Results
of Operations
Year
Ended December 31, 2007 Compared To Year Ended December 31, 2006
Total
Revenues.
The
Company had total revenues of $5,895,726 and $6,229,944 for the years ended
December 31, 2007 and 2006, respectively. The decrease in total revenue was
$334,218 for the year ended December 31, 2007 representing approximately a
5.4%
decrease compared to the total revenue for the year ended December 31, 2006.
Of
the $5,895,726 for the year ended December 31, 2007 and the $6,229,944 for
the
year ended December 31, 2006, $5,895,726 and $6,222,752, respectively, was
related to the business operations of NOW Solutions, a wholly-owned subsidiary
of the Company.
Revenues
primarily consist of fees for software licenses, and consulting and maintenance.
The revenue from license and maintenance for the year ended December 31, 2007
decreased by $86,922 from the same period in the prior year, representing
approximately a 1.7% decrease, due to selling less new or upgraded software
licenses. These sales decreases were partially offset by an increase in
maintenance fees as contractual increases in maintenance revenues and the
maintenance from the 2006 new software license fees offset most of the loss
in
maintenance revenues from customer attrition.
Consulting
revenue for the year ended December 31, 2007 decreased by $340,132 from the
same
period in the prior year, representing approximately a 37.3% decrease. This
decrease was due to fewer implementation and upgrade consulting services as
a
result of fewer software licenses being sold in 2007 as compared to 2006.
Consulting revenues traditionally lag behind software license revenues as the
implementation of new software sales takes several months. There was a slight
increase in consulting revenues in the fourth quarter as some customers
requested assistance in implementing emPath version 6.4 released the end of
July
2007.
Other
revenue, which consists primarily of reimbursable travel expenses, hosting
fees,
and fees related to user conferences for the years ended December 31, 2007
and
2006 increased by $92,836 from the prior year, which represented approximately
a
55.7% increase. This increase was the result of hosting revenues beginning
in
2007, the Now Solutions’ user conference in 2007, partially offset by reduced
reimbursable travel costs related to the lower consulting revenues in 2007
as
compared to 2006.
Selling,
General and Administrative Expenses.
The
Company had selling, general and administrative expenses of $6,637,848 and
$7,156,711 for the years ended December 31, 2007 and 2006, respectively. The
total selling, general and administrative expenses for the year ended December
31, 2007 decreased by $518,863 compared to the selling, general and
administrative expenses for the year ended December 31, 2006, representing
approximately an 7.3% decrease. Of the $6,637,848 for the year ended December
31, 2007 and the $7,156,711 for the year ended December 31, 2006, NOW Solutions
accounted for $5,454,204, and $6,173,446, respectively. The decrease of $518,863
was primarily attributed to the reduction in source code amortization as NOW
Solutions source code was completely amortized in the first quarter of 2006,
a
reduction in loan commitment fees from refinancing notes payable in 2006 for
Vertical and NOW Solutions, a reduction in NOW Solutions salaries related to
the
layoff of the sales department in the U.S. in March 2007, a reduction in NOW
Solutions advertising and trade show costs, a reduction in NOW Solutions travel
costs due to reduced sales staff and reduced consultant travel, and lower
contract labor costs for software development and consulting at NOW Solutions.
Operating
Loss.
The
Company had an operating loss of $985,113 and $1,140,839 for the years ended
December 31, 2007 and 2006, respectively. The operating loss decreased by
$155,726 compared to the operating loss for the year ended December 31, 2006,
representing a decrease of approximately 13.7%. The decrease was attributable
to
the combination of a reduction of $518,863 in selling, general and
administrative expenses partially offset by the $334,218 decrease in
revenues.
Interest
Expense
.
The
Company had interest expense of $1,005,325 and $590,896 for the years ended
December 31, 2007 and 2006, respectively. Interest expense increased for the
year ended December 31, 2007 by $414,429, representing an increase of
approximately 70.1%, compared to the same type of expense for the year ended
December 31, 2006.
The
increase was the result of additional borrowings, the recognition of default
interest rates on the debt in technical default, and the impact of higher
interest rates on new and renegotiated borrowings.
Net
Loss.
The
Company had a net loss of $1,566,345 and $1,728,709 for the years ended December
31, 2007 and 2006, respectively. Net loss for the year ended December 31, 2007
decreased by $162,364 representing a decrease of approximately 9.4%. The
decrease in the net loss of $162,364 was attributable to the combination of
a
decrease in revenues of $334,218 and the increase in interest expense of
$414,429 and the increase of bad debt expense of $173,529, partially offset
by
the decrease in selling, general and administrative expenses of
$518,863.
Dividend
Applicable to Preferred Stock.
The
Company has outstanding Series A 4% Convertible Cumulative Preferred Stock
that
accrues dividends (if such dividends are declared) at a rate of 4% on a
semi-annual basis. The Company also has outstanding Series C 4% Convertible
Cumulative Preferred Stock that accrues dividends (if such dividends are
declared) at a rate of 4% on a quarterly basis. The total dividends applicable
to Series A and Series C Preferred Stock were $588,000 and $600,000 for the
years ended December 31, 2007 and 2006, respectively. The Company did not
declare or pay any dividends in 2007 or 2006.
Net
Loss Applicable to Common Stockholders.
The
Company had a net loss attributed to common stockholders of $2,154,345 and
$2,328,709 for the years ended December 31, 2007 and 2006, respectively. Net
loss applicable to common stockholders for the year ended December 31, 2007
decreased by $174,364, representing a decrease of approximately 7.5%, compared
to the net loss applicable to common stockholders for the year ended December
31, 2006. The decrease in the net loss applicable to common stockholders of
$174,364 was primarily attributable to the combination of a decrease in revenues
of $334,218 and the increase in interest expense of $414,429 and the increase
of
bad debt expense of $173,529, partially offset by the decrease in selling,
general and administrative expenses of $518,863 and a decrease in dividends
applicable to preferred stock of $12,000.
Net
Loss Per Share.
The
Company had a net loss per share of $0.00 and $0.00 for the years ended December
31, 2007 and 2006, respectively.
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