Please see disclaimer at bottom of this document
November 7, 2005 Review of Form 6K earnings release for 9/30/05
1. Statement of Cash flows not yet filed. This makes analysis difficult, if not impossible.
2. Dilution seems heavy. Something always to watch
3. Inventory is building, as revenues are falling. Watch for potential write off.
4. Looks like burn is around $2.5M quarterly. If we use quarterly burn of $4.0M, there is still 5 quarters of cash. It is very possible that I over estimated the burn, but I want to be more conservative. Either way, cash could unarguably run out during fiscal 2007.
5. Balance Sheet Data
|Cash and Marketable Securities||$25,619||$23,017||$20,712||$21,183|
|Trade Receivable Gross||$828||$1,667||$1,872||$471|
|Other receivables and prepaid expense||$703||$459||$275||$448|
|Total Current Assets||$28,382||$26,950||$25,168||$24,394|
|Long Term Investments|
|Prepaid Development and Production||$476||$455||$430||$397|
|Severance Pay Fund||$1,489||$1,543||$1,478||$1,543|
|Total Long Term Investments||$1,965||$1,998||$1,908||$1,940|
|Property and Equipment Net||$384||$341||$391||$378|
|Intangible Assets, Net||$634||$574||$5,865||$5,780|
|Liabilites and Shareholders’ Equity|
|Other Payables and Accrued Expenses||$2,478||$2,482||$2,197||$1,922|
|Total Current Liabilities||$3,334||$3,660||$3,894||$2,225|
|Long Term Liabilities|
|Accrued Severance Pay||$1,985||$2,034||$1,922||$1,983|
|Preferred Shares in Subsidiary||$35,937||$36,144||$35,185||$38,463|
|Additional Paid In Capital||$53,193||$53,231||$61,196||$61,185|
|Accumulated other Comprehensive Loss||($84)||($110)||($73)||($58)|
|Total Shareholders’ Deficiency||($9,891)||($11,975)||($7,669)||($10,179)|
|Total Liabilites and Shareholders’ Equity||$31,365||$29,863||$33,332||$32,492|
September 29, 2005 Review of Form 6K earnings release for 6/30/05
1. Balance Sheet Data
|Cash and Marketable Securities||20712||23017||25619|
|Trade Receivable Gross||1872||1667||828|
|Other receivables and prepaid expense||275||459||703|
|Total Current Assets||25168||26950||28382|
|Long Term Investments|
|Prepaid Development and Production||430||455||476|
|Severance Pay Fund||1478||1543||1489|
|Total Long Term Investments||1908||1998||1965|
|Property and Equipment Net||391||341||384|
|Intangible Assets, Net||5865||574||634|
|Liabilities and Shareholders’ Equity|
|Other Payables and Accrued Expenses||2197||2482||2478|
|Total Current Liabilities||3894||3660||3334|
|Long Term Liabilities|
|Accrued Severance Pay||1922||2034||1985|
|Preferred Shares in Subsidiary||35185||36144||35937|
|Additional Paid In Capital||61196||53231||53193|
|Accumulated other Comprehensive Loss||-73||-110||-84|
|Total Shareholders’ Deficiency||-7669||-11975||-9891|
|Total Liabilities and Shareholders’ Equity||33332||29863||31365|
Profit and Loss Statement
|6 months ended||3 months ended||3 months ended|
|Cost of Revenues||1488||739||749|
|Amortization of developed Technology||120||60||60|
|Research and Development||4770||2086||2684|
|Write off of R&D||1475||0||1475|
|Selling and Marketing||1171||0||1171|
|General and Administrative||745||1001||-256|
|Total Operating Expenses||8161||3087||5074|
|Operating Income (Loss)||-5893||-2013||-3880|
|Financial and Other Expenses||110||88||22|
|Loss Before Minority Interest||-6003||-2101||-3902|
|Minority Interest in Sub||206||5||201|
|Net Loss per share||($0.54)||($0.20)||($0.35)|
|Weighted Avg. Shares O/S||10670815||10626285||44530|
2. Some Analysis
a. Cash and marketable securities are $20,712 at June 30, 2005. They were $25,619 at 12/31/04 and 24,637 at 3/31/05.
b. Revenues increased QoQ by 6.94%
c. Receivables are getting high. I haven’t calculated DSO’s, but I imagine they are longer than typical. Lanoptics is in a lot of testing phases, hence I am concerned with the Receivables. The allowance of $47 also looks a bit meager.
d. Gross Profit % was 57.34% for 3 months ended 3/31/05 and 59.61% for 3 months ended 6/30/05.
e. Operating expenses went up QoQ by 64.37%.
f. Weighted average shares outstanding went up .42% for the quarter. That is an acceptable 1.6% run rate. Watch this closely.
g. Current Share Price is 6.50. Hence market cap is 69.360M. This is about 8X revenues.
h. Cash Flow adjustment. One can argue that write off of R&D is not recurring. I am keeping it here, unless I can be convinced otherwise.
|6 months ended
|Net Cash Used In Operating Activities||-4911|
|Less: Write-off of R&D||-1475|
|Adjusted Cash Used||-6517|
i. EzChip ownership increased from 54.4% to 58.7% during the quarter. This was done via a swap of shares. I haven’t looked to closely.
j. If I ever get time, I will compare the 6 months ended from 2005 to 2004. This is identified in SEC filing. Revenues are up over $2,254 or 139%. Yet, operating expenses alone are up over $3,045.
k. NP-2 samples were shipped in July 2005.
l. Believes that working capital can sufficiently get them through the end of 2006. They could require more funds earlier, if they grow to rapidly or if sufficient revenue is not generated. I would like them to identify how much that “sufficient revenue” is.
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