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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Digital Globe | LSE:DGS | London | Ordinary Share | BMG2870A1036 | COM SHS USD0.001 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 59.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMDGS
RNS Number : 6283C
Digital Globe Services Limited
19 March 2014
19 March 2014
Digital Globe Services, Ltd.
(the "Company" and together with its subsidiaries "DGS")
Interim Results
Digital Globe Services, Ltd. (AIM: DGS), a leading provider of online customer acquisition solutions for large, consumer-facing organisations, is pleased to announce interim results for the six months ended 31 December 2013. Except where stated, comparative figures are stated for the six months ended 31 December 2012.
Financial highlights:
-- Revenue increased 59% to $17.7 million (2012: $11.1 million) -- Gross profit increased by 57% to $6.3 million (2012: $4.0 million)
-- Adjusted EBITDA* increased by 67% to $2.3 million (2012: $1.4 million), with adjusted EBITDA* margin of 13% (2012: 12%)
-- Adjusted earnings per share (basic) of $0.03 (2012: ($0.09))
-- Cash in hand at 31 December 2013 of $2.8 million, after funding $1.5 million of the initial cash consideration for DGS Edu and payment of the final dividend amount of $0.3 million, both in November 2013
*EBITDA is earnings before interest, taxes, depreciation and amortisation. "Adjusted EBITDA" additionally excludes foreign exchange gains or losses, extraordinary items, non-cash Employee Stock Option Plan charges, warrants, legal costs associated with Edu acquisition and non-recurring severance costs.
Operational highlights:
-- Strong support and revenue expansion from core US cable communications clients, including a contract extension with Comcast post period end
-- Consistently seeing double and, in some instances, triple-digit growth from key revenue clients
-- Continuing diversification of revenue base with faster revenue growth outside the top 5 clients
-- Expansion into European market with first UK client and new office premises in central London, to serve as a hub for planned expansion
-- Continuing investment in the business in line with growth opportunities, including new sales team hires, in both the core business and newly acquired Edu, new purpose built call centre in Lahore and new local head office and call centre facility in Karachi, Pakistan
-- Appointment in October 2013 of highly experienced EVP of New Verticals to focus on continued expansion into additional new sectors and in January, a new CTO
-- Acquisition and successful integration of DGS Edu, LLC ("Edu"), which has seen growth in key clients, on-boarding of new schools and accelerated entrance for DGS into a new industry vertical
Jeff Cox, CEO of Digital Globe Services, commented:
"The first half of the year has progressed well and we are pleased to report a strong set of interim results. During the period we have grown top line revenue, invested further in our business platform, and successfully completed the integration of DGS Edu, which added to the client base and is contributing positively to Company earnings.
"As DGS enters the traditionally stronger second half of the year, early trading remains positive and in line with market expectations. With a robust financial position and healthy pipeline of new business opportunities, the Board is confident in a successful outcome for the year as a whole."
For further information please contact:
Digital Globe Services, Ltd. www.dgsworld.com Jeff Cox, CEO +1 303 736 2105 Sandra Rodger, CFO N+1 Singer Shaun Dobson / Aubrey Powell/ Matt Thomas +44 20 7496 3000 Newgate Threadneedle +44 20 7653 9850 Hilary Millar / Caroline Forde / Josh Royston / Jasper Randall
Overview of DGS
Founded in 2008 with offices in London, Bermuda, Netherlands, USA and Ireland, DGS is a specialist provider of outsourced online customer acquisition solutions for large, consumer-facing corporations. DGS delivers customers to its clients through optimised paid search, integrated websites and contact centre support, receiving a fee for each customer acquired for its clients.
DGS is seeking to establish itself as the leading international provider of outsourced online customer acquisition services, through its focus on having the premier technology platform for pricing and procuring paid search advertising on a cost effective basis. Paid search refers to the auction process for key search terms that search providers run and in which prospective advertisers, or their agents, compete in order to have their advertising or search results displayed.
By using its optimising technology platform, dgSMART, and its experience of website management, efficient contact centre operations and other process expertise, DGS is able to bid appropriately and cost effectively for search terms in order to achieve conversion rates that deliver profitable, high quality customers to its clients.
DGS employs over 600 staff in Europe, North America and Asia. The Company currently has over 30 direct and indirect client relationships globally, many of which are with companies in the US Fortune 500. In 2012, DGS commenced operations in Canada and Mexico and, in February 2013, its shares were admitted to trading on AIM, raising additional funds in order to support further growth opportunities in Latin America, Europe and Asia Pacific. In November 2013 DGS acquired the education business unit of a San Francisco based online customer acquisition company and began serving educational institutions via a sector focused business unit, DGS Edu. DGS has also recently started providing its customer acquisition services to the home automation and renewable energy sector, and is examining additional opportunities in the insurance, retail banking, utility and consumer technology sectors.
Chairman and CEO Review
This has been a period of solid progress for the Company, delivering results in line with management expectations for the first half as we execute on our strategic and operational objectives. Through our continuing, successful delivery of valuable customers to our clients, we have continued to grow DGS profitably, reporting revenue and adjusted EBITDA growth of 59% and 67% respectively during the first half of the year against the comparative period to December 2012. This growth has been achieved whilst further investing in the business to ensure we are well placed to capitalise on market opportunities.
The Company is cash generative at the operational level and at period end had a net cash position of $2.8 million.
Financial Review
In the 6 months ended 31 December 2013, the Group produced revenue of $17.7 million (2012: $11.1 million), an increase of 59% on the comparable period. This growth was driven by double and, in some cases, triple-digit growth from our core clients. We have seen a diversification of revenue over the period, with our top 5 clients accounting for 80% (2012: 91%) of revenue, as we enter new verticals and broaden our customer base. Revenue from clients outside of the top 5 increased by 110% to $2.2 million (2012: $1.0 million).
Our cost of revenue varies directly with revenue, though we have made some notable cost-savings through negotiations with key vendors and better buying power as the business continues to grow.
Gross profit increased by 57% to $6.3 million (2012: $4.0 million) and adjusted EBITDA* grew by 67% to $2.3 million (2012: $1.4 million), with an adjusted EBITDA* margin of 13% (2012: 12%).
*A reconciliation of "Adjusted EBITDA" is shown below:
Hot Features
Premium
Six months ended Six months ended Year ended
31 December 31 December 30 June
2013 2012 2013
$ $ $
------------------------ ----------------- ----------------- -----------
EBITDA 1,118,692 1,291,004 3,081,435
------------------------ ----------------- ----------------- -----------
Foreign exchange
gains or losses 4,369 - 128,284
------------------------ ----------------- ----------------- -----------
Extraordinary items - 89,100 344,117
------------------------ ----------------- ----------------- -----------
Non-cash Employee
Stock Option Plan
charges 523,459 - 470,565
------------------------ ----------------- ----------------- -----------
Warrant 344,890 - -
------------------------ ----------------- ----------------- -----------
Legal costs associated 55,384 - -
with EDU acquisition
------------------------ ----------------- ----------------- -----------
One-off severance 264,088 - -
costs
------------------------ ----------------- ----------------- -----------
Adjusted EBITDA 2,310,882 1,380,104 4,024,401
------------------------ ----------------- ----------------- -----------
The Company continues to expand its revenue base while containing its costs resulting in continued EBITDA growth.
As the Company invests in its European and Latin America expansion, it expects to incur increased capital expenditures and higher operating costs that will be tracked to those operating regions. As these businesses scale revenue, the gross margins should approach levels comparable to the more mature North American business.
We have made significant investment in key areas of the business, bolstering the team in terms of finance, sales and technical support and in ensuring our facilities and office environment match the dynamic and innovative business that we operate. SG&A has increased by 95% from that of the prior half year, largely as a result of an increase in key personnel in sales and technology (including consultants) to drive further revenue, additional legal and professional costs associated with restructuring the business to optimise tax efficiencies, and a general increase due to the larger office space in Lahore and the new facility in Karachi to support further growth.
The principal capital expense in the period was the planned expansion of our purpose-built facility in Lahore and an investment in a new head office and call centre facility in Karachi. Based on current projections, these investments will meet our customer growth targets through the end of calendar 2014 and beyond.
The DGS Edu business has continued to perform in line with our expectations since its acquisition in November, adding additional customers to its core client base and generating further revenue from the existing customer base. We continue to look both actively and reactively for other acquisition opportunities which complement our existing business and for openings to provide organic or acquisitive growth in new verticals and geographies.
The Group continues to produce strong cash flow from operations and maintained a cash balance of $2.8 million as of 31 December 2013 after funding $1.5 million of the initial cash consideration for DGS Edu and payment of the final dividend amount of $0.3 million, both in November 2013. This cash balance provides us with the means to make planned capital investment in further expansion or for acquisitions to support any of our strategic growth initiatives.
Dividend
In line with the Company's dividend policy, DGS will endeavour to pay dividends twice annually, subject to the Company bye-laws, business requirements and appropriate reserves accounting for investment in the Company's growth. An interim dividend will be considered and announced in due course following completion of the next scheduled board meeting.
Operational Review
Strategy
The Company's success is underpinned by the execution of its three-pillared growth strategy, namely growing the core US telecoms business and expanding into new geographies and contiguous industry verticals. In this context, DGS has:
-- continued to expand its engagement within the core US cable client base, including a multi-year contract extension with Comcast Communications ("Comcast") post period end, as well as deepened relationships in the business to business sector and in the satellite television industry.
-- progressed into new geographies: Within Europe, we are pleased with the results following early work with the Company's first UK client, a leading mobile network operator, which commenced in the first quarter. In order to capitalise on early momentum, we have cemented our European footprint with the opening of a new London office post period end to drive these operations forward. Within Canada, we are making strong progress with some additional contracts in broadband, wireless and satellite providers.
-- accelerated its entrance into new relevant verticals, including via the acquisition of DGS Edu, and DGS is now a strong and growing player in the education market. We continue to investigate expansion into new verticals, within the home security and renewables arena and have appointed a new member of the team with a focus on exploiting new markets. We also believe there is some longer-term opportunities in the US wireless industry.
Client wins
We have continued to grow the client base during the period, particularly within our core US telecoms business. New names and expansion of existing agreements added during the period include AT&T, Centurylink and Windstream contributing to the further diversification of the client base. For the six months to 31 December 2013, revenue attributed to our top five clients was reduced to 80%, down from 91% for the comparable period.
The affiliate channel has been particularly strong during the first half of the year, delivering an increased level of sales, which is continuing into the second half of the fiscal year. Affiliates represent growth in areas where we have not yet invested and are seen to be a growing segment in our business. DGS utilises sub-affiliates to assist in developing additional profitable leads for additional volume with the Group's main clients. These third party affiliates run their own marketing campaigns and send their leads to the Group's call centres whereby the Group closes the sale and sends the lead to its clients. Compensation for sub-affiliate leads varies by partner, but typically they are paid a bounty per lead, which, when converted by DGS generates a bounty by the company's clients.
We were delighted to have announced, post period end, the extension of our contract with Comcast, the largest multi-system cable operator in the US. The multi- year contract solidifies our position as a strategic partner to Comcast online sales channels. The DGS service will be optimised towards the delivery to Comcast of an increased average order per customer, an area in which DGS has proven market leading expertise. Additionally, DGS will be able to sell Comcast's new home security product as well as earn a one-time residual payment for Comcast customers who renew or maintain service beyond one year, representing incremental value opportunities for DGS.
Product and Service Development
We continue to invest in our proprietary technology platform and technology development teams, to ensure we remain well placed to capitalise on growing momentum and favourable market trends. Strong IP is key for DGS, as it enables our continuing focus on acquiring and delivering high quality customers to our clients and is what continues to differentiate us in the market. The appointment of Chad Rycenga as CTO post period end has bolstered the Company's team and will ensure that fast roll-out, innovation and high quality remain the key characteristics of the Company's technology platform, as well as maintaining a focus on profitable development activities.
In addition DGS has performed custom software development for existing clients, which continues to diversify the Company's offering and provide additional revenue stream. Most recently, DGS has created a platform that allows small business leads to be aggregated across US cable telecommunications companies, at the same time as enhancing its position as an innovation partner for its clients.
Organisational Changes
In the period, DGS organised a move to a purpose-built facility in Lahore and new facilities in Karachi, creating a more flexible and sustainable working environment and promoting DGS as an employer of choice.
DGS has also opened a new office in London, to complement our expansion into Europe and support a planned increase in sales and finance teams to support the growth.
People
DGS has made a number of important hires over the past six months. In October, we strengthened the Board with two key appointments; Mohammed Khaishgi was appointed as Non-Executive Director to the Board, and Sandra Rodger joined the Company as an Executive Director to the Board and Chief Financial Officer, bringing 21 years of financial services experience to the Company.
In October 2013, we were delighted to welcome Gerard Baker, a highly experienced online customer engagement executive to the team as EVP of New Verticals, joining DGS from CSG. Mr. Baker has responsibility for leading DGS' expansion into additional vertical markets. We have also bolstered the sales team with the addition of three new permanent sales staff and one consultant to our US team who is supporting the consistent marketing and extension of the Company's offering to new verticals.
On 28 January 2014, post the period end, DGS appointed Chad Rycenga to the role of Chief Technology Officer to drive further innovative developments of DGS's technology platform, to ensure that development is aligned to commercial objectives and enhance the efficiency of our technical development processes.
Acquisition of Edu
DGS Edu, the business unit acquired in November, is performing well and is contributing positively to Company earnings. The integration of the business is now complete and we are delighted to have added new names to the client roster, as well as grow the key client base and accelerate our diversification into new industry verticals. The new clients enhance DGS Edu's strength in the growing not-for-profit education sector and add to its existing strengths in the for-profit education sector, including creative arts and business programmes.
Acquisitions remain an important element of the Group's growth strategy, and the Board continues to assess opportunities for complementary acquisitions and for growth in new verticals and new geographies.
Market
Our market for online customer lead generation is evolving. Businesses across all sectors and geographies are increasingly aware of the ongoing shift of their end customer to procuring products and services over the internet, and as a resultant, the growing significance of the online sales channel. We have seen considerable consolidation activity within our marketplace, both between customers and competitors, as business seek to achieve scale. However, the landscape of digital marketing providers remains highly fragmented, and we believe there is scope to continue to grow market share given DGS' market leading dgSmart technology platform and proven ability to deliver the highest number of products ordered per sale compared to our competitors.
Summary and Outlook
DGS has made strong progress in the first half of the financial year, after another period of solid growth for the business. The integration of the acquired DGS Edu has been a success, boosting revenue and adding to the customer base. As we enter the traditionally stronger second half of the year, early trading remains positive and in line with market expectations. DGS continues to focus on its three pillars of growth: growing the core US telecoms business, expanding into new geographies and entering new industry verticals. With a robust financial position and healthy pipeline of new business opportunities, the Board is confident in a successful outcome for the year as a whole.
Unaudited Condensed Consolidated Interim Statements of Income
For the six months ended 31 December 2013
6 months ended 6 months ended Year ended
31 December 31 December 30 June
2013 2012 2013
$ $ $
Revenue 17,724,046 11,130,881 25,540,563
Cost of Revenue
Search engine expenses 6,615,113 4,809,937 9,992,482
Lead generation 1,041,092 563,360 1,060,084
Call centre costs 2,810,145 922,979 3,790,939
Communication 679,294 237,921 625,327
Other cost of revenue 303,445 589,723 289,398
Total cost of revenue 11,449,089 7,123,920 15,758,230
-------------- -------------- -----------
Gross profit 6,274,957 4,006,961 9,782,333
-------------- -------------- -----------
Selling, General and Administrative
Expenses
General and administrative costs 261,547 917,317 917,317
Salaries and other employee costs 2,133,274 947,784 2,369,425
Employee Stock Options Plan 523,459 - 470,565
Third-party consultants 519,037 171,381 568,711
Rent and utilities 201,923 42,647 187,500
Traveling and entertainment 315,176 191,967 511,811
Insurance 126,334 61,862 195,565
Office supplies, printing, postage 84,049 95,347 146,750
Communication 79,364 18,825 86,667
Legal and professional expenses 375,762 12,184 170,919
Depreciation and amortisation 330,760 16,016 203,627
Foreign currency exchange loss 4,369 - 128,284
Other 187,081 167,543 603,267
Total selling, general and administrative
expenses 5,142,135 2,642,873 6,560,408
-------------- -------------- -----------
Operating Profit 1,132,822 1,364,088 3,221,925
Other Expenses
Interest expense - net 2,914 (2,500) -
Factoring charges - 244,480 483,586
Bank charges 23,401 8,812 17,647
Warrant 344,890 - -
Total other expenses 371,205 250,792 501,233
-------------- -------------- -----------
Profit before income taxes and
extraordinary items 761,617 1,113,296 2,720,692
Extraordinary items - 89,100 344,117
Income Tax (Credit)/Expense (19,935) 5,105,452 5,091,198
Net Profit/(Loss) 781,552 (4,081,256) (2,714,623)
============== ============== ===========
Profit/(loss) per share - basic 0.03 (0.09)
Profit/(loss) per share - diluted 0.03 (0.09)
Average number of basic shares
in issue 27,111,241 27,021,388
Average number of diluted shares
in issue 27,881,769 27,021,388
Unaudited Condensed Consolidated Interim Balance Sheets
As at As at As at
31 December 31 December 30 June
2013 2012 2013
$ $ $
Assets
Current Assets
Cash and cash equivalents 2,846,841 946,204 4,003,611
Accounts receivable 5,400,378 4,079,962 3,981,662
Prepayments and other assets 1,356,687 382,806 1,095,448
Deferred tax asset 393,615 5,575 220,232
9,997,521 5,414,547 9,300,953
============ =========== ============
Non-Current Assets
Goodwill 987,906 206,382 206,382
Intangible Assets 2,387,620 600,000 775,000
Computer and office equipment,
net of accumulated
depreciation 1,065,671 189,070 543,589
4,441,197 995,452 1,524,971
------------ ----------- ------------
Total Assets 14,438,718 6,409,999 10,825,924
============ =========== ============
Liabilities and Stockholders'
Equity
Current Liabilities
Factoring advance - 2,910,356 -
Accounts payable 3,065,400 2,369,018 2,481,674
Other liabilities 1,264,951 517,078 982,389
Income tax payable 201,227 5,190 47,779
Contingent consideration payable 581,523 - -
5,113,101 5,801,642 3,511,842
------------ ----------- ------------
Non-Current Liabilities
Deferred tax liabilities 64,456 - 64,456
Total Liabilities 5,177,557 5,801,642 3,576,298
============ =========== ============
Stockholders' Equity
Common stock 29,800 9,762 29,667
Preferred stock - 14,048 -
Additional paid-in capital 9,807,008 1,075,952 9,446,091
Warrant 344,890 - -
Accumulated other comprehensive
loss (232) - (816)
Share based payment reserve 994,024 - 470,565
Retained deficit (1,914,329) (491,405) (2,695,881)
Total Stockholders' Equity 9,261,161 608,357 7,249,626
------------ ----------- ------------
Total Liabilities and Stockholders'
Equity 14,438,718 6,409,999 10,825,924
============ =========== ============
Unaudited Condensed Consolidated Statements stockholders' equity
For the six months ended 31 December 2013
Number Common Preferred Additional Accumulated Warrant Share Accumulated Total
of Shares stock Stock paid-in Deficit Based other
in Issue capital Payment comprehensive
Reserve loss
---------- ------- --------- ----------- ----------- ------- -------- ------------- -----------
No $ $ $ $ $ $ $ $
Balance, 30
June 2012 1,000 10 - 158,030 18,742 - - - 176,782
Capital
contribution
by the parent - - - 4,760,762 - - - - 4,760,762
Reversal of
common stock
on Group
reorganisation (1,000) (10) - (158,030) - - - - (158,040)
Issue on new
common stock 9,762,140 9,762 - - - - - - 9,762
Issue on new
preferred
stock 14,047,960 - 14,048 1,075,952 - - - - 1,090,000
Net loss for
the period - - - - (4,081,256) - - - (4,081,256)
Dividend paid
to parent - - - (1,189,653) - - - - (1,189,653)
Balance, 31
December 2012 23,810,100 9,762 14,048 4,647,061 (4,062,514) - - - 608,357
---------- ------- --------- ----------- ----------- ------- -------- ------------- -----------
Conversion of
preferred
stock
to common
stock,
upon listing - 14,048 (14,048) - - - - - -
Capital
contribution
by the parent - - - 93,357 - - - - 93,357
Issue of new
common stock
upon listing
and issue of
share option
plan (SOP)
trust
shares 5,856,855 5,857 - 7,994,142 - - - - 7,999,999
Extraordinary
listing cost - - - (1,386,556) - - - - (1,386,556)
Employee Share
Options Plan
(SOP) charge - - - - - - 470,565 - 470,565
Net profit for
the period - - - - 1,366,633 - - - 1,366,633
Foreign
currency
translation - - - - - - - (816) (816)
Dividend paid - - - (1,901,913) - - - - (1,901,913)
Balance, 30
June 2013 29,666,955 29,667 - 9,446,091 (2,695,881) - 470,565 (816) 7,249,626
---------- ------- --------- ----------- ----------- ------- -------- ------------- -----------
Issue of new
common stock
on acquisition
of DGS EDU LLC 133,339 133 - 499,867 - - - - 500,000
Employee Share
Options Plan
(SOP) charge - - - - - - 523,459 - 523,459
Warrant - - - - - 344,890 - - 344,890
Gain on
exercise
of share
options - - - 150,179 - - - - 150,179
Net profit for
the six months
ended 31
December
2013 - - - - 781,552 - - - 781,552
Foreign
currency
translation - - - - - - - 584 584
Dividend paid - - - (289,129) - - - - (289,129)
Balance, 31
December 2013 29,800,294 29,800 - 9,807,008 (1,914,329) 344,890 994,024 (232) 9,261,161
========== ======= ========= =========== =========== ======= ======== ============= ===========
Unaudited Condensed Consolidated Interim Statements of Cash Flow
For the six months ended 31 December 2013
Six months Six months
ended ended Year ended
31 December 31 December 30 June
2013 2012 2013
$ $ $
Cash flows from operating activities
Net Income/(loss) 781,552 (4,081,256) (2,714,623)
Depreciation and amortisation 330,760 16,016 203,627
Income tax expense 153,448 - 47,779
Stock Options Plan charge 523,459 - 470,565
Warrant 344,890 - -
Foreign currency translation 584 - (816)
Adjustment to reconcile net income
to net cash provided
by operating activities:
Changes in assets and liabilities:
Accounts receivable (1,418,716) (1,443,435) (1,345,113)
Related-party receivables - 208,827 211,427
Prepayments and other assets (261,239) (20,206) (1,095,448)
Accounts payable 583,726 591,407 704,063
Related-party payables - (129,429) (200,085)
Other liabilities 282,561 382,273 918,240
Deferred tax -net (173,384) (48,104) (198,304)
Net cash provided by/(used in)
operating activities 1,147,641 (4,523,907) (2,998,688)
------------ ------------ ------------
Cash flows from investing activities
Purchases of intangible assets (1,543,895) (164,473) (900,000)
Purchases of computer and office
equipment (621,566) - (581,603)
------------ ------------ ------------
Net cash used in investing activities (2,165,461) (164,473) (1,481,603)
------------ ------------ ------------
Cash flows from financing activities
Advances on/(repayments of) factoring
arrangement - 1,623,764 (1,286,592)
Gross proceeds from issue of
new shares - 9,762 9,099,761
Conversion of common stock - (22,828) -
Gain on exercise of share options 150,179 - -
Extraordinary listing cost included
within equity - - (1,386,556)
Other capital contribution - 4,760,762 4,696,078
Dividend paid (289,129) (1,189,653) (3,091,566)
------------ ------------ ------------
Net cash provided by financing
activities (138,950) 5,181,807 8,031,125
------------ ------------ ------------
Net (decrease)/increase in cash (1,156,770) 493,427 3,550,834
Cash at the beginning of the
period 4,003,611 452,777 452,777
Cash at the end of the period 2,846,841 946,204 4,003,611
============ ============ ============
Supplement disclosures of Cash
Flow Information
Cash paid during the period for
interest 2,914 244,480 483,586
Cash paid during the period for
income tax - 387,605 -
Notes to the unaudited condensed consolidated interim financial statements
31 December 2013
(1) Nature of business - Group and its operations
Digital Globe Services, Ltd. (the "Company") was incorporated in Bermuda on 9 November 2012 and admitted to the Alternative Investment Market (AIM) of the London Stock Exchange on 14 February 2013. The Company's registered office is located at 4th Floor, 86-90 Paul Street London EC2A 4NE. Digital Globe Services, Ltd. serves as a holding company for a global portfolio of companies in the internet based advertising and related technology business. It has subsidiaries in the United States, Cyprus, Netherlands, Ireland and Pakistan. The Company also owns and maintains the intellectual property (technology, brand name) associated with the business. "The Group" refers to Digital Globe Services, Ltd. and its subsidiaries:
Ownership
as at
31 December
Subsidiary Location Nature of business 2013
Digital Globe Services,
Inc. USA Internet based advertising 100%
Telsat Online, Inc. USA Internet based advertising 100%
DGS Worlwide Marketing Holding company and
Limited Cyprus global marketing 100%
Call centre and support
DGS (Pvt.) Limited Pakistan services 100%
Call centre and support
DGS Worldwide BV Netherlands services 100%
DGS, Tech, Limited Ireland Tech support services 100%
Lead generation in the
DGS EDU LLC USA Education industry *
* owned indirectly
(2) Summary of significant accounting policies (a) Statement of compliance
The accompanying condensed unaudited consolidated half year financial statements consolidate the results of the Company and its subsidiaries (together referred to as the Group). They have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP). The accounting policies have been applied consistently to all periods presented in the unaudited consolidated financial statements.
(b) Basis of preparation of accounts
As permitted, the accompanying condensed unaudited consolidated half year financial statements have been prepared and approved by the Directors in accordance with AIM rules for companies. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2013.
The financial information contained herein is unaudited and does not constitute full audited financial statements. The comparative figures for the financial year ended 30 June 2013 are not the company's financial statements for that financial year. Those accounts have been reported on by the Company's auditors. The report of the auditors was (i) unqualified, and (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report.
The condensed unaudited consolidated half year financial statements have been prepared on a going concern basis, based on the Directors' opinion, after making reasonable enquiries, that the Group has adequate resources to continue in operational existence for the foreseeable future.
The Interim Report was approved by the Board and authorised for issue on 19 March 2014.
(c) Principles of consolidation
The unaudited consolidated financial statements include the financials of Digital Globe Services, Ltd. and its subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation.
(d) Cash and cash equivalents
The Group maintains bank balances, which, at times, may exceed federally insured limits. Balances are monitored and during the six months ended 31 December 2013, there were no instances in which this limit was breached.
Cash and cash equivalents include cash in hand and cash at bank with original maturities of less than three months or available on demand.
(e) Accounts receivable
Accounts receivable are carried at original invoice amount based upon the installation reports issued by the Group's clients as part of the revenue recognition process. Credit is extended to customers based on an evaluation of a customer's financial condition; collateral has not been required to date. Accounts receivable are generally payable within one month of installment by the customer. Accounts receivable outstanding longer than the contractual payment terms are considered past due. Management estimates, where applicable, an allowance for doubtful accounts, which adjusts gross trade accounts receivable to its net realisable value. Judgements are made by the Group based on historical trends and future expectations.
The Group writes off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. The Group does not generally charge interest on past due receivables. Management has determined that no allowance for doubtful accounts is necessary at 31 December 2013.
(f) Property and equipment
Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight--line method based on the estimated useful lives of the assets. The estimated useful lives are three years for computer equipment while this is 5 years for furniture and fixtures.
Estimated useful life
Computer and Office Equipment 3 years
Electrical Equipment 3 years
Furniture and Fixtures 5 years
Expenditure for maintenance, repairs and improvements that do not prolong the useful life of an asset are charged to the statement of income as incurred.
Additions and improvements that substantially extend the useful life of the asset are capitalised. Upon sale or other disposition of assets, the cost and related accumulated depreciation and amortisation are removed from the respective accounts, and the resulting gain or loss, if any, is included in the consolidated statement of income.
The Group evaluates the impairment of property and equipment in accordance with ASC 360, "Property, Plant and Equipment". ASC 360 states that an impairment of long-lived assets has occurred whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured based on net, undiscounted expected cash flows. Assets are considered to be impaired if the net, undiscounted expected cash flows are less than the carrying amount of the assets. Impairment charges are recorded based upon the difference between the carrying value and the fair value of the asset. Based on the assessment of impairment indicators for long-lived assets, the Group did not record any impairment on long-lived assets during the six months ended 31 December 2013.
(g) Intangible assets
Intangible assets are stated at cost less accumulated amortisation and impairment in value, if any, and amortised on a straight-line basis over their useful lives. Intangible assets relate to the purchase of a BPO Suite Enterprise Call Centre Management System and the licenses and services associated therewith and are being amortised over a period of 3 years.
As part of the acquisition of the Education business of Ampush Media, customer based intangibles, customer lists, software and intellectual property were acquired, which are amortised over their useful economic lives of 4 years. There is also a non-compete covenant, which is being amortised over the period of the non-compete term. During the period, research & development in respect of the development of the on-line platform of DGS EDU LLC has been capitalised; this is being amortised over its useful life of 3 years.
(h) Goodwill
Digital Globe Services, Inc.'s goodwill was recorded as a result of a business combination that occurred in prior years. The additional goodwill relates to the acquisition of the Education business of Ampush Media.
Goodwill is initially recognised as an asset at cost and subsequently measured at cost less impairment in value, if any. The Group reviews its recorded goodwill for impairment on an annual basis, or more often if indicators of potential impairment exist, by determining if the carrying value of each reporting unit exceeds its estimated fair value. During the six months ended 31 December 2013, the Group has not performed an impairment test, in accordance with ASC 350, "Intangibles - Goodwill and Other", on the basis that there were no impairment indicators in existence. Goodwill is considered to be impaired if it is determined that the carrying amount of the net assets of the reporting unit exceeds its fair value.
(i) Use of estimates and judgements
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although management believes its estimates, assumptions and judgments are reasonable, they are based upon information presently available. Due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. Significant estimates include the chargebacks and cancellation rates used in recording receivables and recognising revenue.
(j) Stock options
The Company accounts for stock based compensation under ASC 718, "Compensation - Stock Compensation" ("ASC 718"). ASC 718 requires the measurement and recognition of compensation expense based on estimated fair values for all share-based awards made to employees and directors, including stock options. The Company uses the Black-Scholes Option Pricing Model to determine the fair value of the stock options. The expense for the options is recognised on a straight line basis over the requisite service period.
(k) Taxes
The Group recognises deferred tax assets on deductible temporary differences and deferred tax liabilities on taxable temporary differences. Temporary differences are the differences between the reported amount of assets and liabilities and their tax bases. As those differences reverse, they enter into the determination of future taxable income included on the tax return. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax asset will not be realised. Deferred tax assets and liabilities are measured using the enacted tax rates that will apply to taxable income in the periods the deferred tax item is expected to be settled or realised.
Taxable temporary difference relates primarily to amortisation of goodwill and depreciation, whereas deductible temporary difference relates to net operating losses.
The Group recognises the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognised in the financial statements is the largest benefit that has a greater than 50 per cent. likelihood of being realised upon ultimate settlement with the relevant tax authority. Increases or decreases to the unrecognised tax benefits could result from management's belief that a position can or cannot be sustained upon examination based on subsequent information or potential lapse of the applicable statute of limitation for certain tax positions.
The Group may, from time to time, be assessed interest or penalties by major tax jurisdictions. In the event the Group receives an assessment of interest and/or penalties, the interest would be classified as interest expense while the penalties would be classified as operating expense.
Management evaluated the Group's tax positions and concluded that the Group had taken no uncertain tax positions that require adjustment to the consolidated financial statements. The Group is no longer subject to income tax examination by the US federal, state of Colorado or local tax authorities for years before 2008.
(l) Earnings per share
Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and potentially dilutive shares outstanding during the period. Potentially dilutive shares consist of the incremental common shares issuable upon the exercise of common stock options and warrants. Potentially dilutive shares are excluded from the computation if their effect is antidilutive.
(m) Foreign currency transactions and translation
The functional currency of the Group is the United States (US) dollar. Assets and liabilities denominated in foreign currencies are translated at the rate of exchange prevailing at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of transaction. Net gains and losses resulting from foreign exchange transactions are included in the Statement of Income. The effects of exchange rate fluctuations on translating foreign currency assets and liabilities into US dollars are included as part of the accumulated other comprehensive loss component of Stockholders' Equity.
(n) Long-lived assets
Long-lived assets, other than goodwill, are evaluated for impairment when events or changes in the business circumstances indicate that the carrying amount of the assets may not be fully recoverable through projected undiscounted future operating cash flows or appraised values. The Group concluded that there was no evidence of impairment of long-lived assets for the six months ended 31 December 2013.
(o) Fair value measurements
The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximates to their fair value due to the relatively short-term nature of these financial instruments.
(p) Recent accounting pronouncement
In January 2013, the FASB issued ASU 2013-01, The amendments limit the scope of ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, to certain derivative instruments (including bifurcated embedded derivatives), repurchase agreements and reverse repurchase agreements, and securities borrowing and lending arrangements that are either (1) offset on the balance sheet or (2) subject to an enforceable master netting arrangement or similar agreement. The effective date of the amendments coincides with that of ASU 2011-11 (i.e., for fiscal years beginning on or after 1 January 2013, and interim periods within those years). The amendments will be applied retrospectively for all comparative periods presented on the balance sheet.
In February 2013, ASU 2013-02, Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income was issued. This guidance requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income (AOCI). Companies also are required to present reclassifications by component when reporting changes in AOCI balances. The amendments are effective for public companies in fiscal years, and interim periods within those years, beginning after 15 December 2012.
In February 2013, ASU 2013-03, Financial Instruments (Topic 825), Clarifying the Scope and Applicability of a Particular Disclosure to Nonpublic Entities was issued. This guidance clarifies that nonpublic entities as defined in Accounting Standards Codification (ASC) 820, Fair Value Measurement, are not required to disclose the fair value hierarchy level for financial instruments that are not measured at fair value on the statement of financial position but for which fair value is disclosed. The ASU is effective immediately and therefore applies to 2012 financial statements.
In February 2013, ASU 2013-04, Liabilities (Topic 405), Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force) was issued. This guidance requires an entity that is joint and severally liable to measure the obligation as the sum of the amount the entity has agreed with co-obligors to pay and any additional amount it expects to pay on behalf of one or more co-obligors. The amendments are effective for public companies for fiscal years, and interim periods within those years, beginning after 15 December 2013.
In March 2013, ASU 2013-05, Foreign Currency Matters (Topic 830), Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force) was issued. The amendments specify that a cumulative translation adjustment (CTA) should be released into earnings when an entity ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity. The amendments are effective for public companies for fiscal years, and interim periods within those years, beginning after 15 December 2013.
In April 2013, the FASB issued ASU 2013-07, Presentation of Financial Statements. The ASU contains guidance on applying the liquidation basis of accounting and the related disclosure requirements. The changes are effective for fiscal years that begin after 15 December 2013.
In July 2013, the FASB issued ASU No. 2013-09, Deferral of the Effective Date of Certain Disclosures for Nonpublic Employee Benefit Plans in Update No. 2011-04. This defers the effective date of disclosures of quantitative information about the significant unobservable inputs used in Level 3 fair value measurements for investments held by a nonpublic employee benefit plan in its plan sponsor's own nonpublic entity equity securities, including equity securities of its plan sponsor's nonpublic affiliated entities. ASU 2013-09 is effective on issuance for financial statements that have not been issued.
In July 2013, the FASB issued ASU No. 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting. The new guidance permits an entity to designate the Fed Funds Effective Swap Rate ("Fed Funds rate"), also referred to as the overnight index swap rate ("OIS"), as a benchmark interest rate. In addition, the ASU removes the restriction on using different benchmark interest rates for similar hedges. The ASU is effective immediately, and can be applied prospectively for qualifying new or redesignated hedging relationships entered into on or after July 17, 2013.
In July 2013, ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax was issued. The ASU provides that a liability related to an unrecognised tax benefit would be offset against a deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. The ASU is effective for fiscal years, and interim periods within those years, beginning after 15 December 2013 for public entities.
In December 2013, the FASB issued ASU 2013-12, Definition of a Public Business Entity - an Addition to the Master Glossary. The FASB issued a new definition of a public business entity that will be considered in future standard setting, such as determining which entities can use any private company accounting alternatives under US GAAP that the FASB will provide. The amendment does not affect existing requirements. The new definition may be used in specifying the scope of future financial accounting and reporting guidance.
In January 2014, the FASB published ASU 2014-01,Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Qualified Affordable Housing. ASU 2014-01 affects (1) reporting entities that meet the conditions for and that elect to use the proportional amortisation method to account for investments in qualified affordable housing projects (all amendments in this ASU apply) and (2) reporting entities that do not meet the conditions for or that do not elect the proportional amortisation method (only the amendments in this ASU that are related to disclosures apply). The ASU is effective for public business entities for annual periods, and interim reporting periods within those annual periods, beginning after 15 December 2014.
In January 2014, the FASB published ASU 2014-02,Intangibles - Goodwill and Other (Topic 350): Accounting for Goodwill. This affects all entities, except public business entities and not-for-profit entities and employee benefit plans within the scope of ASC 960 through ASC 965 on plan accounting. If elected, this should be applied prospectively to goodwill existing as of the beginning of the period of adoption and new goodwill recognized in annual periods beginning after 15 December 2014, and interim periods within annual periods beginning after 15 December 2015.
In January 2014, the FASB published ASU 2014-03,Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps - Simplified Hedge Accounting Approach. ASU 2014-03 affects all entities, except public business entities and not-for-profit entities as defined in the Master Glossary of the FASB Accounting Standards Codification, employee benefit plans within the scope of ASC 960 through ASC 965 on plan accounting, and financial institutions. The effective date is for annual periods beginning after 15 December 2014 and interim periods within annual periods beginning after 15 December 2015, with early adoption permitted.
In January 2014, the FASB published ASU 2014-04,Receivables - Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure. This affects all creditors who obtain physical possession (resulting from an in substance repossession or foreclosure) of residential real estate property collateralizing a consumer mortgage loan in satisfaction of a receivable. It is effective, for public business entities, for annual periods, and interim periods within those annual periods, beginning after 15 December 2014.
In January 2014, the FASB published ASU 2014-05,Service Concession Arrangements (Topic 853) - a consensus of the FASB Emerging Issues Task Force. The ASU affects operating entities that enter into service concession contracts with a public-sector entity grantor to operate the grantor's infrastructure to provide a public service and is effective for public business entities with fiscal years beginning after 15 December 2014, and interim periods therein.
The adoption of these standards does not have a material effect on the Group's audited consolidated financial statements.
(q) Revenue recognition
In regards to Digital Globe Services, Inc. and Telsat Online, Inc., revenue is recognised based on actual monthly installations and activation of cable services ordered through Digital Globe Services, Inc. at the end-customers' home address. Once an order is placed through Digital Globe Services, Inc., the order is transferred to the client for activation and installation. The client then schedules the service to be activated at the end-customers' address, and once successfully activated, the data is entered into the client database, which results in the payable to Digital Globe Services, Inc. On a monthly basis, each client reconciles their internal database for all ordered services and determines which activations are deemed payable for that month and sent to Digital Globe Services, Inc. via a monthly payment file. This may include activations from prior months, but are deemed payable after reconciliation. Revenue is then recorded based on the total number of installations recognised in a given month, multiplied by the commission rate as stated in the agreement with the client.
Total installations are reported to Digital Globe Services, Inc. via monthly payment files detailing total installations and total commission value based on final product mix within the month. The payment files provide exact payment information on total commissions earned by Digital Globe Services, Inc. net of chargebacks and cancellations.
In regards to DGS EDU LLC, revenue is accrued for and recognised on a monthly basis based on the leads, clicks and data delivered during the month, net of the historical return/disqualification rate, with any adjustments to confirmed invoicing occurring during the proceeding month, with net adjustments generally being less than 1%. The policy is different from that of the core business, on the basis that the revenue is both earned and can be reliably estimatable. Revenue from core business is not deemed to be earned until the service has been installed, due to certain factors existing in those contracts.
The only other revenue is in relation to IP royalty income, which is eliminated on consolidation.
(r) Search engine and lead generation expenses
The Group's most significant operating costs are the click through fees associated with bidding on key words or phrases with various internet search engines. The most significant vendor used is Google Inc. These expenses are recognised on an accruals basis based on the number of click-throughs for the period. The fees charged by the Search Engines vary depending on day and time but typically range from $1.00 to $3.00 per click. Although the Group has entered into service agreements with various Internet search engines, these agreements do not require either party to make a long--term commitment and can be terminated at any time.
The Group utilises sub-affiliates to assist in developing additional profitable leads for additional volume with the Group's main clients. These third party affiliates run their own marketing campaigns and send their leads to the Group's call centres whereby the Group closes the sale and sends the lead to its clients. Compensation for sub-affiliate leads varies by partner, but typically they are paid a bounty per lead, which, when converted, generate a bounty by the company's clients.
(s) Segment reporting
The Board of Directors believe there is only one operating segment, being online customer acquisition. Although there are operations and entities in various geographies and differing verticals, these serve to ensure the end users have availability of call centre support covering all time zones and multiple languages. The information is disseminated to the relevant management personnel on a monthly basis and is reviewed as an entire Group.
(3) Dividends
During the six months ended 31 December 2013, the Group paid a dividend of $289,129 (representing $0.0107 per depository interest over common shares of $0.001).
(4) Income taxes
The tax provision consists of the following:
Six months Six months Year ended
ended ended
31 December 31 December 30 June
2013 2012 2013
$ $ $
Current tax expense 153,448 5,153,556 5,289,502
Deferred tax benefit (173,383) (48,104) (198,304)
=========== =========== ==========
Total income tax (credit)/expense (19,935) 5,105,452 5,091,198
=========== =========== ==========
Digital Globe Services, Inc. (including its wholly owned subsidiary Telsat online, Inc.) was wholly owned by TRG Holdings, LLC until 30 November 2012. Accordingly, income taxes payable to/ (refundable from) the tax authority were recognised by TRG Holdings, LLC, who was the taxpayer for income tax purposes. On 29 November 2012, Digital Globe Services, Inc. and Telsat Online, Inc. sold their intellectual property (Technology and Brand name) to The Resource Group International Limited at a fair value of US$12.9m. For US tax purposes, taxable income of US$12.9M was recognised, resulting in a current tax expense of US$4.8M. This resulted in a deemed contribution from the then parent company (TRG Holding, LLC). As a part of group re-organisation, Digital Globe Services, Inc. and Telsat online, Inc. left the US consolidated tax group on 30 November 2012 and started filing separate tax return in the US, with effect from 1 December 2012. Other entities in the Group file standalone tax returns in their respective jurisdictions.
The US tax provision calculations include Digital Globe Services, Inc., Telsat Online, Inc., DGS EDU LLC and DGS Worldwide BV. DGS (Pvt.) Limited is exempt from corporate income tax under Pakistan's tax laws, being an exporter of IT enabled services. Digital Globe Services, Ltd. (Holding company) is not subject to any income tax as there is no corporate income tax in Bermuda. Digital Globe Services, Ltd. became a UK tax resident on 26 June 2013.
Management has evaluated the Group's tax positions and concluded that the Group had taken no uncertain tax positions that require adjustment to the consolidated financial statements. The Group recognises interest and penalties related to uncertain tax positions in income tax expense.
As of 31 December 2013, the Group had no provision for interest or penalties related to uncertain tax positions. The years 2009-2012 are open to examination by the tax authorities.
The following shows the nature and components of Group's deferred tax asset and liabilities:
At 31 December At 31 December At 30 June
2013 2012 2013
$ $ $
Current deferred tax asset:
Net operating losses 393,615 51,504 220,232
-------------- -------------- ----------
Depreciation (38,682) (15,674) (38,682)
Amortisation of goodwill (25,774) (30,255) (25,774)
-------------- -------------- ----------
Total non-current deferred tax
liabilities (64,456) (45,929) (64,456)
============== ============== ==========
At 31 December 2013, the Group's US federal and state net operating loss carry forward for income tax purposes is $1.1 million (2012: $0.6 million) which will begin to expire in 2033. These amounts are based on the income tax returns filed for the year ended 30 June 2012 and estimated amounts for the year ended 30 June 2013.
The income tax provision differs from the amount of income tax determined by applying the statutory tax rate to pretax income, due to the following:
Six months ended Six months ended Year ended
31 December 2013 31 December 2012 30 June 2013
% $ % $ % $
Net income/(loss)
for the period 781,552 (4,081,256) (2,714,623)
Total income tax
(credit)/expense (19,935) 5,105,452 5,091,198
--------- ----------- -----------
Net income excluding
income tax 761,617 1,024,196 2,376,575
========= =========== ===========
Expected income
tax expense
using applicable
tax rate (19.28) (146,832) 36.45 5,100,262 34.00 808,036
State taxes, net
of federal effect (1.61) (12,291) 0.51 5,190 3.46 82,336
Foreign subsidiaries
taxed at lower
rate or tax exempt 18.28 139,188 - - (27.79) (660,387)
Gain on sale of
intellectual
property - - - - 204.46 4,859,144
Non-deductible expenses/Other - - - - 0.09 2,069
------- --------- ----- ----------- ------- -----------
Total non-current
deferred tax
liablities (2.61) (19,935) 36.96 5,105,452 214.22 5,091,198
======= ========= ===== =========== ======= ===========
(5) Acquisitions
On 31 October 2013, the Group acquired the Education business of Ampush Media. A separate entity was formed (DGS EDU LLC) to acquire the assets and trading business, as follows:
Provisional fair value
of assets acquired
$
Office furniture & equipment 10,000
Customer-based intangibles 1,500,000
Software & IP 200,000
Information base, books, records and customer
lists 50,000
Covenant not to compete 40,000
Goodwill 781,523
---------------------------------
2,581,523
---------------------------------
The consideration payable will be satisfied through an initial consideration of USD 1.5 million in cash and up to USD 1.0 million in shares, from the issue of up to 266,678 new depositary interests over common shares in the Company (the "Consideration Shares"), issued on a 30 day average of Digital Globe Services, Ltd. closing share price as counted from the thirty days prior to closing the transaction. The share consideration will be paid in two tranches, with 50% paid immediately and 50% to be paid in approximately March 2014 contingent on certain minimum revenue targets being met in the three months after closing. Digital Globe Services, Ltd. retains the right to substitute cash for the second tranche of Consideration Shares, at the prevailing market price for those shares. Each tranche of Consideration Shares will be subject to a 90-day lock-up following the release of the shares to the sellers and a further orderly market arrangement.
In addition, a further deferred cash consideration of up to USD 1.2 million is payable subject to certain revenue targets being met over the 12 months after the 31 October 2013 closing of the transaction. If the earn-out is met, DGS anticipates paying in December 2014 or January 2015. There is an additional commercial services agreement for DGS Inc. to leverage Ampush AMP 2.0 Marketing Platform for social media advertising services in exchange for fees in the amount of $100,000 cash paid up front and usable over the succeeding seven months
The first tranche of shares (133,339 new depositary interests over common shares in the Company) have been issued and an amount of $581,523 has been reflected in the interim financial statements as contingent consideration. Both the contingent consideration and the acquired intangibles have been based on management's best estimate of fair values, based on factors existing at the time of the acquisition. A full fair value exercise will be undertaken prior to the year end and the intangible assets will be adjusted accordingly, in the financial statements for the year ending 30 June 2014.
Revenues from DGS EDU LLC in the period since acquisition amount to $1.4 million. Net income is at break-even since the acquisition date and adjusted EBITDA amounts to $150,000.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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