Amaru Inc. Reports Record Financial Results for Second Quarter FY06; Revenue Climbs 123% to $7.4 Million; Net Income Reaches Record Level of $0.9 Million.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). -- Amaru Amaru may refer to
Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). entertainment and media on demand streaming over broadband channels, Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the portals and 3G devices globally, today announced record financial results for its second quarter and six months ended June June: see month. 30, 2006. 2Q06 Highlights --Revenues increased 123% year-over-year to a record $7.4 million --Entertainment revenue growth more than doubled sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen --Net income grew to record levels of $0.9 million --Partnered with Sony/MGM for distribution deal to film library --Launched Global Broadband TV Broadband TV involves accessing multimedia content via an unmanaged broadband connection and viewing it on a PC or sometimes a normal TV. Broadband TV differs from IPTV as the network bandwidth is unmanaged and the system is inherently open. Service, M2Btv, and innovative PONY set-top boxes The cable TV box that sits on "top" of the TV "set," although it is often located several feet away in an equipment rack. The set-top box descrambles the premium channels and provides a tuner for the higher cable numbers that very old TVs did not support. Second Quarter FY06 Financial Results Revenue for the second quarter of fiscal year 2006 (FY06) grew to record levels of $7.4 million, an increase of 123% over second quarter FY05 revenue of $3.3 million. Gross profits for the second quarter of FY06 were $2.2 million, an increase of 356% compared to gross profit of $0.5 million for the same period in FY05. Gross margin doubled to over 30% up from 14.8% for the same period in FY05. Income from operations for the second quarter of FY06 was approximately $0.9 million, a significant increase over the operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. loss reported a year earlier. Operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for the second quarter of FY06 was 12%, as compared to a loss for the second quarter of FY05. Net income for the second quarter of FY06 reached record levels of $0.9 million, a substantial increase over second quarter FY05 net income of $0.03 million. Diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of for the second quarter FY06 was $0.01, up from second quarter FY05 EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $0.00. "We are pleased with our strong results for the quarter," said Colin Col´in n. 1. (Zool.) The American quail or bobwhite. The name is also applied to other related species. See Bobwhite. Binny Bin´ny n. 1. (Zool.) A large species of barbel (Barbus bynni), found in the Nile, and much esteemed for food. , Amaru Inc.'s Chief Executive Officer. "We achieved record revenues, gross profits, operating income and net income. Our strong growth can be attributed to substantial revenues generated from our digit A single character in a numbering system. In decimal, digits are 0 through 9. In binary, digits are 0 and 1. digit - An employee of Digital Equipment Corporation. See also VAX, VMS, PDP-10, TOPS-10, DEChead, double DECkers, field circus. gaming business, but more significantly from the increasing success and growth of our entertainment businesses. We anticipate this trend will continue as we begin expanding our broadband coverage by launching our broadband digital entertainment platform and new broadband sites in 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. , Japan and 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. . We also plan to launch an innovative travel e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. portal by 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. 2006." Revenue growth in the quarter was driven by digit gaming which grew 166% year over year and accounted for 70% of total revenues. Also contributing to the record quarter was a significant increase in Entertainment revenues which generated 29.8% of total revenues this quarter, more than doubling from first quarter 2006 levels of 14.6%. Entertainment revenues benefited from the sale of PONY set-top box licensing rights on a non-exclusive basis in four Asian countries Noun 1. Asian country - any one of the nations occupying the Asian continent Asian nation country, land, state - the territory occupied by a nation; "he returned to the land of his birth"; "he visited several European countries" . On a year-over-year basis, Entertainment revenues grew 62% and 121% sequentially. The Company continued to solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. its leadership in broadband entertainment on demand, with the launch of its PONY broadband set-top boxes and with its distribution deal with Sony SONY Standard Oil of New York (common, but untrue; it's an urban legend) Pictures. "This agreement is a result of the unique synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. that traditional Hollywood Hollywood. 1 Community within the city of Los Angeles, S Calif., on the slopes of the Santa Monica Mts.; inc. 1903, consolidated with Los Angeles 1910. entertainment companies are seeking as consumers begin to embrace what we call the 'on demand digital lifestyle,'" said Binny. "It is essentially the melding of the highly recognizable content that viewers VIEWERS. Persons appointed by the courts to see and examine certain matters, and make a report of the facts together with their opinion to the court. In practice they are usually appointed to lay out roads and the like. Vide Experts. are looking for Looking for In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. with easily accessible distribution vehicles, such as our broadband channels, that offer consumers the highest quality feeds in a way that fits within their limited schedules." The distribution agreement is a multi-year deal for films in both the Sony/MGM library that allows for first-run films to be available, on-demand On-Demand refers to a service or feature which addresses the user's need for instant gratification and immediacy of use. In most cases the value proposition for an on-demand service is wrapped up in the fact that the user or consumer of the service avoids a significant up-front , to subscribers of Amaru's Global Broadband TV service (M2Btv), accessible through the company's PONY set-top Box, as well as through online websites. For the quarter, cost of sales was $5.2 million, or nearly 70% of revenues, as compared to $2.8 million or 85% of revenues, in the comparable quarter last year. The increase in cost of sales was mainly attributable to the cost of managing and operating the operations and game centers in Cambodia Cambodia (kămbō`dēə), Khmer Kampuchea, officially Kingdom of Cambodia, constitutional monarchy (2005 est. pop. 13,607,000), 69,898 sq mi (181,035 sq km), SE Asia. for digit games. On a sequential One after the other in some consecutive order such as by name or number. basis, the cost of sales were down 10%. Distribution expenses for the quarter were $0.3 million, an increase of 121% when compared to $0.1 million in the comparable quarter last year. The increase is attributable to higher advertising and marketing expenditures from a publicity launch for the Company's global broadband TV services. On a sequential basis, distribution expenses increased 26%. Administrative expenses for the quarter grew to over $1 million, an increase of 167% when compared to $0.4 million in the comparable quarter last year. The main reasons for the significant increase are due to rising staff costs resulting from new hires and due to the payment of mid-year bonuses. In addition, depreciation and license amortization contributed to the increase in administrative expenses. During the quarter, the Company expanded its office and leased new editing suites to meet the growing demands of the business. Also, the amortization of the digit games license for Cambodia increased substantially when compared year over year. Six Months FY06 Financial Results For the first six months of FY06 ended June 30, 2006, revenue increased 202% to $14.3 million, compared to $4.7 million for the first six months of FY05. Gross profits increased 228% to $3.3 million, compared to $1.0 million. Income from operations for the first six months of FY06 was nearly $1.1 million, an increase of 451% over operating income of $0.2 million reported a year earlier. Operating margin for the first six months of FY06 was 7.7%, as compared to 4.2% in the first six months of FY05. Net income for the first six months of FY06 was $1.2 million, an increase of 514% over the same period last year of $0.2 million. Financial Condition The Company's financial condition improved in the quarter. As of June 30, 2006, Amaru had cash and cash equivalents of $6.0 million, over $9.0 million in working capital, and $1.2 million in short-term debt Short-term debt Debt obligations, recorded as current liabilities, requiring payment within the year. (the Company has no long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. ). Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. was $41 million, up from nearly $20 million at year-end 2005. The Company generated $0.8 million in cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses in the first half of 2006. "With a strong, debt free balance sheet and profitable operations, Amaru is on strong footing to pursue our strategic growth initiatives. We plan to continue to invest in acquiring rights to broadband distribution of a range of premium content that will enable us to build a strong viewership view·er·ship n. The people who watch a television program or motion picture: a largely male viewership. base that can be monetized through advertising, subscriptions, pay per view and e-commerce activity to build a multi-layered revenue model," Binny commented. Business Outlook Assuming no significant changes in the marketplace, the company's current expectations are to achieve revenues of $30 million to $35 million by year-end 2006 and to achieve net income of between $1.2 million to $1.5 million by year-end 2006. Conference Call Amaru, Inc. has scheduled a conference call at 8:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy on Monday Monday: see week. , August 14, 2006, to discuss results for the second quarter ended June 30, 2006. Joining Colin Binny, Amaru's President and Chief Executive Officer, on the call will be Francis Francis, French prince, duke of Alençon and Anjou Francis, 1554–84, French prince, duke of Alençon and Anjou; youngest son of King Henry II of France and Catherine de' Medici. Foong, the Chief Financial Officer. The Company plans to distribute its earnings release prior to the call. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (888) 482-0024. International callers should dial (617) 801-9702. When prompted by the operator, mention Conference ID 96686623. The conference call will be broadcast live over the Internet and can be accessed by all interested parties at Amaru's web site at http://www.Amaruinc.com. To listen to the call please go to this website at least 15 minutes prior to the start of the call to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. , and install any necessary audio software. For those unable to participate during the live webcast, an audio replay of the conference call will be archived on the Company's web site for 90 days. About Amaru Inc. Amaru, Inc., through its subsidiaries under the M2B M2B MathML to Braille (computer application) brand, is a leader in the Broadband Media Entertainment business, and a major provider of interactive Entertainment-on-demand, Education-on-demand and e-commerce streaming over Broadband channels, Internet portals, and 3G devices. To date, the Company has launched multiple Broadband TV websites for Hollywood and Asian entertainment, education and online shopping, with over 100 channels designed to cater to various consumer segments and lifestyles. Its content covers diverse genres such as movies, dramas, comedies, documentaries, music, fashion, lifestyle, edutainment Educational material that is also entertaining. (application) edutainment - Interactive education and entertainment services or software, usually supplied commercially via a cable network or on CD-ROM. , and more. The M2B brand has established its competitive edge by offering access to an expansive range of content libraries for aggregation, distribution and syndication See syndication format. on Broadband and other media; including rights for merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. , product branding, promotion and publicity. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , which are subject to change. The information posted in this release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. You can identify these statements by use of the words "may," "will," "should," "plans," "expects," "anticipates," "continue," "estimate," "project," "intend," and similar expressions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those projected or anticipated. These risks and uncertainties include, but are not limited to, growth and demand for broadband services See broadband and broadband service provider. , the unproven unproven Dubious, nonscientific, not proven, quack, questionable, unscientific adjective Relating to that which has not been validated by reproducible experiments or other scientific methods for determining effect or efficacy nature of the subscriber model, consumer adaptation of set-top boxes, the ability to execute content deals on favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. terms, government controls on media & gaming in various regions, the ability to manage rapid growth, disruptions to networks, competitors and new entrants, changes in product mix, our efforts to establish independent broadband sites in countries where conditions are suitable, our ability to expand our offerings of content in entertainment and education, and various other factors beyond the Company's control.
Amaru, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three Months Ended June 30, 2006 and 2005
(Unaudited)
Three Months Ended
---------------------------
June 30, June 30,
2006 2005
------------- -------------
Revenue:
Entertainment $ 2,212,822 $ 1,368,571
Digit gaming 5,220,649 1,964,491
Other income 358 414
------------- -------------
Total Revenue 7,433,829 3,333,476
------------- -------------
------------- -------------
Cost of Services (5,184,910) (2,839,899)
------------- -------------
Gross Profit 2,248,919 493,577
Distribution costs (312,095) (141,109)
Research and Development (1,048,334) (393,356)
------------- -------------
Total Operating Expenses (1,360,429) (534,465)
------------- -------------
Income (loss) from operations 888,490 (40,888)
Other Income:
Interest received 40,289 1,081
------------- -------------
Income (loss) before income taxes 928,779 (39,807)
------------- -------------
Provision for income taxes (8,576) 66,228
------------- ------------
Net income $ 920,203 $ 26,421
============= =============
Earnings per share:
Basic and diluted $ 0.006 $ 0.000
============= =============
Weighted-average number of common shares
outstanding -- basic and diluted 151,100,426 115,211,736
============= =============
Amaru, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Six Months Ended June 30, 2006 and 2005
(Unaudited)
Six Months Ended
---------------------------
June 30, June 30,
2006 2005
------------- -------------
Revenue:
Entertainment $ 3,215,479 $ 2,771,267
Digit gaming 11,094,343 1,964,491
Other income 1,144 941
------------- -------------
Total Revenue 14,310,966 4,736,699
------------- -------------
------------- -------------
Cost of Services (10,973,303) (3,717,913)
------------- -------------
Gross Profit 3,337,663 1,018,786
Distribution costs (559,529) (200,470)
Research and Development (1,682,011) (619,407)
------------ -------------
Total Expenses (2,241,540) (819,877)
------------- -------------
Income (loss) from operations 1,096,123 198,909
Other Income:
Interest received 57,871 1,081
------------- -------------
Income (loss) before income taxes 1,153,994 199,990
------------- -------------
Benefit (Provision) for income taxes 66,465 (1,244)
------------- -------------
Net income $ 1,220,459 $ 198,746
============= =============
Earnings per share:
Basic and diluted $ 0.009 $ 0.002
============= =============
Weighted average number of common shares
outstanding -- basic and diluted 142,983,737 112,092,088
============= =============
Amaru Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
2006 2005
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 6,048,949 $ 4,776,819
Accounts receivable 486,064 842,371
Other receivable 17,528 ---
Deposit for an investment 1,852,613 ---
Prepayment to a supplier 1,098,000 ---
Other current assets 790,013 247,566
Total Current Assets 10,293,167 5,866,756
Non Current Assets
Property and equipment, net 19,679,396 5,264,130
Product development, net 27,765 60,616
Investment at cost 879,664 441,206
Investments available for sale 2,147,580 2,147,580
License, net 9,224,392 6,964,671
Total Non-Current Assets 31,958,797 14,878,203
Total Assets $42,251,964 $20,744,959
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 1,217,027 $ 656,484
Advances from related parties --- 58,392
Total Current Liabilities 1,217,027 714,876
Non Current Liabilities
Deferred tax liability 91,291 157,756
Total Liabilities 1,308,318 872,632
Shareholders' Equity:
Preferred stock -- (par value $0.001)
5,000,000 shares authorized: 0 shares
issued and outstanding at June 30, 2006
and December 31, 2005, respectively. --- ---
Common stock -- (par value $0.001)
200,000,000 shares authorized;
153,478,360 and 125,591,120 shares issued
and outstanding at June 30, 2006 and
December 31, 2005, respectively. 153,478 125,591
Paid-in capital 38,722,403 14,642,550
Subscribed common stock, 0 and 5,675,840
shares at June 30, 2006 and December 31,
2005, respectively --- 4,256,880
Retained earnings 2,054,838 834,379
Comprehensive gain on currency translation 12,927 12,927
Total Stockholders' Equity 40,943,646 19,872,327
Total Liabilities and Shareholders' Equity $42,251,964 $20,744,959
Amaru Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
--------------------------
June 30, June 30,
2006 2005
------------- ------------
Cash Flows from Operating Activities:
Net income $ 1,220,459 $ 198,746
Adjustments to reconcile net income to cash
and cash equivalents used or provided by
operations:
Amortization 173,130 104,815
Depreciation 231,058 26,393
Changes in operation assets and liabilities
Accounts receivable 356,307 (582,330)
Other receivables (17,528) 680,737
Other current assets (1,640,447) (90,577)
Accounts payable and accrued expenses 494,078 250,338
----------------------------------------------------------------------
Net Cash Generated from Operating
Activities 817,057 588,122
----------------------------------------------------------------------
Cash Flows from Investing Activities:
Software development reduction --- (17,460)
Acquisition of equipment (5,906,324) (2,665,664)
Acquisition of license (2,400,000) (3,905,000)
Acquisition of investments (438,458) (145,431)
Deposit paid for an investment (1,852,613) ---
------------------------------------------- --------------------------
Net Cash Used in Investing Activities (10,597,395) (6,733,555)
------------------------------------------- --------------------------
Cash Flows from Financing Activities
Payable to related party (58,392) (72,892)
Issuance of common stock for cash 11,110,860 6,749,500
----------------------------------------------------------------------
Net Cash Provided by Financing Activities $ 11,052,468 $ 6,676,608
----------------------------------------------------------------------
Effect of exchange rate changes on cash and
cash equivalents --- 3,739
------------- ------------
Cash Flows from all Activities: 1,272,130 534,914
Cash and Cash Equivalents at Beginning of
Period 4,776,819 644,319
Cash and Cash Equivalents at End of Period $ 6,048,949 $ 1,179,233
============= ============
Supplemental Disclosure of Non-Cash
Financing and Investing Activities:
Common stock in exchange for repayment of
accounts payable $ --- $ 435,000
Common stock in exchange for acquisition of
film library $ 8,740,000 $ ---
Subscribed common stock issued $ 4,256,880 $ ---
============= ============
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