zk1517546.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(MARK ONE)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from __________ to __________

Commission file number: 000-27648

MAGICJACK VOCALTEC LTD.

(Exact name or Registrant as specified in its charter)

STATE OF ISRAEL

(State or Other Jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

12 BENNY GAON STREET, BUILDING 2B

POLEG INDUSTRIAL AREA, NETANYA, ISRAEL 42504

(Address of principal executive offices, including zip code)

(561) 749-2255

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ¨	Accelerated filer x
Non-accelerated filer ¨ (do not check if a smaller reporting company)	Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

There were 15,751,254 ordinary shares with no par value outstanding at October 31, 2015.

TABLE OF CONTENTS


PART I		FINANCIAL INFORMATION

	ITEM 1.	Financial Statements
		Condensed Consolidated Balance Sheets (Unaudited)	3
		Condensed Consolidated Statements of Operations (Unaudited)	4
		Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	5
		Condensed Consolidated Statement of Capital Equity (Unaudited)	6
		Condensed Consolidated Statements of Cash Flows (Unaudited)	7
		Notes to Condensed Consolidated Financial Statements (Unaudited)	9

	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	34
	ITEM 4.	Controls and Procedures	34

PART II		OTHER INFORMATION

	ITEM 1.	Legal Proceedings	35
	ITEM 1A.	Risk Factors	35
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
	ITEM 3.	Defaults Upon Senior Securities	35
	ITEM 4.	Mine Safety Disclosures	35
	ITEM 5.	Other Information	36
	ITEM 6.	Exhibits	36

DEFINITIONS

In this quarterly report on Form 10-Q, unless the context otherwise requires:

references to “magicJack VocalTec,” the “Company,” “we,” “us” or “our” are to magicJack VocalTec Ltd., a company organized under the laws of the State of Israel (the “Registrant”), and its subsidiaries;

references to “ordinary shares”, “our shares” and similar expressions refer to the Registrant’s Ordinary Shares, no par value;

references to “$” or “dollars” are to U.S. dollars and all references to “NIS” are to New Israeli Shekels. Except as otherwise indicated, financial statements of, and information regarding, magicJack VocalTec are presented in U.S. dollars; and

references to the “magicJack devices” are to the original magicJack®, the magicJack PLUSTM, the New magicJack PLUSTM , the magicJackGO and the magicJackEXPRESSTM.

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

MAGICJACK VOCALTEC LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	September 30,			December 31,
	2015			2014
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	79,569		$	75,945
Investments, at fair value		367			367
Accounts receivable, net of allowance for doubtful accounts and billing adjustments
of $503 and $1,171, respectively		2,568			3,903
Inventories		6,240			5,635
Deferred costs		1,838			2,765
Prepaid income taxes		-			12,513
Deferred tax assets, current		9,115			13,341
Deposits and other current assets		2,079			1,170
Total current assets		101,776			115,639

Property and equipment, net		3,520			3,564
Intangible assets, net		7,177			9,473
Goodwill		32,304			32,304
Deferred tax assets, non-current		30,798			32,510
Deposits and other non-current assets		749			743
Total assets	$	176,324		$	194,233
LIABILITIES AND CAPITAL EQUITY
Current liabilities:
Accounts payable	$	1,322		$	2,879
Income tax payable		2,369			9,197
Accrued expenses and other current liabilities		5,452			8,406
Deferred revenue, current portion		53,280			56,445
Total current liabilities		62,423			76,927

Deferred revenue, net of current portion		51,078			54,782
Other non-current liabilities		11,919			13,438
Total liabilities		125,420			145,147

Commitments and contingencies (Note 9)
Capital equity
Ordinary shares, No par value; 100,000 shares authorized; 25,032 shares
issued at September 30, 2015 and December 31, 2014, respectively		111,771			111,771
Additional paid-in capital		13,869			10,414
Treasury stock (8,860 and 7,164 shares at September 30, 2015
and December 31, 2014, respectively)		(120,891	)		(107,683	)
Retained earnings		46,155			34,584
Total capital equity		50,904			49,086
Total liabilities and capital equity	$	176,324		$	194,233