Stronghold Technologies Reports 2002 Results
Revenues Increase 356% From Prior Year on Continued Expansion
BERNARDSVILLE, N.J., April 15 -- Stronghold Technologies, Inc. (BULLETIN BOARD: SGHT) a developer of DealerAdvance(TM), an enterprise software system leveraging wireless technologies for the automotive retail industry, announced results today for the year ended December 31, 2002.
The Company was able to significantly increase the number of installed dealerships from 6 in 2001 to 33 in 2002. This resulted in an increase in revenue from $614,540 for the fiscal year ended December 31, 2002 to $2,802,483 for 2003, representing an increase of 356%. Stronghold installed 13 of these dealerships in the fourth quarter and produced $1,002,529 in revenue, up from $20,676 in revenue in the fourth quarter in 2001 which is an increase of 4,748%.
During 2002, Stronghold invested substantially and completed its first application, DealerAdvance Sales Solution(TM), a comprehensive CRM system that significantly increases the sales of new and used cars in auto dealerships. The system aids in the selling process by displaying inventory and product information, and reduces the selling time by 30-40 minutes by shortcutting the manual steps in completing and supporting the sale. However, the ROI to the dealership comes from effectively capturing prospect information and communicating follow-up tasks to the sales people to get unsold prospects back into the dealership to buy. In almost all of Stronghold's customer sites, they are experiencing an immediate return on investment, often realizing a 2 to 8 times monthly return over the lease and maintenance fees.
Stronghold has quickly achieved industry leadership in achieving high capture rates on prospects, in communicating and holding sales people accountable to their follow-up tasks, and in demonstrably increasing the sales of new and used cars. The company has also created an implementation process with support services that starts delivering on the value proposition within 21 days of the signing of a proposal.
Stronghold is the only company focused on providing mobility and results to the auto industry, effectively aiding its customers in increasing their market share in the midst of a difficult economy. "Truthfully, I have never seen a more dramatic return from attacking a sales funnel as we have seen in this industry. The mid-line auto dealer is faced with rapid turnover in its sales force, a highly competitive environment for selling, and little to no technology invested in the sales department. Stronghold is making a huge difference by significantly increasing the productivity of the sales force, and extracting many more sales from the existing investments in creating traffic," said Chris Carey, Stronghold's CEO.
Stronghold invested substantial funds in 2002 in building out the distribution network with direct sales and operational support personnel located in 9 markets, including Northern New Jersey, San Francisco, Atlanta, Los Angeles, Phoenix, Miami, Cleveland, Seattle and Washington, DC. The company expects that this investment will provide the base for its sales growth in 2003. According to Chris Carey, "This investment has positioned us with pilot dealerships and support personnel to continue to increase our installed base and revenue. We are producing such a demonstrable and quick ROI, that we expect our marketing efforts will add 50 dealerships in 2003. We are expecting to reach breakeven on a quarterly basis by the fourth quarter of this year."
These investments in software and market development led to an increase in operating expenses for the year ended December 31, 2002 and December 31, 2001 to $5,490,419 from $2,645,396, respectively. This increase in operating expenses led to an increased loss for the company, with a net loss for the year ended December 31, 2002 of $4,823,646, or $0.55 per share compared to a net loss of $2,420,088 or $0.41 for 2001.
In the fourth quarter 2002, and for comparative purposes, operating expenses prior to accountants adjustments and accruals, were $1,711,888, up from $864,509 in the same period in 2001. Losses for the fourth quarter totaled $1,103,109, compared to a loss in the fourth quarter of 2001 of $885,587. In the first quarter of 2003, the Company has reduced overall operating expenses, as the majority of the development effort to complete the first application was substantially complete. Consequently, the Company estimates that the losses will be reduced for the first quarter 2003.
This cumulative loss put increased pressure on the company's cash flow. To properly fund future growth, the company is currently in negotiations to complete a second round of financing for $2 million in equity. In the meantime, the company has sustained operations through a series of loans totaling $940,000 provided by the company's CEO, Chris Carey and his family. Mr. Carey is planning to convert $500,000 of his loans to the purchase of shares in Stronghold. These transactions should be completed by May 1, 2003, and will ensure the company's ability to meet its growth plans. In addition, in March 2003, the Company entered into two bridge loans totaling $400,000 with two outside investors.
About Stronghold Technologies
Stronghold Technologies, Inc., is an innovator in applying wireless technology and process improvement methods to increase business efficiency and sales. The Company has developed an integrated wireless technology, called DealerAdvance(TM), which, among many features, allows automobile dealers to capture a customer's purchasing requirements, search inventory at multiple locations, locate an appropriate vehicle in stock and print out the necessary forms. Through an integrated CRM (Customer Relationship Management) application, the systems sends detailed tasks for prospect and customer follow-up and produces management reports to measure compliance. DealerAdvance(TM) allows sales professionals to increase sales, improve customer follow-up, and reduce administrative costs.
Statements in this press release that are not statements of historical or current fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission.
STRONGHOLD TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
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YEARS ENDED DECEMBER 31, 2002 2001
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SALES $ 2,802,483 $ 614,540
COST OF SALES 1,627,420 247,797
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GROSS PROFIT 1,175,063 366,743
SELLING, GENERAL AND ADMINISTRATIVE 5,490,419 2,645,396
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LOSS FROM OPERATIONS (4,315,356) (2,278,653)
INTEREST EXPENSE 213,447 141,435
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NET LOSS (4,528,803) (2,420,088)
DIVIDENDS (294,843)
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NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS $(4,823,646) $(2,420,088)
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BASIC AND DILUTED LOSS PER
COMMON SHARE $ (0.55) $ (0.41)
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 8,834,730 5,906,250
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STRONGHOLD TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
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Years Ending December 31, 2002 2001
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ASSETS
CURRENT ASSETS
Cash $ 13,384 $ 38,267
Accounts receivable, less
allowance for doubtful accounts
of $200,000 (2002) 1,192,451 532,499
Inventories 228,413 81,348
Prepaid expenses 19,906 4,885
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Total current assets 1,454,154 656,999
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PROPERTY AND EQUIPMENT, NET 173,743 95,953
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OTHER ASSETS
Software development costs 223,224
Other 27,075 27,087
----------- -----------
Total other assets 250,299 27,087
----------- -----------
$ 1,878,196 $ 780,039
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LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 851,660 $ 57,641
Accrued expenses and other
current liabilities 511,905 262,691
Interest payable, stockholders 193,118
Notes payable, stockholders,
current portion 775,000 1,924,443
Note payable, current portion 458,333 1,500,000
Obligations under capital leases,
current portion 15,033
----------- -----------
Total current liabilities 2,805,049 3,744,775
----------- -----------
LONG-TERM LIABILITIES
Notes payable, stockholders,
less current portion 970,749
Note payable, less current
portion 1,041,667
Obligations under capital
leases, less current portion 21,791
----------- -----------
Total long-term liabilities 2,034,207
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock, $.0001 par value;
authorized 5,000,000 shares, 2,002,750
issued and outstanding
(aggregate liquidation
preference of $3,004,125)
201
Common stock, $.0001 par value,
authorized 50,000,000
shares, 9,857,000 issued
and outstanding 986 13,500
Additional paid-in capital 4,839,635
Stock subscription receivable (3,000) (3,000)
Accumulated deficit (7,798,882) (2,975,236)
----------- -----------
Total stockholders' deficit (2,961,060) (2,964,736)
----------- -----------
$ 1,878,196 $ 780,039
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