Exhibit 99.1
FOCUS Enhancements Reports First Quarter 2004 Results
CAMPBELL, CA. - May 11, 2004 - FOCUS Enhancements, Inc. (NASDAQ SC: FCSE), a
worldwide leader in video production and conversion technology, today announced
financial results for its first quarter ended March 31, 2004.
Exceeding company revenue guidance, during the first quarter, FOCUS Enhancements
recorded $4.1 million in revenue, unchanged compared to the first quarter of
2003. Operating expenses were $2.9 million compared to $2.6 million for the
comparable 2003 period. The increase in operating expenses reflects the
company's investment in Direct To Edit(TM) (DTE) and Ultra Wideband (UWB)
technologies, as well as operating expenses from COMO Computer & Motion GmbH
(COMO), acquired on February 27th. Net loss for the quarter was $1.6 million, or
$0.04 per share, versus a net loss of $1.0 million, or $0.03 per share, in the
same quarter of 2003.
Brett Moyer, president and chief executive officer of FOCUS Enhancements,
commented, "During the first quarter we focused on executing our strategic plan.
We announced two acquisitions that will enable us to extend the reach of our
Systems Business creating a `glass-to-glass' video strategy with a fully
integrated digital media workflow line. In addition, we continued the expansion
of the FireStore product line - our efforts were rewarded with a strong customer
response to new products demonstrated at the National Association of
Broadcasters (NAB) trade show in April."
"For the quarter, we exceeded the high end of our revenue guidance and met our
earnings per share projections," stated Gary Williams, chief financial officer
of FOCUS Enhancements. "Also during the quarter, the company's balance sheet was
significantly improved with the reduction of total debt to less than $1.0
million. We continue to keep a tight rein on all of our expenses and closed the
quarter with $2.7 million in cash. In April, we added approximately $5.2 million
to our cash balance via a private placement, which was previously announced. We
anticipate our improved financial condition will assist the ongoing partner
negotiations relating to our UWB strategy."
Moyer added, "The recent financing enabled us to increase engineering resources
for our UWB initiative and strengthen our position with prospective technology
partners. We expect to continue to demonstrate our UWB capabilities and secure a
partner for the UWB initiative this summer."
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Recent Highlights
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Systems Business:
o In January, entered into a definitive agreement to acquire digital
video systems, media servers and devices from Visual Circuits
Corporation (VCC). VCC shareholders will vote on the acquisition at a
special meeting on May 28, 2004. Closing is expected shortly
thereafter.
o On February 27, 2004, acquired COMO, a German company specializing in
video content management and processing solutions. The acquisition
provides FOCUS Enhancements with a European office and expands the
product suite.
o In April, announced, launched and demonstrated product enhancements
and line expansions at NAB in Las Vegas, including:
o FireStore FS-M Standard Definition MPEG Recorder created to
extend FireStore functionality to include MPEG-2 recording,
play-out and timeshift recording, enabling simultaneous record
and playback functions.
o HDV Format compatibility for the HDV camera standard recently
established by the HDV forum. FOCUS Enhancements showcased HDV
support by recording and playing 720p and 1080i MPEG-2 streams on
the FireStore platform. The company will also support a JVC HD
Camera and other future HDV format compatible cameras.
o FireStore FS-3 Media Exchange Format (MXF) file transfer
capability enabling the open industry and platform-independent
MXF format into future FireStore products for compatibility with
non-linear edit (NLE) manufacturers.
o 24p QuickTime and 24p AVI Type 2 DTE formats integrated into
FireStore, enabling camcorder users to access DTE Technology
within native 24p NLE applications.
o FireStore DR-DV5000 and FS-3 Beta Software developed to support
Pinnacle's Liquid Edition DV editing products and Vortex News
solutions.
o In March, shipped initial order of FireStore FS-2 Studio DTE Recorders
(FS-2) to TV Asahi in Tokyo, Japan, complementing its main
high-definition videotape recorders. The FS-2 can accept down
converted standard definition SDI signals and record to disk in native
NLE file formats using FOCUS Enhancements' proprietary DTE technology.
Semiconductor Business:
o Welcomed 20-year semiconductor design veteran Tommy Eng, vice chairman
and founder of Tera Systems, to the Board of Directors.
o Co-announced the formation of the Multiband OFDM Alliance Special
Interest Group to establish industry standards regarding UWB
semiconductor chips.
o Received 26 new semiconductor design starts and 16 design wins for the
first quarter of 2004 compared to 18 design starts and four design
wins in the first quarter of 2003.
Corporate:
o Subsequent to quarter end, raised approximately $5.2 million in net
proceeds to increase engineering resources dedicated to UWB
development and to strengthen the company's negotiating position with
potential manufacturing and vendor partners.
o Converted approximately $4.5 million in principal and accrued interest
owed to Carl Berg, a director, into approximately 2,173,000 shares of
common and 1,257 shares of preferred stock, significantly reducing the
company's debt obligations.
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Moyer concluded, "We anticipate revenue for the second quarter will range
between $4.7 million and $5.2 million, and we reiterate full-year 2004 revenue
range between $23 million and $26 million. We anticipate a loss in the second
quarter between $0.03 and $0.04 per share, excluding any charges associated with
the acquisition of VCC. We expect the VCC acquisition to close as soon as
practicable following the May 28, 2004 special meeting of VCC shareholders at
which time they will be asked to approve the transaction."
Investor Conference Call
The company will host a shareholder conference call to discuss the first quarter
2004 results on Tuesday, May 11, 2004 at 1:30 pm PST after which management will
host a question and answer session. The conference call will be broadcast live
over the Internet at www.focusinfo.com, and the webcast will be available
through June 11, 2004. If you do not have Internet access, the telephone dial-in
number is 706-634-0182 for domestic and international participants. Please dial
in five to ten minutes prior to the beginning of the call at 1:30 p.m. PST (4:30
p.m., EST). A telephone replay will be available through May 13, 2004. Dial
706-645-9291, and enter access code 7137752.
About FOCUS Enhancements, Inc.
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FOCUS Enhancements, Inc. (NASDAQ SC: FCSE) is a leading designer of world-class
solutions in advanced, proprietary video technology. Headquartered in Campbell,
CA, FOCUS Enhancements designs, develops, and markets video solutions in two
distinct markets: advanced proprietary video conversion integrated circuits
(ICs) and affordable, high quality, digital-video conversion and video
production equipment. Semiconductor IC products include designs for PCs, game
cards, internet, set-top boxes, Internet appliances, and interactive TV
applications, and they are sold directly to original equipment manufacturers
(OEMs). FOCUS Enhancements' complete line of video presentation and video
production devices are sold globally through resellers and distributors to the
broadcast, education, cable, business, industrial, presentation, Internet,
gaming, home video production and home theater markets. More information on
FOCUS Enhancements may be obtained from the company's SEC filings, or by
visiting the FOCUS Enhancements home page at http://www.FOCUSinfo.com.
Safe Harbor Statement
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Statements about future results and other expectations constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and the current economic environment. The Company cautions that
these statements are not guarantees of future performance. Actual results may
differ materially from those expressed or implied in the forward-looking
statements. A number of factors in addition to those discussed herein could
cause actual results to differ materially from expectations. Demand for FOCUS
Enhancements' products, which impacts revenue and the gross margin percentage,
is affected by business and economic conditions and changes in customer order
patterns. Any projections are inherently subject to significant economic and
competitive uncertainties and contingencies, many of which are beyond the
control of FOCUS Enhancements. Important assumptions and other important
factors, including risk factors, which could cause actual results to differ
materially from those in the forward-looking statements are specified in the
Company's Form 10-K for the year ended December 31, 2003 and other filings with
the SEC. The Company undertakes no obligation to update forward-looking
statements, whether as a result of new information, future events, or otherwise.
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FOCUS Enhancements, Inc.
Consolidated Balance Sheets
(In thousands, except share data)
(Unaudited)
March 31, December 31,
2004 2003
-------- --------
Assets
Current assets:
Cash and cash equivalents $ 2,701 $ 3,731
Accounts receivable, net of allowances of $345 and $384 1,659 2,385
Inventories 3,206 3,493
Prepaid expenses and other current assets 305 368
-------- --------
Total current assets 7,871 9,977
Long-term assets:
Property and equipment, net 182 146
Other assets 246 151
Intangible assets, net 1,362 635
Goodwill 5,854 5,191
-------- --------
Total long-term assets 7,644 6,123
-------- --------
$ 15,515 $ 16,100
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,930 $ 2,292
Accrued liabilities 1,499 1,989
Borrowings under line-of-credit 453 --
Current portion of long-term debt 282 --
-------- --------
Total current liabilities 4,164 4,281
Long-term liabilities:
Convertible promissory notes payable to shareholder -- 3,867
Long-term debt, net of current portion 196 --
-------- --------
Total long-term liabilities 196 3,867
Stockholders' equity:
Preferred stock, $0.01 par value; authorized 3,000,000 shares; 3,161 and
1,904 shares issued at March 31, 2004 and December 31, 2003,
respectively (aggregate liquidation preference $3,917) -- --
Common stock, $0.01 par value; 100,000,000 shares authorized, 45,876,274
and 42,800,240 shares issued at March 31, 2004 and December 31, 2003,
respectively 459 428
Additional paid-in capital 77,154 71,295
Accumulated deficit (64,610) (63,021)
Cumulative foreign currency translation adjustments (1) --
Notes receivable from related parties (1,097) --
Treasury stock at cost, 497,500 shares at March 31, 2004 and
December 31, 2003, respectively (750) (750)
-------- --------
Total stockholders' equity 11,155 7,952
-------- --------
$ 15,515 $ 16,100
======== ========
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FOCUS Enhancements, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended
------------------------------------
March 31, 2004 March 31, 2003
-------------- --------------
Net revenue $ 4,094 $ 4,090
Cost of revenue 2,762 2,403
-------- --------
Gross margin 1,332 1,687
Operating expenses:
Sales, marketing and support 1,054 998
General and administrative 557 376
Research and development 1,106 1,057
Amortization of intangible assets 164 172
-------- --------
2,881 2,603
-------- --------
Loss from operations (1,549) (916)
Interest expense, net (46) (51)
Other net income 6 --
-------- --------
Loss before income taxes (1,589) (967)
Income tax expense -- 2
-------- --------
Net loss $ (1,589) $ (969)
-------- --------
Net loss per share
Basic and diluted $ (0.04) $ (0.03)
Weighted average common and common
equivalent shares
Basic and diluted 42,905 37,108
Agency Contact:
Lillian Armstrong/ Kirsten Chapman/Brendan Lahiff
Lippert/Heilshorn & Associates
(415) 433-3777
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