FORM 6-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities
Exchange Act of 1934
For the 25th of July, 2006
msystems Ltd.
(Translation of registrant's name in English)
7 Atir Yeda St.
Kfar Saba 44425, Israel
(Address of principal executive offices)
Indicate by check mark whether registrant files or will file annual reports under cover Form 20-F or Form 40-F:
| Form 20-F | X |
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| Form 40-F |
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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 registrant by furnishing the information contained in this Form is also thereby furnishing the information to the commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
| Yes |
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| No | X |
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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/A is incorporated by reference into our Registration Statements on Form S-8 and Form F-3 filed with the Securities and Exchange Commission (Registration No. 333-127467, Registration No. 333-126774 and Registration No. 333-129291).
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EXPLANATORY NOTE
This Amendment is being furnished by us, as an amendment to (1) the Report on Form 6-K/A we furnished with the Securities and Exchange Commission (the "Commission") on April 20, 2006 (the "April 6-K/A"), to provide a revised unaudited pro forma condensed combined statement of income for the year ended December 31, 2004 and (2) the Report on Form 6-K furnished with the Commission on May 18, 2006 (the "May 6-K"), to provide a revised unaudited pro forma condensed combined statement of income for the year ended December 31, 2005, in each case, to give effect to the restatement of our financial statements as of December 31, 2004 and 2005 and for each of the years in the three-year period ended December 31, 2005 to recognize primarily non-cash stock-based compensation expense which are not previously accounted for in our previously issued financial statements. Our financial information and unaudited pro forma condensed financial statements set forth in the April 6-K/A and the May 6-K should no longer be relied upon.
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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.
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| msystems Ltd. | ||||
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| (Registrant) | |
Date: | July 25, 2006 |
| By: | /s/Donna Gershowitz | |||
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| Title: | VP, General Counsel |
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT
On November 14, 2005, msystems Ltd. (the "Company" or "msystems") acquired all the outstanding shares of Microelectronica Española S.A.U. ("MEE"), a Spanish corporation, which develops, manufactures and sells smart cards for the mobile and banking markets, for an aggregate net purchase price of $75.0 million. A description of this transaction is set forth in Note 1e to our audited consolidated financial statements for the year ended December 31, 2005, included in our Annual Report on Form 20-F for the year ended December 31, 2005, which was filed with the Securities and Exchange Commission on July 17, 2006.
The following unaudited pro forma condensed combined statements of income have been prepared to give effect to the acquisition of all of the outstanding shares of MEE by the Company under the purchase method of accounting, after giving effect to the pro forma adjustments described in the accompanying notes.
The following unaudited pro forma condensed combined statements of income combine the historical restated statements of income of the Company and statements of income of MEE. The unaudited pro forma condensed combined statements of income for the years ended December 31, 2005 and 2004 give effect to the acquisition as if it had occurred on January 1, 2005 and 2004, respectively.
The unaudited pro forma condensed combined statements of income do not necessarily and should not be assumed to be an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. Integration costs are not included in the accompanying unaudited pro forma condensed combined statements of income. The unaudited pro forma condensed combined statements of income should be read in conjunction with the respective historical financial statement and the notes thereto of each of the Company and MEE. The pro forma adjustments are based on available financial information and certain estimates and assumptions that the Company believes are reasonable and that are set forth in the notes to the unaudited pro forma condensed combined statements of income.
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msystems Ltd.
Unaudited Pro Forma Condensed Combined Statements of Income
For the year ended December 31, 2005
(U.S. dollars in thousands, except share and per share data)
| msystems | MEE | Adjustments | Note | Pro forma |
| For the year ended December 31, 2005 | For the period from January 1, 2005 to November 14, 2005 |
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| For the year ended December 31, 2005 |
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| As restated (*) |
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| Revised |
Revenues | $ 614,983 | $ 22,820 |
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| $ 637,803 |
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Costs and expenses: |
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Costs of goods sold | 462,427 | 13,698 | 328 | (1a) | 476,453 |
Research and development, net | 38,417 | 1,913 | - |
| 40,330 |
Selling and marketing | 35,964 | 1,004 | 1,166 | (1a) | 38,134 |
General and administrative | 12,816 | 1,619 | - |
| 14,435 |
In-process research and development write off | 2,460 | - | (2,460) | (1b) | - |
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Total costs and expenses | 552,084 | 18,234 | (966) |
| 569,352 |
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Operating income | 62,899 | 4,586 | 966 |
| 68,451 |
Financial and other income, net | 15,013 | 2,484 | (2,702) | (1c) | 14,795 |
Income before taxes on income | 77,912 | 7,070 | (1,736) |
| 83,246 |
Taxes on income | (156) | (1,649) | 574 | (1d) | (1,231) |
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Income after taxes on income | 77,756 | 5,421 | (1,162) |
| 82,015 |
Equity in losses of an affiliate | (3,146) | - | - |
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Minority interest in earnings of a subsidiary | (26,236) | - | - |
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Net income | $ 48,374 | $ 5,421 | $ (1,162) |
| $ 52,633 |
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Basic net earnings per share | $ 1.34 |
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| $ 1.46 |
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Diluted net earnings per share | $ 1.20 |
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| $ 1.31 |
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Weighted average number of Ordinary shares used in Computing basic net earnings per share | 36,164,979 |
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| 36,164,979 |
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Weighted average number of Ordinary shares used in Computing diluted net earnings per share | 40,838,695 |
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| 40,838,695 |
(*) A description of the restatement is set forth in Note 1f to the Company`s consolidated financial statements for the year ended December 31, 2005, included in the Company`s Annual Report on Form 20-F filed with the Securities and Exchange Commission on July 17, 2006.
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See Notes to Unaudited Pro forma Condensed Combined Statements of Income
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msystems Ltd.
Unaudited Pro Forma Condensed Combined Statements of Income
For the year ended December 31, 2004
(U.S. dollars in thousands, except share and per share data)
| msystems | MEE | Adjustments | Note | Pro forma |
| For the year ended December 31, 2004
| For the year ended December 31, 2004 |
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| For the year ended December 31, 2004
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| As restated (*) |
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| Revised |
Revenues | $ 416,560 | $ 32,911 |
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| $ 449,471 |
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Costs and expenses: |
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Costs of goods sold | 303,529 | 20,046 | 373 | (1a) | 323,948 |
Research and development, net | 25,895 | 1,198 | - |
| 27,093 |
Selling and marketing | 32,702 | 1,966 | 1,331 | (1a) | 35,999 |
General and administrative | 7,630 | 1,395 | - |
| 9,025 |
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Total costs and expenses | 369,756 | 24,605 | 1,704 |
| 396,065 |
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Operating income | 46,804 | 8,306 | (1,704) |
| 53,406 |
Financial and other income, net | 4,103 | (962) | (1,438) | (1c) | 1,703 |
Income before taxes on income | 50,907 | 7,344 | (3,142) |
| 55,109 |
Taxes on income | - | (1,322) | 596 | (1d) | (726) |
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Income after taxes on income | 50,907 | 6,022 | (2,546) |
| 54,383 |
Minority interest in earnings of a subsidiary | (30,378) | - | - |
| (30,378) |
Net income | $ 20,529 | $ 6,022 | $ (2,546) |
| $ 24,005 |
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Basic net earnings per share | $ 0.60 |
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| $ 0.70 |
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Diluted net earnings per share | $ 0.56 |
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| $ 0.66 |
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Weighted average number of Ordinary shares used in Computing basic net earnings per share | 34,195,642 |
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| 34,195,642 |
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Weighted average number of Ordinary shares used in Computing diluted net earnings per share | 36,347,941 |
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| 36,347,941 |
(*) A description of the restatement is set forth in Note 1f to the Company`s consolidated financial statements for the year ended December 31, 2005, included in the Company`s Annual Report on Form 20-F filed with the Securities and Exchange Commission on July 17, 2006.
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See Notes to Unaudited Pro forma Condensed Combined Statements of Income
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Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Note 1:
The pro forma condensed combined statements of income for the year ended December 31, 2005 and 2004 include the adjustments necessary to give effect to the acquisition as if it had occurred on January 1, 2005 and January 1, 2004, respectively.
(a) Amortization of intangible assets established as part of the purchase price allocation in connection with the acquisition of MEE. Intangible assets are amortized on a straight-line basis over their estimated useful lives of 5-10 years (see Note 2 below).
(b) Elimination of in-process research and development write-off.
(c) Elimination of interest income on msystems` cash, cash equivalents and marketable securities used as the consideration in the acquisition. The interest income was calculated by multiplying the consideration paid by approximately 3.6% and 2.0%, which were the average return rates on the Company's cash and marketable securities investments during the period from January 1, 2005 to the date of acquisition of MEE (November 14, 2005), and during the year ended December 31, 2004, respectively.
(d) Tax effect of the amortization of intangible assets acquired.
Note 2:
Amortization of acquired intangible assets is calculated using the following estimated useful lives:
| Weighted Average Amortization Period In Years |
Customer relationships | 6.9 |
Trade name | 10 |
Technology | 5 |
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