TAMPA, Fla.--(BUSINESS WIRE)--Innovaro, Inc. (NYSE Amex: INV), today announced that total revenue from continuing operations was $1.9 million for the quarter ended June 30, 2012 as compared to $800,000 for the quarter ended March 31, 2012 and compared to $4.7 million for the quarter ended June 30, 2011 and loss from continuing operations for the quarter ended June 30, 2012 was ($4.8) million as compared to ($1.4) million for the quarter ended March 31, 2012 and compared to ($1.6) million for the quarter ended June 30, 2011.
Second Quarter 2012 Financial Results Summary from Continuing Operations
- Total revenue decreased to $1.9 million for the three months ended June 30, 2012 from $4.7 million for the three months ended June 30, 2011.
- Strategic Services revenue decreased by 62% over second quarter 2011.
- Intelligence and Insights revenue increased by 32% over second quarter 2011.
- Total expenses increased to $7.3 million for the three months ended June 30, 2012 from $6.2 million for the three months ended June 30, 2011. The expenses for the three months ended June 30, 2012 included an impairment loss related to goodwill and intangibles of $4.8 million.
- Loss from continuing operations for the three months ended June 30, 2012 was ($4.8) million, which included the following non-cash expenses: $4.8 million impairment loss, $259,000 in non-cash depreciation and amortization, and $91,000 in non-cash stock-based compensation expense related to vesting options, partially offset by a non-cash benefit of $516,000 from the provision for income tax. Loss from continuing operations for the three months ended June 30, 2011 was ($1.6) million, which included the following non-cash expenses: $310,000 in non-cash depreciation and amortization and $186,000 in non-cash stock-based compensation expense related to vesting options.
Discontinued Operations
During the quarter ended June 30, 2012, as part of the Company’s strategy to maximize cash flow, the Company decided to dispose of certain of its operating divisions that are included in its Intelligence and Insights segment. On June 4, 2012, the Company entered into a non-binding letter of intent with IPFlow International, LLC to sell its Pharmalicensing, Pharma Transfer, Global Licensing and Knowledge Express operating divisions and all related assets for $2,000,000. Under the letter of intent, a definitive agreement had to be reached before August 4, 2012. However, the Company is in continuing discussions with the buyer and believes that it is probable that a definitive agreement will still be reached. The agreement remains subject to customary conditions including negotiation of mutually agreeable terms, satisfactory completion of due diligence and the buyer securing financing. No assurances can be provided that a definitive agreement will be reached and that the sale will be completed.
The Company has determined that these divisions meet the criteria for classification as discontinued operations as of June 30, 2012. Should the sale be completed, the operations and cash flows of these divisions will be eliminated from the Company’s ongoing operations, and the Company will have no significant continuing involvement in these divisions’ operations. Based on an estimate of proceeds from the sale of these divisions, the Company recognized impairment totaling $255,126 in the second quarter of 2012. The Company has reflected the operations of these divisions as discontinued operations in the statements of comprehensive income for all periods presented in this press release and in the Form 10-Q. In addition, the Company has classified the assets and liabilities of the discontinued divisions as current and noncurrent assets and liabilities held for sale in the consolidated balance sheets for all periods presented in this press release and in the Form 10-Q. Substantially all the cash flows from discontinued operations for all periods presented relate to operating activities, and accordingly, the Company has presented cash flows from discontinued operations as a single line item in the consolidated statements of cash flows in this press release and in the Form 10-Q.
The summary of comparative revenue is as follows:
| Revenue for the quarter ended | June 30, 2012 | March 31, 2012 | June 30, 2011 | |||
| From continuing operations | $1,900,000 | $800,000 | $4,700,000 | |||
| From discontinued operations | $500,000 | $400,000 | $600,000 | |||
| From all operations | $2,400,000 | $1,200,000 | $5,300,000 |
Financial Condition
Our total assets were $15.0 million and $20.8 million as of June 30, 2012 and December 31, 2011, respectively. As of June 30, 2012, we had $570,000 in cash, $640,000 in accounts receivable, $38,000 in contracts in process, $3.0 million in accounts payable, accrued expenses and accrued bonus, and $5.4 million in total debt outstanding (of which $1.25 million is due in October 2012 and $2.8 million is due in May 2013). As of December 31, 2011, we had $268,000 in cash, $507,000 in accounts receivable, $513,000 in contracts in process, $2.4 million in accounts payable, accrued expenses and accrued bonus, and $5.6 million in total debt outstanding.
Recent Developments
On August 8, 2012, Bruce Lucas, a member of our Board of Directors, resigned from our Board of Directors effective immediately. On August 9, 2012, Charles Pope, the Chairman of our Board of Directors, resigned from our Board of Directors effective immediately. Each director confirmed that his resignation was due to personal reasons and not as a result of any disagreement with us with respect to our policies, operations or practices. Our Board of Directors has elected Mark Berset to serve as Chairman of the Board of Directors.
Asa Lanum, Innovaro’s CEO stated, “We are pleased with the improved performance in revenue for the second quarter of 2012 versus the first quarter of 2012. Although we see significant opportunity, there remains substantial work to do to make the transition into a mode of repeatable revenue growth and achieve our goals. The third quarter will be challenging for us as we continue to make that transition and restructure Innovaro.”
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Innovaro, Inc. Consolidated Balance Sheet |
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June 30, |
December 31, |
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| ASSETS | ||||||
| Current assets: | ||||||
| Cash | $570,401 | $268,170 | ||||
| Accounts receivable, net | 639,752 | 507,482 | ||||
| Contracts in process | 37,849 | 513,040 | ||||
| Available-for-sale securities | 6,552 | 55,038 | ||||
| Prepaid expenses and other current assets | 171,349 | 235,285 | ||||
| Note receivable and accrued interest | 1,856,000 | 1,804,000 | ||||
| Current assets held for sale | 221,077 | 351,093 | ||||
| Total current assets | 3,502,980 | 3,734,108 | ||||
| Cost method investments | 86,784 | 86,784 | ||||
| Equity method investments | 92,148 | 92,148 | ||||
| Fixed assets, net | 5,521,077 | 5,619,003 | ||||
| Goodwill | - | 3,386,898 | ||||
| Intangible assets, net | 3,085,483 | 4,831,630 | ||||
| Noncurrent assets held for sale | 2,715,956 | 3,015,694 | ||||
| Total assets | $15,004,428 | $20,766,265 | ||||
| LIABILITIES | ||||||
| Current liabilities: | ||||||
| Accounts payable | $821,423 | $512,840 | ||||
| Accrued expenses | 739,069 | 449,432 | ||||
| Accrued bonus pool | 1,408,332 | 1,444,955 | ||||
| Deferred revenue | 247,292 | 123,836 | ||||
| Current maturities of long-term debt | 4,183,006 | 1,644,664 | ||||
| Current liabilities held for sale | 742,143 | 794,893 | ||||
| Total current liabilities | 8,141,265 | 4,970,620 | ||||
| Long-term debt, less current maturities | 1,250,000 | 3,997,775 | ||||
| Deferred tax liability | 283,308 | 798,839 | ||||
| Noncurrent liabilities held for sale | 194,890 | 191,703 | ||||
| Total liabilities | 9,869,463 | 9,958,937 | ||||
| EQUITY | ||||||
| Innovaro stockholders’ equity: | ||||||
| Preferred stock, $.01 par value, 1,000,000 shares authorized; none issued and outstanding | - | - | ||||
| Common stock, $.01 par value, 29,000,000 shares authorized; 15,551,410 and 15,159,544 shares issued; 15,456,410 and 15,039,544 shares outstanding at June 30, 2012 and December 31, 2011, respectively | 154,564 | 150,396 | ||||
| Additional paid-in capital | 87,335,178 | 86,820,437 | ||||
| Accumulated deficit | (82,623,709 | ) | (76,453,214 | ) | ||
| Accumulated other comprehensive income | 37,325 | 53,939 | ||||
| Total Innovaro stockholders’ equity | 4,903,358 | 10,571,558 | ||||
| Noncontrolling interest | 231,607 | 235,770 | ||||
| Total equity | 5,134,965 | 10,807,328 | ||||
| Total liabilities and equity | $15,004,428 | $20,766,265 | ||||
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Innovaro, Inc. Consolidated Statements of Comprehensive Income (Unaudited) |
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| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||
| Revenue: | ||||||||||||
| Strategic services | $1,734,860 | $4,555,245 | $2,478,531 | $7,583,106 | ||||||||
| Intelligence and Insights services | 148,750 | 112,317 | 226,916 | 255,192 | ||||||||
| 1,883,610 | 4,667,562 | 2,705,447 | 7,838,298 | |||||||||
| Expenses: | ||||||||||||
| Direct costs of revenue – Strategic services | 1,123,430 | 4,475,680 | 1,947,248 | 6,157,242 | ||||||||
| Direct costs of revenue – Intelligence and Insights services |
168,935 |
150,237 |
365,140 |
315,117 |
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| Salaries and wages | 240,928 | 352,444 | 503,687 | 520,473 | ||||||||
| Professional fees | 91,309 | 96,136 | 163,580 | 178,109 | ||||||||
| Research and development | 139,988 | 330,087 | 240,251 | 633,664 | ||||||||
| Sales and marketing | 30,885 | 40,105 | 84,009 | 78,864 | ||||||||
| General and administrative | 469,632 | 463,603 | 903,929 | 907,853 | ||||||||
| Depreciation and amortization | 258,661 | 309,867 | 521,402 | 622,082 | ||||||||
| Impairment loss | 4,756,898 | - | 4,756,898 | - | ||||||||
| 7,280,666 | 6,218,159 | 9,486,144 | 9,413,404 | |||||||||
| Other (income) and expense: | ||||||||||||
| Other (income) expense | (230,748 | ) | 8,685 | (351,534 | ) | 14,678 | ||||||
| Interest expense, net | 142,560 | 81,623 | 277,336 | 223,210 | ||||||||
| (88,188 | ) | 90,308 | (74,198 | ) | 237,888 | |||||||
| Loss from continuing operations before income taxes | (5,308,868 | ) | (1,640,905 | ) | (6,706,499 | ) | (1,812,994 | ) | ||||
| Provision for income tax expense (benefit) | (515,531 | ) | (9,814 | ) | (515,531 | ) | (19,628 | ) | ||||
| Loss from continuing operations | (4,793,337 | ) | (1,631,091 | ) | (6,190,968 | ) | (1,793,366 | ) | ||||
| Income (loss) from discontinued operations, net of tax | (73,747 | ) |
164,614 |
16,310 |
151,149 |
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Net loss |
(4,867,084 | ) |
(1,466,477 |
) |
(6,174,658 | ) |
(1,642,217 |
) |
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| Net loss attributable to the noncontrolling interest | (2,977 | ) | (1,976 | ) | (4,163 | ) | (4,403 | ) | ||||
| Net loss attributable to Innovaro stockholders | (4,864,107 | ) | (1,464,501 | ) | (6,170,495 | ) | (1,637,814 | ) | ||||
| Other comprehensive income (loss) | (37,801 | ) | 1,155 | (32,213 | ) | (48,341 | ) | |||||
| Comprehensive loss | $(4,901,908 | ) | $(1,463,346 | ) | $(6,202,708 | ) | $(1,686,155 | ) | ||||
| Basic and diluted income (loss) per share: | ||||||||||||
| Loss from continuing operations | $(0.32 | ) | $(0.11 | ) | $(0.41 | ) | $(0.12 | ) | ||||
| Income (loss) from discontinued operations | 0.00 | 0.01 | 0.00 | 0.01 | ||||||||
| Net loss | (0.32 | ) | (0.10 | ) | (0.41 | ) | (0.11 | ) | ||||
| Weighted average shares outstanding: Basic and diluted | 15,174,780 | 14,963,859 | 15,119,662 | 14,993,148 | ||||||||
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Innovaro, Inc. Consolidated Statements of Cash Flows (Unaudited) |
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| Six Months Ended June 30, | ||||||
| 2012 | 2011 | |||||
| Operating Activities: | ||||||
| Net loss | $(6,174,658 | ) | $(1,642,217 | ) | ||
| Less: Income from discontinued operations, net of tax | 16,310 | 151,149 | ||||
| Loss from continuing operations | (6,190,968 | ) | (1,793,366 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash flows from operating activities: | ||||||
| Depreciation and amortization | 520,259 | 620,897 | ||||
| Amortization of debt discount from investor warrants | 65,889 | 65,526 | ||||
| Stock issued for services | 97,499 | - | ||||
| Goodwill impairment | 3,386,898 | - | ||||
| Intangible asset impairment | 1,370,000 | - | ||||
| Loss (gain) on sale and impairment of available-for-sale securities | (47,630 | ) | 201 | |||
| Loss on derivative liabilities | - | 150,825 | ||||
| Stock-based compensation | 189,580 | 268,135 | ||||
| Deferred income taxes | (515,531 | ) | (19,628 | ) | ||
| Other | 45,596 | 12,082 | ||||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable and contracts in process | 342,921 | (610,388 | ) | |||
| Prepaid expenses and other assets | (23,430 | ) | (40,855 | ) | ||
| Deferred revenue | 123,456 | (14,849 | ) | |||
| Accounts payable and other liabilities | 561,597 | 1,857,510 | ||||
| Net cash flows from operating activities of continuing operations | (73,864 | ) | 496,090 | |||
| Investing Activities: | ||||||
| Capital expenditures | (661 | ) | (22,758 | ) | ||
| Capitalization of software development costs | (45,525 | ) | - | |||
| Proceeds from sale of available-for-sale securities | 63,903 | - | ||||
| Net cash flows from investing activities of continuing operations | 17,717 | (22,758 | ) | |||
| Financing Activities: | ||||||
| Net proceeds from stock offering | 231,830 | - | ||||
| Payments on long-term debt | (285,552 | ) | (383,350 | ) | ||
| Net cash flows from financing activities of continuing operations | (53,722 | ) | (383,350 | ) | ||
| Net cash flows from continuing operations | (109,869 | ) | 89,982 | |||
| Net cash flows from discontinued operations | 412,100 | 280,386 | ||||
| Increase in cash | 302,231 | 370,368 | ||||
| Cash at beginning of period | 268,170 | 262,619 | ||||
| Cash at end of period | $570,401 | $632,987 | ||||
Conference Call Information
We will host a live conference call at 4:30 p.m. ET today to discuss the results. Investors and analysts are invited to attend the conference call.
Investors and analysts can participate in the call by dialing:
US & Canada: 866-578-1005
UK: 0-800-368-0590
Other International Callers: 713-481-0091
About Innovaro, Inc.
Innovaro is The Innovation Solutions Company. The focus of our business is to help clients innovate and grow. Innovaro offers a comprehensive set of services and software to ensure the success of any innovation project, regardless of the size or intent. The Company’s unique combination of consulting services provides innovation expertise, its new LaunchPad software product provides an integrated innovation environment, and Intelligence and Insights services provide businesses the innovation support to drive success. For more information about Innovaro, please visit its website at www.innovaro.com.
Forward-Looking Statements
Certain matters discussed in this press release are “forward-looking statements.” These forward-looking statements can generally be identified as such because the context of the statement will include words such as “expects,” “should,” “believes,” “anticipates” or words of similar import. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements and these factors are identified from time to time in our filings with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This press release is available at www.innovaro.com.