BSD.L Regulatory News (BSD)

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 andtransactions. A summary of the material events and transactions that havetaken place during the Relevant Period are set out below: Highlights - Revenues amounted to $38,604 thousand for the period of nine (9) monthsending 30 September 2014 (equivalent period in 2013: $1,587 thousand). Thebalance of cash and cash equivalent, short term investments and deposits(Including investment in a fund designated at fair value through profit orloss and financial assets at fair value through profit or loss), as of 30September 2014 was $138,189 thousand (31 December 2013: $159,823 thousand).The total assets, as of 30 September 2014 were $228,078 thousand (31 December2013: $160,442 thousand). The significant change is due to the purchase of thecontrolling stake in the share capital of Willi-Food Investments Ltd asexplained below. - The total issued share capital of the Company as at 27 November 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 Holding Corporation Ltd., oneof Israel's largest holding companies, in consideration of an aggregatepayment of NIS1,580 million. As such proposed transaction was classified as areverse 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 shareswas suspended 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 entitledto exercise call options it has acquired. Upon the exercise of said calloptions, the Extended BGI Group will own shares, representing approximately44.1% of the Company's Capital. In the meantime, following the grant ofproxies made by Mr. Naftali Shani and Fortissimo Capital Management Ltd,amongst others, to Israel 18 and pursuant to the shareholders agreementbetween the members of Extended BGI Group, BGI is entitled to vote the sharesrepresenting the Options not yet exercised, representing 13.55% of theCompany'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 theCompany (the "Board") on 12 January, 2014, due to other commitments preventinghim 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 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 (part of whichwas acquired through a special tender offer as set out below), amounting inaggregate to 58% of the shares of WFI (or approximately 55% on a fully dilutedbasis); and (ii) published a special tender offer (the "Special Tender Offer")addressed to all shareholders of WFI (including the Sellers) in accordancewith 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 May2014 and the transaction completed on 4 May 2014 (the "Completion Date").Following such completion, the Company acquired in aggregate 61.65% of theissued share capital of WFI (62.21% of its voting rights), for aggregateconsideration of NIS284.7 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 and Company prospectus published on 29 July, 2014) The Sellers have agreed to continue to be engaged by WFINT as chairman of theboard 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 ofthe Sellers is prohibited from competing against Willi-Food in any materialway, subject to certain agreed exceptions, for an additional period commencingon the termination of his respective engagement with WFINT and terminating onthe later of two years from such termination, or four years from completion ofthe Acquisition but not longer than five (5) years from the completion date.In consideration of such non-compete undertakings, each of the Sellers isentitled to an additional annual payment of NIS1.5 million (approximately£0.25 million) per year following termination of his respective engagement, tobe 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 reversetakeover under the Listing Rules and trading in the Company's shares wasaccordingly suspended on 3 March, 2014. Following the publication of aprospectus by the Company on 29 July, 2014 in connection with the requirementon it to re-apply for the listing of its shares following completion of thetransaction, such suspension was lifted on 4 August 2014 and the Company'sshares were re-admitted to trading on the Standard List of the main market ofthe London Stock Exchange. In accordance with a resolution passed at the Company's annual general meetingheld on 3 July 2014, the Company's name was changed from Emblaze Ltd. to B.S.DCrown Ltd., with effect from 5 August 2014. On 12 August 2014 the change ofname 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 ofthe shares of WFI since the date of the Company's investment therein (May2014), coupled with the current state of the Israeli food industry in general,may be considered to indicate an impairment of goodwill in relation to theCompany's investment in Willi-Food. As a result of these developments, theCompany appointed an independent appraiser to determine the value of theCompany's investment in Willi-Food on a discounted cash-flow basis as ofSeptember 30, 2014. On the basis of such appraiser's conclusion that therecoverable value of said investment significantly exceeds its carrying value,the Company does not believe there is a need to recognise an impairment lossin the financial accounts of the Company. Management In an extraordinary general meeting held on 8 September 2014, the Company'sshareholders approved the terms of service of Mr Israel Jossef Schneorson, thechief executive officer (the "Shneorson Agreement") (which was then subject tothe approval of the shareholders of BGI which approval was obtained on 5October 2014), the terms of employment of Mr Eyal Merdler, the chief financialofficer, and an agreement between the Company and BGI (the "BGI ManagementAgreement") pursuant to which the Company will provide certain services toBGI, including the services of a chief executive officer, chief financialofficer, controller, bookkeeper and administrative services for monthly fee ofNIS 35 thousands (approximately USD 9 thousands). As such, the Company paid BGI a one-off fee of USD 660 thousand in relation tothe services provided to the Company by the chief executive officer and chieffinancial officer between 14 August 2013 and 8 September 2014 and servicesprovided to the Company by the corporate secretary, controller, bookkeepingand certain administrative staff of BGI between 1 January 2014 and 8 September2014. (See Company prospectus published on 8 September, 2014) Intellectual Property In July 2010, BSD 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. On11 July, 2014 and the jury found that BSD's U.S. Patent Number 6,389,473 isvalid, but also found that Apple Inc. did not infringe the patent. On 8 August 2014 the Company filed motions with the original judge hearing theclaim (i) for a judgment as a matter of law that, contrary to the jury'sverdict of 14 July 2014, the Company's U.S. Patent Number 6,389,473 for mediastreaming 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 lawthat, if the court grants the judgment as a matter of law filed by BSD or themotion for new trial filed by BSD, then Apple also requests that the courtgrant a judgment as a matter of law that the asserted claims of the Company'sU.S. Patent Number 6,389,473 for media streaming are invalid and/or grant anew trial on the invalidity of the asserted claims. The court has scheduled a hearing regarding BSD's and Apple's respectivemotions 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 againstMicrosoft Corporation ("Microsoft"). The complaint asserts that Microsoft'sIIS Smooth Streaming system infringes BSD's U.S. patent No. 6,389,473 formedia streaming technology. Legal proceedings in these cases are ongoing. Part Settlement of Claims In October 2014, the Company entered into agreements to settle certainoutstanding claims made against it and disclosed in the prospectus publishedby the Company on 29 July, 2014 and the financial statements of the company asof 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 certainclaims, all in connection with the bankruptcy of Mr Eli Reifman, one of thefounders and a former director of the Company. In April 2012, two of Mr Reifman's creditors filed a claim (the "April 2012Claim") against attorneys who represented them in a transaction with MrReifman and as part of this claim, the two creditors also named the Companyand several of its past directors, as well as a Company's external legaladviser and its auditors, as defendants. The claim amounted to NIS 73.3million (approximately GBP 12.1 million). In June 2012, several creditors of Mr Reifman filed a claim against theCompany, several of its past directors as well as against a Company's externallegal adviser and its auditors (the "June 2012 Claim"). Following thedismissal of the claims of certain such creditors, the outstanding aggregatevalue of the June 2012 Claim amounted to of NIS 81.8 million (approximatelyGBP 13.5 million). Pursuant to the Settlement Agreements, following contributions from theCompany's Directors & Officers Liability insurers, the Company has agreed topay, without admitting to any legal liability, (i) NIS 1.975 million(approximately GBP 0.3 million at present value) in consideration of the fulland final settlement of the April 2012 Claim; and (ii) an amount of NIS 4.2million (approximately GBP 0.7 million) in consideration of the full and finalsettlement of claims representing NIS 69.9 million (approximately GBP 11.6million) of the June 2012 Claim. The Company included a provision in thefinancial statements as of 30 September 2014 in the total amount of GBP 1.05million. In addition, the Company has been informed in relation to the claim describedin paragraph 14.1.4 of Part 8 of the prospectus published by the Company on 29July, 2014 that the Company and several of its past directors were joined asdirect defendants by one of the creditors who filed the original claim, andthat the aggregate amount claimed from the Company and said past-directors hasbeen updated to NIS 22.4 million (approximately GBP 3.7 million). The Companyis considering the amended claim and it yet to submit its amended statement ofdefence. Subsequent to completion of the Settlement Agreements and the amendment of theclaim as described above, the outstanding amounts pursuant to claims filedagainst the Company in respect of Mr Reifman, amount to approximately NIS 30million (approximately GBP 5 million). The Company's legal advisors are of the opinion that the risks of success ofthese claims against the Company are remote. Jossef Schneorson, CEO, commented: "The Company's consolidated financialstatements as of 30 September 2014 demonstrate significant cash and cashequivalent resources and a total owners' equity to total assets ratio of 86%.These parameters are clear indicators of the Company's financial stability. Inlight of its actual results, the directors and management consider that theCompany's current share price does not duly reflect its performance and thereal value of its assets. We believe that the company will have positiveresults in the following years due to its solid investment in WFI and itsstrong cash and cash equivalent resources which enable it to continue itsstrategy of acquisitions and growth through active participation in themanagement of its subsidiaries." A copy of the half yearly financial statements will also be available forinspection on the Company's website, www.bsd-c.com and will be sent forpublication at the Financial Conduct Authority's National Storage Mechanismwhich can be accessed at www.morningstar.co.uk/uk/NSM. Enquiries:Eyal Merdler Eyal@bsd-c.comB.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 FinancialStatements 2 Interim Condensed Consolidated Statements of Financial Position 3 - 4 Interim Condensed Consolidated Statements of Profit or Loss andOther 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: +972-8-6261300Kasierer 21 Shazar Blvd., Noam Fax: +972-3-5633428Bldg. Be'er Sheva 8489411, ey.comIsrael 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 offinancial position of B.S.D Crown Ltd. (Formerly - Emblaze Ltd.) and itssubsidiaries (the "Group") as of 30 September 2014 and the related interimcondensed consolidated statements of profit or loss and other comprehensiveincome, changes in equity and cash flows for the nine month and three monthperiods then ended and explanatory notes. Management is responsible for thepreparation and presentation of these interim condensed consolidated financialstatements in accordance with IAS 34, "Interim Financial Reporting" ("IAS34"), as adopted by the European Union. Our responsibility is to express aconclusion on these interim condensed consolidated financial statements basedon our review. 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, as adopted by the European Union. Beer-Sheva, Israel KOST FORER GABBAY & KASIERER A Member of Ernst & Young27 November, 2014 GlobalINTERIM 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 2,957Short-term deposits 47,191 16,223 16,242Short-term deposits held in trust - 120,629 140,418Financial assets at fair value through profit orloss 61,998 - -Available for sale financial assets - 205 206Trade receivables 25,340 - 30Other receivables and prepaid expenses 2,306 615 522Investment in a fund designated at fair valuethrough 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 67Intangible 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 228,078 143,519 160,442The accompanying notes are an integral part of the interim condensedconsolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 30 September 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousandsLIABILITIES AND EQUITY CURRENT LIABILITIES:Short-term debt 130 - 18,813Current maturities of debentures 3,469 - -Trade payables 5,174 384 699Other accounts payable and deferred revenues 5,039 1,198 1,708Employee benefit liabilities, net 759 346 282Financial 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 40Liability for non- competition payments 1,478 - -Debentures 3,695 - -Deferred taxes 4,179 - - 9,525 18 40EQUITY:Share capital 416 416 416Share premium 469,932 469,931 469,925Treasury shares (76,962) (76,962) (76,962)Available for sale reserve - 122 123Reserve 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 127,412 141,965 139,313Non- controlling interests 69,830 (392) (413) Total equity 197,242 141,573 138,900 Total liabilities and equity 228,078 143,519 160,442The accompanying notes are an integral part of the interim condensedconsolidated financial statements. 27 November, 2014Date of approval of Abraham Wolff Israel Jossef Eyal Merdler the Schneorsonfinancial statements Chairman of the CEO and Vice CFO Board Chairman of the Board INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHERCOMPREHENSIVE 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 1,882Cost of sales 29,069 334 17,102 62 449Gross profit 9,535 1,253 5,495 460 1,433 Research and development 1,001 1,154 308 393 1,562Selling expenses 5,320 134 3,081 - 134General and administrative expenses 10,845 3,422 6,131 1,873 7,095Total 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 5,208Financial 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 discontinuedoperations, net - 129 - (31) 181Net income (loss) (4,538) (244) (2,876) 474 (2,815) Other comprehensive income (loss) tobe reclassified to profit or loss insubsequent periods :Gain (loss) from available-for-salefinancial assets 25 (10) - - (9)Reclassification adjustment for gainon available- for- sale financialassets included in profit or loss (148) - - - -Adjustments arising from translationof financial statements of foreignoperations (10,566) - (11,491) - - Other comprehensive income (loss)not to be reclassified to profit orloss in subsequent periods :Remeasurement loss from definedbenefit 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 pershare attributable to Company'sequity 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 condensedconsolidated 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 UnauditedBalance as ofJanuary 2014 416 469,925 (76,962) 123 - - (254,189) 139,313 (413) 138,900 Non- controllinginterestsarising frominitiallyconsolidatedcompany - - - - - - - - 73,516 73,516 Net income(loss) - - - - - - (5,475) (5,475) 937 (4,538)Othercomprehensiveincome (loss):Gain fromavailable forsale financialassets - - - 25 - - - 25 - 25Reclassificationadjustment forgain onavailable- for-sale financialassets includedin profit orloss - - - (148) - - - (148) - (148)Remeasurement ofnet definedbenefitobligation - - - - - - 18 18 28 46Adjustmentsarising fromtranslation offinancialstatements offoreignoperations - - - - - (5,784) - (5,784) (4,782) (10,566)Totalcomprehensiveloss - - - - - (5,784) (5,457) (11,364) ( 3,817) (15,181) Cost of sharebased payment - 7 - - - - - 7 - 7Transactionswithnon-controllinginterests - costof share basedpayment insubsidiary - - - - (544) - - (544) 544 - Balance as of 30September 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 condensedconsolidated 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 ofJanuary 1,2013(audited) 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494 Loss - - - - (196) (196) (48) (244)Othercomprehensiveloss - - - (10) - (10) - (10)Totalcomprehensiveloss - - - (10) (196) (206) (48) (254) Cost of sharebased payment - 20 - - - 20 - 20Purchase oftreasuryshares - - (687) - - (687) - (687) Balance as ofSeptember 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 January2013 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494 Net loss - - - - (2,746) (2,746) (69) (2,815)Remeasurement loss fromdefined benefit plan - - - - (97) (97) - (97)Loss from available forsale- financial assets - - - (9) - (9) - (9) Total comprehensiveloss - - - (9) (2,843) (2,852) (69) (2,921) Cost of share- basedpayment - 14 - - - 14 - 14Purchase of treasuryshares - - (687) - - (687) - (687) Balance as of 31December 2013 416 469,925 (76,962) 123 (254,189) 139,313 (413) 138,900 The accompanying notes are an integral part of the interim condensedconsolidated 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 continuingoperations to net cash provided by (used in)operating activities :Depreciation and amortisation 1,302 23 31Loss on disposal of fixed assets 10 - -Employee benefit liabilities, net (77) - -Cost of share-based payment 733 20 14Change in financial assets at fair value throughprofit or loss (425) 271 432Interest income (1,128) (787) (1,863)Interest expense on short-term loan 7 - 86Decrease in deferred tax (196) - -Taxes on income 821 - -Exchange rate differences on deposit andshort-term loan (1,269) (2,516) (3,438)Gain from sale of available for sale financialassets (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 prepaidexpenses (78) 377 494Increase (decrease) in trade payables, otherpayables 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 2,450Interest paid (228) - -Income taxes paid (1,344) - - (980) 1,631 2,450 Net cash provided by (used in) operatingactivities from continuing operations 1,387 (3,571) (6,258)Net cash used in operating activities fromdiscontinued operations - (220) (189) Net cash provided by (used in) operatingactivities 1,387 (3,791) (6,447) The accompanying notes are an integral part of the interim condensedconsolidated 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 condensedconsolidated financial statements. NOTE 1:- GENERAL a. B.S.D Crown Ltd. ("B.S.D" or "the Company") is a corporationregistered in Israel.On 5 August 2014 the Company changed its name from Emblaze Ltd. toB.S.D Crown Ltd. b. In May 2014 the Company completed the acquisition of acontrolling stake (approximately 62%) of Willi-Food Investments Ltd. ("WFI")for an aggregate cash consideration of USD 82.3 million. WFI and itssubsidiaries are engaged in the import, marketing and distribution of aseveral hundred food products, mainly in Israel. See Note 3 for furtherdetails of the Acquisition. The financial statements of WFI and itssubsidiaries (the "WFI Group") have been consolidated in these interimcondensed consolidated financial statements from the date of the completion ofthe Acquisition in May 2014. Due to the extent of the trading activities of the WFI Group that wereacquired in relation to the then existing activities of the Company and itssubsidiaries (the "B.S.D Group"), the Acquisition was deemed a reversetakeover under the listing rules of the UK Listing Authority ("UKLA"), andtrading in the Company's shares was accordingly suspended on 3 March 2014 (thedate the Company entered into the agreement for the Acquisition). On 29 July 2014 the Company published a prospectus in connectionwith its reapplication for the listing of its entire issued share capital onthe Standard segment of the Official List of the UKLA and for admission totrading on the London Stock Exchange main market for listed securities. Theadmission became effective on 4 August 2014. The Company's shares arepresently listed for trading under the symbol BSD. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation of the interim consolidated financialstatements: The interim condensed consolidated financial statements for the nine and threemonth periods ended 30 September 2014 have been prepared in accordance withIAS 34, Interim Financial Reporting, as adopted by the European Union. Theinterim condensed consolidated financial statements do not include all theinformation and disclosures required in the annual financial statements, andshould be read in conjunction with the Group's annual financial statements asat 31 December 2013. b. Accounting policies adopted by the B.S.D Group as a consequence of theacquisition of the WFI Group: The accounting policies adopted in the preparation of the interim condensedconsolidated financial statements are consistent with those followed in thepreparation of the B.S.D Group's consolidated annual financial statements forthe year ended 31 December 2013. As a consequence of the initial consolidationof the financial statements of the WFI Group, the following accountingpolicies 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 theacquisition 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, includingcompanies accounted for at equity. Assets, including fair value adjustments upon acquisition, and liabilities ofan investee which is a foreign operation, are translated at the closing rateat each reporting date. Profit or loss items are translated at averageexchange rates for all periods presented. The resulting translationdifferences are recognised in other comprehensive income (loss). Intragroup loans for which settlement is neither planned nor likely to occurin the foreseeable future are, in substance, a part of the investment in theforeign operation and, accordingly, the exchange rate differences from theseloans (net of the tax effect) are recorded, net of the tax effect, in othercomprehensive income (loss). Upon the full or partial disposal of a foreign operation resulting in loss ofcontrol in the foreign operation, the cumulative gain (loss) from the foreignoperation which had been recognised in other comprehensive income istransferred to profit or loss. Upon the partial disposal of a foreignoperation which results in the retention of control in the subsidiary, therelative portion of the amount recognised in other comprehensive income isreattributed 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 considerationtransferred on the acquisition date with the addition of non-controllinginterests in the acquiree. In each business combination, the Company chooseswhether to measure the non-controlling interests in the acquiree based ontheir fair value on the acquisition date or at their proportionate share inthe fair value of the acquiree's net identifiable assets. Direct acquisition costs are carried to the statement of profit or loss asincurred. In a business combination achieved in stages, equity interests in the acquireethat had been held by the acquirer prior to obtaining control are measured atthe acquisition date fair value while recognising a gain or loss resultingfrom 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 theacquisition of the WFI Group (Cont.): - Business combinations and goodwill (Cont.): Contingent consideration is recognised at fair value on the acquisition dateand classified as a financial asset or liability in accordance with IAS 39.Subsequent changes in the fair value of the contingent consideration arerecognised in profit or loss. If the contingent consideration is classified asan equity instrument, it is measured at fair value on the acquisition datewithout subsequent remeasurement. Goodwill is initially measured at cost which represents theexcess of the acquisition consideration and the amount of non-controllinginterests over the net identifiable assets acquired and liabilities assumed.If the resulting amount is negative, the acquirer recognises the resultinggain on the acquisition date. - Allowance for doubtful accounts: The allowance for doubtful accounts is determined in respect of specific debtswhose collection, in the opinion of the Company's management, is doubtful. - Inventories: Inventories are measured at the lower of cost and net realisable value. Thecost of inventories comprises costs of purchase and costs incurred in bringingthe inventories to their present location and condition. Net realisable valueis the estimated selling price in the ordinary course of business lessestimated costs of completion and estimated selling costs. The Companyperiodically evaluates the condition and age of inventories and makesprovisions 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 measuredreliably, it is probable that the economic benefits associated with thetransaction will flow to the Company and the costs incurred or to be incurredin respect of the transaction can be measured reliably. When the Company actsas 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 andis not exposed to the risks and rewards associated with the transaction,revenues are presented on a net basis. Revenues are measured at the fair valueof 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 theacquisition of the WFI Group (Cont.): - Revenue recognition (Cont.): Following are the specific revenue recognition criteria which must be metbefore revenue is recognised: Revenues from the sale of goods: Revenues from the sale of goods are recognised when all the significant risksand rewards of ownership of the goods have passed to the buyer and the sellerno longer retains continuing managerial involvement. The delivery date isusually the date on which ownership passes. - Leases: The criteria for classifying leases as finance or operating leases depend onthe substance of the agreements and are made at the inception of the lease inaccordance 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 benefitsincidental to ownership of the leased asset. At the commencement of the leaseterm, the leased assets are measured at the lower of the fair value of theleased asset or the present value of the minimum lease payments. The leased asset is amortised over the shorter of its useful life or the leaseterm. 2. Operating leases: Lease agreements are classified as an operating lease if they do not transfersubstantially all the risks and benefits incidental to ownership of the leasedasset. Lease payments are recognised as an expense in profit or loss on astraight-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 theacquisition of the WFI Group (Cont.): - Property, plant and equipment: Property, plant and equipment are measured at cost, including directattributable costs, less accumulated depreciation, accumulated impairmentlosses and excluding day-to-day servicing expenses. Cost includes spare partsand 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 issignificant in relation to the total cost of the item is depreciatedseparately using the component method. The cost of an item of property, plant and equipment comprises the initialestimate of the costs of dismantling and removing the item and restoring thesite on which the item is located. Depreciation is calculated on a straight-line basis over the useful life ofthe assets at annual rates as follows: % Mainly % Land 2Buildings 4Motor vehicles 15-20 20Office furniture and equipment 6-15 15Computers 20-33 33Mechanical equipment 10 The useful life, depreciation method and residual value of an asset arereviewed at least each year-end and any changes are accounted forprospectively as a change in accounting estimate. Depreciation of an assetceases at the earlier of the date that the asset is classified as held forsale and the date that the asset is derecognised. - Intangible assets: Separately acquired intangible assets are measured on initial recognition atcost including directly attributable costs. Intangible assets acquired in abusiness combination are measured at fair value at the acquisition date.Expenditures relating to internally generated intangible assets, excludingcapitalised development costs, are recognised in profit or loss when incurred. Intangible assets with a finite useful life are amortised over their usefullife and reviewed for impairment whenever there is an indication that theasset may be impaired. The amortisation period and the amortisation method foran intangible asset are reviewed at least at each year end. Intangible assets with indefinite useful lives are not systematicallyamortised and are tested for impairment annually or whenever there is anindication that the intangible asset may be impaired. The useful life of theseassets is reviewed annually to determine whether their indefinite lifeassessment continues to be supportable. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of theacquisition of the WFI Group (Cont.): If the events and circumstances do not continue to support the assessment, thechange in the useful life assessment from indefinite to finite is accountedfor prospectively as a change in accounting estimate and on that date theasset is tested for impairment. Commencing from that date, the asset isamortised systematically over its useful life. The intangible assets are amortised over their estimated useful life asfollows: 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 assetswhenever events or changes in circumstances indicate that the carrying amountis not recoverable. If the carrying amount of non-financial assets exceeds their recoverableamount, the assets are reduced to their recoverable amount. The recoverableamount is the higher of fair value less costs of sale and value in use. Inmeasuring value in use, the expected future cash flows are discounted using apre-tax discount rate that reflects the risks specific to the asset. Therecoverable amount of an asset that does not generate independent cash flowsis 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 therehave been changes in the estimates used to determine the asset's recoverableamount since the last impairment loss was recognised. Reversal of animpairment loss, as above, shall not be increased above the lower of thecarrying amount that would have been determined (net of depreciation oramortisation) had no impairment loss been recognised for the asset in prioryears and its recoverable amount. The reversal of impairment loss of an assetpresented at cost is recognised in profit or loss. The following criteria are applied in assessing impairment of these specificassets: Goodwill in respect of subsidiaries: The Company reviews goodwill for impairment once a year, on December 31, ormore frequently if events or changes in circumstances indicate that there isan impairment. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of theacquisition of the WFI Group (Cont.): - Impairment of non-financial assets: (Cont.) Goodwill is tested for impairment by assessing the recoverable amount of thecash-generating unit (or group of cash-generating units) to which the goodwillhas been allocated. An impairment loss is recognised if the recoverable amountof the cash-generating unit (or group of cash-generating units) to whichgoodwill has been allocated is less than the carrying amount of thecash-generating unit (or group of cash-generating units). Any impairment lossis allocated first to goodwill. Impairment losses recognised for goodwillcannot 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 theexpensing of employees' and directors' share options (equity-settledtransactions). The cost of equity-settled transactions with employees is measured at the fairvalue of the equity instruments granted at grant date. The fair value isdetermined by using the Binomial method option-pricing model taking intoaccounts the terms and conditions upon which the instruments were granted. The cost of equity-settled transactions is recognised, together with acorresponding increase in equity, over the period in which the performanceand/or service conditions are fulfilled, ending on the date on which therelevant employees become fully entitled to the award (the "vesting date").The cumulative expense recognised for equity-settled transactions at eachreporting date until the vesting date reflects the extent to which the vestingperiod has expired and the Company's best estimate of the number of equityinstruments that will ultimately vest. The expense or income recognised inprofit or loss represents the change between the cumulative expense recognisedat the end of the reporting period and the cumulative expense recognised atthe end of the previous reporting period. Cash-settled transactions: The cost of cash-settled transactions is measured at fair value on the grantdate using an acceptable option pricing model. The fair value is recognised asan expense over the vesting period and a corresponding liability isrecognised. The liability is remeasured at each reporting date until settledat 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 January2014 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. 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 therelated Interpretations: IFRIC 13, "Customer Loyalty Programs", IFRIC 15,"Agreements for the Construction of Real Estate", IFRIC 18, "Transfers ofAssets from Customers" and SIC-31, "Revenue- Barter Transactions InvolvingAdvertising Services". The Standard introduces the following five-step model that applies to revenuefrom contracts with customers: Step 1: Identify the contract(s) with a customer, including reference tocontract 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 variableconsideration, 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 obligationson a relative stand-alone selling price basis using observable information, ifit is available, or by making estimates and assessments. Step 5: Recognise revenue when (or as) the entity satisfies a performanceobligation over time or at a point in time. IFRS 15 also establishes the accounting treatment of incremental costsinvolving obtaining a contract and the costs directly related to fulfilling acontract. The Standard will apply retrospectively to annual periods beginning on orafter January 1, 2017. Early adoption is permitted. The Standard may beapplied to existing contracts beginning with the current period andthereafter. No restatement of the comparative periods will be required as longas comparative disclosures about the current period's revenues under existingIFRS are included. The Company is evaluating the possible impact of the adoption of IFRS 15 butis 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 financialstatements as of December 31, 2013 regarding disclosure of new IFRS Standardsin 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, "FinancialInstruments" ("the final Standard") which includes the following elements:classification and measurement, impairment and hedge accounting. The main changes between the final Standard and thepreviously published phases of the Standard are: Classification and measurement: The final version of IFRS 9 includes another category forthe classification and measurement of financial assets that represent debtinstruments. Financial assets classified in this category will be measured atfair value through other comprehensive income ("FVOCI") and the differencespreviously carried to other comprehensive income as above will be reclassifiedto profit or loss under specific conditions such as when the asset isderecognised. Finance income, exchange rate differences and impairment losseson financial assets, however, will be recognised in profit or loss. Theclassification in this category is allowed for debt instruments that meet thefollowing tests on a cumulative basis: - Based on the financial asset's contractual terms and onspecific dates, the entity is entitled to receive cash flows that representsolely principal payments and interest payments on the principal balance. - The asset is held in the context of a business modelwhose aim is both to collect the contractual cash flows generated from theasset and to dispose of the asset. Impairment: The Final Standard addresses the issue of impairment offinancial assets by introducing the expected credit loss impairment model toreplace the incurred loss model prescribed in IAS 39. The expected credit lossmodel applies to debt instruments measured at amortised cost or at FVOCI andto trade receivables. The model introduces a simpler and economic approach formeasuring impairment: - General approach - credit losses due to default which areexpected to occur in the subsequent 12-month period will be recognisedprovided that there has not been a significant increase in credit risk sincethe date of initial recognition of the instrument. On the other hand, if therehas been a significant increase in credit risk since the date of initialrecognition of the instrument, a provision should be recognised for creditlosses that are expected to occur over the remaining life of the exposure inrespect 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 forcertain groups of assets only, including trade receivables) - according tothis approach, the credit losses that are expected to occur over the remaininglife of the exposure in respect of said instrument should be recognised,regardless of the occurrence of credit risk changes since the date of initialrecognition of said instrument. The Final Standard will be applied retrospectively, subjectto certain exemptions stipulated therein, in the financial statements forannual periods beginning on or after January 1, 2018. Earlier application ispermitted. The Company is evaluating the possible impact of theadoption of IFRS 9 but is presently unable to assess its effect, if any, onthe financial statements. (3) Amendments to IAS 16 and IAS 38 regarding acceptablemethods of depreciation and amortisation: In May 2014, the IASB issued Amendments to IAS 16 and IAS38 (the "Amendments") regarding the use of a depreciation and amortisationmethod based on revenue. According to the Amendments, a revenue-based methodis not considered to be an appropriate manifestation of consumption sincerevenue generated by an activity that includes the use of an asset generallyreflects factors other than the consumption of the economic benefits embodiedin the asset. As for intangible assets, the revenue-based amortisationmethod can only be applied under certain circumstances such as when it can bedemonstrated that revenue and the consumption of economic benefits of theintangible asset are highly correlated. The Amendments will be applied prospectively in the financial statements forannual periods beginning on or after January 1, 2016. Earlier application ispermitted. The Company believes the effect on the financial statements of the adoption ofthe 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 "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"). WFI operates in import, marketing and distribution ofseveral hundred food products mainly in Israel. Under the WFI Agreement, theCompany: (i) acquired the Sellers' entire shareholdings in WFI (part of whichwas acquired through a special tender offer as set out below), amounting inaggregate to 58% of the shares of WFI (or approximately 55% on a fully dilutedbasis); and (ii) published a special tender offer (the "Special Tender Offer")addressed to all shareholders of WFI (including the Sellers) in accordancewith Israeli Companies Law in order to acquire shares carrying 5% of thevoting rights in WFI. The Special Tender Offer was completed on 1 May 2014 andthe Acquisition completed on 4 May 2014. Following such completion, the Company acquired in aggregate 61.65% of theissued share capital of WFI (62.27% of its voting rights on a fully dilutedbasis), for aggregate cash consideration of NIS 284.7 million (USD 82.3million). Upon the Acquisition, the Company nominated directors which comprisethe 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 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 a further approximately 7% of theshares of WFINT on a fully diluted basis (the "WFINT Put Option Shares" andthe "WFINT Put Option" respectively). The WFINT Put Option is exercisable bythe Sellers for a period of four years and one month commencing eleven monthsfrom completion of the Acquisition, at a price of USD 12 per share. The putoption exercise price is subject to adjustment for dividends bonus, shares andrights issues by WFINT. The Company was granted a power of attorney whichenables it to procure the Sellers to sell their WFINT shares to a third partyat a price per share not below USD 12, subject to compliance with applicablelaws, during the WFINT Put Option exercise period. The power of attorney maybe cancelled by the Sellers at any time during that period, although suchcancellation would lead to the immediate cancellation of the WFINT Put Optionin respect of such WFINT Put Option Shares. The Sellers granted the Company anirrevocable proxy with respect to their holdings in WFINT, so as to allow theCompany to vote such shares at shareholders' meetings of WFINT during theperiod commencing on completion of the Acquisition and expiring on theexercise or expiry of the WFINT Put Option. As part of the consideration for the acquisition, the Company recorded aliability for the WFINT Put Option, see 4(a) below. The WFI Agreement modified the terms of the unvested employee options held bythe Sellers, by ensuring the sale price of the shares which will derive fromthe 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 byan independent valuation specialist. In the nine months and three months ended 30 September 2014, the Companyrecorded in profit or loss share-based payment expense of USD 475 thousandsand USD 260 thousands, respectively (in addition to the expense recorded inWFI in the amount of USD 275 thousands and USD 192 thousands, respectively. Asof 30 September 2014, the liability recorded in the statement of financialposition for the put option in respect of the vested portion of these employeeoptions amounted to USD 746 thousand. 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 three years commencingupon completion of the Acquisition (May 2014). On 21 August 2014, theextension of the agreements between the parties for another period of three(3) years (until 21 August 2017) was approved at WFINT's annual generalmeeting. Subject to further agreement between the parties and to applicablelaw, the Sellers may continue their respective engagement following suchperiod. In addition, each of the Sellers is prohibited from competing againstWilli-Food in any material way, subject to certain agreed exceptions, for anadditional period commencing on the termination of his respective engagementwith WFINT and terminating on the later of two years from such termination, orfour years from completion of the Acquisition, but not longer than five (5)years from the completion date. It should be noted that the Company haswithdrawn its application regarding the approval of the Israeli Anti-trustAuthorities to extend the non-competition period to six years from thecompletion date, under all scenarios. In consideration of such non-competeundertakings, each of the Sellers is entitled to an additional annual paymentof NIS 1.5 million (approximately USD 0.4 million) following termination ofhis respective engagement, to be paid by the Company and subject to applicablelaw. 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 combinationand began consolidating the financial statements of WFI from the completiondate of the Acquisition on 4 May 2014. a. Consideration for Acquisition U.S. Dollars in thousandsCash paid 82,342Liability for non-controlling interest put option(a) 5,945Liability for non-competition payments (b) 1,555 89,842 (a) As described in 2 above the Company has granted Sellers a put option tosell up to 504,407 shares of WFINT. The put option is exercisable for a periodof four years and one month, commencing eleven months after the completion ofthe Acquisition at a price of USD 12 per share. The liability reflects thepresent value of the amount payable assuming exercise at the earliestpermissible date of all the shares subject to the put option discounted at anannual rate of 2%. (b) The liability for non-competition payment reflects the present value of anannual payment of NIS 1.5.million (USD 0.4 million to each of the two formercontrolling shareholders of WFI), for a period of two years subsequent to thetermination 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 theacquiree at the acquisition date 20,254Cash paid (82,342) Net cash (62,088) Transaction costs of approximately USD 170 thousand that are directlyattributable to the Acquisition were recorded in profit or loss. b. The Company has elected to measure the non- controllinginterests in WFI at fair value. The fair value of the non- controllinginterest in WFI is based on the quoted market price of the shares of WFI andWFINT on the completion date. The fair value adjustments detailed below are based on a purchaseprice allocation study prepared by an independent valuation specialist as ofthe date of the Acquisition. The purchase price allocation was prepared on thebasis of an acquisition of 100% of the net assets of WFI Group. Deferred taxliability is recorded in respect of those fair value adjustments that resultin 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 137,991Non-controlling interests (73,516) 64,475Goodwill 25,367 The fair value of the identifiable assets and liabilities of WFInear the acquisition date: U.S. Dollars in thousands Cash and cash equivalents 20,254Financial assets at fair value through profit or loss 59,481Trade receivables 30,538Other receivables and prepaid expenses 1,004Investment in a fund designated at fair value throughprofit or loss 4,390Inventories 15,479Property, plant and equipment, net 14,480Prepaid expenses 9Intangible assets:Customer relationships 6,577Supplier relationships 3,914Brands 1,800Non-competition agreements *) 1,375 159,301 Short-term bank debt 834Current maturities of debentures 3,707Trade payables 6,311Other accounts payable and deferred revenues 862Income tax liability 129Employee benefit liabilities, net- short term 620Employee benefit liabilities, net- long term 175Debentures 4,011Deferred taxes 4,661 21,310 137,991 *) The fair value of the non-competition agreements was based on anon-competition period of two years commencing three years after theAcquisition date as the individuals subject to the non-competition agreementshave management service agreements with WFI Group (subject to shareholderapproval) for a period of three years from the date of the Acquisition. Thenon-competition agreements are not amortised while the individuals subject tothese agreements are providing services to the WFI Group due to the fact thataccording to their agreements and the Israeli Companies Law, they areprohibited from competing with WFI's business while serving as officers ofWFI. 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 2,371Customer relationship 6,577Supplier relationship 3,914Brands 1,800Non- competition agreements 1,375Good will 25,367Debentures (337)Deferred taxes (4,161) 36,906 The intangible assets are amortised over their estimated usefullife (see Note 2(b)). d. From the date of Acquisition, WFI has contributed USD 38.5 million ofrevenue and USD 2.1 million (after fair value adjustments) to the net incomeof the B.S.D. If the Acquisition had taken place at the beginning of the year2014, consolidated revenues would have been USD 72.7 million and the netincome 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 ofimporting, marketing and distributing food products ('the Willi-Foodtransaction") totals USD 23,740 thousand. In view of the existence ofindicators of impairment consisting mainly of: a significant decrease in themarket value of the shares of Willi-Food Investments from the date of theCompany's investment therein (May 2014) and the state of the Israeli foodindustry, as of 30 September 2014, the Company calculated the recoverableamount of the cash-generating unit to which the goodwill was allocated, basedon the DCF method. The recoverable amount was determined based on the value inuse by an independent appraiser. Since the recoverable amount of thecash-generating unit exceeds its carrying amount, including goodwill, noimpairment was recognized in respect of the goodwill. In determining therecoverable 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 rateof 2%. NOTE 4: SUPPLEMENTARY INFORMATION a. As described in Note 13(a) to the financial statements as of 31 December2013, the Company filed claims against two companies Apple Inc ("Apple") andMicrosoft Corporation (the "Respondents") for direct and indirect damagescaused by infringement of a patent it developed and registered. On 11 July 2014 the district court in the United States ofAmerica reached a decision regarding the Apple claim, and found that theCompany's patent is valid but Apple did not infringe the patent. In response, the Company filed motions with the originaljudge hearing the claim for a contrary judgment to the jury's verdict inrespect of the non-infringement of the Company's patent or for a new trial onthat point. Apple also filed motions with the original judge hearing the claimfor a contrary judgment to the jury's verdict in respect of the validity ofthe Company's patent. The Company expects the court to rule on these motionsin December 2014. In addition, the Company filed its objections to the bill ofcosts filed by Apple . In the aggregate amount of USD 293 thousands. The management of the Company estimates that the outcome ofthis claim will not have a material adverse effect on the financialstatements. b. In an extraordinary general meeting held on 8 September 2014, the Company'sshareholders approved the terms of service of Mr Israel Jossef Schneorson, thechief executive officer (the "Schneorson Agreement") (which was then subjectto the approval of the shareholders of BGI Investments (1961) Ltd. ("BGI"),which approval was obtained on 5 October 2014), the terms of employment of MrEyal Merdler, the chief financial officer, and an agreement between theCompany and BGI (the "BGI Management Agreement") pursuant to which the Companywill provide certain services to BGI, including the services of a chiefexecutive officer, chief financial officer, controller, bookkeeper andadministrative services for monthly fee of NIS 35 thousands ( approximatelyUSD 9 thousand). As such, the Company paid BGI a one-off fee of USD 660 thousand in relation tothe services provided to the Company by the chief executive officer and chieffinancial officer between 14 August 2013 and 8 September 2014 and servicesprovided to the Company by the corporate secretary, controller, bookkeepingand certain administrative staff of BGI between 1 January 2014 and 8 September2014. NOTE 5:- FINANCIAL INSTRUMENTS Financial instruments that are not measured at fair value: Except as detailed in the following table, the Group believes that thecarrying amount of financial assets and liabilities that are presented atamortised 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 theCompany'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 61,998Investment 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 mainactivity and its sole operating segment is import, marketing and distributionof food products to retail chains, supermarkets, wholesalers, and institutionsmainly in Israel. An operating segment is identified on the basis of information that isreviewed by the chief operating decision maker ("CODM") to make decisionsabout 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 thousandsRevenuesImport marketing and distribution offood products 38,474 22,532Other 130 65 38,604 22,597Segment income (loss)Import marketing and distribution offood products 1,152 545Other *) (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 administrativeexpenses and expenses relating to research and development activities. Seasonality WFI Group operating results may be subject to variations from quarter toquarter depending, among others, the timing of sales campaigns and majorJewish holidays. Therefore, the operating results of WFI Group in the periodended 30 September 2014 are not necessarily indicative of its operatingresults for the year. NOTE 6:- OPERATING SEGMENTS (Cont.) c. Revenues from major customers that contributed 10% or more to the Grouprevenues (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 tothe 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 16Dairy and dairy substitute products 24 23Dried fruit, nuts and beans 14 10NOTE 7:- SUBSEQUENT EVENTS a. Settlements of claims In October 2014, the Company entered into agreements to settle certainoutstanding claims as described in Note 10(b) to the financial statements asof 31 December 2013, (the "Settlement Agreements"). The Company and some of its past directors were named as defendants in certainclaims, all in connection with the bankruptcy of Mr Eli Reifman, one of thefounders and a former director of the Company. In April 2012, two of Mr Reifman's creditors filed a claim (the "April 2012Claim") against attorneys who represented them in a transaction with MrReifman and as part of this claim, the two creditors also named the Companyand several of its past directors, as well as a Company's external legaladviser and its auditors, as defendants. The claim amounted to NIS 73.3million (approximately USD 19.8 million current exchange rate). In June 2012, several creditors of Mr Reifman filed a claim against theCompany, several of its past directors as well as against a Company's externallegal adviser and its auditors (the "June 2012 Claim"). Following thedismissal of the claims of certain such creditors, the outstanding aggregatevalue of the June 2012 Claim amounted to of NIS 81.8 million (approximatelyUSD 22.1 million). Pursuant to the Settlement Agreements, following contributions from theCompany's Directors and Officers Liability insurers, the Company has agreed topay, without admitting to any legal liability, (i) NIS 1.975 million(approximately USD 0.5 million) in consideration of the full and finalsettlement of the April 2012 Claim; and (ii) NIS 4.2 million (approximatelyUSD 1.2 million) in consideration of the full and final settlement of claimsrepresenting NIS 69.9 million (approximately USD 18.9 million) of the June2012 Claim. The Company included a provision in the financial statements as of30 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 describedin Note 10 (b) (d) to the financial statements as of 31 December 2013 that theCompany and several of its past directors were joined as direct defendants byone of the creditors who filed the original claim, and that the aggregateamount claimed from the Company and said past-directors has been updated toNIS 22.4 million (approximately USD 6 million). The Company is considering theamended claim and is yet to submit its amended statement of defense. Subsequent to completion of the Settlement Agreements and the amendment of theclaim as described above, the outstanding amounts pursuant to claims filedagainst the Company in respect of Mr Reifman, amount to approximately NIS 30million (approximately USD 8.1 million). The Company's legal advisors are of the opinion that therisks of success of these claims against the Company are remote. b. Following settlement with HMRC in respect of outstandinginterest claimed by EMSL, as described in Note 10(b)(1) to the financialstatements as of 31 December 2013, in October 2014, EMSL received suchoutstanding interest from HMRC of approximately £ 0.7 million (USD 1.1million) net of estimated expenses. This net income will be included in thefinancial statements for the period ending 31 December 2014. - - - - - - - - - - - - - - - - -