Q4 Fiscal 2008 Results
- Q4 revenues of $17.0 million, compared to $12.2 million in Q4 fiscal 2007
- Q4 pro forma income of $6.1 million, or $0.57 per diluted share, compared to $3.8 million or $0.34 per diluted share in Q4 fiscal 2007
- Q4 GAAP net income of $5.4 million or $0.50 per diluted share, compared to $9.0 million or $0.81 per diluted share in Q4 fiscal 2007
Revenues of $17.0 million for the fourth quarter of fiscal 2008 represent a 39% increase from revenues of $12.2 million in the fourth quarter a year ago. Pro forma income of $6.1 million was up 59% from the year earlier period. Q4 GAAP net income of $5.4 million included $1.5 million in net profit from discontinued operations. In the comparative period, GAAP net income of $9.0 million included $7.8 million in net profit from discontinued operations.
Fiscal Year 2008 Results
- Fiscal 2008 revenues of $55.1 million, compared to $60.0 million in fiscal 2007
- Fiscal 2008 pro forma income of $20.2 million, or $1.83 per diluted share, compared to $25.3 million or $2.24 per diluted share in fiscal 2007
- Fiscal 2008 GAAP net income of $18.5 million or $1.67 per diluted share, compared to $24.7 million or $2.18 per diluted share in fiscal 2007
"I am very pleased to report that in fiscal 2008, MOSAID recorded a fourth consecutive year of profitability and positive cash flow, which we achieved while completing our transition to a pure-play intellectual property company focused on patent licensing and innovation," said John Lindgren, President and CEO, MOSAID. "Although a strong Canadian dollar exerted downward pressure on revenues, we successfully met or surpassed our financial and operational objectives, including signing our first wireless patent license, re-licensing our first term licensee, and further diversifying our Semiconductor patent portfolio through an exclusive sub-licensing agreement with LSI Corporation."
"Building on our substantial amount of booked revenue and growing deal pipeline, we are guiding for revenue growth and another year of substantial profitability in fiscal 2009," said Lindgren. "By executing on our patent portfolio growth and licensing strategies, we see significant, long-term upside revenue potential going forward, based on wireless licensing, new semiconductor licenses, and license renewals. This will enable us to continue to invest in the future through research and development in innovative Flash memory technologies, and to return value to shareholders."
MOSAID had cash and marketable securities of $58.4 million at the end of the fourth quarter of fiscal 2008, compared with $50.8 million at the end of the third quarter of fiscal 2008.
During the fourth quarter, the Company returned $2.7 million to shareholders in quarterly dividend payments. Subsequent to quarter end, MOSAID announced on May 30, 2008, an amendment to the terms of its NCIB, to increase the number of common shares to be purchased from 559,583 to 1,118,731, or 10% of the public float of common shares issued and outstanding as of September 13, 2007.
On June 26, 2008, MOSAID declared a quarterly dividend of $0.25 per share. The dividend, which is an eligible dividend, is payable on July 24, 2008 to shareholders of record as July 10, 2008.
A reconciliation of pro forma income to Canadian generally accepted accounting principles (GAAP) net income is included in the Notes to the Financial Statements accompanying this press release.
Fiscal 2008 Operational Highlights
Wireless Licensing: signed first wireless patent license with Matsushita Electric Industrial Co., Ltd., commonly known as Panasonic.
Semiconductor Licensing: signed patent licenses with Etron Technology, Inc. and ProMOS Technologies Inc., re-signed Winbond Electronics Corporation to a new term license, and settled patent infringement litigation with Mosel Vitelic, Inc.
Licensing Initiatives: signed an exclusive patent licensing agreement with LSI Corporation.
Restructuring: completed the sale of the Semiconductor IP product business to Synopsys, Inc. for US$15.3 million, and sold the Company's Ottawa real estate for $10.5 million.
Innovation: publicly launched HLNAND (Hyperlink NAND) Flash architecture as a technology licensing and internal patent generation initiative.
Q1 and Fiscal 2009 Guidance
Management offers the following guidance for the first quarter of fiscal 2009:
- Q1 revenues of $12.0 million to $13.0 million
- Q1 pro forma income of $3.2 million to $4.0 million, or $0.29 to $0.36 per diluted share
Management is guiding for the following financial results for fiscal 2009:
- Fiscal 2009 revenues of $59.0 million to $61.0 million
- Fiscal 2009 pro forma income of $20.0 million to $21.0 million, or $1.90 to $2.00 per diluted share
MOSAID's revenues result primarily from intellectual property agreements, which by their nature may actually close on dates other than those projected. MOSAID's priority and focus is on obtaining the best terms possible under its agreements, rather than on the particular timing of agreement closure.
Conference Call and Webcast
Management will hold a conference call and webcast on Thursday, June 26, 2008 at 5:00 p.m. EDT. The webcast will be live at www.mosaid.com and may also be accessed by dialing 1-866-436-9172. The webcast will be available on MOSAID's web site for 90 days following the event.
About MOSAID
MOSAID Technologies Inc. is one of the world's leading intellectual property companies. MOSAID develops semiconductor memory technology and licenses patented intellectual property in the areas of semiconductors, and wired and wireless communications systems. MOSAID counts many of the world's largest semiconductor companies among its licensees. Founded in 1975, MOSAID is based in Ottawa, Ontario.
Pro forma income, a non-GAAP measure, is GAAP net income adjusted for stock-based compensation, patent amortization and imputed interest, foreign exchange gains and losses on "Other long-term liabilities," and any other non-recurring items. The Company uses pro forma measures internally to evaluate and manage operating performance as well as to forecast and plan. Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers.
For more information on the Company, visit www.mosaid.com.
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; current assumptions as to the identification of products that are unlicensed to MOSAID's wireless patents; and the timing and amount of MOSAID's Research & Development expenses.
Factors that could cause actual results to differ materially from expected results include, but are not limited to, the following: the extent of embedded DRAM proliferation in the System-on-a-Chip markets; legal rulings and/or regulatory investigations or complaints having an adverse impact on the validity, enforceability, potential royalty rates, and strength or breadth of coverage of MOSAID's essential and/or nonessential patents (including, but not limited to, adverse results from litigation or proceedings in patent offices and government regulatory agencies in various countries around the world); judicial, legislative or regulatory changes that impair the ability of patent holders to earn licensing revenues; economic, social, and political conditions in the countries in which MOSAID 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, or insolvency of, licensees; variability in patent licensees' sales of licensed products, 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; consolidation of MOSAID's licensees; natural events, such as severe weather and earthquakes in the locations in which MOSAID 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.
MOSAID TECHNOLOGIES INCORPORATED
(Subject to the Canada Business Corporations Act)
CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
(In thousands of Canadian Dollars, except per share amounts)
(Unaudited)
Quarter Ended Year Ended
April 30, April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
Revenues $16,959 $12,204 $55,072 $59,981
Operating expenses
Patent portfolio management 1,246 1,136 4,834 4,243
Patent licensing and litigation 5,261 2,071 13,643 7,768
Research and development 603 336 2,351 1,182
General and administration 870 1,891 4,146 7,043
Foreign exchange loss 91 590 606 461
Special committee - 848 147 2,812
------------------------------------------------------------------------
8,071 6,872 25,727 23,509
------------------------------------------------------------------------
Pro forma income from
operations 8,888 5,332 29,345 36,472
Net interest income 562 559 2,130 2,399
------------------------------------------------------------------------
Pro forma income before
income tax 9,450 5,891 31,475 38,871
Income tax expense (Note 3) 3,362 2,055 11,242 13,558
------------------------------------------------------------------------
Pro forma income (Note 6) $6,088 $3,836 $20,233 $25,313
------------------------------------------------------------------------
------------------------------------------------------------------------
Pro forma earnings per share
Basic $0.57 $0.35 $1.85 $2.28
Diluted $0.57 $0.34 $1.83 $2.24
Weighted average number of
shares
Basic 10,721,721 11,023,860 10,962,648 11,103,185
Diluted 10,770,415 11,216,133 11,057,861 11,321,298
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 Ended Year Ended
April 30, April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
Revenues $16,959 $12,204 $55,072 $59,981
Operating expenses
Patent portfolio management 1,246 1,136 4,834 4,243
Patent licensing and litigation 5,261 2,071 13,643 7,768
Research and development 603 336 2,351 1,182
General and administration 870 1,891 4,146 7,043
Foreign exchange loss (gain) 367 (1,040) (3,393) (1,169)
Restructuring - 2,284 19 2,284
Special committee - 848 147 2,812
Stock-based compensation 153 653 550 1,140
Patent amortization and
imputed interest 3,254 2,312 13,223 3,363
------------------------------------------------------------------------
11,754 10,491 35,520 28,666
------------------------------------------------------------------------
Income from operations 5,205 1,713 19,552 31,315
Net interest income (Note 3) 562 559 2,130 2,399
------------------------------------------------------------------------
Income before income tax
expense and discontinued
operations 5,767 2,272 21,682 33,714
Income tax expense 1,854 1,001 10,827 13,189
------------------------------------------------------------------------
Income before discontinued
operations 3,913 1,271 10,855 20,525
Discontinued operations income
(net of tax) (Note 5) 1,512 7,772 7,619 4,184
------------------------------------------------------------------------
Net income 5,425 9,043 18,474 24,709
Dividends 2,680 2,757 10,958 11,102
Normal course issuer bid 173 - 5,120 6,582
Retained earnings, beginning
of period 16,725 10,615 16,901 9,876
------------------------------------------------------------------------
Retained earnings, end of
period $19,297 $16,901 $19,297 $16,901
------------------------------------------------------------------------
Earnings per share (Note 4)
Basic - before discontinued
operations $0.36 $0.12 $0.99 $1.85
Diluted - before discontinued
operations $0.36 $0.11 $0.98 $1.81
Basic - net earnings $0.51 $0.82 $1.69 $2.23
Diluted - net earnings $0.50 $0.81 $1.67 $2.18
Weighted average number of
shares
Basic 10,721,721 11,023,860 10,962,648 11,103,185
Diluted 10,770,415 11,216,133 11,057,861 11,321,298
See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED BALANCE SHEETS
(In thousands of Canadian Dollars)
(Unaudited)
As at As at
April 30, 2008 April 30, 2007
-------------------------------------------------------------------------
Current Assets
Cash and cash equivalents $22,133 $23,396
Marketable securities 36,246 26,876
Accounts receivable 12,304 12,626
Prepaid expenses 486 618
Future income taxes recoverable 11,015 10,278
-------------------------------------------------------------------------
82,184 73,794
Capital assets 957 1,067
Acquired intangibles 70,130 76,823
Long-term receivables - 1,734
Goodwill - 1,786
Long-term assets held for sale - 7,028
Future income taxes recoverable 16,988 24,468
-------------------------------------------------------------------------
$170,259 $186,700
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Current Liabilities
Accounts payable and accrued liabilities $7,723 $16,091
Income tax payable 356 -
Deferred revenue 1,146 542
Mortgage payable - 4,346
Other asset 318 -
Current portion of other long-term
liabilities 5,345 5,239
-------------------------------------------------------------------------
14,888 26,218
Deferred gain on sale-leaseback 1,797 -
Other long-term liabilities 31,195 38,313
-------------------------------------------------------------------------
47,880 64,531
-------------------------------------------------------------------------
Shareholders' Equity (Note 2)
Share capital 100,403 102,276
Contributed surplus 2,997 2,992
Retained earnings 19,297 16,901
Accumulated other comprehensive income (318) -
-------------------------------------------------------------------------
122,379 122,169
-------------------------------------------------------------------------
$170,259 $186,700
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Canadian Dollars)
(Unaudited)
Quarter Ended Year Ended
April 30, April 30,
2008 2007 2008 2007------------------------------------------------------------------------
Operating
Income before discontinued
operations $3,913 $1,271 $10,855 $20,525
Items not affecting cash
Amortization 2,472 1,772 9,653 3,025
Stock-based compensation 153 765 550 1,831
Loss on disposal of capital
assets 95 1,652 95 1,794
Unrealized foreign exchange
gain on other long-term
investments (3,999) - (3,999) -
Future income tax recoverable 1,691 474 6,743 4,603
------------------------------------------------------------------------
4,325 5,934 23,897 31,778
Change in non-cash working
capital items from continuing
operations (3,083) 13,434 (9,341) (1,837)
------------------------------------------------------------------------
1,242 19,368 14,556 29,941
------------------------------------------------------------------------
Investing
Acquisition of capital assets
and acquired intangibles 1,036 (18,976) (1,708) (36,175)
Acquisition of short-term
marketable securities (2,906) (10,048) (119,460) (88,638)
Proceeds on disposal/maturity
of short-term marketable
securities 77 35,876 110,090 117,550
------------------------------------------------------------------------
(1,793) 6,244 (11,078) (7,263)
------------------------------------------------------------------------
Financing
Repayment of mortgage - (62) (4,346) (244)
Long-term liabilities (1,632) (11,678) (4,081) -
Repurchase of shares (364) - (10,324) (9,996)
Dividends (2,680) (2,757) (10,958) (11,102)
Issue of common shares 63 575 2,702 1,745
------------------------------------------------------------------------
(4,613) (13,922) (27,007) (19,597)
------------------------------------------------------------------------
Net cash (outflow) inflow
from continuing operations (5,164) 11,690 (23,529) 3,081
Net cash inflow from
discontinued operations 9,885 235 22,266 4,773
------------------------------------------------------------------------
Net cash inflow (outflow) 4,721 11,925 (1,263) 7,854
Cash and cash equivalents,
beginning of period 17,412 11,471 23,396 15,542
------------------------------------------------------------------------
Cash and cash equivalents,
end of period $22,133 $23,396 $22,133 $23,396
------------------------------------------------------------------------
------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of Canadian Dollars)
(Unaudited)
Quarter Ended Year Ended
April 30, April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
Net income $5,425 $9,043 $18,474 $24,709
------------------------------------------------------------------------
Other comprehensive income,
net of tax:
Gains and losses on
derivatives designated as
cash flow hedges (54) - 846 -
Gains and losses on
derivatives designated as
cash flow hedges in prior
periods transferred to net
income in the current period (302) - (1,164) -
------------------------------------------------------------------------
Other comprehensive income (356) - (318) -
------------------------------------------------------------------------
Comprehensive income $5,069 $9,043 $18,156 $24,709
------------------------------------------------------------------------
------------------------------------------------------------------------
See accompanying Notes to the Consolidated Financial Statements
MOSAID TECHNOLOGIES INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Quarter ended April 30, 2008
(tabular dollar amounts in thousands of Canadian Dollars, except per share amounts)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with Canadian generally accounting principles (GAAP) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements.
In the opinion of management, all adjustments consisting of normal recurring adjustments, considered necessary for a fair presentation of the Company's financial position, results of operations and cash flows have been included. Operating results for the interim period presented are not necessarily indicative of the results to be expected for any subsequent quarter or for the full fiscal year ending April 30, 2008.
The accounting policies used in preparing these interim financial statements are consistent with those used in preparing the annual financial statements, except as follows:
Comprehensive Income
The CICA issued section 1530 of the CICA Handbook, Comprehensive Income. The section is effective for fiscal years beginning on or after October 1, 2006. It describes how to report and disclose comprehensive income and its components.
Comprehensive income is the change in a company's net assets that results from transactions, events and circumstances from sources other than the company's shareholders. It includes items that would not normally be included in net earnings, such as:
- changes in the currency translation adjustment relating to self-sustaining foreign operations;
- unrealized gains or losses on available-for-sale investments; and
- gains and losses on cash flow hedges.
The CICA also made changes to section 3250 of the CICA Handbook, Surplus, and reissued it as section 3251, Equity. The section is also effective for fiscal years beginning on or after October 1, 2006. The changes in how to report and disclose equity and changes in equity are consistent with the new requirements of section 1530, Comprehensive Income.
Financial Instruments - Recognition and Measurement
The CICA issued section 3855 of the CICA Handbook, Financial Instruments - Recognition and Measurement. The section is effective for fiscal years beginning on or after October 1, 2006. It describes the standards for recognizing and measuring financial assets, financial liabilities and non-financial derivatives. This section requires that:
- all financial assets be measured at fair value, with some exceptions such as loans and investments that are classified as held to maturity;
- all financial liabilities be measured at fair value if they are derivatives or classified as held for trading purposes. Other financial liabilities are measured at their amortized cost; and
- all derivative financial instruments be measured at fair value, even when they are part of a hedging relationship.
The CICA has also reissued section 3860 of the CICA Handbook as section 3861, Financial Instruments -- Disclosure and Presentation, which establishes standards for presentation of financial instruments and non-financial derivatives, and identifies the information that should be disclosed about them. These revisions come into effect for fiscal years beginning on or after October 1, 2006.
Hedges
The CICA issued section 3865 of the CICA Handbook, Hedges. The section is effective for fiscal years beginning on or after October 1, 2006, and describes when and how hedge accounting can be used. On May 1, 2007, the Company adopted section 3865 of the CICA Handbook, Hedges on a prospective basis.
Hedging is an activity used by a company to change an exposure to one or more risks by creating an offset between:
- changes in the fair value of a hedged item and a hedging item;
- changes in the cash flows attributable to a hedged item and a hedging item; or
- changes resulting from a risk exposure relating to a hedged item and a hedging item.
Hedge accounting makes sure that all gains, losses, revenues and expenses from the derivative and the item it hedges are recorded in the statement of operations in the same period.
As a result of adopting the above, the Company has:
- recorded its foreign exchange risk management derivatives at fair value as at the reporting date on the balance sheet as "Other liabilities;"
- recorded the effective portion of its derivatives on the balance sheet in "Accumulated other comprehensive income;"
- classified all of its cash equivalents and marketable securities as "Held-for-trading" and recorded those securities at their fair value as at the reporting date, with changes in fair value being recognized in income immediately;
- accounts receivable are classified as "Loans and receivables," which are recorded at amortized cost using the effective interest method;
- mortgage payable is classified as "Other liabilities," which is recorded at amortized cost using the effective interest method;
- accounts payable and accrued liabilities are classified as "Other liabilities," which are recorded at amortized cost using the effective interest method;
- classified its long-term liabilities as "Other liabilities," which are recorded at amortized cost using the effective interest method; and
- reported comprehensive income and its components and accumulated other comprehensive income and its components in the Notes to the consolidated financial statements.
As a result of adoption of the above policies, there was no material
impact on the Statement of Operations.
2. Shareholders' equity and other comprehensive income
The following are the changes in shareholders' equity for the year ended
April 30, 2008:
-------------------------------------------------------------------------
Common Common Contri- Retained Accumu- Total
shares shares buted earnings lated ($)
(number) ($) surplus ($) other
($) compre-
hensive
income
($)
-------------------------------------------------------------------------
Balance at
April 30,
2007 11,055,376 $102,276 $2,992 $16,901 $ - $122,169
-------------------------------------------------------------------------
Net income - - - 18,474 - 18,474
-------------------------------------------------------------------------
Dividends - - - (10,958) - (10,958)
-------------------------------------------------------------------------
Employee
Stock
Option
Program 219,283 3,267 (627) - - 2,640
-------------------------------------------------------------------------
Employee
Share
Purchase
Program 4,731 64 22 - - 86
-------------------------------------------------------------------------
Stock-based
compensation - - 610 - - 610
-------------------------------------------------------------------------
Normal course
issuer bid (559,583) (5,204) (5,120) - (10,324)
-------------------------------------------------------------------------
Unrealized
derivative
gains on
cash flow
hedges - net - - - - (318) (318)
-------------------------------------------------------------------------
Balance at
April 30,
2008 10,719,807 $100,403 $2,997 $19,297 ($318) $122,379
-------------------------------------------------------------------------
3. Net Interest Income
Net interest income comprises the following:
Quarter Ended April 30, Year Ended April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
Interest income $562 $647 $2,361 $2,760
Interest expense - 88 231 361
------------------------------------------------------------------------
------------------------------------------------------------------------
$562 $559 $2,130 $2,399
------------------------------------------------------------------------
------------------------------------------------------------------------
4. Earnings per Share
The following is a reconciliation of the numerator and denominator of the
basic and diluted per share computations:
Quarter Ended April 30, Year Ended April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
Income before discontinued
operations $3,913 $1,271 $10,855 $20,525
Discontinued operations
(net of tax) 1,512 7,772 7,619 4,184
------------------------------------------------------------------------
Net income $5,425 $9,043 $18,474 $24,709
------------------------------------------------------------------------
------------------------------------------------------------------------
Weighted average number of
common shares outstanding 10,721,721 11,023,860 10,962,648 11,103,185
Net effect of stock options 48,694 192,273 95,213 218,113
------------------------------------------------------------------------
Weighted average diluted
number of common shares
outstanding 10,770,415 11,216,133 11,057,861 11,321,298
------------------------------------------------------------------------
------------------------------------------------------------------------
Quarter Ended April 30, Year Ended April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
Earnings per share
Basic - before discontinued
operations $0.36 $0.12 $0.99 $1.85
Diluted - before discontinued
operations $0.36 $0.11 $0.98 $1.81
Basic - net income $0.51 $0.82 $1.69 $2.23
Diluted - net income $0.50 $0.81 $1.67 $2.18
For the quarter ended April 30, 2008 and April 30, 2007, 261,331 and 12,500 options respectively were excluded from the calculation of diluted earnings per share as the exercise price of these options exceeded the average market price of the Company's common stock during this period and were therefore anti-dilutive.
For the year ended April 30, 2008 and April 30, 2007, 258,331 and 12,500 options respectively were excluded from the calculation of diluted earnings per share as the exercise price of these options exceeded the average market price of the Company's common stock during this period and were therefore anti-dilutive.
There were 396,519 and 541,024 options issued and outstanding as at April 30, 2008 and April 30, 2007 respectively.
5. Discontinued operations
Quarter Ended April 30, Year Ended April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
Revenues $163 $8,553 $926 $22,084
Expenses
Labour and materials - 2,073 - 5,736
Research and development (268) 5,849 1,219 16,240
Selling and marketing (4) 2,868 1,026 7,899
Bad debts - - - 88
Restructuring (135) 7,991 31 7,991
------------------------------------------------------------------------
(407) 18,781 2,276 37,954
------------------------------------------------------------------------
Income (loss) from operations 570 (10,228) (1,350) (15,870)
Gain on sale of assets 903 17,806 10,198 17,806
------------------------------------------------------------------------
Gain earnings before tax 1,473 7,578 8,848 1,936
Income tax (recovery) expense (39) (194) 1,229 (2,248)
------------------------------------------------------------------------
------------------------------------------------------------------------
Discontinued operations
(net of tax) $1,512 $7,772 $7,619 $4,184
------------------------------------------------------------------------
------------------------------------------------------------------------
6. Reconciliation of pro forma income with GAAP net income
Quarter Ended April 30, Year Ended April 30,
2008 2007 2008 2007
------------------------------------------------------------------------
GAAP net income $5,425 $9,043 $18,474 $24,709
Add (deduct):
Stock-based compensation 153 653 550 1,140
Patent amortization and
imputed interest 3,254 2,312 13,223 3,363
Restructuring - 2,284 19 2,284
Foreign exchange loss (gain) 276 (1,630) (3,999) (1,630)
Income tax expense - for the
above items (1,508) (1,749) (3,584) (1,064)
Future income tax revaluation - 695 3,169 695
Discontinued operations
(net of tax) (1,512) (7,772) (7,619) (4,184)
------------------------------------------------------------------------
Pro forma income $6,088 $3,836 $20,233 $25,313
------------------------------------------------------------------------
------------------------------------------------------------------------
7. Stock-based Compensation
The Company has an employee stock purchase plan program whereby employees may elect to designate up to 5% of their annual salary to purchase shares of the Company at a 10% discount from the fair market value. The purchase price is deducted over a six month period via payroll.
Also, the Company has an Employee and Director Stock Option Plan. The exercise price is no lower than the market price on the date of grant. Options granted under the Plan expire within a period of six years of granting, with vesting periods determined by the Human Resources Committee.
The Company employs a fair value method of accounting for all options issued to employees or directors on or after April 27, 2002. The fair value of options issued in the quarter was calculated using the Black-Scholes option pricing model and the following assumptions:
Year Ended April 30, 2008 2007
------------------------------------------------------------------------
Risk free interest rate 2.9% 4.4%
Expected life in years 5.5 5.5
Expected dividend yield 6.2% 4.3%
Volatility 53.81% 66.62%
For the quarter ended April 30, 2008, the Company did not issue deferred share units in lieu of options to directors and officers of the Company under its Deferred Share Unit Plan. Deferred share units vest evenly over a four year period. Deferred share units do not have an exercise price and can only be settled using cash consideration.
8. Business Segment Information
The Company operates in one business segment as a developer and licensor of semiconductor and communications technologies.
Contacts: Investor and Media Inquiries MOSAID Technologies Inc. Michael Salter Director, Investor Relations and Corporate Communications 613-599-9539 x1205 Email Contact / www.mosaid.com