TIDMMTMY
RNS Number : 0645V
Matomy Media Group Ltd
28 November 2019
Matomy Media Group | Third Quarter 2019 Financial Results
Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA), today
announced financial results for the third quarter ended 30
September, 2019.
OPERATING REVIEW -Results for the nine-month period ended 30
September 2019
Following the sale of its Mobile activity in November 2018
Matomy operates in one segment Domain monetization (Team
Internet).
Matomy Media Group Consolidated Results for the nine-month
period ended 30 September 2019 (non-GAAP):
($ million) nine-month
period ended
30 September
2019
(unaudited)
Revenue 52.7
Adjusted gross profit* 14.3
Adjusted gross margin* 27.1%
Adjusted EBITDA** 4.7
Direct Adjusted EBITDA*** 8.3
*Adjusted Gross Profit / Margin
Adjusted gross profit is a non-GAAP financial measure that
Matomy defines as revenues less Direct Media Costs.
Matomy believes that adjusted gross profit is a meaningful
measure of operating performance because it is frequently used for
internal management purposes, indicates the performance of Matomy's
solutions in balancing the goals of delivering results to its
customers whilst meeting margin objectives, and facilitates a more
complete understanding of factors and trends affecting Matomy's
underlying revenues performance.
**Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that Matomy
defines as net income before taxes on income, financial expenses
(income), net, depreciation and amortisation, share-based
compensation expenses (cash and non-cash). Adjusted EBITDA is a key
measure Matomy uses to understand and evaluate its core operating
performance and trends, to prepare and approve its annual budget
and to develop short-- and long-term operating plans.
***Direct Adjusted EBIDTA
Direct Adjusted EBITDA is a non-GAAP financial measure that
Matomy defines as Adjusted EBITDA directly attributable to a
specific business less the applicable Corporate Allocations
assigned to such activity.
Going Concern
The Company requires additional capital in order to fund its
liabilities (such liabilities include, among others, liability to
non-controlling interest and convertible bond liability). In order
for the Company to act in a manner that is intended to address the
interests of all stakeholders, the Company signed a binding
agreement to sell all of its stake in Team Internet, as further
detailed in Note 1b(i) to the interim financial statements as of 30
September 2019. If such transaction will be completed, the Company
will have positive net assets (the Company's assets shall exceed
its liabilities) and it shall have sufficient funds to pay all
liabilities as they become due. If the transaction will not be
completed, there is no assurance that the Company will be able to
obtain such required additional capital, and in such circumstances
there is substantial doubt regarding the Company's ability to
continue as a going concern. For further details, refer to Note 1b
to the Company's Interim Financial Statements as of 30 September
2019 and to the Auditors' Report.
Projected Consolidated Sources and Expected Uses of Funds
Statement through September 2020
Pursuant to the requirements the Hybrid Disclosure Model which
apply only to dual listed companies that issue bonds on TASE, this
announcement includes a special statement of projected consolidated
sources and expected uses of funds statement through September 2020
(the "Projected Statement"). The Projected Statement is not
intended to create any continuous on-going disclosure obligation
for the Company. See Appendix A. See also "Cautionary statement
regarding forward-looking statements" below.
Cautionary statement regarding forward-looking statements
This announcement includes certain forward-looking statements,
forecasts, estimates, projections, and opinions. These
forward-looking statements may be identified by the fact that they
do not relate only to historical or current facts or the use of
forward-looking terminology, including the terms "believes",
"estimates", "plans", "projects", "anticipates", "expects",
"intends", "may", "will" or "should" or, in each case, their
negative or other variations or comparable terminology, or by
discussions of strategy, plans, objectives, goals, future events or
intentions. Forward-looking statements include statements regarding
the the negotiations with Rainmaker and the bondholders, the
business strategy, objectives, financial condition, results of
operations and market data of the Company and its subsidiaries (the
"Group"), as well as any other statements that are not historical
facts. These statements reflect the Company's current view
concerning future events and are based on assumptions made by the
Company (including, without limitation, assumptions concerning
currency exchange rate fluctuations, requirements of additional
capital, costs of sale or closure of various operations and changes
to regulations) and information currently available to the
Company.
Although the Company considers that these views and assumptions
are reasonable, by their nature, forward-looking statements involve
unknown risks, uncertainties, assumptions and other factors because
they relate to events and depend on circumstances that will occur
in the future whether or not outside the control of the Company.
These factors, risks, uncertainties, and assumptions could cause
actual outcomes and results to be materially different from those
projected. Past performance cannot be relied upon as a guide to
future performance and should not be taken as a representation that
trends or activities underlying past performance will continue in
the future. No representation is made or will be made that any
forward-looking statements will be achieved or will prove to be
correct. These factors, risks, assumptions, and uncertainties
expressly qualify all subsequent oral and written forward-looking
statements attributable to the Company or persons acting on its
behalf.
The forward-looking statements speak only as of the date of this
announcement. Each of the Company and its respective affiliates
expressly disclaim any obligation or undertaking to update, review
or revise any forward-looking statement and disclaims any
obligation to update its view of any risks or uncertainties
described herein, or to publicly announce the result of any
revisions to the forward-looking statements made in this
announcement to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions or
circumstances on which any such statement is based or otherwise,
except as required by law.
No statement in this announcement is intended or is to be
construed, as a profit forecast or estimate or to be interpreted to
mean that earnings per Company share or overall earnings for the
current or future financial years will necessarily match or exceed
the historical published earnings per Company share or overall
earnings.
By order of the Board:
Sami Totah, Chairman of the Board and Chief Executive
Officer
Ilan Tamir, Chief Operating Officer
About Matomy Media Group Ltd.
Matomy Media Group Ltd. (LSE: MTMY, TASE: MTMY.TA) is a global
advertising technology company. Founded in 2006 with headquarters
in Tel Aviv and offices in Germany, Matomy is dual-listed on the
London and Tel Aviv Stock Exchanges.
For more information:
Press / Investor Relations:
Noam Yellin
Noam@smartteam.co.il
+972544246720
Website: http://investors.matomy.com
Matomy Media Group Ltd. - Sources and " - - ( , ) - 30 2021
Expected Uses of Funds Statement (Solo,
excluding Team
Internet) - through Q3 2021
in thousands
of USD
Nine
months
Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 2021
projected projected projected projected projected projected
Opening
balance $ 4,143 $ 3,791 $ 2,777 $ 4,458 $ 4,183 $ 3,908
Sources: :
Cash flow
from
Operations: :
Working
Capital
Mobfox
activity $ (315)
Tax
Receivable -
Matomy USA $ 798 $ 164
Tax
Receivable -
Matomy KG $ 3,128
Cash flow
from
Financing
activity:
Payments from
CNIC $ 1,792 $ 2,384
$ 3,611 $ - $ 1,956 $ - $ - $ 2,384
------------- --------------- ---------- ---------- ---------- -----------
Expected
Usage of
Funds: :
Cash used for
Operations: $ (438) $ (438) $ (275) $ (275) $ (275) $ (275) :
One-time Cost
of Operations $ (288) -
D&O Insurance
- runoff $ (200) - runoff
Legal cost of
bond
settlement /
sale of TIAG $ (400) -
Net taxes due
in Germany
and UK $ (84) $ (88) , ,
Tax due on
Matomy UK
loan
repayment
Bond interest
due on
December 31,
2019 plus
interest due
until
anticipated
date of the
early
redemption
of the Bonds $ (979) 31/12/19
Less bond
deposit $ 938
Cash flow used for Financing
activity: :
Net Bond
principal
payment $ (3,000) $ - , , "
$ (3,963) $ (1,014) $ (275) $ (275) $ (275) $ (275)
------------- -----------
Closing
balance $ 3,791 $ 2,777 $ 4,458 $ 4,183 $ 3,908 $ 6,017
============== ============= =============== ========== ========== ========== =========== ===========
Assumptions:
1 On 15 November 2019, the Company signed a binding agreement with Centralnic Group PLC, whose
shares are traded on the AIM Market of the London Stock Exchange, the "Purchaser" or
"CNIC")
to sell all the shares in Team Internet. For further details refer to Note 1 in the
Company's
financial statement for the period ending on September 30, 2019. Part of the consideration
is deferred. In addition to the consideration paid on closing by the Purchaser to the
trustee
of the convertible bonds (Series A) of the Company (the "Trustee"), the Company shall
transfer
to the Trustee a cash amount of approx. $3,000K, for the completion of full and immediate
repayment of the Company's outstanding convertible bonds (principal and interest).
2 The Company anticipates that subject to the completion of the Transaction, it will continue
to decrease its professional services (accounting, audit and legal services) expenses. In
addition, the Company will examine possible alternatives with regard to its listings on the
High Growth Segment of the London Stock Exchange's Main Market and the Tel - Aviv Stock
Exchange
which will be implemented during the first half of 2020. The Company expects that as a
result
of all of the above, the Company's operational overhead will be decrease significantly.
Unreviewed
Statement
The statement contains unreviewed financial measures that do not have a standardized meaning
prescribed by GAAP.
Cautionary statement regarding forward-looking statements
This statement includes certain forward-looking statements, forecasts, estimates,
projections
and opinions. These forward-looking statements may be identified by the fact that they do
not relate only to historical or current facts or the use of forward-looking terminology,
including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects",
"intends", "may", "will" or "should or, in each case, their negative or other variations or
comparable terminology, or by discussions of strategy, plans, objectives, goals, future
events
or intentions. Forward-looking statements include statements regarding the business
strategy,
objectives, financial condition, results of operations and market data of the Company and
its subsidiaries (the "Group"), as well as any other statements that are not historical
facts.
These statements reflect the Company's current view with respect to future events and are
based on assumptions made the Company (including, without limitation, assumptions
concerning
currency exchange rate fluctuations, requirements of additional capital, costs of closure
of various operations and changes to regulations) and information currently available to
the
Company.
Although the Company considers that these views and assumptions are reasonable, by their
nature,
forward-looking statements involve unknown risks, uncertainties, assumptions and other
factors
because they relate to events and depend on circumstances that will occur in the future
whether
or not outside the control of the Group. These factors, risks, uncertainties and
assumptions
could cause actual outcomes and results to be materially different from those projected.
Past
performance cannot be relied upon as a guide to future performance and should not be taken
as a representation that trends or activities underlying past performance will continue in
the future. No representation is made or will be made that any forward-looking statements
will be achieved or will prove to be correct. These factors, risks, assumptions and
uncertainties
expressly qualify all subsequent oral and written forward-looking statements attributable
to the Company or persons acting on its behalf.
The forward-looking statements speak only as of the date of this announcement. Each of the
Company and its respective affiliates expressly disclaim any obligation or undertaking to
update, review or revise any forward-looking statement and disclaims any obligation to
update
its view of any risks or uncertainties described herein or to publicly announce the result
of any revisions to the forward-looking statements made in this announcement to reflect any
change in the Company's expectations with regard thereto or any change in events,
conditions
or circumstances on which any such statement is based or otherwise, except as required by
law.
No statement in this announcement is intended, or is to be construed, as a profit forecast
or estimate or to be interpreted to mean that earnings per Company share or overall
earnings
for the current or future financial years will necessarily match or exceed the historical
published earnings per Company share or overall earnings.
Matomy Media Group Ltd. - Gap analysis - comparison of " - 3 2019 -31 2019
Q3, 2019 actual cash flow compared
to the Sources and Expected Uses of Funds Statement
projection published on August 31, 2019
in thousands of USD
Q3 - 2019 Q3 - 2019
Projected Actual
Sources: :
Cash flow from Operations: :
Working Capital Mobfox activity Note 1 below $ (710) $ 17 1
Tax Receivable - Matomy USA Note 2 below $ - $ 66 2
Expected Usage of Funds: :
Ongoing operations Note 3 below $ (438) $ (478) 3
One-time Cost of Operations Note 3 below $ (191) $ (244) 3 -
D&O insurance Note 4 below $ (250) 4
Legal cost of bond settlement /
sale of TIAG Note 5 below $ (200) $ (419) 5 -
Note
1 The company paid suppliers less than expected in Q3, and 1. , 4.
will pay outstanding debts during
Q4.
2 Company collected an amount earlier than expected. 2. .
3 This cost was slightly higher than planned. 3. .
4 The Company and the insurer of the existing policy 4. . , ( ). , run-off 7 , .
encountered difficulties to reach an understanding
about the extension of the existing policy according to
its terms. The existing insurer agreed
to extend the existing policy provided, inter alia,
that the Company will pay a much higher
premium for a limited coverage (exclusion of coverage
in case of insolvency).
In light of the above, the Company's changed the
structure of the insurance coverage and
turned the existing policy into a run-off policy for a
period of 7 years, on the same terms
as the existing policy, and purchased an additional D&O
insurance policy with a reduced coverage
from a different insurer
5 Higher costs than expected due to the sale of Team 5.
Internet transaction
=== ========================================================= ========== ========== ==============================
MATOMY MEDIA GROUP LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL INFORMATION
AS OF 30 SEPTEMBER 2019
U.S. DOLLARS IN THOUSANDS
UNAUDITED
INDEX
Page
--------
Review Report of Independent Auditors 2
Consolidated Balance Sheets 3 - 4
Consolidated Information of Operations 5
Consolidated Information of Changes in Shareholders'
Equity 6 - 7
Consolidated Information of Cash Flows 8 - 9
Notes to Interim Consolidated Financial Information 10 - 28
- - - - - - - - - - - - - - - - - - -
-
The Board of Directors
Matomy Media Group Ltd.
Review Report of Independent Auditors
We have reviewed the consolidated financial information of
Matomy Media Group Ltd. and its subsidiaries (collectively "the
Company"), which comprise the consolidated balance sheet as of 30
September 2019, and the related consolidated information of
operations, changes in shareholder's equity and cash flows for the
nine-month periods ended 30 September 2019 and 2018.
Management's Responsibility for the Financial Information
Management is responsible for the preparation and fair
presentation of the interim financial information in conformity
with U.S. generally accepted accounting principles; this includes
the design, implementation and maintenance of internal control
sufficient to provide a reasonable basis for the preparation and
fair presentation of interim financial information in conformity
with U.S. generally accepted accounting principles.
Auditor's Responsibility
Our responsibility is to conduct our review in accordance with
auditing standards generally accepted in the United States
applicable to reviews of interim financial information. A review of
interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in
scope than an audit conducted in accordance with auditing standards
generally accepted in the United States, the objective of which is
the expression of an opinion regarding the financial information.
Accordingly, we do not express such an opinion.
Conclusion
Based on our review, we are not aware of any material
modifications that should be made to the consolidated financial
information referred to above for it to be in conformity with U.S.
generally accepted accounting principles.
Emphasis of Matter Regarding Going Concern
The accompanying interim financial information have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 1a to the interim financial
information, during the nine-month period ended 30 September, 2019
the Company incurred a net loss of $ 16,026 thousands, and its
working capital deficiency amounted to $ 32,156 thousands as of 30
September, 2019. These conditions, among others, raise substantial
doubts about the Company's ability to continue as a going concern.
Management's evaluation of the events and conditions and
management's plans regarding these matters are described in Note
1b. The interim financial information do not include any
adjustments that might result from the outcome of this
uncertainty.
Tel Aviv, Israel KOST FORER GABBAY & KASIERER
November 28, 2019 A Member of Ernst & Young
Global
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
30 September 31 December
2019 2018
------------ -----------
Unaudited Audited
-----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,938 $ 7,167
Restricted cash - 3,134
Trade receivables, net 5,730 5,947
Government authorities 5,364 9,009
Other receivables and prepaid expenses 1,215 3,474
Discontinued operation 120 4,634
------------ -----------
Total current assets 22,367 33,365
------------ -----------
LONG-TERM ASSETS:
Property and equipment, net 1,406 1,413
Operating lease right-of-use asset 1,836 -
Domains 11,881 11,904
Other intangible assets, net 624 1,451
Goodwill 26,295 42,279
Other assets 55 59
Total long-term assets 42,097 57,106
------------ -----------
Total assets $ 64,464 $ 90,471
============ ===========
The accompanying notes are an integral part of the interim
consolidated financial information.
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
30 September 31 December
2019 2018
------------ -----------
Unaudited Audited
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Liability to non-controlling interest $ 20,643 $ 19,375
Short-term bank credit and current maturities
of bank loans 1,501 5,752
Trade payables 6,932 7,498
Employees and payroll accrual 891 1,813
Convertible bond at fair value (principal of
ILS 101,000 thousand) 19,289 18,540
Accrued expenses and other liabilities 4,766 6,057
Discontinued operation 501 3,928
Total current liabilities 54,523 62,963
------------ -----------
LONG-TERM LIABILITIES:
Deferred tax liabilities 472 2,727
Bank loans, net of current maturities 434 1,116
Operating lease liabilities 1,451 -
Other liabilities 185 318
Total long-term liabilities 2,542 4,161
------------ -----------
EQUITY:
Matomy Media Group Ltd. shareholders' equity:
Ordinary shares 254 254
Additional paid-in capital 86,109 86,031
Accumulated other comprehensive loss (3,174) (3,174)
Accumulated deficit (69,800) (53,788)
Treasury shares (6,231) (6,231)
------------ -----------
Total Matomy Media Group Ltd. shareholders'
equity 7,158 23,092
------------ -----------
Non-controlling interests 241 255
------------ -----------
Total equity 7,399 23,347
------------ -----------
Total liabilities and equity $ 64,464 $ 90,471
============ ===========
The accompanying notes are an integral part of the interim
consolidated financial information.
CONSOLIDATED INFORMATION OF OPERATIONS
U.S. dollars in thousands except share and per share data
Nine months ended Yeear ended
30 September December 31
--------------------------------------------------
2019 2018 2018
------------------------ ------------------------ ------------
Unaudited Audited
-------------------------------------------------- ------------
Revenues $ 52,676 $ 73,072 $ 88,734
Cost of revenues 40,935 57,942 69,867
------------------------ ------------------------ ------------
Gross profit 11,741 15,130 18,867
------------------------ ------------------------ ------------
Operating expenses
Research and development 524 2,137 2,266
Selling and marketing 2,727 6,897 7,694
General and administrative 4,960 4,338 6,125
Impairment, net of change in fair value
of contingent consideration 15,984 293 7,435
Other expenses (Refer to Note 1c(i)) 1,000 - -
Restructuring costs - 1,117 1,923
Loss from sale of activity - 1,777 1,777
------------------------ ------------
Total operating expenses 25,195 16,559 27,220
------------------------ ------------------------ ------------
Operating loss from continuing operations (13,454) (1,429) (8,353)
Convertible bond issuance costs - 1,588 1,588
Financial expenses (income), net 2,385 (1,276) (6,691)
------------------------ ------------------------ ------------
Loss from continuing operations before
taxes on income (15,839) (1,741) (3,250)
Tax on income 187 3,139 3,683
------------------------ ------------------------ ------------
Loss from continuing operations before
gain from sale of affiliated companies (16,026) (4,880) (6,933)
Gain from sale of affiliated companies - - 75
------------------------ ------------------------ ------------
Loss from continuing operations (16,026) (4,880) (6,858)
Loss from discontinued operations,
net - (37,712) (39,787)
------------------------ ------------------------ ------------
Net loss (16,026) (42,592) (46,645)
------------------------ ------------
Net loss attributable to other
non-controlling
interests in subsidiary 14 47 53
------------------------ ------------
Net loss attributable to Matomy Media
Group Ltd. from continuing operations (16,012) $ (4,833) $ (6,805)
------------------------ ------------------------ ------------
Net loss attributable to Matomy Media
Group Ltd. from discontinued operations - $ (37,712) $ (39,787)
------------------------ ------------------------ ------------
Net loss attributable to Matomy Media
Group Ltd. (16,012) (42,545) $ (46,592)
======================== ======================== ============
Basic and diluted loss per ordinary
share from continuing operations (0.16) (0.05) $ (0.07)
Basic and diluted loss per ordinary
share from discontinued operations - (0.39) (0.41)
------------------------ ------------------------ ------------
Basic and diluted loss per ordinary
share (0.16) $ (0.44) $ (0.48)
======================== ======================== ============
Weighted average number of shares used
in computing basic and diluted net
loss per share 97,169,841 96,400,577 96,511,986
======================== ======================== ============
The accompanying notes are an integral part of the interim
consolidated financial information.
CONSOLIDATED INFORMATION OF CHANGES IN SHAREHOLDERS' EQUITY
US dollars in thousands, except share data
Total Matomy
Accumulated Media Group
Additional other Ltd.
Ordinary shares paid-in comprehensive Treasury shareholders' Non-controlling Total
------------------ ----------
Accumulate interests equity
Number Amount capital loss deficit Shares equity
---------- ------ ---------- ------------- ---------- --------- ------------- --------------- ------
Balance as of
1 January
2019 98,372,339 $ 254 $ 86,031 $ (3,174) $ (53,788) $ (6,231) $ 23,092 $ 255 $ 23,347
Stock-based
compensation - - 78 - - - 78 - 78
Vesting of
restricted
share
units 111,500 *) *) - - - - - -
Net loss - - - - (16,012) - (16,012) (14) (16,026)
---------- ------ ---------- ------------- ---------- --------- ------------- --------------- ----------
Balance as of
30 September
2019
(unaudited) 98,483,839 $ 254 $ 86,109 $ (3,174) $ (69,800) $ (6,231) $ 7,158 $ 241 $ 7,399
========== ====== ========== ============= ========== ========= ============= =============== ==========
Total Matomy
Accumulated Media Group
Additional other Ltd.
Ordinary shares paid-in comprehensive Treasury shareholders' Non-controlling Total
------------------ ----------
Accumulate
Number Amount capital Loss deficit Shares equity interests equity
---------- ------ ---------- ------------- ---------- --------- ------------- --------------- ------
Balance as of
1 January
2018 97,535,023 $ 252 $ 85,931 $ (3,174) $ (7,196) $ (6,231) $ 69,582 $ 308 $ 69,890
Stock-based
compensation - - 47 - - - 47 - 47
Exercise of
options and
vesting
of
restricted
share units 425,158 1 (1) - - - - - -
Net loss - - - - (42,545) - (42,545) (47) (42,592)
---------- ------ ---------- ------------- ---------- --------- ------------- --------------- ------------
Balance as of
30 September
2018
(unaudited) 97,960,181 $ 253 $ 85,977 $ (3,174) $ (49,741) $ (6,231) $ 27,084 $ 261 $ 27,345
========== ====== ========== ============= ========== ========= ============= =============== ============
*) Represents an amount lower than $ 1.
The accompanying notes are an integral part of the interim
consolidated financial information.
CONSOLIDATED INFORMATION OF CHANGES IN SHAREHOLDERS' EQUITY
US dollars in thousands, except share data
Total Matomy
Accumulated Media Group
Additional other Ltd.
Ordinary shares paid-in comprehensive Treasury shareholders' Non-controlling Total
------------------ ----------
Accumulate interests equity
Number Amount capital Loss deficit shares equity
---------- ------ ---------- ------------- ---------- --------- ------------- --------------- --------
Balance as of
1 January
2018 97,535,023 $ 252 $ 85,931 $ (3,174) $ (7,196) $ (6,231) $ 69,582 $ 308 $ 69,890
Stock-based
compensation - - 102 - - - 102 - 102
Exercise of
options and
vesting
of restricted
share units 837,316 2 (2) - - - - - -
Net loss - - - - (46,592) - (46,592) (53) (46,645)
---------- ------ ---------- ------------- ---------- --------- ------------- --------------- --------
Balance as of
31 December
2018
(audited) 98,372,339 $ 254 $ 86,031 $ (3,174) $ (53,788) $ (6,231) $ 23,092 $ 255 $ 23,347
========== ====== ========== ============= ========== ========= ============= =============== ========
The accompanying notes are an integral part of the interim
consolidated financial information.
CONSOLIDATED INFORMATION OF CASH FLOWS
US dollars in thousands
Nine months ended Year ended
30 September December 31
----------------------
2019 2018 2018
---------- ---------- ------------
Unaudited Audited
---------------------- ------------
Cash flows from operating activities:
Net loss $ (16,026) $ (42,592) $ (46,645)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,354 7,451 8,647
Stock-based compensation 78 47 102
Impairment of intangible assets, goodwill,
and capitalized research and development 15,984 31,438 38,580
Change in deferred tax, net (2,242) (581) (664)
Change in accrued interest and effect
of foreign exchange differences on long
term loans and leases liability (183) (132) (167)
Gain from sale of affiliated companies - - (75)
Fair value revaluation - convertible
bond 749 (4,979) (11,390)
Decrease in trade receivables 4,732 19,049 22,679
Decrease (increase) in other receivables
and prepaid expenses 511 62 (186)
Decrease in other assets 6 57 57
Decrease in trade payables (3,999) (15,181) (17,796)
Changes in fair value of payment obligation
recognized in earnings 1,268 260 260
Decrease (increase) in tax receivable 3,645 (3,383) (3,399)
Decrease in employees and payroll accruals (922) (2,162) (2,294)
Decrease in accrued expenses and other
liabilities (1,738) (3,636) (4,818)
Loss from sale of activity - 1,777 1,835
Loss (gain) from disposal of property
and equipment and domains (47) 160 847
Other 9 23 (57)
---------- ---------- ------------
Net cash provided by (used in) operating
activities 3,179 (12,322) (14,484)
---------- ---------- ------------
Cash flows from investing activities:
Sale of activity 1,839 600 6,510
Change in long-term deposit - - 66
Sale of investment in affiliated company - - 149
Purchase of property and equipment (103) (166) (206)
Purchase of domains - (1,136) (1,134)
Proceeds from sale of domains and property
and equipment - - 76
Capitalization of research and development
costs (460) (2,060) (2,258)
Other - 110 -
Net cash provided by (used in) investing
activities 1,276 (2,652) 3,203
---------- ---------- ------------
The accompanying notes are an integral part of the interim
consolidated financial information.
CONSOLIDATED INFORMATION OF CASH FLOWS
US dollars in thousands
Nine months ended Year ended
30 September December 31
-------------------
2019 2018 2018
--------- -------- ------------
Unaudited Audited
------------------- ------------
Cash flows from financing activities:
Short-term bank credit, net $ (3,288) $ (94) $ (4,322)
Exercise of options - - *)
Issuance of convertible bond - 29,930 29,930
Repayment of bank loans (1,530) (9,632) (10,019)
Additional payments related to previous
acquisitions - (681) (681)
Acquisition of non-controlling interest - (20,146) (20,146)
Dividend paid to non-controlling interest - (2,711) (2,711)
--------- ------------
Net cash used in financing activities (4,818) (3,334) (7,949)
--------- -------- ------------
Decrease in cash, cash equivalents and
restricted cash (363) (18,308) (19,230)
Cash, cash equivalents and restricted
cash at beginning of period 10,301 29,407 29,531
--------- -------- ------------
Cash, cash equivalents and restricted
cash at end of period $ 9,938 $ 11,099 $ 10,301
========= ======== ============
Non-cash investing activities:
Receivable in connection with acquisitions $ - $ 250 $ 1,839
========= ======== ============
*) Represents an amount less than $ 1.
The accompanying notes are an integral part of the interim
consolidated financial information.
NOTE 1:- GENERAL
a. Matomy Media Group Ltd. ("Matomy") together with its
subsidiaries (collectively - the "Company") offered and provided a
portfolio of proprietary programmatic data-driven platforms
focusing on two core activities of domain monetization and mobile
digital advertising to advertisers, advertising agencies, Apps
developers and domain owners.
Matomy was incorporated in 2006. The Company's markets are
located primarily in the United States and Europe. The Company's
shares are traded on the London Stock Exchange and also on the Tel
Aviv Stock Exchange.
In the period spanning from mid-2017 through November 2018, the
Company exited all of its data-driven advertising platforms with
the exception of Team Internet AG ("Team Internet"), a market
leading domain advertising and monetization platform, with two key
activities: (i) a proprietary domain parking platform that enables
customers to monetize their domain portfolios; and (ii) a
proprietary self-serve platform that allows publishers and
advertisers to buy and sell traffic on a smart programmatic real
time bidding model. The Company, through its UK and German
subsidiaries, currently holds 90% of the share capital of Team
Internet. (Refer to Note 1c(i)).
In the nine-months period ended 30 September 2019, the Company
incurred net loss of $ 16,026. In addition, the Company's working
capital deficiency amounted to $ 32,156 as of 30 September 2019.
The main factor contributing to the loss incurred in 2019 was
goodwill impairment charges of $ 15,984 related to its Domain
Monetisation reporting activity (see Note 2e).
b. The Company requires additional capital in order to fund its
liabilities. Such liabilities include, among others, liability to
non-controlling interest (minority shareholder in Team Internet,
Rainmaker Investments GmbH ("Rainmaker")) and convertible bond
liability (Series A) (the "Bonds") (as further described in Note 1c
below). There is no assurance that the Company will be able to
obtain such require additional capital.
In order for the Company to act in a manner that is intended to
address the interests of all stakeholders, the Company, with the
support of the bondholders and Rainmaker, concentrated its effort
to sell Team Internet.
On 15 November 2019, the Company and Rainmaker signed a binding
agreement with Centralnic Group PLC, whose shares are traded on the
AIM Market of the London Stock Exchange, the "Purchaser" or "CNIC")
to sell all the shares in Team Internet for the total consideration
to be paid for 100% of Team Internet's shares EUR45,854,332 plus
the Interest Amount, as determined in the agreement, and shall
consist of the following (the "Purchase Price"):
(a) A cash payment of EUR39,554,332 (the "Cash Payment"), plus
the Interest Amount that shall be paid on closing date.
In addition to the Cash Payment, the Purchaser shall retain an
amount of EUR900,000 retention (the "Retention Amount"). The
Retention Amount will be fully released after 15 months period,
less deductions for settled claims or for outstanding claims (which
are supported by documents as specified in the agreement).
NOTE 1:- GENERAL (Cont.)
(b) EUR2,700,000 paid in Purchaser shares. The number of shares
will be determined by dividing EUR2,700,000 by the Purchaser share
price, as determined in the agreement.
(c) A deferred cash payment of EUR2,700,000 payable on the date
that is 6 months following the closing.
As part of the Transaction, immediately prior to closing date,
the Company will consummate the purchase of the remaining 10% stake
of Rainmaker in Team Internet (as further detailed in Note 1c(i)
below), by assigning to Rainmaker a portion of the consideration.
Rainmaker shall be entitled to receive a total sum of
EUR19,050,000: (i) a sum of EUR 16,508,190 out of the Cash Payment;
(ii) EUR1,087,350 paid in Purchaser shares. The number of shares
will be determined by dividing EUR1,087,350 by the Purchaser share
price, as determined in the agreement; (iii) a sum of EUR1,087,350
out of the deferred cash payment; (iv) a sum of EUR 367,110 out of
the Retention Amount. Upon consummation of such purchase of the
remaining 10% stake of Rainmaker in Team Internet, no further
claims between Rainmaker and the Company will exist and all alleged
obligations of the Company towards Rainmaker will be settled.
The remaining amount of the Cash Payment (EUR23,046,142) and the
Interest Amount, shall be paid to the trustee of the Bonds (the
"Trustee"). In addition, the Company shall transfer to the Trustee
a cash amount of approximately EUR2,400,000 (which shall be
deposited in an escrow account prior to closing and as a condition
thereto), for the completion of full and immediate repayment of the
Company's outstanding convertible bonds (ILS101,000 thousands)
(principal and interest).
The closing of the Transaction is subject to certain conditions
precedent, such as approvals of the Company's shareholders,
approval of the Bondholders and completion by the Purchaser of its
proposed financing by means of a EUR40,000,000 bond issuance. If
the Conditions Precedent are not satisfied by 31 December 2019
(which date may be extended in certain limited circumstances), then
any party may terminate the agreement.
If the Purchaser's EUR40,000,000 bond issuance has not been
completed prior the termination of the agreement because the
conditions precedent, as detailed in the agreement, were not
satisfied by 31 December 2019, the Purchaser shall pay a break-up
fee of EUR900,000 to the Company and Rainmaker. If the Purchaser's
EUR40,000,000 bond issuance was completed prior to such
termination, but certain other conditions precedent were not
satisfied, a break-up fee of EUR900,000 will be payable to the
Purchaser by the Company and Rainmaker.
There is no certainty at this time that the transaction will be
finalized.
NOTE 1:- GENERAL (Cont.)
c. i. As detailed in Note 1b to the annual financial statements,
in accordance with the share purchase agreement dated December 2017
(the "2017 SPA") with the minority shareholders of Team Internet,
Rainmaker Investments GmbH ("Rainmaker"), the Company was required
to buy the remaining 10% stake in Team Internet (the "Third Sale
Exit") from Rainmaker on November 30, 2018. The Company failed to
pay the amount due on 30 November 2018, which is claimed by
Rainmaker to be equal to EUR 16,015 thousand. Failure by the
Company to pay the consideration for the Third Sale Exit, triggers
certain rights of Rainmaker, among other remedies, such as interest
on late payment and a right to repurchase some or all of the
Company's shares in Team Internet, at Rainmaker's discretion, at a
price of 60% of the original purchase price paid by the Company on
such shares. Such price, after giving effect to the foregoing
discount and assuming all shares are purchased is approximately EUR
31,688 thousand.
In addition, under the 2017 SPA, it was agreed by the parties on
a one-off bonus of $1,000 to be paid to Rainmaker for the extension
of the cooperation between Team Internet and its unrelated search
engine provider beyond 31 July 2019. In March 2019, the Company
expected payment for the search engine renewal bonus, and therefore
a provision was recorded and the expense was recorded as other
expense in the information of operation for the nine-month period
ended 30 September 2019.
Subject to the completion of the Transaction described in b
above, upon consummation of the purchase of the Third Sale Exit as
part of the Transaction, no further claims between Rainmaker and
the Company will exist and all alleged obligations of the Company
towards Rainmaker will be settled.
ii. Beginning in the fourth quarter of 2018, the Company has
been holding discussions with the Trustee and with the
representatives and legal counsel of the bondholders in order to
reach an agreement to adjust certain terms of the Bonds.
The bondholders have, among other things, made a claim that they
are entitled, as of the fourth quarter of 2018, to call the Bonds
for immediate repayment based on the "material adverse effect on
the Company's business" clause, comparing the then current
Company's business conditions and the Company's business conditions
as of the bond's issuance date. The Company rejected this
claim.
In addition, during 2019, the bondholders have convened numerous
bondholders meetings that on their agenda was a resolution with
regard to a contingent demand of an immediate repayment of the
bonds, which was rejected by the bondholders.
Subject to the completion of the Transaction described in b
above, the Company will fully repay its obligations to the
bondholders.
iii. In respect of the Company's convertible bond, as described
in Note 5 herein, noncompliance with certain covenants during two
consecutive quarters constitutes a default event, which under
certain circumstances, as detailed in the bond, entitles the
holders to claim immediate repayment of the Bonds. The following
includes summary of the bond financial covenants:
NOTE 1:- GENERAL (Cont.)
Covenant
Minimum Equity (as defined therein) of $40,000
Net Debt to Adjusted EBITDA Ratio (as defined
therein) of not more than 2.5
Adjusted EBITDA (as defined therein) of at
least $10,000
As of 30 September 2019, the Company was not in compliance for
two or more consecutive quarters with its Minimum Equity covenant
and with the Adjusted EBITDA covenant. Therefore, under ASC 470,
Debt, the convertible bond in the amount of $ 19,289 (principal of
$ 29,006 as of 30 September 2019) was classified to short term
liabilities as of 30 September 2019.
Noncompliance with certain covenants in the bonds triggers an
increase of interest. As a result of the Company's Shareholders'
Equity being lower than $50,000, the interest rate on the
outstanding balance of the principal of the Bonds was increased by
0.5% as of October 1, 2018. In addition, as a result of the
Adjusted EBITDA being lower than $10,000, the interest rate on the
outstanding balance of the principal of the Bonds was increased by
additional 0.5% as of 1 January 2019. Therefore, the updated annual
interest rate for the period commencing on the 1 January 2019 and
through 31 December 2019 will be 6.5%.
iv. On 28 December 2017, major shareholders of the Company
holding in the aggregate approximately 30% of the Company's voting
share capital, provided letters of support addressed to the Company
stating that such shareholders agreed to provide sufficient
financial support, if necessary, to the Company to ensure that the
Company can continue its operations for at least twelve months from
27 December 2017. Under such letters, all eligible shareholders
will have the right to participate under the same terms, which will
be determined by the Board, subject to receipt of any applicable
shareholder approvals (the "Letters of Support").
With respect to such Letters of Support, the Company received
two letters, the first letter from legal counsel to the minority
shareholder in Team Internet, Rainmaker, claiming, among other
things, that the Letters of Support impose a liability upon such
major shareholders to inject funds into the Company in order to
enable it to pay the consideration for the Third Sale Exit. The
second letter from legal counsel to the major shareholders, who
provided the Letters of Support, which include, inter alia, claims
that the obligation under the Letters of Support is intended to
cover funding relating to the Company's on-going operations, that
is, salaries payments and other on-going expenses etc., but does
not cover the consideration for the Third Sale Exit or discharge
the Company's liabilities. The bondholders have also raised claims
that based on their interpretation, the Letters of Support are
intended to cover the payments due to them.
NOTE 1:- GENERAL (Cont.)
On 20 December 2018, the Company received a letter from legal
counsel to the shareholders who provided the Letters of Support,
confirming that in support of the current discussions among the
Company and various stakeholders, including the bondholders, the
aforementioned shareholders agree not to claim that the Letters of
Support expire with respect to the period up to 10 January 2019.
This extension further states that the foregoing extension relates
only to the extent of the circumstances under which the major
shareholders would have been required to provide support pursuant
to the terms of the original Letters of Support until 27 December
2018. The Company received several additional letters from legal
counsel to the shareholders who provided the Letters of Support,
further extending the Letters of Support as described above up to
November 30, 2019.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Unaudited interim financial information
The accompanying unaudited interim consolidated financial
information have been prepared in accordance with accounting
principles generally accepted in the United States ("US GAAP") for
interim financial information. Accordingly, they do not include all
the information and footnotes required by accounting principles
generally accepted in the United States for complete financial
information. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. The results for the
nine-month period ended 30 September 2019 are not necessarily
indicative of the results that may be expected for the year ended
31 December 2019.
In the preparation of the interim consolidated financial
information, except as described in Note 3, it applied the
significant accounting policies, on a consistent basis to the
annual financial statements of the Company as of 31 December
2018.
The unaudited interim consolidated financial information should
be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's financial
statements ("the Annual Report") for the year ended 31 December
2018.
b. Use of estimates:
The preparation of the consolidated financial information in
conformity with US GAAP requires management to make estimates,
judgments and assumptions. The Company's management believes that
the estimates, judgments and assumptions it uses are reasonable
based upon information available at the time they are made. These
estimates, judgments and assumptions can affect the reported
amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the dates of the financial information,
and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those
estimates.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
On an ongoing basis, the Company's management evaluates
estimates, including those related to accounts receivable, fair
values of financial instruments, fair values and useful lives of
intangible assets and reporting units, fair values of stock-based
awards, deferred taxes and income tax uncertainties and contingent
liabilities. Such estimates are based on historical experience and
on various other assumptions that it believes to be reasonable, the
results of which form the basis for making judgments about the
carrying values of assets and liabilities.
c. Internally developed software:
The Company capitalizes certain internal software development
costs, consisting of direct labor associated with creating the
internally developed software. Software development projects
generally include three stages: the preliminary project stage (all
costs expensed as incurred), the application development stage
(costs are capitalized) and the post implementation/operation stage
(all costs expensed as incurred).
The costs capitalized in the application development stage
primarily include the costs of designing the application, coding
and testing of the system. Capitalized costs are amortized using
the straight-line method over the estimated useful life of the
software, generally 3 years, once it is ready for its intended use.
The Company believes the straight-line recognition method best
approximates the manner in which the expected benefit will be
derived. Amortization expense for the related capitalized
internally developed software in the nine month periods ended 30
September 2019 and 2018 totalled $ 402 and $ 2,959, respectively,
and is included in cost of revenues in the accompanying
consolidated information of operations. Management evaluates the
useful lives of these assets on an annual basis and tests for
impairment whenever events or changes in circumstances occur that
could impact the recoverability of these assets.
Capitalized internally developed software of $ 876 and $ 818 are
included in property and equipment in the consolidated balance
sheets as of 30 September 2019 and 31 December 2018,
respectively.
d. Fair value of financial instruments
The carrying amounts of financial instruments carried at cost,
including cash and cash equivalents, short-term deposits, accounts
receivable, prepaid expenses and other assets, accounts payable,
accrued expenses and other liabilities approximate their fair value
due to the short-term maturities of such instruments.
The Company follows the provisions of ASC 820 which defines fair
value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
In determining a fair value, the Company uses various valuation
approaches. ASC 820 establishes a hierarchy for inputs used in
measuring fair value that maximizes the use of observable inputs
and minimizes the use of unobservable inputs by requiring that the
most observable inputs be used when available. Observable inputs
are inputs that market participants would use in pricing an asset
or liability, based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that
reflect assumptions that market participants would use in pricing
an asset or liability, based on the best information available
under given circumstances.
The hierarchy is broken down into three levels, based on the
observability of inputs and assumptions, as follows:
-- Level 1 - Observable inputs obtained from independent
sources, such as quoted prices for identical assets and liabilities
in active markets.
-- Level 2 - Other inputs that are directly or indirectly observable in the market place.
-- Level 3 - Unobservable inputs which are supported by little or no market activity.
The following table present liabilities measured at fair value
on a recurring basis as of 30 September 2019 and 31 December
2018:
30 September 2019
-----------------------------------
Fair value measurements using
input type
-----------------------------------
Level Level Level
1 2 3 Total
---------- ----- ----- ---------
Liabilities:
Bonds $ 19,289 $ - $ - $ 19,289
Total financial liabilities
(unaudited) $ 19,289 $ - $ - $ 19,289
========== ===== ===== =========
31 December 2018
------------------------------------
Fair value measurements using
input type
------------------------------------
Level Level Level
1 2 3 Total
--------- ------ ------ ---------
Liabilities:
Bonds $ 18,540 $ - $ - $ 18,540
Derivative - 933 - 933
Total financial liabilities $ 18,540 $ 933 $ - $ 19,473
========= ====== ====== =========
e. Goodwill and other intangible assets:
Goodwill reflects the excess of the purchase price of business
acquired over the fair value of net identifiable assets acquired.
Goodwill and indefinite intangible assets are not amortized but
instead are tested for impairment, in accordance with ASC 350, at
least annually at December 31 each year, or more frequently if
events or changes in circumstances indicate that the carrying value
may be impaired.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Company determines the fair value of its Domain Monetisation
and Mobile reporting units using the income approach which utilizes
a discounted cash flow model, as it believes that this approach
best approximates the reporting unit's fair value. Judgments and
assumptions related to revenue, gross margin, operating income,
future short-term and long-term growth rates, weighted average cost
of capital, interest, cash flows, and market conditions are
inherent in developing the discounted cash flow model. The Company
considers historical rates and current market conditions when
determining the discounted and growth rates to use in its analyses.
If these estimates or their related assumptions change in the
future, the Company may be required to record impairment charges
for its goodwill.
Due to changes in compliance requirements, a handful of the
Company's publishers have been deactivated, which resulted in
negative impact on the Company's projected EBIDTA. As a result, the
Company recorded during the nine month period ended 30 September
2019, goodwill impairment charges of $15,984 related to its Domain
Monetisation reporting unit, using a weighted average cost of
capital and a long-term growth rate of 15% and 2%, accordingly.
During the year ended 31 December 2018, the Company recorded
goodwill impairment charges of $30,648 related to its Mobile
reporting unit, which is included in loss from discontinued
operations, and $5,014 related to its Domain Monetisation reporting
unit.The majority of the inputs used in the discounted cash flow
model to determine the fair value of the reporting units are
unobservable and thus are considered to be Level 3 inputs.
f. Restricted Cash:
In the first quarter of 2019, the Company adopted FASB ASU No.
2016-18, Statement of Cash Flows (Topic 230): Restricted Cash ("ASU
2016-18"), which enhances and clarifies the guidance on the
classification and presentation of restricted cash in the statement
of cash flows and requires additional disclosures about restricted
cash balances.
NOTE 3:- LEASES
In February 2016, the Financial Accounting Standards Board (the
"FASB") issued Topic 842, which requires the recognition of
right-of-use ("ROU") assets and lease liabilities for operating
leases on the consolidated balance sheet. The Company adopted Topic
842 and its related amendments as of January 1, 2019 using a
modified retrospective transition approach by applying the new
standard to all leases existing at the date of initial application
and not restating comparative periods. The Company elected the
package of practical expedients permitted under the transition
guidance, which allowed the Company to not reassess whether
arrangements contain leases, not reassess lease classification and
not reassess initial direct costs.
Under the new guidance, the Company determined if an arrangement
contains a lease and the classification of that lease, if
applicable, at inception or upon modification of a contract. The
Company elected to not recognize a lease liability or ROU asset for
short-term leases (leases with a term of twelve months or less and
does not include an option to purchase the underlying asset that
the Company is reasonably certain to exercise). Lease liabilities
represent its obligation to make lease payments under the lease.
Operating lease ROU assets and liabilities are recognized at the
lease commencement date based on the present value of lease
payments over the lease term.
NOTE 3:- LEASES (Cont.)
Some leases include one or more options to renew. The exercise
of lease renewal options is typically at the Company's sole
discretion; therefore, the majority of renewals to extend the lease
terms are not included in our right of use assets and lease
liabilities as they are not reasonably certain of exercise. The
Company regularly evaluates the renewal options, and, when it is
reasonably certain of exercise, it will include the renewal period
in its lease term. Lease modifications result in remeasurement of
the lease liability.
The right-of-use asset and lease liability are initially
measured at the present value of the lease payments, discounted
using the interest rate implicit in the lease or, if that rate
cannot be readily determined, the Company's incremental borrowing
rate based on the information available at the date of adoption in
determining the present value of the lease payments. The
determination of its incremental borrowing rate requires
judgment
The Company has operating leases for office space, that expire
through 2025. Below is a summary of operating right-of-use assets
and operating lease liabilities as of 30 September 2019
(Unaudited):
$
-----
Operating right-of-use assets 1,836
Operating lease liabilities, current 315
Operating lease liabilities long-term 1,451
Total operating lease liabilities (unaudited) 1,766
=====
The short-term lease liabilities is included within accrued
expenses and other short term liabilities in the consolidated
balance sheet.
Minimum lease payments for our right of use assets over the
remaining lease periods as of 30 September 2019, are as
follows:
30 September,
2019
(unaudited)
-------------
2019 $ 79
2020 315
2021 315
2022 315
2023 315
Thereafter 465
Total undiscounted lease payments 1,804
Less: Interest (38)
-------------
Present value of lease liabilities $ 1,766
=============
NOTE 3:- LEASES (Cont.)
The weighted average remaining lease terms and discount rates
for all of operating leases were as follows as of 30 September
2019:
Weighted average remaining lease term (years) 2.9
Weighted average discount rate 1.90%
Total rent expenses for the nine months ended 30 September 2019
and 2018 were $ 244 and $ 969, respectively.
NOTE 4:- BANK LOANS AND CREDIT LINE
In relation to the bank loans and credit lines, the Company is
required to comply with certain covenants, as defined in the loan
and bond agreements and its amendments. As of 30 September 2019,
the Company was in full compliance with the financial covenants of
its bank loan. In August and November 2019, the credit line was
extended until February 2020.
NOTE 5:- CONVERTIBLE BOND
In February 2018, the Company completed a public offering in
Israel of convertible (Series A) bonds (the "Bonds"). Through the
issuance of the Bond, the Company raised a total gross
consideration of ILS 103 million (approximately $29,930 as of
issuance date) issuing a total of 101,000 units of Bond, which bear
a coupon of 5.5% per annum, payable semi-annually on June 30 and
December 31 of each of the years 2018 to 2021 (inclusive). The
interest is paid on a semi-annual basis. Interest prepayment in the
amount of ILS 1.6 million ($ 469) is included in other receivables
and prepaid expenses on the balance sheet as of 30 September 2019.
The principal of the Bonds, denominated in ILS, is required to be
repaid in two equal annual instalments commencing in December 2020.
The Bonds are by their terms convertible into ordinary shares of
the Company, at the discretion of the holders, up to ten (10) days
prior to the final redemption date (i.e. December 21, 2021). The
conversion price is subject to adjustment in the event that the
Company effects a share split or reverse share split, rights
offering or a distribution of bonus shares or a cash dividend. The
Company may redeem the Bond upon delisting of the Bond from the
TASE, subject to certain conditions. Refer to Note 1c(iii) for
further information on the Bonds and the Bonds covenants, including
the potential consequences of noncompliance with such financial
covenants.
The Company elected to apply the fair value option in accordance
with ASC 825, "Financial Instruments", to the convertible bond and
therefore all unrealized gains and losses are recognized in
earnings. As of 30 September 2019, the fair value of the
convertible bond, based on its quoted price at the TASE was $
19,289.
NOTE 5:- CONVERTIBLE BOND (Cont.)
The changes of the convertible bond in the nine months ended 30
September 2019 were as follows:
$
--------
Balance 1 January 2019 $ 18,540
Change in fair value 749
Balance as of 30 September, 2019 (Unaudited) $ 19,289
========
As of 30 September 2019, the aggregate principal annual payments
of the bonds are as follows:
Repayment
amount
---------
$
---------
2020 $ 14,503
2021 14,503
$ 29,006
=========
NOTE 6:- EQUITY
a. Options issued to employees and directors:
A summary of the activity in options granted to employees and
directors is as follows:
Weighted-
average
remaining
Weighted-average contractual
Number exercise term
of options price (in years)
----------- ---------------- ------------
Outstanding at January 1,
2019 1,473,843 $ 1.45 3.50
Forfeited (960,638) $ 1.44
-----------
Outstanding at 30 September
2019 (unaudited) 513,205 $ 1.45 3.20
=========== ================ ============
Exercisable at 30 September
2019 (Unaudited) 513,205 $ 1.45 3.20
=========== ================ ============
NOTE 6:- EQUITY
b. Restricted Share Units ("RSU") issued to employees and directors:
Number of
RSU's
---------
Unvested at 1 January 2019 38,500
---------
Granted 106,000
Vested (111,500)
Forfeited (33,000)
Unvested at 30 September 2019
(unaudited) -
=========
c. Treasury shares
As of 30 September 2019 and 31 December 2018, treasury shares
amounted to 10,970,111 shares of which 1,211,236 shares are held by
Team Internet, and are considered outstanding.
NOTE 7:- TAXES ON INCOME
a. (Loss) income before taxes on income is comprised as follows:
Nine months ended Year ended
30 September December
31
---------------------
2019 2018 2018
---------- --------- ----------
Unaudited
---------------------
Domestic $ (6,849) $ (3,215) $ (1,631)
Foreign (8,990) 1,474 (1,619)
$ (15,839) $ (1,741) $ (3,250)
========== ========= ==========
NOTE 7:- TAXES ON INCOME (Cont.)
b. Taxes on income (tax benefit) are comprised as follows:
Nine months ended Year ended
30 September December
31
-------------------
2019 2018 2018
---------- ------- ----------
Unaudited
-------------------
Current:
Domestic $ - $ 1 $ (11)
Foreign 2,412 3,696 4,358
2,412 3,697 4,347
---------- ------- ----------
Deferred:
Domestic $ - $ - $ 2
Foreign (2,225) (558) (666)
(2,225) (558) (664)
---------- ------- ----------
$ 187 $ 3,139 $ 3,683
========== ======= ==========
NOTE 8:- REPORTABLE SEGMENTS
a. General
In 2018, the Company's chief operating decision maker ("CODM")
started to review and make decisions about resources based on three
reporting segments consisting of Team internet, Mobfox and the
remaining non-core activities which reflect the companies updated
business activity and its focus strategic. Accordingly, for
management purposes, the Company was organized into operating
segments based on the products and services and had operating
segments as follows:
-- Mobile Advertising ("Mobfox") - Mobfox is a data-driven,
supply-side platform (SSP) and exchange for mobile in-app
advertising. Connected to developers and publishers, along with
quality demand sources, Mobfox offers comprehensive support for all
major mobile ad formats. Mobfox also offers media buying services
on its myDSP demand-side platform (DSP). Following the sale in
November 2018 this operating segment ceased to exist. For the year
ended 31 December 2018 and nine-month periods ended 30 September
2019 and 2018 this segment is reported as Discounted Operations in
accordance with ASC 205-20.
-- Domain Monetization - Team Internet serves the domain
monetisation market and includes two brands which work seamlessly
together to provide a complete offering. Parking Crew is a domain
parking platform which integrates with many third-party
applications. Tonic, the second platform, is a traffic marketplace
that allows users to monetize traffic and target audiences with a
variety of ad types.
NOTE 8:- REPORTABLE SEGMENTS (Cont.)
-- Non-core Activities - Matomy's non-core activities include
email marketing under the Whitedelivery brand and video advertising
services under the Video from Matomy and Optimatic Media Inc.
("Optimatic") brands. Following the sale of certain activities and
the restructuring of the remaining non-core activities, this
operating segment ceased to exist.
Following the sale of certain activities and the restructuring
of the remaining non-core activities during 2018, the Company
operates only one segment the domain monetization.
b. Segments information:
Nine months ended Year ended
30 September December 31
-------------------
2019 2018 2018
--------- -------- ------------
Unaudited
-------------------
Revenues:
Domain Monetisation $ 52,676 $ 59,500 $ 75,636
Other - 13,572 13,098
--------- -------- ------------
Total revenues $ 52,676 $ 73,072 $ 88,734
========= ======== ============
b. Segments information:
Nine months ended Year ended
30 September December 31
---------------------
2019 2018 2018
---------- --------- ------------
Unaudited
---------------------
Operating loss:
Domain Monetisation $ 7,274 $ 11,420 $ 14,181
Other - (3,685) (4,089)
Reconciling items (1) (20,728) (9,164) (18,445)
---------- --------- ------------
Total loss from continuing
operations $ (13,454) $ (1,429) $ (8,353)
========== ========= ============
(1) Reconciling items are primarily related to impairment loss
and depreciation and amortization costs for the nine months ended
30 September, 2019 and 2018 and for the year ended 31 December
2018, as well as corporate administrative costs and other
miscellaneous items that are not allocated to individual
segments.
NOTE 8:- REPORTABLE SEGMENTS (Cont.)
The following includes the information of operations of the
domain monetization:
Nine months ended Year ended
30 September December 31
--------------------
2019 2018 2018
---------- -------- ------------
Unaudited
--------------------
Revenues $ 52,676 $ 59,500 $ 75,636
Cost of revenues 40,935 45,817 58,089
---------- -------- ------------
Gross profit 11,741 13,683 17,547
---------- -------- ------------
Operating expenses
Research and development 524 326 455
Selling and marketing 2,680 2,996 3,792
General and administrative 1,433 1,206 1,775
Goodwill Impairment 15,984 - 5,014
---------- -------- ------------
Total operating expenses 20,621 4,528 11,036
---------- -------- ------------
Operating income (loss) (8,880) 9,155 6,511
Financial expenses (income),
net 108 (79) (70)
---------- -------- ------------
Income (loss) before taxes
on income (8,988) 9,234 6,581
Tax on income 2,349 2,985 3,658
---------- -------- ------------
Net income (loss) (11,337) 6,249 2,923
Net loss attributable to
non-controlling interests
in subsidiaries 14 47 53
---------- -------- ------------
Net income (loss) $ (11,323) $ 6,296 $ 2,976
========== ======== ============
c. Geographical information:
Revenues by geography are classified based on the location where
the consumer completed the action that generated the relevant
revenues.
1. Revenues from external customers:
Nine months ended Year ended
30 September December 31
-------------------
2019 2018 2018
--------- -------- ------------
Unaudited
-------------------
United States $ 28,706 $ 47,527 $ 55,665
Europe 16,871 18,046 22,709
Asia 2,389 2,711 3,483
Other 4,710 4,788 6,877
--------- -------- ------------
$ 52,676 $ 73,072 $ 88,734
========= ======== ============
NOTE 8:- REPORTABLE SEGMENTS (Cont.)
2. Property and equipment, net:
30 September 31 December
2019 2018
------------ -----------
Unaudited
Israel $ - $ 53
Germany 1,406 1,360
------------ -----------
$ 1,406 $ 1,413
============ ===========
d. In the nine months periods ended 30 September 2019 and 2018
and in the year ended 31 December 2018, one customer contributed
83%, 70% and 72% of the Company's revenues, while no other customer
contributed more than 10%.
NOTE 9:- DISCONTINUED OPERATIONS
As a result of the sale of the Mobfox business, the operating
results from the Mobfox mobile-core segment and the related assets
and liabilities have been presented as discontinued operations in
the consolidated financial information for all periods presented.
The results of operations from discontinued operations presented
below include certain allocations that management believes fairly
reflect the utilization of services provided to the former Mobfox
segment. The allocations do not include amounts related to general
corporate administrative expenses or interest expense. Therefore,
the results of operations from the Mobfox segment do not
necessarily reflect what the results of operations would have been
had the former Mobfox segment operated as a stand-alone
segment.
NOTE 9:- DISCONTINUED OPERATIONS (Cont.)
The following table summarizes the results of discontinued
operations for the nine months ended 30 September 2019 and 2018 and
for the year ended 31 December 2018:
Nine months ended Year ended
30 September December 31
---------------------
2019 2018 2018
------ ------------ ------------
Unaudited
---------------------
Revenues $ - $ 27,957 $ 34,774
Cost of revenues - 25,488 31,422
------- ------------ ------------
Gross profit - 2,469 3,352
------- ------------ ------------
Operating expenses
Research and development - 3,690 4,774
Selling and marketing - 2,652 3,076
General and administrative - 2,893 3,344
Impairment, net of change in
fair value of contingent consideration - 30,607 30,607
Restructuring costs - 202 942
Loss from sale of activity - - 58
------- ------------ ------------
Total operating expenses - 40,044 42,801
------- ------------ ------------
Operating loss - (37,575) (39,449)
Tax on income - 137 338
------- ------------ ------------
Loss from discontinued operations $ - $ (37,712) $ (39,787)
======= ============ ============
The following table summarizes the assets and liabilities of
discontinued operations as of 30 September 2019 and 31 December
2018:
30 September 31 December
2019 2018
------------ -----------
Unaudited
ASSETS
CURRENT ASSETS:
Trade receivables, net $ 120 $ 4,634
------------ -----------
Total current assets of discontinued
operation 120 4,634
------------ -----------
Total assets $ 120 $ 4,634
============ ===========
NOTE 9:- DISCONTINUED OPERATIONS (Cont.)
30 September 31 December
2019 2018
------------ -----------
Unaudited
LIABILITIES
CURRENT LIABILITIES:
Trade payables $ 501 $ 3,928
------------ -----------
Total current liabilities of discontinued
operation 501 3,928
------------ -----------
Total liabilities $ 501 $ 3,928
============ ===========
NOTE 10:- FINANCIAL EXPENSES, NET
Nine months ended Year ended
30 September December 31
-------------------
2019 2018 2018
---------- ------- ------------
Unaudited
-------------------
Financial income:
Interest income $ 124 $ 66 $ 45
Change in fair value of convertible
Bonds - 4,980 11,390
Hedging transactions 174 - -
---------- -------
298 5,046 11,435
---------- ------- ------------
Financial expenses:
Bank fees (136) (316) (387)
Interest expense (1,438) (1,584) (2,042)
Foreign currency remesurement.net (92) (538) (718)
Hedging transactions - (526) (899)
Change in fair value of convertible
Bonds (749) - -
Change in fair value of liability
to non-controlling interest (268) (797) (684)
Other - (9) (14)
---------- -------
(2,683) (3,770) (4,744)
---------- ------- ------------
$ (2,385) $ 1,276 $ 6,691
========== ======= ============
NOTE 11:- RELATED PARTIES
The Company has activity with related parties as part of its
ordinary business. The majority of the related parties'
transactions include domain monetization activity with the
non-controlling interest of Team Internet.
Cost of revenues to related parties amounted to $ 2,251, $ 4,200
and $ 5,009 for the nine months ended 30 September 2019 and 2018
and for the year ended 31 December 2018, respectively.
Trade payables to related parties amounted to $ 239 and $ 255
for 30 September 2019 and for 31 December 2018, respectively.
- - - - - - - - - - - - - - - - - - -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRTMMMZMNRRGLZM
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November 28, 2019 13:04 ET (18:04 GMT)
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