Netdirect(TM) (VTCO)Announces Results for Third Quarter Fiscal Year 2000
Company Reports 169 Percent Increase in E-Commerce Sales Over Third Quarter FY1999
Tuesday December 21, 9:27 am Eastern Time
Company Press Release
SOURCE: Netdirect Corporation International
MINNEAPOLIS, Dec. 21 /PRNewswire/ -- In a quarter that recently culminated in the completion of the major acquisition of substantially all the operating assets of Tech Squared, Inc., a strategic relationship with Lycos, Inc. and a corporate name change, Netdirect Corporation International (OTC Bulletin Board: VTCO - news), formerly known as Virtual Technology Corporation, today announced financial results for the third quarter of fiscal year 2000, ending October 31, 1999. Third quarter net sales were $20,069,000, compared to $1,551,000 for the same period in fiscal year 1999, a nearly twelve-fold increase. The increase primarily reflects growing e-commerce sales and sales attributable to the acquisition of Graphics Technologies, Inc. (GTI), which took place in January.
Third quarter net loss was $4,994,000, or ($0.16) per basic and fully diluted common share, compared with a net loss of $734,000, or ($0.04) per common share in the third quarter of 1999. The third quarter net loss includes $1,772,000 or ($0.06) per share for charges taken for various stock for services agreements and the amortization of intangibles associated with the acquisition of GTI.
The company's e-commerce sales rose 169 percent over the same quarter last year. In third quarter 2000, sales from e-commerce were $4,169,000, compared to $1,551,000 in third quarter 1999.
``We are pleased with the growth our operations showed in the third quarter,' said Greg Appelhof, Netdirect's president and CEO. ``Our efforts resulted in the acquisition of Tech Squared and our strategic relationship with Lycos, positioning us for even stronger growth and profitability in the future.'
E-commerce
Sales on Netdirect's flagship e-commerce Web site (www.virtual-world.com) continued to exhibit significant growth. E-commerce sales not only increased from year to year, but showed momentum over the prior quarter. E-commerce sales rose 40 percent over second quarter 2000.
Netdirect expanded its strategic alliances during the third quarter through its relationship with Yahoo!© Shopping (http://www.shopping.yahoo.com), a popular, one-stop Internet shopping service that is part of Yahoo!'s branded network of global Internet properties. Yahoo!'s millions of shoppers now have access to a select number of Netdirect's technology products. Yahoo! shoppers also enjoy the other value-added services that netdirect.com's customers appreciate. Already, Netdirect reports averaging more than 75 orders per day as a result of the Yahoo relationship.
On September 22, 1999, Netdirect announced it had signed an agreement with FairMarket Inc. to power Netdirect's auction Web site (http://auctions.vtechco.com/). As a FairMarket site, the Netdirect auctions will be a member of the FairMarket Auction Network, a collection of FairMarket-powered, private-label merchant and community auction sites connected through a single massive database of goods and services. At the end of the third quarter, Netdirect completed another significant e-commerce related agreement with Lycos©, the fastest growing Internet portal and the world's largest online community. As announced on November 12, Netdirect has created a premier co-branded Web site allowing both business customers and consumers to purchase a vast selection of computers and technology-related products through the Lycos Network©. The site provides Lycos users access to more than 60,000 hardware products, 100,000 software products, 25,000 office products and thousands of consumer electronic products. Preliminary results show select click-through rates at more than three times the industry average of 0.75 percent.
Netdirect and Lycos market products to the Lycos Network's 30-million monthly visitors. According to Forrester Research, Inc., online sales of personal computer hardware/software are expected to exceed $2.2 billion in 1999 and $2.9 billion in 2000.
Since the quarter ended, Netdirect has announced the re-launch of its flagship e-commerce site at www.netdirect.com. The new site offers breakthrough ways to purchase technology products including, faster, easier navigation, extensive product information, superior search capabilities and an increased focus on providing products and services that meet customers' individual needs.
``Our e-commerce site has long provided businesses and consumers with personalized service and significant benefits, including single, all-inclusive pricing, on-site service and professional pre- and post-sale telephone customer assistance,' said Appelhof. ``The netdirect.com site is unique in combining these value-added features with new capabilities that help us to exceed our customers' needs and expectations.'
Click and Mortar Operations
Revenue from GTI (www.graphicstech.com), reached $16,880,000 in third quarter 2000, a 20 percent increase over second quarter 2000, when revenue totaled $14,104,000. Netdirect acquired GTI in January 1999. GTI is an established, nationwide distribution company with direct relationships with more than 40 manufacturers, including Philips, Hitachi and Viewsonic. It provides integrated e-commerce platforms and fulfillment capabilities for major customers, as well as all of Netdirect's operations. GTI's sales for the first three quarters of fiscal year 2000 totaled $46,842,000.
``GTI helps provide the infrastructure that is essential to e-commerce success. So many e-commerce companies flounder because they do not have the ability to maintain inventory and distribute product efficiently. GTI's seven offices throughout the United States allow us to meet our customers' needs whenever and wherever they arise.' Appelhof said. ``In addition, we will continue to look to GTI for solid, dependable growth in its own right.'
Tech Squared Inc. Acquisition
On December 17, Netdirect completed its acquisition of substantially all of the assets of Tech Squared Inc. (OTC Bulletin Board: TSQD - news), which had been pending during the third quarter. The asset sale included Tech Squared's Net Direct, DTP Direct and distribution operations together with various trade and Internet domain names.
Netdirect hopes to expand and leverage Tech Squared's manufacturer relationships with Apple Computer, Inc. and other major suppliers. The company believes that Tech Squared's manufacturer relationships, together with Netdirect's existing arrangements with IBM, Hitachi, Hewlett Packard, Gateway, Sony and other hardware and software manufacturers, will greatly enhance each customer's shopping experience and satisfaction.
Netdirect believes it will generate significant growth through access to the 138,000 business customers in Tech Squared's catalog and telemarketing databases. Netdirect intends to maximize these relationships by leveraging its e-commerce model and supplying 24-hour Web site service (www.dtpdirect.com). In turn, Netdirect believes that Tech Squared's telemarketing group will help expand Netdirect relationships with its existing business-to-business customers.
``Our ultimate goal is to provide businesses and individuals with multiple ways to purchase technology products, so they can choose the best way for them.' Appelhof explained.
Netdirect Community Techmart(TM)
Netdirect's Community Techmart, a private label e-commerce service with complete inventory, fulfillment and transaction processing systems, announced several important developments during the third quarter. In September, Cosmoz.com launched its new shopping mall with Community Techmart as the backbone for the CosmozMall.com technology store. Netdirect provides over 60,000 hardware and 100,000 software products to CosmozMall.com's new online technology store.
In addition, Netdirect's Community Techmart has partnered with www.shopforschool.com, where students, parents and faculty from more than 1,000 schools can now purchase more than 160,000 hardware and software products at special prices and donate a portion of each purchase to the school of their choice. More than one million individuals have access to the program.
Shopforschool TechMart offers school-age families special bundled products such as the Elementary System featuring a computer, monitor and children's software including ``Where in the USA is Carmen San Diego?' and ``Crayola Make a Masterpiece 5-12.'
Other Accomplishments
The company also strengthened its management team during the quarter by hiring Craig Levinsohn as its Vice President of Marketing. Levinsohn joined Netdirect's executive team and leads all corporate marketing functions. An experienced Internet executive, Mr. Levinsohn has significant expertise in strategic marketing, positioning and innovation, new product launch, Web advertising, and the development of integrated marketing communications programs. Most recently, he served as Director of Corporate Marketing for WAM!NET, Inc. Prior to that, Levinsohn was a marketing and management consultant serving large- and mid-size companies in a variety of industries.
About Netdirect Corporation International
Netdirect is the global e-commerce company that offers businesses, consumers and communities of interest a better way to purchase a full array of technology products with unprecedented, personalized customer service and low prices. The company generates revenue from three distinct, but related, sales channels: online, catalog and wholesale. Its online sites include www.netdirect.com, which offers more than 60,000 hardware products, 100,000 software titles, 25,000 office products and thousands of consumer electronic products, and www.dtpdirect.com, as well as other co-branded and Community Techmart(TM) private label Web sites. Netdirect also generates revenue from its catalog company, DTP Direct, and GTI Distribution Services, an established technology products distribution company with direct relationships with more than 40 manufacturers that provides integrated e-commerce platforms and fulfillment capabilities for major customers, as well as all of Netdirect's operations.
Statements in this Press Release that are not purely historical are ``forward looking statements' within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding Netdirect's expectations, hopes, beliefs, intentions or strategies regarding the future generally, Netdirect's growth strategy, future sales and anticipated trends in Netdirect's business. All forward looking statements included in this Press Release are based on information known to Netdirect on the date hereof, and Netdirect assumes no obligation to update any such forward looking statements. It is important to note that actual results could differ materially from those in such forward looking statements as a result of a number of factors, most of which are out of the control of Netdirect, including, but not limited to, Netdirect 's early stage of development, its lack of profitability and cash flows and competition for the sale of hardware and software products both on and off the internet. As to the Tech Squared acquisition, there is no assurance that Netdirect can successfully and profitably integrate Tech Squared's business into Netdirect's operations.
Netdirect(TM) and Community Techmart(TM) are trademarks of Netdirect Corporation International. All other trademarks included in this release are trademarks of the identified companies.
Netdirect, Third Quarter 2000 Results
3rd quarter FY 2000, 10/31
FY2000 FY1999 %chng.
Revenue $20,069,412 $1,550,752 1,194%
Income - 4,993,583 - 733,672
Earn/share - 0.16 - 0.04
9 months
FY2000 FY1999 %chng.
Revenue $ 53,966,489 $ 3,092,941 1,645%
Income - 16,720,996 - 1,642,509
Earn/share - 0.58 - 0.11
VIRTUAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
Three Months Ended Nine Months Ended
October 31, October 31, October 31, October 31,
1999 1998 1999 1998
NET SALES $20,069,412 $3,092,941 $53,966,489 $1,550,752
COST OF GOODS SOLD 18,707,274 3,049,461 50,189,221 1,434,323
Gross profit (loss) 1,362,138 43,480 3,777,268 116,429
OPERATING EXPENSES
Sales and
marketing 1,843,713 897,707 4,908,994 412,390
General and
administrative 2,168,905 801,090 5,328,294 359,587
Consulting
services 1,538,702 -- 8,092,363 66,852
Amortization of
intangibles 232,824 -- 698,477 --
5,784,144 1,698,797 19,028,128 838,829
LOSS FROM
OPERATIONS (4,422,006) (1,655,317) (15,250,860) (722,400)
OTHER INCOME (EXPENSE)
Interest expense (422,565) (56,349) (1,264,327) (16,601)
Other expense (149,012) 69,157 (205,809) 5,329
(571,577) 12,808 (1,470,136) (11,272)
NET LOSS $(4,993,583) $(1,642,509) $(16,720,996) $(733,672)
NET LOSS PER COMMON SHARE -
BASIC & DILUTED $ (0.16) $(0.11) $ (0.58) $(0.04)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
BASIC & DILUTED 30,360,745 15,297,029 28,691,364 20,215,979
VIRTUAL TECHNOLOGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
October 31, January 31,
ASSETS 1999 1999
(Unaudited)
CURRENT ASSETS
Cash $625,049 $125,993
Accounts receivable, net 8,703,019 4,497,292
Stock subscription,
subsequently collected -- 2,676,436
Loan from related party 123,750 --
Inventories, net 3,131,474 5,236,292
Other current assets 2,783,837 2,761,670
TOTAL CURRENT ASSETS 15,367,129 15,297,683
FURNITURE AND EQUIPMENT,
net of accumulated depreciation of
$101,042 and $38,612,
respectively 628,028 381,662
OTHER ASSETS
Goodwill 7,946,887 8,345,295
Covenant not to compete 375,000 500,000
Consulting agreement 781,586 1,042,115
Prepaid investor
relation services 81,400 103,600
Loan fees 2,499,208 50,250
Deposits 18,984 21,973
Investment in securities 160,000 --
TOTAL ASSETS $27,858,222 $ 25,742,578
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $8,068,228 $7,163,358
Accrued expenses and other
current liabilities 4,319,678 1,884,983
Notes payable 800,970 7,295,673
Line of credit 5,748,122 --
Current amount of capital
lease obligations 11,296 10,628
Loans from related parties -- 45,000
TOTAL CURRENT LIABILITIES 18,948,294 16,399,642
OTHER LIABILITIES
Notes payable, net of
current amount 250,000
Loans from related parties 30,000 371,543
Capital lease obligations,
net of current amount 40,794 49,267
320,794 420,810
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
100,000,000 shares authorized;
shares issued and outstanding -
30,538,680 and 25,345,963,
respectively 30,539 17,572,796
Additional paid
in capital 33,930,261 --
Stock subscription
receivable (925,000) (925,000)
Accumulated deficit (24,446,666) (7,725,670)
8,589,134 8,922,126
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $27,858,222 $25,742,578
SOURCE: Netdirect Corporation International |
