Arel Communications and Software Ltd. Reports Third Quarter 2005 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 ) ("Arel" or "the Company"), a technology leader in universal voice, video and data communications data communications, application of telecommunications technology to the problem of transmitting data, especially to, from, or between computers. In popular usage, it is said that data communications make it possible for one computer to "talk" with another. for interactive conferencing See teleconferencing. , collaboration Working together on a project. See collaborative software. and training applications, reported results for the third quarter ended September September: see month. 30, 2005. Revenues from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter were: $1,126,000 versus $836,000 in the second quarter of 2005, and $708,000 in the third quarter of 2004. Net loss for the quarter was $(1,455,000), or $(0.11) per share, versus a loss of $(134,000), or $(0.01) per share, in the second quarter of 2005 and a net loss of $(1,427,000), or $(0.11) per share in the third quarter of 2004. The quarter's results include a one time capital gain of $125,000 or $0.01 per share, from the sale of the Company's investment in Airspan Airspan (NASDAQ:AIRN) is a [WIMAX] equipment manufacturer founded in 1998 with an R&D facility in the UK. The first product, AS4020 platform, was based on CDMA radio technology adapted for fixed wireless access and was a market success especially in developing markets. Networks, Inc. As part of the Company's decision to divest To deprive or take away. Divest is usually used in reference to the relinquishment of authority, power, property, or title. If, for example, an individual is disinherited, he or she is divested of the right to inherit money. its subsidiary Arel Learning Solutions Inc. ("ALS Als (äls), Ger. Alsen, island, 121 sq mi (313 sq km), Sønderjylland co., S Denmark, in the Lille Bælt, separated from the mainland by the narrow Alensund. ") business before 2005 year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. , the operations of ALS are considered assets held for sale and are presented at the financial statements as discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. . Total revenues including ALS results were: $1,346,000 for the third quarter 2005, $1,080,000 for the second quarter 2005, and $1,038,000 for the third quarter 2004. Philippe Szwarc, chief executive officer of Arel, stated, "During the third quarter, Arel continued to make progress in capturing our early stage opportunities in the rich media conferencing and collaboration market. We signed a new license sale with a large US beverage company, and began working with Microsoft (Microsoft Corporation, Redmond, WA, www.microsoft.com) The most successful and influential software company. Microsoft's software and Intel's hardware pioneered the PC and revolutionized the computer industry. to offer Arel Anyware, a powerful tool that adds multi-point video and voice over IP to the Microsoft Office Live Meeting Microsoft Office Live Meeting is a web conferencing service operated by Microsoft. Live Meeting includes software that is installed on client PCs, and uses a central server for all clients to connect to. platform. These strides in both direct sales and in expanding our strategic partnerships with larger vendors further extend Arel's penetration of and access to large enterprise customer targets. Through careful cost control, we were also able to moderately narrow our loss from continuing operations versus last year." Mr. Szwarc concluded, "We are proud of the progress we have made in building traction Traction Definition 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. in the nascent nascent /nas·cent/ (nas´ent) (na´sent) 1. being born; just coming into existence. 2. just liberated from a chemical combination, and hence more reactive because uncombined. rich-media conferencing and collaboration market. While strategically and operationally meaningful, the successes we have enjoyed to date have not yet translated into sustainable revenue and profit growth. As we have repeated for the past several quarters, Arel continues to bear all the characteristics of a startup company The creator of this article, or someone who has substantially contributed to it, may have a conflict of interest regarding its subject matter. It may require cleanup to comply with Wikipedia's content policies, particularly neutral point of view. pioneering a new, disruptive disruptive /dis·rup·tive/ (-tiv) 1. bursting apart; rending. 2. causing confusion or disorder. market segment and remains subject to the challenges of early stage development: unpredictable quarterly results, including return quarterly net losses; long sales cycles punctuated by an inconsistent flow of both small and large deal wins; and the need for additional investment to build an infrastructure to leverage growth opportunities, leading to negative quarterly cash flow. Given these circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or and our anticipated cash needs, Arel has determined that it is imprudent im·pru·dent adj. Unwise or indiscreet; not prudent. im·pru  dent·ly adv. to continue to support the costs of
being a public company or to rely on public markets for financing.
Therefore, we have undertaken a privatization privatization: see nationalization. privatization Transfer of government services or assets to the private sector. State-owned assets may be sold to private owners, or statutory restrictions on competition between privately and publicly owned process in order to devote Arel's valuable resources solely to the growth opportunities that Arel's Spotlight Spotlight can refer to at least three types of lighting:
Revenues for the first nine months of 2005 from continuing operations were $2,448,000 versus $2,724,000 in the first nine months of 2004. Net loss for the first nine months of 2005 was $(3,188,000), or $(0.24) per share, versus $(3,494,000), or $(0.26) per share, for the first nine months of 2004. 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: 2116473 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 of the on-line broadcast will be available on the website. About Arel Communications and Software: Arel Communications and Software is a leader in conferencing and collaboration solutions. Arel is focused on enhancing communications, facilitating workgroup Two or more individuals who share files and databases. Local networks (LANs) are designed to provide electronic sharing of data within workgroups. In general, products designed for workgroups support approximately 50 people, whereas departmental devices support several hundred, and collaboration and driving productivity in the enterprise. By providing a comprehensive application suite, Arel Spotlight(TM), for leveraging enterprise networks for rich-media communications, Arel replicates in-person adj. 1. undertaken by an individual in person; as, an in-person appearance s>. Adj. 1. in-person - an appearance carried out personally in someone else's physical presence; "he carried out the negotiations in person"; "a meetings in the online environment. Arel's newest solution, Arel Anyware, is an audio-visual au·di·o-vis·u·al also au·di·o·vis·u·al adj. 1. Both audible and visible. 2. Abbr. AV Of or relating to materials, such as films and tape recordings, that present information in audible and pictorial form: plug-in An auxiliary program that works with a major software package to enhance its capability. For example, plug-ins are widely used in image editing programs such as Photoshop to add a filter for some special effect. that establishes true "face-to-face (jargon, chat) face-to-face - (F2F, IRL) Used to describe personal interaction in real life as opposed to via some digital or electronic communications medium. " meetings over the internet. Requiring only a webcam for full-featured video operability Operability is the ability to keep a system in a functioning and operating condition. In a computing systems environment with multiple systems this includes the ability of products, systems and business processes to work together to accomplish a common task such as finding and , users can add video conferencing See videoconferencing. (communications) video conferencing - A discussion between two or more groups of people who are in different places but can see and hear each other using electronic communications. to any web or IM/Presence application (such as Microsoft(R) Office Live Meeting(TM)). Combining voice, video and data conferencing Sharing data interactively among several users in different locations. Data conferencing is made up of whiteboards and application sharing and are often used in conjunction with an audio or videoconferencing connection. in one easy-to-use Web-based solution, Arel fosters interactive communications that significantly improve work environments today. Arel's solutions impact 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. Allowing geographically 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. users to work together in groups, attend webinars and panel discussions, participate in training courses, and have one-on-one one-on-one adj. 1. Consisting of or being direct communication or exchange between two people: one-on-one instruction. 2. Sports Playing directly or exclusively against a single opponent. meetings with customers or colleagues, from virtually anywhere, Arel Spotlight is a powerful tool for critical business communications. For more information, visit 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 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. All trademarks recognized.
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December
------------------- 31,
2005 2004 2004
--------- --------- ---------
(Unaudited) (Audited)
------------------- ---------
U.S. $ in thousands
-----------------------------
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents 1,521 4,233 3,123
Short-term investments 100 698 704
Accounts receivable:
Trade 2,462 4,378 1,681
Other 449 595 484
Investment in ArelNet Ltd. - 548 1,070
Inventories 696 801 791
Assets of discontinued operations 200 - -
--------- --------- ---------
T o t a l current assets 5,428 11,253 7,853
--------- --------- ---------
SEVERANCE PAY FUNDS 462 548 601
PROPERTY AND EQUIPMENT, NET 258 435 352
OTHER ASSETS 30 83 86
--------- --------- ---------
T o t a l assets 6,178 12,319 8,892
========= ========= =========
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Short-term bank credit and current
maturities of long-term loan - 35 -
Accounts payable and accruals:
Trade 499 663 332
Deferred revenues 587 1,519 104
Employees related obligations 685 722 709
Other 1,035 3,044 1,894
Liabilities of discontinued operations 265 -
--------- --------- ---------
T o t a l current liabilities 3,071 5,983 3,039
--------- --------- ---------
LONG-TERM LIABILITIES:
Long-term loan from related party 1,500 - -
Income tax payable 735 - 1,068
Accrued severance pay liability 704 779 840
--------- --------- ---------
T o t a l long-term liabilities 2,939 779 1,908
--------- --------- ---------
T o t a l liabilities 6,010 6,762 4,947
--------- --------- ---------
SHAREHOLDERS' EQUITY:
Share capital 4 4 4
Additional paid-in capital 54,271 54,271 54,271
Accumulated other comprehensive income - 423 945
Accumulated deficit (54,107) (49,141) (51,275)
--------- --------- ---------
168 5,557 3,945
--------- --------- ---------
T o t a l liabilities and
shareholders' equity 6,178 12,319 8,892
========= ========= =========
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended Three moths ended
September 30 September 30
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
(Unaudited) (Unaudited)
----------------- -----------------
U.S. $ in thousands, except loss
per share
REVENUES:
Sales 1,599 1,755 883 291
Services 849 969 243 417
-------- -------- -------- --------
2,448 2,724 1,126 708
Cost of sales and services 1,056 1,171 512 257
-------- -------- -------- --------
Gross profit 1,392 1,553 614 451
Research and development expenses
- net 1,845 1,458 628 458
Selling, general and
administrative expenses 4,335 3,817 1,486 1,417
Income from settlement with W2COM - 411 - -
-------- -------- -------- --------
Operating loss (4,788) (3,311) (1,500) (1,424)
Financial income (expenses) - net 26 (13) (27) (3)
Capital gain from sale of
investment in ArelNet Ltd 1,331 - - -
Capital gain from sale of
investment in Airspan Networks
Inc shares 125 - 125 -
-------- -------- -------- --------
Net loss before income tax benefit (3,306) (3,324) (1,402) (1,427)
Income tax benefit 228 - - -
-------- -------- -------- --------
Loss from continuing operations (3,078) (3,324) (1,402) (1,427)
======== ======== ======== ========
Discontinued operations: Loss on
disposal of segment (110) (170) (53) (41)
-------- -------- -------- --------
Net loss for the period (3,188) (3,494) (1,455) (1,468)
======== ======== ======== ========
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended Year ended
September 30 December 31,
----------------- -------------
2005 2004 2004
-------- -------- -------------
(Unaudited) (Audited)
----------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations (3,078) (3,324) (5,438)
Adjustments required to reconcile
loss from continuing operations to
net cash used in operating
activities from continuing
operations: (110) (170) (190)
Loss from discontinued operation
Depreciation and amortization of
property and equipment 103 179 224
Capital gain on sale of property and
equipment 1 - 59
Capital gain on sale of investment
in ArelNet Ltd. (1,331) - -
Capital gain on sale of investment
in Airspan's shares. (125) - -
Trading marketable securities, net 127 39 34
Allowance for doubtful accounts (40) 115 363
Accrued employee rights up on
retirement - net 3 (160) (152)
Other - net 2 (2) (8)
Changes in operating asset and
liability items:
Decrease (increase) in trade
receivables (before allowance for
doubtful accounts) (884) (1,395) 1,054
Decrease (increase) in other
accounts receivable 121 19 215
Decrease (increase) in inventories 89 (267) (257)
Increase (decrease) in trade
payables 229 174 (157)
Increase (decrease) in deferred
revenues 483 1,225 (190)
Increase (decrease) in employees
related obligations (16) 116 (172)
Increase (decrease) in other
Accounts payable and accruals
(including long-term) (641) (90) 103
-------- -------- -------------
Net cash used in operating activities
from continuing operations (5,067) (3,541) (4,512)
-------- -------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term bank deposits - net 477 3,869 3,868
Purchase of property and equipment (43) (198) (214)
Proceeds from sale of property and
equipment 28 5 -
Sale of investment in ArelNet Ltd.
(including Airspan's shares) 1,495 - -
Collection of long-term loan to an
employee 6 6 9
Amounts carried from (to) other
assets 2 93 7
-------- -------- -------------
Net cash provided by (used in)
investing activities 1,965 3,775 3,670
-------- -------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term loan from
related party 1,500 - -
Repayment of long-term loan - (14) (48)
Issuance of share capital - 78 78
Exercise of options - 38 38
-------- -------- -------------
Net cash provided by (used in)
financing activities 1,500 102 68
-------- -------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,602) 336 (774)
BALANCE OF CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 3,123 3,897 3,897
-------- -------- -------------
BALANCE OF CASH AND CASH EQUIVALENTS
AT END OF PERIOD 1,521 4,233 3,123
======== ======== =============
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