Focus Enhancements, Inc. (NASDAQ:FCSE) a worldwide leader in Ultra
Wideband (UWB) wireless technology, video conversion and digital
media products announced first quarter 2008 financial results.
First Quarter 2008 Financial Results Revenue for the first quarter
of 2008 was $3.9 million, compared to $7.1 million reported for the
same quarter of 2007. The decrease is primarily attributable to
lower Direct To Edit� (DTE) disk recorder sales. Operating expenses
were $6.8 million, compared with $7.3 million in the prior year
period. Research and development (R&D) expenses were $3.6
million, compared to $3.9 million in 2007. Net loss for the first
quarter was $6.0 million, or $0.07 per share, versus a net loss of
$4.4 million, or $0.06 per share, in the same quarter of 2007.
Brett Moyer, president and CEO of Focus Enhancements, stated �We
are clearly disappointed with these first quarter results. Our DTE
recorder sales were impacted by transitioning camcorder technology
at the professional camcorder level. However, as the quarter ended,
we believe our customer�s inventory levels were back in line with
current sales demand and initial second quarter orders indicate the
sales situation is improving. With the successful launch of the new
FS5 DTE recorder and new media asset management (MAM) products at
2008 NAB, we believe our System Business� sales will significantly
increase in subsequent quarters this year when compared to the
first quarter 2008. Our new System Business products concentrate on
expanding file format and multi-platform support across our product
families to establish a continuous workflow and seamless
interoperability platform with popular non-linear editing systems
and video camcorders. Most notably, this has led us to work
together with SONY on developing a customized media server
exclusively for the Sony XDCAM EX� format, that supports Sony�s
powerful new PMW-EX1 camcorder. Additionally, in the Semiconductor
Business, we believe 2008 demand for GPS and portable media player
devices will drive year-over-year growth.� �In February, we took
measures to improve our financial position by aggressively reducing
our costs. We also restructured our debt and raised $9.3 million in
capital to fund UWB development and provide general working
capital. At March 31, 2008, we had $7.7 million in cash and cash
equivalents. We expect third and fourth quarter operating expenses
to be approximately $6.2 million, down from the $6.7 million and
$7.7 million reported in the third and fourth quarters of 2007,
respectively.� �The UWB market continues to develop. We expect
performance to increase substantially as notebook manufactures
begin to embed a native wireless host controller interface (WHCI)
via a PCIe mini card option this fall. This would enable the
desired file transfer speeds approaching 200Mbps versus the current
industry performance averaging less than 40 Mbps in hub and dongles
and validates our development plan to deliver a low cost single
chip CMOS solution in the second quarter of 2009, at a projected
volume price target of sub $7,� concluded Moyer. Highlights from
2008 NAB Show held April 14th to 17th at the Las Vegas Convention
Center: Selected by Sony Electronics to form an alliance to develop
a customized media server that natively supports the Sony XDCAM EX�
Demonstrated ProxSys� PX-100 Media Server for XDCAM EX, which
ingests and organizes media from Sony's PMW-EX1 HD Camcorder with
full metadata continuity and delivers web exports via the
SOAP-based PX Interface Protocol. Enhanced ProxSys PX MAM product
line with improved file-based workflow solutions for broadcast and
video production, post-production, and web-based content delivery
applications. Introduced the MM-1 Universal Media Manager �, which
enables easy creation and distribution of media for enterprises at
an all-inclusive price point. Applications include information
display, digital signage, retail television, as well as private
corporate, hospitality, and government television networks.
Expanded the FS-100 line of Portable DTE recorders for Panasonic P2
users with the 250GB model, which extends recording time in DVCPro
HD full frame and PN modes to up to 11 hours. Showcased the
soon-to-be released, ultra-portable FS-5 DTE recorder with advanced
features enabling wireless metadata custom logging via a laptop,
smartphone or other WiFi capable device for use with DV and HDV
cameras. Investor Conference Call The company will host a
shareholder conference call to discuss the first quarter 2008
results on May 12, 2008 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 at Focus Enhancements� web site
at www.focusinfo.com. The webcast will be available through August
12, 2008. For those without Internet access, the telephone dial-in
number is 888-816-3972 for domestic and 706-634-0182 for
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 May 14; dial
800-642-1687, and enter access code 46400426. 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 wireless
IC chip set based on WiMedia UWB standard and design as well as
markets portable ICs to the video convergence, portable media,
navigation systems and smartphone markets. The company�s System
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 Securities and
Exchange Commission (SEC) filings, or by visiting the Focus
Enhancements home page at http://www.focusinfo.com. 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 2008, 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, 2007, as well as other
filings with the SEC. These statements are based on information as
of May 12, 2008 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 March 31,2008 �
March 31,2007 � Net revenue $ 3,872 $ 7,087 Cost of revenue � 2,374
� � 3,921 � Gross margin � 1,498 � � 3,166 � � Operating expenses:
Sales, marketing and support 2,160 2,125 General and administrative
1,037 1,097 Research and development 3,584 3,938 Amortization of
intangible assets � - � � 105 � � 6,781 � � 7,265 � Loss from
operations (5,283 ) (4,099 ) Interest expense, net (687 ) (290 )
Other income (expense), net � (10 ) � 3 � Loss before income tax
expense (5,980 ) (4,386 ) Income tax expense � 24 � � - � Net loss
$ (6,004 ) $ (4,386 ) � � Net loss per share Basic and diluted $
(0.07 ) $ (0.06 ) � Weighted average number of shares used in per
share calculations: Basic and diluted 83,686 74,199 Focus
Enhancements, Inc. Condensed Consolidated Balance Sheets (In
thousands, except share and per share amounts) (Unaudited) � �
March 31, � Dec. 31, 2008 2007 Assets � Current assets: Cash and
cash equivalents $ 7,601 $ 1,841 Restricted cash 96 90 Accounts
receivable, net of allowances of $159 and $253, respectively 2,315
4,318 Inventories 3,702 3,957 Prepaid expenses and other current
assets � 1,277 � � 1,130 � Total current assets 14,991 11,336 � �
Property and equipment, net 1,393 1,240 Other assets 151 153
Goodwill � 13,191 � � 13,191 � $ 29,726 � $ 25,920 � � Liabilities
and Stockholders' Equity (Deficit) � Current liabilities: Accounts
payable $ 2,363 $ 3,554 Borrowings under line of credit 6,461 3,600
Current portion of capital lease obligations 93 122 Term loan -
2,500 Accrued compensation 994 872 Accrued liabilities � 3,373 � �
2,722 � Total current liabilities 13,284 13,370 � � Convertible
notes - 11,493 Notes payable 20,800 - Discount on notes payable �
(3,605 ) � - � Total liabilities � 30,479 � � 24,863 � � �
Stockholders' equity (deficit): Preferred stock, $0.01 par value;
authorized 3,000,000 shares; 3,161 shares issued and outstanding at
March 31, 2008 and December 31, 2007, respectively (aggregate
liquidation preference $3,917) - - Common stock, $0.01 par value;
150,000,000 shares authorized, 85,428,194 and 85,248,194 shares
issued and outstanding at March 31, 2008 and December 31, 2007,
respectively 841 841 Treasury stock at cost, 580,323 and 516,667
shares at March 31, 2008 and December 31, 2007, respectively (805 )
(775 ) Additional paid-in capital 127,469 123,392 Accumulated other
comprehensive income 404 257 Accumulated deficit � (128,662 ) �
(122,658 ) � Total stockholders' equity (deficit) (753 ) 1,057 � �
$ 29,726 � $ 25,920 � Focus Enhancements, Inc. Selected Business
Segment Data (In thousands) (Unaudited) � Revenue: Three Months
Ended � March 31,2008 March 31,2007 � Systems Business $ 3,246 $
5,853 Semiconductor Business � 626 � 1,234 Net Revenue $ 3,872 $
7,087 � � Research and Development: Three Months Ended � March
31,2008 March 31,2007 � Systems Business $ 1,145 $ 1,100
Semiconductor Business � 2,439 � 2,838 Total Research and
Development $ 3,584 $ 3,938
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