Question-and-Answer Session
Operator
Thank you. Ladies and gentlemen at this time, we will begin the question and answer session. (Operator Instructions) The first question is from Steven Silk of C Silk & Sons. Please go ahead.
Steven Silk – C Silk & Sons
Good morning. I had a couple of accounting questions. The deferred revenue that is mostly made up of licensing revenue that Gazit provided – put on revenue over the year? Is that correct?
Hadas Gazit-Kaiser
Yeah
Steven Silk C Silk & Sons
Okay, excuse me. So, last year, the deferred revenue jump from the $2.3 million on December 2007 to just over $8 million which would indicate to me that most of your revenue, deferred revenue or license renewals occur in the first quarter. Do we expect that in a large inflow of cash in the first quarter?
Hadas Gazit-Kaiser
Yeah.
Guy Bernstein
Yeah, definitely.
Steven Silk – C Silk & Sons
Okay.
Hadas Gazit-Kaiser
Actually what happened – what happened in the fourth quarter of 2008, we invoiced the customers, but still didn’t get the cash. So this is why it’s not reflected in the deferred revenues, but it will be reflected in the first quarter of 2009.
Steven Silk – C Silk & Sons
So, it’s comparable to last year we could – we are looking at probably an inflow of about
Hadas Gazit-Kaiser
Yeah.
Steven Silk – C Silk & Sons
$6 million to $7 million of cash. Okay. The next question, the financial income is a loss of $34,000. I know you have $32 million in cash in the bank, what was the expense against that?
Hadas Gazit-Kaiser
It was mainly the exchange rate that was against us. I mean, euros that we had which influenced this. Euros and also pounds which we have in the branches, this was the reason. As you probably know, the interest rate is really low and we are keeping our cash in very conservative deposits and bonds. So this is why the interest rate is low.
Steven Silk – C Silk & Sons
Okay that’s fine. I noticed in this quarter that the gross margins were lower, would that indicate that your non-core Magic CoreTech and Hermes doing better since they are lower revenue – lower margin products?
Hadas Gazit-Kaiser
Yeah they are doing better, both of them, but still the core business has really improved during all this year and also the fourth quarter, but both of the non-core CoreTech and Hermes are doing much better.
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