B.S.D Crown Ltd. (LSE:BSD) ("BSD" or "the Company") Management Statement Tel Aviv, Israel, 29 August, 2014 Management Statement and Half Yearly Financial Statements During the period commencing 1 January 2014 and ending on 30 June 2014 (the "Relevant Period"), the Company has undergone several events and transactions. A summary of the material events and transactions that have taken place during the Relevant Period are set out below: Highlights - Revenues amounted to $ 16,007 thousand for the period of six (6) months ending 30 June 2014 (H1.2013: $1,065 thousand). The balance of cash and cash equivalent, short term investments and deposits (Including investment in a fund designated at fair value through profit or loss), as of 30 June 2014 was $144,802 thousand (31 December 2013: $159,823 thousand). The total assets, as of 30 June 2014 were $241,115 thousand (31 December 2013: $160,442 thousand). The significant change is due to the purchase of the controlling stake in the share capital of Willi-Food Investments Ltd as explained below. - The total issued share capital of the Company as at 28 August 2014 was 140,578,154 of which 109,990,252 ordinary shares are outstanding and 30,587,902 shares are held in treasury. - In August 2013, a consortium of investors led by the Company announced its intention to acquire a controlling stake in IDB Holding Corporation Ltd., one of Israel's largest holding companies, in consideration of an aggregate payment of NIS1,580 million. As such proposed transaction was classified as a reverse takeover under the listing rules made by the UK Listing Authority ("UKLA") pursuant to Part VI of the Financial Services and Markets Act 2000 (as amended) ("FSMA") (the "Listing Rules"), trading in the Company's shares was suspended on 15 August 2013 and restored on 9 January 2014, following the Israeli District Court decision to uphold a competing offer. (See Company announcements dated 6 January 2014 and 9 January 2014) - On 24 December 2013, BGI Investments (1961) Ltd. ("BGI") and B.G. Alpha Ltd. (together, the "BGI Group") made a tender offer (the "Offer") to holders of the Company's ordinary shares to acquire 5% of the voting rights in the Company at a price per share equal to �0.75. On 28 January 2014 the Offer was successfully completed and the BGI Group purchased an additional 5% of the voting rights in the Company. (See Company announcements dated 13 January 2014, 16 January 2014, 24 January 2014 and 29 January 2014) - Following the success of the Offer, the BGI Group together with Israel 18 B.V., BGI's parent company (together, the "Extended BGI Group"), is entitled to exercise call options it has acquired. Upon the exercise of said call options, the Extended BGI Group will own shares, representing approximately 44.1% of the Company's Capital. In the meantime, following the grant of proxies made by Mr. Naftali Shani and Fortissimo Capital Management Ltd, amongst others, to Israel 18 and pursuant to the shareholders agreement between the members of Extended BGI Group, BGI is entitled to vote the shares representing the Options not yet exercised, representing 13.55% of the Company's Capital. (See Company announcements dated 11 February 2014, 14 February 2014, 20 February 2014, 24 February 2014, 21 March 2014, 27 March 2014 and 29 April 2014) - Mr. Amnon Ben-Shay, who was appointed as a director of the Company on 14 August 2013, submitted his resignation from the board of directors of the Company (the "Board") on 12 January, 2014, due to other commitments preventing him from fulfilling the requirements of his position as a director. (See Company announcements dated 13 January 2014) - On 2 March 2014, the Company entered into an agreement to acquire from Zwi Williger ("ZW") and Joseph Williger ("JW" and, together with ZW, the "Sellers") a controlling stake in the share capital of Willi-Food Investments Ltd. ("WFI"), a company listed on the Tel Aviv Stock Exchange, which in turn owns approximately 58% of G Willi-Food International Ltd ("WFINT" and together with WFI, "Willi-Food"), a company listed on NASDAQ. Under the agreement, the Company: (i) acquired the Sellers' entire shareholdings in WFI (part of which was acquired through a special tender offer as set out below), amounting in aggregate to 58% of the shares of WFI (or approximately 55% on a fully diluted basis); and (ii) published a special tender offer (the "Special Tender Offer") addressed to all shareholders of WFI (including the Sellers) in accordance with Israeli Companies Law in order to acquire additional shares carrying 5% of the voting rights in WFI. The Special Tender Offer was completed on 1 May 2014 and the transaction completed on 4 May 2014 (the "Completion Date"). Following such completion, the Company acquired in aggregate 61.65% of the issued share capital of WFI (62.21% of its voting rights), for aggregate consideration of NIS284.7 million (U.S. $82.3 million). (See Company announcements dated 3 March 2014, 7 April 2014, 28 April 2014, 1 May 2014 and 7 May 2014 and Company prospectus published on 29 July, 2014) Under the WFI Agreement, the Sellers agreed to continue to be engaged by WFINT as chairman of the board of WFINT (in respect of ZW) and president of WFINT (in respect of JW), or as joint chief executive officers of WFI, for an additional period three (3) years commencing upon the Completion Date (May 2014). On 21st August 2014, the extension of the agreements between the parties for another period of three (3) years (until 21st August 2017) was approved at WFINT's annual general meeting. Subject to further agreement between the parties and to applicable law, the Sellers may continue their respective engagement following such period. In addition, each of the Sellers is prohibited from competing against Willi-Food in any material way, subject to certain agreed exceptions described below, for an additional period commencing on the termination of his respective engagement with WFINT and terminating on the later of two years from such termination, or four years from completion of the Acquisition but not longer than six (6) years from the completion date. In consideration of such non-compete undertakings, each of the Sellers is entitled to an additional annual payment of NIS1.5 million (approximately �0.25 million) per year following termination of his respective engagement, to be paid by the Company and subject to applicable law. Under the WFI Agreement, each of the Sellers shall have the rights to be released from his engagement with WFINT where: (i) Willi-Food's accounts will include a `going concern' provision as a result of any activity which is not within the Willi-Food's business operations in the field of import, export, marketing and distribution of food products (the "Current Business Activity"); (ii) the board of directors of WFI, WFINT or any other member of the Willi-Food group materially disrupts Zvi Williger or Joseph Williger's ability to operate in the Current Business Activity as part of said engagement; (iii) Zvi Williger or Joseph Williger are not reappointed as directors of WFI or WFINT during said engagement period; (iv) WFI or the Company, as the case may be, have not voted, as shareholders of WFINT, in favour or extending Zvi Williger and Joseph Williger's service contracts; (v) Zvi Williger or Joseph Williger's engagements were terminated for unreasonable reasons by WFI or WFINT; (vi) there occurs a sale of control in the Current Business Activity, WFI or WFINT to a third party; (vii) there occurs an introduction of a third party as a partner in the Current Business Activity or in the control in WFI or WFINT unless previously approved by the Sellers, such approval not to be unreasonably withheld; or (viii) Zvi Williger or Joseph Williger are incapacitated, in which case (except in the case of (viii) above) the non-compete undertaking referred to above shall cease to apply in relation to him. (See Company prospectus published on 29 July, 2014) Trading The acquisition of the abovementioned stake in WFI is deemed a reverse takeover under the Listing Rules and trading in the Company's shares was accordingly suspended on 3 March, 2014. Following the publication of a prospectus by the Company on 29 July, 2014 in connection with the requirement on it to re-apply for the listing of its shares following completion of the transaction, such suspension was lifted on 4 August 2014 and the Company's shares were re-admitted to trading on the Standard List of the main market of the London Stock Exchange. In accordance with a resolution passed at the Company's annual general meeting held on 3 July 2014, the Company's name was changed from Emblaze Ltd. to B.S.D Crown Ltd., with effect from 5 August 2014. On 12 August 2014 the change of name to B.S.D Crown Ltd. became effective on the London Stock Exchange. Accordingly, the Company's TIDM (ticker symbol) has also changed to BSD. Management On 15 August 2014, the Company published a notice of extraordinary general meeting to be held on 8 September, 2014 and at which the Company's shareholders will be asked to approve the terms of service of Mr Israel Jossef Schneorson (which will be subjected to the approval of BGI Investments (1961) Ltd. ("BGI") shareholders, such shareholder approval being capable of being overruled in special circumstances), the terms of employment of Mr Eyal Merdler and an agreement between the Company and BGI (the "BGI Management Agreement") pursuant to which the Company will provide certain services to BGI, including the services of a chief executive officer, chief financial officer, controller, bookkeeper and administrative services. Subject to the BGI Management Agreement receiving necessary approvals and being entered into, the Company will pay BGI a one-off fee of USD 660,000 in relation to the services provided to the Company by the chief executive officer and chief financial officer between 14 August 2013 and 31 August 2014 and services provided to the Company by the corporate secretary, controller, bookkeeping and certain administrative staff of BGI between 1 January 2014 and 31 August 2014, net of expenses or amounts owing from BGI to the company as at the date of such payment. Subject to the BGI Management Agreement receiving necessary approvals and being entered into, the Company will provide BGI with the services of the chief executive officer (subject to the approval by BGI of the Company's chief executive officer's terms of service), chief financial officer, corporate secretary, controller, bookkeeping and certain administrative staff to BGI in consideration of a monthly fee equal to NIS 35,000 (approximately USD 10,000) or NIS 28,000 (approximately USD 8,000) in the event that the Company's chief executive officer's terms of service are bit approved by BGI. Intellectual Property In July 2010, BSD filed a complaint against Apple Inc. ("Apple") for infringement of the Company's U.S. Patent No. 6,389,473 through Apple's HTTP Live Streaming protocol used in Apple products such as iPhones and iPads. On 11 July, 2014 and the jury found that BSD's U.S. Patent Number 6,389,473 is valid, but also found that Apple Inc. did not infringe the patent. On 8 August 2014 the Company filed motions with the original judge hearing the claim (i) for a judgment as a matter of law that, contrary to the jury's verdict of 14 July 2014, the Company's U.S. Patent Number 6,389,473 for media streaming was infringed; or, alternatively, (ii) for a new trial. Also on 8 August, 2014, Apple filed a motion for a judgment as a matter of law that, if the court grants the judgment as a matter of law filed by BSD or the motion for new trial filed by BSD, then Apple also requests that the court grant a judgment as a matter of law that the asserted claims of the Company's U.S. Patent Number 6,389,473 for media streaming are invalid and/or grant a new trial on the invalidity of the asserted claims. BSD expects the court to rule on these motions in October 2014. (See Company announcements dated 8 July 2014, 14 July 2014, 11 August, 2014 and 12 August, 2014). In October 2012, the Company filed a complaint for patent infringement against Microsoft Corporation ("Microsoft"). The complaint asserts that Microsoft's IIS Smooth Streaming system infringes BSD's U.S. patent No. 6,389,473 for media streaming technology. Legal proceedings in these cases are ongoing. Jossef Schneorson, CEO, commented: "We believe that the new B.S.D Crown Ltd. will have maximised value for its shareholders. We believe that the acquisition of WFI will be a good and solid investment for B.S.D Crown Ltd. shareholders and the results of the Company will be positive and continue to improve." A copy of the half yearly financial statements will also be available for inspection on the Company's website, www.bsd-c.com and will be sent for publication at the Financial Conduct Authority's National Storage Mechanism which can be accessed at www.morningstar.co.uk/uk/NSM. Enquiries: Eyal Merdler This email address is being protected from spambots. You need JavaScript enabled to view it. B.S.D Crown Ltd. B.S.D Crown Ltd. is traded on the London Stock Exchange (LSE: BSD) since 1996. www.bsd-c.com B.S.D CROWN LTD. (FORMERLY- EMBLAZE LTD.) INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF 30 JUNE 2014 UNAUDITED IN U.S. DOLLARS INDEX Page Report on Review of Interim Condensed Consolidated Financial Statements 2 Interim Condensed Consolidated Statements of Financial Position 3 - 4 Interim Condensed Consolidated Statements of Profit or Loss and Other Comprehensive Income 5 Interim Condensed Consolidated Statements of Changes in Equity 6 - 7 Interim Condensed Consolidated Statements of Cash Flows 8 - 9 Notes to Interim Condensed Consolidated Financial Statements 10 - 26 - - - - - - - - - - - - - - - Kost Forer Gabbay & Tel: Kasierer +972-8-6261300 21 Shazar Blvd., Noam Fax: Bldg. +972-3-5633428 Be'er Sheva 8489411, ey.com Israel Report on Review of Interim Condensed Consolidated Financial Statements Board of Directors B.S.D Crown Ltd. (Formerly - Emblaze Ltd.) Introduction We have reviewed the accompanying interim condensed consolidated statement of financial position of B.S.D Crown Ltd. (Formerly - Emblaze Ltd.) and its subsidiaries (the "Group") as of 30 June 2014 and the related interim condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six month and three month periods then ended and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with IAS 34, "Interim Financial Reporting" ("IAS 34"), as adopted by the European Union. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements 2410, 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 International Standards on Auditing 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 condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34, as adopted by the European Union. Beer-Sheva, Israel KOST FORER GABBAY & KASIERER A Member of Ernst & Young 28 August, 2014 Global INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 30 June 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousands ASSETS CURRENT ASSETS: Cash and cash equivalents 31,589 6,337 2,957 Short-term deposits 46,225 112,299 16,242 Short-term deposits held in trust - - 140,418 Financial assets at fair value through profit or loss 62,573 24,362 - Available for sale financial assets - 205 206 Trade receivables 27,993 4 30 Other receivables and prepaid expenses 3,107 1,606 522 Investment in a fund designated at fair value through profit or loss 4,415 - - Inventories 11,318 - - Total current assets 187,220 144,813 160,375 NON-CURRENT ASSETS: Property, plant and equipment, net 14,917 62 67 Prepaid expenses 15 - - Intangible assets: Customer relationships 6,493 - - Supplier relationships 3,805 - - Brands 1,767 - - Non-competition agreements 1,383 - - Goodwill 25,515 - - Total non-current assets 53,895 62 67 Total assets 241,115 144,875 160,442 The accompanying notes are an integral part of the interim condensed consolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION 30 June 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousands LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term debt 70 - 18,813 Current maturities of debentures 3,729 - - Trade payables 5,129 289 699 Other accounts payable and deferred revenues 3,326 2,966 1,708 Employee benefit liabilities, net 804 497 282 Financial liability for non - controlling interest put option 6,240 - - Total current liabilities 19,298 3,752 21,502 NON-CURRENT LIABILITIES: Employee benefit liabilities, net 218 24 40 Liability for non- competition payments 1,573 - - Debentures 4,008 - - Deferred taxes 4,457 - - 10,256 24 40 EQUITY: Share capital 416 416 416 Share premium 469,930 469,931 469,925 Treasury shares (76,962) (76,962) (76,962) Available for sale reserve - 122 123 Reserve from transactions with non- controlling interest (208) - - Foreign currency translation reserve 458 - - Accumulated deficit (256,077) (252,035) (254,189) Equity attributable to Company's equity holders 137,557 141,472 139,313 Non- controlling interests 74,004 (373) (413) Total equity 211,561 141,099 138,900 Total liabilities and equity 241,115 144,875 160,442 The accompanying notes are an integral part of the interim condensed consolidated financial statements. 28 August, 2014 Date of approval of Abraham Wolff Israel Jossef Eyal Merdler the Schneorson financial statements Chairman of the CEO and Vice CFO Board Chairman of the Board INTERIM CONDENSED CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Year ended Six months ended Three months ended 31 30 June 30 June December 2014 2013 2014 2013 2013 Unaudited Audited U.S. dollars in thousands (except earnings (loss) per share) Revenues 16,007 1,065 15,979 465 1,882 Cost of sales 11,967 272 11,939 156 449 Gross profit 4,040 793 4,040 309 1,433 Research and development 693 761 376 323 1,562 Selling expenses 2,239 134 2,239 14 134 General and administrative expenses 4,714 1,549 3,246 897 7,095 Total operating expenses 7,646 2,444 5,861 1,237 8,791 Operating loss (3,606) (1,651) (1,821) (925) (7,358) Financial income 2,442 883 1,531 325 5,208 Financial expense (323) (110) (311) (79) (846) Loss before taxes on income (1,487) (878) (601) (679) (2,996) Taxes on income (175) - (175) - - Loss from continuing operations (1,662) (878) (776) (679) (2,996) Income (loss) from discontinued operations, net - 160 - (107) 181 Net loss (1,662) (718) (776) (786) (2,815) Other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods : Gain (loss) from available-for-sale financial assets 25 (10) - (10) (9) Reclassification adjustment for gain on available- for- sale financial assets included in profit or loss (148) - (148) - - Adjustments arising from translation of financial statements of foreign operations 925 - 925 - - Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods : Remeasurement loss from defined benefit plans - - - - (97) Total other comprehensive income (loss) 802 (10) 777 (10) (106) Total comprehensive income (loss) (860) (728) 1 (796) (2,921) Net income (loss) attributable to: Equity holders of the Company (1,888) (689) (1,029) (774) (2,746) Non- controlling interests 226 (29) 253 (12) (69) Net loss (1,662) (718) (776) (786) (2,815) Total comprehensive income (loss) attributable to: Equity holders of the Company (1,553) (699) (719) (784) (2,852) Non- controlling interests 693 (29) 720 (12) (69) Total comprehensive income (loss) (860) (728) 1 (796) (2,921) Basic and diluted net earnings per share attributable to Company's equity holders (in U.S dollars): Loss from continuing operations (0.02) (0.01) (0.01) (0.01) (0.03) Income from discontinued operations - (* - (* (* Net loss per share (0.02) (0.01) (0.01) (0.01) (0.03) *) Less than USD 0.01 per share. The accompanying notes are an integral part of the interim condensed consolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Attributable to equity holders of the Company Reserve from transactions Foreign Available with non- currency Accum- Non- Share Share Treasury for sale controlling translations ulated controlling Total capital premium shares reserve interest reserve deficit Total interests equity U.S. dollars in thousands Unaudited Balance as of 416 469,925 (76,962) 123 - - (254,189) 139,313 (413) 138,900 1 January 2014 Non- controlling - - - - - - - - 73,516 73,516 interests arising from initially Consolidated company Net income - - - - - - (1,888) (1,888) 226 (1,662) (loss) Other comprehensive income (loss): Gain from - - - 25 - - - 25 - 25 available for sale financial assets Reclassification - - - (148) - - - (148) - (148) adjustment for gain on available- for- sale financial assets included in profit or loss Adjustments - - - - - 458 - 458 467 925 arising from translation of financial statements of foreign operations Total - - - (123) - 458 (1,888) (1,553) 693 (860) comprehensive income (loss) Cost of share - 5 - - - - - 5 - 5 based payment Transactions - - - - (208) - - (208) 208 - with non- controlling interests - cost of share based payment in subsidiary Balance as of 416 469,930 (76,962) - (208) 458 (256,077) 137,557 74,004 211,561 30 June 2014 Attributable to equity holders of the Company Non- Share Share Treasury Available for Accumulated controlling Total capital premium shares sale reserve deficit Total interests equity U.S. dollars in thousands Unaudited Balance as of 1 January 2013 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494 Net loss - - - - (689) (689) (29) (718) Loss from available for sale financial assets - - - (10) - (10) - (10) Total comprehensive loss - - - (10) (689) (699) (29) (728) Cost of share based payment - 20 - - - 20 - 20 Purchase of treasury shares - - (687) - - (687) - (687) Balance as of 30 June 2013 416 469,931 (76,962) 122 (252,035) 141,472 (373) 141,099 The accompanying notes are an integral part of the interim condensed consolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Attributable to equity holders of the Company Available Non- Share Share Treasury for Accumulated controlling Total capital premium shares sale reserve deficit Total interests equity U.S. dollars in thousands Audited Balance as of 1 January 2013 416 469,911 (76,275) 132 (251,346) 142,838 (344) 142,494 Net loss - - - - (2,746) (2,746) (69) (2,815) Remeasurement loss from defined benefit plan - - - - (97) (97) - (97) Loss from available for sale- financial assets - - - (9) - (9) - (9) Total comprehensive loss - - - (9) (2,843) (2,852) (69) (2,921) Cost of share- based payment - 14 - - - 14 - 14 Purchase of treasury stock - - (687) - - (687) - (687) Balance as of 31 December 2013 416 469,925 (76,962) 123 (254,189) 139,313 (413) 138,900 The accompanying notes are an integral part of the interim condensed consolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended Year ended 30 June 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousands Cash flows from operating activities: Net loss (1,662) (718) (2,815) Less - income from discontinued operations - 160 181 Loss from continuing operations (1,662) (878) (2,996) Adjustments to reconcile loss from continuing operations to net cash provided by (used in) operating activities : Depreciation and amortisation 562 16 31 Loss on disposal of fixed assets 10 - - Employee benefit liabilities, net (39) - - Cost of share-based payment 297 20 14 Change in financial assets at fair value through profit or loss 211 328 432 Interest income (684) - (1,863) Interest expense on short-term loan 7 (1,148) 86 Decrease in deferred tax (229) - - Taxes on income 404 Exchange rate differences on deposit and short-term loan (1,256) - (3,438) Gain from sale of available for sale financial assets (214) - - Financial income from debentures (25) - - Finance expenses on financial liabilities 29 - - (927) (784) (4,738) Changes in asset and liability items: Decrease in inventories 4,218 - - Decrease in trade receivables 2,731 - - Decrease (increase) in receivables and prepaid expenses (1,000) 109 494 Decrease in trade payables, other payables and accrued expenses (1,054) (580) (1,468) 4,895 (471) (974) Cash received (paid) during the period: Interest received 163 1,411 2,450 Interest paid (164) - - Taxes paid (698) - - (699) 1,411 2,450 Net cash provided by (used in) operating activities from continuing operations 1,607 (722) (6,258) Net cash used in operating activities from discontinued operations - (146) (189) Net cash provided by (used in) operating activities 1,607 (868) (6,447) The accompanying notes are an integral part of the interim condensed consolidated financial statements. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six months ended Year ended 30 June 31 December 2014 2013 2013 Unaudited Audited U.S. dollars in thousands Cash flows from investing activities: Proceeds from sale of property and equipment 65 - - Purchase of property and equipment (647) (11) (31) Maturing of (investment in) short-term deposits, net (29,983) 9,900 105,953 Withdrawal of (investment in) deposit held in trust 122,404 - (118,253) Purchase of financial assets at fair value through profit or loss (2,936) (12,712) (13,352) Proceeds from sale of financial assets at fair value through profit or loss and available for sale financial assets 297 1,382 26,441 Acquisition of subsidiary (a) (62,088) - - Net cash provided by (used in) investing activities from continuing operations 27,112 (1,441) 758 Cash flows from financing activities: Bank overdraft, net (763) - - Purchase of treasury shares - (687) (687) Net cash used in financing activities from continuing operations (763) (687) (687) Exchange differences on balances of cash and cash equivalents 676 - - Net increase (decrease) in cash and cash equivalents 28,632 (2,996) (6,376) Cash and cash equivalents at the beginning of the period 2,957 9,333 9,333 Cash and cash equivalents at the end of the period 31,589 6,337 2,957 (a) Acquisition of subsidiary: The subsidiary's assets and liabilities at date of acquisition: Working capital (excluding cash and cash equivalents) (98,429) - - Property, plant and equipment (14,480) - - Intangible assets (13,666) - - Goodwill (25,367) - - Prepaid expenses (9) - - Deferred taxes 4,661 - - Non-current liabilities 4,186 - - Financial liability for non- controlling interest put option 5,945 - - Liability for non- competition payment 1,555 - - Non-controlling interests 73,516 - - (62,088) - - (b) Non-cash transactions: Proceeds of short-term loan invested in deposit held in trust - - 18,393 Repayment of short-term loan from deposit held in trust (18,727) - - The accompanying notes are an integral part of the interim condensed consolidated financial statements. NOTE 1:- GENERAL a. B.S.D Crown Ltd. ("B.S.D" or "the Company") is a corporation registered in Israel. On 5 August 2014 the Company changed its name from Emblaze Ltd. to B.S.D Crown Ltd. b. In May 2014 the Company completed the acquisition of a controlling stake (approximately 62%) of Willi-Food Investments Ltd. ("WFI") for an aggregate cash consideration of USD 82.3 million. WFI and its subsidiaries operate in import, marketing and distribution of a several hundred food products, mainly in Israel. See Note 3 for further details of the Acquisition. The financial statements of WFI and its group (the "WFI Group") have been consolidated in these interim condensed consolidated financial statements from the date of the completion of the Acquisition. Due to the extent of the trading activities of WFI that were acquired in relation to the then existing activities of the B.S.D Group, the Acquisition was deemed a reverse takeover under the listing rules of the UK Listing Authority ("UKLA"), and trading in the Company's shares was accordingly suspended on 3 March 2014 (the date the Company entered into the agreement for the Acquisition). On 29 July 2014 the Company published a prospectus in connection with its reapplication for the listing of its entire issued share capital on the Standard segment of the Official List of the UKLA and for admission to trading on the London Stock Exchange main market for listed securities. The admission became effective on 4 August 2014. The Company's shares are presently listed for trading under the symbol BSD. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation of the interim consolidated financial statements: The interim condensed consolidated financial statements for the six months ended 30 June 2014 have been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the European Union. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2013. b. Accounting policies adopted by the B.S.D Group as a consequence of the acquisition of the WFI Group: The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the B.S.D Group's consolidated annual financial statements for the year ended 31 December 2013. As a consequence of the initial consolidation of the financial statements of the WFI Group, the following accounting policies relating to the activities of the WFI Group have been adopted: NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of the acquisition of the WFI Group: (Cont.) - Functional currency and presentation currency: The presentation currency of the financial statements is the US dollar. The Group determines the functional currency of each Group entity, including companies accounted for at equity. Assets, including fair value adjustments upon acquisition, and liabilities of an investee which is a foreign operation, are translated at the closing rate at each reporting date. Profit or loss items are translated at average exchange rates for all periods presented. The resulting translation differences are recognised in other comprehensive income (loss). Intragroup loans for which settlement is neither planned nor likely to occur in the foreseeable future are, in substance, a part of the investment in the foreign operation and, accordingly, the exchange rate differences from these loans (net of the tax effect) are recorded, net of the tax effect, in other comprehensive income (loss). Upon the full or partial disposal of a foreign operation resulting in loss of control in the foreign operation, the cumulative gain (loss) from the foreign operation which had been recognised in other comprehensive income is transferred to profit or loss. Upon the partial disposal of a foreign operation which results in the retention of control in the subsidiary, the relative portion of the amount recognised in other comprehensive income is reattributed to non-controlling interests. - Business combinations and goodwill: Business combinations are accounted for by applying the acquisition method. The cost of the acquisition is measured at the fair value of the consideration transferred on the acquisition date with the addition of non-controlling interests in the acquiree. In each business combination, the Company chooses whether to measure the non-controlling interests in the acquiree based on their fair value on the acquisition date or at their proportionate share in the fair value of the acquiree's net identifiable assets. Direct acquisition costs are carried to the statement of profit or loss as incurred. In a business combination achieved in stages, equity interests in the acquiree that had been held by the acquirer prior to obtaining control are measured at the acquisition date fair value while recognising a gain or loss resulting from the revaluation of the prior investment on the date of achieving control. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of the acquisition of the WFI Group (Cont.): - Business combinations and goodwill (Cont.): Contingent consideration is recognised at fair value on the acquisition date and classified as a financial asset or liability in accordance with IAS 39. Subsequent changes in the fair value of the contingent consideration are recognised in profit or loss or in the statement of comprehensive income. If the contingent consideration is classified as an equity instrument, it is measured at fair value on the acquisition date without subsequent remeasurement. Goodwill is initially measured at cost which represents the excess of the acquisition consideration and the amount of non-controlling interests over the net identifiable assets acquired and liabilities assumed. If the resulting amount is negative, the acquirer recognises the resulting gain on the acquisition date. - Allowance for doubtful accounts: The allowance for doubtful accounts is determined in respect of specific debts whose collection, in the opinion of the Company's management, is doubtful. - Inventories: Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises costs of purchase and costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less estimated costs of completion and estimated selling costs. The Company periodically evaluates the condition and age of inventories and makes provisions for slow moving inventories accordingly. Cost of inventories is determined as follows: Purchased merchandise and products - using the weighted average cost method. - Revenue recognition: Revenues are recognised in profit or loss when the revenues can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the Company and the costs incurred or to be incurred in respect of the transaction can be measured reliably. When the Company acts as a principal and is exposed to the risks associated with the transaction, revenues are presented on a gross basis. When the Company acts as an agent and is not exposed to the risks and rewards associated with the transaction, revenues are presented on a net basis. Revenues are measured at the fair value of the consideration less any trade discounts, volume rebates and returns. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of the acquisition of the WFI Group (Cont.): - Revenue recognition (Cont.): Following are the specific revenue recognition criteria which must be met before revenue is recognised: Revenues from the sale of goods: Revenues from the sale of goods are recognised when all the significant risks and rewards of ownership of the goods have passed to the buyer and the seller no longer retains continuing managerial involvement. The delivery date is usually the date on which ownership passes. - Leases: The criteria for classifying leases as finance or operating leases depend on the substance of the agreements and are made at the inception of the lease in accordance with the following principles as set out in IAS 17. The Group as lessee: 1. Finance leases: Finance leases transfer to the Group substantially all the risks and benefits incidental to ownership of the leased asset. At the commencement of the lease term, the leased assets are measured at the lower of the fair value of the leased asset or the present value of the minimum lease payments. The leased asset is amortised over the shorter of its useful life or the lease term. 2. Operating leases: Lease agreements are classified as an operating lease if they do not transfer substantially all the risks and benefits incidental to ownership of the leased asset. Lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of the acquisition of the WFI Group (Cont.): - Property, plant and equipment: Property, plant and equipment are measured at cost, including direct attributable costs, less accumulated depreciation, accumulated impairment losses and excluding day-to-day servicing expenses. Cost includes spare parts and auxiliary equipment that are used in connection with plant and equipment. A part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately using the component method. The cost of an item of property, plant and equipment comprises the initial estimate of the costs of dismantling and removing the item and restoring the site on which the item is located. Depreciation is calculated on a straight-line basis over the useful life of the assets at annual rates as follows: % Mainly % Land 2 Buildings 4 Motor vehicles 15-20 20 Office furniture and equipment 6-15 15 Computers 20-33 33 Mechanical equipment 10 The useful life, depreciation method and residual value of an asset are reviewed at least each year-end and any changes are accounted for prospectively as a change in accounting estimate. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale and the date that the asset is derecognised. - Intangible assets: Separately acquired intangible assets are measured on initial recognition at cost including directly attributable costs. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Expenditures relating to internally generated intangible assets, excluding capitalised development costs, are recognised in profit or loss when incurred. Intangible assets with a finite useful life are amortised over their useful life and reviewed for impairment whenever there is an indication that the asset may be impaired. The amortisation period and the amortisation method for an intangible asset are reviewed at least at each year end. Intangible assets with indefinite useful lives are not systematically amortised and are tested for impairment annually or whenever there is an indication that the intangible asset may be impaired. The useful life of these assets is reviewed annually to determine whether their indefinite life assessment continues to be supportable. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of the acquisition of the WFI Group (Cont.): If the events and circumstances do not continue to support the assessment, the change in the useful life assessment from indefinite to finite is accounted for prospectively as a change in accounting estimate and on that date the asset is tested for impairment. Commencing from that date, the asset is amortised systematically over its useful life. The intangible assets are amortised over their estimated useful life as follows: Customer relationships 9 years Supplier relationships 5 years Brands 7 years Non-competition agreements 2 years (starting 2017, see Note 3 (c)) - Impairment of non-financial assets: The Company evaluates the need to record an impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying amount is not recoverable. If the carrying amount of non-financial assets exceeds their recoverable amount, the assets are reduced to their recoverable amount. The recoverable amount is the higher of fair value less costs of sale and value in use. In measuring value in use, the expected future cash flows are discounted using a pre-tax discount rate that reflects the risks specific to the asset. The recoverable amount of an asset that does not generate independent cash flows is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognised in profit or loss. An impairment loss of an asset, other than goodwill, is reversed only if there have been changes in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. Reversal of an impairment loss, as above, shall not be increased above the lower of the carrying amount that would have been determined (net of depreciation or amortisation) had no impairment loss been recognised for the asset in prior years and its recoverable amount. The reversal of impairment loss of an asset presented at cost is recognised in profit or loss. The following criteria are applied in assessing impairment of these specific assets: Goodwill in respect of subsidiaries: The Company reviews goodwill for impairment once a year, on December 31, or more frequently if events or changes in circumstances indicate that there is an impairment. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) b. Accounting policies adopted by the B.S.D Group as a consequence of the acquisition of the WFI Group (Cont.): - Impairment of non-financial assets: (Cont.) Goodwill is tested for impairment by assessing the recoverable amount of the cash-generating unit (or group of cash-generating units) to which the goodwill has been allocated. An impairment loss is recognised if the recoverable amount of the cash-generating unit (or group of cash-generating units) to which goodwill has been allocated is less than the carrying amount of the cash-generating unit (or group of cash-generating units). Any impairment loss is allocated first to goodwill. Impairment losses recognised for goodwill cannot be reversed in subsequent periods. - Share-based payment transactions: The Company accounts for share-based compensation in accordance with IFRS 2, "Share-Based Payment". The main impact of IFRS 2 on the Company is the expensing of employees' and directors' share options (equity-settled transactions). The cost of equity-settled transactions with employees is measured at the fair value of the equity instruments granted at grant date. The fair value is determined by using the Binomial method option-pricing model taking into accounts the terms and conditions upon which the instruments were granted. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the "vesting date"). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Company's best estimate of the number of equity instruments that will ultimately vest. The expense or income recognised in profit or loss represents the change between the cumulative expense recognised at the end of the reporting period and the cumulative expense recognised at the end of the previous reporting period. Cash-settled transactions: The cost of cash-settled transactions is measured at fair value on the grant date using an acceptable option pricing model. The fair value is recognised as an expense over the vesting period and a corresponding liability is recognised. The liability is remeasured at each reporting date until settled at fair value with any changes in fair value recognised in profit or loss. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) c. Adoption of new standards and interpretations effective as of 1 January 2014 The nature and the impact of each new standard or amendment adopted are described below: Offsetting Financial Asses and Financial Liabilities - Amendments to IAS 32 These amendments clarify the meaning of "currently has a legally enforceable right to set-off" and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments have no impact on the Company. d. Disclosure of new IFRS standards in the period prior to their adoption: (1) IFRS 15, "Revenue from Contracts with Customers": IFRS 15 ("the Standard") was issued by the IASB in May 2014. IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts, and the related Interpretations: IFRIC 13, "Customer Loyalty Programs", IFRIC 15, "Agreements for the Construction of Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC-31, "Revenue- Barter Transactions Involving Advertising Services". The Standard introduces the following five-step model that applies to revenue from contracts with customers: Step 1: Identify the contract(s) with a customer, including reference to contract consolidation and accounting for contract modifications. Step 2: Identify the distinct performance obligations in the contract Step 3: Determine the transaction price, including reference to variable consideration, financing components that are significant to the contract, non-cash consideration and any consideration payable to the customer. Step 4: Allocate the transaction price to the separate performance obligations on a relative stand-alone selling price basis using observable information, if it is available, or by making estimates and assessments. Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation over time or at a point in time. IFRS 15 also establishes the accounting treatment of incremental costs involving obtaining a contract and the costs directly related to fulfilling a contract. The Standard will apply retrospectively to annual periods beginning on or after January 1, 2017. Early adoption is permitted. The Standard may be applied to existing contracts beginning with the current period and thereafter. No restatement of the comparative periods will be required as long as comparative disclosures about the current period's revenues under existing IFRS are included. The Company is evaluating the possible impact of the adoption of IFRS 15 but is presently unable to assess its effect, if any, on the financial statements. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) d. Disclosure of new IFRS standards in the period prior to their adoption: (Cont.) (2) IFRS 9, "Financial Instruments": In connection with Note 4 to the annual financial statements as of December 31, 2013 regarding disclosure of new IFRS Standards in the period prior to their adoption in the issue of IFRS 9, in July 2014, the IASB issued the final and complete version of IFRS 9, "Financial Instruments" ("the final Standard") which includes the following elements: classification and measurement, impairment and hedge accounting. The main changes between the final Standard and the previously published phases of the Standard are: Classification and measurement: The final version of IFRS 9 includes another category for the classification and measurement of financial assets that represent debt instruments. Financial assets classified in this category will be measured at fair value through other comprehensive income ("FVOCI") and the differences previously carried to other comprehensive income as above will be reclassified to profit or loss under specific conditions such as when the asset is derecognised. Finance income, exchange rate differences and impairment losses on financial assets, however, will be recognised in profit or loss. The classification in this category is allowed for debt instruments that meet the following tests on a cumulative basis: - Based on the financial asset's contractual terms and on specific dates, the entity is entitled to receive cash flows that represent solely principal payments and interest payments on the principal balance. - The asset is held in the context of a business model whose aim is both to collect the contractual cash flows generated from the asset and to dispose of the asset. Impairment: The Final Standard addresses the issue of impairment of financial assets by introducing the expected credit loss impairment model to replace the incurred loss model prescribed in IAS 39. The expected credit loss model applies to debt instruments measured at amortised cost or at FVOCI and to trade receivables. The model introduces a simpler and economic approach for measuring impairment: - General approach - credit losses due to default which are expected to occur in the subsequent 12-month period will be recognised provided that there has not been a significant increase in credit risk since the date of initial recognition of the instrument. On the other hand, if there has been a significant increase in credit risk since the date of initial recognition of the instrument, a provision should be recognised for credit losses that are expected to occur over the remaining life of the exposure in respect of said instrument. NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.) d. Disclosure of new IFRS standards in the period prior to their adoption: (Cont.) (2) IFRS 9, "Financial Instruments": (Cont.) - A simpler approach (applies in certain cases and for certain groups of assets only, including trade receivables) - according to this approach, the credit losses that are expected to occur over the remaining life of the exposure in respect of said instrument should be recognised, regardless of the occurrence of credit risk changes since the date of initial recognition of said instrument. The Final Standard will be applied retrospectively, subject to certain exemptions stipulated therein, in the financial statements for annual periods beginning on or after January 1, 2018. Earlier application is permitted. The Company is evaluating the possible impact of the adoption of IFRS 9 but is presently unable to assess its effect, if any, on the financial statements. (3) Amendments to IAS 16 and IAS 38 regarding acceptable methods of depreciation and amortisation: In May 2014, the IASB issued Amendments to IAS 16 and IAS 38 (the "Amendments") regarding the use of a depreciation and amortisation method based on revenue. According to the Amendments, a revenue-based method is not considered to be an appropriate manifestation of consumption since revenue generated by an activity that includes the use of an asset generally reflects factors other than the consumption of the economic benefits embodied in the asset. As for intangible assets, the revenue-based amortisation method can only be applied under certain circumstances such as when it can be demonstrated that revenue and the consumption of economic benefits of the intangible asset are highly correlated. The Amendments will be applied prospectively in the financial statements for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The Company believes the effect on the financial statements of the adoption of the Amendments will be immaterial. NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. Share purchase agreement 1. On 2 March 2014, the Company entered into an agreement (the "WFI Agreement") to acquire from Zwi Williger ("ZW") and Joseph Williger ("JW" and, together with ZW, the "Sellers") a controlling stake in the share capital of Willi-Food Investments Ltd. ("WFI"), a company listed on the Tel Aviv Stock Exchange, which in turn owns approximately 58% of G. Willi-Food International Ltd ("WFINT" and together with WFI, "Willi-Food"), a company listed on NASDAQ (the "Acquisition"). WFI operates in import, marketing and distribution of several hundred food products mainly in Israel. Under the WFI Agreement, the Company: (i) acquired the Sellers' entire shareholdings in WFI (part of which was acquired through a special tender offer as set out below), amounting in aggregate to 58% of the shares of WFI (or approximately 55% on a fully diluted basis); and (ii) published a special tender offer (the "Special Tender Offer") addressed to all shareholders of WFI (including the Sellers) in accordance with Israeli Companies Law in order to acquire shares carrying 5% of the voting rights in WFI. NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.) Share purchase agreement. (Cont.) The Special Tender Offer was completed on 1 May 2014 and the Acquisition completed on 4 May 2014. Following such completion, the Company acquired in aggregate 61.65% of the issued share capital of WFI (62.27% of its voting rights on a fully diluted basis), for aggregate cash consideration of NIS 284.7 million (USD 82.3 million). Upon the Acquisition, the Company nominated directors which comprise the majority of the board of directors of both WFI and WFINT. 2. Under the WFI Agreement, the Company granted the Sellers a put option to sell all or some of their shares in WFINT (whether held (3.89%) on the date of the WFI Agreement or those which they may hold following the exercise of employee options in WFINT) which amount to a further approximately 7% of the shares of WFINT on a fully diluted basis (the "WFINT Put Option Shares" and the "WFINT Put Option" respectively). The WFINT Put Option is exercisable by the Sellers for a period of four years and one month commencing eleven months from completion of the Acquisition, at a price of USD 12 per share. The put option exercise price is subject to adjustment for dividends bonus, shares and rights issues by WFINT. The Company was granted a power of attorney which enables it to procure the Sellers to sell their WFINT shares to a third party at a price per share not below USD 12, subject to compliance with applicable laws, during the WFINT Put Option exercise period. The power of attorney may be cancelled by the Sellers at any time during that period, although such cancellation would lead to the immediate cancellation of the WFINT Put Option in respect of such WFINT Put Option Shares. The Sellers granted the Company an irrevocable proxy with respect to their holdings in WFINT, so as to allow the Company to vote such shares at shareholders' meetings of WFINT during the period commencing on completion of the Acquisition and expiring on the exercise or expiry of the WFINT Put Option. As part of the consideration for the acquisition, the Company recorded a liability for the WFINT Put Option, see 4(a) below. The WFI Agreement modified the terms of the unvested employee options held by the Sellers, by ensuring the sale price of the shares which will derive from the exercise of the unvested employee options. On the date of the Acquisition, the fair value of the modification for the entire vesting period (three years) of the options amounted to USD 1.4 million, based on a calculation prepared by an independent valuation specialist. In the six months and three months ended 30 June 2014, the Company recorded in profit or loss share-based payment expense of USD 215 thousand (in addition to the expense recorded in WFI in the amount of USD 83 thousand. As of 30 June 2014, the liability recorded in the statement of financial position for the put option in respect of the vested portion of these employee options amounted to USD 298 thousand. 3. Under the WFI Agreement, the Sellers agreed to continue to be engaged by WFINT as chairman of the board of WFINT (in respect of Zvi Williger) and president of WFINT (in respect of Joseph Williger), or as joint chief executive officers of WFI, for an additional period of three years commencing upon completion of the Acquisition (May 2014). On 21st August 2014, the extension of the agreements between the parties for another period of three (3) years (until 21st August 2017) was approved at WFINT's annual general meeting. Subject to further agreement between the parties and to applicable law, the Sellers may continue their respective engagement following such period. In addition, each of the Sellers is prohibited from competing against Willi-Food in any material way, subject to certain agreed exceptions, for an additional period commencing on the termination of his respective engagement with WFINT and terminating on the later of two years from such termination, or four years from completion of the Acquisition, but not longer than five (5) years from the completion date. It should be noted that the Company has withdrawn its application regarding the approval of the Israeli Anti-trust Authorities to extend the non-competition period to six years from the completion date, under all scenarios. In consideration of such non-compete undertakings, each of the Sellers is entitled to an additional annual payment of NIS 1.5 million (approximately USD 0.4 million) following termination of his respective engagement, to be paid by the Company and subject to applicable law. NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.) Share purchase agreement. (Cont.) 4. Business Combination The Company accounted for the Acquisition as a business combination and began consolidating the financial statements of WFI from the completion date of the Acquisition on 4 May 2014. a. Consideration for Acquisition U.S. Dollars in thousands Cash paid 82,342 Liability for non-controlling interest put option (a) 5,945 Liability for non-competition payments (b) 1,555 89,842 (a) As described in 2 above the Company has granted Sellers a put option to sell up to 504,407 shares of WFINT. The put option is exercisable for a period of four years and one month, commencing eleven months after the completion of the Acquisition at a price of USD 12 per share. The liability reflects the present value of the amount payable assuming exercise at the earliest permissible date of all the shares subject to the put option discounted at an annual rate of 2%. (b) The liability for non-competition payment reflects the present value of an annual payment of NIS 1.5.million (USD 0.4 million to each of the two former controlling shareholders of WFI), for a period of two years subsequent to the termination of their service agreements with the Group. (c) Cash outflow/inflow on the acquisition: U.S. Dollars in thousands Cash and cash equivalents acquired with the acquiree at the acquisition date 20,254 Cash paid (82,342) Net cash (62,088) Transaction costs of approximately USD 170 thousand that are directly attributable to the Acquisition were recorded in profit or loss. b. The Company has elected to measure the non- controlling interests in WFI at fair value. The fair value of the non- controlling interest in WFI is based on the quoted market price of the shares of WFI and WFINT on the completion date. The fair value adjustments detailed below are based on a purchase price allocation study prepared by an independent valuation specialist as of the date of the Acquisition. The purchase price allocation was prepared on the basis of an acquisition of 100% of the net assets of WFI Group. Deferred tax liability is recorded in respect of those fair value adjustments that result in taxable temporary differences. NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.) Share purchase agreement. (Cont.) 4. Business Combination (Cont.) U.S. Dollars in thousands Total consideration 89,842 Fair value of net assets acquired 137,991 Non-controlling interests (73,516) 64,475 Goodwill 25,367 The fair value of the identifiable assets and liabilities of WFI near the acquisition date: U.S. Dollars in thousands Cash and cash equivalents 20,254 Financial assets at fair value through profit or loss 59,481 Trade receivables 30,538 Other receivables and prepaid expenses 1,004 Investment in a fund designated at fair value through profit or loss 4,390 Inventories 15,479 Property, plant and equipment, net 14,480 Prepaid expenses 9 Intangible assets: Customer relationships 6,577 Supplier relationships 3,914 Brands 1,800 Non-competition agreements (*) 1,375 159,301 Short-term bank debt 834 Current maturities of debentures 3,707 Trade payables 6,311 Other accounts payable and deferred revenues 862 Income tax liability 129 Employee benefit liabilities, net- short term 620 Employee benefit liabilities, net- long term 175 Debentures 4,011 Deferred taxes 4,661 21,310 137,991 (*) The fair value of the non-competition agreements was based on a non-competition period of two years commencing three years after the Acquisition date as the individuals subject to the non-competition agreements have management service agreements with WFI Group (subject to shareholder approval) for a period of three years from the date of the Acquisition. The non-competition agreements are not amortised while the individuals subject to these agreements are providing services to the WFI Group due to the fact that according to their agreements and the Israeli Companies Law, they are prohibited from competing with WFI's business while serving as officers of WFI. NOTE 3:- ACQUSITION OF WILI-FOOD INVESTMENT LTD. (Cont.) Share purchase agreement. (Cont.) 4. Business Combination (Cont.) c. Fair value adjustment on acquisition: U.S. Dollars in thousands Property plant and equipment 2,371 Customer relationship 6,577 Supplier relationship 3,914 Brands 1,800 Non- competition agreements 1,375 Good will 25,367 Debentures (337) Deferred taxes (4,161) 36,906 The intangible assets are amortised over their estimated useful life (see Note 2(b)). d. From the date of Acquisition, WFI has contributed USD 15.9 million of revenue and USD 620 thousands (after fair value adjustments) to the net income of the B.S.D Group. If the Acquisition had taken place at the beginning of the year 2014, consolidated revenues would have been USD 50.6 million and the net income would have been USD 1.3 million. NOTE 4:- FINANCIAL INSTRUMENTS Financial instruments that are not measured at fair value: Except as detailed in the following table, the Group believes that the carrying amount of financial assets and liabilities that are presented at amortised cost in the financial statements approximates their fair value. Financial liabilities: Carrying amount Fair value 30 June 30 June 2014 2014 Unaudited U.S. Dollars in thousands Debentures and interest payable 7,759 7,585 Below are details of the Group's financial assets that are measured in the Company's statement of financial position at fair value by levels: Financial assets at fair value: 30 June 2014 Unaudited Level 1 Level 2 Total U.S. Dollars in thousands Marketable securities 61,279 1,294 62,573 Investment in fund - 4,415 4,415 Total 61,279 5,709 66,988 NOTE 5:- OPERATING SEGMENTS a. General: Upon the completion of the Acquisition of WFI in May 2014, the Group's main activity and its sole operating segment is import, marketing and distribution of food products to retail chains, supermarkets, wholesalers, and institutions mainly in Israel. An operating segment is identified on the basis of information that is reviewed by the chief operating decision maker ("CODM") to make decisions about resources to be allocated and assess its performance. b. Reporting segments: Six months Three months ended 30 June ended 30 June 2014 Unaudited U.S. Dollars in thousands Revenues Import marketing and distribution of food products 15,942 15,942 Other 65 37 16,007 15,979 Segment income (loss) Import marketing and distribution of 607 food products 607 Other (*) (4,213) (2,428) Operating loss (3,606) (1,821) Financial income, net 2,119 1,220 Loss before taxes (1,487) (601) (*) Other includes mainly unallocated corporate general and administrative expenses and expenses relating to research and development activities. Seasonality WFI Group operating results may be subject to variations from quarter to quarter depending, among others, the timing of sales campaigns and major Jewish holidays. Therefore, the operating results of WFI Group in the period ended 30 June 2014 are not necessarily indicative of its operating results for the year. c. Revenues from major customers that contributed 10% or more to the Group revenues (as percentage of the total revenue): Six and three months ended 30 June 2014 Unaudited % Customer A 15 NOTE 5:- OPERATING SEGMENTS (Cont.) The revenues from the following products contributed 10% or more to the Group revenues (as percentage of the total segment revenue): Six and three months ended 30 June 2014 Unaudited % Canned vegetables 17 Dairy and dairy substitute products 26 Dried fruit, nuts and beans 18 NOTE 6:- SUBSEQUENT EVENTS a. As described in Note 13(a) to the financial statements as of 31 December 2013 the Company filed claims against two companies (the "Respondents") for direct and indirect damages caused by infringement of patents it developed and registered. In 11 July 2014 the district court in United State of America reached a decision regarding one of the claims, and found that the Company's patent is valid but found that the Respondents did not infringe the patent. In response, the Company filed motions with the original judge hearing the claim for a contrary judgment to the jury's verdict or for a new trial. The Respondents have also filed motions with the original judge hearing the claim for a contrary judgment to the jury's verdict in respect of the validity of the Company's patent. The Company expects the court to rule on these motions in October, 2014. In addition, the Company filed its objections to the bill of costs filed by Apple Inc. In the aggregate amount of USD 328 thousands. b. On 15 August 2014, the Company published a notice of extraordinary general meeting to be held on 8 September, 2014 and at which the Company's shareholders will be asked to approve the terms of service of Mr Israel Jossef Schneorson (which will be subjected to the approval of BGI Investments (1961) Ltd. ("BGI") shareholders, such shareholder approval being capable of being overruled in special circumstances), the terms of employment of Mr Eyal Merdler and an agreement between the Company and BGI Investments (1961) Ltd. (the "BGI Management Agreement") pursuant to which the Company will provide certain services to BGI, including the services of a chief executive officer, chief financial officer, controller, bookkeeper and administrative services. Subject to the BGI Management Agreement receiving necessary approvals and being entered into, the Company will pay BGI a one-off fee of USD 660 thousands in relation to the services provided to the Company by the chief executive officer and chief financial officer between 14 August 2013 and 31 August 2014 and services provided to the Company by the corporate secretary, controller, bookkeeping and certain administrative staff of BGI between 1 January 2014 and 31 August 2014, net of expenses or amounts owing from BGI to the company as at the date of such payment . Subject to the BGI Management Agreement receiving necessary approvals and being entered into, the Company will provide BGI with the services of the chief executive officer (subject to the approval by BGI of the Company's chief executive officer's terms of service), chief NOTE 6:- SUBSEQUENT EVENTS (Cont.) financial officer, corporate secretary, controller, bookkeeping and certain administrative staff to BGI in consideration of a monthly fee equal to NIS 35,000 (approximately USD 10,000) or NIS 28,000 (approximately USD 8,000) in the event that the Company's chief executive officer's terms of service are bit approved by BGI. - - - - - - - - - - - - - - - - -