TSSW Reports 1st qtr earnings and announces its current portfolio of Investments in New Business Development Strategy:
TouchStone Software Corp. Reports Financial Results For First Quarter 2000
Company Unveils Portfolio of Investments In New Business Development Strategy
NORTH ANDOVER, Mass.--(BUSINESS WIRE)--May 11, 2000--TouchStone Software Corp. (OTC BB: TSSW), Thursday announced the results for its fiscal first quarter ended March 31, 2000.
The company reported total revenue of $1,786,931, down six percent for the quarter ended March 31, 2000, compared with total revenue of $1,895,598 for the quarter ended March 31, 1999. Total revenue for the quarter ended March 31, 1999 were reported on a pro-forma basis and included product sales from Unicore Software, Inc., which the company acquired on March 8, 1999.
The company reported a loss for the quarter ended March 31, 2000 of $334,432 or $0.03 per share, compared with a loss of $1,504,733 or $0.19 per share for the quarter ended March 31, 1999. The company's first-quarter net income before the effect of amortization of goodwill and other intangibles was $232,629 or $0.02 per share.
Amortization of goodwill and acquired intangible assets associated with the acquisition of Unicore Software is being amortized over approximately three years. During the first quarter 2000, the company recorded $567,061 in amortization charges.
Subsequent to the end of fiscal 1999, the company initiated a major restructuring plan, including the March 8, 2000 announcement of the proposed sale of the company's wholly owned subsidiary, eSupport.com, to Phoenix Technologies, Ltd. (Nasdaq: PTEC), a global leader in system-enabling software solutions for PCs.
Additionally, the company is in the process of transforming its operating model into business development and is changing its corporate identity to better illustrate this new focus. The company will be known as TouchStone Capital Group, Inc.
Through the proposed sale of its software subsidiary, the company anticipates generating the necessary capital to transition into its new business model and act on emerging investment opportunities.
By restructuring, the company expects to create new opportunities, including new revenue sources and profit centers, which management believes will establish greater value for its equity.
By redirecting its resources to business development, the company anticipates building a portfolio of investments in technology-based companies servicing the e-commerce, Internet content, Internet community and Web-enabling technology market sectors.
TouchStone believes that its expertise in identifying investment opportunities and its strategic focus on unique and successful business models, will create both short-term growth potential for equity investors and long-term value for Touchstone's shareholders. Each of the portfolio companies is expected to have niche strategies and the promise of leadership in its respective technology field.
TouchStone's business philosophy is to leverage the combined talents of its management team, and those of its portfolio companies, to create new and innovative products and services.
In November 1999, the company made a $663,000 investment for 260,000 shares of Series A convertible preferred stock of PartsBase.com, a provider of Internet business-to-business e-commerce services for the aviation industry. In March 2000, PartsBase.com filed for an initial public offering and is currently traded on the Nasdaq NMS under the ticker symbol (Nasdaq: PRTS).
In February 2000, the company made a $255,000 investment for 50,000 shares of Series A convertible preferred stock of Ragula Systems Development Co., a developer of mission critical Internet access software and creator of FatPipe Internet sharing software, which enables the computers on a home network to share a single Internet connection -- dial-up, DSL, or cable modem.
The company markets its products worldwide through a network of authorized distributors and dealers.
In March 2000, the company made a $178,500 investment for 116,667 shares of Series A convertible preferred stock of SupplyAccess, Inc., a provider of Internet business-to-business e-commerce services for Fortune 1000 and government customers, enabling one-step business.
SupplyAccess, a subsidiary of En Pointe Technologies, Inc., (Nasdaq: ENPT), with whom it collaborated to develop the SupplyAccess network.
In March 2000, the company made a $535,500 investment for 262,500 shares of Series A convertible preferred stock of Fuher and Associates, Inc, (FAI), a leading provider of integrated technology products and operational solutions to the insurance industry.
In Jan. 2000, the company made a $295,800 investment for 82,858 shares of Series C convertible preferred stock of FastPoint Communications Inc., a rapidly growing network access provider ("NAP") of Internet, data and communications services.
FastPoint's service offerings include high-speed Internet access, such as dedicated access, digital subscriber line ("DSL"); and dial-up Internet access; data center services such as co-location, access and monitoring services; Web hosting and design.
In Dec. 1999 and Jan. 2000, the company entered into two bridge financing agreements in which it loaned $250,000 and $525,000 to Entertainment Boulevard Inc. (OTC BB: EBLD).
The company received 100,000 and 210,000 warrants to purchase the common stock of Entertainment Boulevard, Inc., which owns Vidnet.com, a provider of streaming entertainment related media on the Internet, and comprehensive media encoding services.
In March 2000, the company entered a bridge financing agreement, in which the company made a $150,000 loan and the company received 41,584 shares of common stock of Nucleus, Inc. (OTC BB: NCLS).
Nucleus delivers the digital building blocks for businesses to conduct electronic commerce over the Internet. eNucleus Platform Solution (eNPS) provides an integrated environment which delivers high speed Internet transport, licensed e-business enabling software and Web hosting.
"In a short period of time, we have repositioned our company as a business incubator, dedicated to the task of nurturing a select group of Internet startups through the critical stages of development.
"By providing management guidance, arranging financing, and lending necessary business support to qualified firms, we can better their chance for success, while at the same time improving the rate of return on our investments and enhancing TouchStone's growth potential," said Pierre A. Narath, chairman, president and CEO of TouchStone Software.
"We have invested in several promising new technology companies, which over the course of our incubator program, we expect will develop into market leaders and subsequently reward us with returns on investment.
"Following the completion of the proposed sale of eSupport.com, we will continue to leverage management's expertise in computer-related technology to capitalize on what we currently believe are favorable market conditions."
With headquarters in North Andover, TouchStone Software is recognized as a major force in the utility software market focusing on PC system diagnostics and utilities. Founded in 1982, TouchStone designs, develops and markets a comprehensive line of utility programs, highlighted by the CheckIt(R) Family of system diagnostics.
The CheckIt Family consists of WinCheckIt 6.5(TM), FastMove! 2000(R) and CheckIt NetOptimizer(TM). TouchStone sells and distributes its product throughout the retail, direct and OEM sales channels. In March 1999, Touchstone acquired Unicore Software Inc., which was previously a wholly owned subsidiary of Phoenix Technologies, Ltd. (Nasdaq: PTEC).
Unicore is a full service computer engineering company that is also the world's oldest and largest supplier of BIOS upgrades. The company also provides diagnostics, hard drive installation utilities and drivers to many leading manufacturers in the PC industry.
For more information, visit the company's Web site at www.touchstonesoftware.com or www.tscgi.com
Safe Harbor Statement
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of various factors including the ability of the company to successfully commercialize its new technologies as well as risk factors set forth under "Factors Affecting Future Operating Results" in the company's annual report on Form 10-K and such other risks detailed from time to time in the company's reports filed with the Securities and Exchange Commission. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements, which may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Item 1. Financial Statements
TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2000
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 535,261
Restricted cash 720,000
Accounts receivable, net 871,143
Inventories, net 199,722
Note receivable 925,000
Deferred tax asset 412,000
Prepaid expenses and other current assets 208,294
Total current assets 3,871,420
Investments, marketable securities 69,213
Investments, other 3,112,198
Note receivable, shareholders 700,500
Property, plant and equipment, net 143,143
Goodwill and other intangibles, net 2,500,280
Other assets 30,053
$ 10,426,807
Liabilities and Stockholders' Investment
Current liabilities:
Current maturities of long-term debt $66,964
Accounts payable 445,823
Accrued payroll and related expenses 411,545
Deferred revenue 560,740
Other accrued expenses 599,716
Total current liabilities 2,084,788
Long-term debt 438,379
Deferred tax liability 695,000
Minority interest 36,800
Total liabilities 3,254,967
Shareholders' equity:
Preferred stock, $.001 par value, 3,000,000 shares
authorized, none issued or outstanding
Common stock, $.001 par value, 20,000,000 shares
authorized, issued and outstanding,
11,440,060 (2000) 11,440
Other comprehensive income, net of taxes 584,898
Additional paid-in capital 21,026,934
Deferred compensation (40,633)
Accumulated deficit (14,410,799)
Total shareholders' equity 7,171,840
$10,426,807
TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
Three Months Ended
March 31, March 31,
2000 1999
(unaudited)
Revenues:
Product sales $1,739,909 $ 1,295,598
Royalty income 47,022 -
Net revenues 1,786,931 1,295,598
Cost of revenues 177,140 254,109
Gross profit 1,609,791 1,041,489
Operating expenses:
Sales and marketing 539,960 508,506
General and administrative 612,071 488,123
Research and development 461,152 277,806
Amortization of goodwill and acquired
intangible assets 567,061 211,234
Merger, acquisition and restructuring
charges - 1,174,730
Total operating expenses 2,180,244 2,660,399
Loss from operations (570,453) (1,618,910)
Other income, net 146,890 63,944
Loss before benefit from income taxes (423,563) (1,554,966)
Benefit from income taxes (125,931) (50,233)
Net loss before minority interest (297,632) (1,504,733)
Minority interest (36,800) -
Net loss $ (334,432) $ (1,504,733)
Basic and diluted loss per share $ (0.03) $ (0.19)
Basic weighted average shares
outstanding 11,417,060 7,963,060
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Contact:
TouchStone Software Corp., North Andover
Rich West, 978/686-6468
E-mail: rich_west@unicore.com
or
Market Pathways
Shannon T. Squyres, 949/955-1860 |
