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Formula Telecom Solutions Ltd. (FTS) Announces Interim Results for the Six Months Ended June 30, 2009

London, UK | August 14, 2009: FTS (LSE: FTS), a global provider of Billing, CRM and Business Control solutions for communications and content service providers, today announced its results for the six months ending June 30, 2009.

Highlights: 

• 2009 first half net loss of US$76,000 compared to net profit of US$1,857,000 in the first half of 2008.

• 2009 first half revenues down by 39.7% to US$9,864,000 compared to US$16,351,000 in the first half of 2008.

• 2009 first half gross profit down by 40.1% to US$4,641,000 compared to US$7,750,000 in the first half of 2008.

'The first half of 2009 was affected by the global economic situation which slowed down expenditure on new and existing projects, resulting in delays in closing new deals and implementing existing projects,' said Asher Polani, FTS' Chief Executive Officer. 'Following the greater emphasis on short time-to-market and the lower TCO demands from the market, FTS has repositioned its offering and realigned its business directions, extending 3rd party partnerships and collaboration as well as its product scope & field-handling flexibility, strengthening our market reach & attractiveness. We are extremely confident in our strong pipeline, our breadth of products and roadmap, and we are currently negotiating several new projects, which we expect will materialize during the second half of the year and during 2010.'

About FTS  

FTS (LSE: FTS) is a leading provider of billing, CRM and business control solutions for communications, content and service providers. By analyzing events from a business standpoint rather than just billing them, FTS allows providers to better understand their customer base and leverage business value from every event and interaction. FTS deploys its full range of end-to-end, standalone and add-on solutions with customers in over 40 countries and has implemented solutions in wireless, wireline, cable, content and broadband markets, including multiple cross-network installations. Serving the evolving needs of both traditional and next-generation service providers, the company's operations comprise four international R&D locations and strategically-located sales support offices worldwide. For more information, visit http://www.fts-soft.com/.

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Enquiries:

Sonus PR for FTS

Martin Smith, Tel. +44 20 7851 4821, martin.smith@sonuspr.com 

Seymour Pierce Limited

Mark Percy, Tel: +44 (0) 207 107 8000, markpercy@seymourpierce.com 

FTS

investors@fts-soft.com

Chairman's Statement

I am pleased to report FTS' 2009 interim results for the six months to 30 June 2009.

FTS sells next generation business control and infrastructure software solutions for communications service providers. Our solutions enable providers to address the key issues of today's communication market: customer retention and revenue growth. By analyzing events from a business standpoint rather than just billing them, FTS allows providers to better understand their customer base and leverage business value from every event and interaction. FTS deploys its full range of solutions to customers worldwide and has implemented solutions in wireless, wire line, cable, content and broadband markets. The Company targets Tier-1 operators in developed markets with its business control solutions, as well as operators in emerging markets.

The telecoms market is evolving with the growth in both wireline and wireless broadband (WiMAX, LTE) IP-based communication and continuing consolidation in the market. In response to market changes, providers are restructuring their businesses and aligning vendors to their future needs. This is both a challenge and long-term opportunity for FTS. FTS predicted these transformations in the industry and has been working aggressively to adapt the Company to the new market environment, as well as developing new products and services that meet the customers' ever-changing requirements.

In 2008 FTS announced the launch of Leap™ Billing & CRM - FTS' next generation converged, pre-integrated billing & CRM solution. The product suite has been designed to inherently unify billing and CRM information, providing a holistic view of all customer events and billing events and enabling in-depth service personalization. Based upon a process-driven design, the solution offers unparalleled flexibility, empowering service providers to quickly launch and easily manage multi-service offerings in-house in real time without vendor intervention.

Leap Billing & CRM is an end-to-end converged solution based on telecom-specific business processes that reflect the industry's best practices. The solution allows new business practices to be instantly implemented and new services, bundles and promotions to be rolled out immediately, without involving costly billing and CRM integration projects. In this way, Leap Billing & CRM offers a long-term, viable solution to the ever-evolving needs of telecom providers.

Initial market response is highly positive with strong feedback from industry analysts, industry press, potential partners and customers, stressing the real market need the Company is addressing and the superiority of the solutions it presents. FTS expects to continue its marketing efforts during 2009 to leverage this new momentum with a marketing and sales campaign to launch the new strategy and products. The Company anticipates this new positioning and the associated marketing campaign will result in market interest in its products and lead to new bid proposals. It is expected that some of these will materialize into contracts in the second half of 2009 and 2010, although due to the global economic situation it might take longer than initially expected.

Results

In the six months to 30 June 2009 total revenue was $9.8641m (2008: $16.351m), the decrease of 39.7% was mainly due to longer implementation processes than originally expected mainly due to the global economic situation.

 

Gross profit for the six months to 30 June 2009 was $4.641m (2008: $7.750m), gross margin was 47% same as in 2008. 

Research and development expenditure in the six months to 30 June 2009 was $1.440m (2008: $2.007m), a decrease of 28.2%. This decrease was mainly due to diversion of R&D efforts towards delivery of projects and reduction of the headcount. 

Sales and marketing costs in the twelve months to 30 June 2009 were $1.351m (2008: $1.715m), a decrease of 21.2% mainly due to fewer commissions paid to agents in light of the change in the mix of sales.  

General and administrative costs in the twelve months to 30 June 2009 were $1.881m (2008: $2.294m), a decrease of 18%. This decrease was mainly due to adjustment of provisions. 

The Company's operating loss in the six months to 30 June 2009 was $0.031m (2008: operating income of US$1.734m). 

The net financial income for the six months to 30 June 2009 were $0.259m (2008: financial income of $0.236m) which resulted from gains from securities and bonds in amount of approximately $0.272m, Exchange rate of approximately $0.109m less interest paid on bank loans.

Net loss for the twelve months to 30 June 2009 was $0.076m (2008: net profit of $1.857m). 

Outlook

The Telecom industry, as part of the global market, is experiencing a global turbulence which creates challenges for BSS vendors. However, FTS has taken positive steps to adjust its business to the needs of its customers, and has broken even with a positive EBITDA of $1.01m, despite challenging market conditions.'

We believe that the FTS management's extensive, ongoing efforts will result in increased revenues and profitability in forthcoming years.  

The Company is involved in a number of bid proposals which are at various stages of the sales cycle. We expect some of these to crystallize into contracts in the near future although it is difficult to predict the exact timing.

We also believe that our online charging and policy management solutions will enable us to penetrate Tier-1 service providers in developed markets. We expect to obtain growth in the future, based on our extensive pipeline and consolidated roadmap of products and solutions.

Dan Goldstein

Chairman

The amounts are stated in U.S. dollars ($).

 

To:

The Shareholders

F.T.S - Formula Telecom Solutions Limited

Dear Sir or Madam,

Re: Auditing Accountants Review Report to the Shareholders of F.T.S - Formula Telecom Solutions Limited

Introduction

We have reviewed the attached financial information of F.T.S - Formula Telecom Solutions Limited (herein: 'the Company'), comprising Interim Consolidated Financial Position for 30th June 2009 and the Interim Consolidated Statements of Comprehensive Income (Loss), Interim Consolidated Statements of Changes in Shareholders' Equity and Interim Consolidated Statements of Cash Flows for the periods of six months ending on that date. The Board of Directors and the management are responsible for the preparation and presentation of the financial information for these interim periods in accordance with International Accounting Standard IAS 34 'Interim Financial Reporting'. Our responsibility is to express conclusions as to this interim financial information based on our review. 

Scope of the review

We have carried out our review in accordance with Review Standard 1 of the Israel Certified Public Accountants Institute 'Review of Interim Financial Information Performed by the Auditing Accountant of the Entity'. A review of financial information for interim periods consists of discussions, mainly with persons responsible for financial and accounting matters, and the implementation of analytical and other review procedures. The review is significantly more limited in extent than an audit carried out in accordance with generally accepted auditing standards in Israel and thus does not enable us to attain any degree of certainty that all material matters which could have been indentified in an audit are known to us. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has been brought to our attention that could cause us to be of the view that the aforementioned financial information has not been prepared, in all material respects, in accordance with the International Accounting Standard IAS 34.

Tel-Aviv, Israel    August 13, 2009

	Ziv Haft
	Certified Public Accountants (Isr.)
	BDO Member Firm

F.T.S - Formula Telecom Solutions Limited Interim Consolidated Statements of Comprehensive Income (Loss)
	Period ended June 30,				Year ended December 31,
	2009		2008		2008
	U.S. In thousands
	Unaudited				Audited
Revenues	9,864		16,351		30,031
Cost of sales	5,223		8,601		14,605
Gross profit	4,641		7,750		15,426
Research and development expenses	1,440		2,007		3,710
Sales and marketing costs	1,351		1,715		3,706
General and administrative expenses, net	1,881		2,294		4,662
Profit (loss) from operations	(31)		1,734		3,348
Finance expense	120		182		1,726
Finance income	(379)		(418)		(230)
Profit before tax	228		1,970		1,852
Tax expense	304		113		757
Net Profit (loss)	(76)		1,857		1,095
Other comprehensive income/ (loss):
Net unrecognized actuarial profit (loss)	5		(33)		(49)
Other comprehensive income/ (loss), net of tax	5		(33)		(49)
Total comprehensive income/ (loss) for the period	(71)		1,824		1,046
Earnings (loss) per share:
Basic and diluted (dollars per share)	(0.0023)		0.0568		0.0332
Weighted average number of shares outstanding
Basic and diluted	32,956,012		32,956,012		32,956,012

The accompanying notes form an integral part of the financial statements.

 

F.T.S - Formula Telecom Solutions Limited Interim Consolidated Statements of Changes in Shareholders' Equity
For the six months ended June 30, 2009:
	Share capital		Additional paid in capital		Retained earnings		Treasury share reserves		Total
	U.S. In thousands
	Unaudited
Balance at January 1, 2009 (Audited)	1		10,082		12,191		(463)		21,811
Changes during the six months      ended June 30, 2009:
Net loss for the period	-		-		(76)		-		(76)
Total recognized income and expenses for the period	1		10,082		12,115		(463)		21,735
Issuance of employees' stock options	-		2		-		-		2
Balance at June 30, 2009	1		10,084		12,115		(463)		21,737

For the six months ended June 30, 2008:

	Share capital		Additional paid in capital		Retained earnings		Treasury share reserves		Total
	U.S. In thousands
	Unaudited
Balance at January 1, 2008 (Audited)	1		10,025		11,096		(463)		20,659
Changes during the six months      ended June 30, 2008:
Profit for the period	-		-		1,857		-		1,857
Total recognized income and expenses   for the period	1		10,025		12,953		(463)		22,516
Issuance of employees' stock options	-		32		-		-		32
Balance at June 30, 2008	1		10,057		12,953		(463)		22,548

 

The accompanying notes form an integral part of the financial statements.

 

For the year ended December 31, 2008:

	Share capital		Additional paid in capital		Retained earnings		Treasury share reserves		Total
	U.S. In thousands
	Audited
Balance at January 1, 2008	1		10,025		11,096		(463)		20,659
Changes in equity for 2008:
Profit for the year	-		-		1,095		-		1,095
Total recognized income and expenses   for the year	1		10,025		12,191		(463)		21,754
Issuance of employees' stock options	-		57		-		-		57
Balance at December 31, 2008	1		10,082		12,191		(463)		21,811

The accompanying notes form an integral part of the financial statements.

F.T.S - Formula Telecom Solutions Limited Interim Consolidated Financial Position
		30.6.2009		30.6.2008		31.12.2008
		U.S. In thousands
		Unaudited				Audited
ASSETS
Non-current assets:
Property, plant and equipment (PPE)		780		737		602
Intangible assets		7,006		7,687		7,602
Rental deposits		46		42		45
Deferred tax assets		2,417		3,125		2,763
Total non-current assets		10,249		11,591		11,012
Current assets:
Other receivables and prepaid expenses		809		756		998
Current tax assets		1,936		2,199		1,911
Trade receivables		5,345		9,094		5,618
Financial assets through profit and loss		5,607		4,500		4,249
Cash and cash equivalents		12,029		12,805		14,506
Total current assets		25,726		29,354		27,282
TOTAL ASSETS		35,975		40,945		38,294
LIABILITIES
Non-current liabilities:
Employee benefits, net		517		547		503
Current Liabilities:
Other payables		3,150		3,735		2,816
Trade payables		2,630		6,060		4,411
Customer advances and deferred revenue		1,928		2,760		3,393
Loans and borrowings		6,013		5,295		5,360
Total current liabilities		13,721		17,850		15,980
Total liabilities		14,238		18,397		16,483
TOTAL NET ASSETS		21,737		22,548		21,811

The accompanying notes form an integral part of the financial statements.

	30.6.2009		30.6.2008		31.12.2008
	U.S. In thousands
	Unaudited				Audited
Capital and reserves attributable to    equity holders of the company
Share capital	1		1		1
Additional paid-in capital	10,084		10,057		10,082
Treasury share reserve	(463)		(463)		(463)
Retained earnings	12,115		12,953		12,191
TOTAL EQUITY	21,737		22,548		21,811

The financial statements were approved by the Board of Directors on August 13, 2009, and were signed on it's behalf by:

August 13, 2009
Date of approval		Dan Goldstein	Alon Raz	Asher Polani
of financial statements		Chairman  of the Board	Chief Financial Officer	Chief Executive Officer

The accompanying notes form an integral part of the financial statements.

F.T.S - Formula Telecom Solutions Limited Interim Consolidated Statements of Cash Flows
		Period ended June 30,				Year ended December 31,
		2009		2008		2008
		U.S. In thousands
		Unaudited				Audited
Cash flows from operating activities:
Net profit (loss)		(76)		1,857		1,095
Adjustments for:
Depreciation and amortization		1,041		970		1,989
Tax expense		304		113		757
Employees' stock options		2		32		57
Decrease (increase) in financial assets through    profit and loss		(272)		665		668
Cash flows from activities before changes   In working capital and provisions:
Decrease in trade receivables		273		535		4,011
Decrease in other receivables prepaid expenses  and rental deposits		188		425		180
Increase (decrease) in trade payables		(1,884)		2,006		406
Increase (decrease) in other payables		334		(25)		(944)
Increase in employee benefits		14		99		55
Decrease in customer advances and deferred revenues		(1,465)		(1,765)		(1,132)
Income tax (paid)/ received		17		(393)		(387)
Net cash (used in) provided by operating activities		(1,524)		4,519		6,755

The accompanying notes form an integral part of the financial statements.

		Period ended June 30,				Year ended December 31,
		2009		2008		2008
		U.S. In thousands
		Unaudited				Audited
Cash flows from operating activities brought forward		(1,524)		4,519		6,755
Investing Activities:
Capitalization of software development costs		(261)		(677)		(1,401)
Sale (purchase) of financial assets through profit and loss		(1,086)		-		248
Purchase of  PPE		(259)		(132)		(256)
Net cash used in investing activities		(1,606)		(809)		(1,409)
Financing Activities:
Short-term bank borrowing, net		1,088		(512)		(396)
Interest Paid		(95)		(170)		(321)
Other short-term credit		(340)		70		170
Net cash (used in) provided by financing activities		653		(612)		(547)
Increase (decrease) in cash and cash equivalents		(2,477)		3,098		4,799
Cash and cash equivalents at beginning of period		14,506		9,707		9,707
Cash and cash equivalents at end of period		12,029		12,805		14,506

	Period ended June 30,				Year ended December 31,
	2009		2008		2008
	U.S. In thousands
	Unaudited				Audited
Non-cash activities:
Purchase of property and equipment against trade payables	103		51		15

The accompanying notes form an integral part of the financial statements.

F.T.S - Formula Telecom Solutions Limited

Notes to Interim Consolidated Financial Statements

NOTE 1 - ACCOUNTING POLICIES:

A. General:

F.T.S. - Formula Telecom Solutions Ltd (the 'Company') was founded in January 1997 under the law of the state of Israel.

The Company is a global provider of convergent telecom management solutions for mobile, fixed-line and advanced services operators. The Company provides a range of versatile solutions to the market, which include convergent real-time prepaid and postpaid billing and Customer Relationship Management ('CRM') order management, infrastructure management, Electronic Bill Presentation software, as well as call center implementations.

The Company operates in one operating segment.

B. Assets and Liabilities in foreign currencies

Henceforth are the details of the foreign currencies of the main currencies and the percentage changes in the reporting period:

 

	Period ended June 30,			Year ended December 31,
	2009		2008	2008
US Dollar	3.9190		3.3520	3.8020
Euro	5.5346		5.2849	5.2973

	For the period of six months ended June 30,			Year ended December 31,
	2009		2008	2008
	%		%	%
US Dollar	3.08		(12.84)	(1.14)
Euro	4.48		(6.61)	(6.39)

Note 2 - Significant Accounting Policies:

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in International Financial Reporting Standard IAS 34 ('Interim Financial Reporting').

The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2008 are applied consistently in these interim consolidated financial statements, except for the impact of the adoption of the Standards and Interpretations described below.

-     IFRS 8 - Operating Segments: 

IFRS 8 ('the Standard') discusses operating segments and replaces IAS 14. The Standard applies to companies whose securities are traded or are in the process of filing with any securities stock exchange. The Standard is effective for annual financial statements for periods beginning after January 1, 2009. Earlier application is permitted. The provisions of the Standard will be applied retrospectively, by restatement, unless the necessary information is not available or impractical to obtain.

The Standard determines that an entity will adopt a management approach in reporting on the financial performance of the operating segments. The segment information would be the information that is internally used by management in order to asses its performance and allocate resources to the operating segments.

Furthermore, information is required to be disclosed about the products or services (or group of products and similar services) from which the entity derives its revenues, the countries in which these revenues or assets are derived and major customers, irrespective of whether management uses this information for making operating decisions.

The Company believes that the effect of the new Standard on the current presentation of segments is not expected to be material.

-    IAS 1 (Revised) - Presentation of Financial Statements: 

IAS 1 (Revised) requires entities to present a second statement, a separate 'statement of comprehensive income' display, other than the net income taken from the statement of income, all the items carried in the reported period directly to equity that do not result from transactions with the shareholders in their capacity as shareholders (other comprehensive income) such as adjustments arising from translating the financial statements of foreign operations, fair value adjustments of available-for-sale financial assets, changes in revaluation surplus of fixed assets and such and the tax effect of these items carried directly to equity, while properly allocated between the Company and the minority interests. Alternatively, the items of other comprehensive income may be displayed along with the items of the statement of income in a single statement entitled 'statement of comprehensive income' which replaces the statement of income, while properly allocated between the Company and the minority interests. Items carried to equity resulting from transactions with the shareholders in their capacity as shareholders (such as capital issues, dividend distribution etc.) will be disclosed in the statement of changes in equity as will the summary line carried forward from the statement of comprehensive income, while properly allocated between the Company and the minority interests.

IAS 1 (Revised) also prescribes that in cases of restatement of comparative figures as a result of the retroactive adoption of a change in accounting policy, the entity must include an opening balance sheet disclosing the restated comparative figures.

IAS 1 (Revised) is effective for annual financial statements for periods beginning after January 1, 2009. Earlier application is permitted.

The Company initially implemented IAS 1 (Revised) as of January 1, 2009 by disclosing the comparative figures of income statement according IAS 1 (Revised) (Statements of Comprehensive Income).

-     IFRS 2 (Revised) - Share-based Payment:

Pursuant to the IFRS 2 (Revised) ('the revised Standard'), the definition of vesting terms will only include service conditions and performance conditions. The settlement of a grant that includes non-vesting conditions by the Company or the counterparty will be accounted for by way of vesting acceleration and not by forfeiture. The Standard will be applied retrospectively for financial statements for periods beginning on January 1, 2009. Earlier application is permitted.

Vesting conditions include service conditions which require the counterparty to complete a specified period of service and performance conditions which require specified performance targets to be met. Conditions that are other than service and performance conditions will be viewed as non-vesting conditions and must therefore be taken into account when estimating the fair value of the instrument granted.

The implementation of IAS 2 (Revised) has had no impact on the reported results or financial position of the Company.

-    The Project for the improvement of the International Financial Reporting Standards 2008:

In May 2008, the IASB published 35 amendments for its International Financial Reporting Standards. The amendments were performed for the Project for the improvement of the International Financial Reporting Standards 2008. Some of the amendments refer only to definitions and editing and some refer to recognition, measurement, disclosure and presentation and could affect current accounting policy. Most of the amendments are on annual reports for periods beginning on 1 January, 2009 or after. The amendments can be adopted early, subject to certain conditions. 

The implementation of these amendments has had no impact on the reported results or financial position of the Company.

 

Impact of recently issued accounting standards: 

-     IFRS 3 (Revised) - Business Combinations and IAS 27 (Revised) - Consolidated and Separate Financial Statements:

IFRS 3 (Revised) and IAS 27 (Revised) ('the Standards') will be effective for annual financial statements for periods beginning on January 1, 2010. The combined early adoption of the two Standards is permitted from the financial statements for periods beginning on January 1, 2008.

The principal changes expected to take place following the adoption of the Standards are:

(a)    IFRS 3 currently prescribes that goodwill, as opposed to the acquiree's other identifiable assets and liabilities, will be measured as the excess of the cost of the acquisition over the acquirer's share in the fair value of the identifiable assets, net on the acquisition date. According to the Standards, goodwill can be measured at its full fair value and not only based on the acquired part, this in respect of each business combination transaction measured separately

(b)     A contingent consideration in a business combination will be measured at fair value and changes in the fair value of the contingent consideration, which do not represent adjustments to the acquisition cost in the measurement period, will not be simultaneously recognized as goodwill adjustment. Normally, the contingent consideration will be considered a financial derivative within the scope of IAS 39 and will be presented at fair value through profit or loss.

(c)     Direct acquisition costs attributed to a business combination transaction will be recognized in the statement of income as incurred as opposed to the previous requirement of carrying them as part of the consideration of the cost of the business combination, which has been removed.

(d)     A minority transaction, whether a sale or an acquisition, will be accounted for as an equity transaction and will therefore not be recognized in the statement of income or have any effect on the amount of goodwill, respectively.

(e)     A subsidiary's losses, although resulting in the subsidiary's deficiency, will be allocated between the parent company and minority interests, even if the minority has not guaranteed or has no contractual obligation of sustaining the subsidiary or carrying out another investment.

 

(f)     On the loss of control of a subsidiary, the remaining investment in the subsidiary, if any, will be revalued to fair value against gain and loss from the sale and this fair value will represent the cost basis for the purpose of subsequent treatment.

The Company believes that the effect of the revised Standards on its reported results or financial position is not expected to be material.

-    Amendments to IFRS 2 - Group Cash-settled Share-based Payment Transactions

 

In June 2009 the International Accounting Standards Board amended IFRS 2 to clarify its scope and the accounting for group cash-settled share-based payment transactions in the separate or individual financial statements of the entity receiving the goods or services when that entity has no obligation to settle the share based payment transaction. The amendments also incorporate the guidance contained in the following Interpretations:

• IFRIC 8 Scope of IFRS 2

• IFRIC 11 IFRS 2-Group and Treasury Share Transactions.

The Company believes that the revised Standard will have no effect on its reported results or financial position.

-  Improvements to IFRSs 2009:

In April 2009, the International Accounting Standards Board (IASB) issued amendments to several International Financial Reporting Standards (IFRSs).

Unless otherwise specified, the amendments are effective for annual periods beginning on or after 1 January 2010, although entities are permitted to adopt them earlier.

(a)     Amendment to IAS 1 Presentation of Financial Statements

According to the amendment, regarding convertible liabilities classifying the liability on the basis of the requirements to transfer cash or other assets rather than on settlement better reflects the liquidity and solvency position of an entity.

 

(b)      Amendment to IAS 17 Leases

IAS 17 is amended to delete guidance stating that a lease of land with an indefinite economic life normally is classified as an operating lease, unless at the end of the lease term title is expected to pass to the lessee. The classification of a lease of land will be based upon the terms present at the signing of the lease agreement.

(c)     Amendment to IAS 7 Statement of Cash Flows

According to the amendment, only expenditures that result in a recognized asset in the statement of financial position are eligible for classification as investing activities.

(d)     Amendment to IAS 36 Impairment of Assets

The IASB amended IAS 36 to state that the required unit for goodwill impairment in IAS 36 is not larger than the operating segment level as defined in IFRS 8 before the permitted aggregation.

(e)     Amendment to IAS 39 Financial Instruments: Recognition and Measurement

According to the amendment, the economic characteristics and risks of an embedded derivative are not closely related to the host contract.  

The exercise price of a prepayment option reimburses the lender for an amount up to the approximate present value of lost interest for the remaining term of the host contract.

(f)     Amendment to IAS 18 Revenue  

The amendment adds an example in order to determine whether an entity is acting as a principal or as an agent.

An entity is acting as a principal when it has exposure to the significant risks and rewards associated with the sale of goods or the rendering of services.

An entity is acting as an agent when it does not have exposure to the significant risks and rewards associated with the sale of goods or the rendering of services.  

The Company believes that the revised Standards will have no effect on its financial position, results of operations and cash flows.

NOTE 3 - SIGNIFICANT EVENTS:

On 14 July 2009, the 'Knesset' (Israeli Parliament) passed the 'Economic Efficiency Law (law amendments to the application of the financial plan for years 2009 and 2010) 2009', which includes, among other an amendment to the Income Tax Law (number 171). The legislation includes, inter-alia, that the Company tax rate according to section 126 (a) to the Income Tax Law will be reduced progressively from 24% in 2011 till 18% in 2016 and thereafter. The change in these tax rates wasn't expressed in the Company's financial statements, but, as result of this change, the Company expects a decrease of its deferred tax assets against tax expenses and/or a charge directly to the equity, in the interim financial statements as of 30th September, 2009 and for a period of nine months which will end at the same date, in the total of 160 thousand dollars.

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ENDIR BLGDICSBGGCX