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, 2001
[ ] 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.
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(Exact Name of Registrant as Specified in Its Charter)
Israel N/A
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
24 Raoul Wallenberg Street, Tel Aviv 69719, Israel
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(Address of Principal Executive Offices)
972-3-645-5220
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(Registrant's Telephone Number, Including Area Code)
N/A
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(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, 2001 the Registrant had 19,567,015 Ordinary Shares, par value
NIS 0.1 per share, outstanding.
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 in the future 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
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Part I - Financial Information:
Item 1. Condensed Consolidated Balance Sheets as of June 30, 2001
and December 31, 2000........................................4
Condensed Consolidated Statements of Operations -
for the Three Months and Six Months
ended June 30, 2001 and 2000.................................5
Condensed Consolidated Statements of Cash Flows -
for the Six Months ended June 30, 2001 and 2000..............6
Notes to Condensed Consolidated Financial Statements............7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............10
Item 3. Quantitative and Qualitative Disclosure About Market Risk......16
Part II - Other Information:
Item 1. Legal Proceedings..............................................17
Item 2. Changes in Securities and Use of Proceeds......................17
Item 3. Defaults Upon Senior Securities................................18
Item 4. Submission of Matters to a Vote of Security Holders............18
Item 5. Other Information..............................................20
Item 6. Exhibits and Reports on Form 8-K...............................20
Signatures.....................................................21
3
PART I - FINANCIAL INFORMATION
RADVISION LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of U.S dollars, except share amounts)
June 30, December 31,
2001 2000
-------- ------------
Cash and cash equivalents $ 42,368 $ 41,617
Short-term investments 22,967 39,550
Trade receivables, net of allowance for
doubtful debts $1,400 (2000 - $577) 5,332 7,025
Other receivables and prepaid expenses 876 1,051
Inventories 2,003 4,956
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Total current assets 73,546 94,199
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Long-term investments 26,490 15,897
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Property and equipment, net 5,399 5,200
----- -----
Deposit with insurance companies 1,239 1,055
----- -----
Total assets $106,674 $116,351
======== ========
Current liabilities
Current maturities of long-term loans $ 38 $ 46
Trade payables 1,531 3,716
Other payables and accrued expenses 13,529 16,777
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Total current liabilities 15,098 20,539
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Long-term liabilities
Bank loans - 19
Accrued severance pay 1,877 1,448
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1,877 1,467
----- -----
Total liabilities 16,975 22,006
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Shareholders' equity
Ordinary shares of NIS 0.1 par value:
Authorized - 24,984,470 shares as of June 30,
2001 (2000 - 24,984,470); issued and
outstanding - 19,137,712 shares as of June 30,
2001 (2000 - 19,144,948 shares) 177 165
Additional paid-in capital 103,688 103,849
Treasury stock (2,677) -
Deferred compensation (463) (641)
Accumulated deficit (11,026) (9,028)
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Total shareholders' equity 89,699 94,345
------ ------
Total liabilities and shareholders' equity $106,674 $116,351
======== ========
The accompanying notes form an integral part of these consolidated
financial statements.
4
RADVISION LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands of U.S. Dollars, except per-share and share amounts)
Three months ended Six months ended
June 30, June 30,
-------------------------- ----------------------------
2001 2000 2001 2000
------------- ------------ -------------- -------------
Revenues $10,430 $10,201 $25,325 $18,028
Cost of revenues (2,240) (2,579) (5,964) (4,523)
------ ------ ------ ------
Gross profit 8,190 7,622 19,361 13,505
----- ----- ------ ------
Operating expenses
Research and development
expenses, net (4,563) (2,967) (9,320) (5,261)
Marketing and selling expenses (4,365) (4,523) (9,205) (8,134)
General and administrative expenses (1,308) (670) (2,477) (1,285)
Restructuring costs (3,023) - (3,023) -
------ ------ ------ ------
Total operating expenses (13,259) (8,160) (24,025) (14,680)
------- ------ ------- -------
Operating loss (5,069) (538) (4,664) (1,175)
Financing income, net 1,264 1,279 2,840 1,395
Other expenses - - (173) -
------ ------ ------ ------
Net income (loss) $(3,805) $741 $(1,997) $220
======= ==== ======= ====
Basic earnings (loss) per ordinary
share $(0.20) $0.04 $(0.10) $0.01
====== ===== ====== =====
Weighted average number of ordinary
shares used in calculation 19,199,771 18,598,596 19,204,162 16,612,550
========== ========== ========== ==========
Diluted earnings (loss) per ordinary
share $(0.20) $0.03 $(0.10) $0.01
====== ===== ====== =====
Weighted average number of
ordinary shares used in calculation 19,199,771 21,705,623 19,204,162 19,710,105
========== ========== ========== ==========
The accompanying notes form an integral part of these consolidated
financial statements.
5
RADVISION LTD.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(In thousands of U.S. Dollars)
For the six months ended
June 30,
--------------------------
2001 2000
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,997) $ 220
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Income and expenses not affecting operating cash flows:
Depreciation 769 511
Severance pay, net 245 209
Amortization of deferred compensation 178 302
Other 173 24
Changes in operating assets and liabilities:
Decrease (increase) in trade receivables, net 1,693 (2,517)
Decrease (increase) in other receivables and
prepaid expenses 175 (505)
Decrease (increase) in inventories 2,953 (2,333)
Decrease in trade payables (2,185) (1,485)
Increase (decrease) in other payables and accrued
expenses (3,248) 10,123
------ ------
Net cash provided by (used in) operating activities (1,244) 4,549
------ -----
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in short-term investments 16,583 (26,218)
Increase in long-term investments (10,593) $(43,278)
Purchase of property and equipment (1,151) (1,214)
Proceeds from sale of property and equipment 9 76
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Net cash provided by (used in) investing activities 4,848 (70,634)
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CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of share capital 401 89,270
Purchase of treasury stock (2,677) -
Payment of issuance expenses (550) -
Repayment of long-term loans (27) (36)
--- ---
Net cash provided by (used in) financing activities (2,853) 89,234
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INCREASE IN CASH AND CASH EQUIVALENTS 751 23,149
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD $ 41,617 $ 2,605
-------- --------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 42,368 $ 25,754
======== ========
The accompanying notes form an integral part of these consolidated
financial statements.
6
RADVISION LTD.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - BASIS OF PRESENTATION
The condensed consolidated balance sheet as of June 30, 2001, the
condensed consolidated statements of operations for the three and six
month periods ended June 30, 2000 and 2001 and the condensed
consolidated statements of cash flows for the six month periods ended
June 30, 2000 and 2001 have been prepared by the Company without
audit. The condensed consolidated balance sheet as of December 31,
2000 has been derived from the Company's audited financial statements
as of that date.
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States 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 revenues and expenses during the reported period.
Actual results could differ from those estimates. In the opinion of
management, all adjustments, which include only normal recurring
adjustments, necessary to present fairly the financial position,
results of operations and cash flows at June 30, 2001 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission rules and regulations. These
condensed financial statements should be read in conjunction with the
audited financial statements and notes thereto included in the
Company's Annual Report on Form 20-F for the year ended December 31,
2000 filed with the Securities and Exchange Commission.
The condensed consolidated financial statements of the Company have
been prepared in U.S. dollars, as the currency of the primary economic
environment in which the operations of the Company are conducted is
the U.S. dollar. All of the Company's sales are in U.S. dollars or are
dollar-linked. Most purchases of materials and components and most
marketing costs are denominated in U.S. dollars. Therefore, the
functional currency of the Company is the U.S. dollar.
Transactions and balances originally denominated in U.S. dollars are
presented at their original amounts. Transactions and balances in
other currencies are remeasured into U.S. dollars in accordance with
the principles set forth in Statement No. 52 of the Financial
Accounting Standards Board of the United States ("FASB"). Accordingly,
items have been remeasured as follows:
- Monetary items - at the exchange rate in effect on the
balance sheet date.
7
- Non monetary items - at historical exchange rates.
- Revenue and expense items - at the exchange rates in effect
as of the date of recognition of those items, excluding
depreciation and other items deriving from non-monetary
items.
All exchange gains and losses from the remeasurement mentioned
above,which are immaterial for all periods presented are reflected in
the statement of operations. The representative rate of exchange at
June 30, 2001 was U.S.$1.00 = New Israeli Shekel (NIS) 4.165 and at
June 30, 2000 =NIS 4.084.
Note 2 - RECENTLY ISSUED NEW ACCOUNTING STANDARDS
In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations ("SFAS 141")
and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141
requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized but are
reviewed annually (or more frequently if impairment indicators arise) for
impairment. All other intangible assets will continue to be amortized over
their estimated useful lives. The amortization provisions of SFAS 142 apply
to goodwill and intangible assets acquired after June 30, 2001. With
respect to goodwill and intangible assets acquired prior to July 1, 2001,
the Company is required to adopt SFAS 142 effective January 1, 2002. The
Company believes that the adoption of SFAS 141 and SFAS 142 will not have
an effect on its financial statements.
Note 3 - INVENTORIES
June 30 December 31
------- -----------
2001 2000
------- -----------
Materials and components $1,536 $2,377
Work in process 149 610
Finished products 317 1,969
--- -----
$2,002 $4,956
====== ======
Note 4 - REPURCHASE OF ORDINARY SHARES
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. No time limit was
given with respect to the duration of the share repurchase program. As of
June 30, 2001 we had repurchased 375,223 ordinary shares at a cost of
$2,677,000. We may use the repurchased shares for issuance upon exercise of
employee stock options or other corporate purposes.
8
Note 5 - RESTRUCTURING COSTS
We recorded a 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.
9
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 20-F for the fiscal year ended December 31, 2000.
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 the Hong
Kong, RADVision HK Ltd, which conducts our marketing activities in Asia Pacific.
In 2001, we established a wholly owned subsidiary in the United Kindom,
RADVision (UK) Ltd, which conducts our marketing activities in England.
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.
10
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,
-------------- --------------
2000 2001 2000 2001
---- ---- ---- ----
Revenues
Networking products.................... 58.5% 55.9% 58.9% 62.6%
Technology products.................... 41.5 44.1 41.1 37.4
Total revenues......................... 100.0 100.0 100.0 100.0
Cost of revenues
Networking products.................... - 19.3 - 21.6
Technology products.................... - 2.2 - 1.9
Total cost of revenues................. 25.3 21.5 25.1 23.5
Gross profit.............................. 74.7 78.5 74.9 76.5
Operating expenses
Research and development................ 32.7 43.8 32.5 36.8
Less participation by the Chief Scientist 3.6 - 3.3 -
Research and development, net........... 29.1 43.8 29.2 36.8
Marketing and selling................... 44.3 41.9 45.1 36.4
General and administrative.............. 6.6 12.5 7.1 9.8
Restructuring costs..................... - 28.9 - 11.9
Total operating expenses................. 80.0 127.1 81.4 94.9
Operating loss............................ (5.3) (48.6) (6.5) (18.4)
Financing income, net..................... 12.5 12.1 7.7 10.5
Net income (loss)......................... 7.2 (36.5) 1.2 (7.9)
===== ===== ===== =====
Three Months Ended June 30, 2000 Compared with Three Months Ended June 30, 2001
Revenues. Revenues increased from $10.2 million for the three months ended June
30, 2000 to $10.4 million for the three months ended June 30, 2001, an increase
of $0.2 million, or 2.0%. This increase was due to a $0.4 million, or 9.5%,
increase in sales of our technology products, offset by a decrease of $0.2
million, or 9.6%, in sales of networking products.
Revenues from networking products decreased from $6.0 million for the three
months ended June 30, 2000 to $5.8 million for the three months ended June 30,
2001. The decrease in revenues from networking products is attributable to an
ongoing softness in enterprise spending all over the world.
Revenues from technology products increased from $4.2 million for the three
months ended June 30, 2000 to $4.6 million for the three months ended June 30,
2001. This increase in revenues from technology products was primarily
attributable to increased market demand.
Revenues from sales to customers in the United States increased from $5.2
million, or 50.9% of revenues, for the three months ended June 30, 2000, to $6.1
million, or 58.6% of revenues, for the three months ended June 30, 2001, an
increase of $0.9 million, or 17.3%. This increase in
11
sales to customers in the United States was primarily attributable to the more
rapid adoption of our technology in the United States as compared to the rest of
the world.
Revenues from sales to customers in Europe decreased from $2.6 million, or 25.5%
of revenues, for the three months ended June 30, 2000, to $2.2 million, or 21.2%
of revenues, for the three months ended June 30, 2001, a decrease of $0.4
million, or 15.4%. 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 $1.2 million, or
11.8% of revenues, for the three months ended June 30, 2000, to $1.6 million, or
15.4% of revenues, for the three months ended June 30, 2001, an increase of $0.4
million, or 33.3%. This increase in sales to customers in the Far East was
primarily attributable to increased sales efforts.
Revenues from sales to customers in Israel decreased from $1.2 million, or 11.8%
of revenues, for the three months ended June 30, 2000, to $0.5 million, or 4.8%
of revenues, for the three months ended June 30, 2001, a decrease of $0.7
million, or 58.3%.
Cost of Revenues. Cost of revenues decreased from $2.6 million for the three
month period ended June 30, 2000 to $2.2 million for the three months ended June
30, 2001, a decrease of $0.4 million, or 15.4%. Gross profit as a percentage of
revenues increased from 74.5% for the three months ended June 30, 2000 to 78.8%
for the three months ended June 30, 2001, due to the decreased proportion of
networking products sales and an increase in sales of products with a higher
profitability.
Research and Development, Net. Research and development expenses, net increased
from $3.0 million for the three months ended June 30, 2000 to $4.6 million for
the three months ended June 30, 2001, an increase of $1.6 million, or 53.3%.
This increase was primarily attributable to an increase in the number of
research and development personnel whom we employed, as well as from our
decision not to apply for any grants from the Chief Scientist. In the third
quarter of 2000 we discontinued our relationship with the Chief Scientist in
order to reduce certain restrictions on our business and to avoid paying
increased interest rates in the future on royalty payments. We have increased
our research and development personnel to support our existing and expected new
product lines and to accommodate the growth of our business. Research and
development expenses, net as a percentage of revenues grew from 29.4% for the
three months ended June 30, 2000 to 44.2% for the three months ended June 30,
2001.
Marketing and Selling. Marketing and selling expenses decreased from $4.5
million for the three months ended June 30, 2000 to $4.4 million for the three
months ended June 30, 2001, a decrease of $0.1 million, or 2.2%. We decreased
our sales and marketing expenses in response to current and expected continued
softness in the market for our products. Marketing and selling expenses as a
percentage of revenues decreased from 44.1% for the three months ended June 30,
2000 to 42.3% for the three months ended June 30, 2001.
General and Administrative. General and administrative expenses increased from
$0.7 million for the three months ended June 30, 2000 to $1.3 million for the
three months ended June 30, 2001, an increase of $0.6 million or 85.7%. This
increase was primarily attributable to an increase in personnel expenses.
General and administrative expenses as a percentage of revenues
12
was 6.9% for the three months ended June 30, 2000 and 12.5% for the three months
ended June 30, 2001.
Restructuring Costs. We recorded a 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 increased from $0.5 million for the three
months ended June 30, 2000 to $5.1 million for the three months ended June 30,
2001 as a result of our restructuring costs and increased research and
development expenses.
Financial Income. We had financial income of $1.3 million in both the three
months ended June 30, 2000 and June 30, 2001. This income was principally
derived from the investment of the proceeds of our March 2000 initial public
offering and private placement.
Net Income(Loss). Net loss for the quarter was $3.8 million compared with net
income of $741,000 for the second quarter of 2000.
Six Months Ended June 30, 2001 Compared with Six Months Ended June 30, 2000
Revenues. Revenues increased from $18.0 million for the six months ended June
30, 2000 to $25.3 million for the six months ended June 30, 2001, an increase of
$7.3 million, or 40.6%. This increase was due to a $5.2 million, or 49.1%,
increase in sales of our networking products, as well as a $2.1 million, or
28.4%, increase in sales of technology products.
Revenues from networking products increased from $10.6 million for the six
months ended June 30, 2000 to $15.8 million for the six months ended June 30,
2001. The increase in revenues from networking products is attributable to a
global increase in demand for these units as customers moved from integrated
services digital networks, or ISDN, to IP-based networks, as well as from new
OEM agreements that generated additional product sales.
Revenues from technology products increased from $7.4 million for the six months
ended June 30, 2000 to $9.5 million for the six months ended June 30, 2001. This
increase in revenues from technology products was primarily attributable to
increased market demand.
Revenues from sales to customers in the United States increased from $9.5
million, or 52.8% of revenues, for the six months ended June 30, 2000, to $17.1
million, or 67.6% of revenues, for the six months ended June 30, 2001, an
increase of $7.6 million, or 80.0%. This increase in sales to customers in the
United States was primarily attributable to new OEM agreements that generated
additional product sales.
Revenues from sales to customers in Europe decreased from $4.6 million, or 25.5%
of revenues, for the six months ended June 30, 2000, to $3.9 million, or 15.4%
of revenues, for the six months ended June 30, 2001, a decrease of $0.7 million,
or 15.2%. 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 $2.2 million, or
12.2% of revenues, for the six months ended June 30, 2000, to $3.2 million, or
12.6% of revenues, for the
13
six months ended June 30, 2001, an increase of $1.0 million, or 45.5%. This
increase in sales to customers in the Far East was primarily attributable to
increased sales efforts.
Revenues from sales to customers in Israel decreased from $1.7 million, or 9.4%
of revenues, for the six months ended June 30, 2000, to $1.1 million, or 4.3% of
revenues, for the six months ended June 30, 2001, a decrease of $0.6 million, or
35.3%.
Cost of Revenues. Cost of revenues increased from $4.5 million for the six
months ended June 30, 2000 to $6.0 million for the six months ended June 30,
2001, an increase of $1.5 million, or 33.3%. Gross profit as a percentage of
revenues increased from 75.0% for the six months ended June 30, 2000 to 76.7%
for the six months ended June 30, 2001, due to the increased proportion of
networking products sales that generate a higher profitability.
Research and Development, Net. Research and development expenses, net increased
from $5.3 million for the six months ended June 30, 2000 to $9.3 million for the
six months ended June 30, 2001, an increase of $4.0 million, or 75.5%. This
increase was primarily attributable to an increase in the number of research and
development personnel whom we employed, as well as from our decision not to
apply for any grants from the Chief Scientist. Research and development
expenses, net as a percentage of revenues increased from 29.4% for the six
months ended June 30, 2000 to 36.7% for the six months ended June 30, 2001.
Marketing and Selling. Marketing and selling expenses increased from $8.1
million for the six months ended June 30, 2000 to $9.2 million for the six
months ended June 30, 2001, an increase of $1.1 million, or 13.6%. This increase
was primarily attributable to a $0.7 million, or 15.2%, increase in
personnel-related expenses. Marketing and selling expenses as a percentage of
revenues decreased from 45.0% for the six months ended June 30, 2000 to 36.3%
for the six months ended June 30, 2001.
General and Administrative. General and administrative expenses increased from
$1.3 million for the six months ended June 30, 2000 to $2.5 million for the six
months ended June 30, 2001, an increase of $1.2 million or 92.3%. This increase
was primarily attributable to an increase in personnel expenses. General and
administrative expenses as a percentage of revenues was 7.2% for the six months
ended June 30, 2000 and 9.9% for the six months ended June 30, 2001.
Restructuring Costs. We recorded a 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 increased from $1.2 million for the six
months ended June 30, 2000 to $4.7 million for the six months ended June 30,
2001 as a result of our restructuring expenses and increased research and
development expenses.
Financial Income. Financial income increased from $1.4 million for the six
months ended June 30, 2000 to $2.7 million for the six months ended June 30,
2001 principally as a result of the increased interest income we derived from
the investment of the proceeds of our March 2000 initial public offering and
private placement.
14
Net Income (Loss). Net loss for the first six months of 2001 was $2.0 million
compared with net income of $220,000 for the first six months of 2000.
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, 2001, we had approximately $42.4
million in cash and cash equivalents and our working capital was approximately
$58.4 million.
Net cash used in operating activities was approximately $1.2 million for the six
months ended June 30, 2001. This amount was primarily attributable to a decrease
of $3.2 million in other payables and accrued expenses and a decrease in trade
payables of $2.2 million. These increases in cash used in operating activities
were offset in part by a decrease in trade receivables of $1.7 million and a
decrease in inventory of $3.0 million.
The decrease in inventory for the six months ended June 30, 2001 was primarily
due to our efforts to manage our inventory to correspond with the expected need
of the networking market. The decrease in accounts receivable for the six months
ended June 30, 2001 was primarily the result of reduced sales in the quarter
ended June 30, 2001 compared to the higher level of sales during the last months
of 2000.
Net cash provided by investing activities was $4.8 million for the six months
ended June 30, 2001. During the six months ended June 30, 2001, $1.2 million of
cash used in investing activities was for purchases of property and equipment.
Net cash used in financing activities was $2.9 million for the six months ended
June 30, 2001.
As of June 30, 2001, we had $38,000 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
15
market prices. No time limit was given with respect to the duration of the share
repurchase program. As of June 30, 2001 we had repurchased 375,223 ordinary
shares at a cost of $2,677,000. 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.
16
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
For the account of 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, 2001. 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
=========
17
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.
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, 2001, we held our Annual
General Meeting of Shareholders.
At the meeting, held on June 28, 2001, our shareholders voted:
1. To consider and receive the Directors' Annual Report to Shareholders
for the year ended December 31, 2000, and to consider and receive the
Company's Consolidated Financial Statements for the year ended
December 31, 2000, and the Auditor's report thereon.
For Against Abstained
--- ------- ---------
9,403,212 1,922 4,925
18
2. To appoint Luboshitz, Kasierer & Co. (a member firm of Arthur
Andersen) to conduct the annual audit of the Company's financial
statements for the year ending December 31, 2001, and to authorize the
Board of Directors to fix their compensation.
For Against Abstained
--- ------- ---------
9,397,688 8,814 3,557
3. To elect the following directors to hold office for a term until their
successors are duly elected and qualified at our 2002 Annual General
Meeting of Shareholders.
For Against Abstained
--- ------- ---------
Zohar Zisapel......... 9,401,790 8,269 0
Gadi Tamari........... 9,401,790 8,269 0
Ami Amir.............. 9,401,790 8,269 0
Efraim Wachtel........ 9,401,790 8,269 0
Andreas Mattes........ 9,401,790 8,269 0
4. To approve an amendment to the Company's Year 2000 Employee Stock
Option Plan, increasing the number of Ordinary Shares of the Company
reserved for issuance thereunder from 1,531,422 to 2,121,422.
For Against Abstained
--- ------- ---------
7,485,731 1,922,403 1,925
5. To approve the terms of retirement of Mr. Ami Amir, former Chief
Executive Officer of the Company.
For Against Abstained
--- ------- ---------
7,067,445 1,898,889 443,725
6. To approve the compensation terms of Mr. Gadi Tamari, our new Chief
Executive Officer, and to approve his indemnification by the Company.
For Against Abstained
--- ------- ---------
7,483,230 1,898,428 28,401
7. To approve the grant of options to directors of the Company.
For Against Abstained
--- ------- ---------
7,474,123 1,929,986 5,950
19
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K filed during the last quarter of the period covered by
this report:
None
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 9, 2001
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