SANTA ANA, Calif., April 16, 2015 (GLOBE NEWSWIRE) -- Greenwood Hall Inc. (OTCQB:ELRN), a provider of technology-enabled student lifecycle management solutions that help colleges and universities increase revenue and improve student engagement and outcomes, today announced financial results for the fiscal second quarter ended February 28, 2015.
Second Quarter 2015 Highlights
- Signed five (5) new accounts, a substantial increase from the first quarter of 2014; several will begin significantly impacting revenue in the third quarter 2015
- Continued to expand Southeast presence, including signing multi-year agreement with the Greenville Technical College System in South Carolina
- Renewed and expanded several key accounts, including University of Mississippi, Seminole State College, and a leading national online university
- Partnered with Cengage Learning to collaborate on the development and delivery of student-focused products and services
- Significantly downsized California operations and expanded Phoenix, Arizona operations as part of operational efficiency strategy
- Received strategic investment from first institutional investor, Redwood Fund LP
CEO Commentary
"The second quarter was a challenging yet strategically important quarter for us," said Dr. John C. Hall, Ed.D, CEO of Greenwood Hall. "Revenue for the quarter was lower than last year as we took steps to focus on revenue opportunities that are both profitable and related to our core business and that position Greenwood Hall for sustained long term growth.
"To that end, we saw a significant increase in new sales activity compared to a year ago. We also continued to secure new clients during the quarter including the Greenville Technical College System, which has nearly 30,000 students. Next, we signed a strategic partnership with Cengage Learning, a leading education company, to collaborate on the development and delivery of turnkey lifecycle and cloud-based solutions that enhance the student experience by providing more personalized options such as on-demand services, and real-time student lifecycle management.
"In addition to securing new revenue opportunities, we made substantial progress in executing our plan to drive operating efficiencies. We significantly downsized our California operations and at the same time expanded our Phoenix, Arizona operations. Our expanded footprint in Arizona provides Greenwood Hall access to a strong talent pool of enrollment and student success counselors. We expect these changes will impact our general and administrative expenses into the third quarter of fiscal 2015, however, we believe they will reduce our cost structure over the long term.
"We also recently secured our first institutional investor, Redwood Fund LP, a boutique investment fund that invests in publicly traded, small cap companies that have a track record of successful execution and are poised for growth. We are excited about this investment and our partnership with Redwood Fund.
"We are excited about the steps we've taken to position Greenwood Hall for sustained growth and increased profitability. We believe that focusing our sales effort on key targets and developing channel partnerships will give us a greater ability to better penetrate both new and existing markets. At the same time, we expect our cost-cutting efforts to have full impact by the fourth quarter as evidenced by our six month performance which shows a more than $600,000 reduction in general and administrative expenses since the year ago period," Hall concluded.
Second Quarter 2015 Financial Summary
Revenue for the second quarter of fiscal year 2015 decreased 24% to $1.5 million from $1.9 million in the year ago period, primarily due to steps we took to focus exclusively on revenue opportunities that are both profitable and related to our core business and that position Greenwood Hall for sustained long term growth. The Company experienced a significant increase in new accounts added during the second quarter of fiscal year 2015 compared to the three month period a year ago. These accounts are expected to begin significantly impacting revenue in the third quarter 2015.
Direct cost of services for the second quarter of fiscal year 2015 totaled $979,967, compared to $1,002,184 for the year ago period. This 2% decrease was primarily due to the lower revenues from the same time period, as well as the increase of job duties of personnel related to direct cost of services versus overhead in 2014 and greater overall operating efficiencies.
Selling, general and administrative expenses increased $481,513, or 27%, during the second quarter of fiscal year 2015, primarily due to severance costs related to reducing employee headcount and to drive efficiencies.
Other expense increased 53% for the second quarter of fiscal year 2015, to $453,228 from $295,837 from the year ago period, primarily due to a non-cash change in the value of derivative liabilities.
Loss from operations was $2.2 million for the second quarter of fiscal year 2015, compared to a loss from operations of $1.1 million for the year ago period, primarily due to our efforts to improve operational efficiency by downsizing our California operations and expanding our Arizona operations.
Interest expense for the second quarter of fiscal year 2015 was $202,270, compared to $283,654 in the same period last year, as a result of the Company's debt service as part of its recapitalization that took place during calendar year 2014.
Six Months 2015 Financial Summary
Revenue for the first six months of fiscal year 2015 increased 2% to $4.1 million from $4.0 million in the year ago period, primarily due to new business obtained in 2015.
Direct cost of services for the six months of fiscal year 2015 totaled $2.6 million compared to $1.9 million for the year ago period. This 35% increase was primarily due the increase of job duties of personnel related to direct cost of services versus overhead in 2014 as well as greater overall operating efficiencies.
Selling, general and administrative expenses decreased $567,187, or 26%, during the first six months of fiscal year 2015, primarily due to a reduction in the number of employees and to directly allocating various employees to cost of services.
Other expense increased 24% for the first six months of fiscal year 2015, to $480,529 from $387,842 from the year ago period, primarily due to a non-cash change in the value of derivative liabilities.
Loss from operations for the first six months of fiscal year 2015 was $2.8 million, an increase of $24,468 or 0.9% from the year ago period, primarily due to our efforts to improve operational efficiencies going forward.
Interest expense for the first six months of fiscal year 2015 was $311,798, compared to $372,982 in the same period last year, as a result of the Company's debt service as part of its recapitalization that took place during calendar year 2014.
Liquidity and Capital Resources
At February 28, 2015, Greenwood Hall had cash and cash equivalents totaling $48,479 and a $3.0 million revolving credit line, of which $1.5 million was utilized at February 28, 2015.
Since the beginning of the fiscal quarter ended February 28, 2015, the Company sold 250,000 units, comprised of one share of common stock and one warrant to purchase common stock, at a price of $1.00 per unit, for total proceeds of $250,000. The Company incurred $11,555 of fees associated with this raise, which are presented net of the proceeds. These equity securities were not registered under the Securities Act of 1933.
Outlook
Based on the increased number of served clients and our ongoing pipeline of new business opportunities, management expects FY2015 revenues to increase by 20% to 25% from 2014 levels, with the majority of revenue coming from the education sector rather than our legacy non-profit business. This assumes that we will increase our total number of clients to 40-45 up from 27 clients at December 31, 2014. We also continue to expect to report positive income from operations in the fourth quarter of fiscal year 2015.
About Greenwood Hall
Greenwood Hall is a provider of technology-enabled student lifecycle management services that help colleges and universities increase revenue and improve student engagement and outcomes. Since 2006, Greenwood Hall has developed customized turnkey solutions that combine strategy, people, proven processes and robust technology, to help schools effectively and efficiently improve student outcomes, as well as increase revenues and expand into new marketing channels, such as online learning. Greenwood Hall has served more than 40 education clients and over 70 degree programs.
For more information, visit http://www.greenwoodhall.com, follow us on Twitter @GreenwoodHall and Facebook at http://www.facebook.com/GreenwoodandHall.
Forward Looking Statements
Certain statements contained in this document, including, but not limited to, predictions and projections that may be considered forward-looking statements under securities law, involve a number of risks and uncertainties that could cause actual results to differ materially, including, but not limited to, lack of consumer acceptance and demand for the Company's products, insufficient working capital to expand the Company's technology and engage in product marketing, intense competition from larger and more well-established companies, and other economic, competitive and technological factors involving the Company's operations, markets, services, products and prices, and other factors, including those set forth in the Risk Factors section of the Company's annual report on Form 10-K for the period ended August 31, 2014 filed with the Securities and Exchange Commission ("SEC").
| GREENWOOD HALL, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||
| FEBRUARY 28, 2015 AND AUGUST 31, 2014 | ||
| ASSETS | ||
| (Unaudited) | (Audited) | |
| FEB 2015 | AUG 2014 | |
| CURRENT ASSETS | ||
| Cash and cash equivalents | $ 48,479 | $ 367,286 |
| Accounts receivable, net | 492,660 | 1,039,065 |
| Prepaid expenses and other current assets | 91,077 | 305,691 |
| Current assets to be disposed of | 36,860 | 36,860 |
| TOTAL CURRENT ASSETS | 669,076 | 1,748,902 |
| PROPERTY AND EQUIPMENT, net | 165,723 | 211,525 |
| OTHER ASSETS | ||
| Deposits and other assets | 40,812 | 57,659 |
| TOTAL OTHER ASSETS | 40,812 | 57,659 |
| TOTAL ASSETS | $ 875,611 | $ 2,018,086 |
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||
| CURRENT LIABILITIES | ||
| Accounts payable | $ 911,798 | $ 835,423 |
| Accrued expenses | 279,992 | 284,362 |
| Accrued payroll and related expenses | 592,574 | 411,280 |
| Deferred revenue | 323,810 | 1,102,500 |
| Accrued interest | 32,506 | 35,773 |
| Due to shareholders / officer | 182,223 | 155,476 |
| Notes payable, net of discount of $353,873 and $71,758, respectively | 2,224,893 | 2,053,134 |
| Line of credit | 1,500,000 | 1,500,000 |
| Derivative liability | 578,257 | 118,363 |
| Current liabilities to be disposed of | 335,857 | 335,857 |
| TOTAL CURRENT LIABILITIES | 6,961,910 | 6,832,168 |
| Notes payable, non-current | 1,046,686 | 1,297,988 |
| TOTAL LIABILITIES | 8,008,596 | 8,130,156 |
| COMMITMENTS AND CONTINGENCIES | ||
| STOCKHOLDERS' EQUITY (DEFICIT) | ||
| Common stock, $0.001 par value; 75,000,000 shares authorized, 39,786,450 and 38,536,450 shares issued and outstanding, respectively | 39,786 | 38,536 |
| Additional paid-in capital | 4,921,404 | 3,149,711 |
| Accumulated deficit | (12,094,175) | (9,300,317) |
| TOTAL GREENWOOD HALL, INC. STOCKHOLDERS' EQUITY (DEFICIT) | (7,132,985) | (6,112,070) |
| Noncontrolling interest | -- | -- |
| TOTAL STOCKHOLDERS' EQUITY (DEFICIT) | (7,132,985) | (6,112,070) |
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | $ 875,611 | $ 2,018,086 |
| GREENWOOD HALL, INC. AND SUBSIDIARIES | ||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| FOR THE THREE MONTHS AND SIX MONTHS ENDED FEBRUARY 28, 2015 AND 2014 | ||||
| (UNAUDITED) | ||||
| Three Months Ended | Six Months Ended | |||
| February 28, 2015 | February 28, 2014 | February 28, 2015 | February 28, 2014 | |
| REVENUES | $ 1,480,420 | $ 1,944,852 | $ 4,145,388 | $ 4,048,124 |
| OPERATING EXPENSES | ||||
| Direct cost of services | 979,967 | 1,002,184 | 2,558,438 | 1,893,987 |
| Personnel | 859,274 | 893,092 | 1,718,234 | 2,403,832 |
| Selling, general and administrative | 1,412,596 | 897,265 | 2,182,045 | 2,131,853 |
| TOTAL OPERATING EXPENSES | 3,251,837 | 2,792,541 | 6,458,717 | 6,429,672 |
| INCOME (LOSS) FROM OPERATIONS | (1,771,417) | (847,689) | (2,313,329) | (2,381,548) |
| OTHER INCOME (EXPENSE) | ||||
| Interest expense | (202,270) | (283,654) | (311,798) | (372,982) |
| Change in value of derivatives | (136,870) | -- | (136,870) | -- |
| Miscellaneous income (expense), net | (114,088) | (12,183) | (31,861) | (14,860) |
| TOTAL OTHER INCOME (EXPENSE) | (453,228) | (295,837) | (480,529) | (387,842) |
| INCOME (LOSS) FROM BEFORE PROVISION FOR INCOME TAXES | (2,224,645) | (1,143,526) | (2,793,858) | (2,769,390) |
| Provision for income taxes | -- | -- | -- | -- |
| NET LOSS | (2,224,645) | (1,143,526) | (2,793,858) | (2,769,390) |
| Net income (loss) attributable to noncontrolling interests | -- | -- | -- | -- |
| Net income (loss) attributable to Greenwood Hall, Inc. | $ (2,224,645) | $ (1,143,526) | $ (2,793,858) | $ (2,769,390) |
| Earnings per share - basic and diluted | ||||
| Basic earnings per share attributable to Greenwood Hall, Inc. | $ (0.06) | $ (0.05) | $ (0.07) | $ (0.11) |
| Weighted average common shares - basic and diluted | 39,539,228 | 25,051,591 | 39,452,196 | 25,051,591 |
| GREENWOOD HALL, INC. AND SUBSIDIARIES | ||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| FOR THE THREE MONTHS ENDED FEBRUARY 28, 2015 AND 2014 | ||
| (UNAUDITED) | ||
| 2015 | 2014 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net income (loss) from continuing operations | $ (2,793,858) | $ (2,769,390) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities of continuing operations: | ||
| Non-cash interest on convertible promissory notes | 40,909 | -- |
| Change in value of derivative liabilities | 135,901 | -- |
| Warrants issued for services | 534,498 | -- |
| Depreciation and amortization | 31,861 | 90,913 |
| Changes in operating assets and liabilities: | ||
| Accounts receivable | 546,405 | 539,323 |
| Prepaid expenses and other current assets | 231,461 | 113,161 |
| Accounts payable | 78,605 | 324,189 |
| Accrued expenses | (4,372) | 228,679 |
| Accrued payroll and related | 181,294 | 12,279 |
| Deferred revenue | (778,690) | 47,223 |
| Accrued interest and related | (3,265) | 194,509 |
| Advances from officers, net | 26,747 | 160,834 |
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (1,772,504) | (1,058,280) |
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||
| Purchase of property and equipment | -- | -- |
| NET CASH USED IN INVESTING ACTIVITIES | -- | -- |
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||
| Book overdraft | -- | (170,408) |
| Proceeds from issuance of notes payable | 600,000 | 2,186,354 |
| Payments on notes payable | (384,748) | (1,299,934) |
| Repurchase of common stock | -- | (26,000) |
| Proceeds from the sale of stock | 1,238,445 | -- |
| NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | 1,453,697 | 690,012 |
| NET INCREASE (DECREASE) IN CASH | (318,807) | (368,268) |
| CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 367,286 | 368,268 |
| CASH AND CASH EQUIVALENTS, END OF YEAR | $ 48,479 | $ -- |
| Supplemental disclosures: | ||
| Interest paid in cash | $ 288,169 | $ 371,492 |
| Income taxes paid in cash | $ -- | $ -- |