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Emblaze Ltd (LSE:BLZ) ("Emblaze" or "the Company") Company Update Interim Management Statement Tel Aviv, Israel, 30 May, 2014 Interim Management Statement and Q1 Financial Statements During the period commencing 1 January 2014 to 29 May 2014 (the "RelevantPeriod"), the Company has undergone several events and transactions. A summaryof the material events and transactions that have taken place during theRelevant Period are set out below: Highlights - Revenues amounted to $28 thousand for the period of three months ending 31March 2014 (Q1.2013: $600 thousand). The balance of cash and cash equivalent,short term investments and deposits in trust, as of 31 March 2014 is $138,921thousand (2013: $159,617 thousand). - The total issued share capital of the Company as at 29 May 2014 was140,578,154 of which 109,990,252 ordinary shares are outstanding and30,587,902 shares are held in treasury. - In August 2013, a consortium of investors led by the Company announced itsintention to acquire a controlling stake in IDB Holdings Ltd, one of Israel'slargest holding companies, in consideration of an aggregate payment ofNIS1,580 million. As such proposed transaction was classified as a reversetakeover under the listing rules made by the UK Listing Authority ("UKLA")pursuant to Part VI of the Financial Services and Markets Act 2000 (asamended) ("FSMA") (the "Listing Rules"), trading in the Company's shares wassuspended on 15 August 2013 and restored on 9 January 2014, following theIsraeli 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 ofthe Company's ordinary shares to acquire 5% of the voting rights in theCompany at a price per share equal to £0.75. On 28 January 2014 the Offer wassuccessfully completed and the BGI Group purchased an additional 5% of thevoting rights in the Company. (See Company announcements dated 13 January 2014, 16 January 2014, 24 January2014 and 29 January 2014) - Following the success of the Offer, the BGI Group together with Israel 18B.V., BGI's parent company (together, the "Extended BGI Group") is entitled toexercise call options it has acquired. Upon the exercise of said call options,the Extended BGI Group will own shares, representing approximately 44.1% ofthe Company's Capital. In the meantime, following the grant of proxies made byMr. Naftali Shani and Fortissimo Capital Management Ltd., amongst others,originally in favour of Israel 18 B.V., and in light of the shareholdersagreement entered into between the members of the extended BGI Group, the BGIGroup is entitled to vote the shares representing the Options not yetexercised, representing 13.55% of the Company's Capital. (See Company announcements dated 11 February 2014, 14 February 2014, 20February 2014 ,24 February 2014 ,21 March 2014 ,27 March 2014 and 29 April2014) - Mr. Amnon Ben-Shay, who was appointed as a director of the Company on 14August 2013, submitted his resignation from the board of directors of Emblaze(the "Board") on 12 January, 2014, due to other commitments preventing himfrom 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 ZwiWilliger ("ZW") and Joseph Williger ("JW" and, together with ZW, the"Sellers") a controlling stake in the share capital of Willi-Food InvestmentsLtd. ("WFI"), a company listed on the Tel Aviv Stock Exchange, which in turnowns approximately 58% of G Willi-Food International Ltd ("WFINT" and togetherwith WFI, "Willi-Food"), a company listed on NASDAQ. Under the agreement, theCompany: (i) acquired the Sellers' entire shareholdings in WFI, amounting inaggregate to 58 % of the shares of WFI (or approximately 55% on a fullydiluted basis); and (ii) published a special tender offer (the "Special TenderOffer") addressed to all shareholders of WFI (including the Sellers) inaccordance with Israeli Companies Law in order to acquire additional sharescarrying 5% of the voting rights in WFI. The Special Tender Offer wascompleted on 1 May 2014 and the transaction completed on 4 May 2014. Followingsuch completion, the Company acquired in aggregate 61.65%of the issued sharecapital of WFI (62.27% of its voting rights), for aggregate consideration ofNIS284.7 million (U.S. $82.3 million). (See Company announcements dated 3 March 2014, 7 April 2014, 28 April 2014 ,1May 2014 and 7 May 2014) Trading The acquisition of the abovementioned stake in WFI is deemed a reversetakeover under the Listing Rules and trading in the Company's shares wasaccordingly suspended on 3 March, 2014. It is expected that such suspensionwill be lifted upon the publication of a prospectus by the Company inconnection with the requirement on it to re-apply for the listing of itsshares following completion of the transaction. The Company is currently inthe process of preparing the prospectus. Until the Company has completed theformal application process and satisfied the UKLA as to its eligibility, thereis no certainty that the UKLA will approve the re-listing of the Company'sshares to trading on the Standard List. In such circumstances, the Companywould cease to be listed although the board would actively explore thepossibility of moving to AIM or an alternative listing or admission venue. Intellectual Property In July 2010, Emblaze filed a complaint against Apple Inc. ("Apple") forinfringement of the Company's U.S. Patent No. 6,389,473 through Apple's HTTPLive Streaming protocol used in Apple products such as iPhones and iPads. Thejury trial in this case has been rescheduled to take place in June 2014. In October 2012, the Company filed a complaint for patent infringement againstMicrosoft Corporation ("Microsoft"). The complaint asserts that Microsoft'sIIS Smooth Streaming system infringes Emblaze's U.S. patent No. 6,389,473 formedia streaming technology. Legal proceedings in these two cases are ongoing. Jossef Schneorson, CEO, commented: "We are committed to actively seek to utilisethe Company's resources in order to maximise value for its shareholders. We arehoping and believe that the acquisition of WFI will be a good and solid investmentfor Emblaze shareholders". Enquiries: Eyal Merdler Eyal.merdler@emblaze.comEmblaze Ltd. Emblaze Ltd. is traded on the London Stock Exchange (LSE: BLZ) since 1996.www.emblaze.com EMBLAZE LTD. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF 31 MARCH 2014 UNAUDITED IN U.S. DOLLARS INDEX Page Report on Review of Interim Condensed Consolidated FinancialStatements 4 Interim Condensed Consolidated Statements of Financial Position 5 - 6 Interim Condensed Consolidated Statements of Profit or Loss andOther Comprehensive Income 7 Interim Condensed Consolidated Statements of Changes in Equity 8 - 9 Interim Condensed Consolidated Statements of Cash Flows 10 - 11 Notes to Interim Condensed Consolidated Financial Statements 12 - 14 - - - - - - - - - - - - - - - Report on Review of Interim Condensed Consolidated Financial Statements Board of DirectorsEmblaze Ltd. Introduction We have reviewed the accompanying interim condensed consolidated statement offinancial position of Emblaze Ltd. and its subsidiaries ("the Group") as of 31March 2014 and the related interim condensed consolidated statements of profitor loss and other comprehensive income, changes in equity and cash flows forthe three month period then ended and explanatory notes. Management isresponsible for the preparation and presentation of these interim condensedconsolidated financial statements in accordance with IAS 34, "InterimFinancial Reporting ("IAS 34"). Our responsibility is to express a conclusionon these interim condensed consolidated financial statements based on ourreview. Scope of review We conducted our review in accordance with International Standard on ReviewEngagements 2410, Review of Interim Financial Information Performed by theIndependent Auditor of the Entity. A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financialand accounting matters, and applying analytical and other review procedures. Areview is substantially less in scope than an audit conducted in accordancewith International Standards on Auditing and consequently does not enable usto obtain assurance that we would become aware of all significant matters thatmight be identified in an audit. Accordingly, we do not express an auditopinion. Conclusion Based on our review, nothing has come to our attention that causes us tobelieve that the accompanying interim condensed consolidated financialstatements are not prepared, in all material respects, in accordance with IAS34. Beer-Sheva, Israel KOST FORER GABBAY & KASIERER A Member of Ernst & Young29 May 2014 Global INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 31 March 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousandsASSETS CURRENT ASSETS:Cash and cash equivalents 15,195 21,696 2,957Short-term deposits 41,301 102,248 16,242Short-term deposits held in trust 82,425 - 140,418Financial assets at fair value through profit orloss - 20,300 -Available for sale financial assets 230 215 206Prepaid expenses and other receivables 710 1,873 552 Total current assets 139,861 146,332 160,375 NON-CURRENT ASSETS: Equipment, net 64 63 67 Total assets 139,925 146,395 160,442 The accompanying notes are an integral part of the interim condensedconsolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 31 March 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousandsLIABILITIES AND EQUITY CURRENT LIABILITIES:Trade payables 323 146 699Deferred revenues and accrued expenses 1,520 3,677 1,990Short-term loan - - 18,813 Total current liabilities 1,843 3,823 21,502 NON-CURRENT LIABILITIES: Employee benefit liabilities, net 41 24 40 EQUITY:Share capital 416 416 416Share premium 469,927 469,922 469,925Treasury shares (76,962) (76,300) (76,962)Available for sale reserve 148 132 123Accumulated deficit (255,048) (251,261) (254,189) Equity attributable to Company's equity holders 138,481 142,909 139,313 Non- controlling interests (440) (361) (413) Total equity 138,041 142,548 138,900 Total liabilities and equity 139,925 146,395 160,442 The accompanying notes are an integral part of the interim condensed consolidated financial statements. 29 May 2014Date of approval of the Abraham Wolff Israel Jossef Schneorson Eyal Merdlerfinancial statements Chairman of the CEO and Vice CFO Board Chairman of the Board INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE INCOME Three months ended Year ended 31 March 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousands (except earnings (loss) per share) Revenues 28 600 1,882Cost of sales 28 116 449 Gross profit - 484 1,433 Operating expenses:Research and development 317 438 1,562Selling and marketing - 120 134General and administrative 1,468 652 7,095 Total operating expenses 1,785 1,210 8,791 Operating loss (1,785) (726) (7,358) Financial income 911 558 5,208Financial expense (12) (31) (846) Loss from continuing operations (886) (199) (2,996)Income from discontinued operations, net - 267 181 Net income (loss) (886) 68 (2,815) Other comprehensive income (loss) to bereclassified to profit or loss in subsequentperiods : Gain (loss) from available-for-sale financialassets 25 - (9) Other comprehensive income (loss) not to bereclassified to profit or loss in subsequentperiods : Remeasurement loss from defined benefit plans - - (97) Total other comprehensive income (loss) 25 - (106) Total comprehensive income (loss) (861) 68 (2,921) Net income (loss) attributable to:Equity holders of the Company (859) 85 (2,746)Non- controlling interests (27) (17) (69) Net income (loss) (886) 68 (2,815)Total comprehensive income (loss) attributableto: Equity holders of the Company (834) 85 (2,852)Non- controlling interests (27) (17) (69) Total comprehensive loss (861) 68 (2,921) Basic and diluted net earnings per shareattributable to Company's equity holders (in U.Sdollars):Income (loss) from continuing operations (0.01) (*- (0.03)Income from discontinued operations - (*- (*- Net earnings (loss) per share (0.01) - (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 Available- Non- Share Share Treasury for-sale Accumulated controlling Total capital premium shares reserve deficit Total interests equity U.S. dollars in thousands Unaudited Balance as of 1 January2014 (audited) 416 469,925 (76,962) 123 (254,189) 139,313 (413) 138,900 Loss - - - - (859) (859) (27) (886)Other comprehensiveincome - - - 25 - 25 - 25Total comprehensiveincome (loss) - - - 25 (859) (834) (27) (861) Cost of share basedpayment - 2 - - - 2 - 2 Balance as of 31 March2014 416 469,927 (76,962) 148 (255,048) 138,481 (440) 138,041 Attributable to equity holders of the Company Available- Non- Share Share Treasury for-sale Accumulated controlling Total capital premium shares reserve deficit Total interests equity U.S. dollars in thousands Unaudited Balance as of 1 January2013 (audited) 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494 Income (loss) - - - - 85 85 (17) 68Total comprehensiveincome (loss) - - - - 85 85 (17) 68 Cost of share basedpayment - 11 - - - 11 - 11Purchase of treasuryshares - - (25) - - (25) - (25) Balance as of 31 March2013 416 469,922 (76,300) 132 (251,261) 142,909 (361) 142,548 The accompanying notes are an integral part of the interim condensed consolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Attributed to equity holders of the Company Available- Non- Share Share Treasury for-sale Accumulated controlling Total capital premium shares reserve deficit Total interests equity U.S. dollars in thousands Audited Balance as of 1 January2013 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494 Loss - - - - (2,746) (2,746) (69) (2,815)Other comprehensive loss - - - (9) (97) (106) - (106) Total comprehensive loss - - - (9) (2,843) (2,852) (69) (2,921) Cost of share- basedpayment - 14 - - - 14 - 14Purchase of treasury stock - - (687) - - (687) - (687) Balance as of 31 December2013 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 Three months ended Year ended 31 March 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousands Cash flows from operating activities: Net income (loss) (886) 68 (2,815)Less - income from discontinued operations - 267 181 Loss from continuing operations (886) (199) (2,996) Adjustments to reconcile loss from continuingoperations to net cash provided by (used in)operating activities :Depreciation 9 7 31Loss on disposal of fixed assets 12 - -Employee benefit liabilities, net (41) (10) -Cost of share-based payment 2 11 14Change in financial assets at fair value throughprofit or loss - 25 432Interest income (293) - (1,863)Interest expense on short-term loan 7 (536) 86Exchange rate differences on deposit andshort-term loan (611) - (3,438) (915) (503) (4,738) Changes in asset and liability items:Decrease (increase) in receivables and prepaidexpenses 83 (323) 494Decrease in trade payables, other payables andaccrued expenses (804) (21) (1,468) (721) (344) (974) Cash received (paid) during the period:Interest received 52 645 2,450Interest paid (92) - - (40) 645 2,450 Net cash used in operating activities fromcontinuing operations (2,562) (401) (6,258)Net cash used in operating activities fromdiscontinued operations - (190) (189) Net cash used in operating activities (2,562) (591) (6,447) The accompanying notes are an integral part of the interim condensedconsolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three months ended Year ended 31 March 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousands Cash flows from investing activities: Purchase of property and equipment (18) (3) (31)Maturing of (investment in) short-termdeposits, net (24,516) 19,947 105,953Withdrawal of (investment in) deposit held intrust 39,334 - (118,253)Purchase of financial assets at fair valuethrough profit or loss - (8,368) (13,352)Proceeds from sale of financial assets at fairvalue through profit or loss and available forsale financial assets - 1,403 26,441 Net cash provided by investing activities fromcontinuing operations 14,800 12,979 758 Cash flows from financing activities: Purchase of treasury shares - (25) (687) Net cash used in financing activities fromcontinuing operations - (25) (687) Net increase (decrease) in cash and cashequivalents 12,238 12,363 (6,376)Cash and cash equivalents at the beginning ofthe period 2,957 9,333 9,333 Cash and cash equivalents at the end of theperiod 15,195 21,696 2,957 Non-cash transactions:Proceeds of short-term loan invested indeposit held in trust - - 18,393Repayment of short-term loan from deposit heldin trust (18,727) - - The accompanying notes are an integral part of the interim condensedconsolidated financial statements. NOTE 1:- GENERAL Emblaze Ltd. ("Emblaze" or "the Company") is a corporationregistered in Israel. As at the reporting date, the Company's shares arelisted for trading on the Official List of the London Stock Exchange ("LSE")under the symbol BLZ. See Note 3 for details of suspension of trading in theCompany's shares. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation of the interim consolidated financialstatements: The interim condensed consolidated financial statements for three months ended31 March 2014 have been prepared in accordance with IAS 34, Interim FinancialReporting. The interim condensed consolidated financial statements do notinclude all the information and disclosures required in the annual financialstatements, and should be read in conjunction with the Group's annualfinancial statements as at 31 December 2013. b. New standards, interpretations and amendments adopted by the Company: The accounting policies adopted in the preparation of the interim condensedconsolidated financial statements are consistent with those followed in thepreparation of the Company's consolidated annual financial statements for theyear ended 31 December 2013, except for the adoption of new standards andinterpretations effective as of 1 January 2014. The nature and the impact of each new standard or amendment adopted aredescribed below: Offsetting Financial Asses and Financial Liabilities - Amendments to IAS 32 These amendments clarify the meaning of "currently has a legally enforceableright to set-off" and the criteria for non-simultaneous settlement mechanismsof clearing houses to qualify for offsetting. These amendments have no impacton the Company. NOTE 3:- SUPPLEMENTARY INFORMATION Shares purchase agreement Willi-Food Investment Ltd. 1. On 2 March 2014, the Company entered into an agreement (the "WFIAgreement") to acquire from Zwi Williger ("ZW") and Joseph Williger ("JW" and,together with ZW, the "Sellers") a controlling stake in the share capital ofWilli-Food Investments Ltd. ("WFI"), a company listed on the Tel Aviv StockExchange, which in turn owns approximately 58% of G. Willi-Food InternationalLtd ("WFINT" and together with WFI, "Willi-Food"), a company listed on NASDAQ(the "Acquisition"). Under the WFI Agreement, the Company: (i) acquired theSellers' entire shareholdings in WFI, amounting in aggregate to 58 % of theshares of WFI (or approximately 55% on a fully diluted basis); and (ii)published a special tender offer (the "Special Tender Offer") addressed to allshareholders of WFI (including the Sellers) in accordance with IsraeliCompanies Law in order to acquire additional shares carrying 5% of the votingrights in WFI. NOTE 3:- SUPPLEMENTARY INFORMATION (Cont.) Shares purchase agreement Willi-Food Investment Ltd. (Cont.) The Special Tender Offer was completed on 1 May 2014 and the Acquisitioncompleted on 4 May 2014. Following such completion, the Company acquired inaggregate 61.65% of the issued share capital of WFI (62.27% of its votingrights), for aggregate cash consideration of NIS 284.7 million (U.S. $82.3million). Upon the Acquisition, the Company nominated directors which comprisethe majority of the board of directors of both WFI and WFINT. 2. Under the WFI Agreement, the Company granted the Sellers a put option tosell all or some of their shares in WFINT (whether held (3.89%) on the date ofthe WFI Agreement or those which they may hold following the exercise ofemployee options in WFINT) which amount to approximately 7% of the shares ofWFINT on a fully diluted basis (the "WFINT Put Option Shares" and the "WFINTPut Option" respectively). The WFINT Put Option is exercisable by the Sellersfor a period of four years commencing 11 months from completion of theAcquisition, at a price of US$12 per share. The Company was granted a power ofattorney which enables it to procure the Sellers to sell their WFINT shares toa third party at a price per share not below US$12, subject to compliance withapplicable laws, during the WFINT Put Option exercise period. The power ofattorney may be cancelled by the Sellers at any time during that period,although such cancellation would lead to the immediate cancellation of theWFINT Put Option in respect of such WFINT Put Option Shares. The Sellersgranted the Company an irrevocable proxy with respect to their holdings inWFINT, so as to allow the Company to vote such shares at shareholders'meetings of WFINT during the period commencing on completion of theAcquisition and expiring on the exercise or expiry of the WFINT Put Option. 3. Under the WFI Agreement, the Sellers agreed to continue to be engaged byWFINT as chairman of the board of WFINT (in respect of Zvi Williger) andpresident of WFINT (in respect of Joseph Williger), or as joint chiefexecutive officers of WFI, for an additional period of between 18 months andthree years commencing upon termination of their current service agreementswith WFINT (September 2014). Subject to further agreement between the partiesand to applicable law, the Sellers may continue their respective engagementfollowing such period. In addition, each of the Sellers is prohibited fromcompeting against Willi-Food in any material way, subject to certain agreedexceptions, for an additional period commencing on the termination of hisrespective engagement with WFINT and terminating on the later of two yearsfrom such termination, or four years from completion of the Acquisition. TheCompany requested the approval of the Israeli Anti-trust Authorities to extentthe non-competition period to six years from the completion date. Inconsideration of such non-compete undertakings, each of the Sellers isentitled to an additional annual payment of NIS 1.5 million (approximately US$0.4 million) following termination of his respective engagement, to be paidby the Company and subject to applicable law. NOTE 3:- SUPPLEMENTARY INFORMATION (Cont.) Shares purchase agreement Willi-Food Investment Ltd. (Cont.) 4. Due to the extent of the trading activities acquired in relation to theexisting activities of the Group, the Acquisition is deemed a reverse takeoverunder the listing rules of the UK Listing Authority ("UKLA"), and trading inthe Company's shares was accordingly suspended on 3 March 2014. It is expectedthat such suspension will be lifted upon the publication of a prospectus bythe Company in connection with the Company's application for the readmissionof its shares for trading following completion of the Acquisition. The Companyis currently in the process of preparing the prospectus. The application forthe readmission is subject to the approval of the UKLA. 5. The Company will account for the Acquisition as a businesscombination and will begin consolidating the financial statements of WFI fromthe completion date of the Transaction on 4 May 2014. The Company has elected to measure the non- controlling interestsin WFI at fair value. The fair value of the non- controlling interest in WFIis based on the quoted market price of the shares of WIFI on the completiondate. As of the date of the approval of the financial statements, thevaluation by an independent valuation specialist of the fair value of theassets acquired and liabilities assumed in the business combination has notyet been finalized. Based on a provisional valuation, which is subject tochange, the Company estimates that goodwill arising on the acquisition willamount to approximately US $23 million. - - - - - - - - - - - - - - - - - - -