Filed Pursuant to
Rule 424(b)(1)
Registration No. 333-117954
PROSPECTUS
RADA ELECTRONIC INDUSTRIES LTD.
6,305,892 Ordinary Shares
This prospectus relates to up to 6,305,892 ordinary shares of RADA
Electronic Industries Ltd. that the selling shareholders named in this
prospectus or their transferees may offer from time to time. Of the ordinary
shares offered hereby, 1,800,000 ordinary shares were issued to the selling
shareholders and up to: (i) 1,857,142 ordinary shares are issuable upon
conversion of $3 million of convertible notes, (ii) 1,430,000 ordinary shares
are issuable upon exercise of additional investment rights; and (iii) 1,218,750
ordinary shares are issuable upon exercise of warrants. Such convertible notes,
additional investment rights and warrants were issued to the selling
shareholders pursuant to a Securities Purchase Agreement, dated as of July 9,
2004. The registration of the ordinary shares does not necessarily mean that the
selling shareholders or their transferees will offer or sell their shares.
We are not offering or selling any of our ordinary shares pursuant to
this prospectus. We will not receive any of the proceeds from the sale by the
selling shareholders of the ordinary shares offered by this prospectus. We will
bear all expenses in connection with the preparation of this prospectus.
Our ordinary shares are listed for trading on the Nasdaq SmallCap Market
under the symbol "RADIF." On August 10, 2004, the closing price of our ordinary
shares on the Nasdaq SmallCap Market was $1.64.
These securities involve a high degree of risk. See "Risk Factors" beginning on
page 6.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
AUGUST 11, 2004
Table of Contents
-----------------
Page
----
Notice Regarding Forward-Looking Statements......................... 3
Prospectus Summary.................................................. 4
Risk Factors........................................................ 6
Capitalization and Indebtedness..................................... 17
Reasons for the Offer and Use of Proceeds........................... 18
Market Price Data................................................... 18
Selected Consolidated Financial Data................................ 18
Selling Shareholders................................................ 20
Offer Statistics, Expected Time Table and Plan of Distribution...... 22
Expenses Associated with the Registration........................... 24
Foreign Exchange Controls and Other Limitations..................... 25
Experts............................................................. 25
Legal Matters....................................................... 26
Material Changes.................................................... 26
Where You Can Best Find More Information; Incorporation
of Certain Information by Reference................................. 26
Enforceability of Civil Liabilities................................. 27
When you are deciding whether to purchase the ordinary shares being
offered by this prospectus, you should rely only on the information incorporated
by reference or provided in this prospectus or any supplement. We have not
authorized anyone to provide you with different information. We are not making
any offer of the ordinary shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents.
In this prospectus, "we," "us," "our," the "Company" and "Rada" refer to
Rada Electronic Industries Ltd., an Israeli company, and our subsidiary.
We are a "foreign private issuer" as defined in Rule 3b-4 under the
Securities Exchange Act of 1934, or the Exchange Act. As a result, our proxy
solicitations are not subject to the disclosure and procedural requirements of
Regulation 14A under the Exchange Act and transactions in our equity securities
by our officers and directors are exempt from Section 16 of
2
the Exchange Act. In addition, we are not required under the Exchange Act to
file periodic reports and financial statements as frequently or as promptly as
United States companies whose securities are registered under the Exchange Act.
We distribute annually to our shareholders an annual report containing
financial statements that have been examined and reported on, with an opinion
expressed by, an independent public or certified public accountant. We prepare
our financial statements in United States dollars and in accordance with
accounting principles generally accepted in the United States. All references to
"dollars" or "$" in this prospectus are to United States dollars, and all
references to "shekels" or "NIS" are to New Israeli Shekels.
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in it by reference
contain forward-looking statements which involve known and unknown risks and
uncertainties. We include this notice for the express purpose of permitting us
to obtain the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include: projections of
capital expenditures, competitive pressures, revenues, growth prospects, product
development, financial resources and other financial matters. You can identify
these and other forward-looking statements by the use of words such as "may,"
"will," "should," "plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential" or the negative of such terms, or other comparable
terminology.
Our ability to predict the results of our operations or the effects of
various events on our operating results is inherently uncertain. Therefore, we
caution you to consider carefully the matters described under the caption "Risk
Factors" and certain other matters discussed in this prospectus, the documents
incorporated by reference in this prospectus, and other publicly available
sources. Such factors and many other factors beyond the control of our
management could cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements that
may be expressed or implied by the forward-looking statements.
3
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information about us, the ordinary shares that may be sold from time to time,
and our financial statements and the notes to them, all of which appear
elsewhere in this prospectus or in the documents incorporated by reference in
this prospectus.
RADA ELECTRONIC INDUSTRIES LTD.
We develop, manufacture and sell automated test equipment, avionics
products and ground debriefing systems and provide manufacturing services for
military and commercial use, mainly in Israel, the U.S. and Europe. We refer to
these activities as our core business. We also provide test and repair services
using our CATS(R) testers and test program sets through our Chinese subsidiary.
We were incorporated in Israel on December 8, 1970 and have one majority
owned subsidiary in China. Our registered offices and principal place of
business are located at 7 Giborei Israel Street, Netanya 42504, Israel, and our
telephone number is 972-9-892-1111. Our address on the internet is www.rada.com.
Our agent for service of process in the U.S. is Puglisi & Associates.
PRIVATE PLACEMENT OF ORDINARY SHARES, CONVERTIBLE NOTES,
WARRANTS AND ADDITIONAL INVESTMENT RIGHTS
On July 12, 2004, we concluded a private placement of 1.8 million of our
ordinary shares. The purchase price was $1.60 per share. We also granted the
investors a right to purchase up to an aggregate of 1.1 million additional
ordinary shares at $2.10 per share issuable upon the exercise of additional
investment rights which expire 24 months following the effective date of the
registration statement of which this prospectus is a part. In addition, we
issued an aggregate of $3.0 million principal amount of convertible notes. The
convertible notes will mature in three years, bear interest at a rate of six
month LIBOR plus 2.5% and are convertible at the investors' option at a
conversion price of $2.10 per share. We granted the purchasers of the
convertible notes a right to purchase up to an aggregate of 937,500 additional
ordinary shares at $2.50 per share issuable upon the exercise of warrants which
expire on January 12, 2010. We are filing this prospectus, at our expense, as
required by the securities purchase agreement with the selling shareholders. We
will not receive any proceeds from the resale of the common stock by the selling
shareholders.
4
THE OFFERING
Ordinary shares offered......... 6,305,892 shares, including 1,800,000
ordinary shares that were issued to the
selling shareholders and up to: (i)
1,857,142 shares issuable upon conversion of
convertible notes; (ii) 1,430,000 shares
issuable upon exercise of outstanding
additional investment rights; and (iii)
1,218,750 shares issuable upon exercise of
outstanding warrants.
Nasdaq SmallCap Market Symbol... "RADIF"
Use of proceeds................. We will not receive any proceeds from the
sale of the ordinary shares
offered hereby. We will,
however, receive the proceeds
from the exercise of the
warrants if and when they are
exercised.
5
RISK FACTORS
Investing in our ordinary shares involves a high degree of risk and
uncertainty. You should carefully consider the risks and uncertainties described
below before investing in our ordinary shares. Our business, prospects,
financial condition and results of operations could be adversely affected due to
any of the following risks. In that case, the value of our ordinary shares could
decline, and you could lose all or part of your investment.
Risks Related to Our Business and Our Industry
We have a history of losses, and may not be able to maintain profitable
operations in the future.
We reported a net profit of $758,000 for the fiscal year ended December
31, 2003, but incured losses in the five preceding years. As of December 31,
2003 our accumulated deficit was $57.7 million. No assurance can be given that
we will be able to maintain our current level of revenues or profitability in
the future.
We may need to raise additional capital in the future, which may not be
available to us.
Our working capital requirements and the cash flow provided by our
operating activities are likely to vary greatly from quarter to quarter,
depending on the timing of orders and deliveries, the build-up of inventories,
and the payment terms offered to our customers. As a consequence of our
significant losses, we incurred significant bank debt and sold equity and debt
securities in private placements in the years 1997 through 2003. In June 2003 we
reached an agreement to restructure our debt with Bank Hapoalim B.M. and Bank
Leumi Le-Israel B.M. that significantly improved our financial position. We may
need to raise additional funds for a number of uses, including:
o working capital and operating activities;
o implementing marketing and sales activities for our products;
o maintaining and expanding research and development programs;
o hiring additional qualified personnel; and
o supporting an increased level of operations.
We may not be able to obtain additional funds on acceptable terms or at
all. If we cannot raise needed funds on acceptable terms, we may be required to
delay, scale back or eliminate some aspects of our operations and we may not be
able to:
o develop new products;
o enhance our existing products;
6
o remain current with evolving industry standards;
o fulfill our contractual obligations;
o take advantage of future opportunities;
o respond to competitive pressures or unanticipated requirements; or
o retain our listing on the Nasdaq SmallCap Market.
If adequate funds are not available to us, our business, results of
operations and financial condition will be materially and adversely affected.
Any equity or debt financings, if available at all, may cause dilution to our
then-existing shareholders and may increase our financing expenses. If
additional funds are raised through the issuance of equity securities, the net
tangible book value per share of our ordinary shares would decrease and the
percentage ownership of then current shareholders would be diluted.
We cannot assure you that our shareholders or our banks will continue to provide
sufficient funds to finance our operations.
During the four years ended December 31, 2003, we relied predominately
on our principal shareholders and, to a lesser degree, on new investors to
provide us with working capital. During this period, they provided us with $13.1
million in equity capital, convertible debt and loans. In June 2003, we also
reached an agreement with Bank Hapoalim B.M. and Bank Leumi Le Israel B.M., or
the Banks to restructure $3.451 million of our debt to them. Pursuant to the
agreement, we paid the Banks $1.1 million on account of our debt to them and
they forgave $1.1 million in debt and agreed to accept warrants to purchase
3,781,995 of our ordinary shares, exercisable at par value per share, in lieu of
$1.251 million of debt. We cannot assure you that our shareholders or Banks will
continue to provide us with funds when requested, and that such funds, if any,
will be sufficient to finance our operations. The failure of our principal
shareholders or other investors to provide us with the necessary financing may
result in a significant scaling back or elimination of some aspects of our
operations.
Our growth strategy is based on our forming close business relationships and
cooperation with major aerospace corporations; should these relationships not
materialize into significant agreements or existing contracts fail to be
profitably implemented, we may not be able to implement our growth strategy.
In line with our growth strategy, we have entered into memoranda of
understanding and other co-operation agreements with Smiths Electronic Systems
and Lockheed Martin Aerospace to increase our penetration into the aviation
market. We are currently investing and intend to continue to invest significant
resources to develop these relationships. Should our relationships fail to
materialize into significant agreements or should we fail to work efficiently
with such parties, we may lose sales and marketing opportunities and our
business, results of operations and financial condition could be adversely
affected.
7
Competition in the market for automated test equipment and avionics equipment is
intense and we may be unable to achieve profitability.
The market for our products is highly competitive, and we may not be
able to compete effectively in our market. Our principal competitors in the
automated test equipment market are J.C. AIR, Inc., Aerospatiale Avionique and
Avtron. Our principal competitors in the avionics market are Harris, Rockwell
Collins, Honeywell, Elbit Systems Ltd., Israeli Aircraft Industries, R.S.L. Ltd.
and Elisra Systems Ltd. We expect to continue to face competition from these and
other competitors. Most, if not all, of our competitors are far larger, have
substantially greater resources including financial, technological, marketing
and distribution capabilities, and enjoy greater market recognition than we
have. These competitors may be able to achieve greater economies of scale and
may be less vulnerable to price competition than us. We may not be able to offer
our products as part of integrated systems to the same extent as our competitors
or successfully develop or introduce new products that are more cost effective
or offer better performance than those of our competitors. Failure to do so
could adversely affect our business, financial condition and results of
operations.
Our initiative of providing manufacturing services may not succeed, and as a
result, we may be unable to achieve profitability in our Beit-Shean production
facility and may be forced to shut down its operations.
In June 2000, we began to provide manufacturing services to original
equipment manufacturers in Israel and the United States, using the manufacturing
capabilities of our Beit-Shean plant. The market for our manufacturing services
is highly competitive and we may not be able to compete effectively in this
market. The cost of labor and the efficiency of the production equipment and
production processes are crucial to our success in this market. Consequently,
should we fail to maintain low labor costs, enhance our production equipment and
develop new and more efficient production methods, we may have to shut down the
operations of our Beit-Shean plant, which may harm our competitiveness and could
adversely affect our business, results of operations and financial condition.
Reduction in military budgets worldwide may cause a reduction in our revenues,
which would adversely affect our business, operating results and financial
condition.
A significant portion of our revenues is derived from the sale of
products with military applications. These revenues, on a consolidated basis,
totaled approximately $9.6 million, or 78% of revenues, in 2003, $6.9 million,
or 66% of revenues, in 2002 and $3.1 million, or 37% of revenues, in 2001. The
military budgets of a number of countries may be reduced in the future. Declines
in military budgets may result in reduced demand for our products and
manufacturing services. This would result in reduction in our core business'
revenues and adversely affect our business, results of operations and financial
condition.
8
Sales of our products are subject to governmental procurement procedures and
practices; termination, reduction or modification of contracts with our
customers, and especially with the Government of Israel, or a substantial
decrease in our customers' budgets may adversely affect our business, operating
results and financial condition.
Our military aviation products are sold primarily to government agencies
and authorities and government-owned companies, many of which have complex and
time-consuming procurement procedures. A long period of time often elapses from
the time we begin marketing a product until we actually sell that product to a
particular customer. In addition, our sales to government agencies, authorities
and companies are directly affected by these customers' budgetary constraints
and the priority given in their budgets to the procurement of our products.
Further, our business with the State of Israel and other governmental
entities is, in general, subject to delays in funding and performance of
contracts and the termination of contracts or subcontracts for convenience,
among others. The termination, reduction or modification of our contracts or
subcontracts with the Government of Israel in the event of change in
requirements, policies or budgetary constraints would have an adverse effect on
our business, operating results and financial condition.
If we do not receive the governmental approvals necessary for the export of our
products, our revenues may decrease. Similarly if our suppliers and partners do
not receive their government approvals necessary to export to us their products
or designs, our revenues might decrease and we may fail to implement our growth
strategy.
Under Israeli law, the export of certain of our products and know-how is
subject to approval by the Israeli Ministry of Defense. To initiate sales
proposals with regard to exports of our products and know-how and to export such
products or know-how, we must obtain permits from the Ministry of Defense. We
cannot assure you that we will receive in a timely manner all the required
permits for which we may apply in the future.
Similarly, under foreign laws the export of certain military products,
technical designs and spare parts require the prior approval of, or export
license from, such foreign governments. In order to maintain our third party
production, certain co-development activities and procurements required for the
performance of certain contracts, we must receive detailed technical designs,
products or products' parts samples from our strategic partners or suppliers. We
cannot assure you that we will be able to receive all the required permits
and/or licenses in a timely manner. Consequently, our revenues may decrease and
we may fail to implement our growth strategy.
9
We depend on sales to key customers and the loss of one or more of our key
customers would result in a loss of a significant amount of our revenues.
A significant portion of our revenues is derived from a small number of
customers. Our major customers during the three years ended December 31, 2003
were as follows:
Percentage of Revenues
----------------------
2001 2002 2003
---- ---- ----
Smiths Electronic Systems 6% 34% 22%
The Boeing Company 16% 19% 14%
Israeli Ministry of Defense 12% 3% 11%
Israel Aviation Industries 2% 6% 12%
Portuguese Air Force - 4% 19%
Tarom Romanian Air Transport 17% 1% -
We anticipate that a significant portion of our future revenues will
continue to be derived from sales to a small number of customers. Further, in
accordance with our growth strategy, we are attempting to expand the number of
our customers while building long-term relationships with them. If our principal
customers do not continue to purchase products from us at current levels or if
such customers are not retained and we are not able to derive sufficient
revenues from sales to new customers to compensate for their loss, our revenues
would be reduced and adversely affect our business, financial condition and
results of operations.
We depend on a limited number of suppliers of components for our products and if
we are unable to obtain these components when needed, we would experience delays
in manufacturing our products and our financial results could be adversely
affected.
We acquire most of the components for the manufacturing of our products
from a limited number of suppliers and subcontractors, most of whom are located
in Israel and the United States. Certain of these suppliers are currently the
sole source of one or more components upon which we are dependent. Suppliers of
some of the components for manufacturing require us to place orders with
significant lead-time to assure supply in accordance with our manufacturing
requirements. Inadequacy of operating funds may cause us to delays placement of
such orders and may result in delays in supply. Delays in supply may
significantly hurt our ability to fulfill our contractual obligations and may
significantly hurt our business and result of operations. We cannot assure you
that we will be able to continue to obtain such components from these suppliers
on satisfactory commercial terms. Temporary disruptions of our manufacturing
operations would ensue if we were required to obtain components from alternative
sources, which may have an adverse effect on our financial results.
We rely on the airline industry and the continued financial crises in this
industry adversely affect our sales.
The airline industry is an important market for our automated test
equipment products and product support services. Our ability to achieve growth
and profitability in this market depends in great measure on the economic
condition of the commercial
10
aviation industry. Since 2001, and especially following the tragic events of
September 11, 2001, the airline industry has suffered from economic decline that
caused the bankruptcy of several airlines and imposed financial constraints on
the entire industry. As a result of these conditions, the sales of our automated
test equipment products have materially decreased. The continuance of the crisis
in the commercial aviation industry will adversely affect our business,
financial condition and results of operations.
Rapid technological changes may adversely affect the market acceptance of our
products.
The avionics market in which we compete is subject to technological
changes, introduction of new products, change in customer demands and evolving
industry standards. Our future success will depend upon our ability to keep pace
with technological developments and to timely address the increasingly
sophisticated needs of our customers by supporting existing and new technologies
and by developing and introducing enhancements to our current products and new
products. We cannot assure you that we will be successful in developing and
marketing enhancements to our products that will respond to technological
change, evolving industry standards or customer requirements; that we will not
experience difficulties that could delay or prevent the successful development,
introduction and sale of such enhancements; or that such enhancements will
adequately meet the requirements of the market and achieve any significant
degrees of market acceptance. If release dates of our new products or
enhancements are delayed or, if when released, they fail to achieve market
acceptance, our business, operating results and financial condition would be
materially adversely affected.
We may encounter difficulties with our international operations and sales.
While our principal executive offices are located in Israel, 74% of our
sales in 2003, 86% of our sales in 2002 and 76% of our sales in 2001 were
exports. This subjects us to many risks inherent in international business,
including:
o limitations and disruptions resulting from the imposition of
government controls;
o changes in regulatory requirements;
o export license requirements;
o economic or political instability;
o trade restrictions;
o changes in tariffs;
o currency fluctuations;
o longer receivable collection periods and greater difficulty in
accounts receivable collection;
o greater difficulty in safeguarding intellectual property;
11
o difficulties in managing overseas subsidiaries and international
operations; and
o potential adverse tax consequences.
We cannot assure you that we will be able to sustain or increase
revenues from international operations or that we will not encounter significant
difficulties in connection with the sale of our products in international
markets or that one or more of these factors will not have a material adverse
effect on our future revenues and, as a result, our business, operating results
and financial condition.
Currency exchange rate fluctuations in the world markets in which we conduct
business could have a material adverse effect on our business, results of
operations and financial condition.
We may be adversely affected by fluctuations in currency exchange rates.
While our revenues are generally denominated in U.S. dollars, a significant
portion of our expenses is incurred in NIS. We do not currently engage in any
currency hedging transactions intended to reduce the effect of fluctuations in
foreign currency exchange rates on our results of operations. If we were to
determine that it was in our best interests to enter into any hedging
transactions in the future, there can be no assurance that we will be able to do
so or that such transactions, if entered into, will materially reduce the effect
of fluctuations in foreign currency exchange rates on our results of operations.
In addition, if for any reason exchange or price controls or other restrictions
on the conversion of foreign currencies into NIS were imposed, our business
could be adversely affected. There can be no assurance such fluctuations in the
future will not have a material adverse effect on revenues from international
sales, and consequently, on our business, operating results and financial
condition.
We are dependent on our senior management and key personnel, in particular
Herzle Bodinger, our president and chairman of the board, whose loss would
adversely affect our business.
Our future success depends in large part on the continued services of
our senior management and key personnel. In particular, we are dependent on the
services of Herzle Bodinger, our chairman and president. We do not carry key
person life insurance on our senior management or key personnel. Any loss of the
services of Herzle Bodinger, other members of senior management or other key
personnel could negatively and materially affect our business.
Our proprietary technology is difficult to protect and unauthorized use of our
proprietary technology by third parties may impair our ability to compete
effectively.
Our success and ability to compete largely depends upon protecting our
proprietary technology. We rely on a combination of trade secrets, copyright law
and confidentiality, non-disclosure and assignment-of-inventions agreements to
protect our proprietary technology. Except for a patent that relates to our ACE
system, we do not have any patents.
12
Our products may infringe on the intellectual property rights of others.
Third parties may assert infringement claims against us or claims that
we have violated a patent or infringed on a copyright, trademark or other
proprietary right belonging to them. In addition, any infringement claim, even
one without merit, could result in the expenditure of significant financial and
managerial resources to defend.
We may not be able to obtain title to the land and buildings of our Chinese
subsidiary and may be required to initiate litigation in order to enforce our
rights to receive title to such properties.
Beijing Huarui Aircraft Components Maintenance and Services Co., Ltd. or
CACS, our Chinese subsidiary, conducts its business in an approximately 16,000
square foot facility in Beijing that includes offices and test and repair
facilities. The land for this facility was leased by Beijing Tianzu Forestry
Company, or Tianzu, the minority shareholder in CACS, from the Chinese
government for 30 years. Under a joint venture agreement, and in consideration
for its equity investment in CACS, Tianzu granted CACS usage rights in the land,
constructed the buildings and granted CACS the ownership of these buildings.
However, the transfer of the title to the land and the buildings has not been
completed, which may prevent the disposition of these assets should CACS desire
to do so. Although Tianzu is legally obligated to complete such transfer of
title to the land and the buildings, we can not guarantee that such transfer
will be completed, or that we will not be required to initiate litigation in
order to enforce our rights to receive title to the land and buildings.
Risk Factors Related to Our Ordinary Shares
Our share price has been volatile in the past and may decline in the future.
Our ordinary shares have experienced significant market price and volume
fluctuations in the past and may experience significant market price and volume
fluctuations in the future in response to factors such as the following, some of
which are beyond our control:
o quarterly variations in our operating results;
o operating results that vary from the expectations of securities
analysts and investors;
o changes in expectations as to our future financial performance,
including financial estimates by securities analysts and investors;
o announcements of technological innovations or new products by us or
our competitors;
o announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
13
o changes in the status of our intellectual property rights;
o announcements by third parties of significant claims or proceedings
against us;
o additions or departures of key personnel;
o future sales of our ordinary shares;
o de-listing of our shares from the Nasdaq SmallCap Market; and
o stock market price and volume fluctuations.
Domestic and international stock markets often experience extreme price
and volume fluctuations. Market fluctuations, as well as general political and
economic conditions, such as a recession or interest rate or currency rate
fluctuations or political events or hostilities in or surrounding Israel, could
adversely affect the market price of our ordinary shares.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources both of which could have a material adverse effect on our business
and results of operations.
We may be delisted from the Nasdaq Stock Market if we fail to meet its listing
maintenance requirements.
Our shares have traded on the Nasdaq Stock Market since 1985 and on the
Nasdaq SmallCap Market since June 10, 2002. During periods of 2002 and 2003, we
were not in compliance with Nasdaq's continued listing requirements as our
shareholders' equity fell below the Nasdaq minimum requirement of $2.5 million.
As a result of our agreement with our Banks, we achieved compliance, and in
November 2003, a Nasdaq Listing Qualification Panel issued a decision to
continue the listing of our shares on the Nasdaq SmallCap Market. However, the
panel required us to timely file reports with the SEC and Nasdaq evidencing that
our shareholders' equity as of December 31, 2003 and June 30, 2004 exceeds $2.5
million. While we met this requirement as of December 31, 2003 and June 30,
2004, we cannot assure you that our shareholders' equity will continue to be
greater than $2.5 million or that we will be able to satisfy the other listing
maintenance requirements. In the event we incur losses in the future, we would
be required to raise additional capital in order to maintain our listing on the
Nasdaq SmallCap Market. Should we fail to raise the necessary capital in order
to satisfy such requirements, our ordinary shares may be delisted from the
Nasdaq SmallCap Market and transferred to the OTC Bulletin Board.
We do not intend to pay dividends.
We have never declared or paid any cash dividends on our ordinary
shares. We currently intend to retain future earnings, if any, to finance
operations and expand our business and, therefore, do not expect to pay any
dividends in the foreseeable future.
14
Risks Relating to Our Location in Israel
Conducting business in Israel entails special risks.
We are incorporated under the laws of, and our executive offices,
manufacturing plant and research and development facilities are located in, the
State of Israel. Although most of our sales are made to customers outside
Israel, we are nonetheless directly affected by the political, economic and
military conditions affecting Israel. Specifically, we could be adversely
affected by any major hostilities involving Israel, a full or partial
mobilization of the reserve forces of the Israeli army, the interruption or
curtailment of trade between Israel and its present trading partners, or a
significant downturn in the economic or financial condition of Israel.
Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors, and a
state of hostility, varying from time to time in intensity and degree, has led
to security and economic problems for Israel. Since September 2000, there has
been a marked increase in violence, civil unrest and hostility, including armed
clashes, between the State of Israel and the Palestinians, and acts of terror
have been committed inside Israel and against Israeli targets in the West Bank
and Gaza. There is no indication as to how long the current hostilities will
last or whether there will be any further escalation. Any further escalation in
these hostilities or any future armed conflict, political instability or
violence in the region may have a negative effect on our business condition,
harm our results of operations and adversely affect our share price.
Furthermore, there are a number of countries that restrict business with Israel
or Israeli companies. Restrictive laws or policies of those countries directed
towards Israel or Israeli businesses may have an adverse impact on our
operations, our financial results or the expansion of our business.
Our results of operations may be negatively affected by the obligation of our
personnel to perform military service.
Many of our executive officers and employees in Israel are obligated to
perform up to 36 days, depending on rank and position, of military reserve duty
annually and are subject to being called for active duty under emergency
circumstances. If a military conflict or war arises, these individuals could be
required to serve in the military for extended periods of time. Our operations
could be disrupted by the absence for a significant period of one or more of our
executive officers or key employees or a significant number of other employees
due to military service. Any disruption in our operations could adversely affect
our business.
The economic conditions in Israel have not been stable in recent years.
In recent years Israel has been going through a period of recession in
economic activity, resulting in low growth rates and growing unemployment. Our
operations could be adversely affected if the economic conditions in Israel
continue to deteriorate. In addition, due to significant economic measures
proposed by the Israeli Government,
15
there have been several general strikes and work stoppages in 2003 and 2004,
affecting banks, airports and ports. These strikes have had an adverse effect on
the Israeli economy and on business, including our ability to deliver products
to our customers. Following the passage by the Israeli Parliament of laws to
implement the economic measures, the Israeli trade unions have threatened
further strikes or work-stoppages, and these may have a material adverse effect
on the Israeli economy and on us.
We may be adversely affected if the rate of inflation in Israel exceeds the rate
of devaluation of the NIS against the U.S. dollar.
In 2003 approximately 25% of our expenses were in U.S. dollars or U.S.
dollar-linked NIS, in 2002 approximately 39% of our expenses were in U.S.
dollars or U.S. dollar-linked NIS and in 2001 approximately 45% of our expenses
were in U.S. dollars or U.S. dollar-linked NIS. In each of these years,
virtually all our remaining expenses were in unlinked NIS. Our expenses that are
denominated in U.S. dollars or paid in Israeli currency linked to the U.S.
dollar-NIS exchange rate are influenced by the extent to which any inflation in
Israel is not offset (or is offset on a lagging basis) by the devaluation of the
NIS in relation to the U.S. dollar. In 1998, 2001 and 2002 the rate of
devaluation of the NIS against the dollar exceeded the rate of inflation in
Israel, which benefited us. In 1999 and 2000 the rate of inflation exceeded the
rate of devaluation of the NIS against the U.S. dollar. In 2003 the rate of
inflation was negative and the NIS was revaluated vis-a-vis the dollar. These
changes, as well as the recent world-wide devaluation of the U.S. dollar, have
affected our operations, financial condition and results of operations by
decreasing the NIS equivalents of our U.S denominated revenues and increasing
the U.S. dollar equivalents of our NIS denominated expenses. We cannot assure
you that we will not be materially adversely affected in the future if the rate
of inflation in Israel exceeds the devaluation of the NIS against the U.S.
dollar or if the timing of this devaluation lags behind increases in inflation
in Israel.
Service and enforcement of legal process on us and our directors and officers
may be difficult to obtain.
Service of process upon our directors and officers and the Israeli
experts named herein, all of whom reside outside the United States, may be
difficult to obtain within the United States. Furthermore, since substantially
all of our assets, all of our directors and officers and the Israeli experts
named in this annual report are located outside the United States, any judgment
obtained in the United States against us or these individuals or entities may
not be collectible within the United States.
There is doubt as to the enforceability of civil liabilities under the
Securities Act and the Securities Exchange Act in original actions instituted in
Israel. However, subject to certain time limitations and other conditions,
Israeli courts may enforce final judgments of United States courts for
liquidated amounts in civil matters, including judgments based upon the civil
liability provisions of those Acts.
Provisions of Israeli law may delay, prevent or make difficult an acquisition of
us, which could prevent a change of control and therefore depress the price of
our shares.
16
Provisions of Israeli corporate and tax law may have the effect of
delaying, preventing or making more difficult a merger with, or other
acquisition of, us. This could cause our ordinary shares to trade at prices
below the price for which third parties might be willing to pay to gain control
of us. Third parties who are otherwise willing to pay a premium over prevailing
market prices to gain control of us may be unable or unwilling to do so because
of these provisions of Israeli law.
Your rights and responsibilities as a shareholder will be governed by Israeli
law and differ in some respects from the rights and responsibilities of
shareholders under U.S. law.
We are incorporated under Israeli law. The rights and responsibilities
of holders of our ordinary shares are governed by our memorandum of association,
our articles of association and by Israeli law. These rights and
responsibilities differ in some respects from the rights and responsibilities of
shareholders in typical U.S. corporations. In particular, a shareholder of an
Israeli company has a duty to act in good faith toward the company and other
shareholders and to refrain from abusing his power in the company, including,
among other things, in voting at the general meeting of shareholders on certain
matters.
CAPITALIZATION AND INDEBTEDNESS
The table below sets forth the capitalization of our company as of
December 31, 2003, and as adjusted to give effect to the issuance and sale of
the convertible notes and 1.8 million ordinary shares at a price of $1.60 per
share, as well as warrants and additional investment rights, and the receipt of
the net proceeds therefrom.
.
Actual As Adjusted
------ -----------
(in thousands)
Short-term bank credit and loans.................. $ 1,123 $ 1,123
Long-term loans................................... 1,220 1,220
Convertible notes................................. - 1,509
Ordinary shares of NIS 0.005 par value,
45,000,000 shares authorized;
18,510,716 shares issued and outstanding,
actual; 20,310,716 shares
issued and outstanding as adjusted........... 108 110
Additional paid-in capital........................ 59,139 61,569
Warrants.......................................... 1,405 2,986
Accumulated deficit............................... (57,774) (57,774)
------- -------
Total shareholders' equity..................... $ 2,878 $ 6,891
-------- --------
--------------
(*) The fair value of the warrants was calculated based on the Black-Scholes
pricing model. We plan to obtain a valuation of the warrants that may change the
allocation of the net proceeds to the respective elements of the private
placement based on fair value.
17
REASONS FOR THE OFFER AND USE OF PROCEEDS
We will not receive any of the proceeds from the sale by the selling
shareholders of our ordinary shares. We will, however, receive the proceeds from
the exercise of the additional investments rights and the warrants issued to
selling shareholders if and when they are exercised. We have agreed to bear all
expenses relating to the registration of the ordinary shares registered pursuant
to the registration statements of which this prospectus is a part.
MARKET PRICE DATA
Our ordinary shares trade on the Nasdaq SmallCap Market under the symbol
RADIF. The following table sets forth, for the periods indicated, the range of
high and low sales prices of the ordinary shares on the Nasdaq SmallCap Market:
2002 High Low
---- ---- ---
First Quarter........................... $1.80 $1.55
Second Quarter.......................... 1.63 0.60
Third Quarter........................... 0.72 0.60
Fourth Quarter.......................... 0.64 0.54
2003
----
First Quarter........................... $0.68 $0.57
Second Quarter.......................... 1.04 0.41
Third Quarter........................... 0.76 0.59
Fourth Quarter.......................... 2.37 0.53
2004
----
First Quarter........................... $2.08 $1.31
Second Quarter ......................... 4.78 1.30
Third Quarter (through August 10)....... 2.60 1.60
SELECTED CONSOLIDATED FINANCIAL DATA
We have derived the following selected consolidated financial data as of
December 31, 2002 and 2003 and for each of the years ended December 31, 2001,
2002 and 2003 from our consolidated financial statements which are prepared in
accordance with U.S. generally accepted accounting principles and have been
audited in accordance with U.S. generally accepted auditing standards. Selected
consolidated financial data as of December 31, 1999, 2000 and 2001 and for each
of the years ended December 31, 1999 and 2000 have been derived from other
audited consolidated financial statements prepared in accordance with U.S.
generally accepted accounting principles and generally accepted auditing
standards. The selected consolidated financial data set forth below should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and our consolidated financial statements
with respect to the three years ended December 31, 2003 and as at December 31,
2002 and 2003 contained in our 2003 Annual Report on Form 20-F which is
incorporated herein by reference.
18
Year Ended December 31,
-----------------------------------------------------
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
(U.S. dollars in thousands, except per share data)
INCOME STATEMENT DATA:
Revenues $10,373 $3,816 $8,342 $10,399 $12,315
Cost of revenues 12,707 5,307 7,416 9,223 9,592
------ ----- ----- - ----- -----
Gross profit (loss) (2,334) (1,491) 926 1,176 2,723
Research and development expenses 428 730 534 122 -
Marketing, selling, general and
administrative expenses 4,316 3,612 3,617 3,809 2,698
Operating income (loss) from
continuing operations (7,078) (5,833) (3,225) (2,035) 25
Financial income (expenses), net (1,141) (861) (210) (364) 708
Other income (expenses), net 505 563 (30) (290) (2)
Operating income (loss) (7,714) (6,131) (3,465) (2,689) 731
Equity in loss of affiliated company (101) - - - -
Minority interest in losses of subsidiary 292 32 96 206 27
Income (loss) from continuing
operations (7,523) (6,099) (3,369) (2,483) 758
Gain from disposal of discontinued
segment (net of tax) 306 - - - -
Net income (loss) $(7,217) $(6,099) $(3,369) $(2,483) $758
======= ======= ======= ======= ====
Basic net income (loss) per share
from continuing operations $(0.77) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Diluted net income (loss) per share
from continuing operations $(0.77) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Basic income per share from
discontinued operations $ 0.03 $ - $ - $ - $ -
====== === === === ===
Diluted net income per share from
discontinued operations $ 0.03 $ - $ - $ - $ -
====== === === === ===
Basic net earnings (loss) per share $(0.74) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Diluted net earnings (loss) per share $(0.74) $(0.46) $(0.24) $(0.15) $0.04
====== ====== ====== ====== =====
Weighted average number of shares used
to compute basic net income(loss) per share 9,722 13,305 13,817 16,555 18,511
===== ====== ====== ====== ======
Weighted average number of shares used
to compute diluted net income (loss) per share 9,722 13,305 13,817 16,555 19,704
===== ====== ====== ====== ======
As of December 31,
-----------------------------------------------------
1999 2000 2001 2002 2003
---- ---- ---- ---- ----
(U.S. dollars in thousands)
BALANCE SHEET DATA:
Working capital deficiency.............. $(8,419) $(8,668) $(9,446) $(8,055) $(2,716)
Total assets............................ 19,918 18,874 16,332 14,607 14,549
Short-term credits and current
maturities of long-term debt............ 5,378 5,624 5,920 5,697 1,123
Long-term debt, net of current maturities. 811 8 - - 1,220
Shareholders' equity.................... 4,329 4,069 700 485 2,878
19
SELLING SHAREHOLDERS
The ordinary shares being offered by the selling shareholders were
issued pursuant to a Securities Purchase Agreement, dated as of July 9, 2004,
and are issuable upon conversion of the convertible notes and upon exercise of
the warrants and additional investment rights. For additional information
regarding the issuance of those shares, convertible notes, warrants and
additional investment rights, see "Private Placement of Ordinary Shares,
Convertible Notes, Warrants and Additional Investment Rights" above. We are
registering the ordinary shares in order to permit the selling shareholders to
offer the shares for resale from time to time. Except for the ownership of the
Ordinary Shares, the Convertible Notes, the Warrants and the Additional
Investment Rights issued pursuant to the Securities Purchase Agreement, the
selling shareholders have not had any material relationship with us within the
past three years.
The table below lists the selling shareholders and other information
regarding the beneficial ownership of the ordinary shares by each of the selling
shareholders. The second column lists the number of ordinary shares beneficially
owned by each selling shareholder, based on its ownership of the ordinary
shares, convertible notes, warrants and additional investment rights, as of the
date of this prospectus, assuming conversion of all convertible notes and
exercise of the warrants and additional investment rights held by the selling
shareholders on that date, without regard to any limitations on conversions or
exercise.
The third column lists the ordinary shares being offered by this
prospectus by the selling shareholders.
In accordance with the terms of registration rights agreements with the
selling shareholders, this prospectus generally covers the resale of at least
sum of (i) the number of ordinary shares initially issued pursuant to the
Securities Purchase Agreement and (ii) 130% of the sum of (x) the number of
ordinary shares issuable upon conversion of the convertible notes as of the
trading day immediately preceding the date the registration statement is
initially filed with the SEC, (y) the number of ordinary shares issuable upon
exercise of the related warrants and additional investment rights as of the
trading day immediately preceding the date the registration statement is
initially filed with the SEC. Because the conversion price of the convertible
notes and the exercise price of the warrants and the additional investment
rights may be adjusted, the number of shares that will actually be issued may be
more or less than the number of shares being offered by this prospectus. The
fourth column assumes the sale of all of the shares offered by the selling
shareholders pursuant to this prospectus.
Under the terms of the convertible notes, the warrants and the
additional investment rights, a selling shareholder may not convert the
convertible notes, or exercise the warrants or additional investment rights, to
the extent such conversion or exercise would cause such selling shareholder,
together with its affiliates, to beneficially own a number of ordinary shares
which would exceed 4.99% of our then outstanding ordinary shares following such
conversion or exercise, excluding for purposes of such determination ordinary
shares issuable upon conversion of the convertible notes which have not been
converted and upon exercise of the warrants and additional investment rights
which have not been exercised. The number of shares in the second column does
not reflect this limitation. The selling shareholders may sell all, some or none
of their shares in this offering. See "Plan of Distribution."
20
Number of
Number of Ordinary Maximum Number of Ordinary Shares
Shares Beneficially Ordinary Shares to Beneficially
Owned Prior to be Sold Pursuant to Owned
Name of Selling Shareholder Offering this Prospectus After Offering
--------------------------- -------- --------------- --------------
Smithfield Fiduciary LLC (1) 1,985,244 1,985,244 -
Omicron Master Trust (2) 1,072,405 1,072,405 -
Iroquois Capital LP (3) 1,615,124 1,615,124 -
Portside Growth and
Opportunity Fund (4) 1,072,405 1,072,405 -
Scot J. Cohen 56,071 56,071 -
Richard Abbe 56,071 56,071 -
BL Cubed LLC (5) 224,287 224,287 -
Frederick Berdon 112,143 112,143 -
John Kaufman 56,071 56,071 -
Paul Masters IRA 56,071 56,071 -
-------------------
(1) Highbridge Capital Management, LLC ("Highbridge"), is the trading
manager of Smithfield Fiduciary LLC ("Smithfield") and consequently has
voting control and investment discretion over the ordinary shares held
by Smithfield. Glenn Dubin and Henry Swieca control Highbridge. Each of
Highbridge and Messrs. Dubin and Swieca disclaims beneficial ownership
of the shares held by Smithfield.
(2) Omicron Capital, L.P., a Delaware limited partnership ("Omicron
Capital"), serves as investment manager to Omicron Master Trust, a trust
formed under the laws of Bermuda ("Omicron"), Omicron Capital, Inc., a
Delaware corporation ("OCI"), serves as general partner of Omicron
Capital, and Winchester Global Trust Company Limited ("Winchester")
serves as the trustee of Omicron. By reason of such relationships,
Omicron Capital and OCI may be deemed to share dispositive power over
the ordinary shares owned by Omicron, and Winchester may be deemed to
share voting and dispositive power over the ordinary shares owned by
Omicron. Omicron Capital, OCI and Winchester disclaim beneficial
ownership of such ordinary shares. Omicron Capital has delegated
authority from the board of directors of Winchester regarding the
portfolio management decisions with respect to the ordinary shares owned
by Omicron and, as of April 21, 2003, Mr. Olivier H. Morali and Mr.
Bruce T. Bernstein, officers of OCI, have delegated authority from the
board of directors of OCI regarding the portfolio management decisions
of Omicron Capital with respect to the ordinary shares owned by Omicron.
By reason of such delegated authority, Messrs. Morali and Bernstein may
be deemed to share dispositive power over the ordinary shares owned by
Omicron. Messrs. Morali and Bernstein disclaim beneficial ownership of
such ordinary shares and neither of such persons has any legal right to
maintain such delegated authority. No other person has sole or shared
voting or dispositive power with respect to the ordinary shares being
offered by Omicron, as those terms are used for purposes under
Regulation 13D-G of the Securities Exchange Act of 1934, as amended.
Omicron and Winchester are not "affiliates" of one another, as that term
is used for purposes of the Securities Exchange Act of 1934, as amended,
or of any other person named in this prospectus as a selling
stockholder. No person or "group" (as that term is used in Section 13(d)
of the Securities Exchange Act of 1934, as amended, or the SEC's
Regulation 13D-G) controls Omicron and Winchester.
21
(3) Joshua Silverman has voting control and investment discretion over
securities held by Iroquois Capital LP. Mr. Silverman disclaims
beneficial ownership of the ordinary shares held by Iroquois Capital LP.
(4) Ramius Capital Group, LLC ("Ramius Capital") is the investment adviser
of Portside Growth & Opportunity Fund ("Portside") and consequently has
voting control and investment discretion over securities held by
Portside. Ramius Capital disclaims beneficial ownership of the shares
held by Portside. Peter A. Cohen, Morgan B. Stark, Thomas W. Strauss and
Jeffrey M. Solomon are the sole managing members of C4S& Co., LLC, the
sole managing member of Ramius Capital. As a result, Messrs. Cohen,
Stark, Strauss and Solomon may be considered beneficial owners of any
ordinary shares deemed to be beneficially owned by Ramius Capital.
Messrs. Cohen, Stark, Strauss and Solomon disclaim beneficial ownership
of these ordinary shares.
(5) Mel C. Lifshitz, a member of BL Cubed LLC has voting control and
investment discretion over securities held by BL Cubed LLC. Mr. Lifshitz
disclaims beneficial ownership of the ordinary shares held by BL Cubed
LLC.
OFFER STATISTICS, EXPECTED TIME TABLE
AND PLAN OF DISTRIBUTION
We are registering the ordinary shares issued and issuable upon
conversion of the convertible notes and upon exercise of the warrants and
additional investment rights to permit the resale of these ordinary shares by
the holders of the ordinary shares, convertible notes, warrants and additional
investment notes from time to time after the date of this prospectus. We will
not receive any of the proceeds from the sale by the selling shareholders of the
ordinary shares. We will bear all fees and expenses incident to our obligation
to register the ordinary shares.
The selling shareholders may sell all or a portion of the ordinary
shares beneficially owned by them and offered hereby from time to time directly
or through one or more underwriters, broker-dealers or agents. If the ordinary
shares are sold through underwriters or broker-dealers, the selling shareholders
will be responsible for underwriting discounts or commissions or agent's
commissions. The ordinary shares may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of the sale, at varying
prices determined at the time of sale, or at negotiated prices. These sales may
be effected in transactions, which may involve crosses or block transactions,
o on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
o through the writing of options, whether such options are listed on an
options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
22
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o sales pursuant to Rule 144;
o broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling shareholders effect such transactions by selling ordinary
shares to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the ordinary shares for whom they may act as agent or to whom they
may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the ordinary shares or otherwise, the selling shareholders may enter into
hedging transactions with broker-dealers, which may in turn engage in short
sales of the ordinary shares in the course of hedging in positions they assume.
The selling shareholders may also sell ordinary shares short and deliver
ordinary shares covered by this prospectus to close out short positions. The
selling shareholders may also loan or pledge ordinary shares to broker-dealers
that in turn may sell such shares.
The selling shareholders may pledge or grant a security interest in some
or all of the convertible notes, warrants, additional investment rights or
ordinary shares owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the
ordinary shares from time to time pursuant to this prospectus or any amendment
to this prospectus under Rule 424(b)(3) or other applicable provision of the
Securities Act of 1933, as amended, amending, if necessary, the list of selling
shareholders to include the pledgee, transferee or other successors in interest
as selling shareholders under this prospectus. The selling shareholders also may
transfer and donate the ordinary shares in other circumstances in which case the
transferees, donees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.
The selling shareholders and any broker-dealer participating in the
distribution of the ordinary shares may be deemed to be "underwriters" within
the meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the ordinary shares is made, a prospectus supplement, if required,
will be distributed which will set forth the aggregate amount of ordinary shares
being offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any
23
discounts, commissions and other terms constituting compensation from the
selling shareholders and any discounts, commissions or concessions allowed or
reallowed or paid to broker-dealers.
Under the securities laws of some states, the ordinary shares may be
sold in such states only through registered or licensed brokers or dealers. In
addition, in some states the ordinary shares may not be sold unless such shares
have been registered or qualified for sale in such state or an exemption from
registration or qualification is available and is complied with.
There can be no assurance that any selling shareholder will sell any or
all of the ordinary shares registered pursuant to the shelf registration
statement, of which this prospectus forms a part.
The selling shareholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the ordinary shares by the selling shareholders
and any other participating person. Regulation M may also restrict the ability
of any person engaged in the distribution of the ordinary shares to engage in
market-making activities with respect to the ordinary shares. All of the
foregoing may affect the marketability of the ordinary shares and the ability of
any person or entity to engage in market-making activities with respect to the
ordinary shares.
We will pay all expenses of the registration of the ordinary shares
pursuant to the registration rights agreement; provided, however, that a selling
shareholder will pay all underwriting discounts and selling commissions, if any.
We will indemnify the selling shareholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreements, or the selling shareholders will be entitled to contribution. We may
be indemnified by the selling shareholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling shareholder specifically for use in
this prospectus, in accordance with the related registration rights agreements,
or we may be entitled to contribution.
Once sold under the shelf registration statement, of which this
prospectus forms a part, the ordinary shares will be freely tradable in the
hands of persons other than our affiliates.
EXPENSES ASSOCIATED WITH THE REGISTRATION
We have agreed to bear all expenses relating to the registration of our
ordinary shares registered pursuant to the registration statement of which this
prospectus is a part. We estimate these expenses to be approximately $37,400.00,
which include the following categories of expenses:
24
SEC registration fee............................... $ 1,318
Printing and photocopying.......................... 5,000
Legal fees and expenses............................ 25,000
Accounting fees and expenses...................... 5,000
Transfer agent and registrar fees and expenses..... 1,000
Miscellaneous expenses............................. 81
------------
Total Expenses............................. $ 37,400
------------
FOREIGN EXCHANGE CONTROLS AND OTHER LIMITATIONS
The Israeli Currency Control Law, 1978 imposes certain limitations
concerning foreign currency transactions and transactions between Israeli and
non-Israeli residents, which limitations may be regulated or waived by the
Controller of Foreign Exchange at the Bank of Israel, through "general" and
"special" permits. In May 1998, a new "general permit" was issued pursuant to
which substantially all transactions in foreign currency are permitted. Any
dividends or other distributions paid in respect of ordinary shares and any
amounts payable upon the dissolution, liquidation or winding up of the affairs
of Rada, as well as the proceeds of any sale in Israel of Rada's securities to
an Israeli resident are freely repatriable into non-Israeli currencies at the
rate of exchange prevailing at the time of conversion, provided that Israeli
income tax has been paid on (or withheld from) such payments. Because exchange
rates between the NIS and the U.S. dollar fluctuate continuously, U.S.
shareholders will be subject to any such currency fluctuation during the period
from when such dividend is declared through the date payment is made in U.S.
dollars.
The State of Israel does not restrict in any way the ownership or voting
of ordinary shares by non-residents of Israel, except with respect to subjects
of countries that are in a state of war with Israel.
EXPERTS
Our financial statements incorporated by reference in our Annual Report
(Form 20-F) for the year ended December 31, 2003, have been audited by Kost,
Forer, Gabbay & Kasierer, A Member of Ernst & Young Global, independent
registered public accounting firm as set forth in their report incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
Our consolidated financial statements incorporated by reference in our
Annual Reports (Form 20-F) for the years ended December 31, 2002 and 2001, have
been audited by Luboshitz Kasierer, an Affiliate member of Ernst & Young
International, independent auditors as set forth in their report incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
25
LEGAL MATTERS
Certain legal matters in connection with the registration of the
ordinary shares hereunder with respect to Israeli law will be passed upon for us
by S. Friedman & Co., Advocates, Tel Aviv, Israel, our Israeli counsel.
MATERIAL CHANGES
Except as otherwise described our Annual Report on Form 20-F for the
fiscal year ended December 31, 2003 and in our Reports on Form 6-K filed under
the Exchange Act and incorporated by reference herein, no reportable material
changes have occurred since December 31, 2003.
WHERE YOU CAN BEST FIND MORE INFORMATION; INCORPORATION OF
CERTAIN INFORMATION BY REFERENCE
This prospectus is a part of a registration statement on Form F-3,
Registration No. 333-117954, which we filed with the Securities and Exchange
Commission under the Securities Act of 1933. As permitted by the rules and
regulations of the SEC, this prospectus does not contain all of the information
contained in the registration statement and the exhibits and schedules thereto.
As such we make reference in this prospectus to the registration statement and
to the exhibits and schedules thereto. For further information about us and
about the securities we hereby offer, you should consult the registration
statement and the exhibits and schedules thereto. You should be aware that
statements contained in this prospectus concerning the provisions of any
documents filed as an exhibit to the registration statement or otherwise filed
with the SEC are not necessarily complete, and in each instance reference is
made to the copy of such document so filed. Each such statement is qualified in
its entirety by such reference.
We file annual and special reports and other information with the
Securities and Exchange Commission (Commission File Number 0-15375). These
filings contain important information which does not appear in this prospectus.
For further information about us, you may read and copy these filings at the
SEC's public reference room at 450 Fifth Street, N.W, Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330, and may obtain copies of our filings from the
public reference room by calling (202) 942-8090.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to other documents which we have filed or will file with the SEC.
We are incorporating by reference in this prospectus the documents listed below
and all amendments or supplements we may file to such documents, as well as any
future filings we may make with the SEC on Form 20-F under the Exchange Act
before the time that all of the securities offered by this prospectus have been
sold or de-registered.
o Our Annual Report on Form 20-F for the fiscal year ended December 31,
2003;
o Our Reports on Form 6-K submitted to the SEC on February 26, 2004,
July 12, 2004, July 13, 2004 (two filings) and July 29, 2004.
26
o The description of our Ordinary Shares contained in our Registration
Statement on Form 8-A, including any amendment or reports for the
purpose of updating such description.
In addition, we may incorporate by reference into this prospectus our
reports on Form 6-K filed after the date of this prospectus (and before the time
that all of the securities offered by this prospectus have been sold or
de-registered) if we identify in the report that it is being incorporated by
reference in this prospectus.
Certain statements in and portions of this prospectus update and replace
information in the above listed documents incorporated by reference. Likewise,
statements in or portions of a future document incorporated by reference in this
prospectus may update and replace statements in and portions of this prospectus
or the above listed documents.
We shall provide you without charge, upon your written or oral request,
a copy of any of the documents incorporated by reference in this prospectus,
other than exhibits to such documents which are not specifically incorporated by
reference into such documents. Please direct your written or telephone requests
to Rada Electronic Industries Ltd. 7 Giborei Israel Street, Netanya 42504,
Israel. Attn: Elan Sigal, Chief Financial Officer, telephone number (972)(9)
892-1129. You may also obtain information about us by visiting our website at
www.rada.com. Information contained in our website is not part of this
prospectus.
We are an Israeli company and are a "foreign private issuer" as defined
in Rule 3b-4 under the Securities Exchange Act of 1934. As a result, (1) our
proxy solicitations are not subject to the disclosure and procedural
requirements of Regulation 14A under the Exchange Act, (2) transactions in our
equity securities by our officers and directors are exempt from Section 16 of
the Exchange Act, and (3) until November 4, 2002, we were not required to make,
and did not make, our SEC filings electronically, so that those filings are not
available on the SEC's Web site. However, since that date, we have been making
all required filings with the SEC electronically, and these filings are
available over the Internet at the SEC's Web site at http: // www.sec.gov.
ENFORCEABILITY OF CIVIL LIABILITIES
Service of process upon us and upon our directors and officers and the
Israeli experts named in this prospectus, most of whom reside outside the United
States, may be difficult to obtain within the United States. Furthermore,
because substantially all of our assets and substantially all of our directors
and officers are located outside the United States, any judgment obtained in the
United States against us or any of our directors and officers may not be
collectible within the United States.
We have been informed by our legal counsel in Israel, S. Friedman & Co.
Advocates, that there is doubt as to the enforceability of civil liabilities
under the Securities Act and the Exchange Act in original actions instituted in
Israel. However, subject to specified time limitations, Israeli courts may
enforce a United States final executory judgment in a civil matter including a
monetary or compensatory judgment in a non-civil matter, obtained after due
process before a court of competent jurisdiction according to the laws of the
state in which the judgment is given and the rules of private international law
currently prevailing in Israel, the laws of which do not prohibit the
enforcement of judgment of Israeli courts, provided that:
27
o the judgment is enforceable in the state in which it was given;
o adequate service of process has been effected and the defendant has
had a reasonable opportunity to present his arguments and evidence;
o the judgment and the enforcement thereof are not contrary to the law,
public policy, security or sovereignty of the State of Israel;
o 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
o 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
foreign court and the judgment is no longer appealable and the
judgment is executory in the country in which it was given.
We have irrevocably appointed Puglisi & Associates as our agent to
receive service of process in any action against us in the state and federal
courts sitting in the City of New York, Borough of Manhattan arising out of this
offering or any purchase or sale of securities in connection therewith.
If a foreign judgment is enforced by an Israeli court, it generally will
be payable in Israeli currency, which can then be converted into non-Israeli
currency and transferred out of Israel. The usual practice in an action before
an Israeli court to recover an amount in a non-Israeli currency is for the
Israeli court to render judgment for the equivalent amount in Israeli currency
at the rate of exchange in force on the date thereof, but the judgment debtor
may make payment in foreign currency. Pending collection, the amount of the
judgment of an Israeli court stated in Israeli currency ordinarily will be
linked to the Israeli consumer price index plus interest at the annual statutory
rate set by Israeli regulations prevailing at such time. Judgment creditors must
bear the risk of unfavorable exchange rates.
28
RADA ELECTRONIC INDUSTRIES LTD.
6,305,892 Ordinary Shares
----------------------------
PROSPECTUS
----------------------------
You should rely only on the information incorporated
by reference or provided in this prospectus. We have
not authorized anyone to provide you with different
information. We are not making any offer to sell or
buy any of the securities in any state where the
offer is not permitted. You should not assume that
the information in this prospectus is accurate as of
any date other than the date that appears below.
August 11, 2004