Exhibit 99.1
Focus Enhancements Reports Fourth Quarter and Full Year 2006 Results
- Revenue Increases 69% for Fourth Quarter 2006 and 53% for the
Year, Compared to the Same Periods in 2005 -
- Announces Actively Working With 26 Manufacturers on UWB
Projects -
CAMPBELL, Calif.--(BUSINESS WIRE)--March 1, 2007--Focus
Enhancements, Inc. (NASDAQ:FCSE), a worldwide leader in video
production, PC-to-TV conversion and Ultra Wideband (UWB) wireless
announced financial results for its fourth quarter and year ended
December 31, 2006.
-- Fourth quarter total revenue of $10.3 million increased 69
percent over fourth quarter 2005.
-- Semiconductor Business fourth quarter revenue was $3.1
million, up 179 percent over fourth quarter 2005.
-- Systems Business fourth quarter revenue was $7.2 million, up
45 percent over fourth quarter 2005.
"2006 was a very exciting year as we delivered dramatic revenue
growth in our Semiconductor Business, supported by steady growth in
our Systems Business," stated Brett Moyer, president and chief
executive officer of Focus Enhancements. "Looking forward, our 2006
research and development (R&D) investments combined with our recent
$6.3 million financing have positioned us for a third year of
sequential revenue growth. We are poised to take advantage of the
presently anticipated growth opportunities in the portable device
market and for wireless connectivity, and we expect initial revenue
for our new TV-out and UWB chips in the third quarter of 2007."
Moyer continued, "With our robust UWB technology, we are
pioneering a new wireless marketplace, currently projected by analysts
to be worth approximately $1 billion by 2010. In the past five months,
we have begun actively working with 26 companies, including major
personal computer manufacturers, consumer electronic companies and
original device manufacturers all over the globe. In the third quarter
of this year, we expect our customers to be shipping Wireless USB hard
drives, hubs and dongles enabling products for the 2007 holiday
season. Other active project discussions include smart phones,
portable phones, DVR/media centers, set-top boxes, printers, notebook
computers and televisions. Incorporation of our UWB technology in
these devices will drive UWB revenue in 2008."
Fourth Quarter 2006 Financial Results
Revenue for the fourth quarter was $10.3 million, compared to $6.1
million reported for the same quarter of 2005. Operating expenses were
$7.2 million, compared with $5.5 million in the prior year period. Net
loss for the quarter was $3.0 million, or $0.04 per share, versus a
net loss of $3.3 million, or $0.05 per share, in the same quarter of
2005. Non-GAAP net loss for the fourth quarter was $2.8 million, or
$0.04 per share, versus non-GAAP net loss of $3.2 million, or $0.05
per share, for the fourth quarter 2005. At December 31, 2006, cash and
cash equivalents plus available credit facilities were $6.5 million.
Full-Year 2006 Financial Results
Revenue for the year ended December 31, 2006 was $37.5 million,
compared to $24.6 million reported for the same period of 2005, a 53
percent increase. Operating expenses were $26.3 million, compared to
$24.0 million in 2005. Net loss for the year ended December 31, 2006
was $15.9 million, or $0.23 per share, versus a net loss of $15.4
million, or $0.25 per share, for 2005. Non-GAAP net loss for the year
ended December 31, 2006 was $9.9 million, or $0.14 per share, versus a
non-GAAP net loss of $15.2 million, or $0.25 per share, for 2005.
Gary Williams, chief financial officer of Focus Enhancements,
stated, "During 2006, in addition to 53 percent revenue growth, we
improved gross margin as a percent of revenue by nine percentage
points to 46 percent, and reduced non-GAAP net loss by 35 percent or
$5.3 million. In late February 2007, as we have previously reported,
we substantially strengthened our balance sheet and working capital by
raising net proceeds of $6.3 million in a shelf offering. We expect
this financing to fund the development of our UWB technology and
general operating requirements through 2007."
2007 Outlook
Moyer commented, "With the product sales and R&D strategies we
have in place, throughout 2007 we currently expect revenue to increase
and expenses to decrease sequentially each quarter."
The company currently anticipates full year 2007 revenue between
$42 million and $46 million, with Semiconductor Business revenue
contribution increasing to approximately 35 percent of total revenue.
On these expectations, 2007 gross margin as a percentage of revenue is
anticipated to be approximately 46 percent to 48 percent. Operating
expenses for the year are expected to be approximately $30 million.
For the first quarter of 2007, the company currently anticipates
revenue in the range of approximately $7.0 million to $7.8 million. On
these expectations, first quarter gross margin as a percentage of
revenue is anticipated to be approximately 44 percent to 46 percent.
First quarter 2007 operating expenses are expected to be approximately
$8.3 million, as R&D expenses are expected to peak at $4.6 million
with the company's completion of the tape-out of two new semiconductor
chips.
Recent Highlights
Semiconductor Business:
- -- While at the 2007 International Consumer Electronics Show
(CES) in Las Vegas:
-- Demonstrated the FS45X Series of Video Processors in products
from 12 manufacturers, including Toshiba's Gigabeat, Digital
Cube's i-Station portable media players, Microsoft's Zune, and
Elitegroup Computer Systems.
-- Announced UWB technology will be used for wireless storage
devices with Mapower of Taiwan.
Systems Business:
- -- Introduced the new version 3.0 Firmware upgrade for the FS-100
Portable Direct To Edit(R) (DTE) Recorder giving the users
enhanced workflow features.
- -- On January 30, 2007 we announced that the editors of Videomaker
Magazine recognized FS-100 as the Year's Best Hard Drive Recorder.
Investor Conference Call
The company will host a shareholder conference call to discuss the
fourth quarter 2006 results on March 1, 2007 at 1:30 p.m. Pacific
Time, after which management will host a question and answer session.
The call is being webcast and can be accessed from the Focus
Enhancements web site at www.focusinfo.com. The webcast will be
available through April 1, 2007. For those without Internet access,
the telephone dial-in number is 706-634-0182 for domestic and
international participants. Participants should dial in five to ten
minutes prior to the beginning of the call at 1:30 p.m. PT (4:30 p.m.
ET). A telephone replay will be available through March 5, 2007; dial
706-645-9291, and enter access code 8624965.
About Focus Enhancements, Inc.
Focus Enhancements, Inc. (NASDAQ CM:FCSE), headquartered in
Campbell, CA, is a leading designer of world-class solutions in
advanced, proprietary video and wireless video technologies. The
company's Semiconductor Group develops integrated circuits (ICs) for
high-performance applications in the video convergence market,
including IPTV set-top boxes and portable media players. Focus
Enhancements is currently developing a wireless IC chip set based on
the WiMedia UWB standard and designed to be compatible with Wireless
USB, and used in personal computer (PC), consumer electronics (CE),
and mobile electronics applications. The company's Systems Group
develops video products for the digital media markets, with customers
in the broadcast, video production, digital signage and digital asset
management 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.
Use of Non-GAAP Financial Information
To supplement the company's condensed consolidated financial
statements presented in accordance with GAAP, Focus Enhancements uses
non-GAAP measures of certain components of financial performance,
including net loss and net loss per share data, which are adjusted
from results based on GAAP to exclude certain expenses. These non-GAAP
measures are provided to enhance investors' overall understanding of
the company's current financial performance and the company's
prospects for the future. Specifically, the company believes the
non-GAAP results provide useful information to both management and
investors by excluding certain expenses that may not be indicative of
its core operating results. These measures should be considered in
addition to results prepared in accordance with GAAP, but should not
be considered a substitute for, or superior to, GAAP results. These
non-GAAP measures included in this press release have been reconciled
to the GAAP results.
Safe Harbor Statement
Statements in this press release which are not historical,
including statements regarding management's intentions, hopes,
expectations, representations, plans or predictions about the future
are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements include
statements regarding management's expectations of funding requirements
in 2007, demand for Focus Enhancements' products, which impacts
revenue, gross margin percentage and cash from operations,
management's plans to complete its semiconductor chip designs, move
its technology to silicon, and the performance of its technology,
including UWB in silicon. Because these forward-looking statements
involve risks and uncertainties, there are important factors that
could cause our actual results to differ materially from those in the
forward-looking statements. Factors that could cause actual results to
differ materially include customers' acceptance of recently introduced
products, changes in customer order patterns, unforeseen increased
costs and delays in research and development, the company's ability to
maintain adequate funding to develop and implement UWB technology, the
ability of the company to migrate its UWB technology to silicon in a
timely manner, the performance and acceptance of its UWB technology
when successfully moved to silicon, and the risk factors specified in
the company's Form 10-K for the year ended December 31, 2005, Forms
10-Q for the quarterly periods ended March 31, 2006, June 30, 2006 and
September 30, 2006, as well as other filings with the SEC. These
statements are based on information as of March 1, 2007 and the
company assumes no obligation to update any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
Focus Enhancements, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Year Ended
------------------- --------------------
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
--------- --------- --------- ----------
Net revenue $ 10,283 $ 6,083 $ 37,478 $ 24,551
Cost of revenue 5,302 3,716 20,259 15,520
--------- --------- --------- ----------
Gross margin 4,981 2,367 17,219 9,031
--------- --------- --------- ----------
Operating expenses:
Sales, marketing and support 2,177 1,710 8,930 6,668
General and administrative 1,143 1,139 4,148 4,059
Research and development 3,759 2,531 12,720 12,791
Amortization of intangible
assets 127 127 508 530
--------- --------- --------- ----------
7,206 5,507 26,306 24,048
--------- --------- --------- ----------
Loss from operations (2,225) (3,140) (9,087) (15,017)
Interest expense, net (595) (124) (1,423) (298)
Value of derivative security - - (4,000) -
Change in value of
derivative security - - (1,361) -
Other income (expense), net (144) (26) 6 (76)
--------- --------- --------- ----------
Loss before income tax
expense (2,964) (3,290) (15,865) (15,391)
Income tax expense (benefit) 49 (33) 58 (23)
--------- --------- --------- ----------
Net loss $ (3,013) $ (3,257) $(15,923) $ (15,368)
--------- --------- --------- ----------
Net loss per share
Basic and diluted $ (0.04) $ (0.05) $ (0.23) $ (0.25)
Weighted average number of shares used
in per share calculations:
Basic and diluted 70,452 65,413 69,071 61,664
Focus Enhancements, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
December 31, December 31,
2006 2005
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 5,969 $ 637
Accounts receivable, net of allowances of
$304 in 2006 and $418 in 2005 4,188 3,197
Inventories 4,072 3,743
Prepaid expenses and other current assets 1,207 759
------------ ------------
Total current assets 15,436 8,336
Property and equipment, net 980 1,212
Other assets 187 54
Intangible assets, net 186 866
Goodwill 13,191 13,191
------------ ------------
$ 29,980 $ 23,659
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 3,424 $ 3,001
Accrued liabilities 3,702 3,292
Current portion of capital lease
obligations 10 107
Borrowings under line of credit 3,390 2,966
Current portion of notes payable to bank - 3
Term loan 2,500 2,500
------------ ------------
Total current liabilities 13,026 11,869
Convertible notes 10,946 -
Other liabilities - 100
Capital lease obligations, net of current
portion - 10
------------ ------------
Total liabilities 23,972 11,979
------------ ------------
Stockholders' equity:
Preferred stock, $0.01 par value;
authorized 3,000,000 shares; 3,161 shares
issued and outstanding at December 31,
2006 and 2005, respectively (aggregate
liquidation preference $3,917) - -
Common stock, $0.01 par value; 150,000,000
shares authorized, 73,210,870 and
68,382,113 shares issued and outstanding
at December 31, 2006 and 2005,
respectively 722 674
Treasury stock at cost, 497,055 shares at
December 31, 2006 and 2005, respectively (750) (750)
Additional paid-in capital 111,203 101,297
Deferred stock-based compensation - (214)
Accumulated other comprehensive income 130 47
Accumulated deficit (105,297) (89,374)
------------ ------------
Total stockholders' equity 6,008 11,680
------------ ------------
$ 29,980 $ 23,659
============ ============
*T
- -0-
*T
Focus Enhancements, Inc.
Selected Business Segment Data
(In thousands)
(Unaudited)
Revenue: Three Months Ended Year Ended
- -------------------------------------------------- -------------------
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
---------------------------------------
Systems Business $ 7,186 $ 4,972 $ 25,042 $ 21,148
Semiconductor Business 3,097 1,111 12,436 3,403
--------- --------- --------- ---------
Net Revenue $ 10,283 $ 6,083 $ 37,478 $ 24,551
========= ========= ========= =========
Research and Development: Three Months Ended Year Ended
- -------------------------------------------------- -------------------
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
---------------------------------------
Systems Business $ 923 $ 762 $ 3,159 $ 3,596
Semiconductor Business 2,836 1,769 9,561 9,195
--------- --------- --------- ---------
Total Research and
Development $ 3,759 $ 2,531 $ 12,720 $ 12,791
========= ========= ========= =========
Reconciliation of Net Loss to Non-GAAP Net Loss
(In thousands)
(Unaudited)
Three Months Ended Year Ended
------------------- --------------------
December December December December
31, 2006 31, 2005 31, 2006 31, 2005
----------------------------------------
Net loss, as reported $ (3,013) $ (3,257) $(15,923) $ (15,368)
Plus:
Stock-based compensation 168 17 662 122
Value of derivative
liability - - 4,000 -
Change in value of
derivative liability - - 1,361 -
--------- --------- --------- ----------
Net loss, non-GAAP $ (2,845) $ (3,240) $ (9,900) $ (15,246)
========= ========= ========= ==========
--------- --------- --------- ----------
Net loss per share, non-GAAP
(basic and diluted) $ (0.04) $ (0.05) $ (0.14) $ (0.25)
========= ========= ========= ==========
Weighted average common and
common equivalent shares -
basic and diluted 70,452 65,413 69,071 61,664
CONTACT: Focus Enhancements Investors:
Lippert/Heilshorn & Assoc.
Mary Magnani, 415-433-3777
mmagnani@lhai.com