Exhibit 99.1
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1
December 31, | September 30, | |||||||||||
Note | 2006 | 2007 | ||||||||||
(Unaudited) | ||||||||||||
U.S. dollars in thousands | ||||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash and cash equivalents | $ | 10,170 | $ | 24,531 | ||||||||
Short-term bank deposits | 5,364 | 4,435 | ||||||||||
Short-term marketable securities | 6,578 | 7,128 | ||||||||||
Trade receivables (net of allowance for doubtful accounts of $842 and $1,154 at December 31, 2006 and September 30, 2007, respectively) | 27,433 | 34,232 | ||||||||||
Other accounts receivable and prepaid expenses | 4 | 6,925 | 7,231 | |||||||||
Inventories | 5 | 27,311 | 39,069 | |||||||||
Total current assets | 83,781 | 116,626 | ||||||||||
LONG-TERM ASSETS: | ||||||||||||
Long-term bank deposits | 2,873 | — | ||||||||||
Long-term marketable securities | 4,500 | 1,012 | ||||||||||
Severance pay fund | 2,537 | 2,983 | ||||||||||
Total long-term assets | 9,910 | 3,995 | ||||||||||
PROPERTY AND EQUIPMENT, NET | 2,660 | 3,907 | ||||||||||
Total assets | $ | 96,351 | $ | 124,528 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Trade payables | $ | 22,147 | $ | 29,652 | ||||||||
Deferred revenues | 3,739 | 7,189 | ||||||||||
Other accounts payable and accrued expenses | 6 | 10,627 | 12,186 | |||||||||
Total current liabilities | 36,513 | 49,027 | ||||||||||
LONG TERM LIABILITIES: | ||||||||||||
Accrued severance pay | 4,352 | 4,811 | ||||||||||
Other payables | 7 | 7,925 | 4,262 | |||||||||
Total long-term liabilities | 12,277 | 9,073 | ||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES | 7 | |||||||||||
SHAREHOLDERS’ EQUITY: | 8 | |||||||||||
Share capital - | ||||||||||||
Ordinary shares of NIS 0.01 par value - | ||||||||||||
Authorized: 40,000,000 shares at December 31, 2006 and at September 30, 2007 (unaudited); Issued and outstanding: 27,436,090 and 29,749,336 shares at December 31, 2006 and September 30, 2007 (unaudited), respectively | 68 | 73 | ||||||||||
Additional paid-in capital | 181,128 | 191,249 | ||||||||||
Accumulated other comprehensive income | 64 | 97 | ||||||||||
Accumulated deficit | (133,699 | ) | (124,991 | ) | ||||||||
Total shareholders’ equity | 47,561 | 66,428 | ||||||||||
Total liabilities and shareholders’ equity | $ | 96,351 | $ | 124,528 | ||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
2
Nine Months Ended | ||||||||||||
September 30, | ||||||||||||
Note | 2006 | 2007 | ||||||||||
(Unaudited) | ||||||||||||
U.S. dollars in | ||||||||||||
thousands (except per share data) | ||||||||||||
Revenues | 10 | $ | 75,470 | $ | 115,743 | |||||||
Cost of revenues | 49,314 | 73,952 | ||||||||||
Gross profit | 26,156 | 41,791 | ||||||||||
Operating expenses: | ||||||||||||
Research and development | 9,850 | 11,084 | ||||||||||
Less-grants and participations | 1,543 | — | ||||||||||
Research and development, net | 8,307 | 11,084 | ||||||||||
Selling and marketing | 12,312 | 18,124 | ||||||||||
General and administrative | 3,736 | 3,751 | ||||||||||
Expense in respect of settlement reserve | — | 450 | ||||||||||
Total operating expenses | 24,355 | 33,409 | ||||||||||
Operating income | 1,801 | 8,382 | ||||||||||
Financial income, net | 868 | 326 | ||||||||||
Net income | $ | 2,669 | $ | 8,708 | ||||||||
Net earnings per share: | 11 | |||||||||||
Basic net earnings per share | $ | 0.10 | $ | 0.31 | ||||||||
Diluted net earnings per share | $ | 0.09 | $ | 0.28 | ||||||||
The accompanying notes are an integral part of the interim condensed consolidated financial statements.
3
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
U.S. dollars in | ||||||||
thousands | ||||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 2,669 | $ | 8,708 | ||||
Adjustments required to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
Depreciation | 836 | 960 | ||||||
Stock-based compensation expense | 1,342 | 1,278 | ||||||
Loss (gain) from sale of property and equipment | 22 | (24 | ) | |||||
Accrued severance pay, net | 432 | 13 | ||||||
Decrease (increase) in accrued interest on bank deposits | (190 | ) | 27 | |||||
Interest accrued and amortization of premium on held-to-maturity marketable securities | 96 | 100 | ||||||
Increase in trade receivables, net | (11,665 | ) | (6,799 | ) | ||||
Increase in other accounts receivable and prepaid expenses | (2,133 | ) | (273 | ) | ||||
Increase in inventories | (5,177 | ) | (11,758 | ) | ||||
Increase in trade payables | 6,875 | 7,505 | ||||||
Increase in deferred revenues | 1,489 | 3,450 | ||||||
Increase in other accounts payable and accrued expenses | 1,096 | 1,559 | ||||||
Decrease in other long-term payables | — | (3,663 | ) | |||||
Net cash provided by (used in) operating activities | (4,308 | ) | 1,083 | |||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (803 | ) | (2,183 | ) | ||||
Short-term bank deposits, net | 200 | 968 | ||||||
Proceeds from maturities of long-term bank deposits | 2,035 | 2,807 | ||||||
Investment in held-to-maturity marketable securities | (3,066 | ) | (500 | ) | ||||
Proceeds from maturities of held-to-maturity marketable securities | 4,947 | 3,338 | ||||||
Net cash provided by investing activities | 3,313 | 4,430 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from exercise of share options | 656 | 8,848 | ||||||
Net cash provided by financing activities | 656 | 8,848 | ||||||
Increase (decrease) in cash and cash equivalents | (339 | ) | 14,361 | |||||
Cash and cash equivalents at the beginning of the period | 10,315 | 10,170 | ||||||
Cash and cash equivalents at the end of the period | $ | 9,976 | $ | 24,531 | ||||
The accompanying notes are an integral part of the consolidated financial statements.
4
(U.S. dollars in thousands)
NOTE 1:— GENERAL
Ceragon Networks Ltd. (“the Company”) is a leading provider of high capacity wireless backhaul solutions that enable wireless service providers to deliver voice and premium data services, such as Internet browsing, music and video applications. The Company’s wireless backhaul solutions use microwave technology to transfer large amounts of network traffic between base stations and the infrastructure at the core of the mobile network.
The Company sells its products through a direct sales force, systems integrators, distributors and original equipment manufacturers.
The Company has ten wholly-owned subsidiaries in Brazil, France, Hong Kong, Singapore, India, Mexico, the Philippines, the United Kingdom, Australia and the United States. The subsidiaries provide marketing, distribution, sales and technical support to the Company’s customers worldwide.
As to principal markets and major customers, see Note 10.
NOTE 2:— SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2006, are applied consistently in these unaudited interim consolidated financial statements.
NOTE 3:— UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited interim condensed consolidated statements have been prepared in accordance with generally accounting principles in the United States for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2007, are not necessarily indicative of the results that may be expected for the year ending December 31, 2007. The condensed consolidated balance sheet of December 31, 2006, has been derived from the audited consolidated financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, reference is made to consolidated financial statements and footnotes thereto in the Company’s Annual Report onForm 20-F/A for the year ended December 31, 2006.
NOTE 4:— OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
December 31, | September 30, | |||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Government authorities | $ | 1,661 | $ | 3,160 | ||||
Prepaid expenses | 616 | 739 | ||||||
Deferred expenses | 597 | 2,012 | ||||||
Receivables related to unrecognized sold inventory | 3,892 | 857 | ||||||
Others | 159 | 463 | ||||||
$ | 6,925 | $ | 7,231 | |||||
5
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
NOTE 5:— INVENTORIES
December 31, | September 30, | |||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Raw materials | $ | 6,573 | $ | 5,674 | ||||
Work in progress | 2,257 | 3,104 | ||||||
Finished products | 18,481 | 30,291 | ||||||
$ | 27,311 | $ | 39,069 | |||||
The Company has been utilizing part of the products related to the components written-off in 2005. During the nine month periods ended September 30, 2006 and 2007 (unaudited), previously written-off inventories in the amounts of $57 and $109, respectively, were utilized as components in products in the Company’s ordinary course of production, and were sold as finished products to customers. The sales of these related manufactured products were reflected in the Company’s revenues without additional cost to the cost of sales in the period in which the inventory was utilized.
NOTE 6:— OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31, | September 30, | |||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Employees and payroll accruals | $ | 4,098 | $ | 5,538 | ||||
Accrued expenses | 1,401 | 508 | ||||||
Government authorities (Note 7a) | 3,962 | 4,385 | ||||||
Provision for warranty costs | 1,135 | 1,517 | ||||||
Other | 31 | 238 | ||||||
$ | 10,627 | $ | 12,186 | |||||
NOTE 7:— COMMITMENTS AND CONTINGENT LIABILITIES
a. | Royalties to the Office of the Chief Scientist: |
The Company participated in programs sponsored by the Israeli Government for the support of research and development activities. Through December 31, 2006, the Company obtained grants from the Office of the Chief Scientist of the Israeli Ministry of Industry, Trade and Labor (“the OCS”) in the aggregate of $18,542 for certain of the Company’s research and development projects. The Company was obligated to pay royalties to the OCS, amounting to 3%-3.5% of the sales of the products and other related revenues generated from such projects, equal to 100% of the grants received, linked to the U.S. dollar and for grants received after January 1, 1999 also bearing interest at the rate of LIBOR. The obligation to pay these royalties was contingent on actual sales of the products and in the absence of such sales, no payment is required.
In December 2006, the Company entered into an agreement with the OCS to conclude its research and development grant programs sponsored by the OCS. Under the agreement, as of December 31, 2006, the Company was obligated to repay the OCS approximately $11,887. The total amount of $11,887 was expensed during 2006 as cost of revenues, out of which, $3,962 was recorded in short term liabilities and $7,925 in long-term liabilities. The payment will be in six semiannual installments from 2007 through 2009. The outstanding obligation is linked to the change in Israel’s Consumer Price Index and bears interest. In addition, the Company is required to continue reporting to the OCS regarding its sales semiannually until the obligation is fully paid. At each report, the Company is required to calculate the amount which the Company would have been obligated to pay the OCS, had the Company paid a royalty of 3.15% on all its sales for such period. If
6
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
the resulting amount is more than one-sixth of the total amount of $11,887, the Company will be required to pay the difference in the same payment cycle. However, any such payments will be applied to the last semiannual installments such that the total obligation will not be increased and the period for paying the obligation may be accelerated. As a result of the agreement with the OCS, the Company recorded an expense of $10,444 million in 2006 as cost of revenues.
The total outstanding obligation as of September 30, 2007 was $8,524.
b. | Lease commitments: |
The Company and its subsidiaries lease their facilities and motor vehicles under various operating lease agreements that expire on various dates. Aggregate minimum rental commitments under non-cancelable leases at September 30, 2007, are as follows:
Motor | ||||||||||||
Facilities | vehicles | Total | ||||||||||
2007 (October through December) | $ | 364 | $ | 242 | $ | 606 | ||||||
2008 | 683 | 748 | 1,431 | |||||||||
2009 | 159 | 326 | 485 | |||||||||
2010 | 124 | 219 | 343 | |||||||||
2011 and thereafter | 422 | — | 422 | |||||||||
$ | 1,752 | $ | 1,535 | $ | 3,287 | |||||||
Expenses for lease of facilities for the nine months ended September 30, 2006 and 2007 were approximately $781 and $801 (unaudited), respectively (see also Note 12).
Expenses for the lease of motor vehicles for the nine months ended September 30, 2006 and 2007 were approximately $570 and $650 (unaudited), respectively.
c. | Charges and guarantees: |
As of September 30, 2007 (unaudited), the Company provided bank guarantees in an aggregate amount of $7,736 with respect to tender offer guarantees and performance guarantees to its customers.
d. | Potential claim: |
NEC Corporation, or NEC, has asserted that the Company has been using its intellectual property in certain of the Company’s products. The Company entered into discussions with NEC with respect to NEC’s allegation. On August 8, 2007, in the framework of this discussion, the Company made a settlement offer that included a lump sum payment of $450 and certain cross-licensing arrangements in consideration for a release of any potential claim of infringement relating to NEC’s allegations. Currently, the Company is awaiting to NEC’s response.
The Company believes, based on the opinion of the Company’s legal counsel, that the Company is not infringing any valid NEC patent at issue, and if any of NEC’s claims were to be tried, a competent judge or jury would not find the Company liable to NEC for patent infringement damages. However, in the light of the Company’s offer to NEC, a provision of $450 was accrued in the financial statements as of September 30, 2007.
NOTE 8:— SHAREHOLDERS’ EQUITY
The ordinary shares of the Company are traded on the Nasdaq Global Market and on the Tel Aviv Stock Exchange, under the symbol “CRNT”.
7
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
On October 25, 2007, the Company increased the registered share capital from 40,000,000 ordinary shares to 60,000,000 ordinary shares.
a. | Total comprehensive income: |
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Net income | $ | 2,669 | $ | 8,708 | ||||
Unrealized gain from hedging activities | 92 | 33 | ||||||
Comprehensive gain | $ | 2,761 | $ | 8,741 | ||||
b. | Exercise of options: |
During the nine months period ended September 30, 2007, a total of 2,313,246 options were exercised into ordinary shares, for an aggregate consideration of $8,848.
c. | Share option plans: |
1. Accounting for stock-based compensation:
The Company estimates the fair value of stock options granted under SFAS 123R using the Binomial model with the following weighted-average assumptions for the nine months ended September 30, 2007: risk-free interest rates of 4.10%-5.21% which is based on the yield from U.S. Treasury zero-coupon bonds with an equivalent term; dividend yield of 0%, volatility of price of the Company’s shares of 35.97%-58.39% based upon actual historical stock price movements over the most recent periods ending on the date of grant equal to the expected option term, and early exercise multiples of 2.36 and 3.10 in the nine months ended September 30, 2007 based on actual historical data. Based on the assumptions used, the weighted average expected term of the share options granted in the nine months ended September 30, 2007 is 4.52 years.
The Company recognizes compensation expense based on awards ultimately expected to vest. Estimated forfeitures are based on historical pre-vesting forfeitures and on management’s estimates. SFAS 123(R) requires forfeitures to be estimated and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The total equity-based compensation expense related to all of the Company’s equity-based awards, recognized for each of the nine months ended September 30, 2006 and 2007, was comprised as follows:
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Cost of revenues | $ | 133 | $ | 91 | ||||
Research and development, net | 241 | 204 | ||||||
Selling and marketing | 341 | 524 | ||||||
General and administrative | 627 | 459 | ||||||
Total stock-based compensation expenses | $ | 1,342 | $ | 1,278 | ||||
Effect of stock-based compensation expenses, on basic and diluted loss per Ordinary share | $ | 0.05 | $ | 0.04 | ||||
8
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
2. Under the Company’s 1996 Key Employee Share Incentive Plan, the 1997 Affiliate Employees Share Option Plan (collectively “the Plans”), and the 2003 Share Option Plan (“the 2003 Plan”), options may be granted to officers, directors, employees and consultants of the Company or its subsidiaries. The options vest primarily over three to five years. The options expire ten years from the date of grant.
In light of the adoption of the 2003 Plan, the Company ceased granting options under the 1996 Key Employee Share Incentive Plan as of December 31, 2002 and under the Affiliate Employee Share Option Plan as of February 2003 although options granted under the 1996 Key Employee Share Incentive Plan or 1997 Affiliate Share Option Plan before such dates are still valid, subject to the respective Plans.
3. Upon adoption of its share option plans, the Company reserved for issuance 13,523,188 ordinary shares in accordance with the respective terms thereof. As of December 31, 2006 and September 30, 2007, the Company had an aggregate of 290,112 ordinary shares and 620,939 ordinary shares, respectively, available for future grant under the plans. Any options which are canceled or forfeited before the expiration date become available for future grants.
The following is a summary of the Company’s share options activity for the year ended December 31, 2006 and for the nine months period ended September 30, 2007 (unaudited):
Year Ended December 31, 2006 | ||||||||||||||||
Weighted | Weighted average | |||||||||||||||
average | remaining | Aggregate | ||||||||||||||
Number | exercise | contractual | intrinsic | |||||||||||||
of options | price | term (in years) | value | |||||||||||||
Outstanding at beginning of year | 7,273,364 | $ | 4.17 | |||||||||||||
Granted | 769,000 | $ | 4.77 | |||||||||||||
Exercised | (1,101,087 | ) | $ | 1.92 | ||||||||||||
Forfeited | (412,492 | ) | $ | 5.56 | ||||||||||||
Outstanding at end of the year | 6,528,785 | $ | 4.53 | 6.70 | $ | 9,233 | ||||||||||
Options exercisable at end of the year | 4,030,928 | $ | 4.47 | 5.69 | $ | 7,062 | ||||||||||
Vested and expected to vest | 6,065,617 | $ | 4.53 | 6.70 | $ | 8,578 | ||||||||||
Nine Months Ended September 30, 2007 | ||||||||||||||||
Weighted | ||||||||||||||||
Weighted | Average | |||||||||||||||
Average | Remaining | Aggregate | ||||||||||||||
Number of | Exercise | Contractual | Intrinsic | |||||||||||||
Options | Price | Term (In Years) | Value | |||||||||||||
(Unaudited) | ||||||||||||||||
Outstanding at beginning of period | 6,528,785 | $ | 4.53 | |||||||||||||
Granted | 577,000 | $ | 7.32 | |||||||||||||
Exercised | (2,313,996 | ) | $ | 3.68 | ||||||||||||
Forfeited | (235,327 | ) | $ | 6.15 | ||||||||||||
Outstanding at end of the period | 4,556,462 | $ | 5.17 | 6.97 | $ | 63,039 | ||||||||||
Options exercisable at end of the year | 2,390,359 | $ | 4.93 | 5.68 | $ | 33,629 | ||||||||||
Vested and expected to vest | 3,958,984 | $ | 5.17 | 6.97 | $ | 54,773 | ||||||||||
All of the Company’s options granted during 2006 and the nine months ended September 30, 2007 were with exercise prices which were equal to the market value of the ordinary shares at their grant dates. The
9
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
weighted average grant date per share fair values of the options granted during 2006 and the nine months ended September 30, 2007 (unaudited) were $1.31 and $2.80, respectively.
The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between the Company’s closing share price on the last trading day in the period presented and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2006. This amount is impacted by the changes in the fair market value of the Company’s shares. Total intrinsic value of options exercised during the period ended September 30, 2007 (unaudited) and December 31, 2006 were $35,122 and $3,905, respectively. As of September 30, 2007 (unaudited) and December 31, 2006, there were $1,943 and $1,670 respectively, of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Company’s share option plans. That cost is expected to be recognized over a weighted-average period of one year.
For the year ended December 31, 2006 and the nine months ended September 30, 2006 and 2007 (unaudited), the Company recorded compensation expenses of $1,712, $1,342 and $1,278, respectively.
NOTE 9:— TAXES ON INCOME
In June 2006, the FASB issued Interpretation 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), an interpretation of FASB Statement 109, “Accounting for Income Taxes”. The Interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under FIN 48, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
FIN 48 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. FIN 48 applies to all tax positions related to income taxes subject to SFAS 109. This includes tax positions considered to be “routine” as well as those with a high degree of uncertainty. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for de-recognition of tax positions. The provisions of FIN 48 are effective beginning January 1, 2007. The Company adopted this new interpretation effective January 1, 2007, which did not have a significant impact on its consolidated financial position, results of operations or liquidity.
Based on the Company’s accounting policy, the Company elected to classify interest on income taxes recognized in the financial statements as interest expenses and penalties with respect to income taxes recognized in the financial statements as income taxes. As of September 30, 2007, no such interest expenses and penalties were recognized.
NOTE 10:— SEGMENTS, CUSTOMERS AND GEOGRAPHICAL INFORMATION
The Company applies SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS 131”). The Company operates in one reportable segment (see Note 1 for a brief description of the Company’s business). The total revenues are attributed to geographic areas based on the location of the end customer.
10
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
The following presents total revenues for the nine months ended September 30, 2006 and 2007, and long-lived property and equipment as of December 31, 2006 and September 30, 2007 by geographic areas:
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Revenues from sales to external customers: | ||||||||
North America | $ | 19,597 | $ | 27,457 | ||||
Europe, Middle East and Africa | 27,641 | 37,572 | ||||||
Asia-Pacific | 23,133 | 45,902 | ||||||
Latin America | 5,099 | 4,812 | ||||||
$ | 75,470 | $ | 115,743 | |||||
December 31, | September 30, | |||||
2006 | 2007 | |||||
(Unaudited) | ||||||
Property and equipment, net, by geographic areas: | ||||||
Israel | $ | 2,339 | $ | 3,583 | ||
Others | 321 | 324 | ||||
$ | 2,660 | $ | 3,907 | |||
Major customer data as a percentage of total revenues:
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Customer A | 15 | 12 | ||||||
Customer B | (* | ) | 10 |
*) | Less than 10% of total revenues. |
NOTE 11:— NET EARNINGS PER SHARE
Basic net earnings per share is computed based on the weighted average number of ordinary shares outstanding during each year. Diluted net earnings per share is computed based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential ordinary shares considered outstanding during the year, in accordance with Statement of Financial Accounting Standard No. 128, “Earnings Per Share” (“SFAS 128”).
11
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
The following table sets forth the computation of basic and diluted net earnings per share:
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Numerator: | ||||||||
Numerator for basic and diluted net earnings per share — income available to shareholders | $ | 2,669 | $ | 8,708 | ||||
Denominator: | ||||||||
Denominator for basic net earnings per share — weighted average number of shares | 26,602,155 | 28,526,786 | ||||||
Effect of dilutive securities: | ||||||||
Employee share options | 1,575,671 | 2,280,190 | ||||||
Denominator for diluted net earnings per share — adjusted weighted average number of shares | 28,177,876 | 30,806,976 | ||||||
NOTE 12:— RELATED PARTY BALANCES AND TRANSACTIONS
Most of the related party balances and transactions are with related companies and principal shareholders.
Yehuda Zisapel is a principal shareholder and Zohar Zisapel is the Chairman of the Board of Directors and a principal shareholder of the Company. They are brothers who, as of September 30, 2007, owned 19.9% of the Company’s ordinary shares in the aggregate. They are also founders, directors and principal shareholders of several other companies that are known as the RAD-BYNET group.
Members of the RAD-BYNET group provide the Company on an as-needed basis with legal, management information systems, marketing, and administrative services, and the Company reimburses each company for its costs in providing these services. The aggregate amounts of these expenses for each of the nine months ended on September 30, 2006 and 2007 (unaudited) were approximately $250 and $365, respectively.
The Company leases its offices in Israel from real estate holding companies controlled by Yehuda and Zohar Zisapel. During 2005, the Company extended its facility lease agreement for an additional two years. Additionally, the Company leases the U.S. subsidiary office space from a real estate holding company controlled by Yehuda and Zohar Zisapel. The lease for this facility is valid until September 2008. The aggregate amounts of rent and maintenance expenses related to these properties for each of the nine months ended on September 30, 2006 and 2007 (unaudited) were approximately $302 and $67, respectively.
The Company purchases certain inventory components from other members of the RAD-BYNET group, which are integrated into its products. The aggregate purchase price of these components for each of the nine months ended September 30, 2006 and 2007 (unaudited) was approximately $2,943 and $2,062, respectively.
12
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands)
Transactions with related parties:
Nine Months Ended | ||||||||
September 30, | ||||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Cost of revenues | $ | 3,063 | $ | 2,151 | ||||
Research and development expenses, net | 182 | 154 | ||||||
Selling and marketing expenses | 144 | 162 | ||||||
General and administrative expenses | 34 | 28 | ||||||
Balances with related parties: |
As of | ||||||||
December 31, | September 30, | |||||||
2006 | 2007 | |||||||
(Unaudited) | ||||||||
Trade payables, other accounts payable and accrued expenses | $ | 36 | $ | 184 | ||||
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