EXHIBIT 99.1
Contacts:
Jeff Lambert
Lambert, Edwards & Associates, Inc.
616-233-0500 / avso@lambert-edwards.com
Avatech Solutions
Announces Second Quarter 2005 Results
Owings Mills, Md., Feb. 16, 2005—Avatech Solutions, Inc. (OTCBB: AVSO) today announced results for the second quarter ended December 31, 2004, highlighted by the Company’s return to profitability, double-digit increases in consulting services and substantial progress toward fiscal 2005 goals.
Avatech, the recognized leader in design and engineering technology for the manufacturing, building design and engineering markets, reported revenues for the second quarter of fiscal 2005 of $8.2 million, a 4.1 percent increase compared to revenues of $7.9 million for the second quarter of fiscal 2004. When compared to the first quarter of fiscal 2005, revenues for the second quarter increased 21.2 percent.
The Company also returned to profitability, posting second quarter net income of $9,482 following a first quarter loss of $813,448. The Company’s deferred revenue declined 3.9 percent to $982,514 million for the second quarter of fiscal 2005, primarily due to Product Lifecycle Management (PLM) software and services related revenue recognized during the second quarter.
During the second quarter of fiscal 2005, Avatech reported net income of $9,482, compared to net income of $4,725 for the same period last fiscal year. Avatech said improvements in consulting services and commission revenues, which were fueled by increased sales in Autodesk Subscription software maintenance agreements, drove the increase in net income. Product sales for the second quarter were consistent with the same period last fiscal year due.
“During the second quarter, we made substantial progress toward our fiscal 2005 goals—we hired 21 new customer-facing account executives and technical resources, increased service revenues, invested in employee education to enrich the customer experience and continued to transform Avatech into a diversified service and solution provider,” said Scotty Walsh, CEO of Avatech Solutions. “We continue to take an aggressive approach toward expanding our customer outreach efforts, and our hard work is beginning to take hold. Our consulting services are building traction as customers are increasingly turning to us to meet their needs for product integration, service and support.”
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
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Second Quarter 2005 Highlights
• | When compared to the first quarter of fiscal 2005, revenues for the second quarter increased 21.2 percent. |
• | Revenues for the quarter rose 4.1 percent to $8.2 million. The increase included a 14.3 percent increase in commission revenues and an 11.7 percent increase in consulting services, partially offset by a 0.6 percent decline in product sales. |
• | For the second quarter of fiscal 2005, product sales were $5.2 million, commission revenues were $1.6 million and consulting services were $1.4 million. |
• | Income from operations for the second quarter of fiscal 2005 climbed to $160,277 versus $142,011 for the same period last fiscal year. |
• | Gross margins for the quarter were 43 percent, a nearly seven percentage point increase compared to the second quarter of fiscal 2004. |
Walsh concluded: “During the first half of the year, we made significant investments in the Company, building a solid foundation for future growth—and we are beginning to see the return on those investments. Sales productivity is rising, we’re lowering our product-to-services revenue mix and order backlog has increased.”
“We have created a strong and increasingly diverse product and service offering, and our top priority for the remainder of fiscal 2005 is on execution and meeting our target of positive operating income on a revenue range of $16 million to $18 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 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.
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
Page3 of 6 ~
Avatech Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2004 | June 30, 2004 | |||||
(unaudited) | (audited) | |||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 78,851 | $ | 689,995 | ||
Accounts receivable, less allowance of $100,000 at June 30, 2004 and $101,000 at December 31, 2004 | 4,462,579 | 3,906,724 | ||||
Other receivables | 274,322 | 366,475 | ||||
Inventory | 331,070 | 215,321 | ||||
Prepaid expenses | 322,736 | 398,815 | ||||
Other current assets | 71,719 | 70,775 | ||||
Total current assets | 5,541,277 | 5,648,105 | ||||
Property and equipment: | ||||||
Computer software and equipment | 2,621,893 | 2,396,593 | ||||
Office, furniture and equipment | 846,750 | 881,036 | ||||
Leasehold improvements | 266,738 | 197,245 | ||||
3,735,381 | 3,474,874 | |||||
Less accumulated depreciation and amortization | 3,055,851 | 2,921,705 | ||||
679,530 | 553,169 | |||||
Goodwill | 52,272 | 52,272 | ||||
Other assets | 470,671 | 313,073 | ||||
Total assets | $ | 6,743,750 | $ | 6,566,619 | ||
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 6 ~
Avatech Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
December 31, 2004 | June 30, 2004 | |||||||
(unaudited) | (audited) | |||||||
Liabilities and stockholders’ deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 4,533,671 | $ | 5,257,848 | ||||
Accrued compensation and related benefits | 302,122 | 347,020 | ||||||
Borrowings under line-of-credit | 3,096,035 | 1,640,180 | ||||||
Note payable to related party | 890,447 | — | ||||||
Current portion of long-term debt | 307,093 | 92,544 | ||||||
Deferred revenue | 982,514 | 956,636 | ||||||
Other current liabilities | 342,843 | 333,106 | ||||||
Total current liabilities | 10,454,725 | 8,627,334 | ||||||
Long-term debt | 1,365,407 | 1,606,206 | ||||||
Note payable to related party | — | 878,725 | ||||||
Other long-term liabilities | 334,746 | 318,316 | ||||||
Commitments and contingencies | — | — | ||||||
Minority interest | — | 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 December 31, 2004 | 12,975 | 12,975 | ||||||
Common stock, $0.01 par value; 80,000,000 shares authorized; 9,460,380 and 10,843,064 shares issued and outstanding at June 30, 2004 and December 31, 2004, respectively | 108,430 | 94,605 | ||||||
Additional paid-in capital | 5,505,550 | 3,737,574 | ||||||
Accumulated deficit | (11,038,083 | ) | (10,234,116 | ) | ||||
Total stockholders’ deficit | (5,411,128 | ) | (6,388,962 | ) | ||||
Total liabilities and stockholders’ deficit | $ | 6,743,750 | $ | 6,566,619 | ||||
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
Page5 of 6 ~
Avatech Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended December 31, | ||||||||
2004 | 2003 | |||||||
(unaudited) | (unaudited) | |||||||
Revenues: | ||||||||
Product sales | $ | 5,152,600 | $ | 5,183,449 | ||||
Service revenue | 1,434,110 | 1,283,609 | ||||||
Commission revenue | 1,599,723 | 1,400,015 | ||||||
8,186,433 | 7,867,073 | |||||||
Cost of revenues: | ||||||||
Cost of product sales | 3,485,013 | 3,933,520 | ||||||
Cost of service revenue | 1,161,068 | 1,047,075 | ||||||
4,646,081 | 4,980,595 | |||||||
Gross margin | 3,540,352 | 2,886,478 | ||||||
Other operating expenses: | ||||||||
Selling, general and administrative | 3,307,190 | 2,662,030 | ||||||
Depreciation and amortization | 72,885 | 82,437 | ||||||
3,380,075 | 2,744,467 | |||||||
Operating income | 160,277 | 142,011 | ||||||
Other income (expense): | ||||||||
Minority interest | (20,757 | ) | (38,125 | ) | ||||
Interest and other income (expense) | (8,932 | ) | 5,006 | |||||
Interest expense | (114,162 | ) | (95,172 | ) | ||||
(143,851 | ) | (128,291 | ) | |||||
Income from continuing operations before income taxes | 33,431 | 13,720 | ||||||
Income tax expense | 6,944 | 10,000 | ||||||
Income from continuing operations | 26,487 | 3,720 | ||||||
Income (loss) from operations of discontinued operating segments | — | 1,005 | ||||||
Net income | 9,482 | 4,725 | ||||||
Preferred stock dividends | 19,463 | 10,122 | ||||||
Loss attributable to common stockholders | $ | (9,981 | ) | $ | (5,397 | ) | ||
Loss per common share, basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||
Shares used in computation | 10,124,694 | 9,217,874 | ||||||
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
Page6 of 6 ~
Avatech Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations
Six Months Ended December 31, | ||||||||
2004 | 2003 | |||||||
(unaudited) | (unaudited) | |||||||
Revenues: | ||||||||
Product sales | $ | 9,631,999 | $ | 8,688,397 | ||||
Service revenue | 2,738,591 | 2,760,177 | ||||||
Commission revenue | 2,567,905 | 2,284,811 | ||||||
14,938,495 | 13,733,385 | |||||||
Cost of revenues: | ||||||||
Cost of product sales | 6,604,474 | 6,414,849 | ||||||
Cost of service revenue | 2,131,230 | 2,106,773 | ||||||
8,735,704 | 8,521,622 | |||||||
Gross margin | 6,202,791 | 5,211,763 | ||||||
Other operating expenses: | ||||||||
Selling, general and administrative | 6,584,357 | 5,164,987 | ||||||
Depreciation and amortization | 134,146 | 149,626 | ||||||
6,718,503 | 5,314,613 | |||||||
Operating loss | (515,712 | ) | (102,850 | ) | ||||
Other income (expense): | ||||||||
Minority interest | (58,882 | ) | (76,250 | ) | ||||
Interest and other income (expense) | 3,494 | 4,293 | ||||||
Interest expense | (217,823 | ) | (161,697 | ) | ||||
(273,211 | ) | (233,654 | ) | |||||
Loss from continuing operations before income taxes | (788,923 | ) | (336,504 | ) | ||||
Income tax expense | 15,044 | 21,000 | ||||||
Loss from continuing operations | (803,967 | ) | (357,504 | ) | ||||
Loss from operations of discontinued operating segments | — | (141,247 | ) | |||||
Net loss | (803,967 | ) | (498,751 | ) | ||||
Preferred stock dividends | 38,926 | 17,379 | ||||||
Loss attributable to common stockholders | $ | (842,893 | ) | $ | (516,130 | ) | ||
Loss from continuing operations per share, basic and diluted | $ | (0.08 | ) | $ | (0.04 | ) | ||
Loss per common share, basic and diluted | $ | (0.09 | ) | $ | (0.06 | ) | ||
Shares used in computation | 9,862,176 | 9,177,399 | ||||||
10715 Red Run Blvd, Suite 101 • Owings Mills MD 21117
410-581-8080 • 410-581-8088 FAX
www.avatechsolutions.com