SPCB

Business Context and Reporting Period

Company: SuperCom, Ltd.
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: December 14, 2005
Context: The filing reports on a private placement of equity securities and incorporates by reference press releases regarding operational results for the three and nine months ended September 30, 2005.

Key Financial Metrics and Capital Structure

Capital Raised: $3,000,000 aggregate purchase price.
Transaction Costs: $180,000 cash commission paid to placement agent (6% of gross proceeds).
Securities Issued:

• 4,919,355 ordinary shares.
• Callable warrants to purchase 1,721,774 ordinary shares.

Warrant Terms:

• Exercise Price: $0.60 per share.
• Term: 5 years from closing.
• Call Provision: Callable by the Company if the closing bid price exceeds $1.20 for 20 trading days.

Operational Results: The filing text does not provide specific revenue, profit, cash flow, or margin figures; it only references a press release (Exhibit 99.1) containing results for the period ended September 30, 2005.

Material Changes and Transaction Details

The primary material change is the completion of a private placement to accredited investors and foreign private investors led by Special Situation Fund. Key terms include:

• Anti-Dilution Mechanism: Warrant exercise price adjusts downward if the Company issues shares below $0.60, capped to maintain the investor's fully diluted ownership percentage.
• Registration Rights: The Company must file a registration statement within 30 days and have it declared effective within 90 days. Failure to meet these deadlines incurs a penalty of 1.5% of the aggregate investment per 30-day period.
• Participation Rights: Investors have a one-year right to participate in future financings to maintain their fully diluted ownership percentage.

Guidance, Outlook, and Risks

Management Commentary: The filing does not contain direct management commentary or forward-looking guidance within the text provided, other than the execution of the financing to raise capital.
Risks and Contingencies:

• Penalty Risk: Potential obligation to pay penalties if registration deadlines are missed.
• Dilution Risk: The anti-dilution mechanism on warrants could significantly increase the number of shares issuable if the stock price falls below $0.60.
• Liquidity Risk: The Offered Shares and Warrants are unregistered and cannot be sold in the U.S. without registration or an exemption.

Unusual Items: The transaction includes specific "Trigger Issuance" protections and a "Subsequent Financing" participation right for investors, which are non-standard terms designed to protect investor ownership levels.

Investor Verification Checklist

• Verify the specific operational results (revenue, net income) for the nine months ended September 30, 2005, by reviewing the incorporated press release (Exhibit 99.1).
• Confirm the closing date of the private placement to calculate the exact 30-day and 90-day deadlines for the registration statement filing.
• Assess the current market price of SuperCom shares relative to the $0.60 warrant exercise price and the $1.20 call trigger price.
• Review the full text of the Purchase Agreement and Registration Rights Agreement to understand limitations on the participation rights and anti-dilution caps.