REG - Ethernity Networks - Interim Results
RNS Number : 4185LEthernity Networks Ltd06 September 2019
6 September 2019
ETHERNITY NETWORKS LTD
("Ethernity Networks" or the "Company" or the "Group")
Interim results for the six months ended 30 June 2019 ("H1")
Ethernity Networks Ltd (AIM: ENET.L), announces its interim results for the six months ended 30 June 2019.
Ethernity Networks provides innovative networking and security solutions on programmable hardware for accelerating telecom and cloud networks. Ported onto any Field Programmable Gate Array (FPGA), Ethernity offers complete data plane processing with a rich set of networking features, robust security, to allow improved performances of a wide range of virtual functions to optimise networks. The ACE-NIC SmartNICs, ENET Flow Processors, and turnkey network appliances offer best-in-class fully programmable platforms for the telecoms, cloud service provider and enterprise markets. Ethernity offers complete solutions that enables customers to stop burning CPU cores and to quickly adapt to changing conditions, improving time-to-market and facilitating the deployment of edge computing, 5G User Plane Functionality (UPF) and Network Function Virtualization (NFV).
Financial summary:
· Revenues increased 2.2 times to $971,709 (H1 2018: $441,247)
· Gross profit increased 2.8 times to $843,002 (H1 2018: $299,647)
· EBITDA loss reduced by 56% to $485,451 (H1 2018: $1,111,989)
· Operating loss reduced by 23% to $981,774 (H1 2018: $1,276,489)
· Cash and cash deposits balances at 30 June 2019 of $5.9m (31 December 2018 $8.6m) (30 June 2018: $11.9m).
EBITDA
Unaudited
Audited
30 June 2019
30 June 2018
31 December 2018
US$
US$
US$
Revenues
971,709
441,247
1,123,707
Operating Profit (Loss)
(981,774)
(1,276,489)
(2,785,731)
Add: Depreciation
128,945
42,283
100,918
Add: Amortisation
367,378
122,217
322,724
EBITDA
(485,451)
(1,111,989)
(2,362,089)
Operational highlights:
· Downward trends of 2017 and 2018 reversed with revenue increasing, reflecting increased revenues from contracts signed.
· Operating costs, excluding amortisation and depreciation reduced by 5%.
· ACENIC-100 selected by FiberHome to be promoted to FiberHome's core Chinese telecom operator clients serving tens of millions of households, including China Unicom, China Telecom, and others.
· Successfully completed delivery of the Company`s ACENIC-100 to a major Korean OEM.
· Advanced discussions to supply Ethernity's current Universal Edge Platform (UEP) and next generation 400Gbps UEP devices and solutions to potential Ethernet Access Market, Mobile Backhaul, and Fiber To The Home (FTTH) customers.
· Continued positive reception to the Company's product offerings with Tier1 OEM's.
Further to the annual results for 2018 and information published in the Company`s Annual Report in June of this year, the operational highlights to date in 2019 are as follows:
· Revenue growth in the first half of 2019 was bolstered mainly from the two contracts signed in the latter part of 2018 along with increased recurring revenues derived from previous ENET flow processor engagement, and a licensing deal.
· In January 2018 we announced that an ASIC licensing contract with an existing customer for 5G fixed wireless Customer Premise Equipment (CPE) that uses Ethernity's FPGA on their 5G fixed wireless base node had been put on hold as the customer had decided to accept a proposal from the Company to use our ENET FPGA SoC for serving business customers with ultra-speed wireless connections. Following successful trials of the customer's 5G base station node with the Company's ENET4200 FPGA SoC embedded, the customer intends to complete a rollout of wireless CPE devices targeted for business customers based on its in house Radio ASIC design and Ethernity's ENET3825 CPE FPGA SoC. Deployment of the 5G wireless CPE is planned for H2 2020. Subject to the overall success of the customer's business and the number of units deployed, it is anticipated that this will result in significant annual revenues, commencing 2021 onwards.
· During the three months since the announcement of the 2018 annual results, the Company has had ongoing positive dialogue regarding the Company's 5G offering for its User Plane Functionality (UPF) acceleration proposal based on the ACENIC-100 with Tier1 Service providers and operators. 5G mobile networks are expected to start deployment during 2020 and are based on virtualized environments. With the increase throughput of the 5G mobile network, acceleration of the User Data Plane at the edge of the network has become a core requirement compared to existing 4G mobile networks. This is expected to result in a significantly higher than anticipated demand for the FPGA Smart NIC product for this specific market.
· The Company anticipates concluding agreements over the next six months with Tier1 OEM customers in the Cable Modem Termination System (CMTS), Fiber To The Home (FTTH) Broadband deployment and Ethernet Access Devices (EAD) markets, as previously stated, with rollout and production plans now anticipated for 2020, with mass deployment beginning towards the end of 2020
David Levi, Chief Executive Officer of Ethernity Networks, commented:
"The first half results and growth are in-line with our expectations with the focus being on the Company moving from an IP/technology provider to a solutions provider for virtual networking and security appliances. The licensing contracts signed with Tier1 OEM's represents part of the change we anticipated and is expected to develop into stable recurrent revenue from royalties. The goal of the Company's development activities is to build stable recurrent revenues from technology licensing and supply of our ACENIC-100 and UEP products.
"We have continued with the successful advancement of our UEP hardware platform that will host our field proven flow processor for general edge access deployment with a complete programmable platform. Furthermore, development of the 'Router on a NIC' offering, ACE-NIC FPGA, Smart NIC, and the progress achieved in accepting virtualization especially in the 5G mobile market should, we believe, fuel major revenue streams for the Company going forward."
"We remain confident that Ethernity will meet its long-term objectives and is well positioned to become one of the key solutions providers in its marketplace."
For further information, please contact:
Ethernity Networks
David Levi, Chief Executive Officer
Mark Reichenberg, Chief Financial Officer
Tel: +972 8 915 0392
Arden Partners plc (NOMAD and Broker)
Tom Price / Benjamin Cryer
Tel: +44 207 614 5900
MARKET ABUSE REGULATION
The information communicated in this Announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR"). For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Mark Reichenberg, Chief Financial Officer
OPERATIONAL and financial REVIEW
The challenging market trends continued through the first six months of 2019, including the discussion and evaluation process with potential customers not being entirely within our control. However, the Company is experiencing positive results from focusing on becoming a solutions provider and from the engagement with customers previously during 2018. In 2019, ongoing customer engagement activity has increased substantially. There has been significant progress related to the ACENIC, EAD, UEP and licensing deals, some of which we are hoping to be completed over the remaining months of 2019.
Whilst we had previously commented that the adoption of the new networking virtualisation market in which we operate was delayed by some 12 months from when originally anticipated, we are now beginning to experience the market entering engagement and deployment stages. We remain confident in the long term prospects of the Company and this is supported by the number of ongoing project collaborations around the Company's ACENIC, EAD, UEP and royalty revenues streams.
During the period under review, the Company delivered revenues of $971,709 (H1 2018: $441,247) and a gross profit of $843,002 (H1 2018 $299,647). The gross profit percentage of 86.8% (H1 2018: 67.9%) is higher as compared to the six months ended 31 December 2018 ("H2 2018") due to the different product mix within the revenue, where design wins and royalty revenue, which are near 100% gross margin, contributing 76.9% of revenue in H12019 compared to 55.4% in H1 2018.
EBITDA loss in the first six months of the year was $485,451 (H1 2018 loss: $1,111,989), which is primarily a result of the Company's increased revenue, including increased gross margins achieved.
Operating expenses (including share-based compensation costs and amortisation costs), as a percentage of revenues were 357% in H1 2018, decreasing to 189% of revenues for H1 2019. The increases in operating costs in H1 2019 is attributable mainly to the increase in amortisation costs of $245,161 on the Intangible Assets, with all other operating expenditure being in line with expectations. Operating costs excluding amortisation and depreciation reduced in H1 2019 by 5.2% compared to the same period in H1 2018.
Cash, cash deposits and cash equivalents are $5.9m as at 30 June 2019 (31 December 2018 $8.6m) (H1 2018: $11.9million). Cash utilisation, a key focus for the board, remained in line with expectations during H1, and was approximately $2.7m of which circa $2.0.m was deployed as investment in intangible assets.
SEGMENT REPORT sector analysis
Region
Six months ended 30 June 2019
2019
Six months ended 30 June 2018
2018
Year ended 31 December 2018
2018
%
%
%
United States
588,680
60.6%
46,239
10.5%
478,600
42.6%
Israel
277,188
28.5%
215,114
48.8%
324,220
28.9%
Asia
105,840
10.9%
102,754
23.3%
203,000
18.1%
Europe
0
0.0%
77,140
17.5%
117,888
10.5%
Total
971,708
100.0%
441,247
100.0%
1,123,708
28.6%
The shifting of the geographic mix is represented by the makeup of the products supplied, where in the first half of the current financial year the revenues were weighted towards foreign design wins while royalty revenues in Israel increased. The trend is expected to continue during the second half of the year as design wins and product supply focussing on the Tier1 OEMs outside of Israel continues to grow.
Outlook
The Board remains confident that, on the basis of timely completion of major contracts in the current pipeline, Ethernity will meet its long-term objectives and is well positioned to become one of the key solutions providers in its marketplace. The Company continues to experience an increase in the outreach by OEM's and operators interested in Ethernity's solutions where these solutions are proving increasingly aligned with operators wish to make to their customers in their market places. Network service providers are requiring more flexible solutions to their technology and network needs for offloading support of new data appliances introduced by the market. Ethernity believes it has the best-in-class system solutions to address these needs.
FORWARD LOOKING STATEMENTS
This announcement includes statements that are, or may be deemed to be, "forward-looking statements". By their nature, forward-looking statements involve risk and uncertainty since they relate to future events and circumstances. Actual results may, and often do, differ materially from any forward-looking statements. Any forward-looking statements in this announcement reflect Ethernity Networks' view with respect to future events as at the date of this announcement. Save as required by law or by the AIM Rules for Companies, Ethernity Networks undertakes no obligation to publicly revise any forward-looking statements in this announcement, following any change in its expectations or to reflect events or circumstances after the date of this announcement.
By order of the Board
Mark Reichenberg
Company Secretary
6 September 2019
Interim Unaudited Financial Statements
as at 30 June 2019
STATEMENTS OF FINANCIAL POSITION
US dollars
30 June
31 December
2019
2018
2018
Unaudited
Audited
ASSETS
Current
Cash and cash equivalents
3,418,538
2,715,633
473,815
Other short-term financial assets
2,520,023
9,144,555
8,083,709
Trade receivables
551,812
586,203
642,085
Inventories
114,390
8,600
116,012
Other current assets
234,392
483,560
409,250
Current assets
6,839,155
12,938,551
9,724,871
Non-Current
Property and equipment
589,895
328,039
606,057
Deferred tax assets
800,000
800,000
800,000
Intangible asset
8,843,950
5,101,645
6,869,815
Right-of-use asset
384,761
-
-
Non-current assets
10,618,606
6,229,684
8,275,872
Total assets
17,457,761
19,168,235
18,000,743
LIABILITIES AND EQUITY
Current
Short Term Borrowings
-
-
133,497
Trade payables
346,708
330,710
288,308
Other current liabilities
1,250,310
1,009,081
1,084,728
Current liabilities
1,597,018
1,339,791
1,506,533
Non-Current
IIA royalty liability
-
-
6,578
Long Term Borrowings
-
6,415
-
Lease liability
284,258
-
-
Non-current liabilities
284,258
6,415
6,578
Total liabilities
1,881,276
1,346,206
1,513,111
Equity
Share capital
8,039
8,028
8,039
Share premium
23,396,310
23,356,078
23,396,310
Other components of equity
840,006
757,137
760,849
Accumulated deficit
(8,667,870)
(6,299,214)
(7,677,566)
Total equity
15,576,485
17,822,029
16,487,632
Total liabilities and equity
17,457,761
19,168,235
18,000,743
The accompanying notes are an integral part of the interim financial statements.
STATEMENTS OF COMPREHENSIVE LOSS
US dollars
Six months ended
30 June
For the year ended
31 December
2019
2018
2018
Unaudited
Audited
Revenue
971,709
441,247
1,123,707
Cost of sales
128,707
141,600
311,194
Gross profit
843,002
299,647
812,513
Research and development expenses
279,881
197,010
473,489
General and administrative expenses
718,140
600,662
1,291,175
Impairment losses of financial assets
-
-
132,799
Marketing expenses
837,208
778,464
1,804,886
Other income
(10,453)
-
(104,105)
Operating loss
(981,774)
(1,276,489)
(2,785,731)
Financing costs
(59,235)
(26,385)
(15,450)
Financing income
50,705
134,037
253,992
Net comprehensive loss for the period
(990,304)
(1,168,837)
(2,547,189)
Basic and diluted loss per ordinary share
(0.03)
(0.04)
(0.08)
Weighted average number of ordinary shares for basic and diluted loss per share
32,556,686
32,518,186
32,526,149
The accompanying notes are an integral part of the interim financial statements.
STATEMENTS OF CHANGES IN EQUITY
Amounts in US dollars (except number of shares)
Capital
Share
Share
Other components
Accumulated
Total
of shares
Capital
premium
of equity
deficit
equity
Balance at 1 January 2019 (Audited)
32,556,686
8,039
23,396,310
760,849
(7,677,566)
16,487,632
Employee share-based compensation
-
-
-
79,157
-
79,157
Net comprehensive loss for the period
-
-
-
-
(990,304)
(990,304)
Balance at 30 June 2019 (Unaudited)
32,556,686
8,039
23,396,310
840,006
(8,667,870)
15,576,485
Balance at 1 January 2018 (Audited)
32,518,186
8,028
23,356,078
615,322
(5,130,377)
18,849,051
Employee share-based compensation
-
-
-
141,815
-
141,815
Net comprehensive loss for the period
-
-
-
-
(1,168,837)
(1,168,837)
Balance at 30 June 2018 (Unaudited)
32,518,186
8,028
23,356,078
757,137
(6,299,214)
17,822,029
Balance at 1 January 2018 (Audited)
32,518,186
8,028
23,356,078
615,322
(5,130,377)
18,849,051
Employee share-based compensation
-
-
36,393
145,527
-
181,920
Exercise of employee options
38,500
11
3,839
-
-
3,850
Net comprehensive loss for the year
-
-
-
-
(2,547,189)
(2,547,189)
Balance at 31 December 2018 (Audited)
32,556,686
8,039
23,396,310
760,849
(7,677,566)
16,487,632
The accompanying notes are an integral part of the interim financial statements.
STATEMENTS OF CASH FLOWS
US dollars
Six months ended
30 June
Year ended
31 December
2019
2018
2018
Unaudited
Audited
Operating activities
Net comprehensive loss for the period
(990,304)
(1,168,837)
(2,547,189)
Non-cash adjustments
Depreciation of property and equipment
72,638
42,283
100,918
Depreciation of right of use asset
56,307
-
-
Share-based compensation
16,769
18,951
5,031
Amortisation of intangible assets
367,378
122,217
322,724
Amortisation of liabilities
2,048
(13,623)
(13,255)
IPO related costs
-
-
(9,514)
Foreign exchange gains on cash balances
5,251
-
(24,517)
Net changes in working capital
Decrease (increase) in trade receivables
90,273
(72,238)
(128,120)
Decrease (increase) in inventories
1,622
(8,600)
(116,012)
Decrease (increase) in other current assets
174,858
(45,295)
29,015
Increase in trade payables
58,400
105,623
63,221
Increase in other liabilities
63,348
80,464
162,320
Net cash used in operating activities
(81,412)
(939,055)
(2,155,378)
Investing activities
Decrease of other short-term financial assets
5,563,686
1,924,917
2,985,763
Purchase of property and equipment
(56,476)
(214,482)
(551,135)
Amounts carried to intangible assets
(2,279,125)
(1,930,445)
(3,835,583)
Net cash provided by (used in) investing activities
3,228,085
(220,010)
(1,400,955)
Financing activities
Proceeds from exercise of options
-
-
3,850
Repayment of IIA liability
(12,470)
(5,301)
(5,300)
Proceeds from (repayment of) short term borrowings
(133,497)
-
133,497
Repayment of long-term borrowings
-
(1,107)
(7,522)
Repayment of lease liability
(50,732)
-
-
Net cash provided by (used in) financing activities
196,699)
(6,408)
124,525
Net change in cash and cash equivalents
2,949,974
(1,165,473)
(3,431,808)
Cash and cash equivalents, beginning of year
473,815
3,881,106
3,881,106
Exchange differences on cash and cash equivalents
(5,251)
-
24,517
Cash and cash equivalents, end of year
3,418,538
2,715,633
473,815
Supplementary information:
Interest and lease finance expenses paid during the year
9,874
-
813
Interest received during the year
50,705
113,117
197,949
Supplementary information on non-cash activities:
Share-based compensation capitalised to intangible assets
62,388
122,864
186,403
Investment in a right of use and lease obligation
441,068
-
-
The accompanying notes are an integral part of the interim financial statements.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
ETHERNITY NETWORKS LTD. (hereinafter: the "Company"), was incorporated in Israel on the 15th of December 2003 as Neracore Ltd. The Company changed its name to ETHERNITY NETWORKS LTD. on the 10th of August 2004.
The Company develops and delivers high-end network processing technology for Carrier Ethernet switching, including broadband access, mobile backhaul, Carrier Ethernet demarcation and data centres. The Company's customers are situated throughout the world.
NOTE 2 - SUMMARY OF ACCOUNTING POLICIES
Basis of presentation of the financial statements and statement of compliance with IFRS
The interim condensed financial statements for the six months ended 30 June 2019 have been prepared in accordance with IAS 34, Interim Financial Reporting. The interim condensed financial statements do not include all the information and disclosures required in the annual financial statements in accordance with IFRS and should be read in conjunction with the Company's annual financial statements as at 31 December 2018. The accounting policies applied in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Company's annual financial statements for the year ended 31 December 2018 except as described below with respect to the implementation of new international financial reporting standards that became effective during the interim period.
The interim financial statements for the half-year ended 30 June 2019 (including comparative amounts) were approved and authorized for issue by the board of directors on 5 September 2019.
New Standard adopted as at 1 January 2019
IFRS 16 'Leases'
IFRS 16 replaces IAS 17 'Leases' and three related interpretations. This completes the IASB's long running project to overhaul lease accounting. IFRS 116 defines a Lease as 'a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration'. To apply this definition the Company assesses whether the contract meets three key evaluations which are whether:
· the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company,
· the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract,
· the Company has the right to direct the use of the identified asset throughout the period of use. The Company assesses whether it has the right to direct 'how and for what purpose' the asset is used throughout the period of use.
In accordance with IFRS 16, Leases are recorded in the statement of financial position in the form of a right-of-use asset and a corresponding lease liability for the future rentals to be paid.
Right-of-use asset
The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
Lease liability
The Lease liability is initially recorded at the present value of the future rental payments, discounted over the likely period of the lease (including extensions which are reasonably certain), using the interest rate implicit in the Lease if that rate is readily available or the Company's incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made. It is re-measured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. On the statement of financial position, the current maturities of lease liabilities have been included in other current liabilities.
Each lease payment is allocated between the liability and finance expenses. The finance expenses are charged to profit or loss over the lease period, so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
In order to determine the impact of IFRS 16, the Company was required to perform a full review of all agreements in order to assess whether any additional contracts or parts thereof will now be classified as a Lease under IFRS 16's new definition. The Company has adopted IFRS 16 as from 1 January 2019, while using the practical expedient, allowing it to avoid performing a full review of its existing leases and to only apply IFRS 16 to new or modified contracts. IFRS 16 also allows an exemption from its application, for operating leases with a remaining lease term of less than 12 months and for leases of low-value assets. The Company has elected to account for short-term leases and leases of low-value assets using the IFRS 16 practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term.
The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.
The annual depreciation rates applied, to the operating lease right-of-use assets, are:
Office buildings and parking 25%
The Company has adopted IFRS 16 on 1 January 2019 using the Standard's modified
retrospective approach. Under this approach the cumulative effect of initially applying IFRS 16 is recognised as an adjustment to equity at the date of initial application. However, the adoption did not have an effect on equity. Comparative information is not restated which means that comparative information is still reported under IAS 17 and IFRIC 4.
The Company has elected not to include initial direct costs in the measurement of the right-of-use asset for operating leases in existence at the date of initial application of IFRS 16, being 1 January 2019. At this date, the Company has also elected to measure the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued lease payments that existed at the date of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Company has relied on its historic assessment as to whether leases were onerous immediately before the date of initial application of IFRS 16.
On transition to IFRS 16 the weighted average incremental borrowing rate applied to lease liabilities recognised under IFRS 16 was 4.3%.
The Company has benefited from the use of hindsight for determining lease term when considering options to extend and terminate leases.
The table below shows the cumulative effects of the sections affected by the first-time application on the financial statement at 1 January 2019:
US dollars
In accordance with the previous policy
first time application
In accordance with IFRS 16
Unaudited
Right-of-use asset
-
441,068
441,068
Current maturities of lease liability
-
102,731
102,731
Non-current lease liability
-
338,337
338,337
Following is the impact on the Company's assets and liabilities as of 30 June 2019:
US dollars
In accordance with the previous policy
first time application
In accordance with IFRS 16
Unaudited
Right-of-use asset
-
384,761
384,761
Current maturities of lease liability
-
106,078
106,078
Non-current lease liability
-
284,258
284,258
Future minimum lease payments at 30 June 2019 were as follows:
US dollars
Within one year
One to five years
Total
Unaudited
Lease payments
120,458
299,478
419,936
Finance charges
(14,380)
(15,220)
(29,600)
Net present values
106,078
284,258
390,336
Estimates
When preparing the Interim Financial Statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and will seldom equal the estimated results.
The judgements, estimates and assumptions applied in the Interim Financial Statements, including the key sources of estimation uncertainty, were the same as those applied in the Company's last annual financial statements for the year ended 31 December 2018.
NOTE 3 - FINANCING COSTS
US dollars
Six months ended
30 June
Year ended
31 December
2019
2018
2018
Unaudited
Audited
Bank fees and interest
6,726
8,320
15,450
Lease liability financial expenses
8,820
-
-
Exchange rate differences
43,689
18,065
-
Total financing costs
59,235
26,385
15,450
NOTE 4 - FINANCING INCOME
US dollars
Six months ended
30 June
Year ended
31 December
2019
2018
2018
Unaudited
Audited
Interest and amortization of loan discount
-
20,183
20,417
Interest received
50,705
113,854
197,949
Exchange rate differences
-
-
35,626
Total financing income
50,705
134,037
253,992
NOTE 5 - SEGMENT REPORTING
The Company has implemented the principles of IFRS 8, in respect of reporting segmented activities. In terms of IFRS 8, the management has determined that the Company has a single area of business, being the development and delivery of high-end network processing technology.
The Company's revenues from customers are recognised as follows:
US dollars
Six months ended
30 June
Year ended
31 December
2019
2018
2018
Unaudited
Audited
Revenues recognised over time
565,000
145,000
412,750
Revenues recognised at a point of time
406,709
296,247
710,958
971,709
441,247
1,123,708
The Company's revenues are divided into the following geographical areas:
US dollars
Six months ended
30 June
Year ended
31 December
2019
2018
2018
Unaudited
Audited
Asia
105,840
102,754
203,000
Europe
-
77,140
117,888
Israel
277,189
215,114
324,220
United States
588,680
46,239
478,600
971,709
441,247
1,123,708
%
Six months ended
30 June
Year ended
31 December
2019
2018
2018
Unaudited
Audited
Asia
10.9%
23.3%
18.1%
Europe
0.0%
17.5%
10.5%
Israel
28.5%
48.7%
28.9%
United States
60.6%
10.5%
42.6%
100.0%
100.0%
100.0%
Revenue from customers in the company's domicile, Israel, as well as its major market, the United States, Asia and Europe, have been identified on the basis of the customer's geographical locations.
NOTE 6 - SUBSEQUENT EVENTS
On 25 July 2019, the Board of Directors' approved the granting of 180,000 employee stock options to employees, vesting over a four-year period and expiring 10 years from the date of the grant. The exercise price of these options is GBP 1.00.
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