Arel Communications and Software Ltd. Reports Fourth Quarter 2004 Results.ATLANTA Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. -- Arel Communications and Software Ltd. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ARLC ARLC Automatic Revolving Letter of Credit ), technology leader in universal voice, video and data web communication for interactive conferencing/collaboration and training applications, reported results for the fourth quarter ended December December: see month. 31, 2004. Revenue for the fourth quarter was $555,000 versus $1.0 million in the third quarter of 2004 and $3.1 million in the fourth quarter of 2003. Net loss for the quarter was $(2.1) million, or $(0.16) per share versus $(1.5) million, or $(0.11) per share in the third quarter of 2004 and a net income of $303,000, or $0.02 per share, in the fourth quarter of 2003. Philippe Szwarc, chief executive officer of Arel, stated, "Arel's fourth quarter financial results reflect the still-nascent stage of the rich-media conferencing See teleconferencing. and collaboration Working together on a project. See collaborative software. market's development as this technology, by its disruptive disruptive /dis·rup·tive/ (-tiv) 1. bursting apart; rending. 2. causing confusion or disorder. nature, takes time to gain acceptance. While not reflected in our financial results, Arel built a lengthening lengthening (lengkˑ·the·ning), n the use of various massage or muscle energy techniques to relax and stretch muscle and connective tissue. string of opportunities over the course of the past year as we gradually grad·u·al adj. Advancing or progressing by regular or continuous degrees: gradual erosion; a gradual slope. n. Roman Catholic Church 1. but steadily began penetration The successful unauthorized breach of a security perimeter. See penetration test. of this new market. During Q4, we increased the number of pilots that will be launched in Q1 to 5, with all of the pilots in place during Q3 either still progressing or converting into sales. Also, we are in the process of being approved for 6 new revenue-generating implementations with new customers that are slated for first-half 2005 deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. , all of which we competed for and won through our superior performance and functionality. Mr. Szwarc concluded, "In 2005, our priorities remain to win prospective customers over to the benefits of rich media collaboration through our worldwide direct sales capability, our ability to access key high-level contacts, our existing strategic partnerships and the development of new partner relationships with other vendors and service providers, and our offering of both enterprise and managed service options. We will also maintain as lean a cost base as possible, while selectively investing in our sales and marketing organization, while a stronger, more consistent revenue stream develops. We see an increasing number of early adopters in industries with heavy technological design and distance collaboration needs embracing rich-media collaboration tools A collaboration tool is something that helps people collaborate. The term is often used to mean collaborative software, but collaboration tools were being used before computers existed, a piece of paper can for example can be used as collaboration tool. , and are enjoying their identification of Arel as the premier provider. Over time, as these early adopters prove the benefits of increasing workstyle collaboration and the exceptional ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). that Arel's Spotlight Spotlight can refer to at least three types of lighting:
Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. as a market leader present competitive advantages that position the company well to capture its significant opportunities in this emerging market." Revenue for the full year 2004 was $4.4 million versus $10.1 million for the full year 2003. Net loss for the full year 2004 was $(5.6) million, or $(0.43) per share, versus net income of $473,000 or $0.04 per share, for 2003. Conference Call Arel's management will host a conference call at 10:00 a.m. ET today to discuss earnings and corporate activity. Please call the following dial-in numbers to participate: United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (888) 527-1593 International Participants (706) 679-7685 Conference ID: 4529653 The public is invited to listen to the live webcast of the conference call. For details, visit Arel's website at www.arelcom.com. An archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. of the on-line broadcast will be available on the website $10 Million Revolving Credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. Line Separately, Arel also announced today that it has entered into a three-year $10 million revolving secured credit line agreement with Cetus Corp., an Ohio Corporation controlled by Mr. Clayton Clayton, city (1990 pop. 13,874), seat of St. Louis co., E central Mo., a suburb of St. Louis; inc. 1919. Developed in the 1960s, it has high-rise office buildings, hotels, and shopping centers; several major firms are headquartered there. L. Mathile, Arel's principal shareholder. About Arel Communications and Software: Arel Communications and Software, a technology leader in interactive web communications, develops, markets and sells a universal conferencing software solution for enterprise-wide deployment of integrated voice, video and data web conferencing/collaboration and training applications. Designed around Arel's Integrated Conferencing Platform(TM)(ICP (1) (Internet Cache Protocol) A protocol used by one proxy server to query another for a cached Web page without having to go to the Internet to retrieve it. See CARP and proxy server. ) core software, the Arel Spotlight(TM) application suite facilitates collaboration for key business processes such as corporate and marketing communications Marketing communications (or marcom) are messages and related media used to communicate with a market. Those who practice advertising, branding, direct marketing, graphic design, marketing, packaging, promotion, publicity, sponsorship, public relations, sales, sales , distance learning, product development, customer relationship management, and supply chain management by allowing dispersed dis·perse v. dis·persed, dis·pers·ing, dis·pers·es v.tr. 1. a. To drive off or scatter in different directions: The police dispersed the crowd. b. enterprise users to collaborate in real time with synchronized syn·chro·nize v. syn·chro·nized, syn·chro·niz·ing, syn·chro·niz·es v.intr. 1. To occur at the same time; be simultaneous. 2. To operate in unison. v.tr. 1. voice, video and data. Arel's scaleable, secure, and network-friendly universal conferencing solution is becoming the choice solution for large enterprises moving from 'off-network' pay per usage services to 'on-network' solutions for greater control, cost-savings and integration with internal systems. www.arelcom.com. Certain statements made herein that are not historical are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The words "estimate", "project", "intend", "expect", "believe", "hopeful" and similar expressions are intended to identify forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to the Company's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for the Company's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with the Company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and its location in Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. . For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission. (tables to follow) All trademarks recognized.
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31
-----------------
2004 2003
-------- --------
U.S. dollars in
thousands
Assets
CURRENT ASSETS:
Cash and cash equivalents 3,123 3,897
Short-term investments 704 4,106
Accounts receivable:
Trade 1,681 3,098
Other 484 614
Investment in ArelNet Ltd. 1,070 630
Inventories 791 534
-------- --------
Total current assets 7,853 12,879
-------- --------
SEVERANCE PAY FUNDS 601 483
-------- --------
PROPERTY AND EQUIPMENT, NET 352 421
-------- --------
OTHER ASSETS 86 683
-------- --------
Total assets 8,892 14,466
======== ========
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Current maturities of long-term loan - 52
Accounts payable and accruals:
Trade 332 489
Deferred revenues 104 294
Employees related obligations 709 606
Other 1,894 3,134
-------- --------
Total current liabilities 3,039 4,575
-------- --------
LONG-TERM LIABILITIES:
Income tax payable 1,068 -
Accrued severance pay liability 840 874
-------- --------
Total long-term liabilities 1,908 874
-------- --------
Total liabilities 4,947 5,449
-------- --------
SHAREHOLDERS' EQUITY :
Ordinary shares of NIS 0.001 par value
(authorized: December 31, 2004 and December 31,
2003 - 30,000,000; issued and outstanding:
December 31, 2004 - 13,241,916 shares and
December 31, 2003 - 13,055,739 shares) 4 4
Additional paid-in capital 54,271 54,155
Accumulated other comprehensive income 945 505
Accumulated deficit (51,275) (45,647)
-------- --------
Total shareholders' equity 3,945 9,017
-------- --------
Total liabilities and shareholders'
equity 8,892 14,466
======== ========
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Year ended
December 31 December 31
2004 2003 2004 2003
------------------------------------
U.S. dollars in thousands (except
per share data)
Revenues from sales and services 555 3,055 4,386 10,118
Cost of sales and services 380 1,082 2,239 3,701
------- ------- ------- -------
Gross profit 175 1,973 2,147 6,417
Research and development expenses
- net 430 425 1,888 1,591
Selling, general and
administrative Expenses 1,829 1,237 6,213 4,195
Income from settlement with W2COM - - 411 -
------- ------- ------- -------
Operating income (loss) (2,084) 311 (5,543) 631
Financial income (expenses)- net (50) (8) (85) (158)
------- ------- ------- -------
Income (loss) for the period (2,134) 303 (5,628) 473
======= ======= ======= =======
Basic and diluted income (loss)
per share $(0.16) $0.02 $(0.43) $0.04
======= ======= ======= =======
Weighted average number of shares
used in computation of earning
(loss) per share (in thousands):
Basic 13,241 13,056 13,170 13,056
======= ======= ======= =======
Diluted 13,241 13,783 13,170 13,383
======= ======= ======= =======
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended
December 31
2004 2003
--------------
U.S. dollars
in thousands
--------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) for the year (5,628) 473
Adjustments required to reconcile income (loss)
to net cash used in operating activities:
Depreciation and amortization of property and
equipment 224 318
Capital loss on sale of property and equipment 59 -
Employee stock-based compensation - 20
Trading marketable securities, net 34 2
Allowance for doubtful accounts 363 (24)
Accrued employee rights upon retirement - net (152) 20
Other, net (8) (17)
Changes in operating asset and liability items:
Decrease (increase) in trade receivables (before
allowance for doubtful accounts) 1,054 (619)
Decrease (increase) in other accounts receivable 215 (180)
Decrease (increase) in inventories (257) 634
Decrease in trade payables (157) (312)
Decrease in deferred revenues (190)(1,871)
Increase (decrease) in employees related
obligations 103 (140)
Decrease in other accounts payable and accruals (172) (129)
------- ------
Net cash used in operating activities (4,512)(1,825)
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term bank deposits, net 3,868 (3,969)
Long-term bank deposit - (500)
Purchase of property and equipment (214) (78)
Proceeds from disposal of property and equipment - 29
Collection of long-term loan to an employee 9 9
Amounts carried to other assets 7 (100)
------- ------
Net cash provided by (used in) investing activities 3,670 (4,609)
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of share capital 78 -
Exercise of options 38 -
Repayment of long-term loan (48) (12)
Short-term bank credit - net - (11)
------- ------
Net cash provided by (used in) financing activities 68 (23)
------- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (774)(6,457)
BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF
YEAR 3,897 10,354
------- ------
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF YEAR 3,123 3,897
======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - CASH
PAID DURING THE YEAR FOR:
Interest 2 -
======= ======
Income taxes 220 30
======= ======
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