SUMMARY
* The consolidated sales during the period January - December 2007
amounted to SEK 56,3 million (59,4), and orders received for the
same period totalled SEK 69,6 million (56,0). For the fourth
quarter of 2007, sales amounted to SEK 13,4 million (8,4), and
orders received for the same period, SEK 9 million (6)
* The consolidated operating loss for the period was SEK -70,6
million (-183,4). The loss after tax was SEK -72,3 million
(-182,5). Earnings per share were SEK --0,12 (-0,29).
* The consolidated cash and cash equivalents at the close of the
period amounted to SEK 25,2 million (96,4).
* In mid-May 2007, the Board of Directors resolved to terminate all
development work on SwitchCore's third product generation,
Xpeedium3. A balance sheet for liquidation purposes showed that
the Company's equity was less than half of the Company's
registered share capital. All personnel concerned were given
notice, and, at the close of the period, only 4 employees
remained in the Company.
* Since March 2007, the Board and the management have sought to
find a purchaser for SwitchCore's operation, and, by means of a
non-cash issue, to provide the Company with a new, profitable
operation, which can make use of the Company's losses for tax
purposes and its market listing. In November 2007, an agreement
was reached on the sale of the Company's operating business to
the US company, eSilicon Corporation, at a purchase price of USD
3 million in cash.
* An extraordinary general meeting of SwitchCore in December 2007
approved the sale to eSilicon. The deal was implemented on the
same day. Through the sale, the Company will realise the cash
flow from the existing products and eliminate commercial risk
while waiting for a non-cash issue which will provide the Company
with a new, profitable operation. USD 2 million of the purchase
price was paid immediately on completion of the deal. The
remainder will be paid within a year of that date.
* The extraordinary general meeting in December 2007 also approved
a reduction of the Company's share capital by around SEK 117.7
million without share reduction to cover losses.
* The deal with eSilicon and the reduction in share capital have
corrected the shortfall in the Company's share capital. A new
balance sheet for liquidation purposes, drawn up as at 31
December 2007, demonstrates this. A new extraordinary general
meeting is to be held on 12 February 2008. At this general
meeting, the new balance sheet for liquidation purposes will be
presented, and the Board's proposal that the Company shall not go
into liquidation will be discussed. Notification of the meeting
will be issued separately.
* SwitchCore currently has a good level of liquidity while waiting
on a deal which will bring the Company a new, profitable
operation. It is intended to repay the Company's convertible
subordinated loan in its entirety on the due date of 1 February
2008.
Footnote: Figures in parentheses show the corresponding figures for
the same period of the preceding year.
THE CEO COMMENTS
As stated in connection with the interim reports during 2007, the
Company had for some time been involved in discussions with financial
and industrial parties on participation in the Company's continued
development work with Xpeedium3.
No agreement had been reached during Spring 2007, and so the Company
terminated all development activities to avoid a serious liquidity
crisis. On 11 May 2007, the Board resolved, in consequence of the
termination of the Xpeedium3 project and the impairment of all
capitalised development costs, to draw up a balance sheet for
liquidation purposes, since the Board judged that the Company's
equity was less than half of the registered share capital. The
balance sheet for liquidation purposes then drawn up showed that the
Parent Company's equity as at 30 April 2007 amounted to SEK 22.4
million, equivalent to 18 % of the share capital. Efforts began to
re-negotiate/terminate existing contracts etc., with the aim of
reducing the Company's expenses as rapidly as possible. In addition,
the Board resolved to give all personnel notice, with the exception
of five posts. After the conclusion of the Co-determination Act
negotiations, all personnel given notice were made redundant. At the
end of the period, only four individuals remained in their employment
with the Company. In addition, at the close of the period, all
significant contracts had been terminated or taken over by eSilicon
Corporation. The dispute with Synopsys has been settled.
As a result of the investments made over the years in various
development projects, which had not generated the desired sales
revenue within the planned time, substantial losses for tax purposes
have arisen. At the end of 2007, these losses were estimated at
around SEK 1 billion. To make best use of these losses, the
management and the Board are working towards providing the Company
with a new profit-generating operation. Such a profit-generating
operation will be acquired through a non-cash issue.
The extraordinary general meeting held on 18 December 2007 approved
the sale of SwitchCore's operating business and intangible assets to
the US company, eSilicon Corporation. The deal was implemented on the
same day. Through the sale, the Company will realise the cash flow
from the existing products and eliminate commercial risk while
waiting for a deal which will provide the Company with a new,
profitable operation. The transfer includes tangible assets, all
inventories, all intellectual property rights, the order book,
customer contracts, purchase orders placed etc. The transfer does not
include monetary items (receivables and liabilities) and cash and
cash equivalents. The purchase price amounts to USD 3 million, of
which USD 2 million was paid on the completion of the deal and the
remainder is to be played at the latest within one year.
Co-determination Act negotiations have been completed.
The Parent Company's equity as at 31 December 2007 amounted to SEK
14,8 million.
In accordance with the Board's recommendation, the extraordinary
general meeting on 18 December 2007 resolved to reduce the share
capital by around SEK 117.7 million. The reduction in share capital
was made to cover losses, without share reduction. The quota value is
now SEK 0.01 per share. The transfer to eSilicon and the share
capital reduction have rectified the shortfall in the Company's share
capital. A new balance sheet for liquidation purposes, drawn up as at
31 December 2007, demonstrates this. This means that conditions have
been created to present, at a future extraordinary general meeting
(within the prescribed period of eight months from the annual general
meeting held on 14 June 2007), a balance sheet for liquidation
purposes which demonstrates that the shortfall in share capital has
been rectified, and to resolve that the Company shall not go into
liquidation. This general meeting will take place on 12 February
2008. The notification will be issued separately.
SwitchCore currently has a good level of liquidity while waiting on a
deal which will bring the Company a new, profitable operation. It is
intended to repay the Company's convertible subordinated loan in its
entirety on the due date of 1 February 2008.
SALES AND RESULTS FOR THE PERIOD JANUARY TO DECEMBER
* Consolidated sales for the year totalled SEK 56,3 million (59,4).
Orders received for the equivalent period were SEK 69,6 million
(56), of which the fourth quarter represented SEK 9 million (6). OEM sales to Intel represented 40 percent (40) of total sales.
* The consolidated operating loss for the 12-month period January -
December 2007 was SEK -70,6 million (-183,4), of which SEK 9,4
million (-164,7) was recorded during the fourth quarter. The
principal reason for the sharp result improvement was the Board's
resolution on 11 May 2007 to terminate the Xpeedium3 development
project. As a result of this decision, all capitalised
development costs during 2007 up to that date were impaired to 0,
and no subsequent development costs were capitalised. In the
annual accounts for 2006, which were finalised after the report
for the first quarter of 2007 had been presented, capitalised
development costs of SEK 103.4 million arising up to the end of
2006 were impaired to zero which explains the differences between
the losses in 2006 compared to 2007.
* For the first quarter of 2007, SEK 27.6 million was capitalised
in the Xpeedium3 development project. During the second quarter,
this was impaired to zero.
* The gross profit margin for the period amounted to 38 percent
(41).
* Since all invoicing takes place in USD, and only product cost is
in USD, the gross margin was negatively affected by the weakened
USD.
* The loss after tax was SEK -72,3 million (-182,5).
* Earnings per share were SEK -0,12 (-0,29).
FINANCING AND LIQUIDITY
Equity as at 31 December 2007 amounted to SEK 14,8 million (87,1) and
equity/share to SEK 0,02 (0,14).
Cash flow from operating activities during the period amounted to SEK
-45,6 million (-17,5)
Cash and cash equivalents at the close of the period amounted to SEK
25,2 million (96,4). Liquidity has been adversely affected by the
lower sales volume and by the high level of development costs for
Xpeedium3 during the first quarter of the financial year.
The share capital is SEK 6,194,001.96 SEK, and the number of shares
619,400,196.
THE PARENT COMPANY
* The Parent Company's sales for the period totalled SEK 56,3
million (59,4).
* The Parent Company's loss after net financial income/expense
amounted to SEK -78,7 million (-141,6).
MARKET, PRODUCTS AND SALES
SwitchCore's now transferred operation was based on products
(Xpeedium, Xpeedium2 and Xpeedium2Pro) aimed at applications based on
the Gigabyte Ethernet standard, a communications technology which is
10 times faster than its predecessor, Fast Ethernet. The customers
for this operation are companies who manufacture advanced network
equipment (network switches) for companies and public networks
(access) based on the Ethernet Standard. Customers are concentrated
in North America, Europe and Asia (particularly China and Korea). All
existing orders, customer relationships, products and intellectual
property rights had been transferred to eSilicon at the close of the
period.
ORGANISATION AND STAFF
SwitchCore's organisation consists of the Parent Company, SwitchCore
AB, subsidiaries SwitchCore Options AB, SwitchCore Singapore Private
Limited (in process of liquidation), SwitchCore Intellectual Property
AB, Eroc Technology AB, SwitchCore Taiwan AB (dormant) and SwitchCore
i Stockholm AB (dormant), as well as a subsidiary, SwitchCore
Corporation (a wholly-owned subsidiary of SwitchCore Options AB, in
process of liquidation).
At the close of the period the Group's employees were divided as
follows: The Group had 4 (58) permanent employees, of whom 3 (50)
were in Sweden, and 1 (2) in Asia. Of the employees, 50 (18) percent
are female and 50 (82) percent male. The average age is 44 (41).
From the end of the year, only the CEO and four employees remain in
Switch- Core. One of these employees will transfer employment to
eSilicon during 2008, while the others will remain employed by
SwitchCore.
INVESTMENTS
The Group's investments in tangible assets amounted to SEK 0 million
(1,0), of which SEK 0 million (0.9) were in the Parent Company. In
addition, during the first quarter, investments were made in
capitalised development expenditure totalling SEK 27.6 million
(63.7), of which approximately 26 percent represents personnel costs
and the remainder other external costs such as consultants, tools and
licences. Amortisation of expenditure capitalised earlier in the year
amounted to SEK 27.6 million (27.6). In total, the change in
capitalised development expenditure is SEK 0 million (36.1).
PATENTS
SwitchCore's patents strategy was based on creating a patent
portfolio in which the most important components of the CXE
technology were protected. In total, SwitchCore owned 14 patented
inventions, divided into 31 registrations, 7 in Sweden, 11 in the
USA, 2 in Taiwan, 2 in China and 9 in other countries. In addition, 1
patent application is being processed in the USA. All patents and
patent applications have been transferred to eSilicon.
FUTURE PROSPECTS
The Board and management are working towards providing SwitchCore
with the new profit-generating operation to enable the Company to
realise the value locked in its losses for tax purposes which have
arisen over the years. Since the previous operation has been
liquidated, the conditions for such a transaction have been
significantly improved.
REPORT DATES ETC .
Detailed information on dates for SwitchCore's financial reports
during 2008 will be published on the Company's website as soon as
they have been determined. It is expected that the annual report will
be published at the beginning of March 2008, and will be available on
the Company's website. It is intended to hold the annual general
meeting at the beginning of April 2008.
ACCOUNTING POLICIES
This accounting report has been drawn up in accordance with IFRS.
This means that the report complies with IAS 34. The accounting
principles and calculation methods used are the same as those used in
the most recent annual report.
Lund 24 January 2008
Erwin Leichtle
CEO
The report has not been reviewed by the Company's auditors.
The full report, including tables, may be downloaded from the
accompanying link.
http://hugin.info/130062/R/1184697/236895.pdf
FOR FURTHER INFORMATION:
You are invited to participate in SwitchCore's telephone conferences
for the
media and financial analysts today, 24 January 2008, at 10.00.
Tel: + 46 8 30 63 90 or
Tel: 020 30 63 90; Not calls from mobiles or abroad
State code 535265
Or contact:
Erwin Leichtle, CEO
E-mail: erwin.leichtle@switchcore.se
Mobile: +46 703 38 9300
The full report with tables can be downloaded from the following
link:
SwitchCore AB (publ): Accounting Report January 2007 - December 2007
| Source: SwitchCore AB
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