MANAGEMENT?S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a leading designer, developer and supplier of products and technology that enable
real-time voice, video and data communications over packet networks, including the Internet and other
IP networks.
We were incorporated in
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January 1992, commenced operations in October 1992 and commenced
sales of our products in the fourth quarter of 1994. Before that time, our operations consisted primarily
of research and development and recruiting personnel. In 1995, we established a wholly owned
subsidiary in the United States, RADVision Inc., which conducts our sales and marketing activities in
North America.
All of our revenues are generated in U.S. dollars or are linked to the dollar and a majority of our
expenses are incurred in dollars. Consequently, we use the dollar as our functional currency.
Transactions and balances in other currencies are converted into dollars according to the principles in
Financial Accounting Standards Board Statement No. 52. Gains and losses arising from conversion are
recorded as interest income or expense, as applicable. Our consolidated financial statements are
prepared in dollars and according to generally accepted accounting principles in the United States.
Revenues. We generate revenues from the sale of our products and our technology, which is
primarily sold in the form of software development kits, as well as related maintenance and support
services. We generally recognize revenues from the sale of our products and technology upon shipment
and when collection is probable. Revenues generated from maintenance and support services are
deferred and recognized ratably over the period of the term of service. We price our products on a per
unit basis, and grant discounts based upon unit volumes. We price our software development kits on
the basis of a fixed-fee plus royalties from products developed using the software development kits. We
expect our revenues from the sale of both our products and our technology to increase, though we
expect that the rate of growth of our revenues from the sale of our products will exceed the rate of
growth of our revenues from the sale of our technology.
We sell our products and technology through direct sales and various indirect distribution channels
in North America, Europe, the Far East and Israel. For the year ended December 31, 1999,
approximately 52% of our revenues were generated in the United States.
Cost of revenues. Our cost of revenues consists of component and material costs, direct labor
costs, subcontractor fees, overhead related to manufacturing and depreciation of manufacturing
equipment. Our gross margin is affected by the selling prices for our products as well as the proportion
of our revenues generated from the sale of our technology. Our revenues from the sale of our
technology have higher gross margins than our revenues from the sale of our products and we offer
greater discounts to our high volume OEM customers. As the relative proportion of our revenues from
our products increases as a percentage of our total revenues and we generate a higher percentage of
our revenues from sales to our high volume OEM customers, our gross margins will decline.
Research and development expenses, net. Our research and development expenses consist primarily
of compensation and related costs for research and development personnel, expenses for testing
facilities and depreciation of equipment. All of our research and development costs are expensed as
incurred. Research and development expenses are presented net of payments received from the Chief
Scientist. We do not currently intend to apply for a material amount of grants from the Chief Scientist
in the future. However, we expect to continue to make substantial investments in research and
development.
PROSPECTUS SUMMARY
This summary highlights information contained in this prospectus. Before you decide to invest in our
ordinary shares, you should carefully read the entire prospectus, including the section entitled ??Risk Factors??
and our consolidated financial statements and the notes to those financial statements.
RADVision
We are a leading designer, developer and supplier of products and technology that enable
real-time voice, video and data communications over packet networks, including the Internet and other
networks based on the Internet protocol or IP.
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We have over 250 customers including Alcatel, Bosch,
Cisco Systems, Madge Networks, Nippon Telegraph & Telephone, Nortel Networks, Philips Electronics,
Shanghai Bell, Siemens and 3Com. Our products and technology are used by our customers to develop
systems that enable enterprises and service providers to migrate their voice and video communications
from traditional telephone networks to next generation packet networks.
The use of packet networks for real-time voice, video and data communications is expected to
grow dramatically. This anticipated growth is due to the inherent benefits of packet networks and the
advent of new technologies and standards that have enabled real-time communications over these
networks. ICM Global Intelligence, a market research firm, forecasts that revenues for network
equipment associated with voice-over-IP, or IP telephony, will grow from $477 million in 1999 to
$7.1 billion in 2004. Perey Research & Consulting, an industry consulting firm, forecasts revenues for
network equipment associated with IP video communications to grow from $22 million in 1999 to more
than $643 million in 2003.
We are one of the few companies to offer customers IP communications products and technology
that support both real-time voice and video as well as voice-only packet-based communications. Our
products and technology consist of:
? RADVision gateways, which interface between traditional telephone networks and IP networks;
? RADVision gatekeepers, which control, manage and monitor real-time voice, video and data
traffic over packet networks;
? RADVision IP conferencing bridges, which enable voice and multimedia conferencing over
packet networks among three or more participants; and
? RADVision software development kits, which provide the core technology necessary to build
interoperable, standards-compliant products, applications and services for real-time voice and
video communication over packet networks.
We believe that we have established ourselves as a technology leader in providing enabling
technology and products for a broad range of standards-based IP communications products and
services. Our goal is to continue to be the leading provider of innovative products and technology for
real-time IP communications. Our customers rely on our accumulated expertise with IP
communications standards and technology to significantly reduce their development cycle and improve
their time to market in the rapidly growing market for IP-based voice and video communication. Our
customers can deploy our products as a complete network solution for real-time IP communications,
integrate our products into their own IP communications systems, or use our technology to build their
own standards-compliant IP communications products, systems and applications for enterprises and
service providers.
We were incorporated under the laws of the State of Israel in 1992 and began operations in
October 1992. Our principal executive offices are located at 24 Raoul Wallenberg St., Tel Aviv 69719,
Israel and our telephone number is 011-972-3-645-5220.
The Offering
Ordinary shares offered
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in this offering ........ 3,800,000 shares
Private placement
Ordinary shares offered by us to Siemens ..... 365,767 shares
Ordinary shares offered by us to Samsung .... 225,055 shares
Ordinary shares to be outstanding after this
offering and the private placement .......... 17,975,846 shares
Use of proceeds ......................... We expect to use the net proceeds from this
offering to finance the continued growth of our
business and for general corporate purposes.
Proposed Nasdaq National Market symbol ...... RVSN
The number of ordinary shares referred to in the preceding table to be outstanding after this
offering excludes:
? 3,101,623 shares issuable upon the exercise of outstanding options under our share option plans;
and
? up to 61,900 additional ordinary shares reserved for issuance under our share option plans.
Private Placement
Concurrently with this offering, Samsung Electro-Mechanics Co., Ltd. and Samsung Venture
Investment Corporation, affiliates of Samsung Corporation, and Siemens Aktiengesellschaft have
agreed to purchase an aggregate of 2,625,228 of our ordinary shares at the initial public offering price
in a private placement. Of the 2,625,228 ordinary shares, we will sell 590,822 ordinary shares in the
private placement and the remaining 2,034,406 ordinary shares will be sold by some of our existing
shareholders, including our chairman of the board, our chief executive officer and some of our other
directors.
About this Prospectus
Unless otherwise indicated, all information contained in this prospectus:
? gives effect to the sale of an aggregate of 590,822 ordinary shares by us to Siemens and Samsung
in a private placement concurrent with this offering at the initial public offering price to be
effected immediately after the closing of this offering;
? assumes no exercise of the underwriters? option to purchase from us up to 570,000 additional
ordinary shares to cover over-allotments;
? reflects the conversion of all our preferred shares into ordinary shares on a 1-to-1 basis before
the share recapitalization referred to below;
? reflects the conversion of 2,770 ordinary shares into deferred shares before the share dividend
referred to below;
? assumes an initial offering price of $12.00 per ordinary share, the midpoint of the estimated
initial public offering price range; and
? reflects a 211-for-1 share recapitalization of our ordinary shares, following the conversion of our
preferred shares into ordinary shares, as the result of a share split and share dividend that will
be effected before this offering.
We have a registered trademark for RADVisions. All other trademarks and trade names appearing
in this prospectus are owned by their holders.
Summary Consolidated Financial Data
1995 1996 1997 1998 199
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Year ended December 31,
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(in thousands, except per share data)
Consolidated Statement of Operations Data:
Revenues ..................................... $ 871 $1,491 $ 4,899 $ 8,894 $17,550
Gross profit ................................... 301 721 3,689 7,482 14,697
Operating loss .................................. (1,497) (2,067) (1,062) (852) (2,801)
Net loss ...................................... (1,499) (2,025) (1,056) (829) (2,696)
Basic and diluted net loss per ordinary share ........... $(0.21) $ (0.21) $ (0.10) $ (0.08) $ (0.26)
Weighted average number of ordinary shares used in
computing basic and diluted net loss per ordinary share . . 7,217 9,499 10,234 10,492 10,538
Pro forma basic and diluted net loss per ordinary share .... $ (0.20)
Weighted average number of ordinary shares used in
computing pro forma basic and diluted net loss per
ordinary share ................................ 13,496
As of December 31, 1999
Pro forma
Actual as adjusted
(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents ........................................ $2,605 $43,013
Working capital ............................................... 814 41,222
Total assets .................................................. 13,261 53,669
Total bank debt, net of current maturities ............................ 67 67
Shareholders? equity ............................................ 3,481 43,889
Pro forma basic and diluted net loss per ordinary share gives effect to the conversion of all
outstanding preferred shares into ordinary shares, which will take place before the completion of this
offering.
The pro forma as adjusted information included above in the consolidated balance sheet data gives
effect to:
? the conversion of our preferred shares;
? this offering of our ordinary shares; and
? the private placement by us of 590,822 ordinary shares to Siemens and Samsung at the initial
public offering price. |
