TAKING GLOBAL TRAINING PERSONALLY
2010 ANNUAL REPORT
About SimiGon
SimiGon (AIM: SIM) is a leading developer and supplier of distributed simulation solutions
for defence and civilian applications. SimiGon is the creator of SIMbox, a leading PC-based
platform for creating, managing and deploying simulation-based content across multiple
domains. Through its off-the-shelf training solutions for demanding high-skill occupations,
SimiGon provides diverse organizations with faster and more cost-effective training.
SimiGon’s growing client base includes blue-chip training and simulation systems
providers as well as over 20 air forces and commercial airlines worldwide. Founded in
1998, SimiGon maintains offices in Israel and the United States.
Contents
3
4
5
6
7
10
12
Financial Highlights
Operational Highlights
Market
Solutions
Chairman & CEO Reviews
Board & Management
Financial
TAKING DISTRIBUTED SIMULATION
PERSONALLY
When it comes to distributed simulation solutions, SimiGon technology is the
way to go. Leading the industry shift away from inflexible, stationary and
expensive training systems, offering personal, portable and cost-effective
training solutions optimized for the PC or laptop. Our off-the-shelf platform
and products – for air, land, sea and industrial applications – are highly
flexible, adaptable and robust. This “personal” approach enables multiple
high-skill users to train simultaneously on multiple platforms, saving defence
and civilian organizations significant time and money. We offer state-of-the-
art simulation solutions for non-training applications, bringing the best of
personal simulation to wider audiences.
Financial Highlights
Revenues were $5.21 million for the year ended
December 31, 2010 as compared to $6.06 million
for the year ended December 31, 2009.
Net loss of $0.68 million for the year ended
December 31, 2010 as compared to net profit of
$0.07 million for the year ended December 31,
2009.
The Company recorded a positive cash flow for the
year ended December 31, 2010, despite a net loss
of $0.68 million for the year ended December 31,
2010.
Cash and cash equivalents and short term bank
deposits of $2.62 million. Total net current assets
were $4.31 million, including short term bank loans
of $0.56 million.
Basic and diluted loss per share for the year ended
December 31, 2010 was $0.017 as compared to
Basic and diluted earnings per share of $0.002 for
year ended December 31, 2009.
Total cost of revenues and operating expenses for
the year ended December 31, 2010 were $5.75
million, a decrease of 4% as compared to $5.99
million for the year ended December 31, 2009.
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TAKING DISTRIBUTED SIMULATION
PERSONALLY
Operational Highlights
("JSF")
Company
expanded
training program, with
A major partnership agreement with a leading
Asian supplier of simulation systems was signed by
SimiGon. The Company is providing its SIMbox
technology platform that will be used by the
partner to develop new training and simulation
solutions.
The
its
successfully
collaboration with a leading European defence
company by providing SIMbox as the infrastructure
for a Homeland Security Lab to be used by the
partner for its numerous customers.
SimiGon continues to work closely with Lockheed
Martin (“LM”) on the F-35 Lightning II Joint Strike
Fighter
the
Company’s SIMbox Learning Management System
serving as the baseline of JSF pilot training systems.
This project is anticipated to continue to positively
impact SimiGon’s future revenues.
SimiGon continues its role as the Simulation Based
Training provider for a strategic European aircraft
manufacturer. SIMbox is used as the baseline
training solution for the client’s Academic Training
Centres in several programs.
The UK Military Flying Training System (“UK
MFTS”), an LM program that utilizes SimiGon’s
technology platform,
training and simulation
SIMbox, is being deployed successfully to meet
project milestones.
The Company’s training and simulation platform,
SIMbox, was selected for a lucrative Unmanned
Aerial Vehicle training program and, having been
integrated with the system’s actual Ground Control
System, is now used to deliver a complete Live,
Virtual and Constructive training solution.
SimiGon successfully delivered a new Electronic
Warfare training system to the Israeli Air Force
(IAF) in - 2010.
The Company’s Research and Development
activities have focused on further advancements of
the SIMbox technology infrastructure. As the only
company providing a fully integrated, enterprise
training system supporting Web-based simulation
through Full Mission Simulator
capabilities,
SimiGon’s new technologies and capabilities is
expected to increase its market share and attract
future customers and program wins.
SimiGon signed an agreement with a strategic
airline client to provide the AirTrack In Flight
Entertainment (“IFE”) system. A major milestone
for the Company in the IFE arena, SimiGon will
provide a complete software and hardware
solution.
SimiGon’s is also carrying out strategic work with
the United States Air Force Europe, where the
Company is providing cost-effective training tools
for Joint Terminal Attack Controller training.
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LEVERAGING GROWING MARKETS
FOR PERSONAL TRAINING & SIMULATION
A number of key trends are driving the adoption of personal, flexible solutions in the fast growing
training and simulation markets.
Key Trends
System complexity: Advanced platforms such as
aircraft, ground vehicles, maritime systems, and control
rooms are
increasingly complex, requiring better
training tools. Traditional user manuals based on a
"learning by reading" methodology are no
longer
sufficient, particularly for younger operators.
Customer sophistication: Organizations are more
educated and demanding, and typically know what type
of training solution they want – and demand it from
their training providers. Large suppliers can no longer
“force”
inflexible, expensive solutions onto their
customers.
Off-the-shelf solutions: Military and commercial
customers commonly seek Commercial-Off-The-Shelf
(COTS) components and products that provide clear
time-to-market and cost benefits.
Cost of training: Instructors, trainees and platforms
have limited availability and associated rising costs,
especially in complex environments. This increases the
increase the
need to maximize preparations and
effectiveness of
training
live
Instructor-led and
exercises and operations. Leveraging technology to
provide continuous individual and collective training
using a low-cost platform ensures mission readiness.
Growing Markets
In light of these trends and the current state of the
global economy, there is an industry shift away from
expensive, stationary training systems towards more
robust, cost-effective PC or laptop-based COTS training
solutions. Moreover, “learning by doing” is becoming
widely recognized as the most effective way to train
users, especially
in demanding high-skill
those
occupations in both military and civilian markets.
Despite the economic turmoil, the personal training &
simulation market is thriving.
The global e-learning and simulation market: As many
learning
as 40% of organizations are using a
management system (LMS), with the highest growth in
usage among mid-market buyers. The greater
Modelling & Simulation market at more than $20 billion
per year. The global eLearning market is projected to
reach $107.3 billion by the year 2015, with its growth
driven by reduced costs, simplified training and a
dispersed workforce.
and
solutions
simulation
The Defence industry is a principle growth driver of the
simulation market. While the US defence budget is
under intense pressure, the US Department of Defence
continues to be the undisputed leader in seeking
training
for military
for symmetric and
readiness
preparedness and
asymmetric warfare and is forecast to increase usage of
simulation based training for these purposes. On-going
conflicts push the industry to provide cutting-edge
training solutions. In the military pilot training market,
Forecast International projects 1,600 new fixed wing
military training aircraft over the next ten years and the
market for fighter aircraft will be worth nearly $194.5
fighters will be
billion as approximately 3,150
manufactured. The US
in
Commercial and Military Flight Simulations while the
Asia-Pacific region is the fastest growing market.
is currently the
leader
The Civilian aviation market continues to be a driver in
the simulation market with more than 11, 850 large
commercial jets forecast to be produced over the next
ten years, valued at $1.4 trillion. With the global
economy is affecting Western governments spending,
training and simulation technologies are expected to
play a larger role to offset a decrease in live training
exercises. There is also significant business potential in
areas such as commercial flight training, air traffic
control, maritime operations, nuclear and electric
power plants operator training, crane operations,
driving and medical care. These growingly complex
domains require advanced, holistic training solutions,
such as Simulation Based Training and Learning
Management Systems, enabling operators to achieve
and maintain high levels of operational skill.
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GETTING PERSONAL
WITH DISTRIBUTED SIMULATION SOLUTIONS
SimiGon’s comprehensive portfolio of off-the-shelf solutions – including a state-of-the-art simulation
platform and range of compelling products – “closes the knowledge gap” for professional users. At the
same time, SimiGon’s flexible solutions are easily integrated either by customer organizations or third-
party systems integrators for both military and civilian applications.
SIMbox
SimiGon is the creator of SIMbox, a leading PC-based
for creating, managing and deploying
platform
simulation based content across multiple domains
including
training, mission debriefing, homeland
security and entertainment. SIMbox is a flexible, off-
the-shelf 3D simulation engine comprised of a wide
array of software modules that empowers users to
create an unlimited range of new products and content.
Built from the ground up as a robust and flexible
platform, SIMbox has been deployed successfully by
large training and simulation systems providers, leading
military contractors, and over 20 air forces and
commercial airlines worldwide. SIMbox is comprised of
three main environments:
SIMbox Toolkit development environment: SIMbox
Toolkit
suite,
empowering non-programmers to create, reuse and
control simulation-based applications.
SIMbox Server management environment: SIMbox
Server which serves as the Learning Management
System (LMS), contains various software modules used
for configuration management of developed content,
control over content distribution, data gathering from
end users, and data analysis and report generation.
SIMbox Runtime delivery environment: SIMbox
Runtime provides hi-fidelity 3D distributed simulations
that place the user
in a virtual or constructive
environment with numerous viewpoints for both
military and civilian applications.
easy-to-use development
an
is
AirTrack
the
technology,
AirTrack represents the next generation of passenger
in-flight entertainment (IFE) solutions. Successfully
installed and operational on airlines worldwide,
AirTrack is a cost-effective, rapidly deployable solution
for airlines seeking to upgrade their IFE systems. Based
system’s
on advanced SIMbox
capabilities include hi-fidelity 360º 3D simulation views,
moving maps, external plane views, dynamic media,
and real-time flight data and news. AirTrack is provided
with an easy-to-use, PC-based software configuration
tool that enables airlines to independently and rapidly
customize and upload
in-flight content based on
specific needs.
Systems
Debriefing Systems
SimiGon offers advanced post-mission debriefing
applications that provide critical feedback and improve
operational readiness. Utilizing a standard Windows
graphical user interface (GUI), the PC-based systems
can be deployed at any location and are extremely
simple to operate. SimiGon’s debriefing systems include
D-Brief PC™ and MDDS Pro™. Operated from a server
connected to multiple client workstations, the systems
analyse flight data stored on the aircraft’s PMC or RMM
cartridge. D-Brief PC is used to support real-time air
combat debriefing. MDDS Pro is a digital debriefing
solution incorporating video with 3D simulation.
KnowBook Family
KnowBook
is a family of PC-based COTS training
applications used by leading organisations for training
professional users. KnowBook provides a common
platform for learning, training, planning and debriefing.
The key members of the KnowBook family are:
AirBook™: the family’s flagship application that
enables aircrew and organisations to remain completely
updated with the rapidly changing demands of the
military and civilian aviation world.
GroundBook™, MarineBook™ and CarBook™: the
newest members of the KnowBook family designed for
ground, maritime and driving training scenarios.
Air Traffic Control
SimiGon's successfully deployed Air Traffic Control
training solution includes instructor operator stations,
virtual pilots, voice recognition and the ability for
instructors to modify training sessions in real time. The
systems are used by ATC instructors to train new
controllers in guiding aircraft through take-off and
landing procedures as well as for recurrent and
operational training. The Company aims to leverage its
success in this market to compete for additional military
and civilian ATC training contracts.
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SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP
Chairman & CEO Reviews
Chairman’s Statement
Chief Executive’s Review
SimiGon Ltd. (the company together with its subsidiary
"SimiGon" or the "Group") announces its full year
results for 2010. Despite the expected revenue growth
that has been delayed, the Board is confident that
SimiGon’s investors will see an improvement in the
Company’s operating performance this year and over
the coming years. The difficulties we endured last year
were largely due to uncertainty regarding the industry’s
its well-built
budget. However, SimiGon maintains
position on strategic programs that it has been focusing
on, convinced that these programs will come to
fulfilment. SimiGon’s advanced PC-based training and
simulation systems for various large scale military
aviation training programmes, together with the market
understanding that training and simulation saves
money, reflect a positive revenue outlook as it is well
long term growth. Despite major
positioned for
challenges, I believe that the Company will continue to
make progress developing
its next generation of
products, while carrying on its expense control, and will
retain its focus to win significant, strategic programs to
achieve revenue growth.
Alistair Rae
Chairman
Overview
The results for the year ended 31 December 2010
reflected the industry’s budget uncertainty. Despite
these challenging economic conditions, we are still in an
excellent position regarding the strategic programs we
have been focusing on and are confident that these
programs will continue to come to fruition. SimiGon’s
leadership has taken various actions to reduce risks and
improve our positioning in the marketplace with a clear
focus on long terms success. These actions proved to be
the right actions with a balanced cash flow in 2010.
Furthermore, we have been encouraged by the
progress in the first quarter of 2011 in terms of revenue
and orders, and expect a much improved first half
compared to the first half of 2010. This optimism is
based on the understanding of that training and
simulation saves governments’ money and, perhaps
more importantly, our continuing success in existing
programs and proven ability to attract new partners
with their own exciting long term growth potential.
Programs such as the F-35 Lightning II Joint Strike
Fighter, as well as the UK's Military Flying Training
System will continue to positively impact SimiGon’s
revenue. Our focus on developing new technologies
and products for the future
is progressing. The
Company's market position as a leading training and
simulation supplier
largest military
aviation training programmes, our partnership-oriented
business model, sound technology and the unique
product mix offered by our partners provide excellent
growth opportunities for SimiGon.
in the world's
SimiGon’s leading position in the market of PC-based
training and simulation solutions, being the preferred
supplier of training and simulation technologies for the
world’s largest military flight training programmes. The
SIMbox technology platform serves as a baseline
training solution for all types of training, including air,
land and sea 3D environments. SimiGon’s flexible
revolving around development
business model
partnerships and direct sales of the SIMbox high
technology solution position it to rapidly expand market
share in new and existing markets globally.
- 7 -
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Lockheed Martin as a
Selected by
Learning
Management System for the F-35 Lightning II Joint
Strike Fighter training program, SIMbox has exceptional
commercial potential and is already being used to train
JSF pilots. SimiGon is also providing Lockheed Martin
with its training and simulation system for the UK's
Military Flying Training System, where all UK military
pilots are trained with the advanced SIMbox solution.
These programs propel SimiGon's development efforts,
demonstrating the viability of SimiGon’s training and
simulation technology.
advanced
constantly
technological
commercial markets,
surveys the potential
to
SimiGon
offering
penetrate additional
other industries learning and training simulations using
its
The
Company’s success with leading defence and aerospace
organizations and high profile training programs
continue to draw new partners and customers seeking
to
the
license SimiGon’s
Company’s reach worldwide.
technology, expanding
infrastructure.
Financial Performance
Revenues for the year ended December 31, 2010 were
$5.21 million as compared to $6.06 million for the year
ended December 31, 2009. Gross profit for the year
ended December 31, 2010 was $4.40 million as
for the year ended
compared to $5.08 million
December 31, 2009. Despite a net loss for the year
ended December 31, 2010, the Company recorded a
positive cash flow for the year ended December 31,
2010.
In terms of regional breakdown, 67.39% of SimiGon’s
revenues for the year ended December 31, 2010 were
generated from North America, as compared to 52.85%
for the year ended December 31, 2009. Total revenues
of 26.65% for the year ended December 31, 2010 were
generated from Europe and the Middle East as
compared to 44.46% for the year ended December 31,
2009.
- 8 -
Total revenues of 5.96% for the year ended December
31, 2010 were generated from the Far East, as
compared to 2.69% for the year ended December 31,
2009.
Research and development expenses for the year
ended December 31, 2010 decreased by 3.83% to $1.76
million, as compared to $1.83 million for the year
ended December 31, 2009.
Sales and marketing expenses for the year ended
December 31, 2010
increased by 6.21% to $1.71
million, as compared to $1.61 million for the year
ended December 31, 2009. The Sales and marketing
expenses for the year ended December 31, 2010
include share based compensation totalling $0.22
million, as compared to $0.07 million for the year
ended December 31, 2009.
General and administration expenses for the year
ended December 31, 2010 decreased by 5.73% to $1.48
million, as compared to $1.57 million for the year
ended December 31, 2009. The decrease was mainly
due to lower salary expenses, and provisions.
As a result, the total operating expenses for the year
ended December 31, 2010 decreased by 1.2% to $4.95
million, as compared to $5.01 million for the year
ended December 31, 2009. The operating loss for the
year ended December 31, 2010 was $0.55 million, as
compared to operating profit of $0.07 million for the
year ended December 31, 2009. Net loss for the year
ended December 31, 2010 amounted to $0.68 million,
as compared to total profit of $0.07 million for the year
ended December 31, 2009. That resulted net basic and
diluted loss per share of $0.017 for the year ended
December 31, 2010, as compared to net basic and
diluted earnings per share of $0.002 for the year ended
December 31, 2009.
The Company recorded a positive cash flow for the year
ended December 31, 2010 and as at 31 December 2010,
SimiGon had cash, cash equivalents and deposits in the
amount of $2.62 million, and current maturities of short
term bank loan of $0.56 million.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Product Development
SimiGon is committed to technology innovation and
developing new capabilities and products to ensure
market relevance and build market share. In 2010,
SimiGon research and development efforts focused on
the following areas;
(VOIP)
Infrastructure,
SIMbox simulation engine introduced a new Voice Over
support distributed
IP
to
simulation training as we as
Instructor Operating
Station to utilize radio communication. This system
provides superior quality using a proprietary optimized
compression engine.
SIMbox Graphic Engine introduces the ability to support
in cockpit light effects, full coverage 3D volumetric
clouds system, Real Time Shader System which supports
modern Graphic Processing Unit and creates a rich
advanced 3D systems to enable realistic high resolution
simulation the end user.
SIMbox Complete comprehensive training solution has
been extended with customizable feedback form
creation suite, to provide a complete 360° feedback for
the entire training community within the organization.
SIMbox Server Web Application was enhanced to
provide trainees and instructor an interface to their
training schedule to enable high connectivity and
accessibility for a wide spectrum of devices.
SIMbox Server System has been modified to provide a
boost in performance to large scale organization with
enterprise systems. This enables far flung organizations
to collaborate, monitor and track group and individual
performance, leading to faster effective training.
SIMbox Toolkit has been extended and now includes a
complete set of tools to provide shorter delivery time
making the development phase of simulation console
platforms cost effective in a way never presented
before.
SimiGon R&D continues to be an early adapter of
relevant cutting edge software
for
infrastructure development.
technologies
Outlook
The Directors and I have a positive outlook due to the
Company’s success in delivering advanced PC-based
training and simulation systems to various large scale
military aviation training programmes such as the F-35
Lightning II Joint Strike Fighter and the UK Military
Flying Training System. Building on the track record of
its existing contracts, SimiGon expects to close
additional high profile projects that will continue
generate revenue for the Company. The Company
continues to make substantial advancements in product
development and will maintain its strict budgetary
discipline to ensure positive cash flow.
Amos Vizer
President & CEO
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DISPLAYING PERSONAL COMMITMENT TO
ORGANIZATIONAL SUCCESS
Board & Management
Board of Directors
Alistair Rae, Non-Executive Chairman
Alistair is currently chief executive of
LTG Technologies Plc, an AIM traded
company, having been a non-executive
director from 2002 to 2005. He was the
group finance director of Jarvis Plc
from 2004
the
period of
company
reconstruction. Prior to this he was a director in the
corporate finance department of HSBC Investment Bank
from 1996 to 2002, and before that he worked in
corporate finance at Cazenove for ten years in the UK
and the Far East. Alistair qualified as a chartered
accountant with KPMG.
to 2005, guiding
a
through
Amos Vizer, President & CEO
founding SimiGon, Amos
to
Prior
founded
software
a
Logi-Cali,
development house specializing in data
storage applications. He previously
served as marketing and business
development manager
ISYS
Operational Management Systems, an
international IT company. Amos also previously worked
the missiles division of RAFAEL Armament
for
Development Authority Ltd. Additionally, he served ten
years in the Israeli Air Force (IAF) as an F-4 Phantom
Fighter navigator, a flight school course commander,
and a Popeye missile weapons officer. With extensive
training
in advanced software development, Amos
holds a BA in business administration.
of
Eitan Cohen, Non-Executive Director
Eitan Cohen is a Co-Founder and Chief
Executive Officer of ASIC Depot OOD
an EDA and Semiconductor design
centre. Eitan previously held positions
as CEO and Country manager
for
Semiconductor and EDA companies, in
which he led to the award of multi-
tier-one companies and
million
managed business development activities with potential
partners worldwide.
dollar deals with
accountant
Independent Non-
Nevat Simon,
Executive Director
Nevat has practiced as a certified
public
in his own
accounting firm since 1991, providing
both accounting and other financial
services to the firm’s clients. He has
previously served on the board of
Sprint Investments Ltd. and Multimetrics Ltd., both
publicly listed companies on the Tel Aviv Stock Exchange,
and on the board of a number of private companies.
Nevat has a BA in accounting and marketing from the
Business College of Management in Tel Aviv and has
been a member of the Certified Public Accountant
Council in the Justice Department of the State of Israel
since 1991.
its
in
financial
Efraim Manea, CFO
Mr Manea joined the Company as its
June 2008,
finance controller
managing
aspects
financial
reporting,
including
corporation
tax
and
accounting
preparation, budget and forecasting
and risk management. He has more
than seven years of accounting and management
experience and before joining SimiGon served for
approximately four years as an Audit Team Manager at
Ernst & Young's High-Technology sector. Mr Manea is a
Certified Public Accountant and holds a BA
in
Accounting and Business Administration from the
College for Management in Israel.
strategic
consulting
Dr. Vered Shany, Independent Non-Executive Director
Since March 2002, Vered has managed Tashik
Consultants, providing
and
corporate analysis in the life sciences sector. Previously,
Vered served as managing director of Up-Tech Ventures
Ltd., as a member of the board of directors of the
Incubator, and as vice
Weizmann Science Park
president of marketing
for Arad Technological
Incubator. Prior to that, she was business and
marketing manager of Medun Ltd., a medical start-up
company, from 1995 to 1998. Vered received her
masters’ degree
from
Heriot–Watt University, Edinburgh Business School, and
gained her doctorate of medical dentistry and her
B.Med.Sc. from the Hebrew University of Jerusalem.
in business administration
- 10 -
DISPLAYING PERSONAL COMMITMENT TO
ORGANIZATIONAL SUCCESS (CONT.)
Board & Management (Cont.)
Management
Amos Vizer, President & CEO
founding SimiGon, Amos
Prior
to
founded
software
a
Logi-Cali,
development house specializing in data
storage applications. He previously
served as marketing and business
development manager
ISYS
Operational Management Systems, an
international IT company. Amos also previously worked
for
the missiles division of RAFAEL Armament
Development Authority Ltd. Additionally, he served ten
years in the Israeli Air Force (IAF) as an F-4 Phantom
Fighter navigator, a flight school course commander, and
a Popeye missile weapons officer. With extensive training
in advanced software development, Amos holds a BA in
business administration.
of
in
controller
reporting,
Efraim Manea, CFO
Mr Manea joined the Company as its
finance
June 2008,
managing its financial aspects including
financial
corporation
accounting and tax preparation, budget
and forecasting and risk management.
He has more than seven years of
accounting and management experience and before
joining SimiGon served for approximately four years as an
Audit Team Manager at Ernst & Young's High-Technology
sector. Mr Manea is a Certified Public Accountant and
holds a BA in Accounting and Business Administration
from the College for Management in Israel.
Yaron Goldberg - VP Programs
Yaron has worked
in SimiGon as a
Software Designer, Program Manager
and then Programs Director, managing
all aspects of multiple,
large-scale
programs
to ensure delivery and
implementation of customer contracts,
to
starting
delivery. Nr. Goldberg served for 7 years in the IAF as an
F-4 pilot and as an instructor in the IAF academy. Mr.
Goldberg has a Bachelor degree in Business Management
majoring in Information Technologies. He serves in the
reserve as an instructor in the IAF academy.
from marketing stages
- 11 -
Alon Shavit, VP Business Development
Before joining SimiGon, Alon served 15
years
in the Israeli Air Force (IAF),
having flown F-16s for the past 20
in the
years. He was an
Operational Training Unit (OTU) on A-4s
for two years and a commander of the
F-16 OTU for 18 months. His last role in
IAF was managing the planning, coordination,
the
synchronization, and monitoring of the training program.
Alon holds an MBA and bachelor’s degrees in economics
and psychology.
instructor
Koby Ben Yakar - Director, Product
Development
Koby, 33, has a distinguished record as
an experienced manager with extensive
technical skills and knowledge. Mr. Ben
Yakar has led a wide range of projects
with cross-functional teams, including
Information
SimiGon’s
serving
as
Technology team leader and overseeing the architecture,
design and development of the SIMbox LCMS Server
infrastructure. Mr. Ben Yakar has over 10 years of
experience in large training and simulation technologies
enterprise projects with a proven ability to manage
business and technical relationships for
large-scale
projects.
Merav Nachmani - Director of Human
Resources
Ms. Nachmani, aged 39,
joined
SimiGon in November 2005 and has
SimiGon’s
been managing
HR
Department since
July 2009. Ms.
Nachmani has more than ten years of
aspects
experience
including payroll controlling, accounts payable, accounts
receivable , cash flow and tax reporting. Before joining
SimiGon Ms. Nachmani served as a bookkeeping & salary
controller in several High-Technology companies. Ms.
Nachmani has a Bookkeeping &Salary controller
diploma.
financial
in
FINANCIALS
SIMIGON LTD. AND ITS SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2010 (U.S DOLLARS IN THOUSANDS)
INDEX
Corporate Governance
Report on Directors Remuneration
Directors Report
Independent Auditors' Report
Consolidated Statement of Financial Position
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Share Information, Advisers, Contact Information
PAGE
13
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17
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- 12 -
CORPORATE GOVERNANCE FOR THE PERIOD ENDED 31 DECEMBER 2010
Ended 31 December 2007
Introduction
SimiGon Ltd. commenced trading on the AIM Market operated by the London Stock Exchange on 2 November 2006.
Although the rules of AIM do not require the Company to comply with the Combined Code on corporate governance
(“the Code”) published by the Financial Reporting Council, the Company fully supports the principles set out in the
Code and will attempt to comply with them wherever appropriate, given the Company’s size, the constitution of the
Board and the resources available to the Company. Details are provided below of how the Company applies those
parts of the Code, which it believes to be appropriate.
Directors
The Board comprises two executive Directors, two Non- Executive Directors and two independent Non-Executive
Directors nominated by the majority shareholders of the Company. The Board generally meets a minimum five times a
year and receives a Board pack comprising a report from senior management together with any other material
deemed necessary for the Board to discharge its duties. It is the Board’s responsibility for formulating, reviewing and
approving the Group’s strategy, budgets, major items of expenditure and acquisitions.
Audit Committee
The audit committee consists of Eitan Cohen, Dr. Vered Shany and Nevat Simon and meets at least twice a year. The
role of the audit committee is to review the management and systems of internal control of the company, including in
consultation with the internal auditor and the company’s independent auditor and to recommend any remedial
action. In addition, the approval of the audit committee is required to effect certain related-party transactions.
Remuneration Committee
The remuneration committee consists of Alistair Rae, Dr. Vered Shany and Nevat Simon. The Remuneration
Committee has a primary responsibility to review the performance of the Company’s executive directors and the
senior employees and to recommend their remuneration and other terms of employment.
Shareholder Relations
The Company meets with its shareholders and analysts periodically to encourage communication with shareholders.
In addition, the Company intends to facilitate communication with shareholders through the annual report and
accounts, interim statement, press releases as required during the ordinary course of business and the Company
website (www.simigon.com).
Going Concern
The directors have satisfied themselves that the Company has adequate resources to continue in operational
existence for the foreseeable future, and for this reason the financial statements are prepared on a going concern
basis.
Internal Control
The Board is responsible for the system of internal control and for reviewing its effectiveness. Such systems are
designed to manage rather than eliminate risks and can provide only reasonable and not absolute assurance against
material misstatement or loss. Each year, on behalf of the Board, the audit committee reviews the effectiveness of
these systems. This is achieved primarily by considering risks potentially affecting the Group and from discussions with
the external auditors. Each year, the Group is subject to internal audit, the results of which are presented to the audit
committee.
A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The
Group’s results, as compared against budget, are reported to the Board on a quarterly basis and discussed in detail at
each meeting of the Board. The Group maintains appropriate insurance cover in respect of any legal actions against
the Directors as well as against material loss or claims against the Group and reviews the adequacy of the cover
regularly. To comply with AIM rules, the Company has adopted a code for dealings in its shares by directors and
employees.
- 13 -
REPORT ON DIRECTORS REMUNERATION
Remuneration Policy
The remuneration packages for non-executive directors are based principally on annual salaries. The remuneration
packages for independent non-executive directors are based on an annual fixed fee and till October 2009 were
including payment for each Board or Board committee meeting attended. The remuneration packages for executives
are based on annual salaries and benefits.
Executive
Ami Vizer *
Haim Yatim**
Efraim Manea***
Non-Executive
Alistair Rae
Eitan Cohen
Nevat Simon
Dr. Vered Shany
Total
Total 2010
$
382,247
96,189
39,679
45,465
22,440
24,000
24,000
634,020
Total 2009
$
334,427
149,683
-
55,000
25,410
38,248
37,192
639,960
*) Year 2009 amount does not include $60,250 paid in respect of vacation days and $75,000 bonus paid on 2010 in respect of
2009 sales and does not include $248,069 paid in respect of transfer of severance allocation.
Year 2010 amount does not include $26,100 paid in respect of vacation days and does not include $48,977 paid in respect of
transfer of severance allocation.
**) Till July 2010
***) From August 2010
Please see the Directors Report below for details of options and shares granted to directors.
- 14 -
DIRECTORS REPORT
Directors Report
The directors submit their report and the financial statements of the Group for the period ended 31 December 2010.
Incorporation and Admission onto the AIM Market
The Company was incorporated on 1 October 1998. On November 2006 the Company commenced trading on AIM and
issued 6,076,811 new Ordinary Shares of NIS 0.01 at price of £0.88 per share. The number of Ordinary Shares issued
immediately following the admission were 37,250,666.
Shares
As of December 31, 2010 the total numbers of Ordinary Shares Issued were 41,642,283.
Share Options
As of 31 December 2010, the outstanding balance of options granted to certain employees of SimiGon is
approximately 6.4 percent of the Company’s issued and outstanding shares at an average exercise price of $0.371. The
majority of the options vest in four years from the date of grant. The options expire in ten years from the date of
grant.
Review of Business and Future Developments
The business review is given within the Chief Executive Officer’s statement.
Dividends
The Company has not declared a dividend in respect of the relevant period.
Suppliers Payment Policy
The Group does not operate a standard code in respect of payment to suppliers. It has due regard to the payment
terms of suppliers and generally settles all undisputed accounts within 60 days of the date of invoice, except where
different arrangements have been arranged with suppliers.
Directors
The following directors have held office during the year:
Amos Vizer has been an executive director of the Company since 4 November 1998.
Haim Yatim, appointed as an executive director on 24 September 2006. On July 30, 2010 Mr. Efraim Manea was
appointed as an executive director replacing Mr. Yatim as a Director in the Company.
Alistair Rae, appointed as a director and Chairman of the Board on 27 October 2006.
Nevat Simon, appointed as an independent director on 27 October 2006.
Dr. Vered Shany, appointed as an independent director on 27 October 2006.
Mr. Eitan Cohen was appointed a non-executive director on June 3, 2008.
- 15 -
DIRECTORS REPORT (CONT.)
Directors Interest in Shares and Share Options
The interest of directors in the issued share capital of the company at 31, December 2010 were as follows.
Directors
Alistair Rae*)
Eitan Cohen *)
Dr. Vered Shany *)
Nevat Simon *)
Ami Vizer **)
Efraim Manea ***)
Number of Ordinary Shares Capital
70,454
24,000
24,000
24,000
3,854,098
63,452
Percentage of Ordinary shares
0.17
0.06
0.06
0.06
9.26
0.15
Options
0
0
0
0
410,000
92,500
Substantial Shareholdings
At 31, December 2010 the Company was informed of the following interests of 3% or more in its ordinary shares
issued at that date:
Shareholder
Jeffrey Braun
Packet Science Rami Weitz
A. Vizer Holdings A. Vizer **)
G. Poran Holding Ltd
Green Venture Capital Ltd.
Israel Aircraft Industries Ltd
Moldavski High-tech Ltd
Shroder Euroclear Nominees Limited
Number Of Ordinary Shares
6,543,039
6,244,944
3,854,098
3,778,444
3,067,848
2,624,310
1,750,297
1,711,070
Percentage of issued
15.71
14.99
9.26
9.07
7.36
6.30
4.20
4.11
*) On January 2010 the Non-Executive Board members were granted a total of 119,727 Ordinary shares per year of the
Company with an equivalent fair value on date of grant of $ 0.165. The shares will be vested in 12 equal monthly
instalments.
The following are number of Ordinary shares granted for each director. All shares were vested as of December 31, 2010:
Directors
Alistair Rae
Nevat Simon
Dr. Vered Shany
Eitan Cohen
Number of Ordinary Shares Capital
47,727
24,000
24,000
24,000
The salary reduction of 15% for the Non-Executive Board members remains in effect, and they will be granted additional
Ordinary shares of the Company during 2011.
**) Not Including 1,984,530 Ordinary shares to be issued under the Share Bonus Plan as mentioned in Note 10e under the
Company’s Annual report for year 2010.
***) Not Including 103,703 Ordinary shares to be issued under the Share Bonus Plan as mentioned in Note 10e under the
Company’s Annual report for year 2010.
Auditors
Kost Forer Gabbay & Kasierer
A member of Ernst & Young Global
3 Aminadav St.
Tel Aviv 67067
Israel
- 16 -
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 67067, Israel
Tel: 972 (3)6232525
Fax: 972 (3)5622555
www.ey.com
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
SIMIGON LTD.
We have audited the accompanying consolidated financial statements of SimiGon Ltd. and its subsidiaries
("the Group"), which comprise the consolidated statements of financial position as of December 31, 2010
and 2009, and the consolidated statements of comprehensive income, consolidated statements of changes in
equity and consolidated statement of cash flows for each of the years ended December 31, 2010, 2009 and
2008, and a summary of significant accounting policies and other explanatory information.
Management's Responsibility for the consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with International Financial Reporting Standards and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with International Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors' judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity's
preparation and fair presentation of the consolidated financial statements in order to design audit procedures
that are appropriate for the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial position of the
Group as of December 31, 2010 and 2009, and of its financial performance and cash flows for each of the
years then ended December 31, 2010, 2009 and 2008, in accordance with International Financial Reporting
Standards.
- 17 -
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SIMIGON LTD
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term bank deposits
Trade receivables
Other accounts receivable and prepaid expenses
Total current assets
NON-CURRENT ASSETS:
Long-term prepaid expenses
Fixed assets, net
Intangible assets, net
Total non-current assets
Total assets
December 31,
2010
2009
Note
U.S. dollars in thousands
3
4
5
6
2,110
507
3,377
181
6,175
25
85
1,374
1,484
7,659
2,053
504
3,301
67
5,925
38
104
1,425
1,567
7,492
The accompanying notes are an integral part of the consolidated financial statements.
- 18 -
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SIMIGON LTD
EQUITY AND LIABILITIES
CURRENT LIABILITIES:
Current maturities of loan
Trade payables
Deferred revenues
Other accounts payable and accrued expenses
Total current liabilities
NON-CURRENT LIABILITIES:
Employee benefit liabilities, net
Long-term loan
Other non-current liabilities
Total non-current liabilities
Total liabilities
EQUITY:
Share capital
Treasury shares
Additional paid-in capital
Accumulated deficit
Total equity
Total liabilities and equity
December 31,
2010
2009
Note
U.S. dollars in thousands
9
7
8
9
12a
10
562
205
409
691
895
157
205
697
1,867
1,954
122
188
460
770
101
-
89
190
2,637
2,144
98
-
15,644
(10,720)
5,022
7,659
98
(3)
15,295
(10,042)
5,348
7,492
The accompanying notes are an integral part of the consolidated financial statements.
April 14, 2011
Date of approval of the
financial statements
Alistair Rae
Ami Vizer
Non-Executive Chairman Chief Executive Officer
Efi Mena
Chief Financial Officer
- 19 -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIMIGON LTD
Note
14
13a
13b
13c
13d
13e
13f
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling and marketing
General and administrative
Total operating expenses
Operating profit (loss)
Finance income
Finance cost
Net income (loss) and total comprehensive
income (loss)
Basic and diluted earnings (loss) per share in
Year ended
December 31,
2009
U.S. dollars in thousands
(except share and per share amounts)
2008
2010
5,207
804
4,403
1,760
1,711
1,478
4,949
6,057
977
5,080
1,833
1,610
1,566
5,009
5,143
999
4,144
2,537
1,822
1,849
6,208
(546)
75
(207)
71
230
(229)
(2,064)
354
(270)
(678)
72
(1,980)
U.S. dollars
15
(0.02)
0.00
(0.05)
Weighted average number of shares used in
computing basic earnings (loss) per share (in
thousands)
Weighted average number of shares used in
computing diluted earnings (loss) per share (in
thousands)
15
41,361
40,204
37,453
15
41,361
40,660
37,453
The accompanying notes are an integral part of the consolidated financial statements.
- 20 -
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SIMIGON LTD
Number
of shares
Additional
paid-in
capital
Accumulated
Share
capital
deficit
U .S. dollars in thousands (except share amounts)
Treasury
shares
Total
equity
Balance as of January 1, 2008
37,259,326
89
14,521
Total comprehensive loss
Issuance of shares (Note 10)
Share-based compensation
-
538,868
-
-
1
-
-
210
173
Balance as of December 31,
2008
37,798,194
90
14,904
-
-
-
-
-
(8,134)
6,476
(1,980)
-
-
(1,980)
211
173
(10,114)
4,880
Total comprehensive income
Issuance of shares (Note 10d)
Share-based compensation
Treasury shares (Note 12e)
Exercise of stock options
-
2,263,383
-
-
1,460,979
-
5
-
-
3
-
(5)
396
-
-
-
*) -
-
(3)
-
72
-
-
-
-
72
-
396
(3)
3
Balance as of December 31,
2009
41,522,556
98
15,295
(3)
(10,042)
5,348
Total comprehensive loss
Issuance of shares (Note 10d)
Share-based compensation
Issuance of Treasury shares
(Note 12e)
Balance as of December 31,
-
119,727
-
-
*) -
-
-
-
-
*) -
320
29
2010
41,642,283
98
15,644
-
-
-
3
-
(678)
-
-
-
(678)
*) -
320
32
(10,720)
5,022
*)
Represents an amount lower than $ 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
- 21 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIMIGON LTD
Year ended
December 31,
2009
U.S. dollars in thousands
2010
2008
Cash flows from operating activities:
Net income (loss)
(678)
72
(1,980)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Income and expenses not involving operating cash flows:
Depreciation and amortization
Finance cost (income)
Share-based compensation
Accrued interest on long-term loan
Change in employee benefit liabilities, net
Changes in operating assets and liabilities:
Increase in trade receivables
Decrease (increase) in other accounts receivable and
prepaid expenses (including long-term)
Increase in trade payables
Increase (decrease) in deferred revenues
Increase (decrease) in other accounts payable and accrued
expenses
Interest paid
Interest received
Net cash used in operating activities
110
22
320
(33)
21
125
26
396
26
(205)
134
(70)
173
4
(45)
(76)
(1,421)
(733)
34
48
204
(39)
611
(33)
7
(26)
(93)
(33)
10
(131)
93
(1,114)
(50)
20
(30)
154
22
315
(371)
(417)
(5)
75
70
(1,072)
(2,327)
The accompanying notes are an integral part of the consolidated financial statements.
- 22 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from investing activities:
Investment in short-term deposits, net
Purchase of fixed assets
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from treasury shares
Issuance of shares, net
Exercise of stock options
Repayment of bank loan
Proceeds from refundable grants
Proceeds from long-term bank loans, net
Net cash provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(a)
Supplemental disclosure of non-cash financing
activities:
SIMIGON LTD
Year ended
December 31,
2009
U.S. dollars in thousands
2010
2008
-
(40)
(40)
32
*) -
-
(919)
327
750
190
57
2,053
2,110
-
(23)
(23)
-
-
3
(81)
89
-
11
(500)
(50)
(550)
-
44
-
-
-
946
990
(1,084)
3,137
(1,887)
5,024
2,053
3,137
Issuance of shares in consideration of liability due to
VTSG
-
-
167
*)
Represents an amount lower than $ 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
- 23 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 1:- GENERAL
SIMIGON LTD
a.
b.
c.
The Company commenced its operations on October 1, 1998, and is engaged in
developing advanced learning, training and simulation technologies and applications
for use in professional communities. The Company's registered office is in Herzlia,
Israel.
The Company has two wholly-owned subsidiaries in the United States, SimiGon Inc.,
which is engaged in the marketing of the Company's products in the United States and
National Simulation Services Inc., which is engaged in marketing of the Company's
products in the United States.
On November 2, 2006, the Company completed its Initial Public Offering ("IPO") on
the Alternative Investment Market ("the AIM") on the London Stock Exchange, by
issuing 6,076,811 Ordinary shares of NIS 0.01 par value each at a price of £ 0.88
($ 1.65) per share for a total net consideration of $ 8.4 million.
d.
Definitions:
In these financial statements:
The Group
- SimiGon Ltd. and its subsidiaries.
The Company
- SimiGon Ltd.
Subsidiaries
- Companies that are controlled by the Company.
Related parties - As defined in IAS 24.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
a. Measurement basis:
The Company's financial statements have been prepared on a cost basis, except for the
following:
Employee benefit obligations;
Provisions;
- 24 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
b.
Basis of preparation of the financial statements:
SIMIGON LTD
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"). These Standards comprise:
a)
b)
c)
International Financial Reporting Standards (IFRS).
International Accounting Standards (IAS).
Interpretations issued by the IFRIC and by the SIC.
c.
Consistent accounting policies:
The accounting policies adopted in the financial statements are consistent with those
of all periods presented, except when otherwise indicated.
d.
Significant accounting estimates and assumptions used in the preparation of the
financial statements:
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. These estimates and underlying assumptions are reviewed
regularly. 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 end of the reporting period 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.
Impairment of goodwill:
The Group reviews goodwill for impairment at least once a year. This requires
management to make an estimate of the projected future cash flows from the
continuing use of the cash-generating unit to which the goodwill has been
allocated and also to choose a suitable discount rate for those cash flows.
Further details are given in Note 6.
- 25 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Pensions and other post-employment benefits:
SIMIGON LTD
The liability in respect of post-employment defined benefit plans is determined
using actuarial valuations. The actuarial valuation involves making assumptions
about, among others, discount rates, expected rates of return on assets, future
salary increases and mortality rates. Due to the long-term nature of these plans,
such estimates are subject to significant uncertainty. Further details are given in
Note 8.
Determining the fair value of share-based payment transactions:
The fair value of share-based payment transactions is determined using an
option-pricing model. The model's assumptions consist of the share price,
exercise price, expected volatility, expected life, expected dividend and risk-free
interest rate.
e.
Functional currency and foreign currency:
The consolidated financial statements are presented in U.S. dollars, which is the
Company's functional and presentation currency. Each entity in the Group determines
its own functional currency and items included in the financial statements of each
entity are measured using that functional currency. Transactions in foreign currencies
are initially recorded at the functional currency rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at the balance sheet
date. All differences are taken to the statement of comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency
are translated using the exchange rates as at the dates of the initial transactions.
f.
Consolidated financial statements:
The consolidated financial statements comprise the financial statements of companies
that are controlled by the Company (subsidiaries). Control exists when the Company
has the power, directly or indirectly, to govern the financial and operating policies of
an entity. The consolidation of the financial statements commences on the date on
which control is obtained and ends when such control ceases.
Significant intragroup balances and transactions and gains or losses resulting from
intragroup transactions are eliminated in full in the consolidated financial statements.
The financial statements of the Company and of the subsidiaries are prepared as of the
same dates and periods. The consolidated financial statements are prepared using
uniform accounting policies by all companies in the Group.
- 26 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g.
Cash equivalents:
SIMIGON LTD
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 acquisition.
h.
Short-term deposits:
Short-term bank deposits are deposits with an original maturity of more than three
months from the date of acquisition. The deposits are presented according to their
terms of deposit.
i.
Allowance for doubtful accounts:
The allowance for doubtful accounts is determined in respect of specific debts whose
collection, in the opinion of the Company's management, is doubtful. Impaired debts
are derecognized when they are assessed as uncollectible.
j.
Financial instruments:
Interest-bearing loans:
All loans and borrowings are initially recognized at fair value less directly attributable
transaction costs. After initial recognition, interest bearing loans and borrowings are
subsequently measured at amortized cost using the effective interest method.
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.
Where an existing financial liability is exchanged with another liability from the same
lender on substantially different terms, or the terms of an existing liability are
substantially modified, such an exchange or modification is accounted for as an
extinguishment of the original liability and the recognition of a new liability. The
difference between the carrying amounts of the above liabilities is recognized in profit
or loss. If the exchange or modification is not substantial, it is accounted for as a
change in the terms of the original liability and no gain or loss is recognized on the
exchange.
- 27 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Treasury shares:
SIMIGON LTD
Company shares held by the Company are recognized at cost and deducted from
equity. Any gain or loss arising from a purchase, sale, issuance or cancellation of
treasury shares is recognized directly in equity. Voting rights attached to treasury
shares are revoked.
k.
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.
Lease agreements are classified as an operating lease if they do not transfer
substantially all the risks and benefits incidental to ownership of the leased asset.
Lease payments are recognized as an expense in profit or loss on a straight-line basis
over the lease term.
l.
Fixed assets:
Items of fixed assets are measured at cost with the addition of direct acquisition costs,
less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the useful life of the assets at
annual rates as follows:
%
Computers and peripheral equipment
Office furniture and equipment
Leasehold improvements
33
7 - 15 (mainly 15%)
Over the term of the lease or the estimated
useful life, whichever is shorter
m.
Impairment of non-financial assets:
The Company evaluates the need to record an impairment of the carrying amount 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 future cash flows are discounted using a pre-
tax discount rate that reflects the risks specific to the asset. 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.
- 28 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
n.
Intangible assets:
SIMIGON LTD
Intangible assets acquired in a business combination are included at fair value at the
acquisition date (see Note 6). After initial recognition, intangible assets are carried at
their cost less any accumulated amortization and any accumulated impairment losses.
According to management's assessment, intangible assets have a finite useful life. The
assets are amortized over their useful life using the straight-line method 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 with a finite
useful life are reviewed at least at each financial year end. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are accounted for prospectively as changes in accounting
estimates. The amortization of intangible assets with finite useful lives is recognized
in the profit or loss.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Backlog
Technology
Useful lives
Amortization method used
1 year
straight-line basis
10 years
straight-line basis
o.
Government grants:
Government grants are recognized where there is reasonable assurance that the grant
will be received and the Company will comply with the attached conditions.
Government grants received from the Office of the Chief Scientist ("OCS") and the
Korea Israel Industrial R&D Foundation as support for research and development
projects which grants include an obligation to pay royalties that are conditional on
future sales arising from the project, are recognized upon receipt as a liability if future
economic benefits are expected from the project that will result in royalty-bearing
sales. If no such economic benefits are expected, the grants are recognized as a
reduction of the related research and development expenses. In that event, the royalty
obligation is treated as contingent liability in accordance with IAS 37.
At the end of each reporting period, the Company evaluates, based on its best estimate
of future sales, whether there is reasonable assurance that the liability recognized, in
whole or in part, will not be repaid (since the Company will not be required to pay
royalties). If there is such reasonable assurance, the appropriate amount of the liability
is derecognized and recorded in profit or loss as a reduction of research and
development expenses. If the estimate of future sales indicates that there is no such
reasonable assurance, the appropriate amount of the liability that reflects expected
future royalty payments is recognized with a corresponding adjustment to research and
development expenses.
- 29 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD
Grants received after January 1, 2009, which are recognized as a liability, are
accounted for as forgivable loans, in accordance with IAS 20 (Revised), pursuant to
the provisions of IAS 39, "Financial Instruments: Recognition and Measurement".
Accordingly, when the liability for the loan is first recognized, it is measured at fair
value using a discount rate that reflects a market rate of interest. The difference
between the amount of the grants received and the fair value of the liability is
accounted for upon recognition of the liability as a government grant and recognized
as a reduction of research and development expenses.
Royalty payments are treated as a reduction of the liability.
p.
Research and development:
Research and development costs are charged to profit or loss as incurred as
development costs do not meet the criteria for recognition as an intangible asset.
q.
Revenue recognition:
Revenues are recognized to the extent that it is probable that the economic benefits
will flow to the Company and the revenues can be reliably measured.
The Company generates revenues mainly from licensing the rights to use its software
products and sales of software licenses that require significant customization. The
Company also generates revenues from maintenance, support and training. The
resellers usually add an additional component to the package sold or include the
Company's products as part of a broader package.
Revenues from software licensing that requires significant customization are
recognized by reference to the stage of completion of the transaction at the end of the
reporting period. When the outcome of the transaction cannot be estimated reliably,
revenues are recognized only to the extent of the costs recognized that are recoverable.
A provision for estimated losses on uncompleted contracts is recorded in the period in
which such losses are first identified. As of December 31, 2010, no provision for such
losses has been identified.
Maintenance and support revenue included in multiple element arrangements is
deferred and recognized on a straight-line basis over the term of the maintenance and
support agreement. The fair value of the undelivered elements (maintenance and
support services) is determined based on the price charged for the undelivered element
when sold separately.
Deferred revenue includes unearned amounts received under maintenance and support
contracts, and amounts received from customers but not recognized as revenues.
- 30 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Revenues from software arrangements:
SIMIGON LTD
Software arrangements contain multiple elements (software, integration, installation,
the
upgrades, support,
arrangement's elements, including those delivered on a "when and if available basis",
in order to determine if the elements can be separately identified.
training, consultation etc.). The Company evaluates
The Company recognizes revenues from the sale of software only after the significant
risks and rewards of ownership of the software have been transferred to the buyer for
which a necessary, but not sufficient condition, is delivery of the software, either
physically or electronically, or providing the right to use or permission to make
copies, of the software. The Company recognizes revenues from providing software
related services when the outcome can be measured reliably by reference to the stage
of completion of the transaction at the end of the reporting period. If the services
consist of a number of activities that are not defined over a specified period of time,
revenues are recognized on a straight-line basis over the specified period, unless there
is evidence that some other method better represents the stage of completion.
r.
Earnings (loss) per share:
Earnings per share are calculated by dividing the net income attributable to equity
holders of the Company by the weighted number of Ordinary shares outstanding
during the period. Basic earnings per share only include shares that were actually
outstanding during the period. Potential Ordinary shares are only included in the
computation of diluted earnings per share when their conversion decreases earnings
per share or increases loss per share from continuing operations. Further, potential
Ordinary shares that are converted during the period are included in diluted earnings
per share only until the conversion date and from that date in basic earnings per share.
The Company's share of earnings of investees is included based on the earnings per
share of the investees multiplied by the number of shares held by the Company.
s.
Provisions:
A provision in accordance with IAS 37 is recognized when the Company has a present
(legal) obligation as a result of a past event and 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.
Legal claims:
A provision for claims is recognized when the Group has a present legal or
constructive obligation as a result of a past event, it is more likely than not that an
outflow of resources embodying economic benefits will be required by the Group to
settle the obligation and a reliable estimate can be made of the amount of the
obligation. Where the effect of the time value of money is material, a provision is
measured at its present value.
- 31 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
t.
Employees benefit liabilities:
SIMIGON LTD
The Company's liability for severance pay pursuant to the Israel's Severance Pay Law
(for those who elected not to be fully included under section 14 of the Severance Pay
Law, 1963) is based on the last monthly salary of the employee multiplied by the
number of years of employment, as of the date of severance.
The cost of providing severance pay is determined using an independent actuary.
Actuarial gains and losses are recognized immediately in the statements of
comprehensive income in the period in which they occur.
Pursuant to Section 14 of the Severance Pay Law, which covers 75% of most of the
employees' severance pay, monthly deposits with insurance companies release the
Company from any future severance obligations in respect of those employees
(defined contribution). Deposits under Section 14 are recorded as an expense in the
Company's statements of comprehensive income.
.
u.
Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, short-term bank deposits, trade
receivables, other accounts receivable, short-term bank loans, trade payables and other
accounts payable approximate their fair value due to the short-term maturity of such
instruments.
v.
Share-based payment transactions:
The Company applies the provisions of IFRS 2, "Share-Based Payment". IFRS 2
requires an expense to be recognized where the Company buys goods or services in
exchange for shares or rights over shares ("equity-settled transactions"), or in
exchange for other assets equivalent in value to a given number of shares of rights
over shares ("cash-settled transactions"). The main impact of IFRS 2 on the Company
is
the expensing of employees' and directors' share options (equity-settled
transactions).
The cost of equity-settled transactions with employees is measured by reference to the
fair value at the date on which they are granted. The fair value is determined by using
the Black-Scholes option-pricing model taking into account the terms and conditions
upon which the instruments were granted. The fair values of Ordinary shares for the
purpose of calculating the fair values of options and warrants were determined by
management based on a number of factors.
- 32 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD
The cost of equity-settled transactions is recognized, together with a corresponding
increase in equity, over the period in which the performance and/or service conditions
are fulfilled, ending on the date on which the relevant employees become fully entitled
to the award ("the vesting date"). The cumulative expense recognized for equity-
settled transactions at each reporting date until the vesting date reflects the extent to
which the vesting period has expired and the Company's best estimate of the number
of equity instruments that will ultimately vest.
The Company's employees/other service providers are entitled to remuneration in the
form of equity-settled share-based payment.
w.
Finance income and expenses:
Finance income includes interest income on amounts invested and exchange rate
gains.
Finance expenses comprise interest expense on bank loan fees and exchange rate loss.
x.
Disclosure of new IFRSs in the period prior to their adoption:
IAS 24 - Related Party Disclosures:
The amendment to IAS 24 clarifies the definition of a related party in order to simplify
the identification of such relationships and to eliminate inconsistencies in its
application. In addition, Government-related companies are provided a partial
exemption of disclosure requirements for transactions with the Government and other
Government-related companies. The amendment should be applied retrospectively
commencing from the financial statements for annual periods beginning on January 1,
2011. Earlier application is permitted.
The relevant disclosures will be included in the Company's financial statements.
NOTE 3:- SHORT-TERM BANK DEPOSITS
The short-term bank deposits (between three months and a year) as of December 31, 2010
and 2009 (in a total of $ 507 thousand and $ 504 thousand, respectively) bear an annual
interest rate of 0.35% and 1.4%, respectively.
- 33 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 4: - TRADE RECEIVABLES
Trade receivables (1)
(1) Net of allowance for doubtful accounts
SIMIGON LTD
December 31,
2010
2009
U.S. dollars in thousands
3,377
412
3,301
130
Trade receivables are non-interest bearing and are generally on 30 - 90 days' terms.
The aging analysis of trade receivables is as follows:
Past due but not impaired
Neither
past due
nor
impaired
< 30
days
30 - 60
days
60 - 90
day
> 90
days
Total
U.S. dollars in thousands
2010
2009
3,018
2,913
299
117
-
143
24
44
36
3,377
84
3,301
- 34 -
SIMIGON LTD
NOTES TO CONSOLIDATED STATEMENTS
NOTE 5:- FIXED ASSETS, NET
Composition and movement:
Computers
and
peripheral
equipment
Office
furniture
and
equipment
U.S. dollars in thousands
Leasehold
improvements
Total
710
23
733
40
773
625
56
681
47
728
45
52
165
-
165
*) -
165
105
13
118
8
126
39
47
54
-
54
-
54
44
5
49
4
53
1
5
929
23
952
40
992
774
74
848
59
907
85
104
Cost:
Balance as of January 1, 2009
Acquisitions during the year
Balance as of December 31, 2009
Acquisitions during the year
Balance as of December 31, 2010
Accumulated depreciation:
Balance as of January 1, 2009
Provision during the year
Balance as of December 31, 2009
Provision during the year
Balance as of December 31, 2010
Depreciated cost as of December 31,
2010
Depreciated cost as of December 31,
2009
*)
Represents an amount lower than $ 1 thousands.
NOTE 6:- BUSINESS COMBINATION AND INTANGIBLE ASSETS
On January 24, 2007, SimiGon Inc. signed an agreement ("the Agreement") with Visual
Training Solution Company, Inc. ("VTSG") to acquire the assets and business relating to its
simulation and training technologies. VTSG was a former business partner of the Company
whereby the Company provided the software and VTSG provided the content and hardware
integration.
According to the Agreement, the total consideration of the assets and business acquired is up
to $ 2 million. The first payment of $ 1.25 million was paid on the date the agreement was
signed and the second payment of up to $ 0.75 million, which was due in January 2008, was
contingent upon meeting certain targets such as revenues and employee retention.
- 35 -
SIMIGON LTD
NOTES TO CONSOLIDATED STATEMENTS
NOTE 6:- BUSINESS COMBINATION AND INTANGIBLE ASSETS (Cont.)
The fair values of identifiable assets of VTSG as of the date of acquisition were estimated as
follows:
Technology
Backlog
Total assets acquired
Goodwill arising on acquisition
Total consideration
Fair value
recognized on
acquisition
U.S. dollars
in thousands
505
10
515
735
1,250
The carrying amount of intangible assets acquired as of December 31, 2010 and 2009 in the
accounts of the Company was as follows:
Technology **)
Goodwill arising on acquisition *)
Total
Carrying amount as of
December 31,
2009
2010
U.S. dollars in thousands
306
1,068
1,374
357
1,068
1,425
*)
As part of the Agreement, on February 5, 2008, the Company paid an additional
amount of $ 333 thousand for the second payment. This amount was recorded as an
adjustment to goodwill.
The amount of $ 333 thousand was recorded as follows: (a) $ 166 thousand was offset
from a receivable from VTSG, and (b) the balance of $ 167 thousand was settled
through the issuance of 164,628 Ordinary shares of the Company on February 7, 2008.
As the activities of VTSG have been fully integrated into those of the Company, the
goodwill arising in the acquisition of VTSG is evaluated for impairment purposes as
part of the cash generating unit representing the Company. As of December 31, 2010,
the recoverable amount determined based on the value in use exceeded the carrying
amount of the Company's net assets (equity).
- 36 -
SIMIGON LTD
NOTES TO CONSOLIDATED STATEMENTS
NOTE 6:- BUSINESS COMBINATION AND INTANGIBLE ASSETS (Cont.)
An external expert based his impairment analysis according to IAS 36.
The expert used the following assumptions:
After-tax net cash-flow discount Rate of 23.39%, the yearly average growth for years
2011-2015 of 18.32% and terminal growth value of 3%.
**) During the years ended December 31, 2010, 2009 and 2008, the Company recorded
amortization in the amount of $ 51 thousand, $ 51 thousand and $ 52 thousand,
respectively, which was recorded in cost of revenues.
NOTE 7:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Employees and payroll accruals
Accrued expenses
December 31,
2009
2010
U.S. dollars in thousands
341
350
691
320
377
697
NOTE 8:- EMPLOYEE BENEFIT LIABILITIES, NET
a.
The amounts recognized in the balance sheet are as follows:
Liability at the beginning of the year
Expense recognized in the profit or loss
Contribution paid
Benefits paid
Liability at the end of the year
December 31,
2009
2010
U.S. dollars in thousands
101
31
-
(10)
122
306
84
(1)
(288)
101
- 37 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 8:- EMPLOYEE BENEFIT LIABILITIES, NET
b.
Amounts recognized in the statements of comprehensive income are as follows:
SIMIGON LTD
Current service cost
Interest cost
Expected return on plan assets
Net actuarial loss (gain) recognized in the year
Total expense included in profit or loss
c.
Changes in the present value of defined benefit obligation:
1.
Composition:
Balance at January 1
Interest cost
Current service cost
Benefits paid
Net actuarial loss (gain)
Balance at December 31
2.
Plan assets:
December 31,
2009
2010
U.S. dollars in thousands
26
6
-
(1)
31
18
8
(1)
59
84
2010
2009
U.S. dollars in thousands
101
6
26
(10)
(1)
122
352
8
18
(335)
58
101
a)
Plan assets comprise assets held by a long-term employee benefit fund
and qualifying insurance policies.
b)
The movement in the fair value of the plan assets:
2010
2009
U.S. dollars in thousands
-
-
-
-
-
-
46
(1)
1
(47)
1
-
Balance at January 1
Expected return
Contributions by employer
Benefits paid
Net actuarial gain
Balance at December 31
- 38 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 8:- EMPLOYEE BENEFIT LIABILITIES, NET (Cont.)
d.
The actuarial assumptions used are as follows:
SIMIGON LTD
Year ended
December 31,
2009
2010
2008
Discount rate
5.10%
4.66%
4.29%
Expected rate of return on plan assets
5.39%
4.96%
6.35%
Future salary increases
2%
2%
2%
Average expected remaining working
years
6.44
6.21
5.9
NOTE 9:- LONG-TERM LOAN
a.
Comprised as follows:
Linkage
terms
Interest rate as of
December 31,
2010
2009
December 31,
2010
2009
U.S. dollars in thousands
From bank (c)
LIBOR +4%
4.26%
4.25%
750
918
-
-
-
750
562
188
4
19
23
895
895
-
Less - loan
origination fees
Less - Ordinary
shares issued in
connection with the
loan (see c)
Total long-term loan
Less - current
maturities
- 39 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 9:- LONG-TERM LOAN (Cont.)
b.
The aggregate annual maturities of the long-term loan are as follows:
SIMIGON LTD
First year (current maturities)
Second year
December 31,
2009
2010
U.S. dollars in thousands
562
188
750
895
-
895
c.
On November 16, 2008, the Company signed a loan agreement ("the Loan
Agreement") with Bank Mizrahi Ltd. ("Mizrahi"), according to which Mizrahi
provided a loan to the Company in the amount of $ 1 million. The loan bears an
annual interest rate of LIBOR+4% and is repayable in 12 equal monthly payments
commencing December 25, 2009. As part of the Loan Agreement, the Company
issued to Mizrahi 374,240 Ordinary shares, which were recorded as transaction costs,
based on the market price of the shares on the date of issuance. In addition, the
Company paid loan origination fees of $ 10,000. As of December 31, 2009, the fair
value of the loan approximates its carrying amount.
According to the Loan Agreement, the Company is obligated to maintain cash, cash
equivalents and trade receivables at more than 125% of the loan value. The Company
complied with those obligations.
On May 24, 2010, the Company signed a refinance loan agreement ("Refinance
Loan") with Bank Mizrahi Ltd. ("Mizrahi"), according to which the Company will
repay Mizrahi the initial Loan Agreement in a total of $ 590 thousand and Mizrahi
will provide the Company with a Refinance Loan in a total amount of $ 750 thousand.
The Refinance Loan bears an annual interest rate of LIBOR+4% and is repayable in
12 equal monthly payments commencing April 26, 2011. In addition, the Company
paid loan commission of $ 20 thousand. According to the Loan Agreement, the
Company is obligated to maintain cash, cash equivalents and trade receivables at more
than 150% of the loan value and to maintain cash and cash equivalent balance of $ 500
thousand under Mizrahi. As of December 31, 2010, the Company is in compliance
with this obligation.
As of December 31, 2010, the fair value of the loan approximates its carrying amount.
- 40 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 10:- EQUITY
SIMIGON LTD
a. On November 2, 2006, the Company completed its Initial Public Offering ("IPO") on
the Alternative Investment Market ("the AIM") on the London Stock Exchange, by
issuing 6,076,811 Ordinary shares of NIS 0.01 par value each at a price of £ 0.88
($ 1.65) per share for a total net consideration of $ 8,411 thousand.
b.
In February 2008, the Company issued 164,628 Ordinary shares of the Company, as
additional consideration for the VTSG business (see Note 6).
c. As described in Note 9, in November 2008, the Company issued to Mizrahi 374,240
Ordinary shares in connection with the granting of a loan to the Company.
d. On April 23, 2009, the Board of Directors approved the implementation of a one-year
plan for salary reduction of 15% for senior management and other employees ("the
Reduction Plan"). According to the Reduction Plan, the individuals, in exchange for
the reduction on salary, are to be granted 2,263,383 Ordinary shares of the Company
with an equivalent fair value on date of grant of $ 0.15. The shares which have been
issued and are being held by a trustee will vest in 12 equal monthly instalments. Out
of the issued shares, a total of 380,313 Ordinary shares were returned to the Company
due to departure of employees and recorded as treasury shares ("the Treasury
Shares"). On November 30, 2010, the Chief Executive Officer of the Company and
also a Director of the Company acquired the Treasury Shares at a price of £ 0.0512
($ 0.7979) per share, reflecting the fair market value of the stock on the purchase date.
Further to the Reduction Plan, on July 27, 2009, the Non-Executive Board members
also decided to implement a one-year salary reduction of 15% and instead will be
granted 119,727 Ordinary shares of the Company, with an equivalent fair value on
date of grant of $ 0.165, which will vest in 12 equal monthly instalments. The shares
were issued to the trustee in January 2010.
The salary reduction of 15% for the Non-Executive Board members remains in effect,
and will be granted additional Ordinary shares of the Company.
e. On November 2, 2010, the Board of Directors approved the implementation of a share
bonus plan ("the Share Bonus Plan").
According to the Share Bonus Plan, the Bonus Shares will be granted with an
equivalent value of Ordinary shares based on the quoted fair market price of the shares
as of November 2, 2010, which is equal to $ 0.0821 per Ordinary share ("the Bonus
Shares") at a purchase price of NIS 0.01 per share. The Bonus Shares will be
calculated based on approved Board formula and will be vested upon receiving actual
payment from the customer under the relevant PO.
- 41 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD
As of December 31, 2010, the Company's senior management and other employees are
to be granted 2,582,928 Ordinary shares of the Company. Out of the issued shares, a
total of 1,984,530 Ordinary shares are to be issued to the Chief Executive Officer of
the Company and Director of the Company.
As of the date the financial statements were approved, 2,556,368 shares are due.
As of December 31, 2010, the Company recorded share-based compensation expenses
of $ 212 thousand, in respect of the bonus compensation.
f.
Composition of share capital:
December 31,
2010, 2009
and 2008
Authorized
2010
December 31,
2009
Issued and outstanding
2008
Ordinary shares of
NIS 0.01 par value each
100,000,000
41,642,283 *) 41,522,556 37,798,194
Number of shares
* Not including 2,582,928 shares to be issued under the Share Bonus Plan.
g. Warrants:
In August 2000, in connection with the lease of its facilities, the Company issued to
the lessor fully vested warrants to purchase 51,613 Ordinary shares at an exercise
price of $ 0.90 per share. The options were to be exercised at any time until March 30,
2007. In connection with the extension of the lease period, the Company modified the
options for extending the period of exercise for an additional 36 months until March
2010. The incremental fair value of the modification amounted to $ 24 thousand. On
March 2010, the options expired.
h.
Stock option plan:
In August 2000, the Company's Board of Directors authorized an incentive share
option plan ("the Option Plan") and has since granted options to purchase Ordinary
shares to employees and consultants. Under the Option Plan, options generally vest
rateably over a period of four years, commencing with the date of grant. The exercise
price of the options granted under the Option Plan may not be less than the par value
of the shares. The options generally expire no later than 10 years from the date of the
grant, and are non-transferable, except under the laws of succession. On November 2,
2010, the Company decided to increase its Option Plan reserves by 8,000,000 options
to accumulate a total of 17,500,000. As of December 31, 2010, an aggregate of
10,439,275 Ordinary shares of the Company are still available for future grant.
- 42 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD
The fair value of share options is measured at the grant date using the Black-Scholes
option pricing model taking into account the terms and conditions upon which the
options were granted. The following are the inputs to the model used for each of the
three years in the period ended December 31, 2010: risk-free interest rates ranging
from 1.31%-3.59%; a dividend yield of 0%; volatility factor of the expected market
price of the Company's Ordinary shares of 70%; and a weighted average expected life
of the options of 6.5 years.
The weighted average fair values of the options granted in 2010, 2009 and 2008 were
$ 0.03, $ 0.09 and $ 0.62, respectively.
A summary of the activity in options to employees, consultants, and directors
(including the senior management, see Note 10i below) for the years 2010, 2009 and
2008 is as follows:
2010
Year ended December 31,
2009
2008
Number
of
options
Weighted
average
exercise
price
Number
of
options
Weighted
average
exercise
price
Weighted
average
exercise
price
Number
of options
2,207,822 $ 0.693
1,234,000 $ 0.031
-
-
2,408,069 $ 0.706
477,500 $ 0.089
(442,125) $ 0.002
2,493,269 $ 0.800
73,900 $ 0.618
- $
-
(110,245) $ 0.461
(658,133) $ 0.741
(235,622) $ 0.886
(159,100) $ 1.360
Outstanding at
beginning of
year
Granted
Exercised
Expired
Forfeited
Outstanding at end
of year
2,673,444 $ 0.371
2,207,822 $ 0.693
2,408,069 $ 0.706
Exercisable
options
1,192,198 $ 0.781
1,575,944 $ 0.736
1,867,026 $ 0.558
The options outstanding as of December 31, 2010, have been separated into ranges of
exercise price as follows:
Exercise price
$
$
$
0.002-0.120
0.127-0.630
1.200-2.170
Options
outstanding
as of
December 31,
2010
Weighted
average
remaining
contractual
life (years)
5.99
7.04
5.23
1,275,002
1,085,292
313,150
2,673,444
- 43 -
Options
exercisable
as of
December 31,
2010
157,764
733,509
300,925
1,192,198
NOTES TO CONSOLIDATED STATEMENTS
NOTE 10:- EQUITY (Cont.)
i.
Options to the CEO and senior employees:
SIMIGON LTD
1.
2.
3.
On March 26, 2009, a total of 80,000 options at an exercise price of $ 0.08 per
share were exercised by the Company's senior employees.
On March 29, 2009, a total of 32,978 options at an exercise price of NIS 0.01
per share were exercised by the Company's senior employees.
On January 27, 2010, the Board of Directors granted 1,249,000 options as
follows:
a)
b)
c)
d)
e)
A total of 360,000 options were granted to the CEO at an exercise price
of NIS 0.01 per share.
A total of 312,000 options were granted to senior employees at an
exercise price of NIS 0.01 per share.
A total of 132,000 options were granted to employees at an exercise price
of NIS 0.01 per share.
A total of 304,000 options were granted to employees at an exercise price
of $ 0.13 per share.
A total of 141,000 options were granted to the former CFO at an exercise
price of NIS 0.01 per share.
The options will vest over 3 years in equal annual amounts commencing as of
January 1, 2010 and will be conditional upon the following:
a)
b)
Employee being employed by the Company.
The EBIDTA of the Company (on a consolidated basis) for the relevant
fiscal year shall increase by more than 20% compared to the previous
year.
Vesting will be fully accelerated in the event of any of the following:
a) Merger, acquisition or reorganization of the Company with one or more
other entities;
b)
c)
A sale of all or substantially all of the assets or shares of the Company;
An investment in the Company of at least $ 2 million.
As of December 31, 2010, no options have been vested and the Company did
not record share-based compensation expenses.
- 44 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD
4.
On July 28, 2010, the Board of Directors approved that all vested options
granted to the former CFO in total amount of 319,388 options at the date of
termination of his engagement by the Company will be exercisable until
December 31, 2011, or an M&A event (whichever is sooner).
On September 27, 2010, the Board of Directors approved that all vested options
granted to a former senior employee in total amount of 90,171 options at the
date of termination of her engagement by the Company will be exercisable until
December 31, 2011, or an M&A event (whichever is sooner).
The effect of the modification in terms of the options was an increase in their
fair value in the amount of $ 49 thousand which was recorded as share based
compensation expense in 2010.
j.
Shares to the CEO and senior employees:
1.
2.
The Reduction Plan as mentioned under Note 10d. above includes a total of
342,717 and 435,495 Ordinary shares of the Company which were granted to
the CEO and senior management; respectively, with an equivalent fair value on
date of grant of $ 0.15. The shares which have been issued and are being held
by the Company's trustee, will vest in 12 equal instalments.
The Share Bonus Plan as mentioned under Note 10e includes a total of
1,984,530 and 339,690 Ordinary shares of the Company to be issued to the CEO
and senior management, respectively, at a purchase price of NIS 0.01 per share,
with an equivalent fair value on date of grant equal to $ 0.0821 per Ordinary
Share.
As of the date the financial statements were approved 2,314,476 are due.
As of December 31, 2010, the Company recorded share-based compensation
expenses in a total of $ 163 thousand and $ 28 thousand in respect to the CEO
and senior management, respectively.
- 45 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 11:- INCOME TAXES
a.
Tax benefits under the Law for the Encouragement of Capital Investments, 1959:
SIMIGON LTD
The Company has been granted an "Approved Enterprise" status for an original
program and an additional expansion program, ("the programs") under the Law for the
Encouragement of Capital Investments, 1959 ("the Law"). According to the provisions
of the Law, the Company has elected to enjoy the "alternative benefits track" - a
waiver of grants in return for tax holidays. The "Approved Enterprise" status will
allow the Company a tax holiday on undistributed income derived from the "Approved
Enterprise" program. The income derived from this "Approved Enterprise" will be tax-
exempt for a period of two years, and may enjoy a reduced tax rate of 10% to 25%
(based on percentage of foreign ownership) for an additional five years. The seven-
year period of benefits will commence with the first year in which the Company earns
taxable income.
The Company completed the implementation of its original and expansion programs.
The period of tax benefits, detailed above, is subject to limits of the earlier of 12 years
from the commencement of production, or 14 years from receiving the approval. The
period of benefits has not yet commenced, and will expire in the year 2016.
The entitlement to the above benefits is conditional upon the Company's fulfilling the
conditions stipulated by the above Law, regulations published thereunder and the
letters of approval for the specific investments in "Approved Enterprises". In the event
of failure to comply with these conditions, the benefits may be cancelled and the
Company may be required to refund the amount of the benefits, in whole or in part,
including interest.
Should the Company derive income from sources other than the "Approved
Enterprise" during the period of benefits, such income shall be taxable at the regular
corporate tax rate.
If tax-exempt profits are distributed to shareholders, they would be taxed at the
corporate tax rate applicable to such profits as if the Company had not elected the
alternative system of benefits, currently between 10%-25% for an "Approved
Enterprise".
An amendment to the Law, which became effective in 2005 ("the Amendment")
changed certain provisions of the Law. As a result of the Amendment, a company is
no longer obliged to implement an "Approved Enterprise" status in order to receive the
tax benefits previously available under the alternative benefits provisions, and
therefore there is no need to apply to the Investment Center for this purpose
(Approved Enterprise status remains mandatory for companies seeking grants).
Rather, a company may claim the tax benefits offered by the Investment Law directly
in its tax returns, provided that its facilities meet the criteria for tax benefits set out by
the Amendment. A company is also granted a right to approach the Israeli Tax
Authorities for a pre-ruling regarding their eligibility for benefits under the
Amendment.
- 46 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 11:- INCOME TAXES (Cont.)
SIMIGON LTD
Tax benefits are available under the Amendment to production facilities (or other
eligible facilities), which are generally required to derive more than 25% of the
company's business income from export. In order to receive the tax benefits, the
Amendment states that a company must make an investment in the beneficiary
enterprise exceeding a minimum amount specified in the Law. Such investment may
be made over a period of no more than three years ending at the end of the year in
which the company requested to have the tax benefits apply to the beneficiary
enterprise ("the Year of Election"). Where a company requests to have the tax benefits
apply to an expansion of existing facilities, then only the expansion will be considered
a beneficiary enterprise and the company's effective tax rate will be the result of a
weighted combination of the applicable rates. In this case, the minimum investment
required in order to qualify as a beneficiary enterprise is required to exceed a certain
percentage of the company's production assets before the expansion. The duration of
tax benefits is subject to a limitation of the earlier of 7 years from the Commencement
Year, or 12 years from the first day of the Year of Election.
Amendments to the Law for the Encouragement of Capital Investments, 1959:
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic
Policy for 2011 and 2012 (Amended Legislation), 2011 ("the Amendment"), 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 preferred income. Commencing from the
2011 tax year, the Company will be able to opt to apply (the waiver is non-recourse)
the Amendment and from the elected tax year and onwards, it will be subject to the
amended tax rates that are: 2011 and 2011 - 15% (in development area A - 10%), 2013
and 2014 - 12.5% (in development area A - 7%) and in 2015 and thereafter - 12% (in
development area A - 6%).
b. Measurement of results for tax purposes under the Income Tax (Inflationary
Adjustments) Law, 1985:
Results for tax purposes are measured in terms of earnings in NIS after certain
adjustments for increases in the Israeli Consumer Price Index ("CPI"). As explained in
Note 2d, the financial statements are presented in U.S. dollars. The difference between
the annual change in the Israeli CPI and in the NIS/dollar exchange rate causes a
difference between taxable income or loss and the income or loss before taxes
reflected in the financial statements.
- 47 -
SIMIGON LTD
NOTES TO CONSOLIDATED STATEMENTS
NOTE 11:- INCOME TAXES (Cont.)
c.
Tax reconciliation:
In 2010, 2009 and 2008, the main reconciling item between the statutory tax rate of
the Company and the effective tax rate (0%) is carryforward tax losses and tax
exemption for which no deferred taxes were provided.
d.
Carryforward losses:
Domestic:
As of December 31, 2010, 2009 and 2008, the Company had accumulated losses for
Israeli tax purposes of approximately $ 6.8 million, $ 5.2 million and $ 3.9 million,
respectively, which may be carried forward, in order to offset taxable income in the
future, for an indefinite period.
Foreign:
As of December 31, 2010, 2009 and 2008, the federal tax loss carryforwards of the
U.S. subsidiaries amounted to approximately $ 5.9 million, $ 5.7 million and $ 6.9
million, respectively. Such losses are available for offset against future U.S. taxable
income of the subsidiaries and will expire in the years 2023-2026.
Due to the uncertainty of the utilization of these carryforward losses, no deferred tax
assets have been recorded.
e.
Tax rates applicable to the income of the Company and its subsidiaries:
Domestic:
The rate of the Israeli corporate tax is as follows: 2007 - 29%, 2008 - 27%, 2009 -
26%, 2010 - 25%. Tax at a reduced rate of 25% applies on capital gains arising after
January 1, 2003, instead of the regular tax rate. In July 2009, the "Knesset" (Israeli
Parliament) passed the Law for Economic Efficiency (Amended Legislation for
Implementing the Economic Plan for 2009 and 2010), 2009, which prescribes, among
others, an additional gradual reduction in the rates of the Israeli corporate tax and real
capital gains tax starting 2011 to the following tax rates: 2011 - 24%, 2012 - 23%,
2013 - 22%, 2014 - 21%, 2015 - 20%, 2016 and thereafter - 18%.
Foreign:
The subsidiaries were incorporated in Orlando, Florida, U.S.A., and are taxed
according to U.S. tax laws. The statutory federal tax rate is 35%.
- 48 -
SIMIGON LTD
NOTES TO CONSOLIDATED STATEMENTS
NOTE 11:- INCOME TAXES (Cont.)
f.
Tax assessments:
The Company's tax assessments in Israel for the years until and including 2006 are
considered final, subject to the powers vested with the director of the Tax Authority
pursuant to sections 145, 147 and 152 to the Income Tax Ordinance.
g.
Deferred taxes:
On December 31, 2010, there was no recognized deferred tax liability for taxes that
would be payable on unremitted earnings of the Company and its subsidiaries.
NOTE 12:- CONTINGENT LIABILITIES AND COMMITMENTS
a.
Royalty commitments:
1.
In June 2001, the Company and a third party signed a Cooperation and Project
Funding Agreement with Britech, which is an establishment of the United
Kingdom-Israel Industrial Research and Development Fund. According to the
agreement, Britech agreed to fund, by conditional grant, the implementation of
the proposal submitted by the Company and the third party for a research and
development project in the maximum amount of £ 227 thousand.
The Company shall make repayments to Britech, based on gross sales derived
from the sale, leasing or other marketing or commercial exploitation of the
innovation, including service or maintenance contracts, commencing with the
first commercial transaction. Such payments shall be repaid in Pounds Sterling
at the rate of 2.5% of the first year's gross sales and, in succeeding years, at the
rate of 5% of the gross sales until 100%-150% of the conditional grant and other
sums have been repaid (incremental 50% based upon agreed milestone which
was not fulfilled).
The Company received a total amount of $ 324 thousand, of which $ 150
thousand and $ 174 thousand were deducted from the research and development
expenses in 2001 and 2003, respectively.
Although the development of technology had been completed by the third party
and the Company, the Company has never received the third party's portion of
the developed technology upon completion of the project although it requested
it from both the third party and Britech. Therefore, since the Company cannot
utilize the developed technology without the essential portion developed by the
third party, the Company has not paid any royalties to Britech and the
Company's management believes that it will not be required to pay royalties in
the future for the abovementioned project. In addition, the Company did not
submit any patent applications in connection with the Britech grant.
- 49 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
SIMIGON LTD
2.
On September 1, 2009, the Company and a third party signed a Cooperation and
Project Funding Agreement with KORIL, which is an establishment of the
Korea-Israel Industrial Research and Development Fund. According to the
agreement, KORIL agreed to fund, by conditional grant, the implementation of
the proposal submitted by the Company and the third party for a research and
development project in the maximum amount of $ 273 thousand.
As of December 31, 2010, the Company received total amounts of $ 109
thousand.
The Company shall make repayments to KORIL, based on gross sales derived
from the gross invoiced sales value of the products, processes, inventions,
technology, discoveries, improvements, modifications, methods, software,
specifications, or any form of technical information developed or arising from
the proposal (gross sales). Such payments shall be repaid in U.S. dollars at the
rate of 2.5% of the first year's gross sales until 100% of the conditional grant
and other sums have been repaid.
The total non-current liability for the years ended December 31, 2010 and 2009
was $ 168 thousand and $ 89 thousand, respectively.
As of the financial statement approval date, the Company has not paid any
royalties to KORIL as no related gross sales were recorded.
3.
On September 16, 2010, the Company signed a Project Funding Agreement
("the Agreement") with the Israeli Chief Scientist ("the OCS"). According to the
Agreement, the OCS agreed to fund, by conditional grant, the implementation
of the proposal submitted by the Company for a research and development
project in the maximum amount of $ 365 thousand.
As of December 31, 2010, the Company received an amount of $ 327 thousand.
The Company shall make repayments to the OCS, based on gross sales derived
from the gross invoiced sales value of the products, processes, inventions,
technology, discoveries, improvements, modifications, methods, software,
specifications, or any form of technical information developed or arising from
the proposal (gross sales). Such payments shall be repaid in NIS at the rate of
3% of the first year's gross sales until 100% of the conditional grant and other
sums have been repaid.
The total non-current liability for the year ended December 31, 2010 was $ 232
thousand.
- 50 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
b.
Lease commitments:
SIMIGON LTD
1.
2.
3.
4.
Premises occupied by the Company are rented under various non-cancellable
lease agreements. The rental agreements for the premises in Israel are until
March 2012.
The Company has leased various motor vehicles under cancellable operating
lease agreements, which expire on various dates, the latest of which is in 2013.
Premises occupied by the subsidiaries are rented under a non-cancellable lease
agreement. The latest rental agreement for the premises expires in October
2012.
Future minimum rental payments under non-cancellable operating leases are as
follows:
Year ended December 31,
U.S. dollars
in thousands
2011
2012
367
79
446
The total expense for the years ended December 31, 2010, 2009 and 2008 was
$ 350 thousand, $ 341 thousand and $ 340 thousand, respectively.
c.
Floating charge:
The Company recorded a first priority unlimited floating charge on all of its assets, in
favour of a bank, in consideration of the loan agreement as described in Note 9.
d.
Promotion agreement:
On May 31, 2007, the subsidiary, SimiGon Inc., signed an agreement with a
consultant ("the Consultant"). According to the agreement, SimiGon Inc. has
appointed the Consultant to be its business development and sales consultant for the
promotion of the sale of its products within the territory.
Upon signing the agreement, SimiGon Inc. granted the Consultant 50,000 options at
an exercise price of $ 2.2 per share. The options vest in 10 instalments of 5,000
options each upon the occurrence of a major transaction, as defined in the agreement.
Since the Consultant has not yet completed any major transaction, no options have
vested, and no expense has been recorded in respect of these options.
- 51 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
SIMIGON LTD
On May 1, 2009, the subsidiary, SimiGon Inc., signed a new agreement ("the new
agreement") with the Consultant according to which the Company will pay the
Consultant consulting fees of $ 144 thousand per annum payable in equal monthly
instalments.
Upon signing the New Agreement, the Company granted the Consultant options to
purchase 100,000 Ordinary shares of the Company at an exercise price of $ 0.13 per
share. These options will vest in full over 24 months, provided that the Consultant is
providing services under this agreement during this period. The company included
share based compensation expense in respect of these options in the amount of $ 3
thousand and $ 1 thousand in 2010 and 2009, respectively.
e.
Legal:
In connection with the agreement signed with VTSG (see Note 6), on September 18,
2008, the Company filed a complaint ("the complaint") against VTSG and its CEO.
The complaint stated claims for breach of contract, breach of duty of good faith and
fair dealing, and tortuous interference with contractual and business relationships. The
Company alleges damage in excess of $ 1 million. On November 12, 2008, VTSG and
its CEO responded to the complaint and filed a counterclaim against the Company
alleging claims in excess of $ 1 million for breach of contract and breach of duty of
good faith and fair dealing. On December 8, 2008, the Company responded to the
counterclaim of VTSG and its CEO and denied all their allegations.
On April 14, 2009, the Company reached a settlement with VTSG and its CEO,
according to which the Company received a payment of $ 7.5 thousand (offset against
legal expenses) and a return of 36,497 of its Ordinary shares, with a fair value of
approximately $ 3 thousand which were recorded as treasury shares. On November 30,
2010, the Chief Executive Officer of the Company and also a Director of the
Company, acquired the shares together with the treasury shares (see note 10d) at a
price of £ 0.0512 ($ 0.7979) per share, reflecting the fair market value of the stock on
the purchase date.
- 52 -
NOTES TO CONSOLIDATED STATEMENTS
SIMIGON LTD
NOTE 13:- SUPPLEMENTARY INFORMATION TO THE STATEMENT OF COMPREHENSIVE
INCOME
Year ended
December 31,
2009
U.S. dollars in thousands
2008
2010
a.
Cost of revenues:
Salaries and related benefits
Lease and office maintenance
Travel expenses
Depreciation and amortization
Share-based compensation
Subcontractors
b.
Research and development expenses:
Salaries and related benefits
Lease and office maintenance
Depreciation and amortization
Share-based compensation
Other
Government grants
c.
Selling and marketing expenses:
Salaries and related benefits
Lease and office maintenance
Consultant fees
Advertising and sales promotion
Travel expenses
Depreciation
Share-based compensation
Commission
406
132
35
61
6
164
804
1,466
297
32
22
4
(61)
581
147
23
62
64
100
977
1,400
214
38
185
15
(19)
1,760
1,833
919
132
241
45
142
10
219
3
882
125
258
58
111
12
67
97
1,711
1,610
603
119
70
65
32
110
999
2,135
272
41
57
32
-
2,537
1,102
123
183
190
163
16
45
-
1,822
- 53 -
NOTES TO CONSOLIDATED STATEMENTS
SIMIGON LTD
NOTE 13:- SUPPLEMENTARY INFORMATION TO THE STATEMENT OF COMPREHENSIVE
INCOME (Cont.)
Year ended
December 31,
2009
U.S. dollars in thousands
2010
2008
d.
General and administrative expenses:
Salaries and related benefits
Lease and office maintenance
Consultant fees
Travel expenses
Professional fees and public company
expenses
Depreciation
Share-based compensation
Other
547
95
10
22
436
7
73
288
716
149
122
31
405
13
80
50
698
89
123
85
530
12
39
273
e.
Finance income:
Exchange rate differences
Interest income from banks
f.
Finance cost:
Exchange rate differences
Bank loans and fees
1,478
1,566
1,849
68
7
75
131
76
207
210
20
230
150
79
229
279
75
354
249
21
270
- 54 -
SIMIGON LTD
NOTES TO CONSOLIDATED STATEMENTS
NOTE 14:- REVENUES
The Company manages its business on the basis of one reportable segment.
a.
Revenues:
Software licenses
Software licenses that require
significant customization
Maintenance
Training
Year ended
December 31,
2009
U.S. dollars in thousands
2008
2010
3,666
1,161
296
84
5,207
4,093
1,226
738
-
6,057
3,647
838
517
141
5,143
b.
Geographical information:
Revenues classified by geographical destinations based on the customer location:
EMEA (1)
North America
Asia Pacific
Year ended
December 31,
2009
U.S. dollars in thousands
2008
2010
1,388
3,509
310
5,207
2,693
3,201
163
6,057
1,632
3,011
500
5,143
(1) Europe, Middle East, Australia and Africa.
The carrying amounts of non-current assets (fixed assets, investment property and
intangible assets) in the Company's country of domicile (Israel) and in foreign
countries, based on the location of the assets, are as follows:
2010
December 31,
2009
U.S. dollars in thousands
2008
60
1,399
1,459
82
1,447
1,529
125
1,506
1,631
EMEA
North America
- 55 -
SIMIGON LTD
NOTES TO CONSOLIDATED STATEMENTS
NOTE 14:- REVENUES (Cont.)
c.
Information about major customers:
Revenues from major customers, each of whom amount to 5% or more of total
revenues reported in the financial statements:
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
Customer G
Year ended
December 31,
2009
30%
4%
3%
1%
17%
9%
5%
2010
48%
3%
3%
-
13%
6%
3%
2008
47%
5%
5%
6%
-
1%
3%
NOTE 15:- EARNINGS (LOSS) PER SHARE
The following reflects the income (loss) and share data used in the basic and diluted earnings
(loss) per share computations:
Year ended
December 31,
2009
U.S. dollars in thousands
2010
2008
Income (loss) for the year
(678)
72
(1,980)
2010
2009
2008
Weighted average number of Ordinary shares
for computing basic earnings (loss) per share
41,361
40,204
37,453
Effect of dilution:
Share options
-
456
-
Weighted average number of Ordinary shares
adjusted for the effect of dilution
41,361
40,660
37,453
There have been no significant transactions involving Ordinary shares or potential Ordinary
shares between the balance sheet date and the date of approval of these financial statements.
Share options and warrants (see Note 10) were not included in the 2010 and 2008 earnings
(loss) per share calculation due to their antidilutive effect.
- 56 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
SIMIGON LTD
Year ended
December 31,
2009
U.S. dollars in thousands
2008
2010
a.
Expenses to related party of a
shareholder:
Cost of revenues *)
-
15
88
*)
As part of a project agreement signed with a customer ("the Engagement"), the
Company engaged an independent service provider company controlled by a
Company shareholder.
b.
Compensation of key management
personnel of the Company:
Employee benefits *) **)
Share-based payments ***)
Year ended
December 31,
2009
U.S. dollars in thousands
2008
2010
1,128
264
1,392
1,300
216
1,516
1,262
51
1,313
*)
Includes increase in long-term employee benefits due to change in provision for
severance pay in a total amount of $ 43 thousand and $ 150 thousand for the
years ended December 31, 2010 and 2009, respectively.
**) Year 2010 includes the provision for sales bonus in a total of $ 7 thousand to the
VP of Business Development. Year 2009 includes the provision for sales bonus
in a total of $ 75 thousand and $ 11 thousand to the CEO and to the VP of
Business Development, respectively. It also includes the provision for the CEO
severance pay in a total of $ 30 thousand due to the salary increase approved by
the Company's Board of Directors on January 27, 2010 (see Note 10).
***) Year 2010 includes share-based compensation in a total of $ 163 thousand and
$ 28 thousand due the Share Bonus Plan as described under Note 10e, in respect
to the CEO and senior management, respectively.
- 57 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
c.
Significant agreements with shareholders:
SIMIGON LTD
On September 21, 2006, the Company signed an agreement with Mr. Ami Vizer, the
Chief Executive Officer of the Company, according to which Mr. Ami Vizer is
engaged with a current salary of $ 313 thousand per annum (excluding bonuses and
benefits), terminable by either party on nine months' notice. In addition, pursuant to
this agreement, Mr. Vizer received options.
On January 27, 2010, the Board of Directors also approved the grant of a sales bonus
to the CEO in the amount of $ 75 thousand and an increase of his salary by 10%
effective January 1, 2010.
On September 27, 2006, the Company signed an agreement with Mr. Simi Efrati,
pursuant to which Mr. Efrati receives a fee of $ 122 thousand per annum for
consulting services. The agreement may be terminated by either party on six months'
written notice. In addition, pursuant to this agreement Mr. Efrati received options.
Prior to this agreement, Mr. Simi Efrati had been a Non-Executive director of the
Company. The agreement was terminated effective February 1, 2010.
On September 27, 2006, the Company entered into an agreement with Mr. Rami
Weitz, pursuant to which Mr. Weitz receives a fee of $ 122 thousand per annum in
consideration of consulting services. The agreement may be terminated by either party
by at least six months' written notice. In addition, pursuant to this agreement, Mr.
Weitz received options. Prior to this agreement, Mr. Rami Weitz had been the
Chairman of the Board of Directors of the Company.
NOTE 17:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Capital management:
The primary objective of the Company's capital management is to ensure that it maintains a
strong credit rating and sufficient capital in order to support its business and maximize
shareholder value.
The Company manages its capital structure and makes adjustments to it, in light of changes
in economic conditions.
Financial risks factors:
The Company's activities expose it to various financial risks such as market risk (including
foreign exchange risk), credit risk and liquidity risk.
a.
Foreign exchange risk:
The Company operates in a number of countries and is exposed to foreign exchange
risk resulting from the exposure to different currencies, mainly the NIS. As of
December 31, 2010, balances in foreign currency are immaterial.
- 58 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 17:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
b.
Credit risk:
SIMIGON LTD
Financial instruments that potentially subject the Company to concentrations of credit
risk consist principally of cash and cash equivalents, short-term bank deposits, trade
receivables, current maturities and long-term loan.
Cash and cash equivalents and short-term bank deposits are invested in major banks in
Israel and the United States. Management believes that the financial institutions that
hold investments of the Company and its subsidiaries are financially sound and,
accordingly, minimal credit risk exists with respect to these investments.
The Company trades only with creditworthy customers. The Company performs on-
going credit evaluation of its customer's financial condition and requires collateral as
deemed necessary.
The Company has no off-balance-sheet concentration of credit risk such as foreign
exchange contracts, option contracts or other foreign hedging arrangements.
The Company has no significant concentrations of credit risk. The Company has a
policy to ensure collection through sales of its products to wholesalers with an
appropriate credit history and through retail sales in cash or by credit card.
Credit risk may arise from the exposure of holding several financial instruments with a
single entity or from entering into transactions with several groups of debtors with
similar economic characteristics whose ability to discharge their obligations will be
similarly affected by changes in economic or other conditions. Factors that have the
potential of creating concentrations of risks consist of the nature of the debtors'
activities, such as their business sector, the geographical area of their operations and
the financial strength of groups of borrowers.
The Company regularly monitors the credit extended to its customers and requires
collateral as security for these receivables. The Company provides an allowance for
doubtful accounts based on the factors that affect the credit risk of certain customers,
past experience and other information.
The Company maintains cash and cash equivalents, and other financial instruments in
various financial institutions. These financial institutions are located in different
geographical areas around the world. The Company's policy is to diversify its
investments among the various institutions. According to the Company's policy, the
relative credit stability of the various financial institutions is evaluated on a regular
basis.
As of December 31, 2010, cash and cash equivalents totalled $ 2,617 thousand.
- 59 -
NOTES TO CONSOLIDATED STATEMENTS
NOTE 17:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
c.
Liquidity risk:
SIMIGON LTD
The Company is required to maintain cash, cash equivalents and trade receivables
equal to at least 150% of the carrying amount of the loan (as described in Note 9c).
The table below presents the maturity profile of the Company's financial liabilities
based on contractual undiscounted payments:
December 31, 2010:
Less than
one year
3 to 4
years
U.S. dollars in thousands
Total
Current maturities
Government grants
Trade payables
Other accounts payable and accrued
expenses
December 31, 2009:
586
33
205
658
1,482
-
460
-
-
460
586
493
205
658
1,942
Less than
one year
2 to 3
years
U.S. dollars in thousands
Total
Current maturities
Government grants
Trade payables
Other accounts payable and accrued
expenses
948
-
157
697
1,802
-
89
-
-
89
948
89
157
697
1,891
d.
Interest rate risk:
The Company has a loan which bears interest at a variable rate. The Company
estimates that any reasonably possible changes in the interest rate in the coming year
would not have a material effect on the profit of the Company.
- - - - - - - - - - - - - - - - - -
- 60 -
SHARE INFORMATION
SimiGon is listed on the AIM. The shares of the
Company are available through the Crest settlement
system, enabling immediate, secured electronic trading
and registration of shareholders’ assets. Symbol: SIM
Financial Year End: 31 December
CONTACT INFORMATION
To request additional information about SimiGon
and our products, please contact us by telephone,
fax or e-mail:
SimiGon Ltd.
1 Sapir St.
PO Box 12050
Herzliya, Israel 46733
Tel: +972-9-956-1777
Fax: +972-9-951-3566
SimiGon Inc.
12001 Research Parkway
Suite 236
Orlando, FL, USA 32826-3009
Tel: +1 407 737-7722
Fax: +1 321 251-7692
For more information:
info@simigon.com
ADVISERS
Nominated Adviser and Broker
Evolution Securities
100 Wood Street
London
EC2V 7AN
Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
Auditors and Reporting Accountants
Kost Forer Gabbay & Kasierer
A member of Ernst & Young Global
3 Aminadav Street
Tel Aviv 67067
Israel
Solicitor to the Company as to English law
Halliwells LLP
1 Threadneedle Street
London
EC2R 8AW
Counsel of the Company as to Israeli law
Amit, Pollak, Matalon & Co. Advocates and Notary
Nitsba Tower, 19th Floor, 17 Yitzhak Sadeh St.,
Tel Aviv 67775
Israel
WWW.SIMIGON.COM