GIPS Reports Q3, Wants $10M

Global IP Solutions announces $10M in preemptive share offering and reports Q3 2007 financial results

November 6, 2007

4 Min Read

STOCKHOLM -- Global IP Solutions (GIPS) Holding AB, the leading provider of embedded media processing technologies, announced today a pre-emptive share offering for up to $10 million in ordinary shares. Kistefos AS, a privately owned investment company and the largest shareholder of GIPS, has agreed to guarantee up to $ 8.0 million of the offering. The Board of Directors of GIPS has made the decision to raise additional equity to ensure that the company has the financial resources necessary to correct the deficiencies exposed in its third quarter results and to execute its business strategy through Fiscal 2008 and beyond. An extra ordinary General Assembly will be called for in order to issue the share offering. All current shareholders will have the opportunity to participate in the offering. The subscription price will be established at a later date. It is the intention of the board to price the issue at a small discount to market value, creating a relatively low value on the rights.

The company also reported its financial results for the third quarter ending September 30, 2007. The company is reporting its financial results in both U.S. Dollars (USD) and Swedish Krona (SEK).

Revenues for the third quarter of 2007 were 1,674 USD/SEK 11,157, a 65 percent decrease from the third quarter of 2006, and a 69 percent decrease from the second quarter of 2007. Revenues for the nine months ended September 30, 2007 were 11,834 USD/SEK 81,646 compared to 11,997 USD/SEK 89,659 for the first nine months of 2006, a decrease of 1 percent. Decreased revenues were primarily the result of a significant drop-off in new design wins and a shortfall in royalty revenue.

Gross profit for the third quarter was 1,235 USD/SEK 8,174 compared to 4,109 USD/SEK 30,004 for the comparable quarter of 2006 and 4,952 USD/SEK 34,060 in the second quarter of 2007. Gross profit for the first nine months of 2007 was 10,352 USD/SEK 71,431 compared to 10,370 USD/SEK 77,501 for the first nine months of 2006. Gross profit for the third quarter of 2007 was 74 percent, compared to 85 percent for the third quarter of 2006 and 93 percent for the prior quarter.

Operating expenses were 5,847 USD/SEK 39,817 for the quarter, versus 3,002 USD/SEK 21,940 for the 2006 third quarter and 4,548 USD/SEK 31,234 in the first quarter of 2007. Operating expenses for the nine months ended September 30, 2007 were 14,829 USD/SEK 102,147 versus 7,350 USD/SEK 54,933 for the nine months ended September 30, 2006. The increase in operating expenses was primarily due to an increase in the number of employees and increased expenses related to professional services. Operating expenses for the third quarter of 2007 include $1.6 million in one-time additional charges related to a 15% reduction in the company’s workforce and increased accounts receivable reserves.

EBITDA for the third quarter of 2007 was a loss of (4,612) USD/SEK (31,643), compared to 1,107 USD/SEK 8,064 for the third quarter of 2006. EBITDA for the nine months ended September 30, 2007 was a loss of (4,477) USD/SEK (30,716) versus 3,020 USD/SEK 22,568 for the comparable period of 2006. The net loss for the quarter was (5,644) USD/SEK (37,441), compared to a net profit of 4,263 USD/SEK 31,640 for the third quarter of 2006. The net loss for the first nine months of 2007 was (5,962) USD/SEK (39,652) compared to a net profit of 6,250 USD/SEK 46,712 for the nine months ended September 30, 2006. The net loss for the third quarter of 2007 included 740 USD/SEK 4,909 in amortization of goodwill related to the acquisition of CrystalVoice.

“The company experienced a significant downturn in third quarter revenues due to a substantial decrease in new design wins and a decrease in royalty revenues, particularly from Skype,” said William Scharninghausen, Chief Financial Officer of Global IP Solutions. Previously GIPS reported a dispute with Skype over the length of one of its agreements. Both companies have agreed to arbitration, which is expected to be heard in the second quarter of 2008. “Corrective measures that were taken in the third quarter resulted in a 15 percent reduction in the company’s workforce and other operating expenses going forward,” added Scharninghausen.

Global IP Solutions

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