Exhibit 99.1
Contacts:
Jeff Lambert or Tim Hanson
Lambert, Edwards & Associates, Inc.
616-233-0500 / avso@lambert-edwards.com
Avatech Solutions
Announces First Quarter 2005 Results
Solid Results Driven by a 27.8 Percent Improvement in Product Sales
Owings Mills, MD, Nov. 16, 2004—Avatech Solutions, Inc. (OTCBB: AVSO) today announced results for the first quarter of 2005, highlighted by continued improvement in product sales and significant new investments in the Company’s future growth.
Avatech, the recognized leader in design and engineering technology for the manufacturing, building design and engineering markets, reported revenues for the first quarter of 2005 of $6.7 million, a 15.1 percent increase compared to revenues of $5.8 million for the same period last year. During the first quarter, deferred revenue climbed 6.9 percent to $1.0 million, primarily related to an increase in sales of its Product Lifecycle Management (PLM) software and services. Avatech said improvements in the economy, new product releases and increased marketing in its core Design Automation (DA) segment, as well as growth in its emerging PLM and Facilities Management (FM) software solutions, all contributed to the increase.
During the first quarter of 2005, Avatech reported a net loss of $813,448, or $0.09 per basic share, compared to a net loss of $503,476, or $0.06 per basic share, for the first quarter of 2004. The Company said the net loss was higher than expected due to augmentations of its sales and technical workforce, employee sales and technical training, infrastructure investments, and the deferral of more revenue than expected based on accounting rules imposed on the company. Due to the increased investment in employee training, SG&A (selling, general and administrative) costs as a percentage of sales increased to 48.5 percent during the first quarter of 2005, compared to 42.7 percent for the same period last year.
“We posted solid results for the first quarter of 2005 and are pleased with our 15.1 percent increase in revenues,” said Scotty Walsh, CEO of Avatech Solutions. “During the last two years, we’ve been focused on turning the Company around. With our top line trending upward, we are turning our attention to making significant investments for long-term growth and profitability.
“Typically, we experience a seasonal slowdown during the first quarter. However, we successfully drove sales upward this year, thanks to an improving economy and new product releases,” said Walsh.
10715 Red Run Blvd, Suite 101· Owings Mills MD 21117
410-581-8080· 410-581-8088 FAX
www.avatechsolutions.com
Avatech Solutions
First Quarter 2005 Results
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Highlights
• | Revenues for the quarter rose 15.1 percent to $6.7 million. The increase included a 27.8 percent increase in product sales and a 9.4 percent increase in commission revenues, partially offset by a 11.7 percent decline in service revenue. |
• | Key customer additions during the quarter included: |
• | American Science and Engineering, a leading developer and manufacturer of state-of-the-art X-ray inspection systems for Homeland Security and other critical defense applications, chose SMARTEAM as its enterprise product lifecycle management solution and Avatech as its system integrator. |
• | EMCO, a leading manufacturer of storm and screen doors, chose Avatech as its design automation systems integrator. |
The Company also announced the resignation of Beth O. MacLaughlin as Vice President of Finance and interim CFO. The Company has appointed Catherine Dodson, its Controller, as Vice President and interim CFO. Previously, Dodson was an audit supervisor with Walpert & Wolpoff, LLP, a leading regional accounting firm, and with American Express Tax and Business Services. While on staff with Walpert & Wolpoff, Dodson managed audit and consulting engagements for a wide variety of clients, provided regulatory consulting to the Maryland Insurance Administration, and served on the firm’s internal inspection (quality control) committee. Dodson has been involved with the Avatech management team since the fiscal 2000 audit, supervising year-end audits and providing consulting services and special projects for the board of directors. Earlier in her career, Dodson was a part-time accounting instructor at Rutgers University and a research assistant at the Rutgers Accounting Research Center. Dodson is a certified public accountant and earned a bachelor’s degree in accounting at Rutgers University.
Walsh continued: “Our trend lines continue to move in the right direction and we’re making important investments in the Company as we continue our transition from a value-added reseller to a diversified service and solutions provider. We are committed to being the top reseller in the design automation, facilities and asset management and product lifecycle management business units. For 2005, our initial estimates call for five percent operating income on a revenue range of $36 million to $40 million.”
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
First Quarter 2005 Results
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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.
Avatech Solutions
First Quarter 2005 Results
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Avatech Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
Sept. 30, 2004 (unaudited) | June 30, 2004 (audited) | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 238,786 | $ | 689,995 | ||||
Accounts receivable, less allowance of $100,000 at June 30, 2004 and $109,000 at September 30, 2004 | 3,500,764 | 3,906,724 | ||||||
Other receivables | 160,355 | 366,475 | ||||||
Inventory | 307,150 | 215,321 | ||||||
Prepaid expenses | 372,538 | 398,815 | ||||||
Other current assets | 78,571 | 70,775 | ||||||
Total current assets | 4,658,164 | 5,648,105 | ||||||
Property and equipment: | ||||||||
Computer software and equipment | 2,416,867 | 2,396,593 | ||||||
Office, furniture and equipment | 880,943 | 881,036 | ||||||
Leasehold improvements | 224,897 | 197,245 | ||||||
3,522,707 | 3,474,874 | |||||||
Less accumulated depreciation and amortization | 2,982,204 | 2,921,705 | ||||||
540,503 | 553,169 | |||||||
Goodwill | 52,272 | 52,272 | ||||||
Other assets | 398,654 | 313,073 | ||||||
Total assets | $ | 5,649,593 | $ | 6,566,619 | ||||
Liabilities and stockholders’ deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 4,664,043 | $ | 5,257,848 | ||||
Accrued compensation and related benefits | 257,214 | 347,020 | ||||||
Borrowings under line-of-credit | 2,133,115 | 1,640,180 | ||||||
Note payable to related party | 884,586 | — | ||||||
Current portion of long-term debt | 1,672,499 | 92,544 | ||||||
Deferred revenue | 1,022,576 | 956,636 | ||||||
Other current liabilities | 386,803 | 333,106 | ||||||
Total current liabilities | 11,020,836 | 8,627,334 | ||||||
Long-term debt | — | 1,606,206 | ||||||
Note payable to related party | — | 878,725 | ||||||
Other long-term liabilities | 283,446 | 318,316 | ||||||
Commitments and contingencies | — | — | ||||||
Minority interest | 1,525,000 | 1,525,000 | ||||||
Stockholders’ deficit: | ||||||||
Series D Convertible Preferred Stock, $0.01 par value; 1,297,537 shares authorized, issued and outstanding at June 30, 2004 and September 30, 2004 | 12,975 | 12,975 | ||||||
Common stock, $0.01 par value; 80,000,000 shares authorized; 9,460,380 and 9,596,455 shares issued and outstanding at June 30, 2004 and September 30, 2004, respectively | 95,965 | 94,605 | ||||||
Additional paid-in capital | 3,758,935 | 3,737,574 | ||||||
Accumulated deficit | (11,047,564 | ) | (10,234,116 | ) | ||||
Total stockholders’ deficit | (7,179,689 | ) | (6,388,962 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 5,649,593 | $ | 6,566,619 | ||||
Avatech Solutions
First Quarter 2005 Results
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Avatech Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended September 30, | ||||||||
2004 | 2003 | |||||||
(unaudited) | (unaudited) | |||||||
Revenues: | ||||||||
Product sales | $ | 4,479,400 | $ | 3,504,948 | ||||
Service revenue | 1,304,481 | 1,476,568 | ||||||
Commission revenue | 968,182 | 884,796 | ||||||
6,752,063 | 5,866,312 | |||||||
Cost of revenue: | ||||||||
Cost of product sales | 3,119,461 | 2,481,328 | ||||||
Cost of service revenue | 970,162 | 1,059,698 | ||||||
4,089,623 | 3,541,026 | |||||||
Gross margin | 2,662,440 | 2,325,286 | ||||||
Other operating expenses: | ||||||||
Selling, general and administrative | 3,277,167 | 2,502,958 | ||||||
Depreciation and amortization | 61,261 | 67,189 | ||||||
3,338,428 | 2,570,147 | |||||||
Operating loss | (675,988 | ) | (244,861 | ) | ||||
Other income (expense): | ||||||||
Minority interest | (38,125 | ) | (38,125 | ) | ||||
Interest and other income (expense) | 12,426 | (713 | ) | |||||
Interest expense | (103,661 | ) | (66,525 | ) | ||||
(129,360 | ) | (105,363 | ) | |||||
Loss from continuing operations before income taxes | (805,348 | ) | (350,224 | ) | ||||
Income tax expense | 8,100 | 11,000 | ||||||
Loss from continuing operations | (813,448 | ) | (361,224 | ) | ||||
Loss from operations of discontinued operating segments | — | (142,252 | ) | |||||
Net loss | $ | (813,448 | ) | $ | (503,476 | ) | ||
Loss from continuing operations per share, basic and diluted | $ | (0.09 | ) | $ | (0.04 | ) | ||
Loss per common share, basic and diluted | $ | (0.09 | ) | $ | (0.06 | ) | ||
Shares used in computation | 9,599,659 | 9,127,160 | ||||||