UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 1, 2019
Casa Systems, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 001-38324 | 75-3108867 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) | ||
100 Old River Road Andover, Massachusetts |
01810 | |||
(Address of Principal Executive Offices) |
(Zip Code) |
Registrants Telephone Number, Including Area Code: (978) 688-6706
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, $0.001 par value per share |
CASA | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.01 Completion of Acquisition or Disposition of Assets.
This Current Report on Form 8-K/A is being filed as an amendment to the Current Report on Form 8-K dated July 1, 2019 (the Original Form 8-K) filed by Casa Systems, Inc. (the Company) with the Securities and Exchange Commission on July 1, 2019, announcing the completion of the Companys acquisition of NetComm Wireless Limited (NetComm). At that time, the Company stated in the Original Form 8-K that it intended to file the required financial statements and pro forma financial information within 71 days from the date that the Original Form 8-K was required to be filed. This Current Report on Form 8-K/A amends and supplements Item 9.01 of the Original Form 8-K to present certain financial statements of NetComm and to present certain unaudited pro forma condensed combined financial statements of the Company in connection with the Companys acquisition of NetComm, which financial statements and unaudited pro forma condensed combined financial statements are filed as exhibits hereto and are incorporated herein by reference. All of the other items in the Original Form 8-K remain the same and are hereby incorporated by reference into this Current Report on Form 8-K/A.
Item 9.01 Financial Statements and Exhibits.
The following financial statements and pro forma financial information are filed as part of this Current Report on Form 8-K/A:
(a) Financial statements of business acquired.
The audited consolidated financial statements of NetComm as of and for the year ended June 30, 2018, as well as the accompanying notes and independent auditors report are being filed as Exhibit 99.1 to this Current Report on Form 8-K/A and are incorporated herein by reference.
The unaudited consolidated financial statements of NetComm as of and for the six months ended December 31, 2018 and 2017, as well as the accompanying notes are being filed as Exhibit 99.2 to this Current Report on Form 8-K/A and are incorporated herein by reference.
(b) Pro forma financial information.
The following unaudited pro forma financial information of Casa Systems and NetComm is filed as Exhibit 99.3 to this Current Report on Form 8-K/A and are incorporated herein by reference:
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2019;
Unaudited Pro Forma Condensed Combined Statement of Operations for the twelve months ended December 31, 2018;
Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2019;
Notes to Unaudited Pro Forma Condensed Combined Financial Statements.
(d) Exhibits.
Exhibit Number |
Description | |
23.1 | Consent of Grant Thornton Audit Pty Ltd, Independent Certified Public Accountant. | |
99.1 | NetComm Wireless Limited Audited Consolidated Financial Statements as of and for the year ended June 30, 2018 | |
99.2 | NetComm Wireless Limited Unaudited Condensed Consolidated Financial Statements as of December 31, 2018 and for the Six Months Ended December 31, 2018 and 2017 | |
99.3 | The following unaudited pro forma financial information: | |
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2019; | ||
Unaudited Pro Forma Condensed Combined Statement of Operations for the twelve months ended December 31, 2018; | ||
Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2019; | ||
Notes to Unaudited Pro Forma Condensed Combined Financial Statements. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Casa Systems, Inc. | ||||
Date: September 13, 2019 |
By: | /s/ Maurizio Nicolelli | ||
Maurizio Nicolelli | ||||
Chief Financial Officer |
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated August 15, 2019, with respect to the consolidated financial statements of NetComm Wireless Limited for the year ended June 30, 2018, included in this Current Report on Form 8-K of Casa Systems, Inc. We hereby consent to the incorporation by reference of said report in the Registration Statement of Casa Systems, Inc. on Form S-8 (Form 333-222073).
/s/ GRANT THORNTON AUDIT PTY LTD
Sydney, Australia
September 13, 2019
Exhibit 99.1
NetComm Wireless Limited
Index to the financial statements
For the Year Ended 30 June 2018
Consolidated Statement of Profit or Loss & Other Comprehensive Income |
2 | |||||||
Consolidated Statement of Financial Position |
3 | |||||||
Consolidated Statement of Changes in Equity |
4 | |||||||
Consolidated Statement of Cash Flows |
5 | |||||||
Notes to the financial statements |
||||||||
1. | Statement of Significant Accounting Policies |
6 | ||||||
2. | Revenue and Other Income from Operations |
16 | ||||||
3. | Expenses |
17 | ||||||
4. | Income Tax Expense |
18 | ||||||
5. | Dividends |
20 | ||||||
6. | Cash and Cash Equivalents |
20 | ||||||
7. | Trade and Other Receivables |
21 | ||||||
8. | Inventories |
22 | ||||||
9. | Other Assets |
22 | ||||||
10. | Property, Plant and Equipment |
22 | ||||||
11. | Revenue from Contracts with Customers |
23 | ||||||
12. | Goodwill |
26 | ||||||
13. | Other Intangible Assets |
28 | ||||||
14. | Trade and Other Payables |
29 | ||||||
15. | Borrowings |
29 | ||||||
16. | Employee Benefits |
30 | ||||||
17. | Other Liabilities |
30 | ||||||
18. | Issued Capital |
30 | ||||||
19. | Reserves |
31 | ||||||
20. | Fair Value Measurement |
32 | ||||||
21. | Contingent Liabilities |
32 | ||||||
22. | Commitments |
33 | ||||||
23. | Cash Flow Information |
33 | ||||||
24. | Related Party Transactions |
34 | ||||||
25. | Share-Based Payments |
35 | ||||||
26. | Retirement Benefit Obligations |
36 | ||||||
27. | Earnings per Share |
37 | ||||||
28. | Financial Instruments |
38 | ||||||
29. | Events after the Reporting Date |
43 | ||||||
30. | Segment Reporting |
44 | ||||||
31. | Parent Entity Disclosures |
46 | ||||||
32. | Company Details |
47 | ||||||
Directors Declaration |
48 | |||||||
Independent Auditors Report |
49 |
1
Consolidated Statement of Profit or Loss & Other Comprehensive Income
For the Year Ended 30 June 2018
2018
| ||||
Note
|
$000
| |||
Revenue from the sale of goods
|
2 | 181,691 | ||
Change in inventories
|
1,636 | |||
Raw materials consumed
|
(115,788) | |||
Employee benefits
|
(30,265) | |||
Other expenses
|
3 | (16,746) | ||
Depreciation and amortisation expense
|
3 | (11,300) | ||
OPERATING INCOME
|
9,228 | |||
Finance income
|
49 | |||
Finance costs
|
3 | (15) | ||
PROFIT BEFORE INCOME TAX
|
9,262 | |||
Income tax expense
|
4 | (1,281) | ||
PROFIT FOR THE YEAR
|
7,981 | |||
Attributable to equity holders of the parent
|
7,981 | |||
OTHER COMPREHENSIVE INCOME / (EXPENSE)
|
||||
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS:
|
||||
Exchange differences arising on translation of foreign operations
|
(220) | |||
Net change in the fair value of cash flow hedges recognised in equity
|
(247) | |||
Income tax relating to components of other comprehensive income
|
4 | 74 | ||
Other comprehensive income/(loss) for the period (net of tax)
|
(393) | |||
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD
|
7,588 | |||
Attributable to equity holders of the parent
|
7,588 | |||
| ||||
EARNINGS PER SHARE
|
||||
Basic earnings per share (cents per share)
|
27 | 5.45 | ||
Diluted earnings per share (cents per share)
|
27 | 5.45 |
The above consolidated statement of profit or loss & other comprehensive income should be read in conjunction with the accompanying notes.
2
Consolidated Statement of Financial Position
As at 30 June 2018
2018
| ||||
Note
|
$000
| |||
ASSETS
|
||||
Current assets
|
||||
Cash and cash equivalents
|
6 | 27,349 | ||
Trade and other receivables
|
7 | 32,757 | ||
Inventories
|
8 | 18,873 | ||
Other assets
|
9 | 2,395 | ||
Total current assets
|
81,374 | |||
Non-Current assets
|
||||
Property, plant and equipment
|
10 | 11,183 | ||
Contract assets
|
11(b) | 2,600 | ||
Deferred tax assets
|
4 (c) | 7,271 | ||
Goodwill
|
12 | 896 | ||
Other intangible assets
|
13 | 29,790 | ||
Total non-current assets
|
51,740 | |||
TOTAL ASSETS
|
133,114 | |||
LIABILITIES
|
||||
Current liabilities
|
||||
Trade and other payables
|
14 | 42,943 | ||
Borrowings
|
15 | - | ||
Employee benefits
|
16 | 2,502 | ||
Income tax liability
|
356 | |||
Other current liabilities
|
17 | 2,593 | ||
Total current liabilities
|
48,394 | |||
Non-current liabilities
|
||||
Employee benefits
|
16 | 534 | ||
Total non-current liabilities
|
534 | |||
TOTAL LIABILITIES
|
48,928 | |||
NET ASSETS
|
84,186 | |||
EQUITY
|
||||
Issued capital
|
18 | 65,059 | ||
Reserves
|
19 | 2,335 | ||
Retained earnings
|
16,792 | |||
TOTAL EQUITY
|
84,186 |
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
3
Consolidated Statement of Changes in Equity
For the Year Ended 30 June 2018
Ordinary Shares |
Retained Earnings |
Foreign
|
Foreign Exchange Hedging Reserve |
Options and Share Rights Reserve |
Total | |||||||||
Note | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||
BALANCE AT 1 JULY 2017
|
65,059 | 8,811 | 319 | - | 1,389 | 75,578 | ||||||||
Profit for the period
|
- | 7,981 | - | - | - | 7,981 | ||||||||
Exchange difference on translation of foreign operations
|
19 (b) | - | - | (220) | - | - | (220) | |||||||
Foreign exchange hedging (Net of tax)
|
19 (c) | - | - | - | (173) | - | (173) | |||||||
Total comprehensive income for the period
|
- | 7,981 | (220) | (173) | - | 7,588 | ||||||||
Transaction with owners in their capacity as owners
|
||||||||||||||
Share based payments expense
|
- | - | - | - | 1,020 | 1,020 | ||||||||
BALANCE AT 30 JUNE 2018
|
65,059 | 16,792 | 99 | (173) | 2,409 | 84,186 |
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
4
Consolidated Statement of Cash Flows
For the Year Ended 30 June 2018
2018
| ||||
Note
|
$000
| |||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||
Receipts from customers
|
188,730 | |||
Payments to suppliers and employees
|
(164,845) | |||
Finance costs
|
(15) | |||
Income taxes paid
|
(211) | |||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
23 | 23,659 | ||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||
Proceeds from sale of plant and equipment
|
198 | |||
Interest received
|
49 | |||
Acquisition of property, plant and equipment
|
(3,781) | |||
Acquisition of intangible assets
|
(14,846) | |||
NET CASH USED IN INVESTING ACTIVITIES
|
(18,380) | |||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||
Repayment of borrowings
|
(55) | |||
NET CASH USED IN FINANCING ACTIVITIES
|
(55) | |||
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS HELD
|
5,224 | |||
Cash and cash equivalents before Foreign Exchange Impact at beginning of financial period
|
22,480 | |||
Foreign Exchange Impact on Cash and Cash Equivalents
|
(355) | |||
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL PERIOD
|
6 | 27,349 |
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
5
Notes to the financial statements
For the Year Ended 30 June 2018
1 | Statement of Significant Accounting Policies |
6
Notes to the financial statements
For the Year Ended 30 June 2018
7
Notes to the financial statements
For the Year Ended 30 June 2018
8
Notes to the financial statements
For the Year Ended 30 June 2018
9
Notes to the financial statements
For the Year Ended 30 June 2018
10
Notes to the financial statements
For the Year Ended 30 June 2018
11
Notes to the financial statements
For the Year Ended 30 June 2018
12
Notes to the financial statements
For the Year Ended 30 June 2018
13
Notes to the financial statements
For the Year Ended 30 June 2018
14
Notes to the financial statements
For the Year Ended 30 June 2018
15
Notes to the financial statements
For the Year Ended 30 June 2018
2 Revenue and other income from operations
2018
| ||
$000
| ||
REVENUE
| ||
Sales revenue
|
181,691
| |
TOTAL REVENUE
|
181,691 |
16
Notes to the financial statements
For the Year Ended 30 June 2018
3 | Expenses |
Included in expenses are the following specific items:
a) | Distribution and selling expenses |
2018
| ||
$000
| ||
Distribution and selling expenses
|
1,578 | |
TOTAL DISTRIBUTION AND SELLING EXPENSES
|
1,578 | |
b) Administrative expenses
|
||
2018
| ||
$000
| ||
Insurance expenses
|
1,406 | |
Legal and professional fees
|
1,965 | |
Travel expenses
|
2,558 | |
Contractor costs
|
1,967 | |
TOTAL ADMINISTRATIVE EXPENSES
|
7,896 | |
c) Other expenses
|
||
2018
| ||
$000
| ||
Advertising and marketing
|
1,238 | |
Property expenses
|
3,079 | |
Other expense
|
2,955 | |
TOTAL OTHER EXPENSES
|
7,272 | |
d) Depreciation, amortisation and impairments
|
||
2018
| ||
$000
| ||
Depreciation of property, plant and equipment (Note 10(b))
|
4,335 | |
Amortisation of intangible assets (Note 13(b))
|
5,608 | |
Amortisation of contract assets (Note 11(b))
|
1,357 | |
TOTAL DEPRECIATION, AMORTISATION AND IMPAIRMENTS
|
11,300 |
17
Notes to the financial statements
For the Year Ended 30 June 2018
e) | Auditors remuneration |
Grant Thornton is the auditor of the Group. Amounts received or due and receivable by Grant Thornton are detailed below:
2018
| ||
$
| ||
GRANT THORNTON AUSTRALIA
|
||
Auditing or reviewing the financial statements
|
175,696 | |
Taxation services
|
83,270 | |
Re-audit Fee under US GAAS
|
128,000 | |
Leadership, Talent and Cultural roll out services
|
23,650 | |
Total Grant Thornton Australia
|
410,616 | |
Total Grant Thornton Network Firms
|
29,768 | |
Total Auditors Remuneration
|
440,384 | |
f) Rental expenses on operating leases
|
||
2018
| ||
$000
| ||
Minimum lease payments
|
2,479 | |
g) Finance costs
|
||
2018
| ||
$000
| ||
Bank borrowings
|
14 | |
Finance leases
|
1 | |
TOTAL FINANCE COSTS
|
15 | |
4 Income Tax Expense
(a) Income tax recognised in profit or loss
|
||
2018
| ||
$000
| ||
I) TAX EXPENSE COMPRISES:
|
||
Current tax expense/(benefit)
|
2,779 | |
Deferred tax expense relating to the origination and reversal of temporary differences
|
(756) | |
(Over)/under provision for tax in prior year
|
(742) | |
INCOME TAX EXPENSE
|
1,281 | |
|
||
II) INCOME TAX RECOGNISED IN OTHER COMPREHENSIVE INCOME
|
||
Income tax relating to components of other comprehensive income
|
(74) | |
TOTAL INCOME TAX EXPENSE
|
1,207 |
18
Notes to the financial statements
For the Year Ended 30 June 2018
(b) | The prima facie income tax expense on pre-tax accounting profit from continuing operations and other comprehensive income reconciles to the income tax expense in the financial statements as follows: |
2018
| ||
$000
| ||
I) AMOUNTS RECOGNISED IN PROFIT OR LOSS
|
||
Net profit before tax
|
9,262 | |
Tax at the Australian tax rate of 30%
|
2,779 | |
- Non-deductible expenses
|
7 | |
- Share appreciation rights
|
305 | |
- Differential in overseas tax rates
|
43 | |
- Other items
|
- | |
- (Over)/Under provision for tax in prior years
|
(674) | |
- Research & Development tax concession
|
(1,179) | |
INCOME TAX EXPENSE/(BENEFIT)
|
1,281 | |
II) Amounts recognized in equity
|
||
Net change in the fair value of cash flow hedges
|
(247) | |
Tax at the Australian tax rate of 30%
|
74 | |
TOTAL TAX AMOUNTS RECOGNISED IN EQUITY
|
74 |
(c) | Deferred tax assets/(liabilities) arise from the following: |
Opening balance | Charged to income |
Charged to
other
|
Closing balance | |||||
2018
|
$000 | $000 | $000 | $000 | ||||
Unused tax losses/credit
|
13,319 | 1,082 | - | 14,401 | ||||
Temporary differences
|
||||||||
Accrued expenses
|
199 | 63 | - | 262 | ||||
Provisions
|
679 | 558 | - | 1,237 | ||||
Inventory & Warranty
|
525 | 165 | - | 690 | ||||
Intangibles and Other
|
(6,769) | (2,624) | - | (9,393) | ||||
Cash flow hedges
|
- | - | 74 | 74 | ||||
Total deferred tax assets
|
7,953 | (756) | 74 | 7,271 |
19
Notes to the financial statements
For the Year Ended 30 June 2018
5 | Dividends |
No dividends were paid during the year-ended 30 June 2018 (2017: Nil).
2018
| ||
$000
| ||
Balance of franking account
|
592 | |
Balance of franking account at period end adjusted for franking credits arising from dividends recognised as receivables, and franking debits arising from payment of proposed dividends, and franking credits that may be prevented from distribution in subsequent financial years.
6 | Cash and Cash Equivalents |
a) | Cash on hand |
2018
| ||
$000
| ||
Cash on hand
|
- | |
Cash at bank
|
27,349 | |
27,349
|
b) | Effective interest rate |
These funds are bearing floating interest rates of between 0.05% and 3.05% (2017: 0.05% to 3.05%).
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows:
2018
| ||
$000
| ||
Cash and bank balances
|
24,201 | |
Short-term bank deposits
|
3,148 | |
27,349
|
20
Notes to the financial statements
For the Year Ended 30 June 2018
7 | Trade and Other Receivables |
2018
| ||
$000
| ||
Trade receivables (i) |
32,788
| |
Allowance for doubtful debts
|
(31)
| |
32,757
|
(i) | The average credit period on sales of goods and rendering of services is 45 days, a few customers have End of Month 45 day terms and some primarily North America based customers 60 days. No interest is charged on overdue receivables. An allowance has been made for estimated unrecoverable trade receivable amounts arising from the past sale of goods and rendering of services, determined by reference to past default experience. The Group will also consider any change in the quality of the trade receivable from the date credit was initially granted up to the reporting date. Before accepting any new customers, the Group obtains third party references to assess the potential customers credit quality and define the credit limits by customer. |
2018
| ||
$000
| ||
AGING OF PAST DUE BUT NOT IMPAIRED
|
||
30-60 Days
|
184 | |
60-90 Days
|
19 | |
90+ Days
|
- | |
203
|
The Groups trade receivables that are past due but not impaired were $202,982 (2017: $24,007) as at the reporting date. The Group has not recognised an impairment provision as there has not been a significant change in the credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these past due receivables is 47 days (2017: 78 days).
2018
| ||
$000
| ||
MOVEMENT IN THE ALLOWANCE FOR DOUBTFUL DEBTS
|
||
Balance at the beginning of the year
|
7 | |
Increase (Decrease) in allowance for impairment
|
24 | |
Balance at the end of the year |
31
| |
2018
| ||
$000
| ||
AGING OF IMPAIRED RECEIVABLES
|
||
0-30 Days
|
- | |
30-60 Days
|
- | |
60+ Days
|
31
| |
31
|
21
Notes to the financial statements
For the Year Ended 30 June 2018
8 | Inventories |
2018
| ||
$000
| ||
CURRENT
|
||
Raw materials and stores
|
3,143 | |
Communication modules
|
1,720 | |
Finished goods
|
9,894 | |
Goods in transit
|
6,389 | |
Provision for Stock Obsolescence
|
(2,273) | |
Total Inventories
|
18,873
| |
|
9 | Other Assets |
2018
| ||
$000
| ||
CURRENT
|
||
Prepayments
|
2,375 | |
Deposits and bonds
|
20 | |
2,395
|
10 | Property, Plant and Equipment |
(a) Summary of property, plant and equipment
2018
| ||
$000
| ||
PLANT AND EQUIPMENT
|
||
At cost
|
10,334 | |
Less accumulated depreciation
|
(7,076) | |
Total plant and equipment
|
3,258 | |
|
||
LEASED PLANT AND EQUIPMENT
|
||
At cost
|
917 | |
Less accumulated amortisation
|
(907) | |
Total leased plant and equipment
|
10 | |
|
||
LEASEHOLD IMPROVEMENTS
|
||
At cost
|
3,956 | |
Less accumulated amortisation
|
(1,233) | |
Total leasehold improvements
|
2,723 | |
|
||
DEVELOPMENT ASSETS
|
||
At cost
|
10,260 | |
Less accumulated amortisation
|
(5,068) | |
Total development assets
|
5,192 | |
Total property, plant and equipment |
11,183 |
22
Notes to the financial statements
For the Year Ended 30 June 2018
(b) | Movements in carrying amounts |
Plant and
|
Leased plant and equipment |
Leasehold improvements |
Development assets |
Total | ||||||
$000
|
$000 | $000 | $000 | $000 | ||||||
2018
| ||||||||||
Balance at the beginning of the year
|
4,093 | 117 | 2,161 | 5,488 | 11,859 | |||||
Additions
|
686 | - | 1,092 | 2,003 | 3,781 | |||||
Disposal
|
- | (112) | - | - | (112) | |||||
Net foreign currency translation differences
|
(4) | - | - | (6) | (10) | |||||
Depreciation expense
|
(1,517) | 5 | (530) | (2,293) | (4,335) | |||||
Carrying amount at the end of the year |
3,258 | 10 | 2,723 | 5,192 | 11,183 |
11 | Revenue from Contracts with Customers |
(a) | Disaggregation of revenues |
The Group derives revenues from the transfer of goods and services at a point in time mainly from the following segments and geographical regions:
Segment revenues:
Broadband Business | Telecommunications Infrastructure Equipment & IIoT |
Total Revenues
| ||||||||
Australia & NZ
|
Overseas
|
Australia
|
Overseas
| |||||||
$000
|
$000 | $000 | $000 | $000 | ||||||
2018 TIMING OF REVENUE RECOGNITION
|
||||||||||
At a point in time revenues
|
25,164 | - | 135,086 | 21,441 | 181,691 | |||||
Over Time
|
- | - | - | - | - |
23
Notes to the financial statements
For the Year Ended 30 June 2018
(b) | Contract assets and liabilities |
In accordance with IFRS 15 paragraphs 91 and 95, the Group recognises as an asset the eligible costs of obtaining and fulfilling contracts with customers.
The following is an analysis of the costs that the Group has recognised as an asset at 30 June 2018. The costs mainly consist of employee costs. These costs would not have been incurred if the contract(s) had not been obtained and have been incurred in order to satisfy the performance obligations of the contracts. Prior to the adoption of IFRS 15 such costs were recognised as expenses in the Statement of Profit or Loss and Other Comprehensive Income. There were no material costs of obtaining and fulfilling contracts with customers that were eligible for recognition as contract assets during the period.
2018
| ||
$000
| ||
I) CONTRACT ASSETS
| ||
Opening Balance
|
3,957 | |
Costs incurred to obtain a contract (i)
|
- | |
Costs incurred to fulfil contracts (ii)
|
- | |
Amortisation costs during the period
|
(1,357) | |
2,600
| ||
|
The Group has a carrying value of $2.6 million in contract assets for the year ended 30 June 2018, the assets value has decreased by approximately $1.4 million compared to the year ended 30 June 2017 and the decrease is mainly due to the amortisation costs group has recognised during the year. The Group did not incur any further material costs to fulfil or obtain contracts.
(i) Costs incurred to obtain a contract
2018
| ||
$000
| ||
Asset recognised in relation to incremental costs incurred to obtain a contract at 30 June 2018
|
- | |
Amortisation and impairment loss recognised as cost of providing services during the period
|
- | |
TOTAL COSTS INCURRED TO OBTAIN A CONTRACT
|
-
|
(ii) Costs incurred to fulfil contracts
2018
| ||
$000
| ||
Asset recognised from costs incurred to fulfil a contract at 30 June 2018
|
- | |
Amortisation and impairment loss recognised as cost of providing services during the period
|
(1,357) | |
TOTAL COSTS INCURRED TO FULFIL A CONTRACT
|
(1,357) |
The contract assets are amortised on a straight-line basis over the term of the specific contract the costs relate to, consistent with the pattern of recognition of the associated revenue.
On target volume discounts and rebates were offered to certain customers in the Companys broadband business. For the year ended 30 June 2018 there were no contract liabilities as the Group had discontinued dealing the practice of offering rebates and had settled rebates accrued in the previous periods.
24
Notes to the financial statements
For the Year Ended 30 June 2018
25
Notes to the financial statements
For the Year Ended 30 June 2018
12 | Goodwill |
2018
| ||
$000
| ||
GROSS CARRYING AMOUNT
| ||
Balance at beginning of financial year
|
896
| |
Balance at end of financial year
|
896 | |
NET BOOK VALUE
| ||
At the beginning of the financial year
|
896 | |
At the end of the financial year
|
896 | |
(a) | Impairment testing |
All Goodwill has arisen from acquisitions made during prior financial years.
The Group assessed the recoverable amount of goodwill by applying a value in use (VIU) model for each identified cash-generating unit. The recoverable amounts of the cash-generating units were determined based on past experience and expectations for the future, utilising both internal and external sources of data and relevant industry trends.
For the purpose of annual impairment testing, goodwill has been allocated for impairment testing purposes to the following cash-generating units (CGUs) representing the goodwill that arose in the acquisition of each business:
2018
| ||
$000
| ||
Telecommunications Infrastructure Equipment & IIoT
|
766 | |
Broadband business
|
130 | |
Network Termination Devices (NTD)
|
- | |
896
| ||
|
26
Notes to the financial statements
For the Year Ended 30 June 2018
27
Notes to the financial statements
For the Year Ended 30 June 2018
13 | Other Intangible Assets |
(a) Summary | of intangible assets |
2018
| ||
$000
| ||
PRODUCT DEVELOPMENT COSTS
|
||
Cost
|
38,359 | |
Accumulated amortisation
|
(8,923) | |
Net carrying value
|
29,436 | |
| ||
COMPUTER SOFTWARE
|
||
Cost
|
1,894 | |
Accumulated amortisation
|
(1,540) | |
Net carrying amount
|
354 | |
| ||
TOTAL
|
29,790 |
(b) Movements | in carrying amounts |
Product development |
Computer software |
Other intangibles |
Total | |||||
costs | ||||||||
$000
|
$000 | $000 | $000 | |||||
2018
| ||||||||
Balance at the beginning of the year
|
19,923 | 628 | - | 20,551 | ||||
Additions
|
14,797 | 49 | - | 14,846 | ||||
Amortisation
|
(5,284) | (324) | - | (5,608) | ||||
Net foreign currency translation differences
|
- | 1 | - | 1 | ||||
Carrying amount at year end
|
29,436 | 354 | - | 29,790 |
28
Notes to the financial statements
For the Year Ended 30 June 2018
14 | Trade and Other Payables |
2018
| ||
$000
| ||
CURRENT UNSECURED LIABILITIES
| ||
Trade payables (i)
|
31,770 | |
Sundry payables and accrued expenses
|
11,173 | |
Total current trade and other payables
|
42,943 |
(i) | The average credit period on purchases of certain goods from various Asian countries is 60 days, although some request payment in advance of shipment. No interest is charged on overdue payables. The Group has financial risk management policies in place to ensure that all payables are generally paid within the credit timeframe. |
15 | Borrowings |
2018
| ||
$000
| ||
CURRENT - SECURED
| ||
Finance lease
|
- | |
Bank loan
|
- | |
Total current borrowings
|
- | |
| ||
Total borrowings
|
- |
29
Notes to the financial statements
For the Year Ended 30 June 2018
16 | Employee Benefits |
2018
| ||
$000
| ||
CURRENT
| ||
Employee entitlements
|
2,502 | |
NON - CURRENT
| ||
Employee entitlements
|
534 | |
Total Employee entitlements
|
3,036 | |
17 | Other Liabilities |
2018
| ||
$000
| ||
WARRANTY PROVISION
| ||
Opening Balance
|
388 | |
Movements during the year
|
1,878 | |
Balance at the end of the year
|
2,266 | |
OTHER
| ||
Opening Balance
|
- | |
Movement during the year
|
327 | |
Balance at the end of the year
|
327 | |
Total Other Liabilities
|
2,593 | |
18 | Issued Capital |
2018
| ||
$000
| ||
146,329,906 (2017: 146,329,906) Ordinary shares - paid up no par value
|
65,059 |
(a) Movements in issued and paid up ordinary share capital of the company
2018
|
2018
| |||
No.
|
$000
| |||
At the beginning and end of the reporting period
|
146,329,906
|
65,059
|
Changes to the then Corporations Law abolished the authorised capital and par value concept in relation to share capital from 1 July 1998. Therefore, the Company does not have a limited amount of authorised capital and issued shares do not have a par value. Ordinary shares confer on their holders the right to participate in dividends and/or capital returns declared by the board and an entitlement to vote at any general meeting of the Company.
30
Notes to the financial statements
For the Year Ended 30 June 2018
19 Reserves
(a) Movements in options & share rights reserve
2018
| ||
$000
| ||
Balance at the beginning of the year
|
1,389 | |
Transfer to share rights reserve
|
1,020 | |
Balance at the end of the year
|
2,409 | |
|
(b) Movements in foreign currency translation reserve
2018
| ||
$000
| ||
Balance at the beginning of the year
|
319 | |
Exchange difference on translation of foreign operations
|
(220) | |
Balance at the end of the year
|
99 | |
|
(c) Movements in foreign exchange hedging reserve
2018
| ||
$000
| ||
Balance at the beginning of the year
|
- | |
Net change in the fair value of cash flow hedges
|
(247) | |
Reclassified to profit and loss account
|
- | |
Tax expense
|
74 | |
Balance at the end of the year
|
(173) | |
|
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments, net of tax, related to hedged transactions that have not yet occurred.
The cumulative deferred gain or loss on the hedge is recognised in other comprehensive income and included within the cash flow hedge reserve in equity.
If a forecast transaction is no longer expected to occur or if the hedging instrument becomes ineffective, any related gain or loss recognised in other comprehensive income is transferred immediately to profit and loss.
31
Notes to the financial statements
For the Year Ended 30 June 2018
32
Notes to the financial statements
For the Year Ended 30 June 2018
22 Commitments
(a) Capital expenditure commitments
As at 30 June 2018, the Group is committed to purchase plant and equipment of $685,556 (2017: $777,031)
(b) Expenditure commitments
i) | Non-cancellable operating lease commitments |
2018
| ||
$000
| ||
Not longer than 1 year
|
2,506 | |
Longer than 1 year and not longer than 5 years
|
7,743 | |
10,249
| ||
|
The Group leases its offices in Australia and other countries under operating leases. Leases generally provide the right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount and in some cases an incremental contingent rental. Contingent rents are normally based on movements in the CPI or market reviews.
23 Cash Flow Information
Reconciliation of cash flow from operations with profit after income tax
2018
| ||
$000
| ||
PROFIT FOR THE YEAR
|
7,981 | |
|
||
NON-CASH FLOWS IN PROFIT:
|
||
Depreciation and amortisation
|
11,300 | |
Interest received
|
(49) | |
Change in the fair value of cash flow hedges
|
(173) | |
Foreign exchange translation differences
|
(220) | |
Share rights reserve
|
1,020 | |
11,878
| ||
|
||
CHANGES IN OPERATING ASSETS AND LIABILITIES:
|
||
(Increase) in trade and other receivables
|
(10,047) | |
(Increase) in inventories
|
(1,636) | |
Decrease/(Increase) in other assets
|
2,680 | |
Decrease/(Increase) in deferred tax assets
|
682 | |
Increase in trade and other payables
|
9,350 | |
Increase in other liabilities
|
2,383 | |
Increase in provisions
|
388 | |
3,800
| ||
| ||
|
||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
23,659 |
33
Notes to the financial statements
For the Year Ended 30 June 2018
24 Related Party Transactions
There were no related party transactions other than transactions with Key Management Personnel.
2018
| ||
$
| ||
Short term benefits
|
4,136,907 | |
Post-employment benefits
|
206,147 | |
Other long term benefits
|
23,003 | |
Share-based payments
|
937,480 | |
Termination benefits
|
97,500 | |
TOTAL
|
5,401,037 |
In the prior year, NetComm Wireless Limited executed an agreement with nbn for the supply of Distribution Point Units (DPUs) in the nbn FTTC network. Mr Justin Milne is the Chairman of NetComm Wireless Limited and a Director of the nbn. Mr Milne recused himself from the Board meeting for the period of time whereby the Directors approved the section of this contract. The following aggregate receipts for goods and services occurred with the above party.
2018
| ||
$000
| ||
Receipts for goods and services from entities with common key management personnel |
115,070 |
34
Notes to the financial statements
For the Year Ended 30 June 2018
35
Notes to the financial statements
For the Year Ended 30 June 2018
Issuance of SARs
On December 8, 2015 the Company issued a total of 2,200,000 Share Appreciation Rights (SARs) to Key Management Personnel and other employees at a Base price of $2.98.
Details of Share Appreciation Rights (SAR) held directly, indirectly or beneficially by key management personnel and their related parties are as follows:
Position | Balance on 1 | Fair Value | SARs | Fair Value | SARs | Remaining | Balance at 30 | % | ||||||||||
July 2017 | of SARs on | granted | of SARs | Lapsed | Fair Value | June | Vested at 30 | |||||||||||
date of | during the | Granted | of SARs as | 2018 | June | |||||||||||||
grant | year | during the | at grant | 2018 | ||||||||||||||
year on | date | |||||||||||||||||
Date of | ||||||||||||||||||
Grant | ||||||||||||||||||
K J P Sheridan |
CEO | 500,000 | $814,449 | 400,000 | $349,492 | - | $1,163,941 | 900,000 | 0% | |||||||||
S Collins
|
CTO | 500,000 | $814,449 | 200,000 | $174,746 | - | $989,195 | 700,000 | 0% | |||||||||
G Davie
|
CPO | - | - | 200,000 | $119,091 | - | $119,091 | 200,000 | 0% | |||||||||
C Last
|
CFO | - | - | 200,000 | $174,746 | - | $174,746 | 200,000 | 0% | |||||||||
T Brouwer
|
COO | - | - | 200,000 | $174,746 | - | $174,746 | 200,000 | 0% | |||||||||
S Berriz1 |
SVP Engineering
|
- | - | 200,000 | $174,746 | (200,000) | - | - | - | |||||||||
M Cornelius
|
R&D Director | 100,000 | $162,890 | 100,000 | $87,373 | - | $250,263 | 200,000 | 0% | |||||||||
Total
|
1,100,000
|
$1,791,788
|
1,500,000
|
$1,254,940
|
(200,000)
|
$2,871,982
|
2,400,000
|
1 Sergio Berriz resigned on 19th June 2018 and the SARs issued to him lapsed
The Fair Value of the SARs on Date of Grant is a non-cash accounting expense that will be recognised on a straight-line basis over the vesting period of three years. An expense of $1,019,994 (2017: $321,951) was recorded during the year.
26 Retirement Benefit Obligations
Superannuation commitments:
The Group provides employees with access to external superannuation plans that provide benefits on retirement, resignation, disability or death. This is a defined contribution plan.
36
Notes to the financial statements
For the Year Ended 30 June 2018
27 Earnings per Share
2018
| ||
$000
| ||
EARNINGS RECONCILIATION
|
||
Net profit for the year
|
7,981
| |
Basic and diluted earnings
|
7,981
| |
|
||
2018
| ||
Weighted average number of ordinary shares used as the denominator
|
No.
| |
Number for basic earnings per share
|
146,329,906
| |
Number for diluted earnings per share
|
146,329,906
| |
|
||
2018
| ||
Earnings per share
|
Cents
| |
Basic earnings per share
|
5.45
| |
Diluted earnings per share
|
5.45
|
37
Notes to the financial statements
For the Year Ended 30 June 2018
38
Notes to the financial statements
For the Year Ended 30 June 2018
Closing rate |
Liabilities |
Assets | ||||
2018 |
2018 |
2018 | ||||
$ | $ | $ | ||||
US Dollars |
0.7391 | 19,947,403 | 30,760,434 | |||
EUROS
|
0.6344
|
108,436
|
674,389
|
Profit or Loss
| ||||||||||||
2018
| ||||||||||||
$
| ||||||||||||
US Dollars |
1,625,555 | |||||||||||
EUROS
|
(326,235) |
39
Notes to the financial statements
For the Year Ended 30 June 2018
Other comprehensive
| ||
2018
| ||
$
| ||
New Zealand Dollars
|
26,155 |
40
Notes to the financial statements
For the Year Ended 30 June 2018
Consolidated
| ||
June 2018
| ||
$000
| ||
Secured Bank Loan
|
20,000
| |
Used at reporting date (Note 15)
|
-
| |
Unused at reporting date
|
20,000
| |
Debtor Finance (AUD)
|
-
| |
Surplus debtor receipts (Note 15)
|
-
| |
Unused at reporting date |
- | |
Debtor Finance (USD)
|
-
| |
Used at reporting date (Note 15)
|
-
| |
Unused at reporting date |
- | |
41
Notes to the financial statements
For the Year Ended 30 June 2018
Liquidity and interest risk tables
The following tables detail the Groups remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
Consolidated
| ||||||||||||
Weighted
|
Less than 1 month |
1-3 months |
3 months -1 year |
1-5 years | 5+ years | |||||||
%
|
$000 | $000 | $000 | $000 | $000 | |||||||
2018
|
||||||||||||
Non-interest bearing
|
0.00% | 15,698 | 13,394 | 1,561 | - | - | ||||||
Total
|
15,698 | 13,394 | 1,561 | - | - |
The following tables detail the Groups expected maturity for its non-derivative financial assets. The tables have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the Company/Group anticipates that the cash flow will occur in a different period based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
Weighted
|
Less than 1 month |
1-3 months |
3 months -1 year |
1-5 years | 5+ years | |||||||
%
|
$000 | $000 | $000 | $000 | $000 | |||||||
2018
|
||||||||||||
Non-interest bearing
|
0.00% | 32,127 | 661 | - | - | - | ||||||
Variable interest rate instruments
|
2.17% | 24,201 | 3,148 | - | - | - | ||||||
56,328
|
3,809 | - | - | - |
42
Notes to the financial statements
For the Year Ended 30 June 2018
2018
| ||
$000
| ||
Borrowings
|
-
| |
Cash and cash equivalents
|
27,349
| |
Net Cash
|
27,349
| |
Total equity
|
84,186 | |
Net Borrowings to Equity ratio
|
- | |
43
Notes to the financial statements
For the Year Ended 30 June 2018
Name
|
Officeholder position
|
Appointment date
|
Cease date
| |||
Clint Bell | Company Secretary | 2 July 2018 | ||||
Lucy Xie | Director | 8 August 2019 | ||||
Maurizio Nicolelli | Director | 8 August 2019 | ||||
Scott Bruckner | Director | 1 July 2019 | ||||
Steven Collins | Director | 1 July 2019 | ||||
Peter Beveridge | Company Secretary | 2 July 2018 | ||||
Ken Boundy | Director | 21 November 2018 | ||||
Ken Sheridan | Director | 28 June 2019 | ||||
David Spence | Director | 1 July 2019 | ||||
David Stewart | Director | 1 July 2019 | ||||
Jacqueline Korhonen | Director | 27 August 2018 | 1 July 2019 | |||
Justin Milne | Chairman | 1 July 2019 | ||||
Stuart Black | Director | 1 July 2019 | ||||
Christopher Last | Company Secretary | 5 July 2019 | ||||
Timo Brouwer | Director | 1 July 2019 | 8 August 2019 |
Other than the matters described above, there were no other subsequent events.
30 Segment Reporting
FOR 30 JUNE 2018 | Broadband Business |
Telecommunications |
Consolidated Segment Result | |||
Revenue
|
25,164 | 156,527 | 181,691 | |||
EBITDA
|
1,932 | 18,596 | 20,528 | |||
Depreciation & Amortisation
|
(671) | (10,629) | (11,300) | |||
EBIT
|
1,261 | 7,967 | 9,228 | |||
Finance Income
|
49 | |||||
Finance Cost
|
(15) | |||||
Group Profit before tax
|
9,262 | |||||
Income tax (expense)
|
(1,281) | |||||
Consolidated profit for the period
|
7,981 |
44
Notes to the financial statements
For the Year Ended 30 June 2018
No segment assets and liabilities are disclosed because there is no measure of segment assets or liabilities regularly reported to the chief operating decision maker.
The revenue reported above represents revenue generated from external customers. Intersegment revenues represent transfers between segments, which are eliminated on consolidation.
Revenues from a single customer greater than 10% of total revenues reside in both Broadband & M2M business segment. Segment profit represents the profit earned by each segment without allocation of other income, finance costs and depreciation and amortisation.
BROADBAND
| ||
2018
| ||
$000
| ||
Customer A
|
$3,644 | |
Customer B
|
$3,616 | |
Customer C
|
$3,284 | |
Total Broadband Revenue
|
$25,164 | |
Customer A Share of Total
|
14% | |
Customer B Share of Total
|
14% | |
Customer C Share of Total
|
13% | |
Telecommunications
| ||
2018
| ||
$000
| ||
Customer A
|
$109,254 | |
Customer B
|
$21,856 | |
Total Telecommunications Infrastructure Equipment & IIoT Revenue
|
$156,527 | |
Customer A Share of Total
|
70% | |
Customer B Share of Total
|
14% |
During 2018, $10.2 million or 5.6% (2017: $9.9 million or 9.2%) of the Groups revenues were generated from New Zealand.
45
Notes to the financial statements
For the Year Ended 30 June 2018
31 Parent Entity Disclosures
(a) Financial position
2018
| ||
$000
| ||
ASSETS
|
||
Current assets
|
73,031
| |
Non-current assets
|
52,983
| |
Total assets
|
126,014
| |
| ||
LIABILITIES
|
||
Current liabilities
|
59,363
| |
Non-current liabilities
|
534
| |
Total liabilities |
59,897 | |
Net assets
|
66,117
| |
| ||
EQUITY
|
||
Issued capital
|
65,059
| |
Retained earnings/(accumulated losses)
|
(756)
| |
RESERVES
|
||
General reserves
|
1,987
| |
Foreign exchange hedging reserve
|
(173)
| |
TOTAL EQUITY
|
66,117
|
(b) Financial performance
2018
| ||
$000
| ||
Profit for the year
|
5,517
| |
Other comprehensive Income/(loss)
|
(173)
| |
TOTAL COMPREHENSIVE INCOME/(LOSS)
|
5,344
|
(c) Commitments for the acquisition of property, plant and equipment by the parent entity
2018
| ||
$000
| ||
FINANCE LEASE LIABILITIES
|
||
Not longer than 1 year
|
-
| |
Longer than 1 year and not longer than 5 years
|
-
| |
- |
Finance leases relate to a motor vehicle. The Group has the option to purchase the motor vehicle at the conclusion of the lease arrangements. The Groups obligation under finance leases are secured by the lessors title to the leased assets.
46
Notes to the financial statements
For the Year Ended 30 June 2018
(d) Subsidiaries
Percentage
| ||||
Name of subsidiary |
Country of incorporation |
% | ||
NetComm Wireless (NZ) Limited
|
New Zealand
|
100 | ||
Call Direct Cellular Solutions 2003 Pty Ltd
|
Australia
|
100 | ||
C10 Communications Pty Ltd
|
Australia
|
100 | ||
NetComm Wireless (Canada) Limited
|
Canada
|
100 | ||
NetComm Wireless Inc.
|
United States of America
|
100 | ||
NetComm Wireless (UK) Limited
|
United Kingdom
|
100 |
32 Company Details
The registered office and principal place of business of the Company is:
NetComm Wireless Limited
Level 5, 18-20 Orion Road,
Lane Cove, NSW 2066
47
Directors Declaration
In the opinion of the directors of NetComm Wireless Limited:
a. | The consolidated financial statements and notes of NetComm Wireless Limited give a true and fair view of its financial position as at 30 June 2018 and of its performance for the financial year ended on that date and comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. |
b. | There are reasonable grounds to believe that NetComm Wireless Limited will be able to pay its debts as and when they become due and payable. |
Signed in accordance with a resolution of the Directors
On behalf of the Directors
|
Steve Collins |
Director |
15 August 2019 |
48
Report of Independent Certified Public Accountant
Board of Directors of
NetComm Wireless Limited
We have audited the accompanying consolidated financial statements of NetComm Wireless Limited and subsidiaries, which comprise the consolidated statement of financial position as of June 30, 2018, and the related consolidated statement of profit or loss and other comprehensive income, changes in equity, and consolidated statement of cash flow for the year then ended, and the related notes to the financial statements.
Managements responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Qualified Opinion
International Financial Reporting Standards as issued by the International Accounting Standards Board require that financial statements be presented with comparative financial information. These financial statements do not include comparative financial information for the year ended June 30, 2017.
49
Qualified Opinion
In our opinion, except for the matter described in the Basis for Qualified Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of NetComm Wireless Limited as of June 30, 2018, and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.
/s/ Grant Thornton Audit Pty Ltd
Grant Thornton Audit Pty Ltd
Chartered Accountants
Sydney, 15 August 2019
50
Exhibit 99.2
NetComm Wireless Limited
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the half year ended 31 December 2018
31 Dec 2018 | 31 Dec 2017 | |||||
Note | $000 | $000 | ||||
Revenue from the sale of goods |
94,307 | 88,580 | ||||
Change in inventories of finished goods and work in progress |
20,464 | 476 | ||||
Raw materials consumed |
(79,014) | (56,839) | ||||
Employee benefits |
(16,751) | (15,385) | ||||
Administrative expenses |
3a, 3b | (6,861) | (4,013) | |||
Other expenses |
3c | (3,831) | (3,618) | |||
Depreciation and amortisation expense |
(7,429) | (5,815) | ||||
OPERATING INCOME |
885 | 3,386 | ||||
Finance income |
37 | 41 | ||||
Finance costs |
(7) | (7) | ||||
NET FINANCE INCOME |
30 | 34 | ||||
PROFIT BEFORE INCOME TAX |
915 | 3,420 | ||||
Income tax benefit |
1,394 | 255 | ||||
PROFIT AFTER INCOME TAX |
2,309 | 3,675 | ||||
Attributable to equity holders of the parent |
2,309 | 3,675 | ||||
| ||||||
|
||||||
OTHER COMPREHENSIVE INCOME |
||||||
ITEMS THAT MAY BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS: |
||||||
Exchange differences arising on translation of foreign operations |
131 | (49) | ||||
Net change in the fair value of cash flow hedges recognised in equity |
(188) | 157 | ||||
Income tax relating to components of other comprehensive income |
175 | (47) | ||||
Other comprehensive income for the period (net of tax) |
118 | 61 | ||||
TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE PERIOD |
2,427 | 3,736 | ||||
Attributable to equity holders of the parent |
2,427 | 3,736 | ||||
| ||||||
|
||||||
EARNINGS PER SHARE: |
||||||
Basic earnings per share (cents per share) |
1.58 | 2.51 | ||||
Diluted earnings per share (cents per share) |
1.58 | 2.51 |
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
1
Consolidated Statement of Financial Position
As at 31 December 2018
31 Dec 2018 | 30 June 2018 | |||||
Note | $000 | $000 | ||||
ASSETS |
||||||
Current assets |
||||||
Cash and cash equivalents |
17,362 | 27,349 | ||||
Trade and other receivables |
23,717 | 32,757 | ||||
Inventories |
39,337 | 18,873 | ||||
Other assets |
2,923 | 2,395 | ||||
Total current assets |
83,339 | 81,374 | ||||
|
||||||
Non-current assets |
||||||
Property, plant and equipment |
12,363 | 11,183 | ||||
Contract assets |
1,922 | 2,600 | ||||
Deferred tax assets |
8,676 | 7,271 | ||||
Goodwill |
896 | 896 | ||||
Other intangible assets |
33,718 | 29,790 | ||||
Total non-current assets |
57,575 | 51,740 | ||||
TOTAL ASSETS |
140,914 | 133,114 | ||||
|
||||||
LIABILITIES |
||||||
Current liabilities |
||||||
Trade and other payables |
48,144 | 42,943 | ||||
Contract liabilities |
248 | - | ||||
Employee benefit |
2,515 | 2,502 | ||||
Income tax liability |
327 | 356 | ||||
Other current liabilities |
2,217 | 2,593 | ||||
Total current liabilities |
53,451 | 48,394 | ||||
|
||||||
Non-current liabilities |
||||||
Provisions |
772 | 534 | ||||
Total non-current liabilities |
772 | 534 | ||||
TOTAL LIABILITIES |
54,223 | 48,928 | ||||
NET ASSETS |
86,691 | 84,186 | ||||
| ||||||
|
||||||
EQUITY |
||||||
Issued capital |
5 | 65,059 | 65,059 | |||
Reserves |
2,531 | 2,335 | ||||
Retained earnings |
19,101 | 16,792 | ||||
TOTAL EQUITY |
86,691 | 84,186 | ||||
|
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
2
Consolidated Statement of Changes in Equity
For the half year ended 31 December 2018
Ordinary Shares |
Retained Earnings |
Foreign Currency Translation Reserve |
Foreign Exchange Hedging Reserve |
Options and Share Rights Reserve |
Total | |||||||||
Note | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||
BALANCE AT 1 JULY 2018 |
65,059 | 16,792 | 99 | (173) | 2,409 | 84,186 | ||||||||
Profit for the period |
- | 2,309 | - | - | - | 2,309 | ||||||||
Exchange difference on translation of foreign operations |
- | - | 131 | - | - | 131 | ||||||||
Foreign exchange hedging (Net of tax) |
- | - | - | (13) | - | (13) | ||||||||
Total comprehensive income for the period |
- | 2,309 | 131 | (13) | - | 2,427 | ||||||||
|
||||||||||||||
Recognition of movement in Share Appreciation Rights |
- | - | - | - | 78 | 78 | ||||||||
BALANCE AT 31 DECEMBER 2018 |
65,059 | 19,101 | 230 | (186) | 2,487 | 86,691 | ||||||||
|
||||||||||||||
Ordinary Shares |
Retained Earnings |
Foreign Currency Translation Reserve |
Foreign Exchange Hedging Reserve |
Options and Share Rights Reserve |
Total | |||||||||
Note | $000 | $000 | $000 | $000 | $000 | $000 | ||||||||
BALANCE AT 1 JULY 2017 |
65,059 | 8,811 | 319 | - | 1,389 | 75,578 | ||||||||
Loss for the period |
- | 3,675 | - | - | - | 3,675 | ||||||||
Exchange difference on translation of foreign operations |
- | - | (49) | - | - | (49) | ||||||||
Foreign exchange hedging (Net of tax) |
- | - | - | 111 | - | 111 | ||||||||
Total comprehensive loss for the period |
- | 3,675 | (49) | 111 | - | 3,737 | ||||||||
|
||||||||||||||
Recognition of issuance of Share Appreciation Rights |
- | - | - | - | 528 | 528 | ||||||||
BALANCE AT 31 DECEMBER 2017 |
65,059 | 12,486 | 270 | 111 | 1,917 | 79,843 |
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
3
Consolidated Statement of Cash Flows
For the half year ended 31 December 2018
31 Dec 2018 | 31 Dec 2017 | |||||
Note | $000 | $000 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||
Receipts from customers |
113,592 | 86,836 | ||||
Payments to suppliers and employees |
(111,258) | (87,121) | ||||
Finance costs |
(7) | (7) | ||||
Income taxes paid |
(413) | (145) | ||||
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES |
1,914 | (437) | ||||
|
||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||
Interest received |
37 | 41 | ||||
Acquisition of property, plant and equipment |
(3,701) | (1,017) | ||||
Acquisition of intangible assets |
(8,237) | (7,561) | ||||
NET CASH USED IN INVESTING ACTIVITIES |
(11,901) | (8,537) | ||||
|
||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||
Repayment of borrowings |
- | (13) | ||||
NET CASH USED IN FINANCING ACTIVITIES |
- | (13) | ||||
|
||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS HELD |
(9,987) | (8,987) | ||||
Cash and cash equivalents at beginning of financial period |
27,349 | 22,125 | ||||
CASH AND CASH EQUIVALENTS AT END OF FINANCIAL PERIOD |
17,362 | 13,138 |
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
4
Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
5
Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
6
Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 2 Segment Information (continued)
The following is an analysis of the Groups revenue and results by reportable operating segment for the periods under review:
Broadband | Teleco | Consolidated | ||||
Business | Infrastructure | Segment Result | ||||
Equipment & | ||||||
For 31 December 2018 |
IIOT | |||||
Revenue |
10,680 | 83,627 | 94,307 | |||
Depreciation & Amortisation |
(345) | (7,084) | (7,429) | |||
Operating Income |
(805) | 1,690 | 885 | |||
Finance Income |
- | - | 37 | |||
Finance Cost |
- | - | (7) | |||
GROUP PROFIT BEFORE TAX |
- | - | 915 | |||
Income tax benefit |
- | - | 1,394 | |||
CONSOLIDATED PROFIT FOR THE PERIOD |
- | - | 2,309 | |||
|
||||||
Broadband | Teleco | Consolidated | ||||
Business | Infrastructure | Segment Result | ||||
Equipment & | ||||||
For 31 December 2017 |
IIOT | |||||
Revenue |
13,465 | 75,115 | 88,580 | |||
EBITDA |
1,027 | 8,174 | 9,201 | |||
Depreciation & Amortisation |
(270) | (5,545) | (5,815) | |||
EBIT |
757 | 2,629 | 3,386 | |||
Finance Income |
- | - | 41 | |||
Finance Cost |
- | - | (7) | |||
GROUP PROFIT BEFORE TAX |
- | - | 3,420 | |||
Income tax benefit |
- | - | 255 | |||
CONSOLIDATED PROFIT FOR THE PERIOD |
- | - | 3,675 |
The revenue reported above represents revenue generated from external customers. Intersegment revenues represent transfers between segments which are eliminated on consolidation.
No segment assets and liabilities are disclosed because there is no measure of segment assets or liabilities regularly reported to the chief decision maker.
7
Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 3 Expenses
Included in expenses are the following specific items.
(a) Distribution and selling expenses
31 Dec 2018 | 31 Dec 2017 | |||
$000 | $000 | |||
Distribution and selling costs |
2,183 | 698 | ||
TOTAL DISTRIBUTION AND SELLING COSTS |
2,183 | 698 | ||
(b) Administrative expenses
| ||||
31 Dec 2018 | 31 Dec 2017 | |||
$000 | $000 | |||
Insurance expenses |
804 | 663 | ||
Legal and professional fees |
871 | 855 | ||
Travel expenses |
1,518 | 1,232 | ||
Contractor costs |
1,485 | 565 | ||
TOTAL ADMINISTRATIVE EXPENSES |
4,678 | 3,315 | ||
(c) Other expenses
| ||||
31 Dec 2018 | 31 Dec 2017 | |||
$000 | $000 | |||
Advertising and marketing |
665 | 457 | ||
Property expenses |
1,690 | 1,475 | ||
Other expense |
1,476 | 1,686 | ||
TOTAL OTHER EXPENSES |
3,831 | 3,618 |
Note 4 Dividends
No dividends were paid, recommended for payment nor declared during the reporting period.
8
Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 5 Issuances, Repurchases and Repayments of Equity Securities
Issued Capital at 31 December 2018 amounted to $65,058,928 (146,329,906 ordinary shares). There were no issues, repurchases and repayments of debt securities or equity securities in the half year.
Note 6 Events Occurring After Reporting Date
On the 22nd February the Group announced its proposed acquisition by Casa Systems Inc. for a cash consideration of $1.10 per share and entered into a scheme of arrangement with Casa. Following the successful shareholder vote on the 18th June 2019 and subsequent court approval on the 20th June 2019 the scheme became effective. Implementation of scheme occurred on 1 July 2019 and following that the Group was removed from the official list of Australian Stock Exchange Limited on 2 July 2019.
Due to the acquisition and de-listing of the company from the ASX the Group had to escalate a charge of $0.4 million in relation to Share Appreciation Rights (SARs) issued to its Key Management Personnel as the SARs were cancelled.
During the second half of financial year 2019, the Group recorded an impairment provision of $2.8 million against the carrying values of its capitalised development assets which are classified as intangibles. The impairment related to a specific pre-launch project for which the Group couldnt materialise orders which were contractually committed and hence deemed the asset impaired. Casa Systems, the parent company of the Group (US based and NASDAQ listed entity) applies US GAAP and under its accounting policies all development costs are expensed.
The Group had the following director appointments and retirements since the reporting date and to the date of this report:
Name
|
Officeholder position
|
Appointment date
|
Cease date
| |||
Clint Bell |
Company Secretary | 2 July 2018 | ||||
Lucy Xie |
Director | 8 August 2019 | ||||
Maurizio Nicolelli |
Director | 8 August 2019 | ||||
Scott Bruckner |
Director | 1 July 2019 | ||||
Steven Collins |
Director | 1 July 2019 | ||||
Peter Beveridge |
Company Secretary | 2 July 2018 | ||||
Ken Boundy |
Director | 21 November 2018 | ||||
Ken Sheridan |
Director | 28 June 2019 | ||||
David Spence |
Director | 1 July 2019 | ||||
David Stewart |
Director | 1 July 2019 | ||||
Jacqueline Korhonen |
Director | 27 August 2018 | 1 July 2019 | |||
Justin Milne |
Chairman | 1 July 2019 | ||||
Stuart Black |
Director | 1 July 2019 | ||||
Christopher Last |
Company Secretary | 5 July 2019 | ||||
Timo Brouwer |
Director | 1 July 2019 | 8 August 2019 |
Other than the matters described above, there were no other subsequent events.
Note 7 Contingent Liabilities
The Group has provided certain guarantees totalling $6,754,826 for rental and performance bonds as at 31 December 2018 (30 June 2018: $3,790,328).
There were no other contingent liabilities in existence at 31 December 2018 requiring disclosure in the financial statements.
Non quantifiable contingencies
At any time during the normal course of business the Groups entities can be subject to claims or threatened claims none of which were material to be reported in the financial statements.
9
Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 8 Acquisition of Subsidiary
There were no acquisitions of controlled entities during the period.
Note 9 Fair Value Hierarchy
IFRS 13 requires disclosure of fair value measurements by level of the fair value hierarchy. NetComm Wireless Limiteds cash flow hedges are classed as level 2 as the inputs for fair value measurement are based on observable market data (observable inputs).
The Groups financial assets and financial liabilities measured and recognised at fair value at 31 December 2018 on a recurring basis are as follows:
Forward Exchange Options USD 2,000,000 Forward
Exchange Contracts USD 8,190,610
Measurement of fair value of forward contracts
The Groups foreign currency forward contracts are not traded in active markets. The fair values of most of these contracts are estimated using a valuation technique that maximises the use of observable market inputs, e.g. market exchange and interest rates and are included in Level 2 of the fair value hierarchy.
The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis as at 31 December 2018.
10
Notes to the Consolidated Financial Statements
For the half year ended 31 December 2018
Note 10 Related Party Transactions
In prior year, NetComm Wireless Limited executed an agreement with nbn for the supply of Distribution Point Units (DPUs) in the nbn FTTC network. Mr Justin Milne is the Chairman of NetComm Wireless Limited and a Director of the nbn. Mr Milne recused himself from all Board discussions in relation to the execution of this agreement in line and accordance with the protocol the Group has in place.
The following aggregate receipts for goods and services occurred with the above party:
31 Dec 2018 | 31 Dec 2017 | |||||
$000 | $000 | |||||
RECEIPTS FOR GOODS & SERVICES (EXCLUDING GST): |
| |||||
Receipts for goods and services from entities with common key management personnel |
52,167 | 45,424 | ||||
Note 11 Cash Flow Information
Reconciliation of cash flow from operations with profit/(loss) after income tax.
|
| |||||
31 Dec 2018 | 31 Dec 2017 | |||||
$000 | $000 | |||||
PROFIT FOR THE HALF YEAR |
2,309 | 3,675 | ||||
|
||||||
NON-CASH FLOWS IN PROFIT: |
| |||||
Depreciation and amortisation |
7,429 | 5,815 | ||||
Interest income disclosed as investing cash flow |
(37) | (41) | ||||
Change in the fair value of cash flow hedges |
(13) | 111 | ||||
Foreign exchange translation differences |
131 | (49) | ||||
Share right reserve |
78 | 528 | ||||
|
||||||
CHANGES IN OPERATING ASSETS AND LIABILITIES: |
| |||||
Decrease/(Increase) in trade and other receivables |
9,040 | (9,551) | ||||
(Increase)/Decrease in inventories |
(20,464) | (475) | ||||
(Increase)/Decrease in other assets |
(528) | 2,619 | ||||
(Increase)/Decrease in deferred tax assets |
(1,405) | (484) | ||||
Increase/(Decrease) in trade and other payables |
5,447 | (4,250) | ||||
(Decrease)/Increase in other liabilities |
(295) | 1,574 | ||||
(Decrease)/Increase in income tax liability |
(29) | 136 | ||||
Increase/(Decrease) in provisions |
251 | (45) | ||||
NET CASH PROVIDED BY/(USED IN) FROM OPERATING ACTIVITIES |
1,914 | (437) |
11
Directors Declaration
In the opinion of the Directors:
| the attached financial statements and notes comply with IAS 34 Interim Financial Reporting as issued by International Accounting Standards Board; |
| the attached financial statements and notes give a true and fair view of the Groups financial position as at 31 December 2018 and of its performance for the financial half-year ended on that date; and |
| There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. |
Signed in accordance with a resolution of directors.
On behalf of the Directors
Steve Collins
Director
|
Sydney, 15 August 2019 |
12
Exhibit 99.3
INDEX TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2019
Unaudited Pro Forma Condensed Combined Statement of Operations for the twelve months ended December 31, 2018
Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended March 31, 2019
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
CASA SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined balance sheet as of March 31, 2019 is based on the historical balance sheets of Casa Systems, Inc. (the Company) and NetComm Wireless Limited (NetComm) and have been prepared to reflect the acquisition and related cash payments as if the acquisition had been consummated on March 31, 2019. The unaudited pro forma condensed combined statements of operations for the twelve months ended December 31, 2018 combines the Companys and NetComms historical consolidated statements of operations as if the acquisition had been consummated on January 1, 2018. The unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2019 combines the Companys consolidated statements of operation for the three months ended March 31, 2019 with NetComms consolidated statement of operations for the three months ended December 31, 2018 as if the acquisition had been consummated on January 1, 2018.
Both the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2019 and for the twelve months ended December 31, 2018 include NetComms consolidated statement of operations for the three-month period ended December 31, 2018. Total revenues and net income for the three months ended December 31, 2018 are reflected in the historical financial statements as presented in the interim unaudited pro forma condensed combined statement of operations below.
There were no unusual charges or adjustments to NetComms gross profit, operating expenses or operating income for the three months ended March 31, 2019.
The unaudited pro forma combined financial information is presented for informational purposes only and is not intended to represent or be indicative of the results of operations that would have been achieved if the acquisition had been completed on an earlier date, and should not be taken as representative of future consolidated results of operations or financial condition of the Company. Preparation of the unaudited pro forma combined financial information for all periods presented required management to make certain judgments and estimates to determine the pro forma adjustments, such as purchase accounting adjustments, which include, among others, amortization charges from acquired intangible assets. The unaudited pro forma combined financial information also reflects adjustments to certain financial statement line items included in NetComms historical presentation to align with the corresponding financial statement line items included in the Companys historical presentation. The reclassifications had no impact on the historical results of operations, net income, total assets, liabilities, or stockholders equity reported by the Company or NetComm.
The unaudited pro forma combined financial information should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and NetComm (included in Exhibits 99.1 and 99.2) and other financial information pertaining to the Company included in its respective annual reports on Form 10-K and quarterly reports on Form 10-Q.
CASA SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 31, 2019
(in thousands, except per share amounts)
Casa Systems March 31, 2019 |
NetComm March 31, 2019 |
Pro Forma Adjustments (Note 4) |
Pro Forma Combined |
|||||||||||||||
Assets |
||||||||||||||||||
Current assets: |
||||||||||||||||||
Cash and cash equivalents |
$ | 264,411 | $ | 9,247 | $ | (123,919 | ) | (g), (l) |
$ | 149,739 | ||||||||
Accounts receivable, net |
50,091 | 17,921 | 1,646 | (n) |
69,658 | |||||||||||||
Inventory |
67,773 | 30,110 | (7,010 | ) | (n) |
90,873 | ||||||||||||
Prepaid expenses and other current assets |
4,979 | | 2,224 | (n) |
7,203 | |||||||||||||
Prepaid income taxes |
1,636 | 167 | (167 | ) | (n) |
1,636 | ||||||||||||
Other assets |
| 1,610 | (1,610 | ) | (a) |
| ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
388,890 | 59,055 | (128,836 | ) | 319,109 | |||||||||||||
Property and equipment, net |
29,482 | 8,445 | (435 | ) | (n) |
37,492 | ||||||||||||
Goodwill |
| 635 | 34,880 | (i) |
35,515 | |||||||||||||
Other intangible assets |
| | 44,000 | (j) |
44,000 | |||||||||||||
Contract assets |
| 1,122 | (1,122 | ) | (a) |
| ||||||||||||
Accounts receivable, net of current portion |
1,997 | | | 1,997 | ||||||||||||||
Deferred tax assets |
23,703 | 6,225 | (2,237 | ) | (d), (n) |
27,691 | ||||||||||||
Other assets |
3,694 | 24,367 | (24,354 | ) | (d), (n) |
3,707 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 447,766 | $ | 99,849 | $ | (78,104 | ) | $ | 469,511 | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||
Current liabilities: |
||||||||||||||||||
Accounts payable |
$ | 17,814 | $ | 23,764 | $ | (14,940 | ) | (n) |
$ | 26,638 | ||||||||
Accrued expenses and other current liabilities |
23,088 | | 13,884 | (n) |
36,972 | |||||||||||||
Accrued income taxes |
1,568 | | 282 | (n) |
1,850 | |||||||||||||
Deferred revenue |
31,319 | | | 31,319 | ||||||||||||||
Employee benefit |
| 2,148 | (2,148 | ) | (a) |
| ||||||||||||
Other current liabilities |
| 2,911 | (2,911 | ) | (a) |
| ||||||||||||
Current portion of long-term debt, net of unamortized debt issuance costs |
2,184 | 7,481 | (3,974 | ) | (n) |
5,691 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total current liabilities |
75,973 | 36,304 | (9,807 | ) | 102,470 | |||||||||||||
Accrued expenses and other current liabilities, net of current portion |
| | 489 | (n) |
489 | |||||||||||||
Accrued income taxes, net of current portion |
5,124 | | | 5,124 | ||||||||||||||
Deferred revenue, net of current portion |
8,504 | | | 8,504 | ||||||||||||||
Provisions |
| 547 | (547 | ) | (a) |
- | ||||||||||||
Long-term debt, net of current portion and unamortized debt issuance costs |
292,731 | | | 292,731 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities |
382,332 | 36,851 | (9,865 | ) | 409,318 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Stockholders equity: |
||||||||||||||||||
Common stock |
84 | 52,773 | (52,773 | ) | (k) |
84 | ||||||||||||
Additional paid-in capital |
159,992 | | | 159,992 | ||||||||||||||
Reserves |
| (4,589 | ) | 4,589 | (k) |
| ||||||||||||
Accumulated other comprehensive loss |
(445 | ) | | | (445 | ) | ||||||||||||
Accumulated deficit |
(94,197 | ) | 14,814 | (20,055 | ) | (k), (l) |
(99,438 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity |
65,434 | 62,998 | (68,239 | ) | 60,193 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and stockholders equity |
$ | 447,766 | $ | 99,849 | $ | (78,104 | ) | $ | 469,511 | |||||||||
|
|
|
|
|
|
|
|
See accompanying notes to the unaudited pro forma combined financial information.
CASA SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the twelve months ended December 31, 2018
(in thousands, except per share amounts)
Casa Systems December 31, 2018 |
NetComm December 31, 2018 |
Pro Forma Adjustments (Note 4) |
Pro Forma Combined |
|||||||||||||||
Revenue: |
||||||||||||||||||
Product |
$ | 256,989 | $ | | $ | 136,850 | (a) | $ 393,839 | ||||||||||
Service |
40,138 | | 2,818 | (a) | 42,956 | |||||||||||||
Revenue from the sale of goods |
| 139,668 | (139,668 | ) | (a) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total revenue |
297,127 | 139,668 | | 436,795 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Cost of revenue: |
||||||||||||||||||
Product |
74,350 | | 93,222 | (a), (b), (o) | 167,572 | |||||||||||||
Service |
4,811 | | 765 | (a) | 5,576 | |||||||||||||
Change in inventories of finished goods and work in progress |
| (16,116 | ) | 16,116 | (a) | | ||||||||||||
Raw materials consumed |
| 102,824 | (102,824 | ) | (a) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total cost of revenue |
79,161 | 86,708 | 7,279 | 173,148 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
217,966 | 52,960 | (7,279 | ) | 263,647 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating expenses: |
||||||||||||||||||
Research and development |
70,974 | | 23,869 | (a), (d) | 94,843 | |||||||||||||
Selling, general and administrative |
68,026 | | 28,930 | (a), (c), (d), (m), (e) | 96,956 | |||||||||||||
Employee benefits |
| 23,571 | (23,571 | ) | (a) | | ||||||||||||
Administrative expenses |
| 9,184 | (9,184 | ) | (a) | | ||||||||||||
Other expenses |
| 5,597 | (5,597 | ) | (a) | | ||||||||||||
Depreciation and amortization expense |
| 9,612 | (9,612 | ) | (a) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
139,000 | 47,964 | 4,835 | 191,799 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income from operations |
78,966 | 4,996 | (12,114 | ) | 71,848 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense): |
||||||||||||||||||
Interest income |
6,259 | 34 | | 6,293 | ||||||||||||||
Interest expense |
(19,763 | ) | (11 | ) | | (19,774 | ) | |||||||||||
Gain (loss) on foreign currency, net |
(911 | ) | | 429 | (a), (f) | (482 | ) | |||||||||||
Other income, net |
1,387 | | (20 | ) | (a) | 1,367 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total other income (expense), net |
(13,028 | ) | 23 | 409 | (12,596 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income before benefit from income taxes |
65,938 | 5,019 | (11,705 | ) | 59,252 | |||||||||||||
Benefit from income taxes |
(7,068 | ) | 106 | (3,510 | ) | (h) | (10,472 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income |
$ | 73,006 | $ | 4,913 | $ | (8,195 | ) | $ | 69,724 | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income per share attributable to common stockholders: |
||||||||||||||||||
Basic |
$ | 0.87 | $ | 0.83 | ||||||||||||||
|
|
|
|
|||||||||||||||
Diluted |
$ | 0.79 | $ | 0.76 | ||||||||||||||
|
|
|
|
|||||||||||||||
Weighted-average shares used to compute net income per share attributable to common stockholders: |
||||||||||||||||||
Basic |
83,539 | 83,539 | ||||||||||||||||
|
|
|
|
|||||||||||||||
Diluted |
91,877 | 91,877 | ||||||||||||||||
|
|
|
|
See accompanying notes to the unaudited pro forma combined financial information.
CASA SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the three months ended March 31, 2019
(in thousands, except per share amounts)
Casa Systems Three Months Ended March 31, 2019 |
NetComm Three Months Ended December 31, 2018 |
Pro Forma Adjustments (Note 4) |
Pro Forma Combined |
|||||||||||||||
Revenue: |
||||||||||||||||||
Product |
$ | 26,653 | $ | | $ | 34,494 | (a) | $ | 61,147 | |||||||||
Service |
8,833 | | 714 | (a) | 9,547 | |||||||||||||
Revenue from the sale of goods |
| 35,208 | (35,208 | ) | (a) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total revenue |
35,486 | 35,208 | | 70,694 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Cost of revenue: |
||||||||||||||||||
Product |
9,429 | | 24,238 | (a), (b), (o) | 33,667 | |||||||||||||
Service |
1,560 | | 188 | (a) | 1,748 | |||||||||||||
Change in inventories of finished goods and work in progress |
| (12,647 | ) | 12,647 | (a) | | ||||||||||||
Raw materials consumed |
| 34,447 | (34,447 | ) | (a) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total cost of revenue |
10,989 | 21,800 | 2,626 | 35,415 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
24,497 | 13,408 | (2,626 | ) | 35,279 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Operating expenses: |
||||||||||||||||||
Research and development |
18,405 | | 6,462 | (a), (d) | 24,867 | |||||||||||||
Selling, general and administrative |
20,193 | | 6,524 | (a), (d), (e), (m) | 26,717 | |||||||||||||
Employee benefits |
| 6,393 | (6,393 | ) | (a) | | ||||||||||||
Administrative expenses |
| 3,360 | (3,360 | ) | (a) | | ||||||||||||
Other expenses |
| 1,600 | (1,600 | ) | (a) | | ||||||||||||
Depreciation and amortization expense |
| 3,097 | (3,097 | ) | (a) | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
38,598 | 14,450 | (1,464 | ) | 51,584 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Loss from operations |
(14,101 | ) | (1,042 | ) | (1,162 | ) | (16,305 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Other income (expense): |
||||||||||||||||||
Interest income |
1,652 | 11 | | 1,663 | ||||||||||||||
Interest expense |
(5,197 | ) | (1 | ) | | (5,198 | ) | |||||||||||
Gain (loss) on foreign currency, net |
(92 | ) | | (817 | ) | (a), (f) | (909 | ) | ||||||||||
Other income, net |
229 | | | 229 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total other income (expense), net |
(3,408 | ) | 10 | (817 | ) | (4,215 | ) | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Loss before benefit from income taxes |
(17,509 | ) | (1,032 | ) | (1,979 | ) | (20,520 | ) | ||||||||||
Benefit from income taxes |
(2,170 | ) | (1,338 | ) | (594 | ) | (h) | (4,102 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
$ | (15,339 | ) | $ | 306 | $ | (1,385 | ) | $ | (16,418 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||||
Net loss per share attributable to common stockholders: |
||||||||||||||||||
Basic and diluted |
$ | (0.18 | ) | $ | (0.20 | ) | ||||||||||||
|
|
|
|
|||||||||||||||
Weighted-average shares used to compute net loss per share attributable to common stockholders: |
||||||||||||||||||
Basic and diluted |
83,323 | 83,323 | ||||||||||||||||
|
|
|
|
See accompanying notes to the unaudited pro forma combined financial information.
CASA SYSTEMS, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. | Basis of Presentation |
On July 1, 2019, pursuant to the terms of the Scheme Implementation Deed (the Scheme, or the Agreement) dated February 21, 2019, the Company completed its acquisition of NetComm in exchange for cash consideration of approximately $161.0 million Australian dollars, or AUD ($112.7 million United States dollars, or USD, based on an exchange rate of USD $0.700 per AUD $1.00 on July 1, 2019), and NetComm became a wholly-owned subsidiary of the Company (the Acquisition).
The accompanying unaudited pro forma condensed combined financials statements (the Pro Forma Financial Statements) present the pro forma consolidated financial position and results of operations of the combined company based upon the historical financial statements of the Company and NetComm, after giving effect to the Acquisition and adjustments described in these footnotes, and are intended to reflect the impact of the Acquisition on the Company.
The financial data in the Pro Forma Financial Statements are presented in U.S. Dollars and have been prepared in accordance with the Companys accounting policies that conform to U.S. GAAP and the rules and regulations of SEC Regulation S-X.
The unaudited pro forma condensed combined balance sheet as of March 31, 2019 is based on the historical condensed consolidated balance sheets of the Company and NetComm after giving effect to the Acquisition as if it had occurred on March 31, 2019, including any fair value adjustments required. Similarly, the unaudited pro forma condensed statements of operations for the three months ended March 31, 2019 and the year ended December 31, 2018 are based on the historical consolidated statements of operations of the Company and NetComm after giving effect to the Acquisition as if it had occurred on January 1, 2018.
The historical consolidated financial information has been adjusted in the Pro Forma Financial Statements to give effect to events that are (1) directly attributable to the acquisition, (2) factually supportable and (3) with respect to the unaudited pro forma condensed combined statements of operations, are expected to have a continuing impact on the results of operations.
The Pro Forma Financial Statements do not reflect the expected realization of cost savings following the Acquisition or anticipated costs the Company will incur to realize such synergies. These savings are expected to result from streamlining of product development initiatives, alignment of overlapping functional areas, such as sales and marketing and certain general and administrative functions. Although management expects that costs savings will result from the Acquisition, there can be no assurance that these cost savings will be achieved.
The Acquisition was accounted for under the acquisition method of accounting for business combinations pursuant to Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805). ASC 805 requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair market values as of the date of completion of the merger. ASC 820, Fair Value Measurements (ASC 820), which establishes a framework for measuring fair values, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The Companys cost to acquire NetComm has been allocated to the assets acquired and liabilities assumed based upon the respective preliminary estimate of fair values as of the date of the merger using assumptions that the Companys management believes are reasonable given the information currently available. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. Deferred tax assets and liabilities were recorded under U.S. GAAP based on the Companys preliminary determination of the tax basis in those items, taking into account applicable Australian tax principles. The
Company is currently in the process of finalizing this analysis and the resulting final balances may differ materially from the balances shown in the accompanying Pro Forma Financial Statements. The excess of the purchase price over the estimated amounts of net assets of $35.5 million as of the effective date of the Acquisition was allocated to goodwill, in accordance with the accounting guidance. The amounts allocated to acquired assets and assumed liabilities in the Pro Forma Financial Statements are based on managements preliminary valuation estimates. Definitive allocations are being performed and finalized based on certain valuations and other studies performed by the Company with the services of outside valuation specialists. Accordingly, the purchase price allocation adjustments and related amortization reflected in the foregoing Pro Forma Financial Statements are preliminary, have been made solely for the purpose of preparing these statements and are subject to revision based on a final determination of fair value.
Acquisition-related transaction costs (e.g., investment banker, advisory, legal, valuation, and other professional fees) are not included as a component of consideration transferred but are required to be expensed as incurred. The unaudited pro forma condensed combined balance sheet reflects $6.6 million of total acquisition-related transaction costs of both companies, of which $5.2 million was incurred subsequent to the unaudited pro forma condensed combined balance sheet date and is reflected as a reduction of cash with a corresponding increase in accumulated deficit. These costs are not presented in the unaudited pro forma condensed combined statements of operations because they will not have a continuing impact on the combined results.
2. | Preliminary Purchase Price Allocation |
The Company completed the acquisition of NetComm for approximately AUD $161.0 million (USD $112.7 million, based on an exchange rate of USD $0.700 per AUD $1.00 on July 1, 2019) using cash on hand. NetComms cash and cash equivalents balance at the acquisition date was $3.3 million, as such, total consideration net of cash acquired is $109.4 million. NetComms existing debt of approximately $3.5 million as of the acquisition date has been accounted for as an assumed liability.
For the purpose of this pro forma analysis, the preliminary acquisition accounting is as follows:
(In thousands) | ||||
Assets acquired |
||||
Fair value of tangible assets: |
||||
Accounts receivable |
$ | 19,567 | ||
Inventory |
23,100 | |||
Prepaid expenses and other current assets |
2,224 | |||
Property, plant and equipment |
8,010 | |||
Deferred tax assets |
3,988 | |||
Other assets |
13 | |||
Goodwill |
35,515 | |||
Identifiable intangible assets |
44,000 | |||
|
|
|||
Total assets acquired |
$ | 136,417 | ||
|
|
|||
Liabilities assumed |
||||
Accounts payable |
$ | (8,824 | ) | |
Accrued expenses |
(13,884 | ) | ||
Accrued income taxes |
(282 | ) | ||
Current potion of long-term debt |
(3,507 | ) | ||
Other liabilities |
(489 | ) | ||
|
|
|||
Total liabilities assumed |
$ | (26,986 | ) | |
|
|
|||
Net assets acquired |
$ | 109,431 | ||
|
|
Tangible assets and assumed liabilities were valued at their respective carrying amounts recorded by NetComm, as the Company believes that their carrying values approximate their values at the acquisition date.
Inventory at the acquisition date was adjusted to its estimated fair value using the Comparable Sales Method for work in process (WIP) and finished goods, whereby estimated selling prices are reduced by the sum of any cost to complete, cost of disposal, holding costs and a reasonable profit allowance for the Company. The fair
value of raw materials was evaluated based on estimated replacement cost and was determined to approximate book value.
The amounts presented in the table above are preliminary and have been used to prepare pro forma adjustments in the pro forma condensed combined balance sheet and pro forma condensed combined statements of operations. The final acquisition accounting will be determined when the Company has completed the detailed valuations and necessary calculations. The final acquisition accounting may include (1) changes in fair value of intangible assets such as developed technology, customer relationships and trade names, as well as goodwill and (2) other changes to assets and liabilities. Such changes may be material.
3. | Valuation of Intangible Assets and Goodwill |
The acquisition method of accounting requires the Company to recognize 100% of the fair value of the business acquired as of the acquisition date, which includes identifiable intangible assets and goodwill. The fair value of identifiable intangible assets, including developed technology, customer relationships and trade name, are based upon a detailed valuation that uses information and assumptions provided by management, as further described below.
Identifiable Intangible Assets
The identifiable intangible assets and estimated useful lives are as follows:
Amount (In thousands) |
Estimated Useful Life |
|||||||
Developed technology |
$ | 25,000 | 7 years | |||||
Customer relationships |
18,000 | 10 years | ||||||
Trade name |
1,000 | 3 years | ||||||
|
|
|||||||
Total estimated identifiable intangible assets |
$ | 44,000 | ||||||
|
|
The Company believes that the estimated intangible asset values presented above represent the fair market values at the date of acquisition and do not exceed the amount a third party would pay for such assets. The Company used the income approach to determine the fair market value of the intangible assets. This approach calculates fair value by discounting the estimated after-tax cash future cash flows back to a present value. The baseline data for this analysis was the cash estimates used to price the transaction. Cash flows were forecasted for each intangible asset and then discounted using an appropriate discount rate. The discount rates were benchmarked with reference to the Companys implied internal rate of return, as well as the weighted-average cost of capital of other comparable public companies.
The existing technology assets relate to currently marketed products. Given the uncertainties inherent with product development and introduction, there can be no assurance that any of the combined companys product development efforts will be successful on a timely basis or within budget, if at all. These preliminary estimates of fair value and estimated useful lives may vary materially from the final acquisition accounting, and the difference could have a material impact on the accompanying unaudited pro forma condensed combined financial statements. A 10% change in the valuation of intangible assets would cause a corresponding $0.5 million annual increase or decrease in amortization expense, assuming a weighted-average life of 8.2 years. As the Company completes its annual fair value analysis, additional information may be obtained by the Company regarding the specifics of NetComms intangible assets, and additional insight may be gained that could impact: (i) the estimated total value assigned to intangible assets, (ii) and/or (iii) the estimated weighted-average useful life of each category of intangible assets. The estimated intangible asset values and their useful lives could be impacted by a variety of factors that may become known as the Company completes its final acquisition accounting.
Goodwill
The preliminary acquisition accounting has resulted in goodwill of approximately $35.5 million. Various factors contributed to the establishment of the goodwill, including: the strategic benefit of expanding the breadth of the Companys product offerings; the value of NetComms highly trained work force; the expected revenue growth over time that is attributable to increased market penetration from future products and customers, and cross-selling by the sales force; and the synergies expected to result from reducing redundant infrastructure such as corporate costs and field operations. The goodwill acquired in the acquisition is not deductible for tax purposes.
4. | Pro Forma Adjustments |
The pro forma adjustments included in the Pro Forma Financial Statements are as follows:
(a) | Amounts have been reclassified to conform to the Companys accounting policies and presentation. |
(b) | Reflects an adjustment of $0.1 million and $0.5 million for the year ended December 31, 2018 and the three months ended March 31, 2019, respectively, to recognize the provision reversed by NetComm for obsolete or slow-moving inventory. In accordance with the IAS 2, Inventories, as issued by the IASB, NetComm reverses the provision for inventory write downs in the statement of operations, during the period in which such reversal occurs. Under ASC 330, Inventories, as issued by FASB, reversals of previous write-downs are not permitted, unless they relate to changes in exchange rates or when the inventory that is fully or partially reserved is sold and the associated reserve is also released to cost of sales. |
(c) | Reflects an adjustment of $0.1 million to write off the contract assets capitalized by NetComm under IFRS 15, Revenue from Contracts with Customers, as issued by IASB. Under IFRS 15, NetComm has capitalized certain costs to obtain the contract and costs to fulfil the contract subject to the conditions given under IFRS 15. As of December 31, 2018, the Company had not yet adopted ASC 606, Revenue from Contracts with Customers, as issued by FASB, and was continuing to recognize the revenue under ASC 605, Revenue Recognition. Under ASC 605 and the Companys accounting policies, such costs are expensed as incurred. |
(d) | Reflects an adjustment to write off the capitalized development costs. In accordance with IAS 38, Intangible Assets, as issued by the IASB, NetComm capitalizes research and development costs directly and indirectly attributable to development of new products upon establishment of technical and commercial feasibility. Under ASC 350, Intangible Assets, as issued by FASB, with the exception of certain internally developed computer software and direct-response advertising, all other internally generated development costs are expensed as they are incurred. This adjustment impacts the following financial statement line items in the unaudited pro forma combined financial statements as follows: |
Three Months Ended March 31, 2019 (In thousands) |
||||
Balance sheet |
||||
Assets: |
||||
Deferred tax assets |
$ | 7,267 | ||
Other assets |
(24,222 | ) |
(In thousands) | ||||||||
Twelve Months Ended December 31, 2018 |
Three Months Ended March 31, 2019 |
|||||||
Statement of operations |
||||||||
Operating expenses: |
||||||||
Research and development |
$ | 11,411 | $ | 2,477 | ||||
Selling, general and administrative |
(4,740 | ) | (2,002 | ) | ||||
Benefit from income taxes |
(2,001 | ) | (142 | ) | ||||
|
|
|
|
|||||
Total adjustments |
$ | 4,670 | $ | 333 | ||||
|
|
|
|
(e) | Adjustment to record amortization of customer relationships and trade name of approximately $2.1 million and $0.5 million for the twelve months ended December 31, 2018 and three months ended March 31, 2019, respectively. |
(f) | NetComm has designated its forward foreign currency contracts as cash flow hedges and recognizes the effective portion of fair value movements in hedging instruments as other comprehensive income. The Company does not designate its forward foreign currency contracts as hedging instrument. This adjustment reflects the de-designation of NetComm forward foreign currency contracts in accordance with the Companys accounting policies. As a result, all related other comprehensive income recognized from cash flow hedges during the period presented is reclassified to gain (loss) on foreign currency, net. |
(g) | Reflects the use of the combined company cash balance, including consideration paid to NetComm shareholders and transaction costs for both NetComm and the Company to close the transaction, as discussed in Note 2. |
(h) | Adjustment to reflect the statutory tax rate of 30%. |
(i) | Adjustment to record goodwill recognized in connection with the transaction, as discussed in Note 3. |
(j) | Adjustment to record the fair value of NetComms identifiable intangibles assets, as discussed in Note 3. |
(k) | Adjustment to eliminate NetComms historical equity. The accumulated deficit adjustment also includes impact of recording an adjustment for transaction costs incurred in connection with the acquisition, as discussed in Adjustment (l) below. |
(l) | Reflects transaction costs incurred of $5.2 million in connection with the acquisition of NetComm, but not recorded in the historical financial statements as of the period presented. The amounts are reflected as an adjustment to accumulated deficit but are not reflected in the unaudited pro forma condensed combined statements of operations, as they will not have a continuing impact on the Company. |
(m) | To eliminate transaction costs totaling approximately $0.1 million incurred by NetComm that are included in the historical financial statements for the twelve months ended December 31, 2018. In addition, to eliminate transaction costs totaling approximately $0.9 million (approximately $0.8 million and $0.1 million of this amount was incurred by the Company and NetComm, respectively) that are included in the historical financial statements for the three months ended March 31, 2019. These costs are eliminated as they are attributable to the acquisition of NetComm and will not have a continuing impact on the Company. |
(n) | Adjustment to acquired tangible net assets to reflect the fair value. |
(o) | Adjustment to record amortization of developed technology of approximately $3.6 million and $0.9 million for the twelve months ended December 31, 2018 and three months ended March 31, 2019, respectively. |