PeerTV, a provider of technology solutions for the OTT (TV over the internet) market, today announces its audited results for the year ended 31 December 2010.
- Revenue growth of 52% to $5.3 million (2009: $3.5 million)
- Loss, including costs associated with technical issues encountered in H2 2010 and early 2011, of $4.4 million (2009 loss:$2.5 million)
- Several new clients won
- First installations of MX middleware
- Admission to trading on AIM on 30 December 2010
- Two rounds of equity financing raising $3.0 million
- Technical issues in H2 2010 and H1 2011 severely slowing deliveries and orders, creating unexpected stress on working capital
Technical Issues encountered in H2 2010 and early 2011
During the second half of 2010, certain PeerTV customers encountered technical problems with one type of set top box (STB) supplied by the Company. At first, these problems appeared to be intermittent and were not considered out of the ordinary. Attempts to replicate the problem in the testing facilities at the manufacturer or at PeerTV's offices were not successful. Eventually it became apparent that the issue was caused by electronic interference between the WiFi and HDMI functions of the boxes, due to the proximity of two wires inside the STB. The close proximity had been introduced at the manufacturing site, where the final assembly plan had been made. Similar difficulties were encountered by other set top box manufacturers during the second half of 2010 due to the increasing number of end users purchasing HDMI TV sets. In order to remedy this issue a significant number of existing boxes had to be retrofitted with higher quality antennas and in relation to new STBs, minor modifications to the internal layout of the STB were introduced. The problems also caused production delays, holding off of new orders as clients wanted to ensure that the issue had been resolved and, in certain cases, the need to compensate customers for lost revenues caused by delayed delivery. It was for this reason that the financial results of the Company in Q4 2010 were lower than expected.
The directors believe that the aforementioned technical issues have now been solved through the actions detailed above.
Post Year-end Events
In May of this year, the Company announced that it had reached agreement in principle to acquire Digitek Holdings Ltd., an Israeli printed circuit board manufacturer having significant experience in the organization, management and quality control of outsourced production of electronic equipment in China. A merger of the two businesses is expected to produce significant operational benefits to the Company in logistics, quality control and production management. The merger would constitute a reverse takeover under the AIM Rules and will require shareholder approval. The proposed transaction will also be subject to a successful tender offer in Israel.
The Company also underwent a reorganization of the board of directors with the resignation of Ronnie Jaegermann as CEO and the appointment of Ofer Barda as CEO, Leon R Nahon as Non-executive Chairman and Ossie Weitzman as Chief Financial Officer.. This reorganization is expected to result in significant strengthening in the corporate governance and reporting functions of the Company.
During the year ended 31 December 2010 the Company incurred a loss of $4,399,000 and had net liabilities of $1,253,000 as at the year end. The Company is in the process of raising additional funds to provide working capital by way of a private placement. The directors believe that the proposed merger with Digitek Holdings Ltd, will produce significant operational benefits and that due to the aforementioned merger, the current fundraising and the provision of bridge loan finance since the year end, the Company can be regarded as a going concern. However, it must be clear that the future of the Company is dependent on the successful outcome of the current bid to secure finance and the Company achieving its trading projections.
Subject to the Company's ability to raise required funds, the directors considered that it is appropriate to prepare the financial statements on the going concern basis. However, should additional financing not be secured in the next twelve months, then it is unlikely that the Company will be able to continue in its present form. The financial information does not include any adjustments that would be necessary should this basis not be appropriate.