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HealtheTech, Inc. (HETC) Reports 64% First Quarter Revenue Gain Over Previous Year

10/19/2005 5:12:53 PM

GOLDEN, Colo., May 4 /PRNewswire-FirstCall/ -- HealtheTech, Inc., (Pink Sheets: HETC) the maker of proprietary handheld medical devices and software for the measurement of resting metabolic rate and nutrition monitoring, today reported financial results for the first quarter of 2005. Total revenues for the first quarter of 2005 were $1,209,000, compared to $1,177,000 for the fourth quarter of 2004, a 3% quarter over quarter improvement and a 64% improvement over the $739,000 of total revenues for the first quarter of 2004. Net loss for the first quarter of 2005 improved 57% from the fourth quarter of 2004 and 69% from the first quarter 2004. The Company reported a net loss of $.9 million ($0.13 per share) for the first quarter 2005 compared to a net loss of $2.1 million ($0.30 per share) for the fourth quarter of 2004 and a net loss of $3.0 million ($.43 per share) for the first quarter of 2004. Included in the net loss for the first quarter of 2005 was the recognition of other income in the amount of $465,000. This represents a refund of advertising funds, originally estimated to have been spent in 2003. Since this amount does not reflect current or ongoing operating activity, it has been classified as "other income". Without this offsetting item, net loss for the first quarter of 2005 would have been $1.4 million, or an improvement of 35% and 54% from the fourth and first quarters of 2004, respectively.

First Quarter Statistics -- Three months ended March 31, 2005 (in thousands except per share amounts) 2004 2005 Revenue $739 $1,209 Gross Profit $85 $533 Operating expenses (GAAP) $3,146 $ 1,989 Business operations expense (non-GAAP) $2,373 $ 1,860 Net Loss $(3,018) $(928) Loss per share $(.43) $(0.13) Weighted Average Shares 7,060 7,212

As of March 31, 2004, HealtheTech had $9.4 million in cash, cash equivalents and restricted cash, compared to $9.5 million as of December 31, 2004 and $14.4 million as of March 31, 2004.

"In January 2004 we implemented a new, more targeted strategy addressing commercial fitness, medically supervised weight management and corporate wellness markets," stated Sandy MacPherson, President & CEO. "I'm pleased to report strong growth and acceptance of our products in these key markets. A strong indicator of the success of our "SmartGem" (pre-loaded measurement device) model was the reorder rate for existing customers, which represented over 65% of all measurement revenue during the quarter.

We made improvements to our cost structure by reducing our business operations expense by more than 14% from the previous quarter despite funding the implementation of a direct sales force, and improved our business operations expense 23% from the first quarter of 2004 while at the same time supporting a 64% greater revenue stream than in the first quarter of 2004.

Our revenue growth and strict expense control measures improved operating cash flow by 70% for the first quarter of 2005 versus the same period in 2004 and allowed us to finish the quarter with a higher cash balance than we had anticipated at the start of the year. Additionally, two non-operational cash inflows, totaling $649,000, served to keep our cash balance essentially level with the 2004 year end balance. The $649,000 cash inflows were comprised of the previously mentioned $465,000 advertising refund plus the receipt of $184,000, on account, as the result of lengthened payment terms per a previous agreement with the remitting customer.

We are extremely pleased with this great start to 2005. We continue to believe our current cash position will enable us to execute our growth strategy in 2005 and beyond."

In HealtheTech's previous earning releases they introduced a non-GAAP measure, "business operations expense", that their management uses as a benchmark on how well the Company is managing controllable expenses. While HealtheTech is not suggesting that this measure is superior to traditional GAAP metrics, it effectively isolates those expenses that their employees can directly influence. Reconciliation of this non-GAAP measure to GAAP follows:

Reconciliation of non-GAAP term (in thousands) Three months ended March 31, 2004 2005 Operating expenses (GAAP) $3,146 $1,989 Less -- Restructuring charges (272) -- Less -- Stock-based charges (501) (129) Business operations expense (non-GAAP) $2,373 $1,860 About HealtheTech

HealtheTech, Inc., headquartered in Golden, CO, develops and markets technologically advanced and proprietary handheld medical devices and software for the measurement of resting metabolic rate and monitoring of weight and nutrition. HealtheTech's breakthrough products assist healthcare and wellness professionals in the areas of weight management, fitness, health and medical nutrition therapy, to provide cost-effective and individualized nutrition monitoring and weight management tools. HealtheTech's product line includes hardware and software that enables individuals to monitor their health and nutrition conveniently and affordably. The Company's common stock is traded on the Pink Sheets under the symbol "HETC". For more information, please visit

Forward-Looking Statements

This press release includes "forward-looking statements" within the meaning of applicable securities laws. All statements included herein, other than statements of historical fact, may constitute forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Such statements are based on management's current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks.

HealtheTech, Inc. Statement of Operations ($ in 000's) Three Months Ending 03/31/04 03/31/05 (Unaudited) (Unaudited) Revenue: Product Sales $362 $1,000 Software and Other 377 209 Total Revenue 739 1,209 Cost of Revenue: Product Sales 462 572 Software and Other 175 99 Stock Based Charges 18 6 Total Cost of Revenue 655 677 Gross Profit 85 533 Gross Profit % 11% 44% Operating Expenses: Research & Development 786 347 Selling, General and Administrative 1,588 1,466 Other Operating Expenses 0 47 Restructuring Charges & Asset Impairment 272 0 Stock Based Charges 501 129 Total Operating Expenses 3,146 1,989 Income (Loss) from Operations (3,062) (1,457) Other Income(Expense) 465 Interest Income 44 64 Interest Expense (1) 0 Net (Loss) (3,019) (928) Basic and diluted loss per common share $(0.43) $(0.13) Basic and diluted weighted average common shares outstanding 7,060 7,212 HealtheTech, Inc Balance Sheet ($ in 000's) December 31, March 31, 2004 2005 (Unaudited) ASSETS Current assets: Cash and cash equivalents $8,033 $7,907 Receivables, net of allowance 921 596 Inventory 813 681 Prepaid expenses 399 311 Other current assets 30 28 Total current assets 10,196 9,524 Property & equipment, net 1,038 894 Deposits 365 365 Restricted cash 1,500 1,500 Intangible assets, net of amortization 1,348 1,289 TOTAL 14,447 13,572 LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $211 $189 Accrued liabilities 565 425 Deferred revenue 78 163 Total short-term liabilities 854 777 Other liabilities: Other liabilities 111 108 Total other liabilities 111 108 Total liabilities 966 885 Stockholders' equity: Common stock 7 7 Deferred stock-based charges (1,458) (1,318) Additional paid-in capital 115,521 115,516 Accumulated deficit (100,590) (101,517) Total stockholders' equity 13,481 12,688 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 14,447 13,572

HealtheTech, Inc.

CONTACT: Allison Snyder, Public Relations, +1-720-746-3398, orInvestors, Rick Fresia, CFO, +1-303-526-5085, both of HealtheTech, Inc.

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