1. Board of Directors' Analysis of the Company's Business
1.1.
Company Description
1.1.1. General
Elron Electronic Industries Ltd. ("Elron", the "Company") is an operational holding company focused on building technology companies. Elron's group of companies includes companies at various stages of development that are engaged in a variety of technology fields, such as developing medical devices and others. Elron's principal shareholder is Discount Investment Corporation Ltd. ("DIC") (50.32%), a company controlled by IDB Development Corporation Ltd. ("IDB").
Elron operates through consolidated companies (companies controlled by Elron and whose financial statements are consolidated with Elron's financial statements), associates (companies over which Elron has significant influence and which are included in its financial statements using the equity method), and other companies over which the Company does not have significant influence (included in the financial statements based on fair value) (the "Group Companies").
For details on the accounting method applied to the Group Companies in Elron's financial statements, Elron's holding percentage in the Group Companies, and their carrying value, see the annex to the Company's interim consolidated financial statements as of September 30, 2016 (the "Financial Statements").
The Financial Statements were prepared in accordance with International Financial Reporting Standards ("IFRS").
1.1.2. Main goal
Elron's main goal is to build value for its shareholders by enhancing and exiting its Group Company holdings (whether through their sale or through the public listing of their shares), while simultaneously seeking new investment opportunities in technology companies.
1.1.3. Strategy
In order to achieve this goal, Elron operates according to the following business strategy:
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Identifying and exploiting investment opportunities in companies with innovative technology and significant exit potential, mainly in the field of medical devices and cyber.
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Investing over the long term in order to maximize the possibility of enhancing the Group Companies' value.
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Focusing on investments which afford Elron influence and active involvement in their management.
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Actively enhancing the Group Companies' value by providing hands-on assistance to their management.
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Exploiting opportunities to exit Group Companies.
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1.1.4. RDC
As part of its business strategy, Elron examines a broad range of cooperation and investment proposals, including through RDC – Rafael Development Corporation Ltd. ("RDC"), an Elron subsidiary.
RDC has first rights to commercialize military technologies developed by Rafael – Advanced Defense Systems Ltd. ("Rafael") in civilian markets. RDC seeks to identify technology projects and invest in companies that will either make civilian use of Rafael's military technologies or which will benefit from Rafael's technology, know-how and expertise.
1.1.5. Group companies
Elron's main Group Companies and its holding percentage in them as of the date of filing this report are as follows:
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RDC (50.1%)
- See description in section 1.1.4 above.
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Pocared Diagnostics Ltd. (55% by Elron, 12% by RDC) ("Pocared")
- Pocared is developing a real-time and automated system for infectious diseases diagnosis using optical technology, intended for use by major microbiological laboratories and hospitals, as an alternative to current microbiological practice of bacteria culturing. The system is designed to reduce the average diagnostic time and significantly increase output in comparison with current diagnostic practice.
The system's first application is diagnosis of Urinary Tract Infection
.
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BrainsGate Ltd. (30%) ("BrainsGate")
- BrainsGate is developing a system for treating ischemic stroke. The system operates by electrically stimulating a nerve center located behind the nasal cavity using a miniature implantable electrode, in order to increase blood flow to the brain. The system is intended to significantly lengthen the approved stroke treatment window to 24 hours post-symptom onset, and to provide a more effective treatment than is currently available.
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See Item 4.B – "Business Overview" of the Company's Annual Report for 2015 filed on Form 20-F with the Securities and Exchange Commission ("Elron's 2015 Annual Report") for details on the criteria for classifying a Group Company as a main company.
Additional Group Companies and Elron's holding percentage in them as of the date of filing this report are, among others, as follows:
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Notal Vision Inc. (21%) ("Notal Vision")
- Notal Vision develops, manufactures and provides a system and services for remote monitoring of age-related macular degeneration, or AMD, patients at risk of vision loss, in order to enable early detection of visual changes before the disease progresses to the point of significant vision loss or blindness.
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CartiHeal (2009) Ltd. (35%) ("CartiHeal")
- Cartiheal is developing an implant for repairing cartilage and osteochondral defects in loadbearing joints, such as the knee. The implant has a unique structure, composed of calcium carbonate with hyaluronic acid. The implant biodegrades in the implantation site, and promotes the repair of cartilage and subchondral bone.
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Coramaze Technologies GmbH (28%) ("Coramaze")
- Coramaze is a German company developing a device for functional mitral valve regurgitation – backflow in the left side of the heart, caused by an enlarged left ventricle that prevents the valve from closing properly.
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Nitinotes Ltd. (14%) ("Nitinotes)
develops an endoscopic gastric sleeve procedure for treatment of obesity.
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SixGill Ltd. (22%) ("SixGill")
- SixGill
develops and provides an automated system that crawls the Dark Web and extracts information to provide its customers with relevant intelligence and alerts regarding possible or ongoing cyber-attacks against the enterprise
.
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Alcide IO Ltd. (30%) ("Alcide")
- Alcide is developing a security solution for emerging data center environments to enable visibility and security policy enforcement for hybrid data centers.
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SecuredTouch Inc. (29% by RDC) ("SecuredTouch")
-
SecuredTouch develops
and provides
a real time identity verification platform for mobile apps and mobile websites, that profiles users based on their physical behavior with touchscreen devices, allowing for seamless and persistent identity verification.
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Cyber Secdo Ltd. (24% by RDC) ("Secdo")
- Secdo
operates in the field of automatic detection and investigation of cyber events in organizations through a platform that protects endpoints.
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RDSeed Ltd. (100% by RDC) ("RDSeed")
- RDSeed invests in early stage companies in cyber, information technology and enterprise software. RDSeed's holdings as of the date of filing this report include:
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o
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Cloudyn Software Ltd. (40%) ("Cloudyn"),
which provides solutions for the optimization of cloud computing costs and resources;
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o
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Open Legacy Technologies Ltd. (45%) ("Open Legacy"),
which provides an integration platform, delivering core enterprise applications as digital services (such as for digital banking);
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o
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IronScales Ltd. ("IronScales") (27%),
which is developing and providing a SaaS solution whose goal is to interactively teach employees how to detect and resist spear phishing attempts.
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PlyMedia Israel (2006) Ltd. (23%) ("PlyMedia")
-
PlyMedia has developed and markets a digital advertising platform for ad networks.
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1.1.6. Factors affecting the results of operations and capital resources
As a holding company, Elron's operating results mainly derive from:
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its share in the net losses of Group Companies;
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gains or losses from exit transactions or changes in holdings, and revaluation of investments recorded based on fair value;
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its corporate activities.
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Elron's capital resources in any given period are primarily affected by:
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the extent of its investments;
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proceeds from exit transactions;
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available credit lines or loans;
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dividends distributed to shareholders or received from Group Companies.
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Most of the Group Companies are technology companies which have not yet generated significant revenues, if at all, and which invest considerable resources in development and record losses. As a result, Elron has recorded and is expected to continue to record losses in respect of their ongoing operations, based on the accounting method applied to them in the Financial Statements.
The technology field in which the Group Companies operate are characterized by a high degree of risk. The Group Companies' success is dependent, among other things, upon: their intellectual property and ability to protect it; their ability to raise financing; their ability to successfully complete their products' development and receive regulatory clearance to market them, including through clinical trials; their ability to make the transition from development to manufacturing stages; their ability to market their products on a significant commercial scale; their ability to develop additional products; and their ability to successfully compete in the markets in which they operate.
Elron's ability to effect exit transactions at significant values is affected, among other things, by economic conditions, market conditions in the hi-tech and/or the medical devices industry, the status of the venture capital industry, the status of the capital markets, various contractual and regulatory restrictions, and is also dependent on management's ability to successfully lead exit transactions, and the circumstances and characteristics of the group company whose sale is being considered
.
In addition, Elron's and the Group Companies' ability to obtain external financing is affected by economic conditions, the status of the capital markets, and the status of the venture capital industry.
1.2.
Description of Operations in the Period of this Report and Subsequently
1.2.1. Investments
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In the first nine months of 2016, Elron (directly and indirectly) invested approximately $36 million in the Group Companies. For further details see section 1.4 below and Note 3 to the Financial Statements.
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Investment in Pocared
- In January 2016, Elron and other shareholders invested in Pocared an amount of $5 million (Elron's share was approximately $4.5 million). In July 2016, RDC and other shareholders invested in Pocared a total amount of $10 million (RDC's share was approximately $9 million). In addition, according to the investment agreement, the entire balance of loans granted to Pocared during 2016 and 2015 in the amount of approximately $5.2 million(principal plus accrued interest) was converted into shares (Elron’s share in the loans including interest was approximately $4.8 million). Following the completion of this investment agreement, Elron's consolidated holding in Pocared's outstanding share capital increased from approximately 58% to 67% and from approximately 60% to 68% on a fully diluted basis (effective holding of approximately 61% outstanding share capital and 60% on a fully diluted basis) (for further details see Note 3.A to the Financial Statements)
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Investment in BrainsGate
- In January 2015, an investment agreement in BrainsGate in the amount of $26 million was signed, with the participation of Medtronic and additional shareholders of BrainsGate, including Elron. The first installment in the amount of $11 million was invested immediately (Elron's share in the first installment was approximately $3.3 million). In July 2016, the second installment was invested in the amount of approximately $15 million (Elron's share in the second installment was approximately $4.6 million) (for further details see Note 3.B to the Financial Statements). Elron's holdings in BrainsGat's share capital did not change following this investment.
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Investment in Open Legacy
– In October 2016, subsequent to the reporting date, an investment agreement with new investors and Open Legacy's shareholders, including RDSeed, in the amount of $4
.
5 million was completed (RDSeed's share in this amount was approximately $2
.
3 million). Following this investment, RDSeed's holding in Open Legacy's outstanding shares increased to approximately 45% (for further details see Note 3.E to the Financial Statements).
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New Investment in SixGill
-
In April 2016, Elron completed its first investment in SixGill
in the amount of $2.5 million as part of a $3 million financing round together with another SixGill shareholder. Following this investment, Elron holds approximately 22% of SixGill's outstanding shares (for further details see Note 3.F to the Financial Statements).
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New Investment in SecuredTouch
- In May 2016, RDC completed its first investment in SecuredTouch, in the amount of $2.2 million as part of a $2.5 million financing round together with other SecuredTouch shareholders. Following this investment, RDC holds approximately 29% of SecuredTouch's outstanding shares (for further details see Note 3.G to the Financial Statements).
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New Investment in Alcide
- In June 2016, Elron completed its first investment in Alcide
in the amount of $1.5 million. Following this investment, Elron holds approximately 30% of Alcide's outstanding shares (for further details see Note 3.H to the Financial Statements).
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New Investment in Nitinotes -
In September 2016, Elron signed its first investment agreement in Nitinotes, together with other shareholders of Nitinotes, in the amount of $4.1 million, in three installments (Elron's share is $3 million), upon completion of which Elron will hold approximately 36% of Nitinotes's outstanding shares. The first installment in the amount of $1 million was invested immediately (Elron's share in the first installment was approximately $0.8 million). Following the first installment Elron holds 14% of Nitinotes's outstanding shares (for further details see Note 3.I to the Financial Statements).
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New Investment in Secdo
- In September 2016, RDC completed its first investment in Secdo, in the amount of $4 million, as part of a $6 million financing round together with other Secdo's shareholders. Following this investment, RDC holds approximately 24% of Secdo's outstanding shares (for further details see Note 3.J to the Financial Statements).
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1.2.2. Developments in Group Companies
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BrainsGate's FDA Trial
- Further to Item 4B of Elron's 2015 Annual Report and as conveyed to Elron by BrainsGate, in May 2016, the Data Safety and Monitoring Board ("DSMB") of BrainsGate's study conducted an interim analysis of the results of 600 patients, after their follow-up period ended in April 2016. The purpose of the interim analysis was to support the continuation of the study according to the current format or to cease the study. Based on the interim analysis, the DSMB unanimously recommended to continue with the study in its current format. BrainsGate is continuing to recruit patients for the study and as of the date of filing this report, has recruited approximately 681 patients.
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Pocared's FDA Trial
- Further to Item 4B of Elron's 2015 Annual Report, as conveyed to Elron by Pocared in March 2016 regarding its FDA trial, the examination of the trial results conducted by Pocared revealed that there was a malfunction in some of the calibration components of its systems, which led to incorrect results. The source of the malfunction was identified and its substance was examined, inter alia, by running raw data collected in the trial on a system with properly calibrated components, and the results thereof met Pocared's expectations. Pocared has taken steps to prevent the recurrence of the malfunction and is preparing to conduct a new trial, the aim of which is to demonstrate the efficiency and performance of the system for the purposes of submission to the FDA, similar to the aims of the current trial which was stopped. Pocared is expected to conduct the new trial during 2017.
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Pocared's above estimates are forward-looking in nature, as defined in Israel Securities Law, 5728-1968, and are based on Pocared's estimations of its development and business potential, Pocared's intentions and strategy on the date of this report, and information existing in Pocared on the date of this report. These estimates, in whole or in part, may not materialize, or may materialize in a manner materially different than expected. The principal factors that may affect this are developments in Pocared's field of operation, failure to obtain regulatory approvals to continue development, obtaining the required financing for Pocared or the failure to do so, inability to realize technologies, modifications in technologies, discovery of a malfunction in Pocared's systems, delays or malfunctions in development or manufacturing, modifications in the business plan, goals and/or strategy, or if any risk associated with the course of the trial occurs.
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CartiHeal's trial
- Further to Item 4B of Elron's 2015 Annual Report, in October 2016, CartiHeal received an approval from the FDA for the commencement of the trial, subject to certain conditions
.
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1.2.3. Financing
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Dividend
- On March 10, 2016, the Board of Directors resolved to make an application to the Court for a dividend distribution of $15 million, constituting an amount of $0.504307 per share, not out of the Company's profits, pursuant to Section 303 of the Israeli Companies Law, 1999. In June 2016, the Court approved the distribution of this dividend. On August 29, 2016, in accordance with the approval of the Court, the Company's Board of Directors approved the distribution of a dividend in the amount of $15 million, not out of the Company's profits. On September 26, 2016 the dividend was distributed to the Company's shareholders.
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As of the date of filing this report, Elron's and RDC's non-consolidated liquid resources amounted to approximately $35.0 million and $52.4 million, respectively. These amounts include Elron's and RDC's short term bank deposits in the amounts of $2 million and $8 million, respectively and other short term investments in securities by Elron in the amount of approximately $25.2 million. As of the date of filing this report, Elron and RDC have no debt.
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1.3.
Results of Operations
1.3.1. Elron's main operating results
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For the nine months
ended September 30
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For the three months
ended September 30
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For the year ended December 31
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2016
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2015
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2016
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2015
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2015
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Unaudited
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Audited
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$ thousands
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Net income (loss) attributable to Elron's shareholders
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(17,536
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)
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6,014
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(8,335
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)
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6,330
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2,451
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Net income (loss) per share attributable to Elron's shareholders (in $)
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(0.59
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)
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0.20
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(0.28
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)
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0.21
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0.08
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* The results summarized in the table are presented net of non-controlling interest.
I)
Losses in respect of Group Companies
Elron's share in the net losses of Group Companies:
As previously mentioned, most of the Group Companies are technology companies which have not yet generated significant revenues, if at all, and which invest considerable resources in research and development and in marketing activities. According to accounting principles, these companies' investments in the development of their products are recorded as they occur in their statement of income as an increase in R&D expenses (insofar as these expenses are not capitalized as intangible assets as is permitted, according to accounting principles, only when technological feasibility has been established). Therefore, as the Group Companies increase their investments in order to develop their products and advance their business, they cause Elron to record greater losses in respect of its share in their losses.
The loss Elron recorded in the third quarter and in the first nine months of 2016 in respect of its share in the net losses of Group Companies (net of non-controlling interest) resulted mainly from the losses of Pocared, BrainsGate, CartiHeal and Coramaze
.
The loss Elron recorded in the third quarter and in the first nine months of 2015 in respect of its share in the net losses of Group Companies (net of non-controlling interest) resulted mainly from the losses of Pocared, RDSeed, BrainsGate and CartiHeal.
II)
Gain from disposal and revaluation of investee companies and changes in holdings, net
Gains from exit transactions, changes in holdings, and revaluation of investments recorded in the first nine months of 2016 resulted mainly from a $0.6 million gain, due to an increase in the value of contingent consideration assets from the sale of companies
.
Gains from exit transactions, changes in holdings, and revaluation of investments recorded at fair value in the third quarter and in the first nine months of 2015 resulted mainly from:
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A $8.7 million net gain recorded in the third quarter (net of non-controlling interest) due to the sale of Kyma Medical Technologies Ltd. ("Kyma", sold in September 2015) ($10.3 million before tax);
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A $4.0 million gain recorded in the third quarter due to an increase in the fair value of Jordan Valley Semiconductors Ltd. ("Jordan Valley", the sale was completed in October 2015).
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A $10.1 million gain recorded in the first quarter due to the initial consolidation of Pocared.
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III)
Corporate operating expenses
Corporate operating expenses include general and administrative expenses.
IV)
Taxes on Income
Taxes on income in the third quarter and in the first nine months of 2016 resulted mainly from tax expenses in respect of prior years as a result of final tax assessments up to and including the year 2014. Taxes on income in the first nine months of 2015 resulted mainly from Elron's share in tax expenses recorded by RDC in respect with the sale of Kyma.
1.3.2. Analysis of the consolidated statements of profit and loss
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For the nine months
ended September 30,
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For the three months
ended September 30,
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2016
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2015
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2016
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2015
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Unaudited
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$ thousands
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Explanation
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Income from sales
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-
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715
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-
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266
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Income from sales in 2015 resulted from revenues of Cloudyn. In December 2015 Elron lost control over Cloudyn and commencing from that date, ceased consolidating Cloudyn's results in its financial statements.
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Gain from disposal and revaluation of group companies, and changes in holdings, net
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1,230
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|
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34,805
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25
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24,630
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In the first nine months of 2016, this item mainly included a $1,078 thousand, recorded due to an increase in the value of the contingent consideration asset
in respect of the sale of Kyma
that took place in 2015.
In the first nine months of 2015, this item included mainly: a $10,120 thousand gain recorded in the first quarter from the initial consolidation of Pocared;
a $20,559 thousand gain recorded in the third quarter from the sale of Kyma and a
$4,026 thousand gain recorded in the third quarter due to an increase in Jordan Valley's fair value
.
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Financial income
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2,525
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|
784
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1,177
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271
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|
Financial income in the third quarter and the first nine months of 2016 resulted mainly from interest income on deposits, increase in the value of marketable investments measured at fair value and USD-NIS exchange rate fluctuations, primarily in NIS bank deposits held by RDC.
Financial income in the third quarter and the first nine months of 2015 resulted mainly from interest income on deposits and other investments in securities.
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Total income
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3,755
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36,304
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1,202
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25,167
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Cost of sales
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-
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190
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-
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81
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See explanation under line item 'Income from sales' above.
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Research and development expenses, net
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4,899
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9,400
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1,287
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3,934
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|
Selling and marketing expenses
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296
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1,431
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|
72
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|
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|
476
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See analysis of consolidated companies' operating expenses below.
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For the nine months
ended September 30,
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For the three months
ended September 30,
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2016
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2015
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|
2016
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2015
|
|
|
|
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|
Unaudited
|
|
|
|
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|
$ thousands
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Explanation
|
General and administrative expenses
|
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|
4,637
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|
|
|
4,720
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|
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|
1,722
|
|
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|
1,516
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|
See analysis of Elron's and consolidated companies' operating expenses below.
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Equity in losses of associates, net
|
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|
9,853
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|
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|
7,072
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|
|
|
4,750
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|
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|
1,839
|
|
Elron's share in the net losses of its associates results from its holdings in certain investments that are accounted for under the equity method.
As most of the Group Companies are companies whose operations have not yet generated significant revenues, if at all, and invest considerable resources in research and development and in marketing activities, Elron expects to continue to record losses in respect of these companies' ongoing operations in accordance with the accounting method applied to them in Elron's financial statements. In addition, see the analysis of the results of operations of main associate below.
The Increase in the third quarter and first nine months of 2016 as compared with the third quarter and first nine months of 2015 was mainly due to an increase in investments in new companies made by Elron and RDC in 2016 and recording its share in the losses of these companies (see section 1.2.1 above).
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Financial expenses
|
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|
287
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|
|
|
685
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|
21
|
|
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|
1,537
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|
Financial expenses in the first nine months of 2016 resulted mainly from changes in the fair value of marketable investments measured at fair value.
Financial expenses in the first nine months of 2015 resulted mainly from changes in the fair value of marketable investments measured at fair value and USD exchange rate fluctuations.
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Other expenses
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|
2,181
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|
|
|
43
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|
|
|
2,161
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|
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|
11
|
|
Other expenses in the third quarter and first nine months of 2016 resulted mainly from a change in the estimated provision in respect of contingent liabilities in regards with legal claims and indirect taxation.
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Total expenses
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|
22,153
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|
|
|
23,541
|
|
|
|
10,013
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|
|
|
9,394
|
|
|
|
|
|
For the nine months
ended September 30,
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|
For the three months
ended September 30,
|
|
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
2016
|
|
|
|
2015
|
|
|
|
|
|
Unaudited
|
|
|
|
|
|
$ thousands
|
|
Explanation
|
Income (loss) before taxes on income
|
|
|
(18,398
|
)
|
|
|
12,763
|
|
|
|
(8,811
|
)
|
|
|
15,773
|
|
|
Taxes on income
|
|
|
(1,417
|
)
|
|
|
(3,150
|
)
|
|
|
(1,077
|
)
|
|
|
(3,125
|
)
|
Taxes on income in the third quarter and in the first nine months of 2016 resulted mainly from tax expenses in respect of prior years as a result of final tax assessments up to and including the year 2014. Taxes on income in the first nine months of 2015 resulted mainly from Elron's share in tax expenses recorded by RDC in respect with the sale of Kyma.
|
Net income (loss)
|
|
|
(19,815
|
)
|
|
|
9,613
|
|
|
|
(9,888
|
)
|
|
|
12,648
|
|
|
Net income (loss) attributable to the Company's shareholders
|
|
|
(17,356
|
)
|
|
|
6,014
|
|
|
|
(8,335
|
)
|
|
|
6,330
|
|
|
Net income (loss) attributable to non-controlling interest
|
|
|
(2,279
|
)
|
|
|
3,599
|
|
|
|
(1,553
|
)
|
|
|
6,318
|
|
The net income or loss attributable to non-controlling interests results mainly from the share of the non-controlling interest in the gain or loss recorded by RDC. In the first nine months of 2016 most of the loss was offset by financial income and the change in value of the contingent consideration asset in respect of the sale of Kyma, that was recorded by RDC.
In the third quarter and first nine months of 2015 the loss attributable to non-controlling interest resulted mainly from the share of the non-controlling interest in the gain from the sale of Kyma and the current loss recorded by RDC in respect of the losses of its subsidiaries.
|
Basic and diluted net income (loss) per share attributable to the Company's shareholders (in $)
|
|
|
(0.59
|
)
|
|
|
0.20
|
|
|
|
(0.28
|
)
|
|
|
0.21
|
|
|
1.3.3. Analysis of the consolidated operating expenses
Operating expenses in the third quarter and first nine months of 2016 amounted to $3,081 thousand and $9,832 thousand, respectively, compared with $5,926 thousand and $15,551 thousand, respectively, in the third quarter and first nine months of 2015, and comprised mainly of research and development expenses, net, selling and marketing expenses, and general and administrative expenses of Elron's and consolidated companies' corporate operations, as detailed below:
|
|
For the nine months
ended September 30,
|
|
|
For the three months
ended September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
$ thousands
|
|
Explanation
|
Corporate
|
|
|
2,628
|
|
|
|
2,565
|
|
|
|
946
|
|
|
|
851
|
|
|
RDC
|
|
|
686
|
|
|
|
1,368
|
|
|
|
200
|
|
|
|
317
|
|
The decrease was mainly due to a decrease in expenses related to incubating projects and changes in RDC's workforce.
|
RDSeed
|
|
|
141
|
|
|
|
2,869
|
|
|
|
34
|
|
|
|
1,019
|
|
The change was mainly since RDSeed lost control over Cloudyn in December 2015, and therefore, ceased consolidating Cloudyn's results in its financial statements.
|
Pocared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The operating expenses for the first nine months of 2015 displayed in the table are from the initial consolidation date of Pocared (February 2015) and until the end of the third quarter. Pocared's operating expenses for the first nine months of 2015 in full were $9,917 thousand. The decrease in 2016 resulted mainly from stopping the trial and preparing to conduct a new trial in 2017 (see section 1.2.2 above).
|
Total
|
|
|
9,832
|
|
|
|
15,551
|
|
|
|
3,081
|
|
|
|
5,926
|
|
|
1.3.4. Analysis of the results of operations of main associate
BrainsGate
|
|
For the nine months
ended September 30,
|
|
|
For the three months
ended September 30,
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
Unaudited
|
|
|
|
|
$ thousands
|
|
Explanation
|
Loss
|
|
|
3,893
|
|
|
|
5,164
|
|
|
|
1,333
|
|
|
|
1,387
|
|
BrainsGate is in the development stage and has not yet commenced sales. BrainsGate's losses mainly result from research and development expenses. The decrease in loss in the first nine months of 2016 compared with the first nine months of 2015 was mainly due to share based payment expenses recorded in the first quarter of 2015, due to recapitalization of BrainsGate's equity, as part of the investment agreement from January 2015.
|
1.4.
Financial Position, Liquidity and Capital Resources
Financial position
|
|
September 30, 2016
|
|
|
December 31, 2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
|
|
Total assets in the consolidated statement of financial position
|
|
|
183,064
|
|
|
|
214,869
|
|
Investments in associates and other companies
|
|
|
46,147
|
|
|
|
34,924
|
|
Current assets
|
|
|
111,199
|
|
|
|
151,084
|
|
Long-term receivables
|
|
|
7,039
|
|
|
|
10,395
|
|
Intangible assets
|
|
|
17,438
|
|
|
|
17,438
|
|
Current liabilities
|
|
|
8,221
|
|
|
|
6,363
|
|
Long-term liabilities
|
|
|
2,185
|
|
|
|
2,104
|
|
Equity including non-controlling interest
|
|
|
172,658
|
|
|
|
206,402
|
|
Total equity at September 30, 2016 was $172,658 thousand, representing approximately 94% of the total assets in the statement of financial position, compared with $206,402 thousand at December 31, 2015, representing approximately 96% of total assets in the statement of financial position
.
The decrease in equity resulted mainly from the loss Elron recorded in the first nine months of 2016 and from distribution of dividend to Elron's shareholders in the amount of $15 million (for details regarding the dividend distribution see section 1.2.3 above).
Consolidated working capital at September 30, 2016 amounted to $102
,
978 thousand, compared with $144
,
721 thousand at December 31, 2015. The decrease in working capital resulted from the decrease in liquid resources due to dividend distribution to Elron's shareholders (as mentioned above), investments in subsidiaries and associates (as detailed below) and due to Elron's and its subsidiaries' operating expenses during the first nine months of 2016.
Elron's and RDC's primary cash flows (1)
|
|
For the nine months
ended September 30,
|
|
|
For the three months
ended September 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
|
$ thousands
|
|
Investments in Elron's and RDC's group companies
|
|
|
(36,452
|
)
|
|
|
(22,031
|
)
|
|
|
(19,401
|
)
|
|
|
(10,322
|
)
|
Proceeds from disposal of Elron's and RDC's non-current investments, net of tax
|
|
|
60
|
|
|
|
16,702
|
|
|
|
25
|
|
|
|
16,647
|
|
Dividend distributed by Elron
|
|
|
(15,000
|
)
|
|
|
-
|
|
|
|
(15,000
|
)
|
|
|
-
|
|
(1) The amounts presented include RDC's and RDseed's cash flows in full (100%) in addition to Elron's cash flows, but exclude the cash flows of their subsidiaries
.
Liquid resources balance
Consolidated liquid resources at September 30, 2016 amounted to $105,885 thousand (including short term bank deposits and other investments in securities in the total amount of approximately $70,789 thousand), compared with $150,184 thousand at December 31, 2015 (including short term bank deposits in the amount of approximately $98,233 thousand).
Elron's and RDC's non-consolidated liquid resources at September 30, 2016 amounted to $37,730 and $54,099 thousand, respectively (Elron's and RDC's liquid resources as of september 30, 2016 included short term bank deposits in the total amount of $8,608 thousand and $30,483 thousand, respectively and other short term investments in securities of Elron in the amount of $25,198 thousand). Elron's and RDC's non-consolidated liquid resources at December 31, 2015 amounted to $76,199 and $69,836 thousand, respectively (as mentioned above Elron's and RDC's liquid resources as of December 31, 2015 included short term bank deposits and other short term investments in securities in the amount of approximately $62,260 thousand and $35,973 thousand, respectively).
Uses of cash
The main uses of cash in the third quarter and first nine months of 2016 were Payment of dividend to the company's shareholders in the amount of $15,000 thousand and investments and loans to Group Companies in the amount of $6,164 thousand and $20,315 thousand, respectively, by Elron, and $13,237 and $16,137 thousand, respectively, by RDC. Also, cash was used to pay corporate and RDC's operating expenses, as detailed above in section 1.3.3.
The main uses of cash in the third quarter and first nine months of 2015 were investments and loans to Group Companies in the amount of $9,238 thousand and $18,853 thousand, respectively, by Elron, and $1,084 thousand and $3,178 thousand, respectively, by RDC. Also, cash was used to pay corporate and RDC's operating expenses, as detailed above in section 1.3.3 above.
Investments in Group Companies during the first nine months of 2016 and 2015 are summarized in the following table (see also Note 3 to the Financial Statements for additional details regarding investments in Group Companies):
|
|
Elron
|
|
|
RDC
|
|
|
|
For the nine months ended September 30, 2016
|
|
|
For the nine months ended September 30, 2015
|
|
|
For the nine months ended September 30, 2016
|
|
|
For the nine months ended September 30, 2015
|
|
|
|
Unaudited
|
|
|
|
$ thousands
|
|
Consolidated Companies (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Pocared
|
|
|
6,453
|
|
|
|
11,590
|
|
|
|
8,987
|
|
|
|
-
|
|
|
|
|
6,453
|
|
|
|
11,590
|
|
|
|
8,987
|
|
|
|
-
|
|
Associates and Other Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BrainsGate
|
|
|
4,603
|
|
|
|
3,284
|
|
|
|
-
|
|
|
|
-
|
|
CartiHeal
|
|
|
-
|
|
|
|
1,282
|
|
|
|
-
|
|
|
|
-
|
|
Coramaze
|
|
|
1,963
|
|
|
|
2,020
|
|
|
|
-
|
|
|
|
-
|
|
Notal Vision (2)
|
|
|
2,335
|
|
|
|
597
|
|
|
|
-
|
|
|
|
-
|
|
Cloudyn
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
750
|
|
Open Legacy (3)
|
|
|
-
|
|
|
|
-
|
|
|
|
950
|
|
|
|
730
|
|
SixGill
|
|
|
2,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
SecuredTouch
|
|
|
-
|
|
|
|
-
|
|
|
|
2,200
|
|
|
|
-
|
|
Alcide
|
|
|
1,500
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Nitinotes
|
|
|
761
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Secdo
|
|
|
-
|
|
|
|
-
|
|
|
|
4,000
|
|
|
|
-
|
|
Kyma (4)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,625
|
|
Other
|
|
|
200
|
|
|
|
80
|
|
|
|
-
|
|
|
|
73
|
|
|
|
|
13,862
|
|
|
|
7,263
|
|
|
|
7,150
|
|
|
|
|
|
Total investments
|
|
|
20,315
|
|
|
|
18,853
|
|
|
|
16,137
|
|
|
|
3,178
|
|
(1) The amounts exclude RDC's investment in RDSeed in the amount of $1,100 thousand in the third quarter of 2016 and in the amount of $500 thousand in the third quarter of 2015. These investments do not affect the cash included in the Financial Statements. Subsequent to the reporting date, RDC invested in RDSeed an additional amount of $1,000 thousand.
(2) Subsequent to the reporting date, Elron invested $894 thousand in Notal Vision.
(3) Subsequent to the reporting date, RDSeed invested in Open Legacy an amount of $2,050 thousand.
(4) In September 2015 the sale of Kyma was completed.
(5) Subsequent to the reporting date, RDSeed invested in IronScales an amount of $750 thousand.
Main Group Companies' cash flows
|
|
Cash flows from operating activities
|
|
|
Liquid resources balance
|
|
|
|
For the nine months ended September 30, 2016
|
|
|
For the nine months ended September 30, 2015
|
|
|
For the three months ended September 30, 2016
|
|
|
For the three months ended September 30, 2015
|
|
|
As of September 30,
2016
|
|
|
As of December 31,
2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
|
|
BrainsGate
(*)
|
|
|
(4,155
|
)
|
|
|
(3,972
|
)
|
|
|
(1,444
|
)
|
|
|
(1,363
|
)
|
|
|
19,534
|
|
|
|
8,264
|
|
Pocared
|
|
|
(6,633
|
)
|
|
|
(8,447
|
)
|
|
|
(1,691
|
)
|
|
|
(3,312
|
)
|
|
|
11,872
|
|
|
|
1,955
|
|
(*)
In accordance with US-GAAP.
2. Market Risk Exposure and Management
2.1.
Report on Linkage Bases
Presented below is the Company's consolidated linkage balance at September 30, 2016, December 31, 2015, and September 30, 2015.
As of September 30, 2016 ($ thousands) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
-
|
|
|
|
18,248
|
|
|
|
16,848
|
|
|
|
-
|
|
|
|
35,096
|
|
Other investments in securities
|
|
|
-
|
|
|
|
25,198
|
|
|
|
-
|
|
|
|
-
|
|
|
|
25,198
|
|
Other accounts receivable
|
|
|
6
|
|
|
|
25
|
|
|
|
638
|
|
|
|
117
|
|
|
|
786
|
|
Bank deposits
|
|
|
151
|
|
|
|
33,745
|
|
|
|
11,695
|
|
|
|
-
|
|
|
|
45,591
|
|
Investments in associates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,412
|
|
|
|
24,412
|
|
Investments in other companies measured at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21,735
|
|
|
|
21,735
|
|
Property, plant and equipment, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,241
|
|
|
|
1,241
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,438
|
|
|
|
17,438
|
|
Long-term receivables
|
|
|
-
|
|
|
|
11,413
|
|
|
|
154
|
|
|
|
-
|
|
|
|
11,567
|
|
Total assets
|
|
|
157
|
|
|
|
88,629
|
|
|
|
29,335
|
|
|
|
64,943
|
|
|
|
183,064
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
-
|
|
|
|
171
|
|
|
|
303
|
|
|
|
-
|
|
|
|
474
|
|
Other account payables
|
|
|
-
|
|
|
|
767
|
|
|
|
3,570
|
|
|
|
3,410
|
|
|
|
7,747
|
|
Long-term taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,185
|
|
|
|
2,185
|
|
Total liabilities
|
|
|
-
|
|
|
|
938
|
|
|
|
3,873
|
|
|
|
5,595
|
|
|
|
10,406
|
|
(1) Non-current assets and liabilities in this table include the current maturities in respect thereof.
(2) Including items that are not financial items.
As of December 31, 2015 ($ thousands) (audited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
-
|
|
|
|
41,867
|
|
|
|
10,084
|
|
|
|
-
|
|
|
|
51,951
|
|
Other investments in securities, net
|
|
|
-
|
|
|
|
23,115
|
|
|
|
-
|
|
|
|
4,930
|
|
|
|
28,045
|
|
Other accounts receivable
|
|
|
2
|
|
|
|
47
|
|
|
|
677
|
|
|
|
174
|
|
|
|
900
|
|
Bank deposits
|
|
|
-
|
|
|
|
55,192
|
|
|
|
14,996
|
|
|
|
-
|
|
|
|
70,188
|
|
Investments in associates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
15,529
|
|
|
|
15,529
|
|
Investments in other companies measured at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,395
|
|
|
|
19,395
|
|
Property, plant and equipment, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,028
|
|
|
|
1,028
|
|
Intangible assets
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,438
|
|
|
|
17,438
|
|
Long-term receivables
|
|
|
-
|
|
|
|
10,242
|
|
|
|
153
|
|
|
|
-
|
|
|
|
10,395
|
|
Total assets
|
|
|
2
|
|
|
|
130,463
|
|
|
|
25,910
|
|
|
|
58,494
|
|
|
|
214,869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
-
|
|
|
|
133
|
|
|
|
312
|
|
|
|
-
|
|
|
|
445
|
|
Other account payables
|
|
|
-
|
|
|
|
1,741
|
|
|
|
3,779
|
|
|
|
398
|
|
|
|
5,918
|
|
Long-term taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,104
|
|
|
|
2,104
|
|
Total liabilities
|
|
|
-
|
|
|
|
1,874
|
|
|
|
4,091
|
|
|
|
2,502
|
|
|
|
8,467
|
|
(1) Non-current assets and liabilities in this table include the current maturities in respect thereof.
(2) Including items that are not financial items.
As of September 30, 2015 ($ thousands) (unaudited)
|
|
|
|
|
|
|
|
Other currencies
|
|
|
|
|
|
|
|
|
|
|
Assets
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
-
|
|
|
|
47,855
|
|
|
|
-
|
|
|
|
10,498
|
|
|
|
-
|
|
|
|
58,353
|
|
Short term investments
|
|
|
-
|
|
|
|
18,477
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,844
|
|
|
|
23,321
|
|
Bank deposits
|
|
|
-
|
|
|
|
61,951
|
|
|
|
-
|
|
|
|
12,182
|
|
|
|
-
|
|
|
|
74,133
|
|
Other accounts receivable
|
|
|
67
|
|
|
|
2
|
|
|
|
64
|
|
|
|
771
|
|
|
|
343
|
|
|
|
1,247
|
|
Investments in associates
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,186
|
|
|
|
4,186
|
|
Investments in financial assets measured at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18,907
|
|
|
|
18,907
|
|
Property, plant and equipment, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,036
|
|
|
|
1,036
|
|
Intangible assets, net
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,654
|
|
|
|
17,654
|
|
Long-term receivables
|
|
|
-
|
|
|
|
7,391
|
|
|
|
-
|
|
|
|
50
|
|
|
|
-
|
|
|
|
7,441
|
|
Assets held for sale
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13,056
|
|
|
|
13,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
67
|
|
|
|
135,676
|
|
|
|
64
|
|
|
|
23,501
|
|
|
|
60,026
|
|
|
|
219,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
-
|
|
|
|
88
|
|
|
|
-
|
|
|
|
328
|
|
|
|
-
|
|
|
|
416
|
|
Other account payables
|
|
|
-
|
|
|
|
2,190
|
|
|
|
79
|
|
|
|
5,394
|
|
|
|
272
|
|
|
|
7,935
|
|
Long-term taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,959
|
|
|
|
1,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
-
|
|
|
|
2,278
|
|
|
|
79
|
|
|
|
5,722
|
|
|
|
2,231
|
|
|
|
10,310
|
|
(1) Non-current assets and liabilities in this table include the current maturities in respect thereof.
(2) Including items that are not financial items.
2.2.
Sensitivity Tests of Financial Instruments
The following tables describe sensitivity tests of the fair value of financial instruments included in the Financial Statements that are held by the Company and its subsidiaries, in accordance with changes in market factors.
The following comments should be considered with regards to the tables below:
|
1.
|
The exchange rates used in the sensitivity tests are the closing rates on the day of calculation.
|
|
2.
|
For details regarding the influence of exchange rate changes on financial assets and liabilities, see the reports on linkage bases above.
|
|
3.
|
Sensitivity tests for the influence of NIS interest rate changes were not presented due to their negligible influence on their fair value.
|
I.
Sensitivity tests of balances as of September 30, 2016
Sensitivity test of changes in dollar interest rates
|
|
Gain (loss) from changes in dollar interest rates
|
|
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
2% Absolute value
|
|
|
10%
|
|
|
5%
|
|
|
0% interest
|
|
|
10%
|
|
|
|
|
Section
|
|
$ thousands
|
|
Short term bank deposits
|
|
|
33,758
|
|
|
|
(129
|
)
|
|
|
(15
|
)
|
|
|
(7
|
)
|
|
|
150
|
|
|
|
15
|
|
|
|
7
|
|
Sensitivity test of changes in share prices of investments in other companies measured at fair value
|
|
|
Gain (loss) from changes in the
price of shares
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
10%
|
|
|
5%
|
|
|
10%
|
|
|
5%
|
|
Section
|
|
$ thousands
|
|
Investments in other companies measured at fair value
|
|
|
21,735
|
|
|
|
2,174
|
|
|
|
1,087
|
|
|
|
(2,174
|
)
|
|
|
(1,087
|
)
|
Sensitivity test of changes in fair value of other financial instruments
|
|
|
Gain (loss) from changes in the
Fair value
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
10%
|
|
|
5%
|
|
|
10%
|
|
|
5%
|
|
Section
|
|
$ thousands
|
|
Other investments in securities
|
|
|
25,198
|
|
|
|
2,520
|
|
|
|
1,260
|
|
|
|
(2,520
|
)
|
|
|
(1,260
|
)
|
Other accounts receivable
|
|
|
7,916
|
|
|
|
792
|
|
|
|
396
|
|
|
|
(792
|
)
|
|
|
(396
|
)
|
|
|
|
33,114
|
|
|
|
3,311
|
|
|
|
1,656
|
|
|
|
(3,311
|
)
|
|
|
(1,656
|
)
|
II.
Sensitivity tests of balances as of December 31, 2015
Sensitivity test of changes in dollar interest rates
|
|
Gain (loss) from changes in dollar interest rates
|
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
2% absolute value
|
|
|
10%
|
|
|
5%
|
|
|
0% interest
|
|
|
10%
|
|
|
|
|
|
|
$ thousands
|
|
Short term bank deposits
|
|
|
55,261
|
|
|
|
(592
|
)
|
|
|
(30
|
)
|
|
|
(15
|
)
|
|
|
301
|
|
|
|
30
|
|
|
|
15
|
|
Sensitivity test of changes in share prices of investments in other companies measured at fair value
|
|
|
Gain (loss) from changes in the
price of shares
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
10%
|
|
|
5%
|
|
|
10%
|
|
|
5%
|
|
|
|
$ thousands
|
|
Investments in other companies measured at fair value
|
|
|
19,396
|
|
|
|
1,940
|
|
|
|
970
|
|
|
|
(1,940
|
)
|
|
|
(970
|
)
|
Sensitivity test of changes in fair value of other financial instruments
|
|
|
Gain (loss) from changes in the
price of shares
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
10%
|
|
|
5%
|
|
|
10%
|
|
|
5%
|
|
Section
|
|
$ thousands
|
|
Other investments in securities, net
|
|
|
28,045
|
|
|
|
2,443
|
|
|
|
1,288
|
|
|
|
(2,580
|
)
|
|
|
(1,402
|
)
|
Long-term receivables
|
|
|
6,740
|
|
|
|
674
|
|
|
|
337
|
|
|
|
(674
|
)
|
|
|
(337
|
)
|
|
|
|
34,785
|
|
|
|
3,117
|
|
|
|
1,625
|
|
|
|
(3,254
|
)
|
|
|
(1,739
|
)
|
III.
Sensitivity tests of balances as of September 30, 2015
Sensitivity test of changes in dollar interest rates
|
|
Gain (loss) from changes in dollar interest rates
|
|
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
2% Absolute value
|
|
|
10%
|
|
|
5%
|
|
|
0% interest
|
|
|
10%
|
|
|
|
|
Section
|
|
$ thousands
|
|
Short term bank deposits
|
|
|
61,937
|
|
|
|
(600
|
)
|
|
|
(36
|
)
|
|
|
(18
|
)
|
|
|
360
|
|
|
|
36
|
|
|
|
18
|
|
Sensitivity test of changes in share prices of other investments measured at fair value
|
|
|
Gain (loss) from changes in the
price of shares
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
10%
|
|
|
5%
|
|
|
10%
|
|
|
5%
|
|
Section
|
|
$ thousands
|
|
Other investments measured at fair value (including assets held for sale)
|
|
|
31,963
|
|
|
|
3,196
|
|
|
|
1,598
|
|
|
|
(3,196
|
)
|
|
|
(1,598
|
)
|
Sensitivity test of changes in fair value of other financial instruments
|
|
|
Gain (loss) from changes in the
Fair value
|
|
|
|
|
Increase
|
|
|
Decrease
|
|
|
|
Fair value
|
|
|
10%
|
|
|
5%
|
|
|
10%
|
|
|
5%
|
|
Section
|
|
$ thousands
|
|
Other investments in securities
|
|
|
23,320
|
|
|
|
2,201
|
|
|
|
1,166
|
|
|
|
(1,927
|
)
|
|
|
(1,003
|
)
|
Long term receivables
|
|
|
5,170
|
|
|
|
517
|
|
|
|
259
|
|
|
|
(517
|
)
|
|
|
(259
|
)
|
|
|
|
28,490
|
|
|
|
2,718
|
|
|
|
1,425
|
|
|
|
(2,444
|
)
|
|
|
(1,262
|
)
|
Ari Bronshtein
CEO
|
|
Eduardo Elsztain
Chairman of the Board of Directors
|
November 24, 2016, Tel Aviv
REPORT OF INDEPENDENT AUDITORS
To the shareholders of
ELRON ELECTRONIC INDUSRTIES LTD.
We have reviewed the accompanying financial information of Elron Electronic Industries Ltd.
(the "Company")
and its subsidiaries,
which comprises the
interim
consolidated
statements of financial position
as of September 30, 2016 and the related
interim
consolidated statements of income (loss), comprehensive income (loss), changes in equity and cash flows for the nine and three months then ended. The Company's board of directors and management are responsible for the preparation and presentation of interim financial information for these periods in accordance with IAS 34, "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review.
Scope of review
We conducted our review in accordance with Review Standard 1 of the Institute of Certified Public Accountants in Israel, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity." A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards in Israel and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information is not prepared, in all material respects, in accordance with IAS 34.
In addition to the abovementioned, based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information does not comply, in all material respects, with the disclosure requirements of Chapter D of the Securities Regulations (Periodic and Immediate Reports), 1970.
Tel-Aviv, Israel
|
|
KOST FORER GABBAY & KASIERER
|
November 24, 2016
|
|
A Member of Ernst & Young Global
|
Consolidated Statements of
Financial Position
|
|
September 30
|
|
|
December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
35,096
|
|
|
|
58,353
|
|
|
|
51,951
|
|
Bank deposits
|
|
|
45,591
|
|
|
|
74,133
|
|
|
|
70,188
|
|
Other investments in securities, net
|
|
|
25,198
|
|
|
|
23,321
|
|
|
|
28,045
|
|
Other accounts receivable
|
|
|
5,314
|
|
|
|
1,247
|
|
|
|
900
|
|
Investment in financial asset classified as held for sale
|
|
|
-
|
|
|
|
13,056
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
111,199
|
|
|
|
170,110
|
|
|
|
151,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non‑current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in associates
|
|
|
24,412
|
|
|
|
4,186
|
|
|
|
15,529
|
|
Investments in other companies measured at fair value
|
|
|
21,735
|
|
|
|
18,907
|
|
|
|
19,395
|
|
Long-term receivables
|
|
|
7,039
|
|
|
|
7,441
|
|
|
|
10,395
|
|
Property, plant and equipment, net
|
|
|
1,241
|
|
|
|
1,036
|
|
|
|
1,028
|
|
Intangible assets, net
|
|
|
17,438
|
|
|
|
17,654
|
|
|
|
17,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,865
|
|
|
|
49,224
|
|
|
|
63,785
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
183,064
|
|
|
|
219,334
|
|
|
|
214,869
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of Financial Position
|
|
September 30
|
|
|
December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
474
|
|
|
|
416
|
|
|
|
445
|
|
Other accounts payable
|
|
|
7,747
|
|
|
|
7,935
|
|
|
|
5,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,221
|
|
|
|
8,351
|
|
|
|
6,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term taxes
|
|
|
2,185
|
|
|
|
1,959
|
|
|
|
2,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,185
|
|
|
|
1,959
|
|
|
|
2,104
|
|
Equity attributable to the Company's shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Issued capital
|
|
|
9,573
|
|
|
|
9,573
|
|
|
|
9,573
|
|
Share premium
|
|
|
190,753
|
|
|
|
190,753
|
|
|
|
190,753
|
|
Capital reserves
|
|
|
4,244
|
|
|
|
3,178
|
|
|
|
3,085
|
|
Accumulated deficit
|
|
|
(77,740
|
)
|
|
|
(41,641
|
)
|
|
|
(45,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,830
|
|
|
|
161,863
|
|
|
|
158,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
45,828
|
|
|
|
47,161
|
|
|
|
48,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
172,658
|
|
|
|
209,024
|
|
|
|
206,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
|
183,064
|
|
|
|
219,334
|
|
|
|
214,869
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
|
|
|
|
|
Eduardo Elsztain
|
|
Ari Bronshtein
|
|
Yaron Elad
|
Chairman of the Board of Directors
|
|
Chief Executive Officer
|
|
Vice President &
Chief Financial Officer
|
Approval date of the interim consolidated financial statements: November 24, 2016
Consolidated Statements of
Income (Loss)
|
|
Nine months ended
September 30
|
|
|
Three months ended
September 30
|
|
|
Year ended December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
(except for income (loss) per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from sales
|
|
|
-
|
|
|
|
715
|
|
|
|
-
|
|
|
|
266
|
|
|
|
889
|
|
Gain from disposal and revaluation of investee
companies and changes in holdings, net
|
|
|
1,230
|
|
|
|
34,805
|
|
|
|
25
|
|
|
|
24,630
|
|
|
|
40,590
|
|
Financial income
|
|
|
2,525
|
|
|
|
784
|
|
|
|
1,177
|
|
|
|
271
|
|
|
|
1,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,755
|
|
|
|
36,304
|
|
|
|
1,202
|
|
|
|
25,167
|
|
|
|
42,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
-
|
|
|
|
190
|
|
|
|
-
|
|
|
|
81
|
|
|
|
267
|
|
Research and development expenses
|
|
|
4,899
|
|
|
|
9,400
|
|
|
|
1,287
|
|
|
|
3,934
|
|
|
|
13,129
|
|
Selling and marketing expenses
|
|
|
296
|
|
|
|
1,431
|
|
|
|
72
|
|
|
|
476
|
|
|
|
2,008
|
|
General and administrative expenses
|
|
|
4,637
|
|
|
|
4,720
|
|
|
|
1,722
|
|
|
|
1,516
|
|
|
|
7,556
|
|
Equity in losses of associates, net
|
|
|
9,853
|
|
|
|
7,072
|
|
|
|
4,750
|
|
|
|
1,839
|
|
|
|
8,566
|
|
Financial expenses
|
|
|
287
|
|
|
|
685
|
|
|
|
21
|
|
|
|
1,537
|
|
|
|
650
|
|
Other expenses, net
|
|
|
2,181
|
|
|
|
43
|
|
|
|
2,161
|
|
|
|
11
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,153
|
|
|
|
23,541
|
|
|
|
10,013
|
|
|
|
9,394
|
|
|
|
32,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before taxes on income
|
|
|
(18,398
|
)
|
|
|
12,763
|
|
|
|
(8,811
|
)
|
|
|
15,773
|
|
|
|
10,393
|
|
Taxes on income
|
|
|
(1,417
|
)
|
|
|
(3,150
|
)
|
|
|
(1,077
|
)
|
|
|
(3,125
|
)
|
|
|
(3,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(19,815
|
)
|
|
|
9,613
|
|
|
|
(9,888
|
)
|
|
|
12,648
|
|
|
|
7,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company's shareholders
|
|
|
(17,536
|
)
|
|
|
6,014
|
|
|
|
(8,335
|
)
|
|
|
6,330
|
|
|
|
2,451
|
|
Non-controlling interests
|
|
|
(2,279
|
)
|
|
|
3,599
|
|
|
|
(1,553
|
)
|
|
|
6,318
|
|
|
|
4,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,815
|
)
|
|
|
9,613
|
|
|
|
(9,888
|
)
|
|
|
12,648
|
|
|
|
7,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to the Company's shareholders (in $):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share
|
|
|
(0.59
|
)
|
|
|
0.20
|
|
|
|
(0.28
|
)
|
|
|
0.21
|
|
|
|
0.08
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of
Comprehensive Income (Loss)
|
|
Nine months ended
September 30
|
|
|
Three months ended
September 30
|
|
|
Year ended December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(19,815
|
)
|
|
|
9,613
|
|
|
|
(9,888
|
)
|
|
|
12,648
|
|
|
|
7,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) (net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts that would never be reclassified to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) from financial assets measured at fair value through other comprehensive income, net
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
-
|
|
|
|
5
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain (loss) that would never be reclassified to profit or loss
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
-
|
|
|
|
5
|
|
|
|
(30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts that are classified or may be reclassified to profit or loss under certain conditions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences for foreign operation
|
|
|
35
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gain (loss) that would be reclassified to profit or loss under certain conditions
|
|
|
35
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
(93
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
35
|
|
|
|
(30
|
)
|
|
|
10
|
|
|
|
5
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
(19,780
|
)
|
|
|
9,583
|
|
|
|
(9,878
|
)
|
|
|
12,653
|
|
|
|
6,922
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's shareholders
|
|
|
(17,501
|
)
|
|
|
5,984
|
|
|
|
(8,325
|
)
|
|
|
6,335
|
|
|
|
2,328
|
|
Non-controlling interests
|
|
|
(2,279
|
)
|
|
|
3,599
|
|
|
|
(1,553
|
)
|
|
|
6,318
|
|
|
|
4,594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,780
|
)
|
|
|
9,583
|
|
|
|
(9,878
|
)
|
|
|
12,653
|
|
|
|
6,922
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
|
|
Attributable to the Company's shareholders
|
|
|
|
|
|
|
|
|
|
Issued capital
|
|
|
Share Premium
|
|
|
Capital reserve for transaction with controlling shareholders
|
|
|
Capital reserve
for financial
assets measured at fair value through other comprehensive income
|
|
|
Capital reserve from translation
differences
|
|
|
Capital reserve from transactions
with non-controlling interests
|
|
|
Accumulated deficit
|
|
|
Total
|
|
|
Non- controlling interests
|
|
|
Total equity
|
|
|
|
Unaudited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2016 (audited)
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,192
|
)
|
|
|
(93
|
)
|
|
|
4,019
|
|
|
|
(45,204
|
)
|
|
|
158,207
|
|
|
|
48,195
|
|
|
|
206,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
35
|
|
|
|
-
|
|
|
|
(17,536
|
)
|
|
|
(17,501
|
)
|
|
|
(2,279
|
)
|
|
|
(19,780
|
)
|
Dividend to equity holders of the Company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,000
|
)
|
|
|
(15,000
|
)
|
|
|
-
|
|
|
|
(15,000
|
)
|
Share-based payments in respect of awards issued by subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
68
|
|
|
|
68
|
|
Investment in a consolidated company by RDC (see Note 3.A)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,124
|
|
|
|
-
|
|
|
|
1,124
|
|
|
|
(1,124
|
)
|
|
|
-
|
|
Investment of non-controlling interests in consolidated company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
968
|
|
|
|
968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
September 30
, 2016
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,192
|
)
|
|
|
(58
|
)
|
|
|
5,143
|
|
|
|
(77,740
|
)
|
|
|
126,830
|
|
|
|
45,828
|
|
|
|
172,658
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of Changes in Equity
|
|
Attributable to the Company's shareholders
|
|
|
|
|
|
|
|
|
|
Issued capital
|
|
|
Share Premium
|
|
|
Capital reserve for transaction with controlling shareholders
|
|
|
Capital reserve
for financial
assets measured at fair value through other comprehensive income
|
|
|
Capital reserve from transactions
with non-controlling interests
|
|
|
Retained earnings (accumulated deficit)
|
|
|
Total
|
|
|
Non- controlling interests
|
|
|
Total equity
|
|
|
|
Unaudited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2015 (audited)
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(2,304
|
)
|
|
|
4,019
|
|
|
|
(46,513
|
)
|
|
|
155,879
|
|
|
|
36,898
|
|
|
|
192,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
-
|
|
|
|
6,014
|
|
|
|
5,984
|
|
|
|
3,599
|
|
|
|
9,583
|
|
Share-based payments in respect of awards issued by subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
42
|
|
|
|
42
|
|
Non-controlling interests created due to initially consolidated company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,434
|
|
|
|
5,434
|
|
Investment of non-controlling interests in consolidated company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,136
|
|
|
|
1,136
|
|
Change in non-controlling interests due to sale of a subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
|
52
|
|
Sale of financial assets measured at fair value through other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,142
|
|
|
|
-
|
|
|
|
(1,142
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2015
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,192
|
)
|
|
|
4,019
|
|
|
|
(41,641
|
)
|
|
|
161,863
|
|
|
|
47,161
|
|
|
|
209,024
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of Changes in Equity
|
|
Attributable to the Company's shareholders
|
|
|
|
|
|
|
|
|
|
Issued capital
|
|
|
Share Premium
|
|
|
Capital reserve for transaction with controlling shareholders
|
|
|
Capital reserve
for financial
assets measured at fair value through other comprehensive income
|
|
|
Capital reserve from translation
differences
|
|
|
Capital reserve from transactions
with non-controlling interests
|
|
|
Accumulated deficit
|
|
|
Total
|
|
|
Non- controlling interests
|
|
|
Total equity
|
|
|
|
Unaudited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 1, 2016
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,192
|
)
|
|
|
(68
|
)
|
|
|
4,019
|
|
|
|
(54,405
|
)
|
|
|
149,031
|
|
|
|
47,723
|
|
|
|
196,754
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
|
-
|
|
|
|
(8,335
|
)
|
|
|
(8,325
|
)
|
|
|
(1,553
|
)
|
|
|
(9,878
|
)
|
Dividend to equity holders of the Company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(15,000
|
)
|
|
|
(15,000
|
)
|
|
|
-
|
|
|
|
(15,000
|
)
|
Share-based payments in respect of awards issued by subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6
|
|
|
|
6
|
|
Investment in a consolidated company by RDC (see Note 3.A)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,124
|
|
|
|
-
|
|
|
|
1,124
|
|
|
|
(1,124
|
)
|
|
|
-
|
|
Investment of non-controlling interests in consolidated company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
776
|
|
|
|
776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
September 30
, 2016
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,192
|
)
|
|
|
(58
|
)
|
|
|
5,143
|
|
|
|
(77,740
|
)
|
|
|
126,830
|
|
|
|
45,828
|
|
|
|
172,658
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of Changes in Equity
|
|
Attributable to the Company's shareholders
|
|
|
|
|
|
|
|
|
|
Issued
capital
|
|
|
Share
Premium
|
|
|
Capital
reserve
for
transaction
with
controlling
interests
|
|
|
Capital
reserve
for
financial
assets measured at fair value through other comprehensive income
|
|
|
Capital
reserve
from
transactions
with non-
controlling
interests
|
|
|
Retained earnings (accumulated deficit)
|
|
|
Total
|
|
|
Non-
controlling
interests
|
|
|
Total
equity
|
|
|
|
|
|
|
|
|
|
Unaudited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 1, 2015
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,349
|
)
|
|
|
4,019
|
|
|
|
(47,819
|
)
|
|
|
155,528
|
|
|
|
39,636
|
|
|
|
195,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
|
-
|
|
|
|
6,330
|
|
|
|
6,335
|
|
|
|
6,318
|
|
|
|
12,653
|
|
Share-based payments in respect of awards issued by subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
|
|
19
|
|
Investment of non-controlling interests in consolidated company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,136
|
|
|
|
1,136
|
|
Change in non-controlling interests due to sale of a subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
|
52
|
|
Sale of financial assets measured at fair value through other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
152
|
|
|
|
-
|
|
|
|
(152
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2015
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,192
|
)
|
|
|
4,019
|
|
|
|
(41,641
|
)
|
|
|
161,863
|
|
|
|
47,161
|
|
|
|
209,024
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of Changes in Equity
|
|
Attributable to the Company's shareholders
|
|
|
|
|
|
|
|
|
|
Issued capital
|
|
|
Share Premium
|
|
|
Capital reserve for transaction with controlling shareholders
|
|
|
Capital reserve
for financial
assets measured at fair value through other comprehensive income
|
|
|
Capital reserve from translation
differences
|
|
|
Capital reserve from transactions
with non-controlling interests
|
|
|
Accumulated deficit
|
|
|
Total
|
|
|
Non- controlling interests
|
|
|
Total equity
|
|
|
|
Audited
|
|
|
|
$ thousands
|
|
Balance at January 1, 2015 (audited)
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(2,304
|
)
|
|
|
-
|
|
|
|
4,019
|
|
|
|
(46,513
|
)
|
|
|
155,879
|
|
|
|
36,898
|
|
|
|
192,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30
|
)
|
|
|
(93
|
)
|
|
|
-
|
|
|
|
2,451
|
|
|
|
2,328
|
|
|
|
4,594
|
|
|
|
6,922
|
|
Share-based payments in respect of awards issued by subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
7
|
|
|
|
7
|
|
Non-controlling interests created due to initially consolidated company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,434
|
|
|
|
5,434
|
|
Investment of non-controlling interests in consolidated company
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,073
|
|
|
|
1,073
|
|
Change in non-controlling interests due to loss of control over subsidiaries
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
189
|
|
|
|
189
|
|
Sale of financial assets measured at fair value through other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,142
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,142
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
9,573
|
|
|
|
190,753
|
|
|
|
351
|
|
|
|
(1,192
|
)
|
|
|
(93
|
)
|
|
|
4,019
|
|
|
|
(45,204
|
)
|
|
|
158,207
|
|
|
|
48,195
|
|
|
|
206,402
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of
Cash Flows
|
|
Nine months ended
September 30
|
|
|
Three months ended
September 30
|
|
|
Year ended December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(19,815
|
)
|
|
|
9,613
|
|
|
|
(9,888
|
)
|
|
|
12,648
|
|
|
|
7,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to the profit or loss items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
237
|
|
|
|
377
|
|
|
|
82
|
|
|
|
130
|
|
|
|
494
|
|
Financial expenses (income), net
|
|
|
(2,247
|
)
|
|
|
(558
|
)
|
|
|
(1,261
|
)
|
|
|
1,236
|
|
|
|
(1,329
|
)
|
Stock based compensation and changes in liability in respect of options
|
|
|
68
|
|
|
|
42
|
|
|
|
6
|
|
|
|
19
|
|
|
|
7
|
|
Gain from disposal and revaluation of investee companies and changes in holdings, net
|
|
|
(1,230
|
)
|
|
|
(34,805
|
)
|
|
|
(25
|
)
|
|
|
(24,630
|
)
|
|
|
(40,590
|
)
|
Equity in losses of associates, net
|
|
|
9,853
|
|
|
|
7,072
|
|
|
|
4,750
|
|
|
|
1,839
|
|
|
|
8,566
|
|
Tax on income
|
|
|
1,417
|
|
|
|
3,150
|
|
|
|
1,077
|
|
|
|
3,125
|
|
|
|
3,348
|
|
Other
|
|
|
68
|
|
|
|
(5
|
)
|
|
|
32
|
|
|
|
(7
|
)
|
|
|
(13
|
)
|
|
|
|
8,166
|
|
|
|
(24,727
|
)
|
|
|
4,661
|
|
|
|
(18,288
|
)
|
|
|
(29,517
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in other accounts receivable
|
|
|
119
|
|
|
|
(542
|
)
|
|
|
216
|
|
|
|
(194
|
)
|
|
|
(561
|
)
|
Increase (decrease) in trade payables
|
|
|
29
|
|
|
|
57
|
|
|
|
76
|
|
|
|
(126
|
)
|
|
|
252
|
|
Increase (decrease) in other accounts payable
|
|
|
(433
|
)
|
|
|
538
|
|
|
|
1,875
|
|
|
|
581
|
|
|
|
990
|
|
|
|
|
(285
|
)
|
|
|
53
|
|
|
|
2,167
|
|
|
|
261
|
|
|
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid and received during the year for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes paid
|
|
|
-
|
|
|
|
(11
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(24
|
)
|
Interest received
|
|
|
918
|
|
|
|
816
|
|
|
|
462
|
|
|
|
586
|
|
|
|
1,167
|
|
|
|
|
918
|
|
|
|
805
|
|
|
|
462
|
|
|
|
586
|
|
|
|
1,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(11,016
|
)
|
|
|
(14,256
|
)
|
|
|
(2,598
|
)
|
|
|
(4,793
|
)
|
|
|
(20,648
|
)
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Consolidated Statements of Cash Flows (Cont.)
|
|
Nine months ended
September 30
|
|
|
Three months ended
September 30
|
|
|
Year ended December 31
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
2015
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
$ thousands
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investment activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(450
|
)
|
|
|
(310
|
)
|
|
|
(305
|
)
|
|
|
(152
|
)
|
|
|
(452
|
)
|
Investment in associates and other companies
|
|
|
(21,037
|
)
|
|
|
(9,650
|
)
|
|
|
(10,419
|
)
|
|
|
(2,466
|
)
|
|
|
(16,631
|
)
|
Cash provided from acquisition of investments in subsidiaries
|
|
|
-
|
|
|
|
1,893
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,893
|
|
Proceeds from sale of investments in subsidiaries net of cash disposed of due to deconsolidation
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
-
|
|
|
|
(8
|
)
|
|
|
(1,625
|
)
|
Proceeds from sale of associates and other companies
|
|
|
60
|
|
|
|
16,701
|
|
|
|
25
|
|
|
|
16,646
|
|
|
|
27,482
|
|
Proceeds from sale of financial assets measured at fair value
|
|
|
-
|
|
|
|
188
|
|
|
|
-
|
|
|
|
21
|
|
|
|
188
|
|
Sale of (investment in) other investments in securities, net
|
|
|
2,822
|
|
|
|
(23,762
|
)
|
|
|
-
|
|
|
|
(12,391
|
)
|
|
|
(28,325
|
)
|
Taxes paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,721
|
)
|
Withdrawal of deposits, net
|
|
|
25,482
|
|
|
|
20,322
|
|
|
|
32,170
|
|
|
|
11,303
|
|
|
|
24,423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investment activities
|
|
|
6,877
|
|
|
|
5,374
|
|
|
|
21,471
|
|
|
|
12,953
|
|
|
|
5,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend distributed to the Company's shareholders
|
|
|
(15,000
|
)
|
|
|
-
|
|
|
|
(15,000
|
)
|
|
|
-
|
|
|
|
-
|
|
Investment of non-controlling interests in subsidiaries
|
|
|
1,815
|
|
|
|
1,612
|
|
|
|
1,267
|
|
|
|
1,612
|
|
|
|
1,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(13,185
|
)
|
|
|
1,612
|
|
|
|
(13,733
|
)
|
|
|
1,612
|
|
|
|
1,641
|
|
Exchange rate differences in respect of cash and cash equivalents
|
|
|
469
|
|
|
|
(340
|
)
|
|
|
207
|
|
|
|
(570
|
)
|
|
|
(
237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(16,855
|
)
|
|
|
(7,610
|
)
|
|
|
5,347
|
|
|
|
9,202
|
|
|
|
(14,012
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents as of beginning of the period
|
|
|
51,951
|
|
|
|
65,963
|
|
|
|
29,749
|
|
|
|
49,151
|
|
|
|
65,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents as of end of the period
|
|
|
35,096
|
|
|
|
58,353
|
|
|
|
35,096
|
|
|
|
58,353
|
|
|
|
51,951
|
|
The accompanying notes are an integral part of the interim consolidated financial statements.
Note 1 – General
Elron Electronic Industries Ltd. ("Elron" or the "Company") is an operational holding company that focuses on building technology companies. Elron's group of companies includes companies at different stages of development operating in various technology fields such as medical devices and other fields. The Company is an Israeli-resident company incorporated in Israel, traded on the Tel-Aviv Stock Exchange and the over-the-counter market in the United States. Its registered address is 3 Azrieli Center, Triangle Tower, 42nd floor, Tel Aviv, Israel.
The Company's parent company is Discount Investment Corporation Ltd. ("DIC"), an Israeli-resident company, traded on the Tel-Aviv Stock Exchange. DIC holds an approximately 50.32% interest in the Company as of September 30, 2016.
The accompanying consolidated financial statements have been prepared as of September 30, 2016, and for the nine and three months then ended ("interim consolidated financial statements") in accordance with International Financial Reporting Standards ("IFRS") in condensed format. The interim consolidated financial statements are presented in U.S. dollars, the Company's functional currency, and are rounded to the nearest thousand. These interim consolidated financial statements should be read in conjunction with the Company's annual consolidated financial statements as of December 31, 2015 and the year then ended and accompanying notes ("the annual consolidated financial statements").
Note 2 – Significant Accounting Policies and Basis of presentation
The interim consolidated financial statements were prepared in accordance with generally accepted accounting policies for the preparation of financial statements for interim periods as prescribed in IAS 34 – Interim Financial Reporting, and in accordance with Section D of the Israeli Securities Regulations (Periodic and Immediate Reports), 1970 ("the Regulations").
The significant accounting policies followed in the preparation of the interim consolidated financial statements are identical to those applied in preparation of the annual consolidated financial statements.
Note 3 – Material Changes During the Reporting Period
Pocared Diagnostics Ltd. ("Pocared"), is developing a real-time and automated system for infectious diseases diagnosis using optical technology.
As mentioned in Note 3.A.3.b) to the annual consolidated financial statements, in September 2015, an investment agreement in Pocared, in the amount of $10,000, was signed by Elron and other shareholders, which also included a reorganization of Pocared's share capital.
ELRON ELECTRONIC INDUSTRIES LTD.
Notes to the Interim Consolidated Financial Statements
(USD in thousands, except for price per share and number of shares)
Note 3 – Material Changes During the Reporting Period (Cont.)
The investment amount was in two equal installments in consideration for Preferred B1 shares and warrants for Preferred B1 shares (Elron’s share in the total investment amount was approximately $9,000). The first installment, in the amount of $5,000, was invested immediately. In January 2016, the second installment was invested (Elron’s share in each installment was approximately $4,500).
In the years 2016 and 2015 some of Pocared's shareholders, including Elron, granted loans to Pocared in the total amount of $5,000 (Elron's share in the loans was approximately $4,700).
In July 2016, an investment agreement in Pocared was signed by RDC Rafael Development Corporation Ltd. ("RDC", Elron's 50.1% held subsidiary), and other shareholders of Pocared, in an amount of $10,000, in consideration for Preferred B1 shares and warrants to purchase additional Preferred B1 shares (RDC's share was approximately $9,000). The investment amount was invested immediately. In addition, according to the investment agreement, the aforementioned loans in the amount of approximately $5,200 (principal plus accrued interest) were converted into Preferred B1 shares and warrants to purchase additional Preferred B1 shares (Elron’s share in the loans including interest was approximately $4,800). Following this investment, a capital reserve from transactions with non-controlling interest has been recognized and recorded in the amount of $1,124.
Following the completion of this investment agreement, Elron's consolidated holding in Pocared's outstanding share capital increased from approximately 58% to 67% and from approximately 60% to 68% on a fully diluted basis (effective holding of approximately 61% outstanding share capital and 60% on a fully diluted basis).
BrainsGate Ltd. ("BrainsGate") is developing a minimally invasive treatment platform for patients suffering from Central Nervous System diseases. As of the reporting date, Elron holds approximately 30% of BrainsGate's outstanding shares and approximately 27% on a fully diluted basis. BrainsGate is accounted for under the equity method of accounting.
As mentioned in Note 3.B.4.b) to the annual consolidated financial statements, in January 2015, an investment agreement in BrainsGate in the amount of $26,000 was signed, with the participation of Medtronic and additional shareholders of BrainsGate, including Elron. The investment agreement was in two installments in consideration for Preferred BB shares and warrants for Preferred BB shares (Elron's share in the total investment amount was approximately $7,900). The first installment in the amount of $11,000 was invested immediately (Elron's share in the first installment was approximately $3,300). In July 2016, the second installment was invested (Elron's share in the second installment was approximately $4,600). Elron's holdings in BrainsGate shares did not change following this investment.
ELRON ELECTRONIC INDUSTRIES LTD.
Notes to the Interim Consolidated Financial Statements
(USD in thousands, except for price per share and number of shares)
Note 3 – Material Changes During the Reporting Period (Cont.)
Notal Vision Inc. ("Notal") provides a system and services for remote monitoring from home of AMD patients at risk of vision loss, for the early detection of important visual changes. As of the reporting date, Elron holds approximately 21% of Notal's outstanding shares and approximately 18% on a fully diluted basis. The investment in Notal is accounted for as a financial asset measured at fair value through profit or loss.
In January 2016, Notal signed an investment agreement with its major shareholders, including Elron, in the amount of $5,000 (Elron's share in this amount was approximately $1,000), in consideration for Preferred C shares and warrants for Preferred C shares. The investment amount was invested immediately. In June 2016 and in August 2016, some of Notal's shareholders, including Elron, invested in Notal an amount of $5,000, in two equal installments, in consideration for Preferred C shares and warrants for Preferred C shares. Elron's share in this amount was approximately $1,000.
In October 2016, subsequent to the reporting date, Notal signed an investment agreement with its major shareholders, including Elron, in the amount of $10,000 in consideration for Preferred D shares, in two equal installments (Elron's share in this amount is approximately $1,800). The first installment in the amount of $5,000 was invested immediately (Elron's share in the first installment was approximately $900).
Elron's holdings in Notal's share capital did not change significantly following these investments.