SANTA CLARA, Calif., March 30 - NeoMagic Corporation (Nasdaq: NMGC), a leader and pioneer in developing and delivering low-power solutions for multimedia-rich mobile phones and handheld devices, today reported its fourth quarter and fiscal year 2006 financial results. Total revenue for the fourth quarter of fiscal 2006, ended January 31, 2006, was $104 thousand, compared to total revenue of $8.6 million for the third quarter of fiscal 2006. Net loss for the fourth quarter of fiscal 2006 was $4.0 million, or a loss of $0.57 per share, compared to net income of $779 thousand, or net income of $0.11 per share, in the third quarter of fiscal 2006. The reduction of total revenue and the net loss for the fourth quarter resulted from licensing revenue declining from $8.5 million in the third quarter of fiscal year 2006 to zero in the fourth quarter of fiscal year 2006. In addition, in the fourth quarter of fiscal year 2006 we recorded a tax benefit of $2.9 million from the reversal of a tax reserve, which was the result of the expiration of the statute of limitations for tax returns filed by the Company's former subsidiary in the Cayman Islands.
Total revenue for the fiscal year ended January 31, 2006 was $9.4 million compared to total revenue of $2.5 million for the fiscal year ended January 31, 2005. Net loss for fiscal year 2006 was $9.3 million, or a loss of $1.32 per share, compared to a net loss of $28.2 million, or a loss of $4.33 per share, in fiscal year 2005. Cash, cash equivalents and short-term investments increased from $25.0 million at January 31, 2005 to $26.7 million at January 31, 2006.
"We are happy to report the largest fiscal year revenue since 2001. Our fiscal 2006 results also show a significant increase in total revenue and a significant decrease in our net loss as compared to fiscal year 2005. This improvement was primarily the result of our patent licensing transaction with Sony as well as the sale of selected patents during the first quarter of fiscal year 2006. We are also pleased with the completion of our successful financing during December 2005. We believe that the Company is better positioned to address the market opportunities we see in the mobile phone market, particularly in the growing mobile digital TV market," said Douglas Young, president and chief executive officer of NeoMagic.
Conference Call Highlights
Topics to be covered on NeoMagic's quarterly conference call include the following:
-- NeoMagic is in discussions with multiple companies with respect to
licensing NeoMagic's embedded DRAM patents. Management believes that
the Company's patent portfolio has the potential to generate
significant revenue for NeoMagic.
-- The new NeoMobileTV product should be available for customer sampling
during the third quarter of calendar year 2006. The NeoMobileTV
product is targeted at all global mobile TV standards, including
ISDB-T, DVB-H, X-DMB and the emerging standards in China.
-- The Company's Microsoft WinCE 5.0 Board Support Package has been
certified by Microsoft.
-- At the 3GSM conference in Barcelona, the Company demonstrated digital
mobile TV solutions, fully functioning voice-over-IP and announced the
NeoMobileTV product and a GPS solution.
-- NeoMagic continues to work with a customer in Asia that plans to go
into production with a MiMagic 3-based product. The first production
order is expected in the second quarter of this calendar year.
-- Neonode, a Swedish mobile phone manufacturer, is currently focused on
completing development and ramping production for its next generation
products using the MiMagic 6+. As a result, NeoMagic does not expect
any significant orders to support Neonode's N1 product. Neonode's new,
MiMagic 6+ based products are expected to go into production during the
second half of calendar year 2006.
-- Management has very little visibility into the details for the ODM
program with a Top Five mobile phone OEM that was discussed last
quarter. To support this OEM customer, the ODM is currently developing
a new design with a lower bill of material cost that uses the
MiMagic 6+.
-- One of NeoMagic's OEM customers in Japan has finished a mobile digital
TV phone with the MiMagic 6+ and has completed successful field-testing
of this phone. However, the carrier has decided to delay production of
this phone until early 2007. As a result, the carrier and manufacturer
are currently trying to cost reduce the phone and are going through a
new bill of material review. NeoMagic believes that it is well
positioned to have the MiMagic 6+ chip in the final production model.
-- The phone platform design win with a major Japanese wireless phone
operator is continuing to move forward. This phone platform would use
the MiMagic 6+. A platform design win can be very significant for
NeoMagic since it is the base design that can be used as the template
for multiple phone models. If this program moves forward, we believe
that orders would not begin before calendar year 2007.
-- Management expects to receive initial orders for the MiMagic 6+ within
the next several weeks.
-- NeoMagic continues using the sales strategy of targeting both mobile
phone carriers and mobile phone manufacturers. The Company has
recently had joint discussions with multiple European phone carriers
and one of its OEM customers.
Dial-in Information
NeoMagic will hold its fourth quarter fiscal 2006 conference call to discuss the information contained in this press release today at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time). The call can be accessed via the Internet at http://www.neomagic.com, "Investor Resources." The call can also be accessed by dialing 866-206-7204 in the U.S. and 703-639-1114 internationally. There is no passcode. A replay of the call will be available for seven days beginning on March 30th at 9 p.m. Eastern Time (6 p.m. Pacific Time). The replay number is 888-266-2081 in the U.S. and 703-925-2533 internationally. The passcode for the replay is 848615.
The webcast is also being distributed over CCBN's Investor Distribution Network to both institutional and individual investors. Individual investors can listen to the call through CCBN's individual investor center at http://www.fulldisclosure.com or by visiting any of the investor sites in CCBN's Individual Investor Network. Institutional investors can access the call via CCBN's password-protected event management site, StreetEvents (http://www.streetevents.com).
About NeoMagic
NeoMagic Corporation delivers semiconductor chips and software that provide mobile solutions that enable new multimedia features for handheld devices. These solutions offer low power consumption, small form-factor and high performance processing. The Company demonstrated one of the first solutions used for H.264 video decoding in a mobile digital TV phone, and is developing and delivering solutions for audio/video processing of the dominant mobile digital TV standards, including ISDB-T, DMB, and DVB-H. For its complete system solution, NeoMagic delivers a suite of middleware and sample applications for imaging, video and audio functionality, and provides multiple operating system ports with customized drivers for the MiMagic product family. NeoMagic has a patent portfolio of over 25 patents that cover NeoMagic's proprietary array processing technology, embedded DRAM and other technology. Information on the company may be found on the World Wide Web at http://www.neomagic.com.
This press release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including the Company's design wins, expected orders, production timing, revenue opportunities and the Company's ongoing patent licensing efforts. Our patent licensing activities involve various risks and uncertainties, including, without limitation, uncertainties as to the willingness of other companies to pay material fees to license our intellectual property, the length and uncertain outcome of licensing negotiations, the possibility that litigation may be required to enforce patents, and the risks and costs inherent in any patent litigation. These forward-looking statements reflect current expectations. However, actual events and results could vary significantly based on a variety of factors including but not limited to customer acceptance of NeoMagic products, the market acceptance of mobile phones developed and marketed by customers that use the Company's products, customers' plans to develop smart phones and feature phones, the acceptance of advanced multimedia services such as H.264 television on mobile phones, and the Company's ability to execute product and technology development plans on schedule. There is no certainty that current or future design wins will result in revenue for NeoMagic or that customer forecasts will be accurate. Customers may cancel or delay projects or customers may fail to achieve their expected sales objectives due to competitive or other reasons. Additional risks that could affect the Company's future operating results are more fully described in the Company's most recent annual report, its most recent quarterly report and other filings with the United States Securities and Exchange Commission (SEC), and are available online at http://www.sec.gov. NeoMagic may, from time to time, make additional written or oral forward- looking statements, including statements contained in filings with the SEC and reports to shareholders. NeoMagic does not undertake the obligation to update any forward-looking statements that may be made by or on behalf of the company.
(Logo: http://www.newscom.com/cgi-bin/prnh/20020802/NMGCLOGO )
NOTE: NeoMagic, and the NeoMagic circle logo are registered trademarks, and MiMagic is a trademark, of NeoMagic Corporation. All other trademarks are the property of their respective owners. NeoMagic disclaims any proprietary interest in the marks and names of others.
NEOMAGIC CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
Jan. 31, Oct. 31, Jan. 31, Jan. 31, Jan. 31,
2006 2005 2005 2006 2005
Product revenue $104 $158 $222 $862 $2,466
Licensing revenue 0 8,490 0 8,490 0
Total revenue 104 8,648 222 9,352 2,466
Cost of product revenue 101 147 773 884 3,195
Cost of licensing revenue 0 2,861 0 2,861 0
Impairment of certain
licensed intellectual
property 0 0 89 0 89
Total cost of revenue 101 3,008 862 3,745 3,284
Gross profit (loss) 3 5,640 (640) 5,607 (818)
Operating expenses:
Research and development 3,193 2,980 4,332 12,403 18,208
Sales, general and
administrative 2,049 1,767 1,784 6,916 7,447
Gain on sale of patents 0 0 0 (3,481) 0
Impairment of certain
licensed intellectual
property 0 0 1,437 0 1,437
Total operating expenses 5,242 4,747 7,553 15,838 27,092
Income (loss) from operations (5,239) 893 (8,193) (10,231) (27,910)
Interest income and other 238 192 97 724 415
Interest expense (1,893) (256) (284) (2,569) (534)
Income (loss) before income
taxes (6,894) 829 (8,380) (12,076) (28,029)
Income tax provision (benefit) (2,919) 50 177 (2,770) 196
Net income (loss) $(3,975) $779 $(8,557) $(9,306) $(28,225)
Basic net income (loss)
per share $(0.57) $0.12 $(1.29) $(1.32) $(4.33)
Diluted net income (loss)
per share $(0.57) $0.11 $(1.29) $(1.32) $(4.33)
Weighted average common shares
outstanding for basic 6,955 6,740 6,613 7,074 6,524
Weighted average common shares
outstanding for diluted 6,955 6,882 6,613 7,074 6,524
NEOMAGIC CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
(Unaudited)
January 31, October 31, January 31,
2006 2005 2005
ASSETS
Current assets:
Cash and cash equivalents $26,695 $21,964 $8,944
Short-term investments 0 0 16,082
Accounts receivable, net 9 62 12
Inventory 171 179 376
Other current assets 800 804 792
Total current assets 27,675 23,009 26,206
Property, plant and equipment, net 2,368 2,639 3,835
Other assets 451 413 673
Total assets $30,494 $26,061 $30,714
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,735 $1,507 $1,084
Compensation and related benefits 1,024 1,117 1,017
Income taxes payable 1,059 3,985 3,851
Other accruals 264 66 126
Current portion of capital lease
obligations 1,525 1,408 1,602
Total current liabilities 5,607 8,083 7,680
Capital lease obligations 624 1,244 2,004
Mandatorily redeemable preferred
stock 0 3,387 2,971
Other long-term liabilities 149 141 99
Registration Contingency 606 0 0
Stockholders' equity:
Common stock 36 34 33
Additional paid-in-capital 109,696 95,536 95,606
Deferred compensation (531) (648) (1,280)
Accumulated other comprehensive loss (2) 0 (14)
Accumulated deficit (85,691) (81,716) (76,385)
Total stockholders' equity 23,508 13,206 17,960
Total liabilities and stockholders'
equity $30,494 $26,061 $30,714
