Final Results
Zen Research PLC
23 January 2002
23 January 2002
Zen Research plc
Report for the fourth quarter ended 31 December 2001
REVIEW OF BUSINESS ACTIVITIES
Multibeam TM
Following the reduction in workforce of the Multibeam TM division which Zen
Research plc ('the Company') announced in its previous quarterly report, Zen has
ceased support for all Multibeam TM projects with previous licensing partners.
The Multibeam TM group's primary activities have been reduced to protecting
patents, continuing to improve its intellectual property, and exploring
opportunities and applications for the use of Multibeam TM.
Zen currently has no active projects in MultibeamTM and at this stage has no
revenue expectations from previous Multibeam TM projects.
The Company continues to work with the video player licensee and nonrecurring
engineering revenues are being recorded which cover Zen's development costs
only. Completion of this project is expected before the end of 2002.
New Silicon Value
New Silicon Value ('NSV') employs proprietary full-custom design techniques in
an automated fashion with a view to providing its customers with efficient and
cost effective application specific integrated circuits ('ASICs').
Market conditions within the semi-conductor industry have become more
challenging. Manufacturers remain hesitant to commission new ASIC designs. The
business, and outlook for, New Silicon Value ('NSV') are accordingly adversely
affected as existing customers have lowered their internal forecasts for ASIC
production for the year ended 2002.
NSV is progressing as planned with design work for its existing customers.
Engineering fees will be received for designing these ASICs. Experience has been
that a significant proportion of ASIC designs are either not incorporated into
saleable products or do not result in volume shipments by customers so there can
be no assurance that these customers will ever utilize these designs in
production.
Zen continues to believe in the long-term potential for NSV when the ASIC market
recovers. Accordingly, while recognizing its need to continue to monitor
progress and business performance, Zen expects to continue substantial funding
of NSV during the market downturn. In 2002 this investment is likely to range
from US$9 million to US$12 million depending upon market conditions.
FINANCIAL COMMENTARY
Turnover
Un-audited
Three months Audited
ended Year ended
31 December 31 December
US$ '000 US$ '000
2001 2000 Change 2001 2000 Change
Group Turnover
Continuing 300 110 190 826 271 555
Acquisitions 2,216 -- 2,216 5,020 -- 5,020
2,516 110 2,406 5,846 271 5,575
===== ==== ===== ===== ==== =====
Turnover for the three and twelve months ended 31 December 2001 increased
compared to the comparable periods ended 31 December 2000. This increase was
mainly due to the turnover generated by New Silicon Value, which was acquired in
April 2001, although turnover from continuing operations also increased in the
periods. Turnover from continuing operations was generated from engineering fees
for development work during 2001, whereas the turnover during the comparable
three and twelve-month periods was generated from royalties and engineering
fees. Sequential turnover from continuing operations increased from US$139,000
to US$300,000 at 31 December 2001 due to the timing of billable milestones for a
certain development project during the period. Turnover from acquisitions was
generated from shipments of ASICs and engineering fees for development work.
Research and development
Un-audited
Three months Audited
ended Year ended
31 December 31 December
US$ '000 US$ '000
2001 2000 Change 2001 2000 Change
Research and
development
Continuing 1,555 2,641 (1,086) 9,822 8,295 1,527
Acquisitions 2,308 -- 2,308 5,477 -- 5,477
3,863 2,641 1,222 15,299 8,295 7,004
===== ===== ===== ====== ===== ====
For continuing operations, research and development expenses decreased during
the three-month period ended 31 December 2001 compared to the corresponding
period. This decrease reflects the reduction in headcount and related expenses
and expenditures on outside engineering services. The increase in expenses for
the twelve-month period ended 31 December 2001 was due to a higher rate of
spending compared to the corresponding period prior to the restructuring
activities detailed below. Spending was focused on the development and
enhancement of Zen's intellectual property. During 2001, the Company made two
restructurings of its research and development department due to market
conditions.
Sequential expenditures from continuing operations decreased during the three
months ended 31 December 2001, due to a reduction in salary and related
expenses, as a result of the restructuring taken during the prior quarter, third
party engineering services and other expenses.
Expenditures for research and development for New Silicon Value represent costs
related to the ongoing development of software tools and technologies and
include a charge for share options issued to NSV employees.
Other operating expenses
Un-audited
Three months Audited
ended Year ended
31 December 31 December
US$ '000 US$ '000
2001 2000 Change 2001 2000 Change
Other operating expenses
Continuing 1,516 1,694 (178) 7,227 4,968 2,259
Acquisitions 4,007 -- 4,007 11,488 -- 11,488
5,523 1,694 3,829 18,715 4,968 13,747
===== ===== ===== ====== ===== =====
Other operating expenses incurred by continuing operations for the three-month
period ended 31 December 2001 decreased mainly due to decreased headcount and
related expenses. Sequential expenditures from continuing operations decreased
during the three months ended 31 December 2001, due mainly to a reduction in
salary and related expenses. Other operating expenses incurred by continuing
operations increased for the twelve-month period due to higher levels of
headcount and spending for the twelve-month period compared to the prior year.
Other operating expenses related to New Silicon Value consists mainly of payroll
and related costs and marketing programs. Also included is goodwill amortization
of US$3.1 million and US$9.2 million for the three and twelve months ended 31
December 2001. Goodwill on the acquisition of New Silicon Value amounted to
US$18.6 million and is being amortized over eighteen months.
Restructuring costs
In relation to the postponement of development of MultibeamTM products, the
Company took a charge of US$800,000 in the previous quarter related to the
write-off of certain intellectual property assets. The Company incurred an
additional charge of approximately US$1.1 million in the fourth quarter of 2001
related to headcount reductions and other items mainly related to MultibeamTM.
The Company had taken a charge of US$1.6 million in the second quarter of 2001
related to a restructuring of the Company based on market conditions at that
time.
Consolidated Balance Sheet
Cash on hand and short-term investments decreased at 31 December 2001 to US$59.8
million compared to US$63.3 million at 30 September 2001. This decrease was
mainly due to cash used for the funding of the current operations. See
Consolidated cash flow statement for further details. The increase in creditors
compared to 31 December 2000 was mainly due to the liabilities acquired as the
result of the acquisition of New Silicon Value, and the re-structuring accruals
incurred during the year.
Net current assets decreased from US$94.0 million at 31 December 2000 to US$51.9
million at 31 December 2001. This decrease was mainly due to the US$22.25
million acquisition of New Silicon Value and cash used to fund current
operations.
ENQUIRIES:
Zen Research plc Tel: +44 (0)207 382 0470
Mark Way, Vice President Investor Relations
www.zenresearch.com
Zen Research plc
Results for the quarter and year ended 31 December
Consolidated profit and loss accounts
Un-audited
Three months Audited
ended Year ended
31 December 31 December
US$ '000 US$ '000
2001 2000 2001 2000
Group Turnover
Continuing 300 110 826 271
Acquisitions 2,216 - 5,020 -
2,516 110 5,846 271
Cost of sales (1,743) - (3,839) -
Gross profit 773 110 2,007 271
Research and development (3,863) (2,641) (15,299) (8,295)
Other operating expenses excluding (5,523) (1,694) (18,715) (4,968)
exceptional items
Exceptional items: Costs in - - - (5,806)
connection with initial public
offering
Restructuring costs (1,100) - (3,490) -
Total other operating expenses (6,623) (1,694) (22,205) (10,774)
Total operating expenses (10,486) (4,335) (37,504) (19,069)
Operating loss
Continuing (3,871) (4,225) (19,713) (18,798)
Acquisitions (5,842) - (15,784) -
(9,713) (4,225) (35,497) (18,798)
Net interest receivable 560 1,038 3,055 1,647
Loss on ordinary activities before
taxation (9,153) (3,187) (32,442) (17,151)
Taxation on ordinary activities - 105 (335) (354)
Loss on ordinary activities after
taxation (9,153) (3,082) (32,777) (17,505)
Basic loss per share (US dollars) (0.05) (0.02) (0.18) (0.11)
Fully diluted loss per share (US dollars) (0.05) (0.02) (0.18) (0.11)
Weighted Average 181,195,352 178,679,830 180,512,655 152,730,242
Ordinary Shares
The Company has no recognised gains and losses in any of the periods shown above
other than the loss for the period shown in the relevant profit and loss
account. Accordingly, no separate statement of total recognised gains and
losses has been presented.
Zen Research plc
Consolidated balance sheet at 31 December
Audited Audited
31 December 31 December
2001 2000
US$ '000 US$ '000
Fixed assets
Intangible assets 9,277 1,147
Tangible assets 5,055 1,745
14,332 2,892
Current assets
Stock 295 -
Debtors - due after more 276 1,503
than one year
Debtors - due within one year 2,987 583
3,263 2,086
Short-term investments 49,443 42,726
Cash at bank and in hand 10,334 54,192
59,777 96,918
Creditors - Amounts falling
due within one year (11,458) (4,958)
Net current assets 51,877 94,046
Total assets less current liabilities 66,209 96,938
Creditors - Amounts falling due after more
than one year (5,291) (4,050)
Net assets 60,918 92,888
Capital and reserves
Called up share capital 13,709 13,562
Share premium 101,105 100,529
Other reserves 37,832 37,832
Profit and loss account (91,728) (59,035)
Total equity shareholders' funds 60,918 92,888
Zen Research plc
Consolidated cash flow statement for the quarter and year ended 31 December
Un-audited
Three months Audited
ended Year ended
31 December 31 December
US$ ' 000 US$ '000
2001 2000 2001 2000
Net cash outflow from operating
activities before exceptional items (2,860) (2,600) (19,867) (13,052)
Exceptional items - Costs in
connection with initial public offering - - - (5,806)
Net cash outflow from operating activities (2,860) (2,600) (19,867) (18,858)
Returns on investments and servicing of finance
Interest received 769 1,408 4,077 3,195
Interest paid - - - (635)
Net inflows/(outflows) from returns on 769 1,408 4,077 2,560
investments and servicing of finance
Taxation - (116) - (116)
Purchase of intangible fixed assets - (914) - (1,000)
Capital expenditure and financial investments
Purchase of fixed assets (56) (1,000) (1,054) (1,299)
Sale of tangible fixed assets - 4 - 119
Net cash outflow for capital expenditure (56) (1,910) (1,054) (2,180)
Acquisitions and disposals
Purchase of New Silicon Value (1,327) - (21,200) -
Increase in management of liquid resources (5,127) (628) (6,717) (42,726)
Financing
Repayment of borrowings - - - (1,800)
Proceeds from advances in respect
of royalties - - - 3,000
Net proceeds from issuances of
ordinary shares - 70 723 104,368
Proceeds from issue of shares of
Zen Research NV - - - 9,348
Repayment of loan notes due
from shareholders - 225 180 3,773
Net cash inflow from financing - 295 903 118,689
Increase/(decrease) in cash (8,601) (3,551) (43,858) 57,369
Notes to the Preliminary Announcement of Zen Research plc
1. Basis of preparation
The financial information for the quarter and year ended 31 December
2001 has been prepared on the basis of the accounting policies set out in
the financial statements for the year ended 31 December 2000, under the
historical cost convention and in accordance with accounting standards
applicable in the United Kingdom.
2. Loss per share
Basic loss per share is calculated by dividing the loss attributable
to ordinary shareholders by the weighted average number of ordinary
shares in issue during the period. Diluted loss per share is adjusted
for the effect of potential ordinary shares, such as share options and
warrants.
3. Reconciliation of movements in shareholders funds/(deficit)
Year ended
31 December
US$'000
2001 2000
Loss for the period (32,777) (17,505)
Cost on reissuance of warrants 84 --
Proceeds of issue of ordinary shares 723 114,434
Expenses of share issue charged to
share premium account -- (10,066)
Proceeds of shares by Zen Research NV -- 12,338
Net reduction in shareholders' (31,970) 99,201
funds / (deficit)
Opening shareholders' funds / (deficit) 92,888 (6,313)
Closing shareholders' funds 60,918 92,888
======= =======
4. Notes to cash outflow from operating activities
Year ended
31 December
US$'000
2001 2000
Operating loss (35,497) (18,798)
Depreciation of tangible fixed assets 2,138 948
Amortisation of intangible fixed assets 1,219 401
Amortisation of goodwill 9,278 --
Decrease in stock 460 --
Increase in debtors (804) (551)
Increase (decrease) in creditors 3,339 (858)
(19,867) (18,858)
======= =======
5. Reconciliation of net cash flow to movements in net funds / (debt)
Year ended
31 December
US$'000
2001 2000
(Decrease) / increase in cash (43,858) 98,628
Movement in liquid resources 6,717 --
Borrowings -- 3,267
Movement in net funds / (debt) (37,141) 101,895
Net funds / (debt) 1 January 96,918 (4,977)
Net funds 31 December 59,777 96,918
====== ======
6. Profit and loss account reconciliation
Year ended
31 December
US$'000
2001 2000
Beginning balance (59,035) (41,530)
Loss for the period (32,777) (17,505)
Reissuance of warrants 84 --
Ending balance (91,728) (59,035)
======= =======
7. Acquisition of New Silicon Value Ltd.
In April 2001, Zen acquired most of the assets of Jerusalem-based Silicon
Value (S.V.) Ltd. ('Silicon Value'), a subsidiary of the NASDAQ-listed
Tioga Technologies, for a total of US$22.25 million in cash and debt
assumption. The assets were acquired by a wholly owned subsidiary of Zen
Research plc, New Silicon Value Ltd.
8. Contingent liabilities
If the company decides to exit the development of MultibeamTM products
entirely, management is aware of the possibility that the Company would
incur costs to wind down its business, including but not limited to, the
possible payment to third party contractors on the various projects.
On the acquisition of New Silicon Value (NSV), share options in NSV were
granted to certain employees. These options included a 'put' clause
whereby employees can require the company to purchase the shares. The
options vest over 4 years on the anniversary of the acquisition, one year
after the date of grant. The first options vest on 1 April 2002.
Management is aware of the possibility that these options may be exercised
in future periods. The cost of the options will be recognised to the
profit and loss over the vesting period taking into account the likelihood
of vesting and exercise of the put option. Consequently a charge of
$500,000 has been taken at 31 December 2001. The estimated remaining
potential cost amounts to approximately $2.2 million at year-end 2001.
The Company is aware of a financial dispute between NSV's previous owner
and a key silicon foundry company which may impact NSV's ability either to
utilize that foundry's services or require NSV to expend significant funds
in the future.
The financial information contained in this announcement does not constitute
statutory accounts within the meaning of Section 240 of the Companies Act 1985.
The Company was incorporated on 30 December 1999, and the financial statements
for the year ended 31 December 2000 have been delivered to the Registrar of
Companies. The auditors' report was unqualified and did not contain a statement
either under Section 237(2) or Section 237 (3) of the Companies Act 1985.
The financial statements for the year ended 31 December 2001 have not yet been
delivered to the Registrar of Companies, nor have the auditors reported on them.
The audit report on the full set of financial statements has yet to be signed.
This press release contains forward-looking statements regarding among other
things the future success of ZenO technology and New Silicon Value technology.
These forward looking statements are based on current expectations and are
subject to risks and uncertainties. Actual events and results may differ
materially from those described in these forward-looking statements, as a result
of several factors, including the successful implementation of Zen technology,
the successful integration of New Silicon Value into Zen, the ability of Zen
and New Silicon Value to successfully market and sell their products under
current market conditions, and other risk factors as set forth in the Zen
Offering Circular dated June 26, 2000.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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