6-K 1 y61015e6vk.txt PARADIGM GEOPHYSICAL LTD. FORM 6-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Report of Foreign Private Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934 For the Month of May 2002 PARADIGM GEOPHYSICAL LTD. ------------------------- (Translation of Registrant's Name into English) Gav Yam Center No.3, 9 Shenkar Street, P.O.B. 2061 Herzlia Pituach, Israel 46120 ----------------------------------------------------------------------------- (Address of Principal Executive Offices) Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F....X.... Form 40-F........ Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes........ No....X.... If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-..................... Attached as Exhibit 99.1 to this Report on Form 6-K, and incorporated by reference herein, is the Registrant's Proxy Statement, dated May 31, 2002. SIGNATURE 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. PARADIGM GEOPHYSICAL LTD. (Registrant) By: /s/ Jonathan Keller Jonathan Keller Company Secretary Dated: 31 May, 2002 Exhibit Index 99.1 Proxy Statement, dated May 31, 2002.

DECEMBER 31, ----------------- 2000 2001 ------- ------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 8,647 $ 9,814 Short-term bank deposit -- 1,941 Trade receivables (net of allowance for doubtful accounts of $2,950 in 2000 and $2,883 in 2001) 22,707 28,306 Accrued income 4,077 5,451 Other receivables and prepaid expenses 4,110 5,686 ------- ------- Total current assets 39,541 51,198 ------- ------- LONG-TERM TRADE RECEIVABLES 221 -- ------- ------- SEVERANCE PAY FUND 1,076 1,525 ------- ------- PROPERTY AND EQUIPMENT, NET 13,318 15,902 ------- ------- OTHER ASSETS, NET 25,605 30,561 ------- ------- $79,761 $99,186 ======= =======

DECEMBER 31, -------------------- 2000 2001 -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term bank loans $ 4,528 $ 5,500 Current maturities of long-term bank loans 3,112 1,278 Current maturities of capital lease obligations 546 260 Trade payables 5,375 3,555 Other payables and accrued expenses 10,601 13,240 Note payable -- 6,318 Deferred revenues 4,519 3,810 -------- -------- Total current liabilities 28,681 33,961 -------- -------- LONG TERM LIABILITIES: Long-term bank loans, net of current maturities 1,277 5,099 Convertible loan -- 8,000 Capital lease obligations, net of current maturities 206 -- Accrued severance pay 2,338 2,502 Other long-term liabilities 790 549 -------- -------- Total long-term liabilities 4,611 16,150 -------- -------- SHAREHOLDERS' EQUITY: Share capital: Authorized - 18,000,000 Ordinary shares of NIS 0.5 par value and 2,000,000 Preferred shares of NIS 0.5 par value as of December 31, 2000 and 2001 Issued and outstanding - 0 Preferred shares as of December 31, 2000 and 2001; 14,691,904 Ordinary shares as of December 31, 2000 and 14,891,904 Ordinary shares as of December 31, 2001 2,273 2,297 Additional paid-in capital 60,954 62,038 Accumulated other comprehensive loss (1,784) (2,416) Accumulated deficit (14,974) (12,844) -------- -------- 46,469 49,075 -------- -------- $ 79,761 $ 99,186 ======== ========

YEAR ENDED DECEMBER 31, -------------------------------- 1999 2000 2001 -------- -------- -------- Revenues: Products $ 43,023 $ 46,390 $ 50,765 Services 11,483 16,908 22,001 -------- -------- -------- Total revenues 54,506 63,298 72,766 -------- -------- -------- Operating expenses: Cost of products 12,418 10,816 10,592 Cost of services 5,804 6,352 9,793 Research and development 9,306 11,215 12,847 Sales and marketing, general and administrative 20,638 23,518 26,850 Depreciation 3,865 4,746 5,589 Amortization of intangible assets 3,064 3,360 3,214 Non-recurring expenses 2,705 -- -- Restructuring charges -- -- 540 -------- -------- -------- Total operating expenses 57,800 60,007 69,425 -------- -------- -------- Operating income (loss) (3,294) 3,291 3,341 Financial expenses, net (484) (552) (642) -------- -------- -------- Income (loss) before taxes on income (3,778) 2,739 2,699 Taxes on income -- 380 569 -------- -------- -------- Net income (loss) $ (3,778) $ 2,359 $ 2,130 ======== ======== ======== Basic net earnings (loss) per share $ (0.31) $ 0.17 $ 0.14 ======== ======== ======== Diluted net earnings (loss) per share $ (0.31) $ 0.17 $ 0.14 ======== ======== ========

ACCUMULATED ORDINARY SHARES ADDITIONAL OTHER --------------------- PAID IN COMPREHENSIVE ACCUMULATED SHARES AMOUNT CAPITAL LOSS DEFICIT ------------ ------ ---------- ------------- ----------- Balance as of January 1, 1999 10,514,484 $1,758 $39,236 $ (742) $(13,555) Comprehensive loss: Net loss -- -- -- -- (3,778) Foreign currency translation adjustments -- -- -- (424) -- Total comprehensive loss Issuance of Ordinary shares, net 2,017,544 246 10,736 -- -- Issuance of shares upon exercise of warrants 479,908 58 1,861 -- -- Issuance of shares upon exercise of stock options 14,400 2 70 -- -- ------------ ------ ------- ------- -------- Balance as of December 31, 1999 13,026,336 2,064 51,903 (1,166) (17,333) Comprehensive income: Net income -- -- -- -- 2,359 Foreign currency translation adjustments -- -- -- (618) -- Total comprehensive income Issuance of shares upon acquisition of Flagship 1,500,000 186 8,889 -- -- Issuance of shares upon exercise of warrants 119,782 15 -- -- -- Issuance of shares upon exercise of stock options, net 45,786 8 162 -- -- ------------ ------ ------- ------- -------- Balance as of December 31, 2000 14,691,904 2,273 60,954 (1,784) (14,974) Comprehensive income: Net income -- -- -- -- 2,130 Foreign currency translation adjustments -- -- -- (632) -- Total comprehensive income Issuance of shares upon acquisition of Sysdrill 200,000 24 1,084 -- -- ------------ ------ ------- ------- -------- Balance as of December 31, 2001 14,891,904 $2,297 $62,038 $(2,416) $(12,844) ============ ====== ======= ======= ========

TOTAL SHAREHOLDERS' EQUITY ------------- Balance as of January 1, 1999 $ 26,697 Comprehensive loss: Net loss (3,778) Foreign currency translation adjustments (424) -------- Total comprehensive loss $ (4,202) ======== Issuance of Ordinary shares, net $ 10,982 Issuance of shares upon exercise of warrants 1,919 Issuance of shares upon exercise of stock options 72 -------- Balance as of December 31, 1999 35,468 Comprehensive income: Net income 2,359 Foreign currency translation adjustments (618) -------- Total comprehensive income $ 1,741 ======== Issuance of shares upon acquisition of Flagship $ 9,075 Issuance of shares upon exercise of warrants 15 Issuance of shares upon exercise of stock options, net 170 -------- Balance as of December 31, 2000 46,469 Comprehensive income: Net income 2,130 Foreign currency translation adjustments (632) -------- Total comprehensive income $ 1,498 ======== Issuance of shares upon acquisition of Sysdrill $ 1,108 -------- Balance as of December 31, 2001 $ 49,075 ========

YEAR ENDED DECEMBER 31, ------------------------------------ 1999 2000 2001 -------- -------- -------- Cash flows from operating activities: Net income (loss) $ (3,778) $ 2,359 $ 2,130 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 6,929 8,106 8,803 Impairment of developed technology 1,595 -- -- Decrease (increase) in trade receivables, accrued income and long-term trade receivables (8,866) 10,081 (5,677) Decrease (increase) in other receivables and prepaid expenses (98) 441 (1,299) Increase (decrease) in deferred income taxes, net 203 (171) -- Increase (decrease) in trade and other payables and accrued expenses 1,795 (4,561) (364) Increase (decrease) in deferred revenues 1,004 (2,522) (468) Accrued severance pay, net 243 (1,083) (271) Other 84 (22) -- -------- -------- -------- Net cash provided by (used in) operating activities (889) 12,628 2,854 -------- -------- -------- Cash flows from investing activities: Purchase of property and equipment (5,847) (5,331) (8,677) Proceeds from sale of property and equipment -- 39 453 Purchase of developed technology (1,175) (170) (685) Purchase of a short-term bank deposit -- -- (1,941) Payment for acquisition of a consolidated subsidiary, PTM (1) (8,379) -- -- Payment for acquisition of a consolidated subsidiary, Flagship (2) -- (3,980) -- Payment for acquisition of a consolidated subsidiary, Sysdrill (3) -- -- (141) -------- -------- -------- Net cash used in investing activities (15,401) (9,442) (10,991) -------- -------- -------- Cash flows from financing activities: Proceeds from short-term bank loans 2,000 7,506 4,500 Principal payment of short-term bank loans (1,778) (4,978) (3,528) Principal payments of capital lease obligations (200) (424) (519) Proceeds from long-term bank loans 6,500 -- 5,100 Principal payment of long-term bank loans (427) (2,173) (3,112) Issuance of a convertible loan, net of issuance expenses of $615 -- -- 7,385 Payment of other lease obligations (200) (242) (229) Issuance of share capital, net 10,982 -- -- Proceeds from exercise of warrants and stock options 1,991 185 -- -------- -------- -------- Net cash provided by (used in) financing activities 18,868 (126) 9,597 -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents (584) 130 (293) -------- -------- -------- Increase in cash and cash equivalents 1,994 3,190 1,167 Cash and cash equivalents at the beginning of the year 3,463 5,457 8,647 -------- -------- -------- Cash and cash equivalents at the end of the year $ 5,457 $ 8,647 $ 9,814 ======== ======== ========

YEAR ENDED DECEMBER 31, --------------------------------- 1999 2000 2001 ------- -------- ------- (1) Payment for acquisition of a consolidated subsidiary, PTM, estimated fair values of assets acquired and liabilities assumed at the date of acquisition: Working capital deficiency, excluding cash and cash equivalents $ (672) Property and equipment 318 Acquired technology 5,146 Assembled work-force 851 Goodwill 2,736 ------- $ 8,379 ======= (2) Payment for acquisition of a consolidated subsidiary, Flagship, estimated fair values of assets acquired and liabilities assumed at the date of acquisition: Working capital deficiency, excluding cash and cash equivalents $(1,014) Property and equipment 743 Acquired technology 3,430 Assembled work-force 1,180 Customer base 2,410 Goodwill 7,056 ------- 13,805 Less - amount financed by issuance of shares, net (9,075) Less - accrued prepaid acquisition expenses (750) ------- $ 3,980 ======= (3) Payment for acquisition of a consolidated subsidiary Sysdrill, estimated fair values of assets acquired and liabilities assumed at the date of acquisition: Working capital, excluding cash and cash equivalents $ 1,477 Property and equipment 140 Acquired technology 2,948 Goodwill 3,249 ------- 7,814 Less - amount financed by issuance of shares, net (1,108) Less - accrued prepaid acquisition expenses (283) Less - amount financed by a note payable (6,282) ------- $ 141 ======= Supplemental disclosure of cash flow activities: Cash paid during the year for: Interest $ 42 $ 949 $ 745 ======= ======== ======= Income taxes $ 379 $ -- $ 642 ======= ======== =======

YEAR ENDED DECEMBER 31, ------------------------------ 1999 2000 2001 -------- -------- -------- Non-cash activities: Purchase of leased property and equipment in capital leases $ 1,376 $ -- ======== ======== ======== Note payable issued in respect of acquisition of Sysdrill $ -- $ -- $ 6,282 ======== ======== ======== Accrued prepaid acquisition expenses associated with the Flagship acquisition $ -- $ 750 $ -- ======== ======== ========

DECEMBER 31, ------------------------ 2000 2001 ---------- ---------- IN THOUSANDS, EXCEPT PER SHARE DATA Revenues $ 65,739 $ 73,896 ========== ========== Net income $ 2,248 $ 2,293 ========== ========== Basic net earnings per share $ 0.16 $ 0.15 ========== ========== Diluted net earnings per share $ 0.16 $ 0.15 ========== ==========

DECEMBER 31, ---------------------------- 1999 2000 ----------- ----------- IN THOUSANDS, EXCEPT PER SHARE DATA Revenues $ 72,514 $ 75,033 =========== =========== Net income (loss) $ (5,359) $ 457 =========== =========== Basic net earnings (loss) per share $ (0.39) $ 0.03 =========== =========== Diluted net earnings (loss) per share $ (0.39) $ 0.03 =========== ===========

DECEMBER 31, 1999 ------------------------ IN THOUSANDS, EXCEPT PER SHARE DATA Revenues $ 56,105 ========== Net loss $ (3,867) ========== Basic net loss per share $ (0.32) ========== Diluted net loss per share $ (0.32) ==========

% -------------------------- Computers and peripheral equipment 16 - 33 Office furniture and equipment 6 - 15 Motor vehicles 15 Leasehold improvements over the term of the lease

YEARS ----- Acquired technology 10 Assembled work-force 5-10 Customer base 20 Goodwill 20 Issuance costs of convertible loan 3-5 (over the period from issuance to maturity) Other 5

DECEMBER 31, ------------------------- 2000 2001 ------ ------ U.S. DOLLARS IN THOUSANDS ------------------------- Government authorities $1,481 $1,741 Prepaid expenses 1,350 1,608 Other (1) 1,279 2,337 ------ ------ $4,110 $5,686 ====== ======

DECEMBER 31, ------------------------- 2000 2001 ------- ------- U.S. DOLLARS IN THOUSANDS ------------------------- Cost: Computers and peripheral equipment $26,180 $27,877 Office furniture and equipment 2,604 3,365 Motor vehicles 48 139 Leasehold improvements 3,301 6,240 ------- ------- 32,133 37,621 Accumulated depreciation 18,815 21,719 ------- ------- Depreciated cost $13,318 $15,902 ======= =======

DECEMBER 31, ------------------------- 2000 2001 ------- ------- U.S. DOLLARS IN THOUSANDS ------------------------- Acquired technology (net of accumulated amortization of $3,724,000 in 2000 and $6,154,000 in 2001) $11,171 $12,123 Assembled work-force (net of accumulated amortization of $1,012,000 in 2000 and $1,463,000 in 2001) 2,408 1,957 Customer base (net of accumulated amortization of $30,000 in 2000 and $151,000 in 2001) 2,380 2,259 Goodwill (net of accumulated amortization of $992,000 in 2000 and $1,641,000 in 2001) 9,499 12,985 Issuance costs of convertible loan (net of accumulated amortization of $0 in 2000 and $18,000 in 2001 (see Note 9) -- 597 Other (net of accumulated amortization of $1,499,000 in 2000 and $1,650,000 in 2001) 147 640 ------- ------- $25,605 $30,561 ======= =======

DECEMBER 31, ------------------------- 2000 2001 ------- ------- U.S. DOLLARS IN THOUSANDS ------------------------- Accrued expenses $ 2,493 $ 3,975 Employees and payroll accruals 2,585 3,428 Royalties 1,473 1,682 Employees termination expense 136 540 Income taxes and other taxes 2,093 2,545 Other 1,821 1,070 ------- ------- $10,601 $13,240 ======= =======

DECEMBER 31, ------------------------- 2000 2001 ------ ------ U.S. DOLLARS IN THOUSANDS ------------------------- First year (current maturities) $3,112 $1,278 Second year 1,277 1,300 Third year -- 3,799 ------ ------ $4,389 $6,377 ====== ======

YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------------------- 1999 2000 2001 -------------------------- -------------------------- -------------------------- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE NUMBER PRICE NUMBER PRICE NUMBER PRICE ---------- ---------- ---------- ---------- ---------- ---------- Outstanding at the beginning of the year 1,592,616 $ 5.65 1,603,216 $ 5.67 1,845,156 $ 6.01 Granted 121,500 $ 7 598,350 $ 7 101,000 $ 3.88 Canceled or forfeited (96,500) $ 7 (310,624) $ 6.49 (98,314) $ 6.9 Exercised (14,400) $ 5 (45,786) $ 3.84 -- $ -- ---------- ---------- ---------- ---------- ---------- ---------- Outstanding at the end of the year 1,603,216 $ 5.67 1,845,156 $ 6.01 1,847,842 $ 5.85 ========== ========== ========== ========== ========== ========== Exercisable at the end of the year 1,013,064 $ 5.18 1,079,435 $ 5.31 1,236,108 $ 5.53 ========== ========== ========== ========== ========== ==========

WEIGHTED OPTIONS WEIGHTED OPTIONS AVERAGE OUTSTANDING AVERAGE WEIGHTED EXERCISABLE EXERCISE RANGE OF AS OF REMAINING AVERAGE AS OF PRICE OF EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, OPTIONS PRICE 2001 LIFE (YEARS) PRICE 2001 EXERCISABLE -------------- ------------ ------------ -------- ------------ ----------- $ 0.59 63,336 0.33 $ 0.59 63,336 $ 0.59 $ 2.5 - $ 3.67 174,190 4.03 $ 3.07 89,190 $ 2.5 $ 4 - $ 6 473,026 3.15 $ 4.64 457,026 $ 4.8 $ 7 1,137,290 5.67 $ 7 626,556 $ 7 --------- ------ --------- ------ 1,847,842 $ 5.85 1,236,108 $ 5.53 ========= ====== ========= ======

YEAR ENDED DECEMBER 31, -------------------------------- 1999 2000 2001 --------- --------- --------- Net income (loss) as reported $ (3,778) $ 2,359 $ 2,130 ========= ========= ========= Pro-forma net income (loss) $ (5,035) $ 744 $ 957 ========= ========= ========= Pro-forma basic net earnings (loss) per share $ (0.41) $ 0.06 $ 0.06 ========= ========= ========= Pro-forma diluted net earnings (loss) per share $ (0.41) $ 0.06 $ 0.06 ========= ========= =========

DECEMBER 31, ------------------------- 2000 2001 ------- ------- U.S. DOLLARS IN THOUSANDS ------------------------- Deferred income tax assets: Operating loss carryforward $ 1,200 $ 946 Other 300 187 ------- ------- Net deferred income tax asset before valuation allowance 1,500 1,133 Valuation allowance (1500) (1,133) ------- ------- Net deferred income tax asset $ -- $ -- ======= =======

YEAR ENDED DECEMBER 31, ------------------------- 1999 2000 2001 ------- ----- ----- U.S. DOLLARS IN THOUSANDS ------------------------- Theoretical tax (benefit) computed at the statutory rate of 36% $(1,360) $ 986 $ 972 Increase (decrease) in income taxes resulting from: Carryforward losses for which a valuation allowance was provided -- (500) (254) Losses for which benefits are not recognized 2,878 -- -- Prior year income tax benefit (258) -- -- Other (1,260) (106) (149) ------- ----- ----- Taxes on income $ -- $ 380 $ 569 ======= ===== =====

YEAR ENDED DECEMBER 31, -------------------------- 1999 2000 2001 ----- ----- ---- U.S. DOLLARS IN THOUSANDS -------------------------- Current $ 725 $ 552 $569 Deferred (467) (172) -- Prior year (258) -- -- ----- ----- ---- $ -- $ 380 $569 ===== ===== ==== Domestic $ -- $ 123 $ 44 Foreign -- 257 525 ----- ----- ---- $ -- $ 380 $569 ===== ===== ====

YEAR ENDED DECEMBER 31, ------------------------------ 1999 2000 2001 ------- ------ ------ U.S. DOLLARS IN THOUSANDS ------------------------------ Domestic $(3,465) $ 874 $1,400 Foreign (313) 1,865 1,299 ------- ------ ------ $(3,778) $2,739 $2,699 ======= ====== ======

OPERATING CAPITAL YEAR ENDED DECEMBER 31, LEASES LEASES -------- ------- U.S. DOLLARS IN THOUSANDS ------------------------- 2002 $ 2,883 $ 325 2003 3,363 - 2004 3,343 - 2005 3,056 - 2006 and thereafter 8,736 - -------- ------- Total minimum lease payments $ 21,381 325 ======== Less - amount representing interest (65) ------- Present value of capital lease obligation $ 260 =======

YEAR ENDED DECEMBER 31, 2001 --------------------------------------------------- PRODUCTS SERVICES RECONCILIATION CONSOLIDATED -------- -------- -------------- ------------ U.S. DOLLARS IN THOUSANDS --------------------------------------------------- Revenues $50,765 $22,001 $ -- $72,766 Cost of revenues 10,592 9,793 -- 20,385 Depreciation 718 2,151 2,720 5,589 ------- ------- ------- ------- Segment profit $39,455 $10,057 $(2,720) $46,792 ======= ======= ======= =======

YEAR ENDED DECEMBER 31, 2000 --------------------------------------------------- PRODUCTS SERVICES RECONCILIATION CONSOLIDATED -------- -------- -------------- ------------ U.S. DOLLARS IN THOUSANDS --------------------------------------------------- Revenues $46,390 $16,908 $ -- $63,298 Cost of revenues 10,816 6,352 -- 17,168 Depreciation 609 1,827 2,310 4,746 ------- ------- ------- ------- Segment profit $34,965 $ 8,729 $(2,310) $41,384 ======= ======= ======= =======

YEAR ENDED DECEMBER 31, 1999 --------------------------------------------------- PRODUCTS SERVICES RECONCILIATION CONSOLIDATED -------- -------- -------------- ------------ U.S. DOLLARS IN THOUSANDS --------------------------------------------------- Revenues $43,023 $11,483 $ -- $54,506 Cost of revenues 12,418 5,804 -- 18,222 Depreciation 448 1,395 2,022 3,865 ------- ------- ------- ------- Segment profit $30,157 $ 4,284 $(2,022) $32,419 ======= ======= ======= =======

DECEMBER 31, ------------------------------- 1999 2000 2001 ------- ------- ------- U.S. DOLLARS IN THOUSANDS ------------------------------- Products $ 2,264 $ 2,622 $ 1,101 Services 6,692 8,520 7,826 Other 3,051 2,176 6,975 ------- ------- ------- Total segment assets $12,007 $13,318 $15,902 ======= ======= =======

YEAR ENDED DECEMBER 31, ------------------------------- 1999 2000 2001 ------- ------- ------- U.S. DOLLARS IN THOUSANDS ------------------------------- North and South America $24,219 $32,104 $33,531 EMEA 14,604 19,240 25,121 Far East 15,683 11,954 14,114 ------- ------- ------- $54,506 $63,298 $72,766 ======= ======= =======

DECEMBER 31, ------------------------------- 1999 2000 2001 ------- ------- ------- U.S. DOLLARS IN THOUSANDS ------------------------------- North and South America $ 7,932 $ 7,232 $ 8,951 EMEA 1,704 17,270 17,103 Far East 1,074 1,029 2,133 Israel 16,016 13,392 18,276 ------- ------- ------- $26,726 $38,923 $46,463 ======= ======= =======

YEAR ENDED DECEMBER 31, 1999 --------------- U.S. DOLLARS IN THOUSANDS --------------- Lease termination costs $ 763 Impairment of developed technology 1,595 Other 347 ------- $ 2,705 =======

YEAR ENDED DECEMBER 31, ---------------------------------- 1999 2000 2001 -------- ------- ------- U.S. DOLLARS IN THOUSANDS ---------------------------------- Numerator: Net earnings (loss) for basic net earnings (loss) per share $ (3,778) $ 2,359 $ 2,130 ======== ======= ======= Numerator for diluted net earnings (loss) per share - Net earning (loss) available to shareholders of Ordinary shares $ (3,778) $ 2,359 $ 2,162 ======== ======= ======= Denominator (in thousands): Weighted average number of Ordinary shares (denominator for basic net earnings (loss) per share) 12,205 13,504 14,817 -------- ------- ------- Effect of securities: Employee stock options *) -- 225 149 Warrants issued to third parties *) -- 60 *) -- Convertible loan -- -- 158 -------- ------- ------- Dilutive potential of Ordinary shares *) -- 285 307 -------- ------- ------- Denominator for diluted net earnings (loss) per share - 12,205 13,789 15,124 ======== ======= =======

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