Vertical Branding, Inc. Announces Fourth Quarter and Fiscal Year 2007 Financial Results and Provides 2008 Sales Outlook

Tuesday April 1, 4:02 pm ET

LOS ANGELES--(BUSINESS WIRE)--Vertical Branding, Inc. (OTC BB: VBDG.OB, News), today announced fourth quarter and fiscal year 2007 financial results, and provided a sales forecast for fiscal year 2008. Highlights include:

• Fiscal year 2007 revenues of $36.3 million, a 57% increase over 2006; and
• Company forecasts fiscal year 2008 sales to be $47 million to $50 million, representing 29% to 38% year over year top line growth

?We are proud of what we have accomplished in 2007 in what, by the end of the year, became a challenging environment in ways specific to our company and occurring in the marketplace generally,? said Nancy Duitch, Chief Executive Officer of Vertical Branding, Inc. ?Our overall 2007 results show that our shift of emphasis to retail distribution has significantly strengthened our long-term potential and we experienced impressive sales growth relative to 2006. Among other 2007 goals we achieved were improving the Company?s balance sheet and placing four hot-selling products into higher-volume retail distribution channels.?

Fourth Quarter and Fiscal Year 2007 Results

Revenues for the quarter and fiscal year ended December 31, 2007, were $5.8 million and $36.3 million respectively, a 45% decrease and 57% increase over comparable prior year periods. The Company?s net loss for the quarter and fiscal year ended December 31, 2007, was $3.8 million and $3.4 million respectively, or $0.14 and $0.15 loss per diluted share. This compares to prior year net income of $0.3 million for fourth quarter 2006, or $0.01 earnings per diluted share, and a net loss of $2.8 million for the fiscal year ended December 31, 2006, or $0.17 loss per diluted share.

Adjusted earnings before interest, tax, depreciation and amortization expenses (?Adjusted EBITDA?) for the quarter ended December 31, 2007 were a loss of approximately $1.1 million compared to earnings of $1 million for the fourth quarter of 2006. Adjusted EBITDA for fiscal 2007 was approximately $1.8 million compared to a negative $1.2 million for the year ended December 31, 2006.

The financial results for the fourth quarter of fiscal 2007 were adversely impacted by approximately $2.0 million of non-recurring costs, including almost $0.9 million of charges associated with the bankruptcy of one of the Company?s warehouse and fulfillment vendors, as described in the previous quarter, as well as writedowns of assets from the AdSouth acquisition. In addition, the Company recorded a $1.0 million valuation allowance for deferred tax assets. These and the other items added back to net income to derive Adjusted EBITDA are reconciled to net income (loss) in the table below.

During the fourth quarter and for the year ended December 31, 2007, the Company consolidated its transactional marketing and retail distribution businesses into a single segment called consumer products. This change reflects evolution of the manner in which management views and operates its consumer products business, with transactional marketing activities being used to leverage broader distribution, including traditional retail and international.

?Several factors impacted our fourth quarter results, some arising out of decisions we made in response to a changing environment and others that were unintended and/or unanticipated,? commented Nancy Duitch. ?The major factors include (i) our decision to forego the fourth quarter launch of certain products in development which had higher price points than we believed would attract consumers in a declining economic cycle, (ii) high cost of television media adversely impacting transactional marketing sales, (iii) lower than expected orders for our Zorbeez line of products due, in part, from late shipment of goods, (iv) ongoing bankruptcy-related costs related to a previous vendor, and (v) the write-down of certain assets inherited as part of the Adsouth acquisition. We believe that the fourth quarter results, because of the foregoing circumstances and various measures and actions we have implemented and taken in response, are not indicative of future results as we look to continue in 2008 the growth and success that we achieved as a company in fiscal year 2007 as a whole.?

Fiscal Year 2008 Outlook

The Company expects fiscal year 2008 sales to be between $47-$50 million, representing 29% to 38% year over year top line growth.

Table reconciling Net Income (loss) to Adjusted EBITDA (dollars in thousands)

For Further Information, Contact:
RedChip Companies, Inc.
500 Winderley Place, Suite 100, Orlando, FL 32751,
(800) 733-2447,Fax: (407) 644-0758,
info@redchip.com