Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(MARK ONE)

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

For the quarterly period ended March 31, 2017

☐ 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 HAOMANUT STREET, 2ND FLOOR

POLEG INDUSTRIAL ZONE, NETANYA, ISRAEL 4250445

(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 ⌧ 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 ⌧ No ☐

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

Large accelerated filer ☐

Accelerated filer ☒

Non-accelerated filer ☐

Smaller reporting company ☐

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

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

Yes ¨ No ⌧

There were 16,041,017 ordinary shares with no par value outstanding at April 30, 2017.

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 (Loss) Income (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	31
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	43
	ITEM 4.	Controls and Procedures	43

PART II		OTHER INFORMATION

	ITEM 1.	Legal Proceedings	44
	ITEM 1A.	Risk Factors	44
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	44
	ITEM 3.	Defaults Upon Senior Securities	44
	ITEM 4.	Mine Safety Disclosures	44
	ITEM 5.	Other Information	44
	ITEM 6.	Exhibits	45

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 "common shares", "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. All references to "NIS" are to New Israeli Shekels and "PLN" are to Polish Zloty. 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 PLUS ^TM , the New magicJack PLUS ^TM , the magicJackGO and the magicJackEXPRESS ^TM .

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

MAGICJACK VOCALTEC LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	March 31,			December 31,
	2017			2016
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	48,310		$	52,394
Investments, at fair value		447			447
Accounts receivable, net of allowance for doubtful accounts and billing adjustments
of $376 and $402, respectively		2,687			3,171
Inventories		3,307			4,441
Deferred costs		2,219			2,319
Prepaid income taxes		3,858			527
Receivable from earnout escrow		2,000			2,000
Deposits and other current assets		1,731			1,970
Total current assets		64,559			67,269

Property and equipment, net		3,515			3,805
Intangible assets, net		11,055			28,854
Goodwill		32,304			47,185
Deferred tax assets		37,479			26,568
Deposits and other non-current assets		890			836
Total assets	$	149,802		$	174,517
LIABILITIES AND CAPITAL EQUITY
Current liabilities:
Accounts payable	$	2,555		$	2,790
Income tax payable		-			1,527
Accrued expenses and other current liabilities		8,691			8,426
Deferred revenue, current portion		47,313			48,507
Total current liabilities		58,559			61,250

Deferred revenue, net of current portion		43,292			44,201
Other non-current liabilities		12,183			10,866
Total liabilities		114,034			116,317

Commitments and contingencies (Note 10)
Capital equity
Ordinary shares, No par value; 100,000 shares authorized; 25,039 shares
issued at March 31, 2017 and December 31, 2016		111,783			111,783
Additional paid-in capital		14,303			13,567
Treasury stock (9,004 and 8,988 shares at March 31, 2017
and December 31, 2016, respectively)		(120,300	)		(120,300	)
Retained earnings		30,684			53,785
Total magicJack VocalTec, LTD. shareholders's equity		36,470			58,835
Noncontrolling interest		(702	)		(635	)
Total capital equity		35,768			58,200
Total liabilities and capital equity	$	149,802		$	174,517