Forward Looking Information
This document and certain other public documents incorporated by reference in this document, contain forward-looking statements to the extent they relate to MOSAID or its management, including those identified by the expressions "anticipate," "believe," "foresee," "estimate," "expect," "intend," "could," "may,", "plan," "will," "would" and similar expressions. Similarly, statements in this document that describe MOSAID's business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. These forward-looking statements are not historical facts, but rather reflect MOSAID's current expectations regarding future events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in such forward-looking statements. Assumptions made in preparing forward-looking statements and financial guidance include, but are not limited to, the following: MOSAID's continued expansion of its patent portfolio and of its opportunities for future patent licensing revenue as a result of MOSAID's acquisition of patents from third parties and from development of new inventions; DRAM manufacturers continuing to infringe MOSAID's patents; the timing and amount of MOSAID's litigation expenses; MOSAID's ability to sign new patent licensees; the value proposition associated with MOSAID's products relative to its competition in the market; the timing and amount of MOSAID's Research & Development expenses; the timing of MOSAID's new product introductions; MOSAID's ability to develop, manufacture, and market innovative products in a rapidly changing technological environment; and MOSAID's ability to maintain and enhance existing customer relationships.
Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following: declines or unexpected variations in market growth rates for MOSAID's products; the extent of embedded DRAM proliferation in the System-on-a-Chip markets; variability in customer deployment schedules from quarter to quarter; shifts in the mix of MOSAID products sold; unfavorable legal rulings in MOSAID's patent litigations; economic, social, and political conditions in the countries in which MOSAID, its customers, suppliers, or patent licensees operate, including security risks, health conditions, possible disruptions in transportation networks and fluctuations in foreign currency exchange rates; non-payment or delays in payment by customers/licensees; failure to maintain and enforce MOSAID's existing patent portfolio, or failure to obtain valuable patents as a result of research and development activities, or failure to acquire valuable patents from third parties; MOSAID's ability to recruit and retain skilled personnel; change in MOSAID's financial position; obsolescence of products or inappropriate targeting to markets that fail to materialize; inability to transition to new technologies to meet customer demand; variations in average sales cycles; key component supply restrictions and/or cost increases; critical industry transitions; consolidation of MOSAID's customers and/or licensees; natural events, such as severe weather and earthquakes in the locations in which MOSAID, its customers, suppliers, or patent licensees operate; and changes in the tax rate applicable to MOSAID as the result of changes in the tax law in the jurisdictions in which profits are determined to be earned and taxed, the outcome of tax audits and the ability to realize deferred tax assets.
MOSAID assumes no obligation to update or revise any forward-looking statements. Additional information identifying risks and uncertainties affecting MOSAID's business and other factors that could cause MOSAID's financial results to fluctuate are contained in MOSAID's Annual Information Form, under the section entitled "Risk Factors," and in MOSAID's other public filings available online at www.sedar.com.
FINANCIAL STATEMENTS AND NOTES TO FOLLOW
MOSAID TECHNOLOGIES INCORPORATED
(Subject to the Canadian Business Corporations Act)
CONSOLIDATED BALANCE SHEET
(In thousands of Canadian Dollars)
As at As at
October 31, April 30,
2006 2006
(unaudited) (audited)
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Current Assets
Cash and cash equivalents $28,019 $15,542
Marketable securities 39,189 55,788
Accounts receivable 4,087 7,113
Income taxes receivable - 381
Inventories 1,690 1,779
Prepaid expenses 1,973 1,700
Future income taxes recoverable 11,910 11,910
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86,868 94,213
Capital assets 9,321 9,328
Acquired intangibles 17,714 5,385
Goodwill 1,786 1,786
Future income taxes 22,798 27,439
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$138,487 $138,151
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Current Liabilities
Accounts payable and accrued liabilities $7,728 $7,653
Income taxes payable 314 381
Deferred revenue 1,512 10,545
Mortgage payable 254 244
Current portion of other long-term liabilities
(Note 2) 2,224 -
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12,032 18,823
Mortgage payable 4,216 4,346
Other long-term liabilities (Note 2) 10,009 -
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26,257 23,169
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Shareholders' Equity
Share capital 99,852 102,476
Contributed surplus 3,309 2,630
Retained earnings 9,069 9,876
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112,230 114,982
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$138,487 $138,151
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See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(In thousands of Canadian Dollars, except per share amounts)
(unaudited)
Quarter Quarter Six months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2006 2005 2006 2005
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Revenues $19,594 $16,253 $42,573 $30,486
Expenses
Labour and materials 1,171 2,073 2,394 3,582
Research and development 5,710 2,778 10,638 4,896
Selling and marketing 3,294 2,994 6,297 5,383
General and administration 1,679 1,670 3,825 3,152
Bad debts - - 83 60
Special committee 1,124 - 1,124 -
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12,978 9,515 24,361 17,073
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Income from operations 6,616 6,738 18,212 13,413
Net interest income (Note 3) 674 321 1,260 604
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Income before income tax
expense 7,290 7,059 19,472 14,017
Income tax expense 2,575 2,767 8,100 5,292
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Net income 4,715 4,292 11,372 8,725
Dividends 2,766 1,437 5,597 2,874
Normal course issuer bid 5,399 - 6,582 -
Retained earnings, beginning
of period 12,519 11,159 9,876 8,163
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Retained earnings, end of
period $9,069 $14,014 $9,069 $14,014
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Earnings per share (Note 4)
Basic - net earnings $0.43 $0.37 $1.02 $0.76
Diluted - net earnings $0.42 $0.37 $1.00 $0.75
Weighted average number
of shares
Basic 11,053,768 11,495,689 11,174,697 11,493,056
Diluted 11,240,281 11,666,039 11,380,477 11,689,531
See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian Dollars)
(unaudited)
Quarter Quarter Six months Six months
ended ended ended ended
October 31, October 31, October 31, October 31,
2006 2005 2006 2005
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Operating
Income before discontinued
operations $4,715 $4,292 $11,372 $8,725
Items not affecting cash
Amortization 1,125 506 1,900 958
Stock option expense 343 376 679 611
Future income tax
recoverable 995 896 4,641 1,847
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7,178 6,070 18,592 12,141
Change in non-cash working
capital items (424) (413) (5,802) (3,634)
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6,754 5,657 12,790 8,507
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Investing
Acquisition of capital
assets and acquired
intangibles (302) (216) (14,222) (691)
Acquisition of marketable
securities (12,081) (63,513) (46,150) (114,217)
Acquisition of shares in
Virtual Silicon
Technology Inc. - (6,364) - (6,364)
Proceeds on disposal/
maturity of short-term
marketable securities 22,885 65,067 62,749 114,213
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10,502 (5,026) 2,377 (7,059)
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Financing
Repayment of mortgage (61) (55) (120) (111)
Long-term due to Infineon 2,667 - 12,233 -
Repurchase of shares (8,084) - (9,997) -
Dividends (2,766) (1,437) (5,597) (2,874)
Issue of common shares 327 65 791 254
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(7,917) (1,427) (2,690) (2,731)
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Net cash inflow (outflow)
- continuing operations 9,339 (796) 12,477 (1,283)
Net cash (outflow) -
discontinued operations - - - (62)
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Net cash inflow (outflow) 9,339 (796) (12,477) (1,345)
Cash and cash equivalents,
beginning of period 18,680 6,534 15,542 7,083
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Cash and cash equivalents,
end of period $28,019 $5,738 $28,019 $5,738
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See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Quarter ended October 31, 2006
(tabular dollar amounts in thousands of Canadian Dollars,
except per share amounts)
1. Basis of Presentation
