SOURCE: San West, Inc.

San West, Inc.

May 19, 2011 08:28 ET

San West Inc. Reports First Quarter 2011 Results

Sales Continue to Increase in Response to Marketing Initiatives, Focus on Fuel Efficiency; Expense Reduction Initiatives Lead to 84% Reduction in Operating Income and 76% Narrowing of Net Loss

SANTEE, CA--(Marketwire - May 19, 2011) - San West, Inc. (OTCBB: SNWT), an emerging leader in the motor sports industry, operator of the industry-leading motor sports portal www.CountyImports.com, and Buggy World retailers, today reported financial results for its first quarter of 2011, the period ended March 30, 2011.

Operational and Corporate Highlights

  • San West and CountyImports.com launched a variety of new product offerings, including new electric bicycle and electric bicycle kit products, as well as a new series of motorized scooter products and other ORVs, designed to combat rising fuel prices throughout the United States.
  • San West, Inc. formed a strategic partnership with RND, a local ATV and Dirt-Bike service and accessory retailer, under which RND will pay rent to utilize Buggy World's service area for its primary business, which is repairing and servicing ATVs and Dirt Bikes, and will also be selling soft goods, apparel and accessories in Buggy World's showroom, including products from Oakley, Fox, Shift, No Fear, O'Neill, Troy Lee Designs, Thor, Answer, Renthal, Spy and many others.
  • Initiatives designed to reduce operating expenses resulted in a sharp narrowing of both the operating loss and the net loss, reducing the break-even point as the Company moves toward its peak season.

First Quarter Financial Results
The Company reported revenues for the first quarter of $596,486, an increase of 20.8% compared to the $493,615 for the first quarter last year. Gross profit for the quarter was $119,391, or 20.0% gross profit margin, compared to gross profit of $135,492 or 24.7% gross profit margin for the first quarter of 2010. Gross margin was lower due to the completion of a one-time liquidation of a significant amount of obsolete or dated inventory that had been warehoused for several years, as well as higher costs for scooters and ATVs and increased shipping expenses. Total operating expenses were $249,077, down 22.2% sequentially compared to the $304,323 in the fourth quarter of 2010 and down 271.1% compared to the first quarter last year as management continued to focus on more efficient marketing initiatives and other cost-reduction efforts to narrow the company's losses.

"We continue to focus on ways to reduce our operating expenses while simultaneously growing our revenues, and we have made great progress in that effort year-to-date as operating expenses declined to 41.8% of revenue in the first quarter compared to 187.3% of revenue for the first quarter last year," commented Frank Drechsler, President and CEO of San West Inc. "We have repositioned the company's retail location as the retailer of choice in Southern California as we enter the peak season, and our online properties continue to set new records for high-quality traffic. We believe this strategic positioning should benefit us during the summer months."

Net loss for the quarter was $(225,967), or $(0.00) per share, compared to a net loss of $(952,404) or $(0.01) per share last year. Excluding one-time, non-cash charges totaling $197,100 and $792,175 for the three months ended March 31, 2011 and 2010, respectively, related to stock compensation and the expense associated with the beneficial conversion feature of convertible notes, the Company's loss decreased $87,362 to $72,867 for the three months ended March 31, 2011 compared to $160,229 for the three months ended March 31, 2010.

Mr. Drechsler continued, "While our gross margins have been impacted by higher costs for scooters and ATVs, as well as increased shipping expenses, we have substantially reduced our sales and marketing expenses, and focused on stock-based compensation when possible to reduce cash outlays. As a result, we saw our operating loss narrow by 83.5% and our net loss narrow by 76.3%. This, coupled with the continued double-digit revenue growth, positions us for profitability once we reach critical mass."

About San West, Inc.
San West is an emerging leader in the off-road vehicle (ORV) industry and operator of the industry leading ORV portal, www.CountyImports.com. The Company's web properties have emerged as the established home for all facets of the ORV industry, including off-road buggies, scooters, ATVs, parts and accessories. San West's retail store locations in Southern California specialize in the design, manufacture, sales and repairs of off-road buggies. Additionally, the retail and online stores provide aftermarket performance products and accessories for off-road buggies and other ORVs. Buggy repair services are sold and fulfilled at the Santee, California retail location. For further information about San West, Inc. visit www.CountyImports.com, www.BuggyNation.com, www.youtube.com/user/CountyImportsdotCom, and www.SanWestInc.com.

Forward-Looking Statements
This release contains forward-looking statements, including, without limitation, statements concerning our business and possible or assumed future results of operations. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons including: our ability to continue as a going concern, adverse economic changes affecting markets we serve; competition in our markets and industry segments; our timing and the profitability of entering new markets; greater than expected costs, customer acceptance of our products or difficulties related to our integration of the businesses we may acquire; and other risks and uncertainties as may be detailed from time to time in our public announcements and SEC filings. Although we believe the expectations reflected in the forward-looking statements are reasonable, they relate only to events as of the date on which the statements are made, and our future results, levels of activity, performance or achievements may not meet these expectations. We do not intend to update any of the forward-looking statements after the date of this document to conform these statements to actual results or to changes in our expectations, except as required by law. There is no assurance that a definitive agreement will be completed.

San West, Inc.
Consolidated Balance Sheets
March 31,December 31,
20112010
ASSETS(Unaudited)
CURRENT ASSETS
Cash57,45411,566
Accounts receivable6,0275,079
Inventory (Note B)113,164131,768
Other current assets (Note C)126,590113,406
Total current assets303,235261,819
Fixed assets (Note D)130,226130,226
Accumulated depreciation(59,129)(53,726)
Net fixed assets71,09776,500
Deposits19,47419,474
Goodwill (Note E)234,100234,100
Total assets627,906591,893
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable (Note F)923,552891,180
Other current liabilities243,302235,309
Floorplan notes payable (Note G)4,7214,721
Convertible promissory notes (Note H)256,857194,434
Subsidiary purchase-current portion (Note I)37,14139,176
Total current liabilities1,465,5731,364,820
Subsidiary purchase (Note I)174,107183,280
Convertible promissory notes, non-current (Note H)-110,000
Loans from shareholder (Note J)216,950216,950
Total liabilities1,856,6301,875,050
Commitments and contingencies
STOCKHOLDERS' DEFICIT (Note K)
Preferred stock, no par value, 50,000,000 shares authorized; issued 87,100 and 77,100 at March 31, 2011 and December 31, 2010, respectively.87,10077,100
Common stock, no par value, 300,000,000 shares authorized; issued and outstanding 221,202,859 and 192,742,859 at March 31, 2011 and December 31, 2010, respectively.2,107,4961,837,096
Common stock payable--
Accumulated deficit(3,423,320)(3,197,353)
Total stockholders' deficit(1,228,724)(1,283,157)
Total liabilities and shareholder deficit627,906591,893
San West, Inc.
Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31
20112010
Revenue$596,486$493,615
Cost of goods sold477,095358,123
Gross profit119,391135,492
Expenses
Selling, general and administrative249,077924,442
Total expenses249,077924,442
Income (loss) from operations(129,686)(788,950)
Other income (expense)
Other income-4
Amortization of beneficial conversion feature(80,000)(150,000)
Amortization of deferred financing costs-(862)
Interest expense(16,281)(12,596)
Total other income (expense)(96,281)(163,454)
Net loss$(225,967)$(952,404)
Net (loss) per common share basic$(0.00)$(0.01)
Weighted average shares outstanding basic198,417,970134,487,651
The average shares listed below were not included in the computation of diluted losses per share because to do so would have been antidilutive for the periods presented:
Convertible promissory notes60,642,2853,991,350

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