Filed
Pursuant to Rule 424(b)(3)
Registration
Number 333-152848
THE
INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. NO SELLING
SHAREHOLDER MAY SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
NOT
AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY
THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
1,477,865
Ordinary Shares
RADCOM
Ltd.
________________
This
prospectus relates to the resale from time to time of up to 1,477,865 ordinary
shares, as follows:
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up
to 976,564 ordinary shares held by the selling shareholders;
and
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up
to 501,301 ordinary shares issuable upon exercise of warrants held
by the
selling shareholders.
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We
will
not receive any proceeds from sales of the ordinary shares offered pursuant
to
this prospectus, but we will receive the proceeds from the exercise of warrants.
The selling shareholders identified in this prospectus, or their pledgees,
donees, transferees or other successors-in-interest, may offer the ordinary
shares from time to time through public or private transactions at fixed prices,
at prevailing market prices at the time of sale, at prices related to prevailing
market prices or at privately negotiated prices.
The
selling shareholders and any agent or broker-dealer that participates with
the
selling shareholders in the distribution of the ordinary shares may be
considered “underwriters” within the meaning of the Securities Act of 1933, as
amended (the “Securities Act”), and, in that event, any commissions received by
them and any profit on the resale of the shares may be considered underwriting
commissions or discounts under the Securities Act.
Our
ordinary shares are listed for quotation on the NASDAQ Capital Market and the
Tel Aviv Stock Exchange under the symbol “RDCM.” On August 18, 2008, the closing
sale price of our ordinary shares on the NASDAQ Capital Market was $1.64 per
share and on the Tel Aviv Stock Exchange was NIS 5.82 per share. You are urged
to obtain the current market quotations for our ordinary shares.
________________
Investing
in our ordinary shares involves a high degree of risk. See “Risk Factors” on
page 7 to read about factors you should consider before buying our ordinary
shares.
________________
Neither
the Securities and Exchange Commission nor any state securities commission
or
other regulatory body has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
Prospectus
dated August 26, 2008
TABLE
OF CONTENTS
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ABOUT
THIS PROSPECTUS
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2
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SHARE
SPLIT |
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PROSPECTUS
SUMMARY
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THE
TRANSACTIONS
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5
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RISK
FACTORS
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7
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SPECIAL
NOTE REGARDING FORWARD-LOOKING INFORMATION
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THE
OFFERING AND LISTING
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PRICE
RANGE OF OUR SHARES
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CAPITALIZATION
AND INDEBTEDNESS
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REASONS
FOR THE OFFER AND USE OF PROCEEDS
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SELLING
SHAREHOLDERS
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PLAN
OF DISTRIBUTION
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EXPENSES
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LEGAL
MATTERS
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EXPERTS
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ENFORCEABILITY
OF CIVIL LIABILITIES
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WHERE
YOU CAN FIND ADDITIONAL INFORMATION
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30
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INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
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31
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You
should rely only on the information contained or incorporated by reference
in
this prospectus or any supplement. We have not authorized any other person
to
provide you with different information. If anyone provides you with different
or
inconsistent information, you should not rely on it. We are not, and any
underwriter or agent is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date
on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
ABOUT
THIS PROSPECTUS
This
prospectus is part of a Registration Statement that we filed with the United
States Securities and Exchange Commission (the “SEC”), utilizing a “shelf”
registration process. Under this shelf process, the selling shareholders may
offer up to a total of 1,477,865 ordinary shares, from time to time, in one
or
more offerings in any manner described under the section in this prospectus
entitled “Plan of Distribution.”
Unless
the context otherwise requires, all references in this prospectus to “RADCOM,”
“we,” “our,” “our company,” “us” and the “Company” refer to RADCOM Ltd. and its
consolidated subsidiaries, unless otherwise indicated. References to “RADCOM”
refer to RADCOM Ltd.
All
references in this prospectus to “ordinary shares” refer to our ordinary shares,
par value 0.20 NIS per share.
All
references in this prospectus to “dollars” or “$” are to United States
dollars.
All
references in this prospectus to “shekels” or “NIS” are to New Israeli
Shekels.
REVERSE
SHARE SPLIT
In
May
2008, our shareholders approved a one-to-four reverse share split. The purpose
of the reverse share split was to enable the Company to continue to comply
with
the minimum $1.00 bid price of the NASDAQ Capital Market. We effected this
reverse share split in June 2008. All figures cited in this prospectus reflect
the impact of such reverse share split.
PROSPECTUS
SUMMARY
You
should read the following summary together with the more detailed information
regarding us and the securities being sold in this offering, including the
risks
discussed under the heading “Risk Factors,” contained in this prospectus. You
should also read carefully the consolidated financial statements and notes
thereto and the other information about us that is incorporated by reference
into this prospectus, including our annual report on Form 20-F for the fiscal
year ended December 31, 2007, filed with the SEC on June 30, 2008, referred
to
as “our Form 20-F for 2007,” and our Forms 6-K regarding our 2008 financial
results through June 30, 2008 and recent transactions, all incorporated by
reference into this prospectus.
Our
Company
RADCOM
Ltd. was incorporated in 1985 under the laws of the State of Israel, and we
commenced operations in 1991. The principal legislation under which we operate
is the Israeli Company Laws 1999 (the “Israeli
Companies Law”). Our principal executive offices are located at 24 Raoul
Wallenberg Street, Tel-Aviv 69719, Israel, and our telephone and fax numbers
are
972-3-645-5055 and 972-3-647-4681, respectively.
In
1993,
we established a wholly-owned subsidiary in the United States, RADCOM Equipment,
Inc. (“RADCOM Equipment, Inc.”), a New Jersey corporation, which serves as our
agent for service of process in the United States. RADCOM Equipment is located
at 6 Forest Avenue, Paramus, New Jersey 07652, and its telephone number is
(201)
518-0033. In 1996, we incorporated a wholly-owned subsidiary in Israel, RADCOM
Investments (1996) Ltd. (“RADCOM Investments”), located at our office in
Tel-Aviv, Israel; its telephone number is the same as ours (972-3-645-5055).
In
2001, we established a wholly-owned subsidiary in the United Kingdom, RADCOM
(UK) Ltd., a United Kingdom corporation. RADCOM (UK) Ltd. is located at 2440
The
Quadrant, Aztec West, Almondsbury, Bristol, BS32 4AQ England, and its telephone
number is 44-1454-878827.
We
develop, manufacture, market and support innovative network test and service
assurance solutions for communications service providers and equipment vendors.
We specialize in next generation cellular as well as voice, data and video
over
IP networks. Our solutions are used in the development and installation of
network equipment and in the maintenance of operational networks. Our products
facilitate fault management, network service performance monitoring and
analysis, troubleshooting and pre-mediation (the ability to collect network
information for a third-party application). We currently offer the following
solutions: (i) Network monitoring and (ii) Protocol Analyzers.
(i)
Network
Monitoring: Our
award-winning Omni-Q is a unique, next-generation network testing, monitoring
and performance management solution. The Omni-Q system consists of a powerful
and user-friendly central management module and a broad range of intrusive
and
non-intrusive probes covering various networks and services, including VoIP,
UMTS, CDMA, IPTV, IMS data and others. The Omni-Q’s central management module is
designed to exploit the unique capabilities and feature set of our probes.
It
consolidates captured information into a comprehensive, integrated network
service view that facilitates performance monitoring, fault detection, and
network and service troubleshooting.
(ii)
Protocol
Analyzers: Our
award-winning network protocol analyzers offer a powerful network analysis
and
test solutions available to the Cellular, VoIP and data communications industry.
Our network analyzers support over 700 protocols with multiple interfaces,
allowing users to troubleshoot and analyze the most complex and advanced
networks, quickly and simply.
We
categorize our products into two primary lines: (i) the Omni-Q
network monitoring solution
and (ii)
the Performer family.
(i)
The
Omni-Q Network Monitoring Solution:
The
Omni-Q is a unique, comprehensive, next-generation probe base service assurance
solution for network and service monitoring. The Omni-Q solution consists
of a
powerful and user-friendly central management server and a broad range of
intrusive and non-intrusive probes covering various networks and services,
including VoIP, UMTS, CDMA and data. These probes are based on the R70 probe
and
Performer family platforms, enabling the Omni-Q to deliver full visibility
at
the session and application level (and not only at the single packet or message
level), with full 7-layer analysis. The R70 probe platform is an embedded
Linux
platform, based on our GearSet technology. The GearSet is a technology extension
of our successful GEAR chip technology, allowing a full session tracing and
analysis in a chip set and permitting wirespeed analysis of network services.
In
addition, the Omni-Q benefits global telecommunications carriers, by providing
end-to-end voice quality monitoring and management.
(ii)
The
Performer Family: The
Performer family is an open platform that supports a wide range of test
applications over a variety of technologies. With simplified control from
a
central console, the Performer hardware and software suite tests the quality
and
grade of service of a real-world network environment. The Performer family
is a
PC-based system, utilizing our generic analyzer processor, or GEAR-based,
hardware. Our GEAR (GenEric AnalyzeR processor) chip is our main differentiating
technology. It is a proprietary, one-chip analyzer processor designed to
provide
on all layers wirespeed testing performance, independent of protocols and
technologies. The GEAR processor positions us as the industry leader in the
high-performance, communication test-equipment market. It allows one platform
to
carry out both network troubleshooting and analysis as well as packet and
cell
analysis in real time, at up to 2.5 gigabytes per second (Gbps), with no
limitation on interface type or protocols. The GEAR technology also allows
us to
rapidly develop and roll out new interfaces by merely adding a new interface
with the appropriate functionality. The Performer family is unique for its
combination of strong hardware performance and flexible software
use.
Our
objective is to become a market leader in network test and service monitoring
solutions. To this end, we seek to deliver customer-oriented, technically
advanced and cost-effective products and to support them according to
world-class standards. Key elements of our strategy include:
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Capitalizing
on the growth in the Cellular network and the move of wireline networks
to
IP technology markets and their associated monitoring
needs;
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Leveraging
and expanding our top-tier customer base and distribution channels
to gain
access to the service providers who are offering these new
technologies;
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Broadening
our penetration of major service providers and
vendors;
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Extending
our sales capabilities and distribution
channels;
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Repeating
sales to our existing customers;
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Leveraging
our experience and knowledge in the area of converged networks and
technology platforms to produce comprehensive testing and analysis
solutions for triple-play networks;
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Maintaining
technological leadership while addressing the needs of emerging technology
markets;
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Partnering
with companies that offer complementary solutions and applications;
and
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Carrying
out synergistic strategic transactions with companies in tangent
markets
to broaden our solution portfolio and our sales and marketing
reach.
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Our
sales
network includes RADCOM Equipment, our wholly-owned subsidiary in the United
States, as well as nine independent representatives, and more than 35
independent distributors in over 35 other countries. No
single
customer accounted for more than 10% of our sales in the year ended December
31,
2007 or in the six months ended June 30, 2008.
THE
TRANSACTIONS
Background
Following
are the sequence of events relating to the offering of securities described
in
this prospectus:
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On
December 19, 2007, we entered into a Share and Warrant Purchase Agreement
(defined below) with the selling shareholders relating to the issuance
of
ordinary shares and PIPE Warrants (defined below). On February 3,
2008, we
completed the transaction pursuant to the Share and Warrant Purchase
agreement and issued to the selling shareholders 976,564 ordinary
shares
and PIPE Warrants exercisable into an aggregate of 325,520 ordinary
shares.
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On
April 1, 2008, we entered into a Loan Agreement (defined below) with
Plenus (defined below) pursuant to which we issued to Plenus one
Plenus
Warrant (defined below) exercisable into an aggregate of 175,781
ordinary
shares.
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On
June 16, 2008, we effected a one-for-four reverse share
split.
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Share
and Warrant Purchase Agreement
On
December 19, 2007, we entered into an agreement (the “Share and Warrant Purchase
Agreement”) with the selling shareholders (described under the section in this
prospectus entitled “Selling Shareholders”) pursuant to which we agreed to issue
to the selling shareholders an aggregate of 976,564 ordinary shares and warrants
(the “PIPE Warrants”) exercisable into an aggregate of 325,520 ordinary shares.
On February 3, 2008, we completed the private investment in public equity
transaction (the “PIPE” or “private placement”) pursuant to the Share and
Warrant Purchase Agreement, and we issued to the selling shareholders an
aggregate of 976,564 ordinary shares and the PIPE Warrants. The PIPE Warrants
are exercisable at an exercise price of $3.20 per warrant. The PIPE Warrants
are
exercisable during a three-year period ending on February 3, 2011.
Loan
Agreement
On
April
1, 2008, we entered into an agreement with Plenus II, Limited Partnership,
Plenus II (D.C.M.), Limited Partnership, Plenus
III, Limited Partnership, Plenus III (D.C.M.), Limited Partnership,
Plenus
III (2), Limited Partnership and Plenus III (C.I.), L.P. (collectively,
“Plenus”) (the agreement, the “Loan Agreement”) pursuant to which Plenus
provided us a loan in the amount of $2.5 million; the loan is for a period
of
three years, and it bears interest at the rate of 10% per annum. Under the
Loan
Agreement, we granted Plenus a single warrant, and registration rights with
respect to the ordinary shares underlying the warrant, to purchase $450,000
of
our ordinary shares (the “Plenus Warrant” and together with the PIPE Warrants,
the “Warrants”). The Plenus Warrant is exercisable for a period of five years,
and its exercise price is $2.56 per share. The Plenus Warrant is exercisable
until April 14, 2013, which is five years from the date of closing.
The
Warrants are subject to (i) adjustment for share dividends, share splits,
reclassification, reorganization and other similar events, and (ii)
anti-dilution adjustment.
We
agreed
with the recipients of our ordinary shares and Warrants to register for public
resale the 976,564 ordinary shares issued to them in the PIPE and the 501,301
ordinary shares issuable to them upon exercise of the Warrants. This prospectus
has been prepared, and the Registration Statement of which this prospectus
is a
part has been filed with the SEC, to satisfy our obligations to the recipients
of our ordinary shares and warrants.
Accordingly,
this prospectus covers:
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the
resale by selling shareholders of our ordinary shares issued in the
private placement; and
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the
resale by selling shareholders of our ordinary shares issuable upon
exercise of the Warrants issued in the private placement and pursuant
to
the Loan Agreement.
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Investing
in our ordinary shares involves risks. You should carefully consider the
information under “Risk Factors” beginning on page 7 and the other information
included or incorporated by reference in this prospectus before investing in
our
ordinary shares.
RISK
FACTORS
You
should carefully consider the risks described below and in the other sections
of, and the documents we have incorporated by reference into, this prospectus,
when deciding whether to purchase our ordinary shares. The risks and
uncertainties described below and in the documents we have incorporated by
reference into this prospectus are not the only ones we face. Additional risks
and uncertainties that we are not aware of or that we currently believe are
immaterial may also adversely affect our business, financial condition, results
of operations, and our liquidity. Our business, financial condition or results
of operations could be materially adversely affected by any of these risks.
The
trading price of our ordinary shares could decline due to any of these risks,
and you may lose all or part of your investment.
Risks
Related to Our Business and Our Industry
We
may incur losses in the future.
Although
we had net income in the fiscal year ended December 31, 2005, in the fiscal
years ended December 31, 2006 and 2007, we incurred losses, and we also incurred
losses in the first and second quarters of 2008 of $0.9 million and $1.8
million, respectively.
We
may
incur losses in the future, which could materially affect our cash, liquidity
and adversely affect the value and market price of our shares.
We
have a history of quarterly fluctuations and unpredictability in our results
of
operations and expect these fluctuations to continue. This may cause our stock
price to decline.
We
have
experienced and expect to experience in the future significant fluctuations
in
our quarterly results of operations. Factors that may contribute to fluctuations
in our quarterly results of operations include:
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the
variation in size and timing of individual purchases by our customers;
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absence
of long-term customer purchase contracts;
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seasonal
factors that may affect capital spending by customers, such as the
varying
fiscal year-ends of customers and the reduction in business during
the
summer months, particularly in Europe;
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the
relatively long sale cycles for our products;
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competitive
conditions in our markets;
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the
timing of the introduction and market acceptance of new products
or
product enhancements by us and by our customers, competitors and
suppliers;
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changes
in the level of operating expenses relative to revenues;
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product
quality problems;
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changes
in global or regional economic conditions or in the telecommunications
industry;
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delays
in purchasing decisions or customer orders due to customer consolidation;
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changes
in the mix of products sold; and
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size
and timing of approval of grants from the Government of
Israel.
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We
believe, therefore, that period-to-period comparisons of our operating results
should not be relied upon as a 3reliable indication of future
performance.
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Our
revenues in any period generally have been, and may continue to be,
derived from a relatively small number of orders with relatively
high
average revenues per order. Therefore, the loss of any order or a
delay in
closing a transaction could have a more significant impact on our
quarterly revenues and results of operations than on those of companies
with relatively high volumes of sales or low revenues per order.
Our
products generally are shipped within 15 to 30 days after orders
are
received. As a result, we generally do not have a significant backlog
of
orders, and revenues in any quarter are substantially dependent on
orders
booked, shipped and installed in that quarter.
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We
may
experience a delay in generating or recognizing revenues for a number of reasons
and based on revenue recognition accounting requirements. Unfulfilled orders
at
the beginning of each quarter are typically substantially less than our expected
revenues for that quarter. Therefore, we depend on obtaining orders in a quarter
for shipment in that quarter to achieve our revenue objectives. Moreover, demand
for our products may fluctuate as a result of seasonality. Generally, we are
affected by the capital spending of the end-users of our products. These
end-users tend to spend more towards the end of their fiscal year, which is
typically the end of the calendar year, resulting in more orders during the
second half of the year compared to the first half of the year. This has been
the pattern over the last few years.
Our
revenues for a particular period may also be difficult to predict and may be
adversely affected if we experience a non-linear (back-end loaded) sales pattern
during the period. We generally experience significantly higher levels of sales
towards the end of a period as a result of customers submitting their orders
late in the period or as a result of manufacturing issues or component shortages
which may delay shipments. Such non-linearity in shipments can increase costs,
as irregular shipment patterns result in periods of underutilized capacity
and
periods when overtime expenses may be incurred, and also lead to additional
costs associated with inventory planning and management. Furthermore, orders
received towards the end of the period may not ship within the period due to
our
manufacturing lead times.
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Except
for our cost of revenues, most of our costs, .including personnel
and
facilities costs, are relatively fixed at levels based on anticipated
revenue. As a result, a decline in revenue from even a limited number
of
orders could result in our failure to achieve expected revenue in
any
quarter and unanticipated variations in the timing of realization
of
revenue could cause significant variations in our quarterly operating
results and could result in losses.
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If
our revenues in any quarter remain level or decline in comparison
to any
prior quarter, our financial results could be materially adversely
affected. In addition, if we do not reduce our expenses in a timely
manner
in response to level or declining revenues, our financial results
for that
quarter could be materially adversely affected.
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Due
to the factors described above, as well as other unanticipated factors,
in
future quarters our results of operations could fail to meet the
expectations of public market analysts or investors. If this occurs,
the
price of our ordinary shares may fall.
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A
slowdown in the telecommunications industry generally, or in the sectors of
the
industry that we target (currently primarily 3G and 3.5G Cellular and
triple-play networks), could materially adversely affect our revenues and
results of operations.
Our
future success is dependent upon the continued growth of the telecommunications
industry. The global telecommunications industry is evolving rapidly, and it
is
difficult to predict its potential growth rate or future trends in technology
development. The deregulation, privatization and economic globalization of
the
worldwide telecommunications market that have resulted in increased competition
and escalating demand for new technologies and services may not continue in
a
manner favorable to us or our business strategies. In addition, the growth
in
demand for Internet services and the resulting need for high speed or enhanced
telecommunications equipment may not continue at its current rate or at all.
Our
future success depends upon the increased utilization of our test solutions
by
next-generation network operators and telecommunications equipment vendors.
Industry-wide network equipment and infrastructure development driving the
demand for our products and services may be delayed or prevented by a variety
of
factors, including cost, regulatory obstacles or the lack of, or reduction
in,
consumer demand for advanced telecommunications products and services.
Telecommunications equipment vendors and network operators may not develop
new
technology or enhance current technology. Further, any such new technology
or
enhancements may not lead to greater demand for our products.
Continued
negative trends and factors affecting the telecommunications industry
specifically and the economy in general may result in reduced demand and pricing
pressure on our products.
Negative
trends and factors affecting the telecommunications industry specifically and
the economy in general over the past several years have negatively affected
our
results of operations. As a result of the build-up of capacity by
telecommunications companies in the late 1990s, the telecommunications sector
has been facing significant challenges from excess capacity, new technologies
and intense price competition. This excess network capacity, combined with
the
failure of many competitors in the telecommunications sector, has contributed
to
delayed adoption of next-generation cellular and wireline networks. In addition,
weak economic conditions that started during the second half of 2007 resulted
in
reduced capital expenditures, reluctance to commit to long-term capital outlays
and longer sales processes for network procurements by our customers. We cannot
predict the duration of the improvement or the impact it may have on our results
of operations. Furthermore, during 2007, we were affected by a slowdown in
the
pace of new 3G and 3.5G Cellular deployments.
Generally,
if economic growth in the United States and other countries’ economies is
slowed, many customers may delay or reduce technology purchases. This could
result in reductions in sales of our products, longer sales cycles, slower
adoption of new technologies and increased price competition. In addition,
weakness in the end-user market could negatively affect the cash flow of our
distributors and resellers who could, in turn, delay paying their obligations
to
us. This would increase our credit risk exposure and cause delays in our
recognition of revenues on future sales to these customers. Any of these events
would likely harm our business, operating results and financial condition.
If
global economic and market conditions, or economic conditions in the United
States or other key markets deteriorate, we may experience material impacts
on
our business, operating results, and financial condition.
Finally,
an overall trend toward industry consolidation and rationalization among our
customers, competitors and suppliers can affect our business, especially if
any
of the sectors we service or the countries or regions in which we do business
are affected. Industry consolidation may slow down the implementation of new
systems and technologies. Any future weakness in the economy or the
telecommunications industry could affect us through reduced demand for our
products, leading to a reduction in revenues and a material adverse effect
on
our business and results of operations.
The
market for our products is characterized by changing technology, requirements,
standards and products, and we may be materially adversely affected if we do
not
respond promptly and effectively to such changes.
The
telecommunications market for our products is characterized by rapidly changing
technology, changing customer requirements, evolving industry standards and
frequent new product introductions, certain changes of which could reduce the
market for our products or require us to develop new products. For example,
the
new IPTV market required us to develop a new product to keep ahead with customer
requirements.
New
or
enhanced telecommunications and data communications-related products developed
by other companies could be incompatible with our products. Therefore, our
timely access to information concerning, and our ability to anticipate, changes
in technology and customer requirements and the emergence of new industry
standards, as well as our ability to develop, manufacture and market new and
enhanced products successfully and on a timely basis, will be significant
factors in our ability to remain competitive. For example, many of our strategic
initiatives and investments are aimed at meeting the requirements of application
providers of 3G and 3.5G Cellular and triple-play networks. If networking
evolves toward greater emphasis on application providers, we believe we have
positioned ourselves well relative to our key competitors. If it does not,
however, our initiatives and investments in this area may be of no or limited
value. As a result we cannot quantify the impact of new product introductions
on
our future operations.
In
addition, as a result of the need to develop new and enhanced products, we
expect to continue making investments in research and development before or
after product introductions. Some of our research and development activities
relate to long-term projects, and these activities may fail to achieve their
technical or business targets and may be terminated at any point, and revenues
expected from these activities may not be received for a substantial time,
if at
all.
Our
inventory may become obsolete or unusable.
We
make
advance purchases of various component parts in relatively large quantities
to
ensure that we have an adequate and readily available supply. Our failure to
accurately project our needs for these components and the demand for our
products that incorporate them, or changes in our business strategy or
technology that reduce our need for these components, could result in these
components becoming obsolete prior to their intended use or otherwise unusable
in our business. This would result in a write-off of inventories for these
components.
Any
reversal or slowdown in deregulation of telecommunications markets could
materially harm the markets for our products.
Future
growth in the markets for our products will depend, in part, on the continued
privatization, deregulation and the restructuring of telecommunications markets
worldwide, as the demand for our products is generally higher when a competitive
environment exists. Any reversal or slowdown in the pace of this privatization,
deregulation or restructuring could materially harm the markets for our
products. Moreover, the consequences of deregulation are subject to many
uncertainties, including judicial and administrative proceedings that affect
the
pace at which the changes contemplated by deregulation occur, and other
regulatory, economic and political factors. Furthermore, the uncertainties
associated with deregulation have in the past, and could in the future, cause
our customers to delay purchasing decisions pending the resolution of these
uncertainties.
Our
business could be harmed if we were to lose the services of one or more members
of our senior management team, or if we are unable to attract and retain
qualified personnel.
Our
future growth and success depends to a significant extent upon the continuing
services of our executive officers and other key employees. We do not have
long-term employment agreements or non-competition agreements with any of our
employees. Competition for qualified management and other high-level
telecommunications industry personnel is intense, and we may not be successful
in attracting and retaining qualified personnel. If we lose the services of
any
key employees, we may not be able to manage our business successfully or to
achieve our business objectives.
Our
success also depends on our ability to identify, attract and retain qualified
technical, sales, finance and management personnel. We have experienced, and
may
continue to experience, difficulties in hiring and retaining candidates with
appropriate qualifications. If we do not succeed in hiring and retaining
candidates with appropriate qualifications, our revenues and product development
efforts could be harmed.
We
may lose significant market share as a result of intense competition in the
markets for our existing and future products.
Many
companies compete with us in the market for network testing and service
monitoring solutions. We expect that competition will increase in the future,
both with respect to products that we currently offer and products that we
are
developing. Moreover, manufacturers of data communications and
telecommunications equipment, which are current and potential customers of
ours,
may in the future incorporate into their products capabilities similar to ours,
which would reduce the demand for our products. In addition, affiliates of
ours
that currently provide services to us may, in the future, compete with us.
Many
of
our existing and potential competitors have substantially greater resources,
including financial, technological, engineering, manufacturing and marketing
and
distribution capabilities, and several of them may enjoy greater market
recognition than us. We may not be able to compete effectively with our
competitors. A failure to do so could adversely affect our revenues and
profitability.
We
are dependent upon the success of distributors and sales representatives who
are
under no obligation to distribute our products.
We
are
highly dependent upon our distributors for their active marketing and sales
efforts and for the distribution of our products and sales representatives
in
North America to a lesser degree. Many of our distributors outside of North
America and China are the only entities engaged in the distribution of our
products in their respective geographical areas. Typically, our arrangements
with them do not prevent our distributors from distributing competing products,
or require them to distribute our products in the future. Our distributors
may
not give a high priority to marketing and supporting our products. Our results
of operations could be materially adversely affected by changes in the financial
situation, business or marketing strategies of our distributors. Any such
changes could occur suddenly and rapidly.
We
may lose customers and/or distributors on whom we currently depend and we may
not succeed in developing new distribution channels.
We
had
one customer in North America who accounted for more than 10% of our sales
in
each of 2005 and 2006. This customer reduced its orders in 2007, thereby
accounting for less than 10% of our sales, which had an adverse impact on our
operating results.
Our
seven
largest distributors accounted for a total of approximately 36.1% of our sales
in 2005, 40.7% of our sales in 2006 and 39.3% of our sales in 2007. One of
our
largest distributors in Europe accounted for about 10% of our sales in 2005.
None of our distributors accounted for more than 10% of our sales in 2006 or
2007. If we terminate or lose any of our distributors or if they downsize
significantly, we may not be successful in replacing them on a timely basis,
or
at all. Any changes in our distribution and sales channels, particularly the
loss of a major distributor or our inability to establish effective distribution
and sales channels for new products, will impact our ability to sell our
products and result in a loss of revenues.
We
could be subject to warranty claims and product recalls, which could be very
expensive and harm our financial condition.
Products
as complex as ours sometimes contain undetected errors. These errors can cause
delays in product introductions or require design modifications. In addition,
we
are dependent on other suppliers for key components that are incorporated in
our
products. Defects in systems in which our products are deployed, whether
resulting from faults in our products or products supplied by others, due to
faulty installation or any other cause, may result in customer dissatisfaction,
product return and, potentially, product liability claims being filed against
us. Our warranties permit customers to return defective products for repair.
The
warranty period is for one year. Any failure of a system in which our products
are deployed (whether or not our products are the cause), any product recall
or
product liability claims with any associated negative publicity, could result
in
the loss of, or delay in, market acceptance of our products and harm to our
business.
We
incorporate open source technology in our products, which may expose us to
liability and have a material impact on our product development and
sales.
Some
of
our products utilize open source technologies. These technologies are licensed
to us on varying license structures, including the General Public License.
This
license and others like it pose a potential risk to products in the event they
are inappropriately integrated. In the event that we have not, or do not in
the
future, properly integrate software that is subject to such licenses into our
products, we may be required to disclose our own source code to the public,
which could enable our competitors to eliminate any technological advantage
that
our products may have over theirs. Any such requirement to disclose our source
code or other confidential information related to our products could, therefore,
materially adversely affect our competitive advantage and impact our business
results of operations and financial condition.
We
depend on limited sources for key components and if we are unable to obtain
these components when needed, we will experience delays in manufacturing our
products.
We
currently obtain key components for our products from either a single supplier
or a limited number of suppliers. We do not have long-term supply contracts
with
any of our existing suppliers. This presents the following risks:
| · |
Delays
in delivery or shortages in components could interrupt and delay
manufacturing and result in cancellations of orders for our
products.
|
| · |
Suppliers
could increase component prices significantly and with immediate
effect.
|
| · |
We
may not be able to locate alternative sources for product
components.
|
| · |
Suppliers
could discontinue the manufacture or supply of components used in
our
products. This may require us to modify our products, which may cause
delays in product shipments, increased manufacturing costs and increased
product prices.
|
| · |
We
may be required to hold more inventory than would be immediately
required
in order to avoid problems from shortages or
discontinuance.
|
| · |
We
have experienced delays and shortages in the supply of components
on more
than one occasion in the past. This resulted in delays in our delivering
products to our customers.
|
We
depend on a limited number of independent manufacturers, which reduces our
ability to control our manufacturing process.
We
rely
on a limited number of independent manufacturers, some of which are small,
privately held companies, to provide certain assembly services to our
specifications. We do not have any long-term supply agreements with any
third-party manufacturer. If our assembly services are reduced or interrupted,
our business, financial condition and results of operations could be adversely
affected until we are able to establish sufficient assembly services supply
from
alternative sources. Alternative manufacturing sources may not be able to meet
our future requirements, and existing or alternative sources may not continue
to
be available to us at favorable prices.
If
we do not effectively manage our planned growth, our business and operating
results could be adversely affected.
Our
planned growth has placed, and is expected to continue to place, significant
demands on our management and our administrative and operational resources.
To
manage our planned expansion effectively, we need to continue to develop and
improve our operational and financial systems, sales and marketing capabilities
and expand, train, retain, manage and motivate our employee base. Our systems,
procedures or controls may not be adequate to support our operations and our
management may not be able to successfully exploit future market opportunities,
including, without limitation, strategic partnerships and joint ventures, or
successfully manage our relationships with customers and other third parties.
We
may not continue to grow and, if we do, we may not effectively manage such
planned growth. Any failure to manage planned growth could
have an adverse effect on our business, financial condition and results of
operations.
Our
proprietary technology is difficult to protect and unauthorized use of our
proprietary technology by third parties may impair our ability to compete
effectively.
Our
success and ability to compete depend in large part upon protecting our
proprietary technology. We rely upon a combination of contractual rights,
software licenses, trade secrets, copyrights, nondisclosure agreements and
technical measures to establish and protect our intellectual property rights
in
our products and technologies. In addition, we sometimes enter into
non-competition, non-disclosure and confidentiality agreements with our
employees, distributors and manufacturers’ representatives, and certain
suppliers with access to sensitive information. However, we have no registered
patents, and these measures may not be adequate to protect our technology from
third-party infringement. Moreover, pursuant to current U.S. and Israeli laws,
we may not be able to enforce certain existing non-competition agreements.
Additionally, effective trademark, patent and trade secret protection may not
be
available in every country in which we offer, or intend to offer, our
products.
We
may be subject to litigation, including without limitation, regarding
infringement claims or claims that we have violated intellectual property
rights, which could seriously harm our business.
Third
parties may from time to time assert against us infringement claims or claims
that we have violated a patent or infringed a copyright, trademark or other
proprietary right belonging to them. If such infringement were found to exist,
we might be required to modify our products or intellectual property or obtain
a
license or right to use such technology or intellectual property. Any
infringement claim, even if not meritorious, could result in the expenditure
of
significant financial and managerial resources.
Yehuda
Zisapel and Zohar Zisapel, beneficially own approximately 39.3% of our ordinary
shares and therefore have significant influence over the outcome of matters
requiring shareholder approval, including the election of
directors.
As
of
August 18, 2008, Yehuda Zisapel and Zohar Zisapel (our Chairman of the Board
of
Directors), who are brothers, beneficially owned an aggregate of 1,993,447
ordinary shares, representing approximately 39.3% of the ordinary shares. As
a
result, Yehuda Zisapel and Zohar Zisapel have significant influence over the
outcome of various actions that require shareholder approval, including the
election of our directors. In addition, Yehuda Zisapel and Zohar Zisapel may
be
able to delay or prevent a transaction in which shareholders might receive
a
premium over the prevailing market price for their shares and prevent changes
in
control of management.
We
engage in transactions, and compete, with companies controlled by Yehuda Zisapel
and Zohar Zisapel, which may result in potential
conflicts.
We
are
engaged in, and expect to continue to be engaged in, numerous transactions
with
companies controlled by Yehuda Zisapel and Zohar Zisapel. We believe that such
transactions are beneficial to us and are generally conducted upon terms that
are no less favorable to us than would be available from unaffiliated third
parties. Nevertheless, these transactions may result in a conflict of interest
between what is best for us and the interests of the other parties in such
transactions. In addition, several products of such affiliated companies may
be
used in place of our products, and it is possible that direct competition
between us and one or more of such affiliated companies may develop in the
future. Moreover, opportunities to develop, manufacture, or sell new products
(or otherwise enter new fields) may arise in the future and be pursued by one
or
more affiliated companies instead of or in competition with us. This could
materially adversely affect our business and results of operations.
We
may encounter difficulties with our international operations and sales which
could affect our results of operations.
While
we
are headquartered in Israel, approximately 96.6% of our sales in 2005, 98.5%
of
our sales in 2006 and 96.4% of our sales in 2007 were generated outside of
Israel, including in North America, Europe, Asia, South America and Australia.
This subjects us to many risks inherent in international business activities,
including:
| · |
national
standardization and certification requirements and changes in tax
law and
regulatory requirements;
|
| · |
longer
sales cycles, especially upon entry into a new geographic
market;
|
| · |
export
license requirements;
|
| · |
economic
or political instability;
|
| · |
greater
difficulty in safeguarding intellectual property;
and
|
| · |
difficulty
in managing overseas subsidiaries, branches or international
operations.
|
We
may
encounter significant difficulties in connection with the sale of our products
in international markets as a result of one or more of these factors. In
particular, the significant devaluation of the U.S. dollar vis-à-vis the NIS
during 2007 had and may continue to have an adverse effect on our operations,
as
we derive most of our revenues in U.S. dollars while we incur most of our
expenses in NIS.
Any
inability to comply with Section 404 of the Sarbanes-Oxley Act of 2002 regarding
internal control attestation may negatively impact the report on our financial
statements to be provided by our independent auditors.
We
are
subject to the reporting requirements of the SEC. The SEC, as directed by
Section 404 of the United States Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley
Act”), adopted rules requiring public companies to include a report of
management on the Company’s internal control over financial reporting in its
annual report on Form 10-K or Form 20-F, as the case may be, that contains
an
assessment by management of the effectiveness of the Company’s internal control
over financial reporting. In addition, the Company’s independent registered
public accountants must attest to and report on the effectiveness of the
Company’s internal control over financial reporting. Our management may not
conclude that our internal controls over financial reporting are effective.
Moreover, even if our management does conclude that our internal controls over
financial reporting are effective, our independent accountants may issue an
adverse opinion on our internal control over financial reporting. Any of these
possible outcomes could result in a loss of investor confidence in the
reliability of our financial statements, which could negatively impact the
market price of our shares.
As
a
non-accelerated filer, we must now comply with the annual disclosure
requirements of Section 404 regarding management’s report on internal control
over financial reporting. Pursuant to Section 404(b), we will be required to
provide an independent auditor’s attestation in the 2009 annual report, i.e.,
for the year ended December 31, 2009.
If
we
determine that we are not in compliance with Section 404, we may be required
to
implement new internal control procedures and re-evaluate our financial
reporting. We may experience higher than anticipated operating expenses as
well
as outside auditor fees during the implementation of these changes and
thereafter. Further, we may need to hire additional qualified personnel in
order
for us to be compliant with Section 404. If we are unable to implement these
changes effectively or efficiently, it could harm our operations, financial
reporting or financial results and could result in our conclusion that our
internal controls over financial reporting are not effective.
Our
adoption of SFAS 123(R) will result in ongoing accounting charges that will
significantly reduce our net income.
In
December 2004, the Financial Accounting Standards Board (the “FASB”) issued
Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment” (“SFAS 123(R)”), which requires all companies to measure compensation
expense for all share-based payments (including employee stock options) at
fair
value, and which became effective for public companies for annual reporting
periods of fiscal years beginning
after
June 15, 2005. Our adoption of SFAS 123(R) required us to record an expense
of
$564,000 for stock-based compensation plans during 2007 and will continue to
result in ongoing accounting charges that will significantly reduce our net
income. See Note 6 of the Notes to the Consolidated Financial Statements for
further information in our Form 20-F for 2007.
If
we are characterized as a passive foreign investment company, our U.S.
shareholders may suffer adverse tax consequences.
As
more
fully described in “Item 10. Additional Information—Taxation—United States
Federal Income Tax Considerations—Taxation of Ordinary Shares—Passive Foreign
Investment Company Status” of our Form 20-F for 2007, if for any taxable year
our passive income, or our assets that produce (or are held for the production
of) passive income, exceed specified levels, we may be characterized as a
passive foreign investment company (“PFIC”) for U.S. federal income tax
purposes. This characterization could result in adverse U.S. tax consequences
to
our U.S. shareholders, including gain on the disposition of our ordinary shares
being treated as ordinary income and any resulting U.S. federal income tax
being
increased by an interest charge. Rules similar to those applicable to
dispositions generally will apply to certain “excess distributions” in respect
of our ordinary shares. We believe that we were not a PFIC for 2007 based upon
our income, assets, activities and market capitalization during such year.
However, there are no assurances that the IRS will agree with our conclusion
or
that we will not become a PFIC in subsequent taxable years. U.S. shareholders
should consult with their own U.S. tax advisors with respect to the U.S. tax
consequences of investing in our ordinary shares.
Volatility
of the market price of our ordinary shares could adversely affect us and our
shareholders.
The
market price of our ordinary shares has been and is likely to continue to be
highly volatile and could be subject to wide fluctuations in response to
numerous factors, including the following:
| · |
market
conditions or trends in our
industry;
|
| · |
political,
economic and other developments in the State of Israel and
worldwide;
|
| · |
actual
or anticipated variations in our quarterly operating results or those
of
our competitors;
|
| · |
announcements
by us or our competitors of technological innovations or new and
enhanced
products;
|
| · |
changes
in the market valuations of our
competitors;
|
| · |
announcements
by us or our competitors of significant
acquisitions;
|
| · |
entry
into strategic partnerships or joint ventures by us or our competitors;
and
|
| · |
additions
or departures of key personnel.
|
In
addition, the stock market in general, and the market for Israeli and technology
companies in particular, has been highly volatile. Many of these factors are
beyond our control and may materially adversely affect the market price of
our
ordinary shares, regardless of our performance. Shareholders may not be able
to
resell their ordinary shares following periods of volatility because of the
market’s adverse reaction to such volatility and we may not be able to raise
capital through an offering of securities.
From
time to time we may need to raise financing. If adequate funds are not available
on terms favorable to us or to our shareholders, our operations and growth
strategy will be materially adversely affected.
From
time
to time we may be required to raise financing in connection with our operations
and growth strategy. We do not know whether additional financing will be
available when needed, or whether it will be available on terms favorable to
us.
If adequate funds are not available on terms favorable to us or to our
shareholders, our operations and growth strategy will be materially adversely
affected.
We
might not satisfy all the requirements for continued listing on the NASDAQ
Capital Market, and our shares may be delisted.
Following
a one-to-four reverse share split that we effected on June 16, 2008, we are
currently in compliance with all requirements for continued listing on the
NASDAQ Capital Market, to which we transferred from the NASDAQ Global Market
on
October 1, 2007. We cannot assure you, however, that we will maintain such
compliance over the long term or that we will be able to maintain compliance
with all of the continued listing requirements for the NASDAQ Capital Market.
If
we fail to comply with any of the continued listing requirements, we could
be
delisted from the NASDAQ Capital Market. Our shares would then be quoted on
the
Over-The-Counter Bulletin Board (assuming we satisfied the continued listing
requirements for that quotation system). During 2007 and 2008, our share price
decreased below the required minimum bid price. In addition, in 2007, we fell
below the minimum $10 million shareholders’ equity requirement of the NASDAQ
Global Market and we had to transfer to the NASDAQ Capital Market in order
to
continue to be listed on NASDAQ. The post-reverse share split price of our
ordinary share is approximately $1.64 as of August 18, 2008; however, if our
share price continues to decline we might be unable to satisfy the NASDAQ
Capital Market continued listing requirements, including its minimum bid price
of a $1 per share.
Risks
Relating to Our Location in Israel
Conditions
in Israel affect our operations and may limit our ability to produce and sell
our products.
We
are
incorporated under Israeli law and our principal offices and manufacturing
and
research and development facilities are located in the State of Israel.
Political, economic and military conditions in Israel directly affect our
operations. Since the establishment of the State of Israel in 1948, a number
of
armed conflicts have taken place between Israel and its Arab neighbors, and
a
state of hostility, varying in degree and intensity, has led to security and
economic problems for Israel. We could be adversely affected by hostilities
involving Israel, the interruption or curtailment of trade between Israel and
its trading partners, a significant increase in inflation, or a significant
downturn in the economic or financial condition of Israel. Since October 2000,
there has been a marked increase in hostilities between Israel and the
Palestinians, which has adversely affected the peace process and has negatively
influenced Israel’s relationship with several Arab countries. Also, the
political and security situation in Israel may result in certain parties with
whom we have contracts claiming that they are not9 obligated to perform their
commitments pursuant to force majeure provisions of those contracts. In January
2006, Hamas, an Islamic movement responsible for many attacks against Israelis,
won the majority of the seats in the Parliament of the Palestinian Authority.
The election of a majority of Hamas-supported candidates is expected to be
a
major obstacle to relations between Israel and the Palestinian Authority, as
well as to the stability in the Middle East as a whole. During the third quarter
of 2006, Israel was engaged in war with the Hezballah in Lebanon; however,
the
war did not materially affect the Company’s results. There have been extensive
hostilities along Israel's border with the Gaza Strip since June 2007 when
the
Hamas effectively took control of the Gaza Strip. Further escalation has
occurred during 2008.
Since
our
manufacturing facilities are located exclusively in Israel, we could experience
disruption of our manufacturing due to acts of terrorism or any other
hostilities involving or threatening Israel. If an attack were to occur, any
Israeli military response that results in the call to duty of the country’s
reservists (as further discussed below) could affect the performance of our
Israeli facilities for the short term. Our business interruption insurance
may
not adequately compensate us for losses that may occur and any losses or damages
incurred by us could have a material adverse effect on our business. We do
not
believe that the political and security situation has had any material impact
on
our business to date; however, we can give no assurance that it will have no
such effect in the future.
Some
neighboring countries, as well as certain companies and organizations, continue
to participate in a boycott of Israeli firms and others doing business with
Israel or with Israeli companies. We are also precluded from marketing our
products to certain of these countries due to U.S. and Israeli regulatory
restrictions. Because none of our revenue is currently derived from sales to
these countries, we believe that the boycott has not had a material adverse
effect on us. However, restrictive laws, policies or practices directed towards
Israel or Israeli businesses could have an adverse impact on the expansion
of
our business.
All
male
adult citizens and permanent residents of Israel under the age of 51 are, unless
exempt, obligated to perform military reserve duty annually. Additionally,
these
residents are subject to being called to active duty at any time under emergency
circumstances. Many of our officers and employees are currently obligated to
perform annual reserve duty. Given these requirements, we believe that we have
operated relatively efficiently since beginning operations in 1991 and since
increased hostilities with the Palestinians beginning in October 2000. In
addition, our operations were not materially affected by the war with Lebanon
that took place during the third quarter of 2006. However, we cannot assess
what
the full impact of these requirements on our workforce or business would be
if
the situation with the Palestinians changed, and we cannot predict the effect
on
our business operations of any expansion or reduction of these military reserve
requirements.
We
may be adversely affected if the rate of inflation in Israel exceeds the rate
of
devaluation of the New Israeli Shekel against the dollar, and if the value
of
the New Israeli Shekel against the dollar increases.
A
portion
of our expenses, primarily labor expenses, is incurred in NIS. As a result,
we
are exposed to the risk that the rate of inflation in Israel will exceed the
rate of devaluation of the NIS in relation to the dollar or that the timing
of
this devaluation will lag behind inflation in Israel. Further, during 2007
the
dollar decreased in value relative to the NIS by about 9%. This trend has
continued during the first seven months of 2008 by an additional devaluation
of
the dollar relative to the NIS by about 10%. If this trend towards devaluation
continues, it, coupled with a high inflation rate in Israel, may result in
higher dollar costs for our operations in Israel, adversely affecting our
dollar-measured results of operations.
We
currently benefit from government programs and tax benefits that may be
discontinued or reduced.
We
currently receive grants and potential tax benefits under Government of Israel
programs. In order to maintain our eligibility for these programs and benefits,
we must continue to meet specific conditions, including making specific
investments in fixed assets and paying royalties with respect to grants
received. In addition, some of these programs restrict our ability to
manufacture particular products outside of Israel or to transfer particular
technology. If we fail to comply with these conditions in the future, the
benefits received could be canceled and we could be required to refund any
payments previously received under these programs, or pay increased taxes.
These
programs and tax benefits may be discontinued or curtailed in the future. If
we
do not receive these grants in the future, we will have to allocate funds to
product development at the expense of other operational costs. The amount,
if
any, by which our taxes will increase depends upon the rate of any tax increase,
the amount of any tax benefit reduction and the amount of any taxable income
that we may earn in the future. If the Government of Israel ends these programs
and tax benefits, our business, financial condition and results of operations
could be materially adversely affected.
Provisions
of Israeli law may delay, prevent or make difficult a merger or acquisition
of
us, which could prevent a change of control and depress the market price of
our
shares.
The
Israeli Companies Law (the “Companies Law”) generally requires that a merger be
approved by a company’s board of directors and by a majority of the shares
voting on the proposed merger. Unless a court rules otherwise, the statutory
merger will not be deemed approved if shares representing a majority of the
voting power present at the shareholders meeting, and which are not held by
the
potential merger partner (or by any person who holds 25% or more of the shares
of capital stock or the right to appoint 25% or more of the directors of the
potential merger partner or its general manager), vote against the merger.
Upon
the request of any creditor of a party to the proposed merger, a court may
delay
or prevent the merger if it concludes that there is a reasonable concern that,
as a result of the merger, the surviving company will be unable to satisfy
its
obligations. In addition, a merger may generally not be completed unless at
least (i) 50 days have passed since the filing of the merger proposal with
the
Israeli Registrar of Companies by each of the merging companies, and (ii) 30
days have passed since the merger was approved by the shareholders of each
of
the parties to the merger.
Finally,
Israeli tax law treats some acquisitions, such as stock-for-stock exchanges
between an Israeli company and a foreign company less favorably than do U.S.
tax
laws. For example, Israeli tax law may, under certain circumstances, subject
a
shareholder who exchanges his ordinary shares for shares in another corporation
to taxation prior to the sale of the shares received in such a stock-for-stock
swap.
These
provisions of Israeli corporate and tax law and the uncertainties surrounding
such law may have the effect of delaying, preventing or making more difficult
a
merger with us or an acquisition of us. This result could prevent a change
of
control over us and depress our ordinary shares’ market price which otherwise
might rise as a result of such a change of control.
It
may be difficult to (i) effect service of process, (ii) assert U.S. securities
laws claims and (iii) enforce U.S. judgments in Israel against directors,
officers and auditors named in this annual report.
We
are
incorporated in Israel. All of our executive officers and directors named in
this annual report are non-residents of the United States, except for Avi Zamir
who is a resident of the United States. A substantial portion of our assets
and
the assets of such persons are located outside the United States. Therefore,
it
may be difficult to enforce a judgment obtained in the United States against
us
or any of those persons or to effect service of process upon those persons.
It
may also be difficult to enforce civil liabilities under U.S. federal securities
laws in original actions instituted in Israel.
Our
ordinary shares are listed for trading in more than one market and this may
result in price variations.
Our
ordinary shares are listed for trading on the NASDAQ, and since February 20,
2006, on the Tel-Aviv Stock Exchange (the “TASE”). Trading in our ordinary
shares are traded on these markets in different currencies (U.S. dollars on
the
NASDAQ and New Israeli Shekels on the TASE), and at different times (resulting
from different time zones, different trading days and different public holidays
in the United States and Israel). Actual trading volume on the TASE is currently
lower compared to the trading volume on the NASDAQ, and as such, could be
subject to higher volatility. The trading prices of our ordinary shares on
these
two markets are expected to often differ, resulting from as a result of the
factors described above, as well as in this paragraph, and because of
differences in exchange rates. Any decrease in the trading price of our ordinary
shares on one of these markets could cause a decrease in the trading price
of
our ordinary shares on the other market.
Risks
Relating to Our Traded Securities
The
market price of our ordinary shares may be volatile, and our investors may
not
be able to resell the shares at or above the price they paid, or at
all.
During
the past few years, the worldwide stock markets have experienced high price
and
volume fluctuations. The market prices of securities of technology companies
have been extremely volatile, and have experienced fluctuations that have often
been unrelated or disproportionate to the operating performance of those
companies. These broad market fluctuations could adversely affect market price
of our ordinary shares. The high and low market prices of our ordinary shares
traded on the NASDAQ Capital Market and the TASE during each of the last three
years and during the current year through August 18 are summarized in the table
below.
| |
|
|
|
|
|
|
|
|
NASDAQ
Capital Market
|
|
TASE
|
|
|
|
|
In
$
|
|
In
NIS
|
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
|
2008
(through August 18)
|
|
|
3.40
|
|
|
1.60
|
|
|
12.24
|
|
|
5.60
|
|
|
2007
|
|
|
12.72
|
|
|
2.80
|
|
|
53.44
|
|
|
11.12
|
|
|
2006
|
|
|
20.20
|
|
|
6.96
|
|
|
96.16
|
|
|
31.48
|
|
|
2005
|
|
|
14.36
|
|
|
5.40
|
|
|
N/A
|
|
|
N/A
|
|
The
market price of our ordinary shares may continue to fluctuate substantially
due
to a variety of factors, including:
| · |
any
actual or anticipated fluctuations in our or our competitors’ quarterly
revenues and operating results;
|
| · |
shortfalls
in our operating results from levels forecast by securities
analysts;
|
| · |
public
announcements concerning us or our competitors;
|
| · |
the
introduction or market acceptance of new products or service offerings
by
us or by our competitors;
|
| · |
changes
in product pricing policies by us or our competitors;
|
| · |
changes
in security analysts’ financial estimates;
|
| · |
changes
in accounting principles;
|
| · |
sales
of our shares by existing shareholders;
and
|
| · |
the
loss of any of our key personnel.
|
In
addition, economic, political and market conditions, and military conflicts
and,
in particular, those specifically related to the State of Israel, may affect
the
market price of our shares.
Future
sales of our shares to be registered for resale in the public market, as well
as
conversion of our convertible securities, could dilute the ownership interest
of
our existing shareholders and could cause the market price for our ordinary
shares to fall.
As
of
August 18, 2008, we had 5,076,174 ordinary shares outstanding (excluding 30,843
shares that were repurchased by us in the over-the-counter market in March
and
April 2001). In addition, we reserved 1,097,898 ordinary shares for issuance
under the RADCOM Ltd. 1998 Share Option Plan, RADCOM Ltd. 1998 Employees Bonus
Plan, the RADCOM Ltd. International Employee Stock Option Plan, the 2000 Share
Option Plan, the 2001 Share Option Plan and the 2003 Share Option Plan.
In
May
2004, pursuant to agreements entered into with certain investors, we registered
for resale 962,885 ordinary shares and 240,722 ordinary shares underlying
warrants.
The
exercise of options by our employees, and the exercise of warrants by investors
would dilute the ownership interests of our existing shareholders. Any sales
in
the public market of our ordinary shares issuable upon exercise of options
or
conversion of convertible securities could adversely affect the market prices
of
our ordinary shares. If a large number of our ordinary shares are sold in a
short period, the price of our ordinary shares would likely
decrease.
SPECIAL
NOTE REGARDING FORWARD-LOOKING INFORMATION
This
prospectus (including documents incorporated by reference herein) may contain
forward-looking
statements regarding future events and our future results that are subject
to
the safe harbors created under the Securities Act of 1933, as amended, and
the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These
statements are based on current expectations, estimates, forecasts and
projections about the industries in which we operate and the beliefs and
assumptions of our management. Words such as “expects,” “anticipates,”
“targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,”
“estimates,” “continues,” “may,” variations of such words, and similar
expressions are intended to identify such forward-looking statements. In
addition, any statements that refer to projections of our future financial
performance, our anticipated growth and trends in our businesses, and other
characterizations of future events or circumstances are forward-looking
statements.
Any
or
all of our forward-looking statements in this prospectus may turn out to be
wrong. They can be affected by inaccurate assumptions we might make or by known
or unknown risks and uncertainties. Consequently, no forward-looking statement
can be guaranteed. Actual results may differ materially from the results
currently expected. Factors that could cause such differences include, but
are
not limited to:
| · |
our
ability to successfully penetrate into new markets in which have
limited
history and gain market acceptance for our new tools and
services;
|
| · |
our
ability to accurately predict and respond to market developments
or
demands;
|
| · |
the
impact of failures to accurately estimate the costs of fixed-price
projects, which may result in lower margins or
losses;
|
| · |
fluctuations
in inflation and currency rates;
|
| · |
changes
in general economic and business
conditions;
|
| · |
decline
in the demand for the Company’s
products;
|
| · |
inability
to timely develop and introduce new technologies, products and
applications;
|
| · |
pressure
on prices resulting from competition;
and
|
| · |
the
risks discussed in the Risk Factor section of this prospectus and
in “Item
4. Information on the Company” and “Item 5. Operating
and Financial Review and Prospects” of our Form 20-F for
2007.
|
In
addition, you should note that our past financial and operational performance
is
not necessarily indicative of future financial and operational
performance.
We
undertake no obligation to update any forward-looking statements, whether as
a
result of new information, future events, or otherwise.
THE
OFFERING AND LISTING
|
Aggregate
number of ordinary shares offered by the selling
shareholders
|
|
976,564
ordinary shares
|
| |
|
|
|
Aggregate
number of ordinary shares offered issuable upon exercise of warrants
offered by the selling shareholders
|
|
501,301
ordinary shares
|
| |
|
|
|
Ordinary
shares to be outstanding after this offering
|
|
5,076,174
ordinary shares (subject to certain exclusions listed below)
|
| |
|
|
|
Use
of proceeds
|
|
We
will not receive any proceeds from the sale of ordinary shares by
the
selling shareholders, but we will receive proceeds from the exercise
of
the Warrants. If the Warrants are exercised in full for cash, we
would
realize proceeds before expenses, in the amount of $1,491,663.
|
| |
|
|
|
NASDAQ
Capital Market symbol
|
|
RDCM
|
| |
|
|
|
Tel-Aviv
Stock Exchange symbol
|
|
RDCM
|
The
number of ordinary shares to be outstanding after this offering excludes (i)
the
exercise of 827,931 options, (ii) the exercise of 501,301 warrants and (iii)
30,843 shares that were repurchased by us in March and April 2001.
PRICE
RANGE OF OUR SHARES
The
following table sets forth the high and low bid prices of our ordinary shares
as
reported by the NASDAQ Global Market and the NASDAQ Capital Market, as
applicable, for the calendar periods indicated:
| |
|
High
|
|
Low
|
|
| |
|
|
|
|
|
|
2003
|
|
$
|
8.76
|
|
$
|
2.56
|
|
|
2004
|
|
$
|
11.12
|
|
$
|
4.00
|
|
|
2005
|
|
$
|
14.36
|
|
$
|
5.40
|
|
|
2006
|
|
$
|
20.20
|
|
$
|
6.96
|
|
|
2007
|
|
$
|
12.72
|
|
$
|
2.80
|
|
| |
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
20.20
|
|
$
|
12.64
|
|
|
Second
Quarter
|
|
$
|
11.96
|
|
$
|
8.00
|
|
|
Third
Quarter
|
|
$
|
12.72
|
|
$
|
6.96
|
|
|
Fourth
Quarter
|
|
$
|
13.04
|
|
$
|
9.44
|
|
| |
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
12.72
|
|
$
|
10.40
|
|
|
Second
Quarter
|
|
$
|
11.28
|
|
$
|
5.32
|
|
|
Third
Quarter
|
|
$
|
5.60
|
|
$
|
2.80
|
|
|
Fourth
Quarter
|
|
$
|
4.20
|
|
$
|
2.88
|
|
| |
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
First
Quarter
|
|
$
|
3.40
|
|
$
|
1.80
|
|
|
Second
Quarter
|
|
$
|
2.80
|
|
$
|
1.94
|
|
|
Third
Quarter (through August 18, 2008)
|
|
$
|
2.38
|
|
$
|
1.60
|
|
| |
|
|
|
|
|
|
|
|
Most
recent six months
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
February
2008
|
|
$
|
3.40
|
|
$
|
2.76
|
|
|
March
2008
|
|
$
|
2.80
|
|
$
|
1.80
|
|
|
April
2008
|
|
$
|
2.64
|
|
$
|
2.20
|
|
|
May
2008
|
|
$
|
2.72
|
|
$
|
2.24
|
|
|
June
2008
|
|
$
|
2.80
|
|
$
|
1.94
|
|
|
July
2008
|
|
$
|
2.38
|
|
$
|
1.60
|
|
Dual
Listing
In
addition to trading on the NASDAQ Capital Market (to which we transferred in
October 2007 from the NASDAQ
Global Market),
on
February 20, 2006, our ordinary shares began trading on the TASE.
Tel-Aviv
Stock Exchange
The
following table sets forth the high and low bid prices of our ordinary shares
as
reported by the TASE for the calendar periods indicated:
|
2006
|
|
|
| |
|
|
| |
High
|
Low
|
| |
|
|
|
2006
(February 20, 2006 through December 31, 2006)
|
NIS
96.16
|
NIS
31.48
|
| |
|
|
|
First
Quarter (February 20, 2006 through March 31, 2006)
|
NIS
96.16
|
NIS
76.32
|
| |
|
|
|
Second
Quarter
|
NIS
81.32
|
NIS
37.92
|
| |
|
|
|
Third
Quarter
|
NIS
52.04
|
NIS
31.48
|
| |
|
|
|
Fourth
Quarter
|
NIS
55.00
|
NIS
42.00
|
| |
|
|
|
2007
|
|
|
| |
|
|
|
First
Quarter
|
NIS
53.44
|
NIS
42.48
|
| |
|
|
|
Second
Quarter
|
NIS
47.80
|
NIS
21.70
|
| |
|
|
|
Third
Quarter
|
NIS
23.80
|
NIS
12.08
|
| |
|
|
|
Fourth
Quarter
|
NIS
16.36
|
NIS
11.12
|
| |
|
|
|
2008
|
|
|
| |
|
|
|
First
Quarter
|
NIS
12.24
|
NIS
6.76
|
| |
|
|
|
Second
Quarter
|
NIS
10.00
|
NIS
7.60
|
| |
|
|
|
Third
Quarter (through August 18, 2008)
|
NIS
8.10
|
NIS
5.60
|
| |
|
|
|
Most
recent six months
|
|
|
| |
|
|
|
February
2008
|
NIS
12.24
|
NIS
10.20
|
| |
|
|
|
March
2008
|
NIS
11.00
|
NIS
6.76
|
| |
|
|
|
April
2008
|
NIS
9.20
|
NIS
7.60
|
| |
|
|
|
May
2008
|
NIS
10.00
|
NIS
7.88
|
| |
|
|
|
June
2008
|
NIS
8.80
|
NIS
7.74
|
| |
|
|
|
July
2008
|
NIS
8.10
|
NIS
6.17
|
CAPITALIZATION
AND INDEBTEDNESS
The
table
below sets forth our capitalization and indebtedness as of December 31, 2007,
and as adjusted to give effect to the sale of the 976,564 shares, the issuance
of 325,520 ordinary shares underlying the PIPE Warrants, at an exercise price
of
$3.20 per share, and the issuance of 175,781 ordinary shares underlying the
Plenus Warrant, at an exercise price of $2.56 per share.
| |
|
|
|
| |
|
Actual
|
|
As
Adjusted
|
|
|
|
|
(in
thousands)
|
|
|
Indebtedness
|
|
|
|
|
|
|
Venture
loan
|
|
|
0
|
|
|
2,234
|
|
| |
|
|
|
|
|
|
|
|
Shareholders’
equity
|
|
|
|
|
|
|
|
|
Share
capital - ordinary shares of NIS 0.20 par value (9,997,670 shares
authorized; 4,091,222 actual shares issued and 5,569,087 as adjusted
shares issued)
|
|
|
122
|
|
|
204
|
|
|
Additional
paid-in capital
|
|
|
48,328
|
|
|
52,417
|
|
|
Accumulated
deficit
|
|
|
(40,872
|
)
|
|
(40,872
|
)
|
|
Total
shareholders’ equity
|
|
|
7,578
|
|
|
11,749
|
|
|
Total
capitalization
|
|
|
7,578
|
|
|
13,983
|
|
REASONS
FOR THE OFFER AND USE OF PROCEEDS
We
will
not receive any of the proceeds from the sale of ordinary shares by the selling
shareholders in this offering. If the warrants are exercised in full for cash,
we would realize proceeds before expenses, in the amount of $1,491,663 The
net
proceeds of the exercise of the warrants will be used for working capital and
general corporate purposes, and in accordance with our budget, as it is approved
by our Board of Directors from time to time. We will bear the costs, other
than
underwriting commissions, associated with the sales of ordinary
shares.
SELLING
SHAREHOLDERS
This
prospectus covers the resale, from time to time, by the selling shareholders
of
up to 1,477,865 ordinary shares, of which:
| · |
976,564
ordinary shares were purchased by the selling shareholders in February
2008 under the Share and Warrant Purchase Agreement between us and
the
selling shareholders;
|
| · |
325,520
ordinary shares are issuable upon exercise of warrants granted to
the
selling shareholders under the Share and Warrant Purchase Agreement;
and
|
| · |
175,781
ordinary shares are issuable upon exercise of warrants granted to
Plenus
under the Loan Agreement.
|
For
additional information regarding the offering, see “Prospectus Summary—The
Transactions” above. We are registering the ordinary shares in order to permit
the selling shareholders to offer the shares for resale from time to time.
To
our knowledge, except as indicated in the table below, none of the selling
shareholders have held any position or office, or had any material relationship
with us, our predecessors, or affiliates, within the past three years, or are
a
registered broker-dealer or an affiliate of a registered broker-dealer which
may
be deemed to be an “underwriter” within the meaning of the Securities Act in
connection with these sales.
In
accordance with the Share and Warrant Purchase Agreement, we agreed to use
our
best efforts to cause a registration statement, among other things, to remain
continuously effective until the earliest of (i) the second anniversary of
the
effective date of the registration statement, (ii) the date on which all of
the
shares issued and shares underlying warrants issued to the selling shareholders
as described above have been sold hereunder or (iii) the date on which all
of
the shares issued and shares underlying warrants issued to the selling
shareholders as described above can be sold by holders thereof without
limitation as to volume, pursuant to Rule 144 promulgated under the Securities
Act. Pursuant to the Loan Agreement, as amended to date, we agreed to prepare
and file with the SEC, not later than August 15, 2008, a registration statement
on Form F-3 to enable the resale of the shares underlying the Plenus Warrant,
as
described above. In accordance with the Loan Agreement, we agreed to use our
best efforts to cause a registration statement, among other things, to remain
continuously effective until the earliest of (i) the fifth anniversary of the
Loan Agreement’s closing date, (ii) the date on which all of the shares
underlying warrants issued to the selling shareholders as described above have
been sold hereunder or (iii) the date on which all of the shares underlying
warrants issued to the selling shareholders as described above can be sold
by
holders thereof without limitation as to volume pursuant to Rule 144 promulgated
under the Securities Act.
The
following table presents information provided by the selling shareholders with
respect to beneficial ownership of our ordinary shares as of July 31, 2008,
and
as adjusted to reflect the sale of the shares offered by the selling
shareholders under this prospectus, assuming that all ordinary shares being
offered under this prospectus are ultimately sold in the offering. The table
includes all shares issuable within 60 days of July 31, 2008 upon the exercise
of warrants beneficially owned by the indicated shareholders on that date.
The
applicable percentage of ownership of the Company’s outstanding shares for each
selling shareholder is based on 5,076,174 ordinary shares outstanding as of
July
31, 2008, and such number of ordinary shares issuable upon exercise of the
warrants held by that selling shareholder (excluding 30,843 shares that were
repurchased by us in March and April 2001. Beneficial ownership as set forth
below includes the power to direct the voting or the disposition of the
securities or to receive the economic benefit of ownership of the securities.
To
our knowledge, the persons named in the table have sole voting power, sole
investment control, and the sole right to receive the economic benefit with
respect to all shares listed, except as set forth in the table below.
| |
|
Ordinary
Shares Beneficially Owned
Prior
to Offering
|
|
Ordinary
Shares Being
Offered(4)
|
|
Ordinary
Shares Beneficially Owned
After Offering
|
|
| |
|
Number
|
|
Percent
|
|
|
|
Number
|
|
Percent
|
|
|
Name
of Beneficial Owner
|
|
|
|
|
|
|
|
|
|
|
|
|
Zohar
Zisapel (1) (2) (3)
24
Raoul Wallenberg Street
Tel-Aviv
69719, Israel
|
|
|
911,586
|
|
|
17.9
|
%
|
|
859,375
|
|
|
1,770,961
|
|
|
31.6
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plenus
II, Limited Partnership (6)
Plenus
II (D.C.M.), Limited Partnership (6)
Plenus
III, Limited Partnership (6)
Plenus
III (D.C.M.), Limited Partnership (6)
Plenus
III (2), Limited Partnership(6)
Plenus
III (C.I.), L.P.(6)
16
Abba Eben Avenues
Herzliya
Pituach
Israel
|
|
|
0
|
|
|
0
|
%
|
|
175,781
|
|
|
175,781
|
|
|
3.2
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summit
Capital Management L.P.(7)
3
Azrieli Center, Triangular Building, 40th
floor
132
Menachem Begin Road, Tel Aviv 67023, Israel
|
|
|
0
|
|
|
0
|
%
|
|
65,104
|
|
|
65,104
|
|
|
1.2
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BCS
Growth Fund (Israel) L.P.(8)
3
Daniel Frisch Street
Tel-Aviv
64731, Israel
|
|
|
45,448
|
|
|
0.9
|
%
|
|
13,021
|
|
|
58,469
|
|
|
1.0
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benny
Bergman
3
Daniel Frisch Street
Tel-Aviv
64731, Israel
|
|
|
48,701
|
|
|
0.9
|
%
|
|
26,041
|
|
|
74,742
|
|
|
1.3
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Callicropt
Holdings Limited (9)
Liechtenstein
Street 3/15
Vienna
A-1090, Austria
|
|
|
0
|
|
|
0
|
%
|
|
52,084
|
|
|
52,084
|
|
|
0.9
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amit
Gilon (5)
c/o
Bank Hapoalim
71
Hamesila Street
Herzliya
46580, Israel
|
|
|
5,000
|
|
|
0.1
|
%
|
|
26,041
|
|
|
31,041
|
|
|
0.6
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zohar
Gilon (5)
c/o
Bank Hapoalim
71
Hamesila Street
Herzliya
46580, Israel
|
|
|
7,500
|
|
|
0.1
|
%
|
|
26,041
|
|
|
33,541
|
|
|
0.6
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amos
E. Madanes
1814
North Orleans
Chicago
IL 60614, USA
|
|
|
0
|
|
|
0
|
%
|
|
52,084
|
|
|
52,084
|
|
|
0.9
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abraham
Jacob Neyman
10
Agmon Street
Ramat
Efal 52960, Israel
|
|
|
37,000
|
|
|
0.7
|
%
|
|
52,084
|
|
|
89,084
|
|
|
1.6
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judith
and Jacob Richter
P.O.
Box 58187
Tel-Aviv
61581, Israel
|
|
|
0
|
|
|
0
|
%
|
|
78,125
|
|
|
78,125
|
|
|
1.4
|
%
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amos
and Daughter Investments and Properties Ltd. (10)
P.O.
Box 21633
Tel-Aviv,
Israel
|
|
|
28,449
|
|
|
0.5
|
%
|
|
52,084
|
|
|
80,533
|
|
|
1.4
|
%
|
|
(1)
|
Mr.
Zisapel is the current Chairman of the Company’s Board of
Directors.
|
| |
|
|
(2)
|
Includes
beneficial ownership of Messrs. Zohar Zisapel and Yehuda Zisapel
of
ordinary shares held by RAD Data Communications Ltd., an Israeli
company.
|
| |
|
|
(3)
|
Includes
44,460 ordinary shares owned of record by RAD Data Communications,
13,625
ordinary shares owned of record by Klil and Michael Ltd., an Israeli
company and 25,000 ordinary shares issuable upon exercise of options
exercisable within 60 days of July 31, 2008. Zohar Zisapel is a principal
shareholder and director of each of RAD Data Communications Ltd.
and Klil
and Michael Ltd. and, as such, Mr. Zisapel may be deemed to have
voting
and dispositive power over the ordinary shares held by RAD Data
Communications and Klil and Michael Ltd. Mr. Zisapel disclaims beneficial
ownership of these ordinary shares except to the extent of his pecuniary
interest therein. This information is based on Mr. Zohar Zisapel’s
Schedule 13G/A, filed with the SEC on February 12,
2008.
|
| |
|
|
(4)
|
Includes
ordinary shares and ordinary shares underlying
Warrants.
|
| |
|
|
(5)
|
Zohar
Gilon is a member of the Company’s Board of Directors. Amit Gilon is his
son.
|
| |
|
| (6) |
Aharon
Dovrat, Shlomo Dovrat, Harel Beit On, Avi Zeevi, Moti Weiss, Ruthi
Simha
and Shlomo Karako are shareholders and/or directors of Plenus Management
(2004) Ltd. (“Plenus Management (2004)”), which is the management company
of Plenus II, Limited Partnership and Plenus II (D.C.M.), Limited
Partnership, and therefore, such individuals indirectly, through
Plenus
Management (2004), have shared voting and investment control of the
securities held by Plenus II, Limited Partnership and Plenus II (D.C.M.),
Limited Partnership. Aharon Dovrat, Shlomo Dovrat, Harel Beit On,
Avi
Zeevi, Moti Weiss, Ruthi Simha and Shlomo Karako are shareholders
and/or
directors of Plenus Management III 2007 Ltd. (“Plenus Management III
2007”), which is the management company of Plenus III, Limited
Partnership, Plenus III (D.C.M.), Limited Partnership, Plenus III
(2),
Limited Partnership and Plenus III (C.I.), L.P., and therefore, such
individuals indirectly, through Plenus Management III 2007 have shared
voting and investment control of the securities held by Plenus III,
Limited Partnership, Plenus III (D.C.M.), Limited Partnership, Plenus III
(2), Limited Partnership and Plenus III (C.I.), L.P.
|
| |
|
| (7) |
Modi
Ashkanazi is the General Manager of Summit
Capital Management L.P. and has sole voting and investment control
of the
securities held by Summit Capital Management L.P.
|
| |
|
| (8) |
The
board of directors of BCS
Growth Fund (Israel) L.P., by majority vote, has sole voting and
investment control of the securities held by BCS Growth Fund (Israel)
L.P.
|
| |
|
| (9) |
Joseph
Shefet is the Manager of Callicropt
Holdings Limited. and has sole voting and investment control of the
securities held by Callicropt Holdings Limited.
|
| |
|
| (10) |
Eri Steimatzky
is a
director of Amos
and Daughter Investments and Properties Ltd. and has sole voting and
investment control of the securities held by Amos and Daughter Investments
and Properties Ltd. |
PLAN
OF DISTRIBUTION
The
selling shareholders and any of their pledgees, donees, transferees or other
successors-in-interest may, from time to time, sell any or all of their ordinary
shares being offered under this prospectus, on the NASDAQ Capital Market or
any
other stock exchange, market or trading facility on which the ordinary shares
are traded or in private transactions. These sales may be at fixed or negotiated
prices. The selling shareholders may use any one or more of the following
methods when disposing of shares:
| · |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
| · |
block
trades in which the broker-dealer will attempt to sell the shares
as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
| · |
purchases
by a broker-dealer as principal and resales by the broker-dealer
for its
account;
|
| · |
an
exchange transaction in accordance with the rules of the applicable
exchange;
|
| · |
privately
negotiated transactions;
|
| · |
to
cover short sales made after the date that the Registration Statement
of
which this prospectus is a part is declared effective by the
SEC;
|
| · |
broker-dealers
may agree with the selling shareholders to sell a specified number
of such
shares at a stipulated price per
share;
|
| · |
sales
on any national securities exchange or quotation service on which
the
shares may be listed or quoted at the time of
sale;
|
| · |
sales
in the over-the-counter market;
|
| · |
in
transactions otherwise than on such exchanges or services or in the
over-the-counter market;
|
| · |
through
put or call option transactions, whether such options are listed
on an
options exchange or otherwise;
|
| · |
a
combination of any of these methods of sale;
and
|
| · |
any
other method permitted pursuant to applicable
law.
|
The
shares may also be sold under Rule 144 under the Securities Act, if available,
rather than under this prospectus. The selling shareholders have the sole and
absolute discretion not to accept any purchase offer or make any sale of shares
if they deem the purchase price to be unsatisfactory at any particular
time.
The
selling shareholders may pledge their shares to their brokers under the margin
provisions of customer agreements. If a selling shareholder defaults on a margin
loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers
engaged by the selling shareholders may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the selling shareholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated, which
commissions as to a particular broker or dealer may be in excess of customary
commissions to the extent permitted by applicable law.
If
sales
of shares offered under this prospectus are made to broker-dealers as
principals, we would be required to file a post-effective amendment to the
Registration Statement of which this prospectus is a part. In the post-effective
amendment, we would be required to disclose the names of any participating
broker-dealers and the compensation arrangements relating to such
sales.
The
selling shareholders and any broker-dealers or agents that are involved in
selling the shares offered under this prospectus may be deemed to be
“underwriters” within the meaning of the Securities Act in connection with these
sales. Commissions received by these broker-dealers or agents and any profit
on
the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Any broker-dealers or agents
that are deemed to be underwriters may not sell shares offered under this
prospectus unless and until we set forth the names of the underwriters and
the
material details of their underwriting arrangements in a supplement to this
prospectus or, if required, in a replacement prospectus included in a
post-effective amendment to the Registration Statement of which this prospectus
is a part.
The
selling shareholders and any other persons participating in the sale or
distribution of the shares offered under this prospectus will be subject to
applicable provisions of the Exchange Act and the rules and regulations under
that act, including Regulation M. These provisions may restrict activities
of,
and limit the timing of purchases and sales of any of the shares by, the selling
shareholders or any other person. Furthermore, under Regulation M, persons
engaged in a distribution of securities are prohibited from simultaneously
engaging in market making and other activities with respect to those securities
for a specified period of time prior to the commencement of such distributions,
subject to specified exceptions or exemptions. All of these limitations may
affect the marketability of the shares.
If
any of
the ordinary shares offered for sale pursuant to this prospectus are transferred
other than pursuant to a sale under this prospectus, then subsequent holders
could not use this prospectus until a post-effective amendment or prospectus
supplement is filed, naming such holders. We offer no assurance as to whether
any of the selling shareholders will sell all or any portion of the shares
offered under this prospectus.
We
have
agreed to pay all fees and expenses we incur incident to the registration of
the
shares being offered under this prospectus. However, each selling shareholder
and purchaser is responsible for paying any discounts, commissions, and similar
selling expenses they incur.
The
selling shareholders and we have agreed to indemnify one another against certain
losses, damages, and liabilities arising in connection with this prospectus,
including liabilities under the Securities Act.
We
agreed
to keep this prospectus effective until such date as is the earlier of (i)
the
date when all the ordinary shares covered by this prospectus have been sold
or
(ii) the date on which the ordinary shares may be sold without any restriction
pursuant to Rule 144(k) (or any successor rule) or any other provision under
Rule 144 that permits the selling shareholders to sell their ordinary shares
without respect to any volume limitations or manner of sale restrictions as
determined by our counsel pursuant to a written opinion letter, addressed to
our
transfer agent to such effect. If at any time and for any reason, an additional
registration statement is required to be filed because at such time the actual
number of ordinary shares into which the outstanding warrants are then
exercisable exceeds the number of shares remaining unsold under the Registration
Statement, we shall have 30 business days to file such additional registration
statement, and we are required to use our best efforts to cause such additional
registration statement to be declared effective by the SEC as soon as possible,
but in no event later than 75 days after filing.
EXPENSES
We
are
paying substantially all of the expenses of registering the ordinary shares
under the Securities Act and of compliance with blue-sky laws, including
registration and filing fees, printing and duplication expenses, administrative
expenses, our legal and accounting fees and the legal fees of counsel on behalf
of the selling shareholders. We estimate these expenses to be approximately
$36,617.72, which include the following categories of expenses:
|
SEC
registration fee
|
|
$
|
117.72
|
|
|
Legal
fees and expenses
|
|
$
|
30,000
|
|
|
Accounting
fees and expenses
|
|
$
|
6,000
|
|
|
Miscellaneous
expenses
|
|
$
|
500
|
|
| |
|
|
|
|
|
Total
|
|
$
|
36,617.72
|
|
LEGAL
MATTERS
The
validity of the ordinary shares being offered by this prospectus and other
legal
matters concerning this offering relating to Israeli law will be passed upon
for
us by Goldfarb, Levy, Eran, Meiri, Tzafrir & Co.
EXPERTS
The
consolidated financial statements of Radcom Ltd. and its subsidiary as of
December 31, 2007 and 2006, and for each of the years in the three-year period
ended December 31, 2007 have been incorporated by reference herein in reliance
upon the report of Somekh Chaikin, a member firm of KPMG International,
independent registered public accounting firm, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
The
audit
report covering the December 31, 2007 financial statements refers to a change
in
the method of accounting for share-based compensation upon adoption of Financial
Accounting Standards Board Statement 123(R), “Share-Based Payment” beginning
January 1, 2006.
ENFORCEABILITY
OF CIVIL LIABILITIES
Service
of process upon us and upon some of our directors and officers and the Israeli
experts named in this prospectus who reside outside the United States may be
difficult to obtain within the United States. Furthermore, because some of
our
principal assets and some of our directors and officers are located outside
the
United States, court judgments obtained in the United States, including those
predicated on the civil liability provisions of United States federal securities
laws, against us or any of our directors and officers who reside outside the
United States, may not be collectible within the United States or Israel. It
may
be also difficult to bring an original action in an Israeli court to enforce
liabilities against us or against any of our directors and officers, based
upon
the United States federal securities laws.
We
have
been informed by our legal counsel in Israel that there is doubt concerning
the
enforceability of civil liabilities under the Securities Act and the Exchange
Act, in original actions instituted in Israel. However, subject to specified
time limitations, Israeli courts may enforce a United States final executory
judgment in a civil matter obtained after due process before a court of
competent jurisdiction according to the laws of the state in which the judgment
is given and the rules of private international law currently prevailing in
Israel. The rules of private international law currently prevailing in Israel
do
not prohibit the enforcement of a judgment by Israeli courts provided
that:
| · |
the
judgment is enforceable in the state in which it was
given;
|
| · |
adequate
service of process has been effected and the defendant has had a
reasonable opportunity to present his arguments and
evidence;
|
| · |
the
judgment and the enforcement of the judgment are not contrary to
the law,
public policy, security or sovereignty of the state of
Israel;
|
| · |
the
judgment was not obtained by fraud and does not conflict with any
other
valid judgment in the same matter between the same parties;
and
|
| · |
an
action between the same parties in the same matter is not pending
in any
Israeli court at the time the lawsuit is instituted in a foreign
court.
|
We
have
irrevocably appointed RADCOM Equipment Inc. as our agent to receive service
of
process in any action against us in any federal court or court of the State
of
New Jersey arising out of this offering or any purchase or sale of securities
in
connection with this offering.
If
a
foreign judgment is enforced by an Israeli court, it generally will be payable
in Israeli currency, which can then be converted into non-Israeli currency
and
transferred out of Israel. The usual practice in an action before an Israeli
court to recover an amount in a non-Israeli currency is for the Israeli court
to
issue a judgment for the equivalent amount in Israeli currency at the rate
of
exchange in force on the date of the judgment, but the judgment debtor may
make
payment in foreign currency. Pending collection, the amount of the judgment
of
an Israeli court stated in Israeli currency ordinarily will be linked to the
Israeli consumer price index plus interest at an annual statutory rate set
by
Israeli regulations prevailing at the time. Judgment creditors must bear the
risk of unfavorable exchange rates.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have
filed a Registration Statement on Form F-3 with the SEC for the shares being
offered pursuant to this prospectus. This
prospectus does not include all of the information contained in the Registration
Statement. You should refer to the Registration Statement and its exhibits
for
additional information. Whenever we make reference in this prospectus to any
of
our contracts, agreements or other documents, the references are not necessarily
complete and you should refer to the exhibits attached to the Registration
Statement for copies of the actual contract, agreement or other
document.
We
are
required to file annual reports and other information with the SEC. You can
read
our SEC filings, including the Registration Statement, over the Internet at
the
SEC’s website at http://www.sec.gov. You may also read and copy any document we
file with the SEC at the public reference facilities maintained by the SEC,
100
F Street, N.E., Washington, D.C. 20549. You may also obtain copies of such
material from the SEC at prescribed rates by writing to the Public Reference
Section of the SEC, 100 F Street, N.E., Washington, D.C. 20549. Please call
the
SEC at 1-800-SEC-0330 for further information on the operation of the public
reference facilities.
We
are
subject to certain of the informational requirements of the Exchange Act. As
a
“foreign private issuer,” we are exempt from the rules under the Exchange Act
prescribing certain disclosure and procedural requirements for proxy
solicitations and our officers, directors and principal shareholders are exempt
from the reporting and “short-swing” profit recovery provisions contained in
Section 16 of the Exchange Act, with respect to their purchases and sales of
ordinary shares. In addition, we are not required to file quarterly reports
or
to file annual and current reports and financial statements with the SEC as
frequently or as promptly as U.S. companies whose securities are registered
under the Exchange Act. However, we are required to file with the SEC, within
180 days after the end of each fiscal year, an annual report on Form 20-F
containing financial statements that will be examined and reported on, with
an
opinion expressed by an independent accounting firm. We also furnish quarterly
reports on Form 6-K containing unaudited financial information for the first
three quarters of each fiscal year.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC
allows us to “incorporate by reference” the information we file with or submit
to it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference
is
considered to be part of this prospectus, and later information filed with
or
submitted to the SEC will update and supersede this information. We incorporate
by reference into this prospectus the documents listed below:
(i)
Our
annual report on Form 20-F for the fiscal year ended December 31, 2007, filed
with the SEC on June 30, 2008;
(ii)
Our
reports on Form 6-K furnished to the SEC on March 17, 2008, April 1, 2008,
April
28, 2008, May 6, 2008 , June 5, 2008, July 24, 2008 and August 5, 2008 regarding
our 2008 financial results and recent transactions.
(iii)
The
description of our ordinary shares contained in our registration statement
on
Form 8-A, filed with the SEC on September 19, 1997, and any amendment or
report
filed for the purpose of updating such description.
In
addition, all subsequent annual reports on Form 20-F, and all of our subsequent
filings on Form 6-K filed by us pursuant to the Exchange Act, prior to the
termination of the offering, and any reports on Form 6-K subsequently submitted
to the SEC or portions thereof that we specifically identify in such forms
as
being incorporated by reference into the Registration Statement of which this
prospectus forms a part, shall be considered to be incorporated into this
prospectus by reference and shall be considered a part of this prospectus from
the date of filing or submission of such documents.
As
you
read the above documents, you may find inconsistencies in information from
one
document to another. If you find inconsistencies between the documents and
this
prospectus, you should rely on the statements made in the most recent
document.
We
will
provide without charge to any person (including any beneficial owner) to whom
this prospectus has been delivered, upon oral or written request, a copy of
any
document incorporated by reference in this prospectus but not delivered with the
prospectus (except for exhibits to those documents unless a document states
that
one of its exhibits is incorporated into the document itself). Such requests
should be directed to Jonathan Burgin, Chief Financial Officer, c/o RADCOM
Ltd.,
24
Raoul
Wallenberg Street, Tel-Aviv 69719, Israel, facsimile number
972-3-647-4681.
Our
corporate website address is http://www.radcom.com. The information on our
website is not intended to be a part of this prospectus.
1,477,865
Ordinary Shares
RADCOM
LTD.
___________
PROSPECTUS
_______________
August
26, 2008