TAKING DISTRIBUTED
TRAINING SIMULATION
PERSONALLY
‘12
ANNUAL REPORT
2012 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
10
12
Financial and Operational Highlights
Market
Solutions
Chairman & CEO Reviews
Board & Management
Financial
- 2 -
TAKING DISTRIBUTED TRAINING 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.
revenues
from contracts
time
Significant
first
awarded in the previous year:
First year with material revenue stream outside
aerospace and defence industry with significant
contributions from Check-6, SimiGon’s first major
contract outside the aerospace and defence
First year of generating revenue as prime
contractor
implementing
SIMbox based T-6A Modular Training Devices
(MTD) for the U.S. Air Force Air Education
Training Command (AETC)
successfully
after
Longer term contracts:
Long-term contracts continue to progress well as
revenues ramped up through 2012, including the
Lockheed Martin's F-35 Lightning II Joint Strike Fighter
training program (JSF), the UK’s Military Flying Training
System and the Unmanned Aerial Vehicle training
program.
Post period-end events:
Secured an additional contract from the U.S. Air Force
Air Education Training Command to support and
maintain all of the T-6A Modular Training Devices used
in the training of all Remote Piloted Aircraft (RPA)
students.
Financial Highlights
Revenues increased by 24% to $6.81 million
(2011: $5.48 million)
Net profit increased by 97% to $0.69 million
(2011: $0.35 million)
Gross margin of 80% (2011: 85%)
Increased positive cash flow from operations by
9% to $2.5 million (2011: $2.3 million)
Significant increase in cash and cash equivalents
and short term bank deposits at the year end at
$7.11 million (31 December 2011: $4.74 million)
and the Company has no debt
Operational Highlights
New significant contracts:
Awarded a second and third contract from key
long term strategic European customer. The
total value of all three contracts totals US$2.77
million
Signed substantial contract to provide a South
American country's entire armed forces with
SimiGon’s SIMbox
training and simulation
technology platform
Awarded contract from TAISR Group (TAISR) to
support the Joint Close Air Support (JCAS) and
manned/unmanned
Intelligence, Surveillance
and Reconnaissance (ISR) community
- 3 -
LEVERAGING GROWING MARKETS
FOR PERSONAL TRAINING & SIMULATION
The need for personal, flexible solutions in the
fast growing training and simulation market is
driven by numerous factors.
Key Trends
Growing demand for flexible and cost efficient
training solutions that serve to simplify complex and
stressful operating environments:
With highly skilled operational environments such as
aircraft, air defence, air traffic control systems, UAVs
and deep sea oil rigs becoming increasingly powerful,
complex and potentially more dangerous and
expensive to train on, simulation based training
technologies are proven to be more cost effective
and efficient alternatives to real-life equipment
training.
Governments and commercial customers worldwide
are seeking more sophisticated training programmes
than ever before and no longer accept inflexible,
expensive solutions provided by large suppliers. These
organisations have very detailed and specific demands
for individual and collective training tasks and require
flexibility and extensibility from their training systems
providers.
Government and commercial customers are also
seeking flexible off-the-shelf solutions. SimiGon’s
(COTS)
Commercial-Off-The-Shelf
advanced
technology
these
not
requirements but also save the client considerable
time and money throughout all facets of the
programme, including system design, development
and implementation.
only meet
products
Fast Growing Market
With these market trends and the budget constraints
many governments are experiencing, the industry is
turning away
traditional, expensive and
stationary training systems and moving towards more
robust, flexible, reconfigurable and cost-effective PC-
based or laptop-based COTS training solutions.
from
The interactive, “Learning by doing” methodology
championed by SimiGon’s software systems has
become recognised as the most effective way to train
users, especially
in demanding high-skill
those
occupations, in military and civilian markets.
In spite of a difficult macro-economic environment, and
the ensuing pressure on defence budgets, the training &
simulation market continues to thrive as its cost-saving
benefits are recognised by Government and civilian
leaders. According to a report from Global Industry
Analysts, the greater Modelling & Simulation market is
valued at more than $20 billion annually and the
projection for the global eLearning market is $107.3
billion by 2015. The primary driver of the training and
simulation market is the defence industry, particularly the
US Department of Defence (DOD), a key long term
customer of the Company, and a leading adopter of
advanced training and simulation solutions. As the US
DoD continues to trim operational costs, we believe that
it will aggressively transfer more military training to cost-
effective virtual training to ensure military fighter pilots
maintain an adequate level of mission readiness.
In the military pilot training market alone, 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 billion as
approximately 3,150 fighters will be manufactured.
segment,
important market
Another
Intelligence,
Surveillance and Reconnaissance, estimated at $9 billion
in 2012, will continue to grow globally. The US market is
the largest Commercial and Military Flight Simulation
segment while the Asia-Pacific region
is the fastest
growing market. 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 by
2021, valued at $1.4 trillion.
leverage
SimiGon, with its industry leading technology, and well
established position in strategic programmes, is poised to
successfully
this global opportunity. The
Company’s training methodologies and solutions are
quantified by customers and partners as delivering better
and faster training at a lower cost. Success in the military
training market has landed SimiGon new contracts in the
civilian sector, including training systems for the oil and
gas industry, further strengthening SimiGon’s market
leading position and diversifying its revenues.
for
potential
significant
The
business
further
opportunities for the Company exist in many disciplines:
commercial flight training, air traffic control, homeland
security, maritime operations, nuclear and electric power
plant operator training, mining, crane operations, driving
and medical care. Organisations and operators in these
domains require the advanced, holistic Simulation Based
Training and Learning Management Systems provided by
SimiGon to reach and maintain high levels of operational
skill.
- 4 -
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 –
the
knowledge gap” for professional users. At
the
flexible
solutions are easily integrated either by
customer organizations or third-party
systems integrators for both military and
civilian applications.
SimiGon’s
“closes
same
time,
SIMbox
SimiGon is the creator of SIMbox, a leading PC-based
platform
for creating, managing and deploying
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
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.
- 5 -
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.
AirTrack™
AirTrack represents the next generation of passenger in-
solutions. Successfully
(IFE)
flight entertainment
installed and operational on airlines worldwide, AirTrack
is a cost-effective, rapidly deployable solution for
airlines seeking to upgrade their IFE systems. Based on
advanced SIMbox technology, the system’s 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.
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.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP
Chairman & CEO Reviews
Chairman’s Statement
I am pleased to report a second successive year of
revenue growth and increased profits. The positive
results and continued growth further validates the
managements strategic decision to align itself with
some of the largest global simulation and training
projects in the world, including four of the world’s
largest military
flight training programmes,. This
strategy and the excellent foundations now in place
continue to bear fruit for the Company as it establishes
its long term growth prospects.
In 2012, Company achieved
its key objective of
becoming a prime contractor. In addition to this
objective, 2012 also saw SimiGon sign four new
contracts including a landmark agreement to provide a
South American country's entire armed forces with
SimiGon’s training and technology platforms. Each
leading
contract reaffirms the Company’s market
position in the aerospace and defence sector. The
decision to diversify and expand beyond aerospace and
is also
defence and
revenue
increasingly
contributions now evident from Check-6, SimiGon’s first
major contract outside the aerospace and defence
sector.
into the oil and gas sector
justified with
time
first
forward,
leveraging
Going
SimiGon’s enhanced
reputation from its position as a prime contractor, the
is to continue to build new
Company’s strategy
its customer base. The
partnerships and expand
foundations for long term growth that were put in place
in 2011 and further justified in 2012 have also enabled
SimiGon to target much larger contracts than ever
before.
The last two years have been truly transformational for
the Company and I am delighted to say by building
upon 2011 and 2012’s success SimiGon is in the
strongest position it has ever been. The progress made
over the last 12 months combined with the maintained
momentum that has continued in Q1 2013 gives me
confidence that 2013 will be another impressive year
for the Company.
The prospects for SimiGon in 2013 are excellent and we
are looking forward to ensuring those expectations are
met.
- 6 -
On behalf of the board I would like to thank the
management, employees and all those involved and
associated with SimiGon for their hard work over the
last few years and their continued commitment in 2013
and beyond.
Alistair Rae
Chairman
Chief Executive’s Review
Overview
We are delighted to announce another year of revenue
growth and increased profits as we continue to execute
our long term strategic plan and deliver on the targets
that we set ourselves. This growth is as a result of
increasing revenue from existing agreements, the
ramping-up of long-term contracts, as well as the
number of new contracts won this year. Our move to
become a prime contractor has further enhanced
SimiGon’s reputation in the market. We continue to
leverage our leading position in the market to build new
partnerships, expand our customer base, and target
larger contracts.
Looking ahead, we have entered 2013 with a stronger
order book than at the same time last year as there is
continued demand for our solutions from organisations
looking to deliver effective training programmes and
save on costs at the same time. As a result, we look
forward to the future with confidence.
SimiGon is pleased to report strong revenue and profit
growth in 2012. Revenues increased 24% to $6.81
million (2011: $5.48 million), resulting in a $0.69 million
profit (2011: $0.35 million). The positive results in 2012
and the continued growth
further validates the
managements strategic decision to align itself with
some of the largest global simulation and training
projects in the world, including four of the world’s
largest military flight training programmes. This strategy
and the excellent foundations now in place continue to
bear fruit for the Company as it establishes its long
term growth prospects.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
In addition to this contract, SimiGon’s local partner will
be required to purchase SIMbox Runtime licenses for
the delivery of content to trainees adding an additional
revenue stream.
In July and December, SimiGon signed a second and
third contract with one of its major existing European
customers. The deal expands and enhances SimiGon’s
relationship with the customer.
The second contract is for the development of an initial
aircraft training program within its SIMbox simulation
environment. The Simulation Based Training (SBT)
systems will be installed at the end user site and will be
the backbone of its new Academic Training Center
(ATC). The third contract is for licenses of SimiGon’s
SIMbox technology at the development labs of this
customer's ATC. The combined values of the three
contracts with this customer currently total US$2.77
million. Further maintenance and support service
agreements are expected to follow and hence the
Company is confident that this figure will continue to
increase and contribute towards future revenues.
New markets
In May 2012, SimiGon moved into another new market
within the defence sector when it signed an agreement
with TAISR, to support the Joint Close Air Support and
manned/unmanned
Intelligence, Surveillance and
Reconnaissance community.
is the
This agreement demonstrates that SimiGon
partner of choice for simulated training in the defence
sector and expands the Company's reach into the ISR
market, a new, fast growing and substantial sector,
estimated at $9 billion in 2012 at the Performance
Audit of USA Department of Defense Intelligence,
Surveillance, and Reconnaissance.
ISR
technology seeks to improve mission success rates and
in
the survival potential of those who operate
extremely hostile environments.
JCAS and
Revenue from this initial contract was realised in 2012.
SimiGon expects that this initial contract will contribute
to
improved revenue visibility, underpinning the
company’s growth expectations.
Moving up in the supply chain and becoming a prime
contractor, involves an increase in hardware sales
alongside SimiGon’s software which affected
its
margins (lower at 80% compared with 85% last year),
but the Company continues to believe these remain
higher than the sector average. The sale of third-party
hardware along with our software technology solutions
enables SimiGon to provide a total and comprehensive
solution to its customers and was a stated target for the
Company. Being prime contractor gives the Company a
direct relationship with the customer, further secures
us with increased visibility of long term revenues and
opens up new and potentially significantly
larger
opportunities with customers.
Operational Overview
With a strong foundation firmly established, SimiGon
targeted three key areas to help continue to drive
growth. These were: to become a prime contractor; to
expand military training beyond air forces, into land and
sea simulation environments; and to move into the
non-military training such as the oil and gas industry.
SimiGon has met all of these targets and continues to
deliver on its deliberate long term strategy to push the
company forward.
Major contract
The strong operational progress seen in the first half of
2012 continued in the second half as the Company
achieved several significant contract wins.
and
simulation
technology
In a milestone agreement signed in August 2012,
SimiGon secured a substantial contract to provide a
South American country's armed forces with its SIMbox
platform.
training
Significantly, this contract marks the first time a
country’s entire armed forces has chosen SIMbox as the
training system to be deployed across air, sea and land
is a strong endorsement of
components, which
SimiGon’s solutions. This initial contract contributed
significant revenues in 2012 and is expected to continue
to do so in 2013.
SIMbox will be the baseline training technology used by
its local partner, a newly formed government-owned
company dedicated to the development of training and
simulation systems. SIMbox-based training solutions
will be deployed by the armed forces in training centres
as well as for operational training and distributed joint
forces training exercises.
- 7 -
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
2012 saw the first full year of revenue contribution
from Check-6, a company with worldwide operations
and clients including industry leaders such as Chevron,
Diamond Offshore and BP. SimiGon’s training solutions
have adapted to the oil and gas market and are
performing well. The Company believes there is scope
for further expansion not only with Check-6 but
throughout the oil and gas sector.
A Visiongain industry report has calculated that the oil
& gas virtual reality training and simulation market was
worth $2.24 billion in 2011. This has strong growth
potential over the next ten years from a combination of
increasing demand,
technologies, and
improving
increasing safety concerns helping simulation training
technologies become more widespread.
Long-term contracts
SimiGon achieved a significant milestone when, in late
2011, it was selected as prime contractor for AETC for
the delivery of SIMbox based T-6A Modular Training
Devices. 2012 saw the first year of revenues from this
contract as SimiGon successfully delivered part of
SIMbox based T-6A Modular Training Devices to the
AETC. This contract remains on course and additional
units are due to be delivered in 2013.
In addition, as announced last week, SimiGon secured a
further contract from AETC to support and maintain all
of the T-6A Modular Training Devices used in the
training of all RPA students.
SimiGon’s
T-6A Modular
SimiGon’s entry into the fast growing RPA market and
the successful deliverables in 2012, as prime contractor,
of
Training Devices
demonstrates how SIMbox can be adapted to provide
companies and agencies with the ability to quickly build
simulation based training in a variety of fields. This will
help to further enhance SimiGon’s market leading
for similar
offering and positions the Company
opportunities globally.
SimiGon continue its great work on providing successful
training solutions solution for Unmanned Aerial Vehicle
training program for a leading provider in the small
tactical unmanned aircraft systems.
The market opportunity
SimiGon believes the market in which it operates to be
very attractive, and accordingly has positioned itself
well to take advantage of opportunities as and when
they arise. With operational environments such as
aircraft cockpits, air traffic control systems, UAVs and
other weapons systems becoming increasingly complex,
expensive and dangerous to train on, simulation
software
is a more cost effective and efficient
alternative to real live equipment training..
According to a report from Global Industry Analysts the
greater Modelling & Simulation market is valued at
more than $20 billion annually and the projection for
the global eLearning market is $107.3 billion by the year
2015.
The biggest driver of the training and simulation market
growth is the defence industry. Despite the US defence
budget cuts, the US Department of Defence remains
the undisputed
training and
simulation solutions for military preparedness and
readiness for symmetric and asymmetric warfare.
in seeking
leader
SimiGon has seen a continuing increase in the industry
trend towards usage of simulation based training as the
US, and other governments, seek more ways to reduce
costs while meeting the increasing pressure to develop
innovative training solutions to keep military personnel
trained to the exacting standards required.
In the military pilot training market alone, 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 billion as
approximately 3,150 fighters will be manufactured.
The Company entered the fifth year of supporting
Lockheed Martin's F-35 Lightning II Joint Strike Fighter
training program and the fourth year for the UK Military
Flying Training System. SimiGon continues to deliver on
all its milestones for these projects which continue to
progress and ramp up as the project develops.
SimiGon is well positioned with its industry leading
technology, and well established position, to take
advantage of this global opportunity. Its solutions are
not only cost efficient but also deliver better pass rates
than conventional means giving customers the best
possible training at less cost.
- 8 -
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Financial Performance
Outlook
increase of 24%.
Revenue for the year ended 31 December 2012 was
$6.81 million, compared to $5.48 million in 2011,
reflecting
In terms of regional
breakdown, 73% of SimiGon’s revenues came from
North America (2011: 71%), 25% from Europe and the
Middle East (2011: 27%) and 2% from the Far East
(2011: 2%).
The momentum from the good results in 2012 has
continued into 2013 as sales to the Company’s long-
term partners and recent contract wins ramp up. In
addition, the move to become a prime contractor has
helped SimiGon
target new opportunities and
significantly larger scale contracts than in previous
years.
Looking ahead, with excellent revenue visibility and a
in place, the Board expects
strong order book
continuing year-on-year sales and profit growth in
2013 and looks forward to the future with ever
increasing confidence.
Amos Vizer
President & CEO
Net profit for the fiscal year increased by 97% to $0.69
million (2011: profit of $0.35 million).
Total operating expenses for the year increased by 9%
to $4.74 million (2011: $4.35 million). Research and
development expenses
increased to $2.16 million
(2011: $1.68 million) reflecting the investment made in
recruiting new employees an area that SimiGon believe
is
its future development. Sales and
marketing expenses decreased by 7% to $1.57 million
mainly due share based compensation expenses (2011:
$1.70 million). General and administration expenses
increased to $1.02 million (2011: $0.98 million).
integral to
The operating profit therefore is $0.69 million (2011:
$0.31 million) and the net profit is $0.69 million in 2012
compared to net profit of $0.35 million in 2011. This
resulted in a net basic and diluted earnings per share of
$0.02 (2011: Basic and diluted earnings per share of
$0.01).
SimiGon generated positive cash flow from operations
of $2.5 million in 2012 (2011: $2.3 million) resulting in
the Company having cash, cash equivalents and
deposits totaling $7.11 million as of 31 December 2012
(31 December 2011: $4.74 million). This was after the
Company including fully repaying of it entire bank debt
that was outstanding as at 31 December 2011, as stated
in the interim results on 27 September 2012.
- 9 -
DISPLAYING PERSONAL COMMITMENT TO
ORGANIZATIONAL SUCCESS
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 to 2005, guiding the company
through a period of 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.
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
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-
million
tier-one companies and
managed business development activities with potential
partners worldwide.
dollar deals with
Independent Non-
Nevat Simon,
Executive Director
Nevat has practiced as a certified public
accountant 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
in the Justice
Certified Public Accountant Council
Department of the State of Israel since 1991.
in
controller
reporting,
Efraim Manea, CFO
Mr Manea joined the Company as its
finance
June 2008,
managing its financial aspects including
corporation
financial
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.
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
Weizmann Science Park Incubator, and as vice 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 in business
administration 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.
- 10 -
DISPLAYING PERSONAL COMMITMENT TO
ORGANIZATIONAL SUCCESS (CONT.)
Management
Amos Vizer, President & CEO
Prior to founding SimiGon, Amos founded
Logi-Cali, a software development house
specializing in data storage applications.
He previously served as marketing and
business development manager of 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.
Efraim Manea, CFO
Mr Manea joined the Company as its
finance controller in June 2008, managing
its financial aspects
including financial
reporting, 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.
is a Certified Public
Mr Manea
Accountant and holds a BA in Accounting and Business
Administration from the College for Management in Israel.
Schverak,
Schverak, is
VP
Programs
John
Mr.
results-oriented,
a
certified Project Management Professional
(PMP) with over 20 years of experience in
Program
Project
Management,
Management, Product Management, and
Operations Management. Mr. Schverak
has a proven track record of successfully developing,
managing, and executing project plans to meet customer
and product requirements, including product features,
technical
and
supportability. He has directed all phases of programs
with
technical
performance, and quality. Mr. Schverak has a MBA in MIS
and BS in Operations Management and Procurement
Management.
performance,
responsibility
standards,
schedule,
quality
cost,
for
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 years. He was
an instructor in the 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 the IAF was managing the
planning, coordination, synchronization, and monitoring
of the training program. Alon holds an MBA and
bachelor’s degrees in economics and psychology.
Koby Ben Yakar, VP Product
Koby, 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
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
large-scale
business and technical relationships for
projects.
SimiGon’s
and
training,
Jeff Annis, VP Sales & Marketing
Mr Annis, joined SimiGon in 2011 and
has a career in the Sales & Marketing of
simulation,
software
development technology, primarily in the
Aerospace/Defense
and Automotive
sectors. Before joining SimiGon he held
Director positions at Adacel Systems, Advanced
Rotorcraft Technology, and Engenuity Technologies each
specializing in high-tech, advanced pilot training software
systems. Prior to this Mr. Annis founded American Data-
Pro, a company specializing in the development of
database and network systems. Mr. Annis has a Bachelor
degree
in Management and Marketing from Troy
University in Alabama.
joined SimiGon
Merav Nachmani, Director of Human
Resources
Ms. Nachmani,
in
November 2005 and has been managing
SimiGon’s HR Department since July
2009. Ms. Nachmani has more than ten
years of experience in financial aspects
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.
- 11 -
FINANCIALS
Consolidated Financial Statements of SimiGon Ltd.
and Its Subsidiaries as of December 31, 2012
(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
14
15-16
17
18-19
20
21
22-23
24-60
61
- 12 -
CORPORATE GOVERNANCE FOR THE PERIOD ENDED 31 DECEMBER 2012
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 *
Efraim Manea
Non-Executive
Alistair Rae
Eitan Cohen
Nevat Simon
Dr. Vered Shany
Total
Total 2012
$
404,926
111,566
49,014
23,430
24,600
24,600
638,136
Total 2011
$
402,251
107,038
48,080
22,440
24,000
24,000
605,809
Year 2012 does not include $72,305 paid in respect of vacation days, additional $35,901 paid in respect of severance allocation
transfer, a bonus of $30,000 paid in respect to year 2011 performance.
Year 2011 amount does not include $39,150 paid in respect of vacation days and does not include $31,107 paid in respect of
transfer of severance allocation
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 2012.
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, 2012 the total numbers of Ordinary Shares Issued were 47,153,179.
Share Options
As of 31 December 2012, the outstanding balance of options granted to certain employees of SimiGon is
approximately 10.5 percent of the Company’s issued and outstanding shares at an average exercise price of $0.108.
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.
Efraim Manea was appointed as an executive director on July 30, 2010.
Directors
The following directors have held office during the year:
Amos Vizer has been an executive director of the Company since 4 November 1998.
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 2012 were as follows.
Directors
Alistair Rae*)
Eitan Cohen *)
Dr. Vered Shany *)
Nevat Simon *)
Ami Vizer
Efraim Manea
Number of Ordinary Shares Capital
118,272
48,000
48,000
48,000
8,327,782
189,264
Percentage of Ordinary shares
0.25
0.10
0.10
0.10
17.66
0.40
Options
0
0
0
0
3,336,533
170,082
Substantial Shareholdings
At 31, December 2012 the Company was informed of the following interests of 3% or more in its ordinary shares
issued at that date:
Shareholder
A. Vizer Holdings A. Vizer
Jeffrey Braun
Packet Science Rami Weitz
Herald Investment Management Limited
G. Poran Holding Ltd
Green Venture Capital Ltd.
Shroder Euroclear Nominees Limited
Moldavski High-tech Ltd
S.S.D.E Technologies (1999) Ltd.
Number Of Ordinary Shares
8,327,782
6,543,039
6,244,944
5,000,000
3,778,444
3,067,848
1,711,070
1,750,297
1,161,895
Percentage of issued
17.66
13.88
13.24
10.60
8.01
6.51
3.71
2.46
13.88
On January 2010 the Non-Executive Board members were granted a total of 119,727 Ordinary shares of the Company as part
of a yearly 15% salary reduction, with an equivalent fair value on date of grant of $ 0.165. Messrs. Alistair Rae, Nevat Simon,
Vered Shany and Eitan Cohen, Non-Executive Directors of the Company, were granted 47,727, 24,000, 24,000 and 24,000
Ordinary Shares, respectively; The shares were vested in 12 equal monthly instalments, and as of December 31, 2011 were
fully vested.
The salary reduction of 15% for the Non-Executive Board members remains in effect for additional 2 years. As of December 31,
2012, Messrs. Alistair Rae, Nevat Simon, Vered Shany and Eitan Cohen, Non-Executive Directors of the Company, are to be
granted 47,727, 24,000, 24,000 and 24,000 Ordinary Shares, respectively, in return for the third year salary reduction; this will
represent in aggregate 119,727 Ordinary Shares and 0.25% of the total issued share capital of the Company. Following this
transaction, Messrs. Alistair Rae, Nevat Simon, Vered Shany and Eitan Cohen shall have a beneficial interest of • Ordinary
Shares (0.35%), • Ordinary Shares (0.15%), • Ordinary Shares (0.15%) and • Ordinary Shares (0.15%), respectively.
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, 2012
and 2011, and the consolidated statements of comprehensive income, consolidated statements of changes in
equity and consolidated statements of cash flows for each of the years ended December 31, 2012, 2011 and
2010, 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 present fairly, in all material respects, the financial
position of the Group as of December 31, 2012 and 2011, and its financial performance and cash flows for
each of the years ended December 31, 2012, 2011 and 2010, in accordance with International Financial
Reporting Standards.
April 19, 2013
Tel-Aviv, Israel
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 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:
Restricted cash
Long-term prepaid expenses
Fixed assets, net
Intangible assets, net
Total non-current assets
Total assets
December 31,
2012
2011
Note
U.S. dollars in thousands
3
4
5
6
6,550
556
656
41
7,803
23
25
132
1,274
1,454
9,257
4,231
508
1,240
410
6,389
-
23
87
1,324
1,434
7,823
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
Other non-current liabilities
Total non-current liabilities
Total liabilities
EQUITY:
Share capital
Additional paid-in capital
Accumulated deficit
Total equity
Total liabilities and equity
December 31,
2012
2011
Note
U.S. dollars in thousands
7
8
9
12a
10
-
140
1,005
678
1,823
141
748
889
188
174
113
762
1,237
108
746
854
2,712
2,091
113
16,110
(9,678)
6,545
9,257
105
15,997
(10,370)
5,732
7,823
The accompanying notes are an integral part of the consolidated financial statements.
April 19, 2013
Date of approval of the
financial statements
Alistair Rae
Ami Vizer
Non-Executive Chairman Chief Executive Officer
Efi Menea
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, net
Selling and marketing
General and administrative
Total operating expenses
Operating profit (loss)
Other income
Finance income
Finance expense
Net income (loss) and total comprehensive
income (loss)
Basic and diluted earnings (loss) per share in
Year ended
December 31,
2011
U.S. dollars in thousands
(except share and per share amounts)
2012
2010
6,805
1,367
5,438
2,157
1,569
1,018
4,744
694
26
126
154
692
5,484
826
4,658
1,675
1,696
975
4,346
312
-
305
267
350
5,207
804
4,403
1,760
1,711
1,478
4,949
(546)
-
75
207
(678)
U.S. dollars
15
0.02
0.01
(0.02)
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
44,617
42,867
41,361
15
45,187
42,932
41,361
The accompanying notes are an integral part of the consolidated financial statements.
- 20 -
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SIMIGON LTD.
Number
of shares
Share
capital
Additional
paid-in
capital
Treasury
shares
Accumulated
deficit
Total
equity
U .S. dollars in thousands (except share amounts)
Balance as of January 1, 2010 41,522,556
98
15,295
(3)
(10,042)
5,348
Total comprehensive loss
Issuance of shares (Note 10b)
Share-based compensation
Issuance of Treasury shares
-
119,727
-
-
-
*) -
-
-
-
*) -
320
29
Balance as of December 31,
2010
41,642,283
98
15,644
Total comprehensive income
-
Issuance of shares (Note 10c) 2,444,984
-
Share-based compensation
Exercise of stock options
-
7
-
(Note 10d)
47,502
*) -
-
-
353
-
Balance as of December 31,
2011
44,134,769
105
15,997
Total comprehensive income
Issuance of shares (Note 10b
-
and 10e)
Share-based compensation
Exercise of stock options
(Note 10f)
Balance as of December 31,
-
8
-
3,009,106
-
9,304
*) -
-
-
112
1
2012
47,153,179
113
16,110
-
-
-
3
-
-
-
-
-
-
-
-
-
-
-
(678)
-
-
-
(678)
*) -
320
32
(10,720)
5,022
350
-
-
350
7
353
-
*) -
(10,370)
5,732
692
-
-
-
692
8
112
1
(9,678)
6,545
*)
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.
Cash flows from operating activities:
Net income (loss)
692
350
(678)
Year ended
December 31,
2011
U.S. dollars in thousands
2012
2010
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization
Disposal of fixed assets
Finance expense (income), net
Accrued interest on long-term loan and non-current
liabilities
Share-based compensation
Change in employee benefit liabilities, net
Changes in asset and liability items:
Decrease (increase) in trade receivables
Decrease (increase) in other accounts receivable and
prepaid expenses (including long-term)
Increase (decrease) in trade payables
Increase (decrease) in deferred revenues
Increase (decrease) in other accounts payable and accrued
expenses
98
(26)
(3)
(12)
112
33
584
260
(34)
892
(84)
85
-
16
(124)
353
(14)
2,137
(222)
(31)
(296)
72
Cash paid and received during the year for:
1,820
1,976
Interest paid
Interest received
(1)
4
3
(24)
9
(15)
Net cash provided by (used in) operating activities
2,515
2,311
110
-
22
(33)
320
21
(76)
34
48
204
(39)
611
(33)
7
(26)
(93)
The accompanying notes are an integral part of the consolidated financial statements.
- 22 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIMIGON LTD.
Cash flows from investing activities:
Proceeds from disposal of fixed assets
Increase in restricted cash
Increase in Short-term bank deposits
Purchase of fixed assets
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from treasury shares
Proceeds from share issuance
Exercise of stock options
Repayment of long-term bank loan
Proceeds from refundable grants
Proceeds from long-term bank loans
Net cash provided by (used) 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
Year ended
December 31,
2011
U.S. dollars in thousands
2012
2010
36
(23)
(45)
(103)
(135)
-
2
1
(188)
124
-
(61)
2,319
4,231
6,550
-
-
-
(37)
(37)
-
*) -
*) -
(563)
410
-
(153)
2,121
2,110
4,231
-
-
-
(40)
(40)
32
-
-
(919)
327
750
190
57
2,053
2,110
(a)
Supplemental disclosure of non-cash financing
activities:
Receivable in respect of issuance of shares
6
6
-
*)
Represents an amount lower than $ 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
- 23 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 1:- GENERAL
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.
Dollar
- U.S. dollar
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently in the financial statements for
all periods presented, unless otherwise stated.
a.
Basis of preparation of the financial statements:
These financial statements have been prepared in accordance with International Financial
Reporting Standards ("IFRS").
b.
Functional currency, presentation 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.
The functional currency of the subsidiaries is U.S. dollars.
- 24 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Transactions, assets and liabilities in foreign currency:
SIMIGON LTD.
Transactions denominated in foreign currency (other than the functional currency) are
recorded on initial recognition at the exchange rate at the date of the transaction. After
initial recognition, monetary assets and liabilities denominated in foreign currency are
translated at the end of each reporting period into the functional currency at the exchange
rate at that date. Exchange differences, other than those capitalized to qualifying assets or
recorded in equity in hedging transactions, are recognized in profit or loss. Non-monetary
assets and liabilities measured at cost in a foreign currency are translated at the exchange
rate at the date of the transaction. Non-monetary assets and liabilities denominated in
foreign currency and measured at fair value are translated into the functional currency
using the exchange rate prevailing at the date when the fair value was determined.
c.
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.
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. Significant intragroup balances and
transactions and gains or losses resulting from intragroup transactions are eliminated in
full in the consolidated financial statements.
d.
Cash equivalents:
Cash equivalents are considered as highly liquid investments, including unrestricted
short-term bank deposits with an original maturity of three months or less from the date
of acquisition.
e.
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.
f.
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.
- 25 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g.
Financial instruments:
1. Financial assets:
SIMIGON LTD.
Financial assets within the scope of IAS 39 are initially recognized at fair value plus
directly attributable transaction costs, except for financial assets measured at fair
value through profit or loss in respect of which transaction costs are recorded in profit
or loss.
After initial recognition, the accounting treatment of investments in financial assets is
based on their classification into one of the following four categories:
financial assets at fair value through profit or loss;
held-to-maturity investments;
loans and receivables; and
available-for-sale financial assets.
Loans and Receivables:
Loans and receivables are investments with fixed or determinable payments that are
not quoted in an active market. After initial recognition, loans are measured based on
their terms at amortized cost less directly attributable transaction costs using the
effective interest method and less any impairment losses. Short-term receivables
(such as trade and other receivables) are measured based on their terms, normally at
face value.
2. 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 amount 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.
- 26 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
h.
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.
i.
Presentation of statement of comprehensive income:
The Company has elected to present a single statement of comprehensive income which
includes both the items of the statement of income and the items of other comprehensive
income.
j.
Leases:
The criteria for classifying leases as finance or operating leases depend on the substance
of the agreements and are made at the inception of the lease in accordance with the
following principles as set out in IAS 17.
The Group as leases:
Operating leases:
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.
k.
Property, plant and equipment:
Property, plant and equipment are measured at cost, including directly attributable costs,
less accumulated depreciation, accumulated impairment losses and any related investment
grants and excluding day-to-day servicing expenses.
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
expected life, whichever is shorter
The useful life, depreciation method and residual value of an asset are reviewed at least
each year-end and any changes are accounted for prospectively as a change in accounting
estimate.
- 27 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held
for sale and the date that the asset is derecognized. An asset is derecognized on disposal
or when no further economic benefits are expected from its use. The gain or loss arising
from the derecognition of the asset (determined as the difference between the net disposal
proceeds and the carrying amount in the financial statements) is included in profit or loss
when the asset is derecognized.
l.
Intangible assets:
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.
The useful life of the Technology is 10 years.
m. 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.
n.
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.
The following criteria are applied in assessing impairment of these specific assets:
Goodwill in respect of business combination:
For the purpose of impairment testing, goodwill acquired in a business combination is
allocated, at the acquisition date, to each of the Group's cash-generating units that is
expected to benefit from the synergies of the combination.
- 28 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
The Company reviews goodwill for impairment once a year as of December 31 or more
frequently if events or changes in circumstances indicate that there is impairment.
Goodwill is tested for impairment by assessing the recoverable amount of the cash-
generating unit (or group of cash-generating units) to which the goodwill has been
allocated. An impairment loss is recognized if the recoverable amount of the cash-
generating unit (or group of cash-generating units) to which goodwill has been allocated
is less than the carrying amount of the cash-generating unit (or group of cash-generating
units). Any impairment loss is allocated first to goodwill. Impairment losses recognized
for goodwill cannot be reversed in subsequent periods.
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.
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. After initial recognition, the liability is measured at amortized
cost using the effective interest method. Changes in the projected cash flows are
discounted using the original effective interest and recorded in profit or loss in
accordance with the provisions of IAS 39.AG8.
Royalty payments are treated as a reduction of the liability.
- 29 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
p.
Revenue recognition:
SIMIGON LTD.
Revenues are recognized in profit or loss to the extent that it is probable that the economic
benefits will flow to the Company and the revenues can be reliably measured. Revenues
are measured at the fair value of the consideration received less any trade discounts,
volume rebates and returns.
The Company generates revenues mainly from licensing the 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 31,2012 and 2011, 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.
Revenues from software arrangements:
Software arrangements contain multiple elements (software, integration, installation,
upgrades, support, training, consultation etc.). The Company evaluates the arrangement's
elements, including those delivered on a "when and if available basis", in order to
determine if the elements can be separately identified.
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.
- 30 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
q.
Earnings (loss) per share:
SIMIGON LTD.
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.
r.
Provisions:
A provision in accordance with IAS 37 is recognized when the Company has a present
(legal or constructive) 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. If the
effect is material, provisions are measured according to the estimated future cash flows
discounted using a pre-tax interest rate that reflects the market assessments of the time
value of money and, where appropriate, those risks specific to the liability.
s.
Employees benefit liabilities:
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
the statements of
comprehensive income in the period in which they occur.
losses are recognized
immediately
in
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.
t.
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.
- 31 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
u.
Share-based payment transactions:
SIMIGON LTD.
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 Company's employees/other service providers are entitled to remuneration in the
form of equity-settled share-based payment transactions.
The cost of equity-settled transactions with employees is measured at the fair value of the
equity instruments granted at grant date. The fair value is determined using an acceptable
option pricing model .
As for other service providers, the cost of the transactions is measured at the fair value of
the goods or services received as consideration for equity instruments. In cases where the
fair value of the goods or services received as consideration of equity instruments cannot
be measured, they are measured by reference to the fair value of the equity instruments
granted .
The cost of equity-settled transactions is recognized in profit or loss, together with a
corresponding increase in equity, during the period which the performance and/or service
conditions are to be satisfied, ending on the date on which the relevant employees become
fully entitled to the award ("the vesting period"). The cumulative expense recognized for
equity-settled transactions at the end of each reporting period until the vesting date
reflects the extent to which the vesting period has expired and the Group's best estimate
of the number of equity instruments that will ultimately vest. The expense or income
recognized in profit or loss represents the change between the cumulative expense
recognized at the end of the reporting period and the cumulative expense recognized at
the end of the previous reporting period.
No expense is recognized for awards that do not ultimately vest, except for awards where
vesting is conditional upon a market condition, which are treated as vesting irrespective
of whether the market condition is satisfied, provided that all other vesting conditions
(service and/or performance) are satisfied.
If the Company modifies the conditions on which equity-instruments were granted, an
additional expense is recognized for any modification that increases the total fair value of
the share-based payment arrangement or is otherwise beneficial to the employee/other
service provider at the modification date
v.
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.
- 32 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
w.
Significant accounting judgments, estimates and assupmtions used in the preparation of
the financial statements. In the process of applying the significant accounting policies, the
Group has made the following judgments which have the most significant effect on the
amounts recognized in the financial statements:
a.
-
Judgments:
Determining the fair value of share-based payment transactions:
The fair value of share-based payment transactions is determined using an
acceptable option-pricing model. The model includes data as to the share price and
exercise price, and assumptions regarding expected volatility, expected life,
expected dividend and risk-free interest rate.
b.
Estimates and assumptions:
The preparation of the financial statements requires management to make estimates and
assumptions that have an effect on the application of the accounting policies and on the
reported amounts of assets, liabilities, revenues and expenses. 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.
- Chief Scientist grants:
Government grants received from the Office of the Chief Scientist at the Ministry of
Industry, Trade and Labor are recognized as a liability if future economic benefits are
expected from the research and development activity that will result in royalty-
bearing sales. There is uncertainty regarding the estimated future cash flows and the
estimated discount rate used to measure the amount of the liability. As for the
accounting treatment of grants received from the OCS, see also Note 12.
-
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.
- Pensions and other post-employment benefits:
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 9.
- 33 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
x.
Disclosure of new standards in the period prior to their adoption
IAS 19 (Revised) - Employee Benefits:
The IASB made several changes to IAS 19, the principal of which are as follows:
- The remeasurement of the net defined benefit liability (formerly - actuarial gains and
losses) are recognized in other comprehensive income t and not in profit or loss.
- The "corridor" approach which allowed the deferral of actuarial gains or losses has
been eliminated.
-
Income from the plan assets is recognized in profit or loss based on the discount rate
used to measure the employee benefit liabilities. The return on plan assets excluding
the aforementioned income recognized in profit or loss is included in the
remeasurement of the net defined benefit liability.
- The distinction between short-term employee benefits and long-term employee
benefits is based on the expected settlement date and not on the date on which the
employee first becomes entitled to the benefits.
- Past service cost arising from changes in the plan is recognized immediately.
The Standard is to be applied retrospectively in financial statements for annual periods
commencing on January 1, 2013, or thereafter. Earlier application is permitted.
The Company estimates that the Standard is not expected to have a material impact on its
financial statements.
IFRS 13 - Fair Value Measurement:
IFRS 13 establishes guidance for the measurement of fair value, to the extent that such
measurement is required according to IFRS. IFRS 13 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. IFRS 13 also specifies the
characteristics of market participants and determines that fair value is based on the
assumptions that would have been used by market participants. According to IFRS 13,
fair value measurement is based on the assumption that the transaction will take place in
the asset's or the liability's principal market, or in the absence of a principal market, in the
most advantageous market. The new disclosures are to be applied prospectively and they
do not apply to comparative figures.
The appropriate disclosures will be included in the Company's financial statements upon
initial adoption of IFRS 13.
IFRS 9 - Financial instruments: Classification and Measurement
IFRS 9 reflects the first phase of the IASB's work on the replacement of IAS 39 and
applies to classification and measurement of financial assets and liabilities as defined in
IAS 39. The Standard is effective for annual periods beginning on or after 1 January
2015.
- 34 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
The Company estimates that the Standard is not expected to have a material impact on its
financial statements .
IFRS 10 - Consolidated Financial Statements
IFRS 10 addresses the accounting for consolidated financial statements. It establishes a
single control model that applies to all entities. The Standard is effective for annual
periods beginning on or after 1 January 2013.
The Company estimates that the Standard is not expected to have a material impact on its
financial statements.
NOTE 3:- SHORT-TERM BANK DEPOSITS
The short-term bank deposits (between three months and a year) as of December 31, 2012 and
2011 in a total of $ 556 thousand and $ 508 thousand, respectively, bearing an annual interest
rate of 0.3%.
NOTE 4: - TRADE RECEIVABLES
Trade receivables (1)
(1) Net of allowance for doubtful debts
December 31,
2012
2011
U.S. dollars in thousands
656
369
1,240
394
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
2012
2011
407
153
80
16
*) -
656
947
293
-
*) -
*) -
1,240
*)
Represents an amount lower than $ 1 thousands.
- 35 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 5:- FIXED ASSETS, NET
Composition and movement:
Computers
and
peripheral
equipment
Office
furniture
and
equipment
U.S. dollars in thousands
Leasehold
improvements
Total
773
(111)
24
686
(6)
42
722
728
(111)
26
643
(6)
32
669
53
43
165
(17)
13
161
(18)
61
204
126
(17)
9
118
(8)
16
126
78
43
54
-
-
54
-
-
54
53
-
-
53
-
*) -
53
1
1
992
(128)
37
901
(24)
103
980
907
(128)
35
814
(14)
48
848
132
87
Cost:
Balance as of January 1, 2011
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2011
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2012
Accumulated depreciation:
Balance as of January 1, 2011
Disposal during the year
Depreciation during the year
Balance as of December 31, 2011
Disposal during the year
Depreciation during the year
Balance as of December 31, 2012
Depreciated cost as of December 31,
2012
Depreciated cost as of December 31,
2011
*)
Represents an amount lower than $ 1 thousands.
- 36 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6:- GOODWILL AND AN INTANGIBLE ASSET
SIMIGON LTD.
The carrying amount of intangible assets acquired as of December 31, 2012 and 2011 in the
accounts of the Company was as follows:
Technology **)
Goodwill
Total
Carrying amount as of
December 31,
2012
2011
U.S. dollars in thousands
206
1,068
1,274
256
1,068
1,324
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, 2012, the
recoverable amount determined based on the value in use exceeded the carrying amount
of the Company's net assets (equity).
**) During the years ended December 31, 2012, 2011 and 2010, the Company recorded
amortization in the amount of $ 50 thousand, $ 50 thousand and $ 51 thousand,
respectively, which was recorded in cost of revenues.
NOTE 7:- CURRENT MATURITIES OF LOAN
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.
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.
- 37 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7:- CUREENT MATURITIES OFLOAN (Cont.)
SIMIGON LTD.
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 a cash and cash equivalent balance of
$ 500 thousand under Mizrahi
As of April 30, 2012, the loan was fully repaid.
NOTE 8:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Employees and payroll accruals
Accrued expenses
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET
December 31,
2012
2011
U.S. dollars in thousands
342
336
678
351
411
762
Employee benefits consist of short-term benefits, post-employment benefits, other long-term
benefits and termination benefits.
a.
Post-employment benefits:
According to the labor laws and Severance Pay Law in Israel, the Company is required to
pay compensation to an employee upon dismissal or retirement or to make current
contributions in defined contribution plans pursuant to Section 14 to the Severance Pay
Law, as specified below. The Company's liability is accounted for as a post-employment
benefit. The computation of the Company's employee benefit liability is made in
accordance with a valid employment contract based on the employee's salary and
employment term which establish the entitlement to receive the compensation.
b.
The amounts recognized in the balance sheet are as follows:
December 31,
2012
2011
U.S. dollars in thousands
Liability at the beginning of the year
Expense (income) recognized in the profit or loss
Benefits paid
Liability at the end of the year
108
68
(35)
141
122
(52)
38
108
- 38 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET (Cont.)
b.
Amounts recognized in the statements of comprehensive income are as follows:
December 31,
2012
2011
U.S. dollars in thousands
Current service cost
Interest cost
Net actuarial loss (gain) recognized in the year
Total expense (income) included in profit or loss
46
5
17
68
2
*) -
(54)
(52)
*)
Represents an amount lower than $ 1 thousand.
c.
Changes in the present value of defined benefit obligation:
Composition:
Balance at January 1
Interest cost
Current service cost
Benefits paid
Net actuarial loss (gain)
Balance at December 31
December 31,
2012
2011
U.S. dollars in thousands
108
5
46
(35)
17
141
122
*) -
2
38
(54)
108
*)
Represents an amount lower than $ 1 thousand.
d.
The actuarial assumptions used are as follows:
Year ended
December 31,
2011
2012
2010
Discount rate
4.57%
4.83%
5.10%
Future salary increases
4.72%
2%
2%
Average expected remaining working
years
6.30
6.38
6.44
- 39 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY
a.
b.
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.
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 installments. 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, Mr. Ami Vizer, 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 installments. The shares were issued to
the trustee in January 2010.
The salary reduction of 15% for the Non-Executive Board members will be effective for
additional 2 years, and the Non-Executive Board members will be granted additional
Ordinary shares of the Company.
On April 12, 2012 the Company issued a total of 72,000 and 47,727 Ordinary Shares of
0.01 NIS each to the Company's Non-Executive Directors and to Non-Executive
Chairman of the Board respectively in return for a one year salary reduction.
c.
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 Compensation 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"). The Bonus Shares will vest upon receiving actual payment from the customer
under the relevant PO ("the Bonus Shares Vested Date").
The fair value on date of grant equal to $ 0.08 per Ordinary Share
On July 4, 2011 the Company issued a total of 2,444,984 ordinary shares of 0.01 NIS
each ("Ordinary Shares") to its senior management and other employees. Out of the
shares issued, 1,984,530 and 103,703 Ordinary Shares were issued to the Company's
Chief Executive Officer and Chief Finance Officer, who are also Directors of the
Company, respectively.
As of December 31, 2010 the Company recorded share-based compensation expenses of
$ 212 thousand, in respect of the bonus compensation.
- 40 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
d.
e.
On August 10, 2011, a total of 47,502 options were exercised under the Company's Stock
Option Plan at an exercise price of NIS 0.01.
On September 12, 2011, the Board of Directors approved the implementation of a share
bonus plan ("the Share Bonus Plan") for year 2011.
According to the Share Bonus Plan, the Bonus Compensation will be granted with an
equivalent value of Ordinary shares based on the quoted fair market price of the shares as
of September 12, 2011, which is equal to $ 0.0812 per Ordinary share ("the Bonus
Shares"). The Bonus Shares will vest upon receiving actual payment from the customer
under the relevant PO ("the Bonus Shares Vested Date").
The fair value, on date of grant equal to $ 0.08 per Ordinary Share.
Based on full vesting as of December 31, 2011, the Company's senior management and
other employees are entitled to a total of 2,889,379 Ordinary Shares and a total of
3,141,288 Options at an exercise price of NIS 0.01 per share of the Company, which
Ordinary Shares and Options were issued in 2012.
On April 12, 2012 the Company issued a total 2,055,838 Ordinary Shares of 0.01 NIS
each ("Ordinary Shares") and 3,141,288 Options at an exercise price of 0.01 NIS each
("Options") to its senior management and other employees. Out of the shares issued,
1,972,233 and 22,109 Ordinary Shares were issued to Mr. Ami Vizer the Company's
Chief Executive Officer and to Mr. Efraim Manea Chief Finance Officer, who are also
Directors of the Company, respectively. Out of the Options issued, 2,926,533 and 37,582
Options were issued to Mr. Ami Vizer the Company's Chief Executive Officer and to Mr.
Efraim Manea Chief Finance Officer, who are also Directors of the Company,
respectively.
Further to the above, on October 11, 2012, a total of 833,541 Ordinary Shares of 0.01 NIS
each have been issued to senior management and employees, including 516,921 Ordinary
Shares to Mr. Ami Vizer the Chief Executive Officer of the Company and also a Director
of the Company.
The Company recorded share-based compensation expenses of $ 53 thousand and $298
thousand, in respect of the bonus compensation for year 2012 and 2011, respectively.
f.
On October 17, 2012, a total of 9,304 options were exercised under the Company's Stock
Option Plan at an average exercise price of $ 0.09.
g.
Composition of share capital:
December 31,
2012, 2011
and 2010
Authorized
2012
December 31,
2011
Issued and outstanding
2010
Ordinary shares of NIS 0.01
par value each
100,000,000
47,153,179 44,134,769 41,642,283
Number of shares
- 41 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
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 ratably 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, 2012, an aggregate of 2,288,879 Ordinary shares of the
Company are still available for future grant.
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 the three years ended
December 31, 2012: risk-free interest rates of 1% in year 2012 and a risk-free interest
rates for years 2011 and 2010 ranging from 0.87%-1.92%; a dividend yield of 0%;
volatility factor of the expected market price of the Company's Ordinary shares of 80%;
and a weighted average expected life of the options of 6 years.
On January 31, 2012 the Board of Directors granted to the Company employees a total of
190,000 options to purchase Ordinary shares of the company. Such options are granted in
accordance with the Company's Employees' Stock Option Plan and will vest quarterly
over a period of 4 years commencing from the grant date at an exercise price of US$0.14.
The weighted average fair values of the options granted in 2012, 2011 and 2010 were
$ 0.01, $ 0.15 and $ 0.03, respectively.
A summary of the activity in options to employees, consultants, and directors (including
the senior management, see i. below) for the years 2012, 2011 and 2010 is as follows:
2012
Year ended December 31,
2011
2010
Number
of
options
Weighted
average
exercise
price
Number
of
options
Weighted
average
exercise
price
Weighted
average
exercise
price
Number
of options
1,993,248 $ 0.315
3,331,288 $ 0.01
$ 0.09
(9,304)
(103,946) $ 0.6
(189,498) $ 0.17
2,673,444 $ 0.371
315,000 $ 0.148
(47,502)
$ 0.002
(110,245) $ 0.617
(837,449) $ 0.453
2,207,822 $ 0.693
1,234,000 $ 0.031
-
(110,245) $ 0.461
(658,133) $ 0.741
-
Outstanding at
beginning of year
Granted
Exercised
Expired
Forfeited
Outstanding at end
of year
5,021,788 $ 0.133
1,993,248 $ 0.315
2,673,444 $ 0.371
Exercisable options
1,067,526 $ 0.428
648,683 $ 0.834
1,192,198 $ 0.781
- 42 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD.
The options outstanding as of December 31, 2012, have been separated into ranges of
exercise price as follows:
Exercise price
$ 0.003-0.127
$ 0.129-0.630
$ 1.33-2.170
Options
outstanding
as of
December 31,
2012
Weighted
average
remaining
contractual
life (years)
4,179,288
642,500
200,000
5,021,788
9.00
6.09
4.33
Options
exercisable
as of
December 31,
2012
631,861
250,665
185,000
1,067,526
i.
Options to the CEO and senior employees:
1.
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 management 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 in 3 tranches annually equal amounts commencing as of
January 1, 2010 and will be conditional upon the following:
a)
b)
Employee being employed by the Company, and
The EBITDA of the Company (on a consolidated basis) for the relevant
fiscal year (2011, 2012 and 2013) shall increase by more than 20%
compared to the previous year.
As of December 31 2012, the 2011 EBITDA performance goal was not
achieved therefore the first tranche forfeited.
The 2012 EBITDA performance goal was achieved.
- 43 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
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, 2012 a total of 280,667 options have been vested and the
Company recorded share-based compensation expenses in a total of $15 thousand,
$12 thousands and $6 thousands in respect to Mr. Ami Vizer, the Company's Chief
Executive Officer who is also a Director of the Company, to senior management
and to employees, respectively.
2.
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.
On June 29, 2011 the Company’s Board of Directors approved. the extension in
terms of options granted to former senior employee according to which, options in
a total of 75,000 will be exercisable until June 10, 2012 only in case of a
Transaction (as defined in the Company's Share Option Plan). All other vested
options in a total of 85,400 will be exercisable until December 7, 2012 only in case
of a Transaction (as defined in the Company's Share Option Plan).
On November 28, 2011 the Annual General meeting of the Company’s approved
the grant of 40,000 options to purchase ordinary shares of the Company to Mr.
Efraim Manea, a director of the Company and its CFO. Such options are granted to
Mr. Manea in accordance with the Company's Employees' Stock Option Plan (the
“ISOP”) and in the same terms that similar options are granted to the employees of
the Company. The options will be vested over 36 months commencing September
2012 at an exercise price of US$0.08. The Vested Options are exercisable only in
an event of an Transaction as defined under the ISOP.
3.
4.
5.
Further to note 10e, on April 12, 2012, the Company issued 2,926,533 and 182,541
Options to Mr. Ami Vizer, the Company's Chief Executive Officer who is also a
Director of the Company, and to senior management, respectively.
- 44 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
As of December 31, 2012, the Company recorded share-based compensation
expenses in a total of $51 thousand in respect to the CEO.
Further to note 10e, on December 20, 2012 the Annual General meeting of the
Company’s approved the grant of 37,582 options to purchase Ordinary Shares to
Mr. Efraim Manea, a director of the Company and its CFO.
j.
Shares to the CEO and senior employees:
1. The Reduction Plan as mentioned under Note 10b 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, are fully vested.
2. The Share Bonus Plan as mentioned under Note 10c includes a total of 1,984,530
and 333,601 Ordinary shares of the Company that were granted to the CEO and
senior management, respectively, with an equivalent fair value on date of grant
equal to $ 0.0821 per Ordinary Share.
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.
3. Further to Note 10e, on April 12, 2012 the Company issued a total 1,972,233 and
66,291 Ordinary Shares to Mr. Ami Vizer the Company's Chief Executive Officer
who is also a Director of the Company and to senior management, respectively.
Further to the above, on October 11, 2012, a total of 516,921 and 309,711 Ordinary
Shares of 0.01 NIS each have been issued, to Mr. Ami Vizer the Chief Executive
Officer of the Company and also a Director of the Company and to senior
management, respectively.
As of December 31, 2012 and 2011 the Company recorded share-based
compensation expenses in a total of $51 thousand and $ 248 thousand in respect to
the share granted to the CEO and as of December 31, 2011 the Company recorded
share-based compensation expenses in a total of $45 thousand in respect to the
share granted to the senior management.
- 45 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 11:- INCOME TAXES
a.
Tax benefits under the Law for the Encouragement of Capital Investments, 1959:
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 canceled 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.
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").
- 46 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11:- INCOME TAXES (Cont.)
SIMIGON LTD.
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.
c.
Tax reconciliation:
In 2012, 2011 and 2010, 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, 2012, 2011 and 2010, the Company had accumulated losses for
Israeli tax purposes of approximately $ 5.3 million, $ 6.5 million and $ 6.8 million,
respectively, which may be carried forward, in order to offset taxable income in the
future, for an indefinite period.
- 47 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 11:- INCOME TAXES (Cont.)
Foreign:
As of December 31, 2012, 2011 and 2010, the federal tax loss carryforwards of the U.S.
subsidiaries amounted to approximately $ 6.1 million, $ 5.5 million and $ 5.9 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 Israeli corporate tax rate was 26% in 2009, 25% in 2010 and 24% in 2011.
A company is taxable on its real (non-inflationary) capital gains at the corporate tax rate
in the year of sale. A temporary provision for 2006-2009 stipulates that the sale of an
asset other than a quoted security (excluding goodwill that was not acquired) that had
been purchased prior to January 1, 2003, and sold by December 31, 2009, is subject to
corporate tax as follows: the part of the real capital gain that is linearly attributed to the
period prior to December 31, 2002 is subject to the corporate tax rate in the year of sale as
set forth in the Israeli Income Tax Ordinance, and the part of the real capital gain that is
linearly attributed to the period from January 1, 2003, through December 31, 2009, is
subject to tax at a rate of 25%.
On December 5, 2011, the Israeli Parliament (the Knesset) passed the Law for Tax
Burden Reform (Legislative Amendments), 2011 ("the Law") which, among others,
cancels effective from 2012, the scheduled progressive reduction in the corporate tax rate.
The Law also increases the corporate tax rate to 25% in 2012. In view of this increase in
the corporate tax rate to 25% in 2012, the real capital gains tax rate and the real
betterment tax rate were also increased accordingly.
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%.
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, 2012, there was no recognized deferred tax liability for taxes that
would be payable on unremitted earnings of the Company and its subsidiaries.
- 48 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12:- CONTINGENT LIABILITIES AND COMMITMENTS
a.
Royalty commitments:
SIMIGON LTD.
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.
2.
On September 1, 2009, the Company and a third party signed a Cooperation and
Project Funding Agreement with KORIL (“the Agreement”), 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 (“the proposal”) and the
third party for a research and development project in the maximum amount of
$ 273 thousand.
As of December 31, 2012, the Company received a total amount of $ 254 thousand.
- 49 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
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, 2012 and 2011
was $ 197 thousand and $ 208 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.
On March 29, 2011, the Company signed on a supplement to the Agreement (“the
Supplement”). According to the Supplement, the OCS agreed to fund, by
conditional grant, the implementation of the proposal submitted by the Company
for a research and development continued project in the maximum amount of $ 278
thousand.
As of December 31, 2012, the Company received total amount of $ 611 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
proposals (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 years ended December 31, 2012 and 2011
was $ 483 thousand and $ 479 thousand, respectively.
4.
On April 7, 2011, the Company and a third party signed a Cooperation and Project
Funding Agreement with the Israeli Chief Scientist ("the OCS"), which is an
establishment of the Italian-Israel Industrial Research and Development Fund.
According to the agreement, the OCS agreed to fund, by conditional grant, the
implementation of the proposal submitted by the Company (“the proposal”) and the
third party for a research and development project in the maximum amount of $ 91
thousand.
As of December 31, 2012, the Company received a total amount of $ 98 thousand.
- 50 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 12:- CONTINGENT LIABILITIES AND COMMITMENTS (Cont.)
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, 2012 and 2011was
$ 68 thousand and $ 59 thousand, respectively.
As of the financial statement approval date, the Company has not paid any royalties
to the OCS as no related gross sales were recorded.
b.
Lease commitments:
1. Premises occupied by the Company are rented under various non-cancelable lease
agreements until December 31, 2014.
2. The Company has leased various motor vehicles under cancelable operating lease
agreements, which expire on various dates, the latest of which is in 2014.
3. Premises occupied by the subsidiaries are rented under non-cancelable lease
agreements. The latest rental agreement for the premises expires in March 2016 as
determined under the new lease agreement signed on December 14, 2011 by
SimiGon Inc.
4. Future minimum rental payments under non cancellable operating leases are as
follows:
Year ended December 31,
U.S. dollars
in thousands
2013
2014
2015
2016
286
269
69
69
693
The total expense for the years ended December 31, 2012, 2011 and 2010 was
$ 301 thousand, $ 367 thousand and $ 350 thousand, respectively.
c.
Floating charge:
The Company recorded a first priority unlimited floating charge on all of its assets, in
favor of a bank, in consideration of the Loan Agreement as described in Note 7.
Following the completion of the Loan Agreement and its fully return, the first priority
unlimited floating charge on all of its assets, in favor of a bank was removed.
- 51 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 13:- SUPPLEMENTARY INFORMATION TO THE STATEMENT OF COMPREHENSIVE
INCOME
a.
Cost of revenues:
Salaries and related benefits
Lease and office maintenance
Travel expenses, net
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
Year ended
December 31,
2011
U.S. dollars in thousands
2012
2010
468
54
64
57
10
714
1,367
1,805
323
28
24
1
(12)
602
124
(50)
59
8
83
826
1,433
245
16
21
1
(41)
406
132
35
61
6
164
804
1,466
297
32
22
4
(61)
2,157
1,675
1,760
1,001
70
123
70
113
8
67
117
1,569
965
105
141
54
106
6
296
23
919
132
241
45
142
10
219
3
1,696
1,711
- 52 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 13:- SUPPLEMENTARY INFORMATION TO THE STATEMENT OF COMPREHENSIVE
INCOME (Cont.)
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
Doubtful debt provision
Other
e.
Finance income:
Exchange rate differences
Interest income from banks
f.
Finance cost:
Exchange rate differences
Government grants interest
Bank loans and fees
Year ended
December 31,
2011
U.S. dollars in thousands
2012
2010
611
60
-
21
356
5
22
(25)
(32)
1,018
122
4
126
147
7
-
154
539
67
-
21
327
4
28
(18)
7
975
296
9
305
231
3
33
267
547
95
10
22
436
7
73
282
6
1,478
68
7
75
131
-
76
207
- 53 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 14:- REVENUES
The Company manages its business on the basis of one reportable segment.
a.
Revenues:
Software licenses
Software licenses customization
Recurring Maintenance & Support
Training
Year ended
December 31,
2011
U.S. dollars in thousands
2010
2012
4,604
816
1,342
43
6,805
3,954
553
910
67
5,484
3,666
1,161
296
84
5,207
b.
Geographical information:
Revenues classified by geographical destinations based on the customer location:
EMEA (1)
North America
Asia Pacific
Year ended
December 31,
2011
U.S. dollars in thousands
2010
2012
1,730
4,928
147
6,805
1,475
3,892
117
5,484
1,388
3,509
310
5,207
(1) Europe, South America, 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:
2012
December 31,
2011
U.S. dollars in thousands
2010
37
1,369
1,406
54
1,357
1,411
60
1,399
1,459
EMEA
North America
- 54 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 14:- REVENUES (Cont.)
c.
Information about major customers:
Revenues from major customers, each of whom amount to 10% or more of total revenues
reported in the financial statements:
Customer A
Customer B
Customer C
Customer D
Customer E
Year ended
December 31,
2011
49%
12%
13%
-
-
2012
24%
8%
17%
19%
13%
2010
48%
13%
2%
-
-
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,
2011
U.S. dollars in thousands
2012
2010
Income (loss) for the year
692
350
(678)
2012
2011
2010
Weighted average number of Ordinary shares for
computing basic earnings (loss) per share
44,617
42,867
41,361
Effect of dilution:
Share options
570
65
-
Weighted average number of Ordinary shares
adjusted for the effect of dilution
45,187
42,932
41,361
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 earnings (loss) per share
calculation due to their antidilutive effect.
- 55 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Year ended
December 31,
2011
U.S. dollars in thousands
2010
2012
a.
Expenses to related party of a
shareholder:
Sales and marketing *)
18
-
-
*)
As part of a sales consulting agreement signed with a company whom one of its
shareholder is also a shareholder in SimiGon, holding less than 10%.
b.
Compensation of key management
personnel of the Company:
Employee benefits *)
Share-based payments **)
Year ended
December 31,
2011
U.S. dollars in thousands
2010
2012
1,448
87
1,535
1,281
314
1,595
1,200
256
1,456
*)
Includes increase in long-term employee benefits due to change in provision for
severance pay in a total amount of $ 47 thousand, $ 37 thousand and $ 43 thousand
for the years ended December 31, 2012, 2011 and 2010, respectively.
Year 2012 and 2011 include the provision for sales bonus in a total of $ 2 thousand
and $ 10 thousand to the VP of Business Development, respectively.
Year 2012 includes sales bonus in a total of $ 30 thousand and a provision of $114
thousand for sales bonus to the CEO in respect of the fiscal year 2011and 2012;
respectively (see Note 16c).
**) Year 2012 includes share-based compensation in a total of $ 51 thousand due the
Share Bonus Plan as described under Note 10e, in respect to the CEO.
Year 2012 includes share-based compensation in a total of $ 15 thousand and $12
thousands due Options granted in section 1 under Note 10i, in respect to the CEO
and senior management, respectively.
Year 2011 includes share-based compensation in a total of $ 248 thousand and $ 45
thousand due the Share Bonus Plan as described under Note 10e, in respect to the
CEO and senior management, respectively.
- 56 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
Year 2010 includes share-based compensation in a total of $ 163 thousand and $ 28
thousand due the Share Bonus Plan as described under Note 10c, in respect to the
CEO and senior management, respectively.
c.
Agreement with CFO:
On December 6, 2012, the Board of Directors approved the grant of a one-time
cash bonus to Mr. Efraim Manea, a director of the Company and its CFO with
respect to fiscal year 2013 in the amount of up to $34 thousands per year, subject to
revenues, net profit and share price criteria and milestones.
d.
Significant agreements with shareholders:
1.
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 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, Mr. Ami Vizer, in
exchange for the reduction on salary, was granted 342,717 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
installments.
On January 27, 2010, the Board of Directors approved an increase of 10% in his
salary effective January 1, 2010.
On December 6, 2012, the Board of Directors approved a one-time cash bonus
grant to Mr Ami Vizer with respect to fiscal year 2011 in the amount of $30
thousands. It has also approved the grant of a one-time cash bonus to Mr Ami
Vizer with respect to fiscal years 2012 and 2013 in the amount of up to $125
thousands per year, subject to revenues, net profit and share price criteria and
milestones.
Total salary (excluding share bonus grant mentioned under Notes 10e) of Mr. Ami
Vizer during year 2012 amounted to an annual salary of $ 344 thousand, related
benefits include bonus for 2011 fiscal year of $30 thousands, annual social benefits
of $ 43 thousands (12.5% out of his annual salary), expenses allowance of $6K
severance pay of $29 thousands, vacation days of $39 thousands and health
insurance of $28 thousands. In addition, the Company has made a provision for
2012 bonus in a total of $ 114 thousands.
- 57 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
2.
3.
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 (see Note 10h). 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,
2012, balances in foreign currency are immaterial.
b.
Credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk
consist principally of cash and cash equivalents, short-term bank deposits, and trade
receivables.
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.
- 58 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 17:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
The Company trades only with creditworthy customers. The Company performs ongoing
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.
As of December 31, 2012, cash and cash equivalents together with the Company’s short
time bank deposits amounted to $ 7,106 thousand.
c.
Liquidity risk:
The table below presents the maturity profile of the Company's financial liabilities based
on contractual undiscounted payments:
December 31, 2012:
Less than
one year
3 to 4
Years
U.S. dollars in thousands
Total
Government grants
Trade payables
Other accounts payable and accrued
expenses
December 31, 2011:
Current maturities
Government grants
Trade payables
Other accounts payable and accrued
expenses
38
140
640
818
188
49
174
697
748
-
-
786
140
640
748
1,566
-
746
-
-
188
795
174
697
1,108
746
1,854
- 59 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18:- SUBSEQUENT EVENT
SIMIGON LTD.
On April 11, 2013 the Board of Directors granted to the Company employees a total of 175,000
options to purchase Ordinary shares of the Company. Such options are granted in accordance
with the Company's Employees' Stock Option Plan and will vest quarterly over a period of 4
years commencing from the grant date at an exercise price that will be determined immediately
after the end of the blackout period for share trading.
- - - - - - - - - - - - - - - - - -
F:\W2000\w2000\3381\M\12\E$12-SIMIGON-IFRS.docx
- 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:
ADVISERS
Nominated Adviser and Broker
finnCap
60 New Broad St
London, EC2M 1JJ
SimiGon Ltd.
1 Sapir St.
PO Box 12050
Herzliya, Israel 46733
Tel: +972-9-956-1777
Fax: +972-9-951-3566
Registrar
Computershare Investor Services (Jersey) Limited
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
SimiGon Inc.
7001 University Blvd.
Winter Park, Florida 32792
Phone: +1 (407) 951-5548
Fax: +1 (407) 960-4794
For more information:
info@simigon.com
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