EX-99.1 2 v051895_ex99-1.htm
 
 
PRESS RELEASE

SuperCom Announces Second Quarter 2006 Results

Q2 Revenues down by 16% to $1.8 million, expects 23% growth to $10M-10.8M in 2006

Operational loss decreased to $0.9m, gross margins up to 61% from revenues; reports expanding into new markets

Qadima, Israel, August 31, 2006 - SuperCom Ltd. (OTCBB: SPCBF.OB; Euronext: SUP), a leading provider of smart card and electronic identification (e-ID) solutions, today announced its unaudited financial results for the quarter and six months ended June 30, 2006.

Second Quarter results
 
Revenues for the second quarter ended June 30, 2006 were $1.8 million, representing a decrease of 16% from revenues of $2.1 million as reported in the second quarter of 2005. Sequentially, revenues decreased by 9% from $2 million as recorded in the first quarter of 2006. Gross profit for the second quarter 2006 was $1.1 million or 61% of revenues, compared with $949,000 or 44% of revenues in the second quarter 2005. Sequentially, gross profit grew by 3% from $1.2 million or 58% of revenues reported in the first quarter of 2006.

Operating loss for the second quarter was $877,000 compared to a loss of $1.6 million in the same period last year, and an operating loss of $750,000 in the previous quarter. Pro forma operating loss for the quarter was $716,000 compared to a loss of $1.1 million in the same quarter last year. Second quarter net loss was $993,000 or a loss of $0.04 per diluted share, compared with a net loss of $1.5 million or a loss of $0.08 per diluted share in the same period last year, and a net loss of $725,000 or a loss of $0.03 in the previous quarter. Pro forma net loss for the quarter was $767,000, or a loss of $0.03 per diluted share, compared with a pro forma net loss of $1.1 million, or a loss of $0.06 per diluted share in the same period of last year. 

Eyal Tuchman, CEO of SuperCom, said, “Our second quarter results for 2006 were in line with our expectations. We are very pleased to see that our restructuring process has taken effect as evidenced by the reduction in operating expenditure and our increased margins. We have announced a number of very exciting e-ID projects with customers worldwide and we anticipate that we will sign a number of significant government contracts in the near future. Our aim is to continually improve our efficiency, reach profitability, and re-focus SuperCom on being a leading technology provider of innovative solutions in smart-card and e-ID technologies to the commercial and government sectors.”

The company had cash, short term deposits and marketable securities totaling $1.8 million at the end of the quarter.

 
 
 
 
PRESS RELEASE
 
Half-year results

Revenues for the half year were $3.8 million, representing a decrease of 20% from revenues of $4.8 million as reported in June 2005. Gross profit for the half year 2006 was $2.3 million or 59% of revenues, compared with $2.3 million or 49% of revenues in June 2005.

Operating loss for the half-year 2006 was $1.6 million compared to a loss of $2.1 million in 2005. Pro forma operating loss for the half-year 2006 was $1.4 million compared to a loss of $1.6 million in 2005. Net loss for the half-year was $1.7million, or a loss of $0.07 per diluted share compared to $2.1 million or a loss of $0.12 in 2005. Pro forma net loss for the half-year was $1.5million, or a loss of $0.06 per diluted share, compared with a net loss of $1.6 million, or a loss of $0.09 per diluted share in June 2005.

Recent Developments

 
·
The joining of Neil C. Livingstone, one of America’s preeminent authorities on security issues, to SuperCom’s Advisory Board.
 
·
Announcement of two e-passport biometric pilot programs with European clients.
 
·
Announcement that SuperCom entered into an agreement with H.M.S. Telecom, LLC, a leading oil and gas industry consulting group from Houston, Texas to represent and market SuperCom’s Incident Response Management System (IRMS) to the oil and gas industry.

Mr. Tuchman noted that SuperCom continues to grow its Homeland Security IRMS business and is currently in advanced negotiations with a major city in the US for a sale of its IRMS system. “This is a growing and attractive market in which we have the ability to play a leading role and we expect that during the second half of 2006 we will enter into more agreements further developing our IRMS business. In addition, we will begin the implementation phase of the marketing plan for our Active RF product,” added Mr. Tuchman.
 
Mr. Tuchman concluded, “As we said in the last quarter, we expect that revenues for the full year of 2006 will be in the range of $10.0-10.8 million and believe that the growth will come in the second half of the year. We also expect to reach profitability by the end of the year.”

Conference call
 
SuperCom will be hosting a conference call later today at 11:00am EDT. On the call, management will review and discuss the results and will be available to answer investor questions.
 
To participate, please call one of the following teleconferencing numbers:
 
US Dial-in Number: 877-407-0782
INTERNATIONAL Dial-in Number: 201-689-8567
 
At:
11:00am Eastern Time and 6:00pm Israel Time
 
 
 
 
 
PRESS RELEASE
 
For those unable to listen to the live call, a replay of the call will be available for six weeks an hour after the call in the investor relations section of SuperCom’s website, at: www.supercomgroup.com.

Additionally, there will be a telephone replay available for two weeks following the call. To listen, please dial US: 877-660-6853 and International: 201-612-7415.

About SuperCom
SuperCom, Ltd. provides innovative solutions in smart-card and e-ID technologies to the commercial and government sectors.  The Company offers a wide range of standard and customized smart-card-based solutions for physical and logical security, education, corrections facilities and air & seaports.  It is also a leader in the manufacturing of secure and durable documents such as national identity cards, passports, visas, drivers’ licenses and vehicle registration to improve homeland security, governmental efficiency and document ease of use. Headquartered in Israel, SuperCom has subsidiaries in the US and Hong Kong.

Safe Harbor
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Statements preceded or followed by or that otherwise include the words “believes”, “expects”, “anticipates”, “intends”, “projects”, “estimates”, “plans”, and similar expressions or future or conditional verbs such as “will”, “should”, “would”, “may” and “could” are generally forward-looking in nature and not historical facts. Forward-looking statements in this release also include statements about business and economic trends.  

You should consider the areas of risk described under the heading “Forward Looking Statements” and those factors captioned as “Risk Factors” in our periodic reports under the Securities Exchange Act of 1934, as amended, or in connection with any forward-looking statements that may be made by us and our businesses generally.

All information in this release is as of August 31, 2006.  Except for our ongoing obligation to disclose material information under the federal securities laws, the Company undertakes no duty to update any forward-looking statement to reflect subsequent events, actual results or changes in the Company's expectations. The Company also disclaims any duty to comment upon or correct information that may be contained in reports published by the investment community. 

Contacts
SuperCom, Ltd
The Global Consulting Group
Yaron Shalom
Andrea Priest
972 889 0800
Investor Relations
yaron.shalom@supercomgroup.com
1-646-284-9425
 
apriest@hfgcg.com

FINANCIAL TABLES TO FOLLOW
 
 
 
 
PRESS RELEASE

CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
 
   
December 31,
  
June 30,
  
   
2005
  
2006
  
   
Unaudited
  
Unaudited
  
ASSETS
              
               
CURRENT ASSETS:
              
Cash and cash equivalents
  
$
2,294
  
$
735
  
Short-term deposit
    
1,088
    
868
  
Marketable securities
    
650
    
250
  
Trade receivables
   
1,053
    
2,089
  
Other accounts receivable and prepaid expenses
    
733
    
557
  
Inventories
    
2,205
    
2,032
  
               
Total current assets
    
8,023
    
6,531
  
               
LONG-TERM INVESTMENTS:
              
Long term trade receivables
    
209
    
322
  
Investment in an affiliated company
    
275
    
275
  
Severance pay fund
   
492
    
520
  
               
Total long-term investments
    
976
    
1,117
  
               
PROPERTY AND EQUIPMENT, NET
   
3,210
    
3,104
  
               
INTANGIBLE ASSETS
    
67
    
56
  
               
TOTAL ASSETS
  
$
12,276
  
$
10,808
  

 
 
 
 
PRESS RELEASE

CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands

   
December 31,
  
June 30,
  
   
2005
  
2006
  
   
Unaudited
  
Unaudited
  
           
LIABILITIES AND SHAREHOLDERS' EQUITY
              
               
CURRENT LIABILITIES:
              
Short-term bank credit and current maturities of long-term loan
  
$
855
  
$
623
  
Trade payables
    
770
    
620
  
Employees and payroll accruals
    
322
    
367
  
Accrued expenses and other liabilities
   
1,271
    
1,752
  
               
Total current liabilities
    
3,218
    
3,362
  
               
LONG-TERM LIABILITIES:
              
Long-term loan, net of current maturities
   
195
    
212
  
Accrued severance pay
    
616
    
630
  
               
Total long-term liabilities
    
811
    
842
  
               
               
Shareholders' equity
    
8,247
    
6,604
  
               
TOTAL LIABILITY AND SHAREHOLDERS’ EQUITY
  
$
12,276
  
$
10,808
  

 
 
 
 
PRESS RELEASE

CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share data)
 
   
Six months ended
June 30,
  
Three months ended
June 30,
  
   
2005
  
2006
  
2005
  
2006
  
   
Unaudited
  
                   
Revenues
  
$
4,788
  
$
3,835
  
$
2,160
  
$
1,822
  
Cost of revenues
    
2,462
    
1,555
    
1,211
    
705
  
                           
Gross profit
   
2,326
    
2,280
    
949
    
1,117
  
                           
Operating expenses:
                          
Research and development
    
726
    
642
    
378
    
348
  
Selling and marketing
    
1,739
    
2,099
    
779
    
1,071
  
General and administrative
    
1,500
    
1,166
    
858
    
575
  
Restructuring expenses
    
496
    
-
    
496
    
-
  
                           
Total operating expenses
    
4,461
    
3,907
    
2,511
    
1,994
  
                           
Operating loss
    
(2,135
)
  
(1,627
)
  
(1,562
)
  
(877
)
Financial (expenses) income, net
    
6
    
(31
)
  
23
    
(53
)
Other expenses, net
    
(6
)
  
(60
)
  
(6
)
  
(63
)
                           
Net loss
  
$
(2,135
)
$
(1,718
)
$
(1,545
)
$
(993
)
                           
                           
Basic and diluted net loss per share
  
$
(0.12
)
$
(0.07
)
$
(0.08
)
$
(0.04
)
                           
Weighted average number of Ordinary shares used in computing basic and diluted net loss per share
    
18,260,150
    
23,286,535
    
18,346,140
    
23,315,994
  

 
 
 
 
PRESS RELEASE

* PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except share data)
 
   
Six months ended
June 30,
  
Three months ended
June 30,
  
   
2005
  
2006
  
2005
  
2006
  
   
Unaudited
  
                   
Revenues
  
$
4,788
  
$
3,835
  
$
2,160
  
$
1,822
  
Cost of revenues
    
2,462
    
1,555
    
1,211
    
705
  
                           
Gross profit
   
2,326
    
2,280
    
949
    
1,117
  
                           
Operating expenses:
                          
Research and development
    
726
    
613
    
378
    
320
  
Selling and marketing
    
1,739
    
2,072
    
779
    
1,050
  
General and administrative
    
1,500
    
1,029
    
858
    
463
  
                           
Total operating expenses
    
3,965
    
3,714
    
2,015
    
1,833
  
                           
Operating loss
    
(1,639
)
  
(1,434
)
  
(1,066
)
  
(716
)
Financial (expenses) income, net
    
6
    
(31
)
  
23
    
(53
)
Other (expenses) income, net
    
(6
)
  
5
    
(6
)
  
2
  
                           
Net loss
  
$
(1,639
)
$
(1,460
)
$
(1,049
)
$
(767
)
                           
                           
Basic and diluted net loss per share
  
$
(0.09
)
$
(0.06
)
$
(0.06
)
$
(0.03
)
                           
Weighted average number of Ordinary shares used in computing basic and diluted net loss per share
    
18,260,150
    
23,286,535
    
18,346,140
    
23,315,994
  
 
The Pro-Forma Consolidated Statements of Operations for the periods ended June 30, 2005 exclude restructuring expenses totaling $496.
 
The Pro-Forma Consolidated Statements of Operations for the six months and three months ended June 30, 2006 exclude Equity based compensation expense totaling $158 and $126 respectively, litigation expenses totaling $65 and expenses related to allowance of doubtful debts totaling $35.
 
To supplement our condensed consolidated financial statements presented in accordance with accounting principles generally accepted in the United States (GAAP), the Company is providing an additional measure of operating results excluding certain expenses. The above Pro-Forma information is for informational purposes only. The Company believes that this non-GAAP financial measure is useful to investors because of the one-time, non-recurring nature of the expenses. It is not prepared in accordance with Generally Accepted Accounting Principles in the United States (US GAAP) and should not be considered as a substitute for our historical financial information prepared in accordance with GAAP.

 
 
 
 
PRESS RELEASE

CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
 
   
Six months ended
June 30,
  
Three months ended
June 30,
  
   
2005
  
2006
  
2005
  
2006
  
   
Unaudited
  
Cash flows from operating activities:
                          
Net loss
  
$
(2,135
)
$
(1,718
)
$
(1,545
)
$
(993
)
Adjustments to reconcile net loss to net cash used in operating activities:
                          
Depreciation and amortization
    
654
    
180
    
567
    
113
  
Accrued severance pay, net
   
(7
)
  
(14
)
  
(5
)
  
(32
)
Amortization of deferred stock compensation
    
38
    
155
    
5
    
188
  
Decrease (increase) in trade receivables
    
90
    
(1,149
)
  
-
    
(547
)
Decrease in other accounts receivable and prepaid expenses
    
365
    
176
    
325
    
59
  
Decrease (increase) in inventories
    
(194
)
  
173
    
(34
)
  
44
  
Increase (decrease) in trade payables
    
(357
)
  
(150
)
  
(363
)
  
39
  
Increase (decrease) in employees and payroll accruals
    
44
    
45
    
(118
)
  
30
  
Increase (decrease) in accrued expenses and other liabilities
    
(516
)
  
571
    
222
    
326
  
Exchange differences on principle of long-term loan
    
-
    
3
    
-
    
3
  
Others
    
-
    
-
    
-
    
1
  
                           
Net cash used in operating activities
    
(2,018
)
  
(1,728
)
  
(946
)
  
(769
)
                           
Cash flows from investing activities:
                          
Purchase of property and equipment
    
(253
)
  
(63
)
  
(84
)
  
(33
)
Purchase of other asset
    
-
    
-
    
-
        
Proceeds from short-term deposits, net
    
412
    
220
    
281
    
88
  
Proceed of marketable Securities, net
    
-
    
400
    
-
    
1,050
  
                           
Net cash provided by investing activities
    
159
    
557
    
197
    
1,105
  
                           
Cash flows from financing activities:
                          
Short-term bank credit, net
    
(16
)
  
(331
)
  
(24
)
  
(238
)
Proceeds from long-term loan
    
500
    
204
    
-
    
204
  
Expenses related to issuance of shares in a private placement
    
-
    
(170
)
  
-
    
(170
)
Proceed from exercise of warrant and options, net
    
195
    
-
    
(98
)
  
-
  
Principal payment of long-term loan
    
(370
)
  
(91
)
  
(221
)
  
(48
)
                           
Net cash provided by (used in) financing activities
    
309
    
(388
)
  
(343
)
  
(252
)
                           
Increase (decrease) in cash and cash equivalents
    
(1,550
)
  
(1,559
)
  
(1,092
)
  
84
  
Cash and cash equivalents at the beginning of the period
    
2,894
    
2,294
    
2,436
    
651
  
                           
Cash and cash equivalents at the end of the period
  
$
1,344
  
$
735
  
$
1,344
  
$
735
  
                           
Supplemental disclosure of cash flows information:
                          
Cash paid during the period for:
                          
Interest
  
$
50
  
$
39
  
$
27
  
$
20
  
Supplemental disclosure of non-cash activities:
                          
                           
Accrued expenses related to issuance of shares
  
$
-
  
$
19
  
$
-
  
$
19