USOL Gets Short-Term Reprieve

AUSTIN-USOL Holdings Inc. reported higher revenues and a lower operating loss for its fiscal third quarter, but warned that it’s running out of cash. The company said it has an agreement with lenders and preferred shareholders to meet short-term cash needs and that it will look for further funding.

Austin-based USOL Holdings, through its subsidiary USOnLine, sells telephone, cable television and high-speed Internet service to multifamily dwellings. It has about 130 customers in five markets including Dallas-Fort Worth and Houston.

Revenue rose 10% to $4.2 million as average revenue per customer rose and the number of high-speed data subscribers increased 103%. The higher revenue and reduced operating costs decreased operating earnings to $108,730 from $908,951 in the 2001 third quarter.

The company’s net loss, however, jumped to as high as $16.8 million or 86 cents per share as it wrote off $14.9 million in goodwill. In the same quarter in 2001, the company lost $538,102 or 5 cents per share.

In an agreement with lenders, USOL will not be required to make interest payments on its senior secured loan through March 2003. The lenders also will let USOL buy out the loan at an amount less than the $12.2 million currently owed. As a result, USOL said, preferred shareholders have tentatively agreed to fund operations to give the company time to find more funding. USOL warns preferred shareholders can pull the funding at any time and that the company doesn’t have cash or revenues to keep going without it.