SOURCE: Avatar Systems, Inc.

April 18, 2007 08:30 ET

Avatar Systems, Inc. Reports 2006 Results -- 60.4% Increase in Revenues -- 81.9% Increase in Net Income

CEO Provides Earnings Guidance for 2007

FRISCO, TX -- (MARKET WIRE) -- April 18, 2007 -- Avatar Systems, Inc. (OTCBB: AVSY) today announced year end results for 2006 ended December 31, 2006. Revenues for 2006 were $3,655,453 compared to $2,278,404 for 2005 representing a 60.4% increase. All revenue components increased: Software Sales increased 44.3%, Maintenance 55.6%, Professional Services 145.3% and Hardware 26.0%. Net Income for 2006 was $305,757 or $.03/share compared to $168,130 in 2005 or $.02/share. Cost of revenue increased 78.4% to $1,140,486 from $639,449 in 2005. Operating expenses were up $592,160 or 42.7%. Revenues, Cost and Expenses were impacted and affected by the acquisition of Questa Software Systems, Inc. in August of 2006.

Chuck Shreve, President and Chief Executive Officer of Avatar Systems, Inc., commented on the results, "Our performance in 2006 was a reflection of the dedication of our team of employees and the acceptance and demand for our products which has been positively affected by higher oil and natural gas prices. We now have completely integrated the Questa acquisition and expect 2007 to be a year of continued growth for Avatar. We think that the ingredients are in place for Avatar to produce earnings of $.08/share in 2007."

Avatar Systems' Headquarters are in Frisco, Texas, USA with branch offices in Midland and Tyler, TX. The Company provides ERP / Accounting Software and Computing Infrastructure Solutions for companies engaged in the petroleum exploration and production industry. Avatar has a growing customer base on its Petroware2000™, Integra Energy™ products for Microsoft Windows, Avatar400™ on the IBM AS400 platform, and subscribers utilizing its (SaaS) On-Demand ASP services. Avatar's products and services provide an excellent resource for critical information management requirements of the petroleum industry. Avatar also provides document imaging/document management systems, disaster recovery services and remote backup services for all vertical markets.

The information in this news release includes certain forward-looking statements that are based upon assumptions that in the future may prove not to have been accurate and are subject to significant risks and uncertainties, including statements to the future financial performance of the Company. Although the Company believes that the expectations reflected in its forward-looking statements are reasonable, it can give no assurance that such expectation or any of its forward-looking statements will prove to be correct. Factors that could cause results to differ include, but are not limited to, successful performance of internal plans, product development and acceptance, the impact of competitive services and pricing, or general economic risks and uncertainties.

                           Avatar Systems, Inc.
              STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


                                                    Year ended December 31,
                                                    ----------------------
                                                       2006        2005
                                                    ----------  ----------
Revenue:
   Software                                         $  816,688  $  565,948
   Maintenance                                       1,825,639   1,173,333
   Professional services                               686,547     279,865
   Hardware                                            326,579     259,258
                                                    ----------  ----------
      Total revenue                                  3,655,453   2,278,404
Cost of revenue:
   Software                                            324,008     229,458
   Maintenance                                         388,277     138,900
   Professional services                               161,546      66,320
   Hardware                                            266,655     204,771
                                                    ----------  ----------
      Total cost of revenue                          1,140,486     639,449
                                                    ----------  ----------
      Gross profit                                   2,514,967   1,638,955
Operating expenses:
   Sales and marketing                                 453,411     277,161
   General and administrative                          765,484     481,458
   Amortization                                        536,057     479,465
   Depreciation                                        223,661     148,369
                                                    ----------  ----------
      Total operating expenses                       1,978,613   1,386,453
                                                    ----------  ----------
      Operating income                                 536,354     252,502
Other income (expense):
   Investment income                                    22,768      20,259
   Gain (loss) on sales of marketable securities        18,022     (10,007)
   Interest expense                                   (113,876)     (8,165)
                                                    ----------  ----------
      Total other income (expense)                     (73,086)      2,087
                                                    ----------  ----------
      Income before income taxes                       463,268     254,589
Deferred income tax expense                            157,511      86,459
                                                    ----------  ----------
      NET INCOME                                    $  305,757  $  168,130
Other comprehensive income (loss), net of tax
   Unrealized gain (loss) on marketable securities      12,349      (5,298)
   Deferred income tax expense (benefit)                 4,199      (1,802)
   Reclassification adjustment, net of tax              (6,282)         --
                                                    ----------  ----------
      Other comprehensive income (loss)                  1,868      (3,496)
                                                    ----------  ----------
      Total comprehensive income                    $  307,625  $  164,634
                                                    ==========  ==========
Net income per share:
   Basic and diluted                                $     0.03  $     0.02
                                                    ==========  ==========
Weighted average common shares outstanding:
   Basic                                             8,912,065   8,838,152
                                                    ==========  ==========
   Diluted                                           9,252,552   8,838,152
                                                    ==========  ==========

Contact Information

  • Investor Relations Contact:
    The Eversull Group, Inc.
    Jack Eversull
    972-991-1672
    972-991-7359 (fax)
    Email Contact