29th Sep 2006 07:05
Adamind Ltd29 September 2006 29 September 2006 Adamind Ltd Interim Results for the six months ended 30 June 2006 Adamind Ltd ("Adamind" or "the Company"), a leading global supplier of mediahandling software in the mobile messaging, content and convergence servicesmarkets, announces its financial results for the six months ended 30 June 2006. H1 2006 Financial Highlights •Revenues amounted to $1.70m (H1 2005: $3.2m) •Research and development investment of $1.66m (H1 2005: $1.56m) •Sales & marketing spend of $2.82m (H1 2005: $1.19m) •Net loss of $3.99m (H1 2005: $0.06m profit) •Basic and diluted loss per share of 11 cents (H1 2005: $nil) •Cash and cash equivalents totalled $22.5m as at 26 September 2006 Actions since 30 June 2006 •Management team strengthened •Orna Berry, former Chief Scientist to the State of Israel, appointed Executive Chairperson •New CFO Gideon Marks who brings 25 years of financial expertise •Relocated financial function alongside CEO in US •Appointed Cindy Andreotti as Strategic Advisor to the Board to drive global sales and marketing performance. Andreotti brings more than 25 years of experience in the telecoms industry, including heading successful and profitable business units at MCI and holding senior executive positions at AT&T •Detailed restructuring programme underway which is expected to result in annualised cost savings of $2.5m Commenting on the results, Orna Berry, Executive Chairperson of Adamind, said:"Adamind has faced a difficult period due to slower than expected growth indemand for MMS and content services market, affecting the entire industry. "The Board has taken decisive steps in response to these challenges bystreamlining the business and strengthening the management. We expect to see thebenefits from these actions coming through next year. Trading conditions haveshown encouraging signs of improvement in the third quarter and a number of newcontracts are under negotiation. As a result, the Company remains on track todeliver 2006 full year revenues at a similar level or slightly above last year'sresult and returning to revenue growth from 2007." Enquiries: AdamindOrna Berry, Executive Chairperson +972 9 971 9111 Corfin CommunicationsHarry Chathli, Neil Thapar +44 20 7929 8989 Adamind will be hosting a conference call on Friday 29 September 2006 at 9.30 amB.S.T. In the UK please call: 020 7863 6129 from outside UK please call: +44 207 8636129 Operating review The decline in first half revenues stemmed from an unexpected market slowdown due to a number of factors. End user demand for multimedia messaging services and mobile content is expanding at a slower pace than industry expectations. Further, network operators and content owners are transitioning from the piecemeal introduction of their value added services to common service delivery platforms that can deliver a wide range of MMS and rich content services. This change in market dynamics has contributed to delays in signing new deals with network operators and major content owners. The Company was also affected by a slower-than-anticipated level of customer upgrades via the Company's largest channel partner. In addition the Company increased emphasis on direct sales, which have a longer sales cycle, resulting in a low order intake during the first half. However, trading conditions have shown encouraging signs of improvement in the third quarter. The channel partner referred to above has commenced its customer upgrade programme and shown a gradual improvement in order level in the third quarter of 2006. Financial review Operating losses amounted to $4.5m (H1 2005: $0.83m), reflecting a substantialinvestment in the sales and marketing infrastructure to increase direct sales tonetwork operators, content owners and aggregators. The emphasis on direct salesis part of Adamind's growth strategy to penetrate new markets, though salescycles are longer than through channel partners owing to the higher level ofsupport and implementation provided to customers. Gross margin was 81% in the first half compared with 90% in the same period lastyear. The decline reflected the impact of fixed costs elements of the cost andlower revenues. Net loss amounted to $3.99m (H1 2005: $0.06m of profit) mainly due to increasedsales and marketing and general administrative expenses. Cash and cash equivalents totalled $22.5m as at 26 September 2006. Actions taken since 30 June 2006 The Board has taken decisive steps to reduce the Company's cost base and refocus its direct sales strategy to bring costs in line with sales expectations. A detailed restructuring programme has also been drawn up and is expected to result in annualised cost savings of $2.5m. The programme involves a headcount reduction of 15%. The benefits of the restructuring will start to make an impact from the first half of 2007 continuing through into the second half of next year. With immediate effect, Orna Berry, Adamind's Non Executive Chairperson, will assume the role of Executive Chairperson to provide strategic direction and operational discipline to the management team. Dr Berry has extensive experience in managing and developing technology companies and was formerly the Chief Scientist of the State of Israel, in which role she was responsible for implementing Israeli government policy for industrial R&D research. As announced previously, the Company has also appointed a new Chief Financial Officer, Gideon Marks, and relocated the CFO post to Palo Alto, USA, the Company's headquarters. Gideon has held a number of senior roles in a range of companies including ten years as CFO of the RAD Group, one of Israel's largest communications groups, where he led the NASDAQ IPOs of three associated companies. More recently Gideon was CFO of RealTimeImage, now part of GE Healthcare, and was a Managing Director at Garage Technology Ventures in Palo Alto. He succeeds Eli Sofer and takes up his post from 1 October 2006. In addition, the Company has recruited the services of Cindy Andreotti, who, prior to becoming President and CEO of The Andreotti Group, a strategic business advisory firm, served in a variety of senior executive positions with MCI for 14 years. Most recently, she was president of enterprise markets, where she led successful and profitable business units at MCI including global accounts, government markets, managed services, and conferencing. Before joining MCI in 1990, Andreotti held executive management positions at AT&T. The Company has also taken measures to counteract sluggish market conditions by bringing to market a portfolio of media-handling products and solutions including Device Management Service, SDP, Anti-Abuse and Next Generation Media Adaptation Platform which are capable of addressing services beyond MMS such as Email, Instant Messaging, Content Delivery, Service Delivery and Internet to Mobile Convergence applications. Outlook Adamind has faced a difficult period due to slower than expected growth indemand for MMS and content services market, affecting the entire industry. The Board has taken decisive steps in response to these challenges bystreamlining the business and strengthening the management. We expect to see thebenefits from these actions coming through next year. Trading conditions haveshown encouraging signs of improvement in the third quarter and a number of newcontracts are under negotiation. As a result, the Company remains on track todeliver 2006 full year revenues at a similar level or slightly above last year'sresult and returning to revenue growth from 2007. CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands, except share and per share data 31 December 30 JuneASSETS 2005 2006 --------- ---------- Unaudited ----------CURRENT ASSETS:Cash and cash equivalents $ 1,877 $ 1,057Short-term available-for-sale marketable securities 16,726 13,430Short-term held-to-maturity marketable securities andaccrued interest 2,131 6,071Trade receivables 1,522 984Grants to be received from the Chief Scientist Office - 416Other accounts receivable and prepaid expenses 148 294 --------- ---------- Total current assets 22,404 22,252 --------- ---------- NON-CURRENT ASSETS:Long-term held-to-maturity marketable securities 7,448 3,480Severance pay funds 209 308Equipment, net 424 544Intangible assets, net 2,803 3,662 --------- ---------- Total non-current assets 10,884 7,994 --------- ---------- Total assets $ 33,288 $ 30,246 ========= ========== LIABILITIES AND EQUITY CURRENT LIABILITIES:Trade payables $ 304 $ 590Employees and payroll accruals 848 1,139Accrued expenses and other liabilities 1,570 1,274Deferred revenues 416 441 --------- ---------- Total current liabilities 3,138 3,444 --------- ---------- SEVERANCE PAY LIABILITY 220 375 --------- ---------- Total liabilities 3,358 3,819 --------- ---------- EQUITY:Share capital -Ordinary shares of NIS 0.01 par value - Authorized:50,000,000 shares at 30 June 2006 and 31 December 2005;Issued and outstanding: 35,546,636 and 35,388,636 shares 80 81at 30 June 2006 and 31 December 2005, respectivelyAdditional paid-in capital 31,285 31,779Accumulated deficit (1,435) (5,433) --------- ---------- Total equity 29,930 26,427 --------- ---------- $ 33,288 $ 30,246 ========= ========== The accompanying notes are an integral part of the consolidated financialstatements. CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands, except share and per share data ---------------- Year ended Six months ended 31 December 30 June ---------------- 2005 2005 2006 ---------- -------- -------- Unaudited ---------------- Revenues $ 6,154 $ 3,187 $ 1,704Cost of revenues 632 287 323 ---------- -------- -------- Gross profit 5,522 2,900 1,381 ---------- -------- -------- Operating expenses:Research and development, net 3,157 1,563 1,664Sales and marketing 3,087 1,192 2,817General and administrative 1,127 527 962Amortization of intangible assets 878 451 420 ---------- -------- -------- Total operating expenses 8,249 3,733 5,863 ---------- -------- -------- Operating loss (2,727) (833) (4,482)Financial income, net 1,379 891 484 ---------- -------- -------- Net profit (loss) $ (1,348) $ 58 $ (3,998) ========== ======== ======== Basic and diluted net profit (loss)per share $ (0.04) $ 0.00 $ (0.11) ========== ======== ======== Weighted average number of sharesused in computing basic and dilutednet profit (loss) per share 33,548,392 31,681,919 35,485,231 ========== ======== ======== The accompanying notes are an integral part of the consolidated financialstatements. STATEMENT OF CHANGES IN EQUITY U.S. dollars in thousands, except share data Series A Convertible Ordinary shares Preferred shares --------------- ---------------- Number Amount Number Amount --------- -------- -------- -------- Balance as of 1 January 2005 4,800,000 $ 11 19,200,000 $ 43Issuance ofOrdinary sharesupon InitialPublic Offeringand conversion ofSeries AConvertiblePreferred shares *) (4,800,000) (11) 16,163,636 37Issuance ofOrdinary sharesupon exercise ofemployees' shareoptions - - 25,000 **) -Share-based - - - -compensationNet loss - - - - --------- -------- -------- -------- Balance as of 31 December 2005 - - 35,388,636 80 Issuance ofOrdinary sharesupon exercise ofstock options - - 158,000 1Share-based - - - -compensationCancellation of - - - -issuance expensesNet loss - - - - --------- -------- -------- -------- Balance as of 30June 2006 (unaudited) - $ - 35,546,636 $ 81 ========= ======== ======== ======== *) Net of issuance expenses of $ 2,906. **) Represents an amount lower than $ 1. STATEMENT OF CHANGES IN EQUITY cont.... U.S. dollars in thousands, except share data Additional paid-in Accumulated Total capital deficit equity -------- -------- ------- Balance as of 1 January 2005 $ 5,956 $ (87) $ 5,923Issuance of Ordinary shares uponInitial Public Offering andconversion of Series A ConvertiblePreferred shares *) 25,113 - 25,139Issuance of Ordinary shares uponexercise of employees' shareoptions 9 - 9Share-based compensation 207 - 207Net loss - (1,348) (1,348) -------- -------- ------- Balance as of 31 December 2005 31,285 (1,435) 29,930 Issuance of Ordinary shares uponexercise of stock options 55 - 56Share-based compensation 141 - 141Cancellation of issuance expenses 298 - 298Net loss - (3,998) (3,998) -------- -------- ------- Balance as of 30 June 2006(unaudited) $ 31,779 $ (5,433) $ 26,427 ======== ======== ======= *) Net of issuance expenses of $ 2,906. The accompanying notes are an integral part of the consolidated financialstatements. CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands ------------- Year ended Six months ended 31 December 30 June ------------- 2005 2005 2006 --------- ------- -------Cash flows from operating activities: Unaudited -------------Net profit (loss) $ (1,348) $ 58 $ (3,998)Adjustments to reconcile net profit (loss) tonet cash provided by (used in) operatingactivities:Depreciation and amortization 1,125 570 545Amortization of premiums on held-to-maturitymarketable securities 40 - 32Decrease in trade receivables, grants to bereceived from the Chief Scientist Office andother accounts receivable and prepaidexpenses (1,535) (844) (4)Increase in trade payables, employees andpayroll accruals and other liabilities andseverance pay, net 1,439 708 260Increase (decrease) in deferred revenues 112 47 (132)Share-based compensation 207 115 141 --------- ------- ------- Net cash provided by (used in) operatingactivities 40 654 (3,156) --------- ------- ------- Cash flows from investing activities:Purchase of equipment (258) (113) (238)Investment in short-term available-for-salemarketable securities (16,700) (15,000) -Investment in short-term held-to-maturitymarketable securities (2,038) - -Investment in long-term held-to-maturitymarketable securities (7,468) (5,029) -Proceeds from maturity of short-termavailable-for-sale marketable securities - - 3,300Payment for the acquisition of SenseStream Ltd. (1) - - (782) --------- ------- ------- Net cash provided by (used in) investingactivities (26,464) (20,142) 2,280 --------- ------- ------- Cash flows from financing activities: Issuance of shares upon Initial PublicOffering 28,045 28,045 -Issuance expenses (2,554) (2,554) -Issuance of shares upon exercise ofemployees' share options, net 11 - 56 --------- ------- ------- Net cash provided by financing activities 25,502 25,491 56 --------- ------- ------- Increase (decrease) in cash and cashequivalents (922) 6,003 (820)Cash and cash equivalents at beginning ofperiod 2,799 2,799 1,877 --------- ------- ------- Cash and cash equivalents at end of period $ 1,877 $ 8,802 $ 1,057 ========= ======= ======= Supplemental disclosure of cash flowactivities: Cash received during the period forinterest, net $ 688 $ 210 $ 588 ========= ======= ======= Non-cash financing activities: Conversion of Series A Convertible Preferredshares to Ordinary shares $ - $ 11 $ - ========= ======= ======= Issuance expenses payable $ - $ 352 $ - ========= ======= ======= Cancellation of issuance expenses payable $ - $ - $ 298 ========= ======= ======= CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont.) U.S. dollars in thousands ------------- Year ended Six months ended 31 December 30 June ------------- 2005 2005 2006 --------- ------- ------- Unaudited(1) Payment for the acquisition of -------------SenseStream Ltd. Estimated fair value of assets acquired andliabilities assumed at the date ofacquisition:Working capitaldeficiency, excludingcash and cash equivalents $ - $ - $ 489Property and equipment - - (8)Intangible assets - - (1,280)Accrued severance pay, net - - 17 --------- ------- ------- $ - $ - $ (782) ========= ======= ======= The accompanying notes are an integral part of the consolidated financialstatements. NOTE 1:- GENERAL a. Adamind Ltd. ("the Company") was incorporated in Israel and commencedoperations in 2004. The Company established a wholly-owned subsidiary in theU.S. ("Adamind Inc."), which is primarily engaged in marketing and sales in theU.S. In February 2005, the Company completed an Initial Public Offering ("IPO") onthe London Stock Exchange Alternative Investment Market ("AIM") under the symbol"ADA". The Company issued 11,363,636 Ordinary shares to institutional and otherinvestors and raising approximately $ 28 million before issuance expenses ofapproximately $ 2.9 million, out of that an accrual of $298,000 for stamp dutywas cancelled based on ruling of the court for similar transaction. b. The Company is a provider of software that enables mobile multimedia contentand converged communications services. The company addresses theinteroperability challenge that exists between different mobile devices toreceive and process media rich content. The Adamind Spire(TM) platform providesmedia adaptation and enhancement software enabling service operators tosuccessfully deploy messaging, content and next generation convergence services. c. Acquisition of SenseStream Ltd. ("SenseStream") On 15 February 2006 the Company closed an agreement to acquire all of the issuedand outstanding share capital of a Hong Kong based company, SenseStream, for aconsideration of up to $2,000,000 in cash and Adamind Ltd's shares. Under theterms of the agreement, the Company paid an initial amount of $655,000 in cashto the shareholders of SenseStream and transferred $345,000 directly toSenseStream, in order to cover its third parties liabilities, additionalnon-cash contingent consideration in an amount of $1,000,000 payable in Adamindshares will be payable by April 2007 depending on certain performance targetsbeing met during 2006. NOTE 1:- GENERAL (Cont.) The estimated fair value of the identifiable assets and liabilities as of 15February 2006 are as follows: Current assets $ 27Equipment 8Acquired technology 92Customer agreements 700 --------- 827 --------- Accrued expenses and other liabilities (376)Deferred revenues (157) --------- (533) --------- Fair value of net assets 294Goodwill arising on acquisition 488 --------- $ 782 ========= NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. The significant accounting policies and methods of computation applied in thepreparation of the interim financial statements are the same as those applied inthe annual financial statements of the Company as of 31 December 2005. These financial statements have been prepared in a condensed format as of 30June 2006 and for the six months then ended ("interim financial statements").These financial statements should be read in conjunction with the Company'saudited annual financial statements and accompanying notes as of 31 December2005. b. Adoption of new Standards: The accounting policies adopted in the preparation of the interim condensedfinancial statements are consistent with those followed in the preparation ofthe Company's annual financial statements for the year ended 31 December 2005,except for the adoption of the following amendments mandatory for annual periodsbeginning on or after 1 January 2006: * IAS 39 Financial Instruments: Recognition and Measurement ("IAS 39") - Amendment for financial guarantee contracts; * IAS 39 - Amendment for hedges of forecast intragroup transactions; * IAS 39 - Amendment for the fair value option. The adoption of these amendments did not affect the Company results ofoperations or financial position. - - - - - - - - - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Adams