Interim Results
Adamind Ltd
29 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 media
handling software in the mobile messaging, content and convergence services
markets, 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 in
demand for MMS and content services market, affecting the entire industry.
"The Board has taken decisive steps in response to these challenges by
streamlining the business and strengthening the management. We expect to see the
benefits from these actions coming through next year. Trading conditions have
shown encouraging signs of improvement in the third quarter and a number of new
contracts are under negotiation. As a result, the Company remains on track to
deliver 2006 full year revenues at a similar level or slightly above last year's
result and returning to revenue growth from 2007."
Enquiries:
Adamind
Orna Berry, Executive Chairperson +972 9 971 9111
Corfin Communications
Harry Chathli, Neil Thapar +44 20 7929 8989
Adamind will be hosting a conference call on Friday 29 September 2006 at 9.30 am
B.S.T.
In the UK please call: 020 7863 6129 from outside UK please call: +44 207 863
6129
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 substantial
investment in the sales and marketing infrastructure to increase direct sales to
network operators, content owners and aggregators. The emphasis on direct sales
is part of Adamind's growth strategy to penetrate new markets, though sales
cycles are longer than through channel partners owing to the higher level of
support and implementation provided to customers.
Gross margin was 81% in the first half compared with 90% in the same period last
year. The decline reflected the impact of fixed costs elements of the cost and
lower revenues.
Net loss amounted to $3.99m (H1 2005: $0.06m of profit) mainly due to increased
sales 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 in
demand for MMS and content services market, affecting the entire industry.
The Board has taken decisive steps in response to these challenges by
streamlining the business and strengthening the management. We expect to see the
benefits from these actions coming through next year. Trading conditions have
shown encouraging signs of improvement in the third quarter and a number of new
contracts are under negotiation. As a result, the Company remains on track to
deliver 2006 full year revenues at a similar level or slightly above last year's
result and returning to revenue growth from 2007.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
31 December 30 June
ASSETS 2005 2006
--------- ----------
Unaudited
----------
CURRENT ASSETS:
Cash and cash equivalents $ 1,877 $ 1,057
Short-term available-for-sale marketable securities 16,726 13,430
Short-term held-to-maturity marketable securities and
accrued interest 2,131 6,071
Trade receivables 1,522 984
Grants to be received from the Chief Scientist Office - 416
Other 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 3,480
Severance pay funds 209 308
Equipment, net 424 544
Intangible 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 $ 590
Employees and payroll accruals 848 1,139
Accrued expenses and other liabilities 1,570 1,274
Deferred 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 81
at 30 June 2006 and 31 December 2005, respectively
Additional paid-in capital 31,285 31,779
Accumulated 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 financial
statements.
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 $ 1,704
Cost of revenues 632 287 323
---------- -------- --------
Gross profit 5,522 2,900 1,381
---------- -------- --------
Operating expenses:
Research and development, net 3,157 1,563 1,664
Sales and marketing 3,087 1,192 2,817
General and administrative 1,127 527 962
Amortization 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 shares
used in computing basic and diluted
net profit (loss) per share 33,548,392 31,681,919 35,485,231
========== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
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 $ 43
Issuance of
Ordinary shares
upon Initial
Public Offering
and conversion of
Series A
Convertible
Preferred shares *) (4,800,000) (11) 16,163,636 37
Issuance of
Ordinary shares
upon exercise of
employees' share
options - - 25,000 **) -
Share-based - - - -
compensation
Net loss - - - -
--------- -------- -------- --------
Balance as of
31 December 2005 - - 35,388,636 80
Issuance of
Ordinary shares
upon exercise of
stock options - - 158,000 1
Share-based - - - -
compensation
Cancellation of - - - -
issuance expenses
Net loss - - - -
--------- -------- -------- --------
Balance as of 30
June 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) $ 5,923
Issuance of Ordinary shares upon
Initial Public Offering and
conversion of Series A Convertible
Preferred shares *) 25,113 - 25,139
Issuance of Ordinary shares upon
exercise of employees' share
options 9 - 9
Share-based compensation 207 - 207
Net loss - (1,348) (1,348)
-------- -------- -------
Balance as of 31 December 2005 31,285 (1,435) 29,930
Issuance of Ordinary shares upon
exercise of stock options 55 - 56
Share-based compensation 141 - 141
Cancellation of issuance expenses 298 - 298
Net 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 financial
statements.
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) to
net cash provided by (used in) operating
activities:
Depreciation and amortization 1,125 570 545
Amortization of premiums on held-to-maturity
marketable securities 40 - 32
Decrease in trade receivables, grants to be
received from the Chief Scientist Office and
other accounts receivable and prepaid
expenses (1,535) (844) (4)
Increase in trade payables, employees and
payroll accruals and other liabilities and
severance pay, net 1,439 708 260
Increase (decrease) in deferred revenues 112 47 (132)
Share-based compensation 207 115 141
--------- ------- -------
Net cash provided by (used in) operating
activities 40 654 (3,156)
--------- ------- -------
Cash flows from investing activities:
Purchase of equipment (258) (113) (238)
Investment in short-term available-for-sale
marketable securities (16,700) (15,000) -
Investment in short-term held-to-maturity
marketable securities (2,038) - -
Investment in long-term held-to-maturity
marketable securities (7,468) (5,029) -
Proceeds from maturity of short-term
available-for-sale marketable securities - - 3,300
Payment for the acquisition of
SenseStream Ltd. (1) - - (782)
--------- ------- -------
Net cash provided by (used in) investing
activities (26,464) (20,142) 2,280
--------- ------- -------
Cash flows from financing activities:
Issuance of shares upon Initial Public
Offering 28,045 28,045 -
Issuance expenses (2,554) (2,554) -
Issuance of shares upon exercise of
employees' share options, net 11 - 56
--------- ------- -------
Net cash provided by financing activities 25,502 25,491 56
--------- ------- -------
Increase (decrease) in cash and cash
equivalents (922) 6,003 (820)
Cash and cash equivalents at beginning of
period 2,799 2,799 1,877
--------- ------- -------
Cash and cash equivalents at end of period $ 1,877 $ 8,802 $ 1,057
========= ======= =======
Supplemental disclosure of cash flow
activities:
Cash received during the period for
interest, net $ 688 $ 210 $ 588
========= ======= =======
Non-cash financing activities:
Conversion of Series A Convertible Preferred
shares 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 and
liabilities assumed at the date of
acquisition:
Working capital
deficiency, excluding
cash and cash equivalents $ - $ - $ 489
Property and equipment - - (8)
Intangible assets - - (1,280)
Accrued severance pay, net - - 17
--------- ------- -------
$ - $ - $ (782)
========= ======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
NOTE 1:- GENERAL
a. Adamind Ltd. ("the Company") was incorporated in Israel and commenced
operations in 2004. The Company established a wholly-owned subsidiary in the
U.S. ("Adamind Inc."), which is primarily engaged in marketing and sales in the
U.S.
In February 2005, the Company completed an Initial Public Offering ("IPO") on
the London Stock Exchange Alternative Investment Market ("AIM") under the symbol
"ADA". The Company issued 11,363,636 Ordinary shares to institutional and other
investors and raising approximately $ 28 million before issuance expenses of
approximately $ 2.9 million, out of that an accrual of $298,000 for stamp duty
was cancelled based on ruling of the court for similar transaction.
b. The Company is a provider of software that enables mobile multimedia content
and converged communications services. The company addresses the
interoperability challenge that exists between different mobile devices to
receive and process media rich content. The Adamind Spire(TM) platform provides
media adaptation and enhancement software enabling service operators to
successfully 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 issued
and outstanding share capital of a Hong Kong based company, SenseStream, for a
consideration of up to $2,000,000 in cash and Adamind Ltd's shares. Under the
terms of the agreement, the Company paid an initial amount of $655,000 in cash
to the shareholders of SenseStream and transferred $345,000 directly to
SenseStream, in order to cover its third parties liabilities, additional
non-cash contingent consideration in an amount of $1,000,000 payable in Adamind
shares will be payable by April 2007 depending on certain performance targets
being met during 2006.
NOTE 1:- GENERAL (Cont.)
The estimated fair value of the identifiable assets and liabilities as of 15
February 2006 are as follows:
Current assets $ 27
Equipment 8
Acquired technology 92
Customer agreements 700
---------
827
---------
Accrued expenses and other liabilities (376)
Deferred revenues (157)
---------
(533)
---------
Fair value of net assets 294
Goodwill arising on acquisition 488
---------
$ 782
=========
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. The significant accounting policies and methods of computation applied in the
preparation of the interim financial statements are the same as those applied in
the annual financial statements of the Company as of 31 December 2005.
These financial statements have been prepared in a condensed format as of 30
June 2006 and for the six months then ended ("interim financial statements").
These financial statements should be read in conjunction with the Company's
audited annual financial statements and accompanying notes as of 31 December
2005.
b. Adoption of new Standards:
The accounting policies adopted in the preparation of the interim condensed
financial statements are consistent with those followed in the preparation of
the Company's annual financial statements for the year ended 31 December 2005,
except for the adoption of the following amendments mandatory for annual periods
beginning 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 of
operations or financial position.
- - - - - - - - -
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