BRAINSWAY LTD.
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2015
U.S. DOLLARS IN THOUSANDS
INDEX
Auditors' Report - Internal Control over Financial Reporting
Auditors' Report - Annual Financial Statements
Consolidated Statements of Financial Position
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Page
2 - 3
4
5
6
7
8
Notes to Consolidated Financial Statements
9 - 59
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Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
AUDITORS' REPORT
To the Shareholders of
BRAINSWAY LTD.
Regarding the Audit of Components of Internal Control over Financial Reporting
Pursuant to Section 9b(c) to the Israeli Securities Regulations (Periodic and Immediate Reports), 1970
We have audited the components of internal control over financial reporting of Brainsway Ltd. and its
subsidiaries (collectively, "the Company") as of December 31, 2015. Control components were determined
as explained in the following paragraph. The Company's board of directors and management are responsible
for maintaining effective internal control over financial reporting, and for their assessment of the
effectiveness of the components of internal control over financial reporting included in the accompanying
periodic report for said date. Our responsibility is to express an opinion on the Company's components of
internal control over financial reporting based on our audit.
The components of internal control over financial reporting audited by us were determined in
conformity with Auditing Standard 104 of the Institute of Certified Public Accountants in Israel, "Audit of
Components of Internal Control over Financial Reporting" as amended ("Auditing Standard 104"). These
components consist of: (1) entity level controls, including financial reporting preparation and closing process
controls which include controls related to warrants, options and liabilities, and information technology
general controls; (2) controls over treasurership (3) controls over the revenue recognition process; (4)
controls over the property, plant and equipment process (collectively, "the audited control components").
We conducted our audit in accordance with Auditing Standard 104. That Standard requires that we
plan and perform the audit to identify the audited control components and obtain reasonable assurance about
whether these control components have been effectively maintained in all material respects. Our audit
included obtaining an understanding of internal control over financial reporting, identifying the audited
control components, assessing the risk that a material weakness exists regarding the audited control
components and testing and evaluating the design and operating effectiveness of the audited control
components based on the assessed risk. Our audit of these control components also included performing such
other procedures as we considered necessary in the circumstances. Our audit only addressed the audited
control components, as opposed to internal control over all the material processes in connection with
financial reporting and, therefore, our opinion addresses solely the audited control components. Moreover,
our audit did not address any reciprocal effects between the audited control components and unaudited ones
and, accordingly, our opinion does not take into account any such possible effects. We believe that our audit
provides a reasonable basis for our opinion within the context described above.
- 2 -
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
Because of its inherent limitations, internal control over financial reporting as a whole, and
specifically the components therein, may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the Company effectively maintained, in all material respects, the audited control
components as of December 31, 2015.
We have also audited, in accordance with generally accepted auditing standards in Israel, the
consolidated financial statements of the Company as of December 31, 2015 and 2014 and for each of the
three years in the period ended December 31, 2015 and our report dated March 8, 2016 expressed an
unqualified opinion thereon.
Tel-Aviv, Israel
March 8, 2016
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 3 -
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com
AUDITORS' REPORT
To the Shareholders of
BRAINSWAY LTD.
We have audited the accompanying consolidated statements of financial position of Brainsway Ltd.
("the Company") as of December 31, 2015 and 2014, and the related consolidated statements of profit or
loss, comprehensive income, changes in equity and cash flows for each of the three years in the period ended
December 31, 2015. These financial statements are the responsibility of the Company's board of directors
and management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing standards in Israel, including
those prescribed by the Auditors' Regulations (Auditor's Mode of Performance), 1973. Those standards
require that we plan and perform the audit to obtain reasonable assurance about 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 management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, based on our audits, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company and its subsidiaries as of December 31,
2015 and 2014, and the results of their operations, changes in their equity and cash flows for each of the
three years in the period ended December 31, 2015, in conformity with International Financial Reporting
Standards ("IFRS") and with the provisions of the Israeli Securities Regulations (Annual Financial
Statements), 2010.
We have also audited, in accordance with Auditing Standard 104 of the Institute of Certified Public
Accountants in Israel, "Audit of Components of Internal Control over Financial Reporting", the Company's
components of internal control over financial reporting as of December 31, 2015 and our report dated
March 8, 2016 expressed an unqualified opinion on the effective existence of those components.
Tel-Aviv, Israel
March 8, 2016
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 4 -
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term deposits
Trade receivables, net
Other accounts receivable
NON-CURRENT ASSETS:
Long-term leasing deposits
Property, plant and equipment, net
Intangible assets
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade payables
Other accounts payable
Deferred revenues
Liability in respect of research and development grants
NON-CURRENT LIABILITIES:
Deferred revenues and other liabilities
Liability in respect of research and development grants
Liability in respect of share options to investors
EQUITY:
Share capital
Share premium
Reserve for transaction with controlling shareholder
Share-based payment
Adjustments arising from translating financial statements from
functional currency to presentation currency
Accumulated deficit
Note
5
6
7
8
9
10
11
12
17e
13b
17h, 17j
13b
13c
18
19
BRAINSWAY LTD.
December 31,
2015
U.S. dollars in thousands
*) 2014
11,355
585
2,009
915
14,864
34
7,329
16
7,379
17,261
1,079
976
511
19,827
30
5,889
25
5,944
22,243
25,771
944
1,228
2,526
198
4,896
193
4,204
55
4,452
147
56,016
917
3,654
(2,188)
(45,651)
12,895
22,243
1,528
1,185
2,659
99
5,471
219
3,831
673
4,723
146
55,695
917
2,450
(2,067)
(41,564)
15,577
25,771
*)
Retroactively adjusted for change in presentation currency, see Note 2d.
The accompanying notes are an integral part of the consolidated financial statements.
March 8, 2016
Date of approval of the
financial statements
Dr. David Zchut
Chairman of the Board
Guy Ezekiel
President, CEO and
Director
Hadar Levi
CFO
- 5 -
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
BRAINSWAY LTD.
Note
20a
20b
20c
20d
20e
20f
20g
Revenues
Cost of revenues
Gross profit
Research and development expenses, net
Selling and marketing expenses
General and administrative expenses
Other income
Operating loss
Finance income
Finance expenses
Loss before tax
Taxes on income
Loss
Other comprehensive loss:
Amounts that will not be reclassified
subsequently to profit or loss:
Adjustments arising from translating financial
statements from functional currency to
presentation currency
Total comprehensive loss
2015
Year ended December 31,
*) 2014
U.S. dollars in thousands
(except per share data)
*) 2013
6,800
1,466
5,334
4,103
3,281
2,455
-
4,505
(636)
218
4,087
-
4,087
3,380
656
2,724
6,438
1,896
1,667
-
7,277
(3,195)
2,463
6,545
-
6,545
1,189
199
990
3,688
888
1,185
(504)
4,267
(304)
3,131
7,094
28
7,122
121
4,208
2,119
8,664
367
7,489
Basic loss per share (in dollars)
21
(0.28)
(0.46)
(0.55)
Diluted loss per share (in dollars)
(0.28)
(0.56)
(0.55)
*)
Retroactively adjusted for change in presentation currency, see Note 2d.
The accompanying notes are an integral part of the consolidated financial statements.
- 6 -
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share
capital
Share
premium
Share
options
Reserve for
transaction
with
controlling
shareholder
Reserve for
share-based
payment
transactions
BRAINSWAY LTD.
Adjustments
arising from
translating
financial
statements
from
functional
currency to
presentation
currency
Accumulated
deficit
Total
equity
Balance at January 1, 2013
124
31,371
217
917
580
(419)
(27,897)
5,731
U.S. dollars in thousands
Total comprehensive loss
Issue of shares
Forfeiture and expiration of
share options
Exercise of share options
Cost of share-based payment
Balance at December 31,
2013
Total comprehensive loss
Issue of shares, net
Forfeiture of share options
Exercise of share options
Cost of share-based payment
Balance at December 31,
2014
Total comprehensive loss
Forfeiture and expiration of
share options
Exercise of share options
Cost of share-based payment
-
6
-
3
-
-
7,547
255
1,706
-
-
-
(217)
-
-
-
-
-
-
-
-
-
(38)
(55)
472
367
-
-
-
-
(7,122)
-
(7,489)
7,553
-
-
-
-
1,651
472
133
40,879
-
9
-
4
-
-
11,756
-
3,060
-
146
55,695
-
-
1
-
-
103
218
-
-
-
-
-
-
-
-
-
-
-
-
-
917
959
(52)
(35,019)
7,817
-
-
-
-
--
-
-
(24)
(16)
1,531
2,119
-
-
-
-
(6,545)
-
-
-
-
(8,664)
11,765
(24)
3,048
1,531
917
2,450
(2,067)
(41,564)
15,577
-
-
-
-
-
121
(4,087)
(4,208)
(247)
(120)
1,571
-
-
-
-
-
-
(144)
99
1,571
917
3,654
(2,188)
(45,651)
12,895
Balance at December 31,
2015
147
56,016
The accompanying notes are an integral part of the consolidated financial statements.
- 7 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Loss
Adjustments to reconcile loss to net cash used in operating activities:
Adjustments to the profit or loss items:
Capital loss (gain)
Taxes on income
Depreciation and amortization
Finance expenses (income), net
Cost of share-based payment
Changes in asset and liability items:
Increase in trade receivables
Decrease (increase) in other accounts receivable
Increase (decrease) in trade payable
Increase in other accounts payable
Increase (decrease) in deferred revenues
Cash paid and received during the year for:
Taxes paid
Interest received
BRAINSWAY LTD.
2015
Year ended December 31,
*) 2014
U.S. dollars in thousands
*) 2013
(4,087)
(6,545)
(7,122)
(1)
-
611
(418)
1,416
1,608
(1,162)
(409)
(437)
51
(133)
(2,090)
-
17
17
-
-
336
(732)
1,408
1,012
(699)
(115)
550
381
1,530
1,647
-
93
93
9
28
206
2,827
402
3,472
(228)
115
(207)
33
1,550
1,263
(28)
52
24
Net cash used in operating activities
(4,552)
(3,793)
(2,363)
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment and intangible assets
Sale of short-term investments, net
Investment in long-term deposits, net
Net cash used in investing activities
Cash flows from financing activities:
Receipt of Government grants
Repayment of liability in respect of Government grants
Exercise of share options
Proceeds from issue of securities, net
Net cash provided by financing activities
Exchange differences and commissions on balances of cash and cash equivalents
Adjustments arising from translating financial statements from functional
currency to presentation currency
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
(a)
Significant non-cash transactions:
Exercise of options which were presented as equity liability
Purchase of property, plant and equipment on current suppliers' credit
2
(2,270)
495
(5)
(1,778)
577
(162)
99
-
514
(91)
1
(5,906)
17,261
11,355
-
295
-
(1,496)
423
(12)
(1,085)
383
(67)
1,346
11,765
13,427
186
(2,146)
6,589
10,672
17,261
1,702
463
2
(4,044)
3,449
(5)
(598)
519
(15)
1,005
7,690
9,199
(368)
426
6,296
4,376
10,672
646
-
*)
Retroactively adjusted for change in presentation currency, see Note 2d.
The accompanying notes are an integral part of the consolidated financial statements.
- 8 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 1:- GENERAL
a.
A general description of the Company and its activity:
Brainsway Ltd. ("the Company") was formed on November 7, 2006 with the purpose of
holding 100% of the rights to shares of Brainsway Inc.
b.
c.
d.
e.
Brainsway Inc. ("Inc") was formed in March 2003 in Delaware, US. In August 2003, Inc
formed a wholly owned sub-subsidiary, Moach R&D Services Ltd., which is engaged in
research, development, production and marketing of a non-invasive medical device for
treatment of a wide range of brain disorders ("Moach"). As of December 31, 2015,
pursuant to an investment agreement entered between the parties on December 31, 2012
and revised in 2014, Moach is 54.13% held by the Company and 45.87% by Inc.
In November 2014, Inc formed a wholly owned subsidiary, Brainsway USA Inc. in
Delaware, US with the purpose of developing an independent array of marketing, support
and logistics services in the US. The company started its operation in January 2015.
On January 9, 2013, the US Food and Drug Administration ("FDA") approved the
Company's Deep TMS device for the treatment of depression in patients. The Group
earns revenues from the sale and lease of devices since the end of 2009.
The Company has negative cash flows from operating activities and operating loss of
approximately $ 4.6 million and $ 4.5 million for the year ended December 31, 2015,
respectively. The Company's management and Board believe that the Company will have
the required financial sources to finance its business activity according to its plans in the
foreseeable future.
f.
Definitions:
In these financial statements:
The Company
- Brainsway Ltd.
The Group
- The Company and its investees, as indicated in this Note.
Subsidiaries
- Companies that are controlled by the Company (as defined in
IFRS 10) and whose accounts are consolidated with those of
the Company.
Related parties
- As defined in IAS 24.
Interested parties and
- As defined in the Israeli Securities Regulations (Annual
controlling shareholder
Financial Statements), 2010.
Dollar
- US dollar.
- 9 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in the financial statements for
all periods presented, unless otherwise stated.
a.
Basis of presentation of the financial statements:
These financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS"). Furthermore, the financial statements have been prepared
in conformity with the provisions of the Israeli Securities Regulations (Annual Financial
Statements), 2010.
The Company's financial statements have been prepared on a cost basis, except for:
certain financial instruments which are presented at fair value through profit or loss.
The Company has elected to present the profit or loss items using the function of expense
method.
b.
The operating cycle:
The Company's operating cycle is one year.
c.
Consolidated financial statements:
The consolidated financial statements comprise the financial statements of companies that
are controlled by the Company (subsidiaries). Control is achieved when the Company has
power over the investee, is exposed or has rights to variable returns from its involvement
with the investee and has the ability to affect those returns through its power over the
investee. In assessing control, the effect of potential voting rights is considered only if
they are substantive. The consolidation of the financial statements commences on the date
on which control is obtained and ends when such control ceases.
The financial statements of the Company and of the subsidiaries are prepared as of the
same dates and periods. The accounting policies in the financial statements of the
subsidiaries have been applied consistently and uniformly with those applied in the
financial statements of the Company. Significant intragroup balances and transactions and
gains or losses resulting from transactions between the Company and the subsidiaries are
eliminated in full in the consolidated financial statements.
d.
Functional currency, presentation currency and foreign currency:
1.
Functional currency and presentation currency:
The presentation currency of the financial statements is the US dollar.
The functional currency is the currency that best reflects the economic environment
in which the Company operates and conducts its transactions, is separately
determined for each Group entity and is used to measure its financial position and
operating results. The Group determines the functional currency of each Group
entity.
- 10 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Until September 30, 2015, the functional currency and presentation currency of
Brainsway Ltd., Inc and Moach was the NIS. Since October 1, 2015, the US dollar
constitutes the functional currency of Brainsway Ltd., Inc and Moach due to the
focusing on the US market as well as commencement of significant activity of the
US subsidiary commenced in the US and since it is expected that revenue will
continue to be nominated in US dollars.
Considering the above, since October 1, 2015, the functional currency of the
Company and its subsidiaries was changed prospectively from NIS to US dollars.
Also, since that date the Company changed the presentation currency in the
financial statements
to US dollar. This change was made retroactively.
Comparative data were restated so now they are all presented in the new
presentation currency (the US dollar). The effect of the change in the presentation
currency on prior periods was recorded in capital reserve from translation into the
presentation currency in the statement of comprehensive income.
2.
Transactions, assets and liabilities in foreign currency:
Transactions denominated in foreign currency are recorded upon initial recognition
at the exchange rate at the date of the transaction. After initial recognition,
monetary assets and liabilities denominated in foreign currency are translated at
each reporting date into the functional currency at the exchange rate at that date.
Exchange rate differences are recognized in profit or loss. Non-monetary assets and
liabilities denominated in foreign currency and measured at cost are translated at
the exchange rate at the date of the transaction. Non-monetary assets and liabilities
denominated in foreign currency and measured at fair value are translated into the
functional currency using the exchange rate prevailing at the date when the fair
value was determined.
e.
Cash equivalents:
Cash equivalents are considered as highly liquid investments, including unrestricted
short-term bank deposits with an original maturity of three months or less from the date
of investment or with a maturity of more than three months, but which are redeemable on
demand without penalty and which form part of the Group's cash management.
f.
Short-term deposits:
Short-term bank deposits are deposits with an original maturity of more than three months
from the date of investment and which do not meet the definition of cash equivalents. The
deposits are presented according to their terms of deposit.
- 11 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g.
Allowance for doubtful accounts:
The allowance for doubtful accounts is determined in respect of specific trade receivables
whose collection, in the opinion of the Company's management, is doubtful. The
Company did not recognize an allowance in respect of groups of customers that are
collectively assessed for impairment since it did not identify any groups of customers
which bear similar credit risks. Impaired receivables are derecognized when they are
assessed as uncollectible.
h.
Revenue recognition:
Revenues are recognized 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. Revenues are measured at the fair value of the consideration less any
trade discounts and volume rebates.
Following are the specific revenue recognition criteria which must be met before revenue
is recognized:
Revenues from sale of devices:
Revenues from sale of goods are recognized 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.
Revenues from lease of devices:
Rental income is recognized on a straight-line basis over the lease term.
i.
Government grants:
Government grants are recognized when there is reasonable assurance that the grants will
be received and the Company will comply with all attached conditions.
Government grants received from the Office of the Chief Scientist in Israel are
recognized upon receipt as a liability if future economic benefits are expected from the
research project that will result in royalty-bearing sales.
A liability for the loan is first measured at fair value using a discount rate that reflects a
market rate of interest. The difference between the amount of the grant received and the
fair value of the liability is accounted for as a Government grant and recognized as a
reduction of research and development expenses. After initial recognition, the liability is
measured at amortized cost using the effective interest method. Royalty payments are
treated as a reduction of the liability.
- 12 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
If no economic benefits are expected from the research activity, the grant receipts are
recognized as a reduction of the related research and development expenses. In that event,
the royalty obligation is treated as a contingent liability in accordance with IAS 37.
In each reporting date, the Company evaluates whether there is reasonable assurance that
the liability recognized, in whole or in part, will not be repaid based on the best estimate
of future sales and using the original effective interest method and, if so, the appropriate
amount of the liability is derecognized against a corresponding reduction in research and
development expenses.
Grants received from the Chief Scientist prior to January 1, 2009, which are recognized
as a liability, are accounted for as forgivable loans in accordance with IAS 20, based on
the original terms of the loan.
Amounts paid as royalties are recognized as settlement of the liability.
j.
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:
Finance leases:
A lease that transfers all the risks and rewards incidental to ownership of the leased asset
to the Group is classified as a finance lease. At the commencement of the lease term, the
leased asset is 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 depreciated over the shorter of its useful life and the lease term.
Operating leases:
Leases in which substantially all the risks and rewards of ownership of the leased asset
are not transferred are classified as operating leases. Lease payments are recognized as an
expense in profit or loss on a straight-line basis over the lease term.
- 13 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The Group as lessor:
Finance leases:
In finance leases, all the risks and rewards incidental to ownership of the leased asset are
transferred to the lessee. The leased asset is derecognized and recognized as a financial
asset, "receivables for finance lease", at the present value of the lease payments. After
initial recognition, the lease payments are apportioned between finance income and
collection of the receivable for the lease. The financial asset, "receivables for finance
lease", is tested for impairment and derecognized as prescribed in IAS 39.
Operating leases:
Leases in which substantially all the risks and rewards incidental to ownership of the
leased asset are not transferred to the lessee are classified as operating leases. Rental
income is recognized in profit or loss on a straight-line basis over the lease term. Initial
direct costs incurred in respect of the lease agreement are added to the carrying amount of
the leased asset and recognized as an expense over the lease term on the same basis as the
rental income. Contingent rent is recognized as income in the statement of profit or loss
when the Company is entitled to receive such income.
k.
Taxes on income:
Current or deferred taxes are recognized in profit or loss, except to the extent that they
relate to items which are recognized in other comprehensive income or equity.
1.
Current taxes:
The current tax liability is measured using the tax rates and tax laws that have been
enacted or substantively enacted by the reporting date as well as adjustments
required in connection with the tax liability in respect of previous years.
2.
Deferred taxes:
Deferred taxes are computed in respect of temporary differences between the
carrying amounts in the financial statements and the amounts attributed for tax
purposes.
Deferred taxes are measured at the tax rate that is expected to apply when the asset
is realized or the liability is settled, based on tax laws that have been enacted or
substantively enacted by the reporting date.
Deferred tax assets are reviewed at each reporting date and reduced to the extent
that it is not probable that they will be utilized. Temporary differences for which
deferred tax assets had not been recognized are reviewed at each reporting date and
a respective deferred tax asset is recognized to the extent that their utilization is
probable.
- 14 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
l.
Property, plant and equipment:
Items of property, plant and equipment are measured at cost, including direct acquisition
costs, less accumulated depreciation and excluding day-to-day servicing expenses.
The cost of self-constructed assets includes the cost of materials, direct labor and share-
based payment as well as any costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner intended
by management.
Depreciation is calculated on a straight-line basis over the useful life of the assets at
annual rates as follows:
%
Mainly %
Laboratory equipment
Motor vehicles
Computers
Office furniture and equipment
Leased equipment
Leasehold improvements
15
15
33
6 - 15
10 - 15
see below
7
15
Leasehold improvements are depreciated on a straight-line basis over the shorter of the
lease term (including the extension option held by the Group and intended to be
exercised) and the expected life of the improvement.
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 derecognized.
m.
Intangible assets:
Separately acquired intangible assets are measured on initial recognition at cost including
direct acquisition 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 capitalized development costs, are recognized in
profit or loss when incurred.
Intangible assets with a finite useful life are amortized over their useful life and reviewed
for impairment whenever there is an indication that the asset may be impaired. The
amortization period and the amortization method for an intangible asset are reviewed at
least at each year end.
- 15 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The useful life of intangible assets is as follows:
Computer software license
License
Research and development expenditures:
%
3
18
Research and development expenditures are recognized in profit or loss when incurred.
An intangible asset arising from a development project or from an internal development is
recognized if the Company can demonstrate the technical feasibility of completing the
intangible asset so that it will be available for use or sale; the Company's intention to
complete the intangible asset and use or sell it; the Company's ability to use or sell the
intangible asset; how the intangible asset will generate future economic benefits; the
availability of adequate technical, financial and other resources to complete the intangible
asset; and the Company's ability to measure reliably the expenditure attributable to the
intangible asset during its development.
The Company does not recognize an intangible asset as above because it does not meet
the above criteria.
Software:
The Group's assets include computer systems comprising hardware and software.
Software forming an integral part of the hardware to the extent that the hardware cannot
function without the programs installed on it is classified as property, plant and
equipment. In contrast, stand-alone software that adds functionality to the hardware is
classified as an intangible asset.
License:
The Company has an exclusive license to develop, manufacture, make use of, market, sell
and import products and processes to be developed in the framework of the license
agreement detailed in Note 17j.
n.
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 cash
flows are discounted using a pre-tax discount rate that reflects the risks specific to the
asset.
- 16 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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
recognized 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 recognized. 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 amortization) had no impairment loss been recognized for the asset in
prior years and its recoverable amount. The reversal of impairment loss of an asset
presented at cost is recognized in profit or loss.
o.
Financial instruments:
1.
Financial assets:
Financial assets within the scope of IAS 39 are initially recognized at fair value
plus direct transaction costs, except for financial assets measured at fair value
through profit or loss in respect of which transaction costs are recorded in profit or
loss.
After initial recognition, the accounting treatment of financial assets is based on
their classification as follows:
Loans and receivables:
Loans and receivables are investments with fixed or determinable payments that
are not quoted in an active market. After initial recognition, loans are measured
based on their terms at cost plus direct transaction costs using the effective interest
method and less any impairment losses. Short-term borrowings are measured based
on their terms, normally at face value.
2.
Financial liabilities:
Financial liabilities within the scope of IAS 39 are initially recognized at fair value.
Loans and other liabilities measured at amortized cost are presented less direct
transaction costs. After initial recognition, the accounting treatment of financial
liabilities is based on their classification as follows:
a)
Financial liabilities at amortized cost:
After initial recognition, loans and other liabilities are measured based on
their terms at cost less direct transaction costs using the effective interest
method.
- 17 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b)
Financial liabilities at fair value through profit or loss:
Financial liabilities at fair value through profit or loss include financial
liabilities designated upon initial recognition as at fair value through profit or
loss.
3.
Offsetting financial instruments:
Financial assets and financial liabilities are offset and the net amount is presented
in the statement of financial position if there is a legally enforceable right to set off
the recognized amounts and there is an intention either to settle on a net basis or to
realize the asset and settle the liability simultaneously. The right of set-off must be
legally enforceable not only during the ordinary course of business of the parties to
the contract but also in the event of bankruptcy or insolvency of one of the parties.
In order for the right of set-off to be currently available, it must not be contingent
on a future event, there may not be periods during which the right is not available,
or there may not be any events that will cause the right to expire.
4.
Derecognition of financial instruments:
a)
Financial assets:
A financial asset is derecognized when the contractual rights to the cash
flows from the financial asset expire or the Company has transferred its
contractual rights to receive cash flows from the financial asset or assumes
an obligation to pay the cash flows in full without material delay to a third
party and has transferred substantially all the risks and rewards of the asset,
or has neither transferred nor retained substantially all the risks and rewards
of the asset, but has transferred control of the asset.
b)
Financial liabilities:
A financial liability is derecognized when it is extinguished, that is when the
obligation is discharged or cancelled or expires. A financial liability is
extinguished when the debtor (the Group) discharges the liability by paying
in cash, other financial assets, goods or services; or is legally released from
the liability.
5.
Impairment of financial assets:
The Group assesses at each reporting date whether there is any objective evidence
of impairment of a financial asset or group of financial assets as follows.
- 18 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Financial assets carried at amortized cost:
Objective evidence of impairment exists when one or more events that have
occurred after initial recognition of the asset have a negative impact on the
estimated future cash flows. The amount of the loss recorded in profit or loss is
measured as the difference between the asset's carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not
yet been incurred) discounted at the financial asset's original effective interest rate.
If the financial asset has a variable interest rate, the discount rate is the current
effective interest rate. In a subsequent period, the amount of the impairment loss is
reversed if the recovery of the asset can be related objectively to an event occurring
after the impairment was recognized. The amount of the reversal, up to the amount
of any previous impairment, is recorded in profit or loss.
p.
Fair value measurement:
Fair value is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
Fair value measurement is based on the assumption that the transaction will take place in
the asset's or the liability's principal market, or in the absence of a principal market, in the
most advantageous market.
The fair value of an asset or a liability is measured using the assumptions that market
participants would use when pricing the asset or liability, assuming that market
participants act in their economic best interest.
Fair value measurement of a non-financial asset takes into account a market participant's
ability to generate economic benefits by using the asset in its highest and best use or by
selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for
which sufficient data are available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities measured at fair value or for which fair value is disclosed are
categorized into levels within the fair value hierarchy based on the lowest level input that
is significant to the entire fair value measurement:
Level 1
- quoted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2
- inputs other than quoted prices included within Level 1 that are
observable either directly or indirectly.
Level 3
- inputs that are not based on observable market data (valuation techniques
which use inputs that are not based on observable market data).
- 19 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
q.
Provisions:
A provision in accordance with IAS 37 is recognized when the Group has a present
obligation (legal or constructive) as a result of a past event, it is probable that an outflow
of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
r.
Employee benefit liabilities:
The Group has several employee benefit plans:
1.
Short-term employee benefits:
Short-term employee benefits are benefits that are expected to be settled wholly
before twelve months after the end of the annual reporting period in which the
employees render the related services. These benefits include salaries, paid annual
leave, paid sick leave, recreation and social security contributions and are
recognized as expenses as the services are rendered. A liability in respect of a cash
bonus or a profit-sharing plan is recognized when the Company has a legal or
constructive obligation to make such payment as a result of past service rendered
by an employee and a reliable estimate of the amount can be made.
2.
Post-employment benefits:
The plans are normally financed by contributions to insurance companies and
classified as defined contribution plans or as defined benefit plans.
The Group has defined contribution plans pursuant to section 14 to the Severance
Pay Law under which the Group pays fixed contributions and will have no legal or
constructive obligation to pay further contributions if the fund does not hold
sufficient amounts to pay all employee benefits relating to employee service in the
current and prior periods.
Contributions to the defined contribution plan in respect of severance or retirement
pay are recognized as an expense when contributed concurrently with performance
of the employee's services and no additional provision is required in the financial
statements. See also Note 15.
s.
Share-based payment transactions:
The Company's employees and other service providers are entitled to remuneration in the
form of equity-settled share-based payment.
- 20 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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 using an acceptable
option pricing model.
The cost of equity-settled transactions is recognized in profit or loss together with a
corresponding increase in equity during the period which the performance and/or service
conditions are to be satisfied ending on the date on which the relevant employees become
entitled to the award ("the vesting period"). The cumulative expense recognized for
equity-settled transactions at the end of each reporting date until the vesting date reflects
the extent to which the vesting period has expired and the Group's best estimate of the
number of equity instruments that will ultimately vest.
No expense is recognized for awards that do not ultimately vest.
t.
Loss per share:
Loss per share is calculated by dividing the loss attributable to equity holders of the
Company by the weighted number of Ordinary shares outstanding during the period.
Basic loss per share includes only shares that are outstanding during the period.
Potential Ordinary shares are included in the computation of diluted loss per share when
their effect decreases loss per share from continuing operations. Potential Ordinary shares
that are converted during the period are included in diluted loss per share only until the
conversion date and from that date in basic loss per share. The Company's share of losses
of investees is included based on its share of loss per share of the investees multiplied by
the number of shares held by the Company.
NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS
In the process of applying the significant accounting policies in the financial statements, the
Group has made the following judgments which have the most significant effect on the amounts
recognized in the financial statements:
a.
Judgments:
-
Classification of leases:
In order to determine whether to classify a lease as a finance lease or an operating
lease, the Company evaluates whether the lease transfers substantially all the risks
and benefits incidental to ownership of the asset. In this respect, the Company
evaluates such criteria as the existence of a bargain purchase option, the lease term
in relation to the economic life of the asset and the present value of the minimum
lease payments in relation to the fair value of the asset.
- 21 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 3:- SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
USED IN THE PREPARATION OF THE FINANCIAL STATEMENTS (Cont.)
b.
Estimates and assumptions:
The preparation of the financial statements requires management to make estimates and
assumptions that have an effect on the application of the accounting policies and on the
reported amounts of assets, liabilities, revenues and expenses. Changes in accounting
estimates are reported in the period of the change in estimate.
The key assumptions made in the financial statements concerning uncertainties at the
reporting date and the critical estimates computed by the Group that may result in a
material adjustment to the carrying amounts of assets and liabilities within the next
financial year are discussed below.
-
Grants from the Scientist:
Government grants received from the Chief Scientist at the Ministry of Economy
("OCS") are recognized as a liability if future economic benefits are expected from
the research and development activity that will result in royalty-bearing sales.
There is uncertainty regarding the estimated future cash flows and discount rate
used to measure the amount of the liability.
-
Liability in respect of share options to investors:
The liability in respect of share options to investors is a financial instrument
presented at fair value through profit or loss. There is uncertainty regarding the
Company's management estimates as to the probability of certain scenarios that
were used to compute the derivative to occur.
-
Determining the fair value of share-based payment transactions:
The fair value of share-based payment transactions is determined upon initial
recognition by an acceptable option pricing model. The model is based on share
price and exercise price and assumptions regarding expected volatility, life of share
option, dividend and risk-free interest rate.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION
a.
IFRS 9, "Financial Instruments":
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial
Instruments", which replaces IAS 39, "Financial Instruments: Recognition and
Measurement". IFRS 9 mainly focuses on the classification and measurement of financial
assets and it applies to all assets in the scope of IAS 39.
- 22 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
According to IFRS 9, all financial assets are measured at fair value upon initial
recognition. In subsequent periods, debt instruments are measured at amortized cost only
if both of the following conditions are met:
-
-
the asset is held within a business model whose objective is to hold assets in order
to collect the contractual cash flows.
the contractual terms of the financial asset give rise on specified dates to cash flows
that are solely payments of principal and interest on the principal amount
outstanding.
Subsequent measurement of all other debt instruments and financial assets should be at
fair value. IFRS 9 establishes a distinction between debt instruments to be measured at
fair value through profit or loss and debt instruments to be measured at fair value through
other comprehensive income.
Financial assets that are equity instruments should be measured in subsequent periods at
fair value and the changes recognized in profit or loss or in other comprehensive income
(loss), in accordance with the election by the Company on an instrument-by-instrument
basis. If equity instruments are held for trading, they should be measured at fair value
through profit or loss.
According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognition
and to financial liabilities for which the fair value option has not been elected.
According to IFRS 9, changes in fair value s of financial liabilities which are attributable
to the change in credit risk should be presented in other comprehensive income. All other
changes in fair value should be presented in profit or loss.
IFRS 9 also prescribes new hedge accounting requirements.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018. Early adoption
is permitted. The Company believes that the amendments to IFRS 9 (including all its
phases) are not expected to have a material impact on the financial statements.
b.
IFRS 15, "Revenue from Contracts with Customers":
In May 2014, the IASB issued IFRS 15 ("IFRS 15").
IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", 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".
- 23 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
The IFRS 15 introduces a five-step model that will apply to revenue earned from
contracts with customers:
Step 1: Identify the contract with a customer, including reference to contract combination
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
using estimates and assessments.
Step 5: Recognize revenue when the entity satisfies a performance obligation over time or
at a point in time.
IFRS 15 is to be applied retrospectively for annual periods beginning on or after
January 1, 2018. Early adoption is permitted. IFRS 15 allows an entity to choose to apply
a modified retrospective approach, according to which IFRS 15 will only be applied in
the current period presented to existing contracts at the date of initial application. No
restatement of the comparative periods will be required.
The Company is evaluating the possible impact of IFRS 15 but is presently unable to
assess its effect, if any, on the financial statements.
c.
Amendments to IAS 7, "Statement of Cash Flows", regarding additional disclosures of
financial liabilities:
In January 2016, the IASB issued amendments to IAS 7, "Statement of Cash Flows",
("the amendments") which require additional disclosures regarding financial liabilities.
The amendments require disclosure of the changes between the opening balance and the
closing balance of financial liabilities, including changes from cash flows, changes
arising from obtaining or losing control of subsidiaries, the effect of changes in foreign
exchange rates and changes in fair value.
The amendments are to be applied for annual periods beginning on or after January 1,
2017. Comparative data for periods prior to the effective date of the amendments is not
required. Early adoption is permitted.
The Company will include the necessary disclosures in the financial statements when
applicable.
- 24 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 4:- DISCLOSURE OF NEW STANDARDS IN THE PERIOD PRIOR TO THEIR
ADOPTION (Cont.)
d.
IFRS 16, "Leases":
In January 2016, the IASB issued IFRS 16, "Leases" ("the new Standard"). According to
the new Standard, a lease is a contract, or part of a contract, that conveys the right to use
an asset for a period of time in exchange for consideration.
According to the new Standard:
Lessees are required to recognize an asset and a corresponding liability in the
statement of financial position in respect of all leases (except in certain cases)
similar to the accounting treatment of finance leases according to the existing IAS
17, "Leases".
Lessees are required to initially recognize a lease liability for the obligation to
make lease payments and a corresponding right-of-use asset. Lessees will also
recognize interest and depreciation expenses separately.
Variable lease payments that are not dependent on changes in the Israeli CPI or
interest rates, but are based on performance or use (such as a percentage of
revenues) are recognized as an expense by the lessees as incurred and recognized
as income by the lessors as earned.
In the event of change in variable lease payments that are CPI-linked, lessees are
required to remeasure the lease liability and the effect of the remeasurement is an
adjustment to the carrying amount of the right-of-use asset.
The new Standard includes two exceptions according to which lessees are
permitted to elect to apply a method similar to the current accounting treatment for
operating leases. These exceptions are leases for which the underlying asset is of
low value and leases with a term of up to one year.
The accounting treatment by lessors remains substantially unchanged, namely
classification of a lease as a finance lease or an operating lease.
The new Standard is to be applied for annual periods beginning on or after January 1,
2019. Earlier adoption is permitted provided that IFRS 15, "Revenue from Contracts with
Customers", is applied simultaneously.
For leases existing at the date of transition, the new Standard permits lessees to use either
a full retrospective approach, or a modified retrospective approach, with certain transition
relief whereby restatement of comparative data is not required.
The Company believes that the new Standard is not expected to have a material impact on
the financial statements.
- 25 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 5:- CASH AND CASH EQUIVALENTS
Cash for immediate withdrawal
Cash equivalents - short-term deposits (1)
December 31,
2014
2015
U.S. dollars in thousands
6,541
4,814
11,355
5,104
12,157
17,261
(1)
Short-term deposits at banks are for periods of between one month and three months,
depending on the requirements of the Company. The deposits earn interest at the
respective term of the deposits (dollar - 0.51% per year, NIS - 0.23% per year).
NOTE 6:- SHORT-TERM DEPOSITS
Bank deposits (1)
December 31,
2015
2014
U.S. dollars in thousands
585
1,079
(1)
Short-term deposits at banks are for periods of three months and one year, depending on
the requirements of the Company. The deposits earn interest at the respective term of the
deposits (dollar - 0.35%-0.56% per year).
NOTE 7:- TRADE RECEIVABLES, NET
Open accounts (1)
Credit cards
Checks receivable
Less - allowance for doubtful accounts
Trade receivables, net
December 31,
2015
2014
U.S. dollars in thousands
1,633
261
285
(170)
2,009
919
57
-
-
976
(1) Trade receivables are generally on 90 day credit terms after the date of the transaction.
Certain customers may spread the payments over months by using credit card payment
transactions.
- 26 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 7:- TRADE RECEIVABLES, NET (Cont.)
An analysis of past due but not impaired trade receivables (allowance for doubtful accounts),
trade receivables, net, with reference to December 31, 2015:
Past due trade receivables with aging of
Neither
past due
nor
impaired
< 30
days
30 - 60
days
60 - 90
days
U.S. dollars in thousands
90 - 120
days
> 120
days
Total
December 31, 2015
1,439
72
183
86
49
179
2,009
As of December 31, 2015, the Company has debts more than 90 days past due but not impaired
(allowance for doubtful accounts) in the total of approximately $ 230 thousand, of which an
amount of approximately $ 180 thousand was paid between the reporting date and the date of
the approval of the financial statements. The Company expects to collect the entire amount of
these debts.
As of December 31, 2014, the Company has debts more than 90 days past due in the total of
$ 150 thousand, of which an amount of $ 31 thousand was paid by the date of the approval of
the financial statements.
NOTE 8:- OTHER ACCOUNTS RECEIVABLE
Government ministries
Accrued income - Chief Scientist
Prepaid expenses and other
Loans to employees
Advances to suppliers
December 31,
2015
2014
U.S. dollars in thousands
221
559
16
10
109
915
217
225
51
11
7
511
- 27 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 9:- PROPERTY, PLANT AND EQUIPMENT
Leased
equipment
Equipment
for lease
Laboratory
equipment
Office
furniture
and
equipment
Motor
vehicles Computers
U.S. dollars in thousands
Leasehold
improvements
Total
2,645
1,287
(461)
3,464
1,261
(248)
151
4
-
23
4
-
172
90
(1)
185
(226)
5
(2)
8
3,656
4,251
160
25
269
2015:
Cost:
Balance at January 1, 2015
Additions during the year
Disposals during the year
Adjustments arising from
translating financial
statements from
functional currency to
presentation currency
Balance at December 31,
2015
Accumulated depreciation:
Balance at January 1, 2015
Additions during the year
Disposals during the year
Adjustments arising from
translating financial
statements from
functional currency to
presentation currency
Balance at December 31,
2015
426
574
(219)
32
813
-
-
-
-
-
Depreciated cost at
December 31, 2015
2,843
4,251
68
3
-
3
74
22
5
-
1
28
46
50
4
-
6,573
2,653
(710)
(2)
(29)
52
8,487
34
11
-
-
45
7
683
657
(220)
38
1,158
7,329
75
22
-
2
99
61
6
6
-
(1)
11
14
120
39
(1)
4
162
107
- 28 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 9:- PROPERTY, PLANT AND EQUIPMENT (Cont.)
Leased
equipment
Equipment
for lease
Laboratory
equipment
Office
furniture
and
equipment
Motor
vehicles Computers
U.S. dollars in thousands
Leasehold
improvements
Total
1,460
1,592
(134)
3,329
503
(118)
165
4
-
26
-
-
147
44
-
73
4
-
47
8
-
5,247
2,155
(252)
(273)
(250)
(18)
(3)
(19)
(9)
(5)
(577)
2,645
3,464
151
23
172
68
50
6,573
223
292
(44)
(44)
427
-
-
-
-
-
109
25
-
19
5
-
26
12
-
442
359
(44)
(14)
(2)
(4)
(73)
3
4
-
(1)
6
Depreciated cost at
December 31, 2014
2,218
3,464
120
17
52
22
46
34
16
684
5,889
2014:
Cost:
Balance at January 1, 2014
Additions during the year
Disposals during the year
Adjustments arising from
translating financial
statements from
functional currency to
presentation currency
Balance at December 31,
2014
Accumulated depreciation:
Balance at January 1, 2014
Additions during the year
Disposals during the year
Adjustments arising from
translating financial
statements from
functional currency to
presentation currency
Balance at December 31,
2014
62
21
-
(8)
75
76
- 29 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 10:- INTANGIBLE ASSETS
Composition:
Computer software:
Cost
Less - accumulated amortization
Licenses
Cost
Less - accumulated amortization
NOTE 11:- TRADE PAYABLES
Open debts
Checks payable
December 31,
2015
2014
U.S. dollars in thousands
131
(120)
11
9
(4)
5
16
125
(106)
19
9
(3)
6
25
December 31,
2015
2014
U.S. dollars in thousands
944
-
944
1,351
177
1,528
Trade payables are non-interest bearing and are normally settled on up to 90-day terms.
NOTE 12:- OTHER ACCOUNTS PAYABLE
December 31,
2015
2014
U.S. dollars in thousands
600
501
127
790
329
66
1,228
1,185
Accrued expenses
Employees and payroll accruals
Liabilities to related parties (1)
(1) A current non-interest bearing account.
- 30 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 13:- NON-CURRENT LIABILITIES
a.
Other long-term liabilities are for payment of royalties pursuant to a license agreement.
See Note 17j.
b.
Government grants:
Moach received from the Israeli Government participation grants in research and
development and, in return, it is obligated to pay royalties amounting to 3%-3.5% of sales
of products from such research and development support up to an amount equal to 100%
of total grants received.
As of December 31, 2015, the maximum royalties payable by the company in the future
in respect of active project equal an amount of approximately $ 11,202 thousand,
including exchange differences and interest at the Libor rate. Through December 31,
2015, royalties paid amounted to $ 264 thousand.
c.
Share options:
As of December 31, 2015, the Company had 410,342 share options which are presented
as a liability. See Note 18d, e and f.
NOTE 14:- FINANCIAL INSTRUMENTS
a.
Classification of financial assets and financial liabilities:
The financial assets and financial liabilities in the statement of financial position are
classified by groups of financial instruments pursuant to IAS 39:
December 31,
2014
2015
U.S. dollars in thousands
11,355
3,383
14,738
944
1,228
8
2,180
17,261
2,584
19,845
1,528
1,185
7
2,720
Financial assets:
Cash and cash equivalents
Other
Total current
Financial liabilities:
Trade payables
Other accounts payable
Other
- 31 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
December 31,
2014
2015
U.S. dollars in thousands
Financial liabilities in respect of share options to
investors - at fair value through profit or loss
55
673
Total other financial liabilities - in respect of
liability to the Chief Scientist
Total current
Total non-current
b.
Financial risks factors:
4,402
2,370
4,267
3,930
3,483
3,840
The Group's activities expose it to various financial risks such as market risks (foreign
currency risk, interest risk), credit risk and liquidity risk. The Group's comprehensive risk
management plan focuses on activities that reduce to a minimum any possible adverse
effects on the Group's financial performance.
The Company's CEO oversees the management of these risks in accordance with the
policies approved by the Board.
1. Market risks:
Foreign currency risk:
The currency exposure arises from current accounts and deposits that are mainly
managed in NIS and from liability in respect of employees and payroll accruals
that are paid for in NIS.
2.
Credit risk:
Credit risk is the risk that a counterparty will not meet its obligations as a customer
or under a financial instrument leading to a loss to the Group. The Group is
exposed to credit risk from its operating activity (primarily trade receivables).
3.
Liquidity risk:
The Group monitors its risk to a shortage of cash using quarterly budget tools.
- 32 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
The table below presents the maturity profile of the Group's financial liabilities
based on contractual undiscounted payments:
December 31, 2015:
Less than
one year
1 to 2
years
2 to 3
3 to 4
years
years
U.S. dollars in thousands
4 to 5
years
> 5
years
Total
Trade payables
Payables
Long-term liabilities
Liability in respect of
research and
development grants
944
1,228
2
112
2,286
-
-
2
221
223
-
-
2
405
407
-
-
2
553
555
-
-
2
2,809
2,809
-
-
2
7,895
7,895
944
1,228
12
11,995
14,179
December 31, 2014:
Less than
one year
1 to 2
years
3 to 4
2 to 3
years
years
U.S. dollars in thousands
4 to 5
years
> 5
years
Total
Trade payables
Payables
Long-term liabilities
Liability in respect of
research and
development grants
1,528
1,185
2
69
2,784
-
-
2
178
180
-
-
2
374
376
-
-
2
702
704
-
-
2
1,719
1,721
-
-
2
7,628
7,630
1,528
1,185
12
10,670
13,393
c.
Fair value:
The carrying amount of cash and cash equivalents, short-term deposits, trade receivables,
other accounts receivable, trade payables, other accounts payable, share options, long-
term liabilities and Scientist's grants approximate their fair value.
Financial liabilities measured at fair value:
December 31, 2015:
Opening balance at January 1, 2015
Amounts transferred to the statement of
comprehensive income as net finance income
for the year
Closing balance at December 31, 2015
- 33 -
Level 3
U.S. dollars
in thousands
673
(618)
55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
During 2015, there were no transfers between Level 1 to Level 2 for fair value
measurements of financial instruments and also there were no transfers out of or into
Level 3 for fair value measurements of financial instruments.
d.
Valuation technique:
As of December 31, 2015, the fair value of share options granted in 2012 has been
computed using the binomial model and was NIS 0.52 per share option.
The fair value computation above takes into account the conditions of the share options
listed above as well as the following inputs:
Expected volatility of the share prices (%)
Risk-free interest rate (%)
Share prices (NIS)
Expected dividend (NIS)
Contractual life of options (years)
52.54
0.16
23.35
-
0.44
e.
Sensitivity tests relating to changes in foreign currency:
Sensitivity test to changes in the NIS exchange
rate:
Gain (loss) from the change:
Increase of 5% in exchange rate
Decrease of 5% in exchange rate
Sensitivity test to changes in the Euro exchange
rate:
Gain (loss) from the change:
Increase of 5% in exchange rate
Decrease of 5% in exchange rate
Sensitivity test to changes in the Yen exchange
rate:
Gain (loss) from the change:
Increase of 5% in exchange rate
Decrease of 5% in exchange rate
December 31,
2015
2014
U.S. dollars in thousands
315
(315)
32
(32)
42
(42)
-
-
48
(48)
42
(42)
As of December 31, 2015, the Company has excess of financial assets over financial
liabilities in foreign currency (NIS in relation to US dollar) of $ 6,298 thousand.
- 34 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 14:- FINANCIAL INSTRUMENTS (Cont.)
As of December 31, 2015, the Company has excess of financial assets over financial
liabilities in foreign currency (Euro in relation to US dollar) of $ 645 thousand.
As of December 31, 2015, the Company has excess of financial assets over financial
liabilities in foreign currency (Yen in relation to US dollar) of $ 830 thousand.
Sensitivity tests and principal work assumptions:
The selected changes in the relevant risk variables were determined based on
management's estimate as to reasonable possible changes in these risk variables.
The Company has performed sensitivity tests of principal market risk factors that are
liable to affect its reported operating results or financial position. The sensitivity tests
present the profit or loss in respect of each financial instrument for the relevant risk
variable chosen for that instrument as of each reporting date. The test of risk factors was
determined based on the materiality of the exposure of the operating results or financial
condition of each risk with reference to the functional currency and assuming that all the
other variables are constant.
NOTE 15:- EMPLOYEE BENEFIT ASSETS AND LIABILITIES
Employee benefits consist of short-term benefits, post-employment benefits and other long-term
benefits.
a.
Post-employment benefits:
According to the labor laws and Severance Pay Law in Israel, the Company is required to
pay compensation to an employee upon dismissal or retirement or to make current
contributions in defined contribution plans pursuant to section 14 to the Severance Pay
Law, as specified below. The Company's liability is accounted for as a benefit after the
completion of employment. The computation of the Company's employee benefit liability
is made in accordance with a valid employment contract based on the employee's salary
and employment term which establish the entitlement to receive the compensation. Post-
employment benefits are normally financed by contributions classified as defined benefit
plans or as defined contribution plans as detailed below.
b.
Defined contribution plans:
Section 14 to the Severance Pay Law, 1963 applies to all of the Company's employees
pursuant to which the fixed contributions paid by the Group into pension funds and/or
policies of insurance companies release the Group from any additional liability to
employees for whom said contributions were made. These contributions and contributions
for benefits represent defined contribution plans.
- 35 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 15:- EMPLOYEE BENEFIT ASSETS AND LIABILITIES (Cont.)
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Expenses in respect of defined
contribution plans
184
167
138
NOTE 16:- TAXES ON INCOME
a.
Tax laws applicable to the Company and Moach:
Income Tax (Inflationary Adjustments) Law, 1985:
According to the law, until 2007, the results for tax purposes were adjusted for the
changes in the Israeli CPI.
In February 2008, the "Knesset" (Israeli parliament) passed an amendment to the Income
Tax (Inflationary Adjustments) Law, 1985, which limits the scope of the law starting
2008 and thereafter. Since 2008, the results for tax purposes are measured in nominal
values, excluding certain adjustments for changes in the Israeli CPI carried out in the
period up to December 31, 2007. Adjustments relating to capital gains such as for sale of
property (betterment) and securities continue to apply until disposal. Since 2008, the
amendment to the law includes, among others, the cancellation of the inflationary
additions and deductions and the additional deduction for depreciation (in respect of
depreciable assets purchased after the 2007 tax year).
The Law for the Encouragement of Capital Investments, 1959:
Moach elected year 2012 as year of election. According to the Law, and subject to
receiving the above approval, Moach will be entitled to various tax benefits by virtue of
the "beneficiary enterprise" status, as implied by this Law.
Alternative track:
Under this track, Moach is tax exempt in the first ten years of the benefit period and
subject to tax at the reduced rate of 10%-25% for a period of five / eight years (if the
benefit period qualifying for tax exemption is two years) or one year / four years (if the
benefit period qualifying for tax exemption is six years) for the remaining benefit period
(dependent on the level of foreign investment).
In respect of programs approved prior to the enactment of Amendment No. 60 to the Law,
the benefit period starts with the first year the approved enterprise earns taxable income,
provided that 12 years have not passed since the enterprise began operating and 14 years
have not passed since the approval was granted.
- 36 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME (Cont.)
Following the enactment of Amendment No. 60 to the Law, subsequent to April 1, 2005,
companies under the tax benefits track are no longer required to obtain a letter of
approval from the Investment Center but rather must make a notification of the year of
election for the beneficiary enterprise status and are required, among others, to make a
minimum qualifying investment. This condition requires an investment in the acquisition
of productive assets such as machinery and equipment which must be carried out within
three years. The minimum qualifying investment required for setting up a "new plant" is
NIS 300 thousand, linked to the Israeli CPI in accordance with the guidelines of the
Israeli Tax Authority. As for plant "expansion", the minimum qualifying investment is
the higher of NIS 300 thousand, linked as stated above, and an amount equivalent to the
"qualifying percentage" of the value of the productive assets. In this context, productive
assets that are used by the plant but not owned by it will also be viewed as productive
assets.
Income qualifying for tax benefits under the alternative track is the taxable income of a
company that has met certain conditions as determined by the Law ("a beneficiary
company") and which is derived from an industrial enterprise. If a dividend is distributed
out of tax exempt profits, as above, Moach will become liable for tax at the rate
applicable to its profits from the beneficiary enterprise in the year in which the income
was earned, as if it was not under the alternative track. Moach's policy is not to distribute
such a dividend.
As for beneficiary enterprises in the context of Amendment No. 60 to the Law, the basic
condition for receiving the benefits under this track is that the enterprise contributes to the
country's economic growth and makes a competitive contribution to the Gross Domestic
Product ("a competitive enterprise").
In order for industrial enterprises to comply with this condition, in each tax year during
the benefit period, one of the following conditions must be met:
1.
2.
3.
industrial enterprise's main
The
is biotechnology or
nanotechnology as approved by the Head of the Administration of Industrial
Research and Development, prior to the approval of the relevant program.
field of activity
The industrial enterprise's sales revenues in a specific market during the tax year do
not exceed 75% of its total sales for that tax year. A "market" is defined as a
separate country or customs territory.
At least 25% of the industrial enterprise's overall revenues during the tax year were
generated from the enterprise's sales in a specific market with a population of at
least 14 million.
- 37 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME (Cont.)
Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment
68):
In December 2010, the "Knesset" passed the Law for Economic Policy for 2011 and 2012
(Amended Legislation), 2011, which prescribes, among others, amendments in the Law
for the Encouragement of Capital Investments, 1959 ("the Law"). The Amendment
became effective as of January 1, 2011. According to the Amendment, the benefit tracks
in the Law were modified and a flat tax rate applies to the Company's entire privileged
income under its status as a privileged company with a privileged enterprise.
Commencing from the 2011 tax year, the Company can elect (without possibility of
reversal) to apply the Amendment in a certain tax year and from that year and thereafter,
its entire privileged income from the privileged enterprise will be subject to the amended
tax rates. The tax rates under the Amendment are: 2011 and 2012 - 15% (in development
area A - 10%) and in 2013 - 12.5% (in development area A - 7%).
Amendment to the Law for the Encouragement of Capital Investments, 1959 (Amendment
71):
In August 2013, the "Knesset" issued the Law for Changing National Priorities
(Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013 which
consists of Amendment 71 to the Law for the Encouragement of Capital Investments
("the Amendment"). According to the Amendment, the tax rate on privileged income
from a privileged enterprise in 2014 and thereafter will be 16% (in development area A -
9%).
The Law for the Encouragement of Industry (Taxation), 1969:
Moach has the status of an "industrial company", as defined by this law. According to this
status and by virtue of regulations published thereunder, the Company is entitled to claim
a deduction of accelerated depreciation on equipment used in industrial activities, as
determined in the regulations issued under the Inflationary Law. The Company is also
entitled to amortize a patent or rights to use a patent or intellectual property that are used
in the enterprise's development or advancement, to deduct issuance expenses for shares
listed for trading and to file consolidated report under certain conditions.
b.
Tax rates applicable to the Company and subsidiaries:
1.
The Israeli corporate tax rate was 26.5% in 2015 and 2014 (25% in 2013).
A company is taxable on its real (non-inflationary) capital gains at the corporate
tax rate in the year of sale.
- 38 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 16:- TAXES ON INCOME (Cont.)
In August 2013, the "Knesset" issued the Law for Changing National Priorities
(Legislative Amendments for Achieving Budget Targets for 2013 and 2014), 2013
("the Budget Law"), which consists, among others, of taxation of revaluation gains
effective from August 1, 2013. The provisions regarding revaluation gains will
become effective only after the publication of regulations defining what should be
considered as "retained earnings not subject to corporate tax" and regulations that
set forth provisions for avoiding double taxation of overseas assets. As of the date
of approval of these financial statements, these regulations have not been issued.
On January 5, 2016, the "Knesset" approved the second and third readings the Bill
for Amending the Income Tax Ordinance (No. 217) (Reduction of Corporate Tax
Rate), 2015, which consists of the reduction of the corporate tax rate from 26.5% to
25% effective from 2016 and thereafter.
2.
The principal tax rate applicable to Brainsway USA and Inc whose place of
incorporation is outside Israel is:
A company incorporated in the US - weighted tax at the rate of about 35%-40%
(Federal tax, State tax and City tax of the city where the company operates).
c.
Tax assessments:
The Company received final tax assessments through the 2009 tax year. The subsidiary,
Moach, received final tax assessments through the 2009 tax year. The subsidiary, Inc,
received final tax assessments through the 2011 tax year.
d.
Carryforward losses:
Carryforward losses - the Group:
Carryforward operating tax losses of the Group as of December 31, 2015 total
approximately $ 3 million in Brainsway Ltd. and approximately $ 27 million in Moach.
Under the tax laws in the US, carryforward tax losses in the subsidiary may be carried
forward and offset against taxable income during a period of up to 20 years and may be
subject to limitation due to the "change in ownership" in the company. The scope of
changes in the company's ownership may limit the maximal amount of carryforward
losses that could be offset in a specific tax year. Carryforward tax losses of Brainsway
USA and Inc total approximately $ 0.7 million as of December 31, 2015.
e.
Deferred taxes:
As it is not probable that taxable income will be available in the next years, deferred taxes
were not recognized for the above carryforward losses.
- 39 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES
a.
b.
c.
d.
e.
As for liabilities in respect of payment of royalties to the Chief Scientist, see Note 13b.
The Company engaged with medical centers and academic institutions for performing
clinical trials. In part of the agreements the Company has undertaken to pay royalties
amounting between 0.75% and 1.5% of revenues in the field of the trial if a patent in the
field of the trial is created during the research. The Company is entitled to terminate the
engagements subject to giving an advance notice and there is no additional cost to the
Company for the cancellation.
During 2009-2015, the Company entered into several distribution agreements for the
Deep TMS device with third parties regarding different territories around the world.
According to these distribution agreements, the third parties are granted the exclusive
right to market, distribute, lease, use and promote sales in the different territories for a 10-
year period. The Company will supply the devices to the distributors and they will act on
their account to lease and install them at clients while the device remains the property of
the Company. The different distributors are committed to minimum quantities as in the
agreements.
In June 2013, the Company entered into a non-exclusive marketing agreement for the
Deep TMS device with a third party regarding several specific customers in the US. The
agreement is in effect for a 12-month period after closing and will be extended
automatically subject to the mechanism set in the agreement.
In January 2014, an agreement to establish a logistic center in the US which had been
signed with NVation became binding. According to the agreement, a logistic center that
will address the issue of delivery to clients, training, rendering of services and repairs,
training the assistance staff and etc. will be established in consideration of the lower of
5% of total net revenues (less discounts and returns) from customers in the US and cost +
25%.
On December 31, 2014, the distributor and the Company decided to terminate the above
agreements. When the agreements terminated, the Company undertook to continue
paying the distributor a commission for devices as specified in the agreement up to a
ceiling of $ 456 thousand. As of December 31, 2015, of this ceiling, an amount of $ 368
thousand was paid.
In September 2013, the Company entered into a distribution agreement in Japan with
Century Medical Inc., a member of the Itochu concern, which specializes in the import
and distribution of medical devices and equipment in Japan. According to the agreement,
the distributor is granted the exclusive right to market the Company's Deep TMS device
for the treatment of major depression in patients in Japan for a 10-year period after the
required regulatory approvals for marketing the device in Japan are obtained. If the
distributor meets the minimum quantities which it has committed during the contractual
term, the agreement will be extended by additional 5 years. The distributor is granted a
right of first offer to distribute the Company's device in Japan without further
codification.
- 40 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
In return for receiving the exclusive right to the Company's device for the treatment of
major depression in patients in Japan, the distributor undertook to pay the Company
distribution fees in the total of 190 million Yen (approximately $ 1.7 million) in two
payments as follows: 100 million Yen (approximately $ 0.9 million) within 10 business
days after the date of closing the agreement and the balance of 90 million Yen
(approximately $ 0.8 million) are payable after the authorities in Japan grant their
approval to market the Company's device in Japan.
In each year of the agreement in which the distributor meets the predetermined revenue
target, 10% of the distribution fees are returned to the distributor. As of December 31,
2013, the first amount of $ 0.9 million was received from the distributor (this entire
amount is presented as an advance in the item deferred revenues). The distributor will pay
the Company for any treatment made with the Company's device (pay-per-use) but in no
case below the pre-determined annual amount. The agreement prescribes conditions in
which the Company or the distributor can cancel the agreement, including the authorities'
demand to make a clinical trial and non-compliance with the requirement to purchase
minimum predetermined quantities.
The agreement sets a minimum payment threshold to the Company that is examined
every few years throughout the contractual term. If the distributor does not qualify for the
minimum payment threshold at the end of each period, the Company will be entitled to
terminate the distribution agreement, unless the parties reach another agreement between
them. The agreement further determines that the distributor will act on its account to
receive the regulatory approvals that are required to market the Company's device for the
treatment of depression in patients in Japan and to receive an insurance coverage in the
price range established in the agreement.
During 2013-2015, the Company entered into agreement to perform multicenter trials in
bipolar disorder, smoking, obsessive-compulsive disorder (OCD) and post-traumatic
stress disorder (PTSD) with different medical centers around the world. As of
December 31, 2015, the Company's management estimated that the expected balance of
expenses in respect of these trials would total approximately $ 4.2 million.
On August 25, 2013, the Company received the approval of the MAGNET committee at
the Chief Scientist of the State of Israel for the BSMT tool (brain stimulate and monitor
tool). The tool is for a period of three years, in the framework of which the Company was
approved a work plan for the first year with the scope of approximately NIS 3.7 million at
the rate of grant of up to 66% which the MAGNET administration will give the Company
as non-royalty bearing.
The agreement became binding on November 21, 2013. During January 2014, the
Company's appeal request in respect of the grant in the amount of NIS 600 thousand was
approved thereby placing the work plan at NIS 4.3 million.
f.
g.
- 41 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
On October 2, 2014, the MAGNET committee approved an annual work plan for the
second year with the budget of approximately NIS 4.6 million, of which 66%
(approximately NIS 3 million) the MAGNET administration will give the Company as a
grant.
On October 1, 2015, the MAGNET committee approved an annual work plan for the third
year with the budget of approximately NIS 2.6 million. During December 2015, the
Company's appeal request in respect of the grant in the amount of approximately NIS 175
thousand was approved thereby placing the work plan at approximately NIS 2.8 million,
of which 66% (approximately NIS 1.8 million) the MAGNET administration will give the
Company as a grant.
On May 18, 2015, the subsidiary received the approval of the Chief Scientist of the State
of Israel to support research and development projects in the scope of approximately
NIS 11,100 thousand and NIS 7,704 thousand at participation rates of 50% and 30%,
respectively, pursuant to the provisions of the Law for the Encouragement of Industrial
Research and Development, 1984.
h.
In March 2014, the Company entered into an exclusive marketing and distribution
agreement for the Deep TMS device with a third party in Israel for a maximum period of
15 years subject to meeting minimum sales targets as set in the agreement. In April 2014,
the distributor paid the Company a one-time exclusivity fee in the amount of NIS 1
million. Also, it was agreed with the distributor on a minimum monthly payment for any
leased device and an additional payment based on the number of treatments made with
the device beyond the minimum monthly payment.
i.
Commitments:
Operating lease commitment:
The Group has entered into operating leases on vehicles. These leases have an average
life of three years, with no renewal option included in the contract.
Future minimum lease payable under non-cancellable operating leases as of December 31
are as follows:
December 31,
2014
2015
U.S. dollars in thousands
155
95
19
269
143
94
27
264
First year
Second year
Third year
- 42 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
1. Moach has a rent agreement from March 2011 according to which Moach rents
offices in consideration of monthly rentals of approximately NIS 96 thousand,
linked to the Israeli CPI of January 2011. The rent is binding until September 30,
2014. The rent has terms of renewal until September 30, 2017, subject to giving a
notice to the lessor of at least 4 months before the end of the rent. Moach exercised
the option.
In addition, Moach has a rent agreement from July 2015 according to which Moach
rents a warehouse in consideration of monthly rentals of approximately NIS 8
thousand. The rent is binding until July 31, 2017. The rent has terms of renewal
until July 31, 2019 and 2021. The options may be automatically exercised unless
Moach notifies of its intent not to exercise the options until six months before the
end of the last rent period.
2.
USA Inc has a rent agreement from December 2014 which became binding on
January 1, 2015, according to which USA Inc rents offices in the US for six-month
period in consideration of monthly rentals of approximately $ 3 thousand. The rent
may be automatically renewed for six-month periods and the parties may cancel the
rent with a 60-day advance notice without additional payments.
Future minimum rentals payable under non-cancellable rent agreements of Moach
and USA Inc as of December 31 are as follows:
First year
Second year
Third year
j.
License agreements:
December 31,
2015
2014
U.S. dollars in thousands
339
243
-
582
343
325
243
911
1.
In July 2003, Inc signed a license agreement with NIH - The National Institute of
Health (The American National Institute of Health) ("NIH") according to which the
Company was granted an exclusive license to develop, manufacture, make use of,
market, sell and import products and processes to be developed in the framework
of the license agreement. In return, Inc is committed to pay NIH royalties at fixed
annual amounts of $ 2 thousand from January 1, 2004. In respect of milestones, Inc
will pay $ 10 thousand within 30 days after the approval of the Food and Drug
Administration (FDA) is received. Also, Inc will have to pay in the future royalties
in respect of net sales, as defined in the agreement, amounting 3% of total net sales
in the aggregate of $ 10,000 thousand and 2% of net sales beyond this amount. The
balance of current provision for royalties as of December 31, 2014 was $ 105
thousand.
- 43 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
If Inc enters into a sub-license agreement, it is committed to pay royalties
amounting 8% of the market value of the consideration received for the grant of the
sub-license.
Also, Inc is committed to pay to other inventor royalties amounting 0.045% of net
sales and 1.2% of revenues from sub-licenses.
The agreement is binding until the patent rights expire in October 2021. NIH is
entitled to terminate the agreement early if Inc does not comply with the conditions
of the agreement.
2.
In June 2005, Inc signed a research and development agreement with Yeda
Research and Development Company Ltd. ("Yeda"), according to which Yeda
gave the subsidiary an exclusive license to use any research result for research,
development, marketing and manufacturing of products in consideration of royalty
payment as follows: $ 25 thousand when the patent related to the research is
approved, royalties of 1.5% on cumulative sales of up to $ 10,000 thousand and 1%
on cumulative sales of more than $ 10,000 thousand, royalties of 4% of amounts
payable to Inc for grant of commercial sub-licenses, minimal annual royalties of
$ 1 thousand from the end of the research period and one-time sum of $ 5 thousand
when commercial marketing approval in the US or Europe is obtained. If the
products use only the research results without applying patents registered by NIH,
the consideration may double the abovementioned. The balance of current
provision for royalties as of December 31, 2015 was $ 91 thousand.
Royalties are payable at the later of 15 years after the first commercial sale or the
patent life (20 years through October 2021). This agreement expires at the later of
the expiration of the last patent, 15 years after Inc starts to sell products integrating
the patent and after a period of 20 years during which no sales are made.
The license agreement with Yeda is subject to modifications in the license
agreement with NIH (see j above) and will be cancelled upon the cancellation of
this agreement.
On March 23, 2010, the parties signed an addendum to the agreement in the
framework of which it is agreed and clarified that the agreement with Yeda from
2005 applies to certain patents and, accordingly, the Company is committed to pay
royalties on sale of such patent-based products, according to the provisions of the
agreement. This addendum further determines that the Company will pay reduced
royalties of 1% on sales of Deep TMS device for the treatment of depression in
patients plus $ 50,000 upon the achievement of sales target of $ 10 million of all
products included in the agreement. As of December 31, 2015, the balance of
current provision for royalties includes the addendum mentioned above.
- 44 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 17:- CONTINGENT LIABILITIES, COMMITMENTS AND CHARGES (Cont.)
k.
Charges:
To secure bank credit facility for credit cards that are used by Moach, Moach created and
recorded a charge in favor of Bank Leumi LeIsrael Ltd. that is limited to $ 200 thousand
on the rights and money in specific bank accounts as agreed with the bank.
NOTE 18:- EQUITY
a.
Composition of share capital:
December 31, 2015
December 31, 2014
Authorized
Issued and
outstanding Authorized
Number of shares
Issued and
outstanding
Ordinary shares of NIS 0.04
par value each
25,000,000
14,491,034
25,000,000
14,416,784
b. Movement in share capital:
Issued and outstanding capital:
Number of
shares
NIS
par value
Balance at January 1, 2014
13,310,357
132,999
Issue of shares
Exercise of share options
793,015
313,412
9,118
3,596
Balance at December 31, 2014
14,416,784
145,713
Exercise of share options
74,250
770
Balance at December 31, 2015
14,491,034
146,483
c.
Rights attached to shares:
Ordinary shares confer their holders rights to receive dividends in cash and in Company's
shares, right to nominate the Company's directors and rights to participate in distribution
of dividends upon liquidation in proportion to their holdings. Also, Ordinary shareholders
have one vote at the shareholders' meeting such that each share confers one vote to its
holder.
- 45 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 18:- EQUITY (Cont.)
d.
On April 26, 2012, the Company entered into an investment agreement according to
which it raised from several investors approximately $ 4 million in consideration of the
issuance of 532,382 Ordinary shares of NIS 0.04 par value and 532,382 share options, of
which 51,672 share options were allocated to the managing underwriters. On June 11,
2012, the transaction was closed.
Share options are exercisable over a period of three years at the exercise price of NIS 39
per share option. If the issuance of the Company's shares on the NASDAQ is not
completed within one year after the closing of the investment agreement, the exercise
period will be extended by one more year. As described above, if the above issuance is
not completed within 18 months after the closing of the investment agreement, the
exercise price will be reduced to NIS 36. Half of the share options (or all in the event of a
"merger" as defined in the agreement) may be exercised by the investors in a cashless
exercise. Further, other conditions to protect the holders of the share options are
established such in the event of dividend distribution and other events as elaborated in the
agreement.
Investors are granted protection from a decline in the value of their investment in cases of
acquisition of the Company or its assets, investment in the Company or issuance on the
NASDAQ for a price that reflects a price per share of less than NIS 34.5 according to
conditions elaborated in the agreement. The protection is in effect until the earlier of the
issuance on the NASDAQ and a raising in a total of $ 25 million, according to the
conditions elaborated in the agreement.
e.
On November 6, 2012, the Company entered into an investment agreement according to
which it raised from a strategic investor in the pharm industry $ 1 million in consideration
of the issuance of 112,406 Ordinary shares of NIS 0.04 par value each and 134,887
unquoted share options each may be exercised into one Ordinary share of NIS 0.04 par
value.
Share options are exercisable from the closing date to June 10, 2015 at the exercise price
of NIS 39 per share option. If the issuance of the Company's shares on the NASDAQ is
not completed by June 10, 2013, the exercise period will be extended by one more year.
Also, if the above issuance is not completed by December 10, 2013, the exercise price
will be reduced to NIS 36. Half of the share options (or all in the event of a "merger" as
defined in the agreement) may be exercised by the investors in a cashless exercise.
Further, other conditions to protect the holders of the share options are established such in
the event of dividend distribution and other events as elaborated in the agreement.
Investors are granted protection from a decline in the value of their investment in cases of
acquisition of the Company or its assets, investment in the Company or issuance on the
NASDAQ for a price that reflects a price per share of less than NIS 34.5 according to
conditions elaborated in the agreement. The protection is in effect until the earlier of the
issuance on the NASDAQ and a raising in a total of $ 25 million, according to the
conditions elaborated in the agreement.
- 46 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 18:- EQUITY (Cont.)
f.
On May 16, 2013, the Company entered into an investment agreement according to which
it would raise from several investors approximately $ 6.3 million representing a price of
NIS 60 per share. The investors are entitled to make an additional investment up to the
amount of the original amount invested at the price of $ 17.99 per share. The option is
exercisable over a period of 9 months from the date of closing the first round. According
to the agreement, the Company will allocate up to 451,500 Ordinary shares of NIS 0.04
par value each along with the option to make an additional investment in the framework
of which up to 350,195 Ordinary shares of NIS 0.04 par value each will be issue. The
number of shares to be actually issued will be determined according to the NIS/US dollar
exchange rate on the last business day before closing the transaction.
Investors are granted protection from a decline in the value of their investment in cases
where the Company issues additional shares, including upon registration for trade on the
NASDAQ, at their choice, for a price that reflects a price per unit of less than NIS 60 or
at the effective price per share which reflects an effective price of less than that paid by
the investors according to the terms stipulated in the agreement. The protection is in
effect until the earlier of the issue date on the NASDAQ and 9 months after the closing
date of the transaction.
On June 12, 2013, the TASE approved the allocation.
On June 30, 2013, 66,513 shares and 61,145 share options were allocated in consideration
of $ 1.1 million. Total issuance expenses totaled $ 3 thousand. On August 12, 2013, 5,922
shares and 5,559 share options were allocated in consideration of $ 100 thousand. An
amount of $ 1,080 thousand attributed to shares is presented in equity and an amount of
$ 140 thousand attributed to options was presented as liability upon the initial allocation.
g.
h.
On March 23, 2014, as part of a private placement, the Company allocated 772,585
Ordinary shares of NIS 0.04 par value each for the total consideration of approximately
$ 11 million less issuance expenses of $ 4 thousand.
On April 9, 2014, 20,430 Ordinary shares of NIS 0.04 par value each were issued to
investors according to a protection mechanism set in the agreement with them.
i.
On April 10, 2014, the Company published a shelf prospectus.
Share options:
In 2015, 297,002 unquoted share options that had been granted to the former CEO and director
in the Company were exercised into 74,250 Ordinary shares of NIS 0.04 par value each in
consideration of approximately $ 99 thousand. In addition, 29,025 and 25,138 share options that
had been granted to employees who terminated their employment at the Company in 2014 and
2015, respectively, were forfeited and expired.
- 47 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 18:- EQUITY (Cont.)
Capital management in the Company:
The Company's capital management objectives are to preserve the Group's ability to ensure
business continuity thereby creating a return for the shareholders, investors and other interested
parties.
The Company is not under any minimal equity requirements nor is it required to attain a certain
level of capital return.
NOTE 19:- SHARE-BASED PAYMENT
a.
The expense recognized in the financial statements:
The expense recognized in the financial statements for services received is shown in the
following table:
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Equity-settled share-based payment
plans to employees, directors and
consultants
1,541
1,408
402
The share-based payment transactions that the Company granted to its employees are
described below. There have been no modifications or cancellations to any of the
employee benefit plans in 2010-2012.
On June 25, 2013, the Company's Board approved to allocate to employees, officers and
service providers 240,600 share options that may be exercised into 240,600 Ordinary
shares as follows: (1) 10,000 options vest immediately and may be exercised for the
exercise increment of NIS 52; (2) the remaining options are exercisable for the exercise
increment of NIS 59.13, vest over a period of two years and are computed on a quarterly
basis starting October 1, 2014. The options are exercisable during a period of 10 years.
The grant date fair value of the options was approximately $ 1.7 million. This grant was
communicated to the employees in the third quarter of 2013 and, accordingly, the
Company started to spread the expense on July 1, 2013.
On July 31, 2014, the Company's general meeting approved to grant to the Company's
deputy CEO who as of December 31, 2015 serves as deputy CEO research and
development 114,000 fully vested share options at the exercise price of NIS 40 per share
per share that are exercisable during a period of 5 years. Half of the share options may be
exercised in a cashless exercise and the other half in a cash exercise. The value of the
option compensation is approximately $ 0.8 million. The entire amount of the expense
was recognized during the third quarter of 2014.
- 48 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 19:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
The fair value computation above takes into account the conditions of the share option
listed above as well as the following inputs:
Expected volatility of the share prices (%)
Risk-free interest rate (%)
Share price (NIS)
Expected dividend (NIS)
Contractual life of options (years)
42.54%
0.56%
53.99%
-
1.84%
-
53.12
-
0-5
On December 22, 2014, the Company's Board approved to allocate 110,808 share options
to a consultant and an employee of the sub-subsidiary, Brainsway USA Inc., that may be
exercised into 110,808 Ordinary shares of NIS 0.04 par value for the exercise increment
of NIS 43 per any share option as follows (1) 100,800 options to the consultant will vest
in equal parts over three years on a monthly basis starting January 1, 2015. The exercise
period for options that will vest until December 31, 2015 ends on December 31, 2017; the
exercise period for options that will vest until December 31, 2016 ends on December 31,
2018 and the exercise period for options that will vest until December 31, 2017 ends on
December 31, 2019 (2) 10,008 options to the employee will vest in equal parts on a
monthly basis from January 1, 2015 to December 31, 2015 and may be exercised until
December 31, 2017.
The options were allocated to the optionees on March 22, 2015. The grant date fair value
of the options using the binomial model was determined at approximately NIS 1.2
million. The inputs used for the fair value measurement of the options at the grant date:
expected volatility of the share prices of 43.53%-53.41%, risk-free interest rate of 0.06%-
0.82%, share price of NIS 36.95, exercise coefficient of 2.3-2.8 and expected dividend of
0.
On August 30, 2015, 4,170 options that had been granted to an employee who terminated
employment at the Company were forfeited and on November 29, 2015, the remaining
5,838 options expired.
On January 1, 2016, after the reporting date, the consultant terminated employment at the
Company and, accordingly, the unvested options that had been granted to him have been
forfeited, see Note 23b regarding events after the reporting date.
On November 23, 2015, the general meeting approved to allocate to a director in the
Company, Mr. Yaakov Michelin, 37,597 share options that may be exercised into 37,597
Ordinary shares of NIS 0.04 par value for the exercise increment of NIS 27.97 per any
share option as follows: the options vest over four years; 1/12 of the number of options
vest after 15 months of the date of allocation and 1/12 of the number of options vest after
each subsequent three months.
- 49 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 19:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
The options are exercisable during a period of 10 years.
The grant date fair value of the options using the binomial model was determined at
approximately $ 117 thousand.
On November 23, 2015, after the approval of the general meeting, a director, president
and the CEO of the Company, Dr. Guy Ezekiel, was allocated 1,318,191 share options
that may be exercised into 1,819,191 Ordinary shares of NIS 0.04 par value for the
exercise increment of NIS 33.58 per any share option as follows: the options vest over
four years; 1/4 of the number of options vest after 12 months of June 15, 2015 and 1/16 of
the number of options vest after each subsequent three months.
The options are exercisable during a period of 8 years.
The grant date fair value of the options using the binomial model was determined at
approximately $ 3.6 million.
The inputs used for the fair value measurement of the options at the grant date: expected
volatility of the share prices of 43.08%-59.40%, risk-free interest rate of 0.12%-2.16%,
share price of NIS 25.80, exercise coefficient of 2.8 and expected dividend of 0.
On December 8, 2015, the Company's Board approved to allocate 888,100 share options
to employees of the subsidiary, Moach R&D Services Ltd., and employees and a
consultant of the sub-subsidiary, Brainsway USA Inc., that may be exercised into 888,100
Ordinary shares of NIS 0.04 par value for the exercise increment of NIS 25.99 and
NIS 31.19 per any of the 384,100 and 504,000 share options, respectively, as follows: the
options vest over four years; 1/12 of the number of options vest after 15 months of the
date of allocation and 1/12 of the number of options vest after each subsequent three
months.
The options are exercisable during a period of 10 years.
The grant date fair value of the options using the binomial model was determined at
approximately $ 2.3 million.
The inputs used for the fair value measurement of the options at the grant date: expected
volatility of the share prices of 41.89%-59.33%, risk-free interest rate of 0.23%-2.37%,
share price of NIS 25.19, exercise coefficient of 2.3 and expected dividend of 0.
- 50 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 19:- SHARE-BASED PAYMENT TRANSACTIONS (Cont.)
b. Movement during the year:
The following table lists the number of share options, the weighted average exercise price
of share options and modification in employees and service providers option plans during
the current year:
2015
2014
Number of
options
Weighted
average
exercise
price
$
Number of
options
Weighted
average
exercise
price
$
Share options outstanding at
beginning of year
Share options exercised, expired
or forfeited during the year
Share options granted during the
1,739,052
12.46
2,295,150
2.09
(355,335)
9.69
(670,098)
1.28
year
2,354,696
32.18
114,000
40.00
Share options outstanding at end
of year
3,738,413
25.15
1,739,052
12.46
Share options exercisable at end
of year
1,375,028
12.34
1,547,777
6.69
The binomial model is applied when estimating the grant date fair value of options to
employees.
The weighted average remaining contractual life for the share options outstanding as of
December 31, 2015 was about 6 years (2014 - about 5 years).
The range of exercise prices for share options outstanding as of December 31, 2015 and
2014 was NIS 0.01-NIS 59.13.
- 51 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 20:- ADDITIONAL INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME ITEMS
a.
Additional information on revenues:
1.
Revenues from major customers each of which accounts for 10% or more of total
revenues reported in the financial statements:
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Customer A
Customer B
-
-
649
-
294
141
2.
Revenues reported in the financial statements for each group of similar products
and services:
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Revenues from lease
Revenues from sale
Geographic information:
4,299
2,501
6,800
2,708
672
3,380
956
233
1,189
Revenues reported in the financial statements derive from the Company's country of
domicile (Israel) and foreign countries based on the location of the customers, are as
follows:
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Israel
Foreign countries *)
244
6,556
6,800
404
2,976
3,380
230
959
1,189
*)
In 2015, the Company earned about 76% of its revenues in the US and about 14%
in Europe.
In 2014, the Company earned about 50% of its revenues in the US and about 28%
in Europe.
- 52 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 20:- ADDITIONAL INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME ITEMS (Cont.)
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
b.
Cost of revenues:
Cost of lease
Cost of sales
c.
Research and development expenses,
net:
Salaries and related benefits
Subcontractors
Laboratory materials
Patents
Other
Business trips
Share-based payment
Depreciation
Less - support by Government grants
d.
Selling and marketing expenses:
Salaries and related expenses
Subcontractors
Distribution commissions
Sales promotion and other
Business trips
Share-based payment
Participation in expenses
e.
General and administrative expenses:
Salaries and related expenses
Professional fees and office expenses
Depreciation
Business trips
Allowance for doubtful accounts
Share-based payment
Expenses relating to fundraising
844
622
1,466
2,408
1,402
463
131
497
40
617
32
(1,487)
404
252
656
2,304
2,017
993
153
781
144
1,271
31
(1,256)
155
44
199
2,029
1,733
327
112
359
114
319
27
(1,332)
4,103
6,438
3,688
1,120
-
324
1,269
336
232
-
3,281
930
676
30
82
170
567
-
464
457
167
597
190
30
(9)
1,896
772
663
11
103
-
107
11
232
181
31
228
220
23
(27)
888
420
635
11
37
-
60
22
2,455
1,667
1,185
- 53 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 20:- ADDITIONAL INFORMATION TO THE STATEMENTS OF COMPREHENSIVE
INCOME ITEMS (Cont.)
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
f.
Finance income:
Interest income on bank deposits
Finance income on liability in respect of
Government grants
Finance income on share options
Exchange differences
g.
Finance expenses:
Finance expenses from share options
Finance expenses from liability in
respect of Government grants
Exchange differences
Bank commissions
18
-
618
-
636
-
98
83
37
93
-
2,759
343
3,195
53
251
-
-
304
1,914
2,614
525
3
21
-
496
21
218
2,463
3,131
NOTE 21:- LOSS PER SHARE
Number of shares and loss used in the computation of loss per share:
2015
Year ended December 31,
2014
2013
Loss
attributable
to equity
holders of
the
Company
U.S. dollars
in thousands In thousands
Weighted
number of
shares
Loss
attributable
to equity
holders of
the
Company
U.S. dollars
in thousands In thousands
Weighted
number of
shares
Loss
attributable
to equity
holders of
the
Company
U.S. dollars
in thousands
Weighted
number of
shares
In thousands
Used in the computation of basic
loss
14,463
4,087
14,161
6,545
12,867
7,122
Used in the computation of
diluted loss
14,463
4,087
14,261
8,032
12,867
7,122
To compute diluted loss per share, convertible securities have not been taken into account since
their conversion has anti-dilutive effect.
- 54 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
a.
Balances with interested and related parties:
Composition:
As of December 31, 2015:
Key
management
personnel *)
Other
interested
and related
parties
U.S. dollars in thousands
Other accounts payable
54
72
As of December 31, 2014:
Key
management
personnel *)
Other
interested
and related
parties
U.S. dollars in thousands
Other accounts payable
66
30
*)
Some of the key management personnel are interested parties by virtue of holdings.
b.
Benefits to interested and related parties:
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Salary and related benefits to those
employed by the Company or on its
behalf
1,548
1,499
1,215
Directors' fee to those not employed by
the Company or on its behalf
80
61
46
Number of individuals to whom the
salary and benefits relate:
Related and interested parties
employed by the Company or on its
behalf
Directors not employed by the
Company
11
8
19
9
10
7
8
16
18
- 55 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
c.
Benefits to key management personnel *):
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Short-term employee benefits
Share-based payment
31
1,202
(13)
968
69
181
*)
Some of the key management personnel are interested parties by virtue of holdings.
d.
Purchases from related parties:
2015
Year ended December 31,
2014
U.S. dollars in thousands
2013
Purchases from related parties
9
48
37
e.
Transactions with interested and related parties:
Year ended December 31, 2015:
Costs of property, plant and equipment
Sales to subsidiary
Research and development expenses
Marketing expenses
General and administrative expenses
Key
management
personnel *)
Other
interested
and related
parties
U.S. dollars in thousands
-
-
897
235
1,569
2,701
9
285
-
-
80
374
*)
Some of the key management personnel are interested parties by virtue of holdings.
- 56 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
Year ended December 31, 2014:
Costs of property, plant and equipment
Research and development expenses
Marketing expenses
General and administrative expenses
Year ended December 31, 2013:
Costs of property, plant and equipment
Research and development expenses
Marketing expenses
General and administrative expenses
Key
management
personnel *)
Other
interested
and related
parties
U.S. dollars in thousands
-
1,706
257
491
2,454
48
-
-
61
109
Key
management
personnel *)
Other
interested
and related
parties
U.S. dollars in thousands
-
1,131
137
197
1,465
37
-
-
46
83
*)
Some of the key management personnel are interested parties by virtue of holdings.
f.
g.
On April 30, 2015, Mr. Uzi Sofer ceased his role as a CEO and director in the Company.
On May 18, 2015, the Company informed on the appointment of a new president and
CEO for the Company, Dr. Guy Ezekiel, who started his four-year tenure on June 15,
2015 ("the contractual term"). On June 22, 2015, the general meeting approved his
conditions of employment which consist of, besides monthly payment, the following
bonuses: (1) an annual bonus based on the Company's remuneration policy according to
the decision of the Company's Board; (2) bonuses of $ 500 thousand to be granted based
on target achievements as outlined in his agreement. As of the date of the approval of the
financial statements, the Company's management has no expectation that these targets
will be achieved and, accordingly, no expense was recognized in the financial statements.
- 57 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
h.
i.
j.
On June 22, 2015, the general meeting approved also the conditions of Dr. Guy Ezekiel in
his position as director of the Company, if appointed a director by the Company's general
meeting. On November 23, 2015, the general meeting approved the appointment.
For occupying the position of a director of the Company, Dr. Guy Ezekiel is entitled to
options to purchase Company's shares based on the vesting terms detailed in the
agreement with him as follows: (1) the first portion: subject to and after the service
agreement becomes effective - 1,318,191 options to purchase 1,318,191 Ordinary shares
of the Company of NIS 0.04 par value each for the exercise price of NIS 33.58 which, as
of June 22, 2015, the date on which the general meeting was convened, represented
7.78% of the Company's issued and outstanding capital on a fully diluted basis; (2) the
second portion: subject to and after the term of the agreement is extended by three
additional years ("the extension period") and subject to all approvals required under the
law, including the approvals of the authorized organs of the Company and the stock
exchange - Dr. Guy Ezekiel will be entitled to receive additional options to purchase
Ordinary shares of the Company of NIS 0.04 par value each which, as of the date of
grant, will represent 3.5% of the Company's issued and outstanding capital on a fully
diluted basis for the exercise price to be determined according to the average closing
market price of the share during 30 days before the Board's resolution on the allocation of
the portion.
As for the value of the options allocated to Dr. Ezekiel, see Note 19.
On October 18, 2015, the Company's Board approved to appoint a new director for the
Company. Mr. Yaakov Michelin. This was approved by the general meeting on
November 23, 2015. Mr. Michelin is entitled to: (1) annual compensation and
participation compensation based on the "minimum amount" as listed in the Companies
Regulations and (2) allocation of 37,597 options that may be exercised into shares of the
Company of NIS 0.04 par value each for the exercise price of NIS 27.97 which, as of
October 18, 2015, the date on which the general meeting was convened, represented
0.24% of the Company's issued and outstanding capital on a fully diluted basis. The
options vest and become exercisable over four years starting from the date of allocation at
dates as outlined in his agreement. As for information about the options allocated to Mr.
Michelin, see Note 19.
k.
On June 25, 2015, the Company's VP of marketing ceased his role.
l.
On July 7, 2015, the Company's VP of business development ceased his role.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BRAINSWAY LTD.
NOTE 22:- TRANSACTIONS AND BALANCES WITH INTERESTED AND RELATED PARTIES
(Cont.)
m. On August 16, 2015, a VP of global sales started serving in the Company. On August 6,
2015, the remuneration committee approved his conditions of employment which consist
of, besides monthly payment and subject to the approval of the Board, options to
purchase shares of the Company for the exercise price to be determined according to the
average closing market price of the share during 30 days before the allocation plus a
premium of 20%. The options will be granted based on the vesting terms detailed in the
agreement with him as follows: (1) 160,000 options which vest over four years will be
granted based on the Company's remuneration policy as approved in the general meeting
of June 25, 2015 and (2) up to 40,000 options that will vest based on the achievement of
the predetermined operating targets. On December 8, 2015, the Company's Board
approved to grant the first 160,000 options.
n.
On October 18, 2015, the Company's remuneration committee and Board approved to
change the consulting fees to Dr. David Zchut, the chairman of the Board. This was
approved by the general meeting which convened on November 23, 2015, as follows: for
the period from September 1, 2014 to June 30, 2015, the consulting fees were raised from
NIS 25 thousand a month for consulting services at the scope of 20% of full time
employment to NIS 52.5 thousand a month for consulting services at the scope of 70% of
full time employment. After July 1, 2015, his salary was raised to NIS 30 thousand a
month for consulting services at the scope of 40% of full time employment.
o.
On November 23, 2015, Dr. Eli Rosenbaum ceased his role as a director in the Company.
NOTE 23:- EVENTS AFTER THE REPORTING DATE
a.
b.
During 2016 through the date of the approval of the financial statements, 8,500 and
32,725 share options that had been granted to employees who terminated employment at
the Company in 2015 and 2016, respectively, were forfeited and expired.
On January 1, 2016, 67,200 share options that had been granted to a consultant of the sub-
subsidiary, Brainsway USA Inc., who terminated employment were forfeited and the
remaining 33,600 share options will expire on April 1, 2016.
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