Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May. 10, 2016 | |
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-Q | |
Document Period End Date | Mar. 31, 2016 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 18,626,143 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash and cash equivalents | $ 690 | $ 1,479 |
Restricted cash | 4 | 4 |
Trade accounts receivable, net | 2,371 | 2,020 |
Other current assets | 134 | 120 |
Total Current Assets | 3,199 | 3,623 |
Non-Current Assets: | ||
Property and equipment, net | 164 | 246 |
Goodwill | 25,803 | 25,803 |
Intangible Assets and others, net | 3,017 | 3,175 |
Total Non-Current Assets | 28,984 | 29,224 |
TOTAL ASSETS | 32,183 | 32,847 |
Current Liabilities: | ||
Short-term bank credit and others | 2,457 | 2,736 |
Trade accounts payable | 1,286 | 1,004 |
Deferred revenue | 462 | 925 |
Other current liabilities | 1,150 | 959 |
Total Current Liabilities | 5,355 | 5,624 |
Non-Current Liabilities | ||
Accrued severance pay, net | 255 | 232 |
Loans from others | 288 | 288 |
Other non-current liabilities | 27 | 30 |
Total Non-Current Liabilities | 570 | 550 |
Total Equity | 26,258 | 26,673 |
TOTAL LIABILITIES AND EQUITY | $ 32,183 | $ 32,847 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Income Statement [Abstract] | ||
Revenue | $ 2,827 | $ 2,286 |
Cost of revenue | 1,662 | 1,700 |
Gross profit | 1,165 | 586 |
Research and development costs | 361 | 386 |
Selling, general and administrative expenses | 1,144 | 1,320 |
Amortization of intangible assets | 158 | 254 |
Total operating expenses | 1,663 | 1,960 |
Operating loss | (498) | (1,374) |
Financial expense, net | 28 | 47 |
Loss before taxes on income | (526) | (1,421) |
Taxes on income | 1 | 13 |
Net loss | (527) | (1,434) |
Less: Net income (loss) attributable to non-controlling interest | 20 | (55) |
Net loss attributable to ModSys International Ltd. shareholders | $ (547) | $ (1,379) |
Loss per share - basic: | ||
Attributed to the shareholders | $ (0.03) | $ (0.08) |
Weighted average shares outstanding, basic | 18,595 | 17,863 |
Condensed Consolidated Stateme4
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (527) | $ (1,434) |
Other comprehensive income | ||
Total comprehensive loss | (527) | $ (1,434) |
Comprehensive result attributable to non-controlling interest | 20 | (55) |
Comprehensive loss attributable to ModSys International Ltd. shareholders | $ (547) | $ (1,379) |
Condensed Consolidated Stateme5
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (527) | $ (1,434) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 174 | 280 |
Increase (decrease) in accrued severance pay, net | 23 | (1) |
Stock-based compensation | $ 112 | $ 147 |
Change in fair value of derivatives | ||
Changes in operating assets and liabilities: | ||
Increase in trade receivables | $ (351) | $ (153) |
Increase in other current assets | (14) | (52) |
Increase in trade payables | 282 | 373 |
Increase (decrease) in other liabilities and deferred revenues | (275) | 255 |
Loss on disposal of assets | 77 | |
Net cash used in operating activities | (499) | (585) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (11) | (8) |
Net cash used in investing activities | (11) | (8) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Short term bank credit | (279) | 950 |
Net cash provided by (used in) financing activities | (279) | 950 |
NET CASH INCREASE (DECREASE) IN CASH AND CASH EQUVIALETS | (789) | 357 |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,479 | 449 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ 690 | $ 806 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 1 – Summary of Significant Accounting Policies: A. The Company ModSys International Ltd. (formerly known as BluePhoenix Solutions Ltd.) (together with its subsidiaries, the “Company”, “we”, 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 and majority-owned subsidiaries located in: the United States, the United Kingdom, 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 flow from operations 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 the Company’s current cash position is sufficient to support the ongoing operations for the foreseeable future. B. Recently Issued Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, which revises the guidance in ASC 718, Compensation - Stock Compensation, and will change how companies account for certain aspects of share-based payments to employees, including the income tax impact, classification on the statement of cash flows and forfeitures. The guidance is effective for reporting periods (interim and annual) beginning after December 15, 2017, for public companies. Early adoption is permitted. The Company is currently assessing the potential impact of this ASU on its consolidated financial position and results of operations. 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 new guidance must be adopted using a modified retrospective approach. 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 its consolidated financial statements. C. Unaudited Interim Condensed Consolidated Financial Statements The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for the annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. The interim financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. D. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. E. Principles of Consolidation The consolidated financial statements include the Company's and its subsidiaries' financial statements. The consolidated financial statements of subsidiaries are included in the condensed consolidated financial statements from the date that control is achieved until the date that control ceases. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its operating activities. In assessing control, legal and contractual rights are taken into account. Intercompany transactions and balances are eliminated upon consolidation. |
Goodwill
Goodwill | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill [Abstract] | |
Goodwill | Note 2 – Goodwill: The following is a summary of the change in the carrying amount of goodwill as of March 31, 2016 and December 31, 2015: March 31, December 31, 2016 2015 Unaudited Audited (in thousands) Balance as of January 1 Goodwill $ 67,618 $ 67,618 Accumulated impairment losses at the beginning of the period (41,815 ) (41,815 ) 25,803 25,803 Changes during the period Goodwill related to acquisition - - Balance at end of period Goodwill 67,618 67,618 Accumulated impairment losses at the end of the period (41,815 ) (41,815 ) $ 25,803 $ 25,803 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 information technology 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. The Company determines 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 exchange and an appropriate control premium. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | Note 3 – Fair Value Measurements: The accounting guidance establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 2 – Observable inputs such as quoted prices for similar instruments and quoted prices in markets that are not active, and inputs that are directly observable or can be corroborated by observable market data. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities. Level 3 – Significant inputs to pricing that have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as the complex and subjective models and forecasts used to determine the fair value of financial instruments. Financial assets and liabilities measured at fair value as of March 31, 2016 and December 31, 2015, are summarized below: Fair value measurements using input type March 31, 2016 Level 1 Level 2 Level 3 Total Cash and Cash Equivalents 686 - - 686 Restricted cash 4 - - 4 $ 690 $ - $ - $ 690 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 |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 4 – Commitments and Contingencies: A. Commitments: Israel’s Office of the Chief Scientist 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 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. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 5 – Subsequent Events: On May 13, 2016, the Company received a commitment letter from Comerica Bank regarding its credit facility, according to which the covenant of trailing six month EBITDA was updated and an additional condition to maintain minimum cash at bank of $ 250 thousand was added. The remaining substantive provisions of the credit facility were not materially changed by the commitment letter. |
Summary of Significant Accoun11
Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Summary of Significant Accounting Policies [Abstract] | |
The Company | A. The Company ModSys International Ltd. (formerly known as BluePhoenix Solutions Ltd.) (together with its subsidiaries, the “Company”, “we”, 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 and majority-owned subsidiaries located in: the United States, the United Kingdom, 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 flow from operations 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 the Company’s current cash position is sufficient to support the ongoing operations for the foreseeable future. |
Recently Issued Accounting Pronouncements | B. Recently Issued Accounting Pronouncements In March 2016, the FASB issued ASU No. 2016-09, which revises the guidance in ASC 718, Compensation - Stock Compensation, and will change how companies account for certain aspects of share-based payments to employees, including the income tax impact, classification on the statement of cash flows and forfeitures. The guidance is effective for reporting periods (interim and annual) beginning after December 15, 2017, for public companies. Early adoption is permitted. The Company is currently assessing the potential impact of this ASU on its consolidated financial position and results of operations. 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 new guidance must be adopted using a modified retrospective approach. 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 its consolidated financial statements. |
Unaudited Interim Condensed Consolidated Financial Statements | C. Unaudited Interim Condensed Consolidated Financial Statements The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for the annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ended December 31, 2016. The interim financial statements should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015. |
Use of Estimates | D. Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. |
Principles of Consolidation | E. Principles of Consolidation The consolidated financial statements include the Company's and its subsidiaries' financial statements. The consolidated financial statements of subsidiaries are included in the condensed consolidated financial statements from the date that control is achieved until the date that control ceases. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its operating activities. In assessing control, legal and contractual rights are taken into account. Intercompany transactions and balances are eliminated upon consolidation. |
Goodwill (Tables)
Goodwill (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Goodwill [Abstract] | |
Schedule of goodwill | March 31, December 31, 2016 2015 Unaudited Audited (in thousands) Balance as of January 1 Goodwill $ 67,618 $ 67,618 Accumulated impairment losses at the beginning of the period (41,815 ) (41,815 ) 25,803 25,803 Changes during the period Goodwill related to acquisition - - Balance at end of period Goodwill 67,618 67,618 Accumulated impairment losses at the end of the period (41,815 ) (41,815 ) $ 25,803 $ 25,803 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Fair Value Measurements [Abstract] | |
Summary of fair value measurement | Fair value measurements using input type March 31, 2016 Level 1 Level 2 Level 3 Total Cash and Cash Equivalents 686 - - 686 Restricted cash 4 - - 4 $ 690 $ - $ - $ 690 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 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Schedule of goodwill | ||
Goodwill, Beginning Balance | $ 67,618 | $ 67,618 |
Accumulated impairment losses at the beginning of the period | (41,815) | (41,815) |
Total, Beginning Balance | $ 25,803 | $ 25,803 |
Changes during the period | ||
Goodwill related to acquisition | ||
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 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | $ 686 | $ 1,479 |
Restricted cash | 4,000 | 4,000 |
Intangible asset - Technology | 3,175 | |
Total fair value of assets | 3,707 | 4,658 |
Level 1 [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Cash and cash equivalents | 686 | 1,479 |
Restricted cash | 4 | $ 4 |
Intangible asset - Technology | ||
Total fair value of assets | $ 690 | $ 1,483 |
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 | ||
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 | $ 3,175 | |
Total fair value of assets | $ 3,017 | $ 3,175 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) | 1 Months Ended | 3 Months Ended |
Jul. 31, 2007 | Mar. 31, 2016 | |
Ministry of Production in Italy [Member] | ||
Other Commitments [Line Items] | ||
Proceeds from issuance of debt and other | $ 585,000 | |
Percent of proceeds considered a grant | 36.50% | |
Loan payment period | 10 years | |
Maturity date | Sep. 30, 2018 | |
Percent of proceeds considered long-term debt | 63.50% | |
Long-term debt | $ 102,000 | |
Ministry of Production in Italy [Member] | Minimum [Member] | ||
Other Commitments [Line Items] | ||
Debt instrument, minimum interest rate | 0.87% | |
Israel's Office of the Chief Scientist [Member] | ||
Other Commitments [Line Items] | ||
Royal commitment, percent of funded product sales | 3.00% | |
Royalty commitment, maximum percent of grant linked to product sales | 100.00% | |
Contingent liability, maximum potential royalty payment | $ 183,000 |
Subsequent Events (Details)
Subsequent Events (Details) $ in Thousands | May. 13, 2016USD ($) |
Subsequent Event [Member] | |
Subsequent Events (Textual) | |
Minimum cash at bank | $ 250 |