SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 2006
RADVISION LTD.
(Name of Registrant)
24 Raoul Wallenberg Street, Tel Aviv 69719, Israel
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82-__________
This Form 6-K is being incorporated by reference into the Registrant's Form S-8
Registration Statements File Nos. 333-45422, 333-53814, 333-55130, 333-66250,
333-82488, 333-104377 and 333-116964.
RADVISION Ltd.
6-K Items
1. RADVISION Ltd. Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of
Operations for the Three and Six Month Periods ended June 30, 2006.
ITEM 1
RADVISION LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2006
U.S. DOLLARS IN THOUSANDS
UNAUDITED
INDEX
Page
------
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Statements of Cash Flows 4 - 5
Notes to Consolidated Financial Statements 6 - 13
- - - - - - - - - - - - - - -
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data
June 30, December 31,
2006 2005
---------- -------------
Unaudited Audited
---------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,308 $ 32,927
Short-term bank deposits 32,040 17,503
Short-term marketable securities 43,756 46,015
Trade receivables (net of allowance
for doubtful accounts of $ 734
at June 30, 2006 and December 31, 2005) 13,145 12,257
Other accounts receivable and prepaid expenses 3,635 4,318
Inventories 4,744 2,593
-------- --------
Total current assets 109,628 115,613
----- -------- --------
LONG-TERM INVESTMENTS AND RECEIVABLES:
Long-term bank deposits 17,367 11,395
Long-term marketable securities 32,984 17,111
Severance pay fund 3,247 2,931
-------- --------
Total long-term investments and receivables 53,598 31,437
----- -------- --------
PROPERTY AND EQUIPMENT, NET 3,584 3,190
-------- --------
GOODWILL 2,966 2,966
-------- --------
INTANGIBLE ASSETS, NET 2,996 3,542
-------- --------
Total assets $172,772 $156,748
----- ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 3,917 $ 1,783
Deferred revenues 8,996 8,533
Other accounts payable and accrued expenses 12,717 12,122
-------- --------
Total current liabilities 25,630 22,438
----- -------- --------
ACCRUED SEVERANCE PAY 4,098 3,643
-------- --------
Total liabilities 29,728 26,081
----- -------- --------
SHAREHOLDERS' EQUITY:
Share capital:
Ordinary shares of NIS 0.1 par value:
Authorized - 25,000,000 shares at
June 30, 2006 and December 31, 2005;
Issued and outstanding - 22,245,302 and
21,803,997 shares at June 30, 2006 and
December 31, 2005, respectively 227 218
Additional paid-in capital 120,463 116,446
Deferred stock compensation 2,243 -
Retained earnings 20,111 14,003
-------- --------
Total shareholders' equity 143,044 130,667
----- -------- --------
Total liabilities and shareholders' equity $172,772 $156,748
----- ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
2
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
U.S. dollars in thousands, except per share data
Six months ended Three months ended
June 30, June 30,
------------------- ------------------
2006 (*) 2005 2006 (*) 2005
-------- ---- -------- ----
Unaudited
--------------------------------------
Revenues:
Products $24,649 $20,024 $13,037 $10,527
License and royalties 7,626 7,227 3,649 3,723
Services 9,865 6,502 5,318 3,223
------- ------- ------- -------
Total revenues 42,140 33,753 22,004 17,473
----- ------- ------- ------- -------
Cost of revenues:
Products 5,759 4,363 3,277 2,105
Services 2,321 1,516 1,152 998
------- ------- ------- -------
Total cost of revenues 8,080 5,879 4,429 3,103
----- ------- ------- ------- -------
Gross profit 34,060 27,874 17,575 14,370
------- ------- ------- -------
Operating costs and expenses:
Research and development 11,905 9,709 6,160 5,054
Marketing and selling 15,166 11,763 7,767 6,006
General and administrative 2,976 2,311 1,515 1,152
------- ------- ------- -------
Total operating costs and expenses 30,047 23,783 15,442 12,212
----- ------- ------- ------- -------
Operating income 4,013 4,091 2,133 2,158
Financial income, net 2,704 1,329 1,433 768
------- ------- ------- -------
Income before taxes on income 6,717 5,420 3,566 2,926
Taxes on income 609 30 355 30
------- ------- ------- -------
Net income $ 6,108 $ 5,390 $ 3,211 $ 2,896
======= ======= ======= =======
Basic net earnings per Ordinary share $ 0.28 $ 0.26 $ 0.14 $ 0.14
======= ======= ======= =======
Diluted net earnings per Ordinary share $ 0.27 $ 0.24 $ 0.14 $ 0.13
======= ======= ======= =======
(*) See Note 2 to the interim consolidated financial statements. Net income for
the six and three months ended June 30, 2006 included a stock-based
compensation expense under SFAS 123(R) of $ 2,243 and $ 1,215,
respectively, related to employee stock options. There was no stock-based
compensation expense related to employee stock options under SFAS 123(R) in
the six and three months ended June 30, 2005 because the Company did not
adopt the recognition provisions of SFAS 123(R).
The accompanying notes are an integral part of the consolidated financial
statements.
3
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
Six months ended
June 30,
---------------------
2006 2005
--------- ---------
Unaudited
---------------------
Cash flows from operating activities:
-------------------------------------
Net income $ 6,108 $ 5,390
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,388 1,234
Accrued interest and amortization of premium on held-to-maturity
marketable securities and bank deposits, net (587) 347
Amortization of deferred stock compensation 2,243 -
Gain on sale of property and equipment - (13)
Increase in trade receivables, net (888) (1,038)
Decrease in other accounts receivable and prepaid expenses 813 1,005
Decrease (increase) in inventories (2,151) 209
Increase in deferred tax asset (54) -
Increase (decrease) in trade payables 2,134 (14)
Increase in deferred revenues 463 22
Increase (decrease) in other accounts payable and accrued expenses 595 (1,445)
Accrued severance pay, net 139 21
-------- --------
Net cash provided by operating activities 10,203 5,718
-------- --------
Cash flows from investing activities:
-------------------------------------
Proceeds from redemption of held-to-maturity marketable securities 27,379 8,756
Purchase of held-to-maturity marketable securities (40,815) (9,470)
Proceeds from withdrawal of bank deposits 7,103 9,251
Purchase of bank deposits (27,203) (14,751)
Purchase of property and equipment (1,236) (1,084)
Proceeds from sale of property and equipment - 19
Purchase of FVC assets (1) - (7,001)
-------- --------
Net cash used in investing activities (34,772) (14,280)
-------- --------
Cash flows from financing activities:
-------------------------------------
Exercise of options by employees 3,573 4,716
Tax benefit related to exercise of stock options 377 -
-------- --------
Net cash provided by financing activities 3,950 4,716
-------- --------
Decrease in cash and cash equivalents (20,619) (3,846)
Cash and cash equivalents at beginning of period 32,927 20,206
-------- --------
Cash and cash equivalents at end of period $ 12,308 $ 6,360
======== ========
Supplemental disclosure of non-cash flows from
----------------------------------------------
investing and financing activities:
-----------------------------------
Receivables on account of shares $ 91 $ 27
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
4
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
(1) Supplemental disclosure of cash flow information:
-------------------------------------------------
In March 2005, the Company acquired the assets of First Virtual
Communication Inc. ("FVC"). The net fair value of the assets acquired and
the liabilities assumed at the date of acquisition was as follows:
--------
Working capital, excluding cash and cash equivalents $ 265
Property and equipment 57
Technology 3,285
Distribution networks 1,075
Goodwill 2,319
--------
$ 7,001
========
The accompanying notes are an integral part of the consolidated financial
statements.
5
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 1:- GENERAL
a. RADVISION Ltd. (the "Company") is an Israeli corporation which
designs, develops and supplies 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 ("IP").
The Company's products and technology are used by its customers
to develop systems that enable enterprises and service providers
to use packet networks for real-time IP communications.
The Company operates under two reportable segments: 1) the
Networking Business Unit ("NBU"), which focuses on networking
solutions and products and is responsible for developing
networking products for IP-centric voice, video and data
conferencing services; and 2) the Technology Business Unit
("TBU"), which focuses on creating developer toolkits for the
underlying IP communication protocols and testing tools needed
for real-time voice and video over IP.
The Company has eight wholly-owned subsidiaries: RADVISION Inc.
in the United States, RADVISION HK in Hong Kong, RADVISION U.K.
in the United Kingdom, RADVISION Japan KK in Japan, RADVISION
FRANCE S.A.R.L in France, RADVISION B.V. in the Netherlands
RADVISION GmbH in Germany, all of which are primarily engaged in
marketing the Company's products and technology, and RADVISION
Communication Development (Beijing) Co. Ltd. in China, which is
primarily engaged in research and development.
b. Acquisition of assets and the business of First Virtual
Communication Inc ("FVC"):
On March 15, 2005, following a bidding process held under the
supervision of a United States Bankruptcy Court, the Company
acquired substantially all of the assets of FVC and its
wholly-owned subsidiary, CUseeMe Networks, Inc. FVC creates
leading software products that enable interactive voice, video
and data collaboration over IP-based networks. The cash purchase
price for the acquisition, including transaction costs, was $
7,496.
The acquisition was accounted for under the purchase method of
accounting, in accordance with SFAS No. 141, and accordingly, the
purchase price was allocated to the assets acquired and the
liabilities assumed based on their estimated fair value at the
date of acquisition and the results of FVC's operations were
included in the consolidated financial statements commencing from
the date of acquisition. The excess of the purchase price over
the estimated fair value of the net assets acquired was recorded
as goodwill. The purchase price of the acquisition was determined
and paid based on significant consideration for synergistic and
strategic benefits.
6
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 1:- GENERAL (Cont.)
Based upon a valuation of tangible and intangible assets
acquired, the Company has allocated the total cost of the
acquisition to FVC's net assets as follows:
Tangible assets acquired (including cash
and cash equivalents) $ 1,167
Liabilities assumed (350)
Intangible assets:
Technology 3,285
Distribution networks 1,075
Goodwill 2,319
-------
Total consideration $ 7,496
=======
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the annual financial
statements of the Company as of December 31, 2005 are applied
consistently in these financial statements.
a. Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
b. For further information, refer to the consolidated financial
statements as of December 31, 2005.
c. Accounting for stock-based compensation:
On January 1, 2006, the Company adopted Statement of Financial
Accounting Standards No. 123 (revised 2004), "Share-Based
Payment" ("SFAS 123(R)"), which requires the measurement and
recognition of compensation expense for all share-based payment
awards made to employees and directors, including employee stock
options and employee stock purchases related to employee stock
purchase plans ("employee stock purchases") based on estimated
fair values. SFAS 123(R) supersedes the Company's previous
accounting under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") for periods
beginning January 1, 2006.
The Company adopted SFAS 123(R) using the modified prospective
transition method. In accordance with the modified prospective
transition method, the Company's consolidated financial
statements for prior periods have not been restated to reflect,
and do not include, the impact of SFAS 123(R). Stock-based
compensation expense recognized under SFAS 123(R) for the six and
three months ended June 30, 2006 was $ 2,243 and $ 1,215,
respectively which consisted of stock-based compensation expense
related to employee stock options (see d. below).
7
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SFAS 123(R) requires companies to estimate the fair value of
share-based payment awards on the date of grant using an
option-pricing model. The value of the portion of the award that
is ultimately expected to vest is recognized as expense over the
requisite service periods in the Company's consolidated statement
of income. Prior to the adoption of SFAS 123(R), the Company
accounted for stock-based awards to employees and directors using
the intrinsic value method in accordance with APB 25 as allowed
under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). There was
no stock-based compensation expense related to employee stock
options and employee stock purchases recognized during the six
and three months ended June 30, 2005.
In conjunction with the adoption of SFAS 123(R), the Company
estimates option values using the Black-Scholes method of
attributing the value of stock-based compensation to expense
using the straight-line method. The option-pricing model requires
a number of assumptions, of which the most significant are the
expected stock price volatility, pre-vesting forfeiture rate and
option term (the amount of time from the grant date until the
options are exercised or expire). Expected volatility was
calculated based upon actual historical stock price movements
over the most recent periods ending June 30, 2006 equal to the
expected option term. Expected pre-vesting forfeitures were
estimated based on actual historical pre-vesting forfeitures over
the most recent periods ending June 30, 2006 for the expected
option term. The expected option term was calculated using the
"simplified" method permitted by SAB 107.
The fair value estimated at the date of grant using a Black -
Scholes Option Valuation Model with the following
weighted-average assumptions for the six and three months ended
June 30, 2006 and 2005:
Six months ended Three months ended
June 30, June 30,
-------------------- -------------------
2006 2005 2006 2005
-------- --------- -------- --------
Unaudited
----------------------------------------
Risk free interest 4.51% 3.94% 4.85% 3.91%
Dividend yields 0% 0% 0% 0%
Volatility 0.71 0.37 0.71 0.38
Expected life (years) 6.15 4 6.11 4
8
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, expect per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Pro forma stock compensation expense for the six and three months
ended June 30, 2005:
For the six and three months ended June 30, 2005, the Company
applied the intrinsic value method of accounting for stock
options as prescribed by APB 25, whereby compensation expense is
equal to the excess, if any, of the quoted market price of the
stock over the exercise price at the grant date of the award.
Since all options granted during the quarterly period ended June
30, 2005 had an exercise price equal to the closing market price
of the underlying common stock on the grant date, no compensation
expense was recognized. If compensation expense had been
recognized based on the estimated fair value of each option
granted in accordance with the provisions of SFAS 123, as amended
by Statement of Financial Accounting Standard No. 148, net income
and net earnings per share would have been reduced to the
following pro-forma amounts:
Pro forma information under SFAS No. 123:
Six months Three months
ended ended
June 30, June 30,
2005 2005
----------- ------------
Unaudited
-------------------------
Net income as reported $ 5,390 $ 2,896
Deduct - stock-based compensation expense
determined under fair value method for
all awards 1,705 814
---------- ---------
Pro forma net income $ 3,685$ 2,082
========== =========
Basic net earnings per share, as reported $ 0.26 $ 0.14
========== =========
Diluted net earnings per share, as reported $ 0.24 $ 0.13
========== =========
Pro forma basic net earnings per share $ 0.18 $ 0.10
========== =========
Pro forma diluted net earnings per share $ 0.17 $ 0.10
========== =========
Pro forma compensation expense under SFAS 123, among other
computational differences, does not consider potential
pre-vesting forfeitures. Because of these differences, the pro
forma stock compensation expense presented above for the prior
period ended June 30, 2005 under SFAS 123 and the stock
compensation expense recognized during the current quarterly
period ended June 30, 2006 under SFAS 123(R) are not directly
comparable. In accordance with the modified prospective
transition method of SFAS 123(R), the prior comparative quarterly
results have not been restated.
9
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
d. Reconciliation of GAAP to Non-GAAP operating results:
To supplement the consolidated financial statements presented in
accordance with generally accepted accounting principles
("GAAP"), the Company uses non-GAAP measures of operating
results, net income and earnings per share, which are adjusted
from results based on GAAP to exclude the expenses recorded for
stock compensation in accordance with SFAS 123(R). These non-GAAP
financial measures are provided to enhance overall understanding
of the current financial performance and prospects for the
future. Specifically, the Company believes the non-GAAP results
provide useful information to both management, and investors as
these non-GAAP results exclude the expenses recorded for stock
compensation in accordance with SFAS 123(R) that the Company
believes are not indicative of the core operating results.
Further, these non-GAAP results are one of the primary indicators
management uses for assessing the Company's performance,
allocating resources and planning and forecasting future periods.
These measures should be considered in addition to results
prepared in accordance with GAAP, but should not be considered a
substitute for or superior to GAAP results. These non-GAAP
measures may be different than the non-GAAP measures used by
other companies.
10
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, expect per share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following table reconciles the GAAP to non-GAAP operating
results:
Six months ended Three months ended
June 30, June 30,
---------------------------------------------- -----------------------------------------------
2006 2005 2006 2005
--------------------------------- ----------- ----------------------------------- ---------
Unaudited
-----------------------------------------------------------------------------------------------
Non-GAAP Non-GAAP
GAAP adjustment GAAP GAAP adjustment GAAP
results to Non-GAAP results results to Non-GAAP results
(as share-based results - (as (as share-based results (as
reported) compensation pro forma reported) reported) compensation pro forma reported)
--------- ------------ --------- --------- --------- ------------ --------- ---------
Revenues $42,140 $ - $42,140 $33,753 $22,004 $ - $22,004 $17,473
Cost of revenues 8,080 165 7,915 5,879 4,429 96 4,333 3,103
------- ------ ------- ------- ------- ------ ------- -------
Gross profit 34,060 165 34,225 27,874 17,575 96 17,671 14,370
------- ------ ------- ------- ------- ------ ------- -------
Operating costs and expenses:
Research and development 11,905 681 11,224 9,709 6,160 382 5,778 5,054
Marketing and selling 15,166 939 14,227 11,763 7,767 500 7,267 6,006
General and administrative 2,976 458 2,518 2,311 1,515 237 1,278 1,152
------- ------ ------- ------- ------- ------ ------- -------
Total operating costs and expenses 30,047 2,078 27,969 23,783 15,442 1,119 14,323 12,212
----- ------- ------ ------- ------- ------- ------ ------- -------
Operating income 4,013 2,243 6,256 4,091 2,133 1,215 3,348 2,158
Financial income, net 2,704 - 2,704 1,329 1,433 - 1,433 768
------- ------ ------- ------- ------- ------ ------- -------
Income before taxes 6,717 2,243 8,960 5,420 3,566 1,215 4,781 2,926
Taxes on income, net 609 - 609 30 355 - 355 30
------- ------ ------- ------- ------- ------ ------- -------
Net income $ 6,108 $2,243 $ 8,351 $ 5,390 $ 3,211 $1,215 $ 4,426 $ 2,896
======= ====== ======= ======= ======= ====== ======= =======
Basic net earnings per
Ordinary share $ 0.28 $ 0.10 $ 0.38 $ 0.26 $ 0.14 $ 0.06 $ 0.20 $ 0.14
======= ====== ======= ======= ======= ====== ======= =======
Diluted net earnings per
Ordinary share $ 0.27 $ 0.10 $ 0.37 $ 0.24 $ 0.14 $ 0.06 $ 0.20 $ 0.13
======= ====== ======= ======= ======= ====== ======= =======
11
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 3:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with GAAP for interim financial
information. Accordingly, they do not include all the information and
footnotes required by GAAP for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the six months ended June 30, 2006,
are not necessarily indicative of the results of operations that may
be expected for the year ended December 31, 2006.
NOTE 4:- INVENTORIES
June 30, December 31,
2006 2005
--------- ------------
Unaudited Audited
--------- ------------
Raw materials $ 4,087 $ 2,451
Finished products 657 142
------- -------
$ 4,744 $ 2,593
======= ========
NOTE 5:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
June 30, December 31,
2006 2005
--------- ------------
Unaudited Audited
--------- ------------
Payroll and related accruals $ 3,668 $ 3,133
Accrued expenses and other liabilities 9,049 8,989
-------- --------
$ 12,717 $ 12,122
======== ========
12
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 6:- NET EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
net earnings per share:
Six months ended Three months ended
June 30, June 30,
------------------------ ------------------------
2006 2005 2006 2005
---------- ---------- ----------- ----------
Unaudited
---------------------------------------------------
Numerator:
Net income $ 6,108 $ 5,390 $ 3,211 $ 2,896
========== ========== ========== ==========
Number of shares:
Denominator:
Denominator for basic earnings
per share - weighted average
of ordinary shares 22,105,694 20,854,595 22,216,021 20,994,973
Effect of dilutive securities:
Employee stock options and
unvested restricted shares 426,770 1,172,473 388,626 1,025,973
---------- ---------- ---------- ----------
22,532,464 22,027,068 22,604,647 22,020,946
========== ========== ========== ==========
Basic net earnings per ordinary
share $ 0.28 $ 0.26 $ 0.14 $ 0.14
========== ========== ========== ==========
Diluted net earnings per ordinary
share $ 0.27 $ 0.24 $ 0.14 $ 0.13
========== ========== ========== ==========
- - - - - - - - - - - -
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This information should be read in conjunction with the consolidated financial
statements and notes included in the consolidated financial statements for the
quarterly period ended June 30, 2006 above and the audited consolidated
financial statements and notes thereto and Item 5. Operating and Financial
Review and Prospects contained in our 2005 Annual Report on Form 20-F. The
discussion and analysis which follows may contain trend analysis and other
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
and within the Private Securities Litigation Reform Act of 1995, as amended.
Such forward-looking statements reflect our current views with respect to future
events and financial results. These include statements regarding our earnings,
projected growth and forecasts, and similar matters that are not historical
facts. Forward-looking statements usually include the verbs, "anticipates,"
"believes," "estimates," "expects," "intends," "plans," "projects,"
"understands" and other verbs suggesting uncertainty. We remind shareholders
that forward-looking statements are merely predictions and therefore are
inherently subject to uncertainties and other factors that could cause the
actual results, performance, levels of activity, or our achievements, or
industry results, to differ materially from those expressed or implied by the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. We
undertake no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. We have attempted
to identify significant uncertainties and other factors affecting
forward-looking statements in the section entitled "Risk Factors" and elsewhere
in our 2005 Annual Report on Form 20-F.
Background
We design, develop and supply products and technology that enable
real-time voice, video and data communication over packet networks, including
the Internet and other Internet Protocol, or IP, networks. We were incorporated
in January 1992, commenced operations in October 1992 and commenced sales of our
products in the fourth quarter of 1994. Since our initial public offering on
March 14, 2000, our ordinary shares have been listed on the NASDAQ National
Market (symbol: RVSN), and our ordinary shares have also traded on the Tel Aviv
Stock Exchange since October 20, 2002.
We have eight wholly-owned subsidiaries: RADVISION Inc. in the United
States, RADVISION (HK) Ltd. in Hong Kong, RADVISION (UK) Ltd. in the United
Kingdom, RADVISION FRANCE S.A.R.L. in France, RADVISION Japan KK in Japan,
RADVISION B.V. in the Netherlands, RADVISION GmbH in Germany, all of which are
primarily engaged in the sale and marketing of our products and technology, and
RADVISION Communication Development (Beijing) Co. Ltd. in China., which is
primarily engaged in research and development.
Our revenues are generated in U.S. dollars or are linked to the dollar
and a majority of our expenses are incurred in U.S. dollars. Consequently, we
use the dollar as our functional currency. Transactions and balances in other
currencies are re-measured into dollars according
to the principles in Financial Accounting Standards Board Statement No. 52.
Gains and losses arising from re-measurement are reflected in the statements of
operations as financial income or expenses as appropriate.
Overview
We are the industry's leading provider of high quality, scalable and
easy-to-use products and technologies for videoconferencing, video telephony,
and the development of converged voice, video and data over IP and 3G (Third
Generation) networks. Hundreds of thousands of end-users around the world today
communicate over a wide variety of networks using products and solutions based
on or built around our multimedia communication platforms and software
development solutions.
We have approximately 450 customers worldwide, including Cisco,
Aethra, Alcatel, Lucent, Microsoft, Nortel, NTT/DoCoMo, Orange Telecom, Philips,
Panasonic, Qualcomm, Samsung, Shanghai Bell, Siemens, Sony and Telecom Italy.
Since 2001, we have conducted our business through two separate
business units corresponding to our two product lines to enable our product
development and product marketing teams to respond quickly to evolving market
needs with new product introductions.
Our Networking Business Unit, or NBU, offers one of the broadest and
most complete set of multimedia communication and videoconferencing network
solutions for IP, ISDN, SIP, H.323 and 3G-based networks, supporting most end
points in the industry today. These products are sold to the enterprise market,
U.S. federal government and service provider market.
On March 15, 2005, following a bidding process held under the
supervision of a United States Bankruptcy Court, we acquired substantially all
of the assets of First Virtual Communications, Inc, or FVC, and its wholly owned
subsidiary, CUseeMe Networks, Inc., on an "as is" basis. We acquired FVC's
leading software products that enable interactive voice, video and data
collaboration over IP-based networks. The products provide cost-effective,
integrated end-to-end solutions for large-scale deployments from the desktop to
the conference room and also enable best-of-breed collaborative conferencing
solutions to be extended to ISDN and ATM networks. FVC's Click to Meet(TM)
products provide integrated and scalable desktop conferencing solutions. Click
to Meet(TM) products are fully integrated with a single software architecture
consisting of the Conference Server, the Conference Client and the Middleware to
tie them together. Click to Meet(TM) products are widely used throughout the
world and offer a robust set of functionalities. The purchase price was
approximately $7.0 million. We also hired approximately thirty former employees
of FVC that were based in Nashua, New Hampshire, and who were involved in
marketing, selling and supporting the acquired FVC products. In the year ended
December 31, 2005, we recognized revenues of $5.1 million from Click to Meet(TM)
products as part of our NBU segment.
Our Technology Business Unit, or TBU, is a one-stop-shop for developer
platforms that equipment vendors use to build voice and video over IP and 3G
products and solutions. Our TBU provides protocol development tools and
platforms, as well as associated solutions such as testing platforms and IP
phone toolkits that enable equipment vendors and service providers to develop
and deploy new IP and 3G-based converged networks, services, and technologies.
Our
TBU solutions include developer toolkits for SIP, MEGACO/H.248, MGCP, H.323, and
3G-324M, as well as our ProLab(TM) Test Management Suite and IP Phone Toolkit.
Our toolkits have been used by developers in a wide range of environments from
chipsets to simple user devices such as IP phones, and from integrated video
systems through carrier class network devices such as gateways, switches, soft
switches and 3G multimedia gateways.
Both business units also provide professional services to customers,
assisting them to integrate our technology into their products and to customize
our products to their specific needs.
Our Strategy
Our goal is to be the leading provider of solutions that enable
real-time multimedia (voice, video and data) collaboration and communication
over packet and 3G networks. We provide solutions at every level - protocol
developer toolkits, professional services, network infrastructure, as well as
integrated solutions that complement the communication solutions of other
vendors such as those from Alcatel, Cisco, Microsoft and Sony. We believe that
the combination of offering IP-centric networking products, along with software
toolkits, positions us as a key enabling vendor in the evolution of IP
communications.
Results of Operations
The following table presents, as a percentage of total revenues,
statements of operations data for the periods indicated:
Three months Six months
ended June 30, ended June 30,
------------------- -----------------
2006 2005 2006 2005
--------- -------- ------- -------
Unaudited
---------------------------------------
Revenues 100% 100% 100% 100%
Operating costs and expenses:
Cost of revenues....................... 20.1 17.8 19.2 17.4
Gross profit........................ 79.9 82.2 80.8 82.6
Research and development............ 28.0 28.9 28.3 28.8
Marketing and selling............... 35.3 34.4 36.0 34.9
General and administrative.......... 6.9 6.6 7.1 6.8
Total operating expenses............... 70.2 69.9 71.4 70.5
Operating income ..................... 9.7 12.3 9.4 12.1
Financial income, net.................. 6.5 4.4 6.4 3.9
Taxes on income........................ 1.6 - 1.4 -
Net income............................. 14.6 16.7 14.4 16.0
Three Months Ended June 30, 2006 Compared with Three Months Ended June 30, 2005
Revenues. We generate revenues from sales of our networking products
that are primarily sold in the form of off-the-shelf products, and our
technology products that are primarily sold in the form of software development
kits, as well as related maintenance and support services. We generally
recognize revenues from the sale of our products upon shipment and when
collection is probable. Revenues generated from maintenance and support services
are deferred and recognized ratably over the period of the term of service. We
price our networking
products on a per unit basis and grant discounts based upon unit volumes. We
price our software development kits on the basis of a fixed-fee plus royalties
from products developed using the software development kits. We sell our
products and technology through direct sales and various indirect distribution
channels in the Americas, Europe, and the Asia Pacific region.
Our revenues increased from $17.5 million for the three months ended
June 30, 2005 to $22.0 million for the three months ended June 30, 2006, an
increase of $4.5 million or 25.7%. This increase in revenues was due to a $4.1
million increase in sales of our networking products and a $400,000 increase in
sales of our technology products, mainly in the Americas.
Revenues from networking products increased from $11.9 million for the
three months ended June 30, 2005 to $16.0 million for the three months ended
June 30, 2006, an increase of $4.1 million or 34.5%. The increase in revenues
from networking products was primarily attributable to increased OEM sales to
Cisco. During the three months ended June 30, 2006, we introduced our new video
platform.
Revenues from technology products increased from $5.6 million for the
three months ended June 30, 2005 to $6.0 million for the three months ended June
30, 2006, an increase of $400,000 or 7.1%. The increase in revenues from
technology products was attributable to an $800,000 increase in royalty
revenues, a $200,000 increase in maintenance revenues and a $250,000 increase in
professional services. This increase was offset by a $900,000 decrease in
revenues from software licenses.
Revenues from sales to customers in the Americas increased from $8.8
million, or 50.6% of revenues, for the three months ended June 30, 2005 to $13.0
million, or 59.1% of revenues, for the three months ended June 30, 2006, an
increase of $4.2 million or 47.8%. The increase in sales to customers in the
Americas was primarily attributable to increased OEM sales to Cisco.
Revenues from sales to customers in Europe and the Middle East
increased from $4.9 million for the three month period ended June 30, 2005, or
28.3% of revenues, to $5.3 million, or 24.0% of revenues, for the three months
ended June 30, 2006, an increase of $400,000 or 8.2%. The increase in sales to
customers in Europe and the Middle East is primarily attributable to an increase
in royalty revenues, maintenance revenues and professional services of our TBU.
Revenues from sales to customers in the Asia Pacific region remained
constant at $3.7 million for the three months ended June 30, 2005 and 2006.
Revenues from sales to customers in the Asia Pacific region as a percentage of
revenues decreased from 21.1% of revenues for the three months ended June 30,
2005 to 16.8% of revenues for the three months ended June 30, 2006.
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 products as compared to
our networking products and the proportion of our revenues generated from the
sale of our software solutions of our technology segment as compared to our
hardware products of our networking segment.
Cost of revenues increased from $3.1 million for the three month
period ended June 30, 2005 to $4.4 million for the three months ended June 30,
2006, an increase of $1.3 million, or 41.9%. Gross profit as a percentage of
revenues decreased from 82.2% for the three months ended June 30, 2005 to 79.9%
for the three months ended June 30, 2006, due to the increased proportion of
networking product sales that have lower profit margins. In addition, cost of
revenues for the three months ended June 30, 2006 included $100,000 of
stock-based compensation recorded under Financial Accounting Standards Board
Statement No. 123(revised 2004), "Share-Based Payment," or FASB No. 123(R).
Research and Development. 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.
Research and development expenses increased from $5.1 million for the three
months ended June 30, 2005 to $6.2 million for the three months ended June 30,
2006, an increase of $1.1 million or 21.6%. This increase was primarily
attributable to an increase in the number of research and development personnel.
In addition, research and development expenses for the three months ended June
30, 2006 included $400,000 of stock-based compensation recorded under FASB No.
123(R).
Marketing and Selling. Our marketing and selling expenses consist
primarily of compensation and related costs for sales personnel, marketing
personnel, sales commissions, marketing programs, public relations, promotional
materials, travel expenses and trade show exhibit expenses. Marketing and
selling expenses increased from $6.0 million for the three months ended June 30,
2005 to $7.8 million for the three months ended June 30, 2006, an increase of
$1.8 million or 30.0%. Marketing and selling expenses as a percentage of
revenues increased from 34.4% for the three months ended June 30, 2005 to 35.3%
for the three months ended June 30, 2006. This increase was primarily
attributable to an increase in the number of marketing and sales personnel. In
addition, marketing and selling expenses for the three months ended June 30,
2006 included $500,000 of stock-based compensation recorded under FASB No.
123(R).
General and Administrative. Our general and administrative expenses
consist primarily of salaries and related expenses for executive, accounting and
human resources personnel, professional fees, provisions for doubtful accounts
and other general corporate expenses. General and administrative expenses
increased from $1.2 million for the three months ended June 30, 2005 to $1.5
million for the three months ended June 30, 2006, an increase of $300,000 or
25.0%. General and administrative expenses as a percentage of revenues increased
from 6.6% for the three months ended June 30, 2005 to 6.9% for the three months
ended June 30, 2006. This increase was primarily attributable to $250,000 of
stock-based compensation recorded under FASB No. 123(R).
Operating Income. Our operating income decreased from $2.2 million for
the three months ended June 30, 2005 to $2.1 million for the three months ended
June 30, 2006, a decrease of $100,000 or 4.5%. Excluding stock-based
compensation recorded under FASB No. 123(R), our operating income increased from
$2.2 million for the three months ended June 30, 2005 to $3.3 million for the
three months ended June 30, 2006.
Financial Income, net. Our financial income consists primarily of
interest earned on our bank deposits and other liquid investments, and gains and
losses from the re-measurement of
monetary balance sheet items denominated in non-dollar currencies into dollars.
We recorded financial income, net of $800,000 for the three months ended June
30, 2005 compared to $1.4 million for the three months ended June 30, 2006. This
financial income was principally derived from the investment of the proceeds of
our March 2000 initial public offering, cash generated from operating activities
and the exercise of options by employees. Our financial income increased in the
three months ended June 30, 2006 principally as a result of higher prevailing
interest rates and an increase in funds available for investment.
Six Months Ended June 30, 2006 Compared with Six Months Ended June 30, 2005
Revenues. Our revenues increased from $33.8 million for the six months
ended June 30, 2005 to $42.1 million for the six months ended June 30, 2006, an
increase of $8.3 million or 24.6%. This increase in revenues was due to a $7.5
million increase in sales of our networking products and an $800,000 increase in
sales of our technology products. The result reflects increased sales in all
regions.
Revenues from networking products increased from $22.6 million for the
six months ended June 30, 2005 to $30.1 million for the six months ended June
30, 2006, an increase of $7.5 million or 33.2%. The increase in revenues from
networking products was primarily attributable to increased OEM sales to Cisco,
revenues from the sales of the Click to Meet products which we acquired in March
2005 and increased revenues from our 3G products.
Revenues from technology products increased from $11.1 million for the
six months ended June 30, 2005 to $12.0 million for the six months ended June
30, 2006, an increase of $900,000 or 8.1%. The increase in revenues from
technology products was attributable to a $1.5 million increase in royalty
revenues and a $500,000 increase in maintenance revenues. This increase was
offset by a $1.1 million decrease in revenues from software licenses.
Revenues from sales to customers in the Americas increased from $17.3
million, or 51.3% of revenues, for the six months ended June 30, 2005 to $22.8
million, or 54.2% of revenues, for the six months ended June 30, 2006, an
increase of $5.5 million or 31.8%. The increase in sales to customers in the
Americas was primarily attributable to increased sales of our networking
products, primarily OEM sales to Cisco.
Revenues from sales to customers in Europe and the Middle East
increased from $9.6 million for the six month period ended June 30, 2005, or
28.4% of revenues, to $11.8 million, or 27.9% of revenues, for the six months
ended June 30, 2006, an increase of $2.2 million or 22.9%. The increase in sales
to customers in Europe and the Middle East is primarily attributable to an
increase in sales of our networking products, mainly our 3G products.
Revenues from sales to customers in the Asia Pacific region increased
from $6.8 million, or 20.2% of revenues, for the six months ended June 30, 2005
to $7.5 million, or 17.9% of revenues, for the six months ended June 30, 2006,
an increase of $700,000 or 10.3%. The increase in sales to customers in the Asia
Pacific region is due to strong growth and increased market demand for our
networking products, particularly in China, Japan and Australia.
Cost of Revenues. Cost of revenues increased from $5.9 million for the
six month period ended June 30, 2005 to $8.1 million for the six months ended
June 30, 2006, an increase of $2.2 million or 37.3%. Gross profit as a
percentage of revenues decreased from 82.6% for the six
months ended June 30, 2005 to 80.8% for the six months ended June 30, 2006, due
to the increased proportion of networking product sales that have lower gross
margins. In addition, cost of revenues for the six months ended June 30, 2006
included $200,000 of stock-based compensation recorded under FASB No. 123(R).
Research and Development. Research and development expenses increased
from $9.7 million for the six months ended June 30, 2005 to $11.9 million for
the six months ended June 30, 2006, an increase of $2.2 million or 22.7%.
Research and development expenses as a percentage of revenues decreased from
28.8% for the six months ended June 30, 2005 to 28.3% for the six months ended
June 30, 2006. The increase in research and development expenses was primarily
attributable to an increase in the number of research and development personnel
mainly due to the acquisition of FVC in March 2005. In addition, research and
development expenses for the six months ended June 30, 2006 included $900,000 of
stock-based compensation recorded under FASB No. 123(R).
Marketing and Selling. Marketing and selling expenses increased from
$11.8 million for the six months ended June 30, 2005 to $15.2 million for the
six months ended June 30, 2006, an increase of $3.4 million or 28.8%. Marketing
and selling expenses as a percentage of revenues increased from 34.9% for the
six months ended June 30, 2005 to 36.0% for the six months ended June 30, 2006.
This increase was primarily attributable to an increase in the number of
marketing and sales personnel. In addition, marketing and selling expenses for
the six months ended June 30, 2006 included $900,000 of stock-based compensation
recorded under FASB No. 123(R).
General and Administrative. General and administrative expenses
increased from $2.3 million for the six months ended June 30, 2005 to $3.0
million for the six months ended June 30, 2006, an increase of $700,000 or
30.4%. General and administrative expenses as a percentage of revenues increased
from 6.8% for the six months ended June 30, 2005 to 7.1% for the six months
ended June 30, 2006. This increase was primarily attributable to $500,000 of
stock-based compensation recorded under FASB No. 123(R).
Operating Income. Our operating income decreased from $4.1 million for
the six months ended June 30, 2005 to $4.0 million for the six months ended June
30, 2006. Excluding stock-based compensation recorded under FASB No. 123(R), our
operating income increased from $4.1 million for the six months ended June 30,
2005 to $6.3 million for the six months ended June 30, 2006.
Financial Income, net. We recorded financial income of $1.3 million
for the six months ended June 30, 2005 compared to $2.7 million for the six
months ended June 30, 2006. This financial income was principally derived from
the investment of the proceeds of our March 2000 initial public offering, cash
generated from operating activities and the exercise of options by employees.
Our financial income increased in the six months ended June 30, 2006 principally
as a result of higher prevailing interest rates and an increase in funds
available for investment.
Liquidity and Capital Resources
As of June 30, 2006, we had approximately $12.3 million in cash and
cash equivalents, $75.8 million in short-term investments and our working
capital was approximately $84.0
million as compared to approximately $32.9 million in cash and cash equivalents,
$63.5 million in short-term investments and working capital of approximately
$93.2 million at December 31, 2005. Taking into account long-term liquid
investments, we had approximately $138.5 million in cash and liquid investments
as of June 30, 2006 compared to $125.0 million in cash and liquid investments as
of December 31, 2005.
The following table summarizes our cash flows for the periods
presented:
Six Months ended June 30,
-------------------------
2006 2005
---------- -----------
($ in thousands)
Net cash used in operating activities................. $ 10.2 $ 5.7
Net cash used in investing activities................. $ (34.8) $ (14.2)
Net cash provided by financing activities............. $ 4.0 $ 4.7
Net (decrease) increase in cash and cash equivalents.. $ (20.6) $ (3.8)
Cash and cash equivalents at beginning of period...... $ 32.9 $ 20.2
Cash and cash equivalents at end of period............ $ 12.3 $ 16.4
We generated $10.2 million from operating activities for the six
months ended June 30, 2006 compared to $5.7 million for the same period in 2005.
This amount was primarily attributable to an increase in our net income, which
for cash flow purposes does not reflect stock-based compensation of $2.2 million
recorded under FASB No. 123(R).
Net cash used in investing activities was approximately $34.8 million
for the six months ended June 30, 2006. Of such cash used in investing
activities, $33.6 million was used for investments in bank deposits and
marketable securities, net and $1.2 million was used for purchases of property
and equipment.
Our financing activities generated $4.0 million for the six months
ended June 30, 2006 compared to $4.7 million for the same period in 2005. Cash
provided by financing activities in both periods is attributable to proceeds
received from the exercise of employee stock options.
Our capital requirements are dependent on many factors, including
market acceptance of our products and the allocation of resources to our
research and development efforts, as well as our marketing and sales activities.
We plan to pursue strategic initiatives and make operating investments in 2006
as we position our company to realize what we perceive to be increasing market
opportunities in the coming years. We anticipate that our cash resources will be
used primarily to fund our operating activities, as well as for capital
expenditures. We may establish additional operations as we expand globally.
During the second quarter of 2006, we also announced that we intend to commence
a $30 million stock buy-back program.
Off-Balance Sheet Arrangements
We are not a party to any material off-balance sheet arrangements. In
addition, we have no unconsolidated special purpose financing or partnership
entities that are likely to create material contingent obligations.
Third Quarter 2006 Guidance
Net sales for the third quarter of 2006 are expected to be
approximately $23.2 million, an increase of approximately $4.1 million or 21.5%
compared with the third quarter of 2005.
Net income for the third quarter of 2006 is expected to increase to
approximately $3.4 million, or $0.15 per diluted share. This includes
stock-based compensation expense related to the adoption of FASB No. 123(R) of
$1.3 million or $0.06 per diluted share
These projections are subject to substantial uncertainty that could
cause our future results to differ materially from the guidance we have
provided.
Quantitative And Qualitative Disclosure About Market Risks
We are exposed to a variety of risks, including changes in interest
rates and foreign currency fluctuations.
Interest Rate Risk
As of June 30, 2006, we had cash and cash equivalents and short-term
and long-term investments and deposits of $138.5 million. We invest our cash
surplus in time deposits, cash deposits, U.S. federal agency securities and
corporate bonds with an average credit rating of AA. These investments are not
purchased for trading or other speculative purposes. Due to the nature of these
investments, we believe that we do not have a material exposure to market risk.
Our exposure to market risks for changes in interest rates is limited
since we do not have any material indebtedness.
Foreign Currency Exchange Risk
We develop products in Israel and sell them in the Americas, the
Middle East, Asia and several European countries. As a result our financial
results could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets.
Our foreign currency exposure with respect to our sales is mitigated,
and we expect it will continue to be mitigated, through salaries, purchases of
materials and support operations, in which part of these costs are denominated
in New Israeli Shekels, or NIS.
Since the beginning of 2006, the NIS has devaluated approximately 3.5%
against the dollar. The inflation rate in Israel was approximately 1.6% in the
first six months of 2006 compared to an annual inflation rate of 2.4% in 2005
and 1.2% in 2004.
Since most of our sales are quoted in dollars, and a portion of our
expenses are incurred in NIS, our results may be adversely affected by a change
in the rate of inflation in Israel or if such change in the rate of inflation is
not offset, or is offset on a lagging basis, by a corresponding devaluation of
the NIS against the dollar and other foreign currencies.
Risk Factors
Other than as reflected below, there have been no material changes in
our risk factors reported in our Annual Report on Form 20-F for the year ended
December 31, 2005.
Conducting business in Israel entails special risks.
Since July 2006, Israel has been engaged in an armed conflict with
Hezbollah forces in Lebanon, which has involved rocket attacks on populated
areas in the northern parts of Israel. This situation has had an adverse effect
on Israel's economy, at this stage primarily in the geographical areas directly
harmed by this conflict. If this situation continues or escalates in the future,
the adverse economic effect may deepen and spread to additional geographical
areas. Although such conflict has not had a material adverse impact on our
operations to date, should it develop into broader operations or war, it could
have a negative impact on our operations.
Many of our directors, officers and employees in Israel are obligated
to perform annual reserve duty in the Israeli Defense Forces and may be called
for active duty under emergency circumstances at any time. If a military
conflict or war arises, these individuals could be required to serve in the
military for extended periods of time. Our operations could be disrupted by the
absence for a significant period of one or more of our executive officers or key
employees or a significant number of other employees due to military service.
Any disruption in our operations could adversely affect our business.
The implications of these developments cannot at this time be
foreseen. No predictions can be made as to whether or when a final resolution of
the region's problems will be achieved or the nature thereof and to what extent
the situation will impact Israel's economic development or our operations. Any
future armed conflict, political instability or violence in the region may have
a negative effect on our business condition and operations, impact our results
and adversely affect our share price.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RADVISION LTD.
(Registrant)
/s/ Arnold Taragin
------------------
Arnold Taragin
Corporate Vice President
and General Counsel
Date: August 7, 2006