Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2015 | Mar. 21, 2016 | Jun. 30, 2015 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | Modsys International Ltd | ||
Entity Central Index Key | 1,029,581 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2015 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,015 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 3,591,382 | ||
Entity Common Stock, Shares Outstanding | 18,601,064 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 1,479 | $ 449 |
Restricted cash | 4 | 8 |
Trade accounts receivable, net (Note 12A1) | 2,020 | 2,479 |
Other current assets (Note 12A2) | 120 | 176 |
Total current assets | 3,623 | 3,112 |
LONG TERM ASSETS: | ||
Property and equipment, net (Note 4) | 246 | 321 |
Goodwill (Note 5) | 25,803 | 25,803 |
Intangible assets and others, net (Note 6) | 3,175 | 5,587 |
Total long term assets | 29,224 | 31,711 |
Total assets | 32,847 | 34,823 |
CURRENT LIABILITIES: | ||
Short-term bank credit and others (Note 8) | 2,736 | 1,269 |
Accounts payable and accruals: | ||
Trade accounts payable | 1,004 | 1,230 |
Deferred revenue | 925 | 546 |
Other current liabilities (Note 12A3) | 959 | 989 |
Total current liabilities | 5,624 | 4,034 |
LONG-TERM LIABILITIES: | ||
Accrued severance pay, net (Note 7) | 232 | 229 |
Loans from others (Note 8) | 288 | 114 |
Other non-current liabilities | 30 | 40 |
Total long-term liabilities | 550 | 383 |
Total liabilities | $ 6,174 | $ 4,417 |
COMMITMENTS AND CONTINGENCIES (Note 9) | ||
Equity (Note 10): | ||
Share capital - Preferred shares (authorized: December 31, 2015 - 1,000,000 shares and December 31, 2014 - 0 share; shares issued: December 31, 2015 - 500,000 shares and December 31, 2014 - 0 share. | $ 1,164 | |
Share capital - ordinary shares of NIS 0.04 par value (authorized: December 31, 2015 and 2014 - 25,000,000 shares; shares issued: December 31, 2015 - 18,602,041 and December 31, 2014 - 17,877,333) | 172 | $ 170 |
Additional paid-in capital | 154,882 | 153,208 |
Accumulated other comprehensive loss | (1,537) | (1,537) |
Accumulated deficit | (125,765) | (119,619) |
Treasury shares - December 31, 2015 and 2014 - 33,239 | (1,821) | (1,821) |
ModSys International Ltd. Shareholders' Equity | 27,095 | 30,401 |
Noncontrolling interest | (422) | 5 |
Total equity | 26,673 | 30,406 |
Total liabilities and equity | $ 32,847 | $ 34,823 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - ₪ / shares | Dec. 31, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred shares, par value per share | ₪ 0.04 | ₪ 0.04 |
Preferred shares, shares authorized | 1,000,000 | 0 |
Preferred shares, shares issued | 500,000 | 0 |
Ordinary shares, par value per share | ₪ 0.04 | ₪ 0.04 |
Ordinary shares, shares authorized | 25,000,000 | 25,000,000 |
Ordinary shares, shares issued | 18,602,041 | 17,877,333 |
Treasury shares, shares | 33,239 | 33,239 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Revenues: | ||
Services | $ 8,516 | $ 6,088 |
Products | 1,291 | 1,152 |
Total revenues | 9,807 | 7,240 |
Cost of revenues | 6,033 | 4,076 |
Gross profit | 3,774 | 3,164 |
Research and development costs | 1,495 | 932 |
Selling, general, and administrative expenses | 4,851 | $ 6,044 |
Amortization of intangible assets | 946 | |
Intangible assets impairment | 1,466 | |
Total operating expenses | 8,758 | $ 6,976 |
Operating loss | (4,984) | (3,812) |
Financial income (expenses), net | (1,117) | 115 |
Loss before taxes on income | (6,101) | (3,697) |
Taxes on income | 41 | 25 |
Net loss | (6,142) | (3,722) |
Less: Net loss attributable to non-controlling interest | (328) | (327) |
Net loss attributable to ModSys International Ltd. shareholders | $ (5,814) | $ (3,395) |
Loss per share - basic and diluted : | ||
Attributable to the shareholders | $ (0.32) | $ (0.28) |
Weighted average shares outstanding, basic and diluted | 17,907 | 12,020 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (6,142) | $ (3,722) |
Other comprehensive income | ||
Total comprehensive loss | $ (6,142) | $ (3,722) |
Comprehensive loss attributable to the non-controlling Interests | (328) | (327) |
Comprehensive loss attributable to ModSys International Ltd. shareholders | $ (5,814) | $ (3,395) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Equity - USD ($) $ in Thousands | Total | Preferred shares | Share capital Number of ordinary shares | Additional paid-in capital | Accumulated other comprehensive loss | Cost of Company shares held by subsidiaries | Retained earnings (Accumulated deficit) | Noncontrolling interest | |
Beginning balance at Dec. 31, 2013 | $ 14,304 | $ 105 | $ 133,712 | $ (1,537) | $ (2,084) | $ (116,224) | $ 332 | ||
Beginning balance, shares at Dec. 31, 2013 | 11,404,460 | ||||||||
Net loss | (3,722) | $ (3,395) | $ (327) | ||||||
Stock-based compensation | 727 | $ 727 | |||||||
Exercise of warrants | 321 | $ 1 | 320 | ||||||
Exercise of warrants, shares | 102,343 | ||||||||
Issuance of ordinary shares | $ 18,776 | $ 63 | 18,713 | ||||||
Issuance of ordinary shares, shares | 6,195,494 | ||||||||
Vested RSUs | $ 1 | (264) | $ 263 | ||||||
Vested RSUs, shares | 141,797 | ||||||||
Ending balance at Dec. 31, 2014 | $ 30,406 | $ 170 | $ 153,208 | $ (1,537) | $ (1,821) | $ (119,619) | $ 5 | ||
Ending balance, shares at Dec. 31, 2014 | 17,844,094 | ||||||||
Net loss | $ (6,142) | $ (5,814) | (328) | ||||||
Zulu Intercompany Merger | $ 103 | (103) | |||||||
Stock-based compensation | $ 426 | 422 | $ 4 | ||||||
Issuance of warrants, net | 1,151 | 1,151 | |||||||
Issuance of preferred shares | $ 832 | $ 832 | |||||||
Issuance of preferred shares, shares | |||||||||
Beneficial conversion feature | $ 332 | $ (332) | |||||||
Issuance of ordinary shares | $ 2 | $ (2) | |||||||
Issuance of ordinary shares, shares | 625,000 | ||||||||
Vested RSUs | [1] | ||||||||
Vested RSUs, shares | 99,708 | ||||||||
Ending balance at Dec. 31, 2015 | $ 26,673 | $ 1,164 | $ 172 | $ 154,882 | $ (1,537) | $ (1,821) | $ (125,765) | $ (422) | |
Ending balance, shares at Dec. 31, 2015 | 18,568,802 | ||||||||
[1] | Less than $1 thousand. |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (6,142) | $ (3,722) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,032 | $ 89 |
Intangible assets impairment | 1,466 | |
Increase (decrease) in accrued severance pay, net | 3 | $ (61) |
Stock-based compensation | $ 426 | 727 |
Change in fair value of derivatives | $ (150) | |
Grant of warrants to shareholders | $ 983 | |
Changes in operating assets and liabilities: | ||
Decrease in trade receivables | 459 | $ 575 |
Decrease in other current assets | 56 | 250 |
Decrease in trade payables | (226) | (296) |
Increase (decrease) in other liabilities and deferred revenues | 559 | (886) |
Net cash used in operating activities | (1,384) | (3,474) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Change in restricted cash | 4 | 27 |
Purchase of property and equipment | $ (11) | (51) |
Proceeds from acquisition of subsidiary (Appendix A1) | 14 | |
Net cash used in investing activities | $ (7) | (10) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Short term bank credit | $ 1,467 | 1,229 |
Exercise of warrants | $ 160 | |
Issuance of preferred shares and warrants | $ 1,000 | |
Repayment of long term loan | (46) | $ (48) |
Net cash provided by financing activities | 2,421 | 1,341 |
NET CASH INCREASE (DECREASE) IN CASH AND CASH EQUVIALETS | 1,030 | (2,143) |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 449 | 2,592 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 1,479 | 449 |
Cash paid during the year for: | ||
Income taxes | 25 | |
Interest | $ 129 | $ 10 |
Consolidated Statements of Cas8
Consolidated Statements of Cash Flows (Parenthetical) $ in Thousands | 12 Months Ended |
Dec. 31, 2014USD ($) | |
APPENDIX A (1. PROCEEDS FROM ACQUISITION OF SUBSIDIARY:) | |
Working capital, other than cash | $ 159 |
Property and equipment | (72) |
Intangible assets | (5,587) |
Goodwill | (13,302) |
Other non-current liabilities | 40 |
Issuance of shares | 18,776 |
Total | $ 14 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 1 - Summary of Significant Accounting Policies: A. General: The significant accounting policies, applied on a consistent basis, are as follows: 1. The Company: ModSys International Ltd. (formerly known as BluePhoenix Solutions Ltd.) (together with its subsidiaries, the “Company”, or “Modern Systems”) is an Israeli corporation, which operates in one operating segment of information technology (“IT”) modernization solutions. Modern Systems develops and markets enterprise legacy migration solutions and provides tools and professional services to international markets through several entities including wholly-owned subsidiaries located in: USA, UK, Italy, Romania and Israel. These technologies and services allow business to migrate from their legacy mainframe and distributed IT infrastructures to modern environments and programming languages. The Company has incurred negative cash from operation and net losses in recent years. The Company currently uses its credit line with Comerica to support its negative cash flow position. Management believes that current cash position is sufficient to support the ongoing operations for the next twelve months. (See also Note 8A). 2. Accounting Principles: The consolidated financial statements are prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America. 3. Functional Currency: The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar (“dollar”). In addition, a substantial portion of the Company’s revenues and costs are incurred in dollars. Thus, the functional and reporting currency of the Company is considered to be the dollar. The functional currency of all subsidiaries is the US dollar therefore there is no unrealized gain/loss. Non-monetary transactions denominated in currencies other than the dollar are measured and recorded in dollar at the exchange rates prevailing at transaction date. Monetary assets and liabilities denominated in currencies other than the dollar are translated at the exchange rate on the balance sheet date. Transaction gain or losses on foreign currency translation are recorded in consolidated statement of operations. 4. Use of Estimates and Assumptions in the Preparation of the Financial Statements: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. B. Principles of Consolidation: The consolidated financial statements include the accounts of ModSys International Ltd. and its subsidiaries in which it has a controlling interest. Acquisition of subsidiaries is accounted for under the acquisition method. All intercompany balances and transactions have been eliminated upon consolidation. Non-controlling interests are included in equity. C. Cash and Cash Equivalents: Cash equivalents are considered by the Company to be highly-liquid investments, including inter-alia, short-term deposits with banks, which do not exceed maturities of three months at the time of deposit and which are not restricted. D. Reclassifications: Certain comparative figures have been reclassified to conform to the current year presentation. E. Allowance for Doubtful Accounts: The Company establishes an allowance for doubtful accounts to ensure trade and financing receivables are not overstated due to uncollectability. The allowance for doubtful accounts was based on specific receivables, which their collection, in the opinion of Company’s management, is in doubt. Trade receivables are charged off in the period in which they are deemed to be uncollectible. F. Property and Equipment, Net: Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over their estimated useful lives. Annual rates of depreciation are as follows: % Computers and peripheral equipment 20-33 (mainly 33) Office furniture and equipment 6-15 (mainly 7) Leasehold improvements Over the shorter of lease term or the life of the assets Motor vehicles 15 G. Impairment of Long-Lived Assets: The Company evaluates long-lived assets with definite lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flow and recognizes an impairment loss when the estimated undiscounted future cash flow expected to result from the use of the asset plus the net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, it reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. For the year ending December 31, 2015, no impairment losses had been identified for tangible assets. H. Goodwill and purchased intangible assets Goodwill and purchased intangible assets have been recorded as a result of acquisitions. Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired. Goodwill is not amortized, but rather is subject to an annual impairment test. The Company is one operating segment and one reporting unit related to its overall IT modernization .The goodwill impairment tests are conducted in two steps. In the first step, the Company determines the fair value of the reporting unit. If the net book value of the reporting unit exceeds its fair value, the Company would then perform the second step of the impairment test which requires allocation of the reporting unit’s fair value of all of its assets and liabilities in a manner similar to an acquisition cost allocation, with any residual fair value being allocated to goodwill. The implied fair value of the goodwill is then compared to the carrying value to determine impairment, if any. In 2015 and 2014, the company determined the fair value of a reporting unit using the market approach which is based on the market capitalization by using the share price of the Company in the NASDAQ stock market and an appropriate control premium. As of December 31, 2015 and 2014 market capitalization of the Company was significantly higher than the net book value of the reporting unit and therefore there was no need to calculate a control premium or to continue to step 2. Intangible assets that are not considered to have an indefinite useful life are amortized using the straight-line basis over their estimated useful lives of between 10 months to 9 years. The carrying amount of these assets is reviewed whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the assets is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset (see also Note 1G). On completion of our merger with Sophisticated Business Systems, Inc., a Texas corporation doing business as “Ateras,” the fair value purchase price allocation from this acquisition resulted in the Company recording approximately $5.2 million in technology intangible assets. As of December 31, 2015 there were indicators of potential impairment to the technology intangible assets, since there was a reduction of the revenues and operations in 2015 generated from the technology, compared to previous forecasts. This led the Company to re-evaluate the value of intangible asset based on a finite time discounted cash flow approach with discounted rate of 18%, where the source of cash flows is the underlying technology, based on royalties' payments model, and the projection horizon is consistent with the expected lifetime of the technology. The impairment test indicated that the fair market value of these intangible assets at this time was approximately $3.2 million, causing the Company to record non-cash impairment of approximately $1.5 million for the year ending December 31, 2015. Following the impairment analysis, the useful life estimation of the intangible asset was changed from 8.7 to 5 years. I. Research and Development Costs: Research and development costs are charged to the statement of income as incurred. ASC No. 985, “Software”, requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company’s product development process, technological feasibility is established when detailed program design is completed and verified. Costs incurred by the Company between completion of detailed program design and the point at which the products are ready for general release, have been insignificant. Therefore, all research and development costs have been expensed. J. Stock-based Compensation: In the past two years, all of the stock-based compensation awards were of restricted stock units (“RSUs”). RSUs are valued based on the market value of the underlying stock at the date of grant. The Company also has a stock option plan. Stock option awards are measured and recognized as compensation expense based on estimated fair values on the date of grant using the Black-Scholes option-pricing model. This option pricing model requires that the Company makes several estimates, including the option’s expected life and the price volatility of the underlying stock. The Company recognizes the estimated fair value of option-based awards and RSUs, net of estimated forfeitures, as stock-based compensation costs using the accelerated vesting method. For the years ended December 31, 2015 and 2014 the Company recorded stock-based and RSUs compensation costs in the amount of $0.4 million and $0.7 million, respectively. On December 31, 2015, the total unrecognized stock-based and RSUs compensation costs amounted to $0.7 million, and are expected to be recognized over the next 3 years. K. Revenue Recognition: Revenues derived from direct software license agreements are recognized in accordance with FASB ASC Topic 985 “Software” (“ASC 985”), upon delivery of the software, when collection is probable, the license fee is otherwise fixed or determinable and persuasive evidence of an arrangement exists. The Company recognizes revenues from consulting fees based on the number of hours performed. Revenues from maintenance services are recognized ratably over the term of the maintenance period. When a project involves significant production, modification, customization of software, or delivery of service, that are essential to the fundamentals of the software, revenue is recognized according to the percentage of completion method in accordance with the provisions of FASB ASC Topic 605-25-77. Under this method, estimated revenue is generally accrued based on costs incurred to date, as a percentage of total updated estimated costs. The Company recognizes contract losses, if any, in the period in which they first become evident. There are no rights of return, price protection or similar contingencies in the Company’s contracts. On December 31, 2015, approximately $1.1 million of the accounts receivable balance was unbilled due to the customer’s payment terms. On December 31, 2014, the amount of unbilled revenue was $2 million. The Company presents revenues from products and revenues from services in separate line items. The product revenue line item includes revenue generated from stand-alone software products. In the services revenue line item, the Company includes revenue generated from maintenance and consulting fees and revenues accounted for pursuant to ASC 605-35-25. Tax collected from customers and remitted to government authorities (including VAT) are presented in the income statement on a net basis. L. Advertising Costs: The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2015 and 2014 were $151 and $153 thousand, respectively. M. Income Taxes: Deferred taxes are determined utilizing the “asset and liability” method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, when it’s more likely than not that deferred tax assets will not be realized in the foreseeable future. Deferred tax liabilities and assets are classified as current or non-current based on the expected reversal dates of the specific temporary differences. The Company applied ASC Topic 740-10-05, Income Tax, which provides guidance for recognizing and measuring uncertain tax positions, it prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. It also provides accounting guidance on derecognizing, classification and disclosure of these uncertain tax positions. The Company’s policy on classification of all interest and penalties related to unrecognized income tax positions, if any, is to present them as a component of income tax expense. N. Loss Per Share: Basic net loss per share is computed based on the weighted average number of ordinary shares outstanding during each year (including fully vested RSUs), net of treasury shares. Diluted loss per share is computed based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential ordinary shares considered outstanding during the year (see also Note 12C). Since the Company incurred net loss during the periods presented, no diluted EPS was presented as all the potential ordinary shares were anti-dilutive. O. Financial Instruments: 1. Concentration of credit risks: Financial instruments that have the potential to expose the Company to credit risks are mainly cash and cash equivalents, bank deposit accounts, and trade receivables. The Company holds cash and cash equivalents, and deposit accounts at large banks in Israel, the United States, and Europe, thereby substantially reducing the risk of loss. The Company performs ongoing credit evaluations of its customers for the purpose of determining the appropriate allowance for doubtful accounts and generally does not require collateral. An appropriate allowance for doubtful accounts is included in the accounts. 2. Fair value measurement: The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1 Level 2 Level 3 In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. P. Comprehensive loss: Comprehensive loss, net of related taxes where applicable, includes only net income. Q. Treasury Shares: In the past, the Company repurchased its ordinary shares from time to time on the open market and they are currently held as treasury stock. The Company presents the cost to repurchase treasury stock as a reduction of shareholders’ equity. When treasury shares are used as consideration for share based payment the reduction is based on average purchase cost. R. Derivative Instruments - Warrants: In connection with , determining whether an instrument (or embedded feature) is indexed to an Entity’s own stock, “ASC 815-40-15,(formerly EITF 07-05), the Company determined that the warrants issued at several occasions (which include ratchet down of exercise price based upon lower exercise price in future offerings) are not indexed to the Company’s own stock and therefore should be recorded as a derivative financial liability pursuant to FASB ASC Topic 815 “Derivative and Hedging” (ASC 815-40-25). See also Note 10A3. S. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In August 2015, the FASB issued ASU No. 2015-15, “Presentation of Financial statements – Going concern (subtopic 205-40), Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern” (“ASU 2015-14”). The new standard provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. ASU 2015-15 applies prospectively to annual periods ending after December 15, 2016, and to annual periods thereafter. Early application is permitted. The Company is currently evaluating the impact of the adoption of ASU 2015-15 on our consolidated financial statements. In May 2015, the FASB issued ASU No. 2015-09, Revenue from contracts with customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply a five step methodology: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;(4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. An entity should apply the amendments in this update using one of the following two methods: (1) retrospectively to each prior reporting period presented (along with some practical expedients); or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. The amendments in this update will be effective prospectively for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact of the adoption of this update on our consolidated financial statements. |
Business Combinations
Business Combinations | 12 Months Ended |
Dec. 31, 2015 | |
Business Combinations [Abstract] | |
Business Combinations | Note 2 – Business Combinations: Ateras Merger On December 1, 2014, the Company completed a merger with Sophisticated Business Systems, Inc., a Texas corporation doing business as “Ateras.” At the closing, BP-AT Acquisition LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Modern Systems Corporation (f/k/a BluePhoenix Solutions USA, Inc.), a Delaware corporation and an indirect, wholly-owned subsidiary of ModSys International Ltd. merged with and into Ateras (the “Ateras Merger”). As a result of the Ateras Merger, the separate corporate existence of BP-AT Acquisition LLC ceased and Ateras continued as the surviving corporation and a wholly-owned subsidiary of Modern Systems Corporation. The new entity was then renamed MS Modernization Services, Inc. As of April 2015, due to the Zulu intercompany merger, MS Modernization Services is now a majority-owned subsidiary of Modern Systems and directly and indirectly owned at 88.7% by ModSys International Ltd. (See below discussion of Zulu Intercompany Merger). Upon the closing of the Ateras Merger, the Company issued 6,195,494 unregistered ordinary shares, par value NIS 0.04 per share, to the former Ateras shareholders in exchange for the cancellation of the shares of Ateras stock held by such shareholders in connection with the Ateras Merger. Due to the fact the issuance was of restricted shares, the purchase consideration was calculated with an 11.4% discount for lack of marketability on the share price as of the closing date. It should be noted that sales of restricted shares pursuant to Rule 144 were subject to a minimum six-month holding period and sales by any affiliate shareholders will be subject to volume and other limitations. The purchase consideration was allocated to tangible assets and intangible assets acquired based on their fair values using a purchase price allocation which was finalized during 2015. The fair value assigned to identifiable intangible assets acquired has been determined by using valuation methods that discount expected future cash flows to present value using estimates and assumptions determined by management. The Company determined that purchase price exceeded the fair values of net assets acquired by approximately $13.3 million, which is recognized as goodwill. Upon the purchase price allocation, an amount of $345 thousand was allocated to order backlog to be amortized over a 10 month period and an amount of $5.2 million was allocated to technology to be amortized initially over an 8.7 year period. The table below summarizes the fair value of assets acquired at the purchase date. Cash $ 14 Receivables 1,094 Other current assets 187 Fixed assets 72 Other long-term assets 14 Accounts payable (640 ) Other accounts payable (412 ) Deferred revenue (388 ) Long term liabilities (40 ) Identifiable intangible assets: Order backlog 345 Technology 5,228 Goodwill 13,302 Total assets acquired $ 18,776 The contribution of MS Modernization Services, Inc. results to our consolidated revenues and loss were $235 and $204 thousand for the period from December 1 to December 31, 2014. The transaction costs in 2014 amounted to $348 thousand and were charged to selling, general, and administrative expenses. The unaudited pro forma financial information in the table below summarizes the combined results of our operations and those of MS Modernization Services, Inc. for the periods shown as though the Transaction occurred as of the beginning of fiscal year 2014. The pro forma financial information for the periods presented includes the business combination accounting effects of the Transaction, including amortization charges from acquired intangible assets, based on the provisional estimated fair value mentioned above. The pro forma financial information presented below is for informational purposes only, is subject to a number of estimates, assumptions and other uncertainties, and is not indicative of the results of operations that would have been achieved if the transaction had taken place at January 1, 2014. The unaudited pro forma financial information is as follows: Year ended December 31, 2014 (in thousands) Total revenues $ 11,012 Net Loss attribute to MS Modernization Services, Inc. (4,141 ) Zulu Intercompany Merger On April 23, 2015, the Company completed the intercompany merger (the "Zulu Intercompany Merger") of their majority-owned subsidiary (71. 83% ownership), Zulu Software, Inc. with and into the Company’s wholly-owned subsidiary, MS Modernization Services, Inc. as part of an internal organizational restructuring. The name of the surviving subsidiary is MS Modernization Services, Inc. As a result of the intercompany merger, ModSys International Ltd. owns 88.7% of the surviving subsidiary, MS Modernization Services, Inc. The transaction was accounted for as an equity transaction with non-controlling interests. |
Fair Value Measurement
Fair Value Measurement | 12 Months Ended |
Dec. 31, 2015 | |
Fair Value Measurement [Abstract] | |
Fair Value Measurement | Note 3 - Fair Value Measurement: Items carried at fair value as of December 31, 2015 and 2014 are classified in the table below in one of the three categories described in Note 1.O.2. Fair value measurements using input type December 31, 2015 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 1,479 - - $ 1,479 Restricted cash 4 - - 4 Intangible asset – Technology * - - 3,175 3,175 $ 1,483 $ - $ 3,175 $ 4,658 Fair value measurements using input type December 31, 2014 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 449 - - $ 449 Restricted cash 8 - - 8 $ 457 $ - $ - $ 457 * See Note 1H. |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2015 | |
Property and Equipment, Net [Abstract] | |
Property and Equipment, Net | Note 4 - Property and Equipment, Net: Composition of property and equipment, grouped by major classifications: December 31, 2015 2014 (in thousands) Cost: Computers and peripheral equipment $ 8,726 $ 8,717 Office furniture and equipment 537 535 Leasehold improvements 268 268 Motor vehicles 25 25 9,556 9,545 Accumulated Depreciation: Computers and peripheral equipment 8,576 8,943 Office furniture and equipment 441 438 Leasehold improvements 268 268 Motor vehicles 25 25 9,310 9,224 $ 246 $ 321 Depreciation expenses totaled $86 and $89 thousand for the years ended December 31, 2015 and 2014, respectively. |
Goodwill
Goodwill | 12 Months Ended |
Dec. 31, 2015 | |
Goodwill [Abstract] | |
Goodwill | Note 5 - Goodwill: The change in the carrying amount of goodwill for the years ended December 31, 2015 and 2014 is as follows: December 31, 2015 2014 (in thousands) Balance as of January 1 Goodwill $ 67,618 $ 54,316 Accumulated impairment losses at the beginning of the period (41,815 ) (41,815 ) 25,803 12,501 Changes during the year Goodwill related to acquisition - 13,302 Balance as of December 31 Goodwill 67,618 67,618 Accumulated impairment losses at the end of the period (41,815 ) (41,815 ) $ 25,803 $ 25,803 |
Intangible Assets and Others, N
Intangible Assets and Others, Net | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets and Others, Net [Abstract] | |
Intangible Assets and Others, Net | Note 6 - Intangible Assets and Others, Net: Composition: Useful life December 31, (years) 2015 2014 (in thousands) Original amount: Technology 5 $ 51,494 $ 51,494 Customer related and backlog 0.8 to 9 5,313 5,313 Others 14 14 56,821 56,821 Accumulated Depreciation: Technology** 48,333 46,266 Customer related and backlog 5,313 4,968 53,646 51,234 $ 3,175 $ 5,587 * The amounts of technology and backlog from the Merger are $5.2 and $0.3 million, respectively. (See also Note 2A). ** Includes impairment of $1.5 million for the year ending December 31, 2015. (See also Note 1H and Note 3). |
Accrued Severance Pay, Net
Accrued Severance Pay, Net | 12 Months Ended |
Dec. 31, 2015 | |
Accrued Severance Pay, Net [Abstract] | |
Accrued Severance Pay, Net | Note 7 - Accrued Severance Pay, Net: A. Accrued Liability: The Company may be liable for severance pay to its employees pursuant to the applicable local laws prevailing in the respective countries of employment and employment agreements. For Israeli employees, the liability is partially covered by individual managers’ insurance policies under the name of the employee, for which the Company makes monthly payments. The Company may make withdrawals from the managers’ insurance policies only for the purpose of paying severance pay. U.S. employees are eligible to participate in a 401(k) retirement plan. Under the plan, employees may elect to defer a portion of their salary from taxes and invest it for retirement. The Company may, on a discretionary basis, make matching contributions to the employee deferrals. The amounts accrued and the amounts funded with managers’ insurance policies are as follows: December 31, 2015 2014 (in thousands) Accrued severance payable $ 555 $ 676 Amount funded (323 ) (447 ) $ 232 $ 229 B. Expenses: The expenses related to severance pay for the years ended December 31, 2015 and 2014, were $85 and $75 thousand, respectively. |
Loans from Banks and Others
Loans from Banks and Others | 12 Months Ended |
Dec. 31, 2015 | |
Loans from Banks and Others [Abstract] | |
Loans from Banks and Others | Note 8 - Loans from Banks and Others A. Credit Facility In September 2014, we entered into an amendment to our existing loan agreement with Comerica Bank to: (i) increase the non-formula revolving line up to the amount of $2 million backed by guarantees; (ii) increase the borrowing base revolving line amount up to $1.5 million upon the closing of the Ateras merger; and (iii) extend the loan maturity date to December 31, 2015. The amendment has a financial covenant for a minimum liquidity ratio. Our obligations under the amendment are secured by a security interest in our copyrights, trademarks, and patents. The remaining substantive provisions of the credit facility were not materially changed by this amendment. In May 2015, we entered into an additional amendment to our existing loan agreement with Comerica Bank to among other things: (i) extend the maturity date of the non-formula revolving line and the revolving line to June 30, 2016; (ii) require us to raise new equity, on terms and from investors satisfactory to the lender, of not less than $2.5 million on or before December 31, 2015; and (iii) increase the number of trade accounts for which the concentration limit is not applicable. As of December 31, 2015, we had borrowed $2.0 million against our non-formula revolving line and $712,000 against the revolving line. The principal terms of the agreement are as follows: ● non-formula revolving line in the amount up to $2,000,000 backed by a guarantee from two of the major shareholders; ● revolving line (accounts receivable based) loan in the amount up to $1,500,000; ● both the non-formula revolving line and revolving line loan are at market based interest rates based on Prime + a margin; and ● financial covenant for a minimum bank debt liquidity coverage ratio, calculated as a ratio of liquidity to all indebtedness , other than indebtedness that is guaranteed, to the bank. There is a financial covenant for a minimum liquidity ratio. There are some restrictions on cash balances to be held within banks other than Comerica. As of December 31, 2015, we were in compliance with these restrictions. On November 10, 2015, we received a commitment letter from Comerica Bank to provide Modern Systems Corporation and MS Modernization Services, Inc., “Borrowers” a renewal of the revolving line in the amount of $1.5 million and the non-formula revolving line in the amount of $2.0 million and to extend the maturity date to January 31, 2017. The new covenants are (a) minimum liquidity ratio of 1.25:1.00, (b) trailing six month EBITDA, and (c) to raise new equity of not less than $1.0 million on or before December 31, 2015, which was fulfilled in December 2015 (See Note 10A1). The remaining substantive provisions of the credit facility were not materially changed by the commitment letter. On March 16, 2016 , we entered into the Fifth Amendment to the existing loan agreement with Comerica Bank dated October 2, 2013 as previously amended, to: (i) waive the liquidity covenant violations of September and December 2015; (ii) extend the maturity date of the non-formula revolving line and the revolving line to June 30, 2017; (iii) amend the definition of eligible accounts receivable; (iv) waive the equity event of $2.5 million on or before December 31, 2015; (v) add a new six month rolling EBITDA covenant and (vi) limit the amount of cash transfer to the parent company. The remaining substantive provisions of the credit facility were not materially changed by the commitment letter. B. Long Term Loans from others Composition: Average interest rate December 31, as of 2015 2014 December 31, 2015 Linkage basis Total long-term liabilities net of current portion % (in thousands) Related party promissory note 2.00 $ $ 220 $ - Ministry of Production in Italy (Note 9 A3) 0.87 € 102 154 Current portion (34 ) (40 ) Long term portion $ 288 $ 114 C. Long-term Loans from Others are due as follows: December 31, 2015 2014 (in thousands) First year (current portion) $ 34 $ 40 Second year 254 40 Third year 34 40 Fourth year and thereafter - 34 Total $ 322 $ 154 |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 9 - Commitments and Contingencies: A. Commitments 1. Lease. Office Facilities Vehicles, Equipment, and Other (in thousands) Fiscal 2016 $ 281 $ 34 Fiscal 2017 195 22 Fiscal 2018 156 4 Fiscal 2019 39 - $ 671 $ 60 2. Israel’s Office of the Chief Scientist. 3. Ministry of Production in Italy 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. |
Equity
Equity | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
Equity | Note 10 - Equity: A. Share Capital: 1. In September 2014, Prescott signed a waiver stating that the issuance of the 6,195,494 ordinary shares for the merger described below shall not result in the issuance of additional ordinary shares or other securities of the Company to Prescott and further agreed that the issuance of securities in connection with the Merger did not terminate the “Protection Period” (as such term is defined in the Prescott Agreement). On December 1, 2014, we completed a merger with Sophisticated Business Systems, Inc., a Texas corporation doing business as “Ateras.” At the closing, BP-AT Acquisition LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of Modern Systems Corporation (f/k/a BluePhoenix Solutions USA, Inc.), a Delaware corporation and an indirect, wholly-owned subsidiary of ModSys International Ltd merged with and into Ateras (the “Merger”). As a result of the Merger, the separate corporate existence of BP-AT Acquisition LLC ceased and Ateras continued as the surviving corporation and a wholly-owned subsidiary of Modern Systems Corporation. The new entity was then renamed MS Modernization Services, Inc. The Merger was approved by our shareholders at a meeting held on November 18, 2014. Upon the closing of the Merger, we issued 6,195,494 unregistered ordinary shares, par value NIS 0.04 per share, to the former Ateras shareholders in exchange for the cancellation of the shares of Ateras stock held by such shareholders in connection with the Merger. In connection with the closing of the Merger, Scott Miller was elected to our Board of Directors. In addition, we entered into a Registration Rights Agreement by and a Preemptive Rights Agreement as conditions to the closing of the Merger contemplated by the Merger Agreement. On November 25, 2015, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Pacific Opportunity Fund, LP, Prescott Group Aggressive Small Cap Master Fund and Mindus Holdings, Ltd. (the “Investors”), providing for the issuance in a private placement to the Investors thereunder an aggregate amount of (1) 500,000 preferred shares and (2) warrants to purchase an aggregate of 250,000 ordinary shares of the Company. The warrants have an exercise price of $0.01 per share, and may be exercised in whole or part at any time for two years after issuance. The preferred shares carry an 8% per annum cumulative dividend payable in kind by additional preferred shares, calculated based on amount of $2.00 per share, subject to adjustment for stock splits, combinations, recapitalizations and the like. In the event dividends are paid on any ordinary share, the Company shall pay an additional dividend on all outstanding preferred shares in a per share amount equal (on an as if converted to ordinary share basis) to the amount paid or set aside for each ordinary share. The preferred shares are convertible into the Company’s ordinary shares on a one-to-one basis at the option of the holder. Should the volume weighted average price of the ordinary shares be $5.00 or more for ten consecutive trading days at any time two years from the date of issuance, the preferred shares will be automatically converted into ordinary shares at the adjusted $2.00 share price. Upon any liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, the preferred shares are entitled to a preferential payout of $3.00 per share. The purchase price of $1,000,000 was prorated between the preferred shares and warrants based on their respective fair values. A beneficial conversion feature ("BCF") arises since the conversion price of the convertible preferred shares is less than the fair value of Ordinary share (the preferred shares are convertible into the Company’s ordinary shares on a one-to-one basis). The BCF is calculated based on the intrinsic value as the difference between the effective conversion price (between the preferred shares and ordinary shares) and the market value on the date the preferred shares were issued, multiplied by the number of shares into which the preferred shares are convertible. The BCF from the issuance of the convertible preferred shares resulted in $ 332 thousand being recorded in Company’s Shareholders’ Equity as a reduction of the Retained earnings and an increase to preferred shares. The Purchase Agreement was approved by our shareholders on December 29, 2015. The investors’ purchase of preferred shares and warrants was as follows: Investor Preferred Shares Warrants Purchase Price Columbia Pacific Opportunity Fund, LP 200,000 100,000 $ 400,000 Prescott Group Aggressive Small Cap Master Fund 200,000 100,000 400,000 Mindus Holdings, Ltd. 100,000 50,000 200,000 500,000 250,000 $ 1,000,000 Concurrent with the closing of the purchase of the preferred shares and warrants, the Company issued 625,000 ordinary shares to Prescott Group Aggressive Small Cap Master Fund pursuant to the Amended and Restated Securities Purchase Agreement dated as of November 22, 2013 between the Company and Prescott Group Aggressive Small Cap Master Fund, as if such sale and issuance had occurred prior to November 22, 2015. This was approved by our shareholders on December 29, 2015. On December 29, 2015, our shareholders also approved the issuance of 45,082 warrants for our ordinary shares with an exercise price of $0.01 per share for an amendment to a promissory note. Fifty percent (50%) of these warrants may be exercised on issuance with the remaining 50% vesting on February 24, 2016 unless the promissory note is paid in full on or before that time, which would result in the cancellation of the unvested 50%. At the same shareholder meeting, the shareholders approved the issuance of 409,837 warrants for our ordinary shares with an exercise price of $0.01 per share for the issuance of guarantees of our term note with Comerica Bank. Fifty percent (50%) of these warrants may be exercised on issuance with the remaining 50% vesting on February 24, 2016 unless the Comerica Bank note is reduced to below $1,000,000 on or before that date, which would result in the cancellation of the unvested 50%. Since both the promissory note and the Comerica Bank note haven't been repaid on February 26, 2016, the remaining 50% was vested. The fair value of the warrants was determined to be $982,625 as of December 31, 2015 and is considered an expense of the financing. 2. 3. Derivative liability- warrants: As part of a private placement transaction of shares and warrants in 2009, the Company issued warrants to purchase ordinary shares with an exercise price of $1.56. The warrants were exercisable during a 5-year period from October 2009. As a result of anti-dilution protection, the warrants were not considered indexed to the Company’s own stock and (ratchet down of exercise price based upon lower exercise price in future offerings), and therefore recorded at issuance date as a derivative financial liability pursuant to FASB ASC Topic 815 “ Derivative and Hedging” (ASC 815-40-25). The Company measured the fair value of the outstanding warrants at issuance and at the balance sheet date using a Black-Scholes valuation model. In October 2014, the remaining 102,343 warrants were exercised for a total value of $160,003. B. Share Options: 1. Employee Share Option Plans: Stock-based compensation plans comprise employee stock option plans and restricted stock units (“RSUs”) to employees, officers and directors. The purpose of the plans is to enable the Company to attract and retain qualified personnel and to motivate such persons by providing them with an equity participation in the Company. As of December 31, 2015, the Company has two share-based compensation plans: (a) the 1996 Share Option Plan, and (b) the 2007 Award Plan. Both plans are described below. The compensation costs that were charged to income for those plans amounted to $0.4 million and $0.7 million for 2015 and 2014, respectively. In 1996, the Company adopted the 1996 Share Option Plan. Pursuant to the 1996 Share Option Plan, as amended, the Company reserved 1,050,000 ordinary shares for issuance to directors, officers, consultants and employees of the Company and its subsidiaries. The exercise price of the options granted under the 1996 Share Option Plan ranges from $1.8 to $20. As of December 31, 2015, 174,023 stock options remain available for future awards. Under the 1996 option plan, unless determined otherwise by the board, options vest over a three to four years period from the date of grant and expire 10 years after grant date. Unvested options are forfeited 30-90 days following termination of employment. Any options that are forfeited before expiration become available for future grants. The following table summarizes information about share options outstanding and exercisable as of December 31, 2015: Options Outstanding Options Exercisable Number Outstanding on December 31, 2015 Weighted Average Remaining Contractual Life Years Number Exercisable on December 31, 2015 Exercise Price $ 300,000 6.32 300,000 1.80 Data related to the 1996 Share Option Plan as of December 31, 2015 and 2014 and changes during the years ended on those dates are as follows: 2015 2014 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price $ $ Options outstanding at the beginning of year 393,850 2.89 441,589 3.18 Changes during the year: Forfeited (93,850 ) 6.36 (47,739 ) 5.56 Options outstanding at end of year 300,000 393,850 Options exercisable at year-end 300,000 345,517 * The fair value of each option granted is estimated on the date of grant, using the Black-Scholes option-pricing model. There were no options granted or exercised in 2015 and 2014. The Company is required to assume a dividend yield as an input in the Black-Scholes model. The dividend yield assumption is based on the Company’s historical experience and expectation of future dividends payouts and may be subject to change in the future. The Company uses historical volatility in accordance with FASB ASC Topic 718, “Compensation - stock compensation”. The computation of volatility uses historical volatility derived from the Company’s exchange-traded shares. The risk-free interest assumption is the implied yield currently available on U.S. Treasury zero-coupon bonds, issued with a remaining term equal to the expected life term of the Company’s options. Pre-vesting rates forfeitures are approximately 15% and were estimated based on pre-vesting for feature experience. The Company uses the simplified method to compute the expected option term for options granted. 2. Restricted Share Units (RSU): In 2007, the Company adopted the 2007 Award Plan ( RSU plan). In 2015 and 2014, under the RSU plan, as amended, the Company granted 263,000 Data related to the restricted stock units as of December 31, 2015 and 2014 and changes during the year were as follows: Year ended December 31, 2015 2014 (in thousands) RSUs outstanding at the beginning of the year 219,414 246,838 Changes during the year: Granted * 263,000 140,097 Vested (99,708 ) (137,136 ) Forfeited (22,262 ) (30,385 ) RSUs outstanding at the end of the year 360,444 219,414 Weighted average fair value at grant date $ 1.74 $ 4.13 * The fair value of RSUs is established based on the market value of the Company’s stock on the date of the award. The Company has expensed compensation costs, net of estimated forfeitures, applying the accelerated vesting method. C. Dividends: The Company has not paid any cash dividends on its ordinary shares in the past and does not expect to pay cash dividends on its ordinary shares in the foreseeable future. The Company expects to pay share dividends on its preferred shares which carry an 8% per annum cumulative dividend payable in kind by additional preferred shares, calculated based on amount of $2.00 per share (See also Note 10A1). |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes [Abstract] | |
Income taxes | Note 11 - Income taxes: A. Basis of taxation: The Company and its subsidiaries are subject to tax in many jurisdictions and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. The Company believes that its accruals for tax liabilities are adequate for all open years. The Company considers various factors in making these assessments, including past history, recent interpretations of tax law, and the specifics of each matter. Non-Israeli subsidiaries are taxed according to the tax laws in their respective country of residence. The Company elected to compute its taxable income in accordance with Income Tax Regulations (Rules for Accounting for Foreign Investors Companies and Certain Partnerships and Setting their Taxable Income), 1986. Accordingly, the Company’s taxable income or loss is calculated in U.S. dollars. Applying these regulations reduces the effect of foreign exchange rate (of NIS against the U.S. dollar) on the Company’s Israeli taxable income. Taxable income of Israeli companies is subject to tax at the rate of 26.5% in 2015 and 2014. B. Deferred tax assets and liabilities: Deferred tax reflect the net tax effects of temporary differences between the carrying amounts of assets or liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2015 and 2014, the Company’s deferred taxes were in respect of the following: December 31, 2015 2014 (in thousands) Net operating losses carry forwards $ 32,303 $ 30,539 Provisions for employee rights and other temporary differences 55 61 Deferred tax assets before valuation allowance 32,358 30,600 Valuation allowance (32,358 ) (30,600 ) Deferred tax assets (liability), net $ - $ - C. Loss before Income Taxes is composed as follows: Year ended December 31, 2015 2014 (in thousands) Domestic (Israel) $ (2,724 ) $ (2,939 ) Foreign (3,377 ) (758 ) Total loss before income taxes $ (6,101 ) $ (3,697 ) D. Provision for Taxes: Year ended 2015 2014 (in thousands) Current: Domestic (Israel) $ - $ - Foreign 18 37 18 37 * Taxes related to prior years Deferred: Deferred taxes, net 23 (12 ) Total provision for income taxes $ 41 $ 25 * In 2015 and 2014, mainly related to withholdings tax for prior years that cannot be realized due to liquidation of subsidiaries as non-future estimated taxable income. E. Uncertain Tax Position: The Company has recorded no liability for income taxes associated with unrecognized tax benefits at the date of adoption and have not recorded any liability associated with unrecognized tax benefits during 2015 and 2014. Accordingly, the Company has not recorded any interest or penalty in regard to any unrecognized benefit. F. A reconciliation between statutory tax to effective tax, assuming all income is taxed at the regular rates and the actual tax expense is as follows: December 31, 2015 2014 (in thousands) Loss before income taxes, per consolidated statements of income $ (6,101 ) $ (3,697 ) At the principal tax rate of the group (26.5% in 2015 and 2014) 1,617 (980 ) Decrease in taxes resulting from the following differences: Carry-forward losses for which the Company provided valuation allowance 1,758 1,080 Effect of different tax rates in foreign subsidiaries (3,357 ) (63 ) Taxes related to previous years 23 (12 ) Non-deductible expenses — — Income tax expense in the consolidated statements of income for the reported year $ 41 $ 25 Effective Tax rate — — G. Tax Losses: The Company and its subsidiaries have NOL carry forwards for income tax purposes as of December 31, 2015 of approximately $119 million. $82 million were generated in Israel with no expiration date and the rest outside of Israel. |
Supplementary Financial Stateme
Supplementary Financial Statement Information | 12 Months Ended |
Dec. 31, 2015 | |
Supplementary Financial Statement Information [Abstract] | |
Supplementary Financial Statement Information | Note 12 - Supplementary Financial Statement Information: A. Balance Sheets: 1. Trade Accounts Receivables: December 31, 2015 2014 (in thousands) Trade accounts receivable $ 2,020 $ 3,033 Less allowance for doubtful accounts — (554 ) $ 2,020 $ 2,479 For the years ended December 31, 2015 and 2014, the Company charged expenses for doubtful accounts amounted to $0 and $629 thousand, respectively. For the year ended December 31, 2015 and 2014, the Company deducted from the allowance (bad debts) $31 and $255 thousand. 2. Other Current Assets: December 31, 2015 2014 (in thousands) Prepaid expenses $ 53 $ 105 Short-term lease deposits 11 19 Government departments and agencies 56 52 $ 120 $ 176 3. Other Current Liabilities: December 31, 2015 2014 (in thousands) Government departments and agencies $ 13 $ 133 Employees and wage-related liabilities 669 452 Promissory note * - 220 Accrued expenses and other current liabilities 277 184 $ 959 $ 989 * Promissory note with related party in the amount of $220,000 bearing interest at 2%. The note is extended to be due on June 30, 2017 and therefore classified to long-term liabilities. 4. The Company’s Long-lived Assets are allocated as Follows: December 31, 2015 2014 (in thousands) Israel $ 32 $ 54 U.S.A. 114 158 Europe and other 100 109 $ 246 $ 321 Long-lived assets information is based on the physical location of the assets at the end of each of the fiscal years. It is comprised from the Company’s property and equipment and technology intangible asset. The Company does not identify or allocate goodwill by geographic areas. B. Statements of Operations: 1. Geographic Areas Information: Sales: Classified by Geographic Areas: The Company adopted FASB ASC Topic 280, “segment reporting”. The Company operates in one operating segment (see Note 1 for a brief description of the Company’s business). The total revenues are attributed to geographic areas based on the location of end customers. The following present total revenues for the years ended December 31, 2015 and 2014 by geographic area: Year ended December 31, 2015 2014 (in thousands) North America 6,501 3,743 Europe 2,852 2,688 Israel 454 809 Total Revenue $ 9,807 $ 7,240 2. Principal Customers: There were three customers that represented 21.6%, 13.7% and 12.4% of the Company’s total revenue in 2015. There were two different customers that represented 15.5% and 11.1% of the Company’s total revenue in 2014. There are four customers that represented more than 10% of total trade receivables at December 31, 2015 and December 31, 2014. 3. Financial Income (Expenses), Net: Year ended December 31, 2015 2014 (in thousands) Foreign currency translation adjustments (see Note 1A3) $ 22 $ 5 Interest expense (156 ) (40 ) Grant of warrants to shareholders (983 ) - Change in fair value of derivatives - 150 Financial Income (Expenses), Net $ (1,117 ) $ 115 C. Loss Per Share: Basic and diluted loss per share (“EPS”) was computed based on the average number of shares outstanding during each year. No effect was given to potential instruments such as: share options unvested, RSUs, preferred shares and warrants since their inclusion would be anti-dilutive. The following table sets forth the computation of basic and diluted net earnings per share attributable to ModSys International Ltd.: Year ended December 31, 2015 2014 (in thousands, except 1. Numerator: Amount for basic and diluted loss per share $ (5,814 ) $ (3,395 ) 2. Denominator: Denominator for basic net loss per share - weighted average of shares $ 17,906,723 $ 12,020,474 Effect of dilutive securities $ - $ - Denominator for diluted net earnings per share - weighted average shares and assuming dilution $ 17,906,723 $ 12,020,474 Basic and diluted loss per share attributed ModSys International Ltd. $ (0.32 ) $ (0.28 ) |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 13 – Subsequent Events: On January 15, 2016, the Company entered into a Transition Agreement and Release, or Transition Agreement, with Rick Rinaldo, Modern Systems’ Chief Financial Officer. Pursuant to the Transition Agreement, Mr. Rinaldo will remain Chief Financial Officer through April 15, 2016, or the Separation Date, on which date Mr. Rinaldo will resign as an officer and employee of the Company. During the transition period, Mr. Rinaldo will receive his normal base salary compensation and benefits. In consideration for a standard release of claims, Mr. Rinaldo will vest in his restricted stock units through the Separation Date and will receive a lump sum bonus payment of $6,200 on the Separation Date, provided Mr. Rinaldo meets certain goals and objectives during the transition period. Mr. Rinaldo will have 50,016 shares of RSUs vested on April 15, 2016. On March 16, 2016, the Company entered into the Fifth Amendment to the existing loan agreement with Comerica Bank dated October 2, 2013 as previously amended, to: (i) waive the liquidity covenant violations of September and December 2015; (ii) extend the maturity date of the non-formula revolving line and the revolving line to June 30, 2017; (iii) amend the definition of eligible accounts receivable; (iv) waive the equity event of $2.5 million on or before December 31, 2015; (v) add a new six month rolling EBITDA covenant and (vi) limit the amount of cash transfer to ModSys International Ltd. The remaining substantive provisions of the credit facility were not materially changed by the commitment letter. |
Summary of Significant Accoun22
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies [Abstract] | |
General | A. General: The significant accounting policies, applied on a consistent basis, are as follows: 1. The Company: ModSys International Ltd. (formerly known as BluePhoenix Solutions Ltd.) (together with its subsidiaries, the “Company”, or “Modern Systems”) is an Israeli corporation, which operates in one operating segment of information technology (“IT”) modernization solutions. Modern Systems develops and markets enterprise legacy migration solutions and provides tools and professional services to international markets through several entities including wholly-owned subsidiaries located in: USA, UK, Italy, Romania and Israel. These technologies and services allow business to migrate from their legacy mainframe and distributed IT infrastructures to modern environments and programming languages. The Company has incurred negative cash from operation and net losses in recent years. The Company currently uses its credit line with Comerica to support its negative cash flow position. Management believes that current cash position is sufficient to support the ongoing operations for the next twelve months. (See also Note 8A). 2. Accounting Principles: The consolidated financial statements are prepared in accordance with accounting principles generally accepted (“GAAP”) in the United States of America. 3. Functional Currency: The currency of the primary economic environment in which the operations of the Company and its subsidiaries are conducted is the U.S. dollar (“dollar”). In addition, a substantial portion of the Company’s revenues and costs are incurred in dollars. Thus, the functional and reporting currency of the Company is considered to be the dollar. The functional currency of all subsidiaries is the US dollar therefore there is no unrealized gain/loss. Non-monetary transactions denominated in currencies other than the dollar are measured and recorded in dollar at the exchange rates prevailing at transaction date. Monetary assets and liabilities denominated in currencies other than the dollar are translated at the exchange rate on the balance sheet date. Transaction gain or losses on foreign currency translation are recorded in consolidated statement of operations. 4. Use of Estimates and Assumptions in the Preparation of the Financial Statements: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. |
Principles of Consolidation | B. Principles of Consolidation: The consolidated financial statements include the accounts of ModSys International Ltd. and its subsidiaries in which it has a controlling interest. Acquisition of subsidiaries is accounted for under the acquisition method. All intercompany balances and transactions have been eliminated upon consolidation. Non-controlling interests are included in equity. |
Cash and Cash Equivalents | C. Cash and Cash Equivalents: Cash equivalents are considered by the Company to be highly-liquid investments, including inter-alia, short-term deposits with banks, which do not exceed maturities of three months at the time of deposit and which are not restricted. |
Reclassifications | D. Reclassifications: Certain comparative figures have been reclassified to conform to the current year presentation. |
Allowance for Doubtful Accounts | E. Allowance for Doubtful Accounts: The Company establishes an allowance for doubtful accounts to ensure trade and financing receivables are not overstated due to uncollectability. The allowance for doubtful accounts was based on specific receivables, which their collection, in the opinion of Company’s management, is in doubt. Trade receivables are charged off in the period in which they are deemed to be uncollectible. |
Property and Equipment, Net | F. Property and Equipment, Net: Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated by the straight-line method over their estimated useful lives. Annual rates of depreciation are as follows: % Computers and peripheral equipment 20-33 (mainly 33) Office furniture and equipment 6-15 (mainly 7) Leasehold improvements Over the shorter of lease term or the life of the assets Motor vehicles 15 |
Impairment of Long-Lived Assets | G. Impairment of Long-Lived Assets: The Company evaluates long-lived assets with definite lives for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. The Company assesses the recoverability of the assets based on the undiscounted future cash flow and recognizes an impairment loss when the estimated undiscounted future cash flow expected to result from the use of the asset plus the net proceeds expected from disposition of the asset, if any, are less than the carrying value of the asset. When the Company identifies an impairment, it reduces the carrying amount of the asset to its estimated fair value based on a discounted cash flow approach or, when available and appropriate, to comparable market values. For the year ending December 31, 2015, no impairment losses had been identified for tangible assets. |
Goodwill and purchased intangible assets | H. Goodwill and purchased intangible assets Goodwill and purchased intangible assets have been recorded as a result of acquisitions. Goodwill represents the excess of the purchase price in a business combination over the fair value of net assets acquired. Goodwill is not amortized, but rather is subject to an annual impairment test. The Company is one operating segment and one reporting unit related to its overall IT modernization .The goodwill impairment tests are conducted in two steps. In the first step, the Company determines the fair value of the reporting unit. If the net book value of the reporting unit exceeds its fair value, the Company would then perform the second step of the impairment test which requires allocation of the reporting unit’s fair value of all of its assets and liabilities in a manner similar to an acquisition cost allocation, with any residual fair value being allocated to goodwill. The implied fair value of the goodwill is then compared to the carrying value to determine impairment, if any. In 2015 and 2014, the company determined the fair value of a reporting unit using the market approach which is based on the market capitalization by using the share price of the Company in the NASDAQ stock market and an appropriate control premium. As of December 31, 2015 and 2014 market capitalization of the Company was significantly higher than the net book value of the reporting unit and therefore there was no need to calculate a control premium or to continue to step 2. Intangible assets that are not considered to have an indefinite useful life are amortized using the straight-line basis over their estimated useful lives of between 10 months to 9 years. The carrying amount of these assets is reviewed whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the assets is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset (see also Note 1G). On completion of our merger with Sophisticated Business Systems, Inc., a Texas corporation doing business as “Ateras,” the fair value purchase price allocation from this acquisition resulted in the Company recording approximately $5.2 million in technology intangible assets. As of December 31, 2015 there were indicators of potential impairment to the technology intangible assets, since there was a reduction of the revenues and operations in 2015 generated from the technology, compared to previous forecasts. This led the Company to re-evaluate the value of intangible asset based on a finite time discounted cash flow approach with discounted rate of 18%, where the source of cash flows is the underlying technology, based on royalties' payments model, and the projection horizon is consistent with the expected lifetime of the technology. The impairment test indicated that the fair market value of these intangible assets at this time was approximately $3.2 million, causing the Company to record non-cash impairment of approximately $1.5 million for the year ending December 31, 2015. Following the impairment analysis, the useful life estimation of the intangible asset was changed from 8.7 to 5 years. |
Research and Development Costs | I. Research and Development Costs: Research and development costs are charged to the statement of income as incurred. ASC No. 985, “Software”, requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company’s product development process, technological feasibility is established when detailed program design is completed and verified. Costs incurred by the Company between completion of detailed program design and the point at which the products are ready for general release, have been insignificant. Therefore, all research and development costs have been expensed. |
Stock-based Compensation | J. Stock-based Compensation: In the past two years, all of the stock-based compensation awards were of restricted stock units (“RSUs”). RSUs are valued based on the market value of the underlying stock at the date of grant. The Company also has a stock option plan. Stock option awards are measured and recognized as compensation expense based on estimated fair values on the date of grant using the Black-Scholes option-pricing model. This option pricing model requires that the Company makes several estimates, including the option’s expected life and the price volatility of the underlying stock. The Company recognizes the estimated fair value of option-based awards and RSUs, net of estimated forfeitures, as stock-based compensation costs using the accelerated vesting method. For the years ended December 31, 2015 and 2014 the Company recorded stock-based and RSUs compensation costs in the amount of $0.4 million and $0.7 million, respectively. On December 31, 2015, the total unrecognized stock-based and RSUs compensation costs amounted to $0.7 million, and are expected to be recognized over the next 3 years. |
Revenue Recognition | K. Revenue Recognition: Revenues derived from direct software license agreements are recognized in accordance with FASB ASC Topic 985 “Software” (“ASC 985”), upon delivery of the software, when collection is probable, the license fee is otherwise fixed or determinable and persuasive evidence of an arrangement exists. The Company recognizes revenues from consulting fees based on the number of hours performed. Revenues from maintenance services are recognized ratably over the term of the maintenance period. When a project involves significant production, modification, customization of software, or delivery of service, that are essential to the fundamentals of the software, revenue is recognized according to the percentage of completion method in accordance with the provisions of FASB ASC Topic 605-25-77. Under this method, estimated revenue is generally accrued based on costs incurred to date, as a percentage of total updated estimated costs. The Company recognizes contract losses, if any, in the period in which they first become evident. There are no rights of return, price protection or similar contingencies in the Company’s contracts. On December 31, 2015, approximately $1.1 million of the accounts receivable balance was unbilled due to the customer’s payment terms. On December 31, 2014, the amount of unbilled revenue was $2 million. The Company presents revenues from products and revenues from services in separate line items. The product revenue line item includes revenue generated from stand-alone software products. In the services revenue line item, the Company includes revenue generated from maintenance and consulting fees and revenues accounted for pursuant to ASC 605-35-25. Tax collected from customers and remitted to government authorities (including VAT) are presented in the income statement on a net basis. |
Advertising Costs | L. Advertising Costs: The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2015 and 2014 were $151 and $153 thousand, respectively. |
Income Taxes | M. Income Taxes: Deferred taxes are determined utilizing the “asset and liability” method, whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, when it’s more likely than not that deferred tax assets will not be realized in the foreseeable future. Deferred tax liabilities and assets are classified as current or non-current based on the expected reversal dates of the specific temporary differences. The Company applied ASC Topic 740-10-05, Income Tax, which provides guidance for recognizing and measuring uncertain tax positions, it prescribes a threshold condition that a tax position must meet for any of the benefits of the uncertain tax position to be recognized in the financial statements. It also provides accounting guidance on derecognizing, classification and disclosure of these uncertain tax positions. The Company’s policy on classification of all interest and penalties related to unrecognized income tax positions, if any, is to present them as a component of income tax expense. |
Loss Per Share | N. Loss Per Share: Basic net loss per share is computed based on the weighted average number of ordinary shares outstanding during each year (including fully vested RSUs), net of treasury shares. Diluted loss per share is computed based on the weighted average number of ordinary shares outstanding during each year, plus dilutive potential ordinary shares considered outstanding during the year (see also Note 12C). Since the Company incurred net loss during the periods presented, no diluted EPS was presented as all the potential ordinary shares were anti-dilutive. |
Financial Instruments | O. Financial Instruments: 1. Concentration of credit risks: Financial instruments that have the potential to expose the Company to credit risks are mainly cash and cash equivalents, bank deposit accounts, and trade receivables. The Company holds cash and cash equivalents, and deposit accounts at large banks in Israel, the United States, and Europe, thereby substantially reducing the risk of loss. The Company performs ongoing credit evaluations of its customers for the purpose of determining the appropriate allowance for doubtful accounts and generally does not require collateral. An appropriate allowance for doubtful accounts is included in the accounts. 2. Fair value measurement: The Company measures fair value and discloses fair value measurements for financial and non-financial assets and liabilities. Fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The accounting standard establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1 Level 2 Level 3 In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. |
Comprehensive loss | P. Comprehensive loss: Comprehensive loss, net of related taxes where applicable, includes only net income. |
Treasury Shares | Q. Treasury Shares: In the past, the Company repurchased its ordinary shares from time to time on the open market and they are currently held as treasury stock. The Company presents the cost to repurchase treasury stock as a reduction of shareholders’ equity. When treasury shares are used as consideration for share based payment the reduction is based on average purchase cost. |
Derivative Instruments - Warrants | R. Derivative Instruments - Warrants: In connection with , determining whether an instrument (or embedded feature) is indexed to an Entity’s own stock, “ASC 815-40-15,(formerly EITF 07-05), the Company determined that the warrants issued at several occasions (which include ratchet down of exercise price based upon lower exercise price in future offerings) are not indexed to the Company’s own stock and therefore should be recorded as a derivative financial liability for pursuant FASB ASC Topic 815 “Derivative and Hedging” (ASC 815-40-25). See also Note 10A3. |
Recently Issued Accounting Pronouncements | S. Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. This guidance results in a more faithful representation of the rights and obligations arising from operating and capital leases by requiring lessees to recognize the lease assets and lease liabilities that arise from leases in the statement of financial position and to disclose qualitative and quantitative information about lease transactions, such as information about variable lease payments and options to renew and terminate leases. This guidance is effective prospectively for interim and annual periods beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact of this guidance. In August 2015, the FASB issued ASU No. 2015-15, “Presentation of Financial statements – Going concern (subtopic 205-40), Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern” (“ASU 2015-14”). The new standard provides guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a company’s ability to continue as a going concern within one year from the date the financial statements are issued. ASU 2015-15 applies prospectively to annual periods ending after December 15, 2016, and to annual periods thereafter. Early application is permitted. The Company is currently evaluating the impact of the adoption of ASU 2015-15 on our consolidated financial statements. In May 2015, the FASB issued ASU No. 2015-09, Revenue from contracts with customers (Topic 606). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply a five step methodology: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price;(4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. An entity should apply the amendments in this update using one of the following two methods: (1) retrospectively to each prior reporting period presented (along with some practical expedients); or retrospectively with the cumulative effect of initially applying this update recognized at the date of initial application. The amendments in this update will be effective prospectively for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company is currently evaluating the impact of the adoption of this update on our consolidated financial statements. |
Summary of Significant Accoun23
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Summary of Significant Accounting Policies [Abstract] | |
Schedule of depreciation rates | % Computers and peripheral equipment 20-33 (mainly 33) Office furniture and equipment 6-15 (mainly 7) Leasehold improvements Over the shorter of lease term or the life of the assets Motor vehicles 15 |
Business Combinations (Tables)
Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Business Combinations [Abstract] | |
Summary of estimated fair value of assets acquired at purchase date | Cash $ 14 Receivables 1,094 Other current assets 187 Fixed assets 72 Other long-term assets 14 Accounts payable (640 ) Other accounts payable (412 ) Deferred revenue (388 ) Long term liabilities (40 ) Identifiable intangible assets: Order backlog 345 Technology 5,228 Goodwill 13,302 Total assets acquired $ 18,776 |
Schedule of pro forma information | Year ended December 31, 2014 (in thousands) Total revenues $ 11,012 Net Loss attribute to MS Modernization Services, Inc. (4,141 ) |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Fair Value Measurement [Abstract] | |
Summary of fair value measurement | Fair value measurements using input type December 31, 2015 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 1,479 - - $ 1,479 Restricted cash 4 - - 4 Intangible asset – Technology * - - 3,175 3,175 $ 1,483 $ - $ 3,175 $ 4,658 Fair value measurements using input type December 31, 2014 Level 1 Level 2 Level 3 Total Cash and cash equivalents $ 449 - - $ 449 Restricted cash 8 - - 8 $ 457 $ - $ - $ 457 * See Note 1H. |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Property and Equipment, Net [Abstract] | |
Schedule of Property and Equipment | December 31, 2015 2014 (in thousands) Cost: Computers and peripheral equipment $ 8,726 $ 8,717 Office furniture and equipment 537 535 Leasehold improvements 268 268 Motor vehicles 25 25 9,556 9,545 Accumulated Depreciation: Computers and peripheral equipment 8,576 8,943 Office furniture and equipment 441 438 Leasehold improvements 268 268 Motor vehicles 25 25 9,310 9,224 $ 246 $ 321 |
Goodwill (Tables)
Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Goodwill [Abstract] | |
Schedule of goodwill | December 31, 2015 2014 (in thousands) Balance as of January 1 Goodwill $ 67,618 $ 54,316 Accumulated impairment losses at the beginning of the period (41,815 ) (41,815 ) 25,803 12,501 Changes during the year Goodwill related to acquisition - 13,302 Balance as of December 31 Goodwill 67,618 67,618 Accumulated impairment losses at the end of the period (41,815 ) (41,815 ) $ 25,803 $ 25,803 |
Intangible Assets and Others,28
Intangible Assets and Others, Net (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Intangible Assets and Others, Net [Abstract] | |
Schedule of Intangible Assets and Others, Net | Useful life December 31, (years) 2015 2014 (in thousands) Original amount: Technology 5 $ 51,494 $ 51,494 Customer related and backlog 0.8 to 9 5,313 5,313 Others 14 14 56,821 56,821 Accumulated Depreciation: Technology** 48,333 46,266 Customer related and backlog 5,313 4,968 53,646 51,234 $ 3,175 $ 5,587 * The amounts of technology and backlog from the Merger are $5.2 and $0.3 million, respectively. (See also Note 2A). ** Includes impairment of $1.5 million for the year ending December 31, 2015. (See also Note 1H and Note 3). |
Accrued Severance Pay, Net (Tab
Accrued Severance Pay, Net (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Accrued Severance Pay, Net [Abstract] | |
Schedule of Accrued Severance Pay Liability | December 31, 2015 2014 (in thousands) Accrued severance payable $ 555 $ 676 Amount funded (323 ) (447 ) $ 232 $ 229 |
Loans from Banks and Others (Ta
Loans from Banks and Others (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Loans from Banks and Others [Abstract] | |
Schedule of Long-Term Debt | Average interest rate December 31, as of 2015 2014 December 31, 2015 Linkage basis Total long-term liabilities net of current portion % (in thousands) Related party promissory note 2.00 $ $ 220 $ - Ministry of Production in Italy (Note 9 A3) 0.87 € 102 154 Current portion (34 ) (40 ) Long term portion $ 288 $ 114 |
Maturities of Long-Term Debt | December 31, 2015 2014 (in thousands) First year (current portion) $ 34 $ 40 Second year 254 40 Third year 34 40 Fourth year and thereafter - 34 Total $ 322 $ 154 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Commitments and Contingencies [Abstract] | |
Schedule of minimum rental commitments under non-cancelable leases | Office Facilities Vehicles, Equipment, and Other (in thousands) Fiscal 2016 $ 281 $ 34 Fiscal 2017 195 22 Fiscal 2018 156 4 Fiscal 2019 39 - $ 671 $ 60 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Equity [Abstract] | |
Schedule of investors' purchase of preferred shares and warrants | Investor Preferred Shares Warrants Purchase Price Columbia Pacific Opportunity Fund, LP 200,000 100,000 $ 400,000 Prescott Group Aggressive Small Cap Master Fund 200,000 100,000 400,000 Mindus Holdings, Ltd. 100,000 50,000 200,000 500,000 250,000 $ 1,000,000 |
Schedule of share options outstanding and exercisable | Options Outstanding Options Exercisable Number Outstanding on December 31, 2015 Weighted Average Remaining Contractual Life Years Number Exercisable on December 31, 2015 Exercise Price $ 300,000 6.32 300,000 1.80 |
Schedule of share option plan | 2015 2014 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price $ $ Options outstanding at the beginning of year 393,850 2.89 441,589 3.18 Changes during the year: Forfeited (93,850 ) 6.36 (47,739 ) 5.56 Options outstanding at end of year 300,000 393,850 Options exercisable at year-end 300,000 345,517 |
Schedule of restricted stock units and changes | Year ended December 31, 2015 2014 (in thousands) RSUs outstanding at the beginning of the year 219,414 246,838 Changes during the year: Granted * 263,000 140,097 Vested (99,708 ) (137,136 ) Forfeited (22,262 ) (30,385 ) RSUs outstanding at the end of the year 360,444 219,414 Weighted average fair value at grant date $ 1.74 $ 4.13 * The fair value of RSUs is established based on the market value of the Company’s stock on the date of the award. The Company has expensed compensation costs, net of estimated forfeitures, applying the accelerated vesting method. |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Income Taxes [Abstract] | |
Summary of deferred tax assets and liabilities | December 31, 2015 2014 (in thousands) Net operating losses carry forwards $ 32,303 $ 30,539 Provisions for employee rights and other temporary differences 55 61 Deferred tax assets before valuation allowance 32,358 30,600 Valuation allowance (32,358 ) (30,600 ) Deferred tax assets (liability), net $ - $ - |
Schedule of loss before income taxes | Year ended December 31, 2015 2014 (in thousands) Domestic (Israel) $ (2,724 ) $ (2,939 ) Foreign (3,377 ) (758 ) Total loss before income taxes $ (6,101 ) $ (3,697 ) |
Schedule of provision for taxes | Year ended 2015 2014 (in thousands) Current: Domestic (Israel) $ - $ - Foreign 18 37 18 37 * Taxes related to prior years Deferred: Deferred taxes, net 23 (12 ) Total provision for income taxes $ 41 $ 25 * In 2015 and 2014, mainly related to withholdings tax for prior years that cannot be realized due to liquidation of subsidiaries as non-future estimated taxable income. |
Schedule of reconciliation theoretical tax expense | December 31, 2015 2014 (in thousands) Loss before income taxes, per consolidated statements of income $ (6,101 ) $ (3,697 ) At the principal tax rate of the group (26.5% in 2015 and 2014) 1,617 (980 ) Decrease in taxes resulting from the following differences: Carry-forward losses for which the Company provided valuation allowance 1,758 1,080 Effect of different tax rates in foreign subsidiaries (3,357 ) (63 ) Taxes related to previous years 23 (12 ) Non-deductible expenses — — Income tax expense in the consolidated statements of income for the reported year $ 41 $ 25 Effective Tax rate — — |
Supplementary Financial State34
Supplementary Financial Statement Information (Tables) | 12 Months Ended |
Dec. 31, 2015 | |
Supplementary Financial Statement Information [Abstract] | |
Schedule of trade accounts receivable | December 31, 2015 2014 (in thousands) Trade accounts receivable $ 2,020 $ 3,033 Less allowance for doubtful accounts — (554 ) $ 2,020 $ 2,479 |
Schedule of other current assets | December 31, 2015 2014 (in thousands) Prepaid expenses $ 53 $ 105 Short-term lease deposits 11 19 Government departments and agencies 56 52 $ 120 $ 176 |
Schedule of other current liabilities | December 31, 2015 2014 (in thousands) Government departments and agencies $ 13 $ 133 Employees and wage-related liabilities 669 452 Promissory note * - 220 Accrued expenses and other current liabilities 277 184 $ 959 $ 989 * Promissory note with related party in the amount of $220,000 bearing interest at 2%. The note is extended to be due on June 30, 2017 and therefore classified to long-term liabilities. |
Schedule of long-lived assets by geographic area | December 31, 2015 2014 (in thousands) Israel $ 32 $ 54 U.S.A. 114 158 Europe and other 100 109 $ 246 $ 321 |
Schedule of sales by geographic area | Year ended December 31, 2015 2014 (in thousands) North America 6,501 3,743 Europe 2,852 2,688 Israel 454 809 Total Revenue $ 9,807 $ 7,240 |
Schedule of financial income (expenses), net | Year ended December 31, 2015 2014 (in thousands) Foreign currency translation adjustments (see Note 1A3) $ 22 $ 5 Interest expense (156 ) (40 ) Grant of warrants to shareholders (983 ) - Change in fair value of derivatives - 150 Financial Income (Expenses), Net $ (1,117 ) $ 115 |
Summary of computation of basic and diluted earnings per share | Year ended December 31, 2015 2014 (in thousands, except 1. Numerator: Amount for basic and diluted loss per share $ (5,814 ) $ (3,395 ) 2. Denominator: Denominator for basic net loss per share - weighted average of shares $ 17,906,723 $ 12,020,474 Effect of dilutive securities $ - $ - Denominator for diluted net earnings per share - weighted average shares and assuming dilution $ 17,906,723 $ 12,020,474 Basic and diluted loss per share attributed ModSys International Ltd. $ (0.32 ) $ (0.28) |
Summary of Significant Accoun35
Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2015 | |
Computers and peripheral equipment [Member] | Minimum [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation | 20.00% |
Computers and peripheral equipment [Member] | Maximum [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation | 33.00% |
Computers and peripheral equipment [Member] | Majority [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation | 33.00% |
Office furniture and equipment [Member] | Minimum [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation | 6.00% |
Office furniture and equipment [Member] | Maximum [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation | 15.00% |
Office furniture and equipment [Member] | Majority [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation | 7.00% |
Leasehold improvements [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation, Description | Over the shorter of lease term or the life of the assets |
Motor vehicles [Member] | |
Accounting Policies [Line Items] | |
Annual rates of depreciation | 15.00% |
Summary of Significant Accoun36
Summary of Significant Accounting Policies (Details Textual) - USD ($) | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Summary of Significant Accounting Policies (Textual) | ||
Impairment losses | $ 0 | $ 0 |
Unrecognized stock-based compensation costs | $ 400,000 | 700,000 |
Unrecognized compensation cost, recognition period | 3 years | |
Unbilled accounts receivable | $ 1,100,000 | 2,000,000 |
Advertising costs | $ 151,000 | 153,000 |
Fair values of assets acquired | $ 13,300,000 | |
Intangible asset impairment, Description | Potential impairment to the technology intangible assets, since there was a reduction of the revenues and operations in 2015 generated from the technology, compared to previous forecasts. This led the Company to re-evaluate the value of intangible asset based on a finite time discounted cash flow approach with discounted rate of 18%. | |
RSU [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Unrecognized stock-based compensation costs | $ 700,000 | |
Minimum [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Intangible asset estimated useful life | 10 months | |
Impairment of intangible asset estimated useful life | 5 years | |
Maximum [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Intangible asset estimated useful life | 9 years | |
Impairment of intangible asset estimated useful life | 8 years 8 months 12 days | |
Sophisticated Business Systems [Member] | ||
Summary of Significant Accounting Policies (Textual) | ||
Fair value of intangible assets | $ 3,200,000 | |
Non-cash impairment | 1,500,000 | |
Fair values of assets acquired | $ 5,200,000 |
Business Combinations (Details)
Business Combinations (Details) $ in Thousands | Dec. 31, 2015USD ($) |
Schedule of estimated fair value of assets acquired at purchase date | |
Cash | $ 14 |
Receivables | 1,094 |
Other current assets | 187 |
Fixed assets | 72 |
Other long-term assets | 14 |
Accounts payable | (640) |
Other accounts payable | (412) |
Deferred revenue | (388) |
Long term liabilities | (40) |
Identifiable intangible assets: | |
Order backlog | 345 |
Technology | 5,228 |
Goodwill | 13,302 |
Total assets acquired | $ 18,776 |
Business Combinations (Details
Business Combinations (Details 1) $ in Thousands | 12 Months Ended |
Dec. 31, 2014USD ($) | |
Schedule of pro forma information | |
Total revenues | $ 11,012 |
Net loss attribute to MS Modernization Services, Inc. | $ (4,141) |
Business Combinations (Detail39
Business Combinations (Details Textual) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |||
Dec. 31, 2015 | Dec. 31, 2014 | Apr. 23, 2015 | Dec. 31, 2013 | |
Business Combinations (Textual) | ||||
Transaction costs | $ 348 | |||
Amount allocated to be amortized | $ 1,500 | |||
Goodwill | $ 25,803 | 25,803 | $ 12,501 | |
Ms Modernization Services Inc. [Member] | ||||
Business Combinations (Textual) | ||||
Consolidated loss amount | 204 | |||
Consolidated revenue amount | $ 235 | |||
Zulu Intercompany Merger [Member] | ||||
Business Combinations (Textual) | ||||
Intercompany merger, description | On April 23, 2015, the Company completed the intercompany merger (the "Zulu Intercompany Merger") of their majority-owned subsidiary (71. 83% ownership), Zulu Software, Inc. with and into the Company's wholly-owned subsidiary, MS Modernization Services, Inc. as part of an internal organizational restructuring. The name of the surviving subsidiary is MS Modernization Services, Inc. As a result of the intercompany merger, ModSys International Ltd. owns 88.7% of the surviving subsidiary, MS Modernization Services, Inc. The transaction was accounted for as an equity transaction with non-controlling interests. | |||
Zulu Intercompany Merger [Member] | Ms Modernization Services Inc. [Member] | ||||
Business Combinations (Textual) | ||||
Business acquisition majority owned subsidiary percentage | 88.70% | |||
Ateras Merger [Member] | ||||
Business Combinations (Textual) | ||||
Unregistered ordinary shares issued | 6,195,494 | |||
Unregistered ordinary shares issued, par value | $ 0.04 | |||
Percentage of discount for lack of marketability | 11.40% | |||
Goodwill | $ 13,300 | |||
Order Backlog [Member] | ||||
Business Combinations (Textual) | ||||
Amount allocated to be amortized | $ 345 | |||
Amortized period | 10 months | |||
Technology [Member] | ||||
Business Combinations (Textual) | ||||
Amount allocated to be amortized | $ 5,200 | |||
Amortized period | 8 years 8 months 12 days |
Fair Value Measurement (Details
Fair Value Measurement (Details) - USD ($) | Dec. 31, 2015 | Dec. 31, 2014 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash and cash equivalents | $ 1,479 | $ 449 | |
Restricted cash | 4 | 8 | |
Intangible asset - Technology | [1] | 3,175 | |
Total fair value of assets | 4,658 | 457 | |
Level 1 [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash and cash equivalents | 1,479 | 449 | |
Restricted cash | $ 4 | 8 | |
Intangible asset - Technology | [1] | ||
Total fair value of assets | $ 1,483 | $ 457 | |
Level 2 [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash and cash equivalents | |||
Restricted cash | |||
Intangible asset - Technology | [1] | ||
Total fair value of assets | |||
Level 3 [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Cash and cash equivalents | |||
Restricted cash | |||
Intangible asset - Technology | [1] | $ 3,175 | |
Total fair value of assets | |||
[1] | See Note 1H. |
Property and Equipment, Net (De
Property and Equipment, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Property, Plant and Equipment [Line Items] | ||
Cost | $ 9,556 | $ 9,545 |
Accumulated Depreciation | 9,310 | 9,224 |
Property and equipment, net | 246 | 321 |
Computers and peripheral equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost | 8,726 | 8,717 |
Accumulated Depreciation | 8,576 | 8,943 |
Office furniture and equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost | 537 | 535 |
Accumulated Depreciation | 441 | 438 |
Leasehold improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost | 268 | 268 |
Accumulated Depreciation | 331 | 268 |
Motor vehicles [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Cost | 25 | 25 |
Accumulated Depreciation | $ 25 | $ 25 |
Property and Equipment, Net (42
Property and Equipment, Net (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Property and Equipment, Net (Textual) | ||
Depreciation expenses | $ 86 | $ 89 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Schedule of goodwill | ||
Goodwill, Beginning Balance | $ 67,618 | $ 54,316 |
Accumulated impairment losses at the beginning of the period | (41,815) | (41,815) |
Total, Beginning Balance | $ 25,803 | 12,501 |
Changes during the year | ||
Goodwill related to acquisition | 13,302 | |
Goodwill, Ending Balance | $ 67,618 | 67,618 |
Accumulated impairment losses at the end of the period | (41,815) | (41,815) |
Total, Ending Balance | $ 25,803 | $ 25,803 |
Intangible Assets and Others,44
Intangible Assets and Others, Net (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Finite-Lived Intangible Assets [Line Items] | ||
Original amount | $ 56,821 | $ 56,821 |
Accumulated depreciation | 53,646 | 51,234 |
Intangible assets, net | 3,175 | 5,587 |
Customer related and backlog [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amount | 5,313 | 5,313 |
Accumulated depreciation | $ 5,313 | 4,968 |
Customer related and backlog [Member] | Minimum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible asset, useful life | 9 months 18 days | |
Customer related and backlog [Member] | Maximum [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Finite-lived intangible asset, useful life | 9 years | |
Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amount | $ 51,494 | 51,494 |
Accumulated depreciation | $ 48,333 | 46,266 |
Finite-lived intangible asset, useful life | 5 years | |
Others [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Original amount | $ 14 | $ 14 |
Intangible Assets and Others,45
Intangible Assets and Others, Net (Details Textual) $ in Thousands | 12 Months Ended |
Dec. 31, 2015USD ($) | |
Business Combinations (Textual) | |
Amortization expense | $ 1,500 |
Backlog [Member] | |
Business Combinations (Textual) | |
Amortization expense | 345 |
Technology [Member] | |
Business Combinations (Textual) | |
Amortization expense | $ 5,200 |
Accrued Severance Pay, Net (Det
Accrued Severance Pay, Net (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Accrued Severance Pay, Net [Abstract] | ||
Accrued severance pay | $ 555 | $ 676 |
Amount funded | (323) | (447) |
Accrued severance pay, noncurrent | $ 232 | $ 229 |
Accrued Severance Pay, Net (D47
Accrued Severance Pay, Net (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Accrued Severance Pay, Net [Abstract] | ||
Severance Costs | $ 85 | $ 75 |
Loans from Banks and Others (De
Loans from Banks and Others (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Debt Instrument [Line Items] | ||
Current portion | $ (34) | $ (40) |
Long term portion | 288 | $ 114 |
Related party promissory note [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 220 | |
Debt instrument, average spread interest rate during the period | 2.00% | |
Ministry of Production in Italy [Member] | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 102 | $ 154 |
Debt instrument, average spread interest rate during the period | 0.87% |
Loans from Banks and Others (49
Loans from Banks and Others (Details 1) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Loans from Banks and Others [Abstract] | ||
First year (current portion) | $ 34 | $ 40 |
Second year | 254 | 40 |
Third year | $ 34 | 40 |
Fourth year and thereafter | 34 | |
Total | $ 322 | $ 154 |
Loans from Banks and Others (50
Loans from Banks and Others (Details Textual) | Mar. 16, 2016 | Nov. 10, 2015USD ($) | May. 31, 2015 | Sep. 30, 2014USD ($) | Dec. 31, 2015USD ($)shareholders |
Loans From Banks and Others (Textual) | |||||
Line of credit facility, description | (i) extend the maturity date of the non-formula revolving line and the revolving line to June 30, 2016; (ii) require us to raise new equity, on terms and from investors satisfactory to the lender, of not less than $2.5 million on or before December 31, 2015; and (iii) increase the number of trade accounts for which the concentration limit is not applicable. | (i) increase the non-formula revolving line up to the amount of $2 million backed by guarantees; (ii) increase the borrowing base revolving line amount up to $1.5 million upon the closing of the Ateras merger; and (iii) extend the loan maturity date to December 31, 2015. | |||
Subsequent Event [Member] | |||||
Loans From Banks and Others (Textual) | |||||
Line of credit facility, description | (i) waive the liquidity covenant violations of September and December 2015; (ii) extend the maturity date of the non-formula revolving line and the revolving line to June 30, 2017; (iii) amend the definition of eligible accounts receivable; (iv) waive the equity event of $2.5 million on or before December 31, 2015; (v) add a new six month rolling EBITDA covenant and (vi) limit the amount of cash transfer to the parent company. The remaining substantive provisions of the credit facility were not materially changed by the commitment letter. | ||||
Non-formula revolving line of credit [Member] | |||||
Loans From Banks and Others (Textual) | |||||
Increase in the borrowing capacity | $ 2,000,000 | $ 2,000,000 | |||
Maturity date | Jun. 30, 2016 | Dec. 31, 2015 | |||
Line of credit facility amount borrowed | $ 2,000,000 | $ 2,000,000 | |||
Line of credit facility, description | The new covenants are (a) minimum liquidity ratio of 1.25:1.00, (b) trailing six month EBITDA, and (c) to raise new equity of not less than $1.0 million on or before December 31, 2015, which was fulfilled in December 2015 (See Note 10A1). The remaining substantive provisions of the credit facility were not materially changed by the commitment letter. | ||||
Number of shareholders | shareholders | 2 | ||||
Non-formula revolving line of credit [Member] | Subsequent Event [Member] | |||||
Loans From Banks and Others (Textual) | |||||
Maturity date | Jun. 30, 2017 | ||||
Revolving line of credit [Member] | |||||
Loans From Banks and Others (Textual) | |||||
Increase in the borrowing capacity | $ 1,500,000 | $ 1,500,000 | |||
Maturity date | Jun. 30, 2016 | ||||
Line of credit facility amount borrowed | $ 1,500,000 | $ 712,000 | |||
Revolving line of credit [Member] | Subsequent Event [Member] | |||||
Loans From Banks and Others (Textual) | |||||
Maturity date | Jun. 30, 2017 |
Commitments and Contingencies51
Commitments and Contingencies (Details) $ in Thousands | Dec. 31, 2015USD ($) |
Office Facilities [Member] | |
Operating Leased Assets [Line Items] | |
Fiscal 2,016 | $ 281 |
Fiscal 2,017 | 195 |
Fiscal 2,018 | 156 |
Fiscal 2,019 | 39 |
Total payments due | 671 |
Vehicles, Equipment, and Other [Member] | |
Operating Leased Assets [Line Items] | |
Fiscal 2,016 | 34 |
Fiscal 2,017 | 22 |
Fiscal 2,018 | $ 4 |
Fiscal 2,019 | |
Total payments due | $ 60 |
Commitments and Contingencies52
Commitments and Contingencies (Details Textual) - USD ($) $ in Thousands | 1 Months Ended | 12 Months Ended | |
Jul. 31, 2007 | Dec. 31, 2015 | Dec. 31, 2014 | |
Other Commitments [Line Items] | |||
Rent expense | $ 345 | $ 237 | |
Ministry of Production in Italy [Member] | |||
Other Commitments [Line Items] | |||
Proceeds from issuance of debt and other | $ 585 | ||
Maturity date | Sep. 30, 2018 | ||
Debt instrument, minimum interest rate | 0.87% | ||
Long-term debt | $ 102 | ||
Percent of proceeds considered long-term debt | 63.50% | ||
Percent of proceeds considered a grant | 36.50% | ||
Israel's Office of the Chief Scientist [Member] | |||
Other Commitments [Line Items] | |||
Royal commitment, percent of funded product sales | 18.00% | ||
Royalty commitment, maximum percent of grant linked to product sales | 100.00% | ||
Contingent liability, maximum potential royalty payment | $ 173 |
Equity (Details)
Equity (Details) | 12 Months Ended |
Dec. 31, 2015USD ($)shares | |
Preferred Shares | 500,000 |
Warrants | 250,000 |
Purchase Price | $ | $ 1,000,000 |
Columbia Pacific Opportunity Fund, LP [Member] | |
Investor | Columbia Pacific Opportunity Fund, LP |
Preferred Shares | 200,000 |
Warrants | 100,000 |
Purchase Price | $ | $ 400,000 |
Prescott Group Aggressive Small Cap Master Fund [Member] | |
Investor | Prescott Group Aggressive Small Cap Master Fund |
Preferred Shares | 200,000 |
Warrants | 100,000 |
Purchase Price | $ | $ 400,000 |
Mindus Holdings, Ltd. [Member] | |
Investor | Mindus Holdings, Ltd. |
Preferred Shares | 100,000 |
Warrants | 50,000 |
Purchase Price | $ | $ 200,000 |
Equity (Details 1)
Equity (Details 1) - Stock Options [Member] | 12 Months Ended |
Dec. 31, 2015$ / sharesshares | |
Options Outstanding | |
Number Outstanding on December 31, 2015 | 300,000 |
Weighted Average Remaining Contractual Life Years | 6 years 3 months 26 days |
Options Exercisable | |
Number Exercisable on December 31, 2015 | 300,000 |
Exercise Price | $ / shares | $ 1.80 |
Equity (Details 2)
Equity (Details 2) - Stock Options [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Number of Options | ||
Options outstanding at beginning of year | 393,850 | 441,589 |
Changes during the year: | ||
Forfeited | (93,850) | (47,739) |
Options outstanding at end of year | 300,000 | 393,850 |
Options exercisable at year-end | 300,000 | 345,517 |
Weighted Average Exercise Price | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price | $ 2.89 | $ 3.18 |
Changes during the year: | ||
Forfeited | $ 6.36 | $ 5.56 |
Equity (Details 3)
Equity (Details 3) - Restricted Share Units (RSU) [Member] - $ / shares | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
RSUs outstanding at the beginning of the year | 219,414,000 | 246,838,000 | |
Changes during the year: | |||
Granted | [1] | 263,000,000 | 140,097,000 |
Vested | (99,708) | (137,136) | |
Forfeited | (22,262,000) | (30,385,000) | |
RSUs outstanding at the end of the year | 360,444,000 | 219,414,000 | |
Weighted average fair value at grant date | $ 1.74 | $ 4.13 | |
[1] | The fair value of RSUs is established based on the market value of the Company's stock on the date of the award. The Company has expensed compensation costs, net of estimated forfeitures, applying the accelerated vesting method. |
Equity (Details Textual)
Equity (Details Textual) | 1 Months Ended | 12 Months Ended | |||||||||
Dec. 29, 2015$ / sharesshares | Nov. 25, 2015$ / sharesshares | Nov. 22, 2013shares | Dec. 31, 2015USD ($)plans$ / sharesshares | Dec. 31, 2014USD ($)shares | Dec. 31, 2009USD ($)shares | Dec. 31, 2015₪ / shares | Dec. 31, 2014₪ / shares | Oct. 31, 2014USD ($)shares | Sep. 30, 2014shares | Apr. 30, 2011USD ($) | |
Class of Stock [Line Items] | |||||||||||
Ordinary shares, shares authorized | shares | 25,000,000 | 25,000,000 | |||||||||
Ordinary shares, par value per share | ₪ / shares | ₪ 0.04 | ₪ 0.04 | |||||||||
Treasury stock, shares held by company | shares | 33,239 | ||||||||||
Treasury stock, total consideration | $ | $ 1,821,000 | $ 1,821,000 | |||||||||
Stock repurchase program, shares repurchased | shares | 11,249 | ||||||||||
Stock repurchase program, value of shares repurchased | $ | $ 1,700,000 | ||||||||||
Compensation costs | $ | $ 426,000 | 727,000 | |||||||||
Warrants outstanding | shares | 102,343 | ||||||||||
Warrants exercised | $ | $ 160,003 | ||||||||||
Exercise price of warrants | $ / shares | $ 1.56 | ||||||||||
Warrants, contractual term | 5 years | ||||||||||
Gross proceed received aggregate | $ | $ 18,776,000 | ||||||||||
Unregistered ordinary shares | shares | 6,195,494 | ||||||||||
Interest rate | 2.00% | ||||||||||
Ordinary shares, shares issued | shares | 18,602,041 | 17,877,333 | |||||||||
Loan granted | $ | $ 5,000,000 | ||||||||||
Preferred shares, shares issued | shares | 500,000 | 0 | |||||||||
Retained earnings | $ | $ (125,765,000) | $ (119,619,000) | |||||||||
Benefits to the shareholders | $ | |||||||||||
Preferred Stock [Member] | |||||||||||
Class of Stock [Line Items] | |||||||||||
Ordinary shares issued during perid | shares | |||||||||||
Gross proceed received aggregate | $ | |||||||||||
Benefits to the shareholders | $ | $ 332,000 | ||||||||||
1996 Share Option Plan [Member] | 2007 Award Plan [Member] | |||||||||||
Class of Stock [Line Items] | |||||||||||
Compensation costs | $ | $ 400,000 | $ 700,000 | |||||||||
Number of plan | plans | 2 | ||||||||||
Prescott Group Aggressive Small Cap Master Fund [Member] | |||||||||||
Class of Stock [Line Items] | |||||||||||
Ordinary shares issued during perid | shares | 625,000 | ||||||||||
Ordinary shares, shares issued | shares | 6,195,494 | ||||||||||
Shareholder [Member] | |||||||||||
Class of Stock [Line Items] | |||||||||||
Exercise price of warrants | $ / shares | $ 0.01 | ||||||||||
Issuance expenses | $ | $ 982,625 | ||||||||||
Warrants to purchase ordinary shares | shares | 45,082 | ||||||||||
Exercise of warrants description | Fifty percent (50%) of these warrants may be exercised on issuance with the remaining 50% vesting on February 24, 2016 unless the promissory note is paid in full on or before that time, which would result in the cancellation of the unvested 50%. At the same shareholder meeting, the shareholders approved the issuance of 409,837 warrants for our ordinary shares with an exercise price of $0.01 per share for the issuance of guarantees of our term note with Comerica Bank. Fifty percent (50%) of these warrants may be exercised on issuance with the remaining 50% vesting on February 24, 2016 unless the Comerica Bank note is reduced to below $1,000,000 on or before that date, which would result in the cancellation of the unvested 50%. | ||||||||||
Securities Purchase Agreement [Member] | Investor [Member] | |||||||||||
Class of Stock [Line Items] | |||||||||||
Exercise price of warrants | $ / shares | $ 0.01 | ||||||||||
Warrants, contractual term | 2 years | ||||||||||
Preferred shares, shares issued | shares | 500,000 | ||||||||||
Warrants to purchase ordinary shares | shares | 250,000 | ||||||||||
Preferred stock dividend rate | 8.00% | ||||||||||
Preferred stock, conversion basis | The preferred shares are convertible into the Company's ordinary shares on a one-to-one basis at the option of the holder. Should the volume weighted average price of the ordinary shares be $5.00 or more for ten consecutive trading days at any time two years from the date of issuance, the preferred shares will be automatically converted into ordinary shares at the adjusted $2.00 share price. | ||||||||||
Preferred stock, liquidation preference per share | $ / shares | $ 3 | ||||||||||
Purchase price of preferred shares and warrants | $ | $ 1,000,000 |
Equity (Details Textual 1)
Equity (Details Textual 1) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock-based compensation | $ 426 | $ 727 | |
Preferred stock, dividend payment terms | The Company expects to pay share dividends on its preferred shares which carry an 8% per annum cumulative dividend payable in kind by additional preferred shares, calculated based on amount of $2.00 per share. | ||
1996 Share Option Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Stock options remain available for future awards | 174,023 | ||
Ordinary shares reserved for future issuance | 1,050,000 | ||
Shares outstanding, remaining contractual life | 10 years | ||
Minimum [Member] | 1996 Share Option Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Exercise price for options under plan | $ 1.8 | ||
Vesting period of shares under plan | 3 years | ||
Unvested options, term for forfeiture, post employment | 30 days | ||
Maximum [Member] | 1996 Share Option Plan [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Exercise price for options under plan | $ 20 | ||
Vesting period of shares under plan | 4 years | ||
Unvested options, term for forfeiture, post employment | 90 days | ||
Stock Options [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Pre-vesting forfeiture rate | 15.00% | ||
Restricted Share Units (RSU) [Member] | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Vesting period of shares under plan | 3 years | ||
Shares granted | [1] | 263,000,000 | 140,097,000 |
Shares approved for immediate vesting on grant date | 0 | 7,848 | |
[1] | The fair value of RSUs is established based on the market value of the Company's stock on the date of the award. The Company has expensed compensation costs, net of estimated forfeitures, applying the accelerated vesting method. |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Income Taxes [Abstract] | ||
Net operating losses carry forwards | $ 32,303 | $ 30,539 |
Provisions for employee rights and other temporary differences | 55 | 61 |
Deferred tax assets before valuation allowance | 32,358 | 30,600 |
Valuation allowance | $ (32,358) | $ (30,600) |
Deferred tax assets (liability), net |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes [Abstract] | ||
Domestic (Israel) | $ (2,724) | $ (2,939) |
Foreign | (3,377) | (758) |
Loss before taxes on income | $ (6,101) | $ (3,697) |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015 | Dec. 31, 2014 | ||
Current: | |||
Domestic (Israel) | |||
Foreign | $ 18 | $ 37 | |
Current tax provision (benefit) | $ 18 | $ 37 | |
Taxes related to prior years Deferred: | [1] | ||
Deferred: | |||
Deferred taxes, net | $ 23 | $ (12) | |
Total provision for income taxes | $ 41 | $ 25 | |
[1] | In 2015 and 2014, mainly related to withholdings tax for prior years that cannot be realized due to liquidation of subsidiaries as non-future estimated taxable income. |
Income Taxes (Details 3)
Income Taxes (Details 3) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes [Abstract] | ||
Loss before income taxes, per consolidated statements of income | $ (6,101) | $ (3,697) |
At the principal tax rate of the group (26.5% in 2015 and 2014) | 1,617 | (980) |
Decrease in taxes resulting from the following differences: | ||
Carry-forward losses for which the Company provided valuation allowance | 1,758 | 1,080 |
Effect of different tax rates in foreign subsidiaries | (3,357) | (63) |
Taxes related to previous years | $ 23 | $ (12) |
Non-deductible expenses | ||
Income tax expense in the consolidated statements of income for the reported year | $ 41 | $ 25 |
Effective Tax rate |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Income Taxes (Textual) | ||
Corporate income tax rate | 26.50% | 26.50% |
Net operating loss carry forwards | $ 119 | |
Israel [Member] | ||
Income Taxes (Textual) | ||
Corporate income tax rate | 26.50% | 26.50% |
Net operating loss carry forwards | $ 82 |
Supplementary Financial State64
Supplementary Financial Statement Information (Details) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Supplementary Financial Statement Information [Abstract] | ||
Trade accounts receivable | $ 2,020 | $ 3,033 |
Less allowance for doubtful accounts | (554) | |
Trade accounts receivable, Net | $ 2,020 | $ 2,479 |
Supplementary Financial State65
Supplementary Financial Statement Information (Details 1) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Supplementary Financial Statement Information [Abstract] | ||
Prepaid expenses | $ 53 | $ 105 |
Short-term lease deposits | 11 | 19 |
Government departments and agencies | 56 | 52 |
Other current assets, Total | $ 120 | $ 176 |
Supplementary Financial State66
Supplementary Financial Statement Information (Details 2) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 | |
Supplementary Financial Statement Information [Abstract] | |||
Government departments and agencies | $ 13 | $ 133 | |
Employees and wage-related liabilities | $ 669 | 452 | |
Promissory note | [1] | 220 | |
Accrued expenses and other current liabilities | $ 277 | 184 | |
Other current liabilities, Total | $ 959 | $ 989 | |
[1] | Promissory note with related party in the amount of $220,000 bearing interest at 2%. The note is extended to be due on June 30, 2017 and therefore classified to long-term liabilities. |
Supplementary Financial State67
Supplementary Financial Statement Information (Details 3) - USD ($) $ in Thousands | Dec. 31, 2015 | Dec. 31, 2014 |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived Assets | $ 246 | $ 321 |
Israel [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived Assets | 32 | 54 |
U.S.A. [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived Assets | 114 | 158 |
Europe and other [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Long - lived Assets | $ 100 | $ 109 |
Supplementary Financial State68
Supplementary Financial Statement Information (Details 4) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total Revenue | $ 9,807 | $ 7,240 |
North America [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total Revenue | 6,501 | 3,743 |
Europe [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total Revenue | 2,852 | 2,688 |
Israel [Member] | ||
Revenues from External Customers and Long-Lived Assets [Line Items] | ||
Total Revenue | $ 454 | $ 809 |
Supplementary Financial State69
Supplementary Financial Statement Information (Details 5) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Supplementary Financial Statement Information [Abstract] | ||
Foreign currency translation adjustments (see Note 1A3) | $ 22 | $ 5 |
Interest expense | (156) | $ (40) |
Grant of warrants to shareholders | $ (983) | |
Change in fair value of derivatives | $ 150 | |
Financial Income (Expenses), Net | $ (1,117) | $ 115 |
Supplementary Financial State70
Supplementary Financial Statement Information (Details 6) - USD ($) $ / shares in Units, $ in Thousands | 12 Months Ended | |
Dec. 31, 2015 | Dec. 31, 2014 | |
Numerator: | ||
Amount for basic and diluted loss per share | $ (5,814) | $ (3,395) |
Denominator: | ||
Denominator for basic net loss per share - weighted average of shares | 17,906,723 | 12,020,474 |
Effect of dilutive securities | ||
Denominator for diluted net earnings per share - weighted average shares and assuming dilution | 17,906,723 | 12,020,474 |
Basic and diluted loss per share attributed ModSys International Ltd. | $ (0.32) | $ (0.28) |
Supplementary Financial State71
Supplementary Financial Statement Information (Details Textual) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2015USD ($)Number | Dec. 31, 2014USD ($)Number | ||
Supplementary Financial Statement Information (Textual) | |||
Expenses for doubtful accounts | $ | $ 0 | $ 629 | |
Allowance deducted from bad debts | $ | $ 31 | 255 | |
Promissory note payable | $ | [1] | $ 220 | |
Interest rate | 2.00% | ||
Extended due date | Jun. 30, 2017 | ||
Sales Revenue, Net [Member] | Customer One [Member] | |||
Supplementary Financial Statement Information (Textual) | |||
Concentration risk, percentage | 21.60% | 15.50% | |
Number of customers | 3 | 2 | |
Sales Revenue, Net [Member] | Customer Two [Member] | |||
Supplementary Financial Statement Information (Textual) | |||
Concentration risk, percentage | 13.70% | 11.10% | |
Number of customers | 3 | 2 | |
Sales Revenue, Net [Member] | Customer Three [Member] | |||
Supplementary Financial Statement Information (Textual) | |||
Concentration risk, percentage | 12.40% | ||
Number of customers | 3 | ||
Trade Accounts Receivable [Member] | |||
Supplementary Financial Statement Information (Textual) | |||
Concentration risk, percentage | 10.00% | 10.00% | |
Number of customers | 4 | 4 | |
[1] | Promissory note with related party in the amount of $220,000 bearing interest at 2%. The note is extended to be due on June 30, 2017 and therefore classified to long-term liabilities. |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Mar. 16, 2016 | Jan. 15, 2016 | Dec. 31, 2015 | Dec. 31, 2014 |
RSU [Member] | ||||
Subsequent Event [Line Items] | ||||
Vested | 99,708 | 137,136 | ||
Subsequent Event [Member] | Mr. Rinaldo [Member] | RSU [Member] | ||||
Subsequent Event [Line Items] | ||||
Lump sum bonus payment | $ 6,200 | |||
Vested | 50,016 | |||
Subsequent Event [Member] | Comerica Bank [Member] | ||||
Subsequent Event [Line Items] | ||||
Equity event amount | $ 2,500,000 |