Company Announcements
B.S.D. CROWN LTD - Management Statement and Q3- 2014 Financial Statements
Related Companies
PR Newswire
London, November 27
B.S.D Crown Ltd. (LSE:BSD)
("BSD" or "the Company")
Management Statement
Tel Aviv, Israel, 27 November, 2014
Management Statement and Q3- 2014 Financial Statements
During the period commencing 1 January 2014 and ending on 30 September 2014
(the "Relevant Period"), the Company has undergone several events and
transactions. A summary of the material events and transactions that have
taken place during the Relevant Period are set out below:
Highlights
- Revenues amounted to $38,604 thousand for the period of nine (9) months
ending 30 September 2014 (equivalent period in 2013: $1,587 thousand). The
balance of cash and cash equivalent, short term investments and deposits
(Including investment in a fund designated at fair value through profit or
loss and financial assets at fair value through profit or loss), as of 30
September 2014 was $138,189 thousand (31 December 2013: $159,823 thousand).
The total assets, as of 30 September 2014 were $228,078 thousand (31 December
2013: $160,442 thousand). The significant change is due to the purchase of the
controlling stake in the share capital of Willi-Food Investments Ltd as
explained below.
- The total issued share capital of the Company as at 27 November 2014 was
140,578,154 of which 109,990,252 ordinary shares are outstanding and
30,587,902 shares are held in treasury.
- In August 2013, a consortium of investors led by the Company announced its
intention to acquire a controlling stake in IDB Holding Corporation Ltd., one
of Israel's largest holding companies, in consideration of an aggregate
payment of NIS1,580 million. As such proposed transaction was classified as a
reverse takeover under the listing rules made by the UK Listing Authority
("UKLA") pursuant to Part VI of the Financial Services and Markets Act 2000
(as amended) ("FSMA") (the "Listing Rules"), trading in the Company's shares
was suspended on 15 August 2013 and restored on 9 January 2014, following the
Israeli District Court decision to uphold a competing offer.
(See Company announcements dated 6 January 2014 and 9 January 2014)
- On 24 December 2013, BGI Investments (1961) Ltd. ("BGI") and B.G. Alpha Ltd.
(together, the "BGI Group") made a tender offer (the "Offer") to holders of
the Company's ordinary shares to acquire 5% of the voting rights in the
Company at a price per share equal to £0.75. On 28 January 2014 the Offer was
successfully completed and the BGI Group purchased an additional 5% of the
voting rights in the Company.
(See Company announcements dated 13 January 2014, 16 January 2014, 24 January
2014 and 29 January 2014)
- Following the success of the Offer, the BGI Group together with Israel 18
B.V., BGI's parent company (together, the "Extended BGI Group"), is entitled
to exercise call options it has acquired. Upon the exercise of said call
options, the Extended BGI Group will own shares, representing approximately
44.1% of the Company's Capital. In the meantime, following the grant of
proxies made by Mr. Naftali Shani and Fortissimo Capital Management Ltd,
amongst others, to Israel 18 and pursuant to the shareholders agreement
between the members of Extended BGI Group, BGI is entitled to vote the shares
representing the Options not yet exercised, representing 13.55% of the
Company's Capital.
(See Company announcements dated 11 February 2014, 14 February 2014, 20
February 2014, 24 February 2014, 21 March 2014, 27 March 2014 and 29 April
2014)
- Mr. Amnon Ben-Shay, who was appointed as a director of the Company on 14
August 2013, submitted his resignation from the board of directors of the
Company (the "Board") on 12 January, 2014, due to other commitments preventing
him from fulfilling the requirements of his position as a director.
(See Company announcements dated 13 January 2014)
- On 2 March 2014, the Company entered into an agreement to acquire from Zwi
Williger ("ZW") and Joseph Williger ("JW" and, together with ZW, the
"Sellers") a controlling stake in the share capital of Willi-Food Investments
Ltd. ("WFI"), a company listed on the Tel Aviv Stock Exchange, which in turn
owns approximately 58% of G Willi-Food International Ltd ("WFINT" and together
with WFI, "Willi-Food"), a company listed on NASDAQ. Under the agreement, the
Company: (i) acquired the Sellers' entire shareholdings in WFI (part of which
was acquired through a special tender offer as set out below), amounting in
aggregate to 58% of the shares of WFI (or approximately 55% on a fully diluted
basis); and (ii) published a special tender offer (the "Special Tender Offer")
addressed to all shareholders of WFI (including the Sellers) in accordance
with Israeli Companies Law in order to acquire additional shares carrying 5%
of the voting rights in WFI. The Special Tender Offer was completed on 1 May
2014 and the transaction completed on 4 May 2014 (the "Completion Date").
Following such completion, the Company acquired in aggregate 61.65% of the
issued share capital of WFI (62.21% of its voting rights), for aggregate
consideration of NIS284.7 million (U.S. $82.3 million).
(See Company announcements dated 3 March 2014, 7 April 2014, 28 April 2014, 1
May 2014 and 7 May 2014 and Company prospectus published on 29 July, 2014)
The Sellers have agreed to continue to be engaged by WFINT as chairman of the
board of WFINT (in respect of ZW) and president of WFINT (in respect of JW),
or as joint chief executive officers of WFI until 21st August 2017. Each of
the Sellers is prohibited from competing against Willi-Food in any material
way, subject to certain agreed exceptions, for an additional period commencing
on the termination of his respective engagement with WFINT and terminating on
the later of two years from such termination, or four years from completion of
the Acquisition but not longer than five (5) years from the completion date.
In consideration of such non-compete undertakings, each of the Sellers is
entitled to an additional annual payment of NIS1.5 million (approximately
£0.25 million) per year following termination of his respective engagement, to
be paid by the Company and subject to applicable law.
(See Company prospectus published on 29 July, 2014)
Trading
The acquisition of the abovementioned stake in WFI is deemed a reverse
takeover under the Listing Rules and trading in the Company's shares was
accordingly suspended on 3 March, 2014. Following the publication of a
prospectus by the Company on 29 July, 2014 in connection with the requirement
on it to re-apply for the listing of its shares following completion of the
transaction, such suspension was lifted on 4 August 2014 and the Company's
shares were re-admitted to trading on the Standard List of the main market of
the London Stock Exchange.
In accordance with a resolution passed at the Company's annual general meeting
held on 3 July 2014, the Company's name was changed from Emblaze Ltd. to B.S.D
Crown Ltd., with effect from 5 August 2014. On 12 August 2014 the change of
name to B.S.D Crown Ltd. became effective on the London Stock Exchange.
Accordingly, the Company's TIDM (ticker symbol) has also changed to BSD.
The Company notes: in light of a significant decrease in the market value of
the shares of WFI since the date of the Company's investment therein (May
2014), coupled with the current state of the Israeli food industry in general,
may be considered to indicate an impairment of goodwill in relation to the
Company's investment in Willi-Food. As a result of these developments, the
Company appointed an independent appraiser to determine the value of the
Company's investment in Willi-Food on a discounted cash-flow basis as of
September 30, 2014. On the basis of such appraiser's conclusion that the
recoverable value of said investment significantly exceeds its carrying value,
the Company does not believe there is a need to recognise an impairment loss
in the financial accounts of the Company.
Management
In an extraordinary general meeting held on 8 September 2014, the Company's
shareholders approved the terms of service of Mr Israel Jossef Schneorson, the
chief executive officer (the "Shneorson Agreement") (which was then subject to
the approval of the shareholders of BGI which approval was obtained on 5
October 2014), the terms of employment of Mr Eyal Merdler, the chief financial
officer, and an agreement between the Company and BGI (the "BGI Management
Agreement") pursuant to which the Company will provide certain services to
BGI, including the services of a chief executive officer, chief financial
officer, controller, bookkeeper and administrative services for monthly fee of
NIS 35 thousands (approximately USD 9 thousands).
As such, the Company paid BGI a one-off fee of USD 660 thousand in relation to
the services provided to the Company by the chief executive officer and chief
financial officer between 14 August 2013 and 8 September 2014 and services
provided to the Company by the corporate secretary, controller, bookkeeping
and certain administrative staff of BGI between 1 January 2014 and 8 September
2014. (See Company prospectus published on 8 September, 2014)
Intellectual Property
In July 2010, BSD filed a complaint against Apple Inc. ("Apple") for
infringement of the Company's U.S. Patent No. 6,389,473 through Apple's HTTP
Live Streaming protocol used in Apple products such as iPhones and iPads. On
11 July, 2014 and the jury found that BSD's U.S. Patent Number 6,389,473 is
valid, but also found that Apple Inc. did not infringe the patent.
On 8 August 2014 the Company filed motions with the original judge hearing the
claim (i) for a judgment as a matter of law that, contrary to the jury's
verdict of 14 July 2014, the Company's U.S. Patent Number 6,389,473 for media
streaming was infringed; or, alternatively, (ii) for a new trial.
Also on 8 August, 2014, Apple filed a motion for a judgment as a matter of law
that, if the court grants the judgment as a matter of law filed by BSD or the
motion for new trial filed by BSD, then Apple also requests that the court
grant a judgment as a matter of law that the asserted claims of the Company's
U.S. Patent Number 6,389,473 for media streaming are invalid and/or grant a
new trial on the invalidity of the asserted claims.
The court has scheduled a hearing regarding BSD's and Apple's respective
motions for judgements as a matter of law for 9 December, 2014.
(See Company announcements dated 8 July 2014, 14 July 2014, 11 August, 2014,
12 August, 2014 and 20 October 2014).
In October 2012, the Company filed a complaint for patent infringement against
Microsoft Corporation ("Microsoft"). The complaint asserts that Microsoft's
IIS Smooth Streaming system infringes BSD's U.S. patent No. 6,389,473 for
media streaming technology.
Legal proceedings in these cases are ongoing.
Part Settlement of Claims
In October 2014, the Company entered into agreements to settle certain
outstanding claims made against it and disclosed in the prospectus published
by the Company on 29 July, 2014 and the financial statements of the company as
of 31 December, 2013 published by the Company on 27 March 2014 (the
"Settlement Agreements").
The Company and some of its past directors were named as defendants in certain
claims, all in connection with the bankruptcy of Mr Eli Reifman, one of the
founders and a former director of the Company.
In April 2012, two of Mr Reifman's creditors filed a claim (the "April 2012
Claim") against attorneys who represented them in a transaction with Mr
Reifman and as part of this claim, the two creditors also named the Company
and several of its past directors, as well as a Company's external legal
adviser and its auditors, as defendants. The claim amounted to NIS 73.3
million (approximately GBP 12.1 million).
In June 2012, several creditors of Mr Reifman filed a claim against the
Company, several of its past directors as well as against a Company's external
legal adviser and its auditors (the "June 2012 Claim"). Following the
dismissal of the claims of certain such creditors, the outstanding aggregate
value of the June 2012 Claim amounted to of NIS 81.8 million (approximately
GBP 13.5 million).
Pursuant to the Settlement Agreements, following contributions from the
Company's Directors & Officers Liability insurers, the Company has agreed to
pay, without admitting to any legal liability, (i) NIS 1.975 million
(approximately GBP 0.3 million at present value) in consideration of the full
and final settlement of the April 2012 Claim; and (ii) an amount of NIS 4.2
million (approximately GBP 0.7 million) in consideration of the full and final
settlement of claims representing NIS 69.9 million (approximately GBP 11.6
million) of the June 2012 Claim. The Company included a provision in the
financial statements as of 30 September 2014 in the total amount of GBP 1.05
million.
In addition, the Company has been informed in relation to the claim described
in paragraph 14.1.4 of Part 8 of the prospectus published by the Company on 29
July, 2014 that the Company and several of its past directors were joined as
direct defendants by one of the creditors who filed the original claim, and
that the aggregate amount claimed from the Company and said past-directors has
been updated to NIS 22.4 million (approximately GBP 3.7 million). The Company
is considering the amended claim and it yet to submit its amended statement of
defence.
Subsequent to completion of the Settlement Agreements and the amendment of the
claim as described above, the outstanding amounts pursuant to claims filed
against the Company in respect of Mr Reifman, amount to approximately NIS 30
million (approximately GBP 5 million).
The Company's legal advisors are of the opinion that the risks of success of
these claims against the Company are remote.
Jossef Schneorson, CEO, commented: "The Company's consolidated financial
statements as of 30 September 2014 demonstrate significant cash and cash
equivalent resources and a total owners' equity to total assets ratio of 86%.
These parameters are clear indicators of the Company's financial stability. In
light of its actual results, the directors and management consider that the
Company's current share price does not duly reflect its performance and the
real value of its assets. We believe that the company will have positive
results in the following years due to its solid investment in WFI and its
strong cash and cash equivalent resources which enable it to continue its
strategy of acquisitions and growth through active participation in the
management of its subsidiaries."
A copy of the half yearly financial statements will also be available for
inspection on the Company's website, www.bsd-c.com and will be sent for
publication at the Financial Conduct Authority's National Storage Mechanism
which can be accessed at www.morningstar.co.uk/uk/NSM.
Enquiries:
Eyal Merdler Eyal@bsd-c.com
B.S.D Crown Ltd.
B.S.D Crown Ltd. is traded on the London Stock Exchange (LSE: BSD) since 1996.
www.bsd-c.com
B.S.D CROWN LTD. (FORMERLY- EMBLAZE LTD.)
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF 30 SEPTEMBER 2014
UNAUDITED
IN U.S. DOLLARS
INDEX
Page
Report on Review of Interim Condensed Consolidated Financial
Statements 2
Interim Condensed Consolidated Statements of Financial Position 3 - 4
Interim Condensed Consolidated Statements of Profit or Loss and
Other Comprehensive Income 5
Interim Condensed Consolidated Statements of Changes in Equity 6 - 7
Interim Condensed Consolidated Statements of Cash Flows 8 - 9
Notes to Interim Condensed Consolidated Financial Statements
10 - 27
- - - - - - - - - - - - - - -
Kost Forer Gabbay & Tel: +972-8-6261300
Kasierer
21 Shazar Blvd., Noam Fax: +972-3-5633428
Bldg.
Be'er Sheva 8489411, ey.com
Israel
Report on Review of Interim Condensed Consolidated Financial
Statements
Board of Directors
B.S.D Crown Ltd. (Formerly - Emblaze Ltd.)
Introduction
We have reviewed the accompanying interim condensed consolidated statement of
financial position of B.S.D Crown Ltd. (Formerly - Emblaze Ltd.) and its
subsidiaries (the "Group") as of 30 September 2014 and the related interim
condensed consolidated statements of profit or loss and other comprehensive
income, changes in equity and cash flows for the nine month and three month
periods then ended and explanatory notes. Management is responsible for the
preparation and presentation of these interim condensed consolidated financial
statements in accordance with IAS 34, "Interim Financial Reporting" ("IAS
34"), as adopted by the European Union. Our responsibility is to express a
conclusion on these interim condensed consolidated financial statements based
on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, Review of Interim Financial Information Performed by the
Independent Auditor of the Entity. A review of interim financial information
consists of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying interim condensed consolidated financial
statements are not prepared, in all material respects, in accordance with IAS
34, as adopted by the European Union.
Beer-Sheva, Israel KOST FORER GABBAY & KASIERER
A Member of Ernst & Young
27 November, 2014 Global
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 September 31 December
2014 2013 2013
Unaudited Audited
U.S. dollars in thousands
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 24,897 5,782 2,957
Short-term deposits 47,191 16,223 16,242
Short-term deposits held in trust - 120,629 140,418
Financial assets at fair value through profit or
loss 61,998 - -
Available for sale financial assets - 205 206
Trade receivables 25,340 - 30
Other receivables and prepaid expenses 2,306 615 522
Investment in a fund designated at fair value
through profit or loss 4,103 - -
Inventories 12,062 - -
Total current assets 177,897 143,454 160,375
NON-CURRENT ASSETS:
Property, plant and equipment, net 14,342 65 67
Intangible assets:
Customer relationships 5,870 - -
Supplier relationships 3,357 - -
Brands 1,585 - -
Non-competition agreements 1,287 - -
Goodwill 23,740 - -
Total non-current assets 50,181 65 67
Total assets 228,078 143,519 160,442
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
30 September 31 December
2014 2013 2013
Unaudited Audited
U.S. dollars in thousands
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term debt 130 - 18,813
Current maturities of debentures 3,469 - -
Trade payables 5,174 384 699
Other accounts payable and deferred revenues 5,039 1,198 1,708
Employee benefit liabilities, net 759 346 282
Financial liability for non - controlling interest put option 6,740 - -
Total current liabilities 21,311 1,928 21,502
NON-CURRENT LIABILITIES:
Employee benefit liabilities, net 173 18 40
Liability for non- competition payments 1,478 - -
Debentures 3,695 - -
Deferred taxes 4,179 - -
9,525 18 40
EQUITY:
Share capital 416 416 416
Share premium 469,932 469,931 469,925
Treasury shares (76,962) (76,962) (76,962)
Available for sale reserve - 122 123
Reserve from transactions with non- controlling interests (544) - -
Foreign currency translation reserve (5,784) - -
Accumulated deficit (259,646) (251,542) (254,189)
Equity attributable to Company's equity holders 127,412 141,965 139,313
Non- controlling interests 69,830 (392) (413)
Total equity 197,242 141,573 138,900
Total liabilities and equity 228,078 143,519 160,442
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
27 November, 2014
Date of approval of Abraham Wolff Israel Jossef Eyal Merdler
the Schneorson
financial statements Chairman of the CEO and Vice CFO
Board Chairman of the
Board
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
Nine months Three months Year ended
ended ended 31
30 September 30 September December
2014 2013 2014 2013 2013
Unaudited Audited
U.S. dollars in thousands (except earnings (loss) per
share)
Revenues 38,604 1,587 22,597 522 1,882
Cost of sales 29,069 334 17,102 62 449
Gross profit 9,535 1,253 5,495 460 1,433
Research and development 1,001 1,154 308 393 1,562
Selling expenses 5,320 134 3,081 - 134
General and administrative expenses 10,845 3,422 6,131 1,873 7,095
Total operating expenses 17,166 4,710 9,520 2,266 8,791
Operating loss (7,631) (3,457) (4,025) (1,806) (7,358)
Financial income 3,912 3,407 1,728 2,582 5,208
Financial expense (194) (323) (129) (271) (846)
Income (loss) before taxes on income (3,913) (373) (2,426) 505 (2,996)
Taxes on income (625) - (450) - -
Loss from continuing operations (4,538) (373) (2,876) 505 (2,996)
Income (loss) from discontinued
operations, net - 129 - (31) 181
Net income (loss) (4,538) (244) (2,876) 474 (2,815)
Other comprehensive income (loss) to
be reclassified to profit or loss in
subsequent periods :
Gain (loss) from available-for-sale
financial assets 25 (10) - - (9)
Reclassification adjustment for gain
on available- for- sale financial
assets included in profit or loss (148) - - - -
Adjustments arising from translation
of financial statements of foreign
operations (10,566) - (11,491) - -
Other comprehensive income (loss)
not to be reclassified to profit or
loss in subsequent periods :
Remeasurement loss from defined
benefit plans 46 - 46 - (97)
Total other comprehensive loss (10,643) (10) (11,445) - (106)
Total comprehensive income (loss) (15,181) (254) (14,321) 474 (2,921)
Net income (loss) attributable to:
Equity holders of the Company (5,475) (196) (3,587) 493 (2,746)
Non- controlling interests 937 (48) 711 (19) (69)
Net loss (4,538) (244) (2,876) 474 (2,815)
Total comprehensive income (loss)
attributable to:
Equity holders of the Company (11,364) (206) (9,811) 493 (2,852)
Non- controlling interests (3,817) (48) (4,510) (19) (69)
Total comprehensive income (loss) (15,181) (254) (14,321) 474 (2,921)
Basic and diluted net earnings per
share attributable to Company's
equity holders (in U.S dollars):
Loss from continuing operations (0.05) -*) (0.03) -*) (0.03)
Income from discontinued operations - -*) - -*) (*
Net loss per share (0.05) - (0.03) - (0.03)
*) Less than USD 0.01 per share.
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the Company
Reserve
from
Available transactions Foreign
for with non- currency Non-
Share Share Treasury sale controlling translations Accumulated controlling Total
capital premium shares reserve interest reserve deficit Total interests equity
U.S. dollars in thousands
Unaudited
Balance as of
January 2014 416 469,925 (76,962) 123 - - (254,189) 139,313 (413) 138,900
Non- controlling
interests
arising from
initially
consolidated
company - - - - - - - - 73,516 73,516
Net income
(loss) - - - - - - (5,475) (5,475) 937 (4,538)
Other
comprehensive
income (loss):
Gain from
available for
sale financial
assets - - - 25 - - - 25 - 25
Reclassification
adjustment for
gain on
available- for-
sale financial
assets included
in profit or
loss - - - (148) - - - (148) - (148)
Remeasurement of
net defined
benefit
obligation - - - - - - 18 18 28 46
Adjustments
arising from
translation of
financial
statements of
foreign
operations - - - - - (5,784) - (5,784) (4,782) (10,566)
Total
comprehensive
loss - - - - - (5,784) (5,457) (11,364) ( 3,817) (15,181)
Cost of share
based payment - 7 - - - - - 7 - 7
Transactions
with
non-controlling
interests - cost
of share based
payment in
subsidiary - - - - (544) - - (544) 544 -
Balance as of 30
September 2014 416 469,932 (76,962) - (544) (5,784) (259,646) 127,412 69,830 197,242
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to equity holders of the Company
Share Share Treasury Available-for-sale Accumulated Non-controlling Total
capital premium shares reserve deficit Total interests equity
U.S. dollars in thousands
Unaudited
Balance as of
January 1,
2013
(audited) 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494
Loss - - - - (196) (196) (48) (244)
Other
comprehensive
loss - - - (10) - (10) - (10)
Total
comprehensive
loss - - - (10) (196) (206) (48) (254)
Cost of share
based payment - 20 - - - 20 - 20
Purchase of
treasury
shares - - (687) - - (687) - (687)
Balance as of
September 30,
2013 416 469,931 (76,962) 122 (251,542) 141,965 (392) 141,573
Attributable to equity holders of the Company
Available
Share Share Treasury for sale Accumulated Non-controlling Total
capital premium shares reserve deficit Total interests equity
U.S. dollars in thousands
Audited
Balance as of 1 January
2013 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494
Net loss - - - - (2,746) (2,746) (69) (2,815)
Remeasurement loss from
defined benefit plan - - - - (97) (97) - (97)
Loss from available for
sale- financial assets - - - (9) - (9) - (9)
Total comprehensive
loss - - - (9) (2,843) (2,852) (69) (2,921)
Cost of share- based
payment - 14 - - - 14 - 14
Purchase of treasury
shares - - (687) - - (687) - (687)
Balance as of 31
December 2013 416 469,925 (76,962) 123 (254,189) 139,313 (413) 138,900
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended Year ended
30 September 31 December
2014 2013 2013
Unaudited Audited
U.S. dollars in thousands
Cash flows from operating activities:
Loss (4,538) (244) (2,815)
Less - income from discontinued operations - 129 181
Loss from continuing operations (4,538) (373) (2,996)
Adjustments to reconcile loss from continuing
operations to net cash provided by (used in)
operating activities :
Depreciation and amortisation 1,302 23 31
Loss on disposal of fixed assets 10 - -
Employee benefit liabilities, net (77) - -
Cost of share-based payment 733 20 14
Change in financial assets at fair value through
profit or loss (425) 271 432
Interest income (1,128) (787) (1,863)
Interest expense on short-term loan 7 - 86
Decrease in deferred tax (196) - -
Taxes on income 821 - -
Exchange rate differences on deposit and
short-term loan (1,269) (2,516) (3,438)
Gain from sale of available for sale financial
assets (214) - -
Financial expenses from debentures 75 - -
Finance expenses on financial liabilities 94 - -
(267) (2,989) (4,738)
Changes in asset and liability items:
Decrease in inventories 2,609 - -
Decrease in trade receivables 3,451 - -
Decrease (increase) in receivables and prepaid
expenses (78) 377 494
Increase (decrease) in trade payables, other
payables and accrued expenses 1,190 (2,217) (1,468)
7,172 (1,840) (974)
Cash received (paid) during the period:
Interest received 592 1,631 2,450
Interest paid (228) - -
Income taxes paid (1,344) - -
(980) 1,631 2,450
Net cash provided by (used in) operating
activities from continuing operations 1,387 (3,571) (6,258)
Net cash used in operating activities from
discontinued operations - (220) (189)
Net cash provided by (used in) operating
activities 1,387 (3,791) (6,447)
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended Year ended
30 September 31 December
2014 2013 2013
Unaudited Audited
U.S. dollars in thousands
Cash flows from investing activities:
Proceeds from sale of property and equipment 65 (22) -
Purchase of property and equipment (1,412) - (31)
Maturing of (investment in) short-term
deposits, net (30,949) (129,183) 105,953
Withdrawal of (investment in) deposit held in
trust 122,404 - (118,253)
Purchase of financial assets at fair value
through profit or loss (6,268) (8,607) (13,352)
Proceeds from sale of financial assets at fair
value through profit or loss and available for
sale financial assets 297 644 26,441
Acquisition of subsidiary (a) (62,088) - -
Net cash provided by (used in) investing
activities from continuing operations 22,049 (137,168) 758
Cash flows from financing activities:
Bank overdraft, net (695) - -
Purchase of treasury shares - (308) (687)
Net cash used in financing activities from
continuing operations (695) (308) (687)
Exchange differences on balances of cash and
cash equivalents (801) - -
Net increase (decrease) in cash and cash
equivalents 21,940 (139,352) (6,376)
Cash and cash equivalents at the beginning of
the period 2,957 148,261 9,333
Cash and cash equivalents at the end of the
period 24,897 8,909 2,957
(a) Acquisition of subsidiary:
The subsidiary's assets and liabilities at
date of acquisition:
Working capital (excluding cash and cash
equivalents) (98,429) - -
Property, plant and equipment (14,480) - -
Intangible assets (13,666) - -
Goodwill (25,367) - -
Prepaid expenses (9) - -
Deferred taxes 4,661 - -
Non-current liabilities 4,186 - -
Financial liability for non- controlling
interest put option 5,945 - -
Liability for non- competition payment 1,555 - -
Non-controlling interests 73,516 - -
(62,088) - -
(b) Non-cash transactions:
Proceeds of short-term loan invested in
deposit held in trust - - 18,393
Repayment of short-term loan from deposit held
in trust (18,727) - -
The accompanying notes are an integral part of the interim condensed
consolidated financial statements.
NOTE 1:- GENERAL
a. B.S.D Crown Ltd. ("B.S.D" or "the Company") is a corporation
registered in Israel.
On 5 August 2014 the Company changed its name from Emblaze Ltd. to
B.S.D Crown Ltd.
b. In May 2014 the Company completed the acquisition of a
controlling stake (approximately 62%) of Willi-Food Investments Ltd. ("WFI")
for an aggregate cash consideration of USD 82.3 million. WFI and its
subsidiaries are engaged in the import, marketing and distribution of a
several hundred food products, mainly in Israel. See Note 3 for further
details of the Acquisition. The financial statements of WFI and its
subsidiaries (the "WFI Group") have been consolidated in these interim
condensed consolidated financial statements from the date of the completion of
the Acquisition in May 2014.
Due to the extent of the trading activities of the WFI Group that were
acquired in relation to the then existing activities of the Company and its
subsidiaries (the "B.S.D Group"), the Acquisition was deemed a reverse
takeover under the listing rules of the UK Listing Authority ("UKLA"), and
trading in the Company's shares was accordingly suspended on 3 March 2014 (the
date the Company entered into the agreement for the Acquisition).
On 29 July 2014 the Company published a prospectus in connection
with its reapplication for the listing of its entire issued share capital on
the Standard segment of the Official List of the UKLA and for admission to
trading on the London Stock Exchange main market for listed securities. The
admission became effective on 4 August 2014. The Company's shares are
presently listed for trading under the symbol BSD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation of the interim consolidated financial
statements:
The interim condensed consolidated financial statements for the nine and three
month periods ended 30 September 2014 have been prepared in accordance with
IAS 34, Interim Financial Reporting, as adopted by the European Union. The
interim condensed consolidated financial statements do not include all the
information and disclosures required in the annual financial statements, and
should be read in conjunction with the Group's annual financial statements as
at 31 December 2013.
b. Accounting policies adopted by the B.S.D Group as a consequence of the
acquisition of the WFI Group:
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the B.S.D Group's consolidated annual financial statements for
the year ended 31 December 2013. As a consequence of the initial consolidation
of the financial statements of the WFI Group, the following accounting
policies relating to the activities of the WFI Group have been adopted:
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b. Accounting policies adopted by the B.S.D Group as a consequence of the
acquisition of the WFI Group: (Cont.)
- Functional currency and presentation currency:
The presentation currency of the financial statements is the US dollar.
The Group determines the functional currency of each Group entity, including
companies accounted for at equity.
Assets, including fair value adjustments upon acquisition, and liabilities of
an investee which is a foreign operation, are translated at the closing rate
at each reporting date. Profit or loss items are translated at average
exchange rates for all periods presented. The resulting translation
differences are recognised in other comprehensive income (loss).
Intragroup loans for which settlement is neither planned nor likely to occur
in the foreseeable future are, in substance, a part of the investment in the
foreign operation and, accordingly, the exchange rate differences from these
loans (net of the tax effect) are recorded, net of the tax effect, in other
comprehensive income (loss).
Upon the full or partial disposal of a foreign operation resulting in loss of
control in the foreign operation, the cumulative gain (loss) from the foreign
operation which had been recognised in other comprehensive income is
transferred to profit or loss. Upon the partial disposal of a foreign
operation which results in the retention of control in the subsidiary, the
relative portion of the amount recognised in other comprehensive income is
reattributed to non-controlling interests.
- Business combinations and goodwill:
Business combinations are accounted for by applying the acquisition method.
The cost of the acquisition is measured at the fair value of the consideration
transferred on the acquisition date with the addition of non-controlling
interests in the acquiree. In each business combination, the Company chooses
whether to measure the non-controlling interests in the acquiree based on
their fair value on the acquisition date or at their proportionate share in
the fair value of the acquiree's net identifiable assets.
Direct acquisition costs are carried to the statement of profit or loss as
incurred.
In a business combination achieved in stages, equity interests in the acquiree
that had been held by the acquirer prior to obtaining control are measured at
the acquisition date fair value while recognising a gain or loss resulting
from the revaluation of the prior investment on the date of achieving control.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b. Accounting policies adopted by the B.S.D Group as a consequence of the
acquisition of the WFI Group (Cont.):
- Business combinations and goodwill (Cont.):
Contingent consideration is recognised at fair value on the acquisition date
and classified as a financial asset or liability in accordance with IAS 39.
Subsequent changes in the fair value of the contingent consideration are
recognised in profit or loss. If the contingent consideration is classified as
an equity instrument, it is measured at fair value on the acquisition date
without subsequent remeasurement.
Goodwill is initially measured at cost which represents the
excess of the acquisition consideration and the amount of non-controlling
interests over the net identifiable assets acquired and liabilities assumed.
If the resulting amount is negative, the acquirer recognises the resulting
gain on the acquisition date.
- Allowance for doubtful accounts:
The allowance for doubtful accounts is determined in respect of specific debts
whose collection, in the opinion of the Company's management, is doubtful.
- Inventories:
Inventories are measured at the lower of cost and net realisable value. The
cost of inventories comprises costs of purchase and costs incurred in bringing
the inventories to their present location and condition. Net realisable value
is the estimated selling price in the ordinary course of business less
estimated costs of completion and estimated selling costs. The Company
periodically evaluates the condition and age of inventories and makes
provisions for slow moving inventories accordingly.
Cost of inventories is determined as follows:
Purchased merchandise and products - using the weighted average cost method.
- Revenue recognition:
Revenues are recognised in profit or loss when the revenues can be measured
reliably, it is probable that the economic benefits associated with the
transaction will flow to the Company and the costs incurred or to be incurred
in respect of the transaction can be measured reliably. When the Company acts
as a principal and is exposed to the risks associated with the transaction,
revenues are presented on a gross basis. When the Company acts as an agent and
is not exposed to the risks and rewards associated with the transaction,
revenues are presented on a net basis. Revenues are measured at the fair value
of the consideration less any trade discounts, volume rebates and returns.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b. Accounting policies adopted by the B.S.D Group as a consequence of the
acquisition of the WFI Group (Cont.):
- Revenue recognition (Cont.):
Following are the specific revenue recognition criteria which must be met
before revenue is recognised:
Revenues from the sale of goods:
Revenues from the sale of goods are recognised when all the significant risks
and rewards of ownership of the goods have passed to the buyer and the seller
no longer retains continuing managerial involvement. The delivery date is
usually the date on which ownership passes.
- Leases:
The criteria for classifying leases as finance or operating leases depend on
the substance of the agreements and are made at the inception of the lease in
accordance with the following principles as set out in IAS 17.
The Group as lessee:
1. Finance leases:
Finance leases transfer to the Group substantially all the risks and benefits
incidental to ownership of the leased asset. At the commencement of the lease
term, the leased assets are measured at the lower of the fair value of the
leased asset or the present value of the minimum lease payments.
The leased asset is amortised over the shorter of its useful life or the lease
term.
2. Operating leases:
Lease agreements are classified as an operating lease if they do not transfer
substantially all the risks and benefits incidental to ownership of the leased
asset. Lease payments are recognised as an expense in profit or loss on a
straight-line basis over the lease term.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b. Accounting policies adopted by the B.S.D Group as a consequence of the
acquisition of the WFI Group (Cont.):
- Property, plant and equipment:
Property, plant and equipment are measured at cost, including direct
attributable costs, less accumulated depreciation, accumulated impairment
losses and excluding day-to-day servicing expenses. Cost includes spare parts
and auxiliary equipment that are used in connection with plant and equipment.
A part of an item of property, plant and equipment with a cost that is
significant in relation to the total cost of the item is depreciated
separately using the component method.
The cost of an item of property, plant and equipment comprises the initial
estimate of the costs of dismantling and removing the item and restoring the
site on which the item is located.
Depreciation is calculated on a straight-line basis over the useful life of
the assets at annual rates as follows:
% Mainly %
Land 2
Buildings 4
Motor vehicles 15-20 20
Office furniture and equipment 6-15 15
Computers 20-33 33
Mechanical equipment 10
The useful life, depreciation method and residual value of an asset are
reviewed at least each year-end and any changes are accounted for
prospectively as a change in accounting estimate. Depreciation of an asset
ceases at the earlier of the date that the asset is classified as held for
sale and the date that the asset is derecognised.
- Intangible assets:
Separately acquired intangible assets are measured on initial recognition at
cost including directly attributable costs. Intangible assets acquired in a
business combination are measured at fair value at the acquisition date.
Expenditures relating to internally generated intangible assets, excluding
capitalised development costs, are recognised in profit or loss when incurred.
Intangible assets with a finite useful life are amortised over their useful
life and reviewed for impairment whenever there is an indication that the
asset may be impaired. The amortisation period and the amortisation method for
an intangible asset are reviewed at least at each year end.
Intangible assets with indefinite useful lives are not systematically
amortised and are tested for impairment annually or whenever there is an
indication that the intangible asset may be impaired. The useful life of these
assets is reviewed annually to determine whether their indefinite life
assessment continues to be supportable.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b. Accounting policies adopted by the B.S.D Group as a consequence of the
acquisition of the WFI Group (Cont.):
If the events and circumstances do not continue to support the assessment, the
change in the useful life assessment from indefinite to finite is accounted
for prospectively as a change in accounting estimate and on that date the
asset is tested for impairment. Commencing from that date, the asset is
amortised systematically over its useful life.
The intangible assets are amortised over their estimated useful life as
follows:
Customer relationships 9 years
Supplier relationships 5 years
Brands 7 years
Non-competition agreements 2 years (starting 2017, see Note 3 (c))
- Impairment of non-financial assets:
The Company evaluates the need to record an impairment of non-financial assets
whenever events or changes in circumstances indicate that the carrying amount
is not recoverable.
If the carrying amount of non-financial assets exceeds their recoverable
amount, the assets are reduced to their recoverable amount. The recoverable
amount is the higher of fair value less costs of sale and value in use. In
measuring value in use, the expected future cash flows are discounted using a
pre-tax discount rate that reflects the risks specific to the asset. The
recoverable amount of an asset that does not generate independent cash flows
is determined for the cash-generating unit to which the asset belongs.
Impairment losses are recognised in profit or loss.
An impairment loss of an asset, other than goodwill, is reversed only if there
have been changes in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. Reversal of an
impairment loss, as above, shall not be increased above the lower of the
carrying amount that would have been determined (net of depreciation or
amortisation) had no impairment loss been recognised for the asset in prior
years and its recoverable amount. The reversal of impairment loss of an asset
presented at cost is recognised in profit or loss.
The following criteria are applied in assessing impairment of these specific
assets:
Goodwill in respect of subsidiaries:
The Company reviews goodwill for impairment once a year, on December 31, or
more frequently if events or changes in circumstances indicate that there is
an impairment.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b. Accounting policies adopted by the B.S.D Group as a consequence of the
acquisition of the WFI Group (Cont.):
- Impairment of non-financial assets: (Cont.)
Goodwill is tested for impairment by assessing the recoverable amount of the
cash-generating unit (or group of cash-generating units) to which the goodwill
has been allocated. An impairment loss is recognised if the recoverable amount
of the cash-generating unit (or group of cash-generating units) to which
goodwill has been allocated is less than the carrying amount of the
cash-generating unit (or group of cash-generating units). Any impairment loss
is allocated first to goodwill. Impairment losses recognised for goodwill
cannot be reversed in subsequent periods.
- Share-based payment transactions:
The Company accounts for share-based compensation in accordance with IFRS 2,
"Share-Based Payment". The main impact of IFRS 2 on the Company is the
expensing of employees' and directors' share options (equity-settled
transactions).
The cost of equity-settled transactions with employees is measured at the fair
value of the equity instruments granted at grant date. The fair value is
determined by using the Binomial method option-pricing model taking into
accounts the terms and conditions upon which the instruments were granted.
The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance
and/or service conditions are fulfilled, ending on the date on which the
relevant employees become fully entitled to the award (the "vesting date").
The cumulative expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects the extent to which the vesting
period has expired and the Company's best estimate of the number of equity
instruments that will ultimately vest. The expense or income recognised in
profit or loss represents the change between the cumulative expense recognised
at the end of the reporting period and the cumulative expense recognised at
the end of the previous reporting period.
Cash-settled transactions:
The cost of cash-settled transactions is measured at fair value on the grant
date using an acceptable option pricing model. The fair value is recognised as
an expense over the vesting period and a corresponding liability is
recognised. The liability is remeasured at each reporting date until settled
at fair value with any changes in fair value recognised in profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
c. Adoption of new standards and interpretations effective as of 1 January
2014
The nature and the impact of each new standard or amendment adopted are
described below:
Offsetting Financial Asses and Financial Liabilities - Amendments to IAS 32
These amendments clarify the meaning of "currently has a legally enforceable
right to set-off" and the criteria for non-simultaneous settlement mechanisms
of clearing houses to qualify for offsetting. These amendments have no impact
on the Company.
d. Disclosure of new IFRS standards in the period prior to their adoption:
(1) IFRS 15, "Revenue from Contracts with Customers":
IFRS 15 ("the Standard") was issued by the IASB in May 2014.
IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts, and the
related Interpretations: IFRIC 13, "Customer Loyalty Programs", IFRIC 15,
"Agreements for the Construction of Real Estate", IFRIC 18, "Transfers of
Assets from Customers" and SIC-31, "Revenue- Barter Transactions Involving
Advertising Services".
The Standard introduces the following five-step model that applies to revenue
from contracts with customers:
Step 1: Identify the contract(s) with a customer, including reference to
contract consolidation and accounting for contract modifications.
Step 2: Identify the distinct performance obligations in the contract
Step 3: Determine the transaction price, including reference to variable
consideration, financing components that are significant to the contract,
non-cash consideration and any consideration payable to the customer.
Step 4: Allocate the transaction price to the separate performance obligations
on a relative stand-alone selling price basis using observable information, if
it is available, or by making estimates and assessments.
Step 5: Recognise revenue when (or as) the entity satisfies a performance
obligation over time or at a point in time.
IFRS 15 also establishes the accounting treatment of incremental costs
involving obtaining a contract and the costs directly related to fulfilling a
contract.
The Standard will apply retrospectively to annual periods beginning on or
after January 1, 2017. Early adoption is permitted. The Standard may be
applied to existing contracts beginning with the current period and
thereafter. No restatement of the comparative periods will be required as long
as comparative disclosures about the current period's revenues under existing
IFRS are included.
The Company is evaluating the possible impact of the adoption of IFRS 15 but
is presently unable to assess its effect, if any, on the financial statements.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
d. Disclosure of new IFRS standards in the period prior to their adoption:
(Cont.)
(2) IFRS 9, "Financial Instruments":
In connection with Note 4 to the annual financial
statements as of December 31, 2013 regarding disclosure of new IFRS Standards
in the period prior to their adoption in the issue of IFRS 9, in July 2014,
the IASB issued the final and complete version of IFRS 9, "Financial
Instruments" ("the final Standard") which includes the following elements:
classification and measurement, impairment and hedge accounting.
The main changes between the final Standard and the
previously published phases of the Standard are:
Classification and measurement:
The final version of IFRS 9 includes another category for
the classification and measurement of financial assets that represent debt
instruments. Financial assets classified in this category will be measured at
fair value through other comprehensive income ("FVOCI") and the differences
previously carried to other comprehensive income as above will be reclassified
to profit or loss under specific conditions such as when the asset is
derecognised. Finance income, exchange rate differences and impairment losses
on financial assets, however, will be recognised in profit or loss. The
classification in this category is allowed for debt instruments that meet the
following tests on a cumulative basis:
- Based on the financial asset's contractual terms and on
specific dates, the entity is entitled to receive cash flows that represent
solely principal payments and interest payments on the principal balance.
- The asset is held in the context of a business model
whose aim is both to collect the contractual cash flows generated from the
asset and to dispose of the asset.
Impairment:
The Final Standard addresses the issue of impairment of
financial assets by introducing the expected credit loss impairment model to
replace the incurred loss model prescribed in IAS 39. The expected credit loss
model applies to debt instruments measured at amortised cost or at FVOCI and
to trade receivables. The model introduces a simpler and economic approach for
measuring impairment:
- General approach - credit losses due to default which are
expected to occur in the subsequent 12-month period will be recognised
provided that there has not been a significant increase in credit risk since
the date of initial recognition of the instrument. On the other hand, if there
has been a significant increase in credit risk since the date of initial
recognition of the instrument, a provision should be recognised for credit
losses that are expected to occur over the remaining life of the exposure in
respect of said instrument.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
d. Disclosure of new IFRS standards in the period prior to their adoption: (Cont.)
(2) IFRS 9, "Financial Instruments": (Cont.)
- A simpler approach (applies in certain cases and for
certain groups of assets only, including trade receivables) - according to
this approach, the credit losses that are expected to occur over the remaining
life of the exposure in respect of said instrument should be recognised,
regardless of the occurrence of credit risk changes since the date of initial
recognition of said instrument.
The Final Standard will be applied retrospectively, subject
to certain exemptions stipulated therein, in the financial statements for
annual periods beginning on or after January 1, 2018. Earlier application is
permitted.
The Company is evaluating the possible impact of the
adoption of IFRS 9 but is presently unable to assess its effect, if any, on
the financial statements.
(3) Amendments to IAS 16 and IAS 38 regarding acceptable
methods of depreciation and amortisation:
In May 2014, the IASB issued Amendments to IAS 16 and IAS
38 (the "Amendments") regarding the use of a depreciation and amortisation
method based on revenue. According to the Amendments, a revenue-based method
is not considered to be an appropriate manifestation of consumption since
revenue generated by an activity that includes the use of an asset generally
reflects factors other than the consumption of the economic benefits embodied
in the asset.
As for intangible assets, the revenue-based amortisation
method can only be applied under certain circumstances such as when it can be
demonstrated that revenue and the consumption of economic benefits of the
intangible asset are highly correlated.
The Amendments will be applied prospectively in the financial statements for
annual periods beginning on or after January 1, 2016. Earlier application is
permitted.
The Company believes the effect on the financial statements of the adoption of
the Amendments will be immaterial.
NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD.
Share purchase agreement
1. On 2 March 2014, the Company entered into an agreement (the "WFI
Agreement") to acquire from Zwi Williger ("ZW") and Joseph Williger ("JW" and,
together with ZW, the "Sellers") a controlling stake in the share capital of
Willi-Food Investments Ltd. ("WFI"), a company listed on the Tel Aviv Stock
Exchange, which in turn owns approximately 58% of G. Willi-Food International
Ltd ("WFINT" and together with WFI, "Willi-Food"), a company listed on NASDAQ
(the "Acquisition"). WFI operates in import, marketing and distribution of
several hundred food products mainly in Israel. Under the WFI Agreement, the
Company: (i) acquired the Sellers' entire shareholdings in WFI (part of which
was acquired through a special tender offer as set out below), amounting in
aggregate to 58% of the shares of WFI (or approximately 55% on a fully diluted
basis); and (ii) published a special tender offer (the "Special Tender Offer")
addressed to all shareholders of WFI (including the Sellers) in accordance
with Israeli Companies Law in order to acquire shares carrying 5% of the
voting rights in WFI. The Special Tender Offer was completed on 1 May 2014 and
the Acquisition completed on 4 May 2014.
Following such completion, the Company acquired in aggregate 61.65% of the
issued share capital of WFI (62.27% of its voting rights on a fully diluted
basis), for aggregate cash consideration of NIS 284.7 million (USD 82.3
million). Upon the Acquisition, the Company nominated directors which comprise
the majority of the board of directors of both WFI and WFINT.
NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.)
Share purchase agreement. (Cont.)
2. Under the WFI Agreement, the Company granted the Sellers a put option to
sell all or some of their shares in WFINT (whether held (3.89%) on the date of
the WFI Agreement or those which they may hold following the exercise of
employee options in WFINT) which amount to a further approximately 7% of the
shares of WFINT on a fully diluted basis (the "WFINT Put Option Shares" and
the "WFINT Put Option" respectively). The WFINT Put Option is exercisable by
the Sellers for a period of four years and one month commencing eleven months
from completion of the Acquisition, at a price of USD 12 per share. The put
option exercise price is subject to adjustment for dividends bonus, shares and
rights issues by WFINT. The Company was granted a power of attorney which
enables it to procure the Sellers to sell their WFINT shares to a third party
at a price per share not below USD 12, subject to compliance with applicable
laws, during the WFINT Put Option exercise period. The power of attorney may
be cancelled by the Sellers at any time during that period, although such
cancellation would lead to the immediate cancellation of the WFINT Put Option
in respect of such WFINT Put Option Shares. The Sellers granted the Company an
irrevocable proxy with respect to their holdings in WFINT, so as to allow the
Company to vote such shares at shareholders' meetings of WFINT during the
period commencing on completion of the Acquisition and expiring on the
exercise or expiry of the WFINT Put Option.
As part of the consideration for the acquisition, the Company recorded a
liability for the WFINT Put Option, see 4(a) below.
The WFI Agreement modified the terms of the unvested employee options held by
the Sellers, by ensuring the sale price of the shares which will derive from
the exercise of the unvested employee options. On the date of the Acquisition,
the fair value of the modification for the entire vesting period (three years)
of the options amounted to USD 1.4 million, based on a calculation prepared by
an independent valuation specialist.
In the nine months and three months ended 30 September 2014, the Company
recorded in profit or loss share-based payment expense of USD 475 thousands
and USD 260 thousands, respectively (in addition to the expense recorded in
WFI in the amount of USD 275 thousands and USD 192 thousands, respectively. As
of 30 September 2014, the liability recorded in the statement of financial
position for the put option in respect of the vested portion of these employee
options amounted to USD 746 thousand.
3. Under the WFI Agreement, the Sellers agreed to continue to be engaged by
WFINT as chairman of the board of WFINT (in respect of Zvi Williger) and
president of WFINT (in respect of Joseph Williger), or as joint chief
executive officers of WFI, for an additional period of three years commencing
upon completion of the Acquisition (May 2014). On 21 August 2014, the
extension of the agreements between the parties for another period of three
(3) years (until 21 August 2017) was approved at WFINT's annual general
meeting. Subject to further agreement between the parties and to applicable
law, the Sellers may continue their respective engagement following such
period. In addition, each of the Sellers is prohibited from competing against
Willi-Food in any material way, subject to certain agreed exceptions, for an
additional period commencing on the termination of his respective engagement
with WFINT and terminating on the later of two years from such termination, or
four years from completion of the Acquisition, but not longer than five (5)
years from the completion date. It should be noted that the Company has
withdrawn its application regarding the approval of the Israeli Anti-trust
Authorities to extend the non-competition period to six years from the
completion date, under all scenarios. In consideration of such non-compete
undertakings, each of the Sellers is entitled to an additional annual payment
of NIS 1.5 million (approximately USD 0.4 million) following termination of
his respective engagement, to be paid by the Company and subject to applicable
law.
NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.)
Share purchase agreement. (Cont.)
4. Business Combination
The Company accounted for the Acquisition as a business combination
and began consolidating the financial statements of WFI from the completion
date of the Acquisition on 4 May 2014.
a. Consideration for Acquisition
U.S. Dollars
in thousands
Cash paid 82,342
Liability for non-controlling interest put option
(a) 5,945
Liability for non-competition payments (b) 1,555
89,842
(a) As described in 2 above the Company has granted Sellers a put option to
sell up to 504,407 shares of WFINT. The put option is exercisable for a period
of four years and one month, commencing eleven months after the completion of
the Acquisition at a price of USD 12 per share. The liability reflects the
present value of the amount payable assuming exercise at the earliest
permissible date of all the shares subject to the put option discounted at an
annual rate of 2%.
(b) The liability for non-competition payment reflects the present value of an
annual payment of NIS 1.5.million (USD 0.4 million to each of the two former
controlling shareholders of WFI), for a period of two years subsequent to the
termination of their service agreements with the Group.
(c) Cash outflow/inflow on the acquisition:
U.S. Dollars
in thousands
Cash and cash equivalents acquired with the
acquiree at the acquisition date 20,254
Cash paid (82,342)
Net cash (62,088)
Transaction costs of approximately USD 170 thousand that are directly
attributable to the Acquisition were recorded in profit or loss.
b. The Company has elected to measure the non- controlling
interests in WFI at fair value. The fair value of the non- controlling
interest in WFI is based on the quoted market price of the shares of WFI and
WFINT on the completion date.
The fair value adjustments detailed below are based on a purchase
price allocation study prepared by an independent valuation specialist as of
the date of the Acquisition. The purchase price allocation was prepared on the
basis of an acquisition of 100% of the net assets of WFI Group. Deferred tax
liability is recorded in respect of those fair value adjustments that result
in taxable temporary differences.
NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.)
Share purchase agreement. (Cont.)
4. Business Combination (Cont.)
U.S. Dollars
in thousands
Total consideration 89,842
Fair value of net assets acquired 137,991
Non-controlling interests (73,516)
64,475
Goodwill 25,367
The fair value of the identifiable assets and liabilities of WFI
near the acquisition date:
U.S. Dollars
in thousands
Cash and cash equivalents 20,254
Financial assets at fair value through profit or loss 59,481
Trade receivables 30,538
Other receivables and prepaid expenses 1,004
Investment in a fund designated at fair value through
profit or loss 4,390
Inventories 15,479
Property, plant and equipment, net 14,480
Prepaid expenses 9
Intangible assets:
Customer relationships 6,577
Supplier relationships 3,914
Brands 1,800
Non-competition agreements *) 1,375
159,301
Short-term bank debt 834
Current maturities of debentures 3,707
Trade payables 6,311
Other accounts payable and deferred revenues 862
Income tax liability 129
Employee benefit liabilities, net- short term 620
Employee benefit liabilities, net- long term 175
Debentures 4,011
Deferred taxes 4,661
21,310
137,991
*) The fair value of the non-competition agreements was based on a
non-competition period of two years commencing three years after the
Acquisition date as the individuals subject to the non-competition agreements
have management service agreements with WFI Group (subject to shareholder
approval) for a period of three years from the date of the Acquisition. The
non-competition agreements are not amortised while the individuals subject to
these agreements are providing services to the WFI Group due to the fact that
according to their agreements and the Israeli Companies Law, they are
prohibited from competing with WFI's business while serving as officers of
WFI.
NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.)
Share purchase agreement. (Cont.)
4. Business Combination (Cont.)
c. Fair value adjustment on acquisition:
U.S. Dollars
in thousands
Property plant and equipment 2,371
Customer relationship 6,577
Supplier relationship 3,914
Brands 1,800
Non- competition agreements 1,375
Good will 25,367
Debentures (337)
Deferred taxes (4,161)
36,906
The intangible assets are amortised over their estimated useful
life (see Note 2(b)).
d. From the date of Acquisition, WFI has contributed USD 38.5 million of
revenue and USD 2.1 million (after fair value adjustments) to the net income
of the B.S.D. If the Acquisition had taken place at the beginning of the year
2014, consolidated revenues would have been USD 72.7 million and the net
income would have been USD 5 million (after fair value adjustments).
5. Testing the impairment of goodwill
As of 30 September 2014, the balance of goodwill allocated to the activity of
importing, marketing and distributing food products ('the Willi-Food
transaction") totals USD 23,740 thousand. In view of the existence of
indicators of impairment consisting mainly of: a significant decrease in the
market value of the shares of Willi-Food Investments from the date of the
Company's investment therein (May 2014) and the state of the Israeli food
industry, as of 30 September 2014, the Company calculated the recoverable
amount of the cash-generating unit to which the goodwill was allocated, based
on the DCF method. The recoverable amount was determined based on the value in
use by an independent appraiser. Since the recoverable amount of the
cash-generating unit exceeds its carrying amount, including goodwill, no
impairment was recognized in respect of the goodwill. In determining the
recoverable amount, the Company used the following main assumptions:
- Projected cash flows for a period of 5 years.
- Pre-tax discount rate of 12.4% (10.5% after taxes).
- The projected cash flows take into account an annual permanent growth rate
of 2%.
NOTE 4: SUPPLEMENTARY INFORMATION
a. As described in Note 13(a) to the financial statements as of 31 December
2013, the Company filed claims against two companies Apple Inc ("Apple") and
Microsoft Corporation (the "Respondents") for direct and indirect damages
caused by infringement of a patent it developed and registered.
On 11 July 2014 the district court in the United States of
America reached a decision regarding the Apple claim, and found that the
Company's patent is valid but Apple did not infringe the patent.
In response, the Company filed motions with the original
judge hearing the claim for a contrary judgment to the jury's verdict in
respect of the non-infringement of the Company's patent or for a new trial on
that point. Apple also filed motions with the original judge hearing the claim
for a contrary judgment to the jury's verdict in respect of the validity of
the Company's patent. The Company expects the court to rule on these motions
in December 2014.
In addition, the Company filed its objections to the bill of
costs filed by Apple . In the aggregate amount of USD 293 thousands.
The management of the Company estimates that the outcome of
this claim will not have a material adverse effect on the financial
statements.
b. In an extraordinary general meeting held on 8 September 2014, the Company's
shareholders approved the terms of service of Mr Israel Jossef Schneorson, the
chief executive officer (the "Schneorson Agreement") (which was then subject
to the approval of the shareholders of BGI Investments (1961) Ltd. ("BGI"),
which approval was obtained on 5 October 2014), the terms of employment of Mr
Eyal Merdler, the chief financial officer, and an agreement between the
Company and BGI (the "BGI Management Agreement") pursuant to which the Company
will provide certain services to BGI, including the services of a chief
executive officer, chief financial officer, controller, bookkeeper and
administrative services for monthly fee of NIS 35 thousands ( approximately
USD 9 thousand).
As such, the Company paid BGI a one-off fee of USD 660 thousand in relation to
the services provided to the Company by the chief executive officer and chief
financial officer between 14 August 2013 and 8 September 2014 and services
provided to the Company by the corporate secretary, controller, bookkeeping
and certain administrative staff of BGI between 1 January 2014 and 8 September
2014.
NOTE 5:- FINANCIAL INSTRUMENTS
Financial instruments that are not measured at fair value:
Except as detailed in the following table, the Group believes that the
carrying amount of financial assets and liabilities that are presented at
amortised cost in the financial statements approximates their fair value.
Financial liabilities:
Carrying
amount Fair value
30 30
September September
2014 2014
Unaudited
U.S. Dollars in thousands
Debentures and interest payable 7,183 7,070
Below are details of the Group's financial assets that are measured in the
Company's statement of financial position at fair value by levels:
NOTE 5:- FINANCIAL INSTRUMENTS (Cont.)
Financial assets at fair value:
30 September 2014
Unaudited
Level 1 Level 2 Total
U.S. Dollars in thousands
Marketable securities 60,764 1,234 61,998
Investment in fund - 4,103 4,103
Total 60,764 5,337 66,101
NOTE 6:- OPERATING SEGMENTS
a. General:
Upon the completion of the Acquisition of WFI in May 2014, the Group's main
activity and its sole operating segment is import, marketing and distribution
of food products to retail chains, supermarkets, wholesalers, and institutions
mainly in Israel.
An operating segment is identified on the basis of information that is
reviewed by the chief operating decision maker ("CODM") to make decisions
about resources to be allocated and assess its performance.
b. Reporting segments:
Nine months Three months
ended 30 ended 30
September September
2014
Unaudited
U.S. Dollars in thousands
Revenues
Import marketing and distribution of
food products 38,474 22,532
Other 130 65
38,604 22,597
Segment income (loss)
Import marketing and distribution of
food products 1,152 545
Other *) (8,783) (4,570)
Operating loss (7,631) (4,025)
Financial income, net 3,718 1,599
Loss before taxes (3,913) (2,426)
*) Other includes mainly unallocated corporate general and administrative
expenses and expenses relating to research and development activities.
Seasonality
WFI Group operating results may be subject to variations from quarter to
quarter depending, among others, the timing of sales campaigns and major
Jewish holidays. Therefore, the operating results of WFI Group in the period
ended 30 September 2014 are not necessarily indicative of its operating
results for the year.
NOTE 6:- OPERATING SEGMENTS (Cont.)
c. Revenues from major customers that contributed 10% or more to the Group
revenues (as percentage of the total revenue):
Nine months three months
ended 30 ended 30
September September
2014 2014
Unaudited
% %
Customer A 16 16
The revenues from the following products contributed 10% or more to
the Group revenues (as percentage of the total segment revenue):
Nine Three
months months
ended 30 ended 30
September September
2014 2014
Unaudited
% %
Canned vegetables 16 16
Dairy and dairy substitute products 24 23
Dried fruit, nuts and beans 14 10
NOTE 7:- SUBSEQUENT EVENTS
a. Settlements of claims
In October 2014, the Company entered into agreements to settle certain
outstanding claims as described in Note 10(b) to the financial statements as
of 31 December 2013, (the "Settlement Agreements").
The Company and some of its past directors were named as defendants in certain
claims, all in connection with the bankruptcy of Mr Eli Reifman, one of the
founders and a former director of the Company.
In April 2012, two of Mr Reifman's creditors filed a claim (the "April 2012
Claim") against attorneys who represented them in a transaction with Mr
Reifman and as part of this claim, the two creditors also named the Company
and several of its past directors, as well as a Company's external legal
adviser and its auditors, as defendants. The claim amounted to NIS 73.3
million (approximately USD 19.8 million current exchange rate).
In June 2012, several creditors of Mr Reifman filed a claim against the
Company, several of its past directors as well as against a Company's external
legal adviser and its auditors (the "June 2012 Claim"). Following the
dismissal of the claims of certain such creditors, the outstanding aggregate
value of the June 2012 Claim amounted to of NIS 81.8 million (approximately
USD 22.1 million).
Pursuant to the Settlement Agreements, following contributions from the
Company's Directors and Officers Liability insurers, the Company has agreed to
pay, without admitting to any legal liability, (i) NIS 1.975 million
(approximately USD 0.5 million) in consideration of the full and final
settlement of the April 2012 Claim; and (ii) NIS 4.2 million (approximately
USD 1.2 million) in consideration of the full and final settlement of claims
representing NIS 69.9 million (approximately USD 18.9 million) of the June
2012 Claim. The Company included a provision in the financial statements as of
30 September 2014 in the total amount of USD1.7 million.
NOTE 7:- SUBSEQUENT EVENTS (Cont)
a. Settlements of claims (Cont.)
In addition, the Company has been informed in relation to the claim described
in Note 10 (b) (d) to the financial statements as of 31 December 2013 that the
Company and several of its past directors were joined as direct defendants by
one of the creditors who filed the original claim, and that the aggregate
amount claimed from the Company and said past-directors has been updated to
NIS 22.4 million (approximately USD 6 million). The Company is considering the
amended claim and is yet to submit its amended statement of defense.
Subsequent to completion of the Settlement Agreements and the amendment of the
claim as described above, the outstanding amounts pursuant to claims filed
against the Company in respect of Mr Reifman, amount to approximately NIS 30
million (approximately USD 8.1 million).
The Company's legal advisors are of the opinion that the
risks of success of these claims against the Company are remote.
b. Following settlement with HMRC in respect of outstanding
interest claimed by EMSL, as described in Note 10(b)(1) to the financial
statements as of 31 December 2013, in October 2014, EMSL received such
outstanding interest from HMRC of approximately £ 0.7 million (USD 1.1
million) net of estimated expenses. This net income will be included in the
financial statements for the period ending 31 December 2014.
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