Today, I want to recount an email exchange I recently had with a Fool reader named "Joe," regarding a Jan. 8 earnings release from wearable computing and communications systems firm Xybernaut (NASDAQ:XYBR). Joe wrote me with feedback on an earlier Take that I wrote about this company.

The press release in question read: "Xybernaut expects record revenues for quarter and year." To which I responded, and I quote:

"Keep your eye off the ball, Joe. Remember, the company owns the ball. They show you the ball. Look for what they are not showing you. In other words, if the company says 'record revenues,' you ask 'and what about the earnings?' If they say 'record earnings,' you ask 'and did revenues grow too? And how about free cash flow? Got any of that?'"

On March 9, Xybernaut proved true to its word, issuing its 2003 earnings press release announcing "Record Revenues, Solid Financial Position and International Momentum."

Perfect. Xybernaut pitched three balls at us, so today, I want to play "Press Release Baseball" (a distant cousin of Tim Beyers' game Press Release Bingo). The cardinal rule of Press Release Baseball is, of course, to keep your eye off the ball. Let's begin:

Ball 1: Xybernaut reported record revenues in 2003. But those "record" revenues totaled just $11 million, up only 10% since 2002. In the same time period, the stock's price has increased 164%, and its share count is up a barn-burning 103%.

Ball 2: Xybernaut has a clean balance sheet with no long-term debt and $9.5 million in the bank. So its financial position certainly seems solid. However, in 2003, the company sold $26 million in newly-issued stock. Which means that it burned at least $16.5 million over the course of the year, and now has roughly six months' worth of cash remaining. It will certainly need to issue more stock in 2004 in order to remain solvent, and discloses as much in its 10-K (although, surprise! -- not in the press release.)

Ball 3: Xybernaut has issued 22 press releases in the last three months alone, describing its "international momentum." Yet, in 2003, the company made no profits (indeed, the company has not had a profitable year in its 14 years as a public company), and sold 2.5 times more worth of its common stock than of its goods and services.

Three pitches. Three swings. Three strikes. Time to send Xybernaut to the showers.

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Motley Fool contributor Rich Smith owns no shares in Xybernaut.