Modsys International (MDSY) 10-Q 8 May 14 2014 Q1 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	3 Months Ended
	Mar. 31, 2014	5-May-14
Document and Entity Information [Abstract]	'	'
Entity Registrant Name	'BLUEPHOENIX SOLUTIONS LTD	'
Entity Central Index Key	'0001029581	'
Amendment Flag	'false	'
Current Fiscal Year End Date	'--12-31	'
Document Type	'10-Q	'
Document Period End Date	31-Mar-14	'
Document Fiscal Period Focus	'Q1	'
Document Fiscal Year Focus	'2014	'
Entity Filer Category	'Smaller Reporting Company	'
Entity Common Stock, Shares Outstanding	'	11,467,586

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Current Assets:	'	'
Cash and cash equivalents	$871	$2,592
Restricted cash	12	35
Trade accounts receivable, net	2,469	1,960
Other current assets	310	239
Total Current Assets	3,662	4,826
Non-Current Assets:	'	'
Property and equipment, net	288	287
Goodwill	12,501	12,501
Total Non-Current Assets	12,789	12,788
TOTAL ASSETS	16,451	17,614
Current Liabilities:	'	'
Short-term bank credit and others	40	40
Trade accounts payable	902	886
Deferred revenues	394	719
Other current liabilities	754	902
Total Current Liabilities	2,090	2,547
Non-Current Liabilities	'	'
Accrued severance pay, net	276	290
Loans from others	162	162
Derivative liabilities - warrants	285	311
Total Non-Current Liabilities	723	763
Total Equity	13,638	14,304
TOTAL LIABILITIES AND EQUITY	$16,451	$17,614

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended
In Thousands, except Share data, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013
Income Statement [Abstract]	'	'
Revenue	$1,871	$2,198
Cost of revenue	982	1,090
Gross profit	889	1,108
Research and development costs	335	347
Selling, general and administrative expenses	1,414	1,509
Less: Gain on sales of subsidiaries and Appbuilder	'	845
Total operating expenses	1,749	1,011
Operating profit (loss)	-860	97
Financial income (expenses), net	30	-73
Profit (loss) before taxes	-830	24
Taxes on income	18	48
Net loss from continued operation	-848	-24
Net loss from discontinued operation	'	399
Net loss	-848	-423
Net result attributed to noncontrolling interests	75	177
Loss attributed to BluePhoenix shareholders	($923)	($600)
Loss per share:	'	'
From continued operation- basic and diluted	($0.08)	($0.02)
From discontinued operation- basic and diluted	'	($0.04)
Attributed to the shareholders	-0.08	-0.06
Shares used in per share calculation: Basic and diluted	11,416	10,659

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013
STATEMENTS OF COMPREHENSIVE INCOME [Abstract]	'	'
Net loss	($848)	($423)
Other comprehensive income	'	'
Total comprehensive loss	-848	-423
Comprehensive result attributable to the non-controlling interests	75	177
Loss attributed to BluePhoenix shareholders	($923)	($600)

CONDENSED_CONSOLIDATED_STATEME2

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:	'	'
Net loss	($848)	($423)
Adjustments to reconcile net loss to net cash used in operating activities:	'	'
Depreciation and amortization	38	127
Decrease in accrued severance pay, net	-14	-9
Stock-based compensation	182	148
Change in fair value of derivatives	-26	2
Gain on sales of subsidiaries and Appbuilder	'	473
Changes in operating assets and liabilities:	'	'
Decrease (increase) in trade receivables	-509	148
Increase in other current assets	-48	-102
Increase (decrease) in trade payables	16	-178
Decrease in other current liabilities and deferred revenues	-473	-368
Net cash used in operating activities	-1,682	-1,128
CASH FLOWS FROM INVESTING ACTIVITIES:	'	'
Purchase of property and equipment	-39	-6
Proceeds from sales of subsidiaries and Appbuilder	'	800
Net cash provided by (used in) investing activities	-39	794
CASH FLOWS FROM FINANCING ACTIVITIES:	'	'
Short term bank credit and convertible notes, net	'	-121
Net cash used in financing activities	'	-121
NET CASH DECREASE IN CASH AND CASH EQUVIALETS	-1,721	-455
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	2,592	2,560
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$871	$2,105

Summary_of_Significant_Account

Summary of Significant Accounting Policies	3 Months Ended
	Mar. 31, 2014
Summary of Significant Accounting Policies [Abstract]	'
Summary of Significant Accounting Policies	'
	Note 1 – Summary of Significant Accounting Policies:
		A.	The Company:
	BluePhoenix Solutions Ltd. (“BluePhoenix”) (together with its subsidiaries, the “Company”, "we"), “us” or “our” is a public company incorporated in Israel, which operates in one operating segment of information technology ("IT") modernization solutions.
	The Company develops and markets unique enterprise legacy lifecycle IT modernization solutions and provides tools and professional services to selected customers. The Company manages its business in various international markets through several entities, including its wholly-owned and majority owned subsidiaries located in: United States (where its headquarters are located), United Kingdom, Italy, Romania and Israel.
		B.	Recently Issued Accounting Pronouncements
	New accounting standards that are applicable to the period:
	On January 1, 2014 we adopted FASB ASU 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”). Under ASU 2013-05 when: a parent sells an investment in a foreign entity and ceases to have a controlling interest in that foreign entity or a foreign subsidiary disposes of substantially all of its assets; or, control of a foreign entity is obtained in which it held an equity interest before the acquisition date, the cumulative translation adjustment should be released into net income. The adoption of ASU 2013-05 did not have a significant impact on our results of operations or financial position.
	On January 1, 2014 we adopted FASB ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 eliminates a diversity in practice regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward or a tax credit carryforward exists. The adoption of ASU 2013-11 did not have a significant impact on the presentation of our results of operations or financial position.
	New accounting standards issued and still not applicable for the period:
	In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the requirements for reporting discontinued operations in subtopic 205-20 as well as the related disclosures. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014. The company does not expect material impacts on the consolidated financial statements upon adoption.
		C.	Unaudited interim consolidated financial statements:
	The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for the annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. The interim financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013.
		D.	Use of Estimates
	The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that 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 periods. Actual results could differ from those estimates.
	E.	Principles of consolidation
	The consolidated financial statements include the Company's and its subsidiaries financial statements.  The consolidated financial statements of subsidiaries are included in the consolidated financial statements from the date that control is achieved until the date that control ceases. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its operating activities. In assessing control, legal and contractual rights, are taken into account. Intercompany transactions and balances are eliminated upon consolidation.

Goodwill

Goodwill	3 Months Ended
	Mar. 31, 2014
Goodwill [Abstract]	'
Goodwill	'
	Note 2 – Goodwill:
	The change in the carrying amount of goodwill for the three months ended March 31, 2014 is as follows:
		March 31,			December 31,
		2014			2013
		Unaudited			Audited
			(in thousands)
	Balance as of January 1.	$	54,316		$	54,316
	Accumulated impairment losses at the beginning of the period		(41,815	)		(41,815	)
	Balance at end of period	$	12,501		$	12,501

Fair_Value_Measurements

Fair Value Measurements	3 Months Ended
	Mar. 31, 2014
Fair Value Disclosures [Abstract]	'
Fair Value Measurements	'
	Note 3 – Fair Value Measurements:
	The accounting guidance establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
	Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.
	Level 2 – Observable inputs such as quoted prices for similar instruments and quoted prices in markets that are not active, and inputs that are directly observable or can be corroborated by observable market data. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities.
	Level 3 – Significant inputs to pricing that have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as the complex and subjective models and forecasts used to determine the fair value of financial instruments.
	Financial assets and liabilities measured at fair value as of March  31, 2014 and December 31, 2013, are summarized below:
		Fair value measurements using input type
		March 31, 2014
		Level 1		Level 2			Level 3		Total
	Cash and cash equivalents	$	871	$	-		$	-	$	871
	Restricted cash		12		-			-		12
	Derivative liability - warrants		-		(285	)		-		(285	)
		$	883	$	(285	)	$	-	$	598
		Fair value measurements using input type
		31-Dec-13
		Level 1		Level 2			Level 3		Total
	Cash and cash equivalents	$	2,592	$	-		$	-	$	2,592
	Restricted cash		35		-			-		35
	Derivative liability - warrants		-		(311	)		-		(311	)
		$	2,627	$	(311	)	$	-	$	2,316

Commitments_and_Contingencies

Commitments and Contingencies	3 Months Ended
	Mar. 31, 2014
Commitments and Contingencies [Abstract]	'
Commitments and Contingencies	'
	Note 4 – Commitments and Contingencies:
		A.	Commitments:
	Chief Scientist. One of the Company’s subsidiaries has entered into agreements with the Israel’s Office of the Chief Scientist, or OCS; this subsidiary is obliged to pay royalties to the OCS at a rate of 3% on sales of the funded products, up to 100% of the dollar-linked grant received in respect of these products from the OCS. As of March 31, 2014, the contingent liability that was not recognized amounted to $263,000.
	Ministry of Production in Italy. In July 2007, the Company’s subsidiary, I-Ter, received an amount of $585,000 from the Ministry of Production in Italy for I-Ter's Easy4Plan product. Easy4Plan is a workflow management tool designed for ISO9000 companies. 36.5% of the funds received constitute a grant, and the remaining 63.5%, is a 10-year loan to be repaid by I-Ter in annual installments until September 2018. The loan bears a minimal annual interest of 0.87% and is linked to the euro. As of March 31, 2014, the remaining loan balance was $202,000.
		B.	Contingencies:
	The Company evaluates estimated losses for indemnifications due to product infringement under FASB Topic ASC 450 "Contingencies". At this time, it is not possible to determine the maximum potential amount under these indemnification clauses due to lack of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements may not be subject to maximum loss clauses. Historically, the Company has not incurred costs as a result of obligations under these agreements and has not accrued any liabilities related to such indemnification obligations in the Company’s financial statements.

Discontinued_Operation

Discontinued Operation	3 Months Ended
	Mar. 31, 2014
Discontinued Operation [Abstract]	'
Discontinued Operation	'
	Note 5 – Discontinued Operation:
	In February 2013, the Company executed an agreement for the sale of the operations of BridgeQuest, Inc. and its relevant subsidiary. Total consideration for BridgeQuest, Inc. was $6,500. In addition, as part of the agreement, the Company received additional amounts upon collection of existing account receivables of BridgeQuest, Inc. collected by the purchaser following the transaction. BridgeQuest, Inc.  met the definition of a component. Accordingly, the results of operations in the statement of operations and prior period’s results have been reclassified accordingly.
	The following is the composition from discontinued operation:
		Three Months Ended
		March 31,
		2013
	Revenue	$	-
	Cost of revenue		16
	Gross loss		(16	)
	Research and development costs		-
	Selling, general, and administrative expenses		2
	Loss on realization of shareholdings		372
	Operating loss		(390	)
	Financial expense, net		9
	Loss before provision for  income taxes		(399	)
	Provision for income taxes		-
	Net loss	$	(399	)

Summary_of_Significant_Account1

Summary of Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2014
Summary of Significant Accounting Policies [Abstract]	'
The company	'
		A.	The Company:
	BluePhoenix Solutions Ltd. (“BluePhoenix”) (together with its subsidiaries, the “Company” or "we") is an Israeli corporation, which operates in one operating segment of information technology ("IT") modernization solutions.
	The Company develops and markets unique enterprise legacy lifecycle IT modernization solutions and provides tools and professional services to selected customers. The Company manages its business in various international markets through several entities, including its wholly-owned subsidiaries located in: United States, United Kingdom, Italy, Romania and Israel.
Recently Issued Accounting Pronouncements:	'
		Recently Issued Accounting Pronouncements
	B.
	New accounting standards that are applicable to the period:
	On January 1, 2014 we adopted FASB ASU 2013-05, Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (“ASU 2013-05”). Under ASU 2013-05 when: a parent sells an investment in a foreign entity and ceases to have a controlling interest in that foreign entity or a foreign subsidiary disposes of substantially all of its assets; or, control of a foreign entity is obtained in which it held an equity interest before the acquisition date, the cumulative translation adjustment should be released into net income. The adoption of ASU 2013-05 did not have a significant impact on our results of operations or financial position.
	On January 1, 2014 we adopted FASB ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 eliminates a diversity in practice regarding the presentation of an unrecognized tax benefit when a net operating loss carryforward or a tax credit carryforward exists. The adoption of ASU 2013-11 did not have a significant impact on the presentation of our results of operations or financial position.
	New accounting standards issued and still not applicable for the period:
	In April 2014, the FASB issued ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU changes the requirements for reporting discontinued operations in subtopic 205-20 as well as the related disclosures. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2014. The company does not expect material impacts on the consolidated financial statements upon adoption.
Unaudited interim consolidated financial statements	'
		C.	Unaudited interim consolidated financial statements:
	The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for the annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. The interim financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2013.
Use of Estimates	'
	D.	Use of Estimates
	The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that 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 periods. Actual results could differ from those estimates.
Principles of consolidation	'
	E.	Principles of consolidation
	The consolidated financial statements include the Company's and its subsidiaries financial statements.  The consolidated financial statements of subsidiaries are included in the consolidated financial statements from the date that control is achieved until the date that control ceases. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its operating activities. In assessing control, legal and contractual rights, are taken into account. Intercompany transactions and balances are eliminated upon consolidation.

Goodwill_Tables

Goodwill (Tables)	3 Months Ended
	Mar. 31, 2014
Goodwill [Abstract]	'
Schedule of Goodwill	'
		March 31,			December 31,
		2014			2013
		Unaudited			Audited
		(in thousands)
	Balance as of January 1.	$	54,316		$	54,316
	Accumulated impairment losses at the beginning of the period		(41,815	)		(41,815	)
	Balance at end of period	$	12,501		$	12,501

Fair_Value_Measurements_Tables

Fair Value Measurements (Tables)	3 Months Ended
	Mar. 31, 2014
Fair Value Disclosures [Abstract]	'
Summary of fair value measurements	'
		Fair value measurements using input type
		March 31, 2014
		Level 1		Level 2		Level 3		Total
	Cash and cash equivalents	$	871	$	-	$	-	$	871
	Restricted cash		12		-		-		12
	Derivative liability - warrants		-		-285		-		-285
		$	883	$	-285	$	-	$	598
		Fair value measurements using input type
		31-Dec-13
		Level 1		Level 2		Level 3		Total
	Cash and cash equivalents	$	2,592	$	-	$	-	$	2,592
	Restricted cash		35		-		-		35
	Derivative liability - warrants		-		-311		-		-311
		$	2,627	$	-311	$	-	$	2,316

Discontinued_Operation_Tables

Discontinued Operation (Tables)	3 Months Ended
	Mar. 31, 2014
Discontinued Operation Additional Disclosures [Abstract]	'
Summary of composition from discontinued operation	'
		Three Months Ended
		March 31,
		2013
	Revenue	$	-
	Cost of revenue		16
	Gross loss		(16	)
	Research and development costs		-
	Selling, general, and administrative expenses		2
	Loss on realization of shareholdings		372
	Operating loss		(390	)
	Financial expense, net		9
	Loss before provision for  income taxes		(399	)
	Provision for income taxes		-
	Net loss	$	(399	)

Goodwill_Details

Goodwill (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Goodwill [Line Items]	'	'
Balance as of January 1	$54,316	$54,316
Accumulated impairment losses at the beginning of the period	-41,815	-41,815
Balance at end of period	$12,501	$12,501

Fair_Value_Measurements_Detail

Fair Value Measurements (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
In Thousands, unless otherwise specified
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]	'	'
Cash and cash equivalents	$871	$2,592
Restricted cash	12	35
Derivatives liability - warrants	-285	-311
Total fair value of assets	598	2,316
Level 1 [Member]	'	'
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]	'	'
Cash and cash equivalents	871	2,592
Restricted cash	12	35
Derivatives liability - warrants	'	'
Total fair value of assets	883	2,627
Level 2 [Member]	'	'
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]	'	'
Cash and cash equivalents	'	'
Restricted cash	'	'
Derivatives liability - warrants	-285	-311
Total fair value of assets	-285	-311
Level 3 [Member]	'	'
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]	'	'
Cash and cash equivalents	'	'
Restricted cash	'	'
Derivatives liability - warrants	'	'
Total fair value of assets	'	'

Commitments_and_Contingencies_

Commitments and Contingencies (Details Textual) (USD $)	3 Months Ended	1 Months Ended
	Mar. 31, 2014	Jul. 31, 2007	Mar. 31, 2014
		Ministry of Production in Italy [Member]	Ministry of Production in Italy [Member]
Other Commitments [Line Items]	'	'	'
Royal commitment, percent of funded product sales	3.00%	'	'
Royalty commitment, maximum percent of grant linked to product sales	100.00%	'	'
Contingent liability, maximum potential royalty payment	$263,000	'	'
Proceeds from issuance of debt and other	'	585,000	'
Percent of proceeds considered long-term debt	'	63.50%	'
Percent of proceeds considered a grant	'	36.50%	'
Maturity date	'	30-Sep-18	'
Debt instrument, minimum interest rate	'	0.87%	'
Long-term debt	'	'	$202,000

Discontinued_Operation_Details

Discontinued Operation (Details) (USD $)	3 Months Ended
In Thousands, unless otherwise specified	Mar. 31, 2014	Mar. 31, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]	'	'
Revenue	'	'
Cost of revenue	'	16
Gross loss	'	-16
Research and development costs	'	'
Selling, general, and administrative expenses	'	2
Loss on realization of shareholdings	'	372
Operating loss	'	-390
Financial expense, net	'	9
Loss before provision for income taxes	'	-399
Provision for income taxes	'	'
Net loss	'	($399)

Discontinued_Operation_Details1

Discontinued Operation (Details Textual) (Bridge Quest [Member], USD $)	1 Months Ended
In Thousands, unless otherwise specified	Feb. 28, 2013
Bridge Quest [Member]	'
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]	'
Total consideration for sale of subsidiary	$6