iphotonix llc financial statements as of december 31, …
TRANSCRIPT
IPHOTONIX LLC
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2015
INDEX
Page
Auditors' Report 2
Statement of Financial Position 3
Statement of Comprehensive Income 4
Statement of Changes in Equity 5
Statement of Cash Flows 6-7
Notes to Financial Statements 8-26
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AUDITORS' REPORT
To the Shareholders of
IPHOTONIX LLC
We have audited the accompanying statement of financial position of Iphotonix LLC ("the Company")
as of December 31, 2015 and 2014, and the related statements of profit or loss and other comprehensive
income, changes in equity and cash flows for each of the years then ended. These financial statements are the
responsibility of the Company's board of directors and management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing standards in Israel, including
those prescribed by the Auditor's Regulations (Auditor's Mode of Performance), 1973. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by the board of directors and management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audits, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2015 and 2014, and the results of
its operations, changes in equity and cash flows for each of the two years then ended, in conformity with
International Financial Reporting Standards (IFRS).
Tel-Aviv, Israel KOST FORER GABBAY & KASIERER
March 29, 2016 A Member of Ernst & Young Global
Kost Forer Gabbay & Kasierer 3 Aminadav St. Tel-Aviv 6706703, Israel
Tel:+972-3-6232525 Fax: +972-3-5622555 ey.com
IPHOTONIX LLC
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STATEMENTS OF FINANCIAL POSITION
December 31,
2015 2014
Note U.S. dollars in thousands
ASSETS CURRENT ASSETS:
Cash and cash equivalents 169 78 Trade receivables 4 1,711 664 Other accounts receivable 6 19 Inventories 5 791 667
2,677 1,428
NON-CURRENT ASSETS: Property, plant and equipment 6 70 184 Intangible assets 7 2,037 615 Goodwill 216 - Deposits 102 100
2,425 899
Total assets 5,102 2,327
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term credit from bank 10 236 - Trade payables 8 2,159 736 Shareholders - 300 Other accounts payable 9 294 177
2,689 1,213
NON-CURRENT LIABILITIES:
Loan from bank 10 787 - Shareholders 800 - Related party 18 1,913 1,983 Other non-current liabilities 244 -
3,744 1,983 EQUITY (DEFICIT): 11
Ownership units and premium 7,571 4,978 Capital reserve 460 - Reserve for share-based payment transactions 190 190 Deficit (9,552) (6,037)
Total deficit (1,331) (869)
Total liabilities and equity 5,102 2,327
The accompanying notes are an integral part of the financial statements.
March 29, 2016
Date of approval of the
financial statements
Amir Elbaz
Chief Executive Officer
Boaz Gorfung
Director
Chris Ryan
Chief Finance Officer
IPHOTONIX LLC
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STATEMENTS OF COMPREHENSIVE INCOME
Year ended
December 31,
2015 2014
Note U.S. dollars in thousands
Revenues from sales 8,171 7,284
Cost of sales 12 5,839 4,938
Gross profit 2,332 2,346
Research and development 13 3,464 2,357
Selling and marketing expenses 14 666 526
General and administrative expenses 15 1,191 1,229
5,321 4,112
Operating loss (2,989) (1,766)
Finance expenses 16 526 13
Loss (3,515) (1,779)
Total comprehensive loss (3,515) (1,779)
The accompanying notes are an integral part of the financial statements.
IPHOTONIX LLC
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STATEMENTS OF CHANGES IN EQUITY
The accompanying notes are an integral part of the financial statements.
Ownership units and premium
Other Reserve
Reserve for share-based
payment transaction
Retained earnings
Total equity
U.S. dollars in thousands Balance as of January 1, 2014 2,127 - 123 (4,258) (2,008) Total comprehensive income - - - (1,779) (1,779) Conversion of Shareholders loan to
equity
2,851 -
- - 2,851 Cost of share-based payment - - 67 - 67
Balance as of December 31, 2014 4,978 - 190 (6,037) (869) Total comprehensive income - - - (3,515) (3,515)
Transaction with controlling shareholder and related party
-
460
- - 460
Issue of share capital 2,593 - - - 2,593
Balance as of December 31, 2015 7,571 460 190 (9,552) (1,331)
IPHOTONIX LLC
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STATEMENTS OF CASH FLOWS
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Cash flows from operating activities:
Loss (3,515) (1,779)
Adjustments to reconcile loss to net cash provided by operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization 360 341
Financial expenses 460 -
Cost of share-based payment - 67
820 408
Changes in asset and liability items:
Increase in trade receivables (1,048) (558)
Decrease (increase) in other account receivable 11 (19)
Decrease (increase) in inventories (124) 12
Increase in trade payable 1,423 405
Increase in other accounts payable 118 78
380 (82)
Cash paid and received during the year for:
Net cash used in operating activities (2,315) (1,453)
The accompanying notes are an integral part of the financial statements.
IPHOTONIX LLC
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STATEMENTS OF CASH FLOWS
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Cash flows from investing activities:
Purchase of property, plant and equipment (16) (54)
Net cash used in investing activities (16) (54)
Cash flows from financing activities:
Repayment of bank loan (26) -
Related party (70) (294)
Issue of share capital 2,018 -
Shareholders 500 1,833
Net cash provided by financing activities 2,422 1,539
Increase in cash and cash equivalents 91 32
Cash and cash equivalents at the beginning of the period 78 46
Cash and cash equivalents at the end of the period 169 78
Significant non-cash transactions: Conversion of Shareholders loan to equity - 2,851
Assets acquisitions (see note 1d) 1,868 -
The accompanying notes are an integral part of the financial statements.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
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NOTE 1:- GENERAL
a. Iphotonix LLC ("the Company") is an American Company, based in Richardson,
Texas.The inception date of the Company is January 25, 2012.
The Company is an original design manufacturer (ODM) for the telecommunication
industry. The Company's primary business is Fiber Access Solution.
Iphotonix develops and markets a line of carrier class Customer Premise Equipment
products including the world's broadest independent family of ONT products to original
equipment manufacturers (OEMs) and telecommunications services providers.
On January 26, 2012, under the investment agreement, the Company allocated to Molodan
84% of the Company's ownership units for $ 627 thousand, and for $ 400 thousand the
Company allocated to an additional investor ("Investor") 14% of the Company's ownership
units, the remaining ownership units of the Company is held by the Company's CEO (see
note 18c below).
In addition, the Company granted to the investor option to invest in the Company's capital
up to a total of an additional $ 1.1 million until the end of 2012 (the warrant). The warrant
was recorded in the Company's financial statements at its fair value in amount of $ 64
thousand.
In 2012 the investor exercised the warrant and invested in the Company's equity an
additional $ 1,100 thousand. As a result of this transaction, Molodan share in the
Company's ownership units, was diluted to 49.4% and the CEO's share was diluted to 1.2%
of the Company's ownership units.
Under the new agreement, the investor was granted the right to assign its investment in the
Company only in its entirety and not portions of such investment, to an American Company
traded in NASDAQ (the public corporation), which to the best of the Company's
knowledge, is controlled by the controlling shareholders in the investor. It was further
agreed that if the investor and/or the public corporation shall exercise the option in its
entirety, Molodan shall sell the public corporation at no consideration ownership units
representing 1% of the Company's ownership units whereas the CEO sellthe public
corporation shares representing 2.5% of the Company's against an identical consideration,
pro rata to consideration against which the investor shall sell its holdings to the public
corporation, such that the public corporation shall ultimately hold 51%, Molodan - 46.5%,
and the CEO shall hold 2.5% of the Company's ownership units (the additional warrant).
The fair value of the additional warrant is immaterial.
b. On January 26, 2012, an asset Purchase Agreement was signed between Asymblix (fka -
Iphotonix LLC), a related company (a company held by Molodan at rate of 50% where
Molodan's holdings in the Company are at a rate of 49.4% as of the balance sheet date),
and the Company. According to the agreement, the Company purchased from Asymblix in
consideration of $ 1,005 thousand the ONT business in the field of research, development,
design, manufacture and sale of end-solutions to optical network terminals, including
certain terminals and related software products.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
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NOTE 1:- GENERAL (Cont.)
Purchase Assets includes machinery and equipment, inventory and intangible assets related
to the ONT business.
ONT operations were recorded in the Company's financial statements at their fair value
according to the value of the tangible and intangible assets of the acquired operations that
were estimated by an independent external appraiser. In accordance to the purchase price
allocation, the proceeds of the acquired operations were allocated to the tangible assets that
were acquired, inventory and fixed assets and to intangible assets, technology that was
identified and measured at $ 1,196 thousand.
c. On December 3, 2013 Molodan and SAD. The Company's shareholders signed a new
agreement. SAD's holding in the Company's shares will increase from 50% to 75% and
Molodan's holding in the Company's will decrease from 50% to 25%. The shareholders will
continue to support and finance the Company accordingly to the proportionate of their
holdings.
After the balance sheet date, on March 28, 2016 the shareholders (Molodan and the
Investor) pledged to support the Company up to a total of $600 thousands in order to enable
the Company to meet its cash needs for the next 12 months. Shareholders additionally
guarantee payments to one of the Company's supplier up to a total of $1,000.
d. On March 2, 2015, the Company acquired the assets of Netsocket Inc. ("the Seller"),
American company that engaged in development of NFV technology to Network
virtualization functions.
In consideration for the acquisition the Company:
1. Issued LLC membership interest constituting 6.6% of the Company's membership
interest.
2. Issued a Convertible Promissory Note in the principal amount of $244 thousand. The
Note will be paid on the earlier of: 1) the third anniversary from the closing date or 2)
following the closing of an equity financing (i.e.: any sale by the Company of equity
securities from which the Company realized net cash proceeds in the amount of at least
$3 million).
3. A loan from bank that was expended to the seller in the amount of $1,050 thousand was
assigned to the Company. The loan will be paid in 36 installments and will bear an
interest of 5.5% (See also note 10 below).
The Company estimated the fair value of the identified intangible assets in a total amount
of $1.6 million and the goodwill in the amount of $0.2 million.
e. Definitions:
In these financial statements:
The Company - Iphotonix LLC.
Related parties - As defined in IAS 24.
Dollar - U.S. dollar.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Basis of presentation of the financial statements:
1. Measurement basis:
The Company's financial statements have been prepared on a cost basis.
The Company has elected to present profit or loss items using the function of expense
method.
2. Basis of preparation of the financial statements:
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS").
b. Significant accounting judgments, estimates and assumptions used in the preparation of the
financial statements:
Judgments:
In the process of applying the significant accounting policies, the Company has made the
following judgments which have the most significant effect on the amounts recognized in
the financial statements:
- Determining the fair value of share-based payment transactions:
The fair value of share-based payment transactions is determined using an acceptable
option-pricing model. The assumptions used in the model can include the share price,
exercise price and expected life.
Estimates and assumptions:
The preparation of the financial statements requires management to make estimates and
assumptions that have an effect on the application of the accounting policies and on the
reported amounts of assets, liabilities, revenues and expenses. These estimates and
underlying assumptions are reviewed regularly. Changes in accounting estimates are
reported in the period of the change in estimate.
c. Functional currency and foreign currency:
1. Functional currency and presentation currency:
The presentation currency of the financial statements is the U.S. dollar.
The functional currency, which is the currency that best reflects the economic
environment in which the Company operates and conducts its transactions and is
used to measure its financial position and operating results. The functional currency
of the Company is the U.S. dollar.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
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NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2. Transactions, assets and liabilities in foreign currency:
Transactions denominated in foreign currency (other than the functional currency)
are recorded on initial recognition at the exchange rate at the date of the transaction.
After initial recognition, monetary assets and liabilities denominated in foreign
currency are translated at the end of each reporting period into the functional
currency at the exchange rate at that date. Exchange differences, are recognized in
profit or loss. Non-monetary assets and liabilities measured at cost are translated at
the exchange rate at the date of the transaction.
d. Cash equivalents:
Cash equivalents are considered as highly liquid investments, including unrestricted short-
term bank deposits with an original maturity of three months or less from the date of
acquisition or with a maturity of more than three months, but which are redeemable on
demand without penalty and which form part of the Company's cash management.
e. Inventories:
Inventories are measured at the lower of cost and net realizable value. The cost of
inventories comprises costs of purchase and costs incurred in bringing the inventories to
their present location and condition. Net realizable value is the estimated selling price in
the ordinary course of business less the estimated costs of completion and the estimated
selling costs.
Cost of inventories is determined as follows:
Finished goods - on the basis of average costs.
The Company periodically evaluates the condition and age of inventories and makes
provisions for slow moving inventories accordingly.
f. 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. Impaired debts are
derecognized when they are assessed as uncollectible.
g. Financial instruments:
Financial assets:
Financial assets within the scope of IAS 39 are initially recognized at fair value plus
directly attributable transaction costs, except for investments at fair value through profit or
loss in respect of which transaction costs are recorded in profit or loss.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
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NOTE 2:-SIGNIFICANT ACCOUNTING POLICIES (Cont.)
After initial recognition, the accounting treatment of financial assets is based on their
classification as follows:
Loans and receivables:
The Company has loans and receivables that are financial assets (non-derivative) with fixed
or determinable payments that are not quoted in an active market. After initial recognition,
loans are measured based on their terms at amortized cost using the effective interest
method taking into account directly attributable transaction costs. Short-term receivables
are measured based on their terms, normally at face value.
Financial liabilities:
Financial liabilities measured at amortized cost:
Loans and borrowings are initially recognized at fair value less directly attributable
transaction costs. After initial recognition, loans are measured based on their terms at
amortized cost using the effective interest method taking into account directly attributable
transaction costs. Short-term borrowings are measured based on their terms, normally at
face value.
Derecognition of financial instruments:
Financial assets:
A financial asset is derecognized when the contractual rights to the cash flows from the
financial asset expire or the Company has transferred its contractual rights to receive cash
flows from the financial asset or assumes an obligation to pay the cash flows in full without
material delay to a third party and has transferred substantially all the risks and rewards of
the asset, or has neither transferred nor retained substantially all the risks and rewards of
the asset, but has transferred control of the asset.
Financial liabilities:
A financial liability is derecognized when it is extinguished, that is when the obligation is
discharged or cancelled or expires. A financial liability is extinguished when the debtor
(the Company):discharges the liability by paying in cash, other financial assets, goods or
services; oris legally released from the liability.
Impairment of financial assets:
The Company assesses at the end of each reporting period whether there is any objective
evidence of impairment of a financial asset or group of financial assets as follows.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Financial assets carried at amortized cost:
There is objective evidence of impairment of loans and receivables carried at amortized
cost as a result of one or more events that has occurred after the initial recognition of the
asset and that loss event has an impact on the estimated future cash flows. Evidence of
impairment may include indications that the debtor is experiencing financial difficulties,
including liquidity difficulty and default in interest or principal payments. The amount of
the loss recorded in profit or loss is measured as the difference between the asset's
carrying amount and the present value of estimated future cash flows (excluding future
credit losses that have not yet been incurred) discounted at the financial asset's original
effective interest rate (the effective interest rate computed at initial recognition).The
carrying amount of the asset is reduced through the use of an allowance account (see
allowance for doubtful accounts above). In a subsequent period, the amount of the
impairment loss is reversed if the recovery of the asset can be related objectively to an
event occurring after the impairment was recognized. The amount of the reversal, up to the
amount of any previous impairment, is recorded in profit or loss.
h. Property, plant and equipment
Property, plant and equipment are measured at cost, including directly attributable costs,
less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the useful life of the assets at annual
rates as follows:
%
Computers 33
Equipment 20
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. As for testing the impairment of property, plant and equipment, see j below.
i. Other 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 capitalized development costs, are recognized in profit or loss
when incurred.After initial recognition, intangible assets are carried at their cost less any
accumulated amortization and any accumulated impairment losses.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
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NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
According to management's assessment, intangible assets have a finite useful life. The
assets are amortized over their useful life using the straight-line method and reviewed for
impairment whenever there is an indication that the asset may be impaired. The
amortization period and the amortization method for an intangible asset with a finite useful
life are reviewed at least at each financial year end. Changes in the expected useful life or
the expected pattern of consumption of future economic benefits embodied in the asset are
accounted for prospectively as changes in accounting estimates. The amortization of
intangible assets with finite useful lives is recognized in profit or loss.
The useful life of intangible assets is as follows:
Years
Developed technology 6
IPR&D 10
j. Impairment of non-financial assets:
The Company evaluates the need to record an impairment of the carrying amount 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 recognized in profit or loss.
An impairment loss of an asset, 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
recognized. 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
amortization) had no impairment loss been recognized for the asset in prior years and its
recoverable amount. The reversal of impairment loss of an asset presented at cost is
recognized in profit or loss.
k. Share-based payment transactions:
The Company's CEO is entitled to remuneration in the form of equity-settled share-based
payment transactions.
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 using a standard
option pricing model.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 15 -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The cost of equity-settled transactions is recognized in profit or loss, together with a
corresponding increase in equity, during the period which the performance and/or service
conditions are to be satisfied, ending on the date on which the relevant employees become
fully entitled to the award ("the vesting period"). The cumulative expense recognized for
equity-settled transactions at the end of each reporting period until the vesting date reflects
the extent to which the vesting period has expired and the Group's best estimate of the
number of equity instruments that will ultimately vest. The expense or income recognized
in profit or loss represents the change between the cumulative expense recognized at the
end of the reporting period and the cumulative expense recognized at the end of the
previous reporting period.
No expense is recognized for awards that do not ultimately vest, except for awards where
vesting is conditional upon a market condition, which are treated as vesting irrespective of
whether the market condition is satisfied, provided that all other vesting conditions (service
and/or performance) are satisfied.
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 recognized as an expense over the vesting
period and a corresponding liability is recognized. The liability is remeasured at each
reporting date until settled at fair value with any changes in fair value recognized in profit
or loss.
l. Revenue recognition:
Revenues are recognized 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. Revenues are measured at the fair value of the consideration received
less any trade discounts, volume rebates and returns.
The specific criteria for revenue recognition for the following types of revenues are:
Revenues from the sale of goods:
Revenues from the sale of goods are recognized 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.
Customer discounts:
Current customer discounts are recognized in the financial statements when granted and
are deducted from sales.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 16 -
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
m. Cost of revenues and supplier discounts:
Cost of sales includes expenses for loss, storage and conveyance of inventories to the end
point of sale. Cost of sales also includes provisions for write-downs of inventories,
inventory write offs and provisions for slow-moving inventories.
n. Provisions:
Aprovision in accordance with IAS 37 is recognized when the Companyhas a present
obligation (legal or constructive) as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
NOTE 3:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION
a. IFRS 15, "Revenue from Contracts with Customers":
In May 2014, the IASB issued IFRS 15 ("IFRS 15").
IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", 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 IFRS 15 introduces a five-step model that will apply to revenue earned from contracts
with customers:
Step 1: Identify the contract with a customer, including reference to contract combination
and accounting for contract modifications.
Step 2: Identify the separate 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 using
estimates and assessments.
Step 5: Recognize revenue when the entity satisfies a performance obligation over time or
at a point in time.
IFRS 15 is to be applied retrospectively for annual periods beginning on or after January
1, 2018. Early adoption is permitted. IFRS 15 allows an entity to choose to apply a modified
retrospective approach, according to which IFRS 15 will only be applied in the current
period presented to existing contracts at the date of initial application. No restatement of
comparative periods is required.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 17 -
NOTE 3:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
The Company is evaluating the possible impact of IFRS 15 but is presently unable to assess
its effect, if any, on the financial statements.
b. Amendments to IAS 16 and IAS 38 regarding acceptable methods of depreciation and
amortization:
In May 2014, the IASB issued amendments to IAS 16 and IAS 38 ("the amendments")
regarding the use of a depreciation and amortization method based on revenue. According
to the amendments, a revenue-based method to calculate the depreciation of an asset is not
appropriate because revenue generally reflects factors other than the consumption of the
economic benefits embodied in the asset.
As for intangible assets, the revenue-based amortization method can only be applied in
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 are to be applied prospectively for annual periods beginning on or after
January 1, 2016. Early adoption is permitted.
c. IFRS 9, "Financial Instruments":
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial
Instruments" ("IFRS 9"), which replaces IAS 39, "Financial Instruments: Recognition and
Measurement". IFRS 9 mainly focuses on the classification and measurement of financial
assets and it applies to all assets in the scope of IAS 39.
According to IFRS 9, all financial assets are measured at fair value upon initial recognition.
In subsequent periods, debt instruments are measured at amortized cost only if both of the
following conditions are met:
- the asset is held within a business model whose objective is to hold assets in order
to collect the contractual cash flows.
- the contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
Subsequent measurement of all other debt instruments and financial assets should be at fair
value. IFRS 9 establishes a distinction between debt instruments to be measured at fair
value through profit or loss and debt instruments to be measured at fair value through other
comprehensive income.
Financial assets that are equity instruments should be measured in subsequent periods at
fair value and the changes recognized in profit or loss or in other comprehensive income
(loss), in accordance with the election by the Company on an instrument-by-instrument
basis. If equity instruments are held for trading, they should be measured at fair value
through profit or loss.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 18 -
NOTE 3:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition and
to financial liabilities for which the fair value option has not been elected.
According to IFRS 9, changes in fair value s of financial liabilities which are attributable
to the change in credit risk should be presented in other comprehensive income. All other
changes in fair value should be presented in profit or loss.
IFRS 9 also prescribes new hedge accounting requirements.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018. Early adoption is
permitted.
The Company is evaluating the possible impact of IFRS 9 but is presently unable to assess
its effect, if any, on the financial statements.
d. Amendments to IAS 7, "Statement of Cash Flows", regarding additional disclosures of
financial liabilities:
In January 2016, the IASB issued amendments to IAS 7, "Statement of Cash Flows", ("the
amendments") which require additional disclosures regarding financial liabilities. The
amendments require disclosure of the changes between the opening balance and the closing
balance of financial liabilities, including changes from cash flows, changes arising from
obtaining or losing control of subsidiaries, the effect of changes in foreign exchange rates
and changes in fair value.
The amendments are effective for annual periods beginning on or after January 1, 2017.
Comparative information for periods prior to the effective date of the amendments is not
required. Early application is permitted.
The Company will include the necessary disclosures in the financial statements when
applicable.
NOTE 4:- TRADE RECEIVABLES
a. Composition:
December 31,
2015 2014
U.S. dollars in thousands
Open accounts 1,711 664
Less - allowance for doubtful accounts - -
Trade receivables, net 1,711 664
Trade receivables are non-interest bearing and are generally for 30-45 day terms.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 19 -
NOTE 4:- TRADE RECEIVABLES (Cont.)
An analysis of past due but not impaired trade receivables (allowance for doubtful accounts),
trade receivables, net, with reference to reporting date:
Neither past
due nor
impaired
Total
U.S. dollars in thousands
December 31, 2015 1,711 1,711
December 31, 2014 664 664
NOTE 5:- INVENTORIES
December 31,
2015 2014
U.S. dollars in thousands
Finished goods 692 506
Row Materials 99 161
791 667
NOTE 6:- PROPERTY, PLANT AND EQUIPMENT
Computers
Office furniture
and equipment
Total
Cost: Balance as of January 1, 2015 31 521 552 Acquisitions during the year 35 11 46
Balance as of December 31, 2015 66 532 598 Accumulated depreciation: Balance as of January 1, 2015 20 348 368 Provision during the year 27 133 160
Balance as of December 31, 2015 47 481 528
Depreciated cost at December 31, 2015 19 51 70
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 20 -
NOTE 6:- PROPERTY, PLANT AND EQUIPMENT (CONT.)
Computers
Office furniture
and equipment
Total
Cost: Balance as of January 1, 2014 17 481 498 Acquisitions during the year 14 40 54
Balance as of December 31, 2014 31 521 552 Accumulated depreciation: Balance as of January 1, 2014 17 209 226 Provision during the year 3 139 142
Balance as of December 31, 2014 20 348 368
Depreciated cost at December 31, 2014 11 173 184
NOTE 7:- INTANGIBLE ASSETS
December 31,
2015 2014
U.S. dollars in thousands
Cost 2,818 1,196
Accumulated amortizations 781 581
Balance as of December 31 2,037 615
The intangible assets are being depreciated over a period of 6 years.
NOTE 8:- TRADE PAYABLES
December 31,
2015 2014
U.S. dollars in thousands
Open debts 2,147 733
Notes payable 12 3
2,159 736
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 21 -
NOTE 9:- OTHER ACCOUNTS PAYABLE
December 31,
2015 2014
U.S. dollars in thousands
Employees and payroll accruals 62 70
Warranty accrual 100 28
Deffered expenses 35 6
Other payables 97 73
294 177
NOTE 10:- LOAN FROM BANK
a. Composition:
December 31
2015 2014
U.S. dollars in thousands
Loan from bank 1,023 -
Less - current maturities (236) -
787 -
b. Covenants:
On March 2, 2015 the Company signed a loan agreement with Comerica bank. In
accordance to the loan agreement the Company is obligated to maintain a minimum balance
of cash at bank of not less 125$ thousands.
As of December 31, 2015, the Company is meeting its covenants.
NOTE 11:- EQUITY
a. Composition:
December 31, 2015 and 2014
Ownership Units
Authorized
Issued and
outstanding
Ownership Units 10,000,000 4,918,065
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 22 -
NOTE 11:- EQUITY (CONT.)
b. Unit Appreciation Right (UAR) bonus plan:
iPhotonix LLC established a Unit Appreciation Right (UAR) bonus plan for employees.
The UAR vests if grantee is employed by the Company on the date of a corporate change
of control at which time the grantee will become fully vested in his or her award. The UARs
expire on the earlier 5 years from the date of grant or date of a corporate change of control
if the fair market value of an ownership unit on such date is less than the grant benchmark
value.
As of December 31, 2015, 617,857 UARs were granted.
Upon exercise, grantee is entitled to receive an amount payable for each Unit Appreciation
Right equal to the excess of the Fair Market Value of a share of Ownership Units on the
date of Exercise over the Grant Benchmark value of a share of Ownership Units on the date
of Grant.
The Company estimates that the probability of a Corporate Change, in the next 5 years is
less than 50%. No liability was recognized in the Company's financial statements.
NOTE 12:- COST OF SALES
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Materials 5,378 4,552
Support 53 -
Freight 321 311
Warranty expenses 41 63
Other expenses 46 12
5,839 4,938
NOTE 13:- RESEARCH AND DEVELOPMENT
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Wages, salaries and related expenses 2,505 1,709
Contract labor 78 44
Engineering Prototypes 11 15
Depreciation and amortization 360 341
Other 510 248
3,464 2,357
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 23 -
NOTE 14:- SELLING AND MARKETING EXPENSES
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Wages, salaries and related expenses 444 371
Others 222 155
666 526
NOTE 15:- GENERAL AND ADMINISTRATIVE EXPENSES
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Wages, salaries and related expenses 656 702
Rental and maintenance 176 176
Professional fees 139 106
Others 220 245
1,191 1,229
NOTE 16:- FINANCE EXPENSES
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Interest expense 526 13
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 24 -
NOTE 17:- FINANCIAL INSTRUMENTS
a. Classification of financial assets and liabilities:
The financial assets and financial liabilities in the statement of financial position are
classified by groups of financial instruments pursuant to IAS 39:
December 31,
2015 2014
U.S. dollars in thousands
Financial assets:
Loans and receivables 1,711 664
Financial liabilities:
Financial liabilities measured at amortized cost 6,187 3,026
b. Financial risks factors:
The Company's activities expose it to various financial risks such as credit risk and liquidity
risk.
1. Credit risk:
The Company extends a 30-60 day term to its customers. The Company regularly
monitors the credit extended to its customers and their general financial condition
but does not require collateral as security for these receivables. The Company does
not provide an allowance for doubtful accounts as no accounts have been
uncollectable and all accounts receivable were current at year end.
2. Liquidity risk:
The Company monitors its risk to a shortage of funds using weekly budget and cash
flow tools. Capital calls are made as needed to provide the liquidity the Company
needs to meet its obligations.
December 31, 2015:
Less than one
year 1 to 2 years
2 to 3 years
Not yet determine Total
U.S. dollars in thousands Trade payables 2,159 - - - 2,159 Other account payable 40 - - - 40 Loan from Bank 236 604 183 - 1,023 Shareholders - - - 800 800 Related party - - - 1,913 1,913 Other non-current liabilities - - 244 - 244 2,435 604 427 2,713 6,179
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 25 -
NOTE 17:- FINANCIAL INSTRUMENTS (Cont.)
December 31, 2014:
Less than one
year
Not yet
determine
U.S. dollars in thousands
Trade payables 736 -
Other account payable 7 -
Shareholders - 300
Related party - 1,983
743 2,283
c. Fair value:
Carrying amount Fair value
December 31, December 31,
2015 2014 2015 2014
U.S. dollars in
thousands
U.S. dollars in
thousands
Financial liabilities:
Loan from Bank (1,023) - (1,023) -
Shareholders (800) (300) (350) (208)
Related party (1,913) (1,983) (1,057) (1,147)
The carrying amount of cash and cash equivalents, trade receivables, other accounts
receivable, related party balance, trade payables, other accounts payable and other non-
current liabilities approximate their fair value.
NOTE 18:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
a. Balances with related parties:
December 31,
2015 2014
U.S. dollars in thousands
Related party- Shareholders (1) (800) (300)
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 26 -
Related party- Fellow subsidiary (2) (1,913) (1,983)
Key management employees (9) (1)
(1) See also Note 1(c).
(2) During 2013, a related party granted the Company a loan in the amount of
approximately $ 2.3 million. The repayment period has not yet been determined.
IPHOTONIX LLC
NOTES TO FINANCIAL STATEMENTS
- 27 -
NOTE 18:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
b. Transactions with related parties:
Year ended
December 31,
2015 2014
U.S. dollars in thousands
Purchases of inventory from a fellow subsidiary - 152
Services provided by a fellow subsidiary 31 16
Key management employees 176 179
c. On January 26, 2012, the Company allocated in favor of the CEO participation units
representing, on the grant date, 2% of the Company's ownership units. Furthermore,
additional participation units were allocated for the CEO that are blocked participation units
and held by a trustee, under an incentive plan for the CEO, which shall be released in
installments subject to the plan's conditions and the continued employment of the CEO
over three years. Under the plan's conditions, it was determined, among others, that on
January 1, 2013 an adjustment of the participation units quantity issued to the CEO shall
be performed such that as of that date, he shall hold participation units representing 3% of
the Company's ownership units and in the blocked participation units (held by a trustee)
representing 2% of the Company's ownership units and in the aggregate no more than 5%
of the Company's ownership units. The fair value of the participation units allocated to the
Company's CEO is $ 130 thousand. The Company's financial statements for the year ended
December 31, 2014 include an expense of $ 7 thousand in respect of this grant.
On January 14, 2014, the Company allocated in favor of the CEO additional participation
units representing, on the grant date, 2.5% of the Company's ownership units. Furthermore,
additional options were allocated for the CEO representing 2.5% of the Company's
ownership units. Under the plan's conditions, it was determined, that the participation units
and options will be vested on the day of the grant and will be forfeited if the CEO will leave
the Company prior to event of change of control.
The fair value of the participation units and options allocated to the Company's CEO is
$ 60 thousand. The Company's financial statements for the year ended December 31, 2014
include an expense of $ 60 thousand in respect of this grant.
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