Revenue for the period was $34,117,000 (H1 2005: $26,177,000), an increase of 30%, which is primarily related to our successful relationships with existing customers and the addition of a number of new ones in the period.
Our gross profit margin was 41% (2005: 39%, H2: 2005: 36%, H1: 2005: 42%). As expected, gross margins returned to our targeted levels of above 40%.

Whilst revenues increased significantly during the first half of 2006, selling, general and administrative expenses of $6,244,000 were maintained at the same level as last year (H1 2005: $6,222,000). As a percentage of revenue, selling, general and administrative expenses were 18%, reflecting a decrease of 25% compared with last year (H1 2005: 24%).

Gross R&D expense in the first half of 2006 was $4,533,000 (H1 2005: $5,183,000), a decrease of 13%. This decrease is primarily related to the restructuring of our R&D team in the US. After contributions from the Israeli Chief Scientist and from the European Community, net research and development expenditure was $3,945,000 (H1 2005: $4,798,000).

Operating profit after amortization of intangible assets was $3,511,000 for the first half of 2006 (H1 2005: loss $2,427,000).

Financial income was $1,206,000 (H1 2005: $689,000). This increase is primarily related to increased gains from the sale of marketable securities, an element of which was a one off gain of approximately $300,000.

Net profit after amortization of intangible assets and tax, amounted to $4,439,000 (H1 2005: Loss $1,737,000), resulting in a basic profit per share of 1.14 cents (H1 2005: Loss 0.45 cents).

Our balance sheet remains strong with cash of $45.4m (H1 2005: $47.1m). The majority of the decrease in cash compared to last year resulted from our investment of approximately $1.8 million in Metrobility Optical Systems, Inc. which was completed on 30 June 2006. Period end cash is comprised as follows: Cash and deposits up to three months duration of $6.6 million; short-term investments up to one year of $34.9 million; and long-term investments for more than one year of $3.9 million. We continue to exercise a conservative investment strategy maintaining most balances in bank deposits.

We have continued with our strategy both to broaden our relationships with existing OEM clients as well as developing new relationships. As reported in May, we are expanding an existing relationship with a leading telecom customer to secure business now that will materialize over the next several years. In addition, as reported in February and March, we are signing OEM agreements and have started doing business with new partners. We are optimistic that this trend of expanding business relationships will continue into the second half of 2006 as well as for 2007 and beyond.

In addition to our success with our OEM clients, we expect that our new products for Metro Ethernet rings and VOIP solutions will continue to provide growth opportunities for our direct business.

As carriers continue to migrate to IP and Ethernet based infrastructure, we continue to enhance our solutions in these areas. Our major investment is in our software platform. This software platform is expanding to include additional resiliency capabilities as well as different layout configurations. Support for legacy services is another area where we have a unique position in the market.

We are also working on releasing additional hardware platforms, all based on our unique software. These new platforms will allow us to present complete Ethernet based solutions for the access and metro space.

Plans to integrate Metrobility's product line with our solutions are well underway. Together with the Metrobility products, we are now positioned to provide even more solutions for our customers' needs.

In the VOIP area, we have released a new version of our popular residential solution. We are building on this success and will introduce a new access solution for business customers before the end of the year. These products are designed to meet the needs of carriers as they migrate services to IP based networks.

On 21 June 2006, we announced the acquisition of the business and assets of Metrobility Optical Systems, Inc. for a total consideration of $6.85m payable in cash over the next two years. Metrobility's products complement our offerings in both the US market and South America. We expect to integrate them into our US operations as soon as possible.

We are encouraged by these favorable results and look forward to a continuation of our renewed, profitable, strong growth in the second half of this year and beyond.