Arel Communications and Software Reports Third 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 (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 third quarter ended September September: see month. 30, 2004. Revenue for the third quarter was $1.0 million versus $1.8 million the second quarter of 2004 and $2.6 million in the third quarter of 2003. Net loss for the quarter was $(1.5) million, or $(0.11) per share, versus net loss of $(0.98) million, or $(0.07) per share, in the second quarter of 2004 and a net income of $361,000, or $0.03 per share, in the third quarter of 2003. Total deferred revenue in the quarter was $1.5 million, of which $1.3 million is associated with a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. multi-million dollar contract for which the 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. schedule has recently been finalized See finalization. . Philippe Szwarc, chief executive officer of Arel, stated, "During the third quarter, we successfully extended our market penetration Noun 1. market penetration - the extent to which a product is recognized and bought by customers in a particular market penetration - the act of entering into or through something; "the penetration of upper management by women" , expanding contracts with 2 customers, adding one new customer, completing 5 pilot projects, and winning positions on the "short list" for a number of new potential deals out for bid. Additionally, the deployment schedule for our previously mentioned contract with a major North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. retailer was just recently finalized. Pending a stronger revenue ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale , we are maintaining a constant cost base and selectively investing in our sales and marketing organization. "The rich media collaboration Working together on a project. See collaborative software. conferencing See teleconferencing. market remains in its 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. stage, with early adopters already embracing the unique benefits and superior 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). of Arel's Spotlight Spotlight can refer to at least three types of lighting:
adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d to facilitate conversion of these prospective customers through our worldwide direct sales capability supplemented by strategic partnerships and the development of new partner relationships, offering potential new key accounts both enterprise and managed service options. Mr. Szwarc concluded, "While top-line growth and sustained profitability remain our primary objectives, quarterly sales continue to be affected by lengthy and unpredictable sales cycles. Even so, we continue to increase our pipeline of business, reaffirming Arel's large market prospects. Arel's superior, unique communications tools solution, its liquid, debt-free balance sheet, and expanding geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. create a competitive advantage that positions the company well to capture its significant opportunities in this emerging market." Revenue for the first nine months of 2004 was $3.8 million versus $7.1 million in the first nine months of 2003. Net loss for the first nine months of 2004 was $(3.5) million, or $(0.26) per share, versus net income of $170,000 or $0.01 per share, for the same period in 2003. Conference Call Arel's management will host a conference call at 10:00 a.m. ET 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: 1759228 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. 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.
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED BALANCE SHEETS
September December
30, 31,
--------------------
2004 2003 2003
----------- -------- --------
(Unaudited) (Audited)
-----------------------------
U.S. $ in thousands
-----------------------------
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents 4,233 2,369 3,897
Short-term investments 698 6,116 4,106
Accounts receivable:
Trade 4,378 2,929 3,098
Other 595 714 614
Inventories 801 931 534
----------- -------- --------
T o t a l current assets 10,705 13,059 12,249
----------- -------- --------
INVESTMENT IN AREL NET LTD. 125 125 125
----------- -------- --------
PROPERTY, PLANT AND EQUIPMENT:
Cost 1,974 2,191 2,085
L e s s - accumulated depreciation 1,539 1,697 1,664
----------- -------- --------
435 494 421
----------- -------- --------
OTHER ASSETS 83 152 683
----------- -------- --------
T o t a l assets 11,348 13,857 13,478
=========== ======== ========
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Short-term bank credit and current
maturities of long-term loan 35 24 52
Accounts payable and accruals:
Trade 663 615 489
Accrued restructuring costs - 92 22
Deferred revenues 1,519 935 294
Other 3,766 3,593 3,718
----------- -------- --------
T o t a l current liabilities 5,983 5,259 4,575
----------- -------- --------
LONG-TERM LIABILITIES:
Liability for employee rights upon
retirement, net of
amount funded 231 362 391
Other - 35 -
----------- -------- --------
T o t a l long-term liabilities 231 397 391
----------- -------- --------
T o t a l liabilities 6,214 5,656 4.966
----------- -------- --------
SHAREHOLDERS' EQUITY:
Share capital 4 4 4
Capital surplus 52,876 52,752 52,760
Warrants and options 1,395 1,395 1,395
Accumulated deficit (49,141) (45,950) (45,647)
----------- -------- --------
T o t a l shareholders' equity 5,134 8,201 8,512
----------- -------- --------
T o t a l liabilities and
shareholders' equity 11,348 13,857 13,478
=========== ======== ========
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months Nine months
ended ended
September 30, September 30,
-----------------------------
2004 2003 2004 2003
------- ----- ------ -----
(Unaudited) (Unaudited)
-----------------------------
$U.S. thousands (except per
share data)
-----------------------------
REVENUES:
Sales 299 1,538 1,828 3,915
Services 738 1,108 2,003 3,148
------- ------ ------ ------
1,037 2,646 3,831 7,063
COST OF SALES AND SERVICES 456 802 1,859 2,619
------- ------ ------ ------
GROSS PROFIT 582 1,844 1,972 4,444
RESEARCH AND DEVELOPMENT EXPENSES - net 458 457 1,458 1,166
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,580 1,116 4,387 2,958
INCOME FROM SETTLEMENT WITH W2COM - - 411 -
------- ------ ------ ------
OPERATING INCOME (LOSS) (1,456) 271 (3,462) 320
FINANCIAL INCOME (EXPENSES) - net (12) 90 (32) (150)
------- ------ ------ ------
INCOME (LOSS) FOR THE PERIOD (1,468) 361 (3,494) 170
======= ====== ====== ======
BASIC AND DILUTED INCOME (LOSS) PER SHARE (0.11) 0.03 (0.26) 0.01
======= ====== ====== ======
AREL COMMUNICATIONS AND SOFTWARE LTD.
(An Israeli Corporation)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months Year
ended ended
September December
30, 31,
---------------------
2004 2003 2003
------ ------ ------
(Unaudited) (Audited)
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) for the period (3,494) 170 473
Adjustments required to reconcile income
(loss) to net cash used in operating
activities:
Depreciation and amortization of property
and equipment 179 254 318
Employee stock-based compensation - 12 20
Allowance for doubtful accounts 115 (28) (24)
Accrued employee rights up on retirement -
net (160) (9) 20
Other - net (2) (4) (17)
Changes in operating asset and liability items:
Increase in trade receivables (before
allowance for doubtful accounts) (1,395) (445) (619)
Decrease (increase) in other accounts
receivable 19 (227) (180)
Decrease (increase) in inventories (267) 237 634
Increase (decrease) in accounts payable and
other accruals 1,425 (1,751)(2,452)
------ ------- ------
Net cash used in operating activities (3,580)(1,791)(1,827)
------ ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (198) (58) (78)
Proceeds from disposal of property and
equipment 5 - 29
Long - term bank deposit - - (500)
Short-term bank deposits - net 3,869 (5,983)(3,969)
Amounts carried from (to) other assets 93 (152) (100)
Collection of long-term loan to an employee 6 4 9
Acquisition of marketable securities (15) (2) (6)
Proceeds from sale of marketable securities 54 6 8
------ ------- ------
Net cash provided by (used in) investing
activities 3,814 (6,185)(4,607)
------ ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term bank credit - net - 3 (11)
Issuance of share capital 78 - -
Exercise of options 38 - -
Discharge of long-term loan (14) (12) (12)
------ ------- ------
Net cash provided by (used in) financing
activities 102 (9) (23)
------ ------- ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 336 (7,985)(6,457)
BALANCE OF CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,897 10,354 10,354
------ ------ -------
BALANCE OF CASH AND CASH EQUIVALENTS AT
END OF PERIOD 4,233 2,369 3,897
====== ======= ======
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