Interim Results

Orad Hi-Tec Systems 15 August 2006 Orad Hi-Tec Systems Ltd. ('Orad' or the 'Company') Results for the six months and second quarter of 2006 Tel Aviv, August 15th, 2006 - Orad Hi-Tec Systems Ltd. (Frankfurt - Prime Standard; London - AIM. Symbol: OHT), a leading developer, marketer and distributor of state-of-the-art, 3D graphical solutions for the broadcasting, advertising and visual simulation markets, today announces its results for the six months ended June 30, 2006. • Third consecutive quarter of profitability and fourth consecutive quarter of positive cash-flow • Revenues increased to $8.9 million in H1/06 and $4.6 in Q2/06 • Gross margin improved to 59% in H1/06 and 60% in Q2/06 • Net profit improved to $0.4 million in H1/06 and $0.3 million in Q2/06 • Net profit per share of $0.04 in H1/06 and 0.02 in Q2/06 'We are proud to present the results for the second quarter of 2006. As we anticipated at the end of last year the results for this quarter are an improvement on the first quarter of 2006 and on the first six months of 2005', commented Avi Sharir, Orad's President and Chief Executive Officer, and added: ' During the second quarter we increased our expenses, we increased profitability, achieved positive cash flow and increased our backlog'. For further information: Orad (www.orad.tv) Ehud Ben-Yair, CFO + 972 976 768 62 Shore Capital (London) Graham Shore + 44 20 7408 4090 Haubrok IR GmbH (Dusseldorf) + 49 211 301 260 Michael Kempkes Orad Hi-Tec Systems Ltd ('Orad' or the 'Company') Results for the six months and second quarter ended 30 June 2006 Chief Executive's Statement Revenues for the second quarter of 2006 were $4.6 million, compared to $4.3 million in the first quarter of 2006 and $4.7 million in the fourth quarter of 2005. Gross margin in the second quarter of 2006 was 60% and the net profit amounted to $0.3 million. 'The results for the second quarter of 2006 and the first six months of 2006 show an improvement in sales, maintaining the same cost level and positive cash flow compared to the results for the same periods in 2005. This is our fourth consecutive quarter with positive cash flow generated from our internal resources, and third consecutive quarter of profitability. The backlog for 2006-7 has increased compared to the backlog a year ago' commented Avi Sharir, Orad's President and Chief Executive Officer General information regarding reclassifications: The company has reclassified certain expenses which in 2005 were previously recorded as general and administrative (G&A) and Sales and Marketing (S&M) to other operating expenses and cost of good sold, in order to reflect better the allocation of certain costs. The influence on the profit and loss accounts for the three months and for the six months ended on June 30, 2005 is a decrease of G&A in the amount of $0.19 million and $0.39 million, an increase of $0.35 million and $0.71 million in cost of good sold, an increase of $0.07 million and $0.15 million in R&D and a decrease of $0.23 million and $0.47 million in S&M. These changes had no affect on the operating loss (income), on the net income (loss) and on the basic and diluted earning (loss) per share of H2 2005 , Q2 2005 and as well as on the year ended December 31, 2005. Financial and Operational highlights for the three and six months ended June 30, 2006 compared to the same periods ended June 30, 2005: Revenues, net profit and cash status: Sales in Q2/06 increased by 22% to $4.6 million compared to 3.8 million on Q2/ 2005. Sales in the first six months of 2006 increased by 22% to $8.9 million compared to $7.3 million in the first six months of 2005. Net profit in the second quarter of 2006 increased by 100% to $0.26 compared to $0.13 in the first quarter of 2006. The net profit in Q2/06 improved by $1.5 million compared to Q2/05. In the first six months of 2006 net profit was $0.4 compared to net loss of $2.3 million in the first six months of 2005, an improvement of $2.7 million. In the first six months of 2006 cash , cash equivalents and restricted cash increased to $9.5 million. Gross Margin Gross margin for the second quarter of 2006 was 60%, compared to 58% in the first quarter of 2006, mainly as a result of different sales mix and increasing in sales volume. Gross margin in the second quarter of 2006 improved significantly to 60% compared to 43% in the second quarter of 2005. Gross margin in the first six months of 2006 improved significantly to 59% compared to 45% in the first six months of 2005. Operational expenses: All operational expenses decreased in the second quarter of 2006 compared to the second quarter of 2005 and in the first six months of 2006 compared to the first six months of 2005, despite the major increase in sales and operational activity. Q2/06 Q1/06 Q2/05 H1/06 H1/05 Research and Development 571 650 720 1,221 1,396 Sales and Marketing 1,706 1,483 1,669 3,189 3,087 General and Administrative 417 352 397 769 825 Total Operating expenses: 2,694 2,485 2,786 5,180 5,308 Financial income (expenses) Financial income consists of exchange rate differences related to non-US dollar balances and interest income earned on cash and cash equivalents offset by bank charges. Financial income for the second quarter of 2006 was $0.16 million, compared to financial income of $0.13 million on the first quarter of 2006 and compared to financial expenses of $0.1 million in the second quarter of 2005. The financial income in the first and second quarter of 2006 has been derived mainly from exchange rate differences resulting from strengthening of the Euro against the US Dollar during the period and due to the increase in the interest rate on US dollar deposits. Contact: Orad Hi-Tec Systems Ltd. Ehud Ben-Yair Chief Financial Officer PO Box 2177 Kfar Saba 44425, Israel Tel: +972-9-767-6862 Fax: +972-9-767-6861 E-Mail: ehudb@orad.tv www.orad.tv CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands December 31, June 30, 2005 2006 Unaudited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 5,338 9,237 Restricted cash 500 250 Trade receivables, net 3,754 1,407 Other accounts receivables and prepaid expenses 719 821 Inventories 2,817 2,796 Work in process, net of advances from customers 466 555 Total current assets 13,594 15,066 SEVERANCE PAY FUND 817 941 PROPERTY AND EQUIPMENT, NET 1,914 1,699 Total assets $ 16,325 $ 17,706 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade payables $ 1,262 $ 1,745 Deferred revenues 1,201 1,928 Other accounts payables and accrued expenses 4,182 3,759 Total current liabilities 6,645 7,432 ACCRUED SEVERANCE PAY 1,173 1,350 SHAREHOLDERS' EQUITY: Share capital 28 28 Additional paid-in capital 75,281 75,302 Accumulated other comprehensive loss (547) (547) Accumulated deficit (66,255) (65,859) Total shareholders' equity 8,507 8,924 Total liabilities and shareholders' equity $ 16,325 $ 17,706 CONSOLIDATED STATEMENTS OF OPERATIONS U.S. dollars in thousands, except share and per share data Year ended Six months ended Three months ended December 31, June 30, June 30, 2005 2005 2006 2005 2006 Unaudited Revenues: $ $ $ $ $ Product sales 14,485 6,363 8,916 2,895 4,640 Long-term contracts 916 916 - 916 - Total revenues 15,401 7,279 8,916 3,811 4,640 Cost of revenues: Cost of product sales *) 6,646 3,181 3,629 1,332 1,846 Cost of long-term contracts 1,047 847 - 847 - Total cost of revenues 7,693 4,028 3,629 2,179 1,846 Gross profit 7,708 3,251 5,287 1,632 2,794 Operating expenses: Research and development, net *) 2,451 1,396 1,221 720 571 Sales and marketing *) 6,078 3,087 3,189 1,669 1,706 General and administrative *) 1,754 825 769 397 417 Total operating expenses 10,283 5,308 5,179 2,786 2,694 Operating income (loss) (2,575) (2,057) 108 (1,154) 100 Financial income (expenses), net (316) (284) 293 (114) 162 Other income (expenses), net - (2) (5) 3 2 Net income (loss) $ (2,891) $ (2,343) $ 396 $ (1,265) $ 264 Basic net earnings (loss) per $ $ $ $ $ share (0.27) (0.22) 0.04 (0.12) 0.02 Diluted net earnings (loss) per $ $ $ $ $ share (0.27) (0.22) 0.04 (0.12) 0.02 Weighted average number of shares 10,781 10,779 10,791 10,779 10,791 used in computing basic net earnings (loss) per share (in thousands) Weighted average number of shares 10,781 10,779 10,825 10,779 10,837 used in computing diluted net earnings (loss) per share (in thousands) *) Reclassified - see note a. STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY U.S. dollars in thousands Number of Share Additional Accumulated Accumulated Total outstanding paid-in other deficit ordinary capital capital comprehensive shares income (loss) Balance as of January 1, 2005 10,750,726 $ $ 75,241 $ $ $ 28 (547) (63,364) 11,358 Comprehensive loss: Net loss - - - - (2,891) (2,891) Total comprehensive loss (2,891) Issuance of earn-out shares 28,645 *) - 31 - - 31 Issuance of shares upon 11,250 *) - 9 - - 9 exercise of employees' share options Balance as of December 31, 2005 10,790,621 28 75,281 (547) (66,255) 8,507 Comprehensive income: Net income - - - - 396 396 Total comprehensive income 396 Share-based compensation - - 21 - - 21 Balance as of June 30, 2006 10,790,621 28 75,302 (547) (65,859) 8,924 (unaudited) Balance as of January 1, 2005 10,750,726 $ $ $ $ $ 28 75,241 (547) (63,364) 11,358 Issuance of earnout shares 28,645 *) - 31 - - 31 Comprehensive loss: Net loss - - - - (2,343) (2,343) Total comprehensive loss (2,343) Balance as of June 30, 2005 10,779,371 $ $ $ $ $ (unaudited) 28 75,272 (547) (65,707) 9,046 *) Represents an amount lower than $ 1. CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands Year ended Six months ended December 31, June 30, 2005 2005 2006 Unaudited Cash flows from operating activities: Net income (loss) $ (2,891) $ (2,343) 396 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 623 335 277 Share-based compensation - - 21 Decrease in trade receivables, other accounts receivable and 591 805 2,245 prepaid expenses Decrease (increase) in inventories 591 133 (27) Decrease (increase) in work in process, net of advances from 597 (226) (89) customers Increase (decrease) in trade payables, other accounts 429 (188) 113 payable and accrued expenses and accrued severance pay, net Increase in deferred revenues 460 65 727 Other 31 33 5 Net cash provided by (used in) operating activities 431 (1,386) 3,668 Cash flows from investing activities: Purchase of property and equipment (231) (182) (55) Proceeds from sale of property and equipment 127 19 36 Decrease in restricted cash 250 250 250 Net cash provided by investing activities 146 87 231 Cash flows from financing activities: Issuance of shares upon exercise of employees' share options 9 - - Net cash provided by financing activities 9 - - Increase (decrease) in cash and cash equivalents 586 (1,299) 3,899 Cash and cash equivalents at the beginning of the period 4,752 4,752 5,338 Cash and cash equivalents at the end of the period $ 5,338 $ 3,453 9,237 Supplemental disclosure of cash flows activities: Cash received during the period for: Interest, net $ 109 $ 43 $ 121 SUPPLEMENTARY INFORMATION a. The Company reclassified certain expenses which in 2005 were recorded in the general and administrative expenses ('G&A') and sales and marketing expenses ('S&M') to other operating expenses and to the cost of product sales (' COS'). The influence on the consolidated statements of operations for the three months and for the six months ended June 30, 2005 is a decrease of the G&A in the amount of $ 0.19 million and $0.39 million, respectively, an increase in COS of $ 0.35 million and $ 0.71 million, respectively, an increase in research and development costs ('R&D') of $ 0.07 million and $0.15 million, respectively, and a decrease in S&M of $ 0.23 million and $ 0.47 million, respectively. The influence on the consolidated financial statements for the year ended December 31, 2005 was a decrease in G&A of $ 0.8 million, an increase of $ 1.4 million of COS, an increase of $ 0.2 million in R&D and a decrease of $ 0.8 in S&M. These changes had no effect on the reported operating loss, net loss, basic and diluted loss per share and shareholders equity. b. The Company's shares and options held by members of the Board of Directors and officers of the Company: Number of Number of Ordinary share shares options *) Avi Sharir 2,143,238 184,932 Daniel Furman 753,300 - Moshe Nissim - 35,000 Ehud Ben-Yair - 45,000 Orna Nehustan - 40,000 Amos Horev - 10,000 Dan Falk - 10,000 Anat Segal - 10,000 *) Each share option is exercisable into one Ordinary share. c. As of June 30, 2006, the Company employs 121 employees. - - - - - - - - - - - - - - - - - This information is provided by RNS The company news service from the London Stock Exchange

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