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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 2002
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____to ___
Commission file number: 000-29871
RADVISION LTD.
--------------
(Exact Name of Registrant as Specified in Its Charter)
Israel N/A
------ ---
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
24 Raoul Wallenberg Street, Tel Aviv 69719, Israel
--------------------------------------------------
(Address of Principal Executive Offices)
972-3-645-5220
--------------
(Registrant's Telephone Number, Including Area Code)
N/A
-----------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 6, 2002 the Registrant had 20,002,745 Ordinary Shares, par value
NIS 0.1 per share, outstanding.
1
Preliminary Notes: RADVision Ltd. is incorporated in Israel and is a
"foreign private issuer" as defined in Rule 3b-4 under the Securities Exchange
Act of 1934 (the "1934 Act") and in Rule 405 under the Securities Act of 1933.
As a result, it is eligible to file this quarterly report on Form 6-K (in lieu
of Form 10-Q) and to file its annual reports on Form 20-F (in lieu of Form
10-K). However, RADVision Ltd. elects to file its interim reports on Forms 10-Q
and 8-K and to file its annual reports on Form 10-K.
Pursuant to Rule 3a12-3 regarding foreign private issuers, the proxy
solicitations of RADVision Ltd. are not subject to the disclosure and procedural
requirements of Regulation 14A under the 1934 Act, and transactions in its
equity securities by its officers and directors are exempt from Section 16 of
the 1934 Act.
2
RADVISION LTD.
INDEX
Page
- --------------------------------------------------------------------------------
Part I - Financial Information:
Item 1. Condensed Consolidated Balance Sheets as of June 30, 2002
and December 31, 2001........................................4
Condensed Consolidated Statements of Operations -
for the Three Months and Six Months
ended June 30, 2002 and 2001.................................5
Condensed Consolidated Statements of Cash Flows -
for the Six Months ended June 30, 2002 and 2001..............6
Notes to Condensed Consolidated Financial Statements............7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............11
Item 3. Quantitative and Qualitative Disclosure About Market Risk......17
Part II - Other Information:
Item 1. Legal Proceedings..............................................19
Item 2. Changes in Securities and Use of Proceeds......................19
Item 3. Defaults Upon Senior Securities................................20
Item 4. Submission of Matters to a Vote of Security Holders............20
Item 5. Other Information..............................................21
Item 6. Exhibits and Reports on Form 8-K...............................21
Signatures.....................................................22
3
PART I - FINANCIAL INFORMATION
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
June 30, December 31,
2002 2001
-------------- --------------
Unaudited
--------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,405 $ 6,717
Short-term investments 36,886 52,785
Trade receivables, net of allowance for doubtful
accounts of $1,688 atJune 30, 2002 and
$1,126 at December 31, 2001 7,108 5,078
Other receivables and prepaid expenses 1,500 1,259
Inventories 1,010 1,884
-------------- --------------
Total current assets 53,909 67,723
-------------- --------------
LONG-TERM INVESTMENTS 41,192 26,326
-------------- --------------
PROPERTY AND EQUIPMENT, NET 4,102 4,518
-------------- --------------
DEPOSIT WITH INSURANCE COMPANIES 1,362 1,200
-------------- --------------
Total assets $ 100,565 $ 99,767
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term loans $ 6 $ 19
Trade payables 566 765
Other payables and accrued expenses 15,586 13,562
-------------- --------------
Total current liabilities 16,158 14,346
-------------- --------------
ACCRUED SEVERANCE PAY 1,936 1,872
-------------- --------------
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.1 par value:
Authorized - 24,984,470 shares; Issued
and Outstanding - 19,990,145 shares as
of June 30, 2002 and 19,889,690 shares
as of December 31, 2001 184 182
Additional paid-in capital 104,327 104,209
Deferred stock-based compensation (208) (299)
Accumulated deficit (10,075) (10,640)
-------------- --------------
94,228 93,452
Less - cost of treasury stock - 1,866,115 Ordinary
shares of NIS 0.1 par value as of June 30, 2002
and 1,585,446 Ordinary shares as of December 31, 2001 11,757 9,903
-------------- --------------
Total shareholders' equity 82,471 83,549
-------------- --------------
Total liabilities and shareholders' equity $ 100,565 $ 99,767
============== ==============
The accompanying notes are an integral part of the consolidated financial
statements.
4
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
U.S. dollars in thousands, except per share and share data
Three months ended Six months ended
June 30, June 30,
-------------------------- --------------------------
2002 2001 2002 2001
------------- ------------ ------------- ------------
Unaudited
-----------------------------------------------------
Revenues $ 11,707 $ 10,430 $ 23,264 $ 25,325
Cost of revenues 2,571 2,240 5,129 5,964
----------- ------------ --------- ------------
Gross profit 9,136 8,190 18,135 19,361
----------- ------------ ---------- ------------
Operating costs and expenses:
Research and development 3,870 4,563 7,911 9,320
Marketing and selling 4,587 4,365 9,056 9,205
General and administrative 1,073 1,308 2,042 2,477
Restructuring costs - 3,023 - 3,023
----------- ------------ ----------- -----------
Total operating costs and expenses 9,530 13,259 19,009 24,025
----------- ----------- ----------- -----------
Operating loss 394 5,069 874 4,664
Financing income, net 686 1,264 1,438 2,840
Other expenses - - - (173)
----------- ----------- ----------- -----------
Net income (loss) $ 292 $ (3,805) $ 564 $ (1,997)
=========== ========== ========== ============
Basic net earnings (loss) per Ordinary share $ 0.02 $ (0.20) $ 0.03 $ (0.10)
=========== ========== ========== ============
Weighted average number of Ordinary shares
used in computation of basic earnings (loss)
per share 18,063,334 19,199,771 18,274,259 19,204,162
=========== =========== =========== ===========
Diluted earnings (loss) per Ordinary share $ 0.02 $ (0.20) $ 0.03 $ (0.10)
========== ========== =========== =========
Weighted average number of Ordinary shares
used in computation of diluted earnings
(loss) per share 18,864,264 19,199,771 19,342,119 19,204,162
=========== =========== =========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.
5
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
U.S. dollars in thousands
Six months ended
June 30,
------------------------------
2002 2001
------------- ---------------
Unaudited
------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 564 $ (1,997)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Income and expenses not affecting operating cash flows:
Depreciation 1,274 769
Severance pay, net (97) 245
Amortization of deferred stock-based compensation 91 178
Other - 173
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables, net (2,030) 1,693
Decrease (increase) in other receivables and prepaid expenses (241) 175
Decrease in inventories 874 2,953
Decrease in trade payables (199) (2,185)
Increase (decrease) in other payables and accrued expenses 2,024 (3,248)
------------- ---------------
Net cash provided by (used in) operating activities 2,260 (1,244)
------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short-term investments 15,899 16,583
Increase in long-term investments (14,866) (10,593)
Purchase of property and equipment (858) (1,151)
Proceeds from sale of property and equipment - 9
------------- ---------------
Net cash provided by investing activities 175 4,848
------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of share capital 120 401
Purchase of treasury stock (1,854) (2,677)
Payment of issuance expenses - (550)
Repayment of long-term loans (13) (27)
------------- ---------------
Net cash used in financing activities (1,747) (2,853)
------------- ---------------
Increase in cash and cash equivalents 688 751
Cash and cash equivalents at beginning of period 6,717 41,617
------------- ---------------
Cash and cash equivalents at end of period $ 7,405 $ 42,368
============= ===============
The accompanying notes are an integral part of the consolidated financial
statements.
6
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 1:- SIGNIFICANT ACCOUNTING POLICIES
a. The significant accounting policies applied in the annual
financial statements of the Company as of December 31, 2001, are
applied consistently in these interim financial statements.
b. Financial statements in U.S. dollars:
The Company's transactions are recorded in new Israeli Shekels.
Company's management believes that the U.S. dollar is the
currency of the primary economic environment in which the Company
operates, thus the functional and reporting currency of the
Company is the dollar.
Accordingly, transactions and balances, denominated in U.S.
dollars, are presented at their original amounts. Non-dollar
transactions and balances have been remeasured into U.S. dollars,
in accordance with Statement No. 52 of the Financial Accounting
Standards Board ("FASB"). All transaction gains or losses from
remeasurement of monetary balance sheet items denominated in
non-dollar currencies, are reflected in the statements of
operations as financial income or expenses, as appropriate.
c. Recently issued new accounting standards:
In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("FAS 144"),
which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and superseded SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of", and the accounting and
reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations for a Disposal of a Segment of a Business".
FAS 144 is effective for fiscal years beginning after December
15, 2001, with earlier application encouraged. The Company
expects to adopt FAS 144 as of January 1, 2002 and it does not
expect that the adoption of the Statement will have a significant
impact if any, on the Company's financial position and results of
operations.
NOTE 2:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles in the United
States for interim financial information. Accordingly, they do not
include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the six months ended June 30,
2002 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2002.
7
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 3:- SHORT-TERM AND LONG-TERM INVESTMENTS
June 30, December 31,
2002 2001
------------- -------------
Unaudited
-------------
Bank deposits in U.S. dollars bearing annual
interest rate of approximately 3% $ 16,245 $ 28,396
Marketable debentures, bearing annual
interest of approximately 6.3% 20,641 24,389
------------- -------------
$ 36,886 $ 52,785
============= =============
Marketable debentures in the amount of $24,792 that mature later than
June 30, 2003, bearing annual interest of 4.8%, as well as a bank
deposit in the amount of $16,400 bearing annual interest of 3.7%, are
presented as long-term investments.
The interest rates are as of June 30, 2002.
NOTE 4:- INVENTORIES
June 30, December 31,
2002 2001
------------- -------------
Unaudited
-------------
Raw materials, parts and supplies $ 482 $ 991
Work in progress 270 391
Finished products 258 502
------------- -------------
$ 1,010 $ 1,884
============= =============
NOTE 5:- OTHER PAYABLES AND ACCRUED EXPENSES
Deferred income $ 2,003 $ 3,491
Employees and employee institutions 1,397 2,369
Accrued expenses 12,186 7,702
------------- -------------
$ 15,586 $ 13,562
============= =============
8
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands, except per share data
NOTE 6:- SEGMENTS AND CUSTOMER INFORMATION
a. Industry segments reporting:
Three months ended Six months ended
June 30, June 30,
---------------------- ---------------------
2002 2001 2002 2001
----------- ---------- ----------- ---------
Unaudited
--------------------------------------------
Revenues:
Product sales $ 8,580 $ 5,835 $ 16,919 $ 15,841
Software sales 3,127 4,595 6,345 9,484
----------- ---------- ----------- ---------
Total revenues $ 11,707 $ 10,430 $ 23,264 $ 25,325
----- =========== ========== =========== =========
Cost of revenues:
Product sales $ 2,540 $ 2,013 $ 5,048 $ 5,470
Software sales 31 227 81 494
----------- ---------- ----------- ---------
Total cost of revenues $ 2,571 $ 2,240 $ 5,129 $ 5,964
----- =========== ========== =========== =========
b. For the period ended June 30, 2002 and 2001, one customer
accounted for approximately 30% and 39%, respectively, of sales
for the period.
NOTE 7:- EARNINGS (LOSS) PER SHARE
The following table sets forth the calculation of basic and diluted
earnings (loss) per share:
Three months Six months
ended June 30, ended June 30,
------------------------ -----------------------
2002 2001 2002 2001
----------- ----------- ---------- -----------
Numerator:
Net income (loss) $ 292 $ (3,805) $ 564 $ (1,997)
=========== =========== ========== ===========
Numerator for basic and diluted net
earnings (loss) per share - income
available to shareholders of $ 292 $ (3,805) $ 564 $ (1,997)
Ordinary shares
=========== =========== ========== ===========
Number of shares:
----------------
Denominator:
Denominator for basic earnings (loss)
per share - weighted average of
Ordinary shares 18,063,334 19,199,771 18,274,259 19,204,162
Effect of dilutive securities:
Employee stock options and unvested
restricted shares 800,930 *) - 1,067,860 *) -
----------- ----------- ---------- -----------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 18,864,264 19,199,771 19,342,119 19,204,162
=========== =========== ========== ===========
*) Antidilutive.
9
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 8:- ONE TIME CHARGE
The Company recorded a one-time charge of $3 million in the second
quarter of 2001, for severance costs associated with a 13% workforce
reduction as part of its plan to reduce operating expenses.
- - - - - - - - - - - -
10
RADVISION LTD.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is management's discussion and analysis of certain significant
factors which have affected our financial position and operating results during
the periods included in the accompanying condensed consolidated financial
statements.
The discussion and analysis which follows in this quarterly report may contain
trend analysis and other forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 which reflect our current
views with respect to future events and financial results. These include
statements regarding our earnings, projected growth and forecasts, and similar
matters that are not historical facts. We remind shareholders that
forward-looking statements are merely predictions and therefore are inherently
subject to uncertainties and other factors that could cause the future results
to differ materially from those described in the forward-looking statements.
These uncertainties and other factors include, but are not limited to, the
uncertainties and factors included in the "Risk Factors" contained in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2001.
Overview
We are a leading designer, developer and supplier of products and technology
that enable real-time voice, video and data communications over packet networks,
including the Internet and other IP networks.
We were incorporated in January 1992, commenced operations in October 1992 and
commenced sales of our products in the fourth quarter of 1994. Before that time,
our operations consisted primarily of research and development and recruiting
personnel. In 1995, we established a wholly owned subsidiary in the United
States, RADVision Inc., which conducts our sales and marketing activities in
North America. In 2000, we established a wholly owned subsidiary in Hong Kong,
RADVision HK Ltd, which conducts our marketing activities in Asia Pacific. In
2001, we established a wholly owned subsidiary in the United Kingdom, RADVision
(UK) Ltd, which conducts our marketing activities in England.
Critical Accounting Policies
The following discussion and analysis of our financial condition and results of
operations are based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
sales and expenses during the reporting periods. Areas where significant
judgments are made include, but are not limited to: inventory valuation and
revenue recognition. Actual results could differ materially from these
estimates.
11
Inventories. Inventories are stated at the lower of cost or market. Cost is
determined by the moving average method, inventories write-offs and write-down
provisions are provided to cover risks arising from slow-moving items or
technological obsolescence.
Revenue Recognition. Revenues from sales of products and technology are
recognized in accordance with Statement of Position (SOP) 97-2, as amended by
SOP 98-4, upon delivery, when collection is probable, the vendor's fee is fixed
or determinable and persuasive evidence of an arrangement exists. Provided that
all other elements of SOP 97-2 are met, revenues are recognized upon delivery,
whether the customer is a distributor or the final end user. Revenues for
maintenance and support services are deferred and recognized ratably over the
service period.
In accordance with SOP 97-2, revenues for multi-element arrangements, that is,
sales of products or technology in conjunction with post-contract customer
support services, are segregated. Revenues allocated to the delivered elements
are recognized upon delivery, provided that the other elements of SOP 97-2 are
satisfied. Revenues allocated to the undelivered elements (post-contract
customer support services) are deferred and recognized ratably over the service
period. The portion of the fee for multi-element arrangements allocated to the
undelivered elements (post-contract customer support services) is based on
vendor-specific objective evidence determined, in the case of post-contract
customer support services, based on the annual renewal rate for such services
actually charged to customers for years subsequent to the first year following
sale. The remaining portion of the fee is allocated to the delivered elements
based on the residual value method.
Revenues from products are recognized in accordance with Staff Accounting
Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB No. 101")
when the following criteria are met: persuasive evidence of an arrangement
exists, delivery of the product has occurred, the fee is fixed or determinable
and collectibility is probable. The Company has no obligation to customers
after the date in which products are delivered.
Revenues from maintenance and updates are recognized over the term of agreement.
Deferred revenues include unearned amounts received under maintenance contracts,
and amounts billed to customers but not yet recognized as revenues.
Revenues
We generate revenues from sales of our networking products that are primarily
sold in the form of stand-alone products, and our technology products that are
primarily sold in the form of software development kits, as well as related
maintenance and support services. We generally recognize revenues from the sale
of our products upon shipment and when collection is probable. Revenues
generated from maintenance and support services are deferred and recognized
ratably over the period of the term of service. We price our networking products
on a per unit basis, and grant discounts based upon unit volumes. We price our
software development kits on the basis of a fixed-fee plus royalties from
products developed using the software development kits. We sell our products and
technology through direct sales and various indirect distribution channels in
North America, Europe, the Far East and Israel.
12
Results of Operations
The following table presents, as a percentage of total revenues, condensed
statements of operations data for the periods indicated:
Three months Six months
ended June 30, ended June 30,
-------------------- --------------------
2001 2002 2001 2002
---- ---- ---- ----
Unaudited Unaudited Unaudited Unaudited
--------- --------- --------- ---------
Revenues
Networking products......... 55.9% 73.3% 62.6% 72.7%
Technology products......... 44.1 26.7 37.4 27.3
Total revenues.............. 100.0 100.0 100.0 100.0
Cost of revenues
Networking products......... 19.3 21.7 21.6 21.7
Technology products......... 2.2 0.3 1.9 0.3
Total cost of revenues...... 21.5 22.0 23.5 22.0
Gross profit................... 78.5 78.0 76.5 78.0
Operating expenses
Research and development..... 43.8 33.0 36.8 34.0
Marketing and selling........ 41.9 39.2 36.4 38.9
General and administrative... 12.5 9.2 9.8 8.8
Restructuring costs.......... 28.9 - 11.9 -
Total operating expenses...... 127.1 81.4 94.9 81.7
Operating loss................. (48.6) (3.4) (18.4) (3.7)
Financial income, net.......... 12.1 5.9 10.5 6.1
Net income (loss).............. (36.5) 2.5 (7.9) 2.4
====== === ==== ===
Three Months Ended June 30, 2001 Compared with Three Months Ended June 30, 2002
Revenues. Revenues increased from $10.4 million for the three months ended June
30, 2001 to $11.7 million for the three months ended June 30, 2002, an increase
of $1.3 million, or 12.2%. This increase was due to a $2.8 million, or 48.3%,
increase in sales of our networking products, offset by a decrease of $1.5
million, or 32.6%, in sales of technology products.
Revenues from networking products increased from $5.8 million for the three
months ended June 30, 2001 to $8.6 million for the three months ended June 30,
2002. The increase in revenues from networking products is attributable to an
increase in demand for these units as customers moved from integrated services
digital networks, or ISDN, to IP-based networks.
Revenues from technology products decreased from $4.6 million for the three
months ended June 30, 2001 to $3.1 million for the three months ended June 30,
2002. This decrease in revenues from technology products was primarily
attributable to a decreased market demand as budgets for these products declined
due to the worldwide economic downturn.
Revenues from sales to customers in the United States increased from $6.1
million, or 58.6% of revenues, for the three months ended June 30, 2001, to $7.1
million, or 60.7% of revenues, for the three months ended June 30, 2002, an
increase of $1.0 million, or 16.4%. This increase in sales to customers in the
United States was primarily attributable to increased market demand for our
networking products in this region.
13
Revenues from sales to customers in Europe decreased from $2.2 million, or 21.2%
of revenues, for the three months ended June 30, 2001, to $1.9 million, or 16.2%
of revenues, for the three months ended June 30, 2002, a decrease of $0.3
million, or 13.6%. This decrease in sales to customers in Europe was primarily
attributable to slower adoption of technology in this region.
Revenues from sales to customers in the Far East increased from $1.6 million, or
15.4% of revenues, for the three months ended June 30, 2001, to $2.1 million, or
17.9% of revenues, for the three months ended June 30, 2002, an increase of $0.5
million, or 31.2%. This increase in sales to customers in the Far East was
primarily attributable to increased sales efforts.
Revenues from sales to customers in Israel increased from $0.5 million, or 4.8%
of revenues, for the three months ended June 30, 2001, to $0.6 million, or 5.1%
of revenues, for the three months ended June 30, 2002, an increase of $0.1
million, or 20.0%.
Cost of Revenues. Cost of revenues increased from $2.2 million for the three
month period ended June 30, 2001 to $2.6 million for the three months ended June
30, 2002, an increase of $331,000, or 14.8%. Gross profit as a percentage of
revenues decreased slightly from 78.5% for the three months ended June 30, 2001
to 78.0% for the three months ended June 30, 2002.
Research and Development. Research and development expenses decreased from $4.6
million for the three months ended June 30, 2001 to $3.9 million for the three
months ended June 30, 2002, a decrease of $693,000, or 15.2%. This decrease was
primarily attributable to a decrease in the number of research and development
personnel whom we employed. Research and development expenses as a percentage of
revenues decreased from 43.7% for the three months ended June 30, 2001 to 33.0%
for the three months ended June 30, 2002.
Marketing and Selling. Marketing and selling expenses increased from $4.4
million for the three months ended June 30, 2001 to $4.6 million for the three
months ended June 30, 2002, an increase of $222,000, or 5.1%. This increase was
primarily attributable to an increased sales efforts. Marketing and selling
expenses as a percentage of revenues decreased from 41.9% for the three months
ended June 30, 2001 to 39.2% for the three months ended June 30, 2002.
General and Administrative. General and administrative expenses decreased from
$1.3 million for the three months ended June 30, 2001 to $1.1 million for the
three months ended June 30, 2002, a decrease of $235,000 or 18.0%. This decrease
was primarily attributable to a decrease in personnel expenses. General and
administrative expenses as a percentage of revenues was 12.5% for the three
months ended June 30, 2001 and 9.2% for the three months ended June 30, 2002.
One Time Charge. We recorded a one time charge of $3.0 million in the second
quarter of 2001 for severance costs associated with a 13% workforce reduction as
part of our plan to reduce operating expenses.
Operating Loss. Our operating loss decreased from $5.1 million for the three
months ended June 30, 2001 to $394,000 for the three months ended June 30, 2002
as a result of our cost-cutting efforts.
Financial Income. We had financial income of $686,000 in the three months ended
June 30, 2002 as compared to $1.3 million for the three months ended June 30,
2001. This income was principally derived from the investment of the proceeds of
our March 2000 initial public offering and private placement. Our interest
income decreased due to our use of a portion of the proceeds
14
to repurchase stock in the open market in 2001 and the first quarter of 2002 and
due to lower prevailing interest rates.
Net Income(Loss). Net income for the quarter was $292,000 compared with a net
loss of $3.8 million for the second quarter of 2001.
Six Months Ended June 30, 2002 Compared with Six Months Ended June 30, 2001
Revenues. Revenues decreased from $25.3 million for the six months ended June
30, 2001 to $23.3 million for the six months ended June 30, 2002, a decrease of
$2.0 million, or 7.9%. This decrease was due to a $3.1 million, or 32.6%,
decrease in sales of our technology products, offset in part by a $1.1 million,
or 7.0%, increase in sales of networking products.
Revenues from networking products increased from $15.8 million for the six
months ended June 30, 2001 to $16.9 million for the six months ended June 30,
2002. The 7.0% increase in revenues from networking products is attributable to
a global increase in demand for these units as customers moved from ISDN to
IP-based networks, as well as from new agreements that generated additional
product sales.
Revenues from technology products decreased from $9.5 million for the six months
ended June 30, 2001 to $6.4 million for the six months ended June 30, 2002. This
decrease in revenues from technology products was primarily attributable to
decreased market demand as budgets for these products declined due to the
worldwide economic downturn.
Revenues from sales to customers in the United States decreased from $17.1
million, or 67.6% of revenues, for the six months ended June 30, 2001, to $14.5
million, or 62.2% of revenues, for the six months ended June 30, 2002, a
decrease of $2.6 million, or 15.2%. This decrease in sales to customers in the
United States was primarily attributable to the ongoing softness in enterprise
spending in the United States.
Revenues from sales to customers in Europe decreased from $3.9 million, or 15.4%
of revenues, for the six months ended June 30, 2001, to $3.6 million, or % of
revenues, for the six months ended June 30, 2002, a decrease of $0.3 million, or
7.7%. This decrease in sales to customers in Europe was primarily attributable
to slower adoption of technology in this region.
Revenues from sales to customers in the Far East increased from $3.2 million, or
12.6% of revenues, for the six months ended June 30, 2001, to $4.1 million, or
35.0% of revenues, for the six months ended June 30, 2002, an increase of $0.9
million, or 28.1%. This increase in sales to customers in the Far East was
primarily attributable to increased sales efforts.
Revenues from sales to customers in Israel remained constant at $1.1 million for
the six months ended June 30, 2001 (4.3% of revenues), and for the six months
ended June 30, 2002 (4.7% of revenues).
Cost of Revenues. Cost of revenues decreased from $6.0 million for the six
months ended June 30, 2001 to $5.1 million for the six months ended June 30,
2002, a decrease of $835,000, or 14.0%. Gross profit as a percentage of revenues
increased from 76.7% for the six months ended June 30, 2001 to 78.0% for the six
months ended June 30, 2002, due to the increased proportion of networking
product sales that generate a higher profitability.
15
Research and Development. Research and development expenses decreased from $9.3
million for the six months ended June 30, 2001 to $7.9 million for the six
months ended June 30, 2002, a decrease of $1.4 million, or 15.1%. This decrease
was primarily attributable to a decrease in the number of research and
development personnel whom we employed. Research and development expenses as a
percentage of revenues decreased from 36.8% for the six months ended June 30,
2001 to 34.0% for the six months ended June 30, 2002.
Marketing and Selling. Marketing and selling expenses decreased from $9.2
million for the six months ended June 30, 2001 to $9.1 million for the six
months ended June 30, 2002, a decrease of $149,000, or 16.2%. Marketing and
selling expenses as a percentage of revenues increased from 36.4% for the six
months ended June 30, 2001 to 38.9% for the six months ended June 30, 2002.
General and Administrative. General and administrative expenses decreased from
$2.5 million for the six months ended June 30, 2001 to $2.0 million for the six
months ended June 30, 2002, a decrease of $435,000 or 17.6%. This decrease was
primarily attributable to a decrease in personnel expenses. General and
administrative expenses as a percentage of revenues was 9.8% for the six months
ended June 30, 2001 and 8.8% for the six months ended June 30, 2002.
One Time Charge. We recorded a one time charge of $3.0 million in the first six
months of 2001 for severance costs associated with a 13% workforce reduction as
part of our plan to reduce operating expenses.
Operating Loss. Our operating loss decreased from $4.7 million for the six
months ended June 30, 2001 to $874,000 for the six months ended June 30, 2002 as
a result of cost cutting efforts.
Financial Income. Financial income decreased from $2.8 million for the six
months ended June 30, 2001 to $1.4 million for the six months ended June 30,
2002 principally as a result of the decreased interest income we derived from
the investment of the proceeds of our March 2000 initial public offering and
private placement. Our interest income decreased due to our use of a portion of
the proceeds in 2001 and the first quarter of 2002 to repurchase stock in the
open market and due to lower prevailing interest rates.
Net Income(Loss). Net income for the first six months of 2002 was $565,000
compared with a net loss of $2.0 million for the first six months of 2001.
Liquidity and Capital Resources
From our inception until our initial public offering in March 2000, we financed
our operations through cash generated by operations and a combination of private
placements of our share capital and borrowings under lines of credit. Through
December 31, 1999, we raised a total of approximately $12.2 million in aggregate
net proceeds in four private placements. In March 2000, we sold 4,370,000 of our
ordinary shares in an initial public offering and 590,822 ordinary shares in a
private placement. We received net proceeds of $89.2 million from the public
offering and private placement. As of June 30, 2002, we had approximately $7.4
million in cash and cash equivalents and our working capital was approximately
$37.7 million.
Net cash used in operating activities was approximately $2.3 million for the six
months ended June 30, 2002. This amount was primarily attributable to a decrease
of $2.0 million in other payables and accrued expenses, depreciation expenses of
$1.3 million and a decrease in
16
inventories of $0.9 million. These increases in cash used in operating
activities were offset in part by an increase in trade receivables of $2.0
million.
The decrease in inventory for the six months ended June 30, 2002 was primarily
due to our continued efforts to manage our inventory to correspond with the
expected need of the networking market. The increase in accounts receivable for
the six months ended June 30, 2002 was primarily the result of increase in our
revenues compared to the last quarter of 2001.
Net cash provided by investing activities was $175,000 for the six months ended
June 30, 2002. During the six months ended June 30, 2002, $0.9 million of cash
used in investing activities was for purchases of property and equipment .
Net cash used in financing activities was $1.7 million for the six months ended
June 30, 2002.
As of June 30, 2002, we had $6,000 outstanding under an equipment term loan
facility and a $2.5 million line of credit.
Our capital requirements are dependent on many factors, including market
acceptance of our products and the allocation of resources to our research and
development efforts, as well as our marketing and sales activities. In the last
three years, we have experienced substantial increases in our expenditures as a
result of the growth in our operations and personnel. We anticipate that our
cash resources will be used primarily to fund our operating activities, as well
as for capital expenditures. We anticipate that our capital expenditures and
lease commitments will not increase for the foreseeable future due to the
anticipated slowdown in the growth of our operations, infrastructure and
personnel. Nevertheless, we may establish additional operations as we expand
globally.
On February 28, 2001, we announced that our Board of Directors authorized the
repurchase of up to 10% of our outstanding ordinary shares in the open market
from time to time at prevailing market prices. We completed the share repurchase
program in the first quarter of 2002, having repurchased a total of 1,866,115
ordinary shares at a cost of $11.8 million. We may use the repurchased shares
for issuance upon exercise of employee stock options or other corporate
purposes.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
We currently do not invest in, or hold for trading or other purposes, any
financial instruments subject to market risk. We invest our cash surplus in time
deposits, cash deposits, U.S. federal agency securities and corporate bonds with
an average credit rating of A2. We currently pay interest on our equipment term
loan facility based on the London interbank offered rate. As a result, changes
in the general level of interest rates directly affect the amount of interest
payable by us under this facility. However, because our outstanding debt under
this facility has never exceeded $218,000, we do not expect our exposure to
market risk from changes in interest rates to be material.
We cannot assure you that we will not be materially and adversely affected in
the future if inflation in Israel exceeds the devaluation of the NIS against the
dollar or if the timing of the devaluation lags behind inflation in Israel.
17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
We are not involved in any legal proceedings that are material to our
business or financial condition.
Item 2. Changes in Securities and Use of Proceeds
Use of Proceeds. The following information required by Item 701(f) of
Regulation S-K relates to our initial public offering of ordinary
shares of our company on March 14, 2000. The following table sets
forth, with respect to the ordinary shares registered, the amount of
securities registered, the aggregate offering price of amount
registered, the amount sold and the aggregate offering price of the
amount sold, for both the account of our company and the account of
any selling security holder.
For the account of
For the account the selling
of the company shareholder
-------------- -----------
Number of ordinary shares registered .. 4,370,000 N/A
Aggregate offering price of shares
registered ......................... $87,400,000 N/A
Number of ordinary shares sold ........ 4,370,000 N/A
Aggregate offering price of shares sold $87,400,000 N/A
The following table sets forth the expenses incurred by us in
connection with our public offering during the period commencing the
effective date of the Registration Statement and ending June 30, 2002.
None of such expenses were paid directly or indirectly to directors,
officers, persons owning 10% or more of any class of equity securities
of our company or to our affiliates.
Direct or indirect payments to
persons other than affiliated
persons
------------------------------
Underwriting discounts and commissions .. $6,118,000
Finders' fees ........................... 550,000
Expenses paid to or for underwriters..... 41,290
Other expenses .......................... 2,241,113
---------
Total expenses .......................... $8,950,403
==========
The net public offering proceeds to us, after deducting the total
expenses (set forth in the table above), were $78,449,597.
The following table sets forth the amount of net public offering
proceeds used by us for the purposes listed below. None of such
payments were paid directly or indirectly to directors, officers,
persons owning 10% or more of any class of our equity securities or to
our affiliates.
18
Direct or indirect payments
to persons other than to
Purpose affiliated persons
- ---------------------------------------------- ---------------------------
Acquisition of other companies and
business(es) .............................. N/A
Construction of plant, building and facilities N/A
Purchase and installation of machinery
and equipment ............................ N/A
Purchase of real estate .................... N/A
Repayment of indebtedness .................. N/A
Working capital ............................ $58,448,000
Temporary investments ...................... N/A
Other purposes ............................. N/A
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
During the three month period ended June 30, 2002, we held our
Annual General Meeting of Shareholders.
At the meeting, held on June 29, 2002, our shareholders voted:
1. To consider and receive the Directors' Annual Report to Shareholders
for the year ended December 31, 2001, and to consider and receive the
Company's Consolidated Financial Statements for the year ended
December 31, 2001, and the auditor's report thereon.
For Against Abstained
--- ------- ---------
11,978,057 3,374 1,180
2. To appoint Kost Forer & Gabbay, a member of Ernst & Young
International, to conduct the annual audit of the Company's financial
statements for the year ending December 31, 2002, and to authorize the
Board of Directors to fix their compensation.
For Against Abstained
--- ------- ---------
11,939,595 37,516 5,500
3. To elect the following directors to hold office for a term until their
successors are duly elected and qualified at our 2003 Annual General
Meeting of Shareholders.
For Against Abstained
--- ------- ---------
Zohar Zisapel......... 11,946,378 36,233 0
Gadi Tamari........... 11,946,378 36,233 0
Ami Amir.............. 11,946,378 36,233 0
19
Efraim Wachtel........ 11,946,378 36,233 0
Andreas Mattes........ 11,946,378 36,233 0
4. To approve the grant of options to directors of the company.
For Against Abstained
--- ------- ---------
4,116,456 1,427,615 9,858
5. To approve an amendment to our Year 2000 Employee Stock Option Plan,
increasing the number of ordinary shares reserved for issuance
thereunder from 3,009,052 to 3,241,552.
For Against Abstained
--- ------- ---------
4,131,066 1,418,300 4,563
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, As Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K filed during the last quarter of the period covered by
this report:
On April 29, 2002 the Registrant filed with the Securities and
Exchange Commission a Form 8-K, bearing a cover date of April 26,
2002, reporting a change in certifying accountant.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RADVISION LTD.
(Registrant)
/s/Gad Tamari
-------------
Gad Tamari
Chief Executive Officer
/s/David Seligman
-----------------
David Seligman
Chief Financial Officer
Date: August 13, 2002
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