This excerpt taken from the ELOS 20-F filed Jun 15, 2007.
Results of Operations
Years Ended December 31, 2005 and December 31, 2006
Revenues. Revenues in 2006 have increased by $29.6 million, or 33.8 %, from $87.4 million in 2005 to $117 million. The increase was primarily attributable to increased unit sales as a result of extensive efforts in Europe and Asia as well as increasing efforts in North America which resulted in an increase of the market share of Syneron products.
Cost of Revenues. Cost of revenues increased by $6.5 million in 2006, from $11.4 million in 2005 to $17.9 million. The increase in cost of revenues was primarily attributable to the increase in the number of products manufactured and sold. As a percentage of revenue, cost of revenues increased from 13.1% in 2005 to 15.3 % in 2006 due to change in the mix of products towards products that include Laser instead of IPL. For a detailed explanation on the difference between Laser and IPL, please see Business OverviewIndustry above.
Research and development. Research and Development expenses increased by $3.5 million, from $5.0 million in 2005 to $8.5 million in 2006. As a percentage of revenues, research and development expenses increased from 5.8% in 2005 to 7.3% in 2006. The increase was primarily attributable to expansion of our research and development staff and its activities, the increased consulting services from outside engineering companies. In addition Research and Development expenses for the year ended December 31, 2006 include $ 0.6 million of stock based compensation expenses recorded under SFAS 123(R).
Selling and Marketing Expenses. Selling and marketing expenses increased by $21.2 million, from $25.2 million in 2005 to $46.4 million in 2006. The increase in selling and marketing expenses was primarily attributable to an increase in personnel costs associated with the expansion of our North American sales force and increased activities in Europe, Asia-Pacific and South America. In addition Selling and Marketing expenses for the year ended December 31, 2006 include $ 5.0 million of stock based compensation expenses recorded under SFAS 123(R). As a percentage of revenues, selling and marketing expenses increased from 28.8% in 2005 to 39.7% in 2006.
General and Administrative Expenses. General and administrative expenses increased by $5.9 million, from $3.5 million in 2005 to $9.4 million in 2006. The increase in general and administrative expenses was primarily attributable to an increase in personnel costs associated with the expansion of our finance and other management functions needed to support our overall growth. In addition General and Administrative expenses for the year ended December 31, 2006 include $ 2.3 million of stock based compensation expenses recorded under SFAS 123(R). As a percentage of revenues, general and administrative expenses increased from 4.0% in 2005 to 8.0% in 2006.
Financial Income. Financial income increased $3.4 million, from $3.1 million in 2005 to $6.5 million in 2006. The increase in financial income was primarily attributable to interest earned on our increasing cash balances and marketable securities in 2006. As a percentage of revenues, financial income increased from 3.5% in 2005 to 5.5% in 2006.
Taxes on Income. Income taxes increased by $0.8 million, from $0.7 million in 2005 to $1.5 million in 2006. As an Approved Enterprise and a Benefited Enterprise in Israel, we are exempt from tax on any income derived from our Approved Enterprise and Benefited Enterprise and we pay taxes only on income from other sources which are not integral to our Approved Enterprise and Benefited Enterprise, such as interest on marketable securities. Our subsidiaries had loss carryforwards of approximately $50.0 million as of December 31, 2006 as compared to approximately $38.9 million as of December 31, 2005. We have recorded a valuation allowance for the deferred taxes on these losses since it is more likely than not that we will not be able to offset such losses against future income.