LiveWire Mobile Announces Financial Results for the Quarter Ended December 31, 2009
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LiveWire Mobile, Inc. (Pinksheets: LVWR), a world leader in ringback, mobile music and managed personalization services, today announced preliminary financial results for the fourth quarter ended December 31, 2009:
-- Company delivers highest level as a stand-alone entity of adjusted EBITDA and GAAP profitability for the quarter ended December 31, 2009: -- Adjusted EBITDA of $0.8 million
-- Income from continuing operations of $1.5 million, including certain non-recurring items noted below
-- Revenues of $4.4 million representing an increase of 24% from the fourth quarter of 2008
-- Gross profit improves to 68% from 22% in the fourth quarter of 2008
-- Cash of $7.8 million as of December 31, 2009
Total revenues for the fourth quarter of 2009 were $4.4 million, an increase of 24% compared to $3.6 million for the corresponding quarter in 2008, and a decrease of 9% from $4.9 million for the third quarter of 2009. When excluding $0.5 million of non-recurring managed services revenue in the third quarter of 2009 resulting from commercial changes related to a contract extension with one customer, revenues for the fourth quarter of 2009 increased 2% over the third quarter of 2009. Revenues in the fourth quarter of 2009 include approximately $0.9 million attributable to the recognition of a cap-ex ringback tone customer deployment in Europe completed during the quarter.
Gross profit for the fourth quarter of 2009 was $3.0 million, or 68%, an increase of nearly four times compared to $0.8 million, or 22%, for the fourth quarter of 2008, and a slight decrease as compared to $3.2 million, or 66%, for the third quarter of 2009. The improvement in fourth quarter gross profit year-over-year is primarily attributable to increases in managed services revenues, which have a higher gross profit than cap-ex product and service revenues, as well as cost reductions related to restructuring actions. The slight increase in gross profit percentage from the third quarter of 2009 was primarily attributable to a decrease in deployment costs during the quarter. Also, as the Company has stated previously, gross profit can be impacted by the mix and proportion of cap-ex product and service revenues relative to total revenues.
Adjusted EBITDA from continuing operations (a non-GAAP financial measure) was $0.8 million, or $0.17 per diluted share, for the fourth quarter of 2009 compared to $(2.6) million, or $(0.57) per diluted share in the fourth quarter of 2008, and $0.7 million, or $0.16 per diluted share, for the third quarter of 2009. A complete reconciliation between adjusted EBITDA from continuing operations and operating income (loss) on a GAAP basis is provided in the financial tables at the end of this press release.
Income from continuing operations for the fourth quarter of 2009 was $1.5 million, or $0.31 per diluted share, compared to a loss from continuing operations of $(33.1) million, or $(7.20) per diluted share for the fourth quarter of 2008, and compared to $0.5 million, or $0.10 per diluted share, for the third quarter of 2009. Results for the fourth quarter of 2009 include several non-recurring items including a benefit of $1.1 million related to lease termination agreements finalized in the quarter, and benefits of $0.2 million related to certain changes in subsidiary tax positions; partially offset by $0.5 million of restructuring expenses incurred as part of a reduction in force during the quarter.
Net income for the fourth quarter of 2009 was $1.5 million, or $0.33 per diluted share compared to a net loss of $(16.6) million, or $(3.60) per diluted share, for the fourth quarter of 2008, and compared to net income of $0.2 million, or $0.05 per diluted share for the third quarter of 2009.
Cash totaled $7.8 million on December 31, 2009, compared to $6.5 million on September 30, 2009 and $19.3 million on December 31, 2008. During the fourth quarter of 2009, the Company received the full amount of escrow of $2.8 million from the sale of its Communications Platforms business to Dialogic Corporation. The decrease in cash from December 31, 2008 was primarily due to payment of liabilities associated with the sale of the Communications Platforms business, payments made under restructuring actions, including the restructuring actions undertaken as a result of the sale of the Communications Platforms business, payments under the lease termination agreements entered into in December 2008 and October 2009, and other exited facilities, and repayment of the Company's line of credit. The Company has no bank debt. On February 10, 2010, the Company's Board of Directors declared an annual dividend of $0.20 per share of common stock for 2010. The current dividend is payable on March 26, 2010 to shareholders of record as of the close of business on March 12, 2010, and is expected to be in the range of $0.9 million to $1.0 million.
The Company expects to publish on its website and at www.pinksheets.com its annual audited financial statements as of and for the year ended December 31, 2009 on or before March 31, 2010.
Business Perspective
Matthew Stecker, CEO of LiveWire Mobile, said, "The Company has completed a very successful 2009. Strategically, we delivered on our mission of growing our managed services business across our three product lines: ringback tones, mobile full-track music and videos, and our integrated storefront. The Company also delivered and sustained profitability for the first time in its stand-alone history during the second half of 2009. Operationally, we completed the large-scale restructurings that were necessary to simplify our business after the sale of the Company's Communications Platforms business to Dialogic in December 2008. In so doing, we enter 2010 with a simpler and leaner operating structure and a well-funded balance sheet to drive our 2010 initiatives. We believe these initiatives, which we will communicate more about in the coming months, will position us for long-term growth; they include: aggressively expanding our international footprint for all of our products and services, expanding our worldwide partner alliances, and bringing new applications and services to market that leverage our leadership position and reach that today covers more than 40 existing carrier customers."
Use of Non-GAAP Financial Measures
In addition to reporting its financial results in accordance with generally accepted accounting principles, or GAAP, the Company has also provided in this release adjusted EBITDA from continuing operations which is a non-GAAP financial measure adjusted to exclude certain non-cash and other specified expenses. The Company believes the use of non-GAAP measures in addition to GAAP measures is an additional useful method of evaluating its results of operations. Management uses these non-GAAP financial measures when evaluating the Company's financial results, as well as for internal planning and forecasting purposes. Specifically, the Company has excluded stock-based compensation, amortization of intangible assets, depreciation, restructuring charges, interest income and expense, other income/expense, goodwill impairment and adjustments, and taxes from its non-GAAP financial measures. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the expected results calculated in accordance with GAAP and reconciliations to those expected results should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company may consider whether other significant non-recurring items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses. Reconciliations between the non-GAAP financial measures on a GAAP basis and a non-GAAP basis are provided herein, as applicable.
About LiveWire Mobile, Inc.
LiveWire Mobile (Pinksheets:LVWR) is a world leader in managed personalization services. LiveWire Mobile's integrated suite of mobile personalization services includes ringback tones, ringtones, mobile full-track music and video downloads, a fully integrated storefront, and other applications, as well as dedicated content and service marketing, integrated storefront management and marketing. LiveWire Mobile makes mobile personalization services easier to use and helps drive service usage and adoption. For more information, please visit www.livewiremobile.com.
LiveWire Mobile is a trademark of LiveWire Mobile, Inc.
Statements other than historical facts included or referred to in this Press Release are "forward-looking statements", including forward-looking statements about our well-funded balance sheet, our position for long term growth and driving our 2010 initiatives, including aggressively expanding our international footprint for our products and services, expanding our worldwide partner alliances and bringing new applications and services to market, and the amount and timing of the payment of our 2010 cash dividend. These statements are based on management's expectations as of the date of this document and are subject to uncertainties and changes in circumstances. Actual results may differ materially from these expectations due to risks and uncertainties including, but not limited to uncertainties with respect to our ability to maintain operating expense reductions and cost efficiencies, adjusted EBITDA profitability, profitability and positive cash flow, the impact of restructuring and other charges and one-time items on our business and operations, the implementation and market acceptance of our products and services, uncertainties with respect to our 2010 initiatives, including aggressively expanding our international footprint for all of our products and services, expanding our worldwide partner alliances and bringing new applications and services to market, our ability to grow our managed services business, uncertainties related to the amount and timing of payment of our 2010 cash dividend, our ability to achieve long term growth, fluctuations and declines in our cap-ex business, the size of our target market, our ability to expand our relationships with existing customers and partners and attract new customers and partners, customer concentration (including with Sprint Nextel Corporation and Ericsson AB), our ability to timely launch our products and services to customers, our ability to execute on our development initiatives, our ability to effectively manage cash, revenue fluctuations, uncertainties regarding the impact of management changes, competition, and other risks. We encourage you to read our Annual Report for the year ended December 31, 2008 and other public disclosures for certain additional risk factors. In addition, while management may elect to update forward-looking statements at some point in the future, management specifically disclaims any obligation to do so, even if its estimates change. Any reference to our website in this press release is not intended to incorporate the contents thereof into this press release or any other public announcement.
LIVEWIRE MOBILE, INC.
Condensed Consolidated Balance Sheet
December 31,
2009 2008
(unaudited)
(In thousands except per share data)
ASSETS
Current assets:
Cash and cash equivalents $ 7,834 $ 19,261
Accounts receivable, net of allowance for doubtful accounts of $61 2,111 3,245
and $96, respectively
Receivables under repurchase agreement - 2,575
Inventories 365 718
Cash in escrow - 3,240
Prepaid expenses and other assets 704 1,771
Total current assets 11,014 30,810
Property and equipment, net 1,342 1,060
Other assets, net 175 558
Total assets $ 12,531 $ 32,428
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 717 $ 3,217
Accrued expenses and other liabilities 1,567 3,641
Accrued restructuring, current portion 115 4,454
Capital lease obligations, current portion 190 388
Revolving line of credit - 2,610
Deferred revenue 1,201 2,832
Total current liabilities 3,790 17,142
Accrued restructuring, long term portion - 2,764
Other long term liabilities 114 740
Capital lease obligations, long term portion 170 360
Total liabilities 4,074 21,006
Stockholders' equity:
Preferred stock, $0.05 par value, 3,000,000 shares authorized at - -
December 31, 2009 and 2008,
respectively, no shares issued
and outstanding
Common stock, $0.01 par value, 125,000,000 shares authorized at 53 53
December 31, 2009 and 2008,
respectively; 5,299,144 shares
issued and 4,601,025 shares outstanding at December 31, 2009 and
5,299,144
shares issued and 4,594,170 shares outstanding at December 31, 2008
Additional paid-in capital 437,076 436,986
Accumulated deficit (403,751 ) (400,971 )
Accumulated other comprehensive loss (4,274 ) (3,797 )
Treasury stock, at cost, 698,119 shares at December 31, 2009 and (20,647 ) (20,849 )
704,974 shares at December 31, 2008
Total stockholders' equity 8,457 11,422
Total liabilities and stockholders' equity $ 12,531 $ 32,428
LIVEWIRE MOBILE, INC.
Consolidated Statements of Operations
Three Months Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited)
(in thousands except per share data)
Service revenues $ 3,667 $ 2,902 $ 14,390 $ 10,238
Product revenues 767 678 2,418 5,378
Total revenues 4,434 3,580 16,808 15,616
Total cost of revenues 1,432 2,802 5,932 11,477
Gross profit 3,002 778 10,876 4,139
68 % 22 % 65 % 27 %
Operating expenses:
Selling, general and administrative 1,340 3,501 7,890 24,525
Research and development 965 1,654 5,197 7,455
Restructuring and other related charges (588 ) 6,417 318 7,871
Impairment charges of intangibles and long-lived assets - 11,616 - 11,616
Impairment charges of goodwill (52 ) 11,048 (163 ) 11,048
Total operating expenses 1,665 34,236 13,242 62,515
Operating income (loss) 1,337 (33,458 ) (2,366 ) (58,376 )
Other income (expense), net 41 463 496 (1,352 )
Income (loss) from continuing operations before income taxes 1,378 (32,995 ) (1,870 ) (59,728 )
Income tax (benefit) expense (75 ) 93 297 208
Income (loss) from continuing operations 1,453 (33,088 ) (2,167 ) (59,936 )
Income (loss) from discontinued operations (net of income
tax provision) 79 258 (613 ) 5,873
Gain on disposal of discontinued operations (net of
income tax provision) - 16,280 - 15,913
Net income (loss) $ 1,532 $ (16,550 ) $ (2,780 ) $ (38,150 )
Income (loss) from continuing operations per
common share - basic $ 0.32 $ (7.20 ) $ (0.47 ) $ (13.20 )
Income (loss) from continuing operations per
common share - diluted $ 0.31 $ (7.20 ) $ (0.47 ) $ (13.20 )
Net income (loss) per common share - basic $ 0.33 $ (3.60 ) $ (0.60 ) $ (8.40 )
Net income (loss) per common share - diluted $ 0.33 $ (3.60 ) $ (0.60 ) $ (8.40 )
Common shares - basic 4,601 4,594 4,598 4,540
Common shares - diluted 4,677 4,594 4,598 4,540
LiveWire Mobile, Inc.
Condensed Consolidated Statements of Cash Flows
Year Ended December 31,
2009 2008
(Unaudited)
(In thousands)
Cash flow from operating activities:
Net loss $ (2,780 ) $ (38,150 )
Adjustments to reconcile net loss to cash provided by (used in)
operating activities:
Depreciation of property and equipment and amortization of managed 571 3,275
service assets
Gain on disposal of discontinued operations - (16,280 )
Other-than-temporary impairment loss on marketable securities - 1,881
Impairment of intangibles and other long-lived assets - 11,616
Impairment of goodwill - 11,048
Accretion of marketable securities - (58 )
Amortization of intangible assets - 3,796
Stock-based compensation expense 293 3,717
Loss on disposal of property and equipment - 1,982
Foreign exchange translation gain (436 ) (791 )
Collection of repurchased accounts receivable over fair value 61 -
Changes in operating assets and liabilities, net of effects of
acquisitions:
Accounts receivable 1,134 6,763
Inventories 353 (624 )
Prepaid expenses and other assets 1,687 (2,025 )
Accounts payable (2,500 ) (3,005 )
Accrued expenses and other liabilities (2,742 ) (3,840 )
Accrued restructuring (7,103 ) 4,472
Deferred revenue (1,631 ) 1,064
Cash used in operating activities (13,093 ) (15,159 )
Cash flow from investing activities:
Purchases of property and equipment, managed service assets and (853 ) (1,629 )
licenses
Purchases of marketable securities - (1,340 )
Acquisition of business, net of cash acquired - (13,632 )
Proceeds from sales of marketable securities - 7,585
Proceeds from maturity of marketable securities - 1,920
Receipt of cash in escrow 3,240 -
Proceeds from sale of business, net - 21,966
Purchase of accounts receivable under purchase agreement - (3,816 )
Proceeds from the collection of purchased accounts receivable 2,375 1,412
Cash provided by investing activities 4,762 12,466
Cash flow from financing activities:
Proceeds from revoliving line of credit, net - 2,610
Payment of capital lease obligations (388 ) (255 )
Repayment of debt (2,610 ) (531 )
Proceeds from issuance of common stock - 252
Cash (used in) provided by financing activities (2,998 ) 2,076
Effect of exchange rate changes on cash (98 ) (301 )
Net increase (decrease) in cash and cash equivalents (11,427 ) (918 )
Cash and cash equivalents, beginning of period 19,261 20,179
Cash and cash equivalents, end of period $ 7,834 $ 19,261
LIVEWIRE MOBILE, INC.
Unaudited Reconciliation of Non-GAAP Measures to Comparable GAAP
Measures
Three Months Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
(Unaudited)
(In thousands, except per share data)
GAAP operating income (loss) $ 1,337 $ (33,458 ) $ (2,366 ) $ (58,376 )
Plus:
Stock-based compensation (3 ) 257 244 2,961
Amortization of identified intangible assets - 1,035 - 3,476
Depreciation 111 469 571 1,640
Restructuring (588 ) 6,417 318 7,871
Impairment charges of intangibles and long-lived assets - 11,616 - 11,616
Impairment of goodwill (52 ) 11,048 (163 ) 11,048
Non-GAAP Adjusted EBITDA from continuing operations $ 805 $ (2,616 ) $ (1,396 ) $ (19,764 )
GAAP operating income (loss) per basic share: $ 0.29 $ (7.28 ) $ (0.51 ) $ (12.86 )
Plus:
Stock-based compensation - 0.06 0.05 0.65
Amortization of identified intangible assets - 0.23 - 0.77
Depreciation 0.02 0.09 0.13 0.37
Restructuring (0.13 ) 1.40 0.07 1.73
Impairment charges of intangibles and long-lived assets - 2.52 - 2.56
Impairment of goodwill - 2.41 (0.04 ) 2.43
Non-GAAP Adjusted EBITDA from continuing operations $ 0.18 $ (0.57 ) $ (0.30 ) $ (4.35 )
GAAP operating income (loss) per diluted share: $ 0.29 $ (7.28 ) $ (0.51 ) $ (12.86 )
Plus:
Stock-based compensation - 0.06 0.05 0.65
Amortization of identified intangible assets - 0.23 - 0.77
Depreciation 0.01 0.09 0.13 0.37
Restructuring (0.13 ) 1.40 0.07 1.73
Impairment charges of intangibles and long-lived assets - 2.52 - 2.56
Impairment of goodwill - 2.41 (0.04 ) 2.43
Non-GAAP Adjusted EBITDA from continuing operations $ 0.17 $ (0.57 ) $ (0.30 ) $ (4.35 )
Shares used in computing basic non-GAAP adjusted EBITDA per share 4,601 4,594 4,598 4,540
Shares used in computing diluted non-GAAP adjusted EBITDA per share 4,677 4,594 4,598 4,540
NOTES:
1) BASIS OF PRESENTATION
The condensed consolidated balance sheet as of December 31, 2009, the condensed consolidated statements of operations for the three and twelve month periods ended December 31, 2009 and 2008, and the condensed consolidated statements of cash flows for the years ended December 31, 2009 and 2008 include the unaudited accounts of LiveWire Mobile, Inc. and its wholly owned subsidiaries (collectively, the "Company"). The financial information included herein is unaudited. The condensed consolidated balance sheet at December 31, 2008 has been derived from, but does not include all the disclosures contained in the audited consolidated financial statements for the year ended December 31, 2008.
In the opinion of management, all adjustments which are necessary to present fairly the financial position, results of operations and cash flows for all interim periods presented have been made. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates various estimates including those related to the allowance for doubtful accounts and sales returns, write-down of excess and obsolete inventories to the lower of cost or market value, income taxes, restructuring and other related charges, and accounting for acquisitions and dispositions. Management establishes these estimates based on historical experience and various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The operating results for the three and twelve month periods ended December 31, 2009 and 2008 are not necessarily indicative of the operating results to be expected for any future period.
The Company encourages you to read these financial statements in conjunction with its Annual Report for the year ended December 31, 2008 and other public disclosures.
2) GOODWILL AND INTANGIBLE ASSETS
The Company recorded goodwill and intangible assets as a result of the acquisitions of Groove Mobile, Inc. in March 2008 and Openera Technologies, Inc. in February 2006. On December 31, 2008, the Company recorded an impairment charge for intangible assets and goodwill, which reduced the carrying values of the goodwill and intangible assets to zero. During the three months ended June 30, 2009, the Company received $111,000 in cash previously held in escrow from the Groove Mobile acquisition to settle certain outstanding claims by the Company. During the three months ended December 31, 2009, the Company settled a claim of $52,000 relating to a vendor obligation from the Groove Mobile acquisition. The $163,000 is recorded as a reduction to impairment charges of goodwill within operating expenses for the twelve months ended December 31, 2009.
3) RESTRUCTURING AND OTHER RELATED CHARGES AND ACCRUALS
In the fourth quarter of 2009, the Company entered into two real estate settlement agreements: (i) an agreement to assign its rights and obligations under an existing lease agreement that ran through May 2012 for 45,000 square feet of excess office space (and related sublease agreements) to a third party; and (ii) an amendment to its Lease Termination and Termination Payment Agreement dated December 2008 for a separate facility, providing for the settlement of any further termination payment obligations under that agreement (collectively the "Agreements").
The impact of the Agreements resulted in a net benefit to the Company's Statement of Operations in the quarter ending December 31, 2009 of $1.1 million, as approximately $2.5 million in accrued restructuring and related liabilities recorded on the Company's Balance Sheet as of September 30, 2009 were eliminated. The terms of the Agreements resulted in: (i) the acceleration and payment of $850,000 (under the terms of the original Lease Termination and Termination Payment Agreement $773,000 was due on or before January 1, 2010 and approximately $23,000 was due monthly by October, 2009, November, 2009, and December 2009), (ii) forfeiture by the Company of a $500,000 building security deposit, and (iii) an additional net cash payment of approximately $39,000 related to the assignment of certain sub-tenant obligations.
Also in the fourth quarter of 2009, the Company finalized a cost reduction plan focused on streamlining its operations and eliminating certain fixed costs. The Company eliminated approximately 20 employee positions related to the continued simplification of its ongoing business operations and standardization around its managed services business model. As of December 31, 2009, $0.1 million remained in accrued restructuring and is expected to be paid by June 30, 2010. The Company recorded a restructuring charge of $0.5 million, including costs of $47,000 relating to the acceleration of stock options to a former employee, during the quarter ended December 31, 2009 related to this plan.
In the second quarter of 2009, the Company announced a restructuring plan which consisted primarily of costs associated with a workforce reduction principally at its operations in India, with additional reductions of headcount in Littleton, Massachusetts, Canada and the U.K., and other associated costs. The majority of these workforce reductions were completed by the end of the second quarter of 2009, with the remainder completed by the end of 2009.
In the fourth quarter of 2008, the Company committed to several cost reduction plans focused on streamlining its operations and eliminating certain fixed costs. The Company eliminated 27 employee positions, primarily in its LiveWire Mobile business, to better position it to improve operating margins in response to adverse market conditions experienced by the Company in 2008. In association with the sale of its NMS Communications Platforms business to Dialogic Corporation and in an effort to improve operating margins by eliminating business roles and functions which were not necessary for the go-forward business, the Company eliminated 20 employee positions. During the three months ended March 31, 2009, the Company recorded $0.5 million of additional restructuring charges related to previously eliminated positions, as some of these employees continued to provide service during the first quarter of 2009.
In the second quarter of 2008, the Company recorded a restructuring charge of $1.0 million. Of this amount, $0.4 million related to exited office space located at its former headquarters in Framingham, Massachusetts. The Company consolidated its use of office space subsequent to the LiveWire Mobile business's relocation of its operations to Littleton, Massachusetts in May 2008. The Company also recorded a facility-related restructuring charge of $0.1 million related to consolidation of its French office. In connection with the facility exit activities, the Company wrote down $0.5 million of fixed assets associated with the exited space, primarily consisting of leasehold improvements.
In the first quarter of 2008, in order to reduce operating costs, the Company eliminated nine employee positions in anticipation of synergies associated with the acquisition of Groove Mobile, which resulted in restructuring charges of $0.4 million, consisting entirely of employee severance-related costs. In connection with the acquisition of Groove Mobile, the Company created an exit plan to vacate the Groove Mobile corporate headquarters and relocate employees to the LiveWire Mobile corporate headquarters. The Company recorded a facility exit cost of $0.3 million, which represented the estimated remaining net facility-related costs during the lease term.
4) COMPREHENSIVE INCOME (LOSS)
The following table presents the Company's comprehensive income (loss) for the stated periods.
Three Months Year Ended
Ended December 31,
December 31,
(In thousands) 2009 2008 2009 2008
Net income (loss) $ 1,532 $ (16,550 ) $ (2,780 ) $ (38,150 )
Other comprehensive income (loss) items:
Foreign currency translation adjustment (29 ) (1,058 ) (477 ) (1,451 )
Comprehensive loss $ (1,503 ) $ (17,608 ) $ (3,257 ) $ (39,601 )
The Company maintains intercompany receivable and payable balances existing between the Company's worldwide subsidiaries. During the quarter ended June 30, 2009, the Company determined that it is unlikely that settlement of these intercompany balances will occur in the foreseeable future. Accordingly, these gains or losses for the quarters ended June 30, 2009, September 30, 2009 and December 31, 2009 were excluded from the determination of net income and have been reported as a component of accumulated other comprehensive income.
5) INCOME TAXES
The Company conducts business globally and, as a result, the Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions.
On January 1, 2007, the Company adopted rules pertaining to the accounting for uncertainty in income taxes. This accounting guidance clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements when accounting for income taxes. The guidance prescribes a recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken in or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure and transition. The Company has established a valuation allowance against net deferred tax assets in certain jurisdictions including the United States, because the Company believes that it is more likely than not that the tax assets in those jurisdictions will not be realized prior to their expiration. During the three months ended December 31, 2009, the Company reversed certain liabilities relating to previously uncertain tax positions totaling $626,000 as the statue of limitations relating to the underlying tax positions expired, or the reasons for the uncertainties were eliminated. This income tax benefit was partially offset by withholding taxes incurred and adjustments made to income tax liabilities during the three months ended December 31, 2009 relating to jurisdictions outside of the United States. During the three months ended June 30, 2009, the Company established a full valuation allowance of approximately $135,000 against net deferred tax assets relating to its Indian subsidiary. During the second quarter of 2009, and as part of the restructuring plan described above, operations in India were terminated.
6) DISCONTINUED OPERATIONS
On December 5, 2008, the Company sold its NMS Communications Platforms business and certain assets and liabilities of the NMS Communications Platforms business to Dialogic Corporation. Accordingly, the operating results of the NMS Communication Platforms business have been reclassified as discontinued operations in the unaudited condensed consolidated statements of operations. During the quarter ending December 31, 2009, a net benefit of $79,000 resulted as the Company finalized compliance efforts relating to several foreign subsidiaries where there are no longer operations, and realized certain savings in income tax and value added tax liabilities previously estimated.
7) REVERSE STOCK SPLIT
On December 18, 2009, a one-for-ten reverse split of the Company's common stock became effective. The reverse stock split automatically combined every ten shares of LiveWire Mobile common stock into one share of common stock. The impact of the stock split has been reflected in all periods presented in the financial statements.
8) RECEIPT OF ESCROW FUNDS
On December 4, 2009, the Company received the full amount of the escrow of $2.8 million from the sale of the Communications Platforms business to Dialogic, which closed in December 2008.
Additionally, in connection with the early release of the escrow, the Company entered into an amendment to the Asset Purchase Agreement dated September 12, 2008 with Dialogic to provide a six month extension of representations and warranties related to an agreement in connection with the asset purchase.
9) SUBSEQUENT EVENTS
On February 10, 2010, the Company's Board of Directors declared an annual dividend of $0.20 per share of common stock for 2010. The current dividend is payable on March 26, 2010 to shareholders of record as of the close of business on March 12, 2010.
The Company estimates the cash impact of the declared dividend to be in the range of $0.9 million to $1.0 million.
SOURCE: LiveWire Mobile, Inc.
