BELMONT, Calif., April 2, 2008 /PRNewswire-FirstCall/ -- IXI Mobile, Inc. (BULLETIN BOARD: IXMO, IXMOW, IXMOU) , the maker of the Ogo(TM) family of mobile devices and services, announced today financial results for the quarter and year ended December 31, 2007.
Recent Highlights -- IXI added approximately 19,000 gross new Ogo subscribers in the fourth quarter -- Ogo Average Selling Price (ASP) in the fourth quarter of 2007 increased to $190 compared to $185 in the third quarter, reflecting a shift in product mix towards the Ogo2 -- Service ASP in the fourth quarter of 2007 increased to $2.30 per billed user per month compared to $2.10 per billed user per month in the third quarter GAAP Financials
Revenue for the fourth quarter was $5.2 million, an increase of 8% over $4.8 million in the third quarter of 2007 and 33% over $3.9 million in the fourth quarter of 2006. Gross margin (deficit) in the fourth quarter was (35%) compared to 8% in the third quarter of 2007 and (41%) in the fourth quarter of 2006.
Gross new Ogo subscriptions in the fourth quarter were approximately 19,000, bringing total Ogo net subscriber base at the end of the year to over 138,000. This total includes a write down in the fourth quarter of approximately 1,300 subscribers following receipt of subscriber deactivation notifications from our customers.
Operating expenses (excluding costs of revenues) were $8.8 million in the fourth quarter of 2007, compared to $8.4 million in the third quarter of 2007 and $4.8 million in the fourth quarter of 2006. Operating loss for the fourth quarter of 2007 was $10.6 million, compared to $8.1 million for the third quarter of 2007 and $6.4 million for the fourth quarter of 2006.
Net loss for the fourth quarter of 2007 was $31.9 million, compared to a net loss of $8.5 million for the third quarter of 2007 and $6.6 million for the fourth quarter of 2006. The Company's net loss for the fourth quarter of 2007 included non-cash accounting expenses required to be recorded pursuant to GAAP of approximately $21.0 million of financial expenses recorded in connection with the conversion of a majority of its then outstanding bridge loan, assumption and conversion of a majority of its credit line guarantee and establishment of an equity line of credit agreement, $2.5 million for an inventory, vendor advance payment and pre-paid royalty write-down and $852,000 for stock-based compensation expenses for employees and consultants and expenses recorded in connection with the issuance of stock and incentive plans to management.
Revenue for the year ended December 31, 2007 was $16.2 million, an increase of 26% over $12.9 million for the year ended December 31, 2006. In 2007, approximately $1.6 million was recognized from revenues from inactive devices.
Total operating expenses (excluding cost of revenues) were $32.3 million for the year ended December 31, 2007, compared to $17.9 million for the year ended December 31, 2006. Research and development costs for the year ended December 31, 2007 were $15.9 million, which included engineering costs related to the development of new applications for, and models of, the Ogo device. Operating loss for the year ended December 31, 2007 was $34.7 million, compared to $21.2 million for the year ended December 31, 2006.
Net loss for the year ended December 31, 2007 was $68.6 million, compared to a net loss of $22.7 million for the year ended December 31, 2006. The 2007 net loss included non-cash accounting expenses required to be recorded pursuant to GAAP of approximately $31.2 million of financial expenses recorded in connection with the June 2007 Merger, conversion of a majority of its then outstanding bridge loan, assumption and conversion of a majority of its credit line guarantee and establishment of an equity line of credit agreement, $3.3 million for an inventory, vendor advance payment and pre-paid royalty write-down and $4.3 million for stock-based compensation expenses for employees and consultants and expenses recorded in connection with the issuance of stock and incentive plans to management.
Cash and cash equivalents totaled $17.3 million at December 31, 2007, compared to $2.7 million at December 31, 2006. During the fourth quarter, we raised approximately $9.1 million, net of issuance costs, through a private placement of common stock and warrants.
Commenting on the results, Amit Haller, chief executive officer, said, "We are making progress in our efforts to expand Ogo's global footprint, which is reflected in our increased revenues year over year. One of the highlights of 2007 was the commercial launch of Ogo2.0 in the second quarter. Its release came following a significant investment in research, development and testing. We are also nearing completion of a CDMA version of Ogo2.0, which we believe will increase the addressable market for Ogo, particularly in the United States. In addition to the technical advancements we made throughout the year, we expanded our customer base through the addition of new carrier customers. In 2008, we will continue to work on increasing sales as we focus on controlling our costs and obtaining additional financing."
As previously reported, the Company entered into amendments to its outstanding loan agreements with Southpoint Master Fund L.P. and Gemini Israel Funds, as well as of the guaranty by Gemini Israel Funds of the Company's line of credit from Bank Leumi Le'Israel Ltd., to (1) extend the maturity date of all principal payments under the loan arrangements from June 2008 and June 2009 to June 5, 2010, (2) increase the interest rate from 10% to 20%, effective April 1, 2008, (3) capitalize all interest payments, including any accrued and unpaid interest, and (4) amend the prepayment provisions upon a change of control to provide that the interest payable shall be calculated through the maturity date of June 5, 2010. As a result, at March 31, 2008, the principal amount outstanding under the loan arrangements was $14 million in the aggregate, including an aggregate of approximately $3.3 million of accrued and unpaid interest.
Non-GAAP Results The Company's non-GAAP financial measures are unaudited.
Gross margin(deficit) in the fourth quarter of 2007 was 14.0% compared to (26%) in the fourth quarter of 2006.
Gross margin(deficit) for the year ended December 31, 2007 was 7.2%, compared to (19.4%) in year ended December 31, 2006
The Company's non-GAAP consolidated results of operations for the fourth quarter of 2007 and year ended December 31, 2007 exclude non-cash accounting expenses required to be recorded pursuant to GAAP of approximately $21.0 million and $31.2 million, respectively, of financial expenses recorded in connection with the June 2007 Merger, conversion of a majority of its then outstanding bridge loan, assumption and conversion of a majority of credit line guarantee and establishment of an equity line of credit agreement, $2.5 million and $3.3 million, respectively, for an inventory, vendor advance payment and royalty write-down and $852,000 and $4.3 million, respectively, for stock based compensation expenses for employees and consultants and expenses recorded in connection with the issuance of stock and incentive plans to management. A reconciliation of our non-GAAP measures to GAAP results is included in "Non-GAAP Financial Measures - Reconciliation to GAAP" elsewhere in this release.
The non-GAAP operating loss for the fourth quarter of 2007 was $7.3 million, compared to $7.6 million in the previous quarter and an operating loss of $5.7 million for the fourth quarter of 2006.
The non-GAAP operating loss for the year ended December 31, 2007 was $27.0 million, compared to an operating loss of $19.9 million for the year ended December 31, 2006.
The non-GAAP net loss for the fourth quarter of 2007 was $7.5 million compared to $7.3 million in the previous quarter and a net loss of $6.4 million in the fourth quarter of 2006.
The non-GAAP net loss for 2007 was $29.7 million, compared to a net loss of $21.4 million for 2006.
About IXI Mobile
IXI Mobile, Inc. offers solutions that bring innovative, data-centric mobile devices and services to the mass market. IXI Mobile's Ogo devices are designed to improve the mobile user experience and increase mobile voice and data usage. The Company provides an end to end solution to mobile operators and Internet service providers around the world to support Ogo products. For more information on IXI Mobile, please visit http://www.ixi.com/ . IXI Mobile, Inc. is headquartered in Belmont, CA.
About Ogo
The Ogo family of devices delivers popular applications, including email, instant messaging, SMS, RSS, voice and Web browsing on optimized, easy-to-use handheld devices for a true on-the-go mobile messaging experience. Ogo is available from mobile operators and Internet service providers around the world. More information on Ogo is available at: http://www.ogo.com/ .
Forward Looking Statements
This press release contains forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act. All statements in this press release, other than statements that are purely historical in nature, are forward looking statements. Words such as "believe," "anticipate," "expect," "intend," "plan," "estimate," "project," "will," "may," "trend," "potential," "opportunity," "comfortable," "current," "position," "assume," "outlook," "continue," "remain," "maintain," "sustain," "seek," "achieve," and other similar expressions are intended to identify forward looking statements, although not all forward looking statements contain these words. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward looking statements. We have based these forward looking statements on our current expectations and beliefs about future events. Actual results could differ materially from those discussed or projected in, or implied by, the forward looking statements as a result of various risks and uncertainties, including the Company's ability to raise, and the availability of, additional financing; the Company's continuing history of losses and its ability to continue as a going concern; the Company's ability to provide an affordably priced alternative for mobile email access as well as other value added services; competing products that may, now or in the future, be available to consumers; the Company's ability to develop and market new products or services, including but not limited to CDMA devices, the Company's ability to maintain relationships with existing customers and develop arrangements with new customers; the number or nature of potential customers for the Company's products; the Company's expectations regarding trends in the cell phone, mobile messaging and consumer electronics industries; and the Company's ability to improve its financial performance. This press release should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2007 and its other reports on file with the Securities and Exchange Commission, which contain more detailed discussion of risks and uncertainties that may affect future results. Except as required by law, the Company does not undertake to update any forward looking statements.
IXI MOBILE INC. (formerly: ISRAEL TECHNOLOGY ACQUISITION COMPANY ("ITAC")) AND ITS SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands, except share and per share data Year ended December 31, 2007 2006 2005 Revenues Products sales $13,471 $11,842 $7,793 Services 2,769 1,087 174 Total Revenues 16,240 12,929 7,967 Cost of revenues: Products sales 15,840 11,885 9,243 Services 2,724 4,351 386 Total Cost of revenues 18,564 16,236 9,629 Gross loss (2,324) (3,307) (1,662) Operating expenses: Research and development 15,890 6,897 4,271 Selling and marketing 8,730 7,928 3,323 General and administrative 7,729 3,038 1,449 Total operating expenses 32,349 17,863 9,043 Gain from terminating agreement with CW - - 11,695 Operating income (loss) (34,673) (21,170) 990 Financial expenses, net (33,808) (2,530) (1,334) Other income - 13 - Loss from continuing operations (68,481) (23,687) (344) Income (loss) from discontinued operations (109) 1,035 (11,630) Net loss $(68,590) $(22,652) $(11,974) Basic and diluted net earnings (loss) per share of Common stock: From continuing operations $(6.42) $ (38.55) $(6.65) From discontinued operations $(0.01) $1.51 $(39.47) Basic and diluted net loss per share $(6.43) $ (37.04) $(46.12) Weighted average number of shares of Common stock used in computing basic and Diluted net earnings (loss) per share of Common stock 10,812,986 684,890 294,626 IXI MOBILE INC. (formerly: ISRAEL TECHNOLOGY ACQUISITION COMPANY ("ITAC")) AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands December 31, 2007 2006 ASSETS CURRENT ASSETS: Cash and cash equivalents $17,278 $2,729 Restricted cash 183 269 Trade receivables, net 3,019 3,286 Other receivables and prepaid expenses 1,364 682 Vendor advance payments 4,081 3,947 Inventories, net (of which $7,806 and $9,946 delivered to customers but not yet recognized as revenues as of December 31, 2007 and 2006, respectively) 14,239 13,473 Total current assets 40,164 24,386 LONG-TERM ASSETS: Severance pay fund 917 596 Long-term prepaid expenses 39 93 Property and equipment, net 487 429 Deferred debt costs 348 1,411 Deferred Merger costs - 876 Other assets, net - 62 Total long-term assets 1,791 3,467 Total assets $41,955 $27,853 IXI MOBILE INC. (formerly: ISRAEL TECHNOLOGY ACQUISITION COMPANY ("ITAC")) AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands, except share and per share data December 31, 2007 2006 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) CURRENT LIABILITIES: Current maturities of long-term convertible loan from shareholders $4,492 $- Current maturities of long-term loans from shareholders 2,000 - Short-term bank credit 1,942 6,767 Trade payables 2,095 3,159 Employees and payroll accruals 1,488 1,016 Deferred revenues 10,149 13,035 Other payables and accrued expenses 6,401 3,446 Liabilities of discontinued operations 2,523 2,431 Total current liabilities 31,090 29,854 LONG-TERM LIABILITIES: Long-term loans from shareholders, net of current maturities 2,000 - Long-term convertible loan from shareholders - 4,160 Other long term liabilities 286 - Accrued severance pay 1,138 721 Total long-term liabilities 3,424 4,881 COMMITMENTS AND CONTINGENT LIABILITIES CONVERTIBLE LOAN - 15,840 STOCKHOLDERS' EQUITY (DEFICIENCY) ****): Stock capital - Common stock of $0.0001 par value: Authorized: 60,000,000 and 7,570,862 shares at December 31, 2007 and 2006, respectively; Issued and outstanding: 20,787,955 and 687,992 shares at December 31, 2007 and 2006, respectively 2 *) - Series A Convertible Preferred Stock of $0.01 par value: Authorized: 0 and 90,645 shares at December 31, 2007 and 2006, respectively; Issued and outstanding: 0 and 77,718 shares at December 31, 2007 and 2006, respectively - *) - Series B Convertible Preferred Stock of $0.01 par value: Authorized: 0 and 247,952 shares at December 31, 2007 and 2006, respectively; Issued and outstanding: 0 and 67,861 shares at December 31, 2007 and 2006, respectively - *) - Series C Convertible Preferred Stock of $0.01 par value: Authorized: 0 and 479,627 shares at December 31, 2007 and 2006, respectively; Issued and outstanding: 0 and 222,426 shares at December 31, 2007 and 2006, respectively - *) - Series D Convertible Preferred Stock of $0.01 par value: Authorized: 0 and 5,500,463 shares at December 31, 2007 and 2006, respectively; Issued and outstanding: 0 and 5,104,902 shares at December 31, 2007 and 2006, respectively - *) - Receipt on account of stock ***) 15,840 - Additional paid-in capital **) 151,750 68,715 Notes receivable - (110) Accumulated deficit (160,151) (91,327) Total stockholders' equity (deficiency) 7,441 (22,722) Total liabilities and stockholders' equity (deficiency) $41,955 $27,853 *) Represents an amount lower than $1. **) Net of deferred stock compensation. ***) Including 4,400,000 shares of Common stock that the Company was contractually obligated to issue on account of long-term convertible loan from stockholders converted on October 25, 2007, that were issued on February 22, 2008 (See also Note 17b) ****) Upon the Merger, the shares of IXI stock were canceled and exchanged into the Company's shares at a ratio of 1:0.15. All share information included in this report has been retroactively adjusted to reflect this exchange. Quarterly Financial Data Q4 Q3 Q2 Q1 2007 2007 2007 2007 (unaudited) (in thousands) Revenues $5,182 $4,764 $3,171 $3,123 Cost of revenues 7,008 4,383 4,062 3,111 Research and development, net 4,066 4,687 4,133 3,004 Selling and marketing 3,262 2,122 1,388 1,958 General and administrative 1,496 1,630 3,756 847 Total operating expenses 15,832 12,822 13,339 8,920 Operating (loss) (10,650) (8,058) (10,168) (5,797) Financial expenses, net (21,230) (368) (11,313) (897) Other income 0 0 0 0 Loss from continuing operations (31,880) (8,426) (21,481) (6,694) Loss from discontinued operations (26) (28) (27) (28) Net loss $(31,906) $(8,454) $(21,508) $(6,722) Q4 Q3 Q2 Q1 2006 2006 2006 2006 (unaudited) (in thousands) Revenues $3,886 $3,575 $3,729 $1,739 Cost of revenues 5,472 4,408 4,096 2,260 Research and development, net 2,619 1,491 1,357 1,430 Selling and marketing 1,399 1,210 3,775 1,544 General and administrative 809 667 767 795 Total operating expenses 10,299 7,776 9,995 6,029 Operating (loss) (6,413) (4,201) (6,266) (4,290) Financial expenses, net (763) (1,059) (525) (183) Other income (0) 0 0 13 Loss from continuing operations (7,176) (5,260) (6,791) (4,460) Loss from discontinued operations 574 (27) 514 (26) Net loss $(6,602) $(5,287) $(6,277) $(4,486) Non-GAAP Financial Measures - Reconciliation to GAAP
This non-GAAP presentation and information should not be considered as a substitute for, or as superior to, the Company's financial information prepared in accordance with GAAP. The non-GAAP presentation does not reflect a comprehensive system of accounting, and it differs from similar financial information prepared in accordance with GAAP and from financial information not prepared in accordance with GAAP with the same or similar names that may be used by other companies. The Company strongly urges investors and potential investors in its securities to review the reconciliation of its non-GAAP financial information to the comparable GAAP financial information below, and our consolidated financial statements, including the notes thereto, that are included in the Company's Annual Report on Form 10-K for the year ended December 31, 2007, filed with the Securities and Exchange Commission, and not to rely on any single financial measure to evaluate its business. The principal limitation of this non-GAAP presentation is that it excludes significant expenses that are required by GAAP to be recorded. In addition, the non-GAAP presentation is subject to inherent limitations because it reflects the exercise of judgments by management about which charges are excluded for purposes of the non-GAAP presentation. To mitigate this limitation, the Company presents our non-GAAP presentation together with its GAAP results, and recommends that investors do not give undue weight to the non-GAAP presentation.
The following are the Company's non-GAAP financial measures: non-GAAP Cost of Revenues, non-GAAP operating loss and non-GAAP net loss. The non GAAP financial measures are unaudited.
Non-GAAP Cost of Revenues Reconciliation Year ended December 31, 2007 2006 (in thousands) Total revenues $16,240 $12,929 GAAP cost of revenues: 18,564 16,236 Stock-based option expense in GAAP cost of revenues 204 7 Inventory write down (including vendor advance payments and royalties) 3,289 790 Non-GAAP cost of revenues (excluding the above) $15,071 $15,439 Non-GAAP gross margin 7.2% (19.4%) Non-GAAP Operating Loss Reconciliation Year ended December 31, 2007 2006 (in thousands) GAAP operating loss $(34,673) $(21,170) Stock-based option and share expense in GAAP operating expenses, including merger related expenses 4,347 454 Inventory write-down (including vendor advance payments and royalties) 3,289 790 Non-GAAP operating loss (excluding the above) $(27,037) $(19,926) Non-GAAP Net Loss Reconciliation Year ended December 31, 2007 2006 (in thousands) GAAP net loss $(68,590) $(22,652) Stock-based option and share expense in GAAP operating expenses, including merger related expenses 4,347 454 Inventory write-down (including vendor advance payments and royalties) 3,289 790 Financial expenses (income) relating to merger, conversion of loans and credit line 31,219 0 Non-GAAP net loss (excluding the above) $(29,735) $(21,408) Non-GAAP Cost of Revenues Reconciliation Three months ended December 31, 2007 2006 (in thousands) Total revenues $5,182 $3,886 GAAP cost of revenues: 7,007 5,472 Stock-based option expense in GAAP cost of revenues 36 3 Inventory write-down (including vendor advance payments and royalties) 2,519 573 Non-GAAP cost of revenues (excluding the above) $4,452 $4,896 Non-GAAP gross margin 14.09% (26.01%) Non-GAAP Operating Loss Reconciliation Three months ended December 31, 2007 2006 (in thousands) GAAP operating loss $(10,648) $(6,414) Stock-based option and share expense in GAAP operating expenses, including merger related expenses 852 160 Inventory write-down (including vendor advance payments and royalties) 2,519 573 Non-GAAP operating loss (excluding the above) $(7,277) $(5,681) Non-GAAP Net Loss Reconciliation Three months ended December 31, 2007 2006 (in thousands) GAAP net loss $(31,882) $(7,177) Stock-based option and share expense in GAAP operation expenses, including merger related expenses 852 160 Inventory write-down (including vendor advance payments and royalties) 2,519 573 Financial expenses (income) relating to merger, conversion of loans and credit line 20,973 0 Non-GAAP net loss (excluding the above) $(7,538) $(6,444)
We excluded the following items in the development of the non-GAAP financial measures presented:
-- Share-based compensation expenses. We have excluded share-based compensation expenses, which consist of expenses for share-based compensation that we began recording under SFAS No. 123(R) in the first quarter of fiscal 2006. We excluded these expenses primarily because they are non-cash expenses that we do not consider part of ongoing operating results when assessing the performance of our business. -- Inventory, vendor advance payments and royalty write down. We have excluded the inventory (including vendor advance payments and royalties) write down. Although this may be considered a recurring item, management excludes this write down when evaluating its cost of revenues since it affects the ability to compare periods. -- General and administrative expenses recorded in connection with the issuance of stock, stock options and cash bonuses to our senior management. We have excluded expenses recorded in connection with the issuance of stock, stock options and cash bonuses to Mr. Barak and Mr. Haller in connection with the consummation of the Merger and their specific compensation terms following the consummation of the Merger primarily because we believe that excluding these items allows investors to better assess our operating loss and to compare it to previous periods that did not include these expenses. -- Finance expenses recorded in connection with the consummation of the Merger. In addition to the above mentioned exclusions, we have also excluded financial expenses recorded in connection with the consummation of the Merger primarily because we believe that excluding these non-recurring items allows investors to better assess our net loss and to compare it to previous periods that did not include these expenses. -- Finance expenses recorded in connection with the conversion of the loans and credit line. In addition to the above mentioned exclusions, we have also excluded financial expenses recorded in connection with the conversion of the loans and credit line primarily because we believe that excluding these items allows investors to better assess our net loss and to compare it to previous periods that did not include these expenses.
