EX-99.2 5 dex992.htm UNAUDITED FINANCIAL STATEMENTS Unaudited Financial Statements
 
EXHIBIT 99.2
 
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OF PARTHUS TECHNOLOGIES PLC
 
Condensed consolidated balance sheets at December 31, 2001 (audited) and September 30, 2002 (unaudited)
Unaudited condensed consolidated statements of operations for the nine months ended September 30, 2001 and 2002
Unaudited condensed consolidated statement of shareholders’ equity and comprehensive income for the nine months ended September 30, 2002
Unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 2001 and 2002
Notes to unaudited condensed consolidated financial statements

1

 
PARTHUS TECHNOLOGIES PLC
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
    
December 31,
2001
(audited)
     
September 30,
2002 (unaudited)
  
    
(in thousands)
  
ASSETS
                  
Current assets
                  
Cash and cash equivalents
   
$
121,503
 
   
$
108,271
 
Short term investments—available for sale
   
 
1,800
 
   
 
—  
 
Accounts receivable
   
 
3,541
 
   
 
6,022
 
Prepayments and other current assets
   
 
3,365
 
   
 
3,851
 
Inventory
   
 
797
 
   
 
341
 
    
  
Total current assets
   
 
131,006
 
   
 
118,485
 
Property, plant and equipment, net
   
 
7,691
 
   
 
6,264
 
Investments
   
 
—  
 
   
 
4,500
 
Goodwill, net
   
 
62,691
 
   
 
63,579
 
Intangible assets, net
   
 
4,432
 
   
 
3,412
 
    
  
Total assets
   
$
205,820
 
   
$
196,240
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Current liabilities
                  
Accounts payable
   
$
5,672
 
   
$
4,619
 
Accrued liabilities
   
 
11,178
 
   
 
15,843
 
Deferred revenue
   
 
4,759
 
   
 
2,456
 
Taxes payable
   
 
2,124
 
   
 
1,684
 
    
  
Total current liabilities
   
 
23,733
 
   
 
24,602
 
Shareholders’ equity
                  
Ordinary shares, par value €0.000317 per share; 8,000,000,000 shares authorized at December 31, 2001 and September 30, 2002; 581,180,431 and 593,303,271 shares issued and outstanding at December 31, 2001 and September 30, 2002
   
 
205
 
   
 
208
 
Additional paid in capital
   
 
239,138
 
   
 
241,327
 
Deferred stock compensation
   
 
(5,052
)
   
 
(3,477
)
Accumulated other comprehensive income
   
 
(3,065
)
   
 
(3,036
)
Retained earnings
   
 
(49,139
)
   
 
(63,384
)
    
  
Total shareholders’ equity
   
 
182,087
 
   
 
171,638
 
    
  
Total liabilities and shareholders’ equity
   
$
205,820
 
   
$
196,240
 
    
  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

 
PARTHUS TECHNOLOGIES PLC
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
    
Nine months ended September 30,
  
    
2001
     
2002
  
    
(in thousands
except share and per share data )
  
Revenue
                  
IP license
   
$
21,261
 
   
$
27,391
 
IP creation
   
 
5,558
 
   
 
1,859
 
Hard IP
   
 
3,586
 
   
 
1,785
 
    
  
Total revenue
   
 
30,405
 
   
 
31,035
 
    
  
Cost of revenue
                  
IP license
   
 
3,550
 
   
 
4,176
 
IP creation
   
 
3,907
 
   
 
1,304
 
Hard IP
   
 
1,946
 
   
 
961
 
    
  
Total cost of revenue
   
 
9,403
 
   
 
6,441
 
    
  
Gross margin
   
 
21,002
 
   
 
24,594
 
Research and development
   
 
21,913
 
   
 
18,841
 
Sales and marketing
   
 
8,254
 
   
 
6,442
 
General and administrative
   
 
5,573
 
   
 
4,515
 
Amortization of goodwill & intangible assets
   
 
5,385
 
   
 
1,020
 
In process research & development charge
   
 
10,895
 
   
 
—  
 
Loss on disposal of facility
   
 
—  
 
   
 
213
 
ParthusCeva merger costs
   
 
—  
 
   
 
5,645
 
Restructuring charge
   
 
—  
 
   
 
3,788
 
    
  
Total operating expenses
   
 
52,020
 
   
 
40,464
 
Loss from operations
   
 
(31,018
)
   
 
(15,870
)
Interest income
   
 
5,053
 
   
 
1,828
 
Foreign exchange loss
   
 
(198
)
   
 
(203
)
Minority interest
   
 
(100
)
   
 
—  
 
    
  
Loss before provision for income taxes
   
 
(26,263
)
   
 
(14,245
)
Provision for income taxes
   
 
(300
)
   
 
(—  
)
    
  
Net loss available to ordinary shareholders
   
$
(26,563
)
   
$
(14,245
)
    
  
Net loss per ordinary share
                  
Basic and diluted
   
$
(0.048
)
   
$
(0.024
)
    
  
Weighted average number of ordinary shares outstanding
                  
Basic and diluted
   
 
551,903,475
 
   
 
586,102,070
 
    
  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

 
PARTHUS TECHNOLOGIES PLC
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF
SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
 
    
Number of
Ordinary
Shares
   
Amount
   
Additional
Paid-in
Capital
       
Deferred
Stock
Compensation
       
Accumulated
Other
Comprehensive
Income
     
Retained
Earnings
     
Total
Share-
holders’
Equity
  
    
(in thousands, except share data)
  
Balance at December 31, 2001
   
581,180,431
   
$
205
   
$
239,138
 
     
$
(5,052
)
     
$
(3,065
)
   
$
(49,139
)
   
$
182,087
 
Comprehensive income:
                                                             
Net loss
   
—  
   
 
—  
   
 
—  
 
     
 
—  
 
     
 
—  
 
   
 
(14,245
)
   
 
(14,245
)
Currency translation adjustment
   
—  
   
 
—  
   
 
—  
 
     
 
—  
 
     
 
29
 
   
 
—  
 
   
 
29
 
Total comprehensive income
                                                       
 
(14,216
)
Exercise of share options
   
8,847,271
   
 
2
   
 
994
 
     
 
—  
 
     
 
  —  
 
   
 
—  
 
   
 
996
 
Issue of ordinary shares
   
3,275,569
   
 
1
   
 
1,215
 
     
 
—  
 
     
 
—  
 
   
 
—  
 
   
 
1,216
 
Share issuance costs
   
—  
   
 
—  
   
 
(20
)
     
 
—  
 
     
 
—  
 
   
 
—  
 
   
 
(20
)
Stock compensation expense
   
—  
   
 
—  
   
 
—  
 
     
 
1,575
 
     
 
—  
 
   
 
—  
 
   
 
1,575
 
    
  
  
    
    
  
  
Balance at September 30, 2002
   
593,303,271
   
$
208
   
$
241,327
 
     
$
(3,477
)
     
$
(3,036
)
   
$
(63,384
)
   
$
171,638
 
    
  
  
    
    
  
  
 
 
 
 
 
 
 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

 
PARTHUS TECHNOLOGIES PLC
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
    
Nine months ended September 30,
  
    
2001
     
2002
  
    
(in thousands)
  
Cash flows from operating activities
                  
Net loss
   
$
(26,563
)
   
$
(14,245
)
Adjustments to reconcile net loss to net cash used in operating activities
                  
Loss on disposal of facility
   
 
—  
 
   
 
213
 
Gain on disposal of assets
   
 
(3
)
   
 
—
 
Depreciation
   
 
1,976
 
   
 
2,307
 
Amortization of goodwill and intangible assets
   
 
5,385
 
   
 
1,020
 
In-process research and development charge
   
 
10,895
 
   
 
—  
 
Undistributed earnings of minority interest
   
 
100
 
   
 
—  
 
Unrealized foreign exchange (gains) losses
   
 
(884
)
   
 
315
 
Non-cash stock compensation expense
   
 
1,282
 
   
 
1,575
 
Changes in assets and liabilities
                  
Increase in accounts receivable
   
 
(1,260
)
   
 
(2,017
)
Decrease/(increase) in prepayments and other current assets
   
 
1,657
 
   
 
(822
)
Decrease in inventory
   
 
232
 
   
 
464
 
(Decrease)/increase in accrued liabilities
   
 
(844
)
   
 
5,106
 
Increase (decrease) in deferred revenue
   
 
1,422
 
   
 
(2,349
)
Increase (decrease) in taxes payable
   
 
857
 
   
 
(459
)
Increase (decrease) in accounts payable
   
 
1,453
 
   
 
(836
)
    
  
Net cash used in operating activities
   
 
(4,295
)
   
 
(9,728
)
Cash flows from investing activities
                  
Purchase of fixed assets
   
 
(4,785
)
   
 
(1,436
)
Sale of fixed assets
   
 
3
 
   
 
—  
 
Disposal of facility
   
 
—  
 
   
 
(445
)
Purchase of business and intangible assets
   
 
(25,108
)
   
 
—  
 
Cash acquired with subsidiary undertaking
   
 
1,061
 
   
 
—  
 
Sale of short term investments
   
 
—  
 
   
 
1,800
 
Other investments
   
 
—  
 
   
 
(4,500
)
    
  
Net cash used in investing activities
   
 
(28,829
)
   
 
(4,581
)
Cash flows from financing activities
                  
Proceeds from issuance of share capital
   
 
1,678
 
   
 
949
 
Share issuance costs
   
 
(762
)
   
 
(20
)
    
  
Net cash provided by financing activities
   
 
916
 
   
 
929
 
Effect of exchange rate movements on cash
   
 
(589
)
   
 
148
 
    
  
Net decrease in cash and cash equivalents
   
 
(32,797
)
   
 
(13,232
)
Cash and cash equivalents at beginning of period
   
 
159,865
 
   
 
121,503
 
    
  
Cash and cash equivalents at end of period
   
$
127,068
 
   
$
108,271
 
    
  
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

 
PARTHUS TECHNOLOGIES PLC
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.    Basis of preparation
 
These condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles, have not been audited. These interim consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present this data fairly. The nine-month periods ended September 30, 2001 and 2002 are regarded as distinct financial periods for accounting purposes with the exception of tax where the periods are allocated as appropriate proportions of the expected amounts of the total annual charge. The results for those periods are not necessarily indicative of the expected results for the full financial year. The preparation of the condensed consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and judgments that affect reported amounts and disclosures in these unaudited condensed consolidated financial statements. Actual results could differ from those estimates. These unaudited financial statements should be read in conjunction with the audited financial statements included elsewhere within this prospectus. There have been no significant changes in the Company’s accounting policies from those outlined in the audited financial statements for the year ended December 31, 2001.
 
Certain information and footnote disclosure normally included in financial statements prepared in accordance with United States generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements should be read in conjunction with the accounting policies and notes to the consolidated financial statements of Parthus filed as Exhibit 99.1 to the amended Report on Form 8-K of ParthusCeva, Inc. dated November 1, 2002.
 
2.    Net loss per ordinary share
 
Basic net loss per ordinary share has been computed by dividing net loss available to ordinary shareholders by the weighted average numbers of ordinary shares outstanding during the period. Diluted net loss per ordinary share is computed by adjusting the weighted average number of ordinary shares outstanding during the period for all potentially dilutive shares outstanding and adjusting net loss for any changes in loss that would result from the conversion of such potential ordinary shares.
 
There is no difference, for the periods presented, in net loss used for basic and diluted net loss per ordinary share. The reconciliation of the number of shares used in the computation of basic and net loss per share is as follows:
 
    
Nine months ended September 30,
    
2001
   
2002
Weighted average number of ordinary shares outstanding for basic net loss per ordinary share
   
551,903,475
   
586,102,070
Effect of dilutive share options outstanding
   
—  
   
—  
    
  
Weighted average number of ordinary shares for diluted net loss per ordinary share
   
551,903,475
   
586,102,070
    
  

6

PARTHUS TECHNOLOGIES PLC
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
3.    Business segment information
 
Management is of the opinion that the Company operates in a single industry segment. The analysis of the Company’s operations by geographical area is as follows:
 
    
Nine months ended September 30,
Revenue by destination
   
2001
   
2002
    
(in thousands)
United States
   
$
14,248
   
$
15,399
Europe, Middle East and Africa
   
 
12,832
   
 
12,940
Asia
   
 
3,325
   
 
2,696
    
  
Total
   
$
30,405
   
$
31,035
    
  
 
4.    New accounting pronouncements
 
In July 2001 the Financial Accounting Standards Board (“FASB”) introduced two new statements: SFAS No. 141, “Business Combinations” and Statement No. 142, “Goodwill and Other Intangible Assets”. Those statements change the accounting for business combinations and goodwill in two significant ways. First, SFAS No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. The adoption of the purchase method of accounting had no impact on the Company for the periods presented. Second, SFAS No. 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. The Company adopted SFAS No. 142 effective January 1, 2002 and, accordingly, goodwill amortization ceased on that date.
 
The Company completed its transitional assessment of goodwill impairment in the second quarter of fiscal 2002 as required under SFAS No. 142 and the assessment indicates that there is no charge for impairment.
 
The following table reconciles the reported net loss for the nine months ended September 30, 2001 to the respective pro forma balance adjusted to exclude goodwill amortization, which is no longer recorded under SFAS No. 142:
 
      
Nine months ended
September 30, 2001
  
Reported net loss:
     
$
(26,563
)
Add back goodwill amortization
     
 
4,315
 
      
Adjusted net income
     
$
(22,248
)
      
Basic and diluted net loss per ordinary share:
           
Reported
     
$
(0.048
)
Add back goodwill amortization
     
$
0.008
 
      
Adjusted net loss per ordinary share
     
$
(0.040
)
      
 
SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” (“SFAS No. 144”) addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The provisions

7

PARTHUS TECHNOLOGIES PLC
 
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

of this statement are effective for financial statements issued for fiscal years beginning after December 15, 2001. The adoption of this standard did not have any impact on the Company’s consolidated financial statements.
 
5.    Investments
 
On March 14, 2002 the Company entered into an agreement with UbiNetics to subscribe for 3,966,000 ordinary shares of UbiNetics, representing a minority investment in the shares of that company, for cash consideration of $4.5 million. The investment has been accounted for under the cost method.
 
On the same date the Company completed an asset purchase agreement with UbiNetics, pursuant to which the Company disposed of certain assets and liabilities to UbiNetics. The loss recorded on the disposal amounted to $213,000.
 
6.    Foreign currencies
 
On January 1, 2002, following a review of the economic facts and circumstances in which Parthus operates, the Company and certain subsidiaries adopted the US dollar as the functional currency. The impact of this change was not material to the reported results of operations.
 
7.    Shareholders’ equity
 
Following the announcement of the Company’s intention to enter into a combination agreement with ParthusCeva, Inc., the Company agreed to issue an aggregate of 2,114,109 Parthus ordinary shares effective May 28, 2002 to the former shareholders of Chicory Systems, Inc., in full satisfaction of the Company’s obligations with respect to a contingent issuance of a further 21.9 million ordinary shares in connection with the Company’s acquisition of Chicory. The 2,114,109 share issuance was accounted for as additional purchase consideration and recorded as additional goodwill of $887,926.
 
During the nine months ended September 30, 2002, the Company issued a total of 116,146 ADSs (equivalent to 1,161,460 ordinary shares) to employees under the Company’s Employee Share Purchase Plan for consideration of $327,000.
 
8.    Combination with ParthusCeva, Inc.
 
On November 1, 2002, DSP Group, Inc. (“DSPG”), the Company and ParthusCeva, Inc. (f/k/a Ceva, Inc.) (“ParthusCeva”) completed the combination of the Company with ParthusCeva, formerly a wholly owned subsidiary of DSPG (the “Combination”). Immediately prior to the closing of the Combination, DSPG distributed 100% of the then outstanding equity of ParthusCeva to DSPG stockholders as of October 31, 2002 (the “Record Date”) as part of a tax free spin-off (the “Spin-off”) of ParthusCeva from DSPG.
 
In the Combination, each issued and outstanding Parthus ordinary share, par value €0.000317 per share, (a “Parthus Ordinary Share”) was cancelled and Parthus shareholders received 0.015141 (the “Exchange Ratio”) validly issued and fully paid shares of common stock, par value $0.001 per share, of ParthusCeva (the “Common Stock”) per Parthus Ordinary Share. Correspondingly, holders of Parthus American Depositary Shares (“ADSs”) (each of which represented 10 Parthus Ordinary Shares) received 0.151410 shares of Common Stock per ADS. In connection with the Combination, ParthusCeva also assumed each outstanding option to purchase Parthus Ordinary Shares that had been granted under Parthus’ existing share option plans. Each such assumed option became an option to purchase that number of shares of Common Stock as is equal to the number of Parthus Ordinary Shares subject to such option immediately prior to the Combination multiplied by the Exchange Ratio and rounded down to the nearest whole number, at an exercise price per share equal to the exercise price per Parthus Ordinary Share at which such option was exercisable immediately prior to the Combination divided by the Exchange Ratio and rounded up to the nearest whole cent.
 
Immediately following the Combination, the former holders of Parthus Ordinary Shares and ADSs owned approximately 49.9% of the outstanding shares of Common Stock and the stockholders of DSPG owned approximately 50.1% of the outstanding shares of Common Stock.
 
In addition, immediately prior to the closing of the Combination, an aggregate of US$60 million was distributed to the former Parthus shareholders as a court approved capital repayment (“Capital Repayment”), equal to US$1.008940 per ADS and US$0.100894 per Parthus Ordinary Share.

8