| [November 10, 2005] |
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DataWave Reports Five-Fold Increase in Operating Income on 57% Increase in Second Quarter Revenue
WAYNE, N.J. --(Business Wire)-- Nov. 10, 2005 -- Company Generates Strong Cash Flow from Operations With Significant Increase in Cash Position
DataWave Systems, Inc. (OTCBB: DWVS), a premier provider of prepaid and stored value delivery systems, today reported financial results for the second quarter and six months ended September 30, 2005.
Total revenue for the second quarter of fiscal 2006 increased 57% to $8.4 million, compared to $5.3 million for the same period in fiscal 2005. Operating income for the second quarter of fiscal 2006 was $435,000 versus operating income of $81,000 for the same period last year. Net income for the second quarter of fiscal 2006 was $297,000, or $0.01 per diluted share, versus net income of $159,000, or $0.00 per diluted share, for the same period last year. The company generated approximately $3.5 million of cash flow from operations during the second quarter, resulting in approximately $5.2 million of cash and cash equivalents as of September 30, 2005.
Total revenue for the six months ended September 30, 2005 increased 55% to $15.3 million, compared to $9.8 million for the same period in fiscal 2005. Operating income for the six months ended September 30, 2005 was $533,000 versus operating income of $170,000 for the same period last year. Net income for the six months ended September 30, 2005 was $435,000, or $0.01 per diluted share, versus net income of $241,000, or $0.01 per diluted share, for the same period last year.
Josh Emanuel, Chairman and Chief Executive Officer, stated, "This marks our sixth consecutive quarter of double digit year-over-year increases in revenue, as we continued to aggressively expand our distribution network. Having established relationships with the majority of all major retailers in Canada, we are leveraging our dominant position within Canada and our strong retail relationships in order to launch our major expansion into the U.S. We are also accelerating the introduction of new products such as cash cards and third party gift cards through our existing network, as well as new channel partners throughout North America. Overall, we have built a highly scaleable business model, as illustrated by our five-fold improvement in operating income on top of a 57% increase in revenue, which also generates substantial cash flow, providing us more than sufficient capital to continue our strong organic growth."
As of September 30, 2005, the Company had more than 5,380 terminals installed, and more than 850 host-to-host or distributor locations. Daily transactions processed for the quarter averaged more than 36,100 compared with 27,700 a year ago.
About DataWave
DataWave has been an innovator and developer of prepaid and stored-value programs and merchandising solutions since it was founded in 1994. DataWave pioneered systems that allow for point-of-sale activation of high value, high shrinkage products, such as cash cards, prepaid phone cards and prepaid wireless time. These systems work equally well over the Internet, through intelligent freestanding vending machines and POSA terminals, or with various card activation devices, including cash registers.
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Examples of forward-looking statements in this press release include statements about the Company leveraging its position in the Canadian market to expand into the U.S. market, the continued introduction of new products into the market by the Company and the scalability of the Company's business model. Generally, words such as "expect" "believe", "anticipate", "may", "will", "plan", "intend", "estimate", "could", and other similar expressions are intended to identify forward-looking statements. The forward-looking statements are based on the Company's future plans, strategies, projections and predictions. They should not be construed in any manner as guaranteeing that such results will in fact occur. They are subject to risks and uncertainties that could cause the actual results to differ from those set froth in the forward-looking statements. Such risk factors include, among others, future demand for the prepaid products and specifically the Company's products and brand, the Company's ability to attract new clients and retain existing clients, competition from other businesses providing similar products, the Company's ability to maintain profitability, control expenses and successfully execute its business strategy. These and other risks and uncertainties are discussed in more detail in the Company's periodic reports filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, which are available at the SEC website at www.sec.gov. Forward-looking statements speak only as of the date they are made, and the Company undertakes no obligation to update publicly any of them in light of new information or future events.
"DataWave" is a registered trademark of the Company. All other trademarks and trade names referred to are the property of their respective owners. -0- *T DATAWAVE SYSTEMS INC. CONSOLIDATED BALANCE SHEETS As at September 30, 2005 and March 31,2005 (Expressed in United States dollars, except share amounts) (Unaudited) ---------------------------------------------------------------------- September 30 March 31 2005 2005 ------------------------------------------ --------------------------- Assets Current Cash and cash equivalents $ 5,172,927 $ 4,560,512 Accounts receivable and other 7,026,079 7,366,712 Inventories 5,954,265 4,155,614 Prepaid expenses and deposits 514,876 336,800 ------------------------------------------ --------------------------- Total current assets 18,668,147 16,419,638 ------------------------------------------ --------------------------- Machinery and equipment, net 2,518,106 2,453,571 Equity investment 103,849 39,387 Goodwill 1,885,429 1,857,985 Intangible assets, net 996,309 1,079,843 Other assets 209,252 225,575 ------------------------------------------ --------------------------- Total assets $ 24,381,092 $ 22,075,999 ------------------------------------------ --------------------------- Liabilities Current Accounts payable and accrued liabilities $ 15,846,117 $ 14,547,422 Deferred revenue 1,252,984 839,303 Other current liabilities 137,952 109,346 ------------------------------------------ --------------------------- Total current liabilities 17,237,053 15,496,071 ------------------------------------------ --------------------------- Deferred income taxes 322,437 309,509 Deferred inducement 353,854 342,184 Convertible promissory note 600,000 600,000 Other liabilities - 61,668 ------------------------------------------ --------------------------- Total liabilities 18,513,344 16,809,432 ------------------------------------------ --------------------------- Shareholders' equity Common shares Authorized, 100,000,000 common shares, $0.001 par value Issued, 46,826,834 shares issued and outstanding at September 30, 2005 and March 31, 2005 46,827 46,827 Additional paid-in capital 17,920,408 17,920,408 Accumulated other comprehensive income 631,491 465,048 Accumulated deficit (12,730,978) (13,165,716) ------------------------------------------ --------------------------- Total shareholders' equity 5,867,748 5,266,567 ------------------------------------------ --------------------------- Total liabilities and shareholders' equity $ 24,381,092 $ 22,075,999 ------------------------------------------ --------------------------- *T -0- *T DATAWAVE SYSTEMS INC. CONSOLIDATED STATEMENTS OF OPERATIONS Three and six month period ended September 30, 2005 and 2004 (Expressed in United States dollars, except share amounts) (Unaudited) ---------------------------------------------------------------------- Three months ended Six months ended September 30, September 30, 2005 2004 2005 2004 ------------------- -------------------------------------------------- Revenue Sales $ 6,333,326 $ 3,470,894 $11,386,914 $6,235,101 Net agency sales 2,018,358 1,840,027 3,917,176 3,611,429 ------------------- -------------------------------------------------- Total revenue 8,351,684 5,310,921 15,304,090 9,846,530 Cost of revenues (exclusive of depreciation and amortization) 5,627,202 3,282,883 10,186,565 5,929,937 ------------------- -------------------------------------------------- 2,724,482 2,028,038 5,117,525 3,916,593 ------------------- -------------------------------------------------- Operating costs and expenses General and administrative 1,054,193 819,880 2,002,461 1,578,668 Selling and marketing 468,757 399,384 1,050,305 826,374 Product development 397,160 331,146 793,733 621,401 Depreciation and amortization 369,284 303,039 738,471 552,649 Merger costs - 93,873 - 167,015 ------------------- -------------------------------------------------- Total operating costs and expenses 2,289,394 1,947,322 4,584,970 3,746,107 ------------------- -------------------------------------------------- ------------------- -------------------------------------------------- Operating income 435,088 80,716 532,555 170,486 ------------------- -------------------------------------------------- Other income 38,270 3,454 73,134 2,894 Gain on foreign exchange 9,755 39,210 9,752 35,783 ------------------- -------------------------------------------------- Income before income taxes 483,113 123,380 615,441 209,163 ------------------- -------------------------------------------------- Income taxes (216,460) - (245,165) - Equity income from investee 30,214 35,367 64,462 31,812 ------------------- -------------------------------------------------- Net income $ 296,867 $ 158,747 $ 434,738 $ 240,975 ------------------- ---------------------------===========-=========== Net income per share $ - basic $ 0.01 $ 0.00 $ 0.01 $ 0.01 ------------------- -------------------------------------------------- - diluted $ 0.01 $ 0.00 $ 0.01 $ 0.01 ------------------- -------------------------------------------------- Weighted-average number of common shares - basic 46,826,834 43,889,334 46,826,834 43,889,334 ------------------- -------------------------------------------------- - diluted 56,562,342 43,889,334 56,484,807 43,889,334 ------------------- -------------------------------------------------- *T -0- *T DATAWAVE SYSTEMS INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Six month period ended September 30, 2005 and 2004 (Expressed in United States dollars, except share amounts) (Unaudited) ---------------------------------------------------------------------- Six months ended September 30, 2005 2004 ------------------------------------------ --------------- ----------- Operating activities Net income $ 434,738 $ 240,975 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 738,471 552,649 Equity (income) loss from investee (64,462) (31,812) Amortization of lease inducement 12,735 10,809 Net change in non-cash operating assets and liabilities Accounts receivable and other 340,633 (726,861) Inventories (1,798,651) (1,909,826) Prepaid expenses and deposits (178,076) 91,725 Accounts payable and accrued liabilities 1,298,695 3,477,588 Deferred revenue 413,681 352,387 ------------------------------------------ --------------- ----------- Net cash (used in) provided by operating activities 1,197,764 2,057,634 ------------------------------------------ --------------- ----------- Investing activity Purchase of machinery and equipment (698,891) (660,707) ------------------------------------------ --------------- ----------- Net cash used in investing activity (698,891) (660,707) ------------------------------------------ --------------- ----------- Financing activity Repayment of capital lease obligations (34,127) (31,637) ------------------------------------------ --------------- ----------- Net cash used in financing activity (34,127) (31,637) ------------------------------------------ --------------- ----------- Effect of exchange rate changes on cash and cash equivalents 147,669 32,235 ------------------------------------------ --------------- ----------- (Decrease) increase in cash 612,415 1,397,525 Cash and cash equivalents, beginning of period 4,560,512 852,406 ------------------------------------------ --------------- ----------- Cash and cash equivalents, end of period $ 5,172,927 $ 2,249,931 ------------------------------------------ --------------- ----------- *T
Note: These financial statements have been prepared by Management in accordance with generally accepted accounting principles in the United States and are reported in US dollars.
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