<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
_X_ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
__ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NUMBER: 0-31151
RADVIEW SOFTWARE LTD.
(Exact name of registrant as specified in its charter)
ISRAEL NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 NEW ENGLAND EXECUTIVE PARK
BURLINGTON, MA 01803
(Address of principal executive offices)
TELEPHONE NUMBER (781) 238-1111
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) Yes _X_ No __, and (2) has been
subject to such filing requirements for the past 90 days: Yes _X_ No ___.
As of October 31, 2000 there were 16,366,572 shares of the Registrant's
Ordinary Shares outstanding.
<PAGE>
RADVIEW SOFTWARE LTD. AND SUBSIDIARY
Form 10-Q INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page No.
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999............................. 3
Condensed Consolidated Statements of Operations for the three and nine months
ended September 30, 2000 and 1999........ ....................................................................... 4
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 and 1999............ 5
Notes to Condensed Consolidated Financial Statements............................................................. 6-10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 11-17
Item 3. Quantitative and Qualitative Disclosures About Market Risk....................................................... 17
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................................................ 18
Item 2. Changes in Securities and Use of Proceeds........................................................................ 18
Item 3. Defaults Upon Senior Securities.................................................................................. 19
Item 4. Submission of Matters to a Vote of Security Holders.............................................................. 19
Item 5. Other Information................................................................................................ 19
Item 6. Exhibits and Reports on Form 8-K................................................................................. 19
Signatures....................................................................................................... 20
</TABLE>
2
<PAGE>
RADVIEW SOFTWARE LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------- -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 37,389 $ 7,652
Short-term investments -- 513
Accounts receivable, net 2,360 1,281
Prepaid expenses 602 322
-------- --------
Total current assets 40,351 9,768
Property and Equipment, net 1,789 783
Deposits and Other Assets 614 299
-------- --------
Total assets $ 42,754 $ 10,850
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term loans $ 3,721 $ 17
Related party loan -- 115
Accounts payable 1,251 560
Accrued expenses 2,743 1,598
Deferred revenue 1,152 476
-------- --------
Total current liabilities 8,867 2,766
Long-term Liabilities:
Long-term loans -- 3,562
Related party loan -- 1,332
Accrued severance 538 339
-------- --------
Total long-term liabilities 538 5,233
-------- --------
Total liabilities 9,405 7,999
-------- --------
Shareholders' Equity:
Preferred stock, NIS 0.01 par value --
Authorized -- 8,500,000 shares;
Issued and outstanding -- 0 and 5,265,575 shares at
September 30, 2000 and December 31, 1999,
respectively -- 13
Ordinary shares, NIS 0.01 par value --
Authorized -- 25,000,000 shares;
Issued and outstanding -- 16,366,572 and 4,194,000
shares at September 30, 2000 and December 31,
1999, respectively 42 12
Additional paid-in capital 59,982 16,269
Deferred compensation (7,216) (425)
Accumulated deficit (19,459) (13,018)
-------- --------
Total shareholder's equity 33,349 2,851
-------- --------
Total liabilities and shareholders' equity $ 42,754 $ 10,850
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE>
RADVIEW SOFTWARE LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 2,636 $ 1,402 $ 6,892 $ 2,956
Service 466 186 1,176 281
-------- -------- -------- --------
Total revenues 3,102 1,588 8,068 3,237
COST OF REVENUES:
Software licenses 143 108 431 209
Service 138 22 298 55
-------- -------- -------- --------
Total cost of revenues 281 130 729 264
-------- -------- -------- --------
Gross profit 2,821 1,458 7,339 2,973
-------- -------- -------- --------
OPERATING EXPENSES:
Sales and marketing (1) 3,657 1,073 7,160 2,365
Research and development (1) 1,470 396 3,565 1,223
General and administrative (1) 729 297 2,114 625
Stock-based compensation (1) 533 143 1,106 184
-------- -------- -------- --------
Total operating expenses 6,389 1,909 13,945 4,397
-------- -------- -------- --------
Operating loss (3,568) (451) (6,606) (1,424)
Interest income (expense) 240 (21) 165 (180)
Other income (expense) 14 4 -- (22)
-------- -------- -------- --------
Net loss (3,314) (468) (6,441) (1,626)
Noncash stock dividend distributed
to preferred shareholders 2,585 -- 2,585 --
-------- -------- -------- --------
Net loss attributable to ordinary shareholders $ (5,899) $ (468) $ (9,026) $ (1,626)
======== ======== ======== ========
NET LOSS PER SHARE ATTRIBUTABLE TO
ORDINARY SHAREHOLDERS (NOTE 4(a)):
Basic and diluted net loss per share $ (0.54) $ (0.11) $ (1.39) $ (0.52)
======== ======== ======== ========
Weighted average shares outstanding -
basic and diluted 10,994 4,182 6,484 3,151
======== ======== ======== ========
PRO FORMA NET LOSS PER SHARE ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS (NOTE 4(b)):
Basic and diluted net loss per share $ (0.41) $ (0.05) $ (0.71) $ (0.23)
======== ======== ======== ========
Weighted average shares outstanding -
basic and diluted 14,278 8,948 12,699 7,213
======== ======== ======== ========
</TABLE>
----------
(1) The following summarizes the departmental allocation of the stock-based
compensation charge:
<TABLE>
<S> <C> <C> <C> <C>
Sales and marketing $ 310 $ 48 $ 556 $ 60
Research and development 97 52 198 76
General and administrative 126 43 352 48
-------- -------- -------- --------
Total stock-based compensation $ 533 $ 143 $ 1,106 $ 184
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE>
RADVIEW SOFTWARE LTD. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
2000 1999
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (6,441) $(1,626)
Adjustments to reconcile net loss to net cash used
in operating activities --
Depreciation and amortization 443 185
Amortization of deferred compensation 1,106 184
Interest accrued on long-term loans 156 285
Accrued severance pay 199 (128)
Changes in operating assets and liabilities--
Accounts receivable (1,079) (1,334)
Prepaid expenses (280) (149)
Accounts payable 506 38
Accrued expenses 1,301 669
Deferred revenue 676 (75)
-------- -------
Net cash used in operating activities (3,413) (1,951)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of short-term investments 513 316
Purchases of property and equipment (1,449) (204)
Decrease in other assets (315) --
-------- -------
Net cash (used in) provided by investing activities (1,251) 112
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long-term loans received -- 1,976
Repayment of long-term loans (1,305) (1,611)
Net proceeds from issuance of ordinary and preferred shares 406 3,007
Net proceeds from initial public offering of ordinary shares 35,300 --
-------- -------
Net cash provided by financing activities 34,401 3,372
-------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 29,737 1,533
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,652 1,126
-------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,389 $ 2,659
======== =======
CASH PAID DURING THE PERIOD FOR INTEREST $ 620 $ 19
======== =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
<PAGE>
RADVIEW SOFTWARE LTD. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) OPERATIONS
RadView Software Ltd. (the Company) is an Israeli corporation. The
Company develops, markets and supports software that enables
organizations to verify the scalability, efficiency and reliability of
Web applications, and facilitates their rapid development.
(2) INITIAL PUBLIC OFFERING
On August 14, 2000, the Company completed its initial public offering of
4,000,000 shares of its ordinary shares at $10.00 per share. Proceeds to
the Company, net of underwriting discounts and commissions and offering
costs, were $35.3 million.
In connection with the offering all outstanding shares of preferred stock
were converted into 5,265,575 ordinary shares and 602,757 ordinary shares
were issued to certain shareholders upon the exercise of certain options
and warrants. In addition, the Company issued 258,500 ordinary shares to
certain of its Series A preferred shareholders, which has been accounted
for as a stock dividend. The Company has recorded a charge to additional
paid-in capital for the par value of the ordinary shares and the amount
of net loss attributable to ordinary shareholders used in the computation
of basic and diluted net loss per share has been increased by the value
of the ordinary shares issued.
In September 2000, the Company repaid a loan from a related party
totaling $1,359,000, as contractually required, with proceeds from this
offering.
The Company also intends to use the net proceeds from this offering for
working capital and other general corporate purposes, which may include
product research and development, expansion of its operations and sale
and marketing capabilities, and acquisition of, or investment in
companies, technologies or assets that complement its business. Pending
application of the net proceeds as described above, the Company intends
to invest the net proceeds of the offering in short-term,
investment-grade, interest-bearing securities in U.S. dollar accounts.
(3) SIGNIFICANT ACCOUNTING POLICIES
The Company's consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United
States. The significant policies followed in the preparation of the
consolidated financial statements, applied on a consistent basis, are as
follows:
(a) FINANCIAL STATEMENTS IN U.S. DOLLARS
The consolidated financial statements of the Company have been
prepared in U.S. dollars because the currency of the primary
economic environment in which the operations of the Company are
conducted is the U.S. dollar. Substantially all of the Company's
sales are in U.S. dollars. Most purchases of materials and
omponents and most marketing costs are denominated in U.S.
dollars. Therefore,the functional currency of the Company is the
U.S.dollar.
Transactions and balances denominated in dollars are presented at
their original amounts. Transactions and balances in other
currencies are translated into U.S. dollars in accordance with the
principles set forth in Financial Accounting Standards Board of
the United States (FASB) Statement of Accounting Standards (SFAS)
No. 52, FOREIGN CURRENCY TRANSLATION. Accordingly, items have been
translated as follows:
o Monetary Items -- At the exchange rate in effect on the
balance sheet date.
o Nonmonetary Items -- At historical exchange rates.
6
<PAGE>
o Revenue and Expense Items -- At the exchange rates in effect
as of the date of recognition of those items (excluding
depreciation and other items deriving from nonmonetary items).
All exchange gains and losses from the above-mentioned translation
(which were immaterial for all periods presented) are reflected in
the statements of operations. The representative rate of exchange
as of December 31, 1999 and September 30, 2000 was U.S.$1.00 to
4.030 and 4.093 New Israeli Shekel (NIS), respectively.
(b) INTERIM FINANCIAL STATEMENTS
The accompanying consolidated balance sheet as of September 30,
2000, the consolidated statements of operations for the three and
nine months ended September 30, 2000 and 1999 and the consolidated
statement of cash flows for the nine months ended September 30,
2000 and 1999 are unaudited but, in the opinion of management,
include all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of results for
these interim periods. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted, although the Company believes that the disclosures
included are adequate to make the information presented not
misleading. The results of operations for the nine months ended
September 30, 2000 are not necessarily indicative of the results
to be expected for the entire fiscal year. These financial
statements should be read in conjunction with the consolidated
financial statements and related notes included in the Company's
registration statement on Form F-1 filed with the SEC on August 9,
2000.
(c) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary in the U.S. (RadView
Software, Inc.). All material intercompany balances and
transactions have been eliminated in consolidation.
(d) REVENUE RECOGNITION
The Company recognizes revenue in accordance with Statement of
Position (SOP) 97-2, SOFTWARE REVENUE RECOGNITION. In December
1998, the AICPA issued SOP 98-9, MODIFICATION OF SOP 97-2,
SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN
TRANSACTIONS. SOP 98-9 requires use of the residual method for
recognition of revenues when vendor-specific objective evidence
exists for undelivered elements but does not exist for delivered
elements of a software arrangement. If fair value for a delivered
element does not exist but the fair value does exist for all
undelivered elements, the Company defers the fair value of the
undelivered elements and recognizes the remaining value for the
delivered elements. The Company was required to comply with the
provisions of SOP 98-9 for transactions entered into beginning
January 1, 2000. The adoption of SOP 98-9 did not have a material
effect on the financial position or results of operations.
Revenues from software product licenses are recognized upon
delivery of the software provided there is persuasive evidence of
an agreement, the fee is fixed or determinable and collection of
the related receivable is probable. Revenues under multiple
element arrangements, which may include software, software
maintenance and training, are allocated to each element based on
their respective fair values, based on vendor-specific objective
evidence. This objective evidence represents the price of products
and services when sold separately. Revenue is recognized for
software licenses sold to resellers or distributors at the time of
shipment, provided that all revenue recognition criteria set forth
in SOP 97-2 are fulfilled.
Revenues from software maintenance agreements are recognized
ratably over the term of the maintenance period, which is
typically one year. Revenues from training arrangements are
recognized as the services are performed.
7
<PAGE>
Amounts collected or billed prior to satisfying the above revenue
recognition criteria are reflected as deferred revenue. Deferred
revenue primarily represents deferred maintenance revenue.
(d) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Cash equivalents are highly liquid investments with original
maturities of less than 90 days. The Company accounts for
investments under SFAS No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS
IN DEBT AND EQUITY SECURITIES. Under SFAS No. 115, investments for
which the Company has the positive intent and ability to hold to
maturity, consisting of cash equivalents and short-term
investments, are reported at amortized cost, which approximates
fair market value. Short-term investments consisted of bank
deposits in U.S. dollars, bearing an annual interest rate of 6%.
(4) EARNINGS PER SHARE
(a) NET LOSS PER SHARE
Basic and diluted net loss per share is presented in conformity
with SFAS No. 128, EARNINGS PER SHARE, for all periods presented.
Basic and diluted net loss per ordinary share was determined by
dividing net loss attributable to ordinary shareholders by the
weighted average ordinary shares outstanding during the period.
Diluted net loss per ordinary share is the same as basic net loss
per ordinary share for all periods presented, as the effects of
the Company's potential additional ordinary shares were
antidilutive.
The net loss attributable to ordinary shareholders used in the
computation of basic and diluted net loss per share has been
increased by the value of the stock dividend issued to certain
Series A preferred shareholders at the closing of the initial
public offering.
The following table summarizes the securities outstanding as of
each period end that were not included in the calculation of
diluted net loss per share as their inclusion would be
antidilutive.
<TABLE>
<CAPTION>
As of September 30,
-------------------
2000 1999
----- -----
(in thousands)
<S> <C> <C>
Stock options to purchase ordinary shares... 3,510 3,427
Warrants to purchase ordinary shares........ - 143
Convertible preferred stock................. - 2,337
</TABLE>
In accordance with the Securities and Exchange Commission Staff
Accounting Bulletin No. 98, EARNINGS PER SHARE IN AN INITIAL
PUBLIC OFFERING, the Company determined that there were no nominal
issuances of the Company's ordinary shares prior to the Company's
initial public offering.
(b) PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share has been computed as described above
and also gives effect to the conversion of preferred shares that
were converted upon the completion of the Company's initial public
offering in August 2000, using the if-converted method, from the
original date of issuance.
8
<PAGE>
The following table reflects the reconciliation of the shares used
in the computation of pro forma net loss per share.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2000 1999 2000 1999
------ ----- ------ -----
(in thousands)
<S> <C> <C> <C> <C>
Pro forma basic and diluted:
Weighted average ordinary shares
outstanding used in computing net loss
per share................................ 10,994 4,182 6,484 3,151
Weighted average ordinary shares issuable
upon the conversion of preferred stock... 2,576 2,315 4,362 1,651
Weighted average ordinary shares
issuable upon the exercise of
outstanding warrant...................... 70 143 118 103
Weighted average ordinary shares issuable
upon exercise of outstanding options
held by certain shareholders............. 512 2,050 1,521 2,050
Weighted average ordinary shares to be
issued to certain Series A preferred
shareholders............................. 126 258 214 258
------ ----- ------ -----
Weighted average ordinary shares
outstanding used in computing pro
forma basic and diluted net loss per
share.................................... 14,278 8,948 12,699 7,213
====== ===== ====== =====
</TABLE>
(5) STOCKHOLDERS' EQUITY
In July 2000, a shareholder of the Company exercised an employee stock
option to purchase 391,100 ordinary shares at an exercise price of NIS
0.01 per share.
During the quarter ended September 30, 2000, the Company granted options
to purchase an aggregate of 625,760 ordinary shares to employees and
affiliates at exercise prices equal to the then current fair market value
on the date of grant.
(6) COMPREHENSIVE INCOME
SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires disclosure of all
components of comprehensive income (loss) on an annual and interim basis.
Comprehensive income (loss) is defined as the change in equity of a
business enterprise during a period from transactions and other events
and circumstances from nonowner sources. The Company's comprehensive loss
is equal to net loss for all periods presented.
(7) DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE
The Company has adopted SFAS No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 establishes standards
for reporting information regarding operating segments in annual
financial statements and requires selected information for those segments
to be presented in interim financial reports issued to stockholders. SFAS
No. 131 also establishes standards for related disclosures about products
and services and geographic areas. Operating segments are identified as
components of an enterprise about which separate discrete financial
information is available for evaluation by the chief operating decision
maker, or decision-making group, in making decisions how to allocate
resources and assess performance.
9
<PAGE>
The Company's chief operating decision makers, as defined under SFAS No.
131, are the Chief Executive Officer and the Chief Financial Officer. To
date, the Company has viewed its operations and has managed its business
as principally one operating segment.
The Company's revenues by geographic area are as follows:
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Sept. 30, Ended Sept. 30,
-------------------- --------------------
2000 1999 2000 1999
------ ------ ------ ------
(in thousands)
<S> <C> <C> <C> <C>
United States............ $2,540 $1,331 $6,850 $2,817
Europe................... 310 206 722 316
Israel................... 172 51 348 104
Other.................... 80 - 148 -
------ ------ ------ ------
Total revenues.. $3,102 $1,588 $8,068 $3,237
====== ====== ====== ======
</TABLE>
(8) RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the FASB issued Interpretation No. 44, ACCOUNTING FOR
CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION - AN INTERPRETATION OF
APB OPINION NO. 25. The interpretation clarifies the application of APB
Opinion No. 25 in certain situations, as defined. The interpretation is
effective July 1, 2000, but covers certain events occurring during the
period after December 15, 1998, but before the effective date. To the
extent that events covered by this interpretation occur during the period
after December 15, 1998, but before the effective date, the effects of
applying this interpretation would be recognized on a prospective basis
from the effective date. Accordingly, upon initial application of the
final interpretation, (a) no adjustments would be made to the financial
statements for periods before the effective date and (b) no expense would
be recognized for any additional compensation cost measured that is
attributable to periods before the effective date. The Company expects
that the adoption of this interpretation will not have any effect on the
accompanying consolidated financial statements.
The Securities and Exchange Commission issued Staff Accounting Bulletin
(SAB) No. 101, REVENUE RECOGNITION, in December 1999. The Company is
required to adopt this new accounting guidance through a cumulative
charge to operations, in accordance with Accounting Principles Board
Opinion (APB) No. 20, ACCOUNTING CHANGES, no later than the fourth
quarter of fiscal 2000. The Company believes its current revenue
recognition policy complies with the SEC guidelines. Accordingly, the
Company believes that the adoption of the guidance provided in SAB No.
101 will not have a material impact on future operating results.
In June 1998, the FASB released SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 establishes the
accounting and reporting standards for derivative instruments, including
certain derivative instruments embedded in other contracts, and for
hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial position
and measure those instruments at fair value. SFAS No. 133 is effective
for fiscal quarters of fiscal years beginning after June 15, 2000. The
Company believes that the adoption of SFAS No. 133 will not have a
material impact on the Company's consolidated financial statements.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
SECTIONS OF THE COMPANY'S REGISTRATION STATEMENT ON FORM F-1 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION AND DECLARED EFFECTIVE ON AUGUST 9, 2000, AS
AMENDED, TITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" AND "RISK FACTORS." THE FOLLOWING DISCUSSION CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES, SUCH AS
STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES, EXPECTATIONS AND INTENTIONS.
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE. SEE "SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS."
OVERVIEW
RadView Software Ltd. (the Company) develops, markets and supports software that
enables companies to assure the scalability, efficiency and reliability of web
applications. In 1997, the Company introduced its first web-testing product,
WebLoad, which was initially focused on assessing the scalability of web
applications. Since then, the Company has enhanced the functionality of WebLoad
to provide an integrated solution to assess the performance and accelerate the
deployment of web applications. In February 2000, the Company introduced WebLoad
Resource Manager, which is designed to facilitate the systematic verification of
web application quality throughout the application development lifecycle and to
accelerate the deployment of high performance web applications.
The Company's revenues were $3.1 million and $1.6 million for the three months
ended September 30, 2000 and 1999, respectively, and $8.1 million and $3.2
million for the nine months ended September 30, 2000 and 1999, respectively. The
Company primarily derives its revenues from the license of its WebLoad and
WebLoad Resource Manager software products and, to a lesser extent, from related
services including customer support, maintenance and training.
The Company recognizes software license revenues upon delivery of its software
to customers, provided persuasive evidence of an agreement exists, the fee is
fixed or determinable and collection of the related receivable is probable. The
Company allocates software license revenues under arrangements where it sells
software and services together under one contract to each element based on their
relative fair values, with these fair values being determined using the price
charged when that element is sold separately. If fair value for a delivered
element does not exist but the fair value does exist for all undelivered
elements, the Company defers the fair value of the undelivered elements and
recognizes the remaining value for the delivered elements.
The Company generally recognizes software license revenues from resellers or
distributors at time of shipment, provided that all other revenue recognition
criteria set forth in governing statements of position on software revenue
recognition have been met. The Company recognizes services revenues from
software maintenance agreements ratably over the term of the maintenance period,
typically one year. The Company recognizes services revenues from training as
the services are performed. Amounts collected or billed prior to satisfying the
above revenue recognition criteria are reflected as deferred revenue. Deferred
revenue primarily represents deferred maintenance revenue.
The Company licenses its software primarily through its direct sales force and,
to a lesser extent, through indirect channels. To date, the Company has licensed
its software to customers in North America, Europe, and the Middle East.
Revenues derived from North America accounted for 81.8% and 83.8% of total
revenues for the nine months ended September 30, 2000 and 1999, respectively.
While the Company expects to continue to derive the majority of its revenues
from North America, it intends to derive an increasing percentage of its
revenues from Europe and the Pacific Rim. Substantially all of the Company's
sales are denominated in U.S. dollars.
The Company's net losses were $3.3 million and $468,000 for the three months
ended September 30, 2000 and 1999, respectively, and $6.4 million and $1.6
million for the nine months ended September 30, 2000 and 1999, respectively.
These net losses resulted primarily from the significant costs incurred in the
11
<PAGE>
development of the Company's software, and in the expansion of its operations.
The Company expects to increase its operating expenses and incur additional net
losses for the foreseeable future.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total
revenues, consolidated statement of operations data for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------- ------ ------ ------
<S> <C> <C> <C> <C>
REVENUES:
Software licenses 85.0% 88.3% 85.4% 91.3%
Services 15.0% 11.7% 14.6% 8.7%
------- ------ ------ ------
Total revenues 100.0% 100.0% 100.0% 100.0%
COST OF REVENUES:
Software licenses 4.6% 6.8% 5.3% 6.5%
Services 4.4% 1.4% 3.7% 1.7%
------- ------ ------ ------
Total cost of revenues 9.0% 8.2% 9.0% 8.2%
------- ------ ------ ------
Gross profit 91.0% 91.8% 91.0% 91.8%
OPERATING EXPENSES:
Sales and marketing 117.9% 67.6% 88.7% 73.1%
Research and development 47.4% 24.9% 44.2% 37.8%
General and administrative 23.5% 18.7% 26.2% 19.3%
Stock-based compensation 17.2% 9.0% 13.7% 5.7%
------- ------ ------ ------
206.0% 120.2% 172.8% 135.9%
------- ------ ------ ------
Operating loss (115.0%) (28.4%) (81.8%) (44.1%)
------- ------ ------ ------
Interest income (expense), net 7.7% (1.3%) 2.0% (5.6%)
Other income (expense) 0.5% 0.3% 0.0% (0.7%)
------- ------ ------ ------
Net loss (106.8%) (29.4%) (79.8%) (50.4%)
======= ====== ====== ======
</TABLE>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
REVENUES
TOTAL REVENUES. Total revenues increased 95.3%, from $1.6 million for the three
months ended September 30, 1999 to $3.1 million for the same three-month period
in 2000. Total revenues increased 149.2%, from $3.2 million for the nine months
ended September 30, 1999 to $8.1 million for the same nine-month period in 2000.
SOFTWARE LICENSES. Software license revenues increased 88.0%, from $1.4 million
for the three months ended September 30, 1999 to $2.6 million for the same
three-month period in 2000. Software license revenues increased 133.2%, from
$3.0 million for the nine months ended September 30, 1999 to $6.9 million for
the same nine-month period in 2000. The increases were due to increased market
acceptance of WebLoad and the introduction of its WebLoad Resource Manager
product in February 2000, which represented 39.2% and 35.8% of software license
revenues for the three and nine months ended September 30, 2000, respectively.
SERVICES. Services revenues increased from $186,000 for the three months ended
September 30, 1999 to $466,000 for the same three-month period in 2000. Services
revenues increased from $281,000 for the nine months ended September 30, 1999 to
$1.2 million for the same nine-month period in 2000. The
12
<PAGE>
increases were due to higher maintenance and training revenues resulting from an
increase in the Company's customer base.
COST OF REVENUES
SOFTWARE LICENSES. Cost of software licenses consists principally of direct
product costs, such as product media and packaging, as well as royalties due to
third parties. Cost of software licenses increased from $108,000, or 6.8% of
software license revenue, for the three months ended September 30, 1999 to
$143,000, or 4.6% of software license revenue, for the same three-month period
in 2000. Cost of software licenses increased from $209,000, or 6.5% of software
license revenue, for the nine months ended September 30, 1999 to $431,000, or
5.3% of software license revenue, for the same nine-month period in 2000. The
dollar increases were due to product-related costs associated with increased
licensing of the Company's software.
SERVICES. Cost of services consists principally of personnel-related costs
associated with customer support and training. Cost of services increased from
$22,000, or 1.4% of service revenue, for the three months ended September 30,
1999 to $138,000, or 4.4% of service revenue, for the same three-month period in
2000. Cost of services increased from $55,000, or 1.7% of software license
revenue, for the nine months ended September 30, 1999 to $298,000, or 3.7% of
software license revenue, for the same nine-month period in 2000. The dollar
increases were due to increased personnel costs to provide support and
maintenance services.
OPERATING EXPENSES
SALES AND MARKETING. Sales and marketing expenses consist principally of
salaries and commissions earned by sales personnel, recruiting costs, trade show
costs, travel and other marketing communication costs such as advertising and
product promotion. Sales and marketing expenses increased from $1.1 million, or
67.6% of total revenues, for the three months ended September 30, 1999 to $3.7
million, or 117.9% or total revenues, for the same three-month period in 2000.
Sales and marketing expenses increased from $2.4 million, or 73.1% of total
revenues, for the nine months ended September 30, 1999 to $7.2 million, or 88.7%
of total revenues, for the same nine-month period in 2000. The dollar and
percentage increases were due to the expansion of the Company's sales force,
additional hiring of marketing personnel, higher commission expenses associated
with higher sales, and higher occupancy and travel costs.
RESEARCH AND DEVELOPMENT. Research and development expenses consist principally
of salaries and related expenses required to develop and enhance the Company's
products. Research and development expenses increased from $396,000, or 24.9% of
total revenues, for the three months ended September 30, 1999, to $1.5 million,
or 47.4% of total revenues, for the same three-month period in 2000. Research
and development expenses increased from $1.2 million, or 37.8% of total
revenues, for the nine months ended September 30, 1999, to $3.6 million, or
44.2% of total revenues, for the same nine-month period in 2000. The dollar and
percentage increases were due to increases in the number of software engineering
personnel and related spending associated with the establishment of a software
development organization at the Company's headquarters in Massachusetts during
late 1999 and early 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
principally of finance, executive and administrative salaries and related
expenses and costs. General and administrative expenses increased from $297,000,
or 18.7% or total revenues, for the three months ended September 30, 1999 to
$729,000, or 23.5% of total revenues, for the same three-month period in 2000.
General and administrative expenses increased from $625,000, or 19.3% or total
revenues, for the nine months ended September 30, 1999 to $2.1 million, or 26.2%
of total revenues, for the same nine-month period in 2000. The dollar and
percentage increases were due to increases in the number of finance and
administrative personnel to accommodate the Company's growing U.S. operations.
STOCK-BASED COMPENSATION. Stock-based compensation expenses increased from
$143,000, or 9.0% of total revenues, for the three months ended September 30,
1999, to $533,000, or 17.2% of total revenues, for the same three-month period
in 2000. Stock-based compensation expenses increased from $184,000, or 5.7% of
total revenues, for the nine months ended September 30, 1999, to $1.1 million,
or 13.7% of total revenues, for the same nine-month period in 2000. For grants
to employees, these non-
13
<PAGE>
cash expenses represent the difference between the exercise price and the
estimated fair value of the ordinary shares on the date that related options are
granted. For grants to non-employees, these non-cash expenses represent the
value of a particular grant as determined by the Black-Scholes valuation model.
All stock-based compensation is expensed over the vesting period. Deferred
compensation on the unvested options is deferred and included as a component of
shareholders' equity.
Deferred stock-based compensation totaled $7.2 million at September 30, 2000,
and will result in additional charges to operations through May 2004.
INTEREST INCOME (EXPENSE), NET. Interest income (expense), net consists
principally of interest expense incurred in connection with long-term debt,
offset by interest earned on cash investments. Interest income (expense), net
decreased from ($21,000) for the three months ended September 30, 1999 to
$240,000 for the same three-month period in 2000. Interest income (expense), net
decreased from ($180,000) for the nine months ended September 30, 1999 to
$165,000 for the same nine-month period in 2000. The increase in interest income
was due to higher interest earnings resulting from the investment of proceeds
from the Series B Preferred Share financing in December 1999 and the initial
public offering completed in August 2000.
OTHER INCOME (EXPENSE), NET. Other income (expense), net consists principally of
currency translation gains and losses. Other income (expense), net increased
from $4,000 for the three months ended September 30, 1999 to $14,000 for the
same three-month period in 2000. Other income (expense), net decreased from
($22,000) for the nine months ended September 30, 1999 to $0 for the same
nine-month period in 2000. The changes were due to exchange rate fluctuations.
INCOME TAXES. The Company has estimated net operating loss carryforwards for
Israel tax purposes totaling approximately $10 million at September 30, 2000 to
reduce future Israeli income taxes, if any. These net operating losses may be
carried forward indefinitely and offset against future taxable income. The
Company expects that during the period in which these tax losses are utilized
its income would be substantially tax exempt. Therefore, the income tax rate of
the Company during the tax-exempt period will be zero and there will be no tax
benefit available from these losses and no deferred income taxes have been
included in the Company's financial statements.
The Company's U.S. subsidiary's tax losses through September 30, 2000 amounted
to approximately $5.1 million. These losses are available to offset any future
U.S. taxable income of the U.S. subsidiary and will expire between 2012 and
2020. The Company has recorded a full valuation allowance against its deferred
tax asset due to the uncertainty surrounding the ability and the timing of the
realization of these tax benefits.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through the
sale of equity securities, demand and term debt borrowings and the sale of its
products and services. As of September 30, 2000, the Company has raised
approximately $52.1 million, net of offering costs, from the issuance of
ordinary and preferred shares, including the net proceeds from the initial
public offering.
On August 14, 2000, the Company completed its initial public offering of
4,000,000 ordinary shares at $10.00 per share. The Company received $35.3
million from this offering, net of underwriting discounts and commissions and
offering costs.
As of September 30, 2000, cash and cash equivalents totaled $37.4 million.
The Company has term loans with Bank Hapoalim B.M., an Israeli bank, with an
aggregate principal balance of $3.7 million as of September 30, 2000, of which
$600,000 of principal matures in March 2001 and $3.1 million matures in June
2001. These loans bear interest at LIBOR plus 1.5%.
The Company also had a loan totaling $1.3 million from Rad Data Communications
Ltd., a related party. In September 2000, the Company repaid this loan with
proceeds from the initial public offering, as required under the loan agreement.
14
<PAGE>
Cash used in operating activities was $3.4 million and $2.0 million for the nine
months ended September 30, 2000 and 1999, respectively. Cash used for the first
nine months of 2000 was due to a net loss of $6.4 million and a $1.1 million
increase in accounts receivable, offset in part by depreciation, other noncash
charges, a $1.8 million increase in accounts payable and accrued liabilities and
a $676,000 increase in deferred revenue. Cash used in the first nine months of
1999 was primarily due to a net loss of $1.6 million and a $1.3 million increase
in accounts receivable, partially offset by depreciation, other noncash charges,
deferred interest payments on the Company's bank term debt, and a $707,000
increase in accounts payable and accrued liabilities.
Cash provided by (used in) investing activities was $(1.3 million) and $112,000
for the nine months ended September 30, 2000 and 1999, respectively. Cash used
in investing activities for the first nine months of 2000 was primarily for
purchases of $1.4 million in property and equipment and a $315,000 increase in
other assets, offset by $513,000 in proceeds from the sale of short-term
investments. Cash provided by investing activities for the first nine months of
1999 resulted from $316,000 in proceeds from the sale of short-term investments
offset by property and equipment purchases of $204,000.
Cash provided by financing activities was $34.4 million and $3.4 million for the
nine months ended September 30, 2000 and 1999, respectively. Cash provided by
financing activities for the first nine months of 2000 consisted principally of
$35.3 million in net proceeds from the Company's initial public offering,
$406,000 from the issuance of ordinary and preferred shares prior to the
completion of the initial public offering, offset by $1.3 million for the
repayment of principal on the related party loans. Cash provided by financing
activities for the first nine months of 1999 consisted primarily of proceeds
totaling $3.0 million from the private placement of preferred shares and
$365,000 in net borrowings under long-term loans.
The Company expects its operating expenses to continue to increase, particularly
sales and marketing and research and development expenses, for the foreseeable
future as it executes its business plan. As a result, these operating expenses,
as well as planned capital expenditures and repayment of existing term debt, are
expected to constitute a material use of the Company's cash resources. In
addition, the Company may utilize its cash resources to fund acquisitions or
investments in complementary businesses, technologies or product lines.
The Company believes that its existing cash and short-term investments will be
sufficient to meet its anticipated needs for working capital, term debt
retirement and capital expenditures for at least the next 12 months. Thereafter,
the Company may find it necessary to obtain additional equity or debt financing.
In the event additional financing is required, the Company may not be able to
complete financing on acceptable terms or at all.
IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS
Substantially all the Company's revenues are received, and a large portion of
its expenses are incurred, in U.S. dollars. In 1999, approximately 92.0% and
60.0% of the Company's revenues and expenses, respectively, were denominated in
U.S. dollars. A portion of the Company's expenses, mainly salary and personnel
costs related to its employees in Israel, is incurred in New Israeli Shekels
(NIS). The salaries of the Company's Israel-based employees are partially linked
to inflation in Israel. As a result, the U.S. dollar cost of the Company's
Israeli operations is influenced by inflation in Israel, but may be offset by a
devaluation of the NIS in relation to the U.S. dollar. Any increase in the rate
of inflation in Israel may have a negative effect on the Company's operating
results, unless such inflation is offset by a devaluation of the NIS in relation
to the U.S. dollar. In addition to the Company's operations in Israel, the
Company intends to expand its operations internationally. Accordingly, the
Company expects to incur additional expenses in non-U.S. dollar currencies.
Exchange rates between the NIS and the dollar fluctuate continuously, and
therefore exchange rate fluctuations and especially larger periodic devaluations
will have an impact on the Company's operating results and period-to-period
comparisons of its results. The effects of foreign currency translations are
reported in the Company's financial statements in current operating results.
The Company believes that neither inflation in Israel, nor exchange rate
fluctuations between the NIS and the U.S. dollar, historically has had a
material effect on its operations.
15
<PAGE>
GOVERNMENT GRANTS
The Government of Israel, through the Office of the Chief Scientist, encourages
research and development projects that result in products for export. The
Company received grants of approximately $605,000 from the Office of the Chief
Scientist through December 31, 1996, which were used to fund a predecessor
product. Since December 31, 1996, the Company has neither applied for nor
received any additional grants from the Office of the Chief Scientist. Pursuant
to the terms of these grants, the Company is obligated to pay royalties of 3.0%
to 5.0% of revenues derived from sales of products funded with these grants, up
to 100.0% to 150.0% of certain grant amounts received. The terms of the grant
also require that the know-how from the research and development that is used to
produce the product may not be transferred to third parties without the approval
of the research committee. The Company's maximum potential royalty obligation to
the Office of the Chief Scientist in respect of grants received is approximately
$670,000. As of September 30, 2000, all $670,000 of this potential royalty
obligation has been recognized and accrued, of which $56,000 has been paid.
EFFECTIVE CORPORATE TAX RATE
Israeli companies are generally subject to tax at the rate of 36.0% of taxable
income. However, the Company has derived, and expects to continue to derive, a
substantial portion of its income under its Approved Enterprise capital
investment program. Subject to compliance with applicable requirements, this
income will be tax exempt for a period of two years and will be subject to a
reduced corporate tax rate of 25.0% in the following five years. If the Company
does not comply with the applicable requirements, the tax benefits may be
canceled. The Company believes that it complies with these conditions. If the
Company operates under more than one approval, or if its capital investments are
only partially approved, the Company's effective tax rate will be a weighted
combination of the various applicable tax rates. The Company may not be able to
obtain approval for additional Approved Enterprise programs. Since the Company
has incurred tax losses through September 30, 2000, it has not yet used the tax
benefits for which it is eligible.
MARKET RISK
The Company currently does not invest in, or hold for trading or other purposes,
any financial instruments subject to market risk. The Company currently pays
interest on its loan facilities based on the London interbank offered rate. As a
result, changes in the general level of interest rates directly affect the
amount of money payable by the Company under these facilities. However, the
Company does not expect its exposure to market risk from changes in interest
rates to be material because: (i) the Company's outstanding debt under these
facilities currently approximates $3.7 million, (ii) the debt matures within 12
months, and (iii) the interest rate environment has recently been relatively
stable.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (SFAS) No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES, which establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. To
date, the Company has not engaged in derivative and hedging activities, and
accordingly it does not believe that the adoption of the SFAS No. 133 will have
a material impact on its financial reporting and related disclosures. The
Company will adopt SFAS No. 133 as required by SFAS No. 137, DEFERRAL OF THE
EFFECTIVE DATE OF FASB STATEMENT NO. 133, in fiscal year 2001.
On December 3, 1999, the staff of the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin No. 101 (SAB 101), REVENUE RECOGNITION IN
FINANCIAL STATEMENTS. SAB 101, as amended, summarizes some of the staff's
interpretations of the application of generally accepted accounting principles
to revenue recognition. All registrants are expected to apply the accounting and
disclosure requirements that are described in SAB 101, which is effective for
periods beginning after December 15, 2000. The Company does not expect that the
adoption of the guidance required by SAB 101 will have a material impact on its
financial condition or results of operations.
16
<PAGE>
In March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44, ACCOUNTING FOR CERTAIN TRANSACTIONS INVOLVING STOCK COMPENSATION--AN
INTERPRETATION OF APB OPINION NO. 25. The interpretation clarifies the
application of APB Opinion No. 25 in certain situations, as defined. The
interpretation is effective July 1, 2000, but covers certain events occurring
during the period after December 15, 1998, but before the effective date. To the
extent that events covered by this interpretation occur during the period after
December 15, 1998, but before the effective date, the effects of applying this
interpretation would be recognized on a prospective basis from the effective
date. Accordingly, upon initial application of the final interpretation, (a) no
adjustments would be made to the financial statements for periods before the
effective date and (b) no expense would be recognized for any additional
compensation cost measured that is attributable to periods before the effective
date. The Company expects that the adoption of this interpretation would not
have any effect on the financial statements included elsewhere in this
prospectus.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report on Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Exchange Act that
involve risks and uncertainties. Discussions containing forward-looking
statements may be found in the material set forth under "Management's Discussion
and Analysis of Financial Condition and Results of Operations" as well as in
this report generally. The Company generally uses words such as "believe,"
"may," "could," "will," "intend," "estimate," "expect," "anticipate," "plan,"
and similar expressions to identify forward-looking statements. You should not
place undue reliance on these forward-looking statements. The Company's actual
results could differ materially from those anticipated in the forward-looking
statements for many reasons, including the risks described in this report.
Although the Company believes the expectations reflected in the forward-looking
statements are reasonable, they related only to events as of the date on which
the statements are made, and the Company cannot assure you that its future
results, levels of activity, performance or achievements will meet these
expectation. Moreover, neither the Company nor any other person assumes
responsibility for the accuracy and completeness of the forward-looking
statements. The Company does not intend to update any of the forward-looking
statements after the date of this report to conform these statements to actual
results or to changes in its expectations, except as required by law.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not use derivative financial instruments in its investing
portfolio. The Company places its investments in instruments that meet high
credit quality standards such as money market funds, government securities, and
commercial paper. The Company limits the amount of credit exposure to any one
issuer. The Company does not expect any material loss with respect to its
investment portfolio.
The Company conducts business in various foreign currencies, primarily in
Europe and the Middle East. As a result, the Company is exposed to the effect
of foreign currency exchange rate fluctuations on the U.S. dollar value of
foreign currency-denominated revenues and expenses. The Company does not use
foreign exchange forward contracts to hedge its foreign currency denominated
receivables. Looking forward, there can be no assurance that changes in
foreign currency rates, relative to the U.S. dollar, will not materially
adversely affect the consolidated results of the Company.
17
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings that are material
to its business or financial condition.
ITEM 2. CHANGES IN SECURITIES
(a) CHANGES IN INSTRUMENTS DEFINING THE RIGHTS OF SHAREHOLDERS
Upon the closing of the Company's initial public offering, all of its
outstanding Preferred Shares automatically converted into 5,265,575
ordinary shares.
Upon the completion of the Company's initial public offering, the
Company amended its Articles of Association to change its authorized
capital stock to 25,000,000 ordinary shares. Under the terms of the
Company's amended Articles of Association, by resolution of the
shareholders at a general meeting adopted by a majority of shareholders
entitled to vote, the Company may increase its registered share capital
by the creation of new shares with special rights as adopted in the
resolution.
Upon the closing of the Company's initial public offering, the Company
amended its Articles of Association. The Company's Articles now provide
that, subject to applicable law, notice of at least twenty-one days
must be given for any general meeting of shareholders and any
resolutions, including special resolutions, unless all shareholders
otherwise consent in writing. The amended Articles also provide that an
ordinary resolution shall be deemed adopted when approved by a majority
of votes of the shareholders entitled to vote and who voted in a
General Meeting in person or by proxy. A special resolution shall be
deemed adopted when approved by at least three quarters of the votes of
the shareholders entitled to vote and who voted in a General Meeting in
person or by proxy.
(b) NOT APPLICABLE
(c) SALES OF UNREGISTERED SECURITIES
In July 2000, a shareholder of the Company exercised an employee stock
option to purchase 391,100 ordinary shares at an exercise price of NIS
0.01 per share.
During the quarter ended September 30, 2000, the Company granted
options to purchase an aggregate of 625,760 ordinary shares to
employees and affiliates at exercise prices equal to the then current
fair market value on the date of grant.
The securities issued in the foregoing transactions were either (i)
offered and sold in reliance upon exemptions from the Securities Act of
1933 ("Securities Act") registration requirements set forth in Sections
3(b) and 4(2) of the Securities Act, and any regulations promulgated
thereunder, relating to sales by an issuer not involving any public
offering, or (ii) in the case of certain options to purchase ordinary
shares and ordinary shares issued upon the exercise of such options,
such offers and sales were made in reliance upon an exemption from
registration under Rule 701 promulgated under Section 3(b) of the
Securities Act. No underwriters were involved in the foregoing sales of
securities.
(d) USE OF PROCEEDS FROM SALE OF REGISTERED SECURITIES
On August 9, 2000, in connection with the Company's initial public
offering, the Securities and Exchange Commission declared a
Registration Statement on Form F-1 (No.333-41526) effective that
registered 5,750,000 ordinary shares. The managing underwriters in the
offering were Donaldson Lufkin Jenrette, Wit SoundView, Piper Jaffrey,
and DLJdirect.
18
<PAGE>
On August 15, 2000, the Company sold 4,000,000 of such ordinary shares
at an initial public offering price of $10.00 per share, generating
gross offering proceeds of $40 million. After deducting $2.8 million in
underwriting discounts and approximately $1.9 million in other related
expenses, the net proceeds to the Company were approximately $35.3
million.
The Company used a portion of the net proceeds to make a payment of
$1,359,000 representing principal and accrued interest to the holder of
a related party loan.
The Company currently expects to use the remaining net proceeds
primarily for working capital and general corporate purposes, including
increased research and development expenditures, increased sales and
marketing expenditures, and capital expenditures made in the ordinary
course of business. In addition, the Company may use a portion of the
net proceeds to fund acquisitions or investments in complementary
businesses, technologies or products. Pending such uses, the Company
will invest the net proceeds in short-term, investment grade, and
interest bearing securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K
(a) EXHIBIT INDEX
3.1 Memorandum of Association of Registrant (English
translation) (filed as Exhibit 3.1 to the Company's
Registration Statement on Form F-1, No. 333-41526, and
incorporated herein by reference)
3.3 Form of Articles of Association of Registrant (proposed to
be adopted) (filed as Exhibit 3.3 to the Company's
Registration Statement on Form F-1, No. 333-41526, and
incorporated herein by reference)
4.1 Form of Ordinary Share Certificate (filed as Exhibit 4.1
to the Company's Registration Statement on Form F-1, No.
333-41526, and incorporated herein by reference)
4.2 Investor Rights Agreement (filed as Exhibit 4.2 to the
Company's Registration Statement on Form F-1, No.
333-41526, and incorporated herein by reference)
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed in the three-month period ended
September 30, 2000.
19
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RADVIEW SOFTWARE LTD.
(Registrant)
/s/ Edward Durkin
-----------------
Edward Durkin
Chief Financial Officer
Dated: November 9, 2000
20