TAMPA, Fla.--(BUSINESS WIRE)--Innovaro, Inc. (NYSE MKT: INV) today announced that total revenue from continuing operations was $190,000 for the quarter ended September 30, 2012 as compared to $61,000 for the quarter ended September 30, 2011 and loss from continuing operations for the quarter ended September 30, 2012 was ($796,000) as compared to ($1.1) million for the quarter ended September 30, 2011.
Third Quarter 2012 Financial Results Summary from Continuing Operations
- Intelligence and Insights revenue increased by 210% over third quarter 2011.
- Total expenses from continuing operations decreased to $1.0 million for the three months ended September 30, 2012 from $1.2 million for the three months ended September 30, 2011.
- Loss from continuing operations for the three months ended September 30, 2012 was ($796,000), which included $247,000 in non-cash depreciation and amortization expense, Loss from continuing operations for the three months ended September 30, 2011 was ($1.1 million), which included $262,000 in non-cash depreciation and amortization expense.
Nine Months 2012 Financial Results Summary from Continuing Operations
- Intelligence and Insights revenue increased by 32% over the nine months ended September 30, 2011.
- Total expenses from continuing operations decreased to $3.4 million for the nine months ended September 30, 2012 from $4.0 million for the nine months ended September 30, 2011.
- Loss from continuing operations for the nine months ended September 30, 2012 was ($2.8 million), which included $758,000 in non-cash depreciation and amortization. While loss from continuing operations for the nine months ended September 30, 2011 was ($3.9 million), which included $868,000 in non-cash depreciation and amortization.
Discontinued Operations
Pharmalicensing, Global Licensing, Pharma Transfer and Knowledge Express operating divisions
The Company sold the Pharmalicensing, Global Licensing, Pharma Transfer and Knowledge Express operating divisions to IP Technology Exchange, Inc. (“IP TechEx”) effective as of August 31, 2012, pursuant to an asset purchase agreement dated September 12, 2012.
Strategic Services operating division
During the third quarter of 2012, as part of the Company’s strategy to maximize cash flow the Company’s Board of Directors approved the disposal of the strategic services division, Strategos. The sale of this division was subsequently completed on October 2, 2012.
The Company has determined that each of these divisions meet the criteria for classification as discontinued operations as of September 30, 2012. The Company has reflected the operations of these divisions as discontinued operations in the consolidated statements of comprehensive income for all periods presented. 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.
Financial Condition
Our total assets were $12.5 million and $20.8 million as of September 30, 2012 and December 31, 2011, respectively. As of September 30, 2012, our assets and liabilities from continuing operations included $314,000 in cash, $117,000 in accounts receivable, $1.2 million in accounts payable and accrued expenses, and $5.3 million in total debt outstanding. As of December 31, 2011, our assets and liabilities from continuing operations included $268,000 in cash, $102,000 in accounts receivable, $878,000 in accounts payable and accrued expenses, and $5.6 million in total debt outstanding.
Recent Developments
On September 12, 2012, we sold our Pharmalicensing, Global Licensing, Pharma Transfer and Knowledge Express operating divisions to IP Technology Exchange, Inc. effective as of August 31, 2012. Under the Asset Purchase Agreement, IP Technology Exchange, Inc. will pay the Company $2,000,000 consisting of (i) a lump-sum payment of $600,000 at the time of the sale, (ii) assumption of approximately $70,000 of debt relating to the Divisions, (iii) quarterly payments of $100,000 through August 2014, and (iv) the remaining balance of the purchase price on September 1, 2014. On November 30, 2012, any outstanding balance of the purchase price will begin accruing interest at 5% per annum. IP Technology Exchange, Inc. is entitled to a $125,000 reduction in the purchase price if all amounts are paid to us by May 1, 2013. Two of our current executive officers collectively own 14% equity interest in IP Technology Exchange, Inc.
On October 2, 2012, we entered into an asset purchase agreement to sell certain assets, primarily intellectual property rights and equipment, relating to our strategic services division, known as Strategos, to one of our officers and employees for $100,000. In connection with the asset purchase agreement, we entered into separation and release agreements with all of the officers and employees of our Strategos division pursuant to which they agreed to forgo approximately $1.4 million in bonuses we owed them (and which bonuses had previously been accrued as an expense in our financial statements) in exchange for $150,000. Finally, as part of the transaction, we also entered into a technology license agreement with Strategos, Inc., a newly formed company that will carry on the business formerly conducted by our Strategos division, pursuant to which we agreed to license Strategos, Inc. certain technology and intellectual property rights relating to our Strategos division, including the use of the name “Strategos,” for royalty payments equal to 12.5% of the professional fee revenue earned by Strategos, Inc. in excess of $10 million during the period from October 2, 2012 to December 31, 2015.
On October 22, 2012, our lender agreed to extend the maturity date on the $1.25 million that would otherwise be due on that date. We and the lender are in the process of documenting the agreement.
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Innovaro, Inc. Consolidated Balance Sheets |
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September 30, (Unaudited) |
December 31, |
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| ASSETS | |||
| Current assets: | |||
| Cash | $313,787 | $268,170 | |
| Accounts receivable, net | 117,077 | 101,785 | |
| Stock subscriptions receivable | 250,000 | - | |
| Available-for-sale securities | 5,242 | 55,038 | |
| Prepaid expenses and other current assets | 99,324 | 225,657 | |
| Current portion of notes receivable and accrued interest | 2,282,044 | 1,804,000 | |
| Current assets held for sale | - | 1,279,458 | |
| Total current assets | 3,067,474 | 3,734,108 | |
| Cost method investments | 86,784 | 86,784 | |
| Equity method investments | 92,148 | 92,148 | |
| Notes receivable, net of current portion | 932,949 | - | |
| Fixed assets, net | 5,463,508 | 5,610,956 | |
| Intangible assets, net | 2,576,043 | 3,158,505 | |
| Noncurrent assets held for sale | 307,748 | 8,083,764 | |
| Total assets | $12,526,654 | $20,766,265 | |
| LIABILITIES | |||
| Current liabilities: | |||
| Accounts payable | $518,855 | $512,840 | |
| Accrued expenses | 711,509 | 364,891 | |
| Deferred revenue | 159,436 | 123,836 | |
| Current maturities of long-term debt | 4,043,591 | 1,644,664 | |
| Current liabilities held for sale | 1,541,508 | 2,324,389 | |
| Total current liabilities | 6,974,899 | 4,970,620 | |
| Long-term debt, less current maturities | 1,250,000 | 3,997,775 | |
| Deferred tax liability | 189,233 | 189,233 | |
| Noncurrent liabilities held for sale | 94,075 | 801,309 | |
| Total liabilities | 8,508,207 | 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; 15,471,410 and 15,159,544 shares issued; 15,471,410 and 15,039,544 shares outstanding at September 30, 2012 and December 31, 2011, respectively | 154,714 | 150,396 | |
| Common stock payable | 250,000 | - | |
| Additional paid-in capital | 87,399,671 | 86,820,437 | |
| Accumulated deficit | (84,019,275) | (76,453,214) | |
| Accumulated other comprehensive income | 3,616 | 53,939 | |
| Total Innovaro stockholders’ equity | 3,788,726 | 10,571,558 | |
| Noncontrolling interest | 229,721 | 235,770 | |
| Total equity | 4,018,447 | 10,807,328 | |
| Total liabilities and equity | $12,526,654 | $20,766,265 | |
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Innovaro, Inc. Consolidated Statements of Comprehensive Income (Unaudited) |
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Three Months Ended |
Nine Months Ended |
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| 2012 | 2011 | 2012 | 2011 | |||||
| Revenue: | ||||||||
| Intelligence and Insights services | $190,416 | $61,484 | $417,334 | $316,676 | ||||
| Expenses: | ||||||||
| Direct costs of revenue – Intelligence and Insights services | 177,273 | 154,468 | 542,525 | 479,344 | ||||
| Salaries and wages | 169,959 | 258,064 | 574,943 | 665,486 | ||||
| Professional fees | 97,255 | 97,097 | 253,955 | 274,707 | ||||
| Research and development | 94,637 | 27,936 | 334,888 | 661,600 | ||||
| Sales and marketing | 5,499 | 88,058 | 45,857 | 118,774 | ||||
| General and administrative | 250,448 | 281,536 | 939,282 | 940,356 | ||||
| Depreciation and amortization | 246,908 | 261,714 | 758,157 | 868,458 | ||||
| 1,041,979 | 1,168,873 | 3,449,607 | 4,008,725 | |||||
| Other (income) and expense: | ||||||||
| Other (income) expense | (156,406) | (87,657) | (512,110) | (70,941) | ||||
| Interest expense, net | 100,662 | 106,308 | 315,161 | 329,257 | ||||
| (55,744) | 18,651 | (196,949) | 258,316 | |||||
| Loss from continuing operations before income taxes | (795,819) | (1,126,040) | (2,835,324) | (3,950,365) | ||||
| Provision for income tax expense (benefit) | - | - | - | (19,628) | ||||
| Loss from continuing operations | (795,819) | (1,126,040) | (2,835,324) | (3,930,737) | ||||
| Income (loss) from discontinued operations, net of tax (including loss on disposal) | (601,634) | (11,413) | (4,736,786) | 1,151,067 | ||||
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Net loss |
(1,397,453) | (1,137,453) | (7,572,110) | (2,779,670) | ||||
| Net loss attributable to the noncontrolling interest | (1,886) | (2,835) | (6,049) | (7,238) | ||||
| Net loss attributable to Innovaro stockholders | (1,395,567) | (1,134,618) | (7,566,061) | (2,772,432) | ||||
| Other comprehensive income (loss) | (1,310) | (11,854) | (33,523) | (60,195) | ||||
| Comprehensive loss | $(1,396,877) | $(1,146,472) | $(7,599,584) | $(2,832,627) | ||||
| Basic and diluted income (loss) per share: | ||||||||
| Loss from continuing operations | $(0.05) | $(0.08) | $(0.19) | $(0.26) | ||||
| Income (loss) from discontinued operations | $(0.04) | $0.00 | $(0.31) | $0.07 | ||||
| Net loss | $(0.09) | $(0.08) | $(0.50) | $(0.19) | ||||
| Weighted average shares outstanding: Basic and diluted | 15,458,040 | 15,024,970 | 15,233,278 | 15,003,871 | ||||
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Innovaro, Inc. Consolidated Statements of Cash Flows (Unaudited) |
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| Nine Months Ended September 30, | ||||
| 2012 | 2011 | |||
| Operating Activities: | ||||
| Net loss | $(7,572,110) | $(2,779,670) | ||
| Less: Income (loss) from discontinued operations, net of tax | (4,736,786) | 1,151,067 | ||
| Loss from continuing operations | (2,835,324) | (3,930,737) | ||
| Adjustments to reconcile net loss from continuing operations to net cash flows from operating activities: | ||||
| Depreciation and amortization | 758,157 | 868,458 | ||
| Amortization of debt discount from investor warrants | 98,831 | 98,832 | ||
| Stock issued for services | 97,499 | - | ||
| Loss (gain) on sale and impairment of available-for-sale securities | (47,630) | 201 | ||
| Loss on derivative liabilities | - | 150,825 | ||
| Stock-based compensation | 262,767 | 240,918 | ||
| Deferred income taxes | - | (19,628) | ||
| Other | 52,036 | 12,673 | ||
| Changes in operating assets and liabilities: | ||||
| Accounts receivable | (15,292) | 41,671 | ||
| Prepaid expenses and other assets | 9,644 | 113,436 | ||
| Deferred revenue | 35,600 | (27,068) | ||
| Accounts payable and other liabilities | 422,963 | 445,711 | ||
| Net cash flows from operating activities of continuing operations | (1,160,749) | (2,004,708) | ||
| Investing Activities: | ||||
| Capital expenditures | (661) | (26,733) | ||
| Capitalization of software development costs | (45,525) | (185,272) | ||
| Proceeds from disposal of business | 600,000 | - | ||
| Proceeds from sale of available-for-sale securities | 63,903 | - | ||
| Net cash flows from investing activities of continuing operations | 617,717 | (212,005) | ||
| Financing Activities: | ||||
| Net proceeds from stock offering | 223,286 | - | ||
| Payments on long-term debt | (457,909) | (525,466) | ||
| Net cash flows from financing activities of continuing operations | (234,623) | (525,466) | ||
| Net cash flows from continuing operations | (777,655) | (2,742,179) | ||
| Net cash flows from discontinued operations | 823,272 | 4,025,502 | ||
| Increase in cash | 45,617 | 1,283,323 | ||
| Cash at beginning of period | 268,170 | 262,619 | ||
| Cash at end of period | $313,787 | $1,545,942 | ||
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
Other International Callers: 713-481-0091
About Innovaro, Inc.
Innovaro is The Innovation Solutions Company. We help clients innovate and grow. Innovaro offers a comprehensive set of services and software to assure the success of any innovation project, regardless of the size or intent. The Company's unique combination of LaunchPad software 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.