Adamind Ltd: Preliminary Results for the Year to 31 December 2005.LONDON London, city, Canada London, city (1991 pop. 303,165), SE Ont., Canada, on the Thames River. The site was chosen in 1792 by Governor Simcoe to be the capital of Upper Canada, but York was made capital instead. London was settled in 1826. -- Adamind Ltd (Adamind or "the Company") (LSE LSE - Language Sensitive Editor : ADA Ada, city, United States Ada (ā`ə), city (1990 pop. 15,820), seat of Pontotoc co., S central Okla.; inc. 1904. It is a large cattle market and the center of a rich oil and ranch area. ), the leading provider of media adaptation adaptation, in biology, has several meanings. It can mean the adjustment of living matter to environmental conditions and to other living things either in an organism's lifetime (physiological adaptation) or in a population over many many generations (evolutionary software for multimedia messages ("MMS (Multimedia Messaging Service) An enhanced transmission service that enables graphics, video clips and sound files to be transmitted via cellphones. Developed as part of the 3GPP project, MMS phones are generally backward compatible with SMS and EMS. ") and content services markets, announces its financial results for the year ended 31 December December: see month. 2005. Financial highlights --Revenues increased by 100% to $6.2m (Combined Pro-forma* 2004: $3.1m) --Operating loss reduced by 29% to $2.7m (Combined Pro-forma* 2004: $3.8m) --Gross margin was 90% --Net loss decreased to $1.35m (Combined Pro-forma* 2004: $3.9m) --Net cash as at 31 December 2005 amounted to $28.2m --Achieved neutral operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. for the year --Loss per share decreased to $0.04 (2004: $0.20) * Adamind was formed in November November: see month. 2004 from the merger of the transcoding business units of Royal Philips (company) Philips - A Dutch multinational electronics company. It produces washing machines, consumer electronics, integrated circuits and light bulbs. Together with Sony they set the Compact Disc standard, especially Green Book CD-ROM. Electronics and Emblaze em·blaze 1 tr.v. em·blazed, em·blaz·ing, em·blaz·es 1. To set on fire. 2. To cause to glow; light up. Ltd; Philips MP4NET and Emblaze Transcoding. These are the combined financial information of the two businesses in 2004 as if the business combination had occurred on January January: see month. 1, 2004 as disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in the admission document dated 14 February February: see month. 2005. Operational highlights --Increased total network deployments to over 100 from over 80 at the time of Admission to AIM in February 2005. Now working with the top five of the seven mobile infrastructure vendors and three of the top System Integrators See systems integrator. --Revenue growth reflects new software license sales as well as capacity upgrades --Direct sales to networks increased to 25% of revenues compared with less than 10% in 2004 --Major footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. in US with Verizon Wireless Cellco Partnership, doing business as Verizon Wireless, owns and operates the second largest wireless telecommunications network in the United States, based on total wireless customers. and Universal --Significant inroads inroads Noun, pl make inroads into to start affecting or reducing: my gambling has made great inroads into my savings inroads npl to make inroads into [+ into APAC APAC Australian Partnership for Advanced Computing APAC Agricultural Policy Analysis Center APAC Asia and Pacific APAC Asian Pacific American Coalition APAC Adapted Physical Activity Council (American Alliance for Health) region with direct sales to SMART Communications Smart Communications, Inc. commonly known as "SMART", is the wholly-owned mobile phone subsidiary of PLDT. With over 25 million subscribers on its GSM network as of end-February 2007, equivalent to approximately 58 percent market share. in Philippines Philippines officially Republic of the Philippines Island country, western Pacific Ocean, on an archipelago off the southeast coast of Asia. Area: 122,121 sq mi (316,294 sq km). Population (2005 est.): 84,191,000. , M1 in Singapore Singapore (sĭng`gəpôr, sĭng`ə–, sĭng'gəpôr`), officially Republic of Singapore, republic (2005 est. pop. 4,426,000), 240 sq mi (625 sq km). , Optus in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. and others --Broadened strategic partnership with Ericsson Er·ics·son , John 1803-1889. American engineer and inventor who built the first ironclad warship, the Monitor (1862), which engaged the Confederate Merrimack in a famous naval battle of the Civil War (March 9, 1862). to include video content adaptation Content Adaptation is the action of transforming content to adapt to device capabilities. Content adaptation is usually related to mobile devices that require special handling because of their limited computational power, small screen size and constrained keyboard functionality. and support for Digital Rights Management --Moved into Chinese Chinese, subfamily of the Sino-Tibetan family of languages (see Sino-Tibetan languages), which is also sometimes grouped with the Tai, or Thai, languages in a Sinitic subfamily of the Sino-Tibetan language stock. market and increased presence in APAC region with acquisition of SenseStream in February 2006 Shailendra Shankardas Kesarilal Shailendra (August 30, 1923 Rawalpindi-December 14, 1966 Mumbai) was a popular Indian Hindi lyricist. Early days Shailendra was born in Rawalpindi (Undivided India) to Kesarilal and Parvati Devi. He was eldest of their four sons. Jain Jain also Jai·na n. A believer or follower of Jainism. [Hindi jaina, from Sanskrit jaina-, relating to the saints, from jina , chief executive of Adamind, said: "Adamind is in the sweet spot of the mobile content revolution as consumer use of multimedia messages and rich media content services continues to grow strongly. The momentum of growth seen in 2005 has continued into the New Year. Our pipeline of new orders has expanded significantly, putting Adamind on track to achieve profitability and strong growth for the year as a whole." Overview Adamind announces its maiden MAIDEN. The name of an instrument formerly used in Scotland for beheading criminals. full year results since admission to AIM with a strong operating performance that consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: its position as the world's leading provider of media adaptation software for multimedia messaging ("MMS") and mobile content. The total number of networks that have deployed Adamind's software increased to more than 100 during 2005 compared with over 80 at the time of the flotation flotation or froth flotation Most widely used process for extracting many minerals from their ores. The method separates and concentrates ores by altering their surfaces so that they are either repelled or attracted by water. in February 2005. This was achieved by increasing direct sales to major operators and by working closely with our strategic partners including Ericsson, LogicaCMG LogicaCMG (LSE: LOG, Euronext: LOG) is a UK-based global IT and management consultancy company. It is quoted on the London Stock Exchange and Euronext Amsterdam, and is a member of the FTSE 250 index of shares. , Motorola (Motorola, Inc., Schaumburg, IL, www.motorola.com) A leading manufacturer of semiconductor devices, electronics, telecommunications and satellite systems. Founded in Chicago in 1928 by Paul V. and Openwave (Openwave Systems Inc., Redwood City, CA, www.openwave.com) A software company that provides an application infrastructure for wireless data. Its microbrowsers and server software enable cellphones and other wireless devices to retrieve stock quotes, e-mail and other data from the Web. . The Company benefited from the growing popularity of MMS and rich mobile content with end users and the introduction of new multimedia services by operators worldwide, particularly in Asia and North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . Adamind's software sits at the heart of a mobile network and adapts multimedia content such as picture messages, ringtones and video-clips so that these can be experienced without glitch A temporary or random hardware malfunction. It is possible that a bug in a program may cause the hardware to appear as if it had a glitch in it and vice versa. At times it can be extremely difficult to determine whether a problem lies within the hardware or the software. See glitch attack. across any network and mobile handset The part of the telephone that contains the speaker and the microphone. On a desktop phone, the part you hold in your hand is the handset. On a cellphone, the entire phone is the handset. See multihandset cordless and headset. . As a result, the Company's software plays a critical function in a large and rapidly expanding market for mobile content. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. industry estimates the messaging market alone is expected to grow three-fold to nearly $30bn between 2005 and 2009 (Global Mobile Data Applications Forecast, Yankee Group (the Yankee Group, Boston, MA, www.yankeegroup.com) A major market research, analysis and consulting firm founded in 1970 by Howard Anderson. It provides general consulting and strategic planning in the computer and communications field. , Dec 2005). Over the same period, the potential market for mobile content services is expected to be even bigger at about $60bn. Operating review The Company increased its revenues by 100% to $6.2m and reduced its net loss by 66% to $1.3m in 2005 as set out in the table below:
Year ended
31 Dec 2004
($000) Year ended
Combined 31 Dec 2005
Pro forma* ($000)
------------ ------------
Revenues $ 3,060 $ 6,154
Cost of revenues 252 632
------------ ------------
Gross profit 2,808 5,522
------------ ------------
Total operating expenses 6,652 8,249
----- ------------ ------------
Operating loss (3,844) (2,727)
Financial income (expenses), net (80) 1,379
------------ ------------
Net loss $ (3,924) $ (1,348)
============ ============
Basic and diluted net loss per share $ (0.20) $ (0.04)
============ ============
Weighted average number of shares used in
computing basic and diluted net loss per
Ordinary share 19,200,000 33,548,392
============ ============
* Adamind was formed in November 2004 from the merger of the
transcoding business units of Royal Philips Electronics and
Emblaze Ltd; Philips MP4NET and Emblaze Transcoding. These are the
combined financial information of the two businesses in 2004 as if
the business combination had occurred on January 1, 2004.
The increase in revenues reflects a greater number new operator customers planning the launch of MMS and content services. In addition, the Company benefited from capacity upgrades purchased by existing operator customers to handle rising MMS traffic requiring Adamind's media adaptation technology. License sales to new customers contributed 65% of total revenues while capacity upgrades and maintenance fees from existing customers accounted for the remainder. In March 2005, Adamind's media adaptation platform was deployed at Verizon Wireless, one of the two largest North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. mobile phone companies with approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 50 million subscriber subscriber, n the person, usually the employee, who represents the family unit in relation to the prepayment plan. Other family members are dependents. Also called certificate holders or enrollees. base. Since then the volume of mobile data handled by Adamind's software in the US market has continued to grow steadily as Verizon Wireless, together with other mobile content providers roll out new services, applications and advanced new handsets to increasingly receptive receptive /re·cep·tive/ (re-cep´tiv) capable of receiving or of responding to a stimulus. end-users. Direct sales Direct sales to operators rose strongly during the year after the Company increased its sales and marketing spending to $3.1m last year (2004:$1.6m). Direct sales accounted for 25% of total revenues last year compared with less than 10% in 2004. Major direct wins and up-sell included several prominent regional mobile network operators including Smart Communications in Philippines and Wind in Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. . The Company's success with Smart was particularly noteworthy as the Philippines holds the world's No1 position for achieving the highest proportion of average revenues per user from data services at 40%. Since the year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. , Adamind has also made a major breakthrough with the direct sale of its content production software to Universal Music Mobile US, a subsidiary of Universal Music Group, the world's largest music company. The Company is currently in talks with several other global content owners regarding its content production software. Targeting high growth markets The Company expects to build on its success in the US, Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). and SE Asia markets. Some of the top carriers in the US will be selecting their next generation media adaptation partner for content and MMS this year. In SE Asia, the company expects to make significant capacity upgrade sales this year. In Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). , there will be similar
capacity upgrade sales and some new operator replacement deployments.The Company is making solid progress in penetrating penetrating breaching the tissues of the body. some of the world's fastest growing emerging economies of Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). , India India, officially Republic of India, republic (2005 est pop. 1,080,264,000), 1,261,810 sq mi (3,268,090 sq km), S Asia. The second most populous country in the world, it is also sometimes called Bharat, its ancient name. India's land frontier (c. and China. These countries collectively account for much of the world's population, and the fastest growing mobile subscriber base. During 2006, Adamind expects to announce significant commercial breakthroughs in each of these markets. Last month the Company announced the acquisition of SenseStream, which provides a bridgehead bridge·head n. 1. a. A fortified position from which troops defend the end of a bridge nearest the enemy. b. A forward position seized by advancing troops in enemy territory as a foothold for further advance. into mainland Mainland. 1 Island (1991 pop. 14,150), 178 sq mi (461 sq km), N Scotland. The largest of the Orkney Islands, it is also called Pomona. Kirkwall, the seat of the Orkney Islands council area, is on the island. China, Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. and Taiwanese markets. SenseStream has key relationships with some of the territories biggest mobile operators and network equipment makers. Financial results Revenues increased by 100% to $6.2m compared with $3.1m in the corresponding pro-forma period in 2004. The increase reflects a greater number of new licence fees and capacity upgrades purchased by network operators worldwide. Revenues were broadly similar in the second half at $3.0m compared with the first half due to a number of new agreements expected to be concluded before the end of the year being formally concluded in early January 2006. Operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. reduced by 29% to $2.7m (Combined Pro-forma 2004: $3.8m) reflecting the growth in revenues and a tight control over operational expenditure. Net loss amounted to $1.3m after taking into account financial income of $1.38m reflecting interest income from cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has . The Company also benefited from a $0.6m one-off (1) One at a time. CD-ROM recorders (CD-R drives) are commonly called one-off machines because they write one CD-ROM at a time. (2) Only once. Software that is written to solve a specific problem only one time is sometimes called a one-off. currency gain in the first half of 2005. Gross margin was maintained at 90%. Net cash balances amounted to $28.2m reflecting $25.5m proceeds from the placing on admission to AIM in February 2005. Cash from operations for the full year was neutral. Trading Outlook Adamind continues to enjoy strong demand for its world-class world-class adj. 1. Ranking among the foremost in the world; of an international standard of excellence; of the highest order: a world-class figure skater. 2. mobile content software by major operators worldwide. The recent acquisition of SenseStream in China and the move into the mobile content production arena with the signing of a three-year contract with Universal has also provided a strong foundation for 2006. Since the start of the New Year our pipeline of new orders has expanded significantly, putting Adamind on track to achieve profitability and strong growth for the year as a whole.
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------------------------
U.S. dollars in thousands, except share data
31 December
----------------
Note 2004 2005
---- ------- --------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $2,799 $ 1,877
Short-term available-for-sale marketable
securities 3 - 16,726
Short-term held-to-maturity marketable
securities 3 - 2,131
Trade receivables 233 1,522
Other accounts receivable and prepaid expenses 41 148
------- --------
Total current assets 3,073 22,404
----- ------- --------
NON-CURRENT ASSETS:
Long-term held-to-maturity marketable securities 3 - 7,448
Equipment, net 4 413 424
Intangible assets, net 5 3,681 2,803
------- --------
Total non-current assets 4,094 10,675
----- ------- --------
$7,167 $33,079
======= ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables $ 19 $ 304
Employees and payroll accruals 305 859
Accrued expenses and other liabilities 6 616 1,570
Deferred revenues 304 416
------- --------
Total current liabilities 1,244 3,149
----- ------- --------
EQUITY: 8
Share capital -
Series A Convertible Preferred shares of NIS
0.01 par value: Authorized: 5,000,000 and 0
shares as of 31 December 2004 and 2005,
respectively; Issued and outstanding:
4,800,000 and 0 shares as of 31 December 2004
and 2005, respectively 11 -
Ordinary shares of NIS 0.01 par value:
Authorized: 45,000,000 and 50,000,000 shares
as of 31 December 2004 and 2005,
respectively; Issued and outstanding:
19,200,000 and 35,388,636 shares as of 31
December 2004 and 2005, respectively 43 80
Additional paid-in capital 5,956 31,078
Share-based compensation - 207
Accumulated deficit (87) (1,435)
------- --------
Total equity 5,923 29,930
----- ------- --------
$7,167 $33,079
======= ========
The accompanying notes are an integral part of the financial
CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data
From 7
November
2004 (date of
commencement
of operations)
through Year ended
31 December 31 December
Note 2004 *) 2005
---- --------------- ------------
Revenues 10 $ 978 $ 6,154
Cost of revenues 60 632
--------------- ------------
Gross profit 918 5,522
--------------- ------------
Operating expenses:
Research and development, net 391 3,157
Sales and marketing 299 3,087
General and administrative 175 1,127
Amortization of intangible assets 5 150 878
--------------- ------------
Total operating expenses 1,015 8,249
----- --------------- ------------
Operating loss 97 2,727
Financial income, net 11f 10 1,379
--------------- ------------
Net loss $ 87 $ 1,348
=============== ============
Basic and diluted net loss per share $ 0.00 $ 0.04
=============== ============
Weighted average number of shares
used in computing basic and diluted
net loss per Ordinary share 19,200,000 33,548,392
=============== ============
*) For additional unaudited pro forma combined statement of
operations, see also Note 13.
The accompanying notes are an integral part of the financial
statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
----------------------------------------------------------------------
U.S. dollars in thousands, except share data
Series A
Convertible Additional
Preferred shares Ordinary shares paid-in
------------------ ------------------
Number Amount Number Amount capital
----------- ------ ----------- ------ ----------
Balance at 7 November
2004 (date of
commencement of
operations) - $ - - $ - $ -
Issuance of shares *) 4,800,000 11 19,200,000 43 5,956
Net loss - - - - -
----------- ------ ----------- ------ ----------
Balance as of 31
December 2004 4,800,000 11 19,200,000 43 5,956
Issuance of Ordinary
shares upon Initial
Public Offering and
conversion of Series
A Convertible
Preferred shares **) (4,800,000) (11) 16,163,636 37 25,113
Issuance of Ordinary
shares upon exercise
of employees' share
options - - 25,000 ***) - 9
Share-based
compensation - - - - -
Net loss - - - - -
----------- ----- ----------- ----- ---------
Balance as of 31
December 2005 - $ - 35,388,636 $ 80 $ 31,078
=========== ====== =========== ====== ==========
Share-based Accumulated Total
compensation deficit equity
------------ ------------ --------
Balance at 7 November 2004 (date
of commencement of operations) $ - $ - $ -
Issuance of shares *) - - 6,010
Net loss - (87) (87)
------------ ------------ --------
Balance as of 31 December 2004 - (87) 5,923
Issuance of Ordinary shares upon
Initial Public Offering and
conversion of Series A
Convertible Preferred shares **) - - 25,139
Issuance of Ordinary shares upon
exercise of employees' share
options - - 9
Share-based compensation 207 - 207
Net loss - (1,348) (1,348)
------------ ------------ --------
Balance as of 31 December 2005 $ 207 $ (1,435) $29,930
============ ============ ========
*) Net of issuance expenses of $ 100.
**) Net of issuance expenses of $ 2,906.
***) Represents an amount lower than $ 1.
The accompanying notes are an integral part of the financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------------------------
U.S. dollars in thousands
From 7
November
2004 (date of
commencement
of operations)
through Year ended
31 December 31 December
2004 2005
-------------- -----------
Cash flows from operating activities:
-------------------------------------------
Net loss $ (87) $ (1,348)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 187 1,125
Decrease (increase) in trade
receivables, other accounts receivable
and prepaid expenses 72 (1,535)
Increase in trade payables, employees
and payroll accruals, accrued expenses
and other liabilities 700 1,439
Increase in deferred revenues 84 112
Share-based compensation - 207
-------------- -----------
Net cash provided by operating activities 956 -
-------------- -----------
Cash flows from investing activities:
-------------------------------------------
Purchase of equipment (57) (258)
Investment in short-term available-for-
sale marketable securities - (16,700)
Investment in short-term held-to-maturity
marketable securities - (2,018)
Investment in long-term held-to-maturity
marketable securities - (7,448)
-------------- -----------
Net cash used in investing activities (57) (26,424)
-------------- -----------
Cash flows from financing activities:
-------------------------------------------
Proceeds from issuance of Series A
Convertible Preferred shares 2,000 -
Issuance of shares upon Initial Public
Offering - 28,056
Issuance expenses (100) (2,554)
-------------- -----------
Net cash provided by financing activities 1,900 25,502
-------------- -----------
Increase (decrease) in cash and cash
equivalents 2,799 (922)
Cash and cash equivalents at the beginning
of the period - 2,799
-------------- -----------
Cash and cash equivalents at the end of the
period $ 2,799 $ 1,877
============== ===========
Supplemental disclosure of cash flow
activities:
-------------------------------------------
Cash received during the year for:
Interest, net $ - $ 688
============== ===========
Non-cash financing activities:
-------------------------------------------
Issuance of Ordinary shares for
acquisition of Philips MP4Net media
adaptation business (see Note 1d) $ 3,500 $ -
============== ===========
Issuance of Ordinary shares to Emblaze in
consideration for net assets contributed
from Emblaze as follows:
Trade receivables $ 79 $ -
Other receivables and prepaid expenses 6 -
Equipment 173 -
Acquired technology 643 -
Accrued expenses and other liabilities (147) -
Deferred revenues (144) -
--------------
$ 610 $ -
============== ===========
The accompanying notes are an integral part of the financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data
NOTE 1:- GENERAL
a. Background:
On 17 September 2004, Emblaze Ltd. ("Emblaze"(, a company
organized under the laws of the State of Israel and traded on the
London Stock Exchange, entered into an agreement ("the Agreement")
with DommelRiver Israel Ltd., Philips Digital Networks B.V.
("PDN") and Koninklijke Philips Electronics N.V. ("Philips") (all
of the aforementioned Philips companies - "Philips Parties") to
transfer their respective media adaptation business to a new
Israeli-based company, Adamind Ltd. ("Adamind Ltd." or "the
Company"). Emblaze agreed to contribute the Emblaze media
adaptation business ("Emblaze Media Adaptation Business") and
operations in consideration for the issuance of Ordinary shares of
Adamind Ltd., and the Philips Parties agreed to contribute the
MP4Net media adaptation business ("Philips MP4Net media adaptation
business") to Adamind Ltd. in consideration for the issuance of
Ordinary shares of Adamind Ltd. and other consideration paid by
Emblaze, all as set forth in the Agreement. In addition, Emblaze
agreed to make an equity investment of $ 2,000 in Adamind Ltd. in
consideration for the issuance of Series A Convertible Preferred
shares of Adamind Ltd., as set forth in the Agreement (see c. and
d. below).
In 2004, the Company established a wholly-owned subsidiary in the
U.S. ("Adamind Inc."), which is primarily engaged in marketing,
sales provision of professional services and certain general and
administrative functions associated with the Company's activities.
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 at a price of
1.32 GBP per share, raising approximately $ 28,000 before issuance
expenses of approximately $ 2,900.
b. The Company is a pure play provider of rich media content
adaptation and content enhancement software solutions for the
mobile messaging, content and convergence markets. The Company's
flagship platform, Adamind Spire(TM), provides automated solutions
for content adaptation and enhancement and aims to benefit
virtually every player in the mobile delivery chain. Its
multimedia capabilities enable service operators and content
providers to deploy media rich content applications and services
across a wide range of disparate types of consumer devices.
c. Pursuant to the Agreement, on 7 November 2004, Emblaze transferred
to the Company assets, including intellectual property, and
liabilities related to the media adaptation business with a net
carrying value in the accounts of Emblaze of $ 610 in
consideration for the issuance of 12,000,000 Ordinary shares. In
addition, Emblaze transferred to the Company $ 2,000 in cash as an
equity investment in consideration of 4,800,000 Series A
Convertible Preferred shares. The identification of the assets and
liabilities transferred ("the transferred net assets") was agreed
upon between Emblaze and Philips Parties pursuant to the Agreement
and related documents entered into by and between the Company,
Emblaze and Philips Parties.
d. Business combination:
Pursuant to the Agreement, on 7 November 2004, the Philips Parties
agreed to contribute the Philips MP4Net media adaptation business
to the Company in consideration for the issuance of Ordinary
shares of the Company and other consideration paid by Emblaze.
The transaction has been accounted for under the purchase method
of accounting, under which the Company is considered as the
acquirer of the Philips MP4Net media adaptation business from
Philips. Accordingly, the results of operations of Philips MP4Net
media adaptation business were included in the consolidated
statements of operations of the Company, commencing 7 November
2004.
The estimated fair value of the identifiable assets acquired and
liabilities assumed as of 7 November 2004 are as follows:
Current assets $ 262
Equipment 217
Acquired technology 2,266
Customer agreements 248
---------
2,993
---------
Accrued expenses and other liabilities (91)
Deferred revenues (76)
---------
(167)
---------
Fair value of net assets 2,826
Goodwill arising on acquisition 674
---------
$ 3,500
=========
See Note 13 for unaudited pro forma combined statements of operations
for 2004.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of the Company and its
subsidiary have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). The significant accounting
policies applied in the financial statements, on a consistent basis,
are as follows:
a. Functional and presentation currency:
Substantially all of the Company's sales are made outside Israel
in non Israeli currencies, mainly the U.S. dollar. A substantial
portion of the Company's expenses, mainly selling and marketing
expenses is incurred in or linked to U.S. dollars. The funds of
the Company are held in U.S. dollars. Therefore, the Company's
management has determined that the U.S. dollar is the currency of
the primary economic environment of the Company, and thus its
functional and presentation currency.
b. Principles of consolidation:
The consolidated financial statements include the accounts of the
Company and its subsidiary. Intercompany balances and transactions
have been eliminated upon consolidation.
c. Cash equivalents:
The Company considers all highly liquid investments originally
purchased with maturities of three months or less to be cash
equivalents.
d. Investments in financial assets:
Certain investments in financial assets in the scope of IAS 39,
"Financial Instruments: Recognition and Measurement" are
classified as either at held-to-maturity investments or
available-for-sale financial assets, as appropriate. These
financial assets are recognized initially at fair value. The
Company determines the classification of its financial assets
after initial recognition and, where allowed and appropriate,
re-evaluates this designation at balance sheet date.
Held-to-maturity investments
Debt securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold to maturity
and are stated at amortized cost. The amortized cost of
held-to-maturity securities is adjusted for amortization of
premiums and accretion of discounts to maturity. Such amortization
and interest are included in financial income. Losses due to
impairment are recognized in the statement of operations when
there is subjective evidence that an impairment has been incurred.
As of 31 December 2005, no impairment has been identified.
Available-for-sale financial assets
After initial recognition, available-for-sale financial assets are
measured at fair value with gains or losses being recognized as a
separate component of shareholders' equity until the investment is
derecognized or until the investment is determined to be impaired
at which time the cumulative gain or loss previously reported in
shareholders' equity is included in the consolidated statement of
operations. As of 31 December 2005, no impairment has been
identified.
The fair value of investments that are actively traded in
organized financial markets is determined by reference to quoted
market prices at the close of business on the balance sheet date.
e. Trade receivables:
Trade receivables are recognized and carried at original invoice
amount, less an allowance for any uncollectible amounts. An
allowance for doubtful debts is made when there is objective
evidence that the Company will not be able to collect the full
amount. Bad debts are written-off when identified by management.
As of 31 December 2005 and 2004, no allowance for doubtful debts
was recorded.
f. Equipment:
Equipment is stated at cost, net of accumulated depreciation.
Depreciation is calculated by the straight-line method over the
estimated useful lives of the assets at the following annual
rates:
%
--------------------
Computers and peripheral equipment 25 - 33
Office furniture and equipment 7 - 15
The carrying value of the equipment is reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. As of 31 December 2005 and
2004, no impairment losses have been identified.
g. Intangible assets:
The cost of intangible assets acquired on acquisition is fair
value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any
accumulated amortization and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are
amortized over the useful economic life and assessed for
impairment whenever there is an indication that the intangible
asset may be impaired. The amortization period and the
amortization method for an intangible asset with a finite useful
life is reviewed at least at each financial year-end. The
amortization expense on intangible assets with finite lives is
recognized in the statement of operations.
The Company's intangible assets consist of acquired technology and
customer agreements. The acquired technology is amortized using
the straight-line method over an estimated useful life of five
years during which benefits are expected to be received. The
customer agreements are amortized using the straight-line method
over an estimated useful life of a period between twelve and
eighteen months during which benefits are expected to be received.
As of 31 December 2005 and 2004, no impairment losses have been
identified.
h. Goodwill:
Goodwill acquired in a business combination is initially measured
at cost being the excess of the cost of the business combination
over the acquirer's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost less
any accumulated impairment losses. Goodwill is not amortized and
is reviewed for impairment, annually or more frequently if events
or changes in circumstances indicate that the carrying value may
be impaired.
Impairment is determined by assessing the recoverable amount of
the cash-generating unit, to which the goodwill relates. When the
recoverable amount of the cash-generating unit is less than the
carrying amount, an impairment loss is recognized. Where goodwill
forms part of a cash-generating unit and part of the operation
within that unit is disposed of, the goodwill associated with the
operation disposed of is included in the carrying amount of the
operation when determining the gain or loss on disposal of the
operation. Goodwill disposed of in this circumstance is measured
on the basis of the relative values of the operation disposed of
and the portion of the cash-generating unit retained. As of 31
December 2005 and 2004, no impairment losses have been identified.
i. Revenue recognition:
The Company and its subsidiary generate revenues mainly from
licensing the rights to use the Company's software products, and
from royalty arrangements upon licensing of the Company's software
to end-users. The Company also generates revenues from
maintenance, support, training and professional services. The
Company does not grant a right of return to its customers.
Revenues from software licensing arrangements are recognized to
the extent that it is probable that the economic benefits will
flow to the Company and the revenues can be reliably measured.
Revenues from professional services are recognized when the
services are rendered.
Revenues from royalty arrangements are recognized in the period
when such royalties are reported to the Company, provided that all
other revenue recognition criteria are met. Royalties are
recognized as revenues by the Company, consistently in the quarter
following the quarter in which such royalties are earned. There is
a consistent lag of one quarter between the period in which the
royalties are earned based on sales to end users and the period in
which such royalties are recognized as revenue by the Company.
Maintenance and support revenues are recognized on a straight-line
basis over the term of the maintenance and support agreement.
Deferred revenue includes unearned amounts received under
maintenance and support contracts.
j. Research and development:
Research costs are expensed to operations as incurred.
k. Government grants:
Royalty-bearing grants from the Government of Israel for funding
approved research and development projects are recognized at the
time the Company is entitled to such grants, on the basis of the
costs incurred. These grants are presented as a reduction of
research and development expenses when there is reasonable
assurance that the grants will not be repaid based on estimated
future sales of the funded product. The management reevaluates the
estimated future sales of the funded projects on each reporting
period.
l. Income taxes:
The Company and its subsidiary account for income taxes under the
liability method of accounting. Under the liability method,
deferred taxes are provided based on the differences between the
financial reporting and tax basis of assets and liabilities and
are measured at enacted tax rates that are expected to be
applicable in the year in which the differences reverse. Deferred
tax assets in respect of carryforward losses and other temporary
deductible differences are recognized to the extent that it is
probable that they will be utilized.
m. Exchange rates and linkage basis:
Assets and liabilities in or linked to the Israeli currency, New
Israeli Shekels ("NIS"), or the Euro are included in the financial
statements based on the representative exchange rate as published
by the Bank of Israel on balance sheet date.
Data regarding exchange rates of NIS and Euro in relation to U.S.
dollar are as follows:
Exchange rate of Exchange rate of
As of one U.S. dollar one U.S. dollar
------------------------ ------------------------ --------------------
31 December 2005 Euro 0.845 NIS 4.603
31 December 2004 Euro 0.733 NIS 4.308
n. Basic and diluted net loss per share:
Basic net loss per share is computed based on the weighted average
number of Ordinary shares outstanding during each year. Diluted
net loss per share is computed based on the weighted average
number of Ordinary shares outstanding during each period, plus
dilutive potential Ordinary shares considered outstanding during
the period.
o. Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, trade and other
receivables, and trade and other payables approximate their fair
value due to the short-term maturity of such instruments.
The fair values for marketable securities are based on quoted
market prices.
p. Concentrations of credit risk:
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash
equivalent, marketable securities and trade receivables.
The majority of the Company's cash and cash equivalents are
invested in major banks in the United States and Israel, in U.S.
dollars. Management believes that the financial institutions that
hold the Company's investments are financially sound and
accordingly, minimal credit risk exists with respect to these
investments.
The Company's marketable securities include investments in auction
rate securities, government debentures and corporate debentures.
Management believes that those corporations and governments are
financially sound and that the portfolios are well-diversified,
and accordingly, minimal credit risk exists with respect to these
marketable securities.
Trade receivables are derived from sales to customers primarily
located in Europe, North America and Asia Pacific. The Company and
its subsidiary perform ongoing credit evaluations of their major
customers and to date have not experienced any material losses.
As of 31 December 2005, the Company has no significant off-balance
sheet concentration of credit risk, such as foreign exchange
contracts, option contracts or other foreign hedging arrangements.
q. Share-based payment transactions:
On 1 January 2005, the Company 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 expensing of employees' and
directors' share options (equity-settled transactions).
The cost of equity-settled transactions is measured by reference
to the fair value at the date on which they are granted. The fair
value is determined by using the Black-Scholes option-pricing
model, taking into account the terms and conditions upon which the
instruments were granted.
The cost of equity-settled transactions is recognized, together
with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on
the date on which the relevant employees become fully entitled to
the award ("the vesting date"). The cumulative expense recognized
for equity-settled transactions at each reporting date until the
vesting date reflects the extent to which the vesting period has
expired and the Company's best estimate of the number of equity
instruments that will ultimately vest. No expense is recognized
for awards that do not ultimately vest.
The effect of the adoption of IFRS 2 on the year ended 31 December
2005 was an increase in employee benefits expense and an increase
in net loss in the amount of $ 207, with a corresponding increase
in equity.
The effect of the initial adoption of IFRS 2 (retrospective
application) on the periods prior to 1 January 2005 is immaterial.
NOTE 3:- UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following proforma combined statement of operations for 2004
assumes the acquisition of the Philips MP4Net media adaptation
business described in Note 1 had occurred at the beginning of
2004. The proforma results are not necessarily indicative of what
actually could have occurred had the acquisition been in effect
for the period presented.
From 7 *)
November 2004
(date of
commencement
of operations)
Ten months ended through 31
31 October 2004 December 2004
----------------------- ---------------
PHILIPS
MP4Net
Emblaze media
Media adaptation
Adaptation business Adamind Ltd.
----------- ----------- ---------------
Historical Historical
(audited) (audited)
----------------------- ---------------
Revenues $ 1,307 $ 775 $ 978
Cost of revenues 101 91 60
---------- ------------ ---------------
Gross profit 1,206 684 918
---------- ------------ ---------------
Operating expenses:
Research and development,
net 1,069 2,222 391
Sales and marketing 574 722 299
General and administrative 355 200 175
Amortization of intangible
assets 264 - 150
---------- ------------ ---------------
Total operating expenses 2,262 3,144 1,015
----- ---------- ------------ ---------------
Operating loss (1,056) (2,460) (97)
Financial income (expenses),
net - (90) 10
---------- ------------ ---------------
Net loss $ (1,056) $ (2,550) $ (87)
========== ============ ===============
Basic and diluted net loss per
share
Weighted average number of
shares used in computing
basic and diluted net loss
per share
--------------------------------------
Combined
Unaudited Pro
Adjustments References forma
----------- ----------- -------------
Revenues $ 3,060
Cost of revenues 252
----------- -------------
Gross profit 2,808
----------- -------------
Operating expenses:
Research and development, net (137) A 3,545
Sales and marketing 1,595
General and administrative 730
Amortization of intangible
assets 368 B 782
----------- -------------
Total operating expenses 231 6,652
----- ----------- -------------
Operating loss (231) (3,844)
Financial income (expenses),
net (80)
----------- -------------
Net loss $ (231) $ (3,924)
=========== =============
Basic and diluted net loss per
share $ (0.20)
=============
Weighted average number of
shares used in computing basic
and diluted net loss per share 19,200,000
=============
*) The results of operations from 1 November 2004 through 6 November
2004 were considered immaterial.
References:
A Elimination of research and development costs related to
duplicated activities.
B Amortization of intangible assets acquired from Philips MP4Net
media adaptation business for the year ended 31 December 2004.
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