As filed with the Securities and Exchange Commission on June 9, 2006
Registration No. 333-( )
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM F-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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VOCALTEC COMMUNICATIONS LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
State of Israel Not Applicable
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
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VocalTec Communications Ltd.
60 Medinat Hayehudim Street, P.O. Box 4041
Herzliya 46140, Israel
+972-9-970-3888
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
VocalTec Communications Inc.
1732 Southampton Drive
Carrollton, TX 75007
(214) 476-5107
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies of Communications to:
Dan Shamgar, Adv.
Michael Rimon, Adv.
Meitar Liquornik Geva & Leshem Brandwein
16 Abba Hillel Road
Ramat Gan 52506, Israel
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Approximate date of commencement of proposed sale to the public:
From time to time after effectiveness of this registration statement
(except as otherwise described herein).
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a registration statement pursuant to General Instruction I.C. or
a post-effective amendment thereto that shall become effective upon filing with
the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box. [_]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.C. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities
Act, check the following box. [_]
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
BE REGISTERED REGISTERED UNIT PRICE REGISTRATION FEE
------------- ---------- ---- ----- ----------------
Ordinary shares, nominal value NIS 0.13 935,000 $5.21 (1) $4,871,350 (1) $521
Ordinary shares, nominal value NIS
0.13, issuable upon exercise of
warrants (2) 424,050 $5.21 (1) $2,209,301 (1) $237
Total 1,359,050 $5.21 $7,080,651 $758
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(c) under the Securities Act of 1933, based on the
average of the reported high and low prices of the ordinary shares on the Nasdaq
Capital Market on June 8, 2006.
(2) Pursuant to Rule 416 of the Securities Act of 1933, this Registration
Statement also registers an additional indeterminate number of ordinary shares
issuable upon exercise of such warrants by reason of any share dividend, stock
split, recapitalization or similar transaction effected without the receipt of
consideration which results in an increase in the number of outstanding ordinary
shares.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. NO
SELLING SHAREHOLDER MAY SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS
IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO
BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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SUBJECT TO COMPLETION, DATED JUNE 9, 2006
PROSPECTUS
VOCALTEC COMMUNICATIONS LTD.
1,359,050 Ordinary Shares
This prospectus relates to the resale or other disposition, from time to
time, by the selling shareholders identified in this prospectus, or their
transferees, of up to 1,359,050 of our ordinary shares (except that warrants to
purchase up to 424,050 of the foregoing ordinary shares may be exercised
commencing on November 24, 2006 and until May 23, 2011), or interests therein.
We are registering 935,000 ordinary shares that were issued by us on May 24,
2006 in a private placement transaction, 374,000 ordinary shares that are
issuable upon the exercise of warrants issued to the investors in the private
placement transaction and 50,050 ordinary shares that are issuable upon the
exercise of warrants that we issued to the placement agent in the private
placement transaction and certain affiliates thereof.
We will pay all expenses of registering the foregoing ordinary shares. We
will not receive any proceeds from the sale or other disposition of ordinary
shares by the selling shareholders, but we will receive the proceeds from the
exercise of the warrants.
You should read both this prospectus, together with the additional
information described under the heading "Incorporation of Certain Documents by
Reference," before you decide to invest in our ordinary shares.
Our ordinary shares are traded on Nasdaq Capital Market under the symbol
"VOCL". On June 8, 2006, the last reported sale price of our ordinary shares on
Nasdaq Capital Market was $5.20 per share.
INVESTING IN OUR ORDINARY SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE OF THIS PROSPECTUS TO READ ABOUT FACTORS YOU SHOULD
CONSIDER BEFORE PURCHASING OUR ORDINARY SHARES.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
The date of this prospectus is , 2006.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT OR ADDITIONAL INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR
INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. WE ARE NOT MAKING AN OFFER
OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD
NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF
ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS. OUR BUSINESS,
FINANCIAL CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE
THEN.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS 3
PROSPECTUS SUMMARY 4
RISK FACTORS 4
FORWARD-LOOKING STATEMENTS 19
OFFER STATISTICS 19
CAPITALIZATION AND INDEBTEDNESS 19
REASONS FOR THE OFFER AND USE OF PROCEEDS 19
PRICE HISTORY OF OUR ORDINARY SHARES 20
SELLING SHAREHOLDERS 21
PLAN OF DISTRIBUTION 23
VALIDITY OF SECURITIES 25
EXPERTS 25
MATERIAL CHANGES 25
ENFORCEABILITY OF CIVIL LIABILITIES 25
WHERE YOU CAN FIND MORE INFORMATION 26
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 26
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
United States Securities and Exchange Commission, or the SEC.
Unless the context otherwise requires, all references in this prospectus to
"VocalTec," "we," "our," "our company, "us" and the "Company" refer to VocalTec
Communications Ltd. and its consolidated subsidiaries.
All references in this prospectus to "ordinary shares" refer to our ordinary
shares, par value 0.13 NIS per share.
All references in this prospectus to "dollars" or "$" are to United States
dollars.
All references in this prospectus to "shekels" or "NIS" are to New Israeli
Shekels.
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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 related notes, all of which appear
elsewhere in this prospectus or in the documents incorporated by reference in
this prospectus.
Our corporate name is VocalTec Communications Ltd. for both legal and commercial
purposes. VocalTec was organized under the laws of the State of Israel in 1989.
Our address is 60 Medinat Hayehudim Street, P.O. Box 4041, Herzliya 46140,
Israel, and our telephone number is +972-9-970-3888. We are a provider of
carrier-class multimedia and voice-over-IP solutions for communication service
providers. We provide trunking, peering, access gateway and service delivery
solutions that enable flexible deployment of next-generation networks (NGNs). We
implement and support advanced telecom solutions, specializing in the smooth
migration of voice networks from legacy networks to next generation, IP based
networks. Designed for easy integration in multi-vendor environments, our
solutions handle media processing, signaling, security and service creation
within state-of-the-art NGN networks. Our SIP-based solutions support a variety
of protocols, including Megaco/H.248, MGCP, H.323, ELCP, V5.2 and GR-303, and
incorporate key elements of IMS (IP Multimedia Subsystem) architecture.
In November 2005, VocalTec consummated a business combination with Tdsoft Ltd.,
or Tdsoft, an Israeli privately held company, pursuant to which VocalTec
purchased all of the issued and outstanding share capital of Tdsoft and issued
to the Tdsoft shareholders shares of VocalTec constituting 75% of the issued and
outstanding share capital of VocalTec immediately following such issuance.
On May 24, 2006, VocalTec consummated a private placement transaction pursuant
to which it issued to various investors an aggregate of 935,000 ordinary shares
at a price per share of $5.496 and warrants to purchase an aggregate of 374,000
ordinary shares at an exercise price of $7.9005 per share. In addition, VocalTec
issued to the placement agent in the private placement transaction and its
affiliates warrants to purchase an aggregate of 50,050 ordinary shares at an
exercise price of $7.9005 per share.
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision regarding our ordinary shares. Our business, financial
condition and results of operations could be materially adversely affected by
any of these risks. The trading price of our ordinary shares could decline due
to any of these risks, and you may lose all or part of your investment. We are
subject to various risks resulting from changing economic, political, industry,
business and financial conditions. The principal factors are described below.
THE OUTCOME OF OUR BUSINESS COMBINATION WITH TDSOFT LTD. IS NOT YET KNOWN AND
THERE IS NO ASSURANCE THAT THE BUSINESS COMBINATION WILL RESULT IN THE BENEFITS
THE COMPANY CURRENTLY ANTICIPATES.
The main purpose for the business combination with Tdsoft was the companies'
belief that the combined company would be better positioned to offer competitive
VoIP products to existing and prospective customers. Achieving the expected
benefits of the business combination depends on the timely, efficient and
successful integration of the operations and personnel of both companies. The
challenges presented by the business combination include the successful
development and promotion of unified strategy, procedures and policies, the
ability to realize the synergies between the companies' products and to succeed
in offering to current and prospective customers the combined company's products
and the successful retention of talented employees who may suffer from
uncertainties regarding their position in the combined company and changes in
corporate culture. In addition, the integration is expected to require
substantial attention from the combined company's management, which may result
in the diversion of management resources from regular business concerns to
integration considerations. The integration process may also result in the need
to invest unanticipated additional cash resources, which may divert funds that
the Company expects to use for working capital, including the pursuit of new
business opportunities, and may force the Company to raise additional funds. If
the businesses of the Company and Tdsoft are not successfully integrated, the
benefits of the business combination will not be realized and, as a result, the
combined company's operating results may be adversely affected. In addition, the
success of the combined company depends to a great extent on its ability to
successfully build customer confidence in the products of the Company and Tdsoft
and offer a comprehensive solution and support to existing and potential
customers. There is no assurance that the combined company will be successful in
achieving and maintaining the foregoing.
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THE COMPANY MAY LOSE CUSTOMERS AND BUSINESS PARTNERS DUE TO UNCERTAINTIES
ASSOCIATED WITH THE BUSINESS COMBINATION.
Current and prospective customers and business partners of the Company and
Tdsoft may experience uncertainty about their future relationships with the
combined company. In particular, some of Tdsoft's business partners may be
concerned about competition from the combined company and the companies'
respective customers may be concerned about the combined company's continued
supply of products and services and continued provision of customer service
during the period of integration of the businesses of the Company and Tdsoft and
in the future. There is currently no assurance that the combined company will
continue supplying and servicing the companies' current products. If the
combined company discontinues supplying or servicing any such current product,
current customers of the Company and Tdsoft may terminate their relationship
with us. The loss of any customer or business partner could adversely affect the
Company's results of operations.
IF THE COMPANY FAILS TO MANAGE ITS POST-BUSINESS COMBINATION GROWTH EFFECTIVELY,
ITS EXPENSES COULD INCREASE AND ITS MANAGEMENT'S TIME AND ATTENTION COULD BE
DIVERTED.
As part of the business combination, the Company intends to broaden the scope of
its operations. As a result, its business, results of operations and financial
condition will be substantially harmed if it is unable to manage its expanding
operations efficiently. The Company plans to continue to expand its sales and
marketing, customer support and research and development organizations. Any
future growth may place a significant strain on its management systems and
resources. The Company's failure to manage its growth efficiently could increase
its expenses and divert management's time and attention. In addition, the
Company is likely to incur higher expenses during the initial period of
integration of the operations and personnel of the Company and Tdsoft. These
costs may be significant and may include expenses and other liabilities for or
relating to:
o employee redeployment or relocation;
o maintaining or subletting the leases of the Company's and Tdsoft's
respective corporate headquarters (or any portions thereof);
o liquidating subsidiaries outside of Israel;
o establishing combined research and development facilities and
information technology, or IT, infrastructure.
The integration costs that the Company incurs may negatively impact the
financial condition of the Company and the market price of the Company's shares.
THE EXERCISE OF THE REGISTRATION RIGHTS GRANTED TO THE TDSOFT SHAREHOLDERS MAY
RESULT IN A DECREASE OF THE TRADING PRICE OF THE COMPANY'S ORDINARY SHARES. IN
ADDITION, THE REVERSE SPLIT OF THE COMPANY'S SHARES HAS RESULTED IN A
SIGNIFICANT DECREASE IN THE NUMBER OF THE COMPANY'S SHARES OUTSTANDING, WHICH
MAY ADVERSELY AFFECT THE LIQUIDITY AVAILABLE TO THE COMPANY'S SHAREHOLDERS.
None of the shareholders of the combined company are subject to any "lock up"
arrangement with respect to their shares, and therefore all of them are free to
sell their shares, subject to limitations imposed by applicable securities laws.
For example, the Tdsoft shareholders may sell the Company shares they received
pursuant to the business combination beginning on the first anniversary of the
closing of the business combination, subject to volume limitations under US
federal securities laws. In addition, at the closing of the business combination
the Company granted certain registration rights to the Tdsoft shareholders,
including without limitation the right to demand that the Company register their
shares during a seven-year period commencing nine months following the closing
of the business combination. The exercise of such registration rights may result
in an offer of a large number of shares which may adversely affect the trading
price of the Company's ordinary shares.
Immediately following the closing of the business combination, the Company
effected a reverse split of the Company's shares in the range of 1-for-13, which
has significantly decreased the number of the Company's shares outstanding and
is likely to have an adverse effect on the liquidity available to the Company's
shareholders.
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IN 2002 WE BEGAN DEVELOPING, AND IN 2004 WE BEGAN MARKETING, THE ESSENTRA
PRODUCTS TO NEW CUSTOMERS IN NEW MARKETS. IN 2005 TDSOFT BEGAN MARKETING ITS
TDGATE IP-V5 AND IP-303 AND TDMAX PRODUCTS. SINCE THE BUSINESS COMBINATION, THE
COMPANY IS DEVELOPING PRODUCTS AND TECHNOLOGY LEVERAGING THE KNOW-HOW OF BOTH
TDSOFT AND VOCALTEC. THERE IS NO ASSURANCE THAT WE WILL BE SUCCESSFUL IN
OBTAINING AND MAINTAINING A SUFFICIENT MARKET SHARE FOR OUR PRODUCTS.
During 2002, VocalTec began developing the Essentra products, which are
replacing the H.323 traditional products that were designed for the use of
international long distance networks and carriers in emerging markets. The first
version of the Essentra products during 2003 and a modular product approach of
the Essentra product line was released during July 2004. The initial versions of
the Essentra products were designed based on the then new softswitch
architecture and standards, to approach the same markets and solutions as in our
prior H.323 products. The Essentra products were designed to provide migration
from H.323 networks to new, higher scale softswitch based networks. After
commencing the development of the Essentra products, VocalTec identified a
decrease in the demand for the traditional H.323 products, resulting, among
other reasons, from a decrease in the prices of international long distance
calls, which caused a sharp decrease in demand for solutions of the type that we
offered. This raised concerns about whether there would be a demand for the new
Essentra products, which, while using modern softswitch architecture, were
nevertheless targeted to the declining market. After analyzing alternatives and
witnessing the fast deployment of broadband Internet access to end users and the
increased competition that wireline residential and enterprise services face
from mobile telephony as well as from telephony services offered by cable
operators, VocalTec anticipated that changes in the residential and enterprise
wireline telephony services would be occurring in coming years. VocalTec
expected this change to be in the form of replacement of legacy VoIP equipment,
broadband carriers (also known as Class 5 switches) with modern softswitches and
the offer of telephony services over broadband Internet available at an
increasing number of homes. VocalTec therefore refocused its product development
effort on the redesign of the Essentra products to cope with the much wider set
of requirements of a Class 5 replacement softswitch, supporting legacy
telephony, voice over broadband and hosted enterprise services. Targeted
geographic markets were also changed. While the H.323 products were offered
mainly in developing countries, the Class 5 replacement products were targeted
initially at developed countries.
Through the acquisition of the assets of B-Connected in 2004, Tdsoft acquired
the TAS product, which is a new generation DLC (Digital Loop Carrier - a product
enabling the connection of a subscriber's phone to the carrier access network).
Tdsoft developed the DLC to be a single sided VoIP device for the class 5
replacement market. The TdMAX product (which is the the successor of the TAS) is
a line gateway device that connects POTS (Plain Old Telephone System) and ADSL
modems to the network backbone over IP and VoIP technology.
During 2003, Tdsoft began developing the TdGATE products, a group of devices
connected to a variety of infrastructure domains such as ATM, TDM and IP.
Initially, such products were ATM-based interface that enabled voice over DSL
extension to a Class5 switch, and during 2004 such products were enhanced with
VoIP capabilities, to enable Class5 replacement using VoIP. The majority of the
installations are with existing class 5 switches connected to deliver voice
traffic to DSL based networks. The Hunt 8110 is an ATM edge device that is
installed within the demarcation point between the ATM network and the IP
network to deliver Ethernet services (which is a protocol commonly used in
today's data networks). The TdGATE family design allows us to install the system
in versatile environment to bring solutions to TDM to IP/ATM or ATM/IP to TDM
networks.
We have encountered various challenges inherent to entering into a new business,
including learning and understanding the new target markets, positioning our
products in an already competitive market, creating and maintaining
relationships with new suppliers, customers and other third parties and
subjecting the products to testing and training of sales and marketing employees
to enable them to successfully promote the sale of the Essentra, as well as the
TdGATE IP and TdMAX products. This required the allocation of substantial
resources.
Although we have conducted initial trials with respect to, and have received
several small orders for, our Essentra, TdGATE IP and TdMAX products, some of
these products (for example, our Essentra BAX product) are still subject to
additional testing and modifications and have not yet been used extensively by
customers, which prevents us from developing a track record that is crucial for
the expansion and the development of additional sales channels for our new
products. Essentially, our new products have not yet been fully field-tested by
the market, and therefore the products' advantages have not yet been recognized
and acknowledged by our target MARKETS. Furthermore, unlike our traditional
H.323 and the TdGATE IP products, which were unique and the first of their kind
to be introduced to the telecommunications market, our Essentra and TdMAX
products compete with existing, comparable products of various companies, some
of which have certain advantages over us, including the ability to manufacture
the hardware components used in their solutions, access to prospective customers
and an established market share.
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In light of the foregoing, there is no assurance that we will be successful in
obtaining and maintaining a sufficient market share for our Essentra, TdGATE IP
and TdMAX new products.
WE HAVE ENCOUNTERED AND EXPECT TO CONTINUE TO ENCOUNTER VARIOUS CHALLENGES
INHERENT TO ENTERING INTO A NEW BUSINESS AND THERE IS NO ASSURANCE THAT WE WILL
BE SUCCESSFUL IN OVERCOMING SUCH CHALLENGES.
Due to the fact that we have been developing and offering new products, some of
which are targeted at new customers in new markets, we have encountered and
expect to continue to encounter various challenges. For example, customers of
VOBB (Voice over Broad Band) service providers require various features
products, which features are more complex than those offered through our
traditional products. In addition, while seeking midsize carriers, being new to
this market, we had to consider offering solutions to alternative small carriers
as well, raising the need for flexibility and competitiveness within a wide
range of solutions. Also, our solutions have to be inter-operable with offerings
of various third parties, which results in a more complex and expensive
development and upgrading of the products. Furthermore, in recent years we have
witnessed an increasing competition in the VoIP market, resulting in declining
prices, as VoIP has become a mainstream technology. One of the main challenges
in penetrating the market with the products offered by VocalTec and Tdsoft
relates to the ability to fulfill the full set of class features, when deployed
either in conjunction with a Class5 softswitch from a partner vendor, or when
offered as a stand-alone solution. In addition, price pressure and strong
competition cause difficulties to the market penetration of such products. The
TdMAX product faces stiff competition from Chinese vendors and we may not be
able to compete in markets where the Chinese vendors sell at low prices. If
unsuccessful at generating volume sales of this product, the cost structure will
not enable us to be competitive in this market and we may consider divesting the
TdMAX.
The TdGATE IP-V5 and TdGATE IP-303 gateways are targeted at the market for
replacement of TDM class 5 softswitches while using legacy access connected via
the V5 and GR303 protocols. Currently, the market has not yet adopted this
concept and there is a possibility that carriers may choose not to replace the
TDM switches prior to upgrading the legacy access to VoIP access therefore
eliminating the need for these gateways.
Furthermore, in order to materially increase our revenues, we have to enter into
a larger number of contracts with more customers and create more partnerships
with more vendors, which requires the allocation of more resources by us. Unless
we do so, or are able to successfully re-allocate our resources and reduce our
operational expenses, reaching profitability could be delayed. Moreover, due to
the fact that we are currently in the early stages of penetrating the VOBB
market, the loss of a contractual relationship with any of the customers with
which we have established, or are in the process of establishing, a
relationship, could materially adversely affect our results of operations.
Finally, the Class 5 replacement market is new and is in its early stages, which
is reflected by carrier hesitation and long decision-making process as well as
expectations for evaluation and trial phases prior to the purchase of the
product. In addition, the ability to sell and promote the traditional Tdsoft
products, which are highly dependent on the Class 5 replacement opportunity and
are positioned to allow migrations of such networks from legacy to new networks,
is effected by the early stage of the Class 5 replacement market. Some carriers
prefer to take the overlay network approach, deploying a whole new network
infrastructure side by side with the older network, instead of doing a
replacement of the core or the access equipment. In such cases, the Tdsoft
products are not required; however, the Essentra products can come into play in
such cases with the offering of an NGN Class5 type solution, which can be
installed as the overlay network.
There is no assurance that we will be successful in encountering the foregoing
as well as other challenges in our attempt to offer our Essentra (which now
include the Tdsoft TdGATE products and TdMAX products which are offered as
additional products under the Essentra product line) to new customers in
developed countries and to the channel partners of the combined company. A
failure to successfully encounter such challenges may prevent us from obtaining
and maintaining a sufficient market share, which may materially adversely affect
our results of operations.
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OUR ESSENTRA, TDGATE AND TDMAX PRODUCTS GENERALLY HAVE A LONG SALES CYCLE, WHICH
INCREASES OUR COSTS IN OBTAINING ORDERS, REDUCES THE PREDICTABILITY OF OUR
EARNINGS AND REQUIRES HIGHER WORKING CAPITAL.
Our Essentra, TdGATE and TdMAX products are technologically complex and are
typically intended for use in solutions that may be critical to the business of
our customers. Prospective customers for such products generally must make a
significant commitment of resources to test and evaluate products and to
integrate them into their solutions. As a result, the sales process for such
products is long and often subject to delays associated with lengthy approval
processes that typically accompany the design and testing of our customers'
solutions. The sales cycles of our products to new customers currently average 6
to 12 months from the time we make a proposal to a customer until the time the
customer begins using the relevant product in production mode. This requires us
to invest significant resources to make sales, which increases our costs in
obtaining orders and reduces the predictability of our sales. In addition, in
some cases we need to finance the equipment that we install in our customers'
premises during the period of installment, testing and approval of the
equipment, which requires us to allocate working capital for the period of such
financing. Furthermore, in many cases the sale of our products is conditioned
upon a trial period during which the products are installed at the customers'
premises, which installation requires an investment by us of capital and
manpower, without assurance that the customers will purchase the products.
Long sales cycles also subject us to risks not usually encountered by companies
whose products have short sales cycles, complicating our planning processes and
reducing the predictability of our earnings. These risks include:
o a pre-sale trial procedure intended for defining customers' needs,
which involves additional costs;
o the potential cancellation of orders based on our customers` changing
budgetary constraints; and
o the shift in orders expected in one quarter to another quarter because
of the timing of our customers` procurement decisions.
BECAUSE MANY OF OUR CURRENT AND PLANNED PRODUCTS ARE HIGHLY COMPLEX, THEY MAY
CONTAIN DEFECTS OR ERRORS THAT ARE DETECTED ONLY AFTER DEPLOYMENT IN COMMERCIAL
APPLICATIONS. MOREOVER, OUR CUSTOMERS MAY BUNDLE OUR PRODUCTS WITH THE PRODUCTS
OF OTHER PROVIDERS THAT CONTAIN DEFECTS THAT ARE WHOLLY UNRELATED TO OUR
PRODUCTS. IN EITHER INSTANCE, IF THIS OCCURS, IT COULD HARM OUR REPUTATION AND
RESULT IN REDUCED REVENUES OR INCREASED EXPENSES.
Our products are highly complex and may contain undetected defects, errors or
failures. These products can only be fully tested when deployed in commercial
applications and other equipment. Consequently, our customers may discover
errors after the products have been deployed. The occurrence of any defects,
errors or failures could result in:
o product returns, repairs or replacements;
o cancellation of and reduction in orders;
o uncollectible accounts receivable and delays in collecting accounts
receivable;
o diversion of our resources;
o legal actions by our customers or our customers' end users;
o increased insurance costs; and
o other losses to us or to our customers or end users.
Any of these occurrences could also result in the loss of or delay in market
acceptance of our products and loss of sales, which would harm our business and
adversely affect our results of operations. There can be no assurance that,
despite testing by us or by our customers, errors will not be found in our
products after commencement of commercial deployment. We have from time to time
experienced defects in our products and expect to experience defects in the
future. We may in the future incur costs associated with warranty claims.
Because the trend in our industry is moving toward even more complex solutions
and products in the future, this risk will intensify over time and may result in
increased expenses.
In addition, our customers may bundle, incorporate or connect our products into
or to complex systems that contain errors or defects that are wholly unrelated
to our products. Such occurrences may result in undue delays or cancellations of
the implementation of our customers' bundled products and services. In such
cases, our reputation could be harmed and our results of operations could be
adversely affected, which could result in reduced revenues or increased
expenses.
- 8 -
WE DEPEND ON THE ABILITY OF OUR CHANNELS AND BUSINESS PARTNERS WHO PURCHASE OUR
PRODUCTS TO ACHIEVE BROAD MARKET ACCEPTANCE FOR THEIR PRODUCTS. IF THESE
CHANNELS AND BUSINESS PARTNERS DO NOT SUCCEED IN SELLING THEIR PRODUCTS, THIS
WILL REDUCE DEMAND FOR OUR PRODUCTS AND OUR REVENUES WILL BE ADVERSELY AFFECTED.
Tdsoft's products are normally sold through other vendors, system integrators
and business partners, who repackage or resell the Tdsoft products under their
own private label to consumers or incorporate the Tdsoft products into their own
products, which are then sold to end customers (rather than selling our products
directly to carriers). We plan to use these channels to promote the sale of
Essentra and future products. To achieve this, we will have to allocate
resources to train such channels as to the use of our Essentra products,
resulting in additional costs increased by us and additional time until sales by
our channels of our Essentra products will be feasible. We are dependent upon
the success of our customers and business partners and the broad market
acceptance of their products. To the extent that our channels and business
partners are unsuccessful in selling our products, our revenues and operating
results will be adversely affected.
WE HAVE EXPERIENCED AND MAY CONTINUE TO EXPERIENCE SIGNIFICANT FLUCTUATIONS IN
OUR QUARTERLY RESULTS, WHICH MIGHT MAKE IT DIFFICULT FOR INVESTORS TO MAKE
RELIABLE PERIOD-TO-PERIOD COMPARISONS AND MAY CONTRIBUTE TO VOLATILITY IN THE
MARKET PRICE OF OUR ORDINARY SHARES.
The operating results of each of VocalTec (prior to the business combination)
and Tdsoft have fluctuated and may continue to fluctuate from period to period
for a number of reasons. Although during the years 2003 through 2005 we
witnessed a general improvement in the market for telecommunication equipment,
due to the past volatility of this market we cannot predict the duration or
extent of any recovery in this market or the impact it may have on our revenues
or results of operations.
There are several market conditions that could continue to cause our customers
and potential customers to be conservative in their spending:
o The VoIP market for telecommunications carriers is experiencing a
shift from H.323 technology to softswitch technology, from current
Time Division Multiplexing, or TDM, networks to the innovative
services delivered by Next Generation VoIP Networks, or NGNs,
resulting in a transitional period for many VoIP vendors, including
our company.
o Large carriers are showing an increased interest in migrating their
Public Switch Telephone Networks, or PSTNs, to VoIP softswitch based
networks, and there is still uncertainty with respect to the extent
and timing of shifting PSTNs to VoIP softswitch networks.
o As a result of our long sales cycle (described above), we may need
extended time to build up an order backlog.
These factors make the forecasting of sales inherently uncertain. Significant
annual and quarterly fluctuations in our results of operations may also be
caused by, among other factors, the timing and composition of orders from our
customers, reduced prices for our products, the economic viability and
credit-worthiness of our customers, the collectability of our receivables (some
of which are recognized on a cash basis), the timing of new product
announcements and releases by both our company and our competitors.
Our future results may also be affected by factors that include our ability to
continue to develop, introduce and deliver enhanced and new products in a timely
manner, to offer new products at competitive prices, to offer existing products
at lower prices, to compete with competitors that are larger than we are, and to
anticipate and meet customer demands. There can be no assurance that sales in
any particular quarter will not be lower than those of the preceding quarters,
including comparable quarters.
As a result, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. The volatility in our operating results may
also result in significant volatility in our share price. Furthermore, our share
price is also subject to the price volatility experienced by many companies in
the telecommunications sector, VoIP industry and related sectors. It is also
possible that our quarterly results of operations may be below the expectations
of public market analysts and investors. If this happens, the price of our
ordinary shares is likely to decrease.
EACH OF VOCALTEC (PRIOR TO THE BUSINESS COMBINATION) AND TDSOFT HAS INCURRED
SIGNIFICANT HISTORICAL OPERATING LOSSES AND THERE IS NO ASSURANCE THAT THE
COMBINED COMPANY WILL NOT CONTINUE TO INCUR OPERATING LOSSES.
Since its incorporation in 1989, VocalTec (prior to the business combination)
has had limited sales and has incurred significant operating losses. VocalTec
(excluding the results of operations of Tdsoft) had operating losses in 2005,
2004 and 2003 of $9.5 million, $13.2 million and $8.1 million, respectively. In
2005, 2004 and 2003, Tdsoft had operating losses of approximately $6.4 million,
$5.9 million and $3.9 million, respectively. The Company may continue to incur
operating losses in the future due to, among other reasons, (i) the fact that
the new Essentra products and the TdGATE IP-VS and IP-303 and the TdMAX products
have only recently been offered in new target markets to new customers and has
not yet obtained a substantial market share of the VoIP broadband business and
(ii) the integration of the businesses of VocalTec and Tdsoft, which will
require the allocation of substantial resources. To achieve profitability and
increased sales levels, the Company must, among other things, establish and
increase market demand and acceptance of its products respond effectively to
competitive pressures, offer high quality customer service and support, and
introduce advanced versions, enhancements and new products that meet market
needs on a timely basis.
- 9 -
The Company may continue to incur operating losses in 2006 and thereafter if
revenues are insufficient to cover sales and marketing, research and
development, administrative and other expenses. If revenue levels do not
sufficiently increase, operating results will be adversely affected because any
reduction in expenses may not sufficiently cover reduction in revenues. There is
no assurance that the Company will achieve or sustain significant sales or
profitability in the future.
IF NGN VOIP BASED CARRIER MARKETS FOR OUR PRODUCTS AND TECHNOLOGY FAIL TO GROW,
OR OUR PRODUCTS FAIL TO ACHIEVE MARKET ACCEPTANCE, OUR BUSINESS WILL BE
ADVERSELY AFFECTED.
The markets for our Essentra, TdMAX and TdGATE products are relatively new and
are rapidly evolving technologically. Our products compete with similar products
and services developed by our competitors, some of which have greater market
share and acceptance as well as greater resources to develop and promote such
products. Sales of VoIP products have fluctuated and have been generally
unpredictable, as fluctuation in demand for voice infrastructure products is
dependent on the customers establishing and/or expanding their networks. As is
typical in the case of an evolving industry, demand and market acceptance for
recently introduced technology products and services are subject to a high level
of uncertainty. Furthermore, there is uncertainty as to whether, when and the
pace at which the VoIP market will further increase. Broad market demand and
acceptance of our technology, products and solutions, including our Essentra,
TdMAX and TdGATE products, and interoperability of such products with other VoIP
products are very important to our success and to our ability to generate
revenues.
Market demand and acceptance of our technology, products and solutions will be
highly dependent on functionality, interoperability, reliability, stability and
performance, as well as on external factors beyond our control such as the
development of the VoIP market, including the Voice over Broadband and Class 5
replacement, the introduction of competing products or technologies into the
market and the stability and bandwidth of those networks. There can be no
assurance that packet based voice networks will become widespread, that
connections between Internet Protocol, or IP, networks and PSTNs will become
widespread or that our products and solutions, including our Essentra, TdMAX and
TdGATE products, will generate sales or gain market acceptance. The adaptation
process of connecting IP networks and PSTNs can be time consuming and costly to
both us and our customers and the acceptance of the product or system may
depend, to a substantial extent, on the success of the adaptation. There can be
no assurance that the market for our products and services will grow above
current levels, that our products and solutions will achieve market acceptance
or that other, competitive products will not achieve better acceptance in the
market. If the market does not grow above current levels, or if our products and
solutions do not achieve market acceptance, our business, financial condition
and results of operations will be materially adversely affected.
IF OUR RELATIONSHIPS WITH OUR KEY CUSTOMERS ARE TERMINATED, OUR REVENUES WILL
DECLINE AND OUR BUSINESS WILL BE ADVERSELY AFFECTED.
During 2003, the two main customers of VocalTec (prior to the business
combination), Deutsche Telekom and its T-Systems subsidiary and DataAccess
(India) Limited, or DataAccess, accounted for 52% and 22% of the sales of
VocalTec (prior to the business combination), respectively. In 2004, DataAccess,
which accounted for 6% of the sales of VocalTec (prior to the business
combination) in that year, experienced financial difficulties. Deutsche Telekom
and its T-Systems subsidiary accounted for 31% of the sales of VocalTec (prior
to the business combination) in 2004. In addition, in 2004, Intelecom San Marino
accounted for 12% of the sales of VocalTec (prior to the business combination).
The loss of DataAccess, one of the two largest customers in 2003 and in 2002, as
well as the decrease in revenues from Deutsche Telekom and its T-Systems
subsidiary had an adverse effect on the results of operations of VocalTec (prior
to the business combination). During 2003, the three main customers of Tdsoft
(prior to the business combination), TNN Networks, Graybar and Lucent, accounted
for 20%, 18% and 12% of the sales of Tdsoft (prior to the business combination),
respectively. During 2004, the four main customers of Tdsoft (prior to the
business combination), OG Vodafone, Graybar, ECI and VoIP Pty Ltd., accounted
for 13%, 12%, 11% and 10% of the sales of Tdsoft (prior to the business
combination), respectively. During 2005, the two main customers of Tdsoft (prior
to the business combination), Lucent and OG Vodafone, accounted for 18% and 16%
of the sales of Tdsoft (prior to the business combination), respectively. If for
any reason, our relationship with Deutsche Telekom, Intelecom San Marino, Lucent
or OG Vodafone is terminated, or if either of these key customers reduces
purchases of our products or maintenance or replaces an existing equipment in
its networks with competing products, then our business, financial condition and
results of operations would be materially adversely affected. The impact of the
termination or reduction of our key customer relationships would be intensified
if we are unable to establish and increase sales to other customers in order to
offset this termination or reduction.
- 10 -
WE DEPEND ON THIRD PARTIES FOR THE SUPPLY AND QUALITY OF COMPONENTS REQUIRED FOR
THE MANUFACTURE OF OUR PRODUCTS, AND ANY DELAY OR DISRUPTION IN THE SUPPLY OF
THESE PRODUCTS WILL ADVERSELY AFFECT OUR RESULTS.
We depend on third parties for the manufacture, supply and support of certain
hardware and software components that are integrated into our Essentra, TdMAX
and TdGATE products (including IBM BladeCenterT platform and blades, Intel
signaling gateways, AudioCodes media gateways, TTI Telecom software and various
other suppliers for gateway platforms, voice processing chips, DSP software, SIP
software and SS7 Software). Following the sale and installation of our products,
we rely on our hardware and software suppliers (to varying extents) for
maintenance and service that we provide to our customers. To that end, our
agreements with our suppliers include obligations of our suppliers to provide us
with certain levels of service and maintenance, as well as restrictions on the
right of the supplier to discontinue the manufacture of the hardware components
we purchase from them. We depend on third party suppliers for certain key
components, however, we do not have a long-term supply contract with our
suppliers, and, to date, we did not yet establish a relationship with alternate
suppliers of such components. In addition, manufacturing problems may occur with
these third parties. A supplier may fail to develop and supply products and
components to us on a timely basis, or may supply us with products and
components that do not meet our quality, quantity or cost requirement, or may
cease to provide support with respect to the hardware and software purchased by
the Company; therefore, we face the risk of inadequate component supply, price
increases, late deliveries, poor component quality and failure in the
availability and level of support and maintenance, as any supplier may terminate
its relationships with us or pursue other relationships with our competitors. If
we were to lose our relationship with these suppliers, the lead time required to
qualify new suppliers could be as long as four months. Also, if we lose our
single suppliers or these suppliers are otherwise unable to satisfy our volume
and delivery schedule requirements, it may be difficult to locate alternative
suppliers that are able to develop, manufacture, deliver and provide service and
maintenance with respect to the specialized components we need for our products
in the desired lead times and quality. In addition, if the processes that our
suppliers use to manufacture products and components are proprietary, we may be
unable to obtain comparable components from alternative suppliers.
Furthermore, if we experience quality problems from any of our component
suppliers, it could take us a significant amount of time to identify the problem
as associated with a particular component, ascertain whether this is as a result
of a design or a manufacturing flaw and either correct the problem, if possible,
replace the components or find an alternate source of supply. Any such quality
problem or delay could, in addition to causing us lost sales, detrimentally
affect our reputation in the market and cause us to incur additional costs as a
result of the recall and replacement of affected products.
Finally, our dependence on third party suppliers significantly limits our
ability to compete successfully with some of our competitors, which supply
themselves the hardware components that are used in their solutions and
therefore have the flexibility of making more competitive offers to potential
customers.
IF OUR NEW PRODUCTS DO NOT MEET MARKET AND CUSTOMER REQUIREMENTS OR IF OUR
PRODUCTS DO NOT ACHIEVE INDUSTRY STANDARD CERTIFICATIONS IN OUR TARGET MARKETS,
WE WILL NOT ATTRACT AND RETAIN CUSTOMERS.
Maintaining and increasing our sales revenues are dependent upon the ability of
our products to meet market and customer requirements. To this end, we are
involved in a continuous process to evaluate changing market demands and
customer requirements, and to develop and introduce new products, features and
applications to meet such changing demands and requirements. A number of risks
are inherent in this process. We may not successfully anticipate market
requirements or complete the development or introduction of these products. In
addition, the development of new technologies and products is increasingly
complex and uncertain. This can result in delays in the introduction of new
technologies and products, and requires close collaboration and continued
technological advancement involving multiple hardware and software design teams
and outside suppliers of key components. The failure of any one of these
elements could cause new products to fail to meet specifications, market
requirements or customer demands, or to miss delivery schedules. As the variety
and complexity of our product lines increase, the process of planning production
and inventory levels also becomes increasingly complex.
Our results could be adversely affected by factors such as lack of market
acceptance of our products, development or manufacturing delays, and delays in
customer purchases of products in anticipation of the introduction of new
products and the rapidly changing landscape of emerging standards.
- 11 -
Further, telecommunications carriers outside the U.S. increasingly require that
VoIP products be designed to meet local homologation requirements to demonstrate
interoperability with existing networks of incumbent telecommunications
carriers, each of which may have different specifications. Failure to obtain
such homologation certifications or other industry standard certifications for
our products may result in decreased revenues, significant warranty, support and
repair costs may divert the attention of our engineering personnel, and may
cause significant customer relations problems.
THE MARKET PRICE OF OUR ORDINARY SHARES MAY BE VOLATILE AND INVESTORS MAY NOT BE
ABLE TO RESELL THEIR SHARES AT OR ABOVE THE PRICE PAID, OR AT ALL. IN ADDITION,
IF WE ARE UNABLE TO MAINTAIN THE LISTING OF OUR ORDINARY SHARES ON THE NASDAQ
CAPITAL MARKET, IT WILL BE MORE DIFFICULT FOR OUR SHAREHOLDERS TO SELL THEIR
SHARES.
In addition to our significant operating losses, generally depressed economic
conditions have adversely affected our share price and trading volumes in recent
years. Our ordinary shares were initially quoted on the Nasdaq National Market
in 1996. In December 2002 we transferred to the Nasdaq Capital Market, in July
2003 we transferred back to the Nasdaq National Market, and in April 2005 we
transferred back to the Nasdaq Capital Market, where our shares continue to be
listed under the trading symbol VOCL. We transferred back to the Nasdaq Capital
Market in April 2005 because we no longer satisfied the minimum stockholders'
equity continued listing requirement of the Nasdaq National Market. In August
2005, we received a notice from Nasdaq Capital Market that we were not in
compliance with the Nasdaq Capital Market shareholders equity continuing listing
requirement, and in November 2005 (simultaneously and in conjunction with the
consummation of the business combination) we re-listed our ordinary shares on
the Nasdaq Capital Market. Certain of the initial listing requirements of Nasdaq
Capital Market were met due to consummation of the business combination. If we
are unable to maintain the listing of our ordinary shares on the Nasdaq Capital
Market, due to our non-compliance with certain continued listing requirements of
the Nasdaq Capital Market, it will be more difficult for our shareholders to
sell their shares.
Additional factors that could cause the market price of our ordinary shares to
further decrease significantly include the loss of any of our major customers or
key personnel, new product developments or enhancements by our competitors,
sales of our securities by our shareholders, quarterly fluctuations in actual or
anticipated operating results, continued significant operating losses, market
conditions in the industry, law suits against the Company, its officers or
directors, analysts reports, announcements by competitors, regulatory actions or
other events or factors, including the risk factors described herein and general
economic conditions. In the past, following decreases or volatility in the
market price of a company's securities, securities class action litigation has
often been instituted. Such litigation could result in substantial costs and a
diversion of management's attention and resources, which would have a material
adverse effect on our business, operating results and financial condition.
WE ARE SUBJECT TO STRONG COMPETITION. ACCEPTANCE OF OUR COMPETITORS' PRODUCTS
AND TECHNOLOGY COULD RESULT IN REDUCED REVENUES OR GROSS MARGINS.
The competition in the VoIP communications market is very strong. Our
competitors include telecommunications companies, data communication companies
and pure VoIP companies. Almost all of our competitors are larger than we are,
and can offer more comprehensive solutions either on their own or by partnering
with others. In addition, many of our competitors have greater name recognition,
larger installed customer bases, broader product offerings, and significantly
greater financial, technical and marketing resources than we do. Finally, some
of these competitors are not dependent, as we are, on third parties for the
supply and quality of components required for the manufacture of their products.
Such competition may result in a reduction in prices. Even if we reduce the
prices of our products, there can be no assurance that we will be able to
successfully launch our new products, or compete successfully and effectively
for deals against other companies' product offerings. Furthermore, if we reduce
our prices below current levels due to the competition, our operating losses may
increase and we may be unable to increase our revenues and gross margins.
We expect that additional companies will compete in the IP-based voice networks
market. In the future, we may also develop and introduce other products with new
or additional telecommunications capabilities or services. As a result of any
such development or introductions, we may compete directly with traditional
telecommunications infrastructure and service providers. Additional competitors
may include companies that currently provide computer software products and
services, such as telephone, media and cable television. The ability of some of
our competitors to bundle other enhanced services and other products with VoIP
products could give these competitors an advantage over us.
- 12 -
POLITICAL, ECONOMIC AND MILITARY CONDITIONS IN DOMESTIC OR FOREIGN LOCATIONS,
INCLUDING ISRAEL, COULD NEGATIVELY IMPACT OUR BUSINESS.
Most of our operations are conducted in the State of Israel. Although virtually
all of our sales currently are made to customers outside Israel, we are
nonetheless directly influenced by the political, economic, military and other
conditions in and around Israel and in other countries in which our business is
located or in which our products are sold. In addition, any major hostilities
involving Israel or the interruption or curtailment of trade between Israel and
its present trading partners could have a material adverse effect on our
business, financial conditions or results of operations.
Accordingly, political, economic and military conditions in Israel may directly
affect our business. Since the State of Israel was established in 1948, a number
of armed conflicts have occurred between Israel and its Arab neighbors. Any
hostilities involving Israel or 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, could adversely affect our operations
and product development, cause our revenues to decrease and adversely affect the
share price of publicly traded companies having operations in Israel, such as
us. Although Israel has entered into various agreements with Egypt, Jordan and
the Palestinian Authority, there has been an increase in unrest and terrorist
activity, which began in September 2000 and has continued with varying levels of
severity into 2006. The recent election of representatives of the Hamas movement
to a majority of seats in the Palestinian Legislative Council may create
additional unrest and uncertainty. Furthermore, several countries, principally
in the Middle East, still restrict doing business with Israel and Israeli
companies, and additional countries may impose restrictions on doing business
with Israel and Israeli companies if hostilities in Israel increase. These
restrictions may limit materially our ability to sell our solutions to companies
in these countries.
WE EXTEND CREDIT TO CUSTOMERS FOR PURCHASES OF OUR PRODUCTS AND MAY NOT BE ABLE
TO COLLECT ACCOUNTS RECEIVABLE.
A portion of our receivables results from credit extended to customers for
purchases of our products. There can be no assurance that any of our accounts
receivable will be collected in whole or in part. Any failure in the collection
of accounts receivable will adversely affect our cash flow position and will
result in decreased revenues.
SOME OF OUR DIRECTORS, OFFICERS AND EMPLOYEES ARE OBLIGATED TO PERFORM MILITARY
RESERVE DUTY.
Some of our Israeli directors, and many of our Israeli male officers and
employees are currently obligated to perform up to 36 days of annual reserve
duty. Additionally, all such persons are subject to being called to active duty
at any time under emergency circumstances. We have operated effectively under
these requirements since we began operations. No assessment can be made,
however, as to the full impact of these requirements on our workforce or
business if conditions should change, and we cannot predict the effect on us of
any expansion or reduction of these obligations.
WE ARE DEPENDENT UPON THE CONTINUED EMPLOYMENT OF KEY PERSONNEL.
Our future success depends to a significant extent upon the continued active
participation of our directors, senior executive officers, management members
and other key employees. The loss of the services of any such person could have
a material adverse effect on our business. These persons are not bound by
employment agreements for any specific term. The loss of the services of any of
these persons may adversely affect the development and sales of our products,
and the management of our company. Our success is also dependent upon our
continuing ability to attract and retain highly qualified personnel and key
engineers and sales and marketing personnel, to perform research and
development, commercialize products, and perform the sales and marketing
functions required to bring these products to the market. There can be no
assurance that we will continue to attract and retain such personnel.
OUR INTERNATIONAL OPERATIONS EXPOSE US TO THE RISKS INHERENT IN CONDUCTING
BUSINESS IN INTERNATIONAL MARKETS.
A substantial portion of our sales is in international markets. In addition, a
portion of our research and development operations is outsourced to
subcontractors in Ukraine and Bulgaria. There are certain risks inherent in
conducting business in international markets, including unexpected changes in
regulatory requirements, export restrictions, homologation certifications,
tariffs and other trade barriers, difficulties in staffing and managing foreign
operations, longer payment cycles, credit-worthiness of potential customers, and
political instability, all of which can adversely impact the success of our
international operations. Specifically with respect to Ukraine and Bulgaria,
each of them is still economically and politically unstable, suffers from
exchange rate and inflation fluctuations, political and criminal corruption, and
lack of commercial experience and unpredictability of the civil justice system.
There can be no assurances that one or more of such factors will not have a
material adverse effect on our international operations and, consequently, on
our business, financial condition or results of operations.
- 13 -
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WHICH MAY LIMIT
OUR ABILITY TO COMPETE EFFECTIVELY. IN ADDITION, WE MAY ENGAGE IN RESEARCH AND
DEVELOPMENT PROJECTS IN WHICH WE DEVELOP CERTAIN INTELLECTUAL OR OTHER
PROPRIETARY PROPERTY WITH THIRD PARTIES, AND THERE IS NO ASSURANCE THAT WE WILL
OWN ANY SUCH INTELLECTUAL OR OTHER PROPRIETARY PROPERTY.
Our success is dependent, to a certain extent, upon our proprietary technology.
We currently rely on a combination of trade secret, patent, copyright and
trademark law, together with non-disclosure, contractual licensing restrictions,
and invention assignment agreements, to establish and protect the proprietary
rights and technology used in our products. There can be no assurance, however,
that such measures will provide commercially significant protection for our
proprietary technology, that competitors will not develop products with features
based upon, or otherwise similar to, our products or that we will be able to
prevent competitors from selling similar products. In addition, our ability to
adequately protect our proprietary rights in Ukraine and Bulgaria (where a
portion of our research and development operations to is outsourced
subcontractors) is further unclear due to their political instability and the
fact that the protection of intellectual properties in eastern European
countries has traditionally been difficult to achieve.
In addition, the software market has traditionally experienced widespread
unauthorized reproduction of products in violation of manufacturers'
intellectual property rights. Such activity is difficult to detect and legal
proceedings to enforce the manufacturers' intellectual property rights are often
burdensome and involve a high degree of uncertainty and costs. Unauthorized use
and reproduction of the registration codes contained in our various software
products has occurred from time to time and may continue to occur in the future.
There can be no assurance that our software products will not experience
unauthorized use or reproduction on a massive scale, which will adversely affect
our business, financial condition and results of operations.
Furthermore, we may engage in the future in joint research and development
projects with third parties. The ownership of any intellectual or other
proprietary property developed in such projects shall be negotiated with such
third parties. There is no assurance that we will own any such intellectual or
other proprietary property. For example, during 2005 Tdsoft and Nuera commenced
developing, as part of a joint project, certain hardware and software of a VoIP
gateway platform. Following completion of the project, each of Tdsoft and Nuera
will add its application software on top of the platform, to further develop it
into a generally available product, targeting various gateway applications. Both
companies have full ownership rights with respect to the platform, including
intellectual property, manufacturing and marketing rights. In connection with
the project, Tdsoft has been engaged by Nuera to develop certain application
software that will integrate with the platform. The intellectual property rights
of this application software shall be owned solely by Nuera.
WE MAY NOT BE ABLE TO ENFORCE AGAINST OUR EMPLOYEES AND SUBCONTRACTORS COVENANTS
NOT TO COMPETE AND THEREFORE MAY BE UNABLE TO PREVENT OUR COMPETITORS FROM
BENEFITING FROM THE EXPERTISE OF SOME OF OUR FORMER EMPLOYEES AND
SUBCONTRACTORS.
We currently have non-competition clauses in the employment agreements of nearly
all of our employees, including all of our key employees. The provisions of such
clauses prohibit our employees, if they cease working for us, from directly
competing with us or working for our competitors. Recently, Israeli courts have
required employers, seeking to enforce non-compete undertakings against former
employees, to demonstrate that the competitive activities of the former
employees will cause harm to one of a limited number of material interests of
the employer recognized by the courts (for example, the confidentiality of
certain commercial information or a company's trade secrets). In the event that
any of our employees chooses to work for one of our competitors, we may be
unable to prevent our competitors from benefiting from the expertise of our
former employees obtained from us, if we cannot demonstrate to the court that we
would be harmed.
Additionally, our ability to enforce non-compete covenants with our
sub-contractors in foreign jurisdictions where we conduct a portion of our
research and development operations, is unclear.
- 14 -
LITIGATION AND OTHER DISPUTES REGARDING OUR INTELLECTUAL PROPERTY OR THE
INTELLECTUAL PROPERTY OF OUR SUPPLIERS COULD PROVE COSTLY AND THEREBY ADVERSELY
IMPACT OUR FINANCIAL POSITION AND COULD ALSO RESULT IN AN INJUNCTION OR JUDGMENT
AGAINST US, WHICH COULD ADVERSELY AFFECT OUR BUSINESS.
Third parties have asserted patent infringement and other claims against us from
time to time. A number of these claims were directed at certain basic and
fundamental components of our products. There can be no assurance that third
parties will not assert such claims against us in the future or that such
present and future claims will not be successful. In addition, third parties may
in the future assert patent infringement and other claims against us in
connection with components used in our products that are manufactured by our
suppliers. Patents relating to basic technologies in the communications and
multimedia areas have been recently allowed and patents may be filed in the
future which relate to basic technologies incorporated in our products. We would
incur substantial costs and would experience diversion of management resources
with respect to the defense of any claims relating to proprietary rights, and
this could have a material adverse effect on our business, financial condition
and results of operations. Furthermore, parties making such claims could secure
a judgment awarding substantial damages, as well as injunctive or other
equitable relief which could effectively block our ability to make, use, sell,
distribute or otherwise license our products in the United States or abroad.
Such a judgment could have a material adverse effect on our business, financial
condition and results of operations. Litigation, which is generally costly and
time consuming, may be necessary to determine the scope and validity of others'
proprietary rights or to enforce any patents issued to us, in judicial or
administrative proceedings. In the event a claim relating to proprietary
technology or information is asserted against us, we may seek licenses for such
intellectual property. There can be no assurance, however, that licenses could
be obtained on commercially reasonable terms, if at all, or that the terms of
any offered licenses will be acceptable to us. The failure to obtain the
necessary licenses or other rights could preclude the sale, manufacture or
distribution of our products and, therefore, could have a material adverse
effect on our business, financial condition or results of operations. The cost
of responding to any such claim may be material, whether or not the assertion of
such claim is valid.
IF WE ARE UNABLE TO MAINTAIN OUR RELATIONSHIPS WITH OUR DISTRIBUTORS, OR IF OUR
DISTRIBUTORS' BUSINESSES ARE ADVERSELY AFFECTED BY DEVELOPMENTS UNRELATED TO US,
OUR SALES COULD BE HARMED.
Our marketing strategy includes sales through channel partners, distributors and
resellers, as well as direct sales by our own sales force. There is no assurance
that we will be successful in extending the terms of our various channel,
distribution and reselling agreements or in establishing similar relationships
with other entities if our current channel, distribution and reselling
agreements are not extended, and changes in our relationships with our channels,
suppliers, distributors, value added resellers and agents, or other changes to
their respective businesses could have a material adverse effect on our
business, financial condition or results of operations.
ANY FUTURE MERGERS WITH OR ACQUISITIONS OF COMPANIES OR TECHNOLOGIES AND THE
RESULTING INTEGRATION PROCESS MAY DISTRACT OUR MANAGEMENT AND DISRUPT OUR
BUSINESS.
One of our business strategies is to pursue strategic partnerships, alliances,
mergers and/or acquisitions of complementary businesses, products and
technologies. Pursuit of such strategies requires significant investments in
management time and attention.
We have no current commitments or agreements with respect to any mergers or
acquisitions. However, mergers with or acquisitions of companies involve a
number of risks including the difficulty of assimilating the operations and
personnel of the merged or acquired companies and of maintaining uniform
standards, controls and policies. There can be no assurance that technology or
rights acquired by us will be incorporated successfully into products we
introduce or market, that such products will achieve market acceptance or that
we will not encounter other problems in connection with such acquisitions. If we
consummate one or more significant acquisitions in which the consideration
consists of ordinary shares, shareholders would suffer significant dilution of
their interests in us.
OUR PRINCIPAL SHAREHOLDERS, INCLUDING OUR EXECUTIVE OFFICERS AND DIRECTORS, ARE
ABLE TO INFLUENCE MATTERS REQUIRING SHAREHOLDER APPROVAL.
As of immediately prior to consummation of the private placement transaction,
our principal shareholders, including our directors and certain executive
officers, beneficially owned approximately 58% of the outstanding ordinary
shares of our company (including options that are exercisable on the date hereof
or within 60 days after the date hereof). As a result, such shareholders
together have the ability to significantly influence the election of our
directors and most corporate actions.
OUR EARNINGS WILL BE ADVERSELY AFFECTED DUE TO COMPLIANCE WITH NEW ACCOUNTING
POLICIES RELATING TO THE EXPENSING OF STOCK OPTIONS.
We are required to prepare financial statements in accordance with the Financial
Accounting Standards Board's (FASB) recently issued accounting standard SFAS No.
123(R), "Shared-Based Payment." SFAS No. 123(R) requires the fair value of all
equity-based awards granted to employees to be recognized in financial
statements beginning in the first quarter of 2006. The result is that we will be
required to record an expense with respect to stock option grants, even if the
exercise price of the stock options is equal to the market price of the
underlying shares on the date of grant. The adoption of SFAS No. 123(R) will
have a material adverse effect on our results of operations, although it will
have no impact on our overall financial position or cash flows. SFAS No. 123(R)
also requires the benefits of tax deductions in excess of recognized
compensation cost to be reported as a financing cash flow, rather than as an
operating cash flow as required under current literature. This requirement will
reduce net operating cash flows and increase net financing cash flows in periods
after adoption. The impact will depend on our levels of share-based payments
granted in the future, among other things. See also Item 5 - Operating and
Financial Review and Prospects - Critical Accounting Policies in our Annual
Report on Form 20-F for the year ended December 31, 2005, filed with the SEC on
April 21, 2006, as amended on May 16, 2006 (the "2005 20-F").
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CERTAIN PROVISIONS OF OUR ARTICLES OF ASSOCIATION AND ISRAELI LAW COULD DELAY,
HINDER OR PREVENT A CHANGE IN OUR CONTROL.
Our articles of association contain provisions which could make it more
difficult for a third party to acquire control of us, even if that change would
be beneficial to our shareholders. Specifically, our articles of association
provide that our board of directors is divided into three classes, each serving
three-year terms. In addition, certain provisions of the Israeli Companies Law
of 1999, or the Companies Law, could also delay or otherwise make more difficult
a change in our control. The provision of the Companies Law relating to mergers
and acquisitions are discussed in greater detail in Item 10 - Additional
Information of the 2005 20-F.
OUR UNITED STATES INVESTORS COULD SUFFER ADVERSE TAX CONSEQUENCES IF WE ARE
CHARACTERIZED AS A PASSIVE FOREIGN INVESTMENT COMPANY.
As more fully described in Item 10 - Additional Information - Taxation and
Government Programs of the 2005 20-F, we could be characterized, for United
States income tax purposes, as a passive foreign investment company ("PFIC").
Such characterization could result in adverse United States tax consequences to
U.S. Holders. For purposes of this discussion, a "U.S. Holder" means any
beneficial owner of our ordinary shares who, for United States federal income
tax purposes, is: (i) a citizen or resident of the United States; (ii) a
corporation or entity treated as a corporation organized in or under the laws of
the United States or any state thereof or the District of Columbia; (iii) an
estate the income of which is subject to United States federal income taxation
regardless of source; or (iv) a trust, if a United States court is able to
exercise primary supervision over its administration and one or more United
States persons have the authority to control all of its substantial decisions or
a trust that was in existence on August 20, 1996 and validly elected to continue
to be treated as a domestic trust. Our status as a PFIC could cause, among other
things, any gain recognized on the sale or disposition of our ordinary shares to
be treated as ordinary income for U.S. Holders. Although we do not believe that
we should have been characterized as a PFIC for any tax year through and
including 2005, there can be no assurance that the United States Internal
Revenue Service will agree with this conclusion. Furthermore, there can be no
assurance that we will not be a PFIC in the future. For further discussion of
the consequences of our possible PFIC status, please refer to Item 10 -
Additional Information - Taxation and Government Programs of the 2005 20-F.
THE TAX AND OTHER BENEFITS AVAILABLE TO US FROM ISRAELI GOVERNMENT PROGRAMS MAY
BE DISCONTINUED OR REDUCED AT ANY TIME, WHICH WOULD LIKELY INCREASE OUR TAXES IN
THE LONG TERM AND OUR NET RESEARCH AND DEVELOPMENT EXPENSES.
We benefit from certain tax and other benefits, particularly as a result of the
"Approved Enterprise" status of certain existing facilities and approved
programs from the Government of Israel. In addition, we benefit from
participation by the Office of the Chief Scientist of the State of Israel (the
"Chief Scientist") in certain of our research and development projects. To be
eligible for these participations and tax benefits, we must continue to meet
certain conditions, including, with respect to the tax benefits, making certain
specified investments in fixed assets. There can be no assurance that such
participations and tax benefits will be continued at their current levels or
otherwise. The termination or reduction of certain tax benefits (particularly
benefits available to us as a result of the "Approved Enterprise" status of
certain of our existing facilities and approved programs) could have a material
adverse effect on our business, financial condition or results of operations
(this risk is offset to a certain extent due to the fact that to date we have
accrued significant losses, and therefore taxes will become due with respect to
our income only after such income exceeds our accumulated losses). The
termination or reduction of the participation of the Chief Scientist in research
and development projects could increase our net research and development
expenses or limit or terminate certain research and development projects. In
addition, when we become subject to the obligation to pay royalties to the Chief
Scientist with respect to products developed by us through the use of Chief
Scientist grants, such royalty payment obligation will continue even if we
receive no additional, or reduced, grants from the Chief Scientist.
- 16 -
WE MAY BE ADVERSELY AFFECTED IF THE RATE OF INFLATION IN ISRAEL EXCEEDS THE RATE
OF DEVALUATION OF THE NEW ISRAELI SHEKEL (NIS) AGAINST THE DOLLAR.
A significant portion of our sales are made outside of Israel in dollars and we
incur a significant portion of our expenses in NIS. The cost of our operations
in Israel, as expressed in dollars, is influenced by the extent to which any
increase in the rate of inflation is not offset by the devaluation of the NIS in
relation to the dollar. During the calendar years 2003, 2004 and 2005 the annual
rate of inflation (deflation) was (1.9%), 1.2% and 2.4%, respectively. In 2003
and 2004, the NIS was appreciated against the dollar by 7.6% and 1.6%,
respectively, and devalued against the dollar by 6.8% in 2005. Although to date
we have not purchased forward currency options to decrease our exchange rate
risk, we may do so in the future, to the extent we deem it advisable.
IT MAY BE DIFFICULT TO PURSUE AN ACTION IN THE U.S. OR TO ENFORCE A U.S.
JUDGMENT, INCLUDING ACTIONS OR JUDGMENTS BASED UPON THE CIVIL LIABILITY
PROVISIONS OF THE U.S. FEDERAL SECURITIES LAWS, AGAINST US AND OUR EXECUTIVE
OFFICERS AND DIRECTORS, OR TO ASSERT U.S. SECURITIES LAWS CLAIMS IN ISRAEL.
Most of our directors and officers are not residents of the United States and
most of their assets and our assets are located outside the United States.
Without a consent to service of process, additional procedures may be necessary
to serve individuals who are not U.S. residents. Therefore, it may be difficult
to serve process on those directors, officers who are not U.S. residents, in
order to commence any lawsuit against them before a U.S. court, including an
action based on the civil liability provisions of U.S. federal securities laws.
An investor also may find it difficult to enforce a U.S. court judgment in an
Israeli court, including a judgment based on federal securities laws. In
accordance with the Israeli Law on Enforcement of Foreign Judgments, 5718-1958,
and subject to certain time limitations, an Israeli court may declare a foreign
civil judgment enforceable only if it finds that:
o the judgment was rendered by a court which was, according to the laws
of the state of the court, competent to render the judgment;
o the judgment may no longer be appealed;
o the obligation imposed by the judgment is enforceable according to the
rules relating to the enforceability of judgments in Israel and the
substance of the judgment is not contrary to public policy; and
o the judgment is executory in the state in which it was given.
Even if these conditions are satisfied, an Israeli court will not enforce a
foreign judgment if it was given in a state whose laws do not provide for the
enforcement of judgments of Israeli courts (subject to exceptional cases) or if
its enforcement is likely to prejudice the sovereignty or security of the State
of Israel. An Israeli court will also not declare a foreign judgment enforceable
if:
o the judgment was obtained by fraud;
o there is a finding of lack of due process;
o the judgment was rendered by a court not competent to render it
according to the laws of private international law in Israel;
o the judgment is in conflict with another judgment that was given in
the same matter between the same parties and that is still valid; or
o at the time the action was instituted in the foreign court, a suit in
the same matter and between the same parties was pending before a
court or tribunal in Israel.
An investor may also find it difficult to bring an original action in an Israeli
court to enforce liabilities based upon the U.S. federal securities laws against
us, or against our directors and officers. Israeli courts may refuse to hear a
claim based on a violation of U.S. securities laws and rule that Israel is not
the most appropriate forum in which to bring such a claim. In addition, even if
an Israeli court agrees to hear such a claim, it may determine that Israeli law
and not U.S. law is applicable to the claim. If U.S. law is found to be
applicable, the content of applicable U.S. law must be proved as a fact, which
can be a time-consuming and costly process.
- 17 -
COMMUNICATIONS AUTHORITIES MAY IMPOSE CHARGES, CONTRIBUTION AND OTHER COMMON
CARRIER REGULATIONS ON IP TELEPHONY PROVIDERS.
To date, neither the United States Federal Communications Commission ("FCC"),
state communications authorities, nor the communications authorities of other
countries have subjected IP telephony providers nor VoIP solutions providers to
the regulations that apply to long distance telecommunications carriers. At this
time it is uncertain whether or to what extent the FCC, state communications
authorities, or the communications authorities of other countries will impose
access charges, universal service contributions, and other common carrier
regulations on IP telephony providers or to VoIP solutions providers. There can
be no assurance that future action by the FCC or other communications
authorities will not have an impact on us, directly or indirectly.
- 18 -
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates historical information and
forward-looking statements within the meaning of the federal securities laws.
Statements looking forward in time are included in this prospectus pursuant to
the "safe harbor" provision of the Private Securities Litigation Reform Act of
1995. They involve known and unknown risks and uncertainties that may cause our
actual results in future periods to be materially different from any future
performance suggested herein, including all of the risks and uncertainties
discussed under "Risk Factors" and elsewhere in this prospectus, as well as in
the documents we have incorporated by reference. Future events and actual
results could differ materially from those set forth in, contemplated by or
underlying the forward-looking statements and you should therefore not rely on
these forward-looking statements, which are applicable only as of the date
hereof.
We urge you to consider that statements that use the terms "believe," "do not
believe," "expect," "plan," "intend," "estimate," "anticipate," "project" and
similar expressions are intended to identify forward-looking statements. These
statements reflect our current views with respect to future events and are based
on assumptions and are subject to risks and uncertainties. Our actual results
may differ materially from the results discussed in forward-looking statements.
Factors that could cause our actual results to differ materially include, but
are not limited to, those discussed above under "Risk Factors," elsewhere in
this prospectus and in the documents we have incorporated by reference.
Except as required by applicable law, including the securities laws of the
United States, we do not intend to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise
and we disclaim any obligation to publicly revise any such statements to reflect
any change in expectations or in events, conditions, or circumstances on which
any such statements may be based.
OFFER STATISTICS AND EXPECTED TIMETABLE
The selling shareholders identified in this prospectus may sell from time to
time up to 1,359,050 of ordinary shares (except that the warrants issued to the
selling shareholders to purchase up to 424,050 of the foregoing ordinary shares
may be exercised commencing on November 24, 2006 and until May 23, 2011). We
have agreed to maintain the effectiveness of this registration statement until
the earlier of (i) two years after the effective date of this registration
statement, (ii) such time as all of the shares registered under this
registration statement have been sold pursuant to this registration statement or
(iii) the date on which all of the shares registered under this registration
statement may be resold without registration pursuant to Rule 144(k) under the
Securities Act or any other rule of similar effect.
CAPITALIZATION AND INDEBTEDNESS
The following table sets forth audited consolidated short-term debt and
capitalization, determined in accordance with accounting principles generally
accepted in the United States ("GAAP"), as at December 31, 2005. The information
in this table should be read in conjunction with and is qualified by reference
to the consolidated financial statements and notes thereto and other financial
information incorporated by reference into this prospectus.
As of April 30, 2006
(Actual, in thousands)
-----------------------
Short term debt $ 1,058
Long term debt ---
Total shareholders equity $10,726
REASONS FOR THE OFFER AND USE OF PROCEEDS
The selling shareholders have certain registration rights pursuant to a Purchase
Agreement between the Company and the selling shareholders dated May 18, 2006
(the "Purchase Agreement") with respect to the shares issued and shares
underlying warrants issued to them in the private placement transaction. Under
the Purchase Agreement, the Company undertook to register all of the ordinary
shares issued and ordinary shares issuable upon warrants issued to the selling
shareholders.
- 19 -
This prospectus has been prepared, and the registration statement of which this
prospectus is a part has been filed with the SEC, to satisfy the foregoing
registration obligations.
Accordingly, this prospectus covers the disposition by the selling shareholders,
or their transferees, of 935,000 ordinary shares, or interests therein, issued
to the selling shareholders and an additional 424,050 ordinary shares, or
interests therein, that may be issued to the selling shareholders upon exercise
of warrants issued to them by the Company.
We will not receive any of the proceeds from the sale or other disposition of
our ordinary shares, or interests therein, by the selling shareholders. If the
warrants are exercised in full for cash, we would realize proceeds, before
expenses, in the amount of $3,350,207. The net proceeds of any cash exercise of
the warrants will be used for working capital and general corporate purposes. No
assurance can be given as to whether any of the warrants will be exercised for
cash.
PRICE HISTORY OF OUR ORDINARY SHARES
Our ordinary shares were initially quoted on the Nasdaq National Market in 1996.
In December 2002 we transferred to the Nasdaq Capital Market, in July 2003 we
transferred back to the Nasdaq National Market, and in April 2005 we transferred
back to the Nasdaq Capital Market, where our shares continue to be listed under
the trading symbol VOCL. We transferred back to the Nasdaq Capital Market in
April 2005 because we no longer satisfied the minimum stockholders' equity
continued listing requirement of the Nasdaq National Market. In August 2005, we
received a notice from Nasdaq Capital Market that we were not in compliance with
the Nasdaq Capital Market shareholders equity continuing listing requirement,
and in November 2005 (simultaneously and in conjunction with the consummation of
the business combination) we re-listed our ordinary shares on the Nasdaq Capital
Market. The following tables set forth, for the periods indicated, the high ask
and low bid prices of our ordinary shares, as reported by the Nasdaq National
Market or the Nasdaq Capital Market, as applicable.
HIGH ($) LOW ($)
---- ---
2001 8.12 0.60
2002 3.02 0.26
2003 7.60 0.47
2004 6.90 1.06
2005 (1) 24.7 3.45
2003
First quarter 0.77 0.47
Second quarter 4.45 0.59
Third quarter 7.60 2.81
Fourth quarter 6.40 2.50
2004
First quarter 6.90 3.19
Second quarter 4.20 1.90
Third quarter 2.27 1.07
Fourth quarter 1.77 1.06
2005
First Quarter 1.90 1.06
Second Quarter 1.33 0.64
Third Quarter 0.95 0.50
Fourth Quarter (1) 14.75 3.11
2006
First Quarter (1) 11.00 6.61
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MOST RECENT SIX MONTHS
December 2005 (1) 14.75 3.11
January 2006 (1) 11.00 8.00
February 2006 (1) 9.08 6.61
March 2006 (1) 10.4 7.01
April 2006 (1) 8.72 7.54
May 2006 (1) 8.25 5.70
On June 8, 2006, the last reported sale price of our ordinary shares on the
Nasdaq Capital Market was $5.20 per share.
SELLING SHAREHOLDERS
This prospectus covers an aggregate of 935,000 ordinary shares issued to the
selling shareholders pursuant to the private placement transaction and an
aggregate of 424,050 ordinary shares that may be issued upon exercise of
warrants issued to the selling shareholders pursuant to the private placement
transaction.
The table below provides information about the beneficial ownership of each
selling shareholder as to:
o the number of ordinary shares that are beneficially held by the
selling shareholder; and
o the maximum number of shares that may be offered by each selling
shareholder by this prospectus.
We cannot estimate the number of ordinary shares that will be beneficially owned
by the selling shareholders after completion of this offering because the
selling shareholders may sell or otherwise dispose of all, some or none of the
ordinary shares beneficially owned by them prior to this offering, and may
subsequently acquire the beneficial ownership of other ordinary shares. Our
registration of these securities does not necessarily mean that the selling
shareholders will dispose of any or all of the securities.
The information provided in the table below is provided as of June 9, 2006 and
is based on information provided by the selling shareholders. For purposes of
calculating each person's or entity's percentage ownership of outstanding
ordinary shares, there were 4,688,671 ordinary shares outstanding on May 18,
2006. Except as indicated in the footnotes below, to our knowledge, the persons
named in this table:
o have sole voting and investment power with respect to the shares
beneficially owned by them;
o have not acquired any of the shares offered hereby within the past
three years;
o have not had any position, office or other material relationship with
us, or our affiliates, within the past three years; and
o are not registered broker-dealers or affiliates of registered broker
dealers.
----------
(1) Stock prices reflect the 1-for-13 reverse split we effected on November 25,
2005.
- 21 -
Number of shares Percentage of Number of ordinary
beneficially owned outstanding ordinary Number of ordinary shares underlying
prior to the shares prior to shares offered warrants offered
Name of selling shareholder offering offering hereby hereby
--------------------------- -------- -------- ------ ------
Nite Capital L.P. (1) 40,000 0.7% 40,000 16,000
HarbourVest International
Private Equity Partners III
- Direct Fund L.P. (2) 1,130,444 20.1% 220,000 88,000
Lior Bregman (3) 152,421 3.25% 75,000 30,000
LibertyView Funds, LP (4) 328,600 5.84% 327,074 130,830
LibertyView Special
Opportunities Fund, LP (4) 90,975 1.62% 90,975 36,390
Trust D (For a portion of
the assets of the Kodak
Retirement Income Plan) (4) 183,476 3.26% 181,951 72,780
JMP Securities LLC (5) --- --- --- 43,543
Gil Sudai (6) --- --- --- 5,206
Dan Cohen (7) --- --- --- 1,301
(1) The address of this selling shareholder is 100 East Cook Ave, Suite
201, LibertyVille, IL 60048. Mr. Keith Goodman, manager of this selling
shareholder's general partner, has sole voting and dispositive power with
respect to the shares held by this selling shareholder.
(2) The address of this selling shareholder is One Financial Center,
Boston, MA 02111. HarbourVest International Private Equity Partners III - Direct
Fund L.P. has informed us as follows: HarbourVest Partners, LLC is the managing
member of HIPEP III-Direct Associates L.L.C., the general partner of HarbourVest
International Private Equity Partners III - Direct Fund L.P. HarbourVest
Partners, LLC is under common control with Hancock Venture Partners, Inc., which
is an indirect wholly-owned subsidiary of John Hancock Life Insurance Company.
Signator Investors, Inc., Essex National Securities, Inc. and John Hancock
Funds, Inc. are also indirectly wholly-owned subsidiaries of John Hancock Life
Insurance Company, and each is a member of the NASD.
(3) The address of this selling shareholder is 10 Sinclair Terrace, Short
Hills, NJ 07078.
(4) The address of each of these selling shareholders is C/O LibertyView
Capital, 111 River St. - Suite 1000, Hoboken, NJ 07030. Neuberger Berman, LLC is
the investment adviser of each of these selling shareholders and has sole voting
and dispositive power over the shares held by such selling shareholders, which
power is exercised by Mr. Richard A. Meckler. Since they have a common
investment adviser, these selling shareholders may vote their ordinary shares
together. Each of LibertyView Special Opportunities Fund, LP and Liberty View
Funds, LP has informed us that (i) its general partner is Neuberger Berman Asset
Management, LLC, which is affiliated with Neuberger Berman, LLC, a registered
broker-dealer and (ii) it has purchased the ordinary shares and warrants in the
private placement transaction for investment in its ordinary course of business
and that at the time of such purchase there were no agreements or understanding,
directly or indirectly, with any person to distribute such ordinary shares or
ordinary shares underlying warrants. Trust D (For a portion of the assets of the
Kodak Retirement Income Plan) is not in any way affiliated with a broker-dealer.
(5) Comprised solely of 43,543 ordinary shares issuable upon exercise of
warrants received as partial compensation for acting as placement agent in the
private placement on May 24, 2006. The address of this selling shareholder is
600 Montgomery Street, Suite 1100, San Francisco, CA 94111. Messrs. Craig
Johnson (President), Mark Lehman, Carter Mack and Gerald Tuttle are members of
the Executive Committee of JMP Group LLC, the parent of this selling
shareholder, and have joint voting and dispositive power over the shares held by
such selling shareholder. The selling shareholder has identified itself as a
registered broker-dealer and may therefore be deemed to be an "underwriter"
within the meaning of the Securities Act with respect to the securities being
offered by it. The selling shareholder informed us that it received the warrants
in connection with the private placement transaction as transaction-based
compensation for investment banking services.
(6) The address of this selling shareholder is 117 Rotchild Avenue, Tel
Aviv, Israel.
(7) The address of this selling shareholder is 16 Netsah Street, Tel Aviv,
Israel.
- 22 -
PLAN OF DISTRIBUTION
The selling shareholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling ordinary shares or interests
in ordinary shares received after the date of this prospectus from a selling
shareholder as a gift, pledge, partnership distribution or other transfer, may,
from time to time, sell, transfer or otherwise dispose of any or all of their
ordinary shares or interests in ordinary shares on any stock exchange, market or
trading facility on which the ordinary shares are traded or in private
transactions. These dispositions may be at fixed prices, at prevailing market
prices at the time of sale, at prices related to the prevailing market price, at
varying prices determined at the time of sale, or at negotiated prices.
The selling shareholders may use any one or more of the following methods
when disposing of shares or interests therein:
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
ordinary shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
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 effected after the date the registration statement of
which this Prospectus is a part is declared effective by the SEC;
o through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
o broker-dealers may agree with the selling shareholders to sell a
specified number of such ordinary 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.
The selling shareholders may, from time to time, pledge or grant a security
interest in some or all of the 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, under this
prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act amending 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 the ordinary shares in other circumstances, in which case the
transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus.
In connection with the sale of ordinary shares or interests therein, the
selling shareholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
ordinary shares in the course of hedging the positions they assume. The selling
shareholders may also sell ordinary shares short and deliver these securities to
close out their short positions, or loan or pledge ordinary shares to
broker-dealers that in turn may sell these securities. The selling shareholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or the creation of one or more derivative securities
which require the delivery to such broker-dealer or other financial institution
of ordinary shares offered by this prospectus, which ordinary shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
- 23 -
The aggregate proceeds to the selling shareholders from the sale of
ordinary shares offered by them will be the purchase price of the ordinary
shares less discounts or commissions, if any. Each of the selling shareholders
reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of ordinary shares to be
made directly or through agents. We will not receive any of the proceeds from
this offering. Upon any exercise of the warrants by payment of cash, however, we
will receive the exercise price of the warrants.
The selling shareholders also may resell all or a portion of the ordinary
shares in open market transactions in reliance upon Rule 144 under the
Securities Act of 1933, provided that they meet the criteria and conform to the
requirements of that rule.
The selling shareholders and any underwriters, broker-dealers or agents
that participate in the sale of ordinary shares or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profit they earn on any resale of the
ordinary shares may be underwriting discounts and commissions under the
Securities Act. Selling shareholders who are "underwriters" within the meaning
of Section 2(11) of the Securities Act will be subject to any applicable
prospectus delivery requirements of the Securities Act.
To the extent required, the ordinary shares to be sold, the names of the
selling shareholders, the respective purchase prices and public offering prices,
the names of any agents, dealer or underwriter, any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if applicable,
the ordinary shares may be sold in these jurisdictions only through registered
or licensed brokers or dealers. In addition, in some states ordinary shares may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
We have advised the selling shareholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of ordinary shares in
the market and to the activities of the selling shareholders and their
affiliates. In addition, we will make copies of this prospectus (as it may be
supplemented or amended from time to time) available to the selling shareholders
for the purpose of satisfying any applicable prospectus delivery requirements of
the Securities Act. The selling shareholders may indemnify any broker-dealer
that participates in transactions involving the sale of the ordinary shares
against certain liabilities, including liabilities arising under the Securities
Act.
We have agreed to indemnify the selling shareholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the ordinary shares offered by this prospectus.
We have agreed with the selling shareholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (i) two years after the effective date of this registration
statement, (ii) such time as all of the shares registered hereunder have been
sold pursuant to this registration statement or (iii) the date on which all of
the shares registered hereunder may be resold by the selling shareholders
without registration by reason of Rule 144(k) under the Securities Act or any
other rule of similar effect.
EXPENSES ASSOCIATED WITH THE REGISTRATION
We have agreed to bear all expenses relating to the registration of the
ordinary shares registered pursuant to the registration statement of which this
prospectus is a part. We estimate these expenses to be approximately $20,500, as
set forth below:
SEC registration fee $ 850
Printing, EDGAR and photocopying fees $ 500
Legal fees and expenses $15,000
Accounting fees and expense $ 3,000
Transfer agent and registrar fees and expenses $ 1,000
Miscellaneous expenses $ 150
Total Expenses $20,500
- 24 -
VALIDITY OF SECURITIES
The validity of the ordinary shares offered hereby will be passed upon for us by
Meitar Liquornik Geva & Leshem Brandwein, our Israeli counsel.
EXPERTS
The consolidated financial statements of VocalTec Communications Ltd. appearing
in VocalTec Communication Ltd.'s annual report (Form 20-F) at December 31, 2005
and for the year ended December 31, 2005 have been audited by Kost Forer Gabbay
& Kasierer, independent registered public accounting firm and a member of Ernst
& Young Global, as set forth in its report thereon 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.
The consolidated financial statements of VocalTec Communications Ltd. as of
December 31, 2004 and for each of the two years in the period then ended
incorporated in this prospectus by reference to the VocalTec Communications Ltd.
Annual Report on Form 20-F for the year ended December 31, 2005 have been so
incorporated in reliance on the report of Kesselman & Kesselman, an independent
registered public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
MATERIAL CHANGES
Except as otherwise described in the 2005 20-F and our Reports on Form 6-K
furnished to the SEC after December 31, 2005, all of which are incorporated by
reference herein, no material changes have occurred since December 31, 2005.
ENFORCEABILITY OF CIVIL LIABILITIES
Service of process upon us and upon our directors and officers and the Israeli
experts named in this prospectus, a substantial number of whom reside outside
the United States, may be difficult to obtain within the United States.
Furthermore, because our principal assets and a substantial number 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.
There is doubt concerning 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 rules of private international law currently
prevailing in Israel do not prohibit the enforcement of a judgment by Israeli
courts provided that:
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 of the judgment 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.
We have irrevocably appointed VocalTec Communications Inc. as our agent to
receive service of process in any action against us in any competent court of
the United States arising out of this offering or any purchase or sale of
securities in connection with this offering.
- 25 -
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 issue a judgment for the equivalent amount in Israeli currency
at the rate of exchange in force on the date of the judgment, 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 an annual statutory
rate set by Israeli regulations prevailing at the time. Judgment creditors must
bear the risk of unfavorable exchange rates.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form F-3 under the
Securities Act of 1933 with respect to the securities offered by this
prospectus. However, as is permitted by the rules and regulations of the SEC,
this prospectus, which is part of our registration statement on Form F-3, omits
certain information, exhibits, schedules and undertakings set forth in the
registration statement. For further information about us, and the securities
offered by this prospectus, please refer to the registration statement.
We are subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, or the Exchange Act, that are applicable to a foreign private
issuer. In accordance with the Exchange Act, we file reports with the SEC,
including annual reports on Form 20-F, which we are required to file by June 30
of each year. We also furnish to the SEC under cover of Form 6-K material
information required to be made public in Israel, filed with and made public by
any stock exchange or distributed by us to our shareholders.
The registration statement on Form F-3 of which this prospectus forms a part,
including the exhibits and schedules thereto, and reports and other information
filed by us with the SEC may be inspected without charge and copied at
prescribed rates at the SEC's Public Reference Room at 100 F Street, N.E.,
Washington, D.C. 20549. Copies of this material are also available by mail from
the Public Reference Section of the SEC, at 100 F Street, N.E., Washington D.C.
20549, at prescribed rates. The public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers, such as us, that file
electronically with the SEC (http://www.sec.gov). You can find additional
information about us at our website, http://www.vocaltec.com. The information
contained on, or linked from, our website is not a part of this prospectus.
As a foreign private issuer, we are exempt from the rules under the Exchange Act
prescribing the furnishing and content of proxy statements to shareholders. In
addition, our officers, directors and principal shareholders are exempt from the
"short-swing profits" reporting and liability provisions contained in Section 16
of the Exchange Act and related Exchange Act rules.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with or
submit to it, which means that we can disclose important information to you by
referring to those documents. The information incorporated by reference is
considered to be part of this prospectus, and later information filed with or
submitted to the SEC will update and supersede this information. We incorporate
by reference into this prospectus the documents listed below:
o The 2005 20-F; and
o Our Reports on Form 6-K furnished to the SEC on February 15, 2006,
March 9, 2006 (except that the press release attached as an exhibit to
the Company's Form 6-K furnished to the SEC on March 9, 2006 included
certain information that was amended in a press release published by
the Company on April 21, 2006) and May 18 and 25, 2006.
In addition, all amendments to the foregoing reports and all subsequent annual
reports on Form 20-F and any reports on Form 6-K subsequently furnished to the
SEC or portions thereof that we specifically identify in such Forms 6-K as being
incorporated by reference into the registration statement of which this
prospectus forms a part, shall be considered to be incorporated into this
prospectus by reference and shall be considered a part of this prospectus from
the date of filing or furnishing of such documents.
As you read the above documents, you may find inconsistencies in information
from one document to another. If you find inconsistencies between the documents
and this prospectus, you should rely on the statements made in the most recent
document.
- 26 -
We will deliver to each person (including any beneficial owner) to whom this
prospectus has been delivered a copy of any or all of the information that has
been incorporated by reference into this prospectus but not delivered with this
prospectus. We will provide this information upon written or oral request, and
at no cost to the requester. Requests should be directed to:
VocalTec Communications Ltd.
60 Medinat Hayehudim Street, Herzliya Pituach, 46140, Israel
Tel.: +972-9-970-3888
Fax: +972-9-955-8175
Attn.: Chief Executive Officer
You should rely only on the information contained or incorporated by reference
in this prospectus or any supplement. We have not authorized any other person to
provide you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and any
underwriter or agent is not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
- 27 -
935,000 Ordinary Shares
424,050 Ordinary Shares underlying Warrants
VOCALTEC COMMUNICATIONS LTD.
PROSPECTUS
_____________, 2006
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 8. Indemnification of Directors and Officers
Under the Israeli Companies Law, 1999, or the Companies Law, an Israeli company
may not exempt an office holder from liability with respect to a breach of his
duty of loyalty, but may exempt in advance an office holder from his liability
to the company, in whole or in part, with respect to a breach of his duty of
care (other than with respect to a breach of duty of care with respect to the
distribution of a dividend or redemption of the company's securities). Under the
Companies Law, a company may not indemnify an office holder, nor enter into an
insurance contract that would provide coverage for any monetary liability
incurred as a result of any of the following:
o a breach by the office holder of his duty of loyalty, unless the
office holder acted in good faith and had a reasonable basis to
believe that the act would not prejudice the company;
o a breach by the office holder of his duty of care, if such breach was
done intentionally or in disregard of the circumstances of the breach
or its consequences;
o any act or omission done with the intent to derive an illegal personal
benefit; or
o any fine levied against the office holder as a result of a criminal
offense.
OFFICE HOLDER INSURANCE
Our Articles of Association provide that, subject to the provisions of the
Companies Law, we may enter into a contract for the insurance of the liability
of any of our office holders with respect to:
o a breach of his duty of care to us or to another person;
o a breach of his duty of loyalty to us, provided that the office holder
acted in good faith and had reasonable cause to assume that his act
would not prejudice our interests; or
o a financial liability imposed upon him in favor of another person
concerning an act performed by him in his capacity as an office
holder.
INDEMNIFICATION OF OFFICE HOLDERS
Our Articles of Association provide that we may indemnify an office holder
against:
o a financial liability imposed on him in favor of another person by any
judgment, including a settlement or an arbitrator's award approved by
a court concerning an act performed in his capacity as an office
holder; and
o reasonable litigation expenses, including attorneys' fees, expended by
the office holder or charged to him by a court, in proceedings we
institute against him or instituted on our behalf or by another
person, or in a criminal charge from which he was acquitted.
Under the Companies Law, our Articles of Association may also include a
provision authorizing us to grant in advance an undertaking to indemnify an
office holder, provided that the undertaking is limited to such events which the
board of directors shall deem to be likely to occur in light of the operations
of the Company at the time that the undertaking to indemnify is made and for
such amounts or criteria which the board of directors may, at the time of the
giving of such undertaking to indemnify, deem to be reasonable under the
circumstances. Such undertaking shall set forth such events which the board of
directors shall deem to be likely to occur in light of the operations of the
Company at the time that the undertaking to indemnify is made, and the amounts
and/or criteria which the board of directors may, at the time of the giving of
such undertaking to indemnify, deem to be reasonable under the circumstances;
and a provision authorizing us to retroactively indemnify an office holder.
II-1
REQUIRED APPROVALS
In addition, under the Companies Law, indemnification of, and procurement of
insurance coverage for, our office holders must be approved by our audit
committee and our board of directors and, in specified circumstances, by our
shareholders.
Item 9. Exhibits
EXHIBIT NO. DESCRIPTION
4.1 Form of share certificate of VocalTec Communications Ltd. (1)
4.2 Form of Purchase Agreement dated May 18, 2006 by and among the
Registrant and various investors (2).
4.3 Form of warrant dated May 24, 2006 issued to the investors
parties to the purchase agreement referred to in Item 4.2 and to
the placement agent in the underlying private placement
transaction and certain affiliates thereof (2).
5.1 Opinion of Meitar Liquornik Geva & Leshem Brandwein, counsel to
the registrant, as to the legality of the securities being
offered under this Registration Statement.
23.1 Consent of Kost Forer Gabbay & Kasierer, Member of Ernst & Young
Global.
23.2 Consent of Kesselman & Kesselman, Member of
PriceWaterhouseCoopers.
23.3 Consent of Meitar Liquornik Geva & Leshem Brandwein (included in
Exhibit 5.1).
24.1 Power of Attorney (see Page II-5 of this Registration Statement)
(1) Incorporated by reference to the Registrant's Annual Report on Form
20-F for the year ended December 31, 2005, filed with the Securities and
Exchange Commission on April 21, 2006 (as amended on May 16, 2006).
(2) Incorporated by reference to the Registrant's Report on Form 6-K,
furnished to the Securities and Exchange Commission on May 25, 2006.
Item 10. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
provided, however, that paragraphs (a) (1)(i), (a) (1)(ii) and (a)(1)(iii) do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the registrant pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement, or is contained in a form of prospectus filed pursuant
to Rule 424(b) that is part of the registration statement.
II-2
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) To file a post-effective amendment to the registration statement
to include any financial statements required by Item 8.A of Form 20-F at
the start of any delayed offering or throughout a continuous offering;
provided, however, that this Paragraph (4) shall not apply to the extent
that such financial statements and information are contained in periodic
reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this registration statement.
(5) That, for the purpose of determining liability under the
Securities Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B under the Securities Act
of 1933:
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3)
shall be deemed to be part of the registration statement as of the date the
filed prospectus was deemed part of and included in the registration
statement; and
(B) Each prospectus required to be filed pursuant to Rule 424(b)(2),
(b)(5), or (b)(7) as part of a registration statement in reliance on Rule
430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or
(x) for the purpose of providing the information required by Section 10(a)
of the Securities Act of 1933 shall be deemed to be part of and included in
the registration statement as of the earlier of the date such form of
prospectus is first used after effectiveness or the date of the first
contract of sale of securities in the offering described in the prospectus.
As provided in Rule 430B, for liability purposes of the issuer and any
person that is at that date an underwriter, such date shall be deemed to be
a new effective date of the registration statement relating to the
securities in the registration statement to which that prospectus relates,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; provided, however, that no statement
made in a registration statement or prospectus that is part of the
registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such effective date, supersede or modify
any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C under the Securities
Act of 1933, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after effectiveness,
provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
(6) That, for the purpose of determining liability of the registrant
under the Securities Act of 1933 to any purchaser in the initial
distribution of the securities:
The undersigned registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of
any of the following communications, the undersigned registrant will be a seller
to the purchaser and will be considered to offer or sell such securities to such
purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule
424;
II-3
(ii) Any free writing prospectus relating to the offering prepared by
or on behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the
offering containing material information about the undersigned registrant
or its securities provided by or on behalf of the undersigned registrant;
and
(iv) Any other communication that is an offer in the offering made by
the undersigned registrant to the purchaser.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to the directors, officers and controlling persons
of the registrant pursuant to the provisions described under "Item 8.
Indemnification of Directors and Officers" above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of our counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Herzliya, in the State of Israel, on June 9, 2006.
VOCALTEC COMMUNICATIONS LTD.
By: /s/ Joseph Albagli
----------------------
Joseph Albagli
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints each of
Joseph Albagli and Ilan Rosen, and each of them with power of substitution, as
his attorney-in-fact, in all capacities, to sign any amendments to this
Registration Statement (including post-effective amendments) and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-facts or their substitutes may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Joseph Albagli Chief Executive Officer (Director and
-------------------- principal executive officer) June 9, 2006
Joseph Albagli
/s/ Rafael Weisler Chief Financial Officer (principal
-------------------- financial and accounting officer) June 9, 2006
Rafael Weisler
/s/ Ilan Rosen
--------------------
Ilan Rosen Chairman of the Board of Directors June 9, 2006
/s/ Michal Even-chen
--------------------
Michal Even-Chen Director June 9, 2006
/s/ Joseph Atsmon
--------------------
Joseph Atsmon Director June 9, 2006
/s/ Robert Wadsworth
--------------------
Robert Wadsworth Director June 9, 2006
AUTHORIZED REPRESENTATIVE IN THE U.S.:
VOCALTEC COMMUNICATIONS INC.
BY: /s/ Joseph Albagli
-------------------------
NAME: Joseph Albagli
TITLE: President
DATE: June 9, 2006
II-5
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
4.1 Form of share certificate of VocalTec Communications Ltd. (1)
4.2 Form of Purchase Agreement dated May 18, 2006 by and among the
Registrant and various investors (2).
4.3 Form of warrant dated May 24, 2006 issued to the investors
parties to the purchase agreement referred to in Item 4.2 and to
the placement agent in the underlying private placement
transaction and certain affiliates thereof (2).
5.1 Opinion of Meitar Liquornik Geva & Leshem Brandwein, counsel to
the registrant, as to the legality of the securities being
offered under this Registration Statement.
23.1 Consent of Kost Forer Gabbay & Kasierer, Member of Ernst & Young
Global.
23.2 Consent of Kesselman & Kesselman, Member of
PriceWaterhouseCoopers.
23.3 Consent of Meitar Liquornik Geva & Leshem Brandwein (included in
Exhibit 5.1).
24.1 Power of Attorney (see Page II-5 of this Registration Statement).
(1) Incorporated by reference to the Registrant's Annual Report on Form
20-F, for the year ended December 31, 2005, filed with the Securities and
Exchange Commission on April 21, 2006 (as amended on May 16, 2006).
(2) Incorporated by reference to the Registrant's Report on Form 6-K,
furnished to the Securities and Exchange Commission on May 25, 2006.