o
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REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
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SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Title of each class
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Name of each exchange on which registered
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Ordinary Shares,
NIS 0.1 par value per share
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NASDAQ Global Select Market
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x
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U.S. GAAP
|
o
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International Financial Reporting Standards as issued by the International Accounting Standards Board
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o
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Other
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·
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“we,” “us,” “our,” the “Company,” and “Radware” are to Radware Ltd. and its subsidiaries;
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·
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“ordinary shares” are to our Ordinary Shares, par value NIS 0.1 per share;
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·
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"Companies Law" or the “Israeli Companies Law” are to the Israeli Companies Law, 5759-1999 (as amended);
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·
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the “SEC” are to the United States Securities and Exchange Commission;
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·
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“NASDAQ” are to the NASDAQ Global Market (formerly, the Nasdaq National Market);
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·
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“dollars” or “$” are to United States dollars; and
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·
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“NIS” or “shekels” are to New Israeli Shekels.
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7
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7
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7
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8
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A.
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Selected Financial Data
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8
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B.
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Capitalization and Indebtedness
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9
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C.
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Reasons for the Offer and Use of Proceeds
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9
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D.
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Risk Factors
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9
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23
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||
A.
|
History and Development of the Company
|
23
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B.
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Business Overview
|
23
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C.
|
Organizational Structure
|
33
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D.
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Property, Plants and Equipment
|
34
|
35
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||
36
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||
A.
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Operating Results
|
36
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B.
|
Liquidity and Capital Resources
|
47
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C.
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Research and Development, Patents and Licenses, etc.
|
49
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D.
|
Trend Information
|
49
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E.
|
Off-Balance Sheet Arrangements
|
49
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F.
|
Tabular Disclosure of Contractual Obligations
|
49
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50
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||
A.
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Directors and Senior Management
|
50
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B.
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Compensation
|
52
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C.
|
Board Practices
|
54
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D.
|
Employees
|
59
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E.
|
Share Ownership
|
60
|
63
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||
A.
|
Major Shareholders
|
63
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B.
|
Related Party Transactions
|
64
|
C.
|
Interests of Experts and Counsel
|
66
|
66
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||
A.
|
Consolidated Statements and other Financial Information
|
66
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Legal Proceedings |
66
|
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B.
|
Significant Changes
|
67
|
68
|
||
A.
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Offer and Listing Details
|
68
|
B.
|
Plan of Distribution
|
69
|
C.
|
Markets
|
69
|
D.
|
Selling Shareholders
|
69
|
E.
|
Dilution
|
69
|
F.
|
Expenses of the Issue
|
69
|
70
|
||
A.
|
Share Capital
|
70
|
B.
|
Memorandum and Articles of Association
|
70
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C.
|
Material Contracts
|
74
|
D.
|
Exchange Controls
|
75
|
E.
|
Taxation
|
75
|
F.
|
Dividends and Paying Agents
|
85
|
G.
|
Statement by Experts
|
86
|
H.
|
Documents on Display
|
86
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I.
|
Subsidiary Information
|
86
|
87
|
||
88
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89
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||
89
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||
89
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||
89
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90
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91
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91
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92
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92
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92
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92
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94
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94
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94
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||
95
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Year ended December 31,
|
||||||||||||||||||||
2005
|
2006* | 2007* | 2008* | 2009* | ||||||||||||||||
(US $ in thousands except per share data)
|
||||||||||||||||||||
Statement of Operations Data:
|
||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Products | $ | 55,902 | $ | 57,335 | $ | 59,422 | $ | 59,678 | $ | 65,021 | ||||||||||
Services | 21,682 | 24,075 | 29,209 | 34,903 | 43,883 | |||||||||||||||
|
77,584 | 81,410 | 88,631 | 94,581 | 108,904 | |||||||||||||||
Cost of revenues: | ||||||||||||||||||||
Products | 9,325 | 10,267 | 13,133 | 15,143 | 16,609 | |||||||||||||||
Services | 5,571 | 5,524 | 5,895 | 6,431 | 6,666 | |||||||||||||||
|
14,896 | 15,791 | 19,028 | 21,574 | 23,275 | |||||||||||||||
Gross profit
|
62,688 | 65,619 | 69,603 | 73,007 | 85,629 | |||||||||||||||
Operating expenses:
|
||||||||||||||||||||
Research and development, net
|
13,017 | 17,659 | 23,515 | 28,357 | 25,674 | |||||||||||||||
Sales and marketing
|
40,002 | 50,128 | 57,977 | 63,591 | 55,130 | |||||||||||||||
General and administrative
|
5,244 | 6,178 | 7,114 | 12,066 | 11,930 | |||||||||||||||
Total operating expenses
|
58,263 | 73,965 | 88,606 | 104,014 | 92,734 | |||||||||||||||
Operating profit (loss)
|
4,425 | (8,346 | ) | (19,003 | ) | (31,077 | ) | (7,105 | ) | |||||||||||
Financial income, net
|
5,159 | 7,422 | 7,420 | 3,612 | 1,987 | |||||||||||||||
Income (loss) before income taxes
|
9,584 | (924 | ) | (11,583 | ) | (27,395 | ) | (5,118 | ) | |||||||||||
Income taxes
|
(240 | ) | (356 | ) | (428 | ) | (3,627 | ) | (818 | ) | ||||||||||
Net income (loss)
|
$ | 9,344 | $ | (1,280 | ) | $ | (12,011 | ) | $ | (31,022 | ) | $ | (5,936 | ) | ||||||
Basic net earnings (loss) per share
|
$ | 0.50 | $ | (0.07 | ) | $ | (0.62 | ) | $ | (1.60 | ) | $ | (0.31 | ) | ||||||
Diluted net earnings (loss) per share
|
$ | 0.47 | $ | (0.07 | ) | $ | (0.62 | ) | $ | (1.60 | ) | $ | (0.31 | ) |
Year ended
December 31,
|
||||||||||||||||||||
2005
|
2006
|
2007
|
2008
|
2009
|
||||||||||||||||
(US $ in thousands)
|
||||||||||||||||||||
Weighted average number of ordinary shares used in computing basic net earnings (loss) per share
|
18,800 | 19,325 | 19,477 | 19,440 | 18,879 | |||||||||||||||
Weighted average number of ordinary shares used in computing diluted net earnings (loss) per share
|
20,072 | 19,325 | 19,477 | 19,440 | 18,879 |
Year ended December 31,
|
||||||||||||||||||||
2005
|
2006
|
2007
|
2008
|
2009
|
||||||||||||||||
(US $ in thousands)
|
||||||||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||
Cash and cash equivalents, short-term
bank deposits and marketable
securities
|
$ | 126,901 | $ | 140,375 | $ | 152,110 | $ | 88,796 | $ | 59,090 | ||||||||||
Long-term bank deposits, structured deposit and marketable securities
|
37,592 | 23,756 | 2,735 | 45,112 | 67,021 | |||||||||||||||
Working capital
|
124,005 | 137,406 | 149,954 | 82,292 | 49,573 | |||||||||||||||
Total assets
|
204,347 | 215,668 | 216,067 | 185,464 | 208,900 | |||||||||||||||
Shareholders’ equity
|
177,426 | 182,414 | 176,713 | 148,062 | 149,473 | |||||||||||||||
Capital Stock
|
153,480 | 170,568 | 176,486 | 186,450 | 192,406 |
·
|
Our limited order backlog;
|
·
|
Our need to develop and introduce new and enhanced products and features; and
|
·
|
The long sales cycles of our products.
|
|
·
|
respond more quickly to new or emerging technologies or changes in customer requirements;
|
|
·
|
benefit from greater economies of scale;
|
|
·
|
offer more aggressive pricing;
|
|
·
|
invest more resources in research and development in order to gain or maintain a competitive advantage;
|
|
·
|
devote greater resources to the promotion of their products; and/or
|
|
·
|
bundle their products or incorporate an Application Delivery or Intrusion Prevention component into existing products in a manner that renders our products partially or fully obsolete.
|
|
·
|
invest significantly in research and development;
|
|
·
|
develop, introduce and support new products and enhancements on a timely basis; and
|
|
·
|
gain and consecutively increase market acceptance of our products.
|
·
|
Post-merger integration problems resulting from the combination of any acquired operations with our own operations or from the combination of two or more operations into a new merged entity;
|
·
|
Diversion of management’s attention from our core business;
|
·
|
Substantial expenditures, which could divert funds from other corporate uses;
|
·
|
Entering markets in which we have little or no experience; and
|
·
|
Loss of key employees of the acquired operations.
|
·
|
A large portion of our expenses, principally salaries and related personnel expenses, are paid in New Israel Shekels (“NIS”), whereas most of our revenues are generated in dollars and partially in Euros. We witnessed a weakening of the NIS against the dollar during most of 2009, which decreased the dollar value of our expenses in Israel during 2009. Should the NIS increase its strength in comparison to the dollar, the dollar value of these expenses will increase, and our results of operations will be adversely affected.
|
·
|
A portion of our international sales are denominated in currencies other than dollars, such as the Euro, thereby exposing us to gains and losses on non-U.S. currency transactions.
|
·
|
We incur expenses in several other currencies in connection with our operations in Europe and Asia-Pacific. The devaluation of the dollar relative to such local currencies causes our operational expenses to increase.
|
·
|
The majority of our international sales are denominated in dollars. Accordingly, devaluation in the local currencies of our customers relative to the dollar could cause customers to decrease orders or default on payment, which could harm our results of operations.
|
|
•
|
Fluctuations in our quarterly revenues and earnings and those of our publicly held competitors;
|
|
•
|
Shortfalls in our operating results from levels forecast by securities analysts;
|
|
•
|
Announcements concerning us or our competitors;
|
|
•
|
The introduction of new products and new industry standards;
|
|
•
|
Changes in pricing policies by us or our competitors;
|
|
•
|
General market conditions and changes in market conditions in our industry;
|
|
•
|
The general state of the securities market (particularly the technology sector); and
|
|
•
|
Political, economic and other developments in the State of Israel, the United States and worldwide.
|
·
|
the judgment is enforceable in the state in which it was given;
|
·
|
adequate service of process has been effected and the defendant has had a reasonable opportunity to present his arguments and evidence;
|
·
|
the judgment and its enforcement are not contrary to the law, public policy, security or sovereignty of the State of Israel;
|
·
|
the judgment was not obtained by fraud and does not conflict with any other valid judgment in the same matter between the same parties; and
|
·
|
an action between the same parties in the same matter is not pending in any Israeli court at the time the lawsuit is instituted in the U.S. court.
|
|
·
|
The Application Delivery
solution domain consists of simple load balancing application switches (Layer 4-7) targeted at the medium to large-size business sector for simple applications (SLB); advanced application delivery (ADC) platforms targeted at the medium- to large-size enterprise sector; and wide area network (WAN) optimization controllers (WOC). This domain is also referred to by select industry analysts as the Application Acceleration market. Our Application Delivery product portfolio consists of advanced application delivery platforms, which offer, in addition to Layer 4-7 switching, benefits in terms of business continuity and resiliency, agility, and efficiency by optimizing the delivery of applications across IP and web-based networks. Among others, our products offer sophisticated features, including Web application firewall, extensible Markup Language (XML) validation, Session Initiation Protocol (SIP) Load Balancing, Application Program Interfaces (APIs), content transformation, etc. that are designed to meet complex networking infrastructure and data center demands; and
|
|
·
|
The Network Security
solution domain is more diffuse and consists of firewall/Virtual Private Networks (VPN), Unified Threat Management (UTM), intrusion detection systems, intrusion prevention systems, network behavioral analysis (NBA) systems and Secure Sockets Layer/ Internet Protocol Security (SSL/IPSec) VPN appliances. Our proprietary offering to this domain focuses on network intrusion prevention and attack mitigation systems, which are in-line devices that monitor network and/or system activities for malicious or unwanted behavior and can react, in real-time, to block or prevent those activities.
|
|
·
|
Network Computing
(Editor’s Choice)
|
|
·
|
SC Magazine
(Recommended Buy Award)
|
|
·
|
Network Computing
(Well-Connected)
|
|
·
|
Internet World
(Best of Show)
|
|
·
|
PC Magazine
(Editor’s Choice)
|
|
·
|
Network Magazine
(Product of the Year)
|
|
·
|
Internet Telephony Magazine
(2009 Excellence Award)
|
|
·
|
Communications Solutions
(2008 Product of the Year Award)
|
|
·
|
NGN
(2009 Reader’s Trust Award)
|
|
·
|
NGN
(2009 Leadership Award)
|
|
·
|
Info Security Products Guide
(2009 Global Excellence - Intrusion Prevention Solutions Customer Award)
|
|
·
|
Internet Telephony Magazine
(2008 Product of the Year Award)
|
|
·
|
Info Security Products Guide
(2009 Finalist, Global Products Excellence Customer Trust Award, Security Solution and IPS)
|
|
·
|
N
etwork Computing Magazine
(2009 Finalist, Load Balancing - Product of the Year Award)
|
|
·
|
the Common Criteria Evaluation & Validation Scheme (CCEVS) EAL 3 through the National Security Agency (NSA) program; and
|
|
·
|
FIPS 140-2 through the National Institute of Standards (NIST).
|
·
|
APSolute OS Application-Smart Classification and Flow Management
|
·
|
APSolute OS Health Monitoring and Failure Bypassing
|
·
|
APSolute OS Traffic Redirection
|
·
|
APSolute OS Bandwidth Management
|
·
|
APSolute OS Application Acceleration
|
·
|
APSolute OS Intrusion Prevention
|
·
|
APSolute OS DoS Protection
|
|
·
|
in the Application Delivery solutions market: F5 Networks, Inc., Cisco Systems, Inc., Citrix Systems, Inc. and Brocade Communications Systems, Inc. (Foundry Networks, Inc.); and
|
|
·
|
in the Network Security space, with respect to our Intrusion Prevention Systems, Juniper Networks, Inc., 3Com Systems, Inc. (TippingPoint Technologies Inc.), McAfee, Inc., Sourcefire, Inc., and IBM Corporation (Internet Security Systems).
|
Name of Subsidiary
|
Country of Incorporation
|
Radware Inc.
|
New Jersey, United States of America
|
Radware UK Limited
|
United Kingdom
|
Radware France
|
France
|
Radware Srl
|
Italy
|
Radware GmbH
|
Germany
|
Nihon Radware KK
|
Japan
|
Radware Australia Pty. Ltd.
|
Australia
|
Radware Singapore Pte. Ltd.
|
Singapore
|
Radware Korea Ltd.
|
Korea
|
Radware Canada Inc.
|
Canada
|
Radware India Pvt. Ltd.
|
India
|
Covelight Systems, Inc.
|
Delaware, United States of America
|
·
|
Revenue recognition;
|
·
|
Reserve for product return and stock rotation;
|
·
|
Accounting for doubtful accounts;
|
·
|
Impairment of marketable securities;
|
·
|
Inventory valuation;
|
·
|
Goodwill;
|
·
|
Realizibility of long-lived assets;
|
·
|
Stock-based compensation; and
|
·
|
Income taxes.
|
2007
|
2008
|
2009
|
||||||||||
Revenues: | ||||||||||||
Products | $ | 59,422 | $ | 59,678 | $ | 65,021 | ||||||
Services | 29,209 | 34,903 | 43,883 | |||||||||
88,631 | 94,581 | 108,904 | ||||||||||
Cost of revenues: | ||||||||||||
Products | 13,133 | 15,143 | 16,609 | |||||||||
Services | 5,895 | 6,431 | 6,666 | |||||||||
|
19,028 | 21,574 | 23,275 | |||||||||
Gross profit
|
69,603 | 73,007 | 85,629 | |||||||||
Operating expenses:
|
||||||||||||
Research and development, net
|
23,515 | 28,357 | 25,674 | |||||||||
Sales and marketing
|
57,977 | 63,591 | 55,130 | |||||||||
General and administrative
|
7,114 | 12,066 | 11,930 | |||||||||
Total operating expenses
|
88,606 | 104,014 | 92,734 | |||||||||
Operating loss
|
(19,003 | ) | (31,077 | ) | (7,105 | ) | ||||||
Financial income, net
|
7,420 | 3,612 | 1,987 | |||||||||
Loss before income taxes
|
(11,583 | ) | (27,395 | ) | (5,118 | ) | ||||||
Income taxes
|
(428 | ) | (3,627 | ) | (818 | ) | ||||||
Net loss
|
$ | (12,011 | ) | $ | (31,022 | ) | $ | (5,936 | ) |
2007
|
2008
|
2009
|
||||||||||
Revenues:
|
|
|
||||||||||
Products | 67 | % | 63 | % | 60 | % | ||||||
Services | 33 | 37 | 40 | |||||||||
100 | 100 | 100 | ||||||||||
Cost of Revenues:
|
||||||||||||
Products | 15 | 16 | 15 | |||||||||
Services | 6 | 7 | 6 | |||||||||
21 | 23 | 21 | ||||||||||
Gross profit
|
79 | 77 | 79 | |||||||||
Operating expenses:
|
||||||||||||
Research and development, net
|
27 | 30 | 23 | |||||||||
Sales and marketing
|
65 | 67 | 51 | |||||||||
General and administrative
|
8 | 13 | 11 | |||||||||
Total operating expenses
|
100 | 110 | 85 | |||||||||
Operating loss
|
(21 | ) | (33 | ) | (6) | |||||||
Financial income, net
|
8 | 4 | 2 | |||||||||
Loss before income | ||||||||||||
Taxes
|
(13 | ) | (29 | ) | (4 | ) | ||||||
Income taxes
|
(1 | ) | (4 | ) | (1 | ) | ||||||
Net loss
|
(14 | )% | (33 | )% | (5 | )% |
Year Ended December 31,
|
||||||||||||||||||||||||
2007
|
2008
|
2009
|
||||||||||||||||||||||
(in thousands of U.S. $)
|
(by percentage)
|
(in thousands of U.S. $)
|
(by
percentage)
|
(in thousands of U.S. $)
|
(by percentage)
|
|||||||||||||||||||
North, Central and South America (principally the United States)
|
24,368 | 28 | % | 23,715 | 25 | % | 29,704 | 27 | % | |||||||||||||||
EMEA (Europe, the Middle East and Africa)
|
29,412 | 33 | % | 29,836 | 32 | % | 36,226 | 33 | % | |||||||||||||||
Asia-Pacific
|
34,851 | 39 | % | 41,030 | 43 | % | 42,974 | 40 | % | |||||||||||||||
Total
|
88,631 | 100 | % | 94,581 | 100 | % | 108,904 | 100 | % |
Payments Due By Period (US $ in thousands)
|
||||||||||||||||||||
Contractual obligations
|
Total
|
Less than 1 year
|
1-3 years
|
3-5
years
|
More than 5 years
|
|||||||||||||||
Operating leases(1)
|
5,201 | 2,572 | 2,603 | 26 | - | |||||||||||||||
Total contractual cash obligations (2)(3)
|
5,201 | 2,572 | 2,603 | 26 | - |
Name
|
Age
|
Position
|
||
Roy Zisapel (1)
|
39
|
Chief Executive Officer, President and Director
|
||
Meir Moshe
|
56
|
Chief Financial Officer
|
||
Efrat Baruh-Noy
|
33
|
General Counsel and Secretary
|
||
Ilan Kinreich
|
52
|
Chief Operating Officer
|
||
Amir Peles
|
38
|
Chief Technology Officer
|
||
Sharon Trachtman
|
43
|
VP Global Marketing
|
||
Yehuda Zisapel (7)
|
68
|
Chairman of the Board of Directors
|
||
Colin Green (3)(4)(5)
|
60
|
Chairman of the Audit Committee and Director
|
||
David Rubner (3)(4)(5)(6)
|
69
|
Director
|
||
Hagen Hultzsch (2)(4)(5)(6)
|
69
|
Chairman of the Compensation Committee and Director
|
||
Yael Langer (2)
|
45
|
Director
|
||
Avraham Asheri (4)(5)(7)
|
72
|
Director
|
Salaries, fees, commissions and bonuses
|
Pension, retirement
and other similar benefits
|
|||||||
All directors and officers as a group, consisting of 15 persons *
|
$ | 1,905,000 | $ | 247,000 |
Class
|
Term expiring at
the annual meeting
for the year
|
Directors
|
||
Class I
|
2012
|
Yehuda Zisapel and Avraham Asheri
|
||
Class II
|
2010
|
Roy Zisapel
|
||
Class III
|
2011
|
Hagen Hultzsch and Yael Langer
|
·
|
the Company;
|
·
|
any entity controlling the Company;
|
·
|
any entity controlled by the Company; or
|
·
|
any entity under common control with the Company.
|
·
|
an employment relationship;
|
·
|
a business or professional relationship maintained on a regular basis;
|
·
|
control; and
|
·
|
service as an office holder, excluding service as a director that was appointed to serve as an external director of a company that is about to make its initial public offering.
|
·
|
At least one third of the shares of non-controlling shareholders voted at the meeting in favor of the election; or
|
·
|
The total number of shares voted against the election of the external director does not exceed one percent of the aggregate voting rights in the Company.
|
·
|
the chairman of the Board of Directors;
|
·
|
a controlling shareholder or a relative of a controlling shareholder; and
|
·
|
any director employed by the Company or who provides services to the Company on a regular basis.
|
·
|
Information regarding the advisability of a given action submitted for his or her approval or performed by him or her by virtue of his or her position; and
|
·
|
All other important information pertaining to these actions.
|
·
|
Refrain from any conflict of interest between the performance of his/her duties in the company and the performance of his or her other duties or his or her personal affairs;
|
·
|
Refrain from any activity that is competitive with the company;
|
·
|
Refrain from exploiting any business opportunity of the company to receive a personal gain for himself/herself or others; and
|
·
|
Disclose to the company any information or documents relating to the company's affairs which the office holder has received due to his/her position as an office holder.
|
·
|
Other than in the ordinary course of business;
|
·
|
Not on market terms; or
|
·
|
That is likely to have a material impact on the company's profitability, assets or liabilities.
|
·
|
At least one-third of the shares of shareholders who have no personal interest in the transaction, and who are present and voting (in person, by proxy or by written ballot) vote in favor thereof; or
|
·
|
The shareholders who have no personal interest in the transaction who vote against the transaction do not represent more than one percent of the voting power in the company.
|
As at December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Approximate numbers of employees and subcontractors by geographic location
|
||||||||||||
Israel
|
271 | 262 | 276 | |||||||||
United States
|
107 | 89 | 138 | |||||||||
Other
|
249 | (*) | 183 | 179 | ||||||||
Total workforce
|
627 | 534 | 593 | |||||||||
Approximate numbers of employees and subcontractors by category of activity
|
||||||||||||
Research and development
|
253 | (*) | 191 | 216 | ||||||||
Sales, technical support, business development and marketing
|
292 | 270 | 297 | |||||||||
Management, operations and administration
|
82 | 73 | 80 | |||||||||
Total workforce
|
627 | 534 | 593 |
Name
|
Number of
ordinary shares
|
Percentage of
outstanding
ordinary shares
|
||||||
Yehuda Zisapel(1)
|
3,229,336 | 16.91 | % | |||||
Roy Zisapel
|
878,083 | 4.60 | % | |||||
Meir Moshe(2)
|
234,165 | 1.22 | % | |||||
All directors and executive officers as a group (12 persons) (3)(4)
|
4,451,248 | 23.05 | % |
·
|
The persons to whom options are granted;
|
·
|
The number of shares underlying each options award;
|
·
|
The time or times at which the award shall be made;
|
·
|
The exercise price, vesting schedule and conditions pursuant to which the options are exercisable; and
|
·
|
Any other matter necessary or desirable for the administration of the plan.
|
Name
|
Number of
ordinary shares
|
Percentage of
outstanding
ordinary shares
|
||||||
Yehuda Zisapel (1)
|
3,229,336 | 16.91 | % | |||||
Federated Investors, Inc. (2)
|
1,919,219 | 10.05 | % | |||||
Rima Management, LLC (3)
|
1,864,723 | 9.77 | % | |||||
Zohar Zisapel(4)
|
1, 214,820 | 6.36 | % | |||||
Renaissance Technologies LLC (5)
|
968,900 | 5.07 | % |
|
·
|
One is a five-story building in Tel Aviv, Israel, consisting of approximately 36,000 square feet, plus storage and parking space. The annual rent amounts to approximately $636,000. The lease expires in November 2012.
|
|
·
|
The second location consists of two floors in the Or Tower in Tel Aviv, Israel with approximately 30,000 square feet, plus parking spaces. The lease expires in May 2011. The annual rent for such 2 floors amounts to approximately $641,000.
|
Annual High and Low
|
NASDAQ Global Select Market
|
Tel Aviv Stock Exchange
|
||||||||||||||
High
|
Low
|
High
|
Low
|
|||||||||||||
2005
|
$ 26.56 | $ 15.19 |
NIS 115.00
|
NIS 67.93
|
||||||||||||
2006
|
$ 21.49 | $ 11.44 |
NIS 101.10
|
NIS 50.43
|
||||||||||||
2007
|
$ 16.92 | $ 12.31 |
NIS 67.97
|
NIS 49.64
|
||||||||||||
2008
|
||||||||||||||||
First Quarter
|
$ 14.84 | $ 10.19 |
NIS 59.40
|
NIS 34.51
|
||||||||||||
Second Quarter
|
$ 10.93 | $ 8.81 |
NIS 39.72
|
NIS 29.50
|
||||||||||||
Third Quarter
|
$ 9.80 | $ 7.50 |
NIS 35.64
|
NIS 26.09
|
||||||||||||
Fourth Quarter
|
$ 8.06 | $ 4.99 |
NIS 28.38
|
NIS 18.11
|
||||||||||||
ANNUAL
|
$ 14.84 | $ 4.99 |
NIS 59.40
|
NIS 18.11
|
||||||||||||
2009
|
||||||||||||||||
First Quarter
|
$ 6.48 | $ 5.15 |
NIS 27.30
|
* |
NIS 19.52
|
* | ||||||||||
Second Quarter
|
$ 7.91 | $ 5.59 | N/A | N/A | ||||||||||||
Third Quarter
|
$ 12.5 | $ 7.68 | N/A | N/A | ||||||||||||
Fourth Quarter
|
$ 15.12 | $ 10.99 | N/A | N/A | ||||||||||||
ANNUAL
|
$ 15.12 | $ 5.15 | N/A | N/A |
·
|
Any amendment to the articles of association;
|
·
|
An increase of the company's authorized share capital;
|
·
|
A merger; or
|
·
|
Approval of certain related party transactions and actions which require shareholder approval pursuant to the Companies Law.
|
·
|
A breach of his or her duty of care to us or to another person;
|
·
|
A breach of his or her duty of loyalty to us, provided that the office holder acted in good faith and had reasonable cause to assume that his or her act would not prejudice our interests; or
|
·
|
A financial liability imposed upon him or her in favor of another person.
|
·
|
A financial liability incurred by, or imposed on him or her in favor of another person by a court judgment, including a settlement or an arbitration award approved by the court. Such indemnification may be approved (i) after the liability has been incurred or (ii) in advance, provided that our undertaking to indemnify is limited to events that our Board of Directors believes are foreseeable in light of our actual operations at the time of providing the undertaking and to a sum or criterion that our Board of Directors determines to be reasonable under the circumstances;
|
·
|
Reasonable litigation expenses, including attorney’s fees, expended by the office holder as a result of an investigation or proceeding instituted against him or her by a competent authority, provided that such investigation or proceeding concluded without the filing of an indictment against him or her or the imposition of any financial liability in lieu of criminal proceedings other than with respect to a criminal offense that does not require proof of criminal intent; and
|
·
|
Reasonable litigation expenses, including attorneys' fees, expended by the office holder or charged to him or her by a court in connection with proceedings we institute against him or her or instituted on our behalf or by another person, a criminal indictment from which he or she was acquitted, or a criminal indictment in which he or she was convicted for a criminal offense that does not require proof of criminal intent.
|
·
|
A breach by the office holder of his or her duty of loyalty unless, with respect to indemnification or insurance coverage, the office holder acted in good faith and had a reasonable basis to believe that the act would not prejudice the company;
|
·
|
A breach by the office holder of his or her duty of care if the breach was done intentionally or recklessly unless the breach was done negligently;
|
·
|
Any act or omission done with the intent to derive an illegal personal benefit; or
|
·
|
Any fine levied against the office holder.
|
·
|
Similar to the currently available alternative route, exemption from corporate tax on undistributed income for a period of two to ten years, depending on the geographic location of the Benefited Enterprise within Israel, and a reduced corporate tax rate of 10% to 25% for the remainder of the benefits period, depending on the level of foreign investment in each year. Benefits may be granted for a term of seven to ten years, depending on the level of foreign investment in the company. If the company distributes a dividend out of income derived from the Benefited Enterprise during the tax exemption period, such income will be subject to corporate tax at the applicable rate of the gross amount (10%-25%). The company is required to withhold tax at the source at a rate of 15% from any dividends distributed from income derived from the Benefited Enterprise; and
|
·
|
A special tax route, which enables companies owning facilities in certain geographical locations in Israel to pay corporate tax at the rate of 11.5% on income of the Benefited Enterprise. The benefits period is ten years. Upon payment of dividends, the company is required to withhold tax at source at a rate of 15% for Israeli residents and at a rate of 4% for foreign residents.
|
·
|
Deduction of purchases of know-how and patents over an eight-year period for tax purposes;
|
·
|
Right to elect, under specified conditions, to file a consolidated tax return with additional related Israeli Industrial Companies;
|
·
|
Accelerated depreciation rates on equipment and buildings; and
|
·
|
Deductions over a three-year period of expenses involved with the issuance and listing of shares on a recognized stock market.
|
|
United States Federal Income Tax Considerations
|
·
|
An individual citizen or resident of the United States for U.S. federal income tax purposes;
|
·
|
A corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any political subdivision thereof or the District of Columbia;
|
·
|
An estate, the income of which is subject to U.S. federal income tax regardless of its source; or
|
·
|
A trust (i) if, in general a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (ii) that has in effect a valid election under applicable U.S. Treasury Regulations to be treated as a U.S. person.
|
·
|
Are broker-dealers or insurance companies;
|
·
|
Have elected mark-to-market accounting;
|
·
|
Are tax-exempt organizations or retirement plans;
|
·
|
Are grantor trusts;
|
·
|
Are financial institutions or “financial services entities;”
|
·
|
Hold their shares as part of a straddle, “hedge” or “conversion transaction” with other investments;
|
·
|
Certain former citizens or long-term residents of the United States;
|
·
|
Acquired their shares upon the exercise of employee stock options or otherwise as compensation;
|
·
|
Are real estate investment trusts or regulated investment companies;
|
·
|
Own directly, indirectly or by attribution at least 10% of our voting power; or
|
·
|
Have a functional currency that is not the U.S. dollar.
|
·
|
Such item is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States and, in the case of a resident of a country which has a treaty with the United States, such item is attributable to a permanent establishment or, in the case of an individual, a fixed place of business, in the United States; or
|
·
|
The Non-U.S. Holder is an individual who holds the ordinary shares as a capital asset and is present in the United States for 183 days or more in the taxable year of the disposition and certain other requirements are met;
|
Year ended December 31,
|
U.S. dollar against NIS
|
U.S. dollar against Euro
|
||||||
2005
|
6.8 | % | 15.3 | % | ||||
2006
|
(8.2 | )% | (10.2 | )% | ||||
2007
|
(9.0 | )% | (10.5 | )% | ||||
2008
|
(1.1 | )% | 5.6 | % | ||||
2009
|
(0.7 | )% | (3.3 | )% | ||||
2010(1)
|
(1.4 | )% | (7.1 | )% |
·
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets,
|
·
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and
|
·
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
|
Year Ended December 31,
|
||||||||||||||||
2008
|
2009
|
|||||||||||||||
(US$ in thousands)
|
||||||||||||||||
Audit Fees
|
237 | 93 | % | 247 | 59 | % | ||||||||||
Audit-Related Fees
|
0 | 0 | % | 100 | 24 | % | ||||||||||
Tax Fees
|
17 | 7 | % | 73 | 17 | % | ||||||||||
All Other Fees
|
- | - | - | - | ||||||||||||
Total
|
254 | 100 | % | 420 | 100 | % |
RADWARE LTD. | |||
|
By:
|
/s/ Roy Zisapel | |
Roy Zisapel
|
|||
Chief Executive Officer
|
|||
Page
|
|
F-2 - F-3
|
|
F-4 - F-5
|
|
F-6
|
|
F-7
|
|
F-8
|
|
F-9 - F-37
|
Tel-Aviv, Israel
|
/s/ KOST FORER GABBAY & KASIERER
|
April 29, 2010
|
A Member of Ernst & Young Global
|
Tel-Aviv, Israel
|
/s/ KOST FORER GABBAY & KASIERER
|
April 29, 2010
|
A Member of Ernst & Young Global
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Revenues:
|
||||||||||||
Products
|
$ | 59,422 | $ | 59,678 | $ | 65,021 | ||||||
Services
|
29,209 | 34,903 | 43,883 | |||||||||
Total
revenues
|
88,631 | 94,581 | 108,904 | |||||||||
Cost of revenues:
|
||||||||||||
Products *)
|
13,133 | 15,143 | 16,609 | |||||||||
Services
|
5,895 | 6,431 | 6,666 | |||||||||
Total
cost of revenues
|
19,028 | 21,574 | 23,275 | |||||||||
Gross profit
|
69,603 | 73,007 | 85,629 | |||||||||
Operating expenses:
|
||||||||||||
Research and development
|
23,515 | 28,357 | 25,674 | |||||||||
Sales and marketing
|
57,977 | 63,591 | 55,130 | |||||||||
General and administrative
|
7,114 | 12,066 | 11,930 | |||||||||
Total
operating expenses
|
88,606 | 104,014 | 92,734 | |||||||||
Operating loss
|
(19,003 | ) | (31,007 | ) | (7,105 | ) | ||||||
Financial income, net
|
7,420 | 3,612 | 1,987 | |||||||||
Loss before taxes on income
|
(11,583 | ) | (27,395 | ) | (5,118 | ) | ||||||
Taxes on income
|
428 | 3,627 | 818 | |||||||||
Net loss
|
$ | (12,011 | ) | $ | (31,022 | ) | $ | (5,936 | ) | |||
Basic and diluted net loss per share
|
$ | (0.62 | ) | $ | (1.60 | ) | $ | (0.31 | ) |
*)
|
Include an impairment loss of $ 2,036 in the year ended December 31, 2008 with respect to acquired technology derived from the acquisition of Covelight. See also Note 2(i).
|
Number of
outstanding Ordinary
shares
|
Share
capital
|
Additional paid-in
capital
|
Treasury
stock, at cost
|
Accumulated
other comprehensive
income (loss)
|
Retained earnings (accumulated deficit)
|
Total
comprehensive loss
|
Total
|
|||||||||||||||||||||||||
Balance as of January 1, 2007
|
19,411,903 | $ | 478 | $ | 170,090 | $ | (11,049 | ) | $ | (242 | ) | $ | 23,137 | $ | 182,414 | |||||||||||||||||
Issuance of shares upon exercise of stock options
|
148,000 | 4 | 1,377 | - | - | - | 1,381 | |||||||||||||||||||||||||
Stock based compensation
|
- | - | 4,537 | - | - | - | 4,537 | |||||||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||||||
Unrealized gain from available-for-sale securities, net
|
- | - | - | - | 392 | - | $ | 392 | 392 | |||||||||||||||||||||||
Net loss
|
- | - | - | - | - | (12,011 | ) | (12,011 | ) | (12,011 | ) | |||||||||||||||||||||
Total comprehensive loss
|
$ | (11,619 | ) | |||||||||||||||||||||||||||||
Balance as of December 31, 2007
|
19,559,903 | 482 | 176,004 | (11,049 | ) | 150 | 11,126 | 176,713 | ||||||||||||||||||||||||
Repurchase of shares
|
(880,315 | ) | (24 | ) | - | (6,570 | ) | - | - | (6,594 | ) | |||||||||||||||||||||
Issuance of shares upon exercise of stock options
|
238,850 | 7 | 1,906 | - | - | - | 1,913 | |||||||||||||||||||||||||
Stock based compensation
|
- | - | 8,075 | - | - | - | 8,075 | |||||||||||||||||||||||||
Comprehensive income:
|
- | |||||||||||||||||||||||||||||||
Unrealized loss on available-for-sale securities, net
|
- | - | - | - | (1,023 | ) | - | $ | (1,023 | ) | (1,023 | ) | ||||||||||||||||||||
Net loss
|
- | - | - | - | - | (31,022 | ) | (31,022 | ) | (31,022 | ) | |||||||||||||||||||||
Total comprehensive loss
|
$ | (32,045 | ) | |||||||||||||||||||||||||||||
Balance as of December 31, 2008
|
18,918,438 | 465 | 185,985 | (17,619 | ) | (873 | ) | (19,896 | ) | 148,062 | ||||||||||||||||||||||
Repurchase of shares
|
(68,787 | ) | (2 | ) | - | (417 | ) | - | - | (419 | ) | |||||||||||||||||||||
Issuance of shares upon exercise of stock options
|
66,950 | 2 | 1,016 | - | - | - | 1,018 | |||||||||||||||||||||||||
Stock based compensation
|
- | - | 4,041 | - | - | - | 4,041 | |||||||||||||||||||||||||
Tax benefit related to exercise of stock options
|
- | - | 899 | - | - | - | 899 | |||||||||||||||||||||||||
Comprehensive income:
|
- | - | - | - | - | - | ||||||||||||||||||||||||||
Unrealized gain on available-for-sale securities, net
|
- | - | - | - | 1,808 | - | $ | 1,808 | 1,808 | |||||||||||||||||||||||
Net loss
|
- | - | - | - | - | (5,936 | ) | (5,936 | ) | (5,936 | ) | |||||||||||||||||||||
Total comprehensive loss
|
$ | (4,128 | ) | |||||||||||||||||||||||||||||
Balance as of December 31, 2009
|
18,916,601 | $ | 465 | $ | 191,941 | $ | (18,036 | ) | $ | 935 | $ | (25,832 | ) | $ | 149,473 |
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net loss
|
$ | (12,011 | ) | $ | (31,022 | ) | $ | (5,936 | ) | |||
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
||||||||||||
Depreciation and amortization
|
5,056 | 6,073 | 9,794 | |||||||||
Impairment of acquired technology
|
- | 2,036 | - | |||||||||
Gain on sale of property and equipment
|
- | (8 | ) | - | ||||||||
Stock based compensation
|
4,537 | 8,075 | 4,041 | |||||||||
Amortization of premiums, accretion of discounts and accrued interest on available-for-sale marketable securities, net
|
(3,485 | ) | 588 | 1,765 | ||||||||
Accrued interest on bank deposits and structured deposit
|
(634 | ) | 236 | (130 | ) | |||||||
Accrued severance pay, net
|
402 | 412 | (703 | ) | ||||||||
Decrease (increase) in long-term deferred tax assets
|
(60 | ) | 594 | 1 | ||||||||
Decrease (increase) in trade receivables, net
|
323 | 3,844 | (3,255 | ) | ||||||||
Decrease (increase) in other current assets and prepaid expenses
|
(1,192 | ) | 1,149 | (888 | ) | |||||||
Decrease (increase) in inventories
|
1,493 | (1,284 | ) | (561 | ) | |||||||
Increase (decrease) in trade payables
|
581 | (2,891 | ) | 1,053 | ||||||||
Increase in deferred revenues
|
2,683 | 647 | 8,301 | |||||||||
Increase in other payables and accrued expenses
|
1,182 | 1,825 | 1,844 | |||||||||
Excess tax benefit from stock-based compensation
|
- | - | (899 | ) | ||||||||
Net cash provided by (used in) operating activities
|
(1,125 | ) | (9,726 | ) | 14,427 | |||||||
Cash flows from investing activities:
|
||||||||||||
Purchase of property and equipment
|
(6,747 | ) | (4,645 | ) | (5,837 | ) | ||||||
Proceeds from sale of property and equipment
|
- | 10 | - | |||||||||
Investment in other long-term assets, net
|
(15 | ) | (48 | ) | (36 | ) | ||||||
Investment in bank deposits
|
- | - | (35,000 | ) | ||||||||
Purchase of available-for-sale marketable securities
|
(67,121 | ) | (161,706 | ) | (405,827 | ) | ||||||
Proceeds from redemption and maturity of available-for-sale marketable securities
|
94,237 | 137,485 | 440,575 | |||||||||
Proceeds from redemption of held-to-maturity marketable debt securities
|
22,735 | - | - | |||||||||
Proceeds from structured deposit
|
- | 10,000 | - | |||||||||
Payment for the acquisition of Covelight
|
(7,293 | ) | - | - | ||||||||
Payment for the acquisition of Alteon
|
- | - | (18,022 | ) | ||||||||
|
||||||||||||
Net cash provided by (used in) investing activities
|
35,796 | (18,904 | ) | (24,147 | ) | |||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from exercise of stock options
|
1,381 | 1,913 | 1,018 | |||||||||
Excess tax benefit from stock-based compensation
|
- | - | 899 | |||||||||
Repurchase of shares
|
- | (6,594 | ) | (419 | ) | |||||||
Net cash provided by (used in) financing activities
|
1,381 | (4,681 | ) | 1,498 | ||||||||
Increase (decrease) in cash and cash equivalents
|
36,052 | (33,311 | ) | (8,222 | ) | |||||||
Cash and cash equivalents at the beginning of the year
|
25,324 | 61,376 | 28,065 | |||||||||
Cash and cash equivalents at the end of the year
|
$ | 61,376 | $ | 28,065 | $ | 19,843 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid during the year for income taxes
|
$ | 731 | $ | 743 | $ | 383 | ||||||
Supplemental disclosure of non cash investing and financing activities:
|
||||||||||||
Net change in unrealized gain (loss) on marketable securities
|
$ | 392 | $ | (1,023 | ) | $ | 1,808 |
NOTE 1:-
|
GENERAL
|
|
a.
|
Radware Ltd. ("the Company"), an Israeli corporation commenced operations in April 1997. The Company and its subsidiaries ("the Group") are engaged in the development, manufacture and sale of Application Delivery solutions that provide end-to-end availability, performance and security of business-critical network applications. The Company's products are marketed worldwide.
|
|
b.
|
The Company established wholly-owned subsidiaries in the United States, France, Germany, Singapore, the United Kingdom, Japan, Korea, Canada, India, Australia and Italy. In addition, the Company established branches and representative offices in China, Russia and Taiwan. The Company's subsidiaries are engaged primarily in sales, marketing and support activities.
|
|
c.
|
The Company depends on three major suppliers to supply certain components for the production of its products. If one of these suppliers fails to deliver or delays the delivery of the necessary components, the Company will be required to seek alternative sources of supply. A change in suppliers could result in manufacturing delays, which could cause a possible loss of sales and, consequently, could adversely affect the Company's results of operations and financial position.
|
|
d.
|
The Company relies upon independent distributors (which are considered to be end-users) to market and sell its products to customers. A loss of a major distributor, or any event negatively affecting such distributor's financial condition, could cause an adverse effect on the Company's results of operations and financial position. For the years ended December 31, 2007, 2008 and 2009, no single customer (a distributor) represented more than 10% of the Company's total revenues.
|
|
e.
|
Business combination - acquisition of Covelight Inc. ("Covelight"):
In April 2007, the Company acquired the business of Covelight which included the acquisition of its working capital, property and equipment, technology, customer relationships and goodwill. The Company's management believed that the complementary solution of Covelight would provide the Company with advantage over the competitors in this market and the purpose of the acquisition was to integrate Covelight solution into the Company's product offering. The total consideration of the acquisition was $ 7,660 which was paid in cash of which $ 160 was related to acquisition costs.
An additional cash consideration of $ 8,500 ("earn-out") was to be payable contingent upon reaching sales performance targets by April 2008. Since the sales targets were not achieved, the Company was not required to pay the additional earn-out amount. Accordingly, the total final consideration of the acquisition amounted to $ 7,660.
The purchase price was allocated to the identifiable intangible assets acquired (which have been valued by management and assisted by a third party valuator specialist) based upon their estimated fair values as follows:
|
NOTE 1:-
|
GENERAL (Cont.)
|
|
|
The purchase price was allocated to the identifiable intangible assets acquired (which have been valued by management and assisted by a third party valuator specialist) based upon their estimated fair values as follows:
|
Working capital *)
|
$ | 246 | ||
Property and equipment
|
28 | |||
Total
tangible assets
|
274 | |||
Acquired technology
|
3,191 | |||
Customer relationships
|
175 | |||
Goodwill (not tax deductable)
|
4,020 | |||
Total
intangible assets
|
7,386 | |||
Total
consideration
|
$ | 7,660 |
|
|
*) Working capital includes $ 367 of cash and cash equivalents.
The acquisition of Covelight was accounted for under the purchase method of accounting.
|
|
f.
|
Business combination - acquisition of Alteon:
On March 31, 2009, the Company acquired from Nortel Networks Ltd., Nortel Networks Inc. and other Nortel entities ("Nortel") certain assets and liabilities related to Nortel's Layer 4-7 Application Delivery Business ("Alteon"). The main reason for this acquisition was to increase the Company's installed products customer base. The total consideration of the acquisition was $ 18,022.
In addition the Company incurred acquisition related costs in a total amount of $ 2,485, which are included in general and administrative expenses for the year 2009. Acquisition related costs include investment banking fees, legal and accounting fees and other external costs directly related to the acquisition.
Under business combination accounting the purchase price was allocated to the identifiable intangible assets acquired and liabilities assumed based upon their estimated fair values as follows:
|
Inventory
|
$ | 2,519 | ||
Property and equipment
|
181 | |||
Intangible assets
|
16,241 | |||
Total identifiable assets acquired
|
18,941 | |||
Warranty provision
|
(1,600 | ) | ||
Deferred revenues
|
(10,310 | ) | ||
Total liabilities assumed
|
(11,910 | ) | ||
Goodwill (tax deductable)
|
10,991 | |||
Total consideration
|
$ | 18,022 |
NOTE 1:-
|
GENERAL (Cont.)
|
|
|
Intangible Assets
In performing the purchase price allocation, the Company considered, among other factors, analyses of historical financial performance, highest and best use of the acquired assets and estimates of future performance of Alteon's products. The fair value of intangible assets was determined by management, based on market participant approach to valuation performed by a third party valuation firm using an income approach and based on estimates and assumptions provided by management. The following table sets forth the components of intangible assets associated with the acquisition:
|
Fair value
|
Useful life
|
|||||||
Customer relationships
|
$ | 6,911 |
5.8 years
|
|||||
Brand name
|
832 |
5.8 years
|
||||||
Core technology
|
5,639 |
4.8 years
|
||||||
In-Process research and development
|
2,859 | (*) | ||||||
Total intangible assets
|
$ | 16,241 |
|
(*)
|
Will be determined upon completion of development
|
|
|
Customer relationships represent the underlying relationships and agreements with Alteon installed customer base.
Brand name value represents the recognition value of Alteon brand name as a result of advertising expenditures for customer relations.
Core technology represents a combination of Alteon processes, patents and trade secrets related to the design and development of its products. This proprietary know-how can be leveraged to develop new technology and improve the Company's products.
In-process research and development represents incomplete Alteon research and development projects that had not reached technological feasibility as of the date of the acquisition.
The following unaudited condensed combined pro forma information for the years ended December 31, 2008 and 2009, gives effect to the acquisition of Alteon Business as if the acquisition had occurred on January 1, of each year. The pro forma information is not necessarily indicative of the results of operations, which actually would have occurred had the acquisitions been consummated on that date, nor does it purport to represent the results of operations for future periods. For the purposes of the pro forma information, the Company has assumed that, net loss includes additional amortization of intangible assets related to the acquisition of $3,705 and $928 in 2008 and 2009 respectively.
|
Year ended December 31,
|
||||||||
2008
|
2009
|
|||||||
Unaudited
|
||||||||
Total consolidated
|
||||||||
Revenues
|
$ | 141,331 | $ | 115,951 | ||||
Net loss
|
$ | (7,562 | ) | $ | (3,187 | ) | ||
Basic and diluted net loss per share
|
$ | (0.39 | ) | $ | (0.17 | ) |
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP").
|
|
a.
|
Use of estimates:
|
|
b.
|
Financial statements in United States dollars:
|
|
c.
|
Principles of consolidation:
|
|
d.
|
Cash equivalents:
|
|
e.
|
Bank deposits:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
f.
|
Investment in marketable securities:
|
|
g.
|
Inventories:
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
h.
|
Property and equipment:
|
|
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over the estimated useful lives of the assets at the following annual rates:
|
%
|
|
Computer, peripheral equipment and software
|
15 - 33 (mainly 33 )
|
Office furniture and equipment
|
7 - 15 (mainly 15)
|
Motor vehicles
|
15
|
Leasehold improvements
|
Over the shorter of the term of
the lease or the life of the asset
|
|
i.
|
Impairment of long lived assets and intangible assets subject to amortization:
Property and equipment and intangible assets subject to amortization are reviewed for impairment in accordance with ASC No. 360, "Accounting for the Impairment or Disposal of Long-Lived Assets," whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of December 31, 2007, 2008 and 2009, no impairment losses have been identified.
Intangible assets acquired in a business combination are recorded at fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets that are not considered to have an indefinite useful life are amortized over their estimated useful lives, which range from 1 to 7 years. Some of the acquired customer arrangements are amortized over their estimated useful lives in proportion to the economic benefits realized. This accounting policy results in accelerated amortization of such customer arrangements as compared to the straight-line method. All other intangible assets are amortized over their estimated useful lives on a straight-line basis.
In determining the fair values of long-lived assets for purpose of measuring impairment, starting in 2009, the Company's assumptions include those that market participants will consider in valuations of similar assets.
During 2008, the Company's management has assessed whether there has been an impairment of the Company's intangible assets. This was undertaken due to certain indicators of impairment such as declines in the Company's market capitalization below its shareholders equity, the current credit crisis, the global recession and since actual revenues derived from Covelight technology were significantly lower comparing to the management forecasts estimations as of the date of acquisition. Impairment is considered to exist if total estimated future cash flows on an undiscounted basis are less than the carrying value of the asset or asset group tested for impairment.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
|
In performing that test, the Company's management estimated the sum of the undiscounted future cash-flows, expected to be derived from its asset groups with the existing intangible assets of acquired technology and customer relationship acquired from V-secure and Covelight, in order to test their recoverability. The Company's management used significant assumptions and estimates, including but not limited to projected future revenues and cash flows, growth rates and market share, future gross margins and operating results, future working capital and future capital expenditures. The assumptions developed by the Company's management were based upon historical trends, estimates of future economic conditions and expected competition and the Company's strategic plans. In performing the above analysis and tests, the Company's management developed the required assumptions and the related forecasts underlying the valuation, and was assisted by a third party valuator in applying the customary valuation techniques and required economic models.
The analysis showed that the sum of the undiscounted cash-flow derived from the asset group of technology acquired from Covelight is lower than its carrying amount and accordingly the Company's management was required to perform an analysis of discounted cash flows of the asset group, in order to determine its fair value. Based on such analysis the Company recorded an impairment loss in the amount of $ 2,036. The impairment loss was recorded as part of cost of revenues.
During 2007 and 2009, no impairment loss was recorded.
|
|
j.
|
Goodwill:
Goodwill reflects the excess of the purchase price of business acquired over the fair value of net assets acquired. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.
In accordance with ASC No. 350 the Company performs an annual impairment test at December 31 each year. Goodwill is tested for impairment by comparing the estimated fair value of the Company as an entity with the carrying amounts of its total net assets. Fair value was determined using market comparables and multiples, and by applying a control premium based on market comparables. The Company operates in one operating segment, and this segment comprises its only reporting unit. During the years ended December 31, 2007, 2008 and 2009, no impairment losses were recorded.
|
|
k.
|
Revenue recognition:
The Company and its subsidiaries generate revenues mainly from selling their products and from post-contract customer support, which are sold primarily through distributors and resellers, all of which are considered end-users.
Revenues from product sales are recognized in accordance with ASC No. 605, "Revenue Recognition" when delivery has occurred, persuasive evidence of an agreement exists, the vendor's fee is fixed or determinable, no further obligation exists and collectability is probable.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
|
Revenues in arrangements with multiple deliverables are recognized under the "residual method" when Vendor Specific Objective Evidence ("VSOE") of fair value exists for all undelivered elements and all other revenue recognition criteria are satisfied. VSOE for post-contract customer support is determined based on the price when such element is sold separately for similar products. The price may vary in the territories and vertical markets in which the Company conducts business. Price is determined by using a consistent percentage of the Company's product price lists.
Revenue derived from post-contract customer support, which represents mainly unit replacement and security update service is recognized ratably over the contract period, which is typically one year to three years.
The Company records a provision for estimated sale returns and stock rotation granted to customers on products in the same period the related revenues are recorded in accordance with ASC No. 605. These estimates are based on historical sales returns, stock rotations and other known factors. Such provisions amounted to $ 2,211 and $ 2,085 as of December 31, 2008 and 2009, respectively.
Deferred revenue includes unearned amounts received under post-contract customer support.
|
|
l.
|
Shipping and Handling:
Shipping and handling fees charged to the Company's customers are recognized as product revenue in the period shipped and the related costs for providing these services are recorded as a cost of sale.
|
|
m.
|
Cost of revenues:
Cost of products is comprised of cost of software and hardware production, manuals, packaging, license fees paid to third parties and amortization of acquired technology.
Cost of services is comprised of cost of post sale customer support.
|
|
n.
|
Warranty costs:
The Company generally provides a one year warranty for all of its products. A provision is recorded for estimated warranty costs at the time revenues are recognized based on the Company's experience. Warranty expenses for the years ended December 31, 2007, 2008 and 2009 were immaterial.
|
|
o.
|
Research and development expenses:
Research and development expenses are charged to the statement of operations, as incurred.
|
|
p.
|
Advertising expenses:
Advertising expenses are charged to the statements of operations as incurred. Advertising expenses for the years ended December 31, 2007, 2008 and 2009, amounted to approximately $ 828, $ 267 and $ 254, respectively.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
q.
|
Accounting for stock-based compensation:
The Company accounts for stock-based compensation in accordance with ASC No. 718, "Compensation-Stock Compensation". ASC No. 718 requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statement of operations.
The Company recognizes compensation expenses for the value of its awards based on the accelerated attribution method over the requisite service period of each of the awards, net of estimated forfeitures. ASC No. 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Estimated forfeitures are based on actual historical pre-vesting forfeitures.
The Company selected the Black-Scholes-Merton option pricing model to account for the fair value of its stock-options, awards with only service conditions based on the market value of the underlying shares at the date of grant. The option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility was calculated based upon actual historical stock price movements over an historical period equivalent to the option's expected term. The expected option term represents the period of time that options granted are expected to be outstanding. Expected term of options granted is based upon historical experience. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends. The Company uses other models, such as the lattice model, only in case of grants having complex vesting terms such as market condition.
|
|
r.
|
Income taxes:
The Company accounts for income taxes in accordance with ASC No. 740, "Income Taxes". This statement prescribes the use of the liability method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company and its subsidiaries provide a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value if it is more likely than not that a portion or all of the deferred tax assets will not be realized.
Deferred tax liabilities and assets are classified as current or non current based on the classification of the related asset or liability for financial reporting, or according to the expected reversal dates of the specific temporary differences if not related to an asset or liability for financial reporting.
ASC 740 contains a two-step approach to recognizing and measuring a liability for uncertain tax positions. The first step is to evaluate the tax position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon ultimate settlement. The Company accrues interest related to unrecognized tax benefits in its taxes on income.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
s.
|
Concentrations of credit risks:
Financial instruments that potentially subject the Company and its subsidiaries to concentrations of credit risk consist principally of cash and cash equivalents, bank deposits, available-for-sale marketable securities and trade receivables.
The majority of the Company's and its subsidiaries' cash and cash equivalents and bank deposits are invested in major banks in the United States in U.S. dollars. Such investments in the United States may be in excess of insured limits and are not insured in other jurisdictions. Generally, these cash equivalents may be redeemed upon demand and, therefore management believes that it bear lower risk.
The Company's marketable securities include investments in U.S. government debentures, foreign banks and government debentures and corporate debentures. The Company's investment policy limits the amount the Company may invest in each type of investment, thereby reducing credit risk concentration.
The trade receivables of the Company and its subsidiaries are mainly derived from sales to customers located primarily in the United States, Europe, the Middle East, Africa and Asia Pacific. The Company performs ongoing credit evaluations of its customers. An allowance for doubtful accounts is determined with respect to those amounts that the Company has determined to be doubtful of collection. In certain circumstances, the Company may require from its customers letters of credit, other collateral or additional guarantees. Bad debt expenses for the years ended December 31, 2007, 2008 and 2009 were $ 94, $ 0 and $ 0, respectively. Total write offs during 2007, 2008 and 2009 amounted to $ 0, $ 706 and $ 0, respectively.
|
|
t.
|
Severance pay:
The Company's liability for severance pay for periods prior to April 1, 2007 is calculated pursuant to Israeli severance pay law based on the most recent salary of the employees multiplied by the number of years of employment as of the balance sheet date. The Company recorded as expenses the increase in the severance liability, net of earnings (losses) from the related investment fund. Employees were entitled to one month's salary for each year of employment, or a portion thereof. Until April 1, 2007, the Company's liability is partially funded by monthly payments deposited with insurers; any unfunded amounts would be paid from operating funds and are covered by a provision established by the Company.
The carrying value of the deposited funds for the Company's employees' severance pay for employment periods prior to April 1, 2007 include profits and losses accumulated up to the balance sheet date. The deposited funds may be withdrawn only upon the fulfillment of the obligation pursuant to Israeli severance pay law or labor agreements.
Effective April 1, 2007, the Company's agreements with employees in Israel, in accordance with section 14 of the Severance Pay Law - 1963, provide that the Company's contributions to severance pay fund shall cover its entire severance obligation with respect to period of employment subsequent to April 1, 2007. Upon termination, the release of the contributed amounts from the fund to the employee shall relieve the Company from any further severance obligation and no additional payments shall be made by the Company to the employee. As a result, the related obligation and amounts deposited on behalf of such obligation are not stated on the balance sheet, as the Company is legally released from severance obligation to employees once the amounts have been deposited, and the Company has no further legal ownership on the amounts deposited. Consequently, effective from April 1, 2007, the Company increased its contribution to the deposited funds to cover the full amount of the employees' salaries.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
|
Severance pay expenses for the years ended December 31, 2007, 2008 and 2009 amounted to approximately $ 965, $ 1,824 and $941, respectively.
|
|
u.
|
Fair value of financial instruments:
The Company measures its cash equivalents and marketable securities at fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:
|
|
Level 1
|
-
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
Level 2
|
-
|
Include other inputs that are directly or indirectly observable in the marketplace.
|
|
Level 3
|
-
|
Unobservable inputs which are supported by little or no market activity.
|
|
|
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. (See also Note 4).
|
|
v.
|
Comprehensive income:
The Company accounts for comprehensive income in accordance with ASC No. 220, "Comprehensive Income". This statement establishes standards for the reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Comprehensive income generally represents all changes in shareholders' equity during the period except those resulting from investments by, or distributions to shareholders. The Company's items of other comprehensive income relates to unrealized gains and losses on available for sale marketable debt securities.
|
|
w.
|
Treasury stock:
From time to time the Company repurchases its Ordinary shares on the open market or in other transactions and holds such shares as treasury stock. The Company presents the cost to repurchase treasury stock as a reduction of shareholders' equity.
|
|
x.
|
Basic and diluted net loss per share:
Basic net loss per share is computed based on the weighted average number of Ordinary shares outstanding during each period. Diluted net loss per share is computed based on the weighted average number of Ordinary shares outstanding during each period, plus dilutive potential Ordinary shares considered outstanding during the period, in accordance with ASC No. 260, "Earnings Per Share".
The weighted average number of shares related to outstanding anti dilutive options excluded from the calculation of diluted loss per share as they would have been anti dilutive was 4,704,129, 4,313,072 and 4,700,050 for the years ended December 31, 2007, 2008 and 2009, respectively.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
|
y.
|
Impact of recently issued accounting pronouncements:
In June 2009, the Financial Accounting Standards Board ("FASB") issued a standard that established the FASB Accounting Standards Codification ("ASC") and amended the hierarchy of generally accepted accounting principles ("GAAP") such that the ASC became the single source of authoritative U.S. GAAP. Rules and interpretive releases issued by the SEC under authority of federal securities law are also sources of the authoritative GAAP for SEC registrants. All other literature is considered non-authoritative. New accounting standards issued subsequent to June 30, 2009 are communicated by the FASB through Accounting Standards Updates ("ASUs"). The ASC is effective for the Company from September 1, 2009. Throughout the notes to the consolidated financial statements references that were previously made to former authoritative U.S. GAAP pronouncements have been changed to coincide with the appropriate section of the ASC.
In December 2007, the FASB issued authoritative guidance on business combinations. The guidance significantly changes the accounting for business combinations and establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquiree and recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase. Among the more significant changes, acquired in-process research and development will be capitalized and upon completion amortized over its useful life; acquisition costs will be expensed as incurred; restructuring costs will generally be expensed in periods after the acquisition date; contingent consideration will be recognized at fair value at the acquisition date with subsequent changes recognized in earnings, and reductions in deferred tax valuation allowance relating to a business acquisition will be recognized in earnings. In April 2009, the FASB issued an amendment to the revised business combination guidance regarding the accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies. This guidance was adopted by the Company for business combinations for which the acquisition date is on or after January 1, 2009.
In October 2009, the FASB issued an update to ASC 605-25, "Revenue recognition – Multiple-Element Arrangements", that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements to; (1)Provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated; (2)Require an entity to allocate revenue in an arrangement using estimated selling prices ("ESP") of deliverables if a vendor does not have vendor-specific objective evidence of selling price ("VSOE") or third-party evidence of selling price ("TPE"); (3)Eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method; and (4)Require expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance.
The mandatory adoption is on January 1, 2011, however early adoption is permitted. The Company may elect to adopt the update prospectively, to new or materially modified arrangements beginning on the adoption date, or retrospectively, for all periods presented. The Company is currently evaluating the impact on its consolidated results of operations and financial condition, and whether it will early adopt.
|
NOTE 3:-
|
MARKETABLE SECURITIES
Marketable securities with contractual maturities of less than one year are as follows:
|
December 31,
|
||||||||||||||||||||||||||||||||
2008
|
2009
|
|||||||||||||||||||||||||||||||
Amortized
|
Gross unrealized
|
Gross unrealized
|
Market
|
Amortized
|
Gross unrealized
|
Gross unrealized
|
Market
|
|||||||||||||||||||||||||
cost
|
losses
|
gains
|
value
|
cost
|
losses
|
gains
|
Value
|
|||||||||||||||||||||||||
U.S. Government debentures
|
$ | 20,384 | $ | - | $ | - | $ | 20,384 | $ | 2,543 | $ | - | $ | 24 | $ | 2,567 | ||||||||||||||||
Foreign banks and government debentures
|
22,173 | (175 | ) | 50 | 22,048 | 22,618 | (2 | ) | 323 | 22,939 | ||||||||||||||||||||||
Corporate debentures
|
18,284 | (73 | ) | 88 | 18,299 | 3,605 | - | 6 | 3,611 | |||||||||||||||||||||||
Total
available-for-sale marketable securities
|
$ | 60,841 | $ | (248 | ) | $ | 138 | $ | 60,731 | $ | 28,766 | $ | (2 | ) | $ | 353 | $ | 29,117 |
|
Marketable securities with contractual maturities from one to three years are as follows:
|
December 31,
|
||||||||||||||||||||||||||||||||
2008
|
2009
|
|||||||||||||||||||||||||||||||
Amortized
|
Gross unrealized
|
Gross unrealized
|
Market
|
Amortized
|
Gross unrealized
|
Gross unrealized
|
Market
|
|||||||||||||||||||||||||
cost
|
losses
|
gains
|
value
|
cost
|
Losses
|
gains
|
Value
|
|||||||||||||||||||||||||
U.S. Government debentures
|
$ | 1,020 | $ | - | $ | 35 | $ | 1,055 | $ | 7,052 | $ | - | $ | 14 | $ | 7,066 | ||||||||||||||||
Foreign banks and government debentures
|
34,353 | (925 | ) | 138 | 33,566 | 21,251 | (17 | ) | 391 | 21,625 | ||||||||||||||||||||||
Corporate debentures
|
10,502 | (75 | ) | 64 | 10,491 | 13,133 | - | 197 | 13,330 | |||||||||||||||||||||||
Total
available-for-sale marketable securities
|
$ | 45,875 | $ | (1,000 | ) | $ | 237 | $ | 45,112 | $ | 41,436 | $ | (17 | ) | $ | 602 | $ | 42,021 |
|
Investments with continuous unrealized losses for less than 12 months and 12 months or greater and their related fair values were as follows:
|
December 31, 2009
|
||||||||||||||||||||||||
Investments with
continuous unrealized
losses for less than
12 months
|
Investments with
continuous unrealized
losses for 12 months
or greater
|
Total investments with
continuous unrealized losses
|
||||||||||||||||||||||
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
|||||||||||||||||||
Foreign banks and government debentures
|
$ | 3,095 | $ | (19 | ) | $ | - | $ | - | $ | 3,095 | $ | (19 | ) | ||||||||||
Total available-for-sale marketable securities
|
$ | 3,095 | $ | (19 | ) | $ | - | $ | - | $ | 3,095 | $ | (19 | ) |
NOTE 3:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
December 31, 2008
|
||||||||||||||||||||||||
Investments with
continuous unrealized
losses for less than
12 months
|
Investments with
continuous unrealized
losses for 12 months
or greater
|
Total investments with
continuous unrealized losses
|
||||||||||||||||||||||
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
Fair
value
|
Unrealized losses
|
|||||||||||||||||||
Foreign banks and government debentures
|
$ | 40,337 | $ | (1,060 | ) | $ | 2,197 | $ | (40 | ) | $ | 42,534 | $ | (1,100 | ) | |||||||||
Corporate debentures
|
12,504 | (148 | ) | - | - | 12,504 | (148 | ) | ||||||||||||||||
Total available-for-sale marketable securities
|
$ | 52,841 | $ | (1,208 | ) | $ | 2,197 | $ | (40 | ) | $ | 55,038 | $ | (1,248 | ) |
|
As of December 31, 2008 and 2009, interest receivable amounted to $ 1,383 and $ 977, respectively, and is included within available for sale marketable securities in the balance sheets.
|
NOTE 4:-
|
FAIR VALUE MEASUREMENTS
In accordance with ASC 820, the Company measures its cash equivalents, bank deposits and available for sale marketable securities at fair value on recurring basis. Cash equivalents, bank deposits and marketable securities are classified within Level 1 or Level 2. This is because these assets are valued using quoted market prices or alternative pricing sources and models utilizing market observable inputs.
The Company's financial assets measured at fair value on a recurring basis, including accrued interest components consisted of the following types of instruments as of December 31, 2009 and December 31, 2008:
|
December 31, 2009
|
||||||||||||||||
Fair value measurements using input type
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash equivalents:
|
||||||||||||||||
Money market funds
|
$ | 2,613 | $ | - | $ | - | $ | 2,613 | ||||||||
Bank deposits
|
- | 35,130 | - | 35,130 | ||||||||||||
Available-for-sale:
|
||||||||||||||||
U.S. Government debentures
|
- | 9,632 | - | 9,632 | ||||||||||||
Foreign banks and government debentures
|
- | 44,565 | - | 44,565 | ||||||||||||
Corporate debentures
|
- | 16,941 | - | 16,941 | ||||||||||||
Total financial assets
|
$ | 2,613 | $ | 106,268 | $ | - | $ | 108,881 |
NOTE 4:-
|
FAIR VALUE MEASUREMENTS (Cont.)
|
December 31, 2008
|
||||||||||||||||
Fair value measurements using input type
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Cash equivalents:
|
||||||||||||||||
Money market funds
|
$ | 3,857 | $ | - | $ | - | $ | 3,857 | ||||||||
Available-for-sale:
|
||||||||||||||||
U.S. Government debentures
|
- | 21,439 | - | 21,439 | ||||||||||||
Foreign banks and government debentures
|
- | 55,614 | - | 55,614 | ||||||||||||
Corporate debentures
|
- | 28,790 | - | 28,790 | ||||||||||||
Total financial assets
|
$ | 3,857 | $ | 105,843 | $ | - | $ | 109,700 |
NOTE 5:-
|
INVENTORIES
Inventories are comprised of the following:
|
December 31,
|
||||||||
2008
|
2009
|
|||||||
Raw materials and components
|
$ | 564 | $ | 1,132 | ||||
Work-in-progress
|
1,550 | 2,694 | ||||||
Finished products
|
4,598 | 5,966 | ||||||
$ | 6,712 | $ | 9,792 |
NOTE 6:-
|
PROPERTY AND EQUIPMENT, NET
|
December 31,
|
||||||||
2008
|
2009
|
|||||||
Cost:
|
||||||||
Computer, peripheral equipment and software
|
$ | 25,794 | $ | 30,867 | ||||
Office furniture and equipment
|
3,161 | 3,240 | ||||||
Motor vehicles
|
12 | 12 | ||||||
Leasehold improvements
|
1,274 | 2,140 | ||||||
30,241 | 36,259 | |||||||
Accumulated depreciation:
|
||||||||
Computer, peripheral equipment and software
|
16,102 | 22,077 | ||||||
Office furniture and equipment
|
1,774 | 2,017 | ||||||
Motor vehicles
|
9 | 11 | ||||||
Leasehold improvements
|
663 | 934 | ||||||
18,548 | 25,039 | |||||||
Property and equipment, net
|
$ | 11,693 | $ | 11,220 |
|
Depreciation expenses for the years ended December 31, 2007, 2008 and 2009 were $ 3,811, $ 5,167 and $ 6,491 respectively.
|
NOTE 7:-
|
GOODWILL AND INTANGIBLE ASSETS, NET
|
|
a.
|
Goodwill:
Changes in goodwill for the years ended December 31, 2008 and 2009 are as follows:
|
December 31,
|
||||||||
2008
|
2009
|
|||||||
Goodwill at beginning of year
|
$ | 13,474 | $ | 13,474 | ||||
Acquisition of Alteon
|
- | 10,991 | ||||||
Goodwill at end of year
|
$ | 13,474 | $ | 24,465 |
|
b.
|
Intangible assets:
|
Weighted
|
||||||||||||
average
|
||||||||||||
amortization
|
December 31,
|
|||||||||||
period
|
2008
|
2009
|
||||||||||
(years)
|
||||||||||||
Cost:
|
||||||||||||
Acquired technology
|
6 - 7 | $ | 4,963 | $ | 8,566 | |||||||
In process research and development
|
**) | - | 2,859 | |||||||||
Customers relationships and brand name
|
Mainly 6
|
1,364 | 9,107 | |||||||||
6,327 | 20,532 | |||||||||||
Accumulated amortization:
|
||||||||||||
Acquired technology
|
1,648 | 3,024 | ||||||||||
Customers relationships and brand name
|
787 | 2,714 | ||||||||||
2,435 | 5,738 | |||||||||||
Impairment *)
|
2,036 | - | ||||||||||
Intangible assets, net
|
$ | 1,856 | $ | 14,794 |
|
|
Amortization expenses for the years ended December 31, 2007, 2008 and 2009 were $ 931, $ 906 and $ 3,303, respectively.
|
|
*)
|
The Company recorded in 2008 an impairment loss of $ 2,036 with respect to acquired technology derived from the acquisition of Covelight, see also Note 2(i).
|
|
**)
|
Will be determined upon completion of development
|
|
Future estimated amortization expenses for the years ending:
|
December 31,
|
||||
2010
|
3,739 | |||
2011
|
3,200 | |||
2012
|
2,386 | |||
2013 and thereafter
|
2,610 | |||
Total
|
11,935 |
NOTE 8:-
|
OTHER PAYABLES AND ACCRUED EXPENSES
|
December 31,
|
||||||||
2008
|
2009
|
|||||||
Employees and payroll accruals
|
$ | 4,974 | $ | 6,250 | ||||
Accrued expenses
|
2,224 | 2,991 | ||||||
Governmental authorities
|
2,489 | 2,015 | ||||||
Advances from customers
|
- | 506 | ||||||
Warranty provision
|
181 | 651 | ||||||
$ | 9,868 | $ | 12,413 |
NOTE 9:-
|
COMMITMENTS AND CONTINGENT LIABILITIES
|
|
a.
|
Lease commitments:
The facilities of the Company and its subsidiaries are leased under various operating lease agreements, which expire on various dates, the latest of which is on September 30, 2013. Aggregate minimum rental payments under non-cancelable operating leases as of December 31, 2009, are as follows:
|
December 31,
|
||||
2010
|
2,572 | |||
2011
|
1,629 | |||
2012
|
974 | |||
2013
|
26 | |||
5,201 |
|
|
Total rent expenses for the years ended December 31, 2007, 2008 and 2009 were approximately $ 2,838, $ 3,571 and $ 3,514, respectively (see also Note 15b).
|
|
b.
|
Litigation:
|
|
1.
|
In December 2001, the Company, its Chairman Yehuda Zisapel, its President, Chief Executive Officer and Director Roy Zisapel and its Chief Financial Officer Meir Moshe (the "Individual Defendants") and several underwriters in the syndicates for the Company's September 30, 1999 initial public offering and January 24, 2000 secondary offering, were named as defendants in a class action complaint alleging violations of the federal securities laws in the United States District Court for the Southern District of New York (the "district court"). The complaint sought unspecified damages as a result of alleged violations of Section 11 of the Securities Act of 1933, as amended (the "Securities Act") against all the defendants and Section 15 of the Securities Act against the Individual Defendants arising from activities purportedly engaged in by the underwriters in connection with the Company's initial public offering and secondary offering. Plaintiffs allege that the underwriter defendants agreed to allocate stock in the Company's initial public offering and secondary offering to certain investors in exchange for excessive and undisclosed commissions and agreements by those investors to make additional purchases of stock in the aftermarket at pre-determined prices. An amended complaint filed on April 19, 2002, which is now the operative complaint, added a claim under Section 10(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") against the Company and a claim under Section 20(a) of the Exchange Act against the Individual Defendants.
|
NOTE 9:-
|
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
|
|
Plaintiffs allege that the prospectuses for the Company's initial public offering and secondary offering were false and misleading because they did not disclose these arrangements. The action is being coordinated with approximately three hundred other nearly identical actions filed against other companies before one judge in the district court. On October 9, 2002, the Court dismissed the Individual Defendants from the case without prejudice. This dismissal disposed of the Section 15 and 20(a) control person claims without prejudice, since these claims were asserted only against the Individual Defendants.
On December 5, 2006, the United States Court of Appeals for the Second Circuit (the "Second Circuit") vacated a decision by the district court granting class certification in six "focus" cases, which are intended to serve as test cases. Plaintiffs selected these six cases, which do not include the Company. On April 6, 2007, the Second Circuit denied a petition for rehearing filed by the plaintiffs, but noted that the plaintiffs could ask the district court to certify more narrow classes than those that were rejected.
Prior to the Second Circuit's decision, the majority of issuers, including the Company, had submitted a settlement agreement to the district court for approval. In light of the Second Circuit opinion, the parties agreed that the settlement could not be approved. On June 25, 2007, the district court approved a stipulation filed by the plaintiffs and the issuers that terminated the proposed settlement. On August 14, 2007, the plaintiffs filed amended complaints in the six focus cases. The six focus case issuers and the underwriters named as defendants in the focus cases filed motions to dismiss the amended complaints against them on November 14, 2007. On September 27, 2007, the plaintiffs filed a motion for class certification in the six focus cases. On March 26, 2008, the district court dismissed the Section 11 claims of those members of the putative classes in the focus cases who sold their securities for a price in excess of the initial offering price and those who purchased outside the previously certified class period. With respect to all the other claims, the motions to dismiss were denied. On October 10, 2008, at the request of Plaintiffs, Plaintiffs' motion for class certification was withdrawn, without prejudice.
The parties in the approximately 300 coordinated class actions, including the Company, the underwriter defendants in the Company's class action, and the plaintiffs in the Company's class action, have reached a settlement. The insurers for the issuer defendants in the coordinated cases will make the settlement payment on behalf of the issuers, including the Company. On October 5, 2009, the court granted final approval of the settlement. Judgment was entered on January 10, 2010. A group of three objectors filed a petition to the Second Circuit seeking permission to appeal the District Court's final approval order on the basis that the settlement class is broader than the class previously rejected by the Second Circuit in its December 5, 2006 order vacating the District Court's certifying classes in the focus cases. Plaintiffs have filed an opposition to the petition. In addition, six notices of appeal to the Second Circuit have been filed by different groups of objectors, including the objectors that filed the petition to appeal. The time to file additional notices of appeal has run on February 9, 2010.
Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the matter. Should the settlement not be approved and the Company is found liable, it is, at this time, unable to estimate or predict the potential damages that might be awarded, whether such damages would be greater than the Company's insurance coverage, and whether such damages would have a material impact on the Company's results of operations, cash flows or financial condition in any future period.
|
NOTE 9:-
|
COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
|
|
2.
|
From time to time, the Company is party to other various legal proceedings, claims and litigation that arise in the normal course of business. It is the opinion of management that the ultimate outcome of these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows.
|
NOTE 10:-
|
SHAREHOLDERS' EQUITY
|
|
The Company's shares are listed for trade on the NASDAQ National Market under the symbol "RDWR".
|
|
a.
|
Rights of shares:
Ordinary shares:
The Ordinary shares confer upon the holders the right to receive notice to participate and vote in shareholders meetings of the Company and to receive dividend, if declared.
|
|
b.
|
Treasury stock:
In July 2006, the Company's Board of Directors authorized the repurchase of up to $ 25,000 in the open market, subject to normal trading restrictions. During 2006, the Company purchased 846,855 of its Ordinary shares for total consideration of $ 11,069. During 2008, the Company purchased 880,315 of its Ordinary shares for total consideration of $ 6,594. During 2009 the company purchased 68,787 of its Ordinary shares for total consideration of $ 419. Total consideration for the purchase of these Ordinary shares was recorded as Treasury shares, at cost, as part of shareholders' equity.
|
|
c.
|
Dividends:
Dividends, if any, will be paid in NIS. Dividends paid to shareholders outside Israel may be converted to U.S. dollars on the basis of the exchange rate prevailing at the date of the conversion. The Company does not intend to pay cash dividends in the foreseeable future.
|
|
d.
|
Stock Option Plans:
The Company has two stock option plans, the Company's Key Employee Share Incentive Plan (1997) and the Directors and Consultants Option Plan ("the Stock Option Plans"). Under the Stock Option Plans, options may be granted to officers, directors, employees and consultants of the Company or its subsidiaries. The exercise price per share under the Stock Option Plans was generally, not less than the market price of an Ordinary share at the date of grant. The options expire between 5.2 years to 7 years from the grant date. The options vest primarily over four years. Each option is exercisable for one Ordinary share. Any options, which are forfeited or not exercised before expiration, become available for future grants.
Pursuant to the Stock Option Plans, the Company reserved for issuance 10,477,236 Ordinary shares. As of December 31, 2009, an aggregate of 1,216,583 Ordinary shares of the Company were still available for future grants.
|
NOTE 10:-
|
SHAREHOLDERS' EQUITY (Cont.)
|
|
|
The expected option term represents the period of time that options granted are expected to be outstanding. Prior to December 31, 2007 expected term of options was determined based on simplified method permitted at the time as the average of the vesting period and the contractual term. Starting January 1, 2008 expected term of options granted is based upon historical experience. For options granted to management, the expected term is 4.3 years, for options granted to Directors, the expected term is 3.6 years, for options granted to consultants, the expected term is 3 years, and for options granted to employees, the expected term is 3.5 years.
The fair value of the Company's stock options granted to employees, consultants and directors for the years ended December 31, 2007, 2008 and 2009 was estimated using the following weighted average assumptions:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Risk free interest rate
|
4.46 | % | 2.69 | % | 1.84 | % | ||||||
Dividend yields
|
0 | % | 0 | % | 0 | % | ||||||
Expected volatility
|
47 | % | 43 | % | 40 | % | ||||||
Weighted average expected term from vesting date (in years)
|
4.10 | 3.83 | 3.98 |
Number of options
|
Weighted-average exercise price
|
Weighted- average remaining contractual term
(in years)
|
Aggregate intrinsic value
|
|||||||||||||
Outstanding at January 1, 2009
|
4,313,072 | $ | 14.28 | 3.20 | - | |||||||||||
Granted
|
1,794,500 | $ | 8.21 | N/A | N/A | |||||||||||
Exercised
|
(66,950 | ) | $ | 11.17 | N/A | 113 | ||||||||||
Expired
|
(319,216 | ) | $ | 19.05 | N/A | N/A | ||||||||||
Forfeited
|
(1,021,356 | ) | $ | 13.94 | N/A | N/A | ||||||||||
Outstanding at December 31, 2009
|
4,700,050 | $ | 11.76 | 3.56 | 17,526 | |||||||||||
Exercisable at December 31, 2009
|
1,211,227 | $ | 15.02 | 1.85 | 1,685 | |||||||||||
Vested and expected to vest at December 31, 2009
|
4,422,136 | $ | 11.90 | 3.28 | 15,966 |
NOTE 10:-
|
SHAREHOLDERS' EQUITY (Cont.)
|
December 31, 2008
|
December 31, 2007
|
|||||||||||||||
Number
of options
|
Weighted
average
exercise
price
|
Number
of options
|
Weighted
average
exercise
price
|
|||||||||||||
Options outstanding at the beginning of the year
|
4,704,129 | $ | 14.94 | 3,284,999 | $ | 15.13 | ||||||||||
Changes during the year:
|
||||||||||||||||
Granted
|
1,099,300 | $ | 10.33 | 2,414,900 | $ | 14.30 | ||||||||||
Exercised
|
(238,850 | ) | $ | 8.01 | (148,000 | ) | $ | 9.24 | ||||||||
Expired
|
(555,821 | ) | $ | 14.58 | (771 | ) | $ | 8.05 | ||||||||
Forfeited
|
(695,686 | ) | $ | 14.39 | (846,999 | ) | $ | 16.35 | ||||||||
Options outstanding at the end of the year
|
4,313,072 | $ | 14.28 | 4,704,129 | $ | 14.94 | ||||||||||
Options exercisable at the end of the year
|
1,734,845 | $ | 16.22 | 1,509,396 | $ | 14.94 |
|
|
The weighted-average grant-date fair value of options granted during the years ended December 31, 2007, 2008 and 2009 was $ 4.96, $ 3.29 and $ 2.72, respectively.
As of December 31, 2009, there was approximately $ 5,141 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Company's stock option plans. That cost is expected to be recognized over a weighted-average period of 1.02 years. Total grant-date fair value of vested options for the year ended December 31, 2009 was approximately $ 7,289
The options outstanding under the Company's Stock Option Plans as of December 31, 2009 have been separated into ranges of exercise price as follows:
|
Options
|
Weighted
|
Options
|
Weighted
|
|||||||||||||||||||
outstanding
|
average
|
Weighted
|
exercisable
|
average exercise
|
||||||||||||||||||
Ranges of
|
as of
|
remaining
|
average
|
as of
|
price of
|
|||||||||||||||||
exercise
|
December 31,
|
contractual
|
exercise
|
December 31,
|
exercisable
|
|||||||||||||||||
price
|
2009
|
life (years)
|
price
|
2009
|
options
|
|||||||||||||||||
$ 6.15-10.9 | 2,194,650 | 4.28 | $ | 8.22 | 121,276 | $ | 9.15 | |||||||||||||||
$ 11.57-14.94 | 1,402,500 | 2.67 | $ | 13.43 | 649,076 | $ | 13.64 | |||||||||||||||
$ 15.22-17.00 | 847,050 | 3.99 | $ | 15.63 | 201,400 | $ | 16.68 | |||||||||||||||
$ 18.00-19.31 | 175,700 | 1.10 | $ | 18.49 | 159,325 | $ | 18.48 | |||||||||||||||
$ 23.5-25.30 | 80,150 | 0.27 | $ | 24.04 | 80,150 | $ | 24.04 | |||||||||||||||
4,700,050 | 1,211,227 |
|
|
On December 31, 2007, the Company granted 500,000 stock options to its Chief Executive Officer ("CEO") with an exercise price of $ 15.22 per share. The exercise of these options is contingent upon the increase in the market price of the Company's Ordinary shares. The options granted are divided into four equal tranches (125,000 options each). Each tranche shall be vested one year after the Company's closing share price reaches its performance target or more for 22 consecutive trading days. The closing share price shall be $ 19, $ 21, $ 23 and $ 25 for the first, second, third and the forth tranches respectively. The options expire seven years from the grant date. The fair value of these options was estimated using the lattice method with the following assumptions: risk-free interest rate of 3.7%, volatility factor of the expected market price of the Company's Ordinary shares of 50.64%. Termination rate was based on the Company's expectation that there will be no termination during the vesting period, and was determined to be 0%. Early exercise multiple (suboptimal factor) was estimated to be 3.09.
|
NOTE 10:-
|
SHAREHOLDERS' EQUITY (Cont.)
|
|
|
The Company has historically not paid dividends and has no foreseeable plans to pay dividends and as such, a dividend yield of 0% was applied.
Total compensation expenses amount to $ 3,176 which is recognized over the estimated requisite service period on an accelerated method basis. During the years ended December 31, 2008 and 2009, the Company recorded an amount of $1,508 and $ 1,397, respectively as compensation expenses included in general and administrative expenses with respect to the grant to the CEO.
In October, 2007, the Company granted 100,000 stock options to employees with an exercise price of $ 15.61 per share. The options will vest based on the Company's attaining certain performance conditions such as sales target
.
The options expire seven years from the grant date. The fair value of these options was estimated using the Black-Scholes-Merton option-pricing model with the following assumptions: expected volatility of 45%, risk free interest rate of 4.11%, dividend yield of 0% and expected life of 3.79 years. Total compensation expenses amount to $ 595 which is recognized over the vesting period of 4 years on an accelerated method basis. During the year ended December 31, 2008 and 2009, the Company recorded an amount of $ 226 for each year as compensation expenses.
|
NOTE 11:-
|
LOSS PER SHARE
The following table sets forth the computation of basic and diluted net earnings (loss) per share:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Numerator for basic and diluted loss:
|
||||||||||||
Per share - net loss available to shareholders
|
$ | (12,011 | ) | $ | (31,022 | ) | $ | (5,936 | ) | |||
Weighted average shares outstanding, net of treasury stock:
|
||||||||||||
Denominator for basic loss per share
|
19,477,222 | 19,439,776 | 18,879,230 | |||||||||
Effect of dilutive securities:
|
||||||||||||
Employee stock options
|
*) - | *) - | *) - | |||||||||
Denominator for diluted net loss per share
|
19,477,222 | 19,439,776 | 18,879,230 | |||||||||
Basic and diluted net loss per share
|
$ | (0.62 | ) | $ | (1.60 | ) | $ | (0.31 | ) |
|
*)
|
Antidilutive.
|
NOTE 12:-
|
TAXES ON INCOME
|
|
a.
|
General:
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
2008
|
2009
|
|||||||
Beginning balance
|
$ | 306 | $ | 660 | ||||
Additions for prior year tax positions
|
67 | 250 | ||||||
Additions for current year tax position
|
287 | - | ||||||
Ending balance
|
$ | 660 | $ | 910 |
|
Domestically, the Israeli Tax Authorities ("ITA") is currently examining the income tax returns for the years 2004-2006. The ITA has issued a preliminary assessment under which it demanded the payment of additional taxes in the aggregate amount of NIS 39.5 million with respect to these years (assessment received on November 23, 2009) including interest as of the assessment date. The Company appealed such assessment and is currently under a re-audit process by the ITA. There can be no assurance that the ITA will accept the Company's positions on matters raised and, in such an event, an order will be issued.
In addition, the Company's Israeli tax returns have been examined for all years prior to fiscal 2004, and the Company is no longer subject to audit for these periods.
The Company's subsidiaries file income tax return in the U.S. federal and other jurisdictions. The Company's main subsidiaries tax return are subject to examination by the U.S. federal and other local tax authorities from inception through 2009.
|
|
b.
|
Israeli Taxation:
|
|
1.
|
Foreign Exchange Regulations:
Commencing in taxable year 2003, the Company has elected to measure its taxable income and file its tax return under the Israeli Income Tax Regulations Under the Foreign Exchange Regulations the Israeli company is calculating its tax liability in U.S. Dollars according to certain orders. The tax liability, as calculated in U.S. Dollars is translated into NIS according to the exchange rate as of December 31st of each year.
|
|
2.
|
Tax rates:
Taxable income of Israeli companies is subject to tax at the rate of 26% in 2009, and 25% in 2010 and thereafter. In July 2009, Israel's Parliament (the Knesset) passed the Economic Efficiency Law (Amended Legislation for Implementing the Economic Plan for 2009 and 2010), 2009, which prescribes, among other things, an additional gradual reduction in the Israeli corporate tax rate and real capital gains tax rate starting from 2011 to the following tax rates: 2011 - 24%, 2012 - 23%, 2013 - 22%, 2014 - 21%, 2015 - 20%, 2016 and thereafter - 18%.
|
NOTE 12:-
|
TAXES ON INCOME (Cont.)
|
|
3.
|
Net operating losses carryforward:
The Company has estimated total available carryforward operating and capital tax losses of approximately $ 24,000, which can be carried forward and offset against future taxable income in the future for an indefinite period. Due to the recent operating results and recurring losses, the Company provided a full valuation allowance in respect of all the deferred tax assets resulting from the carryforward operating tax losses for which future offset is doubtful. Management currently believes that it is more likely than not that those deferred tax deductions will not be realized in the foreseeable future.
|
|
4.
|
Tax benefits under the Law for the Encouragement of Capital Investments, 1959:
The Company's production facilities in Israel (Tel-Aviv and Jerusalem) have been granted an "Approved Enterprise" status under the above state law. According to the provisions of such Israeli law, the Company has been granted the "Alternative Benefit Track", under which the main benefits are a tax exemption and reduced tax rate. Therefore, the Company's income derived from the Approved Enterprise and allocated to the Tel Aviv facility will be entitled to a tax exemption for a period of two years and to an additional period of five to eight years with reduced tax rates of 10%-25% (based on percentage of foreign ownership). Income allocated to the Jerusalem facility will be exempt from tax for a period of up to 10 years, provided that the Company meets certain criteria. The income derived from the "Approved Enterprise" program shall be allocated between the facilities in Tel-Aviv and Jerusalem based on a mechanism as determined by the Investment Center.
The duration of tax benefits is subject to a limitation of the earlier of 12 years from commencement of production, or 14 years from the approval date. The Company began to utilize such tax benefits in 2004. The time limitation does not apply to the exemption period.
The entitlement to the above benefits is conditional upon the Company's fulfilling the conditions stipulated by the above law, regulations published hereunder and the letters of approval for the specific investments in "Approved Enterprises". In the event of failure to comply with these conditions, the benefits may be partially or fully canceled and the Company may be required to refund the amount of the benefits, in whole or in part, plus a consumer price index linkage adjustments and including interest.
As of December 31, 2009, accumulated deficit included approximately $ 25,000 in tax-exempt income earned by the Company's "Approved Enterprise". The Company has decided not to declare dividends out of such tax-exempt income. Accordingly, no taxable deferred income has been provided on income attributable to the Company's "Approved Enterprise". If such tax-exempt income is distributed in a manner other than upon complete liquidation of the Company, it would be taxed at the reduced corporate tax rate applicable to such profits (between 10%-25%), and an income tax liability of up to $ 6,250 would be incurred as of December 31, 2009.
If the retained tax-exempt income is distributed, it would be taxed at the corporate tax rate applicable to such profits with respect to the gross amount as if the Company had not elected the alternative tax benefits (currently between 10% - 25%, based on percentage of foreign ownership at the date of declaration).
|
NOTE 12:-
|
TAXES ON INCOME (Cont.)
|
|
|
Income from sources other than the "Approved Enterprise" will be subject to the tax at the regular rate.
During 2004, the Company's production facilities in Israel (Tel-Aviv and Jerusalem) have been granted an expansion program for its Approved Enterprise status by the Investment Center. The Company applied for an amendment to this expansion program, according to which it requested an enlargement to this expansion program, neutralization of certain assets and an approval that the benefits period from such expansion program will commence in 2006.
On April 2005, an amendment to the law ("the Amendment") has changed certain provisions of the law. As a result of the Amendment, a company is no longer obliged to implement an Approved Enterprise status in order to receive the tax benefits previously available under the Alternative Benefits provisions, and therefore there is no need to apply to the Investment Center for this purpose (Approved Enterprise status remains mandatory for companies seeking grants). Rather, a company may claim the tax benefits offered by the Investment Law directly in its tax returns, provided that its facilities meet the criteria for tax benefits set out by the Amendment. A company is also granted a right to approach the Israeli Tax Authorities for a pre-ruling regarding their eligibility for benefits under the Amendment.
Tax benefits are available under the Amendment to production facilities (or other eligible facilities), which are generally required to derive more than 25% of the Company's business income from export. In order to be eligible for the tax benefits, the Amendment states that a company must make an investment in the Beneficiary Enterprise exceeding a minimum amount specified in the law. Such investment may be made over a period of no more than three years ending at the end of the year in which the company requested to have the tax benefits apply to the Beneficiary Enterprise ("the Year of Election"). Where a company requests to have the tax benefits apply to an expansion of existing facilities, then only the expansion will be considered a Beneficiary Enterprise and the company's effective tax rate will be the result of a weighted combination of the applicable rates. In this case, the minimum investment required in order to qualify as a Beneficiary Enterprise is required to exceed a certain percentage of the company's production assets before the expansion. The duration of tax benefits is subject to a limitation of the earlier of 7 to 10 years from the commencement year, or 12 years from the first day of the Year of Election. As of December 31, 2009, the Company did not generate income under the provisions of the Amendment.
|
|
c.
|
Taxes on income are comprised as follows:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Current taxes
|
$ | 580 | $ | 1,042 | $ | 795 | ||||||
Deferred taxes
|
(152 | ) | 2,585 | 23 | ||||||||
$ | 428 | $ | 3,627 | $ | 818 | |||||||
Domestic
|
$ | (40 | ) | $ | 2,074 | $ | 397 | |||||
Foreign
|
468 | 1,553 | 421 | |||||||||
$ | 428 | $ | 3,627 | $ | 818 |
NOTE 12:-
|
TAXES ON INCOME (Cont.)
|
|
d.
|
Deferred income taxes:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's and its subsidiaries' deferred tax liabilities and assets are as follows:
|
December 31,
|
||||||||
2008
|
2009
|
|||||||
Carryforward tax losses
|
$ | 8,879 | $ | 7,222 | ||||
Accrued employees costs
|
1,266 | 963 | ||||||
Intangible assets
|
82 | 314 | ||||||
Unrealized losses on marketable securities
|
218 | - | ||||||
Research and development
|
6,239 | 5,015 | ||||||
Other
|
59 | 41 | ||||||
Deferred tax assets before valuation allowance
|
16,743 | 13,555 | ||||||
Valuation allowance
|
(15,712 | ) | (12,382 | ) | ||||
Net deferred tax asset
|
1,031 | 1,173 | ||||||
Intangible assets, including goodwill
|
(945 | ) | (923 | ) | ||||
Unrealized gains on marketable securities
|
- | (187 | ) | |||||
Deferred tax liability
|
(945 | ) | (1,110 | ) | ||||
Net deferred tax assets
|
$ | 86 | $ | 63 |
|
|
The net change in the valuation allowance was primarily relates to change in the Israeli tax rate in future years.
|
|
e.
|
Foreign:
The subsidiary in the U.S. has provided valuation allowance in respect of deferred tax assets resulting from carry forwards of net operating loss. ASC No. 718 prohibits recognition of a deferred income tax asset for excess tax benefits due to stock option exercises that have not yet been realized through a reduction in income tax payable. $6,800 of the net operating loss carry-forwards relate to excess tax deductions from stock options which have not yet been realized. Such unrecognized deferred tax benefits will be accounted for as a credit to additional paid-in-capital, if and when realized.
Through December 31, 2009, the U.S. subsidiary had a U.S. federal loss carryforward of approximately $ 6,259 mainly resulting from tax benefits related to employees’ stock option exercises that can be carried forward and offset against taxable income up to 20 years, expiring between fiscal 2021 and fiscal 2027. Excess tax benefits related to employee stock option exercises for which no compensation expense was recognized will be credited to additional paid-in capital when realized.
|
NOTE 12:-
|
TAXES ON INCOME (Cont.)
|
|
|
Utilization of U.S. net operating losses may be subject to substantial annual limitation due to the "change in ownership" provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitation may result in the expiration of net operating losses before utilization.
Two other subsidiaries have estimated total available carryforward tax losses of approximately $ 700 to offset against future taxable profit. As of December 31, 2009, the Company recorded a deferred tax asset of $ 63 relating to these available net carryforward losses.
|
|
f.
|
A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income (loss) of the Company and the actual tax expense as reported in the statement of operations is as follows:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Loss before taxes, as reported in the consolidated statements of income
|
$ | (11,583 | ) | $ | (27,395 | ) | $ | (5,118 | ) | |||
Statutory tax rate
|
29 | % | 27 | % | 26 | % | ||||||
Theoretical tax benefit on the above amount at the Israeli statutory tax rate
|
$ | (3,359 | ) | $ | (7,397 | ) | $ | (1,331 | ) | |||
Tax adjustment in respect of different tax rate
|
263 | 563 | 130 | |||||||||
Non-deductible expenses
|
66 | 29 | 52 | |||||||||
Deferred taxes on losses for which valuation allowance was provided, net
|
2,142 | 7,864 | 421 | |||||||||
Stock compensation relating to stock options per ASC No. 718
|
1,316 | 2,180 | 1,296 | |||||||||
Income taxes in respect of prior years
|
- | - | 250 | |||||||||
Other
|
- | 388 | - | |||||||||
Actual tax expense
|
$ | 428 | $ | 3,627 | $ | 818 |
|
g.
|
Income (loss) before income taxes is comprised as follows:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Domestic
|
$ | (13,015 | ) | $ | (26,395 | ) | $ | (7,405 | ) | |||
Foreign
|
1,432 | (1,000 | ) | 2,287 | ||||||||
loss before income taxes
|
$ | (11,583 | ) | $ | (27,395 | ) | $ | (5,118 | ) |
NOTE 13:-
|
GEOGRAPHIC INFOROMATION
Summary information about geographic areas:
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-users.
The following table presents total revenues for the years ended December 31, 2007, 2008 and 2009 and long-lived assets as of December 31, 2008 and 2009:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Revenues from sales to customers located at:
|
||||||||||||
America (principally the United States)
|
$ | 24,368 | $ | 23,715 | $ | 29,704 | ||||||
EMEA *)
|
29,412 | 29,836 | 36,226 | |||||||||
Asia Pacific
|
34,851 | 41,030 | 42,974 | |||||||||
$ | 88,631 | $ | 94,581 | $ | 108,904 |
|
*)
|
Europe, the Middle East and Africa.
|
December 31,
|
||||||||
2008
|
2009
|
|||||||
Long-lived assets, by geographic region:
|
||||||||
America
|
$ | 1,290 | $ | 1,101 | ||||
EMEA
|
9,012 | 8,962 | ||||||
Asia Pacific
|
1,391 | 1,157 | ||||||
$ | 11,693 | $ | 11,220 |
NOTE 14:-
|
SELECTED STATEMENTS OF INCOME DATA
Financial income, net:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Financial income:
|
||||||||||||
Interest on bank deposits
|
$ | 2,917 | $ | 1,186 | $ | 143 | ||||||
Foreign currency translation differences, net
|
70 | - | - | |||||||||
Amortization of premiums, accretion of discounts and interest on marketable debt securities, net
|
4,569 | 3,073 | 2,133 | |||||||||
7,556 | 4,259 | 2,276 | ||||||||||
Financial expenses:
|
||||||||||||
Interest and other bank charges
|
(136 | ) | (222 | ) | (99 | ) | ||||||
Foreign currency translation differences, net
|
- | (425 | ) | (190 | ) | |||||||
$ | 7,420 | $ | 3,612 | $ | 1,987 |
NOTE 15:-
|
BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Represents transactions and balances with other entities in which certain of the Company's Board of Directors, management and shareholders have interest:
|
|
a.
|
The following related party balances are included in the balance sheets:
|
December 31,
|
||||||||
2008
|
2009
|
|||||||
Trade receivables
|
$ | 1,358 | $ | 922 | ||||
Trade payables
|
$ | 305 | $ | 196 |
|
b.
|
The following related party transactions are included in the statements of operations:
|
Year ended December 31,
|
||||||||||||
2007
|
2008
|
2009
|
||||||||||
Revenues (1)
|
$ | 4,184 | $ | 3,821 | $ | 3,387 | ||||||
Operating expenses, net - primarily lease, sub-contractors and communications (2)
|
$ | 1,374 | $ | 1,944 | $ | 2,201 | ||||||
Purchase of property and equipment
|
$ | 948 | $ | 859 | $ | 1,444 |
|
(1)
|
Distribute the Company's products on a non-exclusive basis.
|
|
(2)
|
The Company leases office space and purchases other miscellaneous services from certain companies, which are considered to be related parties. In addition, the Company subleases part of the office space to related parties and provides certain services to related parties.
|
|
The purpose of this Plan is to provide employees of the Company and its Designated Subsidiary with an opportunity to purchase Ordinary Shares of the Company through accumulated payroll deductions.
|
|
a)
|
“
Board
” means the Board of Directors of the Company.
|
|
b)
|
“
Company
” means RADWARE Ltd., an Israeli company whose registered office is in Tel Aviv, Israel, or any successor company.
|
|
c)
|
“
Compensation
” means the fixed salary or wage paid by the Company to an Employee as reported to the Israeli Income Tax Authority, including an Employee's portion of salary deferral contributions to Executives’ Insurance and Advanced Studies Fund and including commissions base amount (100%), but excluding payments for overtime, shift premium, one time bonuses, severance pay, foreign service pay, expense reimbursements, any credit or benefit under any employee plan and any other compensation.
|
|
d)
|
"
Designated Subsidiary
" means any Subsidiary that has been designated by the Board from time to time in its sole discretion as eligible to participate in this Plan.
|
|
e)
|
“
Employee
” means any individual who is an employee of the Company or a Designated Subsidiary whose customary employment with the Company or its Designated Subsidiary is at least twenty (20) hours per week and more than five (5) months in any calendar year except (i) any such person who is prohibited by applicable law from participating in this Plan and (ii) with respect to Israeli Participants, subject to the provisions of Section 11(d) hereof. For purposes of this Plan, the employment relationship shall be treated as continuing intact while the Employee is on sick leave or other leave of absence approved by the Company or Subsidiary. Where the period of leave exceeds ninety (90) days and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated on the 91
st
day of such leave.
|
|
f)
|
“
Exercise Date
” means the Trading Day on the date six (6) months or twelve (12) months after the Offering Date on each Offering Period.
|
|
g)
|
"
Fair Market Value
" per Ordinary Share as of a particular date shall mean the closing price per Ordinary Share on such date as reported on the National Association of Securities Dealers Automated Quotation (NASDAQ) (or on such other recognized market or quotation system on which the trading prices of the Ordinary Shares are traded or quoted at the relevant time).
|
|
h)
|
“
Offering Date
” means the first Trading Day of each Offering Period of this Plan.
|
|
i)
|
“
Offering Period
” means, subject to Section 4 of this Plan, a period of twelve (12) months consisting of two (2) six-month Payment Periods.
|
|
j)
|
"
Option
"
a right to purchase Ordinary Shares pursuant to the terms of this Plan.
|
|
k)
|
“
Ordinary Shares
” means the ordinary shares, NIS 0.1 par value, of the Company.
|
|
l)
|
“
Parent
” means a corporation, domestic or foreign, which holds, directly or indirectly, not less than fifty percent (50%) of the voting shares of all classes of shares of the Company.
|
|
m)
|
“
Participant
” means any Employee subscribing to this Plan in accordance with Section 5 of this Plan.
|
|
n)
|
“
Plan
” means this 2010 Employee Share Purchase Plan, as amended from time to time.
|
|
o)
|
“
Payment Period
” means a period commencing on an Offering Date or on the Trading Day after an Exercise Date and terminating on the Trading Day on the date six (6) months later.
|
|
p)
|
“
Subsidiary
” means a corporation, domestic or foreign, of which not less than fifty percent (50%) of the voting shares of all classes of shares are held, directly or indirectly, by the Company at the time of granting an Option hereunder, whether or not such corporation now exists or is hereafter organized or acquired by the Company.
|
|
q)
|
“
Trading Day
” means a day on which NASDAQ System are open for trading.
|
|
(a)
|
Any Employee who shall be employed on the date his or her participation in this Plan is effective shall be eligible to participate in this Plan, subject to limitations imposed by law.
Notwithstanding the foregoing, an individual, who is otherwise eligible to participate in this Plan but who is on an Insurance Leave (as defined in Section 11(d) below) during any Payment Period shall be eligible to be a Participant in accordance with the provisions of Section 11(d) hereunder.
|
|
(b)
|
Notwithstanding any provisions of this Plan to the contrary, no Employee shall be granted an Option under this Plan if immediately after the grant, such Employee would own shares and/or hold outstanding options to purchase shares possessing ten percent (10%) or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary or Parent of the Company. Any amounts received from an Employee which cannot be used to purchase Ordinary Shares as a result of this limitation will be returned as soon as practicable to the Employee without interest.
|
|
The Plan shall be implemented by overlapping twelve (12) month Offering Periods with the first Offering Period commencing on February 10, 2010, and a new Offering Period commencing on the first Trading Date following the first Exercise Date of each previous Offering Period and ending on the last Trading Day prior to the first anniversary of such commencement date (if such date is not a trading day, the Exercise Date shall be postponed to the next available trading day). This Plan shall continue thereafter until terminated in accordance with Section 20 hereof. Subject to the requirements of Section 20, the Board shall have the power to change the duration and/or frequency of Offering Periods with respect to future offerings and shall use its best efforts to notify Employees of any such change at least fifteen (15) days prior to the scheduled beginning of the first Offering Period to be affected. Furthermore, the Board may adjust the duration of the first Offering Period (up to but not exceeding 15 months) to reflect the timing of this Plan’s implementation, provided that such adjustment is announced to Participants prior to the first Exercise Date under this Plan.
|
|
(a)
|
An eligible Employee may become a Participant by completing a subscription agreement authorizing payroll deductions on a form provided by the Company and filing it with the Company’s payroll office at least ten (10) days prior to the applicable Offering Date, unless a later time for filing the subscription agreement is set by the Board for all eligible Employees with respect to a given Offering Period.
If a Participant has not filed a subscription agreement for the applicable Offering Period at a timely fashion, he or she shall be deemed to have elected not to participate in such offering. Refraining from participating in any offering shall not limit nor prevent a Participant from participating in any successive offering.
|
|
(b)
|
Payroll deductions for a Participant shall commence on the first payroll following the Offering Date and shall end on the Exercise Date of the offering to which such authorization is applicable, unless sooner terminated by the Participant as provided in Section 11.
|
|
(a)
|
At the time a Participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each payday during the Offering Period in an amount no less than one percent (1%) and not more than ten percent (10%) of his or her Compensation (only full numbers without fractions), and may amount to ten percent (10%) of his or her aggregate Compensation during said Offering Period.
|
|
(b)
|
All payroll deductions made by a Participant shall be credited to his or her account under this Plan and will be withheld in whole percentages only. A Participant may not make any additional payments into such account.
|
|
(c)
|
A Participant may discontinue his or her participation in this Plan as provided in Section 11, or may change the rate or amount of his or her payroll deductions during the Offering Period (within the limitations of Section 6(a)) by completing and filing with the Company a new subscription agreement authorizing such change in the rate of deduction; provided, however, that a Participant may not change the rate or amount of his or her payroll deductions more than once in any Payment Period. Provided that the new authorization is received by the Company more than ten (10) days in advance of the start of the next payroll period (the next payday), the change in rate shall be effective at the next payroll only as to Compensation accrued following such effective date. Subject to the limitations of Section 6(d), a Participant’s subscription agreement shall remain in effect for successive Offering Periods unless revised as provided herein or terminated as provided in Section 11.
|
|
(d)
|
To the extent permitted by applicable law, all tax consequences arising from the grant or exercise of any Option, from the payment for Ordinary Shares or from any other event or act, hereunder, shall be borne solely by the Participant. The Company and/or its Subsidiaries and/or Parent shall withhold taxes according to the requirements of any applicable laws, rules, and regulations, including withholding taxes at source. At the time the Option is exercised, in whole or in part, or at the time some or all of the Company’s Ordinary Shares issued under this Plan is disposed of, the Participant must make adequate provision for the Company’s tax withholding obligations, if any, which arise upon the exercise of the Option or the disposition of the Ordinary Shares. At any time, the Company may, but will not be obligated to, withhold from the Participant’s Compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale of Ordinary Shares by the Employee. Furthermore, the Participant shall agree to indemnify the Company and/or its Subsidiaries and/or Parent and hold them harmless against and from any and all liability for any such tax or interest or penalties thereon, including without limitation, liabilities relating to the necessity to withhold, or to have withheld, any such tax from any payment made to the Participant.
|
|
On the Offering Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an Option to purchase on each Exercise Date during such Offering Period (at the per share Option price) up to a number of shares of the Company’s Ordinary Shares determined by dividing such Employee’s payroll deductions accumulated prior to such Exercise Date and retained in the Participant’s account as of the Exercise Date by ninety percent (90%) of the Fair Market Value of a share of the Company’s Ordinary Shares on the Offering Date. Exercise of each Option during the Offering Period shall occur as provided in Section 8, unless the Participant has withdrawn pursuant to Section 11, and each Option shall expire at midnight on the last day of the applicable Payment Period (i.e. at the end of the Exercise Date).
|
|
Unless (i) a Participant withdraws from this Plan as provided in Section 11; or (ii) the share price at the Exercise Date is lower than ninety percent (90%) of the Fair Market Value of a share of the Company’s Ordinary Shares on the Offering Date; or (iii) for Israeli employees, the $/NIS conversion rate as of the exercise date compared to the $/NIS conversion rate as of the offering date has declined in a higher ratio than the ratio derived from dividing the share price at the Exercise Date by ninety percent (90%) of the Fair Market Value of a share of the Company’s Ordinary Shares on the Offering Date, his or her Option for the purchase of shares will be exercised automatically on each Exercise Date of the Offering Period, and the maximum number of full Ordinary Shares subject to Option shall be purchased for such Participant at the applicable Option price with the accumulated payroll deductions in his or her account, all in accordance with Section 7 hereinabove. No fractional shares will be purchased and any amount remaining in the Participant’s account after an Exercise Date shall be held in the account until the next Exercise Date of the Offering Period, unless the Offering Period has been oversubscribed or has terminated with such Exercise Date, in which case such amount shall be refunded to the Participant. During a Participant’s lifetime, a Participant’s Option to purchase Ordinary Shares hereunder is exercisable only by him or her.
|
|
Unless a Participant instructs the Company otherwise, by completing a “keep” form, requesting not to sell his or her Ordinary Shares (derived from the exercise of his or her Options from the Plan), and filing such form with the Company’s payroll office at least five (5) business days prior to the applicable Exercise Date, the Participant’s Ordinary Shares will be sold automatically on the Exercise Date and the net proceeds from this sale will be paid to the Participant in the next payroll payment.
|
|
In case the Participant chooses to keep his Ordinary Shares, as promptly as practicable after the Exercise Date of each Payment Period, the Company shall arrange the delivery to each Participant, as appropriate, of a certificate representing the Ordinary Shares purchased upon exercise of his or her Option. The Ordinary Shares will be transferred to the employee’s account or the trustee’s account (according to the employee’s decision) and any cash remaining to the credit of a Participant’s account under this Plan after a purchase by him or her of Ordinary Shares at the termination of each Payment Period which is insufficient to purchase a full share of Ordinary Shares of the Company shall be applied to the Participant’s account for the next Payment Period.
|
|
(a)
|
A Participant may withdraw all, but not less than all, the payroll deductions credited to his or her account and not yet used to exercise his or her Option under this Plan by giving written notice to the Company at least seven (7) business days prior to the applicable Exercise Date, pursuant to a form to be provided by the Company. All of the Participant’s payroll deductions credited to his or her account will be paid to such Participant as promptly as practicable after receipt of notice of withdrawal and such Participant’s remaining Option or Options for the Offering Period will be automatically terminated, and no further payroll deductions for the purchase of Ordinary Shares will be made during the Offering Period. If a Participant withdraws from an Offering Period, payroll deductions will not resume at the beginning of the succeeding Offering Period unless the Participant delivers to the Company a new subscription agreement.
|
|
(b)
|
Upon a Participant's ceasing to be an Employee prior to an Exercise Date for any reason, including retirement or death, or upon termination of a Participant’s employment relationship (as described in Section 2(e)), the payroll deductions credited to such Participant’s account during the Payment Period but not yet used to exercise the Option will be returned to such Participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15 of this Plan, and such Participant’s remaining Option or Options will be automatically terminated. Such termination shall be deemed a withdrawal from this Plan.
|
|
(c)
|
A Participant’s withdrawal from an Offering Period will not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the Participant withdraws.
|
|
(d)
|
With respect to Israeli Participants, notwithstanding anything to the contrary in the Plan, if during any Payment Period, any portion of the Participant’s Compensation shall be paid to such Participant directly by the Israel’s National Insurance System (“Bituach Leumi”) (such period during which payments are made by National Insurance System being referred to as an “
Insurance Leave
”), the rate of payroll deduction for such Participant shall automatically be reduced to 0% (the “
Reduced Rate of Deduction
”) as of the effective date of the Insurance Leave, unless a Participant gives a written notice of withdrawal to the Company as provided hereinabove. At such time as the Insurance Leave terminates and the Company resumes paying such Participant’s salary directly, the Reduced Rate of Deduction shall continue to apply unless and until the Participant makes changes to the rate of deduction pursuant to Section 6(c) above.
|
|
(e)
|
Neither the Plan nor the participation of a Participant in the Plan shall impose any obligation on the Company to continue the employment of any Participant, and nothing in the Plan shall confer upon any Participant any right to continue in the employ of the Company, or restrict the right of the Company to terminate such employment at any time.
|
|
(a)
|
The maximum number of Ordinary Shares of the Company which shall be made available for sale under this Plan shall be one million (1,000,000) Ordinary Shares subject to adjustment upon changes in capitalization of the Company as provided in Section 19 of this Plan. If on a given Exercise Date the number of Ordinary Shares with respect to which Options are to be exercised exceeds the number of Ordinary Shares then available under this Plan (after deduction of all Ordinary Shares for which Options have been exercised or are then outstanding), the Company shall make a pro rata allocation of the Ordinary Shares remaining available for Option grant in as uniform a manner as shall be practicable and as it shall determined to be equitable. In such event, the Company shall give written notice of such reduction of the number of Ordinary Shares subject to the Option to each Employee affected thereby and shall similarly reduce the rate of payroll deductions, if necessary. Any amounts remaining in an Employee's account which have not been applied to the purchase of Ordinary Shares pursuant to this Section 13 shall be refunded on or promptly after the applicable Exercise Date.
|
|
(b)
|
A Participant will have no interest or voting right in Ordinary Shares covered by his or her Option until such Option has been exercised.
|
|
(c)
|
Ordinary Shares to be delivered to a Participant under this Plan will be registered in the name of the Participant or, subject to applicable law including Section 102 of the Israeli Income Tax Ordinance - 1961, in the name of the Participant and his or her spouse.
|
|
The Plan shall be administered by the Board or, subject to applicable law, a committee appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of this Plan, and to adjudicate all disputed claims filed under this Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties. Members of the Board who are eligible Employees are permitted to participate in this Plan, provided that:
|
|
(a)
|
Members of the Board who are eligible to participate in this Plan may not vote on any matter affecting the administration of this Plan or the grant of any Option pursuant to this Plan.
|
|
(b)
|
If a committee is established to administer this Plan, no member of the Board who is eligible to participate in this Plan may be a member of the committee.
|
|
(a)
|
Subject to applicable law, including the laws of decent and distribution, a Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the Participant’s account under this Plan in the event of such Participant’s death subsequent to the end of the Offering Period but prior to delivery to him or her of such shares and cash. In addition, a Participant may file a written designation of a beneficiary who is to receive any cash from the Participant’s account under this Plan in the event of such Participant’s death prior to the Exercise Date of the Offering Period.
|
|
(b)
|
Such designation of beneficiary may be changed by the Participant at anytime by written notice. In the event of the death of a Participant and in the absence of a beneficiary validly designated under this Plan who is living at the time of such Participant’s death, the Company shall deliver such Ordinary Shares and/or cash to the executor or administrator of the estate of the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such Ordinary Shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
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Neither payroll deductions credited to a Participant’s account nor any rights with regard to the exercise of an Option or to receive Ordinary Shares under this Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section15 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 11.
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All payroll deductions received or held by the Company under this Plan shall be segregated from all other Company accounts and the Company may not use such payroll deductions for any corporate purpose.
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Individual accounts will be maintained for each Participant in this Plan. Statements of account will be given to participating Employees annually, which statements will set forth the amounts of payroll deductions, the per share purchase price, the number of Ordinary Shares purchased and the remaining cash balance, if any.
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(a)
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The Board may at any time and for any reason terminate or amend this Plan. Except as provided in Section 19 and in this Section, no such termination can affect Options previously granted, provided that an Offering Period may be terminated by the Board on any date if the Board determines that the termination of this Plan is in the best interests of the Company and its shareholders.
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(b)
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Without shareholder approval the Board (or its committee, subject to applicable law) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than NIS, permit payroll withholding in excess of the amount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Ordinary Shares for each Participant properly correspond with amounts withheld from the Participant’s Compensation, and establish such other limitations or procedures as the Board (or its committee, subject to applicable law) determines in its sole discretion advisable which are consistent with this Plan.
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(c)
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Participation in the Plan, as evidenced by delivery of a subscription agreement, shall be deemed to constitute an acknowledgment by the Participant that any amendment, termination, suspension or discontinuation of the Plan by the Company shall not be deemed to constitute a “material worsening” of the terms of Participant’s employment, and will not give rise to any right to terminate Participant’s employment or to claim constructive termination.
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All notices or other communications by a Participant to the Company under or in connection with this Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
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Ordinary Shares shall not be issued with respect to an Option unless the exercise of such Option and the issuance and delivery of such Ordinary Shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the Ordinary Shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
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As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Ordinary Shares are being purchased only for investment and without any present intention to sell or distribute such Ordinary Shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
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The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company, if such approval is required by applicable law. It shall continue for a term of twelve (12) months, and shall be renewed automatically at the end of each such term for an additional term of twelve (12) months, until the lapse of 10 years from the date of adoption of this Plan by the Board - unless sooner terminated under the provisions of Section 20. Subject to applicable law, such an automatic renewal shall not require any Board or shareholders approval.
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Name of Subsidiary
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Country of Incorporation
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Radware Inc.
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New Jersey, United States of America
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Radware UK Limited
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United Kingdom
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Radware France
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France
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Radware Srl
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Italy
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Radware GmbH
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Germany
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Nihon Radware KK
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Japan
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Radware Australia Pty. Ltd.
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Australia
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Radware Singapore Pte. Ltd.
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Singapore
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Radware Korea Ltd.
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Korea
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Radware Canada Inc.
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Canada
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Radware India Pvt. Ltd.
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India
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Covelight Systems, Inc.
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Delaware, United States of America
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1.
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I have reviewed this annual report on Form 20-F of Radware Ltd. (the “Registrant”);
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
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4.
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The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
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5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
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/s/ Roy Zisapel | |
Roy Zisapel | |||
Chief Executive Officer | |||
(Principal Executive Officer) |
1.
|
I have reviewed this annual report on Form 20-F of Radware Ltd. (the “Registrant”);
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2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
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4.
|
The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
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(c)
|
Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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|
(d)
|
Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and
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5.
|
The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.
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/s/ Meir Moshe | |
Meir Moshe | |||
Chief Financial Officer | |||
(Principal Financial Officer) |
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/s/ Roy Zisapel | |
Roy Zisapel | |||
Chief Executive Officer | |||
(Principal Executive Officer) |
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|
/s/ Meir Moshe | |
Meir Moshe | |||
Chief Financial Officer | |||
(Principal Financial Officer) |
/s/ Kost Forer Gabbay & Kasierer
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|
Tel - Aviv, Israel
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KOST FORER GABBAY & KASIERER
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April 29, 2010
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A Member of Ernst & Young Global
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