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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
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Technoplast | LSE:TNP | London | Ordinary Share | IL0005410118 | ORD ILS1.0 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.00 | - |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
RNS Number:7455S Technoplast Industries Ld 2 December 2003 KIDRON PLASTICS LTD. FINANCIAL STATEMENTS 30 JUNE 2003 (unaudited) TABLE OF CONTENTS Page Review Report 2 Financial Statements Balance Sheets 3 Statements of Income 4 Statements of Changes in Shareholders' Equity 5 Statements of Cash Flows 6 - 7 Notes to Financial Statements 8 - 10 ========================= =============== The Board of Directors Kidron Plastics Ltd. Dear Sirs, Re: Review of the unaudited interim financial statements for the period ended June 30, 2003 At your request, we reviewed the interim balance sheet of Kidron Plastics Ltd., (hereinafter - the "Company") as of June 30, 2003 and the statements of income, changes in shareholders' equity and cash flows for the six and three month periods then ended. Our review was conducted in accordance with procedures prescribed by the Institute of Certified Public Accountants in Israel and included, inter alia, reading the said financial statements, reading the minutes of the shareholders' meetings and of the Board of Directors and its committees, as well as making inquiries of persons responsible for financial and accounting matters. Since the review performed is limited in scope and does not constitute an audit in accordance with generally accepted auditing standards, we do not express an opinion on the said interim financial statements. Based on our review, we are not aware of any material modifications that would have to be made to the financial statements referred to above in order for them to be in conformity with generally accepted accounting principles, and in accordance with the Securities Regulations (periodic and immediate reports) 1970. We hereby agree to have the review report included in the immediate filing of Technoplast Industries Ltd. which is scheduled to be filed in September 2003. Oren Horowitz & Co. Certified Public Accountants (Isr.) Tel-Aviv, Israel, 14, September 2003 - 2 - The accompanying notes are an integral part of the financial statements. Balance Sheets Adjusted to NIS of June 2003 30 June 31 December 2003 2002 2002 NIS'000 NIS'000 NIS'000 (unaudited) (audited) Current assets Cash and cash equivalents 12 46 14 Trade accounts receivable 4,026 3,998 4,143 Accounts receivable and other debit balances 496 485 661 Inventory 1,106 1,009 1,257 ______ ______ ______ 5,640 5,538 6,075 --------- --------- --------- Long-term debit balances Excess of funded amounts over the liability for 21 32 23 employee severance pay, net --------- --------- --------- Fixed assets 483 489 522 --------- --------- --------- ______ ______ ______ 6,144 6,059 6,620 ______ ______ ______ ______ ______ ______ Current liabilities Credit from banking institutions 4,020 3,902 4,449 Suppliers and service providers 1,354 1,534 1,849 Accounts payable and other credit balances 564 763 412 ______ ______ ______ 5,938 6,199 6,710 --------- --------- --------- Long-term liabilities Deferred taxes 7 12 8 --------- --------- --------- Shareholders' equity (deficit) 199 (152) (98) --------- --------- --------- ______ ______ ______ 6,144 6,059 6,620 ______ ______ ______ ______ ______ ______ Michael Susz Max Kissos Natalie Eilat Chairman of the Board C.E.O. C.F.O. Date: 14 September 2003 The accompanying notes are an integral part of the financial statements. Statements of Income Adjusted to NIS of June 2003 Six months ended Three months ended 30 Year ended 30 June June 31 December 2003 2002 2003 2002 2002 NIS'000 NIS'000 NIS'000 NIS'000 NIS'000 (unaudited) (unaudited) (audited) Revenues 4,948 5,043 2,539 2,610 10,133 Cost of revenues 2,847 2,738 1,420 1,409 5,679 _____ _____ _____ _____ _____ Gross profit 2,101 2,305 1,119 1,201 4,454 -------- -------- -------- -------- -------- Selling and marketing expenses 279 259 145 116 516 General and administrative 1,424 1,714 678 808 3,221 _____ _____ _____ _____ _____ 1,703 1,973 823 924 3,737 -------- -------- -------- -------- -------- _____ _____ _____ _____ _____ Operating income 398 332 296 277 717 Finance income (expenses), net 80 (288) 158 (155) (576) Other expenses - 1 - 1 1 _____ _____ _____ _____ _____ Income before taxes on income 478 43 454 121 140 Taxes on income 181 41 168 51 84 _____ _____ _____ _____ _____ Net income 297 2 286 70 56 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ Base earnings per share (NIS) 2.97 0.02 2.86 0.70 0.56 _____ _____ _____ _____ _____ _____ _____ _____ _____ _____ The accompanying notes are an integral part of the financial statements. Statements of Changes in Shareholders' Equity Adjusted to NIS of June 2003 Share Retained Total capital earnings (accumulated deficit) NIS'000 NIS'000 NIS'000 Balance at 1 January 2002 (*) (154) (154) Changes in 2002 Net income - 56 56 ____ _______ _______ Balance at 31 December 2002 (*) (98) (98) Changes during the period 1-6/2003 (unaudited) Net income - 297 297 ____ _______ _______ Balance at 30 June 2003 (*) 199 199 ____ _______ _______ ____ _______ _______ Balance at 1 January 2002 (*) (154) (154) Changes during the period 1-6/2002 (unaudited) Net income - 2 2 ____ _______ _______ Balance at 30 June 2002 (*) (152) (152) ____ _______ _______ ____ _______ _______ Balance at 1 April 2003 (*) (87) (87) Changes during the period 4-6/2003 (unaudited) Net income - 286 286 ____ _______ _______ Balance at 30 June 2003 (*) 199 199 ____ _______ _______ ____ _______ _______ Balance at 1 April 2002 (*) (222) (222) Changes during the period 4-6/2002 (unaudited) Net income - 70 70 ____ _______ _______ Balance at 30 June 2002 (*) (152) (152) ____ _______ _______ ____ _______ _______ (*) Less than NIS 1,000. The accompanying notes are an integral part of the financial statements. Statements of Cash Flows Adjusted to NIS of June 2003 Six months ended Three months ended Year ended 30 June 30 June 31 December 2003 2002 2003 2002 2002 NIS'000 NIS'000 NIS'000 NIS'000 NIS'000 (unaudited) (unaudited) (audited) Cash flows from operating activities: Net income (loss) 297 2 286 70 56 Adjustments required to reflect cash from 159 (8) 79 (37) (548) operating activities (Appendix A) _____ _____ _____ _____ ______ Net cash provided by (used in) 456 (6) 365 33 (492) operating activities -------- -------- -------- -------- --------- Cash flows from investment activities: Purchase of fixed assets (29) (7) (3) - (101) Proceeds from sale of fixed assets - 45 - 45 46 _____ _____ _____ _____ ______ Net cash provided by (used in) (29) 38 (3) 45 (55) investment activities -------- -------- -------- -------- --------- Cash flows from financing activities: Increase (decrease) in credit from banking (429) (1) (364) (14) 546 institutions, net Repayment of long-term loans - (98) - (28) (98) _____ _____ _____ _____ ______ Net cash provided by (used in) financing (429) (99) (364) (42) 448 activities -------- -------- -------- -------- --------- _____ _____ _____ _____ ______ Increase (decrease) in cash and cash (2) (67) (2) 36 (99) equivalents Cash and cash equivalents at beginning of 14 113 14 10 113 period _____ _____ _____ _____ ______ Cash and cash equivalents at end of period 12 46 12 46 14 _____ _____ _____ _____ ______ _____ _____ _____ _____ ______ The accompanying notes are an integral part of the financial statements. Appendices to the Statements of Cash Flows Adjusted to NIS of June 2003 Appendix A - Adjustments required to reflect cash from operating activities Six months ended Three months ended Year ended 30 June 30 June 31 December 2003 2002 2003 2002 2002 NIS'000 NIS'000 NIS'000 NIS'000 NIS'000 (unaudited) (unaudited) (audited) Income and expenses not constituting cash flows: Depreciation and amortization 68 65 34 32 125 Deferred taxes, net 2 13 3 23 (30) Decrease in liability for employee 2 (4) - 4 5 severance pay Capital loss - 1 - 1 1 _____ _____ _____ _____ ______ 72 75 37 60 101 -------- -------- -------- -------- --------- Changes in assets and liabilities: Decrease (increase) in trade accounts 117 (267) (179) (138) (216) receivable Decrease (increase) in accounts receivable and 162 189 285 7 (144) other debit balances Decrease (increase) in inventory 151 (97) 65 190 (344) Increase (decrease) in suppliers (495) (213) (300) (162) 101 Increase (decrease) in accounts payable and 152 305 171 6 (46) other credit balances ______ ____ ______ ____ _____ 87 (83) 42 (97) (649) -------- -------- -------- -------- --------- ______ ____ ______ ____ _____ 159 (8) 79 (37) (548) ______ ____ ______ ____ _____ ______ ____ ______ ____ _____ NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - GENERAL A. They financial statements are presented as at 30 June 2003 and for the six and three-month periods then ended. The financial statements should be read in conjunction with the annual financial statements as at 31 December 31, 2002 and for the year then ended, together with the accompanying notes. B. The major accounting policies applied in the presentation of the financial statements are identical with those applied in the presentation of the latest annual financial statements. NOTE 2 - FINANCIAL STATEMENTS IN ADJUSTED VALUES Adjusted financial statements The financial statements are presented on the basis of the historical cost convention, adjusted for changes in the general purchasing power of the Israeli currency, on the basis of the changes in the Israeli Consumer Price Index (hereinafter - "I.C.P.I."). We present below information regarding the I.C.P.I. and the exchange rates of the U.S. dollar: ICPI U.S.$ 1 = NIS 30 June 2003 181.1 4.312 31 March 2003 183.4 4.687 31 December 2002 182.0 4.737 30 June 2002 181.7 4.769 31 March 2002 175.0 4.668 Increase (decrease) during: 3-6/03 (1.3%) (8.0%) 1-3/03 0.8% (1.1%) 1-12/02 6.5% 7.3% 3-6/02 3.9% 2.3% 1-3/02 2.4% 5.7% NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 3 - ISRAELI ACCOUNTING STANDARD NO. 12 - DISCONTINUANCE OF ADJUSTING FINANCIAL STATEMENTS According to this standard and according to the decision of the Israel Accounting Standards Board to postpone implementation of the standard as part of Standard No. 17, inflationary adjustment of financial statements will be discontinued as at 1 January 2004. Until 31 December 2003, the Company will continue to present adjusted financial statements in accordance with Opinion No. 36 of the Institute of Certified Public Accountants in Israel. The adjusted values to be included in the financial statements as at 31 December 2003 will serve as the basis for the nominal financial reporting commencing 1 January 2004. NOTE 4 - MERGER AGREEMENT A. On 31 August 2003, an agreement was signed between the shareholders of the Company (hereinafter - the "Shareholders") and Technoplast Industries Ltd. (hereinafter - "Technoplast") whereby the Shareholders will transfer to Technoplast, by way of a merger, all of the shares of the Company against an allotment of Technoplast shares which will grant the Shareholders a 75% share of the issued and paid in share capital of Technoplast (fully diluted). The percentage of the allotment was determined on the basis of a company valuation performed by an outside party. Consummation of the transaction is contingent on the fulfillment of certain conditions and on receipt of the approval of various parties. B. In view of the aforementioned agreement, the following will apply to agreements with interested parties: 1. The management agreement with the parent company, Kidron Management and Holdings (1961) Ltd., will remain in force. This agreement includes management and consulting fees at an annual rate of 5% of the Company's annual sales turnover, and a payment in respect of office services on the basis of the relative office space designated for the provision of services to the Company out of the parent company's office space. The Company estimates that the annual amount it will have to pay in respect of the office services in accordance with the relative share of office space described above would be NIS 150 thousand. 2. During the periods under report, the Company paid various payments to interested parties in respect of services. Under the new agreement, these services will be included as part of the management fees to be paid by the Company as reported in paragraph 1 above. 3. The management agreement with an interested party company, under which the Company paid management and consulting fees of U.S.$ 8,333 a month, will be endorsed such that the management fees will be paid to Technoplast and will remain within the framework of the group's revenues, following the merger. Moreover, the aforementioned management agreement will be amended so as to add a clause that stipulates that Technoplast will charge the Company in respect of expenses involving product development, consultation, and engineering services. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 4 - MERGER AGREEMENT (cont.) B. (cont.) We present below data from the pro forma income statement for the period ended 30 June 2003. The data reflect the major results of company operations in accordance with the new consideration outlined above (in NIS thousands): As reported in the financial statements Six months ended Three months ended 30 Year ended 30 June June 31 December 2003 2002 2003 2002 2002 NIS'000 NIS'000 NIS'000 NIS'000 NIS'000 (unaudited) (unaudited) (audited) General and administrative 1,424 1,714 678 808 3,221 Operating income 398 332 296 277 717 Taxes on income 181 41 168 51 84 Net income 297 2 286 70 56 Base earnings per share (NIS) 2.97 0.02 2.86 0.70 0.56 Pro forma data Six months ended Three months ended 30 Year ended 30 June June 31 December 2003 2002 2003 2002 2002 NIS'000 NIS'000 NIS'000 NIS'000 NIS'000 (unaudited) (unaudited) (audited) General and administrative 1,241 1,398 582 693 2,956 Operating income 581 648 392 392 982 Taxes on income 247 155 203 93 179 Net income 414 204 347 143 226 Base earnings per share (NIS) 4.14 2.04 3.47 1.43 2.26 ======================= ========== KIDRON PLASTICS LTD. FINANCIAL STATEMENTS 31 DECEMBER 2002 KIDRON PLASTICS LTD. FINANCIAL STATEMENTS 31 DECEMBER 2002 TABLE OF CONTENTS Page Auditors' Report 2 Financial Statements Balance Sheets 3 Statements of Income 4 Statements of Changes in Shareholders' Equity 5 Statements of Cash Flows 6 - 7 Notes to Financial Statements 8 - 24 ========================= =============== AUDITORS' REPORT TO THE SHAREHOLDERS OF KIDRON PLASTICS LTD. We have audited the accompanying balance sheets of Kidron Plastics Ltd. (hereinafter the "Company") as at 31 December 2002 and 2001, and the related statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended 31 December 2002. These financial statements are the responsibility of the board of directors and management of the Company. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, including those prescribed by the Israeli Auditors' Regulations (Mode of Performance), 1973. Those standards require that we plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the board of directors and by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in conformity with generally accepted accounting principles, in all material respects, the financial position of the Company as at 31 December 2002 and 2001, and the results of its operations, changes in its shareholders' equity and its cash flows for each of the three years in the period ended 31 December 2002. In addition, in our opinion, the aforementioned financial statements are presented in accordance with the Securities Regulations (Preparation of Annual Financial Statements), 1993. As explained in Note 2, the abovementioned financial statements are presented in adjusted values, based on changes in the general purchasing power of the Israeli currency, in accordance with opinions of the Institute of Certified Public Accountants in Israel. This opinion is based on a previous opinion, the last of which, regarding the year ended 31 December 2002, was rendered on 7 July 2003. We hereby agree to have this opinion included in the immediate filing of Technoplast Industries Ltd. which is scheduled to be filed in September 2003. Oren Horowitz & Co. Certified Public Accountants (Isr.) Tel-Aviv, Israel, 14, September 2003 - 2 - The accompanying notes are an integral part of the financial statements. Balance Sheets Adjusted to NIS of June 2003 31 December 2002 2001 Note NIS'000 NIS'000 Current assets Cash and cash equivalents 14 113 Trade accounts receivable 3 4,143(1) 3,927(1) Accounts receivable and other debit balances 4 661(1) 479(1) Inventory 5 1,257 912 _____ _____ 6,075 5,431 -------- -------- Long-term investments and debit balances Excess of funded amounts over the liability for 6 23 28 employee severance pay, net -------- -------- Fixed assets 7 522 593 -------- -------- _____ _____ 6,620 6,052 _____ _____ _____ _____ Current liabilities Credit from banking institutions 8 4,449 3,947 Suppliers and service providers 9 1,849 1,748 Accounts payable and other credit balances 10 412 457 _____ _____ 6,710 6,152 -------- -------- Long-term liabilities Deferred taxes 15 8 - Liabilities to banking institutions 11 - 54 _____ _____ 8 54 -------- -------- Contingent liabilities, commitments, and liens 13 Shareholders' deficit 12 (98) (154) -------- -------- _____ _____ 6,620 6,052 _____ _____ _____ _____ (1) Reclassified Michael Susz Max Kissos Natalie Eilat Chairman of the Board C.E.O. C.F.O. Date: 14 September 2003 The accompanying notes are an integral part of the financial statements. Statements of Income Adjusted to NIS of June 2003 Year ended 31 December 2002 2001 2000 Note NIS'000 NIS'000 NIS'000 Revenues 14-A 10,133 10,484 11,505 Cost of revenues 14-B 5,679(1) 5,904(1) 6,180(1) ______ ______ ______ Gross profit 4,454 4,580 5,325 --------- --------- --------- Selling and marketing expenses 14-C 516(1) 531(1) 548(1) General and administrative expenses 14-D 3,221(1) 3,399(1) 3,283(1) ______ ______ ______ 3,737 3,930 3,831 --------- --------- --------- ______ ______ ______ Operating income 717 650 1,494 Financing income (expenses), net 14-E (576) (586) 3 ______ ______ ______ Income after financing 141 64 1,497 Other income (expenses), net 14-F (1) 37 (11) ______ ______ ______ Income before taxes on income 140 101 1,486 Taxes on income 15 (84) (323) (561) ______ ______ ______ Net income (loss) 56 (222) 925 ______ ______ ______ ______ ______ ______ Base earnings (loss) per share (NIS) 0.56 (2.22) 9.25 ______ ______ ______ ______ ______ ______ (1) Reclassified. The accompanying notes are an integral part of the financial statements. Statements of Changes in Shareholders' Equity Adjusted to NIS of June 2003 Share Retained Total capital earnings (accumulated deficit) NIS'000 NIS'000 NIS'000 Balance at 1 January 2000 (*) 2,709 2,709 Changes in 2000 Net income - 925 925 Dividend - (430) (430) ____ _______ _______ Balance at 31 December 2000 (*) 3,204 3,204 Changes in 2001 Loss - (222) (222) Dividend - (3,136) (3,136) ____ _______ _______ Balance at 31 December 2001 (*) (154) (154) Changes in 2002 Net income - 56 56 ____ _______ _______ Balance at 31 December 2002 (*) (98) (98) ____ _______ _______ ____ _______ _______ (*) Less than NIS 1,000. The accompanying notes are an integral part of the financial statements. Statements of Cash Flows Adjusted to NIS of June 2003 Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 Cash flow from operating activities Net income (loss) for the year 56 (222) 925 Adjustments required to reconcile net income (loss) to net cash from (548) (1,141) 1,043 operating activities (Appendix A) ____ ____ ____ Net cash provided by (used in) operations activities (492) (1,363) 1,968 ------ ------ ------ Cash flows from investing activities Purchase of fixed assets (101) (215) (220) Proceeds from sale of fixed assets 46 50 82 Redemption (granting) of long-term loans - 869 (869) ____ ____ ____ Net cash provided by (used in) investing activities (55) 704 (1,007) ------ ------ ------ Cash flows from financing activities Increase (decrease) in credit from banking institutions, net 546 3,388 (431) Receipt (redemption) of long-term loan (98) 98 - Dividend distributed - (3,136) (430) ____ ____ ____ Net cash provided by (used in) financing activities 448 350 (861) ------ ------ ------ ____ ____ ____ Increase (decrease) in cash and cash equivalents (99) (309) 100 Cash and cash equivalents, beginning of the year 113 422 322 ____ ____ ____ Cash and cash equivalents, end of the year 14 113 422 ____ ____ ____ ____ ____ ____ The accompanying notes are an integral part of the financial statements. Appendices to the Statements of Cash Flows Adjusted to NIS of June 2003 Appendix A - Adjustments required to reconcile net income /loss to net cash from operating activities Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 Income and expenses not constituting a current flow of funds Depreciation and amortization 125 130 133 Deferred taxes, net (30) 18 11 Increase in liability for employee severance pay, net 5 86 (128) Capital loss (gain) 1 (37) 11 ____ ____ ____ 101 197 27 ------ ------ ------ Changes in assets and liabilities Increase in trade accounts receivable (216) (178) (161) Decrease (increase) in accounts receivable and other debits (144) (355) 248 Decrease (increase) in inventory (345) 126 (84) Increase in supplier balances 101 28 347 Increase (decrease) in accounts payable and other credit balances (45) (959) 666 ____ ____ ____ (649) (1,338) 1,016 ------ ------ ------ ____ ____ ____ (548) (1,141) 1,043 ____ ____ ____ ____ ____ ____ NOTES TO THE FINANCIAL STATEMENTS NOTE 1 - GENERAL A. The Company was incorporated on 10 August 1993 and commenced operations at the beginning of 1994. The Company is engaged in importing, marketing and selling raw materials in the field of plastics. B. Definitions The Company - Kidron Plastics Ltd. Interested parties - As defined in the Securities Regulations (Preparation of Annual Financial Statements) 1993 Related party - As defined in Opinion No. 29 of the Institute of Certified Public Accountants in Israel NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES The major accounting policies applied in the presentation of the financial statements are as follows: A. Adjusted financial statements 1. The Company records its current transactions in nominal Shekels. In accordance with the principles set forth in Opinions issued by the Institute of Certified Public Accountants in Israel, the financial statements are presented in terms of the shekel at the end of the reporting period, having identical purchasing power (adjusted NIS). The purchasing power of adjusted NIS reflects the price level of June 2003 - in accordance with the Israeli Consumer Price Index of June 2003 which was published on 15 July 2003 (see Note 2I). 2. The adjusted amounts presented in the financial statements do not necessarily represent their realizable or current economic value. The figures merely represent historical cost, adjusted for changes in the general purchasing power of the Israeli currency. 3. The term "cost", as used in these financial statements, refers to cost in adjusted shekels. 4. The condensed nominal data are presented in Note 19. B. Principles of adjustment 1. Balance sheet Non-monetary items (amounts in the balance sheet which reflect historical value at the time of acquisition or generation - see below) were adjusted for changes in the Israeli Consumer Price Index (hereinafter - "I.C.P.I.") from the date of purchase or generation. The following items were treated as non-monetary: fixed assets, inventory, and share capital. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.) B. Principles of adjustment (cont.) 2. Statement of Income a. Income statement items (excluding financing items), which reflect transactions conducted during the year, were adjusted on the basis of the dates on which the transactions were carried out, in accordance with monthly base indices. Erosion of monetary balances related to these transactions were including in the financing component. b. Income statement components related to non-monetary items in the balance sheet were adjusted in accordance with the same basis that was used in adjusting the relevant balance sheet item: asset write-downs, etc. c. Income statement components related to allowances contained in the balance sheet were computed on the basis of the changes in the related balance sheet items, taking into consideration the relevant cash flows deriving therefrom. d. The net financing component is derived from the other income statement components, and reflects financing income and expenses in real terms, including the erosion of monetary items during the course of the year. C. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, including contingent liabilities, and the reported amounts of revenues and expenses. These estimates are computed on the basis of Management evaluations, based on past experience and data. Actual results could differ from these estimates. D. Cash and cash equivalents Cash and cash equivalents includes cash held in banks in shekels and in foreign currency, as well as deposits held in banks for immediate withdrawal or with original maturity dates of three months or less. E. Allowance for doubtful debts The allowance for doubtful debts is computed mainly for specific debts, the collection of which is deemed doubtful. F. Inventory Inventory is valued at the lower of cost or market value. Cost is determined on the "first in first out" method. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.) G. Fixed assets Fixed assets are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line method, at annual rates considered adequate to fully depreciate the assets over their estimated useful lives. Annual rates of depreciation are as follows: Equipment and furniture - 6-15%; computers and peripheral equipment - 33%; leasehold improvements - for the duration of the lease. H. Deferred taxes Deferred taxes are computed in respect of temporary differences, which include timing differences in reporting income and expenses for accounting purposes and reporting them for tax purposes, and differences in respect of the value of assets and liabilities for tax purposes and their book value. The deferred taxes are computed at the rates expected to be in effect when the deferred taxes are utilized. I. Israel Consumer Price Index and the Exchange Rate of the U.S. Dollar 1. Balances denominated in foreign currency or linked thereto are presented according to the exchange rate of the balance sheet date. 2. Balances linked to the ICPI are presented on the basis of the index to which they balance is linked. 3. We present below information regarding the increase (decrease) in the I.C.P.I. and the exchange rates of the U.S. dollar: ICPI U.S.$ 1 = NIS 30 June 2003 181.1 4.312 31 December 2002 182.0 4.737 31 December 2001 170.9 4.416 31 December 2000 168.5 4.041 Increase (decrease) during: 2002 6.5% 7.3% 2001 1.4% 9.3% 2000 0.0% (2.7%) J. Revenue recognition Revenues from sales are recognized upon the supply of the products to the customers. Revenues from commissions are recognized on the accrual basis. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (cont.) K. Earnings per share Earnings per share is computed according to the provisions of Opinion No. 55 of the Institute of Certified Public Accountants in Israel. For information regarding the number of shares that was used as the basis for the computation, see Note 16. L. Financial instruments The Company's financial instruments include mainly non-derivative assets and liabilities - cash and cash equivalents, trade and other accounts receivable, credit from banking institutions, trade and other accounts payable. Due to their nature, the fair value of the aforementioned financial instruments is not materially different than their value as presented in the financial statements. M. New accounting standards Standard No. 12 - Discontinuance of Adjusting Financial Statements According to this standard and according to the decision of the Israel Accounting Standards Board to postpone implementation of the standard as part of Standard No. 17, inflationary adjustment of financial statements will be discontinued as at 1 January 2004. Until 31 December 2003, the Company will continue to present adjusted financial statements in accordance with Opinion No. 36 of the Institute of Certified Public Accountants in Israel. The adjusted values to be included in the financial statements as at 31 December 2003 will serve as the basis for the nominal financial reporting commencing 1 January 2004. Standard No. 15 - Decline in Asset Value The Standard stipulates the accounting treatment in the event of a decline in value of the company's assets, including investments in investee companies which are not subsidiaries, goodwill deriving from the acquisition of companies, and adjustments to fair value. This standard applies to the financial statements of periods commencing on 1 January 2003. In the opinion of the Company, this standard will have no material effect, if any, on the financial statements of the Company. NOTE 3 - TRADE ACCOUNTS RECEIVABLE 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Composition: Open accounts 3,059 2,777 Post-dated checks 1,036 1,009 Income receivable 205 196 _______ _______ 4,300 3,982 Allowance for doubtful debts (157) (55) _______ _______ 4,143 3,927 _______ _______ _______ _______ NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 4 - ACCOUNTS RECEIVABLE AND OTHER DEBIT BALANCES 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Composition: Interested party company (1) 185 - Deferred taxes (Note 15) 64 26 Institutions 363 407 Miscellaneous and prepaid expenses 49 46 _______ _______ 661 479 _______ _______ _______ _______ (1) Linked to the I.C.P.I., non-interest bearing. NOTE 5 - INVENTORY 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Raw materials 1,257 912 _______ _______ _______ _______ NOTE 6 - EXCESS OF FUNDED AMOUNTS OVER THE LIABILITY FOR EMPLOYEE SEVERANCE PAY, NET A. Composition: 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Funded amounts 52 69 Less - liability for severance pay 29 41 ______ ______ 23 28 ______ ______ ______ ______ B. The obligation of the Company for employee severance pay is covered by payments of premiums for managers insurance policies and by the liability presented in the balance sheet. The amounts accumulated in the managers insurance policies are not reflected in the financial statements since they are neither controlled nor managed by the Company. C. The funded amounts are on deposit with recognized severance funds, in the name of the Company, and include income accrued until the balance sheet date. The amounts on deposit can be withdrawn only after fulfillment of the terms of the Severance Pay Law. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 7 - FIXED ASSETS Equipment & Motor Computers Leasehold Total furniture vehicles and improve-ments peripheral equipment NIS'000 NIS'000 NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) (adjusted) (adjusted) Cost Balance at 1 January 2002 242 653 58 62 1,015 Acquisitions during the year 8 - 14 79 101 Disposals during the year - (56) - - (56) ______ ______ _____ ______ _______ Balance at 31 December 2002 250 597 72 141 1,060 ---------- --------- -------- --------- ---------- Accumulated depreciation Balance at 1 January 2002 171 182 45 24 422 Depreciation for the year 15 93 9 8 125 Cancellations for disposals during the - (9) - - (9) year ______ ______ _____ ______ _______ Balance at 31 December 2002 186 266 54 32 538 --------- --------- -------- --------- ---------- ______ ______ _____ ______ _______ Depreciated cost 31 December 2002 64 331 18 109 522 ______ ______ _____ ______ _______ ______ ______ _____ ______ _______ 31 December 2001 71 471 13 38 593 ______ ______ _____ ______ _______ ______ ______ _____ ______ _______ NOTE 8 - CREDIT FROM BANKING INSTITUTIONS Interest 31 December Rates 2002 2001 % NIS'000 NIS'000 (adjusted) (adjusted) Overdraft 8.4 - 11.9 423 423 Short-term bank loans (1) 4,026 3,480 Current maturities (see Note 11) - 44 _______ _______ 4,449 3,947 _______ _______ _______ _______ 1. Shekel loans amounting to NIS 1,998 thousand (last year NIS 3,480 thousand) bear interest at a rate of Prime + 0.5%. Loans linked to the U.S. dollar, in an amount of NIS 2,028 thousand, bear interest at a rate of LIBOR + 2.5%. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 9 - SUPPLIERS AND SERVICE PROVIDERS 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Composition Open debts 1,751 1,464 Post-dated checks 98 284 _______ _______ 1,849 1,748 _______ _______ _______ _______ NOTE 10 - ACCOUNTS PAYABLE AND OTHER CREDIT BALANCES 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Composition Interested party companies (1) 322 249 Employees 41 46 Institutions 10 106 Reserve for vacation pay 20 17 Miscellaneous and expenses payable 19 39 _______ _______ 412 457 _______ _______ _______ _______ (1) The balances are linked to the I.C.P.I. NOTE 11 - LIABILITIES TO BANKING INSTITUTIONS Interest 31 December Rates 2002 2001 % NIS'000 NIS'000 (adjusted) (adjusted) Loans linked to the ICPI 5.5 - 98 Less current maturities - 44 _______ _______ - 54 _______ _______ _______ _______ NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 12 - SHARE CAPITAL Composition: Number of shares 31 December 2002 31 December 2001 Registered Issued and Registered Issued and outstanding outstanding Ordinary shares, NIS 1 par value 22,900 100 22,900 100 _________ _________ _________ _________ _________ _________ _________ _________ NOTE 13 - CONTINGENT LIABILITIES, COMMITMENTS AND LIENS A. Liens The Company pledged all of its assets in favour of the First International Bank of Israel Ltd., including all types of rights that it currently has or will have in the future. The amount secured by these liens as at 31 December 2002 totalled NIS 4,450 thousand. B. Guarantees The parent company is a guarantor for the liabilities of the Company to the First International Bank of Israel Ltd. C. Commitments 1. The Company has an agreement with the C.E.O. of the Company to receive C.E.O. services through a company under his control, in consideration for an amount of U.S.$ 14,552 per month, plus an annual bonus based on the results of the Company's operations. Subsequent to the balance sheet date, the amount of the remuneration was changed to U.S.$ 12,469 per month, commencing on 1 January 2003. The agreement is in force until 31 December 2004. 2. The Company has an agreement to receive management services from the parent company in consideration for an amount equal to 5% of the Company's sales turnover. Under this agreement, the Company also received office services from the parent company, and, as part of the agreement, the Company paid in 2002, 2001, and 2000, amounts of NIS 258 thousand, NIS 449 thousand, and NIS 207 thousand respectively. For information regarding the Company's estimate of office services provided subsequent to the balance sheet date, see Note 18. 3. The Company has an agreement for provision of import, storage, and distribution services to an interest party, under which the Company received an amount of NIS 190 thousand in 2002. 4. The Company has an agreement to receive management and consultancy services from an interest party company, in consideration for an amount of U.S.$ 8,333 per month. 5. The Company has an agreement to rent 2 buildings covering an area of 800 sq.m. in Haifa. The buildings are used to maintain and operate a workshop, manufacturing, marketing and importing of raw materials for industry. This agreement is in force until 31 December 2005. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 13 - CONTINGENT LIABILITIES, COMMITMENTS AND LIENS (cont.) D. Litigation In June 2003, a former employee of the Company filed a suit in respect of bodily damages allegedly caused to him during his work at the Company. Based on the opinion of its legal counsel, and on its insurance policy, the Company estimates that there will be no material exposure in respect of this suit, and therefore, no provision was set up in the financial statements in respect thereof. NOTE 14 - NOTES TO THE INCOME STATEMENTS Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) A. Revenues Sales 9,480 9,784 10,767 Commissions 653 700 738 _______ _______ _______ 10,133 10,484 11,505 _______ _______ _______ _______ _______ _______ B. Cost of revenues Purchases 6,024 5,777 6,264 Changes in inventory (345) 127 (84) _______ _______ _______ 5,679 5,904 6,180 _______ _______ _______ _______ _______ _______ C. Selling and marketing expenses Payroll and related expenses 203 215 197 Vehicle maintenance (including depreciation) 204 251 247 Advertising 10 24 29 Others 99 41 75 _______ _______ _______ 516 531 548 _______ _______ _______ _______ _______ _______ D. General and administrative expenses Payroll and related expenses and management fees 1,399 1,559 1,712 Management fees and reimbursement of expenses of parent 1,280 1,401 1,076 company Bad and doubtful debts 107 (5) 51 Depreciation and amortisation 21 19 15 Others 414 425 429 _______ _______ _______ 3,221 3,399 3,283 _______ _______ _______ _______ _______ _______ NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 14 - NOTES TO THE INCOME STATEMENTS (cont.) Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) E. Financing income (expenses), net Short-term loans (370) (282) (70) Erosion and other financing expenses, net (206) (304) 73 _______ _______ _______ (576) (586) 3 _______ _______ _______ _______ _______ _______ F. Other income (expenses), net Capital gain (loss) (1) 37 (11) _______ _______ _______ _______ _______ _______ NOTE 15 - TAXES ON INCOME A. Composition: Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) Current taxes (104) (40) (542) Prior years' taxes (10) (265) (8) Deferred taxes 30 (18) (11) _______ _______ _______ Taxes on income (84) (323) (561) _______ _______ _______ _______ _______ _______ B. Deferred taxes 1. Changes in deferred taxes Short-term Long-term Total NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) Balance as at 1 January 2001 25 19 44 Changes in 2001 Savings (expense) 1 (19) (18) _______ _______ _______ Balance as at 31 December 2001 26 - 26 Changes in 2002 Savings (expense) 38 (8) 30 _______ _______ _______ Balance as at 31 December 2002 64 (8) 56 _______ _______ _______ _______ _______ _______ NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 15 - TAXES ON INCOME (cont.) B. Deferred taxes (cont.) 2. Balances presented in the balance sheet: 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Current assets 64 26 Long-term liabilities (8) - _______ _______ 56 26 _______ _______ _______ _______ C. Legislation pertaining to taxation under inflationary conditions The Income Tax Law (Inflationary Adjustments) 1985 set down measurement of results of operations for tax purposes on a "real" basis. The Company is taxed under this law. D. Final tax assessments The Company has final tax assessments in respect of the tax years up to and including 1999. E. Theoretical tax We present below the major components of the reconciliation between the theoretical income tax expense computed on the pre-tax income (loss) and the amount presented in the financial statements: Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) Pre-tax income 140 101 1,486 _______ _______ _______ _______ _______ _______ Theoretical tax computed at regular rates (50) (36) (535) Increase in tax liability due to: Non-deductible expenses (15) (15) (13) Prior years' taxes (10) (265) (8) Other differences, net (9) (7) (5) _______ _______ _______ Amount presented in financial statements (84) (323) (561) _______ _______ _______ _______ _______ _______ NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 16 - EARNINGS (LOSS) PER SHARE We present below details of the earnings (loss) per share and the number of shares used in computing the earnings (loss) per share): 2002 2001 2000 NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) Earnings (loss) per share 56 (222) 925 _______ _______ _______ _______ _______ _______ Number of shares used to compute EPS 100 100 100 _______ _______ _______ _______ _______ _______ NOTE 17 - INTERESTED AND RELATED PARTIES A. Transactions with interested parties Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 (adjusted) (adjusted) (adjusted) Management fees, office services, and 1,280 1,401 1,076 reimbursement of parent company expenses Management fees, grants, consultancy, and 913 888 1,471 salary of the Company's C.E.O. (1) (2) Grants to former interested parties 89 183 - (1) For information regarding the agreement with the C.E.O., see Note 13C(1). (2) In 2000, the C.E.O. of the Company received a salary, and in 2001 and 2002, management fees were paid to a company under his control. B. Balances with related parties Asset and liability items include the following balances with interested parties: 31 December 2002 2001 NIS'000 NIS'000 (adjusted) (adjusted) Credit balances as at the end of the year (322) (249) _______ _______ _______ _______ Debit balances as of the end of the year 185 - _______ _______ _______ _______ The highest debit balances during the year were: 185 - _______ _______ The balances are linked to the I.C.P.I. and bear no interest. C. For information regarding guarantees with interested parties, see Note 13-B. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 18 - MERGER AGREEMENT A. On 31 August 2003, an agreement was signed between the shareholders of the Company (hereinafter - the "Shareholders") and Technoplast Industries Ltd. (hereinafter - "Technoplast") whereby the Shareholders will transfer to Technoplast, by way of a merger, all of the shares of the Company against an allotment of Technoplast shares which will grant the Shareholders a 75% share of the issued and paid in share capital of Technoplast (fully diluted). The percentage of the allotment was determined on the basis of a valuation performed by an outside party. Consummation of the transaction is contingent on the fulfillment of certain conditions and on receipt of the approval of various parties. B. In view of the aforementioned agreement, the following will apply to agreements with interested parties: 1. The management agreement with the parent company, Kidron Management and Holdings (1961) Ltd., will remain in force. This agreement includes management and consulting fees at an annual rate of 5% of the Company's annual sales turnover, and a payment in respect of office services on the basis of the relative office space designated for the provision of services to the Company out of the parent company's office space. For information regarding the amounts paid by the Company in respect of this agreement, see Note 13-C-2. The Company estimates that the annual amount it will have to pay in respect of the office services in accordance with the relative share of office space described above would be NIS 150 thousand. During the years under report, the Company paid various payments to interested parties in respect of services. Under the new agreement, these services will be included as part of the management fees to be paid by the Company as reported in Note 13-C-2. 2. The management agreement with an interested party company, under which the Company paid management and consulting fees of U.S.$ 8,333 a month, will be endorsed such that the management fees will be paid to Technoplast and will remain within the framework of the group's revenues, following the merger as per Note 13-C-4. Moreover, the aforementioned management agreement will be amended so as to add a clause that stipulates that Technoplast will charge the Company in respect of expenses involving product development, consultation, and engineering services. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 18 - MERGER AGREEMENT (cont.) B. (cont.) We present below data from the pro forma income statement for the three years period ended 31 December 2002. The data reflect the major results of company operations in accordance with the new consideration outlined above (in NIS thousands): As reported in the financial Pro forma data statements 2002 2001 2000 2002 2001 2000 General and administrative 3,221 3,399 3,283 2,956 2,862 2,345 expenses Operating income 717 650 1,494 982 1,187 2,432 Taxes on income 84 323 561 179 517 899 Net income (loss) 56 (222) 925 226 121 1,525 Base earnings (loss) per 0.56 (2.22) 9.25 2.26 1.21 15.25 share - in NIS NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 19 - LINKAGE TERMS Adjusted NIS thousands 31 December 2002 Monetary balances Foreign Index-linked Unlinked Non-monetary Total currency-linked balances (1) Assets Cash and cash equivalents - - 14 - 14 Trade accounts receivable - - 3,938 - 3,938 Accounts receivable and other debit 205 549 - 112 866 balances Inventories - - - 1,257 1,257 Excess of funded amounts over the - - 23 - 23 liability for severance pay, net Fixed assets - - - 522 522 ________ ________ ________ ________ ________ Total assets 205 549 3,975 1,891 6,620 ------------ ------------ ------------ ------------ ------------ Liabilities Credit from banking institutions 2,135 - 2,314 - 4,449 Suppliers and service providers 1,419 - 430 - 1,849 Accounts payable and other credit - 322 90 - 412 balances Deferred taxes - - - 8 8 ________ ________ ________ ________ ________ 3,554 322 2,834 8 6,718 ------------ ------------ ------------ ------------ ------------ ________ ________ ________ ________ ________ Excess assets (liabilities) (3,349) 227 1,141 1,883 (98) ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ Adjusted NIS thousands 31 December 2001 Monetary balances Foreign Index-linked Unlinked Non-monetary Total currency-linked balances (1) Assets Cash and cash equivalents 99 - 14 - 113 Trade accounts receivable - - 3,731 - 3,731 Accounts receivable and other debit 196 407 - 72 675 balances Inventories - - - 912 912 Excess of funded amounts over the - - 28 - 28 liability for severance pay, net Fixed assets - - - 593 593 ________ ________ ________ ________ ________ Total assets 295 407 3,773 1,577 6,052 ------------ ------------ ------------ ------------ ------------ Liabilities Credit from banking institutions - - 3,947 - 3,947 Suppliers and service providers 1,144 - 604 - 1,748 Accounts payable and other credit - 249 208 - 457 balances Liabilities to banking institutions - 54 - - 54 ________ ________ ________ ________ ________ 1,144 303 4,759 - 6,206 ------------ ------------ ------------ ------------ ------------ ________ ________ ________ ________ ________ Excess assets (liabilities) (849) 104 (986) 1,577 (154) ________ ________ ________ ________ ________ ________ ________ ________ ________ ________ (1) Mainly to the Euro. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 20 - COMPANY FINANCIAL STATEMENT DATA IN NOMINAL VALUES A. Balance sheets 31 December 2002 2001 NIS'000 NIS'000 Current assets Cash and cash equivalents 14 106 Trade accounts receivable 4,164(1) 3,707(1) Accounts receivable and other debit balances 664(1) 452(1) Inventory 1,263 861 _______ _______ 6,105 5,126 ----------- ----------- Long-term debit balances Excess of funded portion over liability for severance pay, net 23 26 ------------ ----------- Fixed assets 486 541 ----------- ----------- _______ _______ 6,614 5,693 ________ _______ ________ _______ Current liabilities Credit from banking institutions 4,472 3,725 Suppliers and service providers 1,858 1,649 Accounts payable and other credit balances 414 433 _______ _______ 6,744 5,807 ----------- ----------- Long-term liabilities Loan from banking institution - 50 Deferred taxes 8 - ________ _______ 8 50 ------------ ----------- Shareholders' deficit (138) (164) ------------ ----------- ________ _______ 6,614 5,693 ________ _______ ________ _______ (1) Reclassified. NOTES TO THE FINANCIAL STATEMENTS (cont.) NOTE 20 - COMPANY FINANCIAL STATEMENT DATA IN NOMINAL VALUES (cont.) B. Income statements Year ended 31 December 2002 2001 2000 NIS'000 NIS'000 NIS'000 Revenues 10,057 9,894 10,708 Cost of revenues 5,577 5,558 5,752 ________ ________ ________ Gross profit 4,480 4,336 4,956 ----------- ------------ ------------ Selling and marketing expenses 511 496 504 General and administrative expenses 3,187 3,205 3,042 _______ _______ _______ 3,698 3,701 3,546 ----------- ------------ ------------ Operating income 782 635 1,410 Financing (income) expenses, net (674) (532) 1 _______ _______ _______ Income (loss) after financing 108 103 1,411 Other income (expenses), net 1 37 (3) _______ _______ _______ Income before taxes on income 109 140 1,408 Taxes on income (83) (304) (522) _______ _______ _______ Net income (loss) 26 (164) 886 _______ _______ _______ _______ _______ _______ C. Statement of changes in shareholders' equity Share capital Retained earnings Total (accumulated deficit) NIS'000 NIS'000 NIS'000 Balance at January 1, 2000 (*) 2,473 2,473 Changes in 2000 Net income - 886 886 Dividend distribution - (400) (400) __ _______ _______ Balance at 31 December 2000 (*) 2,959 2,959 Changes in 2001 Loss - (164) (164) Dividend distribution - (2,959) (2,959) __ _______ _______ Balance at 31 December 2001 (*) (164) (164) Changes in 2002 Net income - 26 26 __ _______ _______ Balance at 31 December 2002 (*) (138) (138) __ _______ _______ __ _______ _______ (*) Less than NIS 1,000. This information is provided by RNS The company news service from the London Stock Exchange END IOEILFFLFFLFIIV
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