RNS Number : 9760X
Adamind Ltd
01 July 2008
1 July 2008
Adamind Ltd.
("Adamind" or "the Company")
Preliminary Results for the year ended 31 December 2007
Chairperson's Statement
Adamind announces its full year results for the year ended 31 December 2007.
On 12 April 2007, following shareholder approval at an Extraordinary General Meeting,
Adamind agreed to sell substantially all of its
assets and assign certain related liabilities to Mobixell Networks (Israel) Ltd. ('Mobixell'),
a wholly-owned subsidiary of Mobixell
Networks Inc., a Delaware company. Adamind received as consideration $5,500,000 in cash (of
which $550,000 is currently held in escrow and
subject to certain inspections and approval).
Following completion of the foregoing transaction, Adamind became an "investing company",
in accordance with the AIM Rules.
Results
The income generated by the Company for the period was US$0.7M and net loss was $0.4M
Cash balances at the end of December 2007 were US$24M
Post-year end Events
On 14 April 2008, in accordance with the AIM Rules applied to investment companies, the
Company's shares were suspended from trading on
the London Stock Exchange. Trading in the Company's ordinary shares on the London Stock
Exchange will be cancelled by no later than 14
October 2008.
The Company is actively engaged in distributing its cash balances back to its
shareholders. To date, in its first distribution, the
Company has distributed $19.2 million (gross) and is making every effort to ensure, wherever
possible, shareholders are able to recover the
amounts withheld from the first distribution as required by the Israeli Tax Authorities.
In line with the Company's stated strategy of returning cash to shareholders the Board of
Directors resolved on 6 April 2008 to
consummate the voluntary liquidation of the Company. Such liquidation is subject to, among
other things, the approval of the Company's
shareholders. The Company will continue to inform shareholders of the progress of the
liquidation process.
The final amount of cash available for return to shareholders, at the time of the
Company's liquidation, is subject to tax and
procedural issues in the UK, US and Israel. The Company is actively engaged in discussions
with the relevant authorities in each of these
areas and expects these discussions to be completed in 2009. Until these discussions have been
completed the Company is unable to estimate
the final amount payable to shareholders.
Corfin Communications
Harry Chathli, Clare Perks +44 20 7977 0020
Landsbanki Securities
Simon Bridges, Bertie Clayton +44 20 7426 9000
STATEMENT OF NET ASSETS IN LIQUIDATION
U.S. dollars in thousands
31 December
Note 2007
ASSETS
Cash and cash equivalents 3 $ 22,907
Marketable securities 4 500
Accounts receivable 5 674
24,081
LIABILITIES
Accounts payable 80
Accrued expenses and other liabilities 6 350
430
NET ASSETS AVAILABLE FOR DISTRIBUTION (EQUITY) $ 23,651
The accompanying notes are an integral part of the financial statements.
2008
Date of approval of the 30.06.2008 30.06.2008
financial statements
CONSOLIDATED BALANCE SHEET
U.S. dollars in thousands, except share and per share data
31 December
Note 2006
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 3 $ 15,213
Short-term available-for-sale marketable securities 4 7,451
Trade receivables 1,535
Other accounts receivable and prepaid expenses 5 468
Total current assets 24,667
NON-CURRENT ASSETS:
Property and equipment, net 477
Intangible assets, net 2,087
Total non-current assets 2,564
$ 27,231
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables $ 577
Employees and payroll accruals 936
Accrued expenses and other liabilities 6 1,211
Deferred revenues 657
Total current liabilities 3,381
EQUITY: 8
Share capital -
Ordinary shares of NIS 0.01 par value - Authorized: 81
50,000,000 shares at 31 December 2006 and 2007; Issued
and fully paid: 35,546,636 and 35,824,386 shares at 31
December 2006 and 2007, respectively
Additional paid-in capital 31,768
Net unrealized loss reserve (46)
Accumulated deficit (7,953)
Total equity 23,850
$ 27,231
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
Year ended
31 December
Note 2006 2007
Revenues $ 5,946 $ 691
Cost of revenues 739 165
Gross profit 5,207 526
Operating expenses:
Research and development, net 3,002 819
Selling and marketing 5,550 1,057
General and administrative 2,137 2,562
Amortization of intangible assets 831 204
Impairment of intangible assets 1,165 -
Total operating expenses 12,685 4,642
Operating loss 7,478 4,116
Financial income, net 10e (960) (834)
Other income, net 1b - (3,105)
Tax expense 9f - 200
Net loss $ 6,518 $ 377
Basic and diluted net loss per share $ (0.18) $ (0.01)
Weighted average number of shares used in 35,516,186 35,643,430
computing basic and diluted net loss per
share
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
U.S. dollars in thousands, except share data
Total
Ordinary shares Additional paid-in Net
unrealized Accumulated Total
recognized income
and
Number Amount capital loss reserve
deficit equity
expenses
Balance as of 1 January 2006 35,388,636 $ 80 $ 31,285 $
- $ (1,435) $ 29,930
Issuance of shares upon 158,000 1 64
- - 65
exercise of employee options
Cancellation of issuance - - 298
- - 298
expense
Unrealized losses on - - -
(46) - (46)
$ (46)
available-for-sale marketable
securities
Share-based compensation - - 121
- - 121
-
Net loss - - -
- (6,518) (6,518)
(6,518)
Balance as of 31 December 2006 35,546,636 81 31,768
(46) (7,953) 23,850
$ (6,564)
Issuance of shares upon 277,750 1 119
- - 120
exercise of employee options
Issuance expenses related to - - (213)
- - (213)
shares issued in 2005
Reclassification upon disposal - - -
46 - 46
$ 46
of available-for-sale
marketable securities
Share-based compensation - - 225
- - 225
-
Net loss - - -
- (377) (377)
(377)
Balance as of 31 December 2007 35,824,386 $ 82 $ 31,899 $
- $ (8,330) $ 23,651
$ (331)
The accompanying notes are an integral part of the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Year ended
31 December
2006 2007
Cash flows from operating activities:
Net loss $ (6,518) $ (377)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, amortization and capital loss 1,106 330
Impairment of intangible assets 1,165 -
Gain on sale of Company's assets - (3,105)
Decrease (increase) in trade receivables, other (259) 407
accounts receivable and prepaid expenses
Decrease in trade payables, employees and (87) (1,808)
payroll accruals, accrued expenses and other
liabilities
Increase in deferred revenues 84 615
Share-based compensation 121 225
Net cash used in operating activities (4,388) (3,713)
Cash flows from investing activities:
Purchase of property and equipment (326) (26)
Proceeds from sale of property and equipment 6 -
Proceeds from short-term available-for-sale 9,341 6,997
marketable securities, net
Proceeds from short-term held-to-maturity 9,420 -
marketable securities, net
Payment for the acquisition of Senstream Ltd. (782) -
(1)
Proceeds from the sale of Company's assets, net - 4,529
of related expenses
Net cash provided by investing activities 17,659 11,500
Cash flows from financing activities:
Proceeds from exercise of employees options 65 120
Issuance expenses - (213)
Net cash provided by (used in) financing 65 (93)
activities
Increase in cash and cash equivalents 13,336 7,694
Cash and cash equivalents at the beginning of 1,877 15,213
the year
Cash and cash equivalents at the end of the year $ 15,213 $ 22,907
Supplemental disclosure of cash flow activities:
Cash received during the year for:
Interest $ 1,162 $ 914
Non-cash financing activities:
Receivable in respect of sale of the Company's $ - $ 550
assets
Cancellation of issuance expense payable $ 298 $ -
(1) Payment for the acquisition of
Senstream Ltd.
Estimated fair value of assets acquired and
liabilities assumed at the date of acquisition:
Working capital deficiency, excluding cash and $ 489 $ -
cash equivalents
Property and equipment (8) -
Intangible assets (1,280) -
Accrued severance pay, net 17 -
$ (782) $ -
The accompanying notes are an integral part of the consolidated financial statements.
NOTE 1:- GENERAL
a. Adamind Ltd. ("the Company") was incorporated in Israel and commenced operations in
2004. The Company established a wholly-owned
subsidiary in the U.S. ("Adamind Inc."), which was primarily engaged in marketing and sales in
the U.S. Until the sale of its assets in
April 2007 (see b), the Company was a provider of software that enabled mobile multimedia
content and converged communications services.
b. Sale of Company's assets
In April 2007, the Company completed the sale to Mobixell Networks (Israel) Ltd. (a
subsidiary of Mobixell Technologies Inc.) ("Mobixell
Networks") of substantially all of the Company's tangible and intangible assets (excluding,
among others, cash and cash equivalents and
marketable securities) and related liabilities, in consideration of $ 5,500. The Transaction
was approved by the Company's shareholders on
12 April 2007. Consummation of this Transaction resulted in a gain on the sale of $ 3,105 (net
of transaction costs of $ 421). As part of
the Transaction, 10% of the consideration ($550) was deposited in escrow. The escrow amount
has not yet been released to the Company, as
there is currently a dispute between Mobixell Networks and the Company with respect to a
possible liability to the OCS (see Note 7). Since
the Company believes that it will take all necessary actions to fulfill its obligation, the
amount in escrow is presented as receivable in
the statement of net assets in liquidation as of 31 December 2007.
In late 2007, the Company ceased the operations of its U.S. based subsidiary, Adamind
Inc.
c. Voluntary liquidation
On 16 January 2008, the Company's board of directors resolved to distribute $19,200 to
the Company's shareholders. In March 2008,
the Company obtained court approval for the distribution, resulting in an amount of $ 4,200
left in the Company in order to guarantee any
future debt/liability until these debt/liability is no longer existed and the Company is
dissolved. On 6 April 2008, the Company's board of
directors resolved to commence the voluntary liquidation of the Company. On 17 April 2008, the
Company distributed to its shareholders
approximately $ 19,200, as a return of investment.
d. On 14 April 2008, the Company's shares were suspended from trading on AIM and the
shares are expected to be delisted no later than
14 October 2008.
e. SenseStream Ltd. ("SenseStream")
On 17 February 2006, the Company completed the acquisition of all of the issued and
outstanding share capital of a Hong Kong based
company named SenseStream Limited for an initial consideration of $ 1,000 in cash and a
contingent consideration of up to $ 1,000 in the
Company's shares. The targets set forth in the acquisition agreement were not met and,
accordingly, the Company was not required to issue
any of its Ordinary shares to the former shareholders of SenseStream.
NOTE 1:- GENERAL (Cont.)
Under the terms of the agreement, the Company paid an initial amount of $ 655 in cash to
the shareholders of SenseStream and transferred
$ 345 directly to SenseStream, in order to cover certain third parties liabilities.
The transaction was accounted for under the purchase method of accounting, under which the
Company is considered as the acquirer of
SenseStream. Accordingly, the results of operations of SenseStream were included in the
consolidated statements of operations of Adamind
Ltd., commencing on 15 February 2006.
The estimated fair value of the identifiable assets and liabilities as of 15 February
2006, are as follows:
Current assets $ 27
Equipment 8
Acquired technology 92
Customer agreements 700
827
Accrued expenses and other liabilities (376)
Deferred revenues (157)
(533)
Fair value of net assets 294
Goodwill arising on acquisition 488
$ 782
The carrying value of the assets and liabilities were identical to their fair value except
for acquired technology, customer agreements
and goodwill, which had no carrying value.
From the date of acquisition to 31 December 2006, SenseStream contributed $ 515 to the net
loss of the Company. If the combination had
taken place at the beginning of 2006, the net loss for the Company would have been $ 6,554.
In 2007, the Company ceased the operations of SenseStream, Ltd.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. General:
The financial statements of the Company and its subsidiaries have been prepared in
accordance with International Financial Reporting
Standards ("IFRS"). Until 31 December 2007, the Company's financial statements are presented
on a going concern basis. Subsequent to balance
sheet date, the Company's board of directors decided to commence voluntary liquidation of the
Company (see Note 1c). Accordingly, the going
concern basis is no longer appropriate and as of 31 December 2007, the Company has applied the
liquidation basis (see b below).
b. Liquidation basis:
Under the liquidation basis of accounting, the Company measures its assets and liabilities
in the statement of net assets in
liquidation, based on their net realizable value. In respect of the assets and liabilities of
the Company as of 31 December 2007, which are
substantially all monetary items, the measurement of these items under the liquidation basis
are not materially different from their
measurement under the going concern basis.
c. Going concern basis:
Until 31 December 2007, the financial statements are presented on a going concern basis.
The significant accounting policies applied in the financial statements, on this basis,
are described below.
d. 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.
e. Principles of consolidation:
Subsidiaries are consolidated from the date on which control is transferred to the Company
and cease to be consolidated from the date on
which control is transferred out of the Company. Intercompany balances and transactions have
been eliminated upon consolidation.
f. Cash equivalents:
The Company considers all highly liquid investments originally purchased with maturities
of three months or less to be cash equivalents.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g. Investments in financial assets:
Investments in debt securities in accordance with International Accounting Standard No.39, "Financial Instruments: Recognition and
Measurement" ("IAS 39") are classified available-for-sale financial assets. These financial
assets are recognized initially at fair value.
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 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 equity is included in the consolidated
statement of operations.
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.
h. Revenue recognition:
The Company and its subsidiaries generated 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
generated revenues from maintenance, support,
training and professional services. The Company did 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,
and amounts received from customers but not
recognized as revenues.
Income from interest is recognized as the income accrues.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i. Research and development:
Research costs are expensed to operations as incurred. Development costs are also expensed
to operations as incurred if such costs do
not meet the criteria for capitalization as set forth in IAS 38, "Intangible Assets". In the
years ended 31 December 2006 and 2007, no
development costs were capitalized.
j. 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 deduction from research and
development expenses when there is reasonable assurance that the grants will not be repaid
based on estimated future sales. Such grants are
recorded as a liability when repayment is probable. Development grants that were deducted from
research and development expenses amounted to
$ 644 and $ 0 for the years ended 31 December 2006 and 2007, respectively (see Note 7).
k. Income taxes:
The Company and its subsidiaries 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
carry-forward losses and other temporary deductible differences are recognized to the extent
that it is probable that they will be
utilized.
l. 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, except when such potential shares
are anti-dilutive.
m. Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, trade and other accounts receivable,
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.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
n. Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash and cash
equivalents, 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 Great British
Pounds ("GBP") and as such, expose the Company to currency exchange risk. 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 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.
As of 31 December 2007, the Company has no significant off-balance sheet concentration of
credit risk, such as foreign exchange
contracts, option contracts or other foreign hedging arrangements.
o. Share-based payment transactions:
The Company applies the provisions of 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 fair value of Ordinary shares for the purpose of calculating the fair value of
options and warrants were determined by
management based on a number of factors.
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.
NOTE 3:- CASH AND CASH EQUIVALENTS
31 December
2006 2007
Current accounts $ 1,441 $ 740
Short-term deposits in bank 13,772 22,167
$ 15,213 $ 22,907
NOTE 4:- MARKETABLE SECURITIES
The Company invests in marketable debt securities, which at 31 December 2007 were
classified as available-for-sale. The following is a
summary of marketable debt securities:
31 December 2006 31 December
2007
Amortized Unrealized Market Market
cost *) loss value value
Available-for-sale:
U.S. Treasury debentures $ 500
$ 2,527 $ (15) $ 2,512
Corporate debentures -
4,970 (31) 4,939
$ 500
$ 7,497 $ (46) $ 7,451
The contractual maturity of the investments as of 31 December 2006 and 2007 are as
follows:
31 December 2006 31 December
2007
Amortized Unrealized Market Market
cost *) gain value value
Mature in one year $ 500 $ 500
$ 5,021 $ 4,990
Mature in one to three years - -
2,476 2,461
$ 500 $ 500
$ 7,497 $ 7,451
*) Includes accrued interest.
NOTE 5:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
31 December
2006 2007
Receivable in respect of sale of the Company's assets $ - $ 550
(Note 1b)
Government authorities 135 55
Prepaid expenses 149 -
Accrued interest receivable 54 10
Other 130 59
$ 468 $ 674
NOTE 6:- ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and income tax accrual $ 763 $ 350
Commissions payable 77 -
Related company - -
Government authorities 370 -
Other 1 -
$ 1,211 $ 350
NOTE 7:- CONTINGENT LIABILITIES
Commitment to the Office of the Chief Scientist in Israel ("OCS"):
In 2006, the Company participated in royalty-bearing grant plans of the Government of
Israel. In order to be entitled to such grants,
the Company had to fulfill certain terms and reporting requirements. The Company has not yet
received final approval from the OCS that it
fulfills the terms of the grants. If such approval will not be received in full, the Company
might need to repay a certain portion of the
grant.
The audit by the OCS has not yet begun. Currently, the Company cannot estimate the outcome
of such audit, if any, and as a result, did
not record any provision for a possible refund of grants.
NOTE 8:- EQUITY
a. Rights of Ordinary shares:
Ordinary shares confer upon their holders voting rights, the right to receive dividends,
and the right to a share in excess assets upon
liquidation of the Company.
b. In February 2005, the Company completed an Initial Public Offering ("IPO") on the
London Stock Exchange Alternative Investment
Market ("AIM") under the symbol "ADA". The Company issued 11,363,636 Ordinary shares to
institutional and other investors and raised
approximately $ 28,000 before issuance expenses of approximately $ 2,900
c. Share-based payment plans:
Under the Company's 2004 Global Stock Option Plan ("the Plan"), options may be granted to
officers, directors, employees and consultants
of the Company or its subsidiaries. The Options expire on the tenth anniversary of the grant
date. The options vest generally over four
years.
The Company reserved 4,235,000 Ordinary shares for issuance as options under the Plan. As
of 31 December 2007, there are no shares
available for future grants under the Plan.
A summary of the Company's share option activity and related information is as follows:
Year ended 31 December
2006 2007
Number Weighted Number Weighted
of options average of options average
exercise exercise
price price
Outstanding at beginning of year 3,432,675 $ 0.70 3,479,525 $ 0.97
Granted 856,000 $ 1.92 - $ -
Exercised (158,000) $ 0.41 (277,750) $ 0.43
Forfeited (651,150) $ 0.93 (1,577,600) $ 1.29
Outstanding at end of year 3,479,525 $ 0.97 1,624,175 3, $ 0.71
Exercisable at end of year 1,241,588 $ 0.56 1,547,675 $ 0.64
In 2008, 1,078,925 options were exercised into Ordinary shares. All other options are
deemed to be forfeited.
NOTE 8:- EQUITY (Cont.)
The following table summarizes options outstanding and exercisable as of 31 December
2007:
Range of exercise Options outstanding Weighted Weighted average Options
exercisable Weighted average
price as of average exercise as of
exercise price of
31 December 2007 remaining price 31 December
2007 options exercisable
contractual
life
(years)
$ 0.42 1,358,675 5.38 $ 0.42
1,342,175 $ 0.42
$ 0.62 50,000 0.16 $ 0.62
50,000 $ 0.62
$ 1.9 - 2.06 28,125 0.27 $ 1.97
28,125 $ 1.97
$ 2.39 - 2.53 44,375 2.52 $ 2.52
44,375 $ 2.57
$ 2.64 - 2.85 143,000 6.04 $ 2.68
83,000 $ 2.7
1,624,175 $ 0.71
1,547,675 $ 0.64
Most of the options granted to employees and directors have an exercise price equal to the
fair market value of the shares at the grant
date. The weighted average fair value of the options granted during 2006 was approximately $
0.70.
The fair value of the share options is measured at the grant date using the Black-Scholes
option pricing model, taking into account the
terms and conditions upon which the options were granted.
The following are the inputs to the model used for the year ended 31 December 2006:
risk-free interest rates in the range of 3.0% -
4.4%; dividend yield of 0%; a volatility factor of the expected market price of the Company's
Ordinary shares in the range of 48% - 57%; and
a weighted average expected life of the option for each year in the range of 1.5 - 4.5 years.
In the years ended 31 December 2006 and 2007, the Company recorded employee benefit
expense in respect of options, in the amount of $
121 and $ 225, respectively, with a corresponding increase in equity.
NOTE 9:- INCOME TAXES
a. Measurement of taxable income under the Income Tax (Inflationary Adjustments) Law,
1985:
Until 31 December 2005, results for tax purposes in Israel were measured in terms of
earnings in NIS after certain adjustments for
increases in Israel's Consumer Price Index ("CPI").
Commencing in 2006, the Company elected to measure its taxable income and file its tax
return under the Israeli Income Tax Regulations
(Principles Regarding the Management of Books of Account of Foreign Invested Companies and
Certain Partnerships and the Determination of
Their Taxable Income), 1986. Such an election obligates the Company for three years.Accordingly, commencing in 2006, results for tax
purposes are measured in terms of earnings in U.S. dollars.
b. Tax rates:
On 25 July 2005, the Knesset (Israeli Parliament) approved the Law of the Amendment of the
Income Tax Ordinance (No. 147), 2005, which
prescribes, among others, a gradual decrease in the corporate tax rate in Israel to the
following tax rates: 2006 - 31%, 2007 - 29%, 2008 -
27%, 2009 - 26% and 2010 and thereafter - 25%.
c. Tax benefits under the Law for the Encouragement of Capital Investments, 1959 ("the
Law"):
In respect of the Company's production facilities in Israel, the Company submitted
applications for "Approved Enterprise" status under
the Law. The main benefit arising from such status is the reduction in tax rates on income
derived from "Approved Enterprises".Consequently, the Company is entitled to two years of a tax exemption and five years of a
reduced tax rate (25%) on income from its
"Approved Enterprises", beginning from the time that the Company first has taxable income. The
period of tax benefits is subject to limits
of 12 years from the commencement of production, or 14 years from the approval date, whichever
is earlier. As the Company had no taxable
income, the benefit periods have not yet commenced.
The entitlement to the above benefits is conditional upon the Company fulfilling the
conditions stipulated by the Law, regulations
published thereunder, and the letters of approval for the specific investments in "Approved
Enterprises". In the event of failure to comply
with these conditions, the benefits may be canceled and the Company may be required to refund
the amount of the benefits, in whole or in
part, including interest. As of 31 December 2007, the Company had not utilized any of the
aforementioned tax benefits.
If tax-exempt profits are distributed to shareholders, they would be taxed at the
corporate tax rate applicable to such profits as if
the Company had not elected the alternative system of benefits, currently 25% for an "Approved
Enterprise".
Income from sources other than the "Approved Enterprise" during the benefit period will be
subject to tax at the regular rate prevailing
at that time.
NOTE 9:- INCOME TAXES (Cont.)
d. Net operating loss carry-forward:
As of 31 December 2007, the Company has accumulated net operating loss carry-forwards for
tax purposes amounting to approximately $
5,000, which may be carried forward and offset against taxable income in the future for an
indefinite period.
e. Deferred tax assets:
As of 31 December 2007, deferred tax assets in respect of carry-forward losses and
temporary differences have not been recorded due to
the uncertainty of realization.
f. The Company has certain tax exposures resulting from the operation of the Company in
multiple tax jurisdictions and as a result of
the sale of the Company's assets (see Note 1b). The Company has recorded a tax provision in an
amount which the Company believes is
sufficient to cover any potential exposures related to tax years for which a final assessment
has not been received.
NOTE 10:- SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED STATEMENTS OF OPERATIONS
The following represent the salaries and related benefits and depreciation expense for the
various operating expenses:
Year ended 31 December
2006 2007
a. Cost of revenues:
Salaries and related benefits $ 318 $ 168
Depreciation $ 37 $ 5
Share-based compensation $ 10 $ 18
b. Research and development expenses:
Salaries and related benefits $ 2,394 $ 430
Depreciation $ 116 $ 38
Share-based compensation $ 51 $ 144
NOTE 10:- SUPPLEMENTARY INFORMATION TO THE CONSOLIDATED STATEMENTS OF OPERATIONS
(Cont.)
Year ended 31 December
2006 2007
c. Selling and marketing expenses:
Salaries and related benefits $ 2,294 $ 556
Depreciation $ 78 $ 26
Share-based compensation $ 43 $ 27
d. General and administrative expenses:
Salaries and related benefits $ 1,979 $ 835
Depreciation $ 37 $ 14
Share-based compensation $ 17 $ 36
e. Financial income, net
Financial income:
Interest on bank deposits and on $ 1,174 $ 964
marketable debt securities
Financial expenses:
Interest and other bank charges (72) (31)
Foreign currency translation differences, (81) (52)
net
Amortization of discount on marketable (61) (47)
debt securities
(214) (130)
$ 960 $ 834
NOTE 11:- TRANSACTIONS WITH RELATED PARTIES
The following transactions with Emblaze, which was the controlling shareholder of the
Company until March 2006, are included in the
financial statements:
Year ended 31 December
2006
Cost of revenues $ 83
Research and development, net $ 292
Selling and marketing $ 146
General and administrative $ 73
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This information is provided by RNS
The company news service from the London Stock Exchange
END
FR IIFSRDSILIIT
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