Exhibit 99.1
Contacts:
Jeff Lambert or Tim Hanson
Lambert, Edwards & Associates, Inc.
616-233-0500 / avso@lambert-edwards.com
Avatech Solutions Announces
Fourth Quarter and 2004 Year-End Results
Fifth consecutive quarter of improved operating results
Owings Mills, MD., September 29, 2004—Avatech Solutions, Inc. (OTCBB: AVSO) today announced results for the fourth quarter and 2004 year-end, highlighted by continued improvement in product sales, new sales channels and its ongoing transition from a value-added reseller to a diversified services and solutions provider.
Avatech, a leader in design and engineering systems integration for the manufacturing, building design and engineering markets, reported net revenues for the fourth quarter of 2004 were $6.4 million, a 17.9 percent increase compared to the $5.4 million in revenues reported in the same period last year. The Company also reported an increase in deferred revenue of $202,163 for the quarter, primarily related to an increase in sales of its Product Lifecycle Management (PLM) software and services. Avatech said higher product sales and increased marketing in its core Design Automation (DA) segment, as well as growth in its emerging PLM and Facilities Management (FM) software solutions, drove the increase.
During the fourth quarter of 2004, the Company decreased its losses substantially compared to the same period last year. For the fourth quarter, Avatech reported a net loss of $598,376, or $0.06 per basic share, versus a net loss of $3.3 million, or $0.41 per basic share, for the fourth quarter of 2003. Avatech attributed the improvement to higher sales, as well as its stringent cost controls and ability to better leverage its sales and service infrastructure.
Avatech’s total revenues for fiscal 2004 climbed to $28.0 million, a 24.2 percent increase over the $22.5 million in revenues for 2003. Deferred revenue increased $219,673 to $956,636 for fiscal year 2004, and will be recognized over the next 12 to 18 months. The Company’s net losses were reduced from $3.8 million in 2003, to $926,765 in 2004. Net loss per share for the Company decreased from $0.48 per basic share in 2003, to $0.11 per basic share in 2004. Not including a $2.0 million debt forgiveness in 2003, the Company’s loss would have been $5.8 million, or $0.72 per basic share. The Company reported that SG&A (selling, general and administrative) costs as a percentage of sales declined to 39.6 percent in 2004, versus 54.2 percent in 2003.
10715 Red Run Blvd, Suite 101 • Owings Mills MD 21117
410-581-8080 • 410-581-8088 FAX
www.avatechsolutions.com
Avatech Solutions
Fourth Quarter 2004 Results
Page 2 of 5 ~
“I’m pleased with our fourth quarter and fiscal year results, as Avatech’s trend lines continue to move in the right direction with improving sales, significant reduction in losses, expanded product offerings and important customer wins,” said Scotty Walsh, CEO of Avatech Solutions. “In 2003, our focus was to right the ship—and we did just that. In 2004, we began transitioning the Company from a value-added reseller to a diversified service and solution provider—and we believe we are well on our way.
“During the year, we also added critical new people to the executive management team and completed our board restructuring, adding unique expertise and a wealth of knowledge to our organization,” added Walsh.
Highlights
• | Revenues for the quarter rose 17.9 percent to $6.4 million. The increase included a 30.1 percent increase in product sales and a 13.4 percent increase in commission revenues, partially offset by a 4.8 percent decline in service revenue. |
• | Key customer additions during the quarter included: |
• | EMCO, a leading manufacturer of storm and screen doors, chose Avatech as its design automation systems integrator. |
• | The Durrant Group, a global architecture, engineering, and construction management firm, chose Avatech and Autodesk Consulting services to assist in its software decision-making process, implementation and training. |
• | Manufacturing companies, such as YORK Refrigeration Systems, Alliance Machines Systems International, R.A. Jones & Company and West Bay SonShip Yachts turned to Avatech for SMARTEAM PLM solutions to help them improve their business processes, reduce costs, fuel innovation and shorten time-to-market. |
“We are focused on advancing our three product groups—design automation, facilities and asset management and product lifecycle management—to become the top reseller and service provider in these categories,” said Walsh.
“Looking ahead, we have four goals for 2005. First, to bolster our middle management and customer-facing account executives to increase our market share. Second, to make measurable progress toward our goal of reaching a $100-million run rate by 2008 through organic growth and targeted acquisitions that complement our diversification strategy. Third, to continue to invest in employee education to help enrich their experience and add client value—a key part of the Avatech difference. And finally, continue to transform the Company into a diversified service and solution provider,” said Walsh. “We are confident these initiatives will not only fuel the top line, but also return Avatech to profitability.”
10715 Red Run Blvd, Suite 101 • Owings Mills MD 21117
410-581-8080 • 410-581-8088 FAX
www.avatechsolutions.com
Avatech Solutions
Fourth Quarter 2004 Results
Page 3 of 5 ~
About Avatech Solutions
Avatech Solutions, Inc. (OTCBB: AVSO.OB) is the recognized leader in design and engineering technology solutions with unparalleled expertise in CAD software, data management and process optimization for the manufacturing, engineering, building design and facilities management industries. Headquartered in Owings Mills, Maryland, the company specializes in software integration, standards development and deployment, education and technical support. Avatech is one the largest integrators of Autodesk software worldwide and a leading provider of SMARTEAM PLM solutions. The company serves 18,000 clients worldwide including numerous Fortune 500 and Engineering News Record’s Top 100 companies. Please visitwww.avatechsolutions.com for more information.
Avatech Solutions Safe Harbor Statement
This press release contains forward-looking statements about the expectations, beliefs, plans, intentions and strategies of Avatech Solutions, Inc. There are a number of important factors that could cause actual results to differ materially from those anticipated by any forward-looking information. A description of risks and uncertainties attendant to Avatech and its industry, and other factors that could affect the Company’s financial results, are included in its Securities and Exchange Commission filings, including, but not limited to, the annual report on Form 10-K for the fiscal year ending June 30, 2004 and other Securities and Exchange Commission filings. Investors and shareholders may obtain a free copy of the documents filed by Avatech Solutions, Inc. with the Commission at the Commission’s web site atwww.sec.gov. The documents also may be obtained for free by directing a request to Melody Craigmyle, Vice President of Marketing at 410-581-8080 or emailMCraigmyle@avatechsolutions.com.
All brand names, product names, or trademarks belong to their respective holders.
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10715 Red Run Blvd, Suite 101 • Owings Mills MD 21117
410-581-8080 • 410-581-8088 FAX
www.avatechsolutions.com
Avatech Solutions
Fourth Quarter 2004 Results
Page4 of 5 ~
Avatech Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30 | ||||||||
2004 | 2003 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 689,995 | $ | 540,384 | ||||
Accounts receivable, less allowance of $160,000 in 2003 and $100,000 in 2004 | 3,906,724 | 3,239,224 | ||||||
Other receivables | 366,475 | 153,899 | ||||||
Inventory | 215,321 | 146,877 | ||||||
Prepaid expenses | 398,815 | 395,189 | ||||||
Other current assets | 70,775 | 94,258 | ||||||
Total current assets | 5,648,105 | 4,569,831 | ||||||
Property and equipment: | ||||||||
Computer software and equipment | 2,396,593 | 2,925,159 | ||||||
Office furniture and equipment | 881,036 | 760,020 | ||||||
Leasehold improvements | 197,245 | 207,661 | ||||||
3,474,874 | 3,892,840 | |||||||
Less accumulated depreciation and amortization | 2,921,705 | 3,255,361 | ||||||
553,169 | 637,479 | |||||||
Goodwill | 52,272 | 52,272 | ||||||
Other assets | 313,073 | 12,385 | ||||||
Total assets | $ | 6,566,619 | $ | 5,271,967 | ||||
Liabilities and stockholders’ deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 5,257,848 | $ | 5,089,207 | ||||
Accrued compensation and related benefits | 347,020 | 354,555 | ||||||
Borrowings under line-of-credit | 1,640,180 | 1,634,709 | ||||||
Current portion of long-term debt | 92,544 | 250,000 | ||||||
Deferred revenue | 956,636 | 736,963 | ||||||
Other current liabilities | 333,106 | 325,920 | ||||||
Total current liabilities | 8,627,334 | 8,391,354 | ||||||
Long-term debt | 1,606,206 | — | ||||||
Note payable to related party | 878,725 | 966,503 | ||||||
Other long-term liabilities | 318,316 | 363,307 | ||||||
Commitments and contingencies | — | — | ||||||
Minority interest | 1,525,000 | 1,525,000 | ||||||
Stockholders’ deficit: | ||||||||
Series C Convertible Preferred Stock, $0.01 par value; 1,000,000 shares authorized and 172,008 shares issued and outstanding at June 30, 2003 and -0- shares authorized, issued and outstanding at June 30, 2004 | — | 1,720 | ||||||
Series D Convertible Preferred Stock, $0.01 par value; -0- shares authorized, issued and outstanding at June 30, 2003 and 1,297,537 shares authorized, issued and outstanding at June 30, 2004; aggregate liquation preference of $778,522 at June 30, 2004 | 12,975 | — | ||||||
Common stock, $0.01 par value; 80,000,000 shares authorized; issued and outstanding shares of 8,897,874 at June 30, 2003 and 9,460,380 at June 30, 2004 | 94,605 | 88,980 | ||||||
Additional paid-in capital | 3,737,574 | 3,242,454 | ||||||
Accumulated deficit | (10,234,116 | ) | (9,307,351 | ) | ||||
Total stockholders’ deficit | (6,388,962 | ) | (5,974,197 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 6,566,619 | $ | 5,271,967 | ||||
10715 Red Run Blvd, Suite 101 • Owings Mills MD 21117
410-581-8080 • 410-581-8088 FAX
www.avatechsolutions.com
Avatech Solutions
Fourth Quarter 2004 Results
Page 5 of 5 ~
Avatech Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
Year ended June 30 | ||||||||||||
2004 | 2003 | 2002 | ||||||||||
Revenues: | ||||||||||||
Product sales | $ | 17,710,150 | $ | 12,369,846 | $ | 16,619,444 | ||||||
Service revenue | 5,470,360 | 5,931,623 | 5,775,045 | |||||||||
Commission revenue | 4,769,984 | 4,199,465 | 4,245,987 | |||||||||
27,950,494 | 22,500,934 | 26,640,476 | ||||||||||
Cost of revenue: | ||||||||||||
Cost of product sales | 12,647,646 | 8,776,509 | 11,071,083 | |||||||||
Cost of service revenue | 4,086,069 | 3,766,904 | 3,365,110 | |||||||||
16,733,715 | 12,543,413 | 14,436,193 | ||||||||||
Gross margin | 11,216,779 | 9,957,521 | 12,204,283 | |||||||||
Other operating expenses: | ||||||||||||
Selling, general and administrative | 11,073,122 | 12,201,380 | 11,720,443 | |||||||||
Depreciation and amortization | 330,926 | 411,612 | 503,248 | |||||||||
Impairment loss | — | — | 284,766 | |||||||||
11,404,048 | 12,612,992 | 12,508,457 | ||||||||||
Operating income (loss) | (187,269 | ) | (2,655,471 | ) | (304,174 | ) | ||||||
Other income (expense): | ||||||||||||
Gain on the extinguishment of debt | — | 1,960,646 | — | |||||||||
Minority interest | (152,500 | ) | (94,140 | ) | — | |||||||
Interest and other income | 38,570 | 15,642 | 48,171 | |||||||||
Interest expense | (351,987 | ) | (290,373 | ) | (487,230 | ) | ||||||
(465,917 | ) | 1,591,775 | (439,059 | ) | ||||||||
Loss from continuing operations before income taxes and cumulative effect of change in accounting principle | (653,186 | ) | (1,063,696 | ) | (743,233 | ) | ||||||
Income tax expense (benefit) | 29,898 | 408,072 | (297,651 | ) | ||||||||
Loss from continuing operations before cumulative effect of change in accounting principle | (683,084 | ) | (1,471,768 | ) | (445,582 | ) | ||||||
Income (loss) from operations of discontinued operating segments (including loss on disposal of $354,000 in 2003) | (243,681 | ) | (1,856,538 | ) | 198,087 | |||||||
Loss before cumulative effect of change in accounting principle | (926,765 | ) | (3,328,306 | ) | (247,495 | ) | ||||||
Cumulative effect of change in accounting for goodwill | — | (520,000 | ) | — | ||||||||
Net loss | $ | (926,765 | ) | $ | (3,848,306 | ) | $ | (247,495 | ) | |||
Loss from continuing operations before cumulative effect of change in accounting principle per common share – basic and diluted | $ | (0.08 | ) | $ | (0.18 | ) | $ | (0.07 | ) | |||
Loss per common share – basic and diluted | $ | (0.11 | ) | $ | (0.48 | ) | $ | (0.04 | ) | |||
10715 Red Run Blvd, Suite 101 • Owings Mills MD 21117
410-581-8080 • 410-581-8088 FAX
www.avatechsolutions.com