$ZRVT Zurvita Holdings, Inc. Reports Fiscal Year 2010 Financial Results
Financial Results Driven by Growth in Representative Base and New Revenue Streams
HOUSTON, TX -- (MARKET WIRE) -- 12/07/10 -- Zurvita Holdings, Inc. (OTCBB: ZRVT) (OTCBB: ZRVTE) ("Zurvita" or the "Company"), a dynamic direct-to-consumer network marketing company offering turn-key solutions for high-quality consumer and business products and services, today announced its financial results for the 2010 fiscal year ended July 31, 2010.
Fiscal 2010 Highlights
-- Full year fiscal 2010 revenues reached $6.3 million.
-- Full year fiscal 2010 gross profit rose to $1.7 million.
-- Gross margin for full year fiscal 2010 was 26.7%.
-- Net loss for full year fiscal 2010 was $11.5 million, or $0.20 per diluted share.
-- Held "Champions Weekend" and "Freedom Crusade" national conferences, drawing over 1000 in combined attendance.
-- Launched national online business advertising campaign and introduced enhancements to proprietary local search advertising and search engine directory, "ZLinked."
-- Introduced a series of enhanced business tools to capitalize on major market growth opportunities.
-- Increased total number of sales representatives by approximately 100%.
"We are excited by the results we achieved in fiscal 2010 as we continued to increase our revenue by introducing compelling new products that no one else has, such as commercial energy sales, which represents a multi-billion dollar market and is a true innovation in our industry," said Zurvita Co-Chief Executive Officer Jay Shafer. "Our 100% increase in sales representatives is clear indication that our product mix and sales focus are well on track. Sales in fiscal 2010 were driven by new revenue streams from advertising sales and commissions relating to energy sales as well as increases in marketing fees and administrative website sales. As we head into our next National Conference in February, 2011, we continue to refine our proven strategies to capitalize on growth in trillion dollar industries such as internet services and commercial energy deregulation with cutting edge tools. We continue to see strong upside for our business going into 2011 and beyond as we provide our consultants leading products and services as well as revolutionary new tools needed to create financial freedom."
Fiscal Year 2010 Results
Revenue for the twelve months ended July 31, 2010, was approximately $6.3 million, an increase of $3.5 million compared to revenue of $2.8 million for the seven months ended July 31, 2009, which represents a short fiscal year period due to a change in the Company's fiscal year end from December 31st to July 31st. The increase in total revenue is primarily a result of new advertising and energy revenue streams.
Administrative websites sales and marketing fees were approximately $2.1 million and $1.9 million for the year ended July 31, 2010, respectively, as compared to approximately $514 thousand and $1.3 million, respectively, for the seven months ended July 31, 2009. The increase in administrative website sales and marketing fees was approximately $1.5 million and $642 thousand, respectively. The increase was a direct result of the growth in the total sales representatives to approximately 5,100 as of July 31, 2010, from approximately 2,600 as of July 31, 2009. The Company was able to attract and retain more representatives as a result of greater product offerings in fiscal year 2010 than in the comparable short fiscal year ending July 31, 2009. Advertising sales related to the Company's Local Search Engine directory and commissions related to energy sales were new revenue streams between the periods that both contributed to an aggregate increase of $1.4 million of new revenue for the fiscal year ended July 31, 2010 as compared to the seven months ended July 31, 2009.
Gross profit for the fiscal year ended July 31, 2010, was approximately $1.7 million as compared to gross profit of approximately $697 thousand for the short fiscal year ended July 31, 2009. The Company realized an increase in gross profit due to less non-traditional compensation measures used to compensate consultants. This was achieved by having a greater product offering with improved margins.
Operating expenses for the twelve months ended July 31, 2010, were approximately $8.8 million, compared to $4.3 million for the seven months ended July 31, 2009. Operating expense to revenue ratio decreased to 1.36% for the fiscal year ended July 31, 2010 from 1.51% for the short seven month fiscal period ended July 31, 2009. Operating loss increased to approximately $7.1 million for the fiscal year ended July 31, 2010, from approximately $3.6 million for the short fiscal year ended July 31, 2009.
The Company reported a net loss of approximately $11.5 million, or $0.20 per diluted share, for the fiscal year ended July 31, 2010, compared to a net loss of approximately $3.5 million, or $0.07 per diluted share for the seven months ended July 31, 2009. The increase in net loss was attributable to non-cash amortization and impairment of the Company's advertising and marketing agreements in the amounts of approximately $657 thousand and $2 million, respectively, as well as non-cash unrealized losses recognized on the Company's marketable securities and outstanding liability warrants in the amounts of $290 thousand and approximately $4.0 million, respectively. Diluted earnings per share were calculated using a weighted average share count of 56.7 million for the fiscal year ended July 31, 2010, compared to 49.3 million for the short fiscal year period ended July 31, 2009.
Financial Condition
As of July 31, 2010, the Company had cash and cash equivalents of $289 thousand and working capital of approximately $1.3 million. Net cash used in operating activities for the twelve months ended July 31, 2010, was approximately $3.1 million, down from $3.2 million for the seven months ended July 31, 2009. Total liabilities and stockholders' deficit was $3.4 million as of July 31, 2010 versus total liabilities and stockholders' deficit of $3.5 million for the period ended July 31, 2009.
Business Outlook
"We are excited going into 2011 as we continue to bring together the brightest professionals and the best performing products to help Zurvita independent representatives take their businesses to the next level," said Mark Jarvis, Zurvita Co-Chief Executive Officer. "Zurvita is committed to the growth and success of our consultants and we are focusing our resources on bringing bold, new products to market as we prepare for our next National Conference, the 2011 'Freedom Crusade,' being held February 18th to February 21st in Houston, Texas at the Westin? Galleria. Going forward, we are confident that we have the right team in place to position Zurvita for significant increases in sales and profits."
About Zurvita Holdings, Inc.
Zurvita is a dynamic direct-to-consumer marketing company offering high-quality products and services targeting individuals, families and small businesses. The company's highly differentiated services feature best in class consumer products and small business solutions through a growing network of independent sales consultants. Zurvita has rapid growth potential due to its experienced sales management team and its unique business-to-business strategy offering turnkey solutions for commercial and residential energy, advertising, telecommunications and financial services. For more information, please visit http://www.zurvita.com.
Follow Zurvita on Twitter at: http://twitter.com/Zurvita and on Zurvita's Facebook Fan Page at: www.facebook.com/Zurvita
Safe Harbor Statement
Matters discussed in this press release contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this press release, the words "anticipate," "believe," "estimate," "may," "intend," "expect" and similar expressions identify such forward-looking statements. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained herein. These forward-looking statements are based largely on the expectations of the Company and are subject to a number of risks and uncertainties. These include, but are not limited to, risks and uncertainties associated with: the impact of economic, competitive and other factors affecting the Company and its operations, markets, product, and distributor performance, the impact on the national and local economies resulting from terrorist actions, and U.S. actions subsequently; and other factors detailed in reports filed by the Company.
- FINANCIAL TABLES FOLLOW -
ZURVITA HOLDINGS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
For the For the Seven Year Ended Months Ended July 31, July 31, 2010 2009 ----------- ----------- REVENUES Administrative websites $ 2,055,060 $ 513,908 Advertising sales 936,230 - Commissions 479,225 65,876 Marketing fees and materials 1,911,851 1,269,768 Membership fees 923,654 964,897 ----------- ----------- Total revenues 6,306,020 2,814,449
COST OF SALES Benefit and service cost 1,577,858 412,676 Sales commissions 3,042,922 1,704,331 ----------- ----------- Total cost of sales 4,620,780 2,117,007
GROSS PROFIT 1,685,240 697,442
OPERATING EXPENSES Depreciation 35,555 19,722 Impairment loss on marketing agreement 2,000,000 - Office related expenses 412,587 124,239 Payroll and employee benefits 1,887,185 758,164 Professional fees 1,276,437 1,409,565 Selling and marketing 2,949,708 1,878,349 Travel 206,967 66,285 ----------- ----------- Total operating expenses 8,768,439 4,256,324 ----------- -----------
Loss from operations before other income (expense) (7,083,199) (3,558,882)
OTHER (EXPENSE) INCOME Gain on change in fair value of share conversion feature 131,413 - Gain on settlement of liability - 38,700 Interest expense (270,919) (3,014) Interest income 11,741 - Loss on change in fair value of marketable securities (290,000) - Loss on change in fair value of warrants (3,980,580) - Loss on debt restructure (50,000) - ----------- ----------- Total other (expense) income (4,448,345) 35,686 ----------- -----------
Loss before income taxes (11,531,544) (3,523,196)
Income taxes (19,629) 19,144 ----------- -----------
Net loss (11,511,915) (3,542,340) =========== ===========
Basic and diluted loss per share $ (0.20) $ (0.07) =========== ===========
Basic and diluted weighted average number of common shares outstanding 56,711,644 49,307,924 =========== ===========
ZURVITA HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS
July 31, July 31, 2010 2009 ----------- ----------- ASSETS Current assets Cash $ 289,442 $ 1,390,953 Marketable securities (at fair value) 480,000 - Note receivable - related party 1,702,000 - Accounts receivable 137,123 47,732 Agent advanced compensation 448,553 927,002 Deferred expenses 127,351 - Deferred marketing costs - 657,400 Other assets 41,173 ----------- ----------- Total current assets 3,225,642 3,023,087
Property, plant and equipment (net) 94,965 112,036
LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities Accounts payable $ 249,762 $ 471,081 Accounts payable - related party 127,733 - Notes payable - current 284,967 787,237 Accrued expenses 332,217 148,001 Deferred revenue 808,957 934,321 Deferred compensation - related party 110,238 - Income tax payable 2,628 35,276 ----------- ----------- Total current liabilities 1,916,502 2,375,916
Notes payable - long term 1,639,268 284,967 Fair value of share conversion feature 462,013 - Fair value of warrants 6,370,000 549,780 ----------- ----------- Total liabilities 10,387,783 3,210,663 ----------- -----------
Redeemable preferred stock 4,550,747 1,211,000
Stockholders' deficit Common stock ($.0001 par value, 300,000,000 shares authorized; 69,497,713 and 64,440,000 shares issued and 61,497,713 and 56,440,000 shares outstanding as of July 31, 2010 and July 31, 2009, respectively) 6,950 6,444 Treasury stock (210,000) (210,000) Additional paid-in capital 9,978,738 9,094,182 Accumulated deficit (21,278,278) (9,766,363) ----------- ----------- Total stockholders' deficit (11,502,590) (875,737) ----------- -----------
Total liabilities and stockholders' deficit $ 3,435,940 $ 3,545,926 =========== ===========
ZURVITA HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the For the Seven Year Ended Months Ended July 31, 2010 July 31, 2009 ------------- ------------- Cash flows from operating activities Net loss $ (11,511,915) $ (3,542,340) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of note payable discount 140,307 - Amortization of deferred marketing costs 657,400 - Depreciation 35,555 19,722 Share-based compensation 682,138 190,537 Gain on change in fair value of share conversion feature (131,413) - Gain on extinguishment of liabilities - 38,700 Loss on change in fair value of marketable securities 290,000 - Loss on change in fair value of warrants 3,980,580 - Loss on debt restructure 50,000 - Loss on impairment on marketing agreement 2,000,000 Loss on legal settlement - 600,000 Changes in operating assets and liabilities Increase in accounts receivable (89,391) (36,771) Decrease (increase) in agent advanced compensation 749,793 (68,841) Increase in legal retainer - 50,000 Increase in deferred expenses (127,351) - Increase in other assets (17,047) (15,909) Increase (decrease) in accounts payable and accrued expenses 174,429 (269,558) Decrease in deferred revenue (125,364) (151,355) Increase in deferred compensation related party 110,238 - ------------- ------------- Net cash used in operating activities (3,132,041) (3,185,815) ------------- -------------
Cash flows from investing activities Purchase of promissory note (1,702,000) - Purchase of property and equipment (18,484) - Purchase of marketable securities (770,000) - Funds obtained from reverse merger - 182 ------------- ------------- Net cash provided by (used in) investing activities (2,490,484) 182 ------------- -------------
Cash flows from financing activities Contributions of capital from The Amacore Group, Inc. - 2,564,382 Net proceeds from borrowings - 523,190 Proceeds from exercise of warrants 30,282 - Proceeds from sale of preferred stock 5,300,000 1,750,000 Proceeds from repurchase of common stock - (210,000) Principal payments made on notes payable (809,268) (50,986) ------------- ------------- Net cash provided by financing activities 4,521,014 4,576,586 ------------- -------------
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