Zone-IP Ltd.
("Zone-IP" or the "Company")
Interim Results for the six months ended 30 June 2008
Ra'anana, Israel , 28 August 2008 : Zone-IP Ltd. (LSE: ZIP) announces its
unaudited financial results for six months ended 30 June 2007.
FINANCIAL HIGHLIGHTS:
* Total revenues from operations for six months ended 30 June 2008 were
US$2.37 million (H1 2007: US$3.01 million)
* Operating loss for six months ended 30 June 2008 was US$3.34 million (H1
2007: US$1.76 million)
* Net loss for six months ended 30 June 2008 was US$1.73 million (H1 2007:
US$1.76 million)
* Total assets as at 30 June 2008 were US$10.23 million (H1 2007: US$ 11.42
million)
* Loss per share for six months ended 30 June 2008 of $US0.03 (H1 2007:
US$0.03)
Chairman's Statement
During the six months ended 30 June 2008, the Company incurred a loss of
US$1.73 million (2007: $1.76 million) in turnover of US$2.37 million (2007:
US$3.01 million).
Our wholly-owned subsidiary, Emblaze VCON, has spent the first six months of
the year reorganizing its existing product line and introducing the next
generation of room systems - a new top of the range room system - xPoint,
featuring ISDN and 4CIF technologies - and a new HD MCU - VCBpro with full
audio and video transcoding.
The introduction of xPoint and VCBpro assists us in establishing our position
within the market and enables us to compete in various tenders. However, the
period ended 30 June 2008 saw a slowdown in revenue stream compared to the
corresponding period last year and, hence, resulted in an increase in operating
loss. The decrease in revenue is mainly the result of delays in closing of
several substantial projects in China and the United States. We aim to finalize
the agreements of these projects in the second half of the year.
The Company's gross profit shows continued improvement, mainly due to the
Company's focus on sales of software-based products. The increase in
operational and net losses compared to the six months ended 30 June 2007 is the
result of two main factors: the decrease in revenue as explained above, and the
significant revaluation of the New Israeli Shekel against the US Dollar. The
Company received the majority of its revenue in the six months ended 30 June
2008 in US Dollars while the Company pays most of its expenses in New Israeli
Shekels.
Earlier in July 2008 the Company announced the sale of certain patents and
applications of Emblaze VCON to Handheld Devices & Co., L.L.C, a company
registered in Delaware. Handheld Devices has paid Emblaze-VCON US$3,200,000 in
cash. Emblaze-VCON received US$1,623,000, net of payments to the Office of the
Chief Scientist of the Ministry of Industry and commissions payable to a firm
of patent attorneys, who introduced the buyer to Emblaze-VCON, and associated
legal fees. The net proceeds of the sale of the patents are recorded in
Emblaze-VCON's accounts as a capital gain and are reflected in the results of
the six months ended 30 June 2008.
Dr Hans Wagner
Chairman
28 August 2008
Enquiries:
Zone-IP
Hagit Gal +972 (0)9 769 339
Emblaze VCON
David Amir, VP Finance & +972 (0)9 7627800
Operations
John East & Partners Limited
David Worlidge/Simon Clements +44 (0) 020 7628 2200
About Emblaze-VCON
Emblaze-VCON, a subsidiary of ZONE-IP Ltd., is a world leader in the
development and deployment of Video over-IP Conferencing Solutions, enabling
enterprises of all sizes to optimize their productivity and efficiency through
enhanced interaction and communication. The Company designs, develops,
manufactures and markets high-performance, feature-rich desktop and group
videoconferencing systems designed for a variety of networks, including those
based on the Internet Protocol as well as infrastructure servers to manage the
video network and services.
More information is available at www.emblaze-vcon.com
CONSOLIDATED BALANCE SHEETS
30 June 30 June 31 December
2008 2007 2007
Unaudited Unaudited Audited
$'000 $'000 $'000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 269 2,501 1,968
Restricted cash 2,104 543 1,257
Short-term available-for-sale - 2,135 150
marketable securities
Trade receivables 2,207 1,219 2,383
Other accounts receivable and prepaid 1,058 279 529
expenses
Inventories 2,653 1,854 2,730
Total current assets 8,291 8,531 9,017
NON-CURRENT ASSETS:
Long-term available-for-sale marketable 964 1,665 1,869
securities
Property and equipment, net 449 448 397
Intangible assets, net 522 772 650
Total non-current assets 1,935 2,885 2,916
Total assets 10,226 11,416 11,933
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED BALANCE SHEETS
30 June 30 June 31 December
2008 2007 2007
Unaudited Unaudited Audited
$'000 $'000 $'000
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term bank credit 2,127 1,153 2,330
Trade payables 1,691 2,057 3,042
Employees and payroll accruals 969 501 515
Related party 128 576 53
Government grants 812 643 767
Deferred revenues 123 229 203
Other accounts payable and accrued 1,313 631 429
expenses
Total current liabilities 7,163 5,790 7,339
NON-CURRENT LIABILITIES
Government grants 607 813 593
Employees benefits liability 314 195 232
Total non-current liabilities 921 1,008 825
Liabilities attributed to discontinued 111 - 111
operations
Total liabilities 8,195 6,798 8,275
EQUITY:
Share capital:
Ordinary shares 109 109 109
Share premium 13,316 13,058 13,203
Unrealized gains/(losses) on marketable (144) 14 (139)
securities
Foreign currency translation reserve (5) (2) 4
Accumulated deficit (11,245) (8,561) (9,519)
Total equity 2,031 4,618 3,658
Total liabilities and equity 10,226 11,416 11,933
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
30 June 30 June 31 December
2008 2007 2007
Unaudited Unaudited Audited
$'000 $'000 $'000
Revenues 2,370 3,012 8,265
Cost of revenues (923) (1,299) (3,294)
Gross profit 1,447 1,713 4,971
Operating expenses:
Research and development 1,560 1,557 3,019
Sales and marketing 1,267 1,310 2,682
General and administrative 1,080 744 1,840
Total operating expenses 3,907 3,611 7,541
Operating loss (2,460) (1,898) (2,570)
Financial income 220 301 594
Financial expenses (1,102) (168) (832)
Total operating loss (3,342) (1,765) (2,808)
Other income, net 1,616 - -
Loss for the period from continuing (1,726) (1,765) (2,808)
operations
Discontinued operations:
Income for the period from discontinued - - 85
operations
Loss (1,726) (1,765) (2,723)
Loss per share:
Basic and diluted loss per share from (0.03) (0.03) (0.05)
continuing operations
Basic and diluted loss per share from (0.00) (0.00) (0.00)
discontinued operations
Basic and diluted net loss per share (0.03) (0.03) (0.05)
Weighted average number of shares used in 51,120,253 51,120,253 51,120,253
computing basic and diluted loss per
share
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Foreign
currency
Net translation Total
Share Share unrealized adjustments Accumulated Total recognized
capital premium loss reserve deficit equity expense
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance as of 1 109 12,989 (10) (2) (6,796) 6,290
January 2007
(audited)
Foreign currency - - - 6 - 6 6
translation
Net loss on - - (129) - - (129) (129)
available-for-sale
financial assets
Share-based - 214 - - - 214 -
payment
Loss - - - - (2,723) (2,723) (2,723)
(2,846)
Balance as of 31 109 13,203 (139) 4 (9,519) 3,658
December 2007
(audited)
Foreign currency - - - (9) - (9) (9)
translation
Net loss on - - (5) - - (5) (5)
available-for-sale
financial assets
Share-based - 113 - - - 113 -
payment
Loss - - - - (1,726) (1,726) (1,726)
(1,740)
Balance as of 30 109 13,316 (144) (5) (11,245) 2,031
June 2008
Foreign
currency
Net translation Total
Share Share unrealized adjustments Accumulated Total recognized
capital premium loss reserve deficit equity expense
reserve
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance as of 1 109 12,989 (10) (2) (6,796) 6,290
January 2007
Net loss on - - 24 - - 24 24
available-for-sale
financial assets
Share-based - 69 - - - 69 -
payment
Loss - - - - (1,765) (1,765) (1,765)
(1,741)
Balance as of 30 109 13,058 14 (2) (8,561) 4,618
June 2007
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
30 June 30 June 31 December
2008 2007 2007
Unaudited Unaudited Audited
$'000 $'000 $'000
Cash flows from operating activities:
Net loss (1,726) (1,765) (2,723)
Adjustments to reconcile net loss to net
cash used in operating activities:
Income from discontinued operations - - (85)
Capital gain from sale of intangible (1,616) - -
assets
Depreciation and amortization 233 266 522
Share-based payment 113 69 214
Increase in employee benefits liability 82 46 83
Amortization of premium and discount of (3) - 41
marketable securities
(Increase)/decrease in short and 59 32 (64)
long-term Government grants payables
Working capital adjustments:
Decrease/(Increase) in trade receivables 176 441 (722)
Decrease/(Increase) in other accounts (397) 108 (141)
receivable and prepaid expenses
Decrease/(Increase) in inventories 9 (498) (1,437)
(Decrease)/Increase in trade payables (1,351) 508 1,459
Increase/(Decrease) in employees and 454 (127) (112)
payroll accruals
Decrease in deferred revenues (80) - (268)
Increase/(Decrease) in accrued expenses 884 (250) 41
and other liabilities
Net cash flows used in continuing (3,163) (1,170) (3,192)
operating activities
Net cash flows used in discontinued - - (54)
operating activities
Net cash used in operating activities (3,163) (1,170) (3,246)
Cash flows from investing activities:
Purchase of property and equipment (95) (40) (26)
Restricted cash (847) (306) (1,020)
Investment in marketable securities - (1,682) (2,680)
Proceeds from sale of intangible assets, 1,490 - -
net
Proceeds from sale of marketable 1,053 3,385 5,970
securities
Net cash provided by investing activities 1,601 1,357 2,244
Cash flows from financing activities:
(Decrease)/Increase in short-term bank (203) 638 1,815
credit
Increase/(Decrease) in related party 75 63 (460)
Net cash provided by financing activities (128) 701 1,355
(Decrease)/Increase in cash and cash (1,690) 888 353
equivalents
Net foreign exchange difference (9) - 2
Cash and cash equivalents at beginning of 1,968 1,613 1,613
year
Cash and cash equivalents at end of 269 2,501 1,968
period
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
30 June 30 June 31
2008 2007 December
Unaudited Unaudited 2007
$'000 $'000 Audited
$'000
(1) Supplemental disclosure of cash
flow activities:
Interest received 86 161 302
Interest paid 113 69 72
Tax paid 7 - 15
(2) Non-cash activities:
Transfer from inventories to 68 51 114
property and equipment
Property acquired through - - 34
suppliers' credit
Proceeds from sale of 132 - -
Intangible assets
(3) Net cash flows used in
discontinued operating
activities:
Profit from a discontinued - - 85
operation
Less: Decrease in accrued - - (139)
expenses associated with the
discontinued operation
- - (54)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1:- GENERAL
a. Zone-IP LTD was incorporated in 2002 under the laws of Israel. The Company
is focused on Internet Protocol (IP) related services.
The Company's subsidiary Emblaze Vcon Ltd. (EVC) and its wholly-owned
subsidiary in the U.S. design, develop, manufacture and sell high-performance,
multi-function conferencing systems designed for a variety of networks,
including those based on the Internet protocol. EVC's systems facilitate
interactive communication between remote users through videoconferencing, video
streaming, audio conferencing and data collaboration. These systems are
primarily targeted at business, distance learning, telemedicine and government.
EVC distributes its products worldwide, primarily through distributors and
value-added resellers, as well as original equipment manufacturers. In
addition, the Company maintains regional sales and support offices.
b. During June 2008 EVC has entered into an agreement to sell certain patents
and applications to third party for an aggregate amount of $3,200 in cash, out
of which, the Company received $1,623,000 net of $653,000 paid to the Office of
the Chief Scientist of the Ministry of Industry and net of $924,000
commissions' and associated legal fees paid to a firm of patent attorneys.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies and methods of computation applied in the
preparation of the interim financial information are the same as those applied
in the annual financial statements of the Company as of 31 December 2007.
The interim condensed consolidated financial statements have been prepared in
accordance with IAS 34 Interim Financial Reporting.
NOTE 3:- LOSS PER SHARE
The calculation of loss per share is based on the loss attributable to ordinary
shareholders of $1.73 million (H1 2007 US$1.77 million) divided by the weighted
average number of shares in issue during the year, being 51,120,253 (H1 2007
51,120,253) shares.
NOTE 4: DIVIDENDS
No dividend is proposed for the six months ended 30 June 2008.
COPIES OF THE INTERIM FINANCIAL STATEMENTS
Copies of the interim results will be available on the Company's website
www.zone-ip.com and at the offices of the Company's nominated adviser, John
East & Partners Limited, 10 Finsbury Square, London EC2A 1AD.
END
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