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USA Video's losses in first quarter nearly triple of last year's
By Robert A. Hamilton - More Articles
Published on 5/17/2001
Mystic — USA Video Interactive reported “essentially no sales” during the first three months of this year, while its spending nearly doubled, leading to a loss of $1.3 million for the quarter, up 148 percent from $523,154 in the same period a year earlier, the company reported.
The company also said that its new StreamHQ product line, which it has been promising would be introduced soon, will not hit the market until at least the third quarter of this year.
In a letter to investors, USA Video President Edwin Molina blamed the company's problems on an overall slowdown in the technology sector, and a shift from a focus on hardware only to a range of services, software and hardware in the streaming video market for the Internet and other computerized applications.
“The change in focus required shifting technical and managerial resources from sales of the old line of products to service-based offerings,” according to the firm's quarterly report. “Additionally, the company was required to make a significant investment in a centralized computer hardware and software infrastructure ... as well as hiring a core sales team on which to build a growing sales organization for the future.”
“We appreciate the patience our shareholders have shown throughout this downtrending market and we appreciate the support and confidence you are showing in our future as we develop a new infrastructure that provides the services, results and accountability our business customers demand,” Molina wrote in his letter.
But investors were not patient on the first full day of trading following the release of the quarterly report to the Securities and Exchange Commission. They pushed the price of the stock down to 53 cents on Wednesday, a drop of 5.5 cents or 9.4 percent for the day.
Because of the bad news on its balance sheet, a market bounce from Tuesday's rate cut by the Federal Reserve bypassed USA Video — the technology-heavy Nasdaq rose almost 81 points, or just under 4 percent, on Wednesday.
According to the quarterly report, the cost of sales dropped dramatically as the market dried up, falling from $101,942 in the first three months of 2000 to $723 during the same period this year. But overall, expenses were considerably higher than a year earlier, rising from $685,923 to $1,304,608 during the just-ended quarter.
Shareholders on some of the Internet message boards devoted to discussions about USA Video are also growing increasingly concerned about the dilution of the value of their shares, as the company issues new shares on a regular basis to satisfy its cash requirements. In the last year, the number of shares has grown from just over 74 million to more than 82 million.
But the quarterly report hints that that trend is far from over. The company needs as much as $3.5 million to finance operations through the end of this year, and it will issue stock to raise that money, it said, which at recent prices could put another 6 million shares on the market. Next year, the company predicts it will need to raise another $5 million to $6 million in capital. |
