Ceragon Networks Ltd 6-K, filed Sep 24, 2020
Ceragon Networks Ltd (CRNT)
About this 6-K
Ceragon Networks Ltd filed this 6-K on September 24, 2020.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2020
Commission File Number:
__________________________________
(Translation of registrant's name into English)
__________________________________
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
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Form 20-F ☒ Form 40-F ☐ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): _____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): _____
EXPLANANTORY NOTE
Ceragon Networks Ltd. (the “Registrant”) is furnishing on this Form 6-K its unaudited interim consolidated financial statements for the six months ended June 30, 2020, and the related Operating and Financial Review and Prospects for such period. The Registrant is also furnishing the consent of its independent registered accounting firms to the incorporation by reference into Registrant’s Registration Statement on Form F-3 (No. 333-217194) of its opinion on the Registrant’s consolidated financial statements included in Registrant’s Annual Report on Form 20-F for the year ended December 31, 2019.
Exhibits
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Exhibit Number |
Description |
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Unaudited financial statements of Ceragon Networks, Ltd. for the six months ended June 30, 2020. | |
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Operating and Financial Review and Prospects for the six months ended June 30, 2020. | |
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101 |
Interactive Data File relating to the materials in this report on Form 6-K is formatted in Extensible Business Reporting Language (XBRL). |
This Report on Form 6-K and the exhibits hereto are hereby incorporated by reference into the Registrant’s Registration Statement on Form F-3 (No. 333-217194), as amended and supplemented from time to time.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CERAGON NETWORKS LTD. | ||
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Date: September 24, 2020 |
By: |
/s/ Ran Vered |
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Name: |
Ran Vered | |
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Title: |
Chief Financial Officer | |
Exhibit 99.1
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2020
U.S. DOLLARS IN THOUSANDS
UNAUDITED
INDEX
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Page | |
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F - 2 - F - 3 | |
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F - 4 | |
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Interim Consolidated Statements of Comprehensive Income (loss) |
F - 5 |
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Interim Consolidated Statements of Changes in Shareholders' Equity |
F - 6 |
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F - 7 | |
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F - 8 - F - 20 |
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
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December 31, |
June 30, | ||||||||||||
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Note |
2019 |
2020 | |||||||||||
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Unaudited | ||||||||||||
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ASSETS | |||||||||||||
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CURRENT ASSETS: | |||||||||||||
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Cash and cash equivalents |
$ |
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$ |
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Trade receivables (net of allowance for credit losses of $ |
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Other accounts receivable and prepaid expenses |
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Inventories |
3 |
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Total current assets |
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NON-CURRENT ASSETS: | |||||||||||||
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Long-term bank deposits |
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Deferred tax assets |
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Severance pay and pension fund |
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Property and equipment, net |
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Intangible assets, net |
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Other non-current assets |
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Total non-current assets |
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Total assets |
$ |
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$ |
| |||||||||
The accompanying notes are an integral part of the interim consolidated financial statements
F - 2
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands
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December 31, |
June 30, | ||||||||||||
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Note |
2019 |
2020 | |||||||||||
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Unaudited | ||||||||||||
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LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||
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CURRENT LIABILITIES: | |||||||||||||
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| |||||||||||||
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Trade payables |
$ |
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$ |
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Deferred revenues |
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Short term loans |
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Other accounts payable and accrued expenses |
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Total current liabilities |
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LONG-TERM LIABILITIES: | |||||||||||||
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Accrued severance pay and pension |
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Deferred revenues |
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Other long-term payables |
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Total long-term liabilities |
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COMMITMENTS AND CONTINGENT LIABILITIES |
7 | ||||||||||||
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SHAREHOLDERS' EQUITY: |
10 | ||||||||||||
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Share capital: | |||||||||||||
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| |||||||||||||
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Ordinary shares of NIS |
|
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Additional paid-in capital |
|
| |||||||||||
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Treasury shares at cost – |
( |
) |
( |
) | |||||||||
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Accumulated other comprehensive loss |
( |
) |
( |
) | |||||||||
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Accumulated deficit |
( |
) |
( |
) | |||||||||
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| |||||||||||||
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Total shareholders' equity |
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Total liabilities and shareholders' equity |
$ |
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$ |
| |||||||||
The accompanying notes are an integral part of the interim consolidated financial statements
F - 3
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands (except per share data)
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Six months ended June 30, | ||||||||
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2019 |
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2020 | |||||
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Unaudited | ||||||||
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Revenues |
$ |
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$ |
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Cost of revenues |
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Gross profit |
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Operating expenses: | ||||||||
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Research and development, net |
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Selling and marketing |
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General and administrative |
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Total operating expenses |
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Operating income (loss) |
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( |
) | |||||
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Financial expenses and others, net |
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Income (loss) before taxes |
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( |
) | |||||
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Taxes on income |
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Equity loss in affiliates |
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Net income (loss) |
$ |
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$ |
( |
) | |||
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Basic net income (loss) per share |
$ |
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$ |
( |
) | |||
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Diluted net income (loss) per share |
$ |
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$ |
( |
) | |||
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Weighted average number of shares used in computing basic net income (loss) per share |
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Weighted average number of shares used in computing diluted net income (loss) per share |
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The accompanying notes are an integral part of the interim consolidated financial statements
F - 4
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
U.S. dollars in thousands
|
Six months ended June 30, | ||||||||
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2019 |
|
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2020 | |||||
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Unaudited | ||||||||
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| ||||||||
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Net income (loss) |
$ |
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$ |
( |
) | |||
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Other comprehensive income (loss): | ||||||||
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Change in foreign currency translation adjustment |
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( |
) | |||||
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Cash flow hedges: | ||||||||
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Change in net unrealized gains (losses) |
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( |
) | |||||
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Amounts reclassified into net income (loss) |
( |
) |
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Net change |
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( |
) | |||||
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Other comprehensive income (loss), net |
|
( |
) | |||||
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Total of comprehensive income (loss) |
$ |
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$ |
( |
) | |||
The accompanying notes are an integral part of the interim consolidated financial statements
F - 5
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
U.S. dollars in thousands (except share and per share data)
Six months ended June 30, 2019:
|
Ordinary shares |
Share capital |
Additional paid-in capital |
Treasury shares at cost |
Accumulated other comprehensive income (loss) |
Accumulated deficit |
Total shareholders' equity | ||||||||||||||||||||||
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Balance as of January 1, 2019 |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||||||||||
|
| ||||||||||||||||||||||||||||
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Exercise of options and vesting of RSUs |
|
|
|
- |
- |
- |
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Share-based compensation expense |
- |
- |
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- |
- |
- |
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Other comprehensive income, net |
- |
- |
- |
- |
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- |
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Net income |
- |
- |
- |
- |
- |
|
| |||||||||||||||||||||
|
| ||||||||||||||||||||||||||||
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Balance as of June 30, 2019 |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||||||||||
Six months ended June 30, 2020:
|
Ordinary shares |
Share capital |
Additional paid-in capital |
Treasury shares at cost |
Accumulated other comprehensive income (loss) |
Accumulated deficit |
Total shareholders' equity | ||||||||||||||||||||||
|
Balance as of January 1, 2020 |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||||||||||
|
| ||||||||||||||||||||||||||||
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Cumulative effect of adoption of ASU Topic 326 |
- |
- |
- |
- |
- |
( |
) |
( |
) | |||||||||||||||||||
|
Exercise of options and vesting of RSUs |
|
*) |
|
- |
- |
- |
| |||||||||||||||||||||
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Share-based compensation expense |
- |
- |
|
- |
- |
- |
| |||||||||||||||||||||
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Other comprehensive loss, net |
- |
- |
- |
- |
( |
) |
- |
( |
) | |||||||||||||||||||
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Net loss |
- |
- |
- |
- |
- |
( |
) |
( |
) | |||||||||||||||||||
|
| ||||||||||||||||||||||||||||
|
Balance as of June 30, 2020 |
|
$ |
|
$ |
|
$ |
( |
) |
$ |
( |
) |
$ |
( |
) |
$ |
| ||||||||||||
*)
The accompanying notes are an integral part of the interim consolidated financial statements
F - 6
CERAGON NETWORKS LTD. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
|
Six months ended June 30, | ||||||||
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2019 |
2020 | |||||||
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Unaudited | ||||||||
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Cash flow from operating activities: | ||||||||
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| ||||||||
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Net income (loss) |
$ |
|
$ |
( |
) | |||
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
|
| ||||||||
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Depreciation and amortization |
|
| ||||||
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Stock-based compensation expense |
|
| ||||||
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Decrease (increase) in trade and other receivables, net |
( |
) |
| |||||
|
Decrease (increase) in inventory, net of write off |
( |
) |
| |||||
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Decrease (increase) in deferred tax asset, net |
|
( |
) | |||||
|
Increase (decrease) in trade payables and accrued liabilities |
|
( |
) | |||||
|
Increase in deferred revenues |
|
| ||||||
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Other adjustments |
( |
) |
( |
) | ||||
|
| ||||||||
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Net cash provided by (used in) operating activities |
( |
) |
| |||||
|
| ||||||||
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Cash flow from investing activities: | ||||||||
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Purchase of property and equipment, net |
( |
) |
( |
) | ||||
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Purchase of intangible assets |
( |
) |
( |
) | ||||
|
Proceeds from bank deposits |
|
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Net cash used in investing activities |
( |
) |
( |
) | ||||
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Cash flow from financing activities: | ||||||||
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Proceeds from exercise of stock options |
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Proceeds from bank credits and loans, net |
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Net cash provided by financing activities |
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| ||||||||
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Translation adjustments on cash and cash equivalents |
( |
) |
( |
) | ||||
|
Increase (decrease) in cash and cash equivalents |
( |
) |
| |||||
|
Cash and cash equivalents at the beginning of the period |
|
| ||||||
|
| ||||||||
|
Cash and cash equivalents at the end of the period |
$ |
|
$ |
| ||||
The accompanying notes are an integral part of the interim consolidated financial statements
F - 7
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 1: GENERAL
Ceragon Networks Ltd. ("the Company") is a wireless backhaul specialist. It provides wireless backhaul solutions that enable cellular operators and other wireless service providers to deliver voice and data services, enabling smart-phone applications such as internet browsing, social networking applications, image sharing, music and video applications. Its wireless backhaul solutions use microwave radio technology to transfer large amounts of telecommunication traffic between base stations and small-cells and the core of the service provider's network. The Company also provides wireless fronthaul solutions that use microwave technology for ultra-high speed, ultra-low latency communication for wireless 5G and 4G base stations.
The Company's solutions support all wireless access technologies, including 4G (LTE-Advance, LTE) and 5G services. The Company's systems also serve evolving network architectures including all-IP long haul networks.
The Company sells its products through a direct sales force, systems integrators, distributors and original equipment manufacturers.
The Company's wholly owned subsidiaries provide research and development, marketing, manufacturing, distribution, sales and technical support to the Company's customers worldwide.
NOTE 2:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.Interim consolidated financial statements
The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission regarding interim financial reporting. In the management`s opinion, the interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s interim consolidated financial position as of June 30, 2020, as well as its results of operations and cash flows for the six months ended June 30, 2019 and 2020. The results of operations for the six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020.
b.Use of estimates
The preparation of the interim consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from those estimates.
c.The duration, scope and effects of the ongoing COVID-19 pandemic, government and other third party responses to it, and the related macroeconomic effects, including to the Company’s business and the business of the Company’s suppliers and customers are uncertain, rapidly changing and difficult to predict. As a result, the Company’s accounting estimates and assumptions may change over time in response to this evolving situation.
F - 8
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 2:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Such changes could result in future impairments of intangibles, fair values of stock-based awards, inventory write-off, warranty provision, income taxes, contingent liabilities, and incremental credit losses on receivables, or an increase in the Company’s insurance liabilities as of the time of a relevant measurement event.
d.Significant accounting policies
The accompanying interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 20-F filed with the Securities and Exchange Commission (the "SEC") on March 31, 2020.
Other than the change described below (see note 2e), there have been no changes to the significant accounting policies described in the Annual Report on Form 20-F for the fiscal year ended December 31, 2019 that have had a material impact on the interim consolidated financial statements and related notes.
e.Recently adopted accounting standards
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the more timely recognition of losses. The new accounting standard became effective for the Company beginning January 1, 2020. The adoption of the standard had an impact on the Company’s interim consolidated financial statements and related disclosures. Please refer to note 6.
NOTE 3:INVENTORIES
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December 31, |
June 30, | |||||||
|
2019 |
2020 | |||||||
|
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Raw materials |
$ |
|
$ |
| ||||
|
Work in progress |
|
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Finished products |
|
| ||||||
|
| ||||||||
|
$ |
|
$ |
| |||||
During the six-month ended June 30, 2019 and 2020 the Company recorded inventory write-offs for excess inventory and slow-moving inventory in a total amount of $
F - 9
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 4:FAIR VALUE MEASUREMENT
The carrying amounts of financial instruments carried at cost, including cash and cash equivalents, short-term deposits, restricted cash, accounts receivable, prepaid expenses and other assets, accounts payable, accrued expenses and other liabilities, approximate their fair value due to the short-term maturities of such instruments.
The following table sets forth the Company’s assets that were measured at fair value as of June 30, 2020 and December 31, 2019, by level within the fair value hierarchy:
|
Fair value measurements using input type | ||||||||||
|
|
Fair value hierarchy |
December 31, 2019 |
June 30, 2020 | |||||||
|
| ||||||||||
|
Derivatives instruments |
Level 2 |
$ |
|
$ |
| |||||
|
| ||||||||||
|
Total assets |
$ |
|
$ |
| ||||||
NOTE 5:DERIVATIVE INSTRUMENTS
The Company enters into foreign currency forward and option contracts with financial institutions to protect against the exposure to changes in exchange rates of several foreign currencies that are associated with forecasted cash flows and existing assets and liabilities. The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.
The fair value of derivative contracts in the interim consolidated balance sheets at June 30, 2020 and December 31, 2019 were as follows:
|
Other accounts receivable and prepaid expenses |
|
|
Other accounts payable and accrued expenses | |||||
|
June 30, 2020 | ||||||||
|
Derivatives designated as hedging instruments | ||||||||
|
Currency forward contracts |
$ |
|
$ |
| ||||
|
Derivatives not designated as hedging instruments | ||||||||
|
Currency forward and option contracts |
$ |
|
$ |
| ||||
|
| ||||||||
|
Total derivatives |
$ |
|
$ |
| ||||
F - 10
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 5:DERIVATIVE INSTRUMENTS (Cont.)
|
Other accounts receivable and prepaid expenses |
|
|
Other accounts payable and accrued expenses | |||||
|
December 31, 2019 | ||||||||
|
Derivatives designated as hedging instruments | ||||||||
|
Currency forward contracts |
$ |
|
$ |
| ||||
|
Derivatives not designated as hedging instruments | ||||||||
|
Currency forward and option contracts |
$ |
|
$ |
| ||||
|
| ||||||||
|
Total derivatives |
$ |
|
$ |
| ||||
The notional amounts of outstanding derivative contracts in U.S. dollars at June 30, 2020 and December 31, 2019 were as follows:
|
December 31, 2019 |
|
|
June 30, 2020 | |||||
|
Derivatives designated as hedging instruments | ||||||||
|
Currency forward contracts |
$ |
|
$ |
| ||||
|
Derivatives not designated as hedging instruments | ||||||||
|
Currency forward and option contracts |
$ |
|
$ |
| ||||
|
| ||||||||
|
Total derivatives |
$ |
|
$ |
| ||||
The maximum length of time over which the Company is hedging its exposure to the variability in future cash flows for forecasted transactions is up to 12 months.
For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Gains or losses from contracts that were not designated as hedging instruments are recognized in "financial expenses and others, net".
The effect of derivative contracts on the interim consolidated statements of operations for the six months ended June 30, 2020 and 2019 was as follows:
|
Six months ended June 30, | ||||||||
|
2019 |
2020 | |||||||
|
|
| |||||||
|
Operating income (expenses) |
$ |
|
$ |
( |
) | |||
|
Financial income (expenses) |
$ |
( |
) |
$ |
| |||
NOTE 6:CREDIT LOSSES
Effective January 1, 2020, the Company adopted ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, based on a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables. The Company recorded a cumulative-effect adjustment to its retained earnings as of January 1, 2020 in the amount of $
The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under the previous accounting guidance.
F - 11
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 6:CREDIT LOSSES (Cont.)
The Company is exposed to credit losses primarily through sales to customers. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables.
The estimate of amount of accounts receivable that may not be collected is based on the geographic location of the accounts receivable balances, aging of the accounts receivable balances, the financial condition of customers and the Company’s historical experience with customers in similar geographies.
Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default.
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of trade receivables to present the net amount expected to be collected:
|
Six months ended June 30, 2020 | ||||
|
| ||||
|
Balance, at beginning of period |
$ |
| ||
|
Cumulative effect of adoption of ASU Topic 326 |
| |||
|
Provision for expected credit losses |
| |||
|
Amounts written off charged against the allowance and others |
( |
) | ||
|
| ||||
|
Balance, at end of period |
$ |
| ||
NOTE 7:COMMITMENTS AND CONTINGENT LIABILITIES
a.During the six months ended June 30, 2019 and 2020, the Company received several grants from the Israeli Innovation Authority (“IIA”). The grants require the Company to comply with the requirements of the Research and Development Law, however, the Company is not obligated to pay royalties on sales of products based on technology or know how developed from the grants. In a case involving the transfer of technology or know how developed from the grants outside of Israel, the Company may be required to pay royalties related to past sales of products based on the technology or the developed know how. The Company recorded the IIA grants as a reduction of research and development expenses in the six months ended June 30, 2019 and 2020 in the amount of $
b.Paycheck Protection Program Loan:
In May 2020, the Company received $
F - 12
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 7:COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
c.Charges and guarantees:
As of December 31, 2019, and June 30, 2020, the Company provided bank guarantees in an aggregate amount of $
d.In September 2018, the Company signed commercial agreements with Orocom, a new operator in Peru, to provide broadband connectivity in rural regions. The Peruvian Government (“Fitel”) chose Orocom for the deployment of transport and broadband access networks in three of six regions in Peru. Orocom is owned by a consortium of companies, comprising telecommunications license holders as well as companies with expertise in fiber-based technologies.
After signing the commercial agreements mentioned above and an operating agreement with Orocom and its shareholders, the Company provided, in the second quarter of 2018, bank guarantees amounting to $
e.Litigations:
The Company is currently involved in various claims and legal proceedings. The Company reviews the status of each matter and assesses its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated, the Company accrues a liability for the estimated loss.
On January 6, 2015 the Company was served with a motion to approve a purported class action, naming the Company, its Chief Executive Officer and its then serving directors as defendants. The motion was filed with the District Court of Tel-Aviv (the “Court”). The purported class action alleges breaches of duties by making false and misleading statements in the Company's SEC filings and public statements. The plaintiff seeks specified compensatory damages in a sum of up to $
The Company filed its defense on June 21, 2015, which was followed with documents discovery proceeding.
The plaintiff filed his reply to the Company’s defense by April 2, 2017, in which he included alleged claims that were not included in his original motion. A preliminary hearing was held on May 22, 2017, in the framework of which the Court set dates for response to the Company’s above-mentioned requests as well as dates for evidence hearings.
F - 13
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 7:COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
In May 2017, the Company filed two requests: the first, requesting to dismiss the plaintiff’s response to the Company’s defense, or, alternatively, to allow the Company to respond to it; the second, to continue discussions with regards to the legal question of the governing law. On July 17, 2017, the Court issued its decision in the first request, denying the requested dismissal of plaintiff’s response to the Company’s defense, but allowing the Company to respond to it; on July 29, 2017, the Court issued its decision in the second request, and denied it. The Company filed its response on September 18, 2017.
On October 2, 2017, the plaintiff filed a request to summon two of the Company’s officers (the Company’s Chairman, Mr. Zisapel and the Company’s Chief Executive Officer, Mr. Palti) to the upcoming evidence hearing. Following certain procedural proceedings, the Court held evidence hearings on November 2, 2017 and on January 8, 2018, while, following the aforementioned proceedings, the second was attended by the Company’s Chief Executive Officer.
Summaries were filed by the plaintiff on March 21, 2018 and the Company filed its summaries on June 12, 2018. The plaintiff filed their reply summaries on September 5, 2018.
On October 4, 2018, an interim decision regarding dual listed companies was rendered by the Supreme Court of Israel, which corresponds with the Company’s arguments in this case regarding the governing law and legal regime applicable to the Company. This Supreme Court decision upholds two recent rulings of District Court of Tel-Aviv (Economic Department), which determined that all securities litigation regarding dual listed companies should be decided only in accordance with U.S. law (herein after, the “Supreme Court Decision”).
In light of this, on October 15, 2018, the plaintiff asked the Court to add a plea to his summaries, addressing the Supreme Court Decision. The Court has approved plaintiff’s request and gave to the defendants the right to reply. The Company’s response was submitted on December 4, 2018. Plaintiff’s reply to the Company’s response was submitted on December 26, 2018.
On April 14, 2019, the Court rendered a decision resolving that according to the Supreme Court Decision, examination of the legal questions standing in the basis of the motion, should be based upon U.S. law. Therefore, the Court allowed the plaintiff to amend his motion within 45 days, so that it would include an expert’s opinion regarding U.S. law, and an argument regarding U.S. law implementation in the specific circumstances. The Court also decided that amendment of the motion is subject to plaintiff’s payment of 40,000 NIS to the Company.
On September 23, 2019, the plaintiff filed an amended Motion (“the Amended Motion”), which includes an expert’s opinion regarding U.S. Federal law. Moreover. The Amended Motion includes lengthy arguments that were added on top of the original Motion, specifically, in reference to discovery proceedings and evidence hearings that were held as part of the original motion. Therefore, on September 25, 2019, the Court rendered a decision pointing out that the Amended Motion seems to include the plaintiff’s summaries in the Amended Motion, and so ordered the plaintiff to clarify whether he is willing to relinquish submitting any additional summaries regarding the evidence that were heard in the original motion. On October 2, 2019, the plaintiff responded, alleging that since the Amended Motion does not include any new facts, there is no need to submit additional summaries regarding the evidence heard to this point.
F - 14
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 7:COMMITMENTS AND CONTINGENT LIABILITIES (Cont.)
On December 30, 2019 the Company submitted a motion to dismiss the Amended Motion. The Company alleged that the Amended Motion includes new causes of action, and specifically that the addition of legal causes of action according to U.S. Federal law, cannot be filed due to the specific statute of limitations governing the case. On January 20, 2020, the plaintiff filed its response, which was responded to by the Company on February 20, 2020.
The Court also accepted the Company’s request to submit its response to the Amended Motion after a decision in the Company’s motion to dismiss was rendered.
On February 24, 2020, the Court issued a decision, according to which, the Amended Motion will be decided upon the current court documents, unless either of the parties file a request to hold a hearing in the matter. As neither of the parties requested to hold such a hearing, the parties await the Court’s decision in the matter.
The Company believes that the Court should deny the Amended Motion. However, there is no assurance that the Company's position will be accepted by the Court. In such case the Company may have to divert attention of its executives to deal with this class action as well as incur expenses that may be beyond its insurance coverage for such cases, which cause a risk of loss and expenditures that may adversely affect its financial condition and results of operations. The Company believes it has strong defense arguments and in light of the Supreme Court Decision and recent legal rulings by the District Court of Tel-Aviv (Economic Department) regarding dual listed companies, and after the evidence hearings were conducted and summaries were submitted, the Company believes it is more likely than not, that the Court will reject the Amended Motion for class action. Therefore, the Company did not record a provision as of June 30, 2020.
NOTE 8:LEASES
The Company`s leases include offices and warehouses for its facilities worldwide, as well as car leases, which are all classified as operating leases. Certain leases include renewal options that are under the Company`s sole discretion. The renewal options were included in the right of use (“ROU”) and liability calculation if it was reasonably certain that the Company will exercise the option.
The lease related accounts as of June 30, 2020 were as follows:
|
June 30, 2020 | ||||
|
Other non-current assets |
$ |
| ||
|
Other accounts payable and accrued expenses |
$ |
( |
) | |
|
Other long-term payables |
$ |
( |
) | |
F - 15
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 8:LEASES (Cont.)
The components of lease expense and supplemental cash flow information related to leases for the six months ended June 30, 2020 were as follows:
|
Six months ended June 30, 2020 | ||||
|
| ||||
|
Components of lease expense | ||||
|
Operating lease cost |
$ |
| ||
|
Short-term lease |
$ |
| ||
|
Total lease expenses |
$ |
| ||
|
Six months ended June 30, 2020 | ||||
|
| ||||
|
Supplemental cash flow information | ||||
|
Cash paid for amounts included in the measurement of lease liabilities |
$ |
| ||
|
| ||||
|
Supplemental non-cash information related to lease liabilities arising from obtaining ROU assets |
$ |
| ||
For the six months ended June 30, 2020, the weighted average remaining lease term is
Maturities of lease liabilities as of June 30, 2020 were as follows:
|
The remainder of 2020 |
| |||
|
2021 |
| |||
|
2022 |
| |||
|
2023 |
| |||
|
2024 |
| |||
|
2025 and thereafter |
| |||
|
Total operating lease payments |
| |||
|
Less: imputed interest |
| |||
|
Present value of lease liability |
$ |
|
The Company leases its offices in Israel from real estate holding companies controlled by Yehuda and Zohar Zisapel. Yehuda Zisapel is a principal shareholder of the Company and Zohar Zisapel is the Chairman of the Board of Directors of the Company. Yehuda and Zohar Zisapel are brothers who do not have a voting agreement between them. Jointly or severally, they are also founders, directors and principal shareholders of several other companies that are known as the RAD-BYNET group.
The leases of this facility will expire at the end of December 2020.
F - 16
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 9:NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed based on the weighted average number of shares of ordinary stock outstanding during each period. Diluted net income (loss) per share is computed based on the weighted average number of shares of ordinary stock outstanding during each period, plus dilutive potential shares of common stock considered outstanding during the period, in accordance with FASB ASC No. 260, “Earnings Per Share.”
The total weighted average number of shares related to the outstanding options and Restricted Share Units (“RSUs”) excluded from the calculations of diluted net earnings per share due to their anti-dilutive effect was
NOTE 10:SHAREHOLDERS' EQUITY
a.Ordinary shares
The ordinary shares of the Company entitle their holders to receive notice to participate and vote in general meetings of the Company, the right to share in distributions upon liquidation of the Company and to receive dividends, if declared.
b.Stock Options and RSUs plans
In 2003, the Company adopted a share option plan (the "Plan"). Under the Plan and September 6, 2010 amendment, options and RSUs may be granted to officers, directors, employees and consultants of the Company or its subsidiaries. The options vest primarily over
Upon adoption of the Plan, the Company reserved for issuance
F - 17
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 10:SHAREHOLDERS' EQUITY (Cont.)
The following table summarizes the activities for the Company’s stock options for the six months ended June 30, 2020:
|
Six months ended June 30, 2020 | ||||||||||||||||
|
|
Number of options |
|
|
Weighted average exercise price |
|
|
Weighted average remaining contractual term (in years) |
|
|
Aggregate intrinsic value |
| |||||
|
| ||||||||||||||||
|
Outstanding at beginning of year |
|
$ |
|
|
$ |
| ||||||||||
|
Granted |
|
| ||||||||||||||
|
Exercised |
( |
) |
| |||||||||||||
|
Forfeited or expired |
( |
) |
| |||||||||||||
|
| ||||||||||||||||
|
Outstanding at end of the period |
|
|
|
$ |
| |||||||||||
|
| ||||||||||||||||
|
Options exercisable at end of the period |
|
$ |
|
|
$ |
| ||||||||||
|
| ||||||||||||||||
|
Vested and expected to vest |
|
$ |
|
|
$ |
| ||||||||||
The weighted average fair value of options granted during the six months ended June 30, 2020 and 2019 was $
The following table summarizes the activities for the Company’s RSUs for the six months ended June 30, 2020:
|
Number of RSUs |
|
|
Aggregate intrinsic value | |||||
|
| ||||||||
|
Unvested at beginning of year |
|
$ |
| |||||
|
Granted |
| |||||||
|
Vested |
( |
) | ||||||
|
Forfeited |
( |
) |
| |||||
|
| ||||||||
|
Unvested at end of period |
|
| ||||||
The weighted average fair value at grant date of RSUs granted for the six months ended June 30, 2020 and 2019 was $
As of June 30, 2020, the total unrecognized estimated compensation cost related to non-vested stock options and RSUs granted prior to that date was $
F - 18
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 10:SHAREHOLDERS' EQUITY (Cont.)
The following table sets forth the total share-based compensation expenses included in the interim consolidated statements of operations for the six months ended June 30, 2020 and 2019:
|
Six months ended June 30, | ||||||||
|
2019 |
2020 | |||||||
|
| ||||||||
|
Cost of revenues |
|
| ||||||
|
Research and development |
|
| ||||||
|
Selling and marketing |
|
| ||||||
|
General and administrative |
|
| ||||||
|
| ||||||||
|
Total share-based compensation expense |
$ |
|
$ |
| ||||
NOTE 11:REVENUES
The Company recognizes contract liabilities, or deferred revenues, when it receives advance payments from customers before performance obligations have been performed. The balance of deferred revenues approximates the aggregate amount of the transaction price allocated to the unsatisfied performance obligations at the end of reporting period.
The following table presents the changes in deferred revenues balance during the six months ended June 30, 2020:
|
Six months ended June 30, 2020 | ||||
|
| ||||
|
Balance, beginning of the period |
$ |
| ||
|
New performance obligations |
| |||
|
| ||||
|
Reclassification to revenue as a result of satisfying performance obligations |
( |
) | ||
|
| ||||
|
Balance, end of the period |
| |||
|
Less: long-term portion of deferred revenue |
| |||
|
Current portion, end of period |
$ |
| ||
F - 19
CERAGON NETWORKS LTD. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands (except share and per share data)
NOTE 11:REVENUES (Cont.)
Remaining performance obligations represent contracted revenues that have not yet been recognized, which includes deferred revenues and non-cancelable contracts that will be recognized as revenue in future periods. The following table represents the remaining performance obligations as of June 30, 2020, which are expected to be satisfied and recognized in future periods:
|
Remaining 2020 |
|
|
2021 |
|
|
2022 and thereafter | ||||||
|
Unsatisfied performance obligations |
$ |
|
$ |
|
$ |
| ||||||
The Company elected to apply the optional exemption under ASC 606 paragraph 10-50-14(a) not to disclose the remaining performance obligations that relate to contracts with an original expected duration of one year or less for which deferred revenues have not been recorded yet.
NOTE 12:GEOGRAPHIC INFORMATION
The following table presents the total revenues for the six months ended June 30, 2019 and 2020, allocated to the geographic areas in which it was generated. Revenues are attributed to geographic areas based on the location of the end-users.
|
Six months ended June 30, | ||||||||
|
2019 |
2020 | |||||||
|
| ||||||||
|
North America |
$ |
|
$ |
| ||||
|
Europe |
|
| ||||||
|
Africa |
|
| ||||||
|
Asia-Pacific and Middle East |
|
| ||||||
|
India |
|
| ||||||
|
Latin America |
|
| ||||||
|
| ||||||||
|
$ |
|
$ |
| |||||
The following table presents the locations of the Company’s property and equipment as of December 31, 2019 and June 30, 2020:
|
December 31, 2019 |
June 30, 2020 | |||||||
|
| ||||||||
|
Israel |
$ |
|
$ |
| ||||
|
Others |
|
| ||||||
|
| ||||||||
|
$ |
|
$ |
| |||||
F - 20
|
Six months ended
June 30, 2019
(Unaudited)
|
Six months ended
June 30, 2020
(Unaudited)
|
|||||||||||||||
| $ |
|
%
|
$ |
|
%
|
|||||||||||
|
Revenues
|
142,164
|
100
|
118,298
|
100
|
||||||||||||
|
Cost of revenues
|
91,171
|
64.1
|
87,786
|
74.2
|
||||||||||||
|
Gross profit
|
50,993
|
35.9
|
30,512
|
25.8
|
||||||||||||
|
Operating expenses:
|
||||||||||||||||
|
Research and development, net
|
12,418
|
8.7
|
14,060
|
11.9
|
||||||||||||
|
Selling and marketing
|
19,583
|
13.8
|
16,473
|
13.9
|
||||||||||||
|
General and administrative
|
11,636
|
8.2
|
9,441
|
8.0
|
||||||||||||
|
Total operating expenses
|
43,637
|
30.7
|
39,974
|
33.8
|
||||||||||||
|
Operating income (loss)
|
7,356
|
5.2
|
(9,462
|
)
|
(8.0
|
)
|
||||||||||
|
Financial expenses and others, net
|
(2,939
|
)
|
(2.1
|
)
|
(1,772
|
)
|
(1.5
|
)
|
||||||||
|
Taxes on income
|
(2,532
|
)
|
(1.8
|
)
|
(780
|
)
|
(0.7
|
)
|
||||||||
|
Equity loss in affiliates
|
(314
|
)
|
(0.2
|
)
|
(343
|
)
|
(0.3
|
)
|
||||||||
|
Net income (loss)
|
1,571
|
1.1
|
(12,357
|
)
|
(10.4
|
)
|
||||||||||
|
•
|
Lower direct costs as a result of lower revenues and lower travel expenses as a result of COVID-19.
|
|
•
|
Offset by higher supply chain cost as a result of COVID-19.
|
|
|
• a $17.0 million decrease in trade receivables and other accounts receivables;
• a $7.5 million decrease in inventories, net of write-offs;
• a $5.4 million of depreciation and amortization expenses;
• a $0.9 million increase in stock-based compensation expenses; and
• a $0.8 million increase in deferred revenues.
|
|
|
• our net loss of $12.4 million; and
• a $9.0 million decrease in trade payables and accrued liabilities.
|
|
|
• a $10.2 million increase in trade receivables and other accounts receivables; and
• a $20.8 million increase in inventories, net of write-offs.
|
|
|
• our net income of $1.6 million;
• a $4.4 million of depreciation expenses;
• a $6.2 million increase in deferred revenues paid in advance;
• a $1.2 million increase in stock-based compensation expenses;
• a $1.2 million decrease in deferred tax asset; and
• a $9.5 million increase in trade payables and accrued liabilities.
|