Interim Results
Orca Interactive Ltd
19 September 2005
Orca Interactive Ltd
Interim Results
for the six months ended 30 June 2005
Ra'anana, Israel, 19 September 2005 - Orca Interactive Ltd ('Orca'), a global
leader in the IPTV middleware market, announces its interim results for the six
months ended 30 June 2005.
Financial Highlights:
- Revenues increased seven-fold to $3.0m (H1 2004: $0.4m)
- Gross profit of $2.5m (H1 2004: $0.3m)
- Net loss was halved to $1.3m (H1 2004: $2.6m)
- Strong balance sheet with $21M Net cash
- Loss per share down five-fold to $0.04 (H1 2004: $0.21 loss per share)
Operational Highlights:
- New partnership agreements with IBM, Lucent and Tata Consulting
- New license agreements signed with Lucent, Dansk Bredband and a
Western European telco
- Agreement with Texas Instruments to develop a low cost end-to-end
solution for IPTV and Video on Demand
- Commercial market trial with tier 1 operator
- Ongoing product development maintaining leading technology position
o Launch of Home Media
o Release of new Flash SDK
- Strong pipeline of future deals continuing to build, currently active in a
large number of trials and global tenders
Haggai Barel, Chief Executive Officer of Orca, said:
'During the first half of 2005, we continued to see significant growth in
demand for IPTV. As one of the leading providers of middleware solutions to
this market, we have once again benefited from this growth and our financial
performance across all metrics was strong.
The second half of the year has started well with a number of additional
contract wins. We have continued to make strong progress, especially through
our growing partner base, in building our prospects pipeline in our traditional
territories of EMEA and APAC. Working alongside our partners, we are already in
advanced stages with several contract discussions and expect to be able to make
further announcements in this regard in the near future.
In July we announced our intention to access the American markets. We are
already seeing increased brand recognition for Orca and trials with two tier one
operators have already been initiated.
We remain confident of meeting full year revenue expectations.'
Enquiries:
Orca Interactive Ltd
Haggai Barel, Chief Executive +972 9 7699400
Financial Dynamics
James Melville-Ross / Cass Helstrip +44 20 7831 3113
About Orca Interactive
Orca Interactive (LSE-ORCA) is a leading provider of IPTV middleware and
applications for broadband network operators and service providers. Orca enables
triple-play providers to deliver a full array of attractive video-over-IP
services that generate new revenue streams and strengthen customer loyalty.
Leveraging a flexible telco-grade middleware platform, Orca empowers operators
to deliver broadcast TV, video on demand (VOD), personal video recording (PVR),
home media and other compelling interactive services. Orca's SI-enabled
solutions are designed for easy outsourcing of integration services by an
operator's preferred systems integrator. Orca has formed strategic partnerships
with leading players across the IPTV value chain to ensure best-of-breed
solutions with low total cost of ownership. For more information, please visit
www.orcainteractive.com.
Chief Executive's Review
Overview
During the first half of 2005, we saw a significant growth in demand for IPTV.
As one of the leading providers of middleware solutions to this market, we have
once again benefited from this growth and our financial performance across all
metrics was strong.
Revenues increased seven-fold against the equivalent period in 2004, boosted by
a number of significant new license agreements and pilots. Our partner
programme has also continued to develop and we have added a number of the most
high profile names in the industry to our partner roster since the year began.
Financial performance
Revenues in the first six months were $3.0m, compared to $0.4m in the first half
of 2004. In common with other companies at our stage of growth, we currently
derive our revenues from a small number of customers. Gross margins were 84.4%
(H1 2004: 83.3%).
Sales and marketing expenditure increased to $1.95m compared to $1.5m in H1 2004
as we continued to invest in establishing and building relationships with global
system integrators and network access vendors. Our sales and marketing and
research and development expenditure is expected to rise further during the
second half, as we increase our activity with operators in the North and South
American markets.
Research and development expenditure amounted to $1.25m (H1 2004 $1.07m),
representing 41% of first half revenues for 2005. During the second half of the
year Orca intends to continue to invest significantly in improving its product
infrastructure and offering both to its current niche customer base and to cater
for the growing American market.
Our operating loss reduced to $1.65m (H1 2004: $2.6m). The net loss reduced
from $2.6m to $1.3m resulting in a net loss per share of $0.04 (H1 2004: $0.22
loss per share).
Commencing on 1 January 2005, the Company has adopted IFRS 2, 'Share Based
Payment'. The effect of the adoption of IFRS 2 on the six months ended 30 June
2005 and the six months ended 2004, is an increase in the employee benefits
expenses in the amount of $137,560 and $15,817 respectively, with a
corresponding increase in additional paid-in capital.
At 30 June 2005, the Company had cash balances of $21.0m. Operating cash
outflow during the period was $2.9 million (H1 2004: $1.0 million).
Product development
The Company continues to invest in product development in order to maintain its
technology's market leading position. In June 2005, Orca announced the launch
of Home Media, a digital entertainment application that brings digital media
content from the PC to the TV. Home Media enables subscribers to view
photographs and listen to music via the TV, and empowers IPTV operators to gain
a bigger share of the large digital entertainment market. Orca announced its
first success in selling this product with the Dansk Bredband contract in early
September 2005.
Orca also recently launched its SUI SDK for Flash at the IBC Conference in
Amsterdam. The SUI SDK for Flash, which will be available as part of Orca's
RiGHTv middleware, incorporates Macromedia FlashTM technology for third-party
development of IPTV applications, enabling service providers and system
integrators to build branded, feature-packed TV interfaces that provide an
optimized user experience. We received extremely positive feedback for these
new products from potential customers at IBC.
Customers and Partners
We continued to make good progress with our stated strategy of building a global
partner base to sell through. In the first half of the year we announced global
distribution agreements with IBM, Tata Consulting Services and Lucent
Technologies.
The agreement with Lucent was particularly significant for two reasons; Firstly,
it delivered a commitment to purchase licenses for our RIGHTv middleware.
Secondly, it gave us a significant opportunity to access readily the rapidly
evolving North and South American markets. In July 2005 we determined to
commit extra resources to our partnership with Lucent to address this sizeable
market prospect and to increase customer deal flow.
We have also announced four new commercial deals since the start of the year:
• an agreement with a leading Western European telecommunications and data
transmission carrier which is aiming to launch an IPTV service by the end of
the current year. The operator committed to purchasing 150,000 Orca licenses
over a three year period, 60,000 of which are to be purchased in the current
financial year;
• a license agreement with Danish broadband internet services provider Dansk
Bredband. The initial service will involve subscribers in the Copenhagen
area with planned expansion for over 100,000 subscribers across Denmark and
other parts of Scandinavia within three years; and
• a market pilot with a tier one telecoms provider which is expected to last
until the year end before moving to a full commercial deployment.
• an agreement with Texas Instruments that focuses on delivering an
end-to-end solution for IPTV and Video on Demand
We look forward to announcing more contracts of this type.
Management
In June 2005, we were delighted to welcome Nina Admoni as an external
non-executive director of the Company. Nina brings a wealth of experience
following a career that spans four decades of involvement in the international
business community, including several senior posts that she held in the service
of the Israeli government and on behalf of the United Nations.
Outlook
During the first half of 2005, we continued to see significant growth in demand
for IPTV. As one of the leading providers of middleware solutions to this
market, we have once again benefited from this growth and our financial
performance across all metrics was strong.
The second half of the year has started well with a number of additional
contract wins. We have continued to make strong progress, especially through
our growing partner base, in building our prospects pipeline in our traditional
territories of EMEA and APAC. Working alongside our partners, we are already in
advanced stages with several contract discussions and expect to be able to make
further announcements in this regard in the near future.
In July we announced our intention to access the American markets. We are
already seeing increased brand recognition for Orca and trials with two tier one
operators have already been initiated.
We remain confident of meeting full year revenue expectations.
Haggai Barel
Chief Executive Officer
18 September 2005
BALANCE SHEETS
U.S. dollars
June 30 31 December
2005 2004
---------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,798,894 $ 10,029,427
Short term available-for-sale marketable
securities 7,081,450 13,550,000
Trade receivables and unbilled accounts, net 3,594,217 1,335,173
Other accounts receivable and prepaid expenses 369,437 120,410
---------- ----------
Total current assets 12,843,998 25,035,010
-------------------- ---------- ----------
LONG-TERM AVAILABLE-FOR-SALE MARKETABLE
SECURITIES 12,087,480 1,000,000
---------- ----------
SEVERANCE PAY FUNDS 482,451 444,871
---------- ----------
PROPERTY AND EQUIPMENT, NET 487,336 493,869
---------- ----------
Total assets $ 25,901,265 $ 26,973,750
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 255,002 $ 343,060
Deferred revenues 229,902 14,875
Other accounts payable and accrued expenses 2,803,677 2,476,960
Parent company 434,442 875,088
---------- ----------
Total current liabilities 3,723,023 3,709,983
------------------------- ---------- ----------
ACCRUED SEVERANCE PAY 759,733 686,945
---------- ----------
Total liabilities 4,482,756 4,396,928
---------- ----------
SHAREHOLDERS' EQUITY:
Share capital:
Ordinary shares of NIS 0.01 par value:
Authorized: 55,000,000 shares at 31 December
2004 and 30 June 2005; Issued and outstanding:
35,323,799 shares and 35,410,299 at 31 December
2004 and 30 June 2005, respectively 81,504 81,305
Additional paid-in capital *) 45,568,686 45,424,634
Accumulated deficit *) (24,231,681) (22,929,117)
---------- ----------
Total shareholders' equity 21,418,509 22,576,822
-------------------------- ---------- ----------
$ 25,901,265 $ 26,973,750
========== ==========
*) See Note 2b
The accompanying notes are an integral part of the financial information.
INFORMATION OF OPERATIONS
U.S. dollars, except share data
Six months ended Year
30 June ended
-------------------------- 31 December
2005 2004 2004
-------------------------- -----------
Unaudited
-------------------------- -----------
Revenues $ 3,022,210 $ 408,094 $ 5,201,970
Cost of revenues 476,931 67,913 1,261,675
----------- ----------- -----------
Gross profit 2,545,279 340,181 3,940,295
----------- ----------- -----------
Operating expenses:
Research and development, net 1,253,552 1,065,927 2,016,330
Sales and marketing 1,950,643 1,535,863 3,174,952
General and administrative 857,331 332,048 795,198
Share based compensation (*) 137,560 15,817 85,911
----------- ----------- -----------
Total operating expenses 4,199,086 2,949,655 6,072,391
------------------------ ----------- ----------- -----------
Operating loss 1,653,807 2,609,477 2,132,096
Financial income, net 351,243 50 199,875
----------- ----------- -----------
Net loss $ 1,302,564 $ 2,609,424 $ 1,932,221
=========== =========== ===========
Basic and diluted net loss per share $ 0.04 $ 0.22 $ 0.11
=========== =========== ===========
Weighted average number of shares
used in computing basic and diluted
net loss per share 35,351,187 12,122,227 17,145,648
=========== =========== ===========
(*)Share based compensation includes
the following:
Research and development, net 32,539 4,898 22,839
Sales and marketing 60,730 9,467 43,336
General and administrative 44,291 1,452 19,736
----------- ----------- -----------
Total expenses 137,560 15,817 85,911
-------------- ----------- ----------- -----------
The accompanying notes are an integral part of the financial information.
INFORMATION OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
U.S. dollars
Preferred shares Ordinary shares
--------------------- --------------------
Shares Amount Shares Amount
---------- --------- ---------- ----------
At 1 January 2004
As previously stated 12,098,327 $ 29,196 23,900 $ 51
Effect of adopting IFRS 2 - - - -
Conversion of convertible
loans from Parent Company
into Class A Preferred shares 8,968,643 20,096 - -
Conversion of Class A
Preferred shares into
Ordinary shares upon
Initial Public Offering (21,066,970) (49,292) 21,066,970 49,292
Issuance of Ordinary
shares upon Initial
Public Offering, net **) - - 14,141,414 31,757
Issuance of shares upon
exercise of employees'
share options, net - - 91,515 205
Net loss - - - -
---------- --------- ---------- ----------
Balance as of 31
December 2004 *) - - 35,323,799 81,305
Issuance of shares upon
exercise of employees'
share options, net - - 86,500 199
Comprehensive income (loss):
Net losses on
available-for-sale
financial assets - - - -
Cost of share based
compensation - - - -
Net loss - - - -
---------- --------- ---------- ----------
Balance as of 30 June 2005
(unaudited) - $ - 35,410,299 $ 81,504
========== ========= ========== ==========
*) See Note 2b
**) Net of issuance costs in the amount of approximately $ 3,125,000.
The accompanying notes are an integral part of the financial information.
INFORMATION OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIENCY)
U.S. dollars
Total
Additional recognized
paid-in Accumulated income and
capital deficit Total expense
----------- ------------ ------------ ------------
At 1 January 2004
As previously stated $ 3,002,698 $(20,996,896) $(17,964,951) $(20,996,896)
Effect of adopting
IFRS 2 85,911 (85,911) - -
Conversion of convertible
loans from Parent Company
into Class A Preferred
shares 20,286,305 - 20,306,401 -
Conversion of
Class A Preferred
shares into Ordinary
shares upon Initial
Public Offering - - - -
Issuance of Ordinary
shares upon Initial
Public Offering, net**) 22,024,758 - 22,056,515 -
Issuance of shares upon
exercise of employees'
share options, net 24,962 - 25,167 -
Net loss - (1,846,310) (1,846,310) (1,846,310)
----------- ------------- ------------ ------------
Balance as of
31 December 2004 *) 45,424,634 (22,929,117) 22,576,822 (22,843,206)
Issuance of shares upon
exercise of employees'
share options, net 23,588 - 23,787 -
Comprehensive
income (loss):
Net losses on
available-for-sale
financial assets (17,096) - (17,096) (17,096)
Cost of share based
compensation 137,560 - 137,560 137,560
Net loss - (1,302,564) (1,302,564) (1,302,564)
----------- ------------ ------------ ------------
Balance as of
30 June 2005
(unaudited) $45,568,686 $(24,231,681) 21,418,509 $(24,025,306)
=========== ============ ============ ============
*) See Note 2b
**) Net of issuance costs in the amount of approximately $ 3,125,000.
The accompanying notes are an integral part of the financial information.
INFORMATION OF CASH FLOWS
U.S. dollars
Six months ended Year ended
30 June 31 December
------------------------- -----------
2005 2004 2004
----------- ----------- -----------
Unaudited
-------------------------
Cash flows from operating activities:
-------------------------------------
Net loss $(1,302,564) $(2,609,424) $(1,932,221)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 143,122 208,167 382,579
Cost of share based compensation 137,560 15,817 85,911
Decrease (increase)in trade
receivables, unbilled accounts,
other accounts receivables and
prepaid expenses (2,319,260) 1,260,254 167,733
Increase in interest receivable (188,811) - -
Increase (decrease) in trade and
other payables and accrued
expenses 347,659 132,767 946,779
Increase (decrease) in deferred
revenues 215,027 (13,683) (54,918)
Increase in accrued
severance pay, net 35,208 13,535 10,953
----------- ----------- -----------
Net cash used in operating activities (2,932,059) (992,567) (393,184)
----------- ----------- -----------
Cash flows from investing activities:
-------------------------------------
Investment in long-term available
for sale marketable securities (11,073,876) - (1,000,000)
Investment in short-term available
for sale marketable securities (60,362,150) - (13,550,000)
Proceeds from maturity of
short-term available for sale
marketable securities 66,800,000 - -
Purchase of property
and equipment, net (136,589) (27,669) (47,700)
----------- ----------- -----------
Net cash used in
investing activities (4,772,615) (27,669) (14,597,700)
----------- ----------- -----------
Cash flows from financing activities:
-------------------------------------
Parent Company (440,646) - 875,088
Issuance of shares upon exercise of
employees' share options, net 23,787 - 25,167
Issuance of shares upon Initial Public
Offering - - 25,181,535
Issuance expenses (109,000) - (2,561,020)
Convertible loans from Parent Company - 1,012,163 1,396,417
----------- ----------- -----------
Net cash provided by
financing activities (525,859) 1,012,163 24,917,187
----------- ----------- -----------
Increase (decrease)
in cash and cash equivalents (8,230,533) (8,073) 9,926,303
Cash and cash equivalents at the
beginning of the period 10,029,427 103,124 103,124
----------- ----------- -----------
Cash and cash equivalents at the
end of the period $ 1,798,894 $ 95,051 $10,029,427
=========== =========== ===========
Supplemental disclosure of cash flows
activities:
Cash received during the year for:
Interest $ 261,443 $ - $ 199,676
=========== =========== ===========
Non-cash activities:
Conversion of convertible loans
from Parent Company into shares $ - $ - $20,306,401
=========== =========== ===========
Issuance expenses payable $ - $ - $ 564,000
=========== =========== ===========
The accompanying notes are an integral part of the financial information.
NOTE 1:- GENERAL
a. Orca Interactive Ltd. ('the Company') was incorporated in Israel and
commenced operations in August 1995. The Company is headquartered in Ra'anana,
Israel. In April 2000, the Company was acquired by Emblaze Ltd. ('the Parent
Company'), a company organized under the laws of the State of Israel and traded
on the London Stock Exchange. In October 2004, the Company completed an Initial
Public Offering ('IPO') on the London Stock Exchanges Alternative Investment
Market ('AIM'). The Company issued 14,141,414 Ordinary shares to institutional
and other investors at a price of $1.8 per share, raising amount of
approximately $ 25.2 million before issuance expenses.
b. The Company develops and licenses software for the provision of television
and other entertainment services over IP network infrastructures.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. The significant accounting policies and methods of computation applied in the
preparation of the interim financial information are the same as those applied
in the annual financial statements of the Company as of 31 December, 2004,
except for the adoption of IFRS 2 (see b below).
This financial information have been prepared in a condensed format as of 30
June, 2005, and for the six months then ended ('interim financial information').
This financial information should be read in conjunction with the Company's
audited annual financial statements and accompanying notes as of 31 December,
2004 and for the year then ended. Operating results for the six-month period
ended 30 June, 2005 are not necessarily indicative of the results that may be
expected for the year ended 31 December, 2005.
b. Adoption of new standards:
Commencing 1 January 2005, the Company has adopted IFRS 2, 'Share Based
Payment'. IFRS 2 requires an expense to be recognized where the Company buys
goods or services in exchange for shares or rights over shares ('equity-settled
transactions'), or in exchange for other assets equivalent in value to a given
number of shares of rights over shares ('cash-settled transactions'). The main
impact of IFRS 2 on the Company is the expense of employees' and directors'
share options and other share-based incentives by using an option-pricing-model.
The Company has applied IFRS 2 only to equity-settled awards granted after 7
November 2002 that had not vested on or before 31 December 2004.
The effect of the adoption of IFRS 2 on the six months ended 30 June 2005, and
the six months ended 2004 is an increase in the employee benefits expenses in
the amount of $137,560 and $ 15,817, respectively, with a corresponding increase
in additional paid-in capital.
The effect of the adoption of IFRS 2 on the year ended in December 31, 2004 is
an increase in the employee benefits expenses in the amount of $ 85,911, with a
corresponding increase in additional paid-in capital.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In December 2003, the International Accounting Standards Board (''IASB'')
released revised IAS 32, Financial Instruments: Disclosure and Presentation and
IAS 39, Financial Instruments: Recognition and Measurement. These standards
replace IAS 32 (revised 2000), and supersedes IAS 39 (revised 2000), and should
be applied for annual periods beginning on or after January 1, 2005. The
amendments do not have a material impact on the financial information.
In December 2003, as a part of the IASB's project to improve International
Accounting Standards, the IASB released revisions to the following standards
that supersede the previously released versions of those standards: IAS 1,
Presentation of Financial Statements, IAS 2, Inventories; IAS 8, Accounting
Policies, Changes in Accounting Estimates and Errors; IAS 10, Events after
Balance Sheet Date; IAS 16, Property, Plant and Equipment; IAS 17, Leases; IAS
21, The Effects of Changes in Foreign Exchange Rates, IAS 24, Related Party
Disclosures; IAS 27, Consolidated and Separate Financial Statements; IAS 28,
Investments in Associates; IAS 31, Interests in Joint Ventures; IAS 33, Earnings
per Share and IAS 40, Investment Property. The revised standards should be
applied for annual periods beginning on or after January 1, 2005. The amendments
do not have a material impact on the financial statements.
NOTE 3:- AVAILABILITY OF INTERIM REPORT
Copies of the Interim results are being sent to Orca shareholders and will also
be available at Financial Dynamics, 26 Southampton Buildings, London WC2A 1PB,
UK or from the company's website www.orcainteractive.com.
This information is provided by RNS
The company news service from the London Stock Exchange