Systems America Announces Strong Earnings and Revenue Growth for the Third Quarter and Nine Months Financial Performance of 2012
SAN RAMON, Calif., Oct. 22, 2012 (GLOBE NEWSWIRE) -- Systems America, Inc. (OTC:SYAI) ("Systems America" or the "Company"), a premier provider of cloud computing and information technology solutions, today reported its financial results for the third quarter and nine months of 2012.
For the Nine Months period ended September 30, 2012, Systems America reported net income of US$743,169 compared to net loss of US$9.08 million for the same period the year prior. Adjusting for the impact of acquisitions, net earnings in the nine months amounted to US$743,169, or US$0.0018 per share (basic and fully diluted), compared to net earnings of US$82,716, or US$0.0011 per share (basic and fully diluted) for the nine months of 2011. Adjusted net earnings per share grew 798.45 percent year-over-year.
The Company reported revenue of US$2,536,111 for nine months of 2012 compared to US$1,129,242 for the nine months of 2011, representing an increase of 124.58 percent. Cloud Computing Application Services such as Salesforce.com Support Services sales were up 210.7 percent in 2012, while sales of enterprise solutions grew by 51 percent.
"Consistent with our long-term strategy to increase the value of our Cloud applications and mobility solutions portfolio, the addition of pre-sales and professional services resources coupled with solid demand across the major segments of our business have translated into strong earnings growth and steady improvements in our margin performance," said Adesh Tyagi, Chairman and CEO of Systems America. "As we look to the balance of year, we are well positioned to benefit from the ongoing technology refresh cycle and from new incentives Salesforce.com has created for partners who provide value-added support around the deployment of leading Salesforce.com sales cloud and social media marketing solutions."
Gross profit was US$1,211,487 for nine months of 2012, representing an increase of 94.63 percent compared to gross profit of US$622,444 reported for the nine months of 2011. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 798.45 percent to US$743,169 delivering a 295 basis point year-over-year increase in EBITDA margin to 950 percent.
"The strong growth in EBITDA in 2012 reflects the success of our strategy to shift a greater proportion of our gross profit mix to higher margin engagements such as cloud applications, storage virtualization and private cloud solutions," added Mr. Tyagi. "While still in the early stages, we are very pleased with these results and with the impact our mobility services investments have had on driving substantial improvements in the productivity of our mobility services business."
At the close of the second quarter, the Company had US$843,641 in cash on hand.
Systems America's interim consolidated financial statements and quarterly report are available at http://www.otcmarkets.com/stock/SYAI/filings
Additional Acquisition Update
Systems America has signed Letter of Intent to acquire a business intelligence and data warehousing solutions company with 2012 revenues of $26 million and adjusted EBITDA of $3.8 million. Upon completion of the proposed acquisition and based on negotiated credit facility terms, the Company is expected to have consolidated pro forma revenues of $30 million and earnings of over $4.4 million for the fiscal year ending December 31, 2012.
Systems America had also received favorable terms from Wells Fargo that provides Systems America a secured $7.5 million asset-based credit facility that would be used to acquire this specific targeted business intelligence and data warehousing solutions company. The Closing of the transaction is subject to certain conditions, including execution of a definitive acquisition agreement. The Transaction is expected to close in next few weeks. There can be no assurance that the financing or acquisition will be consummated.
Systems America has also identified, evaluated and discussed acquisition prospects and signed terms with three other acquisition targets, Mobile application and Social Media Services Company, with revenues in excess of $40 million and earnings in excess of $5.4 million for the year ended December 31, 2011. In addition, the Company is currently further negotiating terms with two acquisition targets, Cloud Application Services Company, with revenues in excess of $24 million and earnings in excess of $2.8 million for the year ended December 31, 2011, and another acquisition target with Mobile Application services and Social Analytics Company with revenues in excess of $25 million and earnings in excess of $4.1 million for the year ended December 31, 2011. The Company expects to close several acquisitions mostly in all cash transactions.
About Systems America
Systems America is a premier provider of diversified cloud computing and information technology solutions to commercial and government clients worldwide. We are ranked one of the fastest growing companies with multiple locations around the world. Systems America delivers superior cloud computing, information technology consulting services, and systems and integration services to hundreds of clients worldwide. Building on a core competency of efficient technology infrastructure outsourcing, the company is headquartered in San Ramon, California, United States. For additional information about Systems America, please visit http://www.systemsamerica.com.
The Systems America logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=14070
Forward-Looking Statements and Safe Harbor Statement:
The information provided herein may include forward-looking statements. These forward-looking statements may be identified by the use of terms and phrases such as "anticipates," "believes," "can," "could," "estimates," "expects," "forecasts," "intends," "anticipates", "may," "plans," "projects," "targets," "will," and similar expressions or variations of these terms and similar phrases. These forward-looking statements are largely based on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Such forward-looking statements include, without limitation, projections about our possible future results, statements about our plans, strategies, business prospects, changes and trends in our business and the markets in which we operate. Additionally, statements concerning future matters such as new business models, new products, product enhancements, new technologies, sales levels, expense levels and other statements regarding matters that are not historical are forward-looking statements. Management cautions that these forward-looking statements relate to future events or our future financial performance and are subject to business, economic, regulatory and other risks and uncertainties, both known and unknown, that may cause actual results, levels of activity, performance or achievements of our business or our industry to be materially different from those expressed or implied by any forward-looking statements. Risks that may cause these forward-looking statements to be inaccurate include, among others, termination or suspension of the repurchase program, which may occur at any time, changes in the manner in which we implement the program, we may use substantially less than the full 80 million shares allocated under this repurchase program, fluctuations in the market price of our common stock. There is no certainty or assurance that any prospective events referenced as forward-looking statements will be achieved. The Company undertakes no duty to provide updates with respect to matters disclosed in this press release.
|SYSTEMS AMERICA, INC.|
|Condensed Consolidated Balance Sheets (Unaudited)|
|September 30, 2012|
|Prepaid expenses and other current assets||364,658|
|Total current assets||1,577,605|
|Property and equipment, net||24,091|
|Intangible assets, net||172,315|
|Total assets||$ 3,363,827|
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)|
|Accounts payable||$ 491,546|
|Related party convertible promissory note to stockholder, current portion||8,997|
|Total current liabilities||836,564|
|Long Term liabilities|
|Loans from Shareholders||19,984|
|Stockholders' equity (deficit)|
|Preferred stock, $0.0001 par value; 25,000,000 shares authorized at September 30, 2012; no shares issued and outstanding at September 30, 2012||--|
|Common stock, $0.0001 par value; 2,500,000,000 shares authorized at September 30, 2012; 405,911,095 shares issued and outstanding at September 30, 2012||8,341|
|Additional paid-in capital||13,059,545|
|Total stockholders' equity (deficit)||2,507,279|
|Total liabilities and stockholders' equity (deficit)||$ 3,363,827|
|SYSTEMS AMERICA, INC.|
|Condensed Consolidated Statements of Operations (Unaudited)|
|Three Months Ended||Proforma Nine Months Ended|
|September 30, 2012||September 30, 2011||September 30, 2012||September 30, 2011|
|Revenues||$ 635,385||$ 585,190||$ 2,536,111||$ 1,129,242|
|Cost of revenues||434,570||269,410||1,324,624||506,798|
|Acquisition Costs (One Time)||167,680||9,164,647|
|Income from operations||26,670||(92,173)||743,169||(9,081,931)|
|Net Income||$ 26,670||$ (92,173)||$ 743,169||$ (9,081,931)|
|SYSTEMS AMERICA, INC.|
|Condensed Consolidated Statements of Cash Flow (Unaudited)|
|Nine Months Ended|
|September 30, 2012|
|Cash flows from operating activities|
|Net Profit||$ 743,169|
|Changes in assets or liabilities|
|Prepaid expenses and other current assets||(364,658)|
|Total Adjustments||$ 20,129|
|Net cash (used in) provided by operating activities||763,298|
|Cash flows from investing activities||(7,609)|
|Net cash used in investing activities||(7,609)|
|Cash flows from financing activities|
|Additional Paid in Capital|
|Repayments on related party convertible promissory||(134,301)|
|note to stockholder|
|Net cash provided by (used in) financing activities||(134,301)|
|Net increase in cash||621,389|
|Cash, beginning of period||232,252|
|Cash, end of the period||$ 853,641|
|SYSTEMS AMERICA, INC.|
|Consolidated Statement of Stockholders' Equity|
|For the Period Ended September 30, 2012|
|Balance, December 31, 2011||71,889,239||7,412||14,593,628||(20,084,828)||(5,483,788)|
|Balance, March 31, 2012||71,889,239||7,412||14,593,628||(19,930,205)||(5,329,165)|
|Issuance of common stock in connection with acquisition of Mile5 Solutions||9,000,000||900||79,100||--||80,000|
|Issuance of common stock in consideration for the legal services to be provided||292,980||29||15,971||--||16,000|
|Balance, June 30, 2012||81,182,219||8,341||14,688,699||(19,853,022)||(5,155,982)|
|Issuance of common stock in consideration for 5 for 1 Forward Stock Split effective as of August 20, 2012||324,728,876|
|Balance, September 30, 2012||405,911,095||8,341||14,688,699||(19,826,352)||(5,129,312)|
|The accompanying notes are an integral part of these financial statements.|
SYSTEMS AMERICA, INC.
Notes to Consolidated Financial Statements (Unaudited)
September 30, 2012
1. Summary of Significant Accounting Policies
Nature of business
Systems America, Inc. ("the Company" or "Systems America") is a vertically led global cloud and mobile application services organization and a leading provider of diversified cloud computing and information technology solutions. Systems America delivers superior cloud computing, information technology consulting services, and systems and integration services to hundreds of clients worldwide. Systems America provides end to end services including advisory, implementation, testing and application management and support services of cloud and mobile application solutions.
The Company incurred net income of $26,670 for the three months ended September 30, 2012 and had an accumulated deficit of $10.55 million on September 30, 2012. Since 2007, the Company has primarily relied on debt and equity financing to fund its operations. Management believes that with ongoing efforts to control costs and plans for increasing revenue, that the Company will be able to sustain operations until positive cash flows are achieved.
The consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or the amount and classification of liabilities or any adjustments that might be necessary should the Company be unable to continue as a going concern.
The Company was originally incorporated on May 17, 1984 under the name 133166 Canada, Inc. and after a series of name changes became Receptagen, Ltd. on July 12, 1993. On July 12, 2001, the stockholders of Receptagen approved an exchange of common stock of the Company for all of the outstanding common stock of Spantel Communications, Inc. ("BVI"), a company incorporated on September 9, 1999 in the British Virgin Islands. BVI carried on its business through Spantel 2000 S.A. ("Spantel S.A."), a company incorporated in Spain. On October 30, 2001, BVI changed its name to Spantel Communications, Inc. ("Spantel") and completed its domestication and incorporation in the State of Florida, transferring its charter from Canadian Federal jurisdiction.
On January 20, 2010, Spantel changed its name to Systems America, Inc. ("Systems America") and filed an amendment to its articles in the State of Florida. On June 10, 2010, Systems America entered into a share exchange agreement with Systems America, Inc., a Delaware Corporation, ("Systems America Delaware") whereby Systems America exchanged 21,000,000 shares of restricted common stock for all the outstanding common stock of Systems America Delaware.
Under the share exchange agreement, Systems America entered into a spin off agreement whereby it agreed to transfer 100% of its interest in Spantel S.A. to Almond, Inc. ("Almond").
For accounting purposes, the acquisition has been treated as a recapitalization of Systems America Delaware with Systems America Delaware as the acquirer (reverse acquisition). The historical financial statements prior to June 10, 2010, are those of Systems America Delaware and exclude the results of Spantel. As part of the transaction, the consolidated entity assumed a convertible promissory note issued by Spantel to Almond for the principal amount of $208,000.
Certain significant risks and uncertainties
The Company participates in a dynamic, high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Company's future financial position: results of operations or cash flows, advances and trends in new technologies and industry standards, pressures resulting from new offerings by competitors, changes in certain strategic relationships or customer relationships, litigation or claims against the Company based on intellectual property, patent, product, regulatory or other factors, risk associated with changes in domestic and international economic or political conditions or regulations, availability of necessary product components, and the Company's ability to attract and retain employees necessary to support its growth.
Principles of consolidation and basis of presentation
The consolidated financial statements include the accounts of the Company, and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's subsidiaries were acquired during 2010, 2011 and September 30, 2012, therefore, the results of operations of these businesses have been consolidated since the date of acquisition.
Use of estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses during the reporting period.
Significant estimates and assumptions made by management include the assessment of recoverability of long-lived assets and their estimated useful lives, the determination of the fair value of assets acquired and liabilities assumed for business acquisitions, and the measurement of current and deferred income tax assets and liabilities. Actual results could differ from those estimates.
The Company generates revenue from professional services rendered to customers. Revenue is recognized under the Company's contracts generally when persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collectability is reasonably assured. The majority of the Company's revenue is generated under time-and-material contracts whereby costs and revenue are recognized as services are performed, with the corresponding cost of providing those services reflected as cost of revenue. The majority of customers are billed on an hourly or daily basis whereby actual time is charged directly to the customer. Such method is expected to result in reasonably consistent profit margins over the contract term. The Company establishes billing terms at the time project deliverables are agreed, and continually monitors timely payments from customers and assesses collection issues.
Reimbursements for out-of-pocket expenses received from customers have been included as part of revenues.
Cash and cash equivalents
Cash and cash equivalents include cash balances and highly liquid investments with an original maturity of three months or less.
Property and equipment
Property and equipment are stated at cost net of accumulated depreciation. Depreciation on property and equipment is calculated on the straight-line basis over the estimated useful lives of the assets, generally three to five years. Expenditures for major renewals and betterments that extend the useful lives of the property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.
Goodwill is tested for impairment at the reporting unit level on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. There was no impairment of goodwill for the period ended September 30, 2012.
Intangible assets are reported at cost less accumulated amortization and accumulated impairment loss, if any. Amortization is recognized on a straight-line basis over the estimated useful lives. The Company periodically evaluates its intangible assets for indications of impairment. If this evaluation indicates that the value of the intangible assets may be impaired, the Company makes an assessment of the recoverability of the net carrying value of the asset over its remaining useful life, based on the estimated undiscounted future cash flows of the asset. If this assessment indicates that the intangible asset is not recoverable, the Company reduces the net carrying value of the related intangible asset to fair value and may adjust the remaining amortization period. The estimated future cash flow assumptions are derived from judgments and expectations based on management's experience in the industry. In addition to the recoverability assessment, the Company routinely reviews the remaining estimated lives of its intangible assets. Any reduction in the useful life assumption will result in increased amortization expense in the period when such determination is made, as well as in subsequent periods. There was no impairment of intangible assets or changes in estimated useful lives during year for period ended September 30, 2012.
The Company accounts for income taxes in accordance with the liability method of accounting for income taxes. Under the liability method, deferred assets and liabilities are recognized based upon anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases. The provision for income taxes is comprised of the current tax liability and the changes in deferred tax assets and liabilities. The Company establishes a valuation allowance to the extent that it is more likely than not that deferred tax assets will not be recoverable against future taxable income.
The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
2. Property and Equipment
Property and equipment consisted of the following as of September 30, 2012:
|Furniture and equipment||$19,154|
|Less: accumulated depreciation||(2,570)|
|Property and equipment, net||$24,091|
Depreciation expense totaled $2,570 for the three months period ended September 30, 2012.
4. Stockholders' Equity (Deficit)
The Company does not currently have any stock option plans. The Company's common stock is considered restricted common stock pursuant to Rule 144 under the Securities Act of 1933.
As of September 30, 2012, the Company was authorized to issue 25,000,000 shares of preferred stock. There are no shares issued and outstanding as of September 30, 2012. The rights, preferences and privileges of preferred stock are as follows:
The holders of shares of preferred stock are entitled to receive dividends when and as declared by the Board of Directors of the Company (the "Board of Directors") at such rate per share, if any, and at such time and in such manner, as shall be determined and fixed by the Board of Directors in the Articles of Amendment authorizing the series of preferred stock of which such shares are a part.
In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the Company, the holders of the outstanding shares of preferred stock shall be entitled to receive such amount, if any, for each share of preferred stock, as the Board of Directors shall determine and fix in the Articles of Amendment authorizing the series of preferred stock of which such shares of preferred stock are a part, and no more.
If the assets of the Company are not sufficient to pay to all holders of preferred stock the amounts to which they would be entitled in the event of voluntary or involuntary liquidation, dissolution or winding up of the Company, then the holders of record of each series of preferred stock which is entitled to share in the assets of the Company in any such event shall be entitled to share in the assets of the Company to the extent, if any, and in the manner, determined by the Board of Directors in the Articles of Amendment authorizing the series of preferred stock of which such shares are a part, and no more. In any such case, the holders of record of shares of preferred stock of the same series shall be entitled to share ratably in accordance with the number of shares of preferred stock of the series so held of record by them to the extent, if any, that the series is entitled to share in the assets of the Company in such event.
No payment shall be made to the holders of shares of common stock of the Company in the event of the voluntary or involuntary liquidation, dissolution, or winding up of the Company unless the holders of record of shares of preferred stock have been paid the full amount to which they are entitled in such event or unless a sufficient amount has been set aside for such payment.
Each share of preferred stock is convertible, at the right and option of the stockholder, at any time after the date of issuance of such shares, into such number of fully paid and non-assessable shares of common stock as is determined by dividing each share by its respective conversion price per share, determined as hereafter provided, in effect on the date the certificate is surrendered for conversion. The conversion price is subject to adjustment for certain dilutive issuances, splits, and combinations.
Each stockholder of preferred stock is entitled to the number of votes as determined by the Board of Directors in the Articles of Amendment authorizing the series of preferred stock of which such shares are a part, and no more.
5. Commitments and Contingencies
The Company leases office space and corporate housing expiring in 2013. Approximate future minimum obligations under these lease agreements at September 30, 2012 are $60,808 for 2012 and 2013.
Rent expense for the three months ended in September 30, 2012 totaled $22,174.
From time to time, the Company is involved in various legal proceedings and receives claims, arising from the normal course of business activities. In the Company's opinion, resolution of these matters is not expected to have a material adverse impact on its consolidated results of operations, cash flows or financial position.
6. Related Party Transactions
In January 2011, the Company acquired Nexent Ventures LLC, a Delaware Limited Liability Company owned by a related party to the Company's CEO. In 2012, These shares has been returned to the Company and cancelled. This transaction was cancelled in 2012 and shares issued has been returned to the Company and cancelled.
7. Income Taxes
The Company has had continuous losses providing loss carry-forwards and there is no assurance that there will be future taxable income that the loss carry-forwards might offset. As such, no provision for income taxes has been included in the financial statements other than minimum state franchise taxes.
Based on the cumulative operating losses to date, management believes that it is more likely than not that the deferred tax assets will not be utilized, such that a full valuation allowance has been recorded.
The Company's effective tax rate as a percentage of net loss before income tax benefit differs from the statutory federal income tax rate of 34% primarily due to uncertainty over the utilization of net operating loss carry-forwards.
The Company has Federal and California net operating loss carry-forwards. These amounts were generated in the period from inception to September 30, 2012 and can be carried forward twenty years for federal and California tax purposes. The federal and state carry-forwards begin to expire in 2030.
8. Stockholder's Equity
Common Stock splits
On July 30, 2012, the Company's Board of Directors declared a 5 for 1 forward stock split in the form of a dividend. The record date for this stock dividend was August 20, 2012, and the payment and effective date was August 20, 2012. Shares issued prior to August 20, 2012 and per share amounts have been retroactively restated to reflect the impact of the stock split.
CONTACT: Press Contact: Systems America, Inc. Investor.Relations@systemsamerica.com
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