29 Aug 2008 14:01
Emblaze Ltd. Interim results for six months ended 30 June 2008
Ra'anana, Israel, 29 August 2008: Emblaze Ltd ("Emblaze" or "the Group"), the technology services group , announces its financial results for the six months ended 30 June 2008. All references to $ are to US Dollars.
Emblaze Group consists of two main operating arms: Growth andInnovation. The Growth arm relates to the stable, mature and operationalcompanies managed under the Formula group. The Innovation arm relates to thein-house investments made by the Group in technology research and developmentof future wireless and cellular products.
Growth Arm Financial Highlights
- Formula, our growth arm, has continued the constant growth trend throughout its group activities. All its subsidiaries contributed positively to the increasing operational results: Matrix continued to grow both in revenues and in operating profit; Magic presented an impressive operating profit in the second quarter and Sapiens reported a seventh consecutive quarter of operational profit
- Revenues for the six months ended 30 June 2008 totaled $287.3 million compared to $235.7 million in the same period of 2007, an increase of 22%.
- Operating income in the first half of 2008 was $15.5 million compared to $12.3 million in the first half of 2007, an increase of 26%.
- Net income generated from continuing operation in the six months ended 30 June 2008 was $7.3 million compared to $6.4 million in the same period of 2007.
- Cash and short term investments totaled approximately $203 million as of 30 June 2008 and current ratio was 2.4.
- In April 2008, Formula distributed a cash dividend of approximately $10 million, or $0.76 per share.
Innovation Arm Financial and Operational Highlights
- The innovation activities, mainly Emblaze Mobile and Emoze,represent major investments in research and development, funded primarily bythe Group's own cash and dividends distributed by the growth arm. This is acash intensive operation, focusing investments in cutting edge technologies ofhigh-risk and potentially high-reward in terms of growth and profitabilityonce such technologies have come to fruition. All innovation arm developmentactivities have been progressing positively over the past six months towardstheir commercial goals.
- Emblaze Mobile has made significant advances in the development of its cutting edge mobile device ("Monolith") in cooperation with Sharp, Access and other global vendor partners.
- Launch date of the Monolith was delayed by six months to mid 2009, due to technological complexities. However, Emblaze Mobile management believes this delay will have no impact on the device's lead over potential competition or its commercial potential.
- Initial discussions with top global operators have begun and yielded enthusiastic responses, and start of commercial negotiations for device purchases.
- The management of Emblaze Mobile has been making efforts to raisecapital investment from external sources to fund the continued development ofthe Monolith. Despite difficulties in obtaining the external finance, causedmainly due to the negative general sentiment in the global financial markets,the management of Emblaze Mobile maintains discussions with several interestedinvestment groups from the US and Japan and remains positive about its abilityto achieve the capital raise in the medium term.- Emoze is an advanced technology enabling almost any mobile deviceto have BlackBerry*- like push-mail and PIM services on the move. Themanagement believes it is the only real Push Email and PIM technology capableof operating on over 500 million devices. Emoze has been aggressivelyperfecting the technology for both corporate and consumer use and intends toexpand the usage of its products via global OEM with handset makers andstrategic distribution partnerships.
* BlackBerry is ‚® of RIM
- Investments in research and development of the Monolith and Emozetechnology in the first half of 2008 amounted to approximately $15 million andit is estimated that the Emblaze Group will invest additional $28 million incash until the launch of the Monolith by mid 2009, including on-going expensesfor the Emoze operation and assuming very conservatively that no externalfinance will be obtained.
- Innovation arm investments are the main contributor to the Group's consolidated loss over the six months period and will continue to generate a loss going forward over 2009. On the upside, subject to a successful launch of the Monolith during mid 2009, Emblaze Mobile management expects significant potential revenues from the sale of the product and its related services and licenses to be booked already in 2009 and the company itself to become one of the most significant contributors to group profitability and shareholder's value in the following year.
- Such investments in cutting edge innovation and development are deemed by us to be of core value and strategic essence to the Group's overall potential and future growth in profitability and shareholders' value.
Consolidated Results of Growth and Innovation arms combined - Financial Highlights
- Emblaze holds 50.1% of the Formula group. Formula achieved $287 million in revenue and $7.3 million in net income, of which $3.1 million are contributed to the Emblaze Group results.
- Revenue reached $289.6 million (H1 2007: $125.3 million);
- Net loss amounted to $10.8 million (H1 2007: net income of $2.8 million) and is mainly the result of continuous R&D investments in the Innovation arm of the Group;
- Group net assets up to $710.9 million from $695.2 million as at 31 December 2007; and
- The sale of the Group holding in Orca Interactive, announced in May 2008, resulted in capital gain of approximately $4.7 million, of which $3.1 million were recognized in the reported period. The capital gain was classified as discontinued operations in the financial accounts for the first half of 2008.
Overview
The contribution of each activity to the Emblaze Group is presented in the table below (selected items)*:
Emblaze Group - Financial Six months endedHighlights June 30, 2008(unaudited) US$ in thousands Growth Innovation Consolidated Activity Arm Revenues 287,264 2,373 289,637 Gross profit 69,774 1,450 71,224 Operating income (loss) 14,031 (18,212) (4,181) Income (loss) from continuing 2,670 (16,542) (13,872)operationIncome from discontinued operations - 3,066 3,066 Net income (loss) 2,670 (13,476) (10,806)
*) Corporate expenses were allocated to Growth and Innovation arms
GROWTH ACTIVITY
The growth activity of the Group includes Formula Systems (1985) Ltd. ("Formula") and its subsidiaries. Formula is a NASDAQ and TASE listed company principally engaged, through its subsidiaries, in providing software consulting services, developing proprietary software products and providing computer-based business solutions.
The Formula group revenue for the first half of 2008 totaled $287.3 million,an increase of 22% compared to $235.7 million in the first half of 2007.Formula's operating income in the first half of 2008 was $15.5 millioncompared to $12.3 million in the first half of 2007, an increase of 26%. Thenet income generated from continuing operation in the six months ended June30, 2008 was $7.3 million compared to $6.4 million in the same period of 2007.
In April 2008, Formula distributed a cash dividend of approximately $10 million, or $0.76 per share.
Formula consists of established companies, with developed products and services that are delivering revenue and profit as outlined henceforth:
Matrix IT Ltd. (TASE: MTRX)
Matrix, one of Israel's leading integration and informationtechnology services companies, recorded an increase in revenue of 29% in thefirst half of 2008 to $193 million, up from $149.6 million in H1 2007. TheOperational profit for the interim period amounted to $13.8 million, up from$10.7 million in the interim period of 2007. Net profit increased to $10.5million, up from $9.1 million in H1 2007.Pursuant to Matrix's dividend policy of distributing 50% of its net profits,Matrix distributed dividends of approximately $11.2 million on 30 March 2008in consideration of 2007 profits. Cash and short term investments as at 30June 2008 were $111.5 million.Matrix has won several significant projects during this quarter, enhancing itsprofessional leadership in the implementation and management of large scaleprojects with leading top tier customers. In the first half of 2008, Matrixcontinues to maintain its position as Israel's market leader in the financialsector, CRM, internet, ERP as well as provider of government and defensesolutions.
Magic Software Enterprises Ltd.
Magic is a provider of composite application development and deployment platforms with a service-oriented architecture (SOA), including application integration and business process management (BPM), with existing and legacy systems.
Magic's revenues for the six months ended 30 June 2008 reached $31.1 million,up from $28.1 million in the same period of 2007, an increase of 11%.Operating income for the first half of 2008 was $1.5 million compared to $0.9million in the same period of 2007. Net income from continuing operation forthe first half of 2008 totaled $1.7 million compared to net income of $0.7million in the same period of 2007.
In May, Magic introduced `uniPaaS', the next generation of its eDeveloper solution. `uniPaaS' features the industry's broadest choice of deployment modes - on-premises/on-demand; software/SaaS; full client/web; global/local or any other form. It also offers full compatibility with eDeveloper V10. This technology provides Magic a significant competitive edge.
Sapiens International Corporation N.V.
Sapiens, a global provider of IT solutions that modernize businessprocesses to enable insurance and other companies to quickly adapt to changes,reached revenue in the first half of 2008 of $21.5 million. Sapiens's secondquarter of 2008 shows its seventh consecutive quarter of operating profit. Theoperating profit in the first half of 2008 was $1 million compared to $0.3million in the comparable period of 2007. During the first six months of theyear, Sapiens generated $2.8 million in cash flow from operations, reachingtotal cash equivalents and short term investments on hand of $12 million.Sapiens is enjoying an increasing pipeline of potential deals with majorcustomers' world wide.
The table below summarises the H1 2008 performance of our growth activity in comparison to its H1 2007 performance (selected items):
Formula Systems - financial highlights Six months ended
(unaudited) June 30, 2008 2007 US$ in thousands % of change Revenues 287,264 235,720 22% Gross profit 70,064 58,198 20% Operating income 15,492 12,328 26%
Net income from continuing operation 7,282 6,442 13%
INNOVATION ARM
Our innovation arm includes advanced technology companies. While high-risk innature, Emblaze believes in the potential value derived from such activitiesand will seek to mitigate risks by sharing its investment with leading globalindustry partners and close management.
Emblaze Mobile Ltd. ("Emblaze Mobile")
Emblaze Mobile, wholly owned by the Emblaze Group, is a designer of advancedmobile devices. It has embarked on an ambitious project to design the ultimate"all-in-one" mobile device. The main principle of this futuristic device is tocreate an all-in-one communication device whereby each part of the device(e.g. telephone, camera, MP3 player, GPS, Email, movie player etc.) providesfunctionality to match standalone dedicated devices (like a digital camera,iPod etc.) while maintaining an exceptional ease and simplicity of use. Thedevice is designed to have a revolutionary and intuitive operating systemcoupled with a unique User Interface that will rival giants such as Symbianand Windows Mobile in the market. Emblaze Mobile has signed an agreement withJapanese firms Sharp and Access for the development and manufacturing of thedevice.EMOZE Ltd. ("EMOZE")EMOZE, a 95% subsidiary of the Emblaze Group, is a provider of Push email andPIM synchronization to mobile users. The company represents realisation of the`mobile office' vision, accessible for all mobile users around the world.
During the first six months of 2008, EMOZE moved to address the business community with the recent release of an upgraded Enterprise Edition and launched the world's first push mobile email solution for Java handsets, enabling over 800 mobile phone models to enjoy a BlackBerry*-like mobile email experience.
* BlackBerry is ‚® of RIMZONE-IP Ltd.
ZONE-IP Ltd. is a 65% held subsidiary of the Emblaze Group and a holding company for Emblaze VCON Ltd. Emblaze VCON is engaged 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.
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.
Outlook
The positive momentum in the Group's Growth business is continuing and theactivity of the Innovation arm is closely monitored in order to mitigate therisks. We will continue to strengthen our business, both organically and viatargeted mergers and acquisitions and in light of the general marketconditions, we remain cautiously optimistic of our prospects for the year as awhole.Enquiries:EmblazeHadas Gazit, Hagit Gal + 972 9 7699302/ 339About Emblaze
Emblaze Ltd is a group of technology companies addressing both growth and innovation activities thus combining the stability of "bread and butter" mature technology enterprises with "high-risk / high-reward" investments in innovation.
Our Growth arm includes Formula Systems , whichharbors the following subsidiaries: Magic Software Enterprises Ltd. develops, markets and supports composite application developmentand deployment platforms with a service-oriented architecture (SOA), includingapplication integration and business process management (BPM), with existingand legacy systems; Matrix IT Ltd. (TASE: MTRX) is one of Israel's leadingintegration and information technology services companies, active in fourprincipal areas: software solutions and services, software products,infrastructure solutions and hardware products, and training andassimilation.; Sapiens International Corporation N.V. isa provider of IT solutions that modernize business processes to enableinsurance and other companies to quickly adapt to changes; and nextSourceInc., designs, develops and implements web-based, high quality, innovativehuman capital management solutions.Our Innovation arm includes Emblaze Mobile, a designer of advanced mobiledevices; EMOZE, a provider of Push Email and synchronisation technology formobile devices; and ZONE-IP (Emblaze V CON), a provider of wirelessvideo communications technologies and conferencing solutions for operators andenterprise markets over IP networks.
The Emblaze Group is traded on the London Stock Exchange since 1996. www.Emblaze.com
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands June 30, December 31, 2008 2007 UnauditedASSETSCURRENT ASSETS:Cash and cash equivalents $ 163,176 $ 172,456Short-term investments 60,925 56,900Trade receivables 155,770 141,922
Other receivables and prepaid expenses 30,207
37,220
Inventories 5,543
5,887
Assets held for sale and assets of discontinued operations 35
17,307 Total current assets 415,656 431,692
LONG-TERM RECEIVABLES AND INVESTMENTS 22,245
25,481 SEVERANCE PAY,NET 45,027 37,599 PROPERTY AND EQUIPMENT, NET 17,497 16,297 GOODWILL 156,362 130,734 OTHER ASSETS, NET 54,134 53,443 Total assets $ 710,921 $ 695,246CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data
June 30, December 31, 2008 2007 Unaudited LIABILITIES AND SHAREHOLDERS' EQUITYCURRENT LIABILITIES:Trade payables $ 54,287 $ 60,689Short-term liabilities to banks and others 18,002
34,284
Other payables and accrued expenses 96,526
77,727
Liabilities held for sale and liabilities of discontinuesoperations 438 9,726Convertible Debt 4,407 3,524 Total current liabilities 173,660 185,950 LONG-TERM LIABILITIES
Convertible and non-convertible Debt 82,701
71,880Liabilities to bank and other 23,997 23,685Deferred tax liability 5,936 5,764Other long term liabilities 2,570 4,287Accrued severance pay 55,417 44,002 Total long-term liabilities 170,621 149,618 MINORITY INTEREST 220,339 208,602 SHAREHOLDERS' EQUITY:Share capital:Ordinary shares of NIS 0.01 par value - Authorized: 200,000,000 shares at December 31, 2007and at June 30, 2008; Issued: 140,578,154 shares atDecember 31, 2007 and June 30, 2008; Outstanding:111,476,687 shares at December 31, 2007 and atJune 30, 2008 416 416Additional paid-in capital 471,359 470,891Treasury stock, at cost (76,433) (76,433)
Accumulated other comprehensive income 10,556
4,993Accumulated deficit (259,597) (248,791) Total shareholders' equity 146,301 151,076
Total liabilities and shareholders' equity $ 710,921 $
695,246
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
Six months ended Year ended June 30, December 31, 2008 2007 2007 Unaudited Revenues $ 289,637 $ 125,305 $ 387,276Cost of revenues 218,413 94,318 288,327 Gross profit 71,224 30,987 98,949 Operating expenses:Research and development, net 17,628 4,038 13,742Selling and marketing 26,338 12,757 36,681General and administrative 31,439 14,770 43,475 Total Operating Expenses 75,405 31,565 93,898 Operating Income (loss) (4,181) (578) 5,051 Financial income (expenses) (1,012) 21 (3,873)Other income 1,138 7,810 7,408 Income (loss) before taxes on income (4,055) 7,253 8,586 Taxes on income 913 160 718 Income (loss) before minority interest andequity gains (loss) (4,968)
7,093 7,868
Equity in earnings (losses) of affiliatedcompanies, net (390) 859 528Minority interest (8,514) (4,166) (11,400) Income (loss) from continuing operations (13,872)
3,786 (3,004)
Gain (loss) from discontinued operations, net 3,066 (947) (232) Net Income (Loss) $ (10,806) $ 2,839 $ (3,236) Basic and diluted earnings (loss) per share:From continuing operations $ (0.12) $ 0.03 $ (0.03) From discontinued operations 0.02 0.00 0.00 Net loss per share $ (0.10) $ 0.03 $ (0.03) Weighted average number of shares used incomputing basic and diluted earnings (loss) pershare 111,476,687 111,476,190 111,476,440
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands Accumulated other compre- hensive Additional Treasury Total Share paid-in Stock, income Accumulated comprehensive capital capital at cost (loss) deficit income (loss) Total
Balance as of December 31, 2006 416 463,848 (7,381) (2,187) (235,716)
218,980Repurchase of shares from relatedparties, net - - (70,953) - - (70,953)Issuance of shares upon exercise ofstock options - 49 182 - - 231Issuance of shares upon businesscombinations, net - 1,139 1,711 - - 2,850Debt security from related party - 2,500 - - - 2,500Share based compensation expenses - 864 - - - 864Comprehensive loss:Unrealized gains fromavailable-for-sale marketable securities, net - - - 1,905 - $ 1,905 1,905Foreign currency translationadjustments - - - (46) - (46) (46)Net loss - - - - (9,839) (9,839) (9,839)
Total comprehensive loss $ (7,980)
Balance as of December 31, 2006 416 468,400 (76,441) (328) (245,555)
146,492Issuance of shares upon exercise ofstock options - (1) 8 - - 7Tax benefits related to exercise ofoptions in a subsidiary - 243 - - - 243Increase of investment due todecreasein percentage in holding in adevelopment stage subsidiary - 1,897 - - - 1,897
Share based compensation expenses - 352 - - - 352Comprehensive loss:Unrealized gains from available-for-sale marketable securities,net - - - 752 - $ 752 752Foreign currency translationadjustments - - - 4,569 - 4,569 4,569Net loss (3,236) (3,236) (3,236)
Total comprehensive Income $ 2,085
Balance as of December 31, 2007 416 470,891 (76,433) 4,993 (248,791)
151,076 Tax benefits related to exerciseof options in a subsidiary 87 87Share based compensationexpenses 381 381Comprehensive loss:Realized gains from available-for-sale marketable securities,net - - - (529) - $ (529) (529)Foreign currency translationadjustments - - - 6,092 - 6,092 6,092Net loss (10,806) (10,806) (10,806) Total comprehensive Income $ (5,243)Balance as of June 30, 2008(unaudited) 416 $ 471,359 $ (76,433) $ 10,556 $ (259,597) $ 146,301
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Six months ended Year ended June 30, December 31, 2008 2007 2007 UnauditedCash flows from operating activities:Net income (loss) $ (10,806) $ 2,839 $
(3,236)
Less: loss (gain) from discontinuedoperations (3,061) 947
232
Income (loss) from continuing operations (13,867) 3,786 (3,004)
Depreciation and amortization 7,124 3,875
11,459
Amortization of marketable debt securitiespremiums and accretion of discounts, net (16) 167
380
Share based compensation expenses 381 150
577
Share based compensation expenses ofsubsidiaries 1,215 216
577
Net loss (gain) on sales of marketablesecurities and changes in accrued interest,net (1,962) 112
2,019
Impairment of investment in marketablesecurities and others 912 -
4,215
Equity (gain) losses, net 390 (859)
(528)
Changes in value of long term loans anddeposits, net (45) 179
708
Other income and capital losses (gains), net 172 (7,064) (8,580)Minority interests in gains of subsidiaries 8,514 4,166 11,400Decrease (increase) in trade receivables,other receivables and prepaid expenses andinventories 11,748 (170)
(3,730)
Decrease in trade payables, other payablesand accrued expenses , accrued severancepay, net and other long term liabilities (1,144) (17,304) (15,437)Changes in deferred tax, net 309 (1,815)
(1,903)
Other - (133)
(349)
Net cash provided by (used in) operatingactivities from continuing operations 13,731 (14,694)
(2,196)
Net cash used in operating activities fromdiscontinued operations (2,556) (3,385)
(10,429)
Net cash provided by (used in) operatingactivities 11,175 (18,079)
(12,625)
Cash flows from investing activities:Purchase of property and equipment, net (2,218) (1,308) (3,176)Proceeds from sale of property and equipment 567 51
108
Investment in (proceeds from) short-termbank deposits (3,193) (1,214)
5,899
Investment in short-term marketablesecurities (7,872) -
(27,391)
Proceeds from maturity of short-termmarketable securities 1,053 4,193
801
Investment in long-term marketablesecurities - (1,682)
(2,680)
Proceeds from sales, calls and maturity ofmarketable securities 13,022 28,479
76,917
Proceeds from (investment in) long-term bankdeposits and restricted deposits 2,561 (223)
(10,233)
Capitalization of software development andother costs of subsidiaries (3,800) (1,971)
(4,355)
Purchase of minority interest insubsidiaries (8,300) (2,834)
(4,368)
Proceeds from realization of investments 15,400 59,461 62,279
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Six months ended Year ended June 30, December 31, 2008 2007 2007 Unaudited Investment in and loans to affiliated andother companies - -
(2,319)
Cash paid for the acquisition ofsubsidiaries thereof , net of cash acquired (11,830) (4,802) (5,305)Payments to formally stockholders ofconsolidated company on behalf of purchaseliability (5,081) -
-
Purchase of intangible assets bysubsidiaries -
(499)
Cash acquired in conjunction with theacquisition of Formula Systems (1985) Ltd ,net of cash paid - 88,865 88,865Other (138) - - Net cash provided by (used in) investingactivities from continuing operations (9,829) 167,015
174,543
Net cash provided by investing activitiesfrom discontinued operations 9,745 2,858
11,447
Net cash provided by (used in) investingactivities (84) 169,873
185,990
Cash flows from financing activities:Proceeds from exercise of stock options insubsidiaries 632 874
1,626
Proceeds from exercise of stock options - 8
7
Issuance of convertible debt in a subsidiary - -
64,602
Dividend to minority shareholders in asubsidiary (10,683) (2,887)
(3,498)
Short-term borrowing and bank credit, net (17,033) 2,656 (37,793) Repayment of long-term loans
(6,118) (36,043)
(61,717)
Receipt of long-term loans 27 11,952
13,000
Issuance of ordinary shares in a subsidiaryto minority shareholders, net 11,955
14,898
Deposits - SWAP deal in a subsidiary 1,193 -
(1,040)
Repayment of convertible debt in asubsidiary (2,035) (3,416)
(7,818)
Purchase of treasury stock in a subsidiaryby a subsidiary thereof - 2,731
3,017
Net cash used in financing activities fromcontinued operations (34,017) (12,170)
(14,716)
Net cash provided by financing activitiesfrom discontinued operations - -
7
Net cash used in financing activities (34,017) (12,170)
(14,709)
Effect of exchange rate on cash ofcontinuing operations 11,255 (2,305) 3,517
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands Six months ended Year ended June 30, December 31, 2008 2007 2007 Unaudited Increase (decrease) in cash and cashequivalents from continuing operations $ (18,860) $ 137,846 $ 161,148Increased (decrease) in cash and cashequivalents from discontinued operations 7,189 (527) 1,025Cash and cash equivalents from continuingoperations at the beginning of the year 172,456 10,784 10,784Cash and cash equivalents from discontinuedoperations at the beginning of the year 2,393 1,892
1,892
Cash and cash equivalents from continuingoperations at the end of the year 163,176 145,912 $
172,456
Cash and cash equivalents from discontinuedoperations at the end of the year 2 4,083 $
2,393 Six months ended Year ended June 30, December 31, 2008 2007 2007 Unaudited Supplemental disclosure of cash flowinformation: Cash paid during the period for: Interest $ 3,456 $ 2,362 $ 6,322 Income taxes 2,900 1,697 5,109NOTE 1:- GENERAL
Emblaze Ltd. ("Emblaze" or "the Company") is an Israeli corporation. The Company's shares are traded on the London Stock Exchange ("LSE") under the symbol BLZ. The Company operates in two principal business segments, namely Growth and Innovation. The Growth segment relates to the development, production and marketing of information technology ("IT") solutions and services. The Innovation segment relates to research and development of technology for advanced wireless and cellular solutions and products.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2007, are applied consistently in these financial statements.
b. Reclassification:
Certain reclassifications were made to prior years' financial statements to conform to the current year's presentation.
NOTE 3:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim financial statements have been prepared inaccordance with accounting principles generally accepted in the United Statesfor interim financial information. Accordingly, they do not include all theinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements. In the opinion ofmanagement, all adjustments (consisting of normal recurring accruals)considered necessary for a fair presentation have been included. Operatingresults for the six-month period ended June 30, 2008 are not necessarilyindicative of the results that may be expected for the year ended December 31,2008.
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