Last checked at 21 Aug 2015 07:00
21 August 2015
Starcom PLC
("Starcom" or the "Company")
Interim Results
For the Six Months ended 30 June 2015
Starcom (AIM: STAR), which specialises in the development of wireless solutions for the remote tracking, monitoring and protection of a variety of assets and people, announces its interim results for the six months ended 30 June 2015.
Highlights
· Revenue for the period of $2.64m (H1 2014: $2.63m)
· Gross margin of 44% (H1 2014:48%)
· Loss for the period of $691,000 (H1 2014: $985,000)
· Successful fundraising of £475,000
For further information, please contact: | |||
Starcom PLC | Northland Capital (Nomad) | Northland Capital (Broking) | Leander (Financial PR) |
Michael Rosenberg Avi Hartmann
| Edward Hutton David Hignell | John Howes Abigail Wayne
| Christian Taylor-Wilkinson |
Tel: 07785 727595 +972 543070103
| Tel: 020 7382 1100 | Tel: 020 7382 1100 | Tel: 07795 168 157 |
CHAIRMAN'S STATEMENT
I am pleased to present the Company's unaudited results for the six months ended 30 June 2015. Revenues for the period were $2,634,626 (2014: $2,627,127). The net loss before and after tax was $691,000 (2014: loss $985,000).
The Company continues to implement its new growth strategy whereby it redirects its efforts towards new market segments where its superior technology can achieve a stronger competitive position. To this end, the Company continues to refine its new tracking products described in the 2014 Annual Report released last May, such as:-
· Helios Hybrid - innovatively integrating and selectively utilizing cellular and satellite communications to secure tracking continuity across large and remote territories. With this unique product, the Company has recently won a small tender by a major international organization, which endorses its competitive advantage;
· Tetis (previously named Triton) - tracking and monitoring temperature fluctuations and light penetration within containers in addition to location-tracking as these containers travel around the globe; and
· The New Watchlock - a new model developed in partnership with Mul-T-Lock to reduce the unit size and extend battery life, expected to be ready for market towards the end of 2015.
The new products are being successfully tested with first clients while the Company is focusing on putting in place suitable distribution networks. For example, a new distribution arrangement has been entered into with a large organisation in the Middle East which should lead to good orders for Watchlock during 2016. Once orders are placed, we shall report further on this arrangement which covers certain defined territories in that area. We are also pursuing some major opportunities in Asia which inevitably will take time to mature.
In the meantime, sales of the new products are still low and 60% of sales in the first half were derived from the Helios product and the more traditional and competitive car tracking market. This competition has resulted in price reductions and consequently margins being eroded. However, these sales enable the Company to increase the installed base of subscribers to its tracking control software. This recurring high margin SAS revenue stream for the use of the web based software and mobile applications constitutes a supplementary growth engine for the Company. These web based revenues increased by 15.8% during the period and represented 30.1% of total revenues, as compared with 26.1% in the equivalent period last year.
Financial Review
As previously reported, the Company has ceased to recognise revenues from bill and hold contracts until actual orders are shipped. The board believes this is a more accurate and conservative method of accounting. The major impact of this change was reflected in the final 2014 results
The impact of tougher price competition in the Helios car tracking market, partially compensated for by the increase in the high margin software revenues, resulted in consolidated gross margins being slightly lower in the period than before, at 44 per cent, compared with 48 per cent in the corresponding period. However, the resulting loss before tax is significantly reduced from the same period in 2014 mainly due to cost cutting measures referred to below.
We have placed strong focus on the cost base of the Company and, as a result, approximately $130,000 of savings in operating expenses have been achieved in the first half of 2015. It is expected that further savings of approximately $400,000 will be achieved in the second half of this year, resulting in total expected savings of approximately $530,000 for 2015.
A placing of new shares in June 2015 raised $701,000 net and as a result net assets improved to $4,400,000 after taking account of the trading loss (31 December 2014:$4,368,000). Inventories decreased by 15% over the period but remain relatively high. Consequently revenues from new sales in the coming months will generate stronger cash flow as stock levels are reduced.
We announced in June 2015 that Udi Shenig had been appointed as our CFO following Eitan Yanuv's decision to step down from the board for personal reasons. We wish Eitan well and thank him for his contribution since the IPO.
Outlook
Based on the very positive market reception the new products have attracted as they are being presented to potential clients and distributors, the board believes that the shifting of the emphasis to the less price-sensitive but still very large market segments for which the new products are designed will bring about over time the desired growth in revenues and the return to profitability. The Company is therefore intensifying its efforts in order to increase distribution channels for the new products. A number of marketing initiatives that are under way should begin to impact on sales in the second half of the year.
STARCOM Plc
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. Dollars in thousands
June 30 | December 31 | |||||
Note | 2015 | 2014 | 2014 | |||
Unaudited | Unaudited | Audited | ||||
ASSETS | ||||||
NON-CURRENT ASSETS: | ||||||||||
Property, plant and equipment, net | 358 | 413 | 395 | |||||||
Intangible assets | 4 | 2,462 | 2,193 | 2,312 | ||||||
Total Non-Current Assets | 2,820 | 2,606 | 2,707 | |||||||
CURRENT ASSETS: | ||||||||||
Inventories | 2,877 | 2,636 | 3,382 | |||||||
Trade receivables | 2,200 | 3,242 | 1,943 | |||||||
Other receivables | 203 | 417 | 114 | |||||||
Income Tax Authorities | 58 | 50 | 56 | |||||||
Short-term deposit | 103 | 110 | 101 | |||||||
Cash and cash equivalents | 204 | 107 | 103 | |||||||
Total Current Assets | 5,645 | 6,562 | 5,699 | |||||||
TOTAL ASSETS | 8,465 | 9,168 | 8,406 | |||||||
LIABILITIES AND EQUITY | ||||||||||
EQUITY | ||||||
4,400 | 6,204 | 4,368 | ||||
NON-CURRENT LIABILITIES: | ||||||
Long-term loans from banks | 722 | 930 | 698 | |||
CURRENT LIABILITIES: | ||||||
Short-term bank credit | 421 | 129 | 309 | |||
Short-term loans and current maturities from banks | 281 | 271 | 331 | |||
Trade payables | 2,144 | 1,211 | 2,167 | |||
Shareholders | 6 | 306 | 182 | 374 | ||
Other payables | 191 | 241 | 159 | |||
Total Current Liabilities | 3,343 | 2,034 | 3,340 | |||
TOTAL LIABILITIES AND EQUITY | 8,465 | 9,168 | 8,406 | |||
The accompanying notes are an integral part of the interim condensed consolidated interim financial statements.
August 20, 2015 | |||
Date of Approval of the Financial Statements | Michal Rosenberg Chairman of the Board | Avi Hartman CEO |
STARCOM Plc
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. Dollars in thousands
Six Months Ended June 30 | Year Ended December 31 | ||||||
Note | 2015 | 2014 | 2014 | ||||
Unaudited | Unaudited | Audited | |||||
Revenues | 2,635 | 2,627 | 5,005 | ||||
Cost of sales | (1,482) | (1,360) | (2,499) | ||||
Gross profit | 1,153 | 1,267 | 2,506 | ||||
Operating expenses: | |||||||
Research and development, net | (67) | (108) | (253) | ||||
Selling and marketing | (236) | (396) | (687) | ||||
General and administrative | (1,349) | (1,678) | (4,251) | ||||
Other expenses | - | - | (221) | ||||
(1,652) | (2,182) | (5,412) | |||||
Operating loss | (499) | (915) | (2,906) | ||||
Finance income | - | - | 233 | ||||
Finance expenses | 7 | (192) | (70) | (145) | |||
Net finance income (costs) | (192) | (70) | 88 | ||||
Total comprehensive loss for the period | (691) | (985) | (2,818) | ||||
Loss per share: | |||||||
Basic and diluted loss per share (in dollars) | 5 | (0.01) | (0.01) | (0.04) | |||
The accompanying notes are an integral part of the interim condensed consolidated interim financial statements.
STARCOM Plc
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
U.S. Dollars in thousands
Share Capital * | Premium on Shares | Capital Reserve | Capital Reserve for Share-based payment | Accumulated Earnings |
|
Total | |||||||
(Unaudited) | |||||||||||||
Balance- January 1, 2015 | - | 6,240 | 89 | 373 | (2,334) | 4,368 | |||||||
Proceeds from issued share capital, net of mobilization costs - see Note 3a |
- |
701 |
- |
- |
- |
701 | |||||||
Share based payment | - | - | - | 22 | 22 | ||||||||
Comprehensive loss for the period | - | - | - | - | (691) | (691) | |||||||
Balance- June 30, 2015 | - | 6,941 | 89 | 395 | (3,025) | 4,400 | |||||||
(Unaudited) | |||||||||||||
Balance- January 1, 2014 | - | 3,121 | 89 | 309 | 484 | 4,003 | |||||||
Proceeds from issued share capital, net of mobilization costs |
- |
3,119 |
- |
- |
- |
3,119 | |||||||
Share based payment | - | - | - | 67 | - | 67 | |||||||
Comprehensive loss for the period | - | - | - | - | (985) | (985) | |||||||
Balance- June 30, 2014 | - | 6,240 | 89 | 376 | (501) | 6,204 | |||||||
(Audited) | |||||||||||||
Balance- January 1, 2014 | - | 3,121 | 89 | 309 | 484 | 4,003 | |||||||
Proceeds from issued share capital, net of mobilization costs | - | 3,119 | - | - | - | 3,119 | |||||||
Share based payment | - | - | - | 64 | - | 64 | |||||||
Comprehensive loss for the year | - | - | - | - | (2,818) | (2,818) | |||||||
Balance- December 31, 2014 | - | 6,240 | 89 | 373 | (2,334) | 4,368 |
* An amount less than one thousand.
The accompanying notes are an integral part of the interim condensed consolidated interim financial statements.
STARCOM Plc
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. Dollars in thousands
Six Months Ended June 30 | Year Ended December 31 | |||||
2015 | 2014 | 2014 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | Unaudited | Unaudited | Audited | |||
Comprehensive loss | (691) | (985) | (2,818) | |||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation and amortization | 149 | 134 | 461 | |||
Interest expense (income) and linkage differences | 100 | (259) | (146) | |||
Equity settled option-based payment expense | 22 | 67 | 64 | |||
Capital loss | - | 20 | 19 | |||
Changes in assets and liabilities: | ||||||
Decrease (Increase) in inventories | 505 | 161 | (585) | |||
Decrease (Increase) in trade receivables | (264) | (154) | 1,133 | |||
Decrease (Increase) in other receivables | (89) | (15) | 289 | |||
Increase in Income Tax Authorities | (2) | - | - | |||
(Decrease in trade payables | (23) | (1,934) | (1,220) | |||
Increase (Decrease) in other payables | 32 | (7) | (75) | |||
Net cash used in operating activities | (261) | (2,972) | (2,878) | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||
Purchases of property and equipment | (1) | (247) | (267) | |||
Proceeds from sales of property, plant and equipment | - | 46 | 53 | |||
Increase (Decrease) in short-term deposit | (2) | 25 | 45 | |||
Purchase of intangible assets | (261) | (286) | (700) | |||
Net cash used in investing activities | (264) | (462) | (869) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||
Proceeds from short-term bank credit, net | 99 | 18 | 197 | |||
Short-term loans from banks | (89) | - | 87 | |||
Receipt of long-term loans | 158 | 737 | 737 | |||
Repayment from (proceeds to) shareholders | (68) | 269 | 204 | |||
Repayment of long-term loans | (127) | (406) | (543) | |||
Consideration from issue of shares | 701 | 2,874 | 3,119 | |||
Net cash provided by financing activities | 674 | 3,492 | 3,801 | |||
Increase in cash and cash equivalents | 149 | 58 | 54 | |||
Net foreign exchange difference | (48) | - | - | |||
Cash and cash equivalents at the beginning of the period | 103 | 49 | 49 | |||
Cash and cash equivalents at the end of the period | 204 | 107 | 103 | |||
Appendix A - Additional Information | ||||||
Interest paid during the period | (28) | (29) | (58) | |||
The accompanying notes are an integral part of the interim condensed consolidated interim financial statements.
STARCOM Plc
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
U.S. Dollars in thousands
NOTE 1 - | GENERAL INFORMATION |
a. | The Reporting Entity | |||
Starcom plc ("the Company") was incorporated in Jersey on November 28, 2012. During February 2013 the Company signed an asset purchase agreement with Starcom Systems S.A., a Panamanian company that specializes in easy-to-use practical wireless solutions that combine advanced technology, telecommunications and digital data for the protection and management of people, fleets of vehicles, containers and assets and engages in production, marketing, distribution, research and development of G.P.S systems. | ||||
In accordance with the agreement, Starcom Systems S.A. sold to the Company for a nominal consideration its business and assets, including its holdings in Starcom G.P.S. Systems Limited, an Israeli company that engages in the same field. | ||||
Subsequent to completion of the transaction, the Company transferred to an additional company in Jersey, Starcom Systems Limited, its entire activity, except for its holdings in Starcom G.P.S Limited, for a nominal consideration. Thus, the Company became a holding company, holding 100% of Starcom Systems Limited and approximately 97% of Starcom G.P.S Limited, where Company operations are conducted. | ||||
During 2013, the Company acquired the remaining 3% of Starcom G.P.S. Limited. | ||||
On February 27, 2013 the Company's shares were admitted to trading on London's Stock Exchange Alternative Investment Market ("AIM") following a successful Initial Public Offering ("IPO") raising £ 2.72 ($ 4.09) million before expenses, reflecting a Company valuation of £ 14.2 ($ 27.53) million. On February 3, 2014 the Company raised £ 2 million before expenses. On June 1, 2015 the Company raised £ 475 ($723) thousand before expenses. For additional detail in regard to the infusion of capital see note 3. | ||||
b. | Definitions in these financial statements | |||
1. | The Company - Starcom Plc | |||
2. | Starcom Israel - Starcom G.P.S. Systems Ltd. | |||
3. | Starcom Jersey - Starcom GPS Limited | |||
4. | The Group - Starcom Plc and its subsidiaries | |||
NOTE 2 - | BASIS OF PREPARATION AND CHANGE IN THE GROUP'S ACCOUNTING POLICIES |
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a. | Basis of preparation | ||||||||
The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Accounting Standard No. 34 ("Interim Financial Reporting"). The interim consolidated financial information should be read in conjunction with the annual financial statements as of 31 December, 2014 and for the year ended on that date and with the notes thereto. The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2014 are applied consistently in these interim consolidated financial statements, except adoption of new standards and interpretations effective as of 1 January 2015, as detailed in Note 2c below.
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| b. | Use of estimates and judgments |
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| The preparation of financial statements in conformity with IFRS requires management of make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. |
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| The judgment of management, when implementing the Group accounting policies and the basic assumptions utilized in the estimates that are bound up in uncertainties are consistent with those that were utilized to prepare the annual financial statements. |
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| c. | Changes in the accounting policies
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| The Group applies, for the first time, certain standards and amendments as detailed below. As required by IAS 34, the nature and the effect of these changes are disclosed below. |
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IFRS 2 Share-based Payment
This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditions, which are vesting conditions, including:
· A performance condition must contain a service condition
· A performance target must be met while the counterparty is rendering service
· A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group
· A performance condition may be a market or non-market condition
· If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied
The above definitions are consistent with how the Group has identified any performance and service conditions which are vesting conditions in previous periods, and thus these amendments do not impact the Group's accounting policies.
IFRS 8 Operating Segments
The amendments are applied retrospectively and clarify that:
· An entity must disclose the judgements made by management in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are 'similar'
· The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.
The Group has not applied the aggregation criteria in IFRS 8.12. The Group didn't present the reconciliation of segment assets to total assets in previous periods and continues not to disclose it as the total assets are not reported to the chief operating decision maker for the purpose of his decision making.
IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets
The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued by reference to observable data by either adjusting the gross carrying amount of the asset to market value or by determining the market value of the carrying value and adjusting the gross carrying amount proportionately so that the resulting carrying amount equals the market value. In addition, the accumulated depreciation or amortization is the difference between the gross and carrying amounts of the asset. The Group did not record any revaluation adjustments during the current interim period.
IAS 24 Related Party Disclosures
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The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. This amendment is relevant for the Group as it receives management services from its shareholders. See also note 6.
IFRS 13 Fair Value Measurement
The amendment is applied prospectively and clarifies that the portfolio exception in IFRS 13 can be applied not only to financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as applicable). The Group does not apply the portfolio exception in IFRS 13.
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NOTE 3 - | SIGNIFICANT EVENTS DURING THE REPORTED PERIOD |
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| Issue of Shares and Mobilization of Capital |
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| On June 1, 2015, the Company issued 11,875,000 Ordinary Shares raising £475 ($723) thousand before expenses. |
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| In connection with the share issuance, the Company has granted Northland Capital Partners Limited options to subscribe for 430,000 new Ordinary Shares at 4p per share, exercisable at any time for a period of 5 years following Admission.
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NOTE 4 - | INTANGIBLE ASSETS |
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Composition: |
| |||||||||||||||
Cost of Materials (including overhead costs) |
Direct Labour |
Total |
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Cost: |
| |||||||||||||||
Balance as of January 1 2015 | 2,040 | 981 | 3,021 |
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Additions during the year | 51 | 210 | 261 |
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Balance as of June 30 2015 | 2,091 | 1,191 | 3,282 |
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Accumulated Depreciation: |
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Balance as of January 1 2015 | (334) | (173) | (507) |
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Depreciation during the year | (71) | (40) | (111) |
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Balance as of June 30 2015 | (405) | (213) | (618) |
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Impairment of assets | (121) | (81) | (202) |
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Net book value as of June 30 2015 | 1,565 | 897 | 2,462 |
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Cost of Materials (including overhead costs) |
Direct Labour |
Total | |||||
Cost: | |||||||
Balance as of January 1 2014 | 1,502 | 819 | 2,321 | ||||
Additions during the year | 145 | 141 | 286 | ||||
Balance as of June 30 2014 | 1,647 | 960 | 2,607 | ||||
Accumulated Depreciation: | |||||||
Balance as of January 1 2014 | (224) | (94) | (318) | ||||
Depreciation during the year | (46) | (50) | (96) | ||||
Balance as of June 30 2014 | (270) | (144) | (414) | ||||
Net book value as of June 30 2014 | 1,377 | 816 | 2,193 | ||||
Cost of Materials (including overhead costs) |
Direct Labour |
Total | |||||
Cost: | |||||||
Balance as of January 1 2014 | 1,502 | 819 | 2,321 | ||||
Additions during the year | 538 | 162 | 700 | ||||
Balance as of December 31 2014 | 2,040 | 981 | 3,021 | ||||
Accumulated Depreciation: | |||||||
Balance as of January 1 2014 | (224) | (94) | (318) | ||||
Depreciation during the year | (110) | (79) | (189) | ||||
Balance as of December 31 2014 | (334) | (173) | (507) | ||||
Impairment of assets | (121) | (81) | (202) | ||||
Net book value as of December 31 2014 |
1,585 |
727 |
2,312 | ||||
NOTE 5 - | SHARE CAPITAL | |
a. | Composition - as of June 30 2015 common stock of no par value, authorized 118,500,000 shares; issued and outstanding - 96,308,333 shares. | |
b. | A Company share grants to its holder voting rights, rights to receive dividends and rights to net assets upon dissolution. | |
c. | See Note 3. | |
NOTE 6 - | SHAREHOLDERS
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| a. | Related parties that own the controlling shares in the Group are: | |
| Mr. Avraham Hartman (20.1%), Mr. Uri Hartman (20.1%), Mr. Doron Kedem (20.1%). | ||
b. | Balances: | June 30 | December 31 | |||||
| 2015 | 2014 | 2014 | |||||
| Current balance | (306) | (182) | (374) | ||||
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c. |
Transactions: |
Six Months Ended June 30 |
Year Ended December 31 |
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| 2015 | 2014 | 2014 |
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| Total salaries, services rendered and related expenses for shareholders |
274 |
523 |
645 |
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NOTE 7 - | FINANCE INCOME (EXPENSES) |
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| Six Months Ended June 30 | Year Ended December 31 | ||||||
| 2015 | 2014 | 2014 | |||||
| Interest to banks and others | (31) | (29) | (87) | ||||
| Exchange rate differences | (104) | (10) | 233 | ||||
| Bank charges | (50) | (30) | (50) | ||||
| Interest to suppliers | (7) | (1) | (8) | ||||
| Net finance (income) expenses |
(192) |
(70) |
88 | ||||
NOTE 8 - | SEGMENTATION REPORTING |
Segments' differentiation policy: The Company's management has defined its segmentation policy based on the financial essence of the different segments. This refers to services versus goods, delivery method and allocated resources per sector. On this basis, the following segments were defined:
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Segment information regarding the reported segments: |
Sets | Web | Accessory | Other | Total | |||||||
Period Ended 30.06.2015: | |||||||||||
Segment revenues | 1,757 | 793 | 34 | 51 | 2,635 | ||||||
Cost of sales | (1,410) | (34) | (7) | (31) | (1,482) | ||||||
Gross profit | 347 | 759 | 27 | 20 | 1,153 | ||||||
Operating expenses | (1,652) | ||||||||||
Operating loss | (499) | ||||||||||
Period Ended 30.06.2014: | |||||||||||
Segment revenues | 1,759 | 685 | 50 | 133 | 2,627 | ||||||
Cost of sales | (1,255) | (88) | (13) | (4) | (1,360) | ||||||
Gross profit | 504 | 597 | 37 | 129 | 1,267 | ||||||
Operating expenses | (2,182) | ||||||||||
Operating loss | (915) | ||||||||||
Year Ended 31.12.2014: | |||||||||||
Segment revenues | 3,276 | 1,504 | 48 | 177 | 5,005 | ||||||
Cost of sales | (2,370) | (66) | (24) | (39) | (2,499) | ||||||
Gross profit | 906 | 1,438 | 24 | 138 | 2,506 | ||||||
Operating expenses | (915) | (25) | - | - | (940) | ||||||
Operating profit (loss) before general and administrative expenses |
(9) |
1,413 |
24 |
138 |
1,566 | ||||||
Unattributed general and administrative expenses and other expenses |
(4,472) | ||||||||||
(2,906) |