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 September 30, 2002
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____to ___
Commission file number: 000-29871
RADVISION LTD.
(Exact Name of Registrant as Specified in Its Charter)
Israel N/A
------ ---
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
24 Raoul Wallenberg Street, Tel Aviv 69719, Israel
(Address of Principal Executive Offices)
___972-3-645-5220_____
(Registrant's Telephone Number, Including Area Code)
_____________N/A __________________
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of November 12, 2002 the Registrant had 20,069,224 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.
RADVISION LTD. AND ITS SUBSIDIARIES
RADVISION LTD.
INDEX
Page
Part I - Financial Information:
Item 1.Condensed Consolidated Balance Sheets
as of September 30, 2002 (unaudited) and December 31, 2001..........4
Condensed Consolidated Statements of Operations -
for the Three Months and Nine Months
ended September 30, 2002 and 2001 (unaudited)...................... 5
Condensed Consolidated Statements of Cash Flows -
for the Nine Months ended September 30, 2002 and 2001 (unaudited)...6
Notes to Condensed Consolidated Financial Statements....................7
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations......................11
Item 3.Quantitative and Qualitative Disclosure About Market Risk............. 17
Item 4.Controls and Procedures................................................18
Part II - Other Information:
Item 1. Legal Proceedings.....................................................18
Item 2. Changes in Securities and Use of Proceeds.............................18
Item 3. Defaults Upon Senior Securities.......................................19
Item 4. Submission of Matters to a Vote of Security Holders...................19
Item 5. Other Information.....................................................19
Item 6. Exhibits and Reports on Form 8-K......................................20
Signatures..................................................21
Certifications
Exhibit 99.1................................................22
Exhibit 99.2................................................23
Exhibit 99.3................................................24
Exhibit 99.4................................................25
PART I - FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
September 30,
2002 December 31, 2001
------------------ -------------------
Unaudited
------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 14,628 $ 6,717
Short-term investments 28,392 52,785
Trade receivables, net of allowance for doubtful accounts of $ 1,829 and
$ 1,126 as of September 30, 2002 and December 31, 2001, respectively 6,546 5,078
Other accounts receivable and prepaid expenses 2,187 1,259
Inventories 1,110 1,884
------------------ -------------------
Total current assets 52,863 67,723
-----
------------------ -------------------
LONG-TERM INVESTMENTS 43,878 26,326
------------------ -------------------
PROPERTY AND EQUIPMENT, NET 3,678 4,518
------------------ -------------------
DEPOSIT WITH INSURANCE COMPANIES 1,456 1,200
------------------ -------------------
Total assets $ 101,875 $ 99,767
-----
================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term loans $ - $ 19
Trade payables 363 765
Other accounts payable and accrued expenses 16,323 13,562
------------------ -------------------
Total current liabilities 16,686 14,346
------
------------------ -------------------
ACCRUED SEVERANCE PAY 1,992 1,872
------------------ -------------------
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.1 par value - Authorized: 24,984,470 shares; Issued
and outstanding: 20,017,885 and 19,889,690 shares as of September 30,
2002 and December 31, 2001, respectively 185 182
Additional paid-in capital 104,358 104,209
Deferred stock-based compensation (163) (299)
Accumulated deficit (9,426) (10,640)
------------------ -------------------
94,954 93,452
Less - cost of Treasury stock - 1,866,115 and 1,585,446 Ordinary shares of
NIS 0.1 par value as of September 30, 2002 and December 31, 2001,
respectively 11,757 9,903
------------------ -------------------
Total shareholders' equity 83,197 83,549
-----
------------------ -------------------
Total liabilities and shareholders' equity $ 101,875 $ 99,767
-----
================== ===================
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------
U.S. dollars in thousands, except per share and share data
Nine months ended Three months ended
September 30, September 30,
------------------------------ ------------------------------
------------------------------ ------------------------------
2002 2001 2002 2001
------------- -------------- -------------- --------------
Unaudited
---------------------------------------------------------------
---------------------------------------------------------------
Revenues $ 35,422 $ 35,532 $ 12,158 $ 10,207
Cost of revenues 7,744 8,063 2,615 2,099
------------- -------------- -------------- --------------
Gross profit 27,678 27,469 9,543 8,108
------------- -------------- -------------- --------------
Operating costs and expenses:
Research and development 11,726 13,639 3,815 4,319
Marketing and selling 13,698 12,895 4,642 3,690
General and administrative 3,113 3,534 1,071 1,057
Restructuring costs - 3,023 - -
------------- -------------- -------------- --------------
Total operating costs and expenses 28,537 33,091 9,528 9,066
-----
------------- -------------- -------------- --------------
Operating income (loss) (859) (5,622) 15 (958)
Financial income, net 2,073 3,959 635 1,118
Other expenses - (174) - -
------------- -------------- -------------- --------------
Net income (loss) $ 1,214 $ (1,837) $ 650 $ 160
============= ============== ============== ==============
Basic net earnings (loss) per Ordinary share $ 0.07 $ (0.10) $ 0.04 $ 0.01
============= ============== ============== ==============
Weighted average number of Ordinary shares
used in calculation of basic earnings (loss)
per share 18,298,174 19,088,173 18,137,900 18,995,041
============= ============== ============== ==============
Diluted earnings (loss) per Ordinary share $ 0.06 $ (0.10) $ 0.03 $ 0.01
============= ============== ============== ==============
Weighted average number of Ordinary shares
used in calculation of diluted earnings (loss)
per share 19,381,940 19,088,173 18,792,868 20,226,819
============= ============== ============== ==============
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
Nine months ended
September 30,
--------------------------------
-------------- - ---------------
2002 2001
-------------- ---------------
Unaudited
--------------------------------
Cash flows from operating activities:
------------------------------------
Net income (loss) $ 1,214 $ (1,837)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 1,831 1,702
Severance pay, net (136) 208
Amortization of deferred stock-based compensation 136 260
Decrease (increase) in trade receivables, net (1,468) 1,622
Increase in other accounts receivable and prepaid expenses (928) (71)
Decrease in inventories 774 3,284
Decrease in trade payables (402) (2,142)
Increase (decrease) in other accounts payable and accrued expenses 2,761 (4,004)
Other - 174
-------------- ---------------
Net cash provided by (used in) operating activities 3,782 (804)
-------------- ---------------
Cash flows from investing activities:
------------------------------------
Decrease in short-term investments 24,353 18,004
Increase in long-term investments (17,512) (19,934)
Purchase of property and equipment (991) (1,479)
Proceeds from sale of property and equipment - 9
-------------- ---------------
Net cash provided by (used in) investing activities 5,850 (3,400)
-------------- ---------------
Cash flows from financing activities:
------------------------------------
Issuance of share capital 152 543
Purchase of Treasury stock (1,854) (6,186)
Payment of issuance expenses - (550)
Repayment of long-term loans (19) (39)
-------------- ---------------
Net cash used in financing activities (1,721) (6,232)
-------------- ---------------
Increase (decrease) in cash and cash equivalents 7,911 (10,436)
Cash and cash equivalents at beginning of period $ 6,717 $ 41,617
-------------- ---------------
Cash and cash equivalents at end of period $ 14,628 $ 31,181
============== ===============
--------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
RADVISION LTD. AND ITS SUBSIDIARIES
25
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
a. The significant accounting policies applied in the annual financial
statements of the Company as of December 31, 2001 are applied
consistently in these financial statements.
b. Recently issued accounting standards: In August 2001, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("FAS 144"), which addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and
superseded SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting
the Results of Operations for a Disposal of a Segment of a Business".
FAS 144 is effective for fiscal years beginning after December 15,
2001, with earlier application encouraged. The Company adopted FAS 144
as of January 1, 2002 and it does not expect that the adoption of the
Statement will have a significant impact if any, on the Company's
financial position and results of operations.
FASB recently also issued SFAS No. 146 "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS 146"). SFAS 146
addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)". SFAS 146 improves
financial reporting by requiring that a liability for a cost
associated with an exit or disposal activity be recognized and
measured initially at fair value only when the liability is incurred.
The provisions of SFAS 146 are effective for exit or disposal
activities that are initiated after December 31, 2002. Adoption of
SFAS 146 is not expected to have a material effect on the Company's
financial position or operating results.
NOTE 2: UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not
include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included.
NOTE 3: SHORT-TERM INVESTMENTS
September 30, December 31,
2002 2001
----------------------- --------------------
Unaudited
-----------------------
-----------------------
Bank deposits in U.S. dollars bearing annual interest
at a rate of approximately 2.7% $12,732 $28,396
Marketable debentures, bearing annual interest at a rate
of approximately 6.1% $15,660 $24,389
----------------------- --------------------
$28,392 $52,785
======================= ====================
Marketable debentures in the amount of $ 29,516 that mature later
than September 30, 2003, bearing annual interest of 4.7%, as well
as a bank deposit in the amount of $ 14,362 bearing annual
interest of 3.7%, are presented as long-term investments.
The interest rates are as of September 30, 2002.
NOTE 4: INVENTORIES
September 30, December 31,
2002 2001
----------------------- --------------------
Unaudited
-----------------------
Raw materials, parts and supplies $ 429 $ 991
Work in progress 559 391
Finished products 122 502
----------------------- --------------------
$ 1,110 $ 1,884
======================= ====================
NOTE 5: OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
September 30, December 31,
2002 2001
--------------------- ---------------------
--------------------- ---------------------
Unaudited
---------------------
---------------------
Deferred income $ 2,127 $ 3,491
Employees and employee institutions 1,419 2,369
Accrued expenses 12,777 7,702
--------------------- ---------------------
$ 16,323 $ 13,562
===================== =====================
NOTE 6: SEGMENTS AND CUSTOMER INFORMATION
a. Intersegment revenues and cost of revenues:
Nine months ended Three months ended
September 30, September 30,
------------------------------- ------------------------------
------------------------------- ------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- --------------
Unaudited
----------------------------------------------------------------
Revenues:
Product sales $ 25,956 $ 22,091 $ 9,037 $ 6,250
Software sales 9,466 13,441 3,121 3,957
-------------- -------------- -------------- --------------
Total revenues $ 35,422 $ 35,532 $ 12,158 $ 10,207
-----
============== ============== ============== ==============
Cost of revenues:
Product sales $ 7,656 $ 7,744 $ 2,608 $ 2,017
Software sales 88 319 7 82
-------------- -------------- -------------- --------------
Total cost of revenues $ 7,744 $ 8,063 $ 2,615 $ 2,099
-----
============== ============== ============== ==============
b. For the nine months ended September 30, 2002 and 2001, one
customer accounted for approximately 27% and 35%, respectively, of
sales for the period.
NOTE 7: EARNINGS (LOSS) PER SHARE
The following table sets forth the calculation of basic and
diluted earnings (loss) per share:
Nine months ended Three months ended
September 30, September 30,
------------------------------ -------------------------------
------------------------------ -------------------------------
2002 2001 2002 2001
------------- -------------- -------------- ---------------
Unaudited
----------------------------------------------------------------
Numerator:
Net income (loss) $ 1,214 $ (1,837) $ 650 $ 160
============= ============== ============== ===============
Numerator for diluted earnings per share
- income (loss) $ 1,214 $ (1,837) $ 650 $ 160
============= ============== ============== ===============
Number of shares:
Denominator:
Denominator for basic earnings (loss)
per share - weighted average of
Ordinary shares 18,298,174 19,088,173 18,137,900 18,955,041
Effect of dilutive securities:
Employee stock options and unvested
restricted shares 1,083,766 *) - 654,968 1,271,778
------------- -------------- -------------- ---------------
------------- -------------- -------------- ---------------
Denominator for diluted earnings per
share - adjusted weighted average
shares and assumed conversions 19,381,940 19,088,173 18,792,868 20,226,819
============= ============== ============== ===============
*) Antidilutive.
NOTE 8: ONE-TIME EXPENSES
The Company recorded a one-time expense of $ 3 million in the
second quarter of 2001, for severance costs associated with a 13%
workforce reduction as part of its plan to reduce operating
expenses.
NOTE 9: SUBSEQUENT EVENTS
Effective October 20, 2002, the Company's shares were listed for
dual trading on the Tel-Aviv Stock Exchange. The Company's shares
had previously been listed for trading only on the Nasdaq National
Market.
- - - - - - - - - - - -
RADVISION LTD.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is management's discussion and analysis of certain significant
factors which have affected our financial position and operating results during
the periods included in the accompanying condensed consolidated financial
statements.
The discussion and analysis which follows in this quarterly report may contain
trend analysis and other forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 which reflect our current
views with respect to future events and financial results. These include
statements regarding our earnings, projected growth and forecasts, and similar
matters that are not historical facts. We remind shareholders that
forward-looking statements are merely predictions and therefore are inherently
subject to uncertainties and other factors that could cause the future results
to differ materially from those described in the forward-looking statements.
These uncertainties and other factors include, but are not limited to, the
uncertainties and factors included in the "Risk Factors" contained in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2001.
Overview
We are a leading designer, developer and supplier of products and technology
that enable real-time voice, video and data communications over packet networks,
including the Internet and other IP networks.
We were incorporated in January 1992, commenced operations in October 1992 and
commenced sales of our products in the fourth quarter of 1994. Before that time,
our operations consisted primarily of research and development and recruiting
personnel. In 1995, we established a wholly owned subsidiary in the United
States, RADVision Inc., which conducts our sales and marketing activities in
North America. In 2000, we established a wholly owned subsidiary in Hong Kong,
RADVision HK Ltd, which conducts our marketing activities in Asia Pacific. In
2001, we established a wholly owned subsidiary in the United Kingdom, RADVision
(UK) Ltd, which conducts our marketing activities in England.
Critical Accounting Policies
The following discussion and analysis of our financial condition and results of
operations are based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
sales and expenses during the reporting periods. Areas where significant
judgments are made include, but are not limited to: inventory valuation and
revenue recognition. Actual results could differ materially from these
estimates.
Inventories. Inventories are stated at the lower of cost or market. Cost is
determined by the moving average method, inventories write-offs and write-down
provisions are provided to cover risks arising from slow-moving items or
technological obsolescence.
Revenue Recognition. Revenues from sales of products and technology are
recognized in accordance with Statement of Position (SOP) 97-2, as amended by
SOP 98-9, upon delivery, when collection is probable, the vendor's fee is fixed
or determinable and persuasive evidence of an arrangement exists. Provided that
all other elements of SOP 97-2 are met, revenues are recognized upon delivery,
whether the customer is a distributor or the final end user. Revenues for
maintenance and support services are deferred and recognized ratably over the
service period.
In accordance with SOP 97-2, revenues for multi-element arrangements, that is,
sales of products or technology in conjunction with post-contract customer
support services, are segregated. Revenues allocated to the delivered elements
are recognized upon delivery, provided that the other elements of SOP 97-2 are
satisfied. Revenues allocated to the undelivered elements (post-contract
customer support services) are deferred and recognized ratably over the service
period. The portion of the fee for multi-element arrangements allocated to the
undelivered elements (post-contract customer support services) is based on
vendor-specific objective evidence determined, in the case of post-contract
customer support services, based on the annual renewal rate for such services
actually charged to customers for years subsequent to the first year following
sale. The remaining portion of the fee is allocated to the delivered elements
based on the residual value method.
Revenues from products sales are recognized in accordance with Staff Accounting
Bulletin No. 101 "Revenue Recognition in Financial Statements" ("SAB No. 101")
when the following criteria are met: persuasive evidence of an arrangement
exists, delivery of the product has occurred, the fee is fixed or determinable
and collectibility is probable. The Company has no obligation to customers after
the date on which products are delivered. Revenues from maintenance and updates
are recognized over the term of agreement.
Deferred revenues include unearned amounts received under maintenance contracts,
and amounts billed to customers but not yet recognized as revenues.
Revenues
We generate revenues from sales of our networking products that are primarily
sold in the form of stand-alone products, and our technology products that are
primarily sold in the form of software development kits, as well as related
maintenance and support services. We generally recognize revenues from the sale
of our products upon shipment and when collection is probable. Revenues
generated from maintenance and support services are deferred and recognized
ratably over the period of the term of service. We price our networking products
on a per unit basis, and grant discounts based upon unit volumes. We price our
software development kits on the basis of a fixed-fee plus royalties from
products developed using the software development kits. We sell our products and
technology through direct sales and various indirect distribution channels in
North America, Europe, the Far East and Israel.
Results of Operations
The following table presents, as a percentage of total revenues, condensed
statements of operations data for the periods indicated:
Three months Nine months
ended September 30, ended September 30,
2001 2002 2001 2002
Unaudited Unaudited Unaudited Unaudited
Revenues
Networking products............................. 61.2% 74.3% 62.2% 72.9%
Technology products............................. 38.8 25.7 38.8 27.1
Total revenues.................................. 100.0 100.0 100.0 100.0
Cost of revenues
Networking products............................. 19.8 21.4 21.8 21.7
Technology products............................. 0.8 0.1 0.9 0.2
Total cost of revenues.......................... 20.6 21.5 22.7 21.9
Gross profit....................................... 79.4 78.5 77.3 78.1
Operating expenses
Research and development........................ 42.3 31.4 38.4 33.1
Marketing and selling........................... 36.2 38.2 36.3 38.7
General and administrative...................... 10.3 8.8 9.9 8.8
Restructuring costs............................. - 8.5
Total operating expenses.......................... 88.8 78.4 93.1 80.6
Operating profit (loss)............................ (9.4) 0.1 (15.8) (2.5)
Financial income, net.............................. 11.0 5.2 10.6 5.9
Net income (loss).................................. 1.6 5.3 (5.2) 3.4
=== === ==== ===
-----------------------------------------------------
Three Months Ended September 30, 2001 Compared with Three Months Ended
September 30, 2002
Revenues. Revenues increased from $10.2 million for the three months ended
September 30, 2001 to $12.2 million for the three months ended September 30,
2002, an increase of $2.0 million, or 19.6%. This increase was due to a $2.9
million, or 46.8%, increase in sales of our networking products, and a decrease
of $900,000, or 22.5%, in sales of technology products.
Revenues from networking products increased from $6.2 million for the three
months ended September 30, 2001 to $9.1 million for the three months ended
September 30, 2002. The increase in revenues from networking products is
attributable to an increase in demand for these units as customers moved from
integrated services digital networks, or ISDN, to IP-based networks.
Revenues from technology products decreased from $4.0 million for the three
months ended September 30, 2001 to $3.1 million for the three months ended
September 30, 2002. This decrease in revenues was primarily attributable to
decreased market demand as budgets for these products declined due to the
worldwide economic downturn.
Revenues from sales to customers in the United States decreased from $5.8
million, or 56% of revenues, for the three months ended September 30, 2001, to
$5.4 million, or 44.3% of revenues, for the three months ended September 30,
2002, a decrease of $400,000, or 6.9%. This decrease in sales was primarily as a
result of the ongoing softness in enterprise spending in the United States.
Revenues from sales to customers in Europe increased from $2.5 million, or 24.5%
of revenues, for the three months ended September 30, 2001, to $3.0 million, or
24.5% of revenues, for the three months ended September 30, 2002, an increase of
$500,000, or 20.0%. This increase in sales was primarily attributable to
increased sales efforts in this region.
Revenues from sales to customers in the Far East increased from $1.6 million, or
15.7% of revenues, for the three months ended September 30, 2001, to $3.3
million, or 27.0% of revenues, for the three months ended September 30, 2002, an
increase of $1.7 million, or 106.2%. This increase in sales was primarily
attributable to increased sales efforts in this region.
Revenues from sales to customers in Israel increased from $0.3 million, or 2.9%
of revenues, for the three months ended September 30, 2001, to $0.5 million, or
4.1% of revenues, for the three months ended September 30, 2002, an increase of
$200,000, or 66.7%.
Cost of Revenues. Cost of revenues increased from $2.1 million for the three
month period ended September 30, 2001 to $2.6 million for the three months ended
September 30, 2002, an increase of $500,000, or 23.8%. Gross profit as a
percentage of revenues decreased slightly from 79.4% for the three months ended
September 30, 2001 to 78.5% for the three months ended September 30, 2002.
Research and Development. Research and development expenses, decreased from $4.3
million for the three months ended September 30, 2001 to $3.8 million for the
three months ended September 30, 2002, a decrease of $500,000, or 11.6%. This
decrease was primarily attributable to a decrease in the number of research and
development personnel whom we employed. We have decreased our research and
development personnel consistent with the scope of our research and development
programs. Research and development expenses as a percentage of revenues
decreased from 42.3% for the three months ended September 30, 2001 to 31.4% for
the three months ended September 30, 2002.
Marketing and Selling. Marketing and selling expenses increased from $3.7
million for the three months ended September 30, 2001 to $4.6 million for the
three months ended September 30, 2002, an increase of $900,000, or 24.3%. We
increased our sales and marketing expenses in response to current and expected
continued improvement in the market for our products. Marketing and selling
expenses as a percentage of revenues increased from 36.2% for the three months
ended September 30, 2001 to 38.2% for the three months ended September 30, 2002.
General and Administrative. General and administrative expenses remained
constant at a slightly less than $1.1 million for both periods. General and
administrative expenses as a percentage of revenues were 10.3% for the three
months ended September 30, 2001 and 8.8% for the three months ended September
30, 2002.
Operating Income (Loss). We had an operating loss of $1.0 million for the three
months ended September 30, 2001 compared to operating income of $15,000 for the
three months ended September 30, 2002 principally as a result of our increased
revenues.
Financial Income. We had financial income of $1.1 million for the three months
ended September 30, 2001 compared to $635,000 for the three months ended
September 30, 2002. This income was principally derived from the investment of
the proceeds of our March 2001 initial public offering and private placement.
Our financial income declined principally as a result of lower interest rates
and the use of a portion of our invested funds in connection with our 2001 stock
repurchase program.
Net Income(Loss). Net income for the quarter was $650,000 compared with net
income of $160,000 for the third quarter of 2001.
Nine months Ended September 30, 2001 Compared with Nine months Ended September
30, 2002
Revenues. Revenues decreased slightly from $35.5 million for the nine months
ended September 30, 2001 to $35.4 million for the nine months ended September
30, 2002, a decrease of $110,000.
Revenues from networking products increased from $22.1 million for the nine
months ended September 30, 2001 to $25.9 million for the nine months ended
September 30, 2002. 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 decreased from $13.4 million for the nine
months ended September 30, 2001 to $9.5 million for the nine months ended
September 30, 2002. This decrease in revenues was primarily attributable to
decreased market demand.
Revenues from sales to customers in the United States decreased from $22.9
million, or 64.5% of revenues, for the nine months ended September 30, 2001, to
$19.8 million, or 55.9% of revenues, for the nine months ended September 30,
2002, a decrease of $3.1 million, or 13.5%. This decrease in sales to customers
in the United States was primarily attributable to the ongoing softness in
enterprise spending in the United States.
Revenues from sales to customers in Europe increased from $6.4 million, or 18%
of revenues, for the nine months ended September 30, 2001, to $6.6 million, or
18.6% of revenues, for the nine months ended September 30, 2002, an increase of
$200,000, or 3.1%.
Revenues from sales to customers in the Far East increased from $4.8 million, or
13.5% of revenues, for the nine months ended September 30, 2001, to $7.4
million, or 20.9% of revenues, for the nine months ended September 30, 2002, an
increase of $2.6 million, or 54.2%. This increase in sales was primarily
attributable to increased sales efforts in this region.
Revenues from sales to customers in Israel increased from $1.4 million, or 3.9%
of revenues, for the nine months ended September 30, 2001, to $1.6 million, or
4.5% of revenues, for the nine months ended September 30, 2002, a increase of
$200,000, or 14.3%.
Cost of Revenues. Cost of revenues decreased from $8.1 million for the nine
months ended September 30, 2001 to $7.7 million for the nine months ended
September 30, 2002, a decrease of $400,000, or 4.9%. Gross profit as a
percentage of revenues increased from 77.3% for the nine months ended September
30, 2001 to 78.1% for the nine months ended September 30, 2002, due to the
increased level of networking products sales that generate a higher level of
profitability.
Research and Development. Research and development expenses decreased from $13.6
million for the nine months ended September 30, 2001 to $11.7 million for the
nine months ended September 30, 2002, a decrease of $1.9 million, or 13.9%. This
decrease was primarily attributable to a decrease in the number of research and
development personnel whom we employed. Research and development expenses as a
percentage of revenues decreased from 38.4% for the nine months ended September
30, 2001 to 33.1% for the nine months ended September 30, 2002.
Marketing and Selling. Marketing and selling expenses increased from $12.9
million for the nine months ended September 30, 2001 to $13.7 million for the
nine months ended September 30, 2002, an increase of $800,000, or 6.2%. We
increased our sales and marketing expenses in response to current and expected
continued improvement in the market for our products. Marketing and selling
expenses as a percentage of revenues increased from 36.3% for the nine months
ended September 30, 2001 to 38.7% for the nine months ended September 30, 2002.
General and Administrative. General and administrative expenses decreased from
$3.5 million for the nine months ended September 30, 2001 to $3.1 million for
the nine months ended September 30, 2002, a decrease of $0.4 million or 11.4%.
This decrease was primarily attributable to a decrease in personnel expenses.
General and administrative expenses as a percentage of revenues was 9.9% for the
nine months ended September 30, 2001 and 8.8% for the nine months ended
September 30, 2002.
One Time Charge. We recorded a one time charge of $3.0 million in the first nine
months of 2001 for severance costs associated with a 13% workforce reduction as
part of our plan to reduce operating expenses.
Operating Loss. Our operating loss decreased from $5.6 million for the nine
months ended September 30, 2001 to $900,000 for the nine months ended September
30, 2002.
Financial Income. Financial income decreased from $3.9 million for the nine
months ended September 30, 2001 to $2.1 million for the nine months ended
September 30, 2002, principally as a result of lower interest rates we derived
from the investment of the proceeds of our March 2001 initial public offering
and private placement and the use of a portion of our invested funds in
connection with our 2001 stock repurchase plan.
Net Income(Loss). Net income for the first nine months of 2002 was $1.2 million
compared with a net loss of $1.8 for the first nine months of 2001.
Liquidity and Capital Resources
From our inception until our initial public offering in March 2001, 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 September 30, 2002, we had approximately
$14.6 million in cash and cash equivalents and our working capital was
approximately $36.2 million.
Net cash provided by operating activities was approximately $3.8 million for the
nine months ended September 30, 2002. This amount was primarily attributable to
an increase of $2.8 million in other payables and accrued expenses, depreciation
expenses of $1.8 million and a decrease in inventories of $800,000. These
increases in cash provided by operating activities were offset in part by an
increase in trade receivables of $1.5 million and increase in other accounts
receivables and prepaid expenses of $900,000.
The decrease in inventory at September 30, 2002 was primarily due to our efforts
to manage our inventory to correspond with the expected need of the networking
market. The increase in accounts receivable at September 30, 2002 was primarily
the result of increased sales in the quarter compared to the lower level of
sales during the last months of 2001.
Net cash provided by investing activities was $5.8 million for the nine months
ended September 30, 2002. During the nine months ended September 30, 2002, $1.0
million of cash used in investing activities was for purchases of property and
equipment.
Net cash used in financing activities was $1.7 million for the nine months ended
September 30, 2002, those funds were primarily used for stock repurchases.
As of September 30, 2002, we had an unused $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. We
anticipate that our cash resources will be used primarily to fund our operating
activities, as well as for capital expenditures. We do not believe that our
capital expenditures and lease commitments will increase for the foreseeable
future due to the anticipated slowdown in the growth of our operations,
infrastructure and personnel. Nevertheless, we may establish additional
operations as we expand globally.
On February 28, 2001, we announced that our Board of Directors authorized the
repurchase of up to 10% of our outstanding ordinary shares in the open market
from time to time at prevailing market prices. We completed the share repurchase
program in the first quarter of 2002, having repurchased a total of 1,866,115
ordinary shares at a cost of $11.8 million. We may use the repurchased shares
for issuance upon exercise of employee stock options or other corporate
purposes.
On August 28, 2002, we announced that our Board of Directors authorized the
repurchase of up to $10 million or 2 million of the company's outstanding
ordinary shares in the open market from time to time at prevailing market
prices. We are awaiting court approval in order to initiate the repurchase
program.
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 material 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.
Item 4. Controls and Procedures
Within the 90 days prior to the date of the filing of this Form 10-Q, the
company carried out an evaluation, under the supervision and with the
participation of the company's management, including the company's chief
executive officer and its chief financial officer, of the effectiveness of the
design and operation of the company's disclosure controls and procedures
pursuant to Securities Exchange Act of 1934 Rule 13a-14. Based upon that
evaluation, the company's chief executive officer and chief financial officer
concluded that the company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the company required to
be included in the company's periodic SEC filings.
There have been no significant changes in the Company's internal controls or
other factors which could significantly affect internal controls subsequent to
the date the Company carried out its evaluation.
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, 2001. The following table sets
forth, with respect to the ordinary shares registered, the amount of
securities registered, the aggregate offering price of amount
registered, the amount sold and the aggregate offering price of the
amount sold, for both the account of our company and the account of
any selling security holder.
For the account of For the account of the
the company selling 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 September 30, 2002. None of such expenses were paid
directly or indirectly to directors, officers, persons owning
10% or more of any class of equity securities of our company
or to our affiliates.
Direct or indirect payments to
persons other than affiliated persons
-------------------------------------
$6,118,000
Underwriting discounts and commissions ................
Finders' fees ......................................... 550,000
Expenses paid to or for underwriters................... 41,290
Other expenses ........................................ 2,241,113
---------
Total expenses ........................................ $8,950,403
=========
The net public offering proceeds to us, after deducting the
total expenses (set forth in the table above), were
$78,449,597.
The following table sets forth the amount of net public
offering proceeds used by us for the purposes listed below.
None of such payments were paid directly or indirectly to
directors, officers, persons owning 10% or more of any class
of our equity securities or to our affiliates.
Direct or indirect payments to
persons other than to affiliated
Purpose 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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification by Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification by Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
99.3 Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.4 Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section
1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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: November 13, 2002
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Gad Tamari, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RADVision Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/Gad Tamari*
--------------
Gad Tamari
Chief Executive Officer
* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.
Exhibit 99.2
CERTIFICATION PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, David Seligman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of RADVision Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/David Seligman*
-----------------
David Seligman
Chief Financial Officer
* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.
Exhibit 99.3
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RADVision Ltd. (the "Company") on
Form 10-Q for the period ending September 30, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Gad Tamari, Chief
Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350, as
adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/Gad Tamari*
--------------
Gad Tamari
Chief Executive Officer
November 13, 2002
* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.
Exhibit 99.4
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of RADVision Ltd. (the "Company") on
Form 10-Q for the period ending September 30, 2002 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, David Seligman,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 1350,
as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Company.
/s/David Seligman*
------------------
David Seligman
Chief Financial Officer
November 13, 2002
* The originally executed copy of this Certification will be maintained at the
Company's offices and will be made available for inspection upon request.