SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 20-F/A
AMENDMENT NO. 1
[ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR
12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934
or
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 0-15375
RADA ELECTRONIC INDUSTRIES LTD.
(Exact Name of Registrant as Specified in Its Charter
and Translation of Registrant's Name Into English)
Israel
(Jurisdiction of Incorporation or Organization)
7 Giborei Israel Street, Netanya 42504, Israel
(Address of Principal Executive Offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
None
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Ordinary Shares, NIS 0.005 Par Value
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report:
Ordinary Shares, par value NIS 0.005 per share..........13,816,839
(as of December 31, 2001)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Indicate by check mark which financial statement item the registrant has elected
to follow:
Item 17___ Item 18 X
This annual report on Form 20-F is incorporated by reference into the
registrant's Registration Statement on Form F-3, Registration No. 333-12074.
ITEM 18. FINANCIAL STATEMENTS
--------------------
We are filing our audited consolidated financial statements pursuant to SEC
Temporary Final Rule and Final Rule: Requirements for Arthur Andersen LLP
Auditing Clients; Rel. No. 33-8070.
In our unaudited balance sheets as of December 31, 2000 and 2001 we
classified our accrued severance pay net of deposits with insurance companies.
Under Israeli law and labor agreements, the Company is required to make
severance and/or pension payments to employees who are dismissed, as well as to
those leaving employment under certain other circumstances. In respect of these
liabilities, regular deposits are made with various severance pay and pension
funds and insurance companies. On advice of our auditors and in accordance with
US GAAP, our audited balance sheets as of December 31, 2000 and 2001 classify
the total amount of severance liability as a long-term liability and the
deposits as a long-term asset rather than classifying our accrued severance pay
net of deposits with severance pay and pension funds and insurance companies,
which classification has no effect on our results of operations and shareholders
equity.
AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Index To Audited Financial Statements..................................F-1
Report of Independent Auditors.........................................F-2
Audited Consolidated Balance Sheets....................................F-3
Audited Consolidated Statements of Operations..........................F-5
Audited Statements of Changes in Shareholders' Equity (Deficit)........F-6
Audited Consolidated Statements of Cash Flows..........................F-7
Notes to Audited Consolidated Financial Statements.....................F-9
74
ITEM 19 EXHIBITS
--------
INDEX TO EXHIBITS
Exhibit Description
------- -----------
3.1* Memorandum of Association of the Registrant
3.2* Articles of Association of the Registrant
4.1* Specimen of Share Certificate
10.1* 1993 Employee Stock Option Plan, as amended
10.2* 1994 Employee Stock Option Plan, as amended
10.3* 1996 Employee Stock Option Plan, as amended
10.4* 1999 Employee Stock Option Plan, as amended
10.5* Form of warrants to directors
10.6* Loan Agreement dated June 3, 2001 between the Registrant
and Mr. Howard Yeung
10.7* Deed of Termination of Joint Venture Agreement dated June
3, 2001, effective as of January 1, 2000 and Agreement for
the acquisition of part of the issued share capital of New
Reef Holding Ltd. dated June 3, 2001, effective as of
January 1, 2000
10.8** Letter Agreement dated May 15, 2002 between the Registrant
and the authorized representative of Howard P.L. Yeung
re Conversion of Outstanding Loans into Ordinary Shares
and Warrants
10.9** Letter Agreements dated May 15, 2002 between the
Registrant and the Investors re Private Placement of
Ordinary Shares and Warrants
23.1 Consent of Kost, Forer & Gabbay, Certified Public
Accountants (Israel)
99.1 CEO Certification Pursuant To 18 U.S.C. Section 1350 As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002
99.2 CFO Certification Pursuant To 18 U.S.C. Section 1350 As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002
------------------
* Filed as an exhibit to our Annual Report on Form 20-F for the year ended
December 31, 2000 and incorporated herein by reference.
** Filed as an exhibit to our Annual Report on Form 20-F for the year ended
December 31, 2001 and incorporated herein by reference.
75
RADA ELECTRONIC INDUSTRIES LTD.
Page
Index To Audited Financial Statements..................................F-1
Report of Independent Auditors.........................................F-2
Audited Consolidated Balance Sheets....................................F-3
Audited Consolidated Statements of Operations..........................F-5
Audited Statements of Changes in Shareholders' Equity (Deficit)........F-6
Audited Consolidated Statements of Cash Flows..........................F-7
Notes to Audited Consolidated Financial Statements.....................F-9
F-1
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
RADA ELECTRONIC INDUSTRIES LIMITED
----------------------------------
We have audited the accompanying consolidated balance sheets of RADA Electronic
Industries Limited and its subsidiaries (the "Company") as of December 31, 2000
and 2001 and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Company and its subsidiaries as of December 31, 2000 and 2001, and the results
of its operations and cash flows for each of the three years in the period ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States.
/s/Luboshitz Kasierer
LUBOSHITZ KASIERER
ARTHUR ANDERSEN
Tel-Aviv, Israel
April 28, 2002
F-2
RADA ELECTRONIC INDUSTRIES LIMITED
CONSOLIDATED BALANCE SHEETS
In thousands of U.S. dollars, except share and per share data
DECEMBER 31,
----------------------
NOTE 2001 2000
---- -------- ---------
Current assets
Cash and cash equivalents $ 74 $ 20
Trade receivables (net of allowance for
doubtful accounts of $189 and $141 as of
December 31, 2001 and 2000, respectively) 817 894
Other receivables and prepaid expenses (3) 67 687
Recoverable costs and accrued profits not yet
billed (4) 109 192
Inventories (5) 2,022 1,641
-------- --------
Total current assets 3,089 3,434
-------- --------
Long-term assets
Inventories in excess of amounts expected to
be sold currently (5) - 347
Long-term receivables (6) 1,163 911
-------- --------
1,163 1,258
-------- --------
Severance pay funds 1,351 1,505
-------- --------
Property and equipment, net (7)
Cost 18,631 19,783
Less - accumulated depreciation 12,010 11,768
-------- --------
Total property and equipment, net 6,621 8,015
-------- --------
Other assets, net (8) 4,108 4,662
-------- --------
Total assets $ 16,332 $ 18,874
======== ========
The accompanying notes are an integral part of these consolidated financial
statements
F-3
RADA ELECTRONIC INDUSTRIES LIMITED
CONSOLIDATED BALANCE SHEETS
In thousands of U.S. dollars, except share and per share data
DECEMBER 31,
-----------------------
NOTE 2001 2000
---- --------- ---------
Current liabilities
Short-term bank credits and loans (9) $ 5,912 $ 5,581
Current maturities of long-term debt (11) 8 43
Trade payables 797 1,020
Other liabilities and accrued expenses (10) 2,825 2,924
Deferred revenues 2,363 2,408
Billing in excess of incurred costs and profits (4) 224 126
--------- ---------
Total current liabilities 12,129 12,102
--------- ---------
Long-term liabilities
Long-term debt, net of current maturities (11) - 8
Accrued severance pay 1,784 1,938
Loan due to a related party (16) 1,061 -
--------- ---------
2,845 1,946
--------- ---------
Contingencies, commitments and liens (12)
Minority interests 658 757
--------- ---------
Shareholders' equity (13)
Share capital
Ordinary shares of NIS 0.005 par value:
Authorized - 26,000,000 shares; issued
and outstanding - 13,816,839 shares as
of December 31, 2001 and 2000 103 103
Additional paid-in capital 56,646 56,646
Accumulated deficit (56,049) (52,680)
--------- ---------
Total shareholders' equity 700 4,069
--------- ---------
Total liabilities and shareholders' equity $ 16,332 $ 18,874
========= =========
The accompanying notes are an integral part of these consolidated financial
statements
F-4
RADA ELECTRONIC INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands of U.S. dollars, except per share data
FOR THE YEAR ENDED
DECEMBER 31,
----------------------------------
NOTE 2001 2000 1999
---- --------- --------- ---------
Revenues
Sale of ATE products and avionics
equipment $ 5,784 $ 2,530 $ 9,715
Sale of aircraft spare parts and repair and
maintenance services 1,246 848 658
Leasing of equipment 1,312 438 -
--------- --------- ---------
8,342 3,816 10,373
--------- --------- ---------
Cost of revenues (15A) 7,416 5,307 12,707
--------- --------- ---------
Gross profit (loss) 926 (1,491) (2,334)
--------- --------- ---------
Operating expenses
Research and development expenses (15B) 534 730 428
Marketing and selling expenses 1,512 1,292 1,540
General and administrative expenses 2,105 2,320 2,776
--------- --------- ---------
Total operating expenses 4,151 4,342 4,744
--------- --------- ---------
Operating loss from continuing
operations (3,225) (5,833) (7,078)
Financing expenses, net (15C) (210) (861) (1,141)
Other income (expenses), net (15D) (30) 563 505
--------- --------- ---------
(3,465) (6,131) (7,714)
Equity in losses of affiliated company - - (101)
Minority interest in losses of subsidiaries 96 32 292
--------- --------- ---------
Loss from continuing operations (3,369) (6,099) (7,523)
Gain from disposal of discontinued segment - - 306
--------- --------- ---------
Net loss $ (3,369) $ (6,099) $ (7,217)
========= ========= =========
Basic and diluted net loss per share:
From continuing operations $ (0.24) $ (0.46) $ (0.77)
========= ========= =========
From discontinued segment - - $ 0.03
========= ========= =========
Net loss $ (0.24) $ (0.46) $ (0.74)
========= ========= =========
Weighted average number of ordinary
shares used in computing basic
and diluted net loss per share
(in thousands) 13,817 13,305 9,722
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements
F-5
RADA ELECTRONIC INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY (DEFICIENCY)
In thousands of U.S. dollars, except share data
TOTAL
NUMBER OF ADDITIONAL RECEIVABLE RECEIPT ON SHAREHOLDERS'
ORDINARY SHARE PAID-IN ON ACCOUNT ACCOUNT OF ACCUMULATED EQUITY
SHARES CAPITAL CAPITAL OF SHARES SHARES DEFICIT (DEFICIENCY)
------ ------- ------- --------- ------ ------- ------------
Balance at January 1, 1999 6,531,342 $ 94 $ 39,176 $ - $ - $ (39,364) $ (94)
Issuance of ordinary shares (*) 3,110,000 4 6,310 240 - - 6,554
Conversion of loans to ordinary 2,496,016 3 4,873 - - - 4,876
shares
Issuance of ordinary shares in
consideration for services performed 60,000 (**) 90 - - - 90
Consideration received for shares
to be issued - - - - 120 - 120
Net loss - - - - - (7,217) (7,217)
---------- ------ -------- -------- ------- --------- --------
Balance at December 31, 1999 12,197,358 101 50,449 240 120 (46,581) 4,329
Issuance of ordinary shares (*) 1,458,372 2 5,125 - (120) - 5,007
Amount received on account of shares - - 240 (240) - - -
Conversion of loan to ordinary shares 7,292 (**) 28 - - - 28
Issuance of ordinary shares in
connection with settlement of debt 153,817 (**) 804 - - - 804
Net loss - - - - - (6,099) (6,099)
---------- ------ -------- -------- ------- --------- --------
Balance at December 31, 2000 13,816,839 103 56,646 - - (52,680) 4,069
Net loss - - - - - (3,369) (3,369)
---------- ------ -------- -------- ------- --------- --------
Balance at December 31, 2001 13,816,839 $ 103 $ 56,646 $ - $ - $ (56,049) $ 700
========== ====== ========= ======== ======= ========= ========
(*) Net of issuance expenses of approximately $263 and $60 in the years
1999 and 2000, respectively.
(**) Represents an amount less than $1.
The accompanying notes are an integral part of these consolidated financial
statements
F-6
RADA ELECTRONIC INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands of U.S. dollars
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------------
2001 2000 1999
--------- --------- ---------
CASH FLOW FROM OPERATING ACTIVITIES
Net loss $ (3,369) $ (6,099) $ (7,217)
Adjustments to reconcile net loss to net cash used in
operating activities (See Appendix A) 2,468 1,951 3,707
--------- --------- ---------
Net cash used in operating activities (901) (4,148) (3,510)
--------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment (236) (1,020) (1,231)
Capitalization of software development costs (104) (243) (308)
Grant of loans to employees, officers and directors (9) - -
Sale of a consolidated subsidiary (See Appendix B) (14) - -
--------- --------- ---------
Net cash used in investing activities (363) (1,263) (1,539)
--------- --------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of shares and amount received on
account of shares, net - 5,007 6,434
Increase (decrease) in short-term bank credits and loans, net 361 377 (1,207)
Proceeds from issuance of long-term debt and loan to related
party 1,000 15 20
Repayment of long-term debt (43) (146) (436)
--------- --------- ---------
Net cash provided by financing activities 1,318 5,253 4,811
--------- --------- ---------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 54 (158) (238)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 20 178 416
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 74 $ 20 $ 178
========= ========= =========
Noncash transactions:
Conversion of convertible debt, net $ - $ 28 $ 4,876
========= ========= =========
Ordinary shares issued in settlement of debt $ - $ 804 $ 90
========= ========= =========
Receivable from shareholder $ - $ - $ 240
========= ========= =========
Offset of advance from investment in affiliated company $ - $ - $ 1,307
========= ========= =========
Reclassification of property and equipment to inventory $ 325 $ - $ -
========= ========= =========
Supplement disclosures of cash flow activities -
Net cash paid during the year for:
Income taxes $ 13 $ 69 $ -
========= ========= =========
Interest $ 525 $ 520 $ 714
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements
F-7
RADA ELECTRONIC INDUSTRIES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT.)
In thousands of U.S. dollars
DECEMBER 31,
----------------------------------
2001 2000 1999
--------- -------- ---------
APPENDIX A -
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Depreciation and amortization $ 1,710 $ 1,950 $ 2,437
Write-off of inventories - 200 2,718
Loss on investment in affiliated company - - 300
Write-off of property and equipment and other assets 251 217 898
Gain on sale of discontinued segment - - (306)
Loss on sale of a consolidated subsidiary 30 - -
Minority interest in losses of subsidiaries (96) (32) (292)
Equity in losses of affiliated company - - 101
Others 61 29 286
Decrease in trade receivables 21 693 513
Decrease in other receivables and prepaid expenses 559 236 111
Decrease (increase) in inventories 7 (558) 878
Decrease (increase) in long-term receivables 47 (56) -
Decrease (increase) in costs and estimated earnings in
excess of billings on uncompleted contracts, net 181 560 (1,125)
Decrease in trade payables (159) (684) (2,298)
Decrease in other liabilities and accrued expenses (99) (1,591) (1,998)
Increase (decrease) in deferred revenues (45) 1,159 1,442
Increase (decrease) in accrued severance pay, net - (172) 42
--------- --------- ---------
$ 2,468 $ 1,951 $ 3,707
========= ========= =========
DECEMBER 31,
2001
------------
APPENDIX B - SALE OF A CONSOLIDATED SUBSIDIARY (JETBORNE)
Working capital (excluding cash and cash equivalents) $ 69
Property and equipment 2
Long-term assets 238
Minority interest (3)
Loss on realization (30)
Long-term receivable (290)
-------
$ (14)
-------
The accompanying notes are an integral part of these consolidated financial
statements
F-8
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In thousands of U.S. dollars except share and per share data
NOTE 1 - GENERAL
A. RADA Electronic Industries Limited, an Israeli corporation (the
"Company") is engaged in the development, manufacturing and sale
of Automated Test Equipment ("ATE") products, avionics equipment
and aviation data acquisition and debriefing systems.
B. As reflected in the consolidated financial statements, as of
December 31, 2001, the Company had an accumulated deficit of
$56,049 and a working capital deficiency of $9,040. Subsequent to
balance sheet date, a shareholder agreed to convert a $1.0
million loan granted to the Company into shares, under certain
conditions. In addition, this shareholder agreed to advance to
the Company an additional $500 as a loan. Three other
shareholders committed to purchase shares of the Company in the
amount of approximately $950, under certain conditions. The
Company believes that the actions described above, together with
its improved operations will enable it to finance its liquidity
needs at least through December 31, 2002. See Note 18(1) and
18(2).
C. The Company operates a test and repair shop based on the use of
its ATE in Beijing, China through its 80% owned Chinese
subsidiary, Beijing Huari Aircraft Components Maintenance and
Services Co. Ltd. ("CACS"). CACS was established as a joint
venture company with a third party, which owns the remaining 20%
equity interest.
D. The Company sold aircraft spare parts through Jetborne
International, Inc. ("Jetborne"), which was 75% owned by the
Company until December 31, 2001. Jetborne historically purchased
inventory in bulk, mainly at auctions, and sold the spare parts
over long periods of time through a computerized communication
system through which sales and purchases of airplanes spare parts
are effected. In March 2002, the Company sold its 75% equity
interest in Jetborne in consideration for one dollar and recorded
a loss of $30. As of December 31, 2001, the Company did not
consolidate the assets and liabilities of Jetborne in the
December 31, 2001 balance sheet, as the Company did not have
control over Jetborne as of December 31, 2001 and none of its
directors or representatives had functioned as directors or
managers of Jetborne. The Company consolidated Jetborne's results
of operations for the year 2001 and did not include it's assets
and liabilities as of December 31, 2001 (see Note 6).
E. As for major customer see Note 17.
F-9
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared in accordance with generally
accepted accounting principles in the United States ("US GAAP"). The
significant accounting policies followed in the preparation of the
financial statements, applied on a consistent basis, are as follows:
A. USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
B. FINANCIAL STATEMENTS IN U.S. DOLLARS
The consolidated financial statements of the Company have been
prepared in U.S. dollars as the currency of the primary economic
environment in which the operations of the Company and its
subsidiaries (the "Group") are conducted is the U.S. dollar. Most
of the Group's sales are made outside Israel in U.S. dollars, as
is a substantial portion of its expenses and capital issuances.
Thus, the functional and reporting currency of the Group is the
U.S. dollar.
Transactions and balances denominated in U.S. dollars are
presented at their original amounts. Transactions and balances in
other currencies are remeasured into U.S. dollars in accordance
with Statement of Financial Accounting Standards No. 52 "Foreign
Currency Translation" ("SFAS 52") of the U.S. Financial
Accounting Standards Board ("FASB"). Accordingly, items have been
remeasured as follows:
- Monetary items - at the exchange rate in effect on the
balance sheet date.
- Nonmonetary items - at historical exchange rates.
- Revenues and expense items - at the exchange rates in effect
as of the date of recognition of those items (excluding
depreciation and other items deriving from non-monetary
items).
F-10
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
B. FINANCIAL STATEMENTS IN U.S. DOLLARS (Cont.)
All exchange gains and losses from the remeasurement mentioned
above are reflected in the statement of operations. The
representative rate of exchange at December 31, 2001 was
U.S.$1.00 = NIS 4.416; and at December 31, 2000 and 1999 = NIS
4.041 and NIS 4.153, respectively.
C. BASIS OF CONSOLIDATION
The consolidated financial statements include the financial
statements of the Company and its subsidiaries. The Company
consolidates the financial statements of all subsidiaries with
greater that 50% ownership and control. The major subsidiary is
CACS. The Company sold its 75% equity interest in Jetborne and
therefore consolidated only the statement of operations for the
year ended December 31, 2001 (see Note 6). Significant
intercompany balances and transactions have been eliminated in
consolidation.
D. CASH EQUIVALENTS
All highly liquid investments that are not restricted as to
withdraw or use with an, original maturity of three months or
less are considered cash equivalents.
E. ALLOWANCE FOR DOUBTFUL ACCOUNTS
The allowance is determined based upon management's evaluation of
receivables doubtful of collection on a specific identification
basis.
F. INVENTORIES
Inventories are stated at the lower of cost or market value.
Inventory write-offs are provided to cover risks arising from
slow-moving items, excess inventories, and for market prices
lower than cost.
Cost is determined as follows:
Raw materials and components- using "the first-in, first-out"
cost method.
F-11
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
F. INVENTORIES (Cont.)
Work-in-process - represents the cost of manufacturing with the
addition of allocable indirect manufacturing costs.
Finished goods - on the basis of direct manufacturing costs with
the addition of allocable indirect manufacturing costs.
Amounts related to long-term contracts as determined by the
percentage of completion method of accounting are recorded as
"Recoverable cost and accrued profit not yet billed".
Inventories include aircraft spare parts that, although currently
available for sale, are expected to be sold over a period
exceeding one year and are included under long-term assets.
G. RESEARCH AND DEVELOPMENT EXPENSES
Statement of Financial Accounting Standards No. 86 "Accounting
for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," ("SFAS No.86") "requires capitalization of
certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company
and its subsidiaries product development process, technological
feasibility is established upon completion of a working model.
Research and development costs incurred in the process of
producing product masters and product enhancements and producing
the Company's Aircraft Test Systems Programs Sets ("TPS")
software library, which is integrated with the Company's test
station, are generally charged to expenses as incurred, net of
participation of the Office of the Chief Scientist in the Israeli
Ministry of Industry and Trade ("OCS") and the Israel - United
States Binational Industrial Research and Development Foundation
("BIRD Foundation").
Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general
release, have been capitalized.
F-12
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
H. OTHER ASSETS
Capitalized software costs are amortized by the greater of the
amount computed using the: (i) ratio that current gross revenues
from sales of the software to the total of current and
anticipated future gross revenues from sales of that software, or
(ii) the straight-line method over the estimated useful life of
the product (five to twenty years). The Company assesses the
recoverability of this intangible asset on a regular basis by
determining whether the amortization of the asset over its
remaining life can be recovered through undiscounted future
operating cash flows from the specific software product sold.
I. 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. Annual
rates of depreciation are as follows:
Buildings 2.5 - 4%
Machinery and equipment 10 - 33%
Office furniture and equipment 6 - 33%
Motor vehicles 15 - 20%
Leasehold improvements are amortized over the shorter of the
estimated useful life or the lease period.
Assets, in respect of which investment grants have been received,
are presented at cost less the related grant amount. Depreciation
is based on net cost.
F-13
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
J. LONG LIVED ASSETS
The Company periodically evaluates the recoverability and the
appropriateness of the amortization periods of its long-lived
assets in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long Lived
Assets and for the Long Lived Assets to be Disposed of ("SFAS No.
121").The Company recognizes impairment losses for long-lived
assets whenever events or changes in circumstances result in the
carrying amount of the assets exceeding the sum of the expected
future undiscounted cash flows associated with such assets. The
measurement of the impairment losses to be recognized is to be
based on the difference between the fair values and the carrying
amounts of the assets. Impairment loss recorded in the statement
of operations for the years ended December 31, 2001, 2000 and
1999 amounted to $251, $217 and $898, respectively.
K. INCOME TAXES
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standard No. 109, "Accounting
for Income Taxes" ("SFAS No. 109"). 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 based 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 provides a valuation allowance, if necessary to reduce
deferred tax assets to their estimated reliable value.
F-14
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
L. SEVERANCE PAY
The Company's liability for severance pay is calculated pursuant
to Israeli severance pay law generally based on the most recent
salary of the employees multiplied by the number of years of
employment, as of the balance sheet date. Employees are entitled
to one month's salary for each year of employment or a portion
thereof. The Company's liability for all of its Israeli employees
is partly provided by monthly deposits for insurance policies
and/or pension funds and by an accrual. The value of these
policies is recorded as an asset in the Company's balance sheet.
The deposited funds of the Company's employees include profits
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. The value of
the deposited funds is based on the cash surrendered value of
these policies, and includes immaterial profits.
Severance expense recorded in the statement of operations is net
of interest and other income accumulated in the deposits.
Severance expense, for the years ended December 31, 2001, 2000
and 1999 amounted to $194, $29 and $158, respectively.
M. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group used the following methods and assumptions in
estimating their fair value disclosures for financial
instruments:
The carrying amount of cash and cash equivalents, trade
receivables, short-term bank credits and trade payables
approximate their fair value due to the short term maturity of
these instruments.
The carrying amount of long term debts are equivalent or
approximate their fair value as they bear interest at approximate
market rates.
F-15
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
N. CONCENTRATION OF CREDIT RISK
The Groups sells its products and services mainly to financially
sound, well-established customers. Credit risk is concentrated in
the United States, Europe and Israel.
Financial instruments that potentially subject the Groups to
concentrations of credit risk consist principally of cash and
cash equivalent and short-term bank credit.
Cash and cash equivalents are mainly in U.S dollars with major
banks in Israel. Management believes that the financial
institutions that hold the Groups investments are financially
sound and, accordingly, minimal credit risk exists with respect
to these investments.
O. ROYALTY BEARING GRANTS
Royalty-bearing grants in respect of research and development
projects from the OCS and the BIRD Foundation, are recognized at
the time the Company is entitled to such grants on the basis of
the costs incurred and are included as a deduction from research
and development costs.
P. SHARE BASED COMPENSATION
The Company accounts for stock option grants in accordance with
Accounting Principles Board Opinion No. 25 - "Accounting for
Stock Based Compensation" ("APB No. 25") and FASB Interpretation
No. 44 "Accounting for Certain Transactions Involving Stock
Compensation" ("Fin No. 44"). Under APB No.25, when the exercise
price of the Company's share options is less than the market
price of the underlying shares on the date of grant, compensation
expense is recognize. The pro forma disclosures, required by
Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" ("SFAS No. 123"), are provided in
Note 13B.
The Company accounts for shares, stock options and warrants
issued to non-employees in accordance with SFAS No. 123. The
Company uses the Black-Scholes Option Pricing model to value
options and warrants granted to non-employees.
F-16
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
Q. REVENUE RECOGNITION
The Group generates revenues mainly from the sale of products and
from long-term fixed price contracts for ATE, avionics, ground
debriefing systems. In addition, the Group leases ATE and
provides manufacturing services.
Revenues from sales of products are recognized in accordance with
Staff Accounting Bulletin No. 101 "Revenue Recognition in
Financial Statements" ("SAB No. 101"), when shipment has
occurred, persuasive evidence of an arrangement exists, the
vendor's fee is fixed or determinable, no further obligation
remains and collectibility is probable.
Revenues from services are recognized upon performance of the
services.
Revenues from long-term fixed price contracts are recognized
based on Statement of Position No. 81-1 "Accounting for
Performance of Construction - Type and Certain Production - Type
Contracts" ("SOP 81-1"), using contract accounting on a
percentage of completion method based on the ratio of actual
costs incurred to total costs estimated to be incurred over the
duration of the contract. With regard to contracts for which a
loss is anticipated, a provision is made for the entire amount of
the estimated loss at the time such loss becomes evident.
Revenue under operating leases of equipment are recognized in
accordance with Statement of Financial Accounting Standard No. 13
"Accounting for Leases" ("SFAS No. 13"), ratably over the lease
period.
Deferred revenues include unearned amounts received under
services contract, and amounts received from customers but not
yet recognize as revenues.
F-17
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
R. 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 year.
Diluted net loss per share is computed based on the weighted
average number of ordinary shares outstanding during each year,
plus dilutive potential ordinary shares considered outstanding
during the year, in accordance with Statement of Financial
Accounting Standard No. 128 "Earnings per Share" ("SFAS No.
128"). All outstanding share options and warrants have been
excluded from the computation of diluted loss per share because
their effect is anti-dilutive for all periods presented. Options
and warrants to purchase 1,115,200, 2,511,982 and 2,359,894
ordinary shares were not included in the computation of years
1999, 2000 and 2001 diluted loss per share because such options
and warrants were considered anti-dilutive.
S. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS 141") and No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 requires all business
combinations initiated after June 30, 2001, to be accounted for
using the purchase method. Under SFAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized
but are reviewed annually (or more frequently if impairment
indicators arise) for impairment. All other intangible assets
will continue to be amortized over their estimated useful lives.
The amortization provisions of SFAS 142 apply to goodwill and
intangible assets acquired after June 30, 2001. With respect to
goodwill and intangible assets acquired prior to July 1, 2001,
the Company is required to adopt SFAS 142 effective January 1,
2002. The adoption of SFAS 141 and 142 will not have an impact on
the Company's financial position or results of operations since
there is no goodwill and no intangible assets with indefinite
lives.
F-18
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONT.)
S. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (Cont.)
In August 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS
144"). Although SFAS 144 supersedes FASB Statement No. 121, it
retains the requirements of SFAS 121 regarding recognition of
impairment loss for long-lived assets to be held and used (based
on undiscounted cash flows) and resolves certain implementation
issues. Also, the accounting model used in SFAS 121 for
long-lived assets to be disposed of by sale (lower of carrying
amount or fair value less cost to sell) is broadened by SFAS 144
to include discontinued operations and supersedes the reporting
provision of APB Opinion No. 30, "Reporting the Results of
Operations of a Segment of a Business". Therefore, discontinued
operations will no longer be measured on a net realizable value
basis and future operating losses will no longer be recognized
before they occur. SFAS 144 also broadens the presentation of
discontinued operations to include a component of an entity
(rather than a segment of a business). The provisions of SFAS 144
are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within
those years. The Company believes that the adoption of SFAS 144
will not have a material impact on the Company's financial
statements.
NOTE 3 - OTHER RECEIVABLES AND PREPAID EXPENSES
DECEMBER 31,
------------
2001 2000
---- ----
Advances to suppliers $ 19 $483
Prepaid expenses 47 143
Other 1 61
-- --
$ 67 $687
==== ====
F-19
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 4 - CONTRACTS IN PROCESS
Amounts included in the financial statements which relate to
recoverable costs and accrued profits not yet billed on contracts in
process are classified as current assets. Billings on uncompleted
contracts in excess of incurred cost and accrued profits are
classified as current liabilities. Summarized below are the components
of the amounts:
A. RECOVERABLE COSTS AND ACCRUED PROFITS NOT YET BILLED:
DECEMBER 31,
------------
2001 2000
---- ----
Costs incurred on uncompleted
Contracts $ 1,425 $ 732
Accrued profits 1,709 546
----- ---
3,134 1,278
Less - amount billed and progress
Payments 3,021 1,086
Less - estimated loss on contracts 4 -
-- --
$ 109 $ 192
======= =======
B. BILLING IN EXCESS OF INCURRED COSTS AND PROFITS
Costs incurred on uncompleted
Contracts $ 994 $ 2,276
Accrued profits 1,090 2,112
----- -----
2,084 4,388
Less - amount billed and progress
payments 2,308 4,514
----- -----
$ (224) $ (126)
======= =======
F-20
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 5 - INVENTORIES
DECEMBER 31,
------------
2001 2000
---- ----
Current:
Raw materials and components $ 1,199 $ 933
Work in process 417 302
Finished goods 406 406
--- ---
$ 2,022 $ 1,641
======== ========
Inventories in excess of amounts expected
to be sold currently:
Aircraft spare parts $ - $ 347
======== ========
Write-off of inventories, for the years ended December 31, 2001,
2000 and 1999 amounted to $0, $200 and $2,718 respectively.
NOTE 6 - LONG-TERM RECEIVABLES
DECEMBER 31,
------------
2001 2000
---- ----
Loan to former Chief Executive Officer (1) $ 605 $ 632
Loan to a former officer (1) 239 250
Loans to employees 29 29
Loan to Jetborne (2) 290 -
--- --
$ 1,163 $ 911
======== =======
(1) The loans to former officers are linked to the Israeli Consumer
Price Index ("CPI") and bears interest of 4% per annum. The loans
were granted from 1989 through 1997. The Company is currently in
litigation with its former CEO and the former officer - see Note
16.
(2) Loan to Jetborne - On December 31, 2001, the Company sold its 75%
ownership in Jetborne in consideration for one dollar. Jetborne
will repay the Company within ten years from the date of the
agreement the outstanding loan and debt including accrued
interest as of December 31, 2001. In addition, Jetborne will pay
the Company royalties as a percentage of the gross revenues of
Jetborne which derived from the inventory held by Jetborne as of
December 31, 2001. It is agreed that the first payment on account
of the royalties shall be deducted from the outstanding loan and
debt. In any event, all payments due to the Company under the
agreement will be paid no later than the tenth anniversary of the
agreement. The outstanding loan and debt are presented at an
estimated discounted fair value of $290. Accordingly, the Company
recorded a loss of $30 as a result of the sale of Jetborne
pursuant to the agreement.
F-21
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 7 - PROPERTY AND EQUIPMENT, NET
DECEMBER 31,
------------
2001 2000
---- ----
COST
Factory building $ 1,940 $ 1,940
Other building 1,042 1,042
Machinery and equipment 14,386 15,548
Motor vehicles 623 623
Office furniture and equipment 422 412
Leasehold improvements 20 20
Tools and implements - base stock 198 198
--- ---
18,631 19,783
------ ------
ACCUMULATED DEPRECIATION
Factory building 1,030 958
Other building 104 78
Machinery and equipment 10,158 10,110
Motor vehicles 483 414
Office furniture and equipment 231 206
Leasehold improvements 4 2
-- --
12,010 11,768
------ ------
Depreciated cost $ 6,621 $ 8,015
========= =========
The Company's factory building in Beit-Shean, Israel is located on
land leased from the Israel Lands Administration until the year
2034.
Depreciation expense was $1,103, $1,071 and $1,398 for the years
ended December 31, 2001, 2000 and 1999, respectively. Write-off of
property and equipment was $200, $47 and $720 for the years ended
December 31, 2001, 2000 and 1999, respectively.
Machinery and equipment, net includes self constructed machinery and
equipment under rental as of December 31, 2001 and 2000 in the
amount of approximately $1,800 and $1,900, respectively.
Liens - see Note 12G.
F-22
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 8 - OTHER ASSETS, NET
DECEMBER 31,
------------
2001 2000
---- ----
COST
Test Systems Programs Sets (TPS) $ 8,275 $ 8,171
Product masters and enhancements 1,411 1,411
----- -----
$ 9,686 $ 9,582
------- -------
ACCUMULATED AMORTIZATION
Test Systems Programs Sets $ 4,449 $ 4,073
Product masters and enhancements 1,129 847
----- -----
Amortized cost 5,578 4,920
----- -----
$ 4,108 $ 4,662
======= =======
Amortization expense was $607, $879 and $1,039 for the years ended
December 31, 2001, 2000 and 1999, respectively.
Write-off of other assets was $51, $170, $178 for the years ended
December 31, 2001, 2000 and 1999, respectively.
NOTE 9 - SHORT-TERM BANK CREDITS AND LOANS
DECEMBER 31,
------------
2001 2000
---- ----
Loans in U.S. dollars (1) $ 4,043 $ 2,082
Short-term bank credits in U.S. Dollars 1,000 773
Short-term bank credits in NIS (2) 869 1,580
Loans in NIS (3) - 1,146
-- -----
$ 5,912 $ 5,581
======== ========
(1) The interest rate at December 31, 2001 is between 4.5% and 4.9%.
(December 2000 - 7%-8.75%)
(2) The interest rate at December 31, 2001 is approximately 6.8%.
(3) The interest rate at December 31, 2000 is between 10.5% and
11.8%.
The weighted average interest rate on the aggregate amount of
short-term bank credits and loans at December 31, 2001 is 5% (December
2000 - 10%).
The total authorized credit line of the Company at December 31, 2001
is $5,795.
Liens - see Note 12G.
F-23
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 10 - OTHER LIABILITIES AND ACCRUED EXPENSES
DECEMBER 31,
------------
2001 2000
---- ----
Payroll and related expenses $ 1,083 $ 1,131
Accrued professional fees 141 237
Accrued royalties (see Note 13B and 13C) 469 450
Provision for legal proceedings 394 427
Other 738 679
--- ---
$ 2,825 $ 2,924
======== =======
NOTE 11 - LONG-TERM DEBT, NET OF CURRENT MATURITIES
DECEMBER 31,
------------
2001 2000
---- ----
Lease obligations and others $ 8 $ 51
Less - current maturities 8 43
-- --
$ - $ 8
---- -----
Liens - see Note 12G.
F-24
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 12 - CONTINGENCIES, COMMITMENTS AND LIENS
A. As of December 31, 2001, the Company was a party to various legal
proceedings, including the following:
(1) In June 1998, the Company's Board of Directors accepted the
resignation of the Company's former CEO. In November 1998,
the former CEO commenced legal proceedings against the
Company in the Tel Aviv Regional Court for Labor Disputes,
claiming approximately $500 in respect of salary, severance
pay, vacation pay and other fringe benefits. The former CEO
also claimed that a personal loan that was provided to him
by the Company had been forgiven. In May 2001, an additional
claim of approximately $250 was filed by the former CEO
against the Company in the Tel-Aviv District Court for
damages allegedly caused to him as a result of attachment
imposed on certain of his assets by the Company that was
subsequently cancelled by the Court. In addition, in 2001,
the Company filed a claim against a former Board member that
in case the former CEO's claim in the Labor Court is
accepted by the court, damages in the amount of $250 will be
covered by the former Board member. Furthermore, the Company
filed additional suits against the former CEO and a former
director in the amount of $250 for funds that they allegedly
transferred from the Company to a third party. In September
1999 and in 2001, the Company filed suits against the former
CEO and the former Board member in the District Court of Tel
Aviv in the amount of $1,650 for damages caused to the
Company in the purchase of a subsidiary and negligence of
management. In August 2000, the Company filed an additional
suit against the former CEO in the amount of approximately
$500 regarding the repayment of the loan provided to the
former CEO. Legal counsel believes that the Company has a
valid defense against the claims. Although these claims are
in preliminary stages, management believes that there will
be no material adverse effect on the Company's financial
position or result of operations.
F-25
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 12 - CONTINGENCIES, COMMITMENTS AND LIENS (CONT.)
(2) In 1999 and 2000, the former CEO and his son filed a few
complaints against the President and are seeking damages for
alleged slander by the defendant in the amount of
approximately $800.
(3) In 1999, a supplier filed a claim against the Company's
former subsidiary, Vectronics. As part of the sale of
Vectronics, the Company agreed to take responsibility for
former claims against Vectronics. The claim is in the amount
of $2,500 for damages relating to Vectronic's alleged
failure to manufacture a certain component for the supplier.
In the opinion of the Company's legal counsel, Vectronics
has a strong defense against the allegations.
(4) In 2000, a former employee and officer of the Company filed
a claim against the Company in the Tel Aviv District Court
for Labor Disputes claiming approximately $580 in respect of
severance pay, vacation pay and other fringe benefits. In
2001, the Company filed a counter-claim in the amount of
$300 in respect of the repayment of a personal loan that was
provided to the former employee. In the opinion of the
Company's legal counsel, the Company has a strong defense
against the allegations.
(5) In May 2001, a former director filed a claim against the
Company, whereby he claims that he is entitled to 600,000
options to purchase Ordinary shares of the Company. Legal
counsel believes that the claim does not have any merit.
(6) The Company is involved from time to time in various legal
claims in the ordinary course of business, including claims
by agents for commissions and others. The Company's
management, based on the advice of its legal counsel,
believes such claims will not have a material adverse effect
on the financial position or results of operations of the
Company.
Presently, the Company is unable to predict the final outcome of
the above claims. The Company has accrued an amount which it
believes is sufficient to cover any damages, if any, that may
result from these claims.
F-26
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 12 - CONTINGENCIES, COMMITMENTS AND LIENS (CONT.)
B. The Company's research and development efforts have been
partially financed through royalty bearing programs
sponsored by the OCS. In return for the OCS's participation,
the Company is committed to pay royalties at a rate ranging
from 3 % to 5% of sales of the products supported by the
OCS, up to 100% of the amount of such participation
received. The Company's total obligation for royalties, net
of royalties paid or accrued totaled approximately $686 as
of December 31, 2001.
The total amount of royalties charged to operations in the
years ended December 31, 1999, 2000 and 2001 was
approximately $73, $2 and $153, respectively.
C. Research and development projects undertaken by the Company
and a subsidiary abroad were partly financed by the BIRD
Foundation. The Company and the subsidiary are committed to
pay royalties to the BIRD Foundation at a rate of 2.5% of
sales proceeds for which the BIRD Foundation provided
funding up to 150% of the sum financed by the BIRD
Foundation. The Company's and subsidiaries total obligation
for royalties, net of royalties paid or accrued, totaled
approximately $1,918 as of December 31, 2001.
The total amount of royalties charged to operations for in
the years ended December 31, 1999, 2000 and 2001 was
approximately $0, $29 and $13, respectively.
D. The offices of the Company and its subsidiaries are rented
under non-cancelable operating leases expiring by January
31, 2003. Annual minimum future rental payments under the
leases, at exchange rates in effect on December 31, 2001,
are approximately as follows:
2002 $ 150
2003 12
--
$ 162
=====
Rent expense for the years ended December 31, 2001, 2000 and
1999 was $171, $200 and $179, respectively.
F-27
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 12 - CONTINGENCIES, COMMITMENTS AND LIENS (CONT.)
E. The vehicles of the Company are rented under operating leases
expiring by July 1, 2005. Annual minimum future rental payments
under the leases, at exchange rates in effect on December 31,
2001, are approximately as follows:
2002 $ 107
2003 107
2004 92
2005 18
--
$ 324
=====
Rent expense for the years ended December 31, 2001, 2000 and 1999
was $24, $7 and $0, respectively.
F. The Company has certain offset obligations with the Ministry of
Economic Affairs of the Netherlands to purchase equipment. The
offset obligations expire August 16, 2003.
G. The Company has recorded floating liens on all of its assets and
specific liens on certain assets for liabilities to the banks and
other creditors.
NOTE 13 - SHAREHOLDERS' EQUITY
A. SHARE CAPITAL
Ordinary Shares confer upon their holders voting rights, the
right to receive cash dividends and the right to share in excess
assets upon liquidation of the Company.
In March 2001, the Company effected a 2.5 to 1 reverse stock
split with respect to its ordinary shares. All shares, stock
options and warrants and net loss per share amounts in these
financial statements have been restated for all periods to
reflect the reverse stock split.
In February 1999, the Company issued 1,360,000 Ordinary shares in
a private placement to certain investors in consideration for an
aggregate amount of $2,125.
In February 1999, the Company issued 270,592 Ordinary shares in
connection with the conversion of a short-term loan granted to
the Company in June 1998 in the amount of $677, including accrued
interest as of the date of conversion. Since these shares were
not registered, as required by the loan agreement, the Company
issued an additional 80,000 shares for no further consideration.
Expense for the value of these shares was not recorded as the
amount is not material.
F-28
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 13 - SHAREHOLDERS' EQUITY (CONT.)
A. SHARE CAPITAL (Cont.)
In March 1999, the Company issued 40,000 Ordinary shares in
connection with services provided to the Company in the amount of
$90. Since these shares were not registered as agreed upon with
the service provider, the Company agreed to issue an additional
20,000 unregistered shares for no further consideration. Expense
for the value of the 20,000 unregistered shares was not recorded
as the amount is not material.
In June 1999, the Company issued 320,000 Ordinary shares in a
private placement to a shareholder in consideration for $460 and
1,280,000 Ordinary shares in consideration for the conversion of
a loan in the amount of $2,037 granted to the Company in May
1998.
In August 1999, the Company issued 1,310,000 Ordinary shares in a
private placement to certain investors in consideration for an
aggregate amount of $3,865.
In August 1999, the Company issued 865,424 Ordinary shares in
connection with a loan granted to the Company in September 1998
in the amount of $2,142 including interest not paid as of the
date of the conversion.
In February 2000, the Company issued 518,372 Ordinary shares in a
private placement to certain investors in consideration for an
aggregate amount of approximately $2,758.
In May 2000, the Company issued 940,000 Ordinary shares in a
private placement to certain investors in consideration for an
aggregate amount of approximately $2,249.
During 2000, the Company issued 36,230 Ordinary shares to a
services provider in connection with settlement of a debt in the
amount of $304. All shares issued to the above mentioned service
provider were issued at market price which represented fair
market value.
During 2000, the Company issued 117,587 Ordinary shares to an
additional service provider in connection with settlement of a
debt in the amount of $500. All shares issued to the above
mentioned service provider were issued at market price which
represented fair market value.
In August 2000, the Company issued 7,292 Ordinary shares in
respect of a loan in the amount of $28 given to the Company in
December 1997.
F-29
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 13 - SHAREHOLDERS' EQUITY (CONT.)
B. STOCK OPTION PLANS
In 1993, the Company's Board of Directors approved the adoption
of an Employee Stock Option Plan (the "1993 Plan"), which
authorizes the grant of options to purchase up to an aggregate of
200,000 ordinary shares to officers, directors, consultants and
key employees of the Company and its subsidiaries. Options
granted under the 1993 Plan expire within maximum of ten years
from the date of grant. The 1993 Plan will expire on November 23,
2003 unless sooner terminated by action of the Board of
Directors. Options granted under the Company's Plans vest ratably
over three years, one third on each anniversary of the grant.
The exercise price of an option granted to an employee may not be
less than 60% of the fair market value of the Company's ordinary
shares on the date of grant of the option. The exercise price of
an option granted to a non-employee director or consultant may
not be less than 80% of the fair market value of the Company's
ordinary shares on the date of grant of the option.
In 1994, the Company's Board of Directors approved the adoption
of an Employee Stock Option Plan (the "1994 Plan"), which
authorizes the grant of options to purchase up to an aggregate of
200,000 ordinary shares to officers, directors, consultants and
key employees of the Company and its subsidiaries. The terms of
the 1994 Plan are substantially identical to those of the 1993
Plan.
In 1996, the Company's Board of Directors approved the adoption
of an Employee Stock Option Plan (the "1996 Plan"), which
authorizes the grant of options to purchase up to an aggregate of
240,000 ordinary shares to officers, directors, consultants and
key employees of the Company and its subsidiaries. The terms of
the 1996 Plan are substantially identical to the terms of the
plan described above.
In 1999, the Company's Board of Directors and shareholders
approved the adoption of an Employee Stock Option Plan (the "1999
Plan"), which authorizes the grant of options to purchase up to
an aggregate of 800,000 ordinary shares to employees, officers,
and directors of the Company and its subsidiaries. The terms of
the 1999 Plan are substantially identical to the Plans described
above.
F-30
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 13 - SHAREHOLDERS' EQUITY (CONT.)
B. STOCK OPTION PLANS (Cont.)
In addition, in 1999, the Board of Directors approved the
issuance of 840,000 warrants to purchase ordinary shares to the
President and certain directors of the Company. The warrants were
granted at an exercise price equal to or greater than the fair
market value of an ordinary share at the date of grant. The
remaining terms of the warrants are substantially identical to
the terms described above. In November 2000, the shareholders of
the Company approved the increase in the number of shares subject
to the 1999 Plan by an additional 240,000 ordinary shares. At
December 31, 2001, 642,000 options were available for grant under
the Plans described above.
All options were granted at fair market value. Transactions
related to the above plans during the years ending December 31,
2001, 2000 and 1999 were as follows:
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF EXERCISE OF EXERCISE OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------- -------- ------- -------- ------- ----------
2001 2000 1999
-------------------- -------------------- -----------------------
Options outstanding at
beginning of the year 1,742,000 $ 5.40 1,155,200 $ 5.98 360,000 $ 4.90
Granted - - 664,800 4.50 854,000 6.30
Forfeited or cancelled (104,000) 4.78 (78,000) 5.85 (58,800) 4.35
-------- ---- ------- ---- ------- ----
Options outstanding at
end of the year 1,638,000 $ 5.48 1,742,000 $ 5.40 1,155,200 5.98
========= ====== ========= ======= ========= ====
Exercisable at end
of year 949,200 $ 4.71 531,867 $ 4.08 237,067 $ 5.43
======= ====== ======= ======= ======= =======
Weighted average
fair value of options
granted $ - $ - $ -
====== ======= =======
F-31
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 13 - SHAREHOLDERS' EQUITY (CONT.)
B. STOCK OPTION PLANS (Cont.)
The following table summarizes information about options
outstanding and exercisable at December 31, 2001:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------- -------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED- OUTSTANDING WEIGHTED-
AT REMAINING AVERAGE AT AVERAGE
RANGE OF EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 2001 LIFE (YEARS) PRICE 2001 PRICE
---------------- ------------ ------------ --------- ------------ ---------
$ 2.25-6.25 1,202,400 7.87 $ 4.24 781,600 $ 3.80
$ 6.50-10.00 427,600 7.67 8.82 159,600 8.72
$ 13.70 8,000 2.00 13.70 8,000 13.70
----- ----- ----- -----
1,638,000(*) $ 5.48 949,200 $ 4.71
========== ====== ======= =======
(*) Includes 840,000 warrants outstanding to directors of the
Company.
The Company accounts for stock option grants to employees and
directors in accordance with APB No. 25. Pro forma information
regarding net loss and net loss per share is required by SFAS No.
123 as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant, using
the Black and Scholes Option Valuation Model, with the following
weighted-average assumptions for each of the three years in the
period ended December 31, 2001: (1) expected life of option of
two years; (2) dividend yield of 0%; (3) expected volatility of
36%; and (4) risk-free interest rate of 1.75% (5% -2000 and
1999). If deferred compensation had been determined under the
above mentioned fair value method, the effect on the Company's
net loss and net loss per share would have been immaterial for
all the reported periods.
F-32
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 13 - SHAREHOLDERS' EQUITY (CONT.)
C. WARRANTS
In May 2001, in connection with the loan described in Note 16, a
warrant to purchase 91,912 ordinary shares was issued to a
shareholder at an exercise price of $2.176 per ordinary share
exercisable until June 2003. As of December 31, 2001, no shares
were issued in respect to the above mentioned warrant.
In May 2000, warrants to purchase 388,778 ordinary shares were
issued to investors who participated in the February 2000 private
placements, at an exercise price of $2.75 per share, exercisable
until June 2003. As of December 31, 2001, no shares were issued
in respect to the abovementioned warrants.
In May 1998, in connection with a loan granted to the Company by
a shareholder, warrants to purchase 144,000 ordinary shares were
issued, to the shareholder at exercise prices between $3.75 and
$6.25 per share, exercisable until June 2003. The Company
accounted for this warrant grant in accordance with Accounting
Principles Board Opinion No. 14 - "Accounting for Convertible
Debt and Debt Issued with Purchase Warrants" ("APB No. 14"). As
of December 31, 2001, no shares were issued in respect to the
above mentioned warrants.
During 1997 and 1998, warrants to purchase 80,000 ordinary shares
were issued to the President of the company at exercise prices
between $3.06 and $6.13 per ordinary share, with no expiry date.
As of December 31, 2001, no shares were issued in respect to the
above mentioned warrants. The above mentioned warrants were
issued at a market price which represented fair market value at
each of the dates of grant.
D. DIVIDENDS
The Company has never paid cash dividends to shareholders. The
Company intends to retain future earnings for use in its business
and does not anticipate paying cash dividends on its ordinary
shares in the foreseeable future. Any future dividend policy will
be determined by the Board of Directors and will be based upon
conditions then existing, including results of operations,
financial condition, current and anticipated cash needs,
contractual restrictions and other conditions as the Board of
Directors may deem relevant.
F-33
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 14 - TAXES ON INCOME
A. TAX BENEFITS UNDER THE LAW FOR THE ENCOURAGEMENT OF CAPITAL
INVESTMENT, 1959.
The Company has been granted an "Approve Enterprise" status for
one investment program in the alternative program, by the Israeli
Government under the Law for Encouragement of Capital
Investments, 1959 ("the Law"). Since the Company is a "foreign
investors' company", as defined by the Law, it is entitled to a
ten-years period of benefits, for enterprises approved after
April 1993. The main tax benefits from said status are a tax
exemption for two years, and a reduced tax rate (based on the
percentage of foreign shareholding in each tax year) on income
from its approved enterprise, for the remainder of the benefit
period. These tax benefits are subject to a limitation of the
earlier of twelve years from commencement of operations, or
fourteen years from receipt of approval. In the event of a
distribution of a cash dividends out of tax-exempt income, the
Company will be liable to corporate tax at a rate of 25% in
respect of the amount distributed. As the Company has not yet
reported any taxable income, the benefit period has not yet
commenced.
Income from sources other than the Approved Enterprise during the
benefit period will be subject to tax at the regular corporate
tax rate of 36%.
The Company is entitled to charge accelerated depreciation in
respect of machinery and equipment used by the Approved
Enterprise.
The entitlement to the above mentioned benefits is conditional
upon the Company's fulfilling the conditions stipulated by the
above mentioned law, regulations published thereunder and the
certificates of approval for the specific investments in approved
enterprises. In the event of failure to comply with these
conditions, the benefits may be canceled and the Company may be
required to refund the amount of the benefits, in whole or in
part, with the addition of linkage differences, to the CPI and
interest.
F-34
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 14 - TAXES ON INCOME (CONT.)
B. MEASUREMENT OF TAXABLE INCOME UNDER THE INCOME TAX (INFLATION
ADJUSTMENTS) LAW
Results for tax purposes are measured and adjusted in accordance
with the change in the CPI. As explained in Note 2B, the
consolidated financial statements are presented in U.S. dollars.
The differences between the change in the Israeli CPI and in the
NIS/U.S. dollar exchange rate cause a difference between taxable
income or loss and the income or loss before taxes reflected in
the consolidated financial statements. In accordance with
paragraph 9(f) of SFAS No. 109, the Company has not provided
deferred income taxes on this difference between the financial
reporting basis and the tax basis of assets and liabilities.
C. THE LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969
The Company is an "Industrial Company" under the Law for the
Encouragement of Industry. The principal benefit is the
deductibility of expenses in connection with a public offering.
D. As of December 31, 2001, the net operating loss carryforwards for
tax purposes relating to the Company in Israel amounted to
approximately $43,745. Carryforward losses in Israel may be
carried forward indefinitely and may be offset against future
taxable income. The Company expects that during the period in
which these tax losses are utilized its income would be
substantially tax-exempt, and accordingly, no deferred tax asset
has been recorded.
As of December 31, 2001, carryforward losses relating to
non-Israeli companies, approximately $4,255. Carryforward losses
in non-Israeli companies may be carried forward indefinitely and
may be offset against future taxable income. As the Company
believes that the realization of this carryforward loss is not
more likely than not to be realized, the Company has recorded a
valuation allowance in respect of the entire amount of the
deferred tax asset relating to the carryforward losses.
E. Final tax assessments have been received by the Company in Israel
through the tax year 1998. Based on certain disputed tax
assessments of the Company's U.S. subsidiaries an amount of
approximately $50 is due to the Internal Revenue Service. The
Company is appealing the assessment and does not believe it will
ultimately be required to pay this balance.
F-35
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 14 - TAXES ON INCOME (CONT.)
F. LOSS BEFORE INCOME TAXES
YEAR ENDED DECEMBER 31,
------------------------------
2001 2000 1999
---- ---- ----
Israel $ 2,837 $ 5,869 $ 4,146
Others 532 230 3,071
--- --- -----
$ 3,369 $ 6,099 $ 7,217
======= ======= =======
G. The main reconciling items between the statutory tax rate of the
Company and the effective tax rate are the non-recognition of tax
benefits from accumulated net operating losses carryforward and
other temporary differences among the various subsidiaries
worldwide due to the uncertainty of the realization of such tax
benefits.
NOTE 15 - SELECTED STATEMENTS OF OPERATIONS DATA
A - COST OF REVENUES
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
---- ---- ----
Salaries and employee benefits 2,598 1,232 2,322
Procurement 1,928 908 3,291
Estimated loss (profit) on
contracts - (142) 342
Depreciation and amortization 1,592 1,885 2,268
Write-off of inventories - 200 2,718
Other manufacturing costs 263 321 477
Cost of sale of aircraft spare parts
and repair and maintenance services 1,035 903 1,289
----- --- -----
$7,416 $5,307 $12,707
====== ====== =======
F-36
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 15 - SELECTED STATEMENTS OF OPERATIONS DATA (CONT.)
B - RESEARCH AND DEVELOPMENT EXPENSES
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
---- ---- ----
Salaries and employee benefits $ 373 $ 559 $ 488
Subcontractors 55 63 74
Materials 16 48 -
Other 194 303 174
--- --- ---
638 973 736
Capitalization of software
development costs (104) (243) (308)
---- ---- ----
$ 534 $ 730 $ 428
====== ======== ======
C - FINANCING EXPENSES, NET
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
---- ---- ----
INCOME:
Translation adjustments $ 335 $ - $ -
Interest income on cash
equivalents and bank deposits 33 - 10
Other - - 84
-- -- --
368 - 94
--- -- --
EXPENSES:
Translation adjustments - 185 102
Interest on long-term debt 6 27 230
Interest on short-term
loans and other credit balances 418 540 462
Bank commissions 63 97 152
Interest to related parties 61 - 289
Other 30 12 -
-- -- --
578 861 1,235
--- --- -----
$ (210) $ (861) $ (1,141)
======= ======= ========
D - OTHER INCOME (EXPENSES), NET
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
---- ---- ----
Loss on sale of subsidiary (1999 -
loss on investment in affiliated
company) $ (30) $ - $ (300)
Other - 563 805
------ ------ ------
$ (30) $ 563 $ 505
====== ====== ======
F-37
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 16 - RELATED PARTY BALANCES AND TRANSACTIONS
Related party balances reflected in the balance sheets as of December
31, 2001 and 2000 are as follows:
DECEMBER 31,
------------
2001 2000
---- ----
Loan due to a related party (1) $1,061 $ -
====== ====
Balance due to related party $ 12 $ -
====== ====
(1) In 2001, a Company's shareholder and director granted a loan to
the Company in the amount of $1,000 at an annual interest rate of
10% until December 31, 2001 and 15% annual interest rate
commencing January 1, 2002. In June 2002 the loan and the accrued
interest were converted into 2,775,201 ordinary shares. (See Note
18(2)).
Related party transactions reflected in the statement of operations
for the years ended December 31, 2001, 2000, and 1999 are as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
---- ---- ----
Affiliated company:
Sales revenues $ - $ 24 $ 24
Commission expense to former
Director - - 32
Loss on investment in affiliated
company - - 300
Purchases 43 - -
Other - 183 -
Shareholder:
Interest expense 61 - 289
F-38
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 17 - CUSTOMERS AND GEOGRAPHIC INFORMATION
In accordance with SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information", the Company is organized and
operates as one business segment, which develops, manufactures and
sales ATE products, avionics equipment and aviation data acquisition
and debriefing systems.
A. REVENUES BY GEOGRAPHIC AREAS
Revenues are attributed to geographic area based on the location of
the end customers as follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
---- ---- ----
North America $ 3,931 $ 1,416 $ 944
Europe 1,826 721 6,597
Israel 1,963 1,326 2,297
Other 622 353 535
--- --- ---
Total $ 8,342 $ 3,816 $ 10,373
======== ======= ========
B. REVENUES
Revenues from single customers which exceed 10% of the total revenues
in the reported year as a percentage of total revenues, are as
follows:
YEAR ENDED DECEMBER 31,
-----------------------
2001 2000 1999
---- ---- ----
% % %
---- ---- ----
Customer A 12 13 16
Customer B (*) 12 (*)
Customer C (*) 12 16
Customer D - - 20
Customer E (*) (*) 15
Customer F 16 16 (*)
Customer G 17 - -
(*) Less than 10%.
F-39
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 17 - CUSTOMERS AND GEOGRAPHIC INFORMATION (CONT.)
C. LONG LIVED ASSETS BY GEOGRAPHIC AREAS
AS OF DECEMBER 31,
------------------
2001 2000
---- ----
Israel $ 8,285 $ 9,833
China 2,444 2,844
----- -----
$10,729 $12,677
======= =======
NOTE 18 - SUBSEQUENT EVENT (UNAUDITED)
1. In June 30, 2002, the Company issued 1,938,766 ordinary shares in
a private placement to certain investors in consideration for an
aggregate amount of $950. In addition, such investors will be
issued warrants to purchase 4,302,041 of the Company's ordinary
shares. Such warrants will be valid for five years and will be
exercisable during the first 36 months after issuance at an
exercise price of $2 per share, and thereafter, during the
following 24 month period, at an exercise price which will be
equal to the higher of: (i) $2 per share or (ii) 50% of the
average closing price during the ten trading days prior to an
exercise date.
2. In June 2002, the Company issued 2,775,201 ordinary shares in a
private placement to a shareholder in consideration for a loan
that was given to the company in the amount of $1,350 ($1,000
outstanding as of December 31, 2001). In addition, the Company
will issue the shareholder warrants to purchase 8,265,306
ordinary shares. Such warrants will be valid for five years and
will be exercisable during the first 36 months at an exercise
price of $2 per share, and thereafter, during an additional
period of 24 months, at an exercise price which shall be equal to
the higher of: (i) $2 per share or (ii) 50% of the average
closing price of one ordinary shares during the ten trading days
prior to the exercise date.
F-40
RADA ELECTRONIC INDUSTRIES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
In thousands of U.S. dollars, except share and per share data
NOTE 18 - SUBSEQUENT EVENT (UNAUDITED)(CONT.)
3. On June 6, 2002, the Company announced that its ordinary shares
will trade on the Nasdaq SmallCap Market effective as of the open
of business on June 10, 2002. The Company's ordinary shares will
continue to be listed on Nasdaq SmallCap Market via an exception
from the minimum $2.5 million net tangible assets requirement.
While the Company failed to meet this requirement as of September
30, 2001, the Company was granted a temporary exception from this
standard subject to the Company meeting certain conditions. The
exception will expire on August 30, 2002. In the event that the
Company is deemed to have met the terms of the exception, it
shall continue to be listed on the Nasdaq SmallCap market. The
Company believes that it can meet these conditions, however,
there can be no assurance that it will do so. If at some future
date the Company's ordinary shares should cease to be listed on
the Nasdaq SmallCap market, they may continue to be listed in the
OTC-Bulletin Board.
# # # # #
F-41
S I G N A T U R E S
THE REGISTRANT HEREBY CERTIFIES THAT IT MEETS ALL OF THE REQUIREMENTS
FOR FILING ON FORM 20-F AND THAT IT HAS DULY CAUSED AND AUTHORIZED THE
UNDERSIGNED TO SIGN THIS AMENDED REGISTRATION STATEMENT ON ITS BEHALF.
RADA ELECTRONIC INDUSTRIES LTD.
By: /s/ Herzle Bodinger
-----------------------
Name: Herzle Bodinger
Title: President
Dated: August 29, 2002
76
EXHIBIT INDEX
Exhibit Description Page No.
------- ----------- --------
3.1* Memorandum of Association of the Registrant
3.2* Articles of Association of the Registrant
4.1* Specimen of Share Certificate
10.1* 1993 Employee Stock Option Plan, as amended
10.2* 1994 Employee Stock Option Plan, as amended
10.3* 1996 Employee Stock Option Plan, as amended
10.4* 1999 Employee Stock Option Plan, as amended
10.5* Form of warrants to directors
10.6* Loan Agreement dated June 3, 2001 between the Registrant
and Howard Yeung
10.7* Deed of Termination of Joint Venture Agreement dated June
3, 2001, effective as of January 1, 2000 and Agreement for
the acquisition of part of the issued share capital of New
Reef Holding Ltd. dated June 3, 2001, effective as of
January 1, 2000
10.8** Letter Agreement dated May 15, 2002 between the Registrant and
the authorized representative of Howard P.L. Yeung re Conversion
of Outstanding Loans into Ordinary Shares and Warrants
10.9** Letter Agreements dated May 15, 2002 between the Registrant
and the Investors re Private Placement of Ordinary Shares and
Warrants
23.1 Consent of Kost, Forer & Gabbay, Certified Public Accountants
(Israel)
99.1 CEO Certification Pursuant To 18 U.S.C. Section 1350 As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
99.2 CFO Certification Pursuant To 18 U.S.C. Section 1350 As Adopted
Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002
-------------------
* Filed as an exhibit to our Annual Report on Form 20-F for the year ended
December 31, 2000 and incorporated herein by reference.
** Filed as an exhibit to our Annual Report on Form 20-F for the year ended
December 31, 2001 and incorporated herein by reference.