EX-99.1 2 exhibit_99-1.htm EXHIBIT 99.1

 
Exhibit 99.1
ATTUNITY LTD. AND ITS SUBSIDIARIES
 
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 
AS OF JUNE 30, 2017
 
UNAUDITED
 
U.S. DOLLARS IN THOUSANDS

INDEX
 
 
Page
   
2 - 3
   
4
   
5
   
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7 - 13
 


ATTUNITY LTD. AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands

   
June 30,
   
December 31,
 
   
2017
   
2016
 
   
Unaudited
   
Audited
 
ASSETS
           
             
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
9,994
   
$
9,166
 
Trade receivables, net
   
5,844
     
7,031
 
Prepaid expenses and other account receivables
   
1,289
     
663
 
Totalcurrent assets
   
17,127
     
16,860
 
                 
LONG-TERM ASSETS:
               
Other assets
   
159
     
155
 
Deferred taxes, net
   
1,950
     
2,340
 
Severance pay fund
   
4,226
     
3,770
 
Property and equipment, net
   
1,300
     
1,214
 
Intangible assets, net
   
2,105
     
2,778
 
Goodwill
   
30,929
     
30,929
 
Total long-term assets
   
40,669
     
41,186
 
                 
Total assets
 
$
57,796
   
$
58,046
 
 
The accompanying notes are an integral part of the interim consolidated financial statements.
 
2


ATTUNITY LTD. AND ITS SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands, except share and per share data

   
June 30,
   
December 31,
 
   
2017
   
2016
 
   
Unaudited
   
Audited
 
LIABILITIES AND SHAREHOLDERS' EQUITY
           
CURRENT LIABILITIES:
           
             
Trade payables
 
$
824
   
$
375
 
Payment obligation related to acquisitions
   
-
     
271
 
Deferred revenues
   
12,571
     
10,676
 
Employees and payroll accruals
   
4,429
     
4,741
 
Accrued expenses and other current liabilities
   
1,812
     
2,021
 
Liability presented at fair value
   
300
     
-
 
                 
Total current liabilities
   
19,936
     
18,084
 
                 
LONG-TERM LIABILITIES:
               
Other liabilities
   
295
     
277
 
Deferred revenues
   
1,923
     
1,438
 
Liability presented at fair value
   
-
     
512
 
Accrued severance pay
   
5,801
     
5,027
 
                 
Total long-term liabilities
   
8,019
     
7,254
 
                 
SHAREHOLDERS' EQUITY:
               
                 
Share capital - ordinary shares of NIS 0.4 par value -
   
1,946
     
1,921
 
Authorized: 32,500,000 shares at June 30, 2017 and December 31, 2016; Issued and outstanding: 17,062,445 shares at June 30, 2017 and 16,841,238 shares at December 31, 2016
               
Additional paid-in capital
   
151,554
     
149,716
 
Accumulated other comprehensive loss
   
(1,077
)
   
(1,013
)
Accumulated deficit
   
(122,582
)
   
(117,916
)
Total shareholders' equity
   
29,841
     
32,708
 
                 
Total liabilities and shareholders' equity
 
$
57,796
   
$
58,046
 
 
The accompanying notes are an integral part of the interim consolidated financial statements.
3

ATTUNITY LTD. AND ITS SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF INCOME
U.S. dollars and shares in thousands, except per share data

   
Six months ended
 
   
June 30,
 
   
2017
   
2016
 
   
Unaudited
 
Revenues:
           
             
Software licenses
 
$
13,164
   
$
13,539
 
Maintenance and services 
   
14,180
     
12,433
 
Total revenues
   
27,344
     
25,972
 
                 
Operating expenses:
               
Cost of software license
   
613
     
1,267
 
Cost of maintenance and services
   
3,912
     
3,112
 
Research and development
   
6,799
     
6,792
 
Selling and marketing
   
16,655
     
17,847
 
General and administrative
   
2,501
     
2,308
 
Impairment of acquisition-related intangible assets
   
-
     
2,132
 
Total operating expenses
   
30,480
     
33,458
 
                 
Operating loss
   
(3,136
)
   
(7,486
)
Financial income (expenses), net
   
(58
)
   
80
 
Loss before income taxes
   
(3,194
)
   
(7,406
)
Income tax benefit (taxes on income)
   
(1,472
)
   
957
 
Net loss
 
$
(4,666
)
 
$
(6,449
)
 
               
Basic and diluted net loss per share
 
$
(0.28
)
 
$
(0.39
)
Weighted average number of shares used in computing basic net and diluted loss per share
   
16,951
     
16,671
 
 
The accompanying notes are an integral part of the interim consolidated financial statements.

4

ATTUNITY LTD. AND ITS SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands
 
   
Six months ended
June 30,
 
   
2017
   
2016
 
   
Unaudited
 
             
Net loss
 
$
(4,666
)
 
$
(6,449
)
                 
Other comprehensive income (loss):
               
                 
Cash flow hedges:
               
                 
Changes in unrealized gains
   
311
     
91
 
Reclassification adjustments for gains included in net loss
   
(205
)
   
(16
)
                 
Net change
   
106
     
75
 
                 
Foreign currency translation adjustment
   
(170
)
   
(25
)
                 
Net change in accumulated comprehensive loss
   
(64
   
50
 
                 
Comprehensive loss
 
$
(4,730
)
 
$
(6,399
)

The accompanying notes are an integral part of the interim consolidated financial statements.

5

ATTUNITY LTD. AND ITS SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
U.S. dollars in thousands

   
Six months ended June 30,
 
   
2017
   
2016
 
   
Unaudited
 
Cash flows activities:
           
Net loss
 
$
(4,666
)
 
$
(6,449
)
Adjustments required to reconcile net loss to net cash provided by (used in) operating activities:
               
Depreciation
   
239
     
237
 
Stock based compensation
   
1,650
     
1,922
 
Amortization of intangible assets
   
673
     
1,393
 
Impairment of acquisition-related intangible assets
   
-
     
2,132
 
Accretion of payment obligation
   
-
     
(12
)
Change in:
               
   Accrued severance pay, net
   
318
     
111
 
   Trade receivables
   
1,207
     
(2,714
)
   Other accounts receivable and prepaid expenses
   
(527
)
   
(491
)
   Other long term assets
   
(1
)
   
179
 
   Trade payables
   
434
     
397
 
   Deferred revenues
   
2,166
     
1,262
 
   Employees and payroll accruals
   
(315
)
   
1,138
 
   Accrued expenses and other current liabilities
   
(181
)
   
49
 
Liabilities presented at fair value
   
(219
)
   
(86
)
Tax benefit related to exercise of stock options
   
-
     
44
 
Change in deferred taxes, net
   
406
     
(1,196
)
Net cash provided by (used in) operating activities
   
1,184
     
(2,084
)
 
               
Cash flows from investing activities:
               
Purchase of property and equipment
   
(320
)
   
(340
)
Net cash used in investing activities
   
(320
)
   
(340
)
 
               
Cash flows from financing activities:
               
Proceeds from exercise of stock options
   
213
     
155
 
Payment of contingent consideration
   
(271
)
   
(1,239
)
Tax benefit related to exercise of stock options
   
-
     
(44
)
Net cash used in financing activities
 
$
(58
)
 
$
(1,128
)
Foreign currency translation adjustments on cash and cash equivalents
   
22
     
(51
)
 
               
Increase (decrease) in cash and cash equivalents
   
828
     
(3,603
)
Cash and cash equivalents at the beginning of the year
   
9,166
     
12,522
 
 
               
Cash and cash equivalents at the end of the year
 
$
9,994
   
$
8,919
 
                 
Supplemental disclosure of cash flow activities:
               
Cash paid during the year for taxes
   
1,204
     
563
 
Supplemental disclosure of non- cash investing activities:
         
Issuance of shares related to acquisition
   
-
     
224
 

The accompanying notes are an integral part of the interim consolidated financial statements.

6


ATTUNITY LTD. AND ITS SUBSIDIARIES
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 1:-
GENERAL
 
Attunity Ltd. (the "Company" or "Attunity") develops, markets, sells and supports data integration and Big Data management software solutions that enable availability, delivery and management of data across heterogeneous enterprise platforms, organizations, and the cloud. In addition, the Company provides maintenance, consulting, and other related services for its products. 
The Company has wholly-owned subsidiaries in the United States, United Kingdom, Hong-Kong and Israel. The Company's subsidiaries are engaged primarily in sales and marketing.

NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES

a.
Unaudited interim consolidated financial statements:

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information. In the opinion of management, the unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair presentation of the Company's consolidated financial statements.
 
The balance sheet at December 31, 2016 has been derived from the audited consolidated financial statements of the Company at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.
 
The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended December 31, 2016, included in the Company’s Annual Report on Form 20-F, filed with the U.S. Securities and Exchange Commission ("SEC") on March 1, 2017, as amended on Form 20-F/A, filed with the SEC on March 6, 2017 (collectively, the "Annual Report"). The significant accounting policies applied in the Company’s audited 2016 consolidated financial statements and notes thereto included in the Annual Report  are applied consistently in these financial statements. Results for the six months ended June 30, 2017 are not necessarily indicative of results that may be expected for the year ending December 31, 2017.
 
Unless otherwise noted, all references to "dollars" or "$" are to United States dollars.

b.
Use of estimates:
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
 
7

ATTUNITY LTD. AND ITS SUBSIDIARIES
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
 
c.
Impact of recently issued accounting standards not yet adopted:
 
1.
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", which amends the existing accounting standards for revenue recognition. The FASB has recently issued several amendments to the standard, including clarification on accounting for licenses of intellectual property and on identifying performance obligations. The Company plans to adopt the new standard effective January 1, 2018.

The new standard permits two methods of adoption: retrospectively to each prior reporting period presented (the so-called "full retrospective method"), or retrospectively with the cumulative effect of initially applying the new standard recognized at the date of initial application (the so-called "modified retrospective method"). The Company currently anticipates adopting the new standard using the modified retrospective method. The Company is continuing to evaluate the impact that the standard will have on its consolidated financial statements and related disclosures.

2.
In January 2017, the FASB issued ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business", which revises the definition of a business and provides new guidance in evaluating when a set of transferred assets and activities is a business. This guidance will be effective for the Company in the first quarter of 2018 on a prospective basis, and early adoption is permitted. The Company does not expect the standard to have a material impact on its consolidated financial statements.

3.
In January 2017, the FASB issued ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" ("ASU 2017-04”), which eliminates step two from the goodwill impairment test. Under ASU 2017-04, an entity should recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds its fair value up to the amount of goodwill allocated to that reporting unit. This guidance will be effective for the Company in the first quarter of 2020 on a prospective basis, and early adoption is permitted. The Company does not expect the standard to have a material impact on its consolidated financial statements.

 
8


ATTUNITY LTD. AND ITS SUBSIDIARIES
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 3:-
FAIR VALUE MEASUREMENTS

The FASB issued Accounting Standards Codification ("ASC") No. 820, "Fair Value Measurements and Disclosures" ("ASC No. 820"), which defines fair value and establishes a framework for measuring fair value. According to ASC No. 820, fair value is an exit price, representing the amount that would be received for selling an asset or paid for the transfer of a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date.

Level 2:
Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3:
Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
 
The Company measures the contingent payment obligations payable, if any, in connection with its acquisitions of businesses or entities ("Contingent Considerations"), foreign currency derivative contracts and other derivative instruments at fair value. Foreign currency derivative contracts are classified within Level 2 as the valuation inputs are based on quoted prices and market observable data of similar instruments. The Contingent Considerations related to acquisitions and liabilities presented at fair value are classified within Level 3 as the valuation inputs are based on significant inputs not observable in the market. See also Note 5 below.
 
There have been no transfers between fair value measurements levels during the six months ended June 30, 2017.

The below table sets forth the Company's assets and liabilities that were measured at fair value as of June 30, 2017 and December 31, 2016 by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

9

 
ATTUNITY LTD. AND ITS SUBSIDIARIES
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 3:-        FAIR VALUE MEASUREMENTS (Cont.)
 
   
June 30, 2017 (unaudited)
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets:
                       
                         
Foreign exchange contracts
 
 
-
   
$
99
   
 
-
   
$
99
 
                                 
Total assets
 
 
-
   
$
99
   
 
-
   
$
99
 

Liabilities:
                       
                         
Liabilities presented at fair value
   
-
     
-
    $
300
    $
300
 
                                 
Total liabilities
 
 
-
   
 
-
   
$
300
   
$
300
 
 
   
December 31, 2016
(audited)
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Liabilities:
                       
                         
Contingent Considerations related to acquisitions
 
 
-
   
 
-
   
$
271
   
$
271
 
Foreign exchange contracts
   
-
    $
7
     
-
    $
7
 
Liability presented at fair value
   
-
     
-
    $
512
    $
512
 
                                 
Total liabilities
 
$
-
   
$
7
   
$
783
   
$
790
 

The following table set forth the change of fair value measurements that are categorized within Level 3:

Total fair value as of January 1, 2017
 
$
783
 
         
Cash settlements
   
(271
)
Changes in fair value recognized in expenses
   
(212
)
         
Total fair value as of June 30, 2017 (unaudited)
 
$
300
 


10

ATTUNITY LTD. AND ITS SUBSIDIARIES
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 4:-
OTHER INTANGIBLE ASSETS, NET

Net other intangible assets consisted of the following:

   
Weighted average amortization
   
June 30,
   
December 31,
 
   
period
   
2017
   
2016
 
   
(years)
   
Unaudited
       
Original amount:
                 
                   
Core technology
  4.74    
$
13,384
   
$
13,384
 
Customer relationships
  5.84      
1,981
     
1,981
 
Non-competition agreement
  4      
224
     
224
 
                         
             
15,589
     
15,589
 
Accumulated amortization and impairment charges:
                       
                         
Core technology
           
7,589
     
6,977
 
Customer relationships
           
1,577
     
1,544
 
Non-competition agreement
           
196
     
168
 
Impairment of acquisition-related intangible assets (*)
           
4,122
     
4,122
 
                         
             
9,362
     
8,689
 
Other intangible assets, net:
                       
                         
Core technology
           
1,876
     
2,488
 
Customer relationships
           
201
     
234
 
Non-competition agreement
           
28
     
56
 
                         
           
$
2,105
   
$
2,778
 
 
 The estimated future amortization expense of other intangible assets as of June 30, 2017 for the years ending December 31:
 
2017
 
$
673
 
2018
   
943
 
2019
   
415
 
Thereafter
   
74
 
         
   
$
2,105
 

(*)
In 2016, the Company recorded a $4,122 impairment charge on developed technology. This impairment was based upon forecasted discounted cash flows which considered delayed sales trends with longer than expected sales cycles of Appfluent products, which the Company believes is primarily due to the innovative nature of this solution.
 
11

ATTUNITY LTD. AND ITS SUBSIDIARIES
 
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 5:-
LIABILITY PRESENTED AT FAIR VALUE
 
The Company entered into a Loan Agreement with Plenus Technologies Ltd. ("Plenus" or the "Lender"), on January 31, 2007 (as amended on March 30, 2009 and September 4, 2011, the "Loan Agreement"). According to the Loan Agreement  if, during the period between March 19, 2009 and December 31, 2017, the Company enters into a "Fundamental Transaction" (which is defined in the Loan Agreement to include various types of change of control transactions), then the Lender shall be entitled to the following: (i) in the cases of merger or acquisition of shares, an amount equal to 15% of the aggregate proceeds payable in connection with such Fundamental Transaction to the shareholders, or (ii) in the case of the sale of substantially all of the Company's assets, an amount equal to 15% of the aggregate proceeds payable to the Company in connection with such Fundamental Transaction; the "aggregate proceeds" shall be calculated while subtracting any amount of debts, liabilities and obligations which have accrued prior to the closing of such Fundamental Transaction and have not been assumed by the purchaser in such Fundamental Transaction. During such period, the Lender may elect to receive $300 in cash in lieu of such contingent payment right.
 
The Company accounted for the above mentioned contingent payment right as a liability presented at fair value on the balance sheet, which was marked to market at each reporting period. As of June 30, 2017 and December 31, 2016, the liability amounted to $300 and $512, respectively. The fair value of this liability was performed by a third party valuation firm using the Binomial Model for options valuation, based on assumptions provided by management.
 
NOTE 6:-
DERIVATIVES AND HEDGING ACTIVITIES

The Company accounts for derivatives and hedging based on ASC No. 815, "Derivatives and Hedging" ("ASC No. 815"). ASC No. 815 requires the Company to recognize all derivatives on the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship.

According to ASC No. 815, for derivative instruments that are designated and qualify as hedging instruments, the Company must designate the hedging instrument, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. If the derivatives meet the definition of a hedge and are so designated, depending on the nature of the hedge, changes in the fair value of such derivatives will either be offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings, or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value is recognized in earnings.

12


ATTUNITY LTD. AND ITS SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data

NOTE 6:-
DERIVATIVES AND HEDGING ACTIVITIES (Cont.)

The Company entered into forward and option contracts to hedge against the risk of overall changes in future cash flow from payments of payroll and related expenses denominated in New Israeli Shekels ("NIS"). As of June 30, 2017, the fair value of the Company's outstanding hedging contracts that were designated as hedging instruments was recorded as an asset of $99, included in the balance sheet within "Other accounts receivable and prepaid expenses". As of December 31, 2016, the fair value of the Company's outstanding hedging contracts that were designated as hedging instruments was recorded as liability of $7, included in the balance sheet within "Accrued expenses and other current liabilities". The Company measured the fair value of these hedging contracts in accordance with ASC No. 820, and they were classified as Level 2. Net income (loss) from hedging transactions recognized in financial expenses, net during the first six months of 2017 and 2016 was ($2) and $3, respectively.
 
As of June 30, 2017 and December 31, 2016, the notional principal amount of the hedging contracts to sell U.S. dollars held by the Company was $2,873 and $4,963, respectively.

As of June 30, 2017 and December 31, 2016, there were no hedging contracts that were not designated as hedging instruments.
 
NOTE 7:-        FINANCIAL INCOME (EXPENSES), NET

   
Six months ended
June 30,
 
   
2017
   
2016
 
   
Unaudited
 
Financial income:
           
             
Revaluation of liabilities presented at fair value
 
$
212
   
$
86
 
Hedging
   
-
     
3
 
Exchange rate differences
   
167
     
100
 
                 
     
379
     
189
 
Financial expenses:
               
                 
Hedging
   
(2
)
   
-
 
Exchange rate differences
   
(364
)
   
(29
)
Interest and bank charges
   
(71
)
   
(57
)
Accretion of contingent consideration
   
-
     
(23
)
                 
     
(437
)
   
(109
)
                 
Total financial income (expenses), net
 
$
(58
)
 
$
80
 

 
13