expense           (179,963)     (96,161)    (612,672)    (191,049)
Depreciation and
 amortization              (191,891)    (108,434)    (562,935)    (256,261)
                        -----------  -----------  -----------  -----------
Net loss                $  (956,081) $(1,234,037) $(3,408,006) $(3,080,011)
                        ===========  ===========  ===========  ===========


The following is a reconciliation of net loss to EBITDA:

                          Three months ended         Nine months ended
                             September 30,             September 30,
                           2008         2007         2008         2007
                        -----------  -----------  -----------  -----------
Net loss                $  (956,081) $(1,234,037) $(3,408,006) $(3,080,011)
Interest expense, net       179,963       96,161      612,672      191,049
                        -----------  -----------  -----------  -----------
EBIT                       (776,118)  (1,137,876)  (2,795,334)  (2,888,962)
Depreciation and
 amortization               191,891      108,434      562,935      256,261
                        -----------  -----------  -----------  -----------
EBITDA                  $  (584,227) $(1,029,442) $(2,232,399) $(2,632,701)
                        ===========  ===========  ===========  ===========


The following is a reconciliation of net EBITDA to Adjusted EBITDA;
 which excludes all non-cash items; one-time expenditures and stock related
 compensation:

                          Three months ended         Nine months ended
                             September 30,             September 30,
                           2008         2007         2008         2007
                        -----------  -----------  -----------  -----------
EBITDA                  $  (584,227) $(1,029,442) $(2,232,399) $(2,632,701)
Stock related
 compensation               119,453      300,324      613,362      811,065

Fair value of conversion
 feature of convertible
 debt                       (31,250)      50,000      331,250       45,833
Fair value of warrant
 liabilities                 98,259         (670)      96,385       (6,332)
Bad debt allowance
 for entities                     -       23,000       32,500       23,000
                        -----------  -----------  -----------  -----------
ADJUSTED EBITDA         $  (397,765) $  (656,788) $(1,158,902) $(1,759,135)
                        ===========  ===========  ===========  ===========

Contact Information

  • Contact:

    American TonerServ Corp.
    Phone: 800-736-3515
    E-mail: Email Contact

    Jordan Goldstein
    Stakeholder Communications
    Phone: 415-369-9000