Scopus Video Networks Ltd. - Report of Foreign Issuer (6-K)
October 07 2008 - 5:02PM
Edgar (US Regulatory)
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
The Securities Exchange Act of 1934
For the month of
October, 2008
Scopus Video Networks
Ltd.
(Translation of
registrants name into English)
10 Haamal St.,
Park Afek, Rosh Haayin 48092
(Address of principal executive offices)
Indicate by check mark whether the
registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F
x
Form 40-F
o
Indicate by check mark whether the
registrant by furnishing the information contained in this form is also thereby furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange
Act of 1934.
Yes
o
No
x
If Yes is
marked, indicate below the file number assigned to the registrant in connection with Rule
12g3-2(b): 82-
N/A
Attached hereto and incorporated by
reference herein is a copy of Scopus Video Networks Ltd.s Interim Condensed
Consolidated Financial Statements for the first half of 2008.
Attached hereto and incorporated by
reference herein is the Managements Discussion and Analysis of Financial Condition
and Results of Operations for Scopus Video Networks Ltd. for the first half of 2008.
This Form 6-K is hereby incorporated
by reference into Scopus Video Networks Ltd.s, Registration Statement on Form S-8
(Registration No. 333-133995) and into Scopus Video Networks Ltd.s registration
statement on Form F-3, filed with the Securities and Exchange Commission on October 16,
2007 (File No. 333-146745).
2
SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
|
|
SCOPUS VIDEO NETWORKS LTD.
(Registrant)
By: /s/ Yaron Simler
Yaron Simler
Chief Executive Officer
|
|
|
By: /s/ Moshe Eisenberg
Moshe Eisenberg
Chief Financial Officer
|
Date: October 7, 2008
3
SCOPUS VIDEO NETWORKS
LTD.
INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2008
(In thousands of U.S.
dollars)
4
SCOPUS VIDEO NETWORKS LTD.
INDEX TO INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
SCOPUS VIDEO NETWORKS LTD.
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
|
June 30,
2 0 0 8
|
December 31,
2 0 0 7
|
|
Unaudited
|
*
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
Cash and cash equivalents
|
|
|
$
|
30,016
|
|
$
|
23,090
|
|
Short-term deposits
|
|
|
|
-
|
|
|
7,227
|
|
Trading securities
|
|
|
|
5,968
|
|
|
5,230
|
|
Trade accounts receivable (net of allowance for doubtful
accounts of $137 and $152, respectively)
|
|
|
|
14,637
|
|
|
12,409
|
|
Inventories (Note 3)
|
|
|
|
9,106
|
|
|
7,774
|
|
Other receivables and current assets
|
|
|
|
2,756
|
|
|
2,151
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
62,483
|
|
|
57,881
|
|
|
|
|
|
|
|
|
|
Fixed assets, net
|
|
|
|
4,196
|
|
|
3,453
|
|
|
|
|
|
|
|
|
|
Deposits in general severance fund
|
|
|
|
257
|
|
|
230
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
|
120
|
|
|
105
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
|
$
|
67,056
|
|
$
|
61,669
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
CURRENT LIABILITIES:
|
|
|
Trade accounts payable
|
|
|
$
|
10,007
|
|
$
|
6,221
|
|
Other payables and current liabilities
|
|
|
|
11,819
|
|
|
11,184
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
21,826
|
|
|
17,405
|
|
|
|
|
|
|
|
|
|
Liabilities for vacation and severance pay
|
|
|
|
1,901
|
|
|
1,945
|
|
|
|
|
|
|
|
|
|
Contingent liabilities (Note 4)
|
|
|
|
|
|
SHAREHOLDERS' EQUITY:
|
|
|
Ordinary shares, NIS 1.4 par value; authorized
|
|
|
66,071,428 shares at June 30, 2008 and December 31,
|
|
|
2007; issued and outstanding 13,990,530
|
|
|
and 13,926,907 shares at June 30, 2008 and December 31, 2007
|
|
|
Respectively
|
|
|
|
4,542
|
|
|
4,517
|
|
Additional paid-in capital
|
|
|
|
78,332
|
|
|
77,428
|
|
Other comprehensive income
|
|
|
|
100
|
|
|
72
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
(39,645
|
)
|
|
(39,698
|
)
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
|
43,329
|
|
|
42,319
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
$
|
67,056
|
|
$
|
61,669
|
|
|
|
|
|
|
* Derived from the audited balance sheet at December 31, 2007.
The accompanying notes are an integral part of the interim condensed consolidated financial
statements.
6
SCOPUS VIDEO NETWORKS LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share and per share data)
|
Six months ended
June 30,
|
|
2 0 0 8
|
2 0 0 7
|
|
Unaudited
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
35,504
|
|
$
|
25,769
|
|
|
|
|
Cost of revenues
|
|
|
|
18,220
|
|
|
13,216
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
17,284
|
|
|
12,553
|
|
|
|
|
Research and development expenses,
|
|
|
net of participation by the Officer of the Chief Scientist of
|
|
|
$1,472 and $1,254 respectively
|
|
|
|
6,718
|
|
|
5,066
|
|
|
|
|
Sales and marketing expenses
|
|
|
|
8,383
|
|
|
7,871
|
|
|
|
|
General and administrative expenses
|
|
|
|
2,458
|
|
|
2,550
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
|
(275
|
)
|
|
(2,934
|
)
|
|
|
|
Financing income, net
|
|
|
|
348
|
|
|
587
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
|
73
|
|
|
(2,347
|
)
|
|
|
|
Income tax expenses
|
|
|
|
(19
|
)
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
$
|
54
|
|
$
|
(2,373
|
)
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per ordinary share
|
|
|
$
|
0.00
|
|
$
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in
|
|
|
basic and diluted loss per ordinary share calculation
|
|
|
|
13,953,537
|
|
|
13,438,118
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the interim condensed consolidated financial statements.
7
SCOPUS VIDEO NETWORKS LTD.
INTERIM CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands, except share and per share data)
|
Six months ended June 30, 2008
|
|
Ordinary
Shares
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Other comprehensive
Income from
derivatives
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2008
|
|
|
$
|
4,517
|
|
$
|
77,428
|
|
$
|
(39,698
|
)
|
|
72
|
|
$
|
42,319
|
|
Exercise of share options
|
|
|
|
25
|
|
|
165
|
|
|
-
|
|
|
-
|
|
|
190
|
|
Amortization of deferred stock-based
compensation granted to employees
|
|
|
|
-
|
|
|
652
|
|
|
-
|
|
|
-
|
|
|
652
|
|
Amortization of deferred stock-based
compensation granted to consultant
|
|
|
|
-
|
|
|
87
|
|
|
-
|
|
|
-
|
|
|
87
|
|
Accumulated gain from derivatives
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
28
|
|
|
28
|
|
Net income for the period
|
|
|
|
-
|
|
|
-
|
|
|
53
|
|
|
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2008
|
|
|
$
|
4,542
|
|
$
|
78,332
|
|
$
|
(39,645
|
)
|
|
100
|
|
$
|
43,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2007
|
|
Ordinary
Shares
|
Additional
paid-in
capital
|
Accumulated
deficit
|
Other comprehensive
Income from
derivatives
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance - January 1, 2007
|
|
|
$
|
4,322
|
|
$
|
74,118
|
|
$
|
(36,921
|
)
|
|
-
|
|
$
|
41,519
|
|
Exercise of share options
|
|
|
|
83
|
|
|
610
|
|
|
-
|
|
|
-
|
|
|
693
|
|
Amortization of deferred stock-based
|
|
|
compensation granted to employees
|
|
|
|
-
|
|
|
920
|
|
|
-
|
|
|
-
|
|
|
920
|
|
Net loss for the period
|
|
|
|
-
|
|
|
-
|
|
|
(2,373
|
)
|
|
-
|
|
|
(2,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Balance - June 30, 2007
|
|
|
$
|
4,405
|
|
$
|
75,648
|
|
$
|
(39,294
|
)
|
|
-
|
|
$
|
40,759
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral
part of the interim condensed consolidated financial statements.
8
SCOPUS VIDEO NETWORKS LTD.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands, except share and per share data)
|
Six months ended
June 30,
|
|
2 0 0 8
|
2 0 0 7
|
|
Unaudited
|
|
|
|
|
|
|
Cash Flows - Operating Activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
53
|
|
|
(2,373
|
)
|
Depreciation
|
|
|
|
760
|
|
|
589
|
|
Decrease in severance pay liability, net
|
|
|
|
(134
|
)
|
|
(8
|
)
|
Increase in vacation liability
|
|
|
|
334
|
|
|
92
|
|
Amortization of deferred stock-based compensation
|
|
|
|
739
|
|
|
920
|
|
Gain from disposal of fixed assets
|
|
|
|
-
|
|
|
(1
|
)
|
Decrease (increase) in trade accounts receivable, net
|
|
|
|
(2,228
|
)
|
|
1,053
|
|
Increase in other receivables and current assets
|
|
|
|
(605
|
)
|
|
(393
|
)
|
Decrease (increase) in inventories
|
|
|
|
(1,331
|
)
|
|
2,193
|
|
Increase in other assets
|
|
|
|
(15
|
)
|
|
(2
|
)
|
Increase (decrease) in trade accounts payable
|
|
|
|
3,800
|
|
|
(2,501
|
)
|
Increase in other payables and current liabilities
|
|
|
|
376
|
|
|
1,481
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
1,749
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
Cash Flows - Investing Activities
|
|
|
Decrease (Increase) in short-term deposits
|
|
|
|
7,227
|
|
|
(28,463
|
)
|
Increase in trading securities
|
|
|
|
(738
|
)
|
|
-
|
|
Purchase of fixed assets
|
|
|
|
(1,502
|
)
|
|
(721
|
)
|
Proceeds from disposal of fixed assets
|
|
|
|
-
|
|
|
5
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
4,987
|
|
|
(29,179
|
)
|
|
|
|
|
|
|
|
|
Cash Flows - Financing Activities
|
|
|
Proceeds from exercise of options
|
|
|
|
190
|
|
|
693
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
|
190
|
|
|
693
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
6,926
|
|
|
(27,436
|
)
|
Cash and cash equivalents at beginning of the period
|
|
|
|
23,090
|
|
|
29,950
|
|
|
|
|
|
|
Cash and cash equivalents at end of the period
|
|
|
$
|
30,016
|
|
$
|
2,514
|
|
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
Interest paid in cash
|
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
Taxes paid in cash
|
|
|
|
-
|
|
|
2
|
|
|
|
|
|
|
The accompanying notes are an
integral part of the interim condensed consolidated financial statements.
9
SCOPUS VIDEO NETWORKS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
|
Scopus
Video Networks Ltd., an Israeli corporation, and its wholly owned subsidiary in
the United States of America, Scopus Video Networks Inc. (SVNI), (together
the Company) provide digital video networking platforms that allow network
operators and content providers to transmit, process and manage digital video content.
The Company operates in one operating and reporting segment.
|
NOTE 2
|
|
UNAUDITED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
|
The
accompanying unaudited interim consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in the United States of America
for interim financial information. Accordingly, they do not include all the information
and footnotes required by generally accepted accounting principles in the United States
of America for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months period ended June
30, 2008 are not necessarily indicative of the results that may be expected for the year
ended December 31, 2008.
|
|
|
June 30,
2 0 0 8
|
December 31,
2 0 0 7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
$
|
7,361
|
|
$
|
5,732
|
|
|
Finished products
|
|
|
|
1,252
|
|
|
1,794
|
|
|
Finished products used for demonstration purposes
|
|
|
|
493
|
|
|
248
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,106
|
|
$
|
7,774
|
|
|
|
|
|
|
|
|
In the six months ended June 30, 2008 and the year ended December 31, 2007, the Company
wrote down inventories in the amounts of $256 and $1,197 respectively.
|
NOTE 4
|
|
CONTINGENT
LIABILITIES
|
|
In
November 2004, one of the Companys suppliers filed a monetary claim against
the Company and its chairman in the amount of $150 with respect to services allegedly
provided by the supplier. According to the claim, the Company owes the supplier monies
for consulting services provided by him on the year of 2003. In December 2004 the Company
submitted a statement of defense and a cross action in the amount of $140. On November
11, 2007, a judgment was rendered, according to which the Company was obligated to pay
the supplier the amount of approximately $99.1 and grant the supplier an option to
purchase 8,260 of the Company ordinary shares. The Company filed an appeal to the
district court regarding the judgment rendered against the Company, including all its
components and statements. In May 2006, the same supplier filed a second claim against
the Company and its chairman in the approximate amount of $800. According to the claim,
the Company owes the supplier monies for consulting services provided by him on the years
2004-2005. In light of the undesirable outcome of the first claim and the suppliers
intention to file another lawsuit in respect to amounts allegedly owned for the year
2006, on March 19, 2008, the Company signed a settlement agreement with the supplier,
without admitting any claim what so ever, under which the Company paid the supplier $650
and granted the supplier an option to purchase 28,410 of the Companys ordinary
shares, in return for a final and complete dismissal of both claims. The settlement
agreement was finalized on April 9, 2008.
|
10
SCOPUS VIDEO NETWORKS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
NOTE 5
|
|
GEOGRAPHIC
AREAS AND MAJOR CUSTOMERS
|
|
The
Company adopted SFAS 131 Disclosure about Segments on an Enterprise and Related
Information. The Company operates in one operating and reporting segment.
|
|
A. Geographic information
|
|
|
Six months ended
June 30,
|
|
|
2 0 0 8
|
2 0 0 7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
USA
|
|
|
|
6,029
|
|
|
5,046
|
|
|
Other
|
|
|
|
1,843
|
|
|
2,184
|
|
|
|
|
|
|
|
|
Total North and South America
|
|
|
|
7,872
|
|
|
7,230
|
|
|
|
|
|
|
|
|
|
|
|
|
India
|
|
|
|
6,195
|
|
|
1,506
|
|
|
Other
|
|
|
|
3,205
|
|
|
6,228
|
|
|
|
|
|
|
|
|
Total Asia and the Pacific Rim
|
|
|
|
9,400
|
|
|
6,228
|
|
|
|
|
|
|
|
|
|
|
|
|
Russia
|
|
|
|
3,107
|
|
|
1,524
|
|
|
France
|
|
|
|
2,636
|
|
|
2,549
|
|
|
Other
|
|
|
|
12,489
|
|
|
8,238
|
|
|
|
|
|
|
|
|
Total Europe, the Middle East and Africa
|
|
|
|
18,232
|
|
|
12,311
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
35,504
|
|
|
25,769
|
|
|
|
|
|
|
|
|
|
June 30,
2 0 0 8
|
December 31,
2 0 0 7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed assets, net:
|
|
|
|
|
|
|
|
|
|
Israel
|
|
|
|
3,918
|
|
|
3,131
|
|
|
USA
|
|
|
|
278
|
|
|
322
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
4,196
|
|
|
3,453
|
|
|
|
|
|
|
|
NOTE 6
|
|
NEW
ACCOUNTING PRONOUNCEMENTS
|
|
In
March 2008, the FASB issued SFAS No. 161 Disclosures about Derivative
Instruments and Hedging Activities (SFAS No. 161), which will
require increased disclosures about an entitys strategies and objectives for using
derivative instruments; the location and amounts of derivative instruments in an entitys
financial statements; how derivative instruments and related hedged items are accounted
for under SFAS No. 133, and how derivative instruments and related hedged items
affect its financial position, financial performance, and cash flows. Certain disclosures
will also be required with respect to derivative features that are credit risk-related.
SFAS No. 161 is effective for the Company beginning on January 1, 2009 on a
prospective basis. The Company does not expect this standard to have a material impact on
the Companys consolidated results of operations or financial condition.
|
|
In
December 2007, the U.S. Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin 110 (SAB 110) to amend the SECs
views discussed in Staff Accounting Bulletin 107 (SAB 107)
regarding the use of simplified method in developing an estimate of expected life of
share options in accordance with SFAS No. 123(R). SAB 110 was effective
for the Company beginning in the first quarter of fiscal year 2008. The adoption of SAB 110
did not have an impact on the Companys consolidated financial statements.
|
|
In
April 2008, the FASB issued FSP No. FAS 142-3, Determination of the
Useful Life of Intangible Assets (FSP 142-3). FSP 142-3
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,
Goodwill and Other Intangible Assets (SFAS 142). This change
is intended to improve the consistency between the useful life of a recognized intangible
asset under SFAS 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS 141(r) and other GAAP. FSP 142-3 is effective for
financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. The requirement for determining useful lives
must be applied prospectively to intangible assets acquired after the effective date and
the disclosure requirements must be applied prospectively to all intangible assets
recognized as of, and subsequent to, the effective date. FSP 142-3 is effective for
the Company beginning in the first quarter of fiscal year 2009. The Company is currently
evaluating the impact of FSP 142-3 on its consolidated financial statements.
|
11
SCOPUS VIDEO NETWORKS LTD.
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except share and per share data)
NOTE 7
|
|
SUBSEQUENT
EVENTS
|
|
On
August 4, 2008, the Company entered into a non-binding term sheet (Term Sheet)
to acquire the business of Optibase Ltd. (Optibase), the Companys
principal shareholder. Optibase, based in Herzliya, Israel, provides professional
encoding, decoding, video server upload and streaming solutions for telecom operators,
service providers, broadcasters and content creators. According to its audited financial
statements, Optibase reported revenues of approximately $23 million in 2007.
Pursuant to
the Term Sheet, the Company will acquire certain assets and liabilities related to the
digital video and streaming business of Optibase, in consideration for 2.6 million
ordinary shares of the Company plus an earn-out of up to 0.9 million additional ordinary
shares based on the achievement of sales goals. Upon completion of the transaction,
Optibase, currently a 36% shareholder of the Company, will own approximately 46% of the
Companys outstanding ordinary shares, or 49%, if taking into account the full
attainment of the additional earn-out shares.
|
|
As
part of the Term Sheet, the parties agreed that all necessary corporate actions will be
taken in order to amend the Company articles of association, such that the Company will
no longer have a staggered board and the Company shall adopt standard provisions
regarding the appointment of directors at the Company general meeting by an ordinary
majority. The parties agreed on the composition of the board of directors of the Company
following the closing of the transaction.
|
|
The
proposed transaction is subject to the completion of due diligence, negotiation and
execution of definitive agreements and to the satisfaction of customary closing
conditions, including the approval of the respective shareholders of the Company and
Optibase. In accordance with Israeli law, the approval of the transaction shall require
the approval of a special majority of the shareholders of the Company, because it is a
transaction with a principal shareholder. The transaction is expected to close in the
fourth quarter of 2008. However, there is no assurance that definitive agreements
providing for the transaction as contemplated by the Term Sheet will be executed or that
the transaction will be consummated at such time or at all.
|
12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
We
develop market and support digital video networking products including
intelligent video gateways, encoders, decoders and network management products. Our
customers include satellite, cable and telecom service providers and terrestrial
broadcasters, collectively referred to as network operators. Our products are typically
installed in a network operator equipment facility or broadcast center to support digital
television, high-definition television, or HDTV, live event coverage and the distribution
of video content between network operator facilities. We market our products through a
combination of third-party distribution, direct sales and partnerships with original
equipment manufacturers, or OEMs.
|
|
We
introduced the first generation of our encoders and decoders in 1995. The majority of our
revenues to date have been derived from sales of encoders and decoders. In 2001, we began
the development of our intelligent video gateway, an advanced video processing product.
We have since directed a large portion of our research and development efforts towards
developing and marketing this product. We began shipping our intelligent video gateway in
the fourth quarter of 2003.
|
|
On
December 16, 2005, we completed an initial public offering of 4,500,000 of our ordinary
shares at a price to the public of $7 per share.
|
Six Months Ended June
30, 2008 Compared with Six Months Ended June 30, 2007
|
Revenues
.
Total revenues increased by 38% to $35.5 million in the first six
months of 2008 from $25.8 million in the first six months of 2007. This
increase is mainly attributable to:
|
|
|
Increased
revenues in Europe, the Middle East and Africa, which increased from $12.3 million
to $18.2 million, and revenues in the U.S., which increased from $7.2 million
to $7.8 million, due to our increased marketing and sales efforts;
|
|
|
An
increase in revenues from $6.2 million to $9.4 million in Asia and the Pacific Rim, which
mainly resulted from new projects in India;
|
|
|
Increased
productivity of our sales force, which resulted from our sales and marketing efforts to
target specific customers and markets; and
|
|
|
Increased
demand for our E-9000 encoder, which increased revenue from our encoder product group.
|
|
Gross profit.
Our gross profit increased by 38% to $17.2 million in the first six
months of 2008 from $12.5 million in the first six months of 2007. Gross profit as a
percentage of revenues was the same in both period 49%.
|
|
Research
and Development, Net.
Total research and development costs increased by 30% to $8.2 million
in the first six months of 2008 from $6.3 million in the first six months of 2007.
These amounts exclude OCS grants of $1.5 million and $1.3 million for the first six
months of 2008 and 2007, respectively. The increase in our research and development
expenses is primarily caused by increase in salaries expenses, due to hiring of
additional personnel, and the devaluation of the U.S. dollar against the New Israeli
Shekel.
|
|
Selling and Marketing.
Selling and marketing expenses increased by 6.5% to $8.3 million in
the first six months of 2008 from $7.8 million in the first six months of 2007. The
increase was due to the expansion of our sales and marketing efforts, including the
hiring of additional personnel and payment of commissions on increased revenues.
|
|
General
and Administrative
. General and administrative expenses remained at the same level of
$2.5 million in the first six months of 2008 as in the first six months of 2007.
|
|
Financial Income
,
Net
. Financial income, net, were $0.3 million in the first six months
of 2008 compared to $0.6 million in the first six months of 2007. In the first six months
of 2008, we incurred a decrease of our financial income due to a reduction of the
interest rate on our deposits as well as incurring financing expenses from the
devaluation of the US dollar against the New Israeli Shekel, which caused a reduction of
financing income, net in the first six months of 2008.
|
|
Taxes on Income
. Income taxes for the first six months of 2008 were $19 thousands compared
with $26 thousands in the first six months of 2007. The decrease in income tax expense
for the six months of 2008 resulted from taxable income from the operations of our U.S.
subsidiary.
|
13
|
LIQUIDITY AND CAPITAL RESOURCES
|
|
As
of June 30, 2008, we had $30 million in cash and cash equivalents; in addition we had
$5.9 million in trading securities. As of June 30, 2007, we had $23 million in cash and
cash equivalents, $7.2 million in short term deposits and $5.2 in trading securities.
|
|
Operating
activities
. Net cash provided by operating activities was $1.7 million for the first
six months of 2008 compared to $1.0 million of net cash provided in operating activities,
for the first six months of 2007. Net cash provided during the first six month of 2007
resulted primarily from a decrease in trade receivables and inventory balance while the
net cash provided during the first six month of 2008 resulted primarily from the
transition into profitability, and an increase in trade accounts payable which were
offset by an increase in trade account receivables and inventory as a result of the
increase in our revenues and business activity.
|
|
Investment
activities
. Net cash used in investing activities was $5 million for the first six
months of 2008 compared to $29 million provided in the first six months of 2007. The
change resulted primarily from investment of $28.5 million worth of cash in short-term
bank deposits in the first six months of 2007.
|
|
Financing
activities
. Net cash provided by financing activities was $0.2 million for the first
six months of 2008 compared to $0.7 million for the first six months of 2007. These
amounts resulted from the exercise of stock options by our employees.
|
14
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