Higher net loss is due to higher expenses in R&D most probably in the Zii segment.
Net sales for the first quarter of FY2011 decreased by 21% compared to the same quarter in FY2010. Revenue was lower in the first quarter of FY2011 as the Group continue to be affected by the difficult market for its products, particularly for the personal digital entertainment products.
Gross profit margin was 25% in the first quarter of FY2011 and FY2010. Gross profit margin at 25% was consistent with the mix of products sold.
Net loss for the first quarter of FY2011 was US$3.6 million compared to US$1.0 million in the first quarter of FY2010.
Research and development expenses in the first quarter of FY2011 increased by 13% compared to the first quarter of FY2010. There was an increase in research and development expenses as the Group needs to continue to invest in product research and development in areas that are strategic to the Group, cutting back research and development spending only in product areas that are not strategic to the Group.
Other gains of US$13.1 million in the first quarter of FY2011 were mainly due to a US$13.2 million of foreign exchange gains. Other gains of US$10.5 million in FY2010 comprised mainly of a US$4.9 million gain on disposal of investment in an associated company and foreign exchange gains of US$5.8 million. In the first quarter of FY2010, the Group has disposed its entire interest in an associated company, Qala Singapore Pte Ltd, an internet service provider, for a cash consideration of US$6.2 million.
The functional currency of the Company and its subsidiaries is predominantly the US dollar and accordingly, gains and losses resulting from the translation of monetary assets and liabilities denominated in currencies other than the US dollar are reflected in the determination of net income (loss). The exchange differences were mainly due to the cash and cash equivalent balances held by the Group. Besides US dollar, cash and cash equivalents were held mainly in Singapore dollar, Euro, British Pound and Japanese Yen. The exchange gain in the first quarter of FY2011 was mainly due to the significant appreciation of these currencies against the US dollar during the quarter. In the first quarter of FY2010, these currencies had also appreciated against the US dollar, but the appreciation was not as significant compared to the first quarter of FY2011.
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