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| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| Unaudited | Audited | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | 6,787 | $ | 1,763 | ||||
| Restricted cash | 501 | 241 | ||||||
| Trade receivables, net | 5,165 | 4,701 | ||||||
| Unbilled receivables, net | 23 | - | ||||||
| Other accounts receivable and prepaid expenses | 734 | 539 | ||||||
Total current assets | 13,210 | 7,244 | ||||||
| LONG-TERM ASSETS: | ||||||||
| Severance pay fund | 1,382 | 1,228 | ||||||
| Long Term Restricted cash | 86 | *) 41 | ||||||
| Long-term deposits and long-term assets | 96 | *) 138 | ||||||
| Property and equipment, net | 509 | 448 | ||||||
| Intangible assets, net | 34 | 55 | ||||||
| Goodwill | 6,061 | 5,870 | ||||||
Total long-term assets | 8,168 | 7,780 | ||||||
Total assets | $ | 21,378 | $ | 15,024 | ||||
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| Unaudited | Audited | |||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current maturity of convertible debentures (Note 3) | $ | 864 | $ | 1,521 | ||||
| Trade payables | 303 | 310 | ||||||
| Deferred revenues | 2,469 | 1,659 | ||||||
| Accrued expenses and other accounts payable | 3,012 | 1,992 | ||||||
Total current liabilities | 6,648 | 5,482 | ||||||
| LONG-TERM LIABILITIES: | ||||||||
| Convertible debentures (Note 3) | 4,319 | 3,804 | ||||||
| Accrued severance pay | 1,620 | 1,446 | ||||||
Total long-term liabilities | 5,939 | 5,250 | ||||||
| COMMITMENTS, CONTINGENCIES AND CHARGES | ||||||||
| SHAREHOLDERS' EQUITY: | ||||||||
| Share capital - | ||||||||
| Ordinary shares of NIS 0.04 par value - | ||||||||
Authorized: 125,000,000 shares at June 30, 2011 and December 31, 2010; Issued and outstanding: 10,855,424 shares at June 30, 2011 and 9,400,638 shares at December 31, 2010. | 120 | 103 | ||||||
| Additional paid-in capital | 34,041 | 31,363 | ||||||
| Accumulated other comprehensive loss | (665 | ) | (1,175 | ) | ||||
| Accumulated deficit | (24,705 | ) | (25,999 | ) | ||||
Total shareholders' equity | 8,791 | 4,292 | ||||||
Total liabilities and shareholders' equity | $ | 21,378 | $ | 15,024 | ||||
| August 3, 2011 | ||||||
Date of approval of the financial statements |
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2010 | ||||||||||||||||
| Unaudited | Audited | |||||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Products | $ | 7,359 | $ | 4,886 | $ | 3,154 | $ | 2,470 | $ | 9,165 | ||||||||||
| Services | 6,861 | 5,612 | 3,908 | 2,749 | 12,597 | |||||||||||||||
Total revenues | 14,220 | 10,498 | 7,062 | 5,219 | 21,762 | |||||||||||||||
| Cost of revenues: | ||||||||||||||||||||
| Products | 755 | 476 | 246 | 209 | 803 | |||||||||||||||
| Services | 4,813 | 3,530 | 2,620 | 1,766 | 7,547 | |||||||||||||||
Total cost of revenues | 5,568 | 4,006 | 2,866 | 1,975 | 8,350 | |||||||||||||||
| Gross profit | 8,652 | 6,492 | 4,196 | 3,244 | �� | 13,412 | ||||||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Research and development, net | 981 | 829 | 490 | 416 | 1,647 | |||||||||||||||
| Selling and marketing | 3,477 | *) 3,001 | 1,748 | *) 1,475 | 6,160 | |||||||||||||||
| General and administrative | 2,213 | *) 1,741 | 991 | *) 788 | 3,845 | |||||||||||||||
Total operating costs and expenses | 6,671 | 5,571 | 3,229 | 2,679 | 11,652 | |||||||||||||||
| Operating income | 1,981 | 921 | 967 | 565 | 1,760 | |||||||||||||||
| Financial income (expenses) , net | (684 | ) | (942 | ) | (408 | ) | 509 | (2,190 | ) | |||||||||||
| Other expenses, net | - | (6 | ) | - | (6 | ) | (6 | ) | ||||||||||||
| Income (loss) from continuing operations before taxes on income | 1,297 | (27 | ) | 559 | 1,068 | (436 | ) | |||||||||||||
| Taxes on income | 3 | 1 | 2 | (5 | ) | 24 | ||||||||||||||
| Net income (loss) | $ | 1,294 | $ | (28 | ) | $ | 557 | $ | 1,073 | $ | (460 | ) | ||||||||
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2010 | ||||||||||||||||
| Unaudited | Audited | |||||||||||||||||||
| Net earnings (loss) per share, (Note 4): | ||||||||||||||||||||
| Basic | $ | 0.14 | $ | *) - | $ | 0.06 | $ | 0.11 | $ | (0.05 | ) | |||||||||
| Diluted | $ | 0.12 | $ | *) - | $ | 0.05 | $ | 0.10 | $ | (0.05 | ) | |||||||||
| Accumulated | ||||||||||||||||||||||||||||
| Additional | other | |||||||||||||||||||||||||||
| Ordinary shares | paid-in | comprehensive | Accumulated | Comprehensive | ||||||||||||||||||||||||
| Number | Amount | capital | income (loss) | deficit | loss | Total | ||||||||||||||||||||||
| Balance at January 1, 2010 | 9,325,638 | $ | 102 | $ | 31,144 | $ | (677 | ) | $ | (25,539 | ) | $ | 5,030 | |||||||||||||||
| Issuance of Ordinary shares for consulting services | 75,000 | 1 | 78 | - | - | 79 | ||||||||||||||||||||||
| Change in foreign currency translation adjustments, net | - | - | - | (498 | ) | $ | (498 | ) | (498 | ) | ||||||||||||||||||
| Net loss | - | - | - | - | (460 | ) | (460 | ) | (460 | ) | ||||||||||||||||||
| Comprehensive loss | $ | (958 | ) | |||||||||||||||||||||||||
| Equity-based compensation expenses to directors | - | - | 141 | - | - | 141 | ||||||||||||||||||||||
| Balance at December 31, 2010 | 9,400,638 | 103 | 31,363 | (1,175 | ) | (25,999 | ) | 4,292 | ||||||||||||||||||||
| Issuance of Ordinary shares and Warrants (Note 5) | 1,425,000 | 17 | 2,639 | - | - | 2,656 | ||||||||||||||||||||||
| Change in foreign currency translation adjustments, net | - | - | - | 510 | - | $ | 510 | 510 | ||||||||||||||||||||
| Net profit | - | - | - | - | 1,294 | 1,294 | 1,294 | |||||||||||||||||||||
| Comprehensive loss | $ | 1,804 | ||||||||||||||||||||||||||
| Exercise of stock options | 29,786 | *) - | 39 | - | - | 39 | ||||||||||||||||||||||
| Balance at June 30, 2011 (unaudited) | 10,855,424 | $ | 120 | $ | 34,041 | $ | (665 | ) | $ | (24,705 | ) | $ | 8,791 | |||||||||||||||
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2010 | ||||||||||||||||
| Unaudited | Audited | |||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net income (loss) | $ | 1,294 | $ | (28 | ) | $ | 557 | $ | 1,073 | $ | (460 | ) | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||||||
| Stock-based compensation expenses to directors | - | - | - | - | 141 | |||||||||||||||
| Stock-based compensation expenses to shares granted to consultant | - | 79 | - | - | 79 | |||||||||||||||
| Depreciation and amortization | 126 | 130 | 58 | 53 | 259 | |||||||||||||||
| Change in accrued severance pay, net | 20 | (29 | ) | (1 | ) | (10 | ) | (45 | ) | |||||||||||
| Change in accrued Interest pay | - | - | (5 | ) | (25 | ) | - | |||||||||||||
| Loss (gain) from disposal of property and equipment, net | - | 8 | - | 8 | (1 | ) | ||||||||||||||
| Erosion of non-dollar linked restricted cash | (17 | ) | 21 | (17 | ) | 13 | 10 | |||||||||||||
| Decrease (increase) in trade receivables, net | (191 | ) | (696 | ) | (929 | ) | 436 | (340 | ) | |||||||||||
| Decrease (increase) in unbilled receivables | (23 | ) | 898 | (17 | ) | 272 | 1,417 | |||||||||||||
| Increase (decrease) in fair value of convertible debentures | 783 | 532 | 437 | (734 | ) | 2,119 | ||||||||||||||
| Increase (decrease) in other accounts receivable and prepaid expenses | (203 | ) | (93 | ) | 67 | 39 | 36 | |||||||||||||
| Decrease in trade payables | (12 | ) | (338 | ) | (209 | ) | (618 | ) | (355 | ) | ||||||||||
| Increase in deferred revenues | 847 | 932 | 165 | 322 | 338 | |||||||||||||||
| Increase (decrease) in accrued expenses and other accounts payable | 1,040 | (443 | ) | 1,118 | (129 | ) | (684 | ) | ||||||||||||
| Net cash provided by operating activities | 3,664 | 973 | 1,224 | 700 | 2,514 | |||||||||||||||
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2010 | ||||||||||||||||
| Unaudited | Audited | |||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Advance payment for sale of affiliate | - | - | - | - | 369 | |||||||||||||||
| Decrease (Increase) in restricted cash, net | (285 | ) | 207 | (305 | ) | 165 | 362 | |||||||||||||
| Purchase of property and equipment | (157 | ) | (63 | ) | (75 | ) | (44 | ) | (153 | ) | ||||||||||
| Decrease in short-term deposits, net | - | 21 | - | - | 73 | |||||||||||||||
| Increase in long-term deposits | (6 | ) | (30 | ) | (6 | ) | (13 | ) | (7 | ) | ||||||||||
| Net cash provided by (used in) investing activities | (448 | ) | 135 | (386 | ) | 108 | 644 | |||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Proceeds from exercise of stock options | 39 | - | 39 | - | - | |||||||||||||||
| Proceeds from Issuance of Ordinary shares, net of issuance expenses | 2,656 | - | 2,656 | - | - | |||||||||||||||
| Decrease in short-term bank loans, net | - | (110 | ) | - | (1 | ) | (114 | ) | ||||||||||||
| Repayment of convertible debentures | (925 | ) | (1,382 | ) | (925 | ) | (826 | ) | (4,092 | ) | ||||||||||
| Net cash provided by (used in) financing activities | 1,770 | (1,492 | ) | 1,770 | (827 | ) | (4,206 | ) | ||||||||||||
| Effect of exchange rate on cash and cash equivalent balances | 38 | (88 | ) | 78 | (36 | ) | (55 | ) | ||||||||||||
| Increase (decrease) in cash and cash equivalents | 5,024 | (472 | ) | 2,686 | (55 | ) | (1,103 | ) | ||||||||||||
| Cash and cash equivalents at the beginning of the period | 1,763 | 2,866 | 4,101 | 2,449 | 2,866 | |||||||||||||||
| Cash and cash equivalents at the end of the period | $ | 6,787 | $ | 2,394 | $ | 6,787 | $ | 2,394 | $ | 1,763 | ||||||||||
| Supplemental disclosure of cash flows activities: | ||||||||||||||||||||
| Cash paid during the year for: | ||||||||||||||||||||
| Tax | $ | 3 | $ | 1 | $ | 2 | $ | - | $ | 55 | ||||||||||
| Interest | $ | 3 | $ | 61 | $ | 3 | $ | 50 | $ | 83 | ||||||||||
| NOTE 1:- | GENERAL |
| a. | Business and organization: Top Image Systems Ltd. ("TIS" or "the Company") is engaged in the development and marketing of a variety of information recognition systems and technologies and automated document capture solutions for the efficient flow of information within and between organizations. The Company's software minimizes the need for manual data entry by automatically capturing, reading, understanding, identifying, processing, classifying and routing the information contained in documents, increasing data capture accuracy and the rate of information processing. The Company's shares are traded on The NASDAQ capital market in the United States and on the Tel-Aviv Stock Exchange ("TASE"). |
| b. | The Company's main marketing and sales activities are conducted through its subsidiaries in the United States, the United Kingdom, Germany, Japan and Singapore. |
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES |
| a. | Unaudited Interim Financial Information The accompanying consolidated balance sheet as of June 30, 2011, consolidated statements of income for the three and six months ended June 30, 2010 and 2011 and consolidated statements of cash flows for the six and three months ended June 30, 2010 and 2011 are unaudited. These unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company's consolidated financial position as of June 30, 2011, our consolidated results of operations for the three and six and three months ended June 30, 2010 and 2011 and our consolidated cash flows for the six months ended June 30, 2010 and 2011. The balance sheet at December 31, 2010 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. These interim unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2010 included in the Company's Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission (“SEC”) on March 31, 2011. Results for the three and six months ended June 30, 2011 are not necessarily indicative of results that may be expected for the year ending December 31, 2011. Unless otherwise noted, all references to “dollars” or “$” are to United States dollars and all references to “NIS” are to New Israeli Shekels. |
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| b. | Use of estimates The preparation of financial statements in conformity with United States generally accepted accounting principles requires our management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management believes that the estimates, judgments and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. |
| d. | Basic and diluted net earnings (loss) per share Basic net earnings (loss) per share are computed based on the weighted average number of Ordinary shares outstanding during each year. Diluted net earnings per share are computed based on the weighted average number of Ordinary shares outstanding during each year, plus the dilutive potential of Ordinary shares considered outstanding during the year. Part of the outstanding stock options has been excluded from the calculation of the diluted net earnings (loss) per share because such securities are anti-dilutive for the three and six months ended June 30, 2010 and 2011 and for the year ended December 31, 2010. The weighted average number of shares related to the outstanding options and convertible debentures excluded from the calculations of diluted net earnings (loss) per share are detailed in the table below: |
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | |||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2010 | |||||||||||||||
| Unaudited | Audited | ||||||||||||||||||
| - | 1,806,272 | - | - | 1,721,505 | |||||||||||||||
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| e. | Convertible debentures The Company adopted ASC 825, "Financial Instruments" as of the beginning of 2008 and irrevocably elected to apply the fair value option to its convertible debentures. The primary reasons for electing the fair value option were simplification and cost-benefit considerations as well as expansion of use of fair value measurement consistent with the FASB's long-term measurement objectives for accounting for financial instruments. |
| f. | Fair value of financial instruments The following methods and assumptions were used by the Company and its subsidiaries in estimating their fair value disclosures for financial instruments: The carrying amounts of cash and cash equivalents, trade receivables and other accounts receivable, trade payables and other accounts payable approximate their fair value due to the short-term maturity of these instruments. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in valuation methodologies to measure fair value: |
| Level 1 - | Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. |
| Level 2 - | Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
| Level 3 - | Unobservable inputs which are supported by little or no market activity and significant to the overall fair value measurement. |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company measures its convertible debt at fair value on a recurring basis. Convertible debt is classified within Level 1, since this liability is valued using quoted market price in an active market (see Note 3). |
| NOTE 2:- | SIGNIFICANT ACCOUNTING POLICIES (Cont.) |
| g. | Impact of recently issued Accounting Standards In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220)—Presentation of Comprehensive Income, to require an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity. The amendments should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after 15 December 2011. The Company is currently evaluating the impact on its consolidated financial statements. |
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
| Unaudited | Audited | |||||||
| Fair value | $ | 5,183 | $ | 5,325 | ||||
| Unpaid principal balance | (5,567 | ) | (6,250 | ) | ||||
| $ | (384 | ) | $ | (925 | ) | |||
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | |||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2010 | |||||||||||||||
| Unaudited | Audited | ||||||||||||||||||
| $ | (783 | ) | $ | (532 | ) | $ | (437 | ) | $ | 734 | $ | (2,119 | ) | ||||||
Six months ended June 30, | Three months ended June 30, | Year ended December 31, | ||||||||||||||||||
| 2011 | 2010 | 2011 | 2010 | 2010 | ||||||||||||||||
| Unaudited | Audited | |||||||||||||||||||
| Numerator for basic net earnings (loss) per share - net income (loss) available to shareholders | $ | 1,294 | $ | (28 | ) | $ | 557 | $ | 1,073 | $ | (460 | ) | ||||||||
| Net income (loss) used for the computation of diluted net earnings (loss) per share | $ | 1,297 | $ | (28 | ) | $ | 555 | $ | 1,102 | $ | (460 | ) | ||||||||
| Weighted average Ordinary shares outstanding | 9,542,851 | 9,378,138 | 9,685,064 | 9,400,638 | 9,389,512 | |||||||||||||||
| Effect of dilutive securities: | ||||||||||||||||||||
| Employees stock options | 107,166 | **) - | 214,333 | **) - | **) - | |||||||||||||||
| Convertible debentures | 1,092,684 | **) - | 1,092,684 | 1,797,196 | **) - | |||||||||||||||
| 1,199,850 | **) - | 1,307,017 | 1,797,196 | **) - | ||||||||||||||||
| Diluted weighted average Ordinary shares outstanding | 10,742,701 | 9,378,138 | 10,992,081 | 11,197,834 | 9,389,512 | |||||||||||||||
| Net earnings (loss) per share | ||||||||||||||||||||
| Basic | $ | 0.14 | $ | **) - | $ | 0.06 | $ | 0.11 | $ | (0.05 | ) | |||||||||
| Diluted | $ | 0.12 | $ | **) - | $ | 0.05 | $ | 0.10 | $ | (0.05 | ) | |||||||||
| *) | Represent an amount lower than $ 0.01. |
| **) | Anti-dilutive. |
| NOTE 5:- | PRIVATE PLACEMENT TRANSACTION |
| NOTE 6:- | SUBSEQUENT EVENT |
