EX-99.1 2 v185943_ex99-1.htm Unassociated Document

 
 

 
Zanett, Inc.
212-583-0300
 
 
  


FOR IMMEDIATE RELEASE


$10.7 Million Revenue in Q1 up 12% from Q4;
$923k Cashflow Generated in Q1
$800k in Debt Paid Down;
$135 Million Gross Sales Pipeline;
Form 10K filed by Zanett



NEW YORK, NY, May 18, 2010 -- Zanett, Inc. (NasdaqCM : ZANE), a leading consulting firm specializing in serving Fortune 500 corporations and mid-market organizations in Health care, Life Sciences, Manufacturing & Distribution, Retail, Gaming & Hospitality, and State & Local Government has announced its financial results for Q1 ended March 31, 2010.

FINANCIAL HIGHLIGHTS FOR FIRST QUARTER OF 2010

·    
12% revenue increase to $10.7 million in Q1 2010, vs. $9.6 million in Q4 2009.
·    
2% revenue decline to $10.7 million in Q1 2010, vs. $11.0 million in the first three months of 2009.
·    
GAAP Operating loss of $18K in Q1 of 2010, vs. GAAP operating loss of $194K in the same period 2009.
·    
Cashflow provided by operating activities totaled $923K.
·    
$800,000 in debt repaid.
·    
Total business closed over $17 million – revenue to be realized over the next 18 months.
·    
Pipeline remains strong over $135 million un-weighted at March 31, 2010.

POSITIVE DEVELOPMENTS – ZANETT WELL POSITIONED

Dennis Harkins, President & CFO of Zanett, said, “Revenue was unremarkably stable during Q1, but during the period we did realize over $900k in cashflow, and paid down over $800k in debt.  The part that is really exciting for me is the $17 million in new contracts which were closed during Q1.  Because the nature of these contracts is long-term, the bulk of this revenue will be realized over the next 18 months.”

“I think we are very well positioned.  Our un-weighted pipeline of new business remains strong, currently approaching $135 million.  I am very excited about the next 9 months.  If everything remains on track, we could be in for a record year.”

“Each and every one of our employees is working double-time to take advantage of the opportunities presented to us today.  Our employees are the single thing that makes Team Zanett great.”




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About Zanett, Inc.

Zanett is a leading business process outsourcing (BPO), IT enabled services (ITES), and information technology (IT) consulting firm serving Fortune 500 corporations and mid-market organizations in Healthcare, Life Sciences, Manufacturing & Distribution, Retail, Gaming & Hospitality, and State & Local Government.  Zanett helps organizations align business objectives with outsourced technology-enabled services to create Real Enterprise Value. We offer solutions ranging from business consulting as well as custom business solutions that integrate and implement Oracle's full suite of product offerings Oracle, JD Edwards, PeopleSoft, Seibel, including infrastructure technology and managed services together with associated Oracle Fusion technologies. Zanett employs over 210 professionals in North America and Asia with offices in Atlanta, Boston, Cincinnati, Indianapolis, Jacksonville, New York City, North Palm Beach, and Manila. For more information please visit http://www.zanett.com/ or http://healthcare.zanett.com .

 

Certain statements in this news release regarding projected results of operations, or, projected results of financial plans or future strategies and initiatives, including, but not limited to, projections of revenue, projections of profitability, any and all future expectation, and plans for future activities may and should be regarded as ``forward-looking statements'' within the meaning of the Securities Litigation Reform Act. These statements involve, among other things, known and unknown risks, uncertainties and other factors that may cause Zanett, Inc.'s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Zanett currently is considering, but in reality may or may not in the future implement any or all of the items and issues listed in any planned budget or strategic initiative, due to, among other things, known and unknown risks, uncertainties and other factors.

Circumstances do change, and if and when the landscape changes, Zanett shall endeavor to remain as flexible as possible, and adjust its strategy accordingly. Zanett, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, change in strategy, or otherwise. The aforementioned listing of risks and uncertainties is not inclusive. For a more detailed discussion of some, but not all, of the risks and uncertainties that may affect Zanett, Inc., see Zanett, Inc.'s filings with the Securities and Exchange Commission.

Neither Zanett, Inc. nor Zanett Oracle Solutions is a part of, a division of, nor a subsidiary of, nor in any other manner connected with Oracle Corporation, and no implication is made whatsoever to suggest as such.

- FINANCIAL TABLES TO FOLLOW -
 
 
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Zanett, Inc.
Condensed Consolidated Balance Sheets
 
 
March 31,
    
December 31,
 
  
2010
    
2009
   
(unaudited)
      
Assets
          
Current assets:
          
    Cash and cash equivalents
   $ 71,483     $ 180,598
    Accounts receivable net of allowance
  
 
        
        for doubtful accounts of $374,440 and
              
        $432,490, respectively
     6,480,352       6,536,874
Income tax receivable
  
13,431
       51,863
Unbilled revenue
     560,027       206,681
Prepaid expenses
     322,304       250,335
Customer deposits
     535,000       535,000
Other current assets
     177,944       174,306
               
        Total current assets
     8,160,541       7,935,657
               
Property and equipment, net
     1,271,890       1,304,522
Goodwill
     17,072,189       16,479,746
Other intangibles, net
     542,142       615,088
Other assets
     148,734       165,349
               
        Total assets
   $ 27,195,496     $ 26,500,362
               
Liabilities and stockholders' equity
              
Current liabilities:
              
    Accounts payable
   $ 2,082,146     $ 1,235,640
    Accrued expenses   
2,446,830
       2,836,387
    Short-term debt  
 3,550,982
       4,350,090
    Short-term debt-related party
  
-
        6,652,322
    Short-term renewable unsecured subordinated debt  
 1,222,226
       1,123,048
    Other current liabilities  
 1,577,563
       1,032,620
    Income taxes payable  
 11,056 14,591
        
    Deferred revenue  
 1,682,247
       1,228,802
    Deferred income taxes  
 30,645
       30,645
    Capital lease obligations  
 35,988
       35,988
               
        Total current liabilities
     12,639,683       18,540,133
               
Convertible subordinated note
     7,131,983       -
Long term renewable unsecured subordinated debt
     975,978       1,131,104
Capital lease obligation
     38,982       47,980
Deferred rent expense
     85,136       76,535
Deferred income taxes
     25,053       25,053
               
        Total liabilities
     20,896,815       19,820,805
               
Commitments and contingencies
     -       -
               
Stockholders' equity
              
    Preferred stock, $0.001 par value; 10,000,000 shares
              
        authorized; none issued and outstanding
     -       -
    Common stock, $0.001 par value; 50,000,000 shares
              
        authorized; 8,738,833 and 8,738,833 shares
              
        issued and outstanding, respectively
     32,443       32,443
    Additional paid-in capital
     32,482,502       32,482,502
    Treasury stock, at cost; 14,915 shares
     (179,015 )     (179,015
    Accumulated deficit
     (26,037,249 )     (25,656,373
               
        Total stockholders' equity
     6,298,681       6,679,557
               
        Total liabilities and stockholders' equity
   $ 27,195,496     $ 26,500,362

 

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ZANETT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
    Three Months ended March 31,  
   
2010
    
2009
  
Revenue
   $ 10,699,921     $ 10,959,853  
Operating expenses:
                
    Cost of revenue
     7,867,260       7,648,136  
    Selling and marketing
     1,365,643       1,618,774  
    General and administrative
     1,485,317       1,886,528  
                 
            Total operating expenses
     10,718,220       11,153,438  
                 
            Operating loss
     (18,299 )     (193,585 )
                 
Other expense:
                
    Interest expense
     (337,693 )     (327,488 )
                 
    Total other expense
     (337,693 )     (327,488 )
                 
Loss from continuing operations
                
    before income taxes
     (355,992 )     (521,073 )
                 
Income tax provision
     25,000       34,136  
                 
Loss from continuing operations
                
    after taxes
   $ (380,992 )   $ (555,209 )
                 
Gain on sale of discontinued operations,
                
    net of taxes
     -       887,500  
                 
Net (loss)/income
   $ (380,992 )   $ 332,291  
                 
Basic and diluted income/(loss) per share:
                
                 
Continuing operations
   $ (0.04 )   $ (0.07 )
Discontinued operations
   $ -     $ 0.11  
                 
Net (loss)/income per common share to common
                
    stockholders – basic and diluted
   $ (0.04 )   $ 0.04  
                 
Weighted average shares outstanding - basic
                
    and diluted
     8,738,833       8,297,783  
                 
 
 
 
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Zanett, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
   
Three Months Ended
  
   
March 31,
  
   
2010
    
2009
  
Cash flows from operating activities:
            
Net (loss)/income
   $ (380,992 )   $ 332,291  
Adjustments to reconcile net income (loss) to net cash
                
    used in operating activities:
                
              Depreciation and amortization
     213,001       227,091  
              Stock based compensation and services
     -       155,800  
              Gain on sale of discontinued operations
     -       (887,500 )
              Provision (reduction) for doubtful accounts
     (58,050 )     351,654  
              Deferred income taxes
     -       (7,589 )
              Changes in:
                
                   Accounts receivable
     114,572       (1,436,203 )
                   Unbilled revenue
     (353,346 )     (328,580 )
                   Prepaid expenses and other current assets
     (62,127 )     (27,332 )
                   Other assets
     16,616       39,964  
                   Accrued expenses
     90,217       354,690  
                   Accounts payable
     846,507       555,193  
                   Income taxes payable
     (3,535 )     18,218  
                   Other current liabilities
     -       (5,274 )
                   Deferred revenue
     453,446       (273,896 )
                   Deferred rent expense
     8,601       (1,850 )
                   Income tax receivable
     38,432       -  
                 
    Net cash provided by (used in) operating activities
     923,342       (933,323 )
                 
Cash flows from investing activities:
                
    Cash received for acquisitions, net of cash acquired
     -       20,715  
    Cash paid for contingent consideration related
                
        to acquisitions
     (47,500 )     (72,644 )
    Additions to property and equipment
     (107,423 )     (128,070 )
    Cash received from sale of discontinued operations, net
     -       720,833  
                 
    Net cash (used in)/provided by investing activities
     (154,923 )     540,834  
                 
Cash flows from financing activities:
                
    Payments for debt issuance costs
     (13,480 )     -  
   (Repayments)/borrowings of short term debt
     (799,109 )     36,093  
    Repayments for redemptions of unsecured notes
     (55,948 )     (40,937 )
    Capital lease payments
     (8,997 )     -  
                 
    Net cash used in financing activities
     (877,534 )     (4,844 )
                 
Net decrease in cash and cash equivalents
     (109,115 )     (397,333 )
Cash and cash equivalents, beginning of period
     180,598       450,304  
                 
Cash and cash equivalents, end of period
     71,483     $ 52,971  
                 
Supplemental cash flow information:
                
Income taxes paid
   $ 8,004     $ 23,507  
                 
Interest paid
   $ 129,025     $ 234,436  
                 
Non-cash financing activity:
                
Shares issued for contingent consideration
     -       502,672  
                 
Contingent consideration accrued
   $ 582,443     $ 194,578  
                 
Exchange of related party debt for convertible
                
    Subordinated debt
   $ 7,131,983     $ -  
                                                                


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