NEWTON, Mass. Aug. 14, 2001 (PRIMEZONE) -- LifeFX, Inc. (Nasdaq:LEFX), the leading developer of Stand-In(tm) virtual people for the Internet, today reported its unaudited second quarter financial results for the quarter and six months ended June 30, 2001.
To date, written contracts have totaled $268,000. During the quarter, the company announced its first revenue-generating customers from licensing agreements, including Sprint, BankSiel and One to One Interactive for Motorola iDen. However, LifeFX does not expect to begin reporting licensing revenue until the third quarter of 2001, due to accounting regulations regarding revenue recognition. LifeFX, similar to other software licensing companies, is required to adopt Securities and Exchange Commission Staff Accounting Bulletin No. 101: "Revenue Recognition in Financial Statements" (SAB 101), which requires the company to report its revenue on a fulfillment basis. Reporting revenue on a fulfillment basis means that LifeFX must recognize revenues over the term of each agreement, regardless of when the cash is actually received. For example, a 12-month licensing agreement with Company A would be reported in 1/12 increments for each month of the agreement after the license is initiated.
Reported revenue for the second quarter was $6,325, which was generated from contracts for the production of LifeFX Stand-In virtual people. For the first six months of 2001, LifeFX reported total production revenue of $13,825. The company did not have revenue in the comparable periods last year, as its products were still in the research and development or planning stages.
Total operating expenses for the second quarter of 2001 were $3.7 million, compared to the $2.7 million the company reported in June 2000. The increase was primarily due to higher employment-related expenses as a result of the increased number of employees, expenses related to the company's efforts to raise capital through a private placement offering and depreciation expense.
For the first half of 2001, total operating expenses were $17.0 million, compared to the $4.6 million the company reported after the first six months of 2000. The company attributed the majority of the increase to a one-time, non-cash charge of $9.8 million related to the issuance of stock and warrants to UniServices, the technology licensing company owned by the University of Auckland, and to higher research and development expenses.
As previously reported, LifeFX amended its agreements with UniServices in January 2001. The agreements were amended in part to compensate UniServices for services previously rendered under a fundamental business relationship with LifeFX, which commenced in 1997, and to grant LifeFX an exclusive license to expand into further markets, including professional medical, scientific and engineering.
The net loss for the second quarter of 2001 was $3.7 million compared to a loss of $2.5 million in June of 2000. On a fully diluted per share basis, the net loss for the second quarter of 2001 was $0.11 vs. $0.13 for the second quarter of 2000.
For the six months ended June 2001, the net loss was $16.9 million compared to a loss of $4.3 million for the same period in 2000. Excluding the one-time research and development expense, the fully diluted loss per share was $0.25, compared to a loss of $0.35 per share in the first half of 2000.
Early in the first quarter of 2001, Safeguard Scientifics, a stockholder and strategic partner of the company, committed an additional $5 million to LifeFX. Under the terms of the deal, Safeguard exercised all 10,199,119 of its $0.01 warrants and 1,459,205 of its $2.50 warrants, which provided $3.75 million of cash to LifeFX. Safeguard exercised another 500,000 of its $2.50 warrants on July 16, completing its commitment of $5 million to LifeFX.
"Our financial position continues to be on target with our internal expectations," said Lucie Salhany, CEO and Co-President, LifeFX, Inc. "Given the cash we are generating from revenue, the cash on the balance sheet at June 30, 2001, and the additional capital we have received from the exercise of Safeguard's warrants, we expect to continue the momentum of development and growth of LifeFX."
"As we've reported previously, we achieved several milestones in the quarter, including the announcement of our first revenue-generating customers, the addition of new partners, the completion of several customer/partner Websites with LifeFX Stand-In virtual people, and the commencement of Kodak in-kind marketing and support," continued Ms. Salhany. "Fulfilling our promises to our fellow stockholders is a top priority at LifeFX, and we remain committed to meeting future milestones and ultimately becoming the standard for interactive, personal communications over the Web and Web-enabled appliances.
About LifeFX
Lifef/x, Inc., a Safeguard Scientifics (NYSE:SFE) partner company, is creating the face of the Internet by developing photo-realistic, digital human faces, or LifeFX Stand-In (tm) virtual people, that can interact in real time. LifeFX Stand-In (tm) virtual people will be used by Web businesses as life-like customer-service and sales representatives, guides, teachers and entertainers, while consumer applications will include e-mail, instant messaging and chat rooms. The LifeFX technology was originally developed for professional medical applications by the University of Auckland, with which LifeFX has an exclusive, worldwide, perpetual, paid-up license. LifeFX holds three patents and has five pending. For more information about LifeFX, visit http://www.lifefx.com. For application ideas and demos, visit http://www.facemail.com
Statements made in this news release, other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements are made based on management's belief as well as assumptions made by, and information currently available to, management pursuant to the "safe-harbor" provisions of the Private Securities Litigation Reform Act of 1995. Lifef/x, Inc.'s future results may differ materially from the results anticipated in these forward-looking statements because of a variety of factors, including the ability of the company to implement its business strategy; the ability of the company to achieve the intended benefits of this strategy; the ability of the company to complete development of its technology; the ability of the company to achieve success in forging strategic relationships; adoption of the technology by major consumer and commercial Websites; the ability of the company to commercialize the technology before competitors; the ability of the company to retain key employees; and those factors identified in Lifef/x, Inc.'s annual report on Form 10-K for the fiscal year ended Dec. 31, 2000, and its quarterly reports on Form 10-Q and subsequent reports filed with the Securities and Exchange Commission.
LIFEF/X, INC. AND SUBSIDIARY
Consolidated Balance Sheets
June 30, December 31,
2001 2000
------------ ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 2,747,108 $ 5,150,629
Interest receivable 6,431 17,265
Other receivables 280 4,836
Prepaid expenses 74,960 84,953
------------ ------------
Total current assets 2,828,779 5,257,683
Property, plant and
equipment (net) 1,993,905 2,282,839
Investments 217,500 217,500
Deposits 5,958 28,910
------------ ------------
$ 5,046,142 $ 7,786,932
============ ============
Liabilities and Shareholders'
Equity
Current liabilities:
Accounts payable and
accrued expenses $ 1,312,193 $ 1,408,033
Current portion of capital
lease obligation 73,694 89,232
------------ ------------
Total current liabilities 1,385,887 1,497,265
Capital lease obligation,
net of current portion 26,945 57,822
Other long-term liabilities 100,723 192,597
------------ ------------
1,513,555 1,747,684
------------ ------------
Shareholders' equity:
Common stock, $.001 par
value. Authorized
100,000,000 shares: issued
and outstanding
33,115,724 shares (2001) and
19,207,401 shares (2000) 33,115 19,207
Additional paid-in capital 72,976,386 59,271,858
Deferred compensation
related to stock options (1,828,374) (2,530,682)
Accumulated deficit (67,648,540) (50,721,135)
------------ ------------
Total shareholders' equity 3,532,587 6,039,248
------------ ------------
$ 5,046,142 $ 7,786,932
============ ============
LIFEF/X, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three months ended Six months ended
June 30, June 30,
------------------------ -------------------------
2001 2000 2001 2000
----------- ----------- ------------ -----------
(Unaudited) (Unaudited)
Revenue $ 6,325 -- $ 13,825 --
----------- ----------- ------------ -----------
Operating costs
and expenses:
General and
administrative 2,058,399 1,583,890 3,864,152 2,826,860
Research and
development 1,660,770 1,143,124 13,151,152 1,820,841
----------- ----------- ------------ -----------
Total operating
costs and
expenses 3,719,169 2,727,014 17,015,304 4,647,701
----------- ----------- ------------ -----------
Loss from
operations (3,712,844) (2,727,014) (17,001,479) (4,647,701)
Non operating
(income) expense:
Interest expense 11,405 12,394 25,782 24,668
Other income -- (3,250) -- (3,250)
Interest income (38,334) (211,334) (104,156) (420,687)
----------- ----------- ------------ -----------
Loss before
income tax
expense (3,685,915) (2,524,824) (16,923,105) (4,248,432)
Income tax
expense -- 2,500 4,300 4,556
----------- ----------- ------------ -----------
Net loss $(3,685,915) (2,527,324) $(16,927,405) (4,252,988)
=========== =========== ============ ===========
Net loss per
common share on
a basic and
diluted basis: $ (0.11) (0.13) $ (0.59) (0.22)
=========== =========== ============ ===========
Weighted average
common shares
outstanding 32,873,966 19,168,582 28,674,245 19,084,355
=========== =========== ============ ===========