NETANYA, Israel, Nov. 17, 2015 (GLOBE NEWSWIRE) -- RADA Electronic Industries Ltd. (NASDAQ:RADA) today announced its financial results for the third quarter and the nine months ended September 30, 2015.
2015 third Quarter Results
Revenues totaled $3.3 million, a 31% decrease compared to $4.8 million in the third quarter of 2014.
Gross Profit totaled $0.6 million, a 58% decrease compared to $1.3 million in the third quarter of 2014.
Operating Expenses totaled $1.24 million, a 2% increase compared to $1.21 million in the third quarter of 2014.
Financial Expenses totaled approximately $1.1 million, a 254% increase compared to financial expenses of approximately $0.3 million in the third quarter of 2014. Third quarter 2015 financial expenses includes a non-cash amortization expense of approximately $0.9 million associated with a debt discount resulting from the beneficial conversion feature applicable to the outstanding debt due to shareholders of the Company. The Company will continue to record such non-cash amortization expense until the earlier of the exercise of the conversion feature of the debt or the maturity of such debt in August 2016.
Net loss for the third quarter was approximately $1.7 million, or ($0.13) per share on a basic and diluted basis compared to net loss of $ approximately $0.2 million, or ($0.02) per share on basic and diluted basis, for the third quarter of 2014. The net loss for the third quarter of 2015 includes the non-cash amortization expense of approximately $0.9 million.
Nine months 2015 Results
Revenues totaled $11 million, a 34% decrease compared to $16.6 million for the same period in 2014.
Gross profit totaled $1.9 million, a 61% decrease compared to $4.9 million for the same period in 2014.
Operating expenses totaled $3.5 million, a 6% decrease compared to $3.8 million for the same period in 2014.
Financial expenses totaled approximately $2.8 million, a 232% increase compared to financial expenses of approximately $0.86 million for the same period in 2014. Financial expenses in the nine months of 2015 includes a non-cash amortization expense of approximately $2.1 million associated with a debt discount resulting from the beneficial conversion feature applicable to the outstanding debt due to shareholders of the Company.
Net loss for the nine months of 2015 was approximately $4.5 million, or ($0.43) per share on a basic and diluted basis, compared with net income of approximately $0.34 million, or $0.04 per share on a basic and diluted basis, for the comparable period in 2014. The net loss for the first nine months of 2015 includes a non- cash amortization expense of approximately $2.1 million associated with the outstanding debt due to shareholders.
Management Comment
Commenting on the results, Zvika Alon, RADA's Chief Executive Officer said, “Our revenues during the third quarter were negatively impacted as a result of delays, due to prolonged negotiations and the contracting processes of our customers, in securing several large avionic product orders that were expected during the first half of 2015, but were not received until recently. The low level of revenues during the third quarter reduced our gross margin as well as our operating income as our engineering, operating and R&D expenses remained consistent with such expenses in 2014. As we reported during the third quarter, we received several avionics production orders that we believe will maintain our current production rate and sales volume of our avionics business through 2016. During the remainder of 2015 we will also deliver a limited number of radar units to several potential new customers for evaluation of the units as components of systems being developed by them. We hope that that these evaluations will be successful and that these companies decide to proceed with additional orders as soon as 2016.
On July 30, 2015, we completed a public offering of our ordinary shares which resulted in $8,500,000 in gross proceeds to our company. As approved by our shareholders in an Extraordinary General Meeting of the Company held on April 16, 2015, the net proceeds of this offering was used to reduce debt owed to shareholders and enabled us to repay approximately 70% of their then outstanding debt. The reduction of our debt significantly improved our balance sheet. The shareholders also approved the right for the lenders (who are affiliated with shareholders and the controlling shareholder of the Company) the right to convert the outstanding balance of loans they provided to the Company into ordinary shares at a discount to market. This caused the recognition of debt discount derived from this beneficial conversion feature and resulted in a significant amount of non-cash financing expenses to the Company. Such non-cash amortization expenses will continue until the earlier of the exercise of the conversion feature of the debt or the maturity of such debt in August 2016.
This remaining outstanding non-bank debt, in the outstanding amount of $3.1 million is subject to an existing Standstill Agreement between the lender and the Company. The lender cannot (except in extraordinary circumstances) enforce this debt before August, 2016. As of this time we do not project the ability to repay this debt from operations. We also need to obtain additional working capital to pay trade vendors on a timely basis and to support our research and development activities through 2016. If we do not resolve these issues, there will be substantial doubt about our ability to continue as a “going concern.” Therefore, the Company is actively negotiating with the lender to have it exercise its conversion rights and is also seeking to raise additional funds to meet this obligation from others. The company is also actively attempting to raise additional funds to support its working capital needs from third parties and our controlling shareholder.”
About RADA
RADA Electronic Industries Ltd. is an Israel-based defense electronics contractor. The Company specializes in the development, production, and sales of Tactical Land Radar for Force and Border Protection, Inertial Navigation Systems for air and land applications and Avionics Systems and Upgrades.
Note: Certain statements in this press release are "forward-looking statements" within the meaning of the Private Securities Litigation Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially. Such risk uncertainties and other factors include, but are not limited to, changes in general economic conditions, risks in product and technology developments, market acceptance of new products and continuing product demand, level of competition and other factors described in the Company's Annual Report on Form 20-F and other filings with the Securities and Exchange Commission.
CONSOLIDATED BALANCE SHEET
U.S. dollars in thousands, except share and per share data
| ASSETS | Sep 30, 2015 | December 31, 2014 | ||||
| Unaudited | Audited | |||||
| Cash and cash equivalents | $ | 1,775 | $ | 1,786 | ||
| Restricted cash | 419 | 349 | ||||
| Trade receivables, net | 3,972 | 3,455 | ||||
| Costs and estimated earnings in excess of billings on uncompleted contracts | 1,529 | 2,657 | ||||
| Other accounts receivables and prepaid expenses | 623 | 428 | ||||
| Inventories | 6,887 | 6,651 | ||||
| Total current assets | 15,205 | 15,326 | ||||
| LONG-TERM RECEIVABLES AND OTHER DEPOSITS | 1,389 | 1,394 | ||||
| PROPERTY, PLANT AND EQUIPMENT, NET | 2,800 | 2,790 | ||||
| GOODWILL | 587 | 587 | ||||
| Total assets | $ | 19,981 | $ | 20,097 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| CURRENT LIABILITIES: | ||||||
| Bank credit | $ | 2,115 | $ | 1,589 | ||
| Trade payables | 2,182 | 1,315 | ||||
| Convertible shareholders’ loans | 1,054 | 8,120 | ||||
| Other accounts payable and accrued expenses | 2,879 | 4,267 | ||||
| Total current liabilities | 8,230 | 15,291 | ||||
| LONG-TERM LIABILITIES: | ||||||
| Accrued severance pay and other long term liabilities | 654 | 634 | ||||
| Total long-term liabilities | 654 | 634 | ||||
| RADA SHAREHOLDERS' EQUITY | ||||||
| Share capital - | ||||||
| Ordinary shares of NIS 0.015 par value - Authorized: 30,000,000 shares at September 30, 2015 and 16,333,333 shares at December 31, 2014; Issued and outstanding: 15,898,965 at September 30, 2015 and 8,988,396 at December 31, 2014 respectively. | 147 | 119 | ||||
| Additional paid-in capital | 82,426 | 70,884 | ||||
| Accumulated other comprehensive income | 443 | 536 | ||||
| Accumulated deficit | (72,497 | ) | (67,992 | ) | ||
| Total RADA shareholders’ equity | 10,519 | 3,547 | ||||
| Non-controlling interest | 578 | 625 | ||||
| Total equity | 11,097 | 4,172 | ||||
| Total liabilities and equity (*) Convertible shareholders loans is presented net of loan discount derived of beneficial conversion feature in the amount of $2,120 as of September 30, 2015. | $ | 19,981 | $ | 20,097 | ||
CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands, except share and per share data
| Nine months ended Sep 30, | Three months ended Sep 30, | Year ended December 31, | |||||||||||||
| 2015 | 2014 | 2015 | 2014 | 2014 | |||||||||||
| (Unaudited) | Audited | ||||||||||||||
| Revenues | $ | 11,045 | $ | 16,602 | $ | 3,321 | $ | 4,818 | $ | 22,481 | |||||
| Cost of revenues | 9,173 | 11,638 | 2,767 | 3,509 | 15,944 | ||||||||||
| Gross profit | 1,872 | 4,964 | 554 | 1,309 | 6,537 | ||||||||||
| Operating expenses: | |||||||||||||||
| Research and development | 543 | 566 | 144 | 187 | 789 | ||||||||||
| Marketing and selling | 1,740 | 1,733 | 653 | 526 | 2,392 | ||||||||||
| General and administrative | 1,274 | 1,484 | 442 | 503 | 1,901 | ||||||||||
| Total operating expenses: | 3,557 | 3,783 | 1,239 | 1,216 | 5,082 | ||||||||||
| Operating profit (loss) | (1,685 | ) | 1,181 | (685 | ) | 93 | 1,455 | ||||||||
| Financial expenses, net | 739 | 855 | 179 | 299 | 1,254 | ||||||||||
| Financial expenses related to amortization of a beneficial conversion feature | 2,104 | 881 | - | - | |||||||||||
| Consolidated profit (loss) | (4,528 | ) | 326 | (1,745 | ) | (206 | ) | 201 | |||||||
| Less: Net loss attributable to Non-controlling interest | 23 | 12 | 19 | 4 | 7 | ||||||||||
| Net income (loss) attributable to RADA's shareholders | $ | (4,505 | ) | $ | 338 | $ | (1,726 | ) | $ | (202 | ) | $ | 208 | ||
| Net earnings (loss) per share: | |||||||||||||||
| Basic and diluted earnings (loss) per share | $ | (0.43 | ) | $ | 0.04 | $ | (0.13 | ) | $ | (0.02 | ) | $ | 0.02 | ||
| Weighted average number of Ordinary shares used for computing basic and diluted net earnings (loss) per share | 10,563,599 | 8,924,032 | 13,696,695 | 8,934.742 | 8,944,803 | ||||||||||