Restructuring initiative
Transfer of Numachip activities and personnel to new subsidiary - Numascale AS
The Dolphin Express business will have 25 employees vs 44 in former Dolphin.
Cost base in the Dolphin Express business will be 50% lower than former Dolphin
The board of directors in Dolphin today resolved to establish a wholly owned subsidiary, NumaScale AS and transfer all assets, intellectual property, personnel and activities related to the development of NumaChip to this subsidiary. In this way, the value and the upside potential of the NumaChip technology will be highly visible. At the same time, the remaining Dolphin Express business will have half the cost base and increased visibility to earnings.
The Board intends through this restructuring to create two independent businesses, each highly valuable in its own right. The NumaScale business has high future revenue potential. It is a development phase company with revolutionary technology and demonstrable customer demand. It represents a compelling investment profile for investors in venture technology. The Dolphin business will focus on growing Dolphin Express revenue leveraging its leadership products which are available now.
The transaction
Numascale will complete the development of the NumaChip product and build a long-term business based on its proprietary cache coherent technology. Effective immediately Dolphin has transferred 12 employees to the new subsidiary. All NumaChip assets, development in process, and intellectual property and up to NOK 5 million in operating cash will be transferred to the Numascale subsidiary as soon as all formal procedures are finalized. Numascale will initially have no debt and the equity is estimated to be up to NOK 24.5 million including operating cash.
The transfer of assets and cash will be executed through a directed share issue in Numascale to Dolphin against cash and consideration in kind. The non-cash value of the transaction will be in the order of NOK 19.5 million, whereof NOK 16.5 million of technology and 3 million of goodwill, and represents taxable income for Dolphin. This will reduce tax loss to be carried forward accordingly, which amounted to about NOK 90 million as of March 31st 2008. As of March 31st, booked value of the NumaChip-technology in Dolphin was NOK 18.2 million.
Cost savings
Through operating cost reductions and lower development expenses in the Dolphin Express business the cost base in Dolphin is expected to be reduced by about 50% before consolidating the new subsidiary. It will consist of 25 employees vs 44 previously. After the transfer, it is expected that Dolphin will not require additional funding prior to reaching positive cash generation in 2008.
Numascale
An initial private placement of shares in Numascale AS will be offered to the shareholders of Dolphin. A prospectus for this offering will be registered at the Oslo Stock Exchange and the subscription period is assumed to commence in August 2008. Any additional funding will be sought from Norwegian and international venture investors as well as industrial partners/investors. Further details of the planned issue to shareholders will be announced as soon as possible. Dolphin will consolidate Numascale in the group accounts from the effective date of the transfer as long as the ownership share remains above 50%.
Management of Numascale
Kåre Løchsen will be CEO of Numascale. Kåre is currently the project manager for NumaChip and has worked with the core technology of NumaChip since its inception. An interim Board of Directors will be replaced by new members following the share issue in August 2008.
Market outlook for Numascale
The company is very positive on the market prospects for the Numascale business. It promises to revolutionize the development of `mainframe` class computer capabilities at a fraction of the cost and thereby opening up large markets for new customers. The company is engaged with a number of high profile potential customers within the high performance computing and high-end server markets. Additionally, it anticipates achieving the important milestone of physical prototype demonstration in Q3 and is on track for first customer sample delivery in Q1 2009. Validation of customer interest continues to grow
with a number of commitments for evaluation of first samples.
Dolphin ASA
After the spin off Dolphin will consist of a sales, marketing, hardware development and operations organization in Boston and software development, finance and headquarters in Oslo. The company will remain listed on the Oslo Stock exchange.
The strategy and outlook for the Dolphin Express business remains unchanged. Recent development and customer-and partner interaction reinforce the boards belief that the company is well positioned to achieve high growth in providing leadership interconnect solutions to the internet content server market with its Dolphin Express products.
The Board believes this restructuring enables both entities to focus on their unique market opportunities and develop the appropriate infrastructure to service their business models. The Board believes that Numascale as a standalone business represents an attractive investment opportunity in an innovative semiconductor development company. After the transfer, Dolphin will be a targeted and very cost effective business, uniquely positioned to take advantage of its high growth potential.
For further information, please contact:
Tim Miller, CEO, telephone 1 508 7405 949
Alex Gundersen, CFO, telephone +47 41 47 41 07
A PDF version of this message is attached at
www.newsweb.no