BackWeb Technologies Ltd. (Nasdaq:BWEB), a leading provider of
offline and mobile Web software, today reported financial results
for its second quarter and six months ended June 30, 2006. The
Company also reported that it is being impacted by a May 2006
implementation of the $1.00 minimum bid price rule to the
securities of all non-U.S. companies listed on the Nasdaq Capital
Market. As a non-U.S. company, BackWeb was previously exempt from
the minimum bid price rule. The Company has now received
notification from The Nasdaq Stock Market indicating that for 30
consecutive business days, the bid price of BackWeb's Ordinary
Shares has closed below the minimum $1.00 per share requirement for
continued inclusion on the Nasdaq Capital Market. BackWeb has been
given until January 16, 2007 to gain compliance with the Rule. Q2
Results BackWeb reported Q2 2006 revenue of $1.14 million, below
revenue of $1.66 million in Q1 2006 and revenue of $1.72 million in
Q2 2005. The decrease in total revenue was a result of lower
consulting and license revenue. License revenue declined as several
larger anticipated sales were not completed as expected. Consulting
revenue declined as one expected customer project was delayed, and
the Company is seeing an increasing share of BackWeb
product-related services performed by BackWeb partners. License
sales in the Q2 2006 period were $462,000 and consisted of orders
from Janssen, L.P., a division of Johnson & Johnson; Bristol
Meyers Squibb; and the United States Department of Agriculture, as
well as recognition of other license and royalty revenues. As
anticipated, Q2 2006 included no license revenue contribution from
F-Secure Corporation, whereas during Q1 2006 and Q2 2005 the
Company recognized license revenue of $245,000 and $375,000,
respectively, from this customer. Total net expenses in the quarter
were $2.24 million, resulting in a net loss of $1.10 million, or
$0.03 per share, for Q2 2006. This compares to a net loss of
$842,000, or $0.02 per share, in Q1 2006 and a net loss of
$233,000, or $0.01 per share, in Q2 2005. Non-cash stock-based
compensation (FAS 123R) related expenses of approximately $100,000
were included in operating expenses in both Q2 2006 and in Q1 2006,
with no comparable expense reflected in the second quarter and six
months results of 2005. Q1 and Q2 2006 were the first periods in
which FAS 123R expenses were included in the Company's income
statement. BackWeb's CEO, Bill Heye, stated, "In Q2 we did not
convert several larger opportunities in our pipeline into orders,
many of which we believe will close in coming quarters. Although
revenue was down for the quarter and clearly a disappointment, our
market remains solid with a pipeline of opportunities and increased
activity and sales prospects with our partners. Our current
customers continue to license additional software and to renew
their maintenance contracts at a rate greater than 80%. "As
discussed before, we view the continued development of key
partnerships as a primary strategic goal, and we are executing on
that goal. This quarter, one of our license sales was driven by a
new solutions integration partner, and our other license sales were
made to customers with whom our partners are active. Working with
partners cost effectively raises awareness for our products and
drives license sales. It also helps our customers integrate their
BackWeb solutions more easily into their existing service provider
relationships and results in the lowest total cost of ownership.
Our work with global and regional services partners such as Tata
Consultancy Services, BearingPoint, Wipro Technologies,
BusinessEdge Solutions and Adjoined Consulting (now Kanbay
International) has accelerated. "As these partnerships have
expanded, our direct consulting services revenue has decreased and
our consulting services headcount is too high. We are therefore
reducing our expenses so that we can better align our costs with
revenues as we pursue our goal of profitability." Through planned
staffing reductions in its services unit, some other departments
and certain other expense reductions, BackWeb seeks to reduce its
ongoing expenses by approximately 20% from Q2 2006 levels. The
reductions are designed to reduce the Company's quarterly cash burn
and conserve its cash position. BackWeb anticipates a charge of
approximately $200,000 in the third quarter to reflect severance
and other costs related to the personnel and expense reductions.
The Q3 charge is expected to offset initial cost reductions and
contribute to total expenses in Q3 that should be equal to or
slightly above Q2 2006 levels. The reductions will begin to benefit
the Company's Q4 2006 results. BackWeb's Vice President, Finance,
Ken Holmes, commented, "Our guiding strategy continues to be
growing our customer base and revenue through productive
partnerships with industry leaders while also ensuring BackWeb
remains sufficiently funded to support this business model. The
reductions we are making now, which make both financial and
strategic sense, should enhance our ability to execute our business
plan going forward. "BackWeb's balance sheet and cash position
remained sound, with no long-term debt and cash investments
totaling approximately $6.2 million as of June 30, 2006. Q2 cash
flow benefited from collection of accounts receivable related to
large sales completed in prior quarters that were not collected
until the second quarter of 2006. Given planned spending levels
following our expense reductions, we believe BackWeb has sufficient
capital to meet the needs of the business going forward and to
execute on our business plan." NASDAQ Non-Compliance Notice In May
2006, Nasdaq implemented a change in its continued listing
requirements to stipulate that non-U.S. companies must now comply
with Nasdaq Marketplace Rule 4320(e)(2)(E)(i) (the Rule) which
states that the closing per share bid price of Nasdaq listed
companies must be at or above at $1.00. As a result, BackWeb must
now comply with this Rule and has received notification from Nasdaq
indicating that for the last 30 consecutive business days, the bid
price of the Company's Ordinary Shares has closed below the minimum
$1.00 per share requirement for continued inclusion on the Nasdaq
Capital Market. In accordance with Nasdaq rules, BackWeb will be
provided 180 calendar days, or until January 16, 2007, to gain
compliance by having the bid price of its shares close at $1.00 per
share or more for a minimum of 10 consecutive trading days. If
BackWeb has not gained compliance by January 16, 2007, Nasdaq staff
will determine if the Company continues to meet The Nasdaq Capital
Market initial listing criteria as set forth in Marketplace Rule
4320(e), except for the bid price requirement. If it meets the
initial listing criteria, Nasdaq staff will notify the Company that
it has been granted an additional 180 calendar-day compliance
period. If the Company is not eligible for an additional compliance
period, Nasdaq staff will provide written notification that the
Company's Ordinary Shares will be delisted. At that time, the
Company may appeal the Nasdaq staff's determination to delist its
Ordinary Shares to a Nasdaq Listing Qualifications Panel. About
BackWeb Technologies: BackWeb (http://www.backweb.com) mobilizes
critical web applications and content for mobile workforces and
remote offices. Mobile professionals can be productive anytime,
anywhere, without interruption, regardless of connection status or
network availability. BackWeb's patented web and polite
synchronization mobile solution delivers a seamless and simple user
experience. The solution is commonly deployed to sales forces,
field employees, mobile managers and remote operations. Typical
e-business applications include enterprise sales force automation,
CRM, e-learning and training and Human Capital Management (HCM).
Content examples include document repositories and rich media.
BackWeb customers include market leaders such as Boehringer
Ingelheim, Eastman Kodak, GE Healthcare, Hewlett-Packard, Johnson
& Johnson, KLA Tencor, Lam Research, and Pfizer. BackWeb also
serves customers through partnerships with BEA, Oracle PeopleSoft
and SAP. BackWeb's operations are cantered in San Jose, California,
New York, New York, and Rosh Ha 'akin, Israel. Make every minute of
your mobile professional's day productive; visit www.backweb.com or
call (877) 222-5932. (C) 2006 BackWeb Technologies Ltd. All rights
reserved. BackWeb is a registered trademark and Offline Access
Server is a trademark of BackWeb Technologies Ltd. All other
trademarks are property of their respective owners. Cautionary Note
regarding Forward-Looking Statements Statements in this news
release, which are not purely historical, are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934,
including statements of beliefs, plans, expectations or intentions
regarding the future. Such forward-looking statements include, but
are not limited to, statements regarding: the demand for the
Company's products and services and its pipeline of opportunities;
the level of activity and sales prospects with the Company's
partners; planned measures to reduce the Company's expenses,
including planned staffing reductions in the Company's services
unit and outsourcing some services to partners; the level of
savings the Company expects to realize, and the amount of the
charge the Company expects to incur from such measures; the
Company's ability to meet the needs of its business and execute on
its business plan based on its level of capital; and the Company's
ability to regain compliance with NASDAQ's minimum bid price per
share requirement. Actual results could differ materially from
those in such forward-looking statements. Factors that could cause
actual results to differ materially from expectations include, but
are not limited to: the Company has a history of operating losses
and expects to continue to incur losses; the uncertainty of market
acceptance of offline access products or our ability to license
those products to customers; general economic conditions or any
downturn in IT industry spending; the ability of BackWeb to develop
innovative technology and deliver solutions that meet customer
needs; and the potential emergence of competitive technologies or
competitor companies. In addition, please refer to our periodic
filings with the Securities and Exchange Commission, including our
report on Form 10-Q for the quarter ended March 31, 2006, which
contain more detailed descriptions of the risk factors facing our
business. BackWeb assumes no obligation to update any of the
forward-looking statements in this release. -0- *T BackWeb
Technologies Ltd. Condensed Consolidated Statements of Operations
(In thousands, except per share data) Three months ended Six months
ended ---------------------- --------------------- June 30, June
30, June 30, June 30, 2006 2005 2006 2005 Unaudited Unaudited
Unaudited Unaudited ---------- ---------- ---------- ---------
Revenue: License $ 462 $ 859 $ 1,253 $ 1,627 Service 680 859 1,545
1,748 ---------- ---------- ---------- --------- Total revenue
1,142 1,718 2,798 3,375 Cost of revenue: License 19 7 40 13 Service
182 193 422 351 ---------- ---------- ---------- --------- Total
cost of revenue 201 200 462 364 ---------- ---------- ----------
--------- Gross profit 941 1,518 2,336 3,011 ---------- ----------
---------- --------- Operating expenses: Research and development
619 547 1,202 1,140 Sales and marketing 980 805 2,054 1,530 General
and administrative 479 446 1,084 850 ---------- ----------
---------- --------- Total operating expenses 2,078 1,798 4,340
3,520 ---------- ---------- ---------- --------- Loss from
operations (1,137) (280) (2,004) (509) Finance and other income,
net 40 47 65 27 ---------- ---------- ---------- --------- Net loss
$ (1,097) $ (233) $ (1,939) $ (482) ========== ==========
========== ========= Net loss per share $ (0.03) $ (0.01) $ (0.03)
$ (0.01) ========== ========== ========== ========= Shares used in
computing net loss per share 41,250 40,993 41,181 40,923 ==========
========== ========== ========= BackWeb Technologies Ltd. Condensed
Consolidated Balance Sheets (In thousands) June 30, December 31,
2006 2005 Unaudited ----------- ASSETS Current assets: Cash and
investments $ 6,168 $ 7,876 Trade accounts receivable, net 1,308
1,554 Other current assets 427 325 ----------- ----------- Total
current assets 7,903 9,755 Long-term investments and other assets
44 35 Property and equipment, net 177 213 ----------- -----------
Total assets $ 8,124 $ 10,003 =========== =========== LIABILITIES
AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and
accrued liabilities $ 1,844 $ 1,978 Deferred revenue 890 976
----------- ----------- Total current liabilities 2,734 2,954
Long-term liabilities - 8 Total shareholders' equity 5,390 7,041
----------- ----------- Total liabilities and shareholders' equity
$ 8,124 $ 10,003 =========== =========== *T
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