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| Aureal Wins Lawsuit - Fourth Quarter Adversely Impacted by Costs Financial Resources Stretched - Aureal Seeking Capital |
| Fremont,
CA – March 23, 2000 – (OTC Bulletin Board: AURL) Aureal Inc., a leader in
digital audio imaging, today announced its financial results for the fourth quarter of
1999 ended January 2, 2000. Revenues for the quarter were $8.5 million, down from $11.2
million in the third quarter and $10.8 million in the year-ago fourth quarter. Revenues
for the full year 1999 totaled $40.3 million, a 59% increase over the $25.3 million
recognized in 1998. "A 59% increase in revenues year-to-year is an accomplishment to be very proud of – our team has done an outstanding job of expanding the company," said Kip Kokinakis, President and CEO of Aureal. "While we can reflect on that success, we also recognize that during the fourth quarter the patent litigation with Creative and trial process distracted us. To fight and win a lawsuit of such magnitude was a major undertaking for a company our size, and it didn’t come without significant costs. Both our people and financial resources were stretched, especially during the fourth quarter, and that impacted our efforts to further expand the reach of our products. In addition, Rich Christopher, a member of our board of directors has elected to step down from our board at this time." Fourth quarter operations generated a net loss of $9.5 million compared to a loss of $3.5 million in the fourth quarter of 1998. The year-to-date loss for 1999 was $26.9 million, compared to a loss of $18.5 million for 1998. Legal expenses attributable to the patent litigation exceeded $6.4 million in 1999, an increase of over $6 million from the prior year. After adjustment for the stock rights offering and reverse stock split in June 1999, the losses per share for 1999 totaled $3.67 ($0.95 for the fourth quarter) compared to $11.78 for 1998 ($1.62 for the fourth quarter). 1998 results included $15.5 million of preferred stock accretion for the year compared to only $1.5 million of such costs in 1999. "Unfortunately, even when you’re right and you win in court, it can have a huge impact on your business," said David Domeier, Senior VP Finance and CFO of Aureal. "We can’t measure the impact of the trial process and attendant market disruption on our sales for the quarter or the year, but we know the customers were confused by what was going on. We lost sales and incurred substantial costs in preparing for and fighting the case in court." Gross margin percentages for the fourth quarter and full year 1999 were consistent at 34% and 35% respectfully, compared to 30% for both the fourth quarter and full year 1998. All major expense categories were up for 1999 compared to 1998 reflecting the growth in sales, the number of new products developed and introduced during the year, and the significant increase in legal costs for the year. Research and development costs declined in the fourth quarter, compared to the third quarter, following completion of specific projects and the reduction of staff and related expenditures. "Our financial resources are severely stretched to the point that we must seek an immediate capital infusion to continue our business," continued Kokinakis. To that end, we have held discussions with multiple parties regarding a potential sale of our company or a significant capital infusion. Such discussions are continuing at this time, but there is no assurance that we will complete a transaction. Our largest shareholder has stepped in to provide interim funding through its acquisition from our prior lenders of, and funding under, our existing credit facility, although there is no assurance that this will continue." About Aureal Aureal is a leading provider of advanced audio solutions for the computer, entertainment, Internet, and professional audio markets. The company designs, builds and distributes advanced audio semiconductor, audio card and software solutions for personal computers through the OEM, integrator/reseller/VAR and direct-to-customer channels. Aureal also licenses technology designed to define and improve advanced audio standards in the marketplace. Aureal’s significant customers include Compaq Computer Corporation, Dell Computer Corporation, IBM Personal Systems Group, Micron Electronics and Sony Electronics. Aureal’s award-winning product line includes A3D positional audio technology, Vortex audio processors, Vortex-based sound cards and A3D Pro sound design software. For more information on Aureal or our products and industry leading audio technologies, please visit our websites at www.aureal.com and www.a3d.com. Forward-Looking Statements NOTE: Aureal, the Aureal logo, A3D, and A3D Pro are
trademarks, and Vortex is a registered trademark of Aureal Inc. Other names may be
trademarks of their respective owners. Aureal, Inc.
Year-end 1999 Financial Information
(dollars in thousands, except per share amounts)
Twelve Months Ended Three Months Ended
January 2, January 3, January 2, January 3,
2000 1999 2000 1999
(Unaudited)
Condensed Consolidated Statements of Operations
Sales $40,257 $25,328 $8,463 $10,775
Gross Profit 14,195 7,520 2,855 3,183
Operating Expenses:
Research and
Development 15,994 11,817 3,682 3,269
Sales and Marketing 11,097 6,373 3,372 1,878
General and
Administrative 10,906 3,820 4,905 952
Total Operating
Expenses 37,997 22,010 11,959 6,099
Operating Loss (23,802) (14,490) (9,104) (2,916)
Interest Expense
and Other (3,132) (4,016) (418) (560)
Net Loss $(26,934) $(18,506) $(9,522) $(3,476)
Accretion/Dividends
on Preferred Stock (1,495) (15,519) (4) (1,507)
Loss Attributable
to Common
Stockholders $(28,429) $(34,025) $(9,526) $(4,983)
Basic Loss per Share
Attributable to
Common Stockholders $(3.67) $(11.78) $(0.95) $(1.62)
January 2, January 3,
2000, 1999
Condensed Consolidated Balance Sheets
Current Assets $14,991 $10,471
Property and Equipment 2,881 2,480
Other Long-term Assets 327 687
Total Assets $18,199 $13,638
Current Liabilities $25,890 $14,057
Long-term Liabilities 22 889
Total liabilities 25,912 14,946
Stockholders' Equity (Deficit) (7,713) (1,308)
Total Liabilities and
Stockholders' Equity (Deficit) $(18,199) $(13,638)
Number of Common Shares
Outstanding (adjusted for
1-for-15 reverse stock split
on June 10, 1999) 10,389 3,178
SOURCE: Aureal, Inc. Public Relations: Eldy Nodal-Pato (Aureal) Investor Relations: David J. Domeier (Aureal) |
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