RNS Number:9997P
Emblaze Ltd
22 September 2003
Emblaze Ltd
Interim results for the six months ended 30 June 2003
September 22, 2003 - - Emblaze Ltd ("Emblaze" or "the Group"), a provider of
media services and delivery solutions over wireless and broadband networks today
announces interim results for the six months ended 30 June 2003.
Summary
* Results for the six months ended 30 June 2003 reflect the dwindling
momentum of the telecom sector downturn that has prevailed over the
past three years, mixed with global signs of potential market
"reawakening"
* Revenues of $3.8 million for H1 (2002 H1: $3.0 million) are in line
with Group's expectations. Strong pipeline of deals in all four
business units
* Strong Balance Sheet with $267 million of cash portfolio and no
debt. The Group continues to maintain an efficient cost control
programme
* Net loss of $25.2 million (2002 H1: $45.2 million)
* Initial deals and deployments were successfully executed in Europe
and the Far East providing positive indications for the future
* Emblaze Semiconductor and UK's TTPCom today announced they are
developing an integrated platform to provide brand name and OEM/ODM
handset makers with a fully featured multimedia mobile phone solution
* The Board has permission to buy back up to 13% of shares (approx. 3%
purchased to date) and will continue to do so as and when appropriate
Eli Reifman, Chief Executive Officer of Emblaze, said:
"We are pleased with the progress all four business units have made in the first
half this year. The strategic decision to continue investing in R&D and sales &
marketing to maintain our position and business relationships despite the
downturn and until the point the market returns - is being proven correct. All
four businesses are recognised among market leaders, having innovative products
that add value and have won contracts and are in a number of final stages of
tenders. This is a long haul patience game. We have been maintaining our
position for the past three years keeping awareness of our group and its
offerings at all times in order to become the vendor of choice once markets turn
around and telcos start spending money again.
"We are finding that the network operators and telecom companies have begun
investing again in new markets and technology and are in the process of testing
new infrastructure and terminals. More and more of them are turning into actual
deployments and commercial launches of handsets and services globally. We hope
to soon experience a positive impact of a market reawakening on our businesses.
Despite the uncertainties that still cloud some aspects of market development we
see that the market is almost there and the Group is well placed to take
advantage of it."
Enquiries:
Emblaze
Eli Reifman + 972 9 769 9302
Doron Cohen
Hagit Gal
Brunswick
Harry Chathli + 44 207 404 5959
Chi Lo
More information about Emblaze can be found on www.emblaze.com.
CHAIRMAN'S STATEMENT
The results for the six months ended 30 June 2003 reflect a mixture of the
difficult market conditions faced by the global telecommunications sector in
2002 and some optimism that there are plans by global operators to renew
investment into new markets and technology.
In 2002 the Board decided to invest heavily in R&D and sales & marketing in
order to continue developing innovative products that would add value to our
customers and create a better user experience. This strategy has borne fruit
with all four business units of the Group maintaining leading market positions
by winning contracts, entering into significant partnerships or being in the
final stages of tenders.
As we indicated previously, our customers are still in the pre market stage.
For the Emblaze Group to be successful in the rich media personal communications
market it needs telecom and cellular operators to invest in infrastructure and
the terminals but above all investment to upgrade the networks is needed. 2.5G
networks are now operating in almost all of the key European, Asian and US
markets. The network operators are now focusing on the infrastructure and
beginning to invest in it. Full commercial trials are being carried out and some
operators have already had commercial launches and begun to generate revenues
from mobile media services. New handsets and smartphones are being developed
that support the services but we expect that the introduction to the market will
be slow. All this continues to impact Emblaze's ability to convert early stage
contracts and commercial pilots into consistent revenue flow in a predictable
timeframe.
RESULTS
Turnover for the six-month period was $3.8 million compared with $3.0 million
for the same period last year. There was a net loss of $25.2 million for the
period (2002 H1: $45.2 million loss).
Net cash used in operating activities amounted to $20.2 million (2002 H1: $19.8
million). Operating expenses include cost of $15.6 million for R&D expenses,
$8.5 million for sales & marketing expenses, $4.3 million for general and
administrative expenses and $2.9 million from amortization of intangible assets.
The Group has a strong balance sheet with $289 million in total shareholders'
equity, $267 million of cash portfolio and no debt.
Cash investments portfolio of $267 million is presented in the balance sheet
under the following breakdown:
30 June 2003
$m
Cash and cash equivalents 51
Short-term bank deposits and marketable securities 78
Long-term (over 1 year to maturity) marketable securities* 138
----
Total 267
----
* Marketable securities are mainly comprised of US Government Treasuries and
other agencies and highly rated corporate debentures.
The Israeli Court has approved the Company's request to repurchase up to 13% of
the issued ordinary shares of the Company. To date Emblaze purchased
approximately 3% of the ordinary share capital.
We will continue to regularly review costs in relation to our view on how our
markets are developing.
OPERATING REVIEW
Emblaze Systems (E-Sys)
Emblaze Systems provides the back end systems (servers) and front end solutions
(software) to network and cellular operators for delivery of rich media value
added services.
UCnGO, acquired in July 2002, has been successfully integrated into E-Sys.
Today, over 40% of all Multimedia Messaging Services (MMS) installations
globally have an E-Sys's solution component EMcoder in them for which Emblaze
has already received significant royalties. As the MMS market is growing rapidly
and bringing additional revenues to network operators, E-Sys sees potential in
direct sales of transcoding solutions to operators.
Also, in the first six months of this year, E-Sys's end-to-end solution met with
great approval in the commercial pilot conducted by mmO2. E-Sys also signed a
deal worth over one million dollars with a Far East cellular operator.
Going forward, E-Sys is finding itself in the final three of most tenders put
out by network operators. The market for E-Sys products is amongst those network
operators in Europe, Far East and Australasia who are looking to gain market
share in their respective countries by commercially launching rich media
services to their subscribers. Portugal's Optimus was one such win and we hope
to make similar announcements in latter half of this year or early next year.
Emblaze Semiconductor (Emblaze Semi)
Emblaze Semiconductor is a FABless chip design and research company specialising
in multi-media components for mass-market consumer electronics.
Emblaze Semi and UK's TTPCom today announced they are developing an integrated
platform to provide brand name and OEM/ODM handset makers with a fully featured
multimedia mobile phone solution.
Emblaze Semi main target market remains mobile phones, PDAs and smart phones
enabled for MMS, video clip and MP3 download and playback. Emblaze Semi is also
expanding into other consumer markets requiring the delivery of moving pictures
in products such as wireless video monitoring devices.
Alphacell
Alphacell designs white label next generation multimedia phones.
As provider of white label customised phones, Alphacell's target markets are
network operators and companies who are brand building or wish to use phones to
reinforce their established brands.
Alphacell launched its first product, M5, in February 2003. It is currently
going through final stages of relevant approvals. It has already received the
key stage GCF approval. In December 2002, Alphacell signed a Memorandum of
Understanding for the design and manufacture of an advanced rich media
smartphone, planned for launch into the Israeli market in 2003. It is on track
to ship the smartphones in the latter part of this year.
Orca Interactive Ltd (Orca)
Orca is a provider of broadband and content management solutions to broadband TV
networks, telcos, cable and cellular operators alike.
In March 2003, Orca launched a full commercial service of Chunghwa Telecom's
Multimedia on Demand to 20,000 households in Taipei. Chunghwa Telecom has over
one million ADSL subscribers which positions Orca to roll out services to
further households.
Orca, through its relationship with Nokia is getting through to telcos in
European, Asian and Latin American countries primarily and is in final stages of
many tenders to provide video on demand and TV over broadband. Earlier in
September 2003 it signed a similar agreement with HP which is a global market
leader in developing applications for interactive television. This relationship
will see Orca be invited into further tenders in other parts of the world.
OUTLOOK
All four business units of the Emblaze Group have worked towards establishing
themselves as key players in their market although the freeze in capex
expenditure from 2002 continued through to the first half of 2003. The strategic
decision to invest heavily in R&D and sales & marketing to maintain our position
and business relationships until the point the market returns is proving
correct. All four businesses are recognised as having innovative products that
add value and have won contracts and are in a number of final stages of tenders.
The pre-market stage of development of networks is almost in place with most of
the developed world operating 2.5G systems. We are finding that the network
operators and telecom companies have begun investing again in new markets and
technology and are in the process of testing new infrastructure and terminals.
How soon this impacts on our businesses is still uncertain. However, there is
enough visibility in the pipeline to support our hopes for improvement in sales
in the second half of the financial year and a beginning of renewed growth in
revenues.
EMBLAZE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
June 30, December 31,
2003 2002
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $51,469 $57,562
Short-term marketable securities and accrued interest 78,039 57,327
Trade receivables 1,776 1,356
Other receivables and prepaid expenses 4,320 5,893
Inventories 2,669 2,744
138,273 124,882
Total current assets
MARKETABLE SECURITIES AND OTHER LONG-TERM INVESTMENTS AND
BANK DEPOSITS 138,180 179,729
SEVERANCE PAY FUNDS 2,536 2,201
PROPERTY AND EQUIPMENT, NET 11,982 12,545
GOODWILL, NET 2,738 2,738
INTANGIBLE ASSETS, NET 16,587 19,445
$310,296 $341,540
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $2,872 $4,705
Deferred revenues 538 611
Other payables and accrued expenses 12,389 15,087
Total current liabilities 15,799 20,403
ACCRUED SEVERANCE PAY 3,615 3,203
LONG-TERM RESTRUCTURING ACCRUAL 1,961 2,247
SHAREHOLDERS' EQUITY:
Share capital 412 412
Additional paid-in capital 464,957 464,798
Deferred stock compensation (750) (1,200)
Treasury stock, at cost (5,702) (2,909)
Accumulated other comprehensive income 611 19
Accumulated deficit (170,607) (145,433)
Total shareholders' equity 288,921 315,687
$310,296 $341,540
----------- ------------
The accompanying notes are an integral part of the consolidated financial
statements.
EMBLAZE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except per share data
Six months ended Year ended
June 30, December 31,
2003 *)2002 2002
Unaudited
Revenues $3,795 $2,980 $6,839
Cost of revenues 2,700 2,013 5,922
Gross profit 1,095 967 917
Operating expenses:
Research and development, net 15,586 12,603 29,224
Sales and marketing 8,531 10,536 21,413
General and administrative 4,321 5,040 9,998
Amortization of intangible assets 2,858 1,898 3,930
Total operating expenses 31,296 30,077 64,565
Operating loss before other operating
expenses (30,201) (29,110) (63,648)
Other operating expenses - - (11,721)
Operating loss (30,201) (29,110) (75,369)
Financial income and other expenses,
net 5,027 7,221 7,647
Loss before equity in losses of an
affiliate (25,174) (21,889) (67,722)
Equity in losses of an affiliate - (229) (229)
Net loss from continuing operations,
before cumulative effect of a change
in an accounting principle (25,174) (22,118) (67,951)
Net loss from cumulative effect of a
change in an accounting principle - (23,055) (23,055)
Net loss $(25,174) $(45,173) $(91,006)
------------ ------------ ------------
Basic net loss per share:
From continuing operations $(0.19) $(0.16) $(0.49)
------------ ------------ ------------
From cumulative effect of a change in
an accounting principle $- $(0.17) $(0.17)
------------ ------------ ------------
Basic net loss per share $(0.19) $(0.33) $(0.66)
------------ ------------ ------------
Number of shares used in computing
basic and diluted net loss per share
*) Includes the retroactive effect of the implementation of SFAS No.142
"Goodwill and Other Intangible Assets" presented as cumulative effect of a
change in an accounting principle.
The accompanying notes are an integral part of the consolidated financial
statements.
EMBLAZE LTD. AND ITS SUBSIDIARIES
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands
Share Additional Deferred Treasury Accumulated Accumulated Total Total
capital paid-in stock stock other deficit compre-
capital compensation comprehensive hensive
income income
(loss) (loss)
Balance as of January 1,
2002 $411 $463,239 $- $(423) $(784) $(54,427) $408,016
Repurchase of shares - - - (3,566) - - (3,566)
Re-issuance of shares
upon acquisition of
assets from UCnGO Ltd.
and UCnGo Inc. - (139) - 1,080 - - 941
Issuance of shares upon
exercise of stock
options 1 143 - - - - 144
Stock compensation
expenses in respect of
options which terms have
been modified - 55 - - - - 55
Deferred stock
compensation - 1,500 (1,500) - - - -
Amortization of deferred
stock compensation - - 300 - - - 300
Comprehensive loss:
Unrealized income on
forward and put-option
contracts, net - - - - 803 - $803 803
Net loss - - - - - (91,006) (91,006)(91,006)
Total comprehensive loss $(90,203)
------------
Balance as of December
31, 2002 412 464,798 (1,200) (2,909) 19 (145,433) 315,687
Repurchase of shares - - - (2,793) - - (2,793)
Issuance of shares upon *)
exercise of stock
options - 159 - - - - 159
Amortization of deferred
stock compensation - - 450 - - - 450
Comprehensive loss:
Unrealized income on
put-option contracts,
net - - - - 592 - $592 592
Net loss - - - - - (25,174) (25,174)(25,174)
Total comprehensive loss $(24,582)
------------
Balance as of June 30,
2003 (unaudited) $412 $464,957 $(750) $(5,702) $611 $(170,607) $288,921
------ ------------ -------- ----------- ------ -------------- --------
*) Represents an amount lower than $ 1
The accompanying notes are an integral part of the consolidated financial
statements.
EMBLAZE LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
Six months ended Year ended
June 30, December 31,
2003 *) 2002 2002
Unaudited
Cash flows from operating activities:
Net loss $(25,174) $(45,173) $(91,006)
Adjustments to reconcile net loss to net
cash used in operating activities:
Impairment of acquired technology - - 6,104
Impairment of property and equipment - - 634
Depreciation and amortization 5,056 3,663 7,698
Amortization of marketable debt
securities premium and accretion of
discounts, net 1,433 1,438 3,135
Stock compensation expenses 450 55 355
Net loss (gain) on sales of marketable
securities (108) (10) 3
Equity in losses of an affiliate - 229 229
Write down of investments in companies - - 5,419
Cumulative effect of a change in an
accounting principle, net - 23,055 23,055
Decrease (increase) in trade receivables,
other receivables and prepaid expenses,
inventories and accrued interest income 2,547 (2,406) (2,410)
Increase (decrease) in trade payables,
other payables and accrued expenses and
accrued severance pay, net (4,119) (346) 3,341
Decrease in deferred revenues (73) (377) (396)
Increase (decrease) in long-term
restructuring accrual (286) - 2,247
Other 78 18 48
Net cash used in operating activities (20,196) (19,854) (41,544)
Cash flows from investing activities:
Purchase of property and equipment (2,125) (2,693) (7,076)
Proceeds from sale of property and
equipment 10 26 53
Proceeds from short-term bank deposits 56 10,334 10,334
Investment in short-term marketable
securities (3,442) (17,649) (35,598)
Proceeds from maturity of short-term
marketable securities 27,650 65,848 84,389
Investment in long-term marketable
securities (31,718) (95,506) (98,879)
Proceeds from sales and calls of
long-term marketable securities 26,880 3,300 34,102
Short-term loan to a third party, net - 3,386 3,386
Investment in long-term bank deposits (580) - -
Proceeds form long-term bank deposits - 600 1,400
Long-term loan to AlphaCell Wireless
(2001) Ltd., net - 13,049 13,049
Payment for acquisition of additional
share of a subsidiary, AlphaCell,
Wireless (2001) Ltd. - (15,945) (15,945)
Payment for acquisition of assets from
UCnGO Ltd. and UCnGO Inc. - - (2,621)
Investment in companies (21) - (979)
Net cash provided by (used in) investing
activities 16,710 (35,250) (14,385)
Cash flows from financing activities:
Repurchase of shares (2,793) (1,753) (3,566)
Proceeds from exercise of stock options 186 318 339
Net cash used in financing activities (2,607) (1,435) (3,227)
Decrease in cash and cash equivalents (6,093) (56,539) (59,156)
Cash and cash equivalents at the
beginning of period 57,562 116,718 116,718
Cash and cash equivalents at the end of
period $51,469 $60,179 $57,562
---------- ---------- ----------
*) Includes the retroactive effect of the implementation of SFAS No.142
"Goodwill and Other Intangible Assets" presented as cumulative effect of a
change in an accounting principle.
The accompanying notes are an integral part of the consolidated financial
statements.
EMBLAZE LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:- GENERAL
Emblaze Ltd. (the "Company") and its subsidiaries provide solutions for
rich-media delivery and associated services over wireless and broadband IP
networks. The Company's products are marketed worldwide.
The Company has five active subsidiaries: Orca Interactive Ltd. an Israeli
corporation, Emblaze Semiconductor Ltd. an Israeli corporation, AlphaCell
Wireless (2001) Ltd. an Israeli corporation, Emblaze Systems Inc. a U.S.
corporation and Emblaze Systems U.K.
NOTE 2:- INTERIM CONSOLIDATED FINANCIAL STATEMENTS INFORMATION
The financial statements include the unaudited consolidated balance sheets as of
June 30, 2003 and the results of operations and cash flows for the six months
ended June 30, 2003 and 2002 and the statements of changes in shareholders'
equity for the six months ended June 30, 2003. This unaudited information has
been prepared by the Company on the same basis as the audited consolidated
financial statements for the year ended December 31, 2002, and, in management's
opinion, reflects all adjustments necessary for a fair presentation of the
financial information in accordance with generally accepted accounting
principles in the United States, for the periods presented.
This information is provided by RNS
The company news service from the London Stock Exchange
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