Manuka Inc (fka MNKA)

[midastouch017]

THREE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED WITH THREE MONTHS ENDED SEPTEMBER
30, 2004

REVENUES. Revenues consist of gross sales of products less discounts. We are currently concentrating on entering and implementing large-scale projects. In the three months ended September 30, 2005, we had revenue of $239,000, compared to $85,000 in the three months ended September 30, 2004. Revenues increased by $154,000, or 181.1%, in the three months ended September 30, 2005 compared to the three months ended September 30, 2004. The increase is mainly related to higher sales to our North American customers.

COST OF REVENUE. Our cost of revenue consists of materials, sub-contractors and compensation costs. Cost of revenues increased by $90,000, or 152.5%, to $149,000 in the three months ended September 30, 2005 from $59,000 in the three months ended September 30, 2004. Cost of revenues as a percentage of sales was 62.3% in the three months ended September 30, 2005, compared with 69.4% in the three months ended September 30, 2004.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses consist primarily of compensation costs attributable to employees engaged in ongoing research and development activities, development-related raw materials and sub-contractors, and other related costs. Research and development expenses increased by $58,000, or 32.4%, to $237,000 in the three months ended September 30, 2005 from $179,000 in the three months ended September 30, 2004. This increase in research and development expenses is primarily related to the development and implementation of our RFID technology.

SELLING AND MARKETING EXPENSES. Selling and marketing expenses consist primarily of costs relating to compensation attributable to employees engaged in sales and marketing activities, promotion, advertising, trade shows and exhibitions, sales support, travel, commissions and related expenses. Selling and marketing expenses increased by $64,000, or 19.7%, to $388,000 in the three months ended September 30, 2005 from $324,000 in the three months ended September 30, 2004. This increase in selling and marketing expenses was primarily due to higher marketing expenses related to the new sales agreements we have entered into. We believe that the significant investment in pre-sales and marketing activities will contribute to our short-term and long-term sales levels.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses consist primarily of compensation costs for administration, finance and general management personnel, insurance, legal, accounting and administrative costs. General and administrative expenses increased by $25,000, or 15.1%, to $190,000 in the three months ended September 30, 2005 from $165,000 in the three months ended September 30, 2004. The increase was primarily related to higher accounting expenses.

FINANCIAL INCOME, NET. Financial income, net increased by $4,000, or 133.3%, to $7,000 in the three months ended September 30, 2005 from $3,000 in the three months ended September 30, 2004. This increase is due to changes in the exchange rate between the United States Dollar and the Israeli New Shekel.

NET LOSS. We had a net loss of $732,000 in the three months ended September 30, 2005, compared with a net loss of $639,000 in the three months ended September 30, 2004. The 14.5 % increase in net loss in the three months ended September 30, 2005 in comparison with the three months ended September 30, 2004 is attributable mainly to the increase in operating expenses.

NINE MONTHS ENDED SEPTEMBER 30, 2005 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2004

REVENUE. Revenue consists of gross sales of products less discounts. We are currently concentrating on entering and implementing large-scale projects. These potential contracts are subject to a long sales cycle and fluctuated timetable for entering and implementing such projects. Revenues increased by $396,000, or 63.4%, in the nine months ended September 30, 2005 compared to the nine months ended September 30, 2004. In the nine months ended September 30, 2005, we had revenue of $1,020,000, compared to $624,000 in the nine months ended September 30, 2004, primarily due to higher sales to our North American customers.

http://biz.yahoo.com/e/051109/inks.ob10qsb.html

at first read, very impressive

Dubi