As filed with the Securities and Exchange Commission on May 18, 2004
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM F-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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RADA ELECTRONIC INDUSTRIES LTD.
(Exact name of Registrant as specified in its charter)
Israel Not Applicable
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Rada Electronic Industries Ltd.
7 Giborei Israel Street
Netanya 42504, Israel
Tel: (972)(9) 892-1111
Fax: (972)(9) 885-5885
(Address and telephone number of Registrant's principal executive offices)
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Mr. Herzle Bodinger, President
Rada Electronic Industries Inc.
c/o Carter Ledyard & Milburn LLP
2 Wall Street
New York, NY 10005
Tel: 212-238-8605
Fax: 212-732-3232
(Name of agent for service)
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Copies of all communications, including communications
sent to agent for service, should be sent to:
Steven J. Glusband, Esq. Sarit Molcho, Adv.
Carter Ledyard & Milburn LLP S. Friedman & Co., Advocates
2 Wall Street 25 Hamered Street
New York, NY 10005 Tel Aviv, Israel 68125
Tel: 212-238-8605 Tel: (972)(3) 796-1500
Fax: 212-732-3232 Fax: (972)(3) 796 1501
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 436,
please check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CALCULATION OF REGISTRATION FEE
==========================================================================================================
Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price per aggregate offering registration
securities to be registered registered ordinary share price fee
==========================================================================================================
Ordinary shares, par value
NIS 0.005 per share 19,956,226 $1.89 (1) $37,717,267 $4,778.78 (2)
==========================================================================================================
(1) Estimated pursuant to Rule 457(c) and 457 (o) solely for the purpose
of computing the amount of the registration fee on the basis of the
average of the low bid and high ask prices ($1.95 and $1.82) of an
ordinary share as reported by Nasdaq on May 14, 2004.
(2) Calculated pursuant to Section 6(b) of the Securities Act of 1933 as
follows: proposed maximum aggregate offering price multiplied by
.0001267.
ii
SUBJECT TO COMPLETION, DATED MAY 18, 2004
The information in this prospectus is not complete and may be changed.
These securities may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
RADA ELECTRONIC INDUSTRIES LTD.
19,956,226 Ordinary Shares
This prospectus relates to 19,956,226 ordinary shares that the selling
shareholders named in this prospectus or their transferees may offer from time
to time. The registration of these ordinary shares does not necessarily mean
that any of the selling shareholders or their transferees will offer or sell
their shares.
We are not offering or selling any of our ordinary shares pursuant to
this prospectus. We will not receive any of the proceeds from the sale by the
selling shareholders of the ordinary shares offered by this prospectus. We will
bear all expenses in connection with the preparation of this prospectus.
Our ordinary shares are listed for trading on the Nasdaq SmallCap Market
under the symbol "RADIF." On May 17, 2004, the closing price of our ordinary
shares on the Nasdaq SmallCap Market was $1.90.
These securities involve a high degree of risk. See "Risk Factors" beginning on
page 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
2004
Table of Contents
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Page
----
Notice Regarding Forward-Looking Statements........................ 3
Prospectus Summary................................................. 4
Risk Factors....................................................... 5
Use of Proceeds.................................................... 16
Market Price Data.................................................. 16
Selected Consolidated Financial Data............................... 17
Selling Shareholders............................................... 19
Plan of Distribution............................................... 21
Foreign Exchange Controls and Other Limitations.................... 23
Experts............................................................ 23
Legal Matters...................................................... 24
Material Changes................................................... 24
Where You Can Best Find More Information; Incorporation
of Certain Information by Reference................................ 24
Enforceability of Civil Liabilities................................ 25
When you are deciding whether to purchase the ordinary shares being
offered by this prospectus, you should rely only on the information incorporated
by reference or provided in this prospectus or any supplement. We have not
authorized anyone to provide you with different information. We are not making
any offer of the ordinary shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents.
In this prospectus, "we," "us," "our," the "Company" and "Rada" refer to
Rada Electronic Industries Ltd., an Israeli company, and our subsidiary.
We are a "foreign private issuer" as defined in Rule 3b-4 under the
Securities Exchange Act of 1934, or the Exchange Act. As a result, our proxy
solicitations are not subject to the disclosure and procedural requirements of
Regulation 14A under the Exchange Act and transactions in our equity securities
by our officers and directors are exempt from Section 16 of the Exchange Act. In
addition, we are not required under the Exchange Act to file periodic reports
and financial statements as frequently or as promptly as United States companies
whose securities are registered under the Exchange Act.
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We distribute annually to our shareholders an annual report containing
financial statements that have been examined and reported on, with an opinion
expressed by, an independent public or certified public accountant. We prepare
our financial statements in United States dollars and in accordance with
accounting principles generally accepted in the United States. All references to
"dollars" or "$" in this prospectus are to United States dollars, and all
references to "shekels" or "NIS" are to New Israeli Shekels.
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in it by reference
contain forward-looking statements which involve known and unknown risks and
uncertainties. We include this notice for the express purpose of permitting us
to obtain the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include: projections of
capital expenditures, competitive pressures, revenues, growth prospects, product
development, financial resources and other financial matters. You can identify
these and other forward-looking statements by the use of words such as "may,"
"will," "should," "plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential" or the negative of such terms, or other comparable
terminology.
Our ability to predict the results of our operations or the effects of
various events on our operating results is inherently uncertain. Therefore, we
caution you to consider carefully the matters described under the caption "Risk
Factors" and certain other matters discussed in this prospectus, the documents
incorporated by reference in this prospectus, and other publicly available
sources. Such factors and many other factors beyond the control of our
management could cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements that
may be expressed or implied by the forward-looking statements.
3
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information about us, the ordinary shares that may be sold from time to time,
and our financial statements and the notes to them, all of which appear
elsewhere in this prospectus or in the documents incorporated by reference in
this prospectus.
RADA ELECTRONIC INDUSTRIES LTD.
We develop, manufacture and sell automated test equipment, avionics
products and ground debriefing systems and provide manufacturing services for
military and commercial use, mainly in Israel, the U.S. and Europe. We refer to
these activities as our core business. We also provide test and repair services
using our CATS(R) testers and test program sets through our Chinese subsidiary.
We were incorporated in Israel on December 8, 1970 and have one active
subsidiary in China. Our registered offices and principal place of business are
located at 7 Giborei Israel Street, Netanya 42504, Israel, and our telephone
number is 972-9-892-1111. Our address on the internet is www.rada.com. Our agent
for service of process in the U.S. is Rada Electronic Industries Inc.
The Offering
Ordinary shares offered.......... 19,956,226 shares, including
13,667,345 shares are issuable upon exercise
of outstanding warrants
Nasdaq SmallCap Market Symbol.... "RADIF"
Use of proceeds.................. We will not receive any proceeds from the
sale of the ordinary shares offered hereby.
We will, however, receive the proceeds from
the exercise of the warrants if and when they
are exercised.
4
RISK FACTORS
Investing in our ordinary shares involves a high degree of risk and
uncertainty. You should carefully consider the risks and uncertainties described
below before investing in our ordinary shares. Our business, prospects,
financial condition and results of operations could be adversely affected due to
any of the following risks. In that case, the value of our ordinary shares could
decline, and you could lose all or part of your investment.
Risks Related to Our Business and Our Industry
We have a history of losses, and may not be able to maintain profitable
operations in the future.
We reported a net profit of $758,000 for the fiscal year ended December
31, 2003, but incured losses in the five preceding years. As of December 31,
2003 our accumulated deficit was $57.7 million. No assurance can be given that
we will be able to maintain our current level of revenues or profitability in
the future.
We may need to raise additional capital in the future, which may not be
available to us.
Our working capital requirements and the cash flow provided by our
operating activities are likely to vary greatly from quarter to quarter,
depending on the timing of orders and deliveries, the build-up of inventories,
and the payment terms offered to our customers. As a consequence of our
significant losses, we incurred significant bank debt and sold equity and debt
securities in private placements in the years 1997 through 2003. In June 2003 we
reached an agreement to restructure our debt with Bank Hapoalim B.M. and Bank
Leumi Le-Israel B.M. that significantly improved our financial position. We may
need to raise additional funds for a number of uses, including:
o working capital and operating activities;
o implementing marketing and sales activities for our products;
o maintaining and expanding research and development programs;
o hiring additional qualified personnel; and
o supporting an increased level of operations.
We may not be able to obtain additional funds on acceptable terms or at
all. If we cannot raise needed funds on acceptable terms, we may be required to
delay, scale back or eliminate some aspects of our operations and we may not be
able to:
o develop new products;
o enhance our existing products;
o remain current with evolving industry standards;
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o fulfill our contractual obligations;
o take advantage of future opportunities;
o respond to competitive pressures or unanticipated requirements;
or
o retain our listing on the Nasdaq SmallCap Market.
If adequate funds are not available to us, our business, results of
operations and financial condition will be materially and adversely affected.
Any equity or debt financings, if available at all, may cause dilution to our
then-existing shareholders and may increase our financing expenses. If
additional funds are raised through the issuance of equity securities, the net
tangible book value per share of our ordinary shares would decrease and the
percentage ownership of then current shareholders would be diluted.
We cannot assure you that our shareholders or our banks will continue to provide
sufficient funds to finance our operations.
During the four years ended December 31, 2003, we relied predominately
on our principal shareholders and to a lesser degree on new investors to provide
us with working capital. During this period, they provided us with $13.1 million
in equity capital, convertible debt and loans. In June 2003, we also reached an
agreement with Bank Hapoalim B.M. and Bank Leumi Le Israel B.M., or the Banks to
restructure $3.451 million of our debt to them. Pursuant to the agreement, we
paid the Banks $1.1 million on account of our debt to them and they forgave $1.1
million in debt and agreed to accept warrants to purchase 3,781,995 of our
ordinary shares, exercisable at par value per share, in lieu of $1.251 million
of debt. We cannot assure you that our shareholders or Banks will continue to
provide us with funds when requested, and that such funds, if any, will be
sufficient to finance our operations. The failure of our principal shareholders
or other investors to provide us with the necessary financing may result in a
significant scaling back or elimination of some aspects of our operations.
Our growth strategy is based on our forming close business relationships and
cooperation with major aerospace corporations; should these relationships not
materialize into significant agreements or existing contracts fail to be
profitably implemented, we may not be able to implement our growth strategy.
In line with our growth strategy, we have entered into memoranda of
understanding and other co-operation agreements with Smiths Electronic Systems
and Lockheed Martin Aerospace to increase our penetration into the aviation
market. We are currently investing and intend to continue to invest significant
resources to develop these relationships. Should our relationships fail to
materialize into significant agreements or should we fail to work efficiently
with such parties, we may lose sales and marketing opportunities and our
business, results of operations and financial condition could be adversely
affected.
6
Competition in the market for automated test equipment and avionics equipment is
intense and we may be unable to achieve profitability.
The market for our products is highly competitive, and we may not be
able to compete effectively in our market. Our principal competitors in the
automated test equipment market are J.C. AIR, Inc., Aerospatiale Avionique and
Avtron. Our principal competitors in the avionics market are Harris, Rockwell
Collins, Honeywell, Elbit Systems Ltd., Israeli Aircraft Industries, R.S.L. Ltd.
and Elisra Systems Ltd. We expect to continue to face competition from these and
other competitors. Most, if not all, of our competitors are far larger, have
substantially greater resources including financial, technological, marketing
and distribution capabilities, and enjoy greater market recognition than we
have. These competitors may be able to achieve greater economies of scale and
may be less vulnerable to price competition than us. We may not be able to offer
our products as part of integrated systems to the same extent as our competitors
or successfully develop or introduce new products that are more cost effective
or offer better performance than those of our competitors. Failure to do so
could adversely affect our business, financial condition and results of
operations.
Our initiative of providing manufacturing services may not succeed, and as a
result, we may be unable to achieve profitability in our Beit-Shean production
facility and may be forced to shut down its operations.
In June 2000, we began to provide manufacturing services to original
equipment manufacturers in Israel and the United States, using the manufacturing
capabilities of our Beit-Shean plant. The market for our manufacturing services
is highly competitive and we may not be able to compete effectively in this
market. The cost of labor and the efficiency of the production equipment and
production processes are crucial to our success in this market. Consequently,
should we fail to maintain low labor costs, enhance our production equipment and
develop new and more efficient production methods, we may have to shut down the
operations of our Beit-Shean plant, which may harm our competitiveness and could
adversely affect our business, results of operations and financial condition.
Reduction in military budgets worldwide may cause a reduction in our revenues,
which would adversely affect our business, operating results and financial
condition.
A significant portion of our revenues is derived from the sale of
products with military applications. These revenues, on a consolidated basis,
totaled approximately $9.6 million, or 78% of revenues in 2003, $6.9 million, or
66% of revenues, in 2002 and $3.1 million, or 37% of revenues, in 2001. The
military budgets of a number of countries may be reduced in the future. Declines
in military budgets may result in reduced demand for our products and
manufacturing services. This would result in reduction in our core business'
revenues and adversely affect our business, results of operations and financial
condition.
7
Sales of our products are subject to governmental procurement procedures and
practices; termination, reduction or modification of contracts with our
customers, and especially with the Government of Israel, or a substantial
decrease in our customers' budgets may adversely affect our business, operating
results and financial condition.
Our military aviation products are sold primarily to government agencies
and authorities and government-owned companies, many of which have complex and
time-consuming procurement procedures. A long period of time often elapses from
the time we begin marketing a product until we actually sell that product to a
particular customer. In addition, our sales to government agencies, authorities
and companies are directly affected by these customers' budgetary constraints
and the priority given in their budgets to the procurement of our products.
Further, our business with the State of Israel and other governmental
entities is, in general, subject to delays in funding and performance of
contracts and the termination of contracts or subcontracts for convenience,
among others. The termination, reduction or modification of our contracts or
subcontracts with the Government of Israel in the event of change in
requirements, policies or budgetary constraints would have an adverse effect on
our business, operating results and financial condition.
If we do not receive the governmental approvals necessary for the export of our
products, our revenues may decrease. Similarly if our suppliers and partners do
not receive their government approvals necessary to export to us their products
or designs, our revenues might decrease and we may fail to implement our growth
strategy.
Under Israeli law, the export of certain of our products and know-how is
subject to approval by the Israeli Ministry of Defense. To initiate sales
proposals with regard to exports of our products and know-how and to export such
products or know-how, we must obtain permits from the Ministry of Defense. We
cannot assure you that we will receive in a timely manner all the required
permits for which we may apply in the future.
Similarly, under foreign laws the export of certain military products,
technical designs and spare parts require the prior approval of, or export
license from, such foreign governments. In order to maintain our third party
production, certain co-development activities and procurements required for the
performance of certain contracts, we must receive detailed technical designs,
products or products' parts samples from our strategic partners or suppliers. We
cannot assure you that we will be able to receive all the required permits
and/or licenses in a timely manner. Consequently, our revenues may decrease and
we may fail to implement our growth strategy.
8
We depend on sales to key customers and the loss of one or more of our key
customers would result in a loss of a significant amount of our revenues.
A significant portion of our revenues is derived from a small number of
customers. Our major customers during the three years ended December 31, 2003
were as follows:
Percentage of Revenues
---------------------------
2001 2002 2003
---- ---- ----
Smiths Electronic Systems 6% 34% 22%
The Boeing Company 16% 19% 14%
Israeli Ministry of Defense 12% 3% 11%
Israel Aviation Industries 2% 6% 12%
Portuguese Air Force - 4% 19%
Tarom Romanian Air Transport 17% 1% -
We anticipate that a significant portion of our future revenues will
continue to be derived from sales to a small number of customers. Further, in
accordance with our growth strategy, we are attempting to expand the number of
our customers while building long-term relationships with them. If our principal
customers do not continue to purchase products from us at current levels or if
such customers are not retained and we are not able to derive sufficient
revenues from sales to new customers to compensate for their loss, our revenues
would be reduced and adversely affect our business, financial condition and
results of operations.
We depend on a limited number of suppliers of components for our products and if
we are unable to obtain these components when needed, we would experience delays
in manufacturing our products and our financial results could be adversely
affected.
We acquire most of the components for the manufacturing of our products
from a limited number of suppliers and subcontractors, most of whom are located
in Israel and the United States. Certain of these suppliers are currently the
sole source of one or more components upon which we are dependent. Suppliers of
some of the components for manufacturing require us to place orders with
significant lead-time to assure supply in accordance with our manufacturing
requirements. Inadequacy of operating funds may cause us to delays placement of
such orders and may result in delays in supply. Delays in supply may
significantly hurt our ability to fulfill our contractual obligations and may
significantly hurt our business and result of operations. We cannot assure you
that we will be able to continue to obtain such components from these suppliers
on satisfactory commercial terms. Temporary disruptions of our manufacturing
operations would ensue if we were required to obtain components from alternative
sources, which may have an adverse effect on our financial results.
We rely on the airline industry and the continued financial crises in this
industry adversely affect our sales.
The airline industry is an important market for our automated test
equipment products and product support services. Our ability to achieve growth
and profitability in this market depends in great measure on the economic
condition of the commercial aviation industry. Since 2001, and especially
following the tragic events of September 11, 2001, the airline industry has
suffered from economic decline that caused the
9
bankruptcy of several airlines and imposed financial constraints on the entire
industry. As a result of these conditions, the sales of our automated test
equipment products have materially decreased. The continuance of the crisis in
the commercial aviation industry will adversely affect our business, financial
condition and results of operations.
Rapid technological changes may adversely affect the market acceptance of our
products.
The avionics market in which we compete is subject to technological
changes, introduction of new products, change in customer demands and evolving
industry standards. Our future success will depend upon our ability to keep pace
with technological developments and to timely address the increasingly
sophisticated needs of our customers by supporting existing and new technologies
and by developing and introducing enhancements to our current products and new
products. We cannot assure you that we will be successful in developing and
marketing enhancements to our products that will respond to technological
change, evolving industry standards or customer requirements; that we will not
experience difficulties that could delay or prevent the successful development,
introduction and sale of such enhancements; or that such enhancements will
adequately meet the requirements of the market and achieve any significant
degrees of market acceptance. If release dates of our new products or
enhancements are delayed or, if when released, they fail to achieve market
acceptance, our business, operating results and financial condition would be
materially adversely affected.
We may encounter difficulties with our international operations and sales.
While our principal executive offices are located in Israel, 74% of our
sales in 2003, 86% of our sales in 2002 and 76% of our sales in 2001 were
exports. This subjects us to many risks inherent in international business,
including:
o limitations and disruptions resulting from the imposition of
government controls;
o changes in regulatory requirements;
o export license requirements;
o economic or political instability;
o trade restrictions;
o changes in tariffs;
o currency fluctuations;
o longer receivable collection periods and greater difficulty in
accounts receivable collection;
o greater difficulty in safeguarding intellectual property;
o difficulties in managing overseas subsidiaries and international
operations; and
10
o potential adverse tax consequences.
We cannot assure you that we will be able to sustain or increase
revenues from international operations or that we will not encounter significant
difficulties in connection with the sale of our products in international
markets or that one or more of these factors will not have a material adverse
effect on our future revenues and, as a result, our business, operating results
and financial condition.
Currency exchange rate fluctuations in the world markets in which we conduct
business could have a material adverse effect on our business, results of
operations and financial condition.
We may be adversely affected by fluctuations in currency exchange rates.
While our revenues are generally denominated in U.S. dollars, a significant
portion of our expenses is incurred in NIS. We do not currently engage in any
currency hedging transactions intended to reduce the effect of fluctuations in
foreign currency exchange rates on our results of operations. If we were to
determine that it was in our best interests to enter into any hedging
transactions in the future, there can be no assurance that we will be able to do
so or that such transactions, if entered into, will materially reduce the effect
of fluctuations in foreign currency exchange rates on our results of operations.
In addition, if for any reason exchange or price controls or other restrictions
on the conversion of foreign currencies into NIS were imposed, our business
could be adversely affected. There can be no assurance such fluctuations in the
future will not have a material adverse effect on revenues from international
sales, and consequently, on our business, operating results and financial
condition.
We are dependent on our senior management and key personnel, in particular
Herzle Bodinger, our president and chairman of the board, whose loss would
adversely affect our business.
Our future success depends in large part on the continued services of
our senior management and key personnel. In particular, we are dependent on the
services of Herzle Bodinger, our chairman and president. We do not carry key
person life insurance on our senior management or key personnel. Any loss of the
services of Herzle Bodinger, other members of senior management or other key
personnel could negatively and materially affect our business.
Our proprietary technology is difficult to protect and unauthorized use of our
proprietary technology by third parties may impair our ability to compete
effectively.
Our success and ability to compete largely depends upon protecting our
proprietary technology. We rely on a combination of trade secrets, copyright law
and confidentiality, non-disclosure and assignment-of-inventions agreements to
protect our proprietary technology. Except for a patent that relates to our ACE
system, we do not have any patents.
11
Our products may infringe on the intellectual property rights of others.
Third parties may assert infringement claims against us or claims that
we have violated a patent or infringed on a copyright, trademark or other
proprietary right belonging to them. In addition, any infringement claim, even
one without merit, could result in the expenditure of significant financial and
managerial resources to defend.
We may not be able to obtain title to the land and buildings of our Chinese
subsidiary and may be required to initiate litigation in order to enforce our
rights to receive title to such properties.
Beijing Huarui Aircraft Components Maintenance and Services Co., Ltd. or
CACS, our Chinese subsidiary, conducts its business in an approximately 16,000
square foot facility in Beijing that includes offices and test and repair
facilities. The land for this facility was leased by Beijing Tianzu Forestry
Company, or Tianzu, the minority shareholder in CACS, from the Chinese
government for 30 years. Under a joint venture agreement, and in consideration
for its equity investment in CACS, Tianzu granted CACS usage rights in the land,
constructed the buildings and granted CACS the ownership of these buildings.
However, the transfer of the title to the land and the buildings has not been
completed, which may prevent the disposition of these assets should CACS desire
to do so. Although Tianzu is legally obligated to complete such transfer of
title to the land and the buildings, we can not guarantee that such transfer
will be completed, or that we will not be required to initiate litigation in
order to enforce our rights to receive title to the land and buildings.
Risk Factors Related to Our Ordinary Shares
Our share price has been volatile in the past and may decline in the future.
Our ordinary shares have experienced significant market price and volume
fluctuations in the past and may experience significant market price and volume
fluctuations in the future in response to factors such as the following, some of
which are beyond our control:
o quarterly variations in our operating results;
o operating results that vary from the expectations of securities
analysts and investors;
o changes in expectations as to our future financial performance,
including financial estimates by securities analysts and
investors;
o announcements of technological innovations or new products by us
or our competitors;
o announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
o changes in the status of our intellectual property rights;
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o announcements by third parties of significant claims or
proceedings against us;
o additions or departures of key personnel;
o future sales of our ordinary shares;
o de-listing of our shares from the Nasdaq SmallCap Market; and
o stock market price and volume fluctuations.
Domestic and international stock markets often experience extreme price
and volume fluctuations. Market fluctuations, as well as general political and
economic conditions, such as a recession or interest rate or currency rate
fluctuations or political events or hostilities in or surrounding Israel, could
adversely affect the market price of our ordinary shares.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources both of which could have a material adverse effect on our business
and results of operations.
We may be delisted from the Nasdaq Stock Market if we fail to meet its listing
maintenance requirements.
Our shares have traded on the Nasdaq Stock Market since 1985 and on the
Nasdaq SmallCap Market since June 10, 2002. During periods of 2002 and 2003, we
were not in compliance with Nasdaq's continued listing requirements as our
shareholders' equity fell below the Nasdaq minimum requirement of $2.5 million.
As a result of our agreement with our Banks, we achieved compliance, and in
November 2003, a Nasdaq Listing Qualification Panel issued a decision to
continue the listing of our shares on the Nasdaq SmallCap Market. However, the
panel required us to timely file reports with the SEC and Nasdaq evidencing that
our shareholders' equity as of December 31, 2003 and June 30, 2004 exceeds $2.5
million. While we met this requirement as of December 31, 2003, we cannot assure
you that our shareholders' equity will continue to be greater than $2.5 million
or that we will be able to satisfy the other listing maintenance requirements.
In the event we incur losses in the future, we would be required to raise
additional capital in order to maintain our listing on the Nasdaq SmallCap
Market. Should we fail to raise the necessary capital in order to satisfy such
requirements, our ordinary shares may be delisted from the Nasdaq SmallCap
Market and transferred to the OTC Bulletin Board.
We do not intend to pay dividends.
We have never declared or paid any cash dividends on our ordinary
shares. We currently intend to retain future earnings, if any, to finance
operations and expand our business and, therefore, do not expect to pay any
dividends in the foreseeable future.
13
Risks Relating to Our Location in Israel
Conducting business in Israel entails special risks.
We are incorporated under the laws of, and our executive offices,
manufacturing plant and research and development facilities are located in, the
State of Israel. Although most of our sales are made to customers outside
Israel, we are nonetheless directly affected by the political, economic and
military conditions affecting Israel. Specifically, we could be adversely
affected by any major hostilities involving Israel, a full or partial
mobilization of the reserve forces of the Israeli army, the interruption or
curtailment of trade between Israel and its present trading partners, or a
significant downturn in the economic or financial condition of Israel.
Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors, and a
state of hostility, varying from time to time in intensity and degree, has led
to security and economic problems for Israel. Since September 2000, there has
been a marked increase in violence, civil unrest and hostility, including armed
clashes, between the State of Israel and the Palestinians, and acts of terror
have been committed inside Israel and against Israeli targets in the West Bank
and Gaza. There is no indication as to how long the current hostilities will
last or whether there will be any further escalation. Any further escalation in
these hostilities or any future armed conflict, political instability or
violence in the region may have a negative effect on our business condition,
harm our results of operations and adversely affect our share price.
Furthermore, there are a number of countries that restrict business with Israel
or Israeli companies. Restrictive laws or policies of those countries directed
towards Israel or Israeli businesses may have an adverse impact on our
operations, our financial results or the expansion of our business.
Our results of operations may be negatively affected by the obligation of our
personnel to perform military service.
Many of our executive officers and employees in Israel are obligated to
perform up to 36 days, depending on rank and position, of military reserve duty
annually and are subject to being called for active duty under emergency
circumstances. If a military conflict or war arises, these individuals could be
required to serve in the military for extended periods of time. Our operations
could be disrupted by the absence for a significant period of one or more of our
executive officers or key employees or a significant number of other employees
due to military service. Any disruption in our operations could adversely affect
our business.
The economic conditions in Israel have not been stable in recent years.
In recent years Israel has been going through a period of recession in
economic activity, resulting in low growth rates and growing unemployment. Our
operations could be adversely affected if the economic conditions in Israel
continue to deteriorate. In addition, due to significant economic measures
proposed by the Israeli Government, there have been several general strikes and
work stoppages in 2003 and 2004, affecting banks, airports and ports. These
strikes have had an adverse effect on the Israeli economy and on business,
including our ability to deliver products to our customers. Following the
passage by the Israeli Parliament of laws to implement the economic
14
measures, the Israeli trade unions have threatened further strikes or
work-stoppages, and these may have a material adverse effect on the Israeli
economy and on us.
We may be adversely affected if the rate of inflation in Israel exceeds the rate
of devaluation of the NIS against the U.S. dollar.
In 2003 approximately 25% of our expenses were in U.S. dollars or U.S.
dollar-linked NIS, in 2002 approximately 39% of our expenses were in U.S.
dollars or U.S. dollar-linked NIS and in 2001 approximately 45% of our expenses
were in U.S. dollars or U.S. dollar-linked NIS. In each of these years,
virtually all our remaining expenses were in unlinked NIS. Our expenses that are
denominated in U.S. dollars or paid in Israeli currency linked to the U.S.
dollar-NIS exchange rate are influenced by the extent to which any inflation in
Israel is not offset (or is offset on a lagging basis) by the devaluation of the
NIS in relation to the U.S. dollar. In 1998, 2001 and 2002 the rate of
devaluation of the NIS against the dollar exceeded the rate of inflation in
Israel, which benefited us. In 1999 and 2000 the rate of inflation exceeded the
rate of devaluation of the NIS against the U.S. dollar. In 2003 the rate of
inflation was negative and the NIS was revaluated vis-a-vis the dollar. These
changes, as well as the recent world-wide devaluation of the U.S. dollar, have
affected our operations, financial condition and results of operations by
decreasing the NIS equivalents of our U.S denominated revenues and increasing
the U.S. dollar equivalents of our NIS denominated expenses. We cannot assure
you that we will not be materially adversely affected in the future if the rate
of inflation in Israel exceeds the devaluation of the NIS against the U.S.
dollar or if the timing of this devaluation lags behind increases in inflation
in Israel.
Service and enforcement of legal process on us and our directors and officers
may be difficult to obtain.
Service of process upon our directors and officers and the Israeli
experts named herein, all of whom reside outside the United States, may be
difficult to obtain within the United States. Furthermore, since substantially
all of our assets, all of our directors and officers and the Israeli experts
named in this annual report are located outside the United States, any judgment
obtained in the United States against us or these individuals or entities may
not be collectible within the United States.
There is doubt as to the enforceability of civil liabilities under the
Securities Act and the Securities Exchange Act in original actions instituted in
Israel. However, subject to certain time limitations and other conditions,
Israeli courts may enforce final judgments of United States courts for
liquidated amounts in civil matters, including judgments based upon the civil
liability provisions of those Acts.
Provisions of Israeli law may delay, prevent or make difficult an acquisition of
us, which could prevent a change of control and therefore depress the price of
our shares.
Provisions of Israeli corporate and tax law may have the effect of
delaying, preventing or making more difficult a merger with, or other
acquisition of, us. This could cause our ordinary shares to trade at prices
below the price for which third parties might be willing to pay to gain control
of us. Third parties who are otherwise willing to
15
pay a premium over prevailing market prices to gain control of us may be unable
or unwilling to do so because of these provisions of Israeli law.
Your rights and responsibilities as a shareholder will be governed by Israeli
law and differ in some respects from the rights and responsibilities of
shareholders under U.S. law.
We are incorporated under Israeli law. The rights and responsibilities
of holders of our ordinary shares are governed by our memorandum of association,
our articles of association and by Israeli law. These rights and
responsibilities differ in some respects from the rights and responsibilities of
shareholders in typical U.S. corporations. In particular, a shareholder of an
Israeli company has a duty to act in good faith toward the company and other
shareholders and to refrain from abusing his power in the company, including,
among other things, in voting at the general meeting of shareholders on certain
matters.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale by the selling
shareholders of our ordinary shares. We will, however, receive the proceeds from
the exercise of the warrants issued to selling shareholders if and when they are
exercised. We have agreed to bear all expenses relating to the registration of
the ordinary shares registered pursuant to the registration statements of which
this prospectus is a part.
MARKET PRICE DATA
Our ordinary shares trade on the Nasdaq SmallCap Market under the symbol
RADIF. The following table sets forth, for the periods indicated, the range of
high and low sales prices of the ordinary shares on the Nasdaq SmallCap Market:
2002 High Low
---- ----- -----
First Quarter................................. $1.8 $1.55
Second Quarter................................ 1.63 0.6
Third Quarter................................. 0.72 0.6
Fourth Quarter................................ 0.64 0.54
2003
----
First Quarter................................. $0.68 $0.57
Second Quarter................................ 1.04 0.41
Third Quarter................................. 0.76 0.59
Fourth Quarter................................ 2.37 0.53
2004
----
First Quarter................................. $2.08 $1.31
Second Quarter (through May 17, 2004)......... 4.78 1.30
16
SELECTED CONSOLIDATED FINANCIAL DATA
We have derived the following selected consolidated financial data as of
December 31, 2002 and 2003 and for each of the years ended December 31, 2001,
2002 and 2003 from our consolidated financial statements which are prepared in
accordance with U.S. generally accepted accounting principles and have been
audited in accordance with U.S. generally accepted auditing standards by Kost
Forer Gabbay & Kasierer, a Member of Ernst & Young Global and Luboshitz
Kasierer, an affiliate member of Ernst & Young International, reports with
respect to such consolidated financial statements appear in our Annual Report on
Form 20-F for the year ended December 31, 2003 incorporated by reference herein.
Selected consolidated financial data as of December 31, 1999, 2000 and 2001 and
for each of the years ended December 31, 1999 and 2000 have been derived from
other audited consolidated financial statements prepared in accordance with U.S.
generally accepted accounting principles and generally accepted auditing
standards. The selected consolidated financial data set forth below should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated financial statements
with respect to the three years ended December 31, 2003 and as at December 31,
2002 and 2003 contained in our 2003 Annual Report on Form 20-F which is
incorporated herein by reference.
17
Year Ended December 31,
-----------------------------------------------------
1999 2000 2001 2002 2003
------- ------ ------ ------- -------
(U.S. dollars in thousands, except per share data)
INCOME STATEMENT DATA:
Revenues $10,373 $3,816 $8,342 $10,399 $12,315
Cost of revenues 12,707 5,307 7,416 9,223 9,592
------ ----- ----- ----- -----
Gross profit (loss) (2,334) (1,491) 926 1,176 2,723
Research and development expenses 428 730 534 122 -
Marketing, selling, general and
administrative expenses 4,316 3,612 3,617 3,809 2,698
Operating income (loss) from
continuing operations (7,078) (5,833) (3,225) (2,035) 25
Financial income (expenses), net (1,141) (861) (210) (364) 708
Other income (expenses), net 505 563 (30) (290) (2)
Operating income (loss) (7,714) (6,131) (3,465) (2,689) 731
Equity in loss of affiliated company (101) - - - -
Minority interest in losses of subsidiary 292 32 96 206 27
Income (loss) from continuing
operations (7,523) (6,099) (3,369) (2,483) 758
Gain from disposal of discontinued
segment (net of tax) 306 - - - -
Net income (loss) $(7,217) $(6,099) $(3,369) $(2,483) $758
======= ======= ======= ======= ====
Basic net income (loss) per share
from continuing operations $(0.77) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Diluted net income (loss) per share
from continuing operations $(0.77) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Basic income per share from
discontinued operations $ 0.03 $ - $ - $ - $ -
====== === === === ===
Diluted net income per share from
discontinued operations $ 0.03 $ - $ - $ - $ -
====== === === === ===
Basic net earnings (loss) per share $(0.74) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Diluted net earnings (loss) per share $(0.74) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Weighted average number of shares used
to compute basic net income(loss) per
share 9,722 13,305 13,817 16,555 18,511
===== ====== ====== ====== ======
Weighted average number of shares used
to compute diluted net income (loss)
per share 9,722 13,305 13,817 16,555 19,704
===== ====== ====== ====== ======
As of December 31,
-----------------------------------------------------
1999 2000 2001 2002 2003
------- ------ ------ ------- -------
(U.S. dollars in thousands)
BALANCE SHEET DATA:
Working capital deficiency.............. $(8,419) $(8,668) $(9,446) $(8,055) $(2,716)
Total assets............................ 19,918 18,874 16,332 14,607 14,549
Short-term credits and current
maturities of long-term debt............ 5,378 5,624 5,920 5,697 1,123
Long-term debt, net of current
maturities.............................. 811 8 - - 1,220
Shareholders' equity.................... 4,329 4,069 700 485 2,878
18
SELLING SHAREHOLDERS
The selling shareholders named in this prospectus are selling an
aggregate of 19,956,226 ordinary shares of which 6,288,881 are issued and
outstanding and 13,667,345 are issuable upon the exercise of warrants. The
19,956,226 ordinary shares offered hereby are being sold by selling shareholders
that acquired their shares in private placements effected by us in February
1999, June 1999, June 2002 and by two of our banks that acquired their warrants
in an agreement we entered into on September 24, 2003. We will not receive any
proceeds from the sale of the ordinary shares by the selling shareholders. We
will, however, receive the proceeds from the exercise of the warrants, if and
when they are exercised.
The table below sets forth:
o the names of the selling shareholders;
o the number of ordinary shares beneficially owned by the selling
shareholders, as of May 2, 2004;
o the percentage of Rada's outstanding ordinary shares beneficially owned by
each of the selling shareholders as of May 2, 2004;
o the number of ordinary shares that each selling shareholder may offer under
this prospectus;
o the number of ordinary shares that each selling shareholder will
beneficially own assuming the sale of all of the ordinary shares covered by
this prospectus; and
o the percentage of Rada's outstanding ordinary shares that each selling
shareholder will beneficially own assuming the sale of all of the ordinary
shares covered by this prospectus.
Ordinary Shares Ordinary Shares
Beneficially Owned Prior Beneficially Owned
Name of Beneficial Owner to this Offering After this Offering
Ordinary shares,
Percent of par value 0.005 Percent of
total shares NIS per share, total
outstanding offered pursuant shares
Number(1) (2) to this prospectus Number outstanding
---------- ------------ ------------------ --------- -----------
Howard P.l. Yeung
(3)(4)(5)(6)............... 20,407,861 76.1% 12,836,116 7,571,745 33.9%
Horsham Enterprises Ltd.
(5)(6)..................... 1,350,086 7.2% 608,400 741,686 3.99%
Ben-Zion Gruber (7)(8)....... 204,082 1.1% 204,082 - -
The Shaar Fund Ltd. (9)(10).. 816,326 4.4% 816,326 - -
Chaim Hershkovitz (11)(12)... 408,164 2.2% 408,164 - -
Henry Lefkowitz (13)(14)..... 945,087 5.1% 918,366 26,721 *
Paul Schwarz (15)............ 430,000 2.3% 430,000 - -
Artur Weinberger (16)(17).... 102,040 0.6% 102,040 - -
Ralph Rizziello (18)(19)..... 102,040 0.6% 102,040 - -
Arnold Fishman (20)(21)...... 183,674 1.0% 183,674 - -
Dina Cohen (22).............. 51,200 0.3% 51,200 - -
Joseph Gruber (23)........... 26,531 0.1% 26,531 - -
Yekotel Zeit (24)(25)........ 765,305 4.1% 765,305 - -
Zvi Oren (26) (27) .......... 203,982 1.1% 203,982 - -
Yisrael Meir Deutsch (28)(29) 600,000 3.2% 600,000 - -
Maury Greenspan (30) (31) 600,000 3.2% 600,000 - -
19
Bank Leumi Le-Israel
B.M.(32)(33)............... 660,000 3.6% 660,000 - -
Bank Hapoalim B.M.(34)(35)... 440,000 2.4% 440,000 - -
--------------
* Less than 1%
(1) Ordinary shares beneficially owned include shares that may be acquired
pursuant to options and warrants that are currently exercisable or which
will first become exercisable within 60 days of the date of this
prospectus.
(2) Based on 18,548,633 ordinary shares outstanding prior to this offering.
Ordinary shares deemed beneficially owned by virtue of the right of any
person or group to acquire such shares within 60 days of the date of this
prospectus including by the exercise of warrants, are treated as
outstanding only for purposes of determining the percent owned by such
person or group.
(3) Includes 8,265,306 ordinary shares issuable upon the exercise of currently
exercisable warrants issued to Mr. Howard P.L. Yeung.
(4) Includes 3,781,991 ordinary shares issuable to Mr. Howard P.L. Yeung in
the event he acquires warrants from Bank Leumi le-Israel B.M. and Bank
Hapoalim B.M. by exercising a call option granted to him by such banks
pursuant to an option agreement dated September 24, 2003.
(5) The address of Mr. Howard P.L. Yeung, Mr. Kenneth Yeung and Horsham
Enterprises Ltd. is 2202 Kodak Houge II, 39 Healthy Street, North Point,
Hong Kong.
(6) Based upon, information received from Mr. Yeung the 1,350,086 shares are
held by Horsham Enterprises Ltd., a corporation incorporated in the
British Virgin Islands. Messrs. Howard P.L. Yeung and his brother Kenneth
Yeung are the beneficial owners, in equal shares, of Horsham Enterprises
Ltd. Accordingly, Messrs. Yeung may be deemed to be the beneficial owners
of the ordinary shares held by Horsham Enterprises Ltd.
(7) Includes 204,082 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(8) The address of Mr. Gruber is 11 Hagefen Street, Efrat 90435, Israel.
(9) Includes 816,326 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(10) The address of the Shaar Fund Ltd. is 9 Kaya Flamboyan Street, P. O. Box
812, Curocao, Netherlands Antilles. Inter-Caribbean Services Ltd., a
company incorporated in the British Virgin Islands and the fully-owned
subsidiary of Citco Fund Services, is the sole director of the Shaar Fund,
an open-end fund. Shaar Fund Advisory Services Ltd., a company
incorporated in the British Virgin Islands, has the sole voting and
dispositive power regarding the shares beneficially owned by Citco Fund
Services. Such voting and dispositive power is exercised on behalf of
Shaar Fund Advisory Services by Wim Langenvild, who is the managing
director of such company. Accordingly, Shaar Fund Advisory Services may be
deemed to be the beneficial owner of the ordinary shares held by the Shaar
Fund.
(11) Includes 408,164 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(12) The address of Mr. Chaim Hershkovitz is 22 Admor Mikotzic, Bnei Brak,
Israel.
(13) Includes 612,244 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(14) The address of Mr. Henry Lefkowitz is 1927 52nd Street, Brooklyn, New York
11204. Mr. Lefkowitz disclaims any beneficial interest in the ordinary
shares held by Mrs. Lefkowitz.
(15) The address of Mr. Paul Schwarz is 25 Agasi Street, Jerusalem 93877,
Israel.
(16) Includes 51,020 ordinary shares issuable upon the exercise of currently
exercisable warrants.
20
(17) The address of Mr. Artur Weinberger is c/o Schwarz, 25 Agasi Street,
Jerusalem 93877, Israel.
(18) Includes 51,020 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(19) The address of Mr. Ralph Rizziello is 37 East Union Bordentown, NJ, 08505.
(20) Includes 91,837 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(21) The address of Mr. Arnold Fishman 1564 49th Street, Brooklyn, NY 11219.
(22) The address of Mrs. Dina Cohen is 21 Harishonim Avenue, Moza Elit 90820,
Israel.
(23) The address of Mr. Joseph Gruber is Ben Zion Gruber, 11 Hagefen Street,
Efrat 90435, Israel.
(24) Includes 765,305 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(25) The address of Mr. Yekotel Zeit is 30 Reved Street, Bnei Brak, Israel.
(26) Includes 102,041 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(27) The address of Mr. Zvi Oren is 8 Dakar Street, Ramat Gan, Israel.
(28) Includes 600,000 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(29) The address of Mr. Yisrael Meir Deutsch is 10 Chai Taib, Jerusalem,
Israel.
(30) Includes 600,000 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(31) The address of Mr. Maury Greenspan is 52 Agassi Street, Jerusalem, Israel.
(32) Includes 660,000 ordinary shares issuable upon the exercise of currently
exercisable warrants.
(33) The address of Bank Leumi Le-Israel B.M. is 24-32 Yehuda Halevi Street,
Tel Aviv 65546, Israel.
(34) Includes 440,000 ordinary shares issuable upon the exercise of
currently exercisable warrants.
(35) The address of Bank Hapoalim B.M. is 50 Rothchild Street, Tel Aviv,
Israel.
PLAN OF DISTRIBUTION
We are registering the ordinary shares offered hereby on behalf of the
selling shareholders. As used herein, "selling shareholders" includes donees,
pledgees, transferees or other successors-in-interest selling shares received
after the date of this prospectus from a named selling shareholder as a gift,
pledge, partnership distribution or other transfer. All costs, expenses and fees
in connection with the registration of the shares offered by this prospectus
will be borne us, other than brokerage commissions and similar selling expenses,
if any, attributable to the sale of shares offered hereby which will be borne by
the selling shareholders. Sales of the shares offered hereby may be effected by
selling shareholders from time to time in one or more types of transactions
(which may include block transactions) on the Nasdaq SmallCap Market at
prevailing market prices, in the over-the-counter market, in negotiated
transactions, through publicly or privately negotiated put or call options
transactions relating to the shares offered hereby, through short sales of the
shares offered hereby (including the closing of any open short
21
position), or a combination of such methods of sale, at market prices prevailing
at the time of sale, or at negotiated prices. Such transactions may or may not
involve brokers or dealers. The selling shareholders have advised us that they
have not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of the shares offered hereby by the selling shareholders.
The selling shareholders may enter into hedging transactions with regard
to the shares offered hereby. In connection with such transactions the
counterparties to such transactions may engage in short sales of the shares
offered hereby or of securities convertible into or exchangeable for such shares
in the course of hedging positions they assume with selling shareholders. The
selling shareholders may also enter into other transactions which require the
delivery of the shares offered by this prospectus, which shares such
counterparties may resell pursuant to this prospectus (as amended or
supplemented, if necessary, to reflect such transaction).
The selling shareholders may effect these transactions by selling the
shares offered hereby directly to purchasers or to or through broker-dealers,
which may act as agents or principals. Such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
selling shareholders and/or the purchasers of the shares offered hereby for whom
such broker-dealers may act as agents or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer might be in excess of
customary brokerage commissions).
The selling shareholders and any broker-dealers that act in connection
with the sale of the shares offered hereby might be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, and any commissions
received by such broker-dealers and any profit on the resale of the shares
offered hereby sold by them while acting as principals might be deemed to be
underwriting discounts or commissions under the Securities Act. We have agreed
to indemnify each selling shareholder against certain liabilities, including
liabilities arising under the Securities Act. The selling shareholders may agree
to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares offered hereby against certain
liabilities, including liabilities arising under the Securities Act.
Because selling shareholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling shareholders
will be subject to the prospectus delivery requirements of the Securities Act.
We have informed the selling shareholders that the anti-manipulative provisions
of Regulation M promulgated under the Exchange Act may apply to their sales in
the market.
Selling shareholders also may resell all or a portion of the shares
offered hereby in open market transactions in reliance upon Rule 144 under the
Securities Act, provided they meet the criteria and conform to the requirements
of Rule 144 or another exemption under the Securities Act.
Upon our being notified by a selling shareholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
offered hereby through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplement to this
prospectus will be filed, if required, pursuant to Rule 424(b) under the
Securities Act, disclosing:
22
o the name of each such selling shareholder and of the
participating broker-dealer(s);
o the number of shares involved;
o the initial price at which such shares were sold;
o the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable;
o that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in
this prospectus; and
o other facts material to the transaction.
In addition, upon our being notified by a selling shareholder that a
donee, pledgee, transferee or other successor-in-interest intends to sell more
than 500 shares, a supplement to this prospectus will be filed.
FOREIGN EXCHANGE CONTROLS AND OTHER LIMITATIONS
The Israeli Currency Control Law, 1978 imposes certain limitations
concerning foreign currency transactions and transactions between Israeli and
non-Israeli residents, which limitations may be regulated or waived by the
Controller of Foreign Exchange at the Bank of Israel, through "general" and
"special" permits. In May 1998, a new "general permit" was issued pursuant to
which substantially all transactions in foreign currency are permitted. Any
dividends or other distributions paid in respect of ordinary shares and any
amounts payable upon the dissolution, liquidation or winding up of the affairs
of Rada, as well as the proceeds of any sale in Israel of Rada's securities to
an Israeli resident are freely repatriable into non-Israeli currencies at the
rate of exchange prevailing at the time of conversion, provided that Israeli
income tax has been paid on (or withheld from) such payments. Because exchange
rates between the NIS and the U.S. dollar fluctuate continuously, U.S.
shareholders will be subject to any such currency fluctuation during the period
from when such dividend is declared through the date payment is made in U.S.
dollars.
The State of Israel does not restrict in any way the ownership or voting
of ordinary shares by non-residents of Israel, except with respect to subjects
of countries that are in a state of war with Israel.
EXPERTS
Kost Forer Gabbay & Kasierer, a Member of Ernst & Young Global, has
audited our consolidated financials statements at December 31, 2003 and for the
year ended December 31, 2003, and Luboshitz Kasierer, an Affiliate member of
Ernst & Young International independent auditors, has audited our consolidated
financials statements at December 31, 2001 and 2002, and for each of the two
years in the period ended December 31, 2002, as set forth in their reports. We
have incorporated by reference our consolidated financial statements elsewhere
in this prospectus and in the Registration Statement in reliance on the Kost
Forer Gabbay & Kasierer and Luboshitz Kasierer reports, given on their authority
as experts in accounting and auditing.
23
LEGAL MATTERS
Certain legal matters in connection with the registration of the
ordinary shares hereunder with respect to Israeli law will be passed upon for us
by S. Friedman & Co., Advocates, Tel-Aviv, Israel, our Israeli counsel.
MATERIAL CHANGES
Except as otherwise described our Annual Report on Form 20-F for the
fiscal year ended December 31, 2003 and in our Reports on Form 6-K filed under
the Exchange Act and incorporated by reference herein, no reportable material
changes have occurred since December 31, 2003.
WHERE YOU CAN BEST FIND MORE INFORMATION; INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
This prospectus is a part of a registration statement on Form F-3,
Registration No. 333- ________ , which we filed with the Securities and Exchange
Commission under the Securities Act of 1933. As permitted by the rules and
regulations of the SEC, this prospectus does not contain all of the information
contained in the registration statement and the exhibits and schedules thereto.
As such we make reference in this prospectus to the registration statement and
to the exhibits and schedules thereto. For further information about us and
about the securities we hereby offer, you should consult the registration
statement and the exhibits and schedules thereto. You should be aware that
statements contained in this prospectus concerning the provisions of any
documents filed as an exhibit to the registration statement or otherwise filed
with the SEC are not necessarily complete, and in each instance reference is
made to the copy of such document so filed. Each such statement is qualified in
its entirety by such reference.
We file annual and special reports and other information with the
Securities and Exchange Commission (Commission File Number 0-15375). These
filings contain important information which does not appear in this prospectus.
For further information about us, you may read and copy these filings at the
SEC's public reference room at 450 Fifth Street, N.W, Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330, and may obtain copies of our filings from the
public reference room by calling (202) 942-8090.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to other documents which we have filed or will file with the SEC.
We are incorporating by reference in this prospectus the documents listed below
and all amendments or supplements we may file to such documents, as well as any
future filings we may make with the SEC on Form 20-F under the Exchange Act
before the time that all of the securities offered by this prospectus have been
sold or de-registered.
o Our Annual Report on Form 20-F for the fiscal year ended December
31, 2003;
24
o The description of our Ordinary Shares contained in our
Registration Statement on Form 8-A, including any amendment or
reports for the purpose of updating such description.
In addition, we may incorporate by reference into this prospectus our
reports on Form 6-K filed after the date of this prospectus (and before the time
that all of the securities offered by this prospectus have been sold or
de-registered) if we identify in the report that it is being incorporated by
reference in this prospectus.
Certain statements in and portions of this prospectus update and replace
information in the above listed documents incorporated by reference. Likewise,
statements in or portions of a future document incorporated by reference in this
prospectus may update and replace statements in and portions of this prospectus
or the above listed documents.
We shall provide you without charge, upon your written or oral request,
a copy of any of the documents incorporated by reference in this prospectus,
other than exhibits to such documents which are not specifically incorporated by
reference into such documents. Please direct your written or telephone requests
to Rada Electronic Industries Ltd. 7 Giborei Israel Street, Netanya 42504,
Israel. Attn: Elan Sigal, Chief Financial Officer, telephone number (972)(9)
892-1129. You may also obtain information about us by visiting our website at
www.rada.com. Information contained in our website is not part of this
prospectus.
We are an Israeli company and are a "foreign private issuer" as defined
in Rule 3b-4 under the Securities Exchange Act of 1934. As a result, (1) our
proxy solicitations are not subject to the disclosure and procedural
requirements of Regulation 14A under the Exchange Act, (2) transactions in our
equity securities by our officers and directors are exempt from Section 16 of
the Exchange Act, and (3) until November 4, 2002, we were not required to make,
and did not make, our SEC filings electronically, so that those filings are not
available on the SEC's Web site. However, since that date, we have been making
all required filings with the SEC electronically, and these filings are
available over the Internet at the SEC's Web site at http: // www.sec.gov.
ENFORCEABILITY OF CIVIL LIABILITIES
Service of process upon us and upon our directors and officers and the
Israeli experts named in this prospectus, most of whom reside outside the United
States, may be difficult to obtain within the United States. Furthermore,
because substantially all of our assets and substantially all of our directors
and officers are located outside the United States, any judgment obtained in the
United States against us or any of our directors and officers may not be
collectible within the United States.
We have been informed by our legal counsel in Israel, S. Friedman & Co.
Advocates, that there is doubt as to the enforceability of civil liabilities
under the Securities Act and the Exchange Act in original actions instituted in
Israel. However, subject to specified time limitations, Israeli courts may
enforce a United States final executory judgment in a civil matter including a
monetary or compensatory judgment in a non-civil matter, obtained after due
process before a court of competent jurisdiction according to the laws of the
state in which the judgment is given and the rules of private international law
currently prevailing in Israel, the laws of which do not prohibit the
enforcement of judgment of Israeli courts, provided that:
25
o the judgment is enforceable in the state in which it was given;
o adequate service of process has been effected and the defendant
has had a reasonable opportunity to present his arguments and
evidence;
o the judgment and the enforcement thereof are not contrary to the
law, public policy, security or sovereignty of the State of
Israel;
o the judgment was not obtained by fraud and does not conflict with
any other valid judgment in the same matter between the same
parties; and
o an action between the same parties in the same matter is not
pending in any Israeli court at the time the lawsuit is
instituted in the foreign court and the judgment is no longer
appealable and the judgment is executory in the country in which
it was given.
We have irrevocably appointed Rada Electronic Industries Inc. as our
agent to receive service of process in any action against us in the state and
federal courts sitting in the City of New York, Borough of Manhattan arising out
of this offering or any purchase or sale of securities in connection therewith.
If a foreign judgment is enforced by an Israeli court, it generally will
be payable in Israeli currency, which can then be converted into non-Israeli
currency and transferred out of Israel. The usual practice in an action before
an Israeli court to recover an amount in a non-Israeli currency is for the
Israeli court to render judgment for the equivalent amount in Israeli currency
at the rate of exchange in force on the date thereof, but the judgment debtor
may make payment in foreign currency. Pending collection, the amount of the
judgment of an Israeli court stated in Israeli currency ordinarily will be
linked to the Israeli consumer price index plus interest at the annual statutory
rate set by Israeli regulations prevailing at such time. Judgment creditors must
bear the risk of unfavorable exchange rates.
26
RADA ELECTRONIC INDUSTRIES LTD.
19,956,226 Ordinary Shares
----------------------------
PROSPECTUS
----------------------------
You should rely only on the information incorporated
by reference or provided in this prospectus. We have
not authorized anyone to provide you with different
information. We are not making any offer to sell or
buy any of the securities in any state where the
offer is not permitted. You should not assume that
the information in this prospectus is accurate as of
any date other than the date that appears below.
2004
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 8. Indemnification of Directors and Officers
The Companies Law provides that a company may not exonerate office
holders from liability for a breach of their duty of loyalty, but may exonerate
in advance office holders from their liability to the company, in whole or in
part, for a breach of their duty of care. Our articles of association provide
that, subject to any restrictions imposed by the Companies Law, we may enter
into an insurance contract providing coverage for the liability of any of our
office holders for:
o a breach of their duty of care to us or to another person;
o a breach of their duty of loyalty to us, provided that they acted
in good faith and had reasonable grounds to assume that their act
would not prejudice our interests; and
o a financial liability imposed upon them in favor of another
person for an act performed by them in their capacity as office
holders.
In addition, we may indemnify office holders against the following
expenses or liabilities imposed upon them in their capacity as office holders:
o a financial liability imposed on them in favor of another person
by any judgment, including a settlement or an arbitrator's award
approved by a court; and
o reasonable litigation expenses, including attorneys' fees,
incurred by such office holders or imposed upon them by a court,
in connection with proceedings instigated by us against them or
that are instigated on our behalf or by another person, or as a
result of a criminal charge from which they were acquitted or a
criminal charge in which they were convicted for a criminal
offense that does not require proof of intent.
The Companies Law provides that a company may not indemnify an office
holder nor enter into an insurance contract which would provide coverage for any
monetary liability incurred as a result of any of the following:
o a breach by an officer holder of their duty of loyalty, unless
the office holder acted in good faith and had a reasonable basis
to believe that the act would not prejudice the company;
o a breach by an office holder of their duty of care if such breach
was committed intentionally or recklessly;
o an act or omission with the intent to unlawfully derive a
personal benefit; or
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o a fine levied against the office holder as a result of a criminal
offense.
These provisions are specifically limited in their scope by the
Companies Law, which provides that a company may not indemnify an office holder,
nor enter into an insurance contract which would provide coverage for any
monetary liability incurred as a result of certain improper actions.
Pursuant to the Companies Law, indemnification of, and procurement of
insurance coverage for, our office holders must be approved by our audit
committee and our board of directors and, in specified circumstances, by our
shareholders.
We have indemnified our office holders to the fullest extent permitted
by law. We currently maintain a directors and officers liability insurance
policy with a per claim and aggregate coverage limit of $5.0 million.
Item 9. Exhibits
(a) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
3.1 Memorandum of Association of the Registrant*
3.2 Articles of Association of the Registrant*
4.1 Specimen of Ordinary Share Certificate*
4.2 Form of Warrant Certificate issued on June 30, 2002 to
subscribers for ordinary shares in the Registrant's
private placement of June 2002
4.3 Form of Warrant to Bank Hapoalim B.M. and Bank Leumi
Le-Israel B.M.**
5 Opinion of S. Friedman & Co., Advocates regarding
legality of the securities being registered
23.1 Consent of Kost Forer Gabbay & Kasierer, a Member of
Ernst & Young Global
23.2 Consent of Luboshitz Kasierer, an Affiliate member of
Ernst & Young International
23.3 Consent of S. Friedman & Co., Advocates (included in
Exhibit 5 hereto)
24 Power of Attorney (included in the signature page to the
Registration Statement)
-------------------
* Previously filed as an exhibit to the Annual Report on Form 20-F for the year
ended December 31, 2000 and incorporated herein by reference.
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** Previously filed as exhibit 10.11 to the Annual Report on Form 20-F for the
year ended December 31, 2002 and incorporated herein by reference.
Item 10. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii)To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, That paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the
Registrant pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bone fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(4) To file a post-effective amendment to the registration statement
to include any financial statements required by Item 8.A. of Form
20-F at the start of any
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delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3)
of the Act need not be furnished, provided that the Registrant
includes in the prospectus, by means of a post-effective
amendment, financial statements required pursuant to this
paragraph and other information necessary to ensure that all
other information in the prospectus is at least as current as the
date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial
statements and information required by Section 10(a)(3) of the
Act or Rule 3-19 of Regulation S-K if such financial statements
and information are contained in periodic reports filed with or
furnished to the Commission by the Registrant pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Form F-3.
(5) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act, may be permitted to directors, officers and
controlling persons of the Company, pursuant to the foregoing
provisions, or otherwise, the Company has been advised that in
the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it complies with all of
the requirements for filing on Form F-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Netanya, Israel, on May 18, 2004.
By: /s/ Herzle Bodinger
-------------------
Herzle Bodinger
Chairman of the Board of Directors and
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, each director and officer whose
signature appears below constitutes and appoints, Herzle Bodinger and/or Elan
Sigal, or either of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and re-substitution, to sign in any and all
capacities any and all amendments or post-effective amendments to this
registration statement on Form F-3 and to file the same with all exhibits
thereto and other documents in connection therewith with the Securities and
Exchange Commission, granting such attorneys-in-fact and agents, and each of
them, full power and authority to do all such other acts and execute all such
other documents as they, or any of them, may deem necessary or desirable in
connection with the foregoing, as fully as the undersigned might or could do in
person, hereby ratifying and confirming all that such attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed below by the following persons in the capacities
indicated on May 18, 2004.
Signature Title
/s/ Herzle Bodinger Chairman of the board and president
-------------------
Herzle Bodinger
/s/ Adar Azancot Chief executive officer
----------------
Adar Azancot
/s/ Elan Sigal Chief financial officer
---------------
Elan Sigal
/s/ Adrian Berg Director
----------------
Adrian Berg
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/s/ Asaf Agmon Director
---------------
Asaf Agmon
/s/ Roy Kui Chuen Chan Director
-----------------------
Roy Kui Chuen Chan
/s/ Ben Zion Gruber Director
--------------------
Ben Zion Gruber
/s/ Hava Snir Outside Director
--------------
Hava Snir
/s/ Zvi Tropp Outside Director
--------------
Zvi Tropp
Rada Electronic Industries Inc.
By: /s/ Herzle Bodinger Authorized Representative in the
------------------- United States
President, Rada Electronic
Industries Inc.
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