Elbit Imaging Announces Release of Its Unaudited Financial Results
TEL AVIV, ISRAEL / ACCESSWIRE / May 18, 2017 / Elbit Imaging Ltd. ("EI" or the "Company") (TASE: EMITF; NASDAQ: EMITF) is publishing today, further to its announcement dated May 15, 2017, its unaudited financial statements for 2016 on Form 6-K.
The Company announced on May 15, 2017 that it was unable to complete and file with the Securities and Exchange Commission (the "SEC") its Annual Report on Form 20-F for the year ending December 31, 2016 (the "2016 Form 20-F") by the extended deadline of May 15, 2017.
On May 15, 2017, the Company's subsidiary, Plaza Centers N.V. ("PC" or "Plaza"), published its annual financial statements for 2016, which contained a report in which its independent auditor, KPMG Hungaria Kft. ("KPMG"), expressed no opinion with regard to PC's financial statements.
KPMG indicated that the basis for its disclaimer related to potential irregularities with respect to certain contracts entered into by PC concerning the Casa Radio project in Romania, which contracts PC had reported to the Romanian authorities. KPMG noted also that the Company appointed a special committee in 2016 to examine these matters, as they may involve potential violations of the requirements of the U.S. Foreign Corrupt Practices Act ("FCPA"), including the books and records provisions of the FCPA, and that the Company approached and is co-operating fully with relevant authorities regarding these matters. For additional information, see notes 4 C (1) and 13 C (12) to the unaudited financial statements.
KPMG indicated that the basis for its disclaimer also related to an agency and commission contract signed in 2011 regarding the sale in 2012 of property in the United States jointly owned by PC and the Company. KPMG stated the characteristics of such contract indicates that it may involve a potential violation of laws and regulations. KPMG further said that it believes that PC had not completed a sufficient investigation of the circumstances of this contract and of the implications of the payments made thereunder. See note 13 C (13) to the unaudited financial statements.
KPMG further said that, as part of its responsibility to ensure that PC's business activities are conducted in accordance with laws and regulations, and to identify and address any non-compliance, it expects PC to carry out a full review of past contracts to identify whether or not there may be other contracts which could involve potential violations of the laws and regulations of any of the jurisdictions to which PC may be subject. PC did not agree to carry out such a review to the extent KPMG considered sufficient and appropriate, according to KPMG.
In addition, KPMG noted the risk that the public authorities could seek to terminate the Pubic Private Partnership Agreement ("PPP Agreement") and/or relevant permits and/or could seek to impose delay penalties based on perceived breaches of Plaza's commitments under the PPP Agreement. KPMG indicated that PC's management has assessed this risk as unlikely, on the basis that the public authorities have not sought to assert their rights since the perceived breach in 2012 and on the assessment of the merits of Plaza's counter claims against the public authorities. KPMG noted that in the event that the public authorities seek to terminate the PPP Agreement and/or seek to impose penalties, and Plaza's counter claims are not upheld, PC may incur penalties and/or recover less than the carrying amount of the Casa Radio assets recorded in the consolidated financial statements as at year-end (approximately €73.2 million). Additionally, PC's ability to realize these assets may be delayed. See Note 4 C (1) to the unaudited financial statements.
Furthermore, KPMG noted that there are significant risks and uncertainties pertaining to the achievement of PC's cash flow forecasts, which include the occurrence of events which are beyond PC's sole control. Any delays in the realization of PC's assets and investments and collection of proceeds thereof or realization at lower prices than expected by PC, as well as any other deviations from PC's assumptions, could have an adverse effect on PC's cash flows and its ability to service its indebtedness in line with contractual terms. See Note 7 B (2) to the unaudited financial statements.
