TAKING DISTRIBUTED
TRAINING SIMULATION
PERSONALLY
‘13
2013 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
9
11
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.
In the fifth year of a long-term contract to provide
training simulations for a strategic European
aircraft manufacturer
In the third year of a contract with Check-6, the
Company’s
first major contract outside the
aerospace and defence industry
Awarded additional contract from U.S. Air Force
Air Education Training Command in July 2013
Post period-end events:
Entered civil aviation market in China, through
joint venture, with a contract worth $0.75 million
Financial Highlights
Revenues increased by 20% to $8.17 million
(2012: $6.81 million)
Net profit increased by 27% to $0.9 million
(2012: $0.71 million)
Gross margin of 75% (2012: 80%)
Significant increase in cash and cash equivalents
and short term bank deposits at the year end to
$8.61 million (31 December 2012: $7.11 million)
and the Company has no outstanding bank debt
Maiden dividend declared at 0.543 cents per
share
Operational Highlights
New significant contracts:
Won a significant contract worth $6.7 million,
securing access to a major new geographical
region and further cementing role as prime
contractor
Delivering on all long term contracts:
Now in its sixth year supporting Lockheed
Martin's F-35 Lightning II Joint Strike Fighter
training program (JSF)
Entered the fifth year of supporting the UK
Military Flying Training System
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LEVERAGING GROWING MARKETS
FOR PERSONAL TRAINING & SIMULATION
The need for Simulation and training solutions
increases as governments and militaries reduce
live training hours.
Key Trends
The demand for flexible and cost efficient training
solutions that meet technical and budget constraints
is rapidly growing.
industry
impact on
Governments worldwide are being forced to take cost
cutting initiatives due to reduced financial resources.
This
is well
the defense
documented. A result of the budget cuts is a renewed
focus to attain cheaper and more effective training
solutions. The U.S. Air Force spends US$2.9 million
dollars to train each fighter pilot with new mandates
to reduce this cost. With highly skilled operational
environments such as aircraft; air defence; air traffic
control systems; Unmanned Vehicles for Air, Land and
Sea; and deep sea oil rigs becoming more 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 training on real-life equipment.
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, specific and
immediate demands for individual training, collective,
and distributed training tasks and require flexibility
and extensibility
systems
providers. Government and commercial customers
are also seeking flexible off-the-shelf solutions that
can be adopted and customized
indigenously.
SimiGon’s advanced Commercial-Off-The-Shelf (COTS)
technology
these
not
requirements but also save the client considerable
time and money throughout programme lifecycles,
including
and
design,
implementation.
development
only meet
products
training
system
from
their
Fast Growing Market
With these market trends and the budget constraints
many governments are experiencing, the industry is
turning away from traditionally expensive, stationary,
limited training systems and moving towards more
robust, flexible, reconfigurable and cost-effective PC
and mobile-based COTS training solutions.
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 personnel
maintain an adequate level of mission readiness.
The overall new military aircraft market for the next ten
years, about 11,940 aircraft, is worth an estimated $480
billion by Forecast International. In the military training
aircraft segment, Forecast International projects 1,500
new fixed wing military training aircraft over the next ten
years and the market for fighter aircraft will be worth
nearly $183 billion as approximately 2,900 fighters will be
manufactured. Numerous countries are in in various
stages of replacing their aging fleet. These acquisitions,
including helicopters, aircraft, ground vehicles, frigates,
submarines and other equipment, projects a significant
need for simulation and training.
The Civilian aviation market continues to be a driver in the
simulation market with more than 35,280 commercial
airplanes forecast to be produced by 2032, valued at $4.8
trillion. SimiGon, with its industry leading technology, and
well established position in various strategic programmes,
is poised to successfully leverage 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 civilian pilots
and oil and gas drilling operators, further strengthening
SimiGon’s market leading position and diversifying its
revenues.
The potential of further significant business 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
in these
medical care. Organisations and operators
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
the
compelling products –
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
for creating, managing and deploying
platform
simulation based content across multiple domains
including
training, mission debriefing, homeland
security and entertainment. SIMbox is a flexible, off-
the-shelf 3D simulation engine comprised of a wide
array of software modules that empowers users to
create an unlimited range of new products and content.
Built from the ground up as a robust and flexible
platform, SIMbox has been deployed successfully by
large training and simulation systems providers, leading
military contractors, and over 20 air forces and
commercial airlines worldwide. SIMbox is comprised of
three main environments:
SIMbox Toolkit development environment: SIMbox
Toolkit
suite,
empowering non-programmers to create, reuse and
control simulation-based applications.
SIMbox Server management environment: SIMbox
Server which serves as the Learning Management
System (LMS), contains various software modules used
for configuration management of developed content,
control over content distribution, data gathering from
end users, and data analysis and report generation.
SIMbox Runtime delivery environment: SIMbox
Runtime provides hi-fidelity 3D distributed simulations
in a virtual or constructive
that place the user
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-
flight entertainment
solutions. Successfully
(IFE)
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 delighted to report SimiGon’s third successive year
of revenue growth, higher profits and increased cash
position.
SimiGon continues to execute on its long term strategy
and achieve its targets evidenced by the successful
transition to become a major prime contractor,
enhancing SimiGon's reputation as a market leader and
partner of choice for the world's largest simulation
training programmes, including five of the world’s
largest military flight training programmes. This strategy
provides an excellent foundation and
is a strong
indication of our long term growth prospects.
In the course of 2013, the Company successfully
continued
its key objective of becoming a prime
contractor, including a landmark agreement of $6.7
million, gaining access to a strategic geographical
region. This contract along with other business secured
during 2013, further justify the Company’s market
leading position in the aerospace and defence sector.
Our decision to diversify and expand beyond aerospace
and defence and into the oil and gas sector seems
increasingly precipitous with significant revenue from
Check-6, SimiGon’s first major contract outside the
aerospace and defence sector.
The Company’s strong organic cash flow from existing
operations provides it with the ability to reinvest in the
growth of the business. However, the directors have
recognized the importance of a cash dividend to our
shareholders and the market. Subject to the Board’s
resolution, we have decided to implement an annual
dividend, comprised of approximately 30% of the
Company's earnings per share and approximately 30%
of the Company's net profit.
As I look forward, the foundations for long term growth
that we have built to continue to build new
partnerships, become a prime contractor and expand
the customer base, proved itself in 2013 and have
enabled SimiGon to target larger contracts. SimiGon
has excellent revenue visibility, a strong order book in
place and an encouraging pipeline of business leads,
which leads to excellent prospects for the year 2014.
Our results would not be possible without the
dedication and resourcefulness of our colleagues and I
would like to take this opportunity to thank them on
behalf of the Board and our shareholders.
Alistair Rae
Chairman
Chief Executive’s Review
We are delighted to announce another year of strong
revenue growth and
increased profits. 2013 saw
SimiGon expand into new territories, secure significant
new contracts and further cement our role as a prime
contractor as we continued to provide a highly valued
solution to our customers.
Looking ahead, we will continue to leverage our leading
position and our improved global footprint to build new
partnerships, expand our customer base, and target
even larger contracts. 2014 has begun positively with
strong demand for our solutions and a robust pipeline
of exciting new opportunities. In addition, we are
encouraged by our first foray in to the civil aviation
market in China, the world’s fastest growing aviation
market. As a result of our strong progress, we view the
future with confidence as demonstrated by the
Company’s maiden dividend.
Overview
SimiGon is pleased to report another year of strong
revenue and profit growth in 2013, both as a result of
significant new business being won within the period,
and an increase in recurring revenues from existing
strategic partners. Revenues increased 20% to $8.17
million (2012: $6.81 million), resulting in a $0.9 million
net profit (2012: $0.71 million).
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SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Furthermore, SimiGon has continued to enhance its
prospects for securing new contracts by further
diversifying its product offering and entering new
markets as demonstrated by the move into the rapidly
growing civil aviation market in China.
Cementing role as prime contractor
In June 2013 the Company secured one of the largest
contracts in its history, valued at $6.7m and expected to
be delivered over an 18 month period, and thereby also
opened up a major new geographical region for
SimiGon. The Company has already begun to deliver
upon this contract, which comprises Phase I of the
customer’s program, and believes there remains
potential for similar contracts with this customer in
potential subsequent phases.
Long-term contracts
The Company is pleased to have continued to develop
and further a number of long-term relationships during
the year, with certain particular relationships described
further below:
SimiGon continues to successfully deliver upon its
exclusive contract, signed in October 2011, with Check-
6 Inc., one of the leading providers of training solutions
to the energy and mining industries, for the provision
and delivery of SIMbox based training solutions.
SimiGon maintains its close relationship with a major
existing European customer that it has been working
with since 2009. Following additional orders, received
during 2013, the Company
is confident that this
relationship will continue and lead to additional orders
in the future.
In late 2011, SimiGon was selected as prime contractor
for AETC for the delivery of SIMbox based T-6A Modular
Training Devices. After the successful delivery of the
initial phase,
this agreement was subsequently
extended in July 2013 as SimiGon secured an additional
contract from AETC to support and maintain all of the T-
6A Modular Training Devices used in the training of all
Remote Piloted Aircraft students. This specific contract
is valued over an 18 month period and further evidence
of the long term nature of the relationship with this
valued partner.
The management’s strategic decision to align itself with
some of the largest global simulation and training
projects in the world and move up in the supply chain
to become a prime contractor is bearing fruit as
2013.
evidenced by
Consequently, the Company is encouraged by being
able to target significantly larger contracts, such as the
$6.7 million contract that the Company was pleased to
announce in June 2013.
the positive
results
in
As stated at the time of the interim results, the
successful transition to becoming a prime contractor
in hardware sales alongside
increase
involves an
SimiGon's software which affects
its margins. As
expected margins improved in the second half following
the successful deployment of the hardware systems in
the first half and were 75% for the full year compared
with 80% last year, which the Company continues to
believe remain higher than the sector average.
The strategy, foundations and combination of new and
extended contracts have now been established, the
Company’s
the market has been
in
enhanced, and the Company now believes it now has an
ideal platform for growth in both the short and long
term.
reputation
Operational Review
2013 saw SimiGon take another significant step forward
in cementing its position as the provider of choice for
large simulation training programs. The Company has
continued to deliver upon its long term contracts on
time and on budget, often exceeding customer
expectations in both the execution of delivery and
performance of its systems, enhancing the Company’s
chances of extensions being agreed.
The Company is particularly pleased, in June 2013, to
have secured a $6.7 million contract to provide, as a
prime contractor, a SIMbox training solution and
delivery upon this contract has progressed well with a
number of milestones already reached.
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. Positioning SimiGon in this way puts
the company in the window for some of the largest
simulation training contracts in the world and the
Company is now targeting contracts far larger than had
previously been possible.
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SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
In addition to its longstanding relationship with AETC,
SimiGon is now in its sixth year supporting Lockheed
Martin's JSF training program a contract that has
consistently been delivered on time and on budget.
SimiGon is also in its fifth year supporting the UK
Military Flying Training System. The Company has
continued to deliver upon this long term contract,
often exceeding customer expectations in both the
execution of delivery and performance of its systems.
SimiGon continues to provide successful solutions for
Unmanned Aerial Vehicle (UAV) training for a leading
in the small tactical unmanned aircraft
provider
systems. Through SimiGon’s ecosystem of partners
worldwide, the Company’s technology
is used to
support initial operator training in classrooms as well
as advanced operational training. SimiGon continues to
increase its footprint in the growing UAV market.
Maiden dividend declaration
In light of the strong cash position and its confidence in
continued strong cash generation, the Board intends to
pay a maiden dividend of 0.543 cents per share.
The Company remains keen to reinvest its strong
organic cash flow from existing operations into the
growth of the business. The directors recognise,
however, the importance of a cash dividend to certain
investors and have
shareholders and potential
therefore decided to commence the payment of
annual dividends, equating to approximately 30% from
the Company’s earnings per
to
approximately 30% of the Company’s net profit, and
subject to the Board believing that it is prudent to do
so. The dividend will be payable on Friday, 30 May
2014. The record date of payment of the dividend will
be Friday 9 May 2014. The ex-dividend date will be
Wednesday 7 May 2014.
share
and
According to the Israeli tax ordinance and regulations,
the dividend payment will be subject to 25%
withholding at source unless reduced by a relevant tax
treaty. In this regard, shareholders, who have a tax
withholding exemption or reduced withholding tax
rate from dividend payments obtained from by Israeli
Tax Authorities, should present and deliver it to the
Company, together with the contact details of their
stock broker, no later than the end of the business day
of Tuesday, 6 May 2014.
Financial Performance
increase of 20%.
Revenue for the year ended 31 December 2013 was
$8.17 million, compared to $6.81 million in 2012,
reflecting
In terms of regional
breakdown, 62% of SimiGon’s revenues came from
North America (2012: 72%), 17% from Europe and the
Middle East (2012: 25%) and 21% from the Far East
(2012: 2%).
Net profit for the fiscal year increased by 27% to $0.9
million (2012: profit of $0.71 million).
Total operating expenses for the year increased by 8%
to $5.1 million (2012: $4.73 million). Research and
development expenses
increased to $2.40 million
(2012: $2.15 million) mainly due currency exchange
rates between the NIS and the USD and the investment
made in recruiting new research and development
employees. Sales and marketing expenses increased by
5% to $1.65 million (2012: $1.57 million) and general
and administration expenses increased to $1.05 million
(2012: $1.02 million).
The operating profit therefore is $1.0 million (2012:
$0.71 million) and the net profit is $0.9 million in 2013
compared to net profit of $0.71 million in 2012. This
resulted in a net basic and diluted earnings per share
of $0.02 (2012: Basic and diluted earnings per share of
$0.02).
SimiGon generated positive cash flow from operations
of $1.93 million in 2013 resulting in the Company
having cash, cash equivalents and deposits totaling
$8.61 million as of 31 December 2013 (31 December
2012: $7.11 million) with no outstanding bank debt.
Outlook
SimiGon’s successful transition to becoming a prime
contractor, its robust pipeline of new opportunities
and increasingly strong financial position strengthens
the Board’s confidence in the Company’s long term
prospects as demonstrated by the Company's maiden
dividend declaration.
The positive momentum seen
in 2013 has been
maintained at the start of 2014 and as a result the
Company expects to see continued growth in revenues
and profit in 2014.
Amos Vizer
President & CEO
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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.
- 9 -
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 Nahmani, 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.
- 10 -
FINANCIALS
Consolidated Financial Statements of SimiGon Ltd.
and Its Subsidiaries as of December 31, 2013
(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
12
13
14 - 15
16
17 - 18
19 - 20
21 - 22
23 - 24
25 - 63
64
- 11 -
CORPORATE GOVERNANCE FOR THE PERIOD ENDED 31 DECEMBER 2013
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.
- 12 -
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 2013
$
407,321
129,117
54,597
26,400
26,400
26,400
670,235
Total 2012
$
404,926
111,566
49,014
23,430
24,600
24,600
638,136
Year 2013 does not include $26,512 paid in respect of vacation days, additional $28,721 paid in respect of severance allocation
transfer and a bonus of $120,000 paid in respect to year 2012 performance.
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.
Please see the Directors Report below for details of options and shares granted to directors.
- 13 -
DIRECTORS REPORT
The directors submit their report and the financial statements of the Group for the period ended 31 December 2013.
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, 2013 the total numbers of Ordinary Shares Issued were 47,292,706.
Share Options
As of 31 December 2013, the outstanding balance of options granted to certain employees of SimiGon is
approximately 10.4 percent of the Company’s issued and outstanding shares at an average exercise price of $0.13. 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.
- 14 -
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 2013 were as follows.
Directors
Alistair Rae
Eitan Cohen
Dr. Vered Shany
Nevat Simon
Ami Vizer
Efraim Manea
Number of Ordinary Shares Capital
165,999
72,000
72,000
72,000
8,327,782
189,264
Percentage of Ordinary shares
0.35
0.15
0.15
0.15
17.61
0.40
Options
0
0
0
0
3,336,533
170,082
Substantial Shareholdings
At 31, December 2013 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
Green Venture Capital Ltd.
G. Poran Holding Ltd
Shroder Euroclear Nominees Limited
Number Of Ordinary Shares
8,327,782
6,543,039
6,244,944
5,050,000
3,067,848
2,273,444
1,711,070
Percentage of issued
17.61
13.84
13.20
10.68
6.49
4.81
3.62
Auditors
Kost Forer Gabbay & Kasierer
A member of Ernst & Young Global
3 Aminadav St.
Tel Aviv 67067
Israel
- 15 -
Kost Forer Gabbay & Kasierer
3 Aminadav St.
Tel-Aviv 6706703, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
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, 2013
and 2012, 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, 2013, 2012 and
2011, 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 as adopted by the European
Union 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, 2013 and 2012, and its financial performance and cash flows for
each of the years ended December 31, 2013, 2012 and 2011, in accordance with International Financial
Reporting Standards as adopted by the European Union.
April 24, 2014
Tel-Aviv, Israel
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
- 16 -
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
Property, plant and equipment
Intangible assets, net
Total non-current assets
Total assets
December 31,
2013
2012
Note
U.S. dollars in thousands
3
4
5
6
7
8,100
511
249
69
8,929
404
31
115
1,223
1,773
10,702
6,550
556
656
41
7,803
23
25
132
1,274
1,454
9,257
The accompanying notes are an integral part of the consolidated financial statements.
- 17 -
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SIMIGON LTD.
EQUITY AND LIABILITIES
CURRENT LIABILITIES:
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,
2013
2012
Note
U.S. dollars in thousands
8
9
12a
10
143
1,218
808
2,169
177
777
954
140
1,005
678
1,823
141
748
889
3,123
2,712
113
16,248
(8,782)
7,579
10,702
113
16,110
(9,678)
6,545
9,257
The accompanying notes are an integral part of the consolidated financial statements.
April 24, 2014
Date of approval of the
financial statements
Alistair Rae
Non-Executive Chairman
of the Board of Directors
Ami Vizer
Chief Executive Officer
and Director
Efraim Manea
Chief Financial Officer
and Director
- 18 -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIMIGON LTD.
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development, net
Selling and marketing
General and administrative
Total operating expenses
Operating profit
Other income
Finance income
Finance expense
Net income
Note
14
13a
13b
13c
13d
13e
13f
Year ended
December 31,
2012 *)
U.S. dollars in thousands
(except share and per share amounts)
2013
2011 *)
8,172
2,070
6,102
2,404
1,652
1,048
5,104
998
-
57
159
896
6,805
1,367
5,438
2,145
1,568
1,015
4,728
710
26
126
154
708
5,484
828
4,656
1,695
1,699
979
4,373
283
-
305
267
321
*) Restated to reflect the implementation of IAS 19 (Revised) Employee Benefits.
The accompanying notes are an integral part of the consolidated financial statements.
- 19 -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIMIGON LTD.
Year ended
December 31,
2012 *)
U.S. dollars in thousands
(except share and per share amounts)
2013
2011 *)
Note
Net income
896
708
321
Other comprehensive income not to be
reclassified to profit or loss in subsequent
periods:
Remeasurement gain (losses) from defined
benefits plan
Total comprehensive income
Basic and diluted earnings per share in U.S.
dollars
Weighted average number of shares used in
computing basic earnings per share (in
thousands)
Weighted average number of shares used in
computing diluted earnings per share (in
thousands)
**) -
896
(16)
692
29
350
0.02
0.02
0.01
15
47,188
45,884
42,867
15
49,131
46,454
42,932
*) Restated to reflect the implementation of IAS 19 (Revised) Employee Benefits.
**) Represents an amount lower than $ 1 thousand.
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
Accumulated
deficit
Total
equity
U .S. dollars in thousands (except share amounts)
Balance as of January 1, 2011
41,642,283
98
15,644
(10,720)
5,022
Net income
Other comprehensive income:
Actuarial gain from defined
benefit plan *)
Total comprehensive income
-
-
-
Issuance of shares (Note 10c)
Share-based compensation
Exercise of stock options (Note
2,444,984
-
-
-
-
7
-
10d)
47,502
**) -
-
-
-
-
353
-
321
321
29
350
-
-
-
29
350
7
353
**) -
Balance as of December 31,
2011
44,134,769
105
15,997
(10,370)
5,732
Net income
Other comprehensive income:
Actuarial losses from defined
benefit plan *)
Total comprehensive income
-
-
-
Issuance of shares (Note 10b and
Note 10e)
Share-based compensation
Exercise of stock options (Note
3,009,106
-
-
-
-
8
-
10f)
9,304
**) -
-
-
-
-
112
1
708
708
(16)
692
-
-
-
(16)
692
8
112
1
Balance as of December 31,
2012
47,153,179
113
16,110
(9,678)
6,545
*) Restated to reflect the implementation of IAS 19 (Revised) Employee Benefits.
**) Represents an amount lower than $ 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
- 21 -
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SIMIGON LTD.
Number
of shares
Share
capital
Additional
paid-in
capital
Accumulated
deficit
Total
equity
U .S. dollars in thousands (except share amounts)
Balance as of January 1, 2013
47,153,179
113
16,110
(9,678)
6,545
Net income
Other comprehensive income:
Actuarial losses from defined
benefit plan
Total comprehensive income
-
-
-
-
-
-
Issuance of shares (Note 10b)
Share-based compensation
Exercise of stock options (Note
10g)
119,727
-
*) -
-
19,800
*) -
-
-
-
-
137
1
896
896
*) -
896
-
-
-
*) -
896
*) -
137
1
Balance as of December 31,
2013
47,292,706
113
16,248
(8,782)
7,579
*)
Represents an amount lower than $ 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
- 22 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIMIGON LTD.
Cash flows from operating activities:
Net income
896
708 *)
321 *)
Year ended
December 31,
2012
U.S. dollars in thousands
2013
2011
Adjustments to reconcile net income to net cash used in
operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization
Gain on disposal of fixed assets
Finance expense (income), net
Accrued interest on non-current liabilities
Share-based compensation
Change in employee benefit liabilities, net
Changes in asset and liability items:
Decrease 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
Cash paid and received during the year for:
Interest paid
Interest received
98
-
(1)
28
137
36
407
(21)
3
213
132
98
(26)
(3)
(12)
112
17 *)
584
260
(34)
892
(84)
85
-
16
(124)
353
15 *)
2,137
(222)
(31)
(296)
72
1,032
1,804
2,005
-
1
1
(1)
4
3
(24)
9
(15)
Net cash provided by operating activities
1,929
2,515
2,311
*) Restated to reflect the implementation of IAS 19 (Revised) Employee Benefits.
The accompanying notes are an integral part of the consolidated financial statements.
- 23 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIMIGON LTD.
Cash flows from investing activities:
Proceeds from disposal of fixed assets
Increase in restricted cash
Decrease (increase) in short-term bank deposits
Increase in long-term deposits
Purchase of fixed assets
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from share issuance
Exercise of stock options
Repayment of long-term bank loan
Proceeds from (repayment of) refundable grants
Net cash used in financing activities
Increase 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,
2012
U.S. dollars in thousands
2013
2011
-
(381)
45
(12)
(30)
(378)
*) -
1
-
(2)
(1)
1,550
6,550
8,100
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
(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.
- 24 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 1:- GENERAL
a. 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.
b. The Company has two wholly-owned subsidiaries in the United States, SimiGon Inc. and
National Simulation Services Inc., which are engaged in the marketing of the Company's
products in the United States and wholly-owned subsidiary in Singapore, SimiGon Pte
Ltd which is engaged in marketing of the Company's products in the Far East.
c. 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").
Functional currency, presentation currency and foreign currency:
b.
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.
- 25 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Transactions, assets and liabilities in foreign currency:
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 is achieved when the
Company is exposed, or has rights, to variable returns from its involvement with the
investee and has the ability to affect those returns through its power over the investee.
Potential voting rights are considered when assessing whether an entity has control. 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.
- 26 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
g.
Financial instruments:
1. Financial assets:
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.
- 27 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
h.
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.
i.
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 lessee:
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.
j.
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.
- 28 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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.
k.
Intangible assets:
Intangible assets (Technology) acquired in a business combination are included at fair
value at the acquisition date (see Note 7). 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.
l.
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.
m.
Impairment of non-financial assets:
The Company evaluates the need to record an impairment of the carrying amount of
non-financial assets whenever events or changes in circumstances indicate that the
carrying amount is not recoverable. If the carrying amount of non-financial assets
exceeds their recoverable amount, the assets are reduced to their recoverable amount.
The recoverable amount is the higher of fair value less costs of sale and value in use. In
measuring value in use, the expected future cash flows are discounted using a pre-tax
discount rate that reflects the risks specific to the asset. The recoverable amount of an
asset that does not generate independent cash flows is determined for the cash-
generating unit to which the asset belongs. Impairment losses are recognized in profit or
loss.
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.
- 29 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
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.
n. 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.
- 30 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
o.
Revenue recognition:
Revenues are recognized in profit or loss when the revenues can be measured reliably, it
is probable that the economic benefits associated with the transaction will flow to the
Company and the costs incurred or to be incurred in respect of the transaction can be
measured reliably. When the Company acts as a principal and is exposed to the risks
associated with the transaction, revenues are presented on a gross basis. Revenues are
measured at the fair value of the consideration less any trade discounts.
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.
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 31,2013 and 2012, 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,
the
upgrades, support,
arrangement's elements, including those delivered on a "when and if available basis", in
order to determine if the elements can be separately identified.
training, consultation etc.). The Company evaluates
The Company recognizes revenues from the sale of software only after the significant
risks and rewards of ownership of the software have been transferred to the buyer for
which a necessary, but not sufficient condition, is delivery of the software, either
physically or electronically, or providing the right to use or permission to make copies,
of the software. The Company recognizes revenues from providing software related
services when the outcome can be measured reliably by reference to the stage of
completion of the transaction at the end of the reporting period. If the services consist of
a number of activities that are not defined over a specified period of time, revenues are
recognized on a straight-line basis over the specified period, unless there is evidence
that some other method better represents the stage of completion.
- 31 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
p.
Earnings per share:
Earnings per share are calculated by dividing the net income attributable to equity
holders of the Company by the weighted number of Ordinary shares outstanding during
the period. Basic earnings per share only include shares that were actually outstanding
during the period. Potential Ordinary shares are only included in the computation of
diluted earnings per share when their conversion decreases earnings per share or
increases loss per share from continuing operations. Further, potential Ordinary shares
that are converted during the period are included in diluted earnings per share only until
the conversion date and from that date in basic earnings per share. The Company's share
of earnings of investees is included based on the earnings per share of the investees
multiplied by the number of shares held by the Company.
q.
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.
r.
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
independent actuary. Remeasurements,
comprising of actuarial gains and losses, are recognized immediately in the statement of
financial position with a corresponding debit or credit to other comprehensive income in
the period in which they occur. Remeasurements are not reclassified to profit or loss in
subsequent periods.
is determined using an
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.
s.
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.
- 32 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
t.
Share-based payment transactions:
The Company applies the provisions of IFRS 2, "Share-Based Payment". IFRS 2
requires an expense to be recognized where the Company buys goods or services in
exchange for shares or rights over shares ("equity-settled transactions"), or in exchange
for other assets equivalent in value to a given number of shares of rights over shares
("cash-settled transactions"). The main impact of IFRS 2 on the Company is the
expensing of employees' and directors' share options (equity-settled transactions).
The 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
the share-based payment arrangement or
employee/other service provider at the modification date
is otherwise beneficial
to
u.
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.
- 33 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
v.
Significant accounting judgments, estimates and assumptions 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 7.
- 34 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
w. Commencing from January 1, 2013, the company applies IFRS 10. "Consolidated
financial statements", IFRS 12, "Disclosure of Interests in Other Entities" and IFRS 13,
"Fair Value Measurement". This adoption did not have any effect on the company's
financial statements.
As a result of the application of IAS 19R, the Company has retroactively applied the
following amendments:
Actuarial gains and losses are recognized in other comprehensive income when
incurred and not carried to profit or loss.
Return on plan assets is recognized in profit or loss based on the discount rate
used to measure the employee benefit liabilities regardless of the actual result of
the investment portfolio.
See note 9.
x.
Disclosure of new standards in the period prior to their adoption
1. IFRS 9, "Financial Instruments":
to replace
a. The IASB issued IFRS 9, "Financial Instruments", the first part of Phase 1 of a
project
Instruments: Recognition and
Measurement". IFRS 9 ("IFRS 9") focuses mainly on the classification and
measurement of financial assets and it applies to all financial assets within the
scope of IAS 39.
IAS 39, "Financial
Amendments regarding derecognition and financial liabilities (Phase 2) have
also been issued. According to those amendments, the provisions of IAS 39 will
continue to apply to derecognition and to financial liabilities for which the fair
value option (designated as measured at fair value through profit or loss) has
not been elected; that is, the classification and measurement provisions of IAS
39 will continue to apply to financial liabilities held for trading and financial
liabilities measured at amortized cost.
In November 2013, the IASB issued a new version of IFRS 9 (IFRS 9 (2013))
which includes the new hedge accounting requirements and related amendments
to IFRS 9, IFRS 7 and IAS 39.
IFRS 9 (2013) does not have a mandatory effective date, but it is available for
adoption now.
The Company believes that IFRS 9 (including all its phases) is not expected to
have a material impact on the financial statements.
- 35 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2. Amendments to IAS 36, "Impairment of Assets":
In May 2013, the IASB issued amendments to IAS 36, "Impairment of Assets" ("the
amendments") regarding the disclosure requirements of fair value less costs of
disposal. The amendments include additional disclosure requirements of the
recoverable amount and fair value. The additional disclosures include the fair value
hierarchy, the valuation techniques and changes therein, the discount rates and the
principal assumptions underlying the valuations.
The amendments are effective for annual periods beginning on January 1, 2014 or
thereafter. Earlier application is permitted.
The appropriate disclosures will be included in the Company's financial statements
upon the first-time adoption of the amendments.
NOTE 3:- SHORT-TERM BANK DEPOSITS
The short-term bank deposits (between three months and a year) as of December 31, 2013 and
2012 in a total of $ 511 thousand and $ 556 thousand, respectively, bearing an annual interest
rate of 0.04%.
NOTE 4: - TRADE RECEIVABLES
Trade receivables (1)
(1) Net of allowance for doubtful debts
December 31,
2012
2013
U.S. dollars in thousands
249
326
656
369
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
2013
2012
101
407
115
*) -
153
80
-
16
33
*) -
249
656
*)
Represents an amount lower than $ 1 thousands.
- 36 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 5:- RESTRICTED CASH
a. As part of a $6.7 million contract signed on May 2013 in which SimiGon was selected
as a prime contractor to deliver a SIMbox based training solution, on June 10, 2013
the Company issued a Performance Bond in favor of its customer in a total amount of
$335 thousand prior to contract deliveries and receiving payments from the client. The
Performance Bond expires on December 17, 2015.
b. To operate an ongoing business account in Bank Mizrahi, the Company is obligated to
secure a deposit in a total amount of $45 thousand in its favor.
c. As part of SimiGon Ltd premises lease agreement, the Company is obligated to secure
a deposit in a total amount of $24 thousand in favor of the landlord.
NOTE 6:- PROPERTY, PLANT AND EQUIPMENT
Composition and movement:
Computers
and
peripheral
equipment
Office
furniture
and
equipment
U.S. dollars in thousands
Leasehold
improvements
Total
Cost:
Balance as of January 1, 2012
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2012
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2013
Accumulated depreciation:
Balance as of January 1, 2012
Disposal during the year
Depreciation during the year
Balance as of December 31, 2012
Disposal during the year
Depreciation during the year
Balance as of December 31, 2013
Depreciated cost as of December 31, 2013
Depreciated cost as of December 31, 2012
686
(6)
42
722
(13)
26
735
643
(6)
32
669
(13)
31
687
48
53
161
(18)
61
204
-
4
208
118
(8)
16
126
-
16
142
66
78
54
-
-
54
-
-
54
53
-
*) -
53
-
*) -
53
1
1
*) Represents an amount lower than $ 1 thousands.
- 37 -
901
(24)
103
980
(13)
30
997
814
(14)
48
848
(13)
47
882
115
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 7:- GOODWILL AND AN INTANGIBLE ASSET
The carrying amount of intangible assets acquired as of December 31, 2013 and 2012 in the
accounts of the Company was as follows:
Technology **)
Goodwill
Total
Carrying amount as of
December 31,
2012
2013
U.S. dollars in thousands
155
1,068
1,223
206
1,068
1,274
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, 2013,
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, 2013, 2012 and 2011, the Company recorded
amortization in the amount of $ 51 thousand, $ 50 thousand and $ 50 thousand,
respectively, which was recorded in cost of revenues.
NOTE 8:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Employees and payroll accruals
Accrued expenses
December 31,
2013
2012
U.S. dollars in thousands
451
357
808
342
336
678
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET
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.
- 38 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET (Cont.)
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.
c.
The amounts recognized in the balance sheet are as follows:
2013
December 31,
2012
U.S. dollars in thousands
2011
Liability at the beginning of the year
Expense recognized in the profit or loss
Benefits paid
Liability at the end of the year
141
65
(29)
177
108
68
(35)
141
122
(52)
38
108
b.
Amounts recognized in the statements of comprehensive income are as follows:
2013
Year ended December 31,
2012
U.S. dollars in thousands
2011
Current service cost
Interest cost
Remeasurement loss (gain) recognized in
the year
Total expense (income) included in profit
or loss
*)
Represents an amount lower than $ 1 thousand.
56
9
*) -
65
47
5
16
68
2
*) -
(54)
(52)
c.
Changes in the present value of defined benefit obligation:
Composition:
2013
Year ended December 31,
2012
U.S. dollars in thousands
2011
Balance at January 1
Interest cost
Current service cost
Benefits paid
Net actuarial loss (gain)
Balance at December 31
141
9
56
(29)
*) -
177
108
5
47
(35)
16
141
122
*) -
2
38
(54)
108
*)
Represents an amount lower than $ 1 thousand.
- 39 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET (Cont.)
d.
The actuarial assumptions used are as follows:
Year ended
December 31,
2012
2013
2011
Discount rate
4.26%
4.57%
4.83%
Future salary increases
4.43%
4.72%
2%
Average expected remaining working
years
6.65
6.30
6.38
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 commencing October 2010, and the Non-Executive Board members
will be granted additional Ordinary shares of the Company.
- 40 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
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.
On October 9, 2013 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.
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.
d.
e.
- 41 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
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 $ 66 thousand and $53
thousand, in respect of the bonus compensation for year 2013 and 2012, respectively.
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.
On August 5, 2013, a total of 19,800 options were exercised under the Company's Stock
Option Plan at an average exercise price of $ 0.043.
f.
g.
h.
Composition of share capital:
December 31,
2013, 2012
and 2011
Authorized
2013
December 31,
2012
Issued and outstanding
2011
Ordinary shares of
NIS 0.01 par value each
100,000,000
47,292,706 47,153,179 44,134,769
Number of shares
i.
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, 2013, an aggregate of 2,281,148
Ordinary shares of the Company are still available for future grant.
- 42 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
On November 24, 2013, the Company’s Board of directors approved the extension of
the Israeli Share and Option Plan for 2003 for additional 10 years under the same terms
and conditions.
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 (the "ISOP")
and will vest quarterly over a period of 4 years commencing from the grant date at an
exercise price of US$0.14.
On April 11, 2013 the Board of Directors granted to the Company employees a total of
155,000 options to purchase Ordinary shares of the company. Such options were
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 $0.33 U.S. dollars.
On May 30, 2013 the Board of Directors granted to the Company employees a total of
150,000 options to purchase Ordinary shares of the company. Such options were
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 $0.42 U.S. dollars.
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, 2013: risk-free interest rates of 1% in year 2013 and a risk-free
interest rates for years 2012 and 2011 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. The weighted
average fair values of the options granted in 2013, 2012 and 2011 were $ 0.38, $ 0.01
and $ 0.15, respectively.
A summary of the activity in options to employees, consultants, and directors (including
the senior management, see j. below) for the years 2013, 2012 and 2011 is as follows:
2013
Year ended December 31,
2012
2011
Number
of
options
Weighted
average
exercise
price
Number
of
options
Weighted
average
exercise
price
Weighted
average
exercise
price
Number
of options
5,021,788
305,000
(19,800)
-
$ 0.133
$ 0.377
$ 0.043
-
$
(344,517) $ 0.053
1,993,248
3,331,288
(9,304)
$ 0.315
$ 0.01
$ 0.09
(103,946) $ 0.6
(189,498) $ 0.17
$ 0.371
2,673,444
$ 0.148
315,000
(47,502)
$ 0.002
(110,245) $ 0.617
(837,449) $ 0.453
Outstanding at
beginning of year
Granted
Exercised
Expired
Forfeited
Outstanding at end of
year
4,962,471
$ 0.134
5,021,788
$ 0.133
1,993,248
$ 0.315
Exercisable options
2,549,519
$ 0.187
1,067,526
$ 0.428
648,683
$ 0.834
- 43 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
The options outstanding as of December 31, 2013, have been separated into ranges of
exercise price as follows:
Options
outstanding
as of
December 31,
Exercise price
2013
Weighted
average
remaining
contractual
life (years)
Options
exercisable
as of
December 31,
2013
$ 0.003 - $ 0.127
$ 0.129 - $ 0.630
$ 1.33 - $ 2.170
3,897,788
864,683
200,000
4,962,471
7.84
4.04
3.36
2,018,726
345,793
185,000
2,549,519
j.
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.
The 2011 EBITDA performance goal was not achieved therefore the first
tranche did not vest.
The 2012 and 2013 EBITDA performance goal was achieved.
- 44 -
NOTES TO THE 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, 2013 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.
3.
4.
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.
- 45 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY (Cont.)
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.
As of December 31, 2013, 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, 2013 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.
k.
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.
For the years ended December 31, 2013 and 2012, the Company recorded share-
based compensation expenses in a total of $66 thousand and $ 51 thousand,
respectively, in respect to the shares granted to the CEO and for the year ended
December 31, 2011, the Company recorded share-based compensation expenses
in a total of $45 thousand in respect to the shares granted to the senior
management.
- 46 -
NOTES TO THE 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.
- 47 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 11:- INCOME TAXES (Cont.)
Tax benefits are available under the Amendment to production facilities (or other
eligible facilities), which are generally required to derive more than 25% of the
company's business income from export. In order to receive the tax benefits, the
Amendment states that a company must make an investment in the beneficiary
enterprise exceeding a minimum amount specified in the Law. Such investment may be
made over a period of no more than three years ending at the end of the year in which
the company requested to have the tax benefits apply to the beneficiary enterprise ("the
Year of Election").
Where a company requests to have the tax benefits apply to an expansion of existing
facilities, then only the expansion will be considered a beneficiary enterprise and the
company's effective tax rate will be the result of a weighted combination of the
applicable rates. In this case, the minimum investment required in order to qualify as a
beneficiary enterprise is required to exceed a certain percentage of the company's
production assets before the expansion. The duration of tax benefits is subject to a
limitation of the earlier of 7 years from the Commencement Year, or 12 years from the
first day of the Year of Election.
Amendments to the Law for the Encouragement of Capital Investments, 1959:
In December 2010, the "Knesset" (Israeli Parliament) passed the Law for Economic
Policy for 2011 and 2012 (Amended Legislation), 2011 ("the Amendment"), which
prescribes, among others, amendments in the Law for the Encouragement of Capital
Investments, 1959 ("the Law"). The Amendment became effective as of January 1,
2011.
According to the Amendment, the benefit tracks in the Law were modified and a flat tax
rate applies to the Company's entire preferred income. Commencing from the 2011 tax
year, the Company will be able to opt to apply (the waiver is non-recourse) the
Amendment and from the elected tax year and onwards, it will be subject to the
amended tax rates that are: 2011 and 2011 - 15% (in development area A - 10%), 2013
and 2014 - 12.5% (in development area A - 7%) and in 2015 and thereafter - 12% (in
development area A - 6%).
b. Measurement of results for tax purposes under the Income Tax (Inflationary
Adjustments) Law, 1985:
Results for tax purposes are measured in terms of earnings in NIS after certain
adjustments for increases in the Israeli Consumer Price Index ("CPI"). As explained in
Note 2d, the financial statements are presented in U.S. dollars. The difference between
the annual change in the Israeli CPI and in the NIS/dollar exchange rate causes a
difference between taxable income or loss and the income or loss before taxes reflected
in the financial statements.
c.
Tax reconciliation:
In 2013, 2012 and 2011, 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.
- 48 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 11:- INCOME TAXES (Cont.)
d.
Carryforward losses:
Domestic:
As of December 31, 2013, 2012 and 2011, the Company had accumulated losses for
Israeli tax purposes of approximately $ 3.4 million, $ 5.3 million and $ 6.5 million,
respectively, which may be carried forward, in order to offset taxable income in the
future, for an indefinite period.
Foreign:
As of December 31, 2013, 2012 and 2011, the federal tax loss carryforwards of the U.S.
subsidiaries amounted to approximately $ 6.4 million, $ 6.1 million and $ 5.5 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.
As of December 31, 2013, the tax loss carryforwards of the Singaporean subsidiary
amounted to approximately $ 44 thousands, which may be carried forward, in order to
offset taxable income in the future, for an indefinite period.
Deferred tax assets relating to carryforward operating losses were not recognized
because their utilization in the foreseeable future is not probable.
e.
Tax rates applicable to the income of the Company and its subsidiaries:
Domestic:
The Israeli corporate tax rate was 24% in 2011 and 25% in 2012 and 2013.
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 the date of sale is subject to
tax at a rate of 25%.
On December 5, 2011, the "Knesset" (Israeli parliament) passed the Law for Tax
Burden Reform (Legislative Amendments), 2011 ("the Law") which, among
others, cancels effective from 2012, the scheduled 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%, as above, the real capital gain tax rate
and the real betterment tax rate were also increased accordingly.
- 49 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 11:- INCOME TAXES (Cont.)
On August 5, 2013, the "Knesset" issued the Law for Changing National
Priorities (Legislative Amendments for Achieving Budget Targets for 2013 and
2014), 2013 ("the Budget Law"), which consists, among others, of fiscal changes
whose main aim is to enhance the collection of taxes in those years.
These changes include, among others, increasing the corporate tax rate from 25%
to 26.5%, cancelling the reduction in the tax rates applicable to privileged
enterprises (9% in development area A and 16% elsewhere) and, in certain cases,
increasing the rate of dividend withholding tax within the scope of the Law for
the Encouragement of Capital Investments to 20% effective from January 1,
2014. There are also other changes such as taxation of revaluation gains effective
from August 1, 2013. The provisions regarding revaluation gains will become
effective only after the publication of regulations defining what should be
considered as "retained earnings not subject to corporate tax" and regulations that
set forth provisions for avoiding double taxation of overseas assets. As of the date
of approval of these financial statements, these regulations have not been issued.
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, 2013, there was no recognized deferred tax liability for taxes that
would be payable on unremitted earnings of the Company and its subsidiaries.
NOTE 12:- OTHER LIABILITIES AND COMMITMENTS
a.
Royalty commitments:
1.
In June 2001, the Company and a third party signed a Cooperation and Project
Funding Agreement with Britech, which is an establishment of the United
Kingdom-Israel Industrial Research and Development Fund.
According to the agreement, Britech agreed to fund, by conditional grant, the
implementation of the proposal submitted by the Company and the third party for
a research and development project in the maximum amount of £ 227 thousand.
- 50 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 12:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
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, 2013, the Company received a total amount of $ 254
thousand.
The Company shall make repayments to KORIL, based on gross sales derived
from the gross invoiced sales value of the products, processes, inventions,
technology, discoveries,
improvements, modifications, methods, software,
specifications, or any form of technical information developed or arising from the
proposal (gross sales). Such payments shall be repaid in U.S. dollars at the rate of
2.5% of the first year's gross sales until 100% of the conditional grant and other
sums have been repaid.
The total non-current liability for the years ended December 31, 2013 and 2012
was $ 200 thousand and $ 197 thousand, respectively.
- 51 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 12:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
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, 2013, 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, 2013 and 2012
was $ 499 thousand and $ 483 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, 2013, the Company received a total amount of $ 95
thousand.
The Company shall make repayments to the OCS, based on gross sales derived
from the gross invoiced sales value of the products, processes, inventions,
technology, discoveries,
improvements, modifications, methods, software,
specifications, or any form of technical information developed or arising from the
proposal (gross sales). Such payments shall be repaid in NIS at the rate of 3% of
the first year's gross sales until 100% of the conditional grant and other sums
have been repaid.
The total non-current liability for the year ended December 31, 2013 and 2012
was $ 78 thousand and $ 68 thousand, respectively.
- 52 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 12:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
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 2016.
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 a lease agreement signed on December 14, 2011 by SimiGon Inc.
4. 4. Future minimum rental payments under non cancellable operating leases are as
follows:
Year ended December 31,
U.S. dollars
in thousands
2014
2015
2016
327
99
69
495
The total expense for the years ended December 31, 2013, 2012 and 2011 was
$ 317 thousand, $ 301 thousand and $ 367 thousand, respectively.
- 53 -
NOTES TO THE 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,
2012
U.S. dollars in thousands
2013
2011
595
72
139
59
14
1,191
2,070
2,084
319
25
16
2
(44)
468
54
64
57
10
714
604 *)
124
(50)
59
8
83
1,367
828
1,793 *)
323
28
12
1
(12)
1,453 *)
245
16
21
1
(41)
2,404
2,145
1,695
1,118
80
123
41
92
9
93
96
1,652
1,000 *)
70
123
70
113
8
67
117
968 *)
105
141
54
106
6
296
23
1,568
1,699
*) Restated to reflect the implementation of IAS 19 (Revised) Employee Benefits.
- 54 -
NOTES TO THE 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
Travel expenses
Professional fees and public company
expenses
Depreciation
Share-based compensation
Doubtful debt provision
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,
2012 *)
U.S. dollars in thousands
2013
2011
681
63
14
314
5
14
(43)
608 *)
60
21
324
5
22
(25)
1,048
1,015
56
1
57
124
29
6
159
122
4
126
147
7
-
154
543 *)
67
21
334
4
28
(18)
979
296
9
305
231
3
33
267
*) Restated to reflect the implementation of IAS 19 (Revised) Employee Benefits.
- 55 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 14:- REVENUES
The Company manages its business on the basis of one reportable segment.
a.
Revenues:
Software licenses and customization
Recurring Maintenance & Support
Training
Year ended
December 31,
2012
U.S. dollars in thousands
2013
2011
6,356
1,745
71
8,172
5,420
1,342
43
6,805
4,507
910
67
5,484
b.
Geographical information:
Revenues classified by geographical destinations based on the customer location:
EMEA and South America (1)
North America
Asia Pacific
Year ended
December 31,
2012
U.S. dollars in thousands
2013
2011
1,399
5,032
1,741
8,172
1,730
4,928
147
6,805
1,475
3,892
117
5,484
(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:
EMEA and South America
North America
2013
December 31,
2012
U.S. dollars in thousands
2011
41
1,297
1,338
37
1,369
1,406
54
1,357
1,411
- 56 -
NOTES TO THE 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
Customer F
Year ended
December 31,
2012
24%
8%
17%
19%
13%
-
2013
21%
10%
15%
20%
6%
20%
2011
49%
12%
13%
-
-
-
NOTE 15:- EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted earnings per
share computations:
Year ended
December 31,
2012 *)
U.S. dollars in thousands
2011*)
2013
Net income for the year
896
708
321
2013
2012
2011
Weighted average number of Ordinary shares
for computing basic earnings (loss) per share
47,188
45,884
42,867
Effect of dilution:
Share options
1,943
570
65
Weighted average number of Ordinary shares
adjusted for the effect of dilution
49,131
46,454
42,932
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.
*) Restated to reflect the implementation of IAS 19 (Revised) Employee Benefits.
- 57 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
Year ended
December 31,
2012
U.S. dollars in thousands
2011
2013
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,
2012
U.S. dollars in thousands
2011
2013
1,560
83
1,643
1,448
87
1,535
1,281
314
1,595
*)
Includes increase in long-term employee benefits due to change in provision for
severance pay in a total amount of $ 40 thousand, $ 47 thousand and $ 37
thousand for the years ended December 31, 2013, 2012 and 2011, respectively.
Year 2013 include bonus payment in a total of $ 17 thousand to the VP of
Business Development and VP Projects.
Year 2013 includes bonus provision to Mr. Efraim Manea, a director of the
Company and its CFO with respect to fiscal year 2013 in the amount of $33
thousands (see Note 16d).
Year 2013 includes bonus provision to Mr. Ami Vizer, the Company's Chief
Executive Officer and executive director (“the CEO”) in respect to fiscal year
2013 in the amount of $115 thousands, and a payment of $ 6 thousand paid to the
CEO in respect of the bonus of the fiscal year 2012 (see Note 16e).
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 bonus in a total of $ 30 thousand and a bonus provision of
$114 thousand to the CEO in respect of the fiscal year 2011 and 2012;
respectively (see Note 16e).
- 58 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
**) Years 2013 and 2012 include share-based compensation in a total of $ 51
thousand and $51 thousand; respectively, due the Share Bonus Plan as described
under Note 10e, in respect to the CEO.
Year 2013 includes share-based compensation in a total of $ 15 thousand and $17
thousands due Options granted in section 1 under Note 10i, in respect to the CEO
and senior management, respectively.
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.
c.
Compensation policy for the Company’s Directors and officers:
On November 24, 2013, the Company’s Board of directors approved the adoption
of a Compensation policy for the Company’s Directors and officers (the
“Compensation Policy Plan”) as required by the Israeli Companies Law in order
to provide the Company the ability to attract, retain, reward and motivate highly
skilled Officers and to assure that the compensation structure meets the
Company's interests and its overall financial and strategic objectives.
The Compensation policy for the Company’s Directors and officers was approved
at SimiGon Annual General Meeting for year 2013 held on December 30, 2013.
d.
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, subject to
revenues, net profit and share price criteria and milestones.
On November 24, 2013, 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 2014 in accordance to the Company’s Compensation Policy
Plan mentioned above. The granted bonus is in the amount of up to $35
thousands, subject to revenues, net profit and share price criteria and milestones.
- 59 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
e.
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 (the “Conditions”). Based on the Conditions above, the Company
recorded as of December 31, 2012, a provision of $114 thousands in respect to
Mr Ami Vizer bonus for year 2012. The actual bonus was paid on April 2013
amounted to $ 120 thousands.
On November 24, 2013, the Board of Directors approved the grant Mr. Ami
Vizer, the Company's Chief Executive Officer and executive director a one-time
cash bonus to with respect to fiscal year 2014 in accordance to the Company’s
Compensation Policy Plan mentioned above. The granted bonus is in the amount
of up to $125 thousands, subject to revenues, net profit and share price criteria
and milestones. On December 30, 2013 the Company’s Annual General Meeting
for year 2013, approved 2014 bonus grant to Mr Ami Vizer.
Total salary (excluding share bonus grant mentioned under Notes 10e) of Mr.
Ami Vizer during year 2013 amounted to an annual salary of $ 345 thousand,
related benefits include bonus for 2012 fiscal year of $120 thousands, annual
social benefits of $ 43 thousands (12.5% out of his annual salary), expenses
allowance of $6 thousands, car insurance of $2K work insurance of $2 thousands,
recovery fees of $1 thousands, severance pay of $29 thousands, vacation days of
$39 thousands and health insurance of $31 thousands. In addition, the Company
has made a provision for 2013 bonus in a total of $ 114 thousands.
In the annual general meeting for year 2013 held on December 30, 2013, the
shareholders, reapproved the employment agreement of Mr. Ami Vizer as the
Company's Chief Executive Officer and an executive director.
- 60 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 16:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
2.
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.
On April 22 2014, the Company signed on a Loan Agreement with Mr. Rami
Weitz (“the Loan Agreement”) according to which, the Company will provide
Mr.Weitz with a loan in a total of $60 thousand baring an accrue interest at the
minimum rate mandated by law, repayable within 12 months till April 7, 2015.
According to the Loan Agreement, the Company shall have the right at any time
(even prior to the due repayment date) to set-off and deduct any amount due
hereunder from any amount payable by the Lender to Mr.Weitz, to Packet
Science Ltd. or to any company in which Mr.Weitz and/or his immediate family
and/or third respective affiliates have a controlling interest.
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.
- 61 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 17:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
Cash and cash equivalents and short-term bank deposits are invested in major banks in
Israel and the United States. Management believes that the financial institutions that
hold investments of the Company and its subsidiaries are financially sound and,
accordingly, minimal credit risk exists with respect to these investments.
The Company trades only with creditworthy customers. The Company performs
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, 2013, cash and cash equivalents together with the Company's short
time bank deposits amounted to $ 8,612 thousand.
c.
Liquidity risk:
The table below presents the maturity profile of the Company's financial liabilities
based on contractual undiscounted payments:
December 31, 2013:
Less than
one year
3 to 4
Years
U.S. dollars in thousands
Total
Government grants
Trade payables
Other accounts payable and accrued
expenses
38
143
770
951
777
-
-
777
815
143
770
1,728
- 62 -
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 17:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
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
38
140
640
818
748
-
-
748
786
140
640
1,566
NOTE 18:- SUBSEQUENT EVENTS
On April 24, 2014 the Company’s Board of Directors approved the distribution of a maiden
interim dividend in the amount of $268 thousands (approximately $0.543 cent per share).
The dividend is payable on May 30, 2014. The record date for payment of the dividend is May
9, 2014. The ex-dividend date is May 7, 2014.
- - - - - - - - - - - - - - - - - -
F:\W2000\w2000\3381\M\13\E$12-SIMIGON-IFRS.docx
- 63 -
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
- 64 -
WWW.SIMIGON.COM