WE TAKE DISTRIBUTED SIMULATION TRAINING
PERSONALLY
2017
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 air forces and commercial airlines
worldwide. Founded in 1998, SimiGon maintains offices in
Israel and the United States.
Contents
3
4
6
7
14
16
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, SimiGon offers personal, portable and cost-effective training solutions
optimized for the PC or laptop. Our off-the-shelf platform and products – for air, land,
sea and industrial applications – are highly flexible, adaptable and robust. This
“personal” approach enables multiple high-skill users to train simultaneously on
multiple platforms, saving defence and civilian organizations significant time and
money. We offer state-of-the-art simulation solutions for non-training applications,
bringing the best of personal simulation to wider audiences.
Financial Highlights
Audited final results slightly ahead of trading update
on 16 January 2018
Revenues of $4.34 million (2016: $6.02 million)
Net loss of $0.95 million (2016: net profit of $0.36
million)
Gross margin 78% (2016: 69%)
Basic and diluted loss per share of $0.02 (2016:
earning per share $0.01)
Delivery milestones completed for large scale contract as
prime contractor, including the successful completion of
all systems delivery milestones for $6.7 million contract
announced in June 2013;
Continued support for major military flight training
programmes including advanced jet training program and
the U.S. Air Force Air Education Training Command
Undergraduate Remotely Piloted Aircraft Training
(“URT”);
Continued Research & Development (“R&D”) efforts to
position the Company for new high growth market
opportunities and support simulation based training
across all hardware devices; and
Operational Highlights
Continue to identify additional opportunities and expand
into the commercial and civilian training markets.
Continued success in securing additional business in
core defence-related market;
Successfully
leveraged the USAF T-6A Flight
to win
(“FTD”) upgrade
Training Devices
Contractor Logistics Support modification;
Successful support for Lockheed Martin’s UK
(“UKMFTS”)
Military Flight Training System
including
offsite
extended
development program support and additional
licenses;
Delivery milestones
contract
announced in June 2016 for the Israeli Air Force for
F16 maintenance trainers (IAF F16 Maintenance
Trainer);
for $2 million
onsite
and
3
APPLYING ROBUST TRAINING & SIMULATION SYSTEMS FOR
MULTIPLE DOMAINS
Robust Training and Simulation systems are needed to improve individual readiness and organization-
wide performance for high skills jobs in multiple domains.
Key Trends
The military and civilian training and simulation markets
are forecast to achieve significant growth over the next
decade due to new training requirements for high skill
positions and the evident cost savings available through
advanced training technology.
The Military Training and Simulation market, SimiGon’s
traditional core market, is expected to reach US$17 billion
by 2026 while the civilian, Smart Education and Learning
market, representing new expansion opportunities for
SimiGon, is expected to grow from $193.24 billion in 2016
to $586.04 billion by 2021, a compound growth rate of
25%. This market includes Simulation, eLearning, Virtual
Instructor, Collaborative, Adaptive and Blended learning,
core technology components of SimiGon’s training
solutions.
Commercial training continues to value technology-based
solutions that reduce costs, similar to the ongoing Military
training trend.
Well trained operators in demanding, high skill roles are
required in military and civilian organizations. The type of
training and delivery platform is wide ranging while a
common core technology capable of meeting the
disparate requirements of each domain
is highly
desirable. While the best simulation technology can’t
completely fully replicate the sensation of landing on a
moving aircraft carrier; drilling for oil on a deep sea rig;
providing maintenance service on an F-16 flight line,
performing de-icing on military and commercial aircraft
readying for their mission /flight, or training for customer
service-driven
training has
significant usefulness for hard skills and soft skills jobs.
This is supported by a large body of research. In short, by
simulating the operating environment and real world
conditions, personnel are better prepared to handle real
life situations from basic operations to troubleshooting to
emergencies, in a safe, cost effective, environmentally
friendly setting. The military sector is driven by new
platform acquisitions and technology upgrades requiring
advanced training of complex systems.
simulation
industries,
Likewise, the civilian market is driven by a need to reduce
accidents and liability through advanced training methods
and technologies.
Training and simulation is utilized across multiple military and
civilian domains to provide realistic, cost-effective training.
For example,
in military aviation, the cost savings of
simulated vs. flight hour is generality 90% or greater. With
this enormous cost savings, the Government and Civilian
sectors recognize the value of simulation in total training
programs. Additional efficiencies delivered through training
technologies such as an Intelligent Tutor include a dynamic
training capacity capable of adapting to a trainee’s skill level
and enabling
learning. The market will
continue to seek and require cost effective, advanced
training and simulation technologies and solutions. SimiGon’s
disruptive training and simulation technologies, solutions and
services provide effective and efficient training systems to
the market, delivering substantial time and cost savings for
customer and partners.
individual pace
Additional business growth is developed through system
maintenance, upgrades and support contracts for existing
training devices as well as technology upgrades and further
deployment of training aids, devices and simulators.
SimiGon’s technology products and services mix provide
added value to customer requirements through improved
training efficiencies and training analytics for saving time and
money.
Business Growth Opportunities
SimiGon is engaged in several market plays that will lead to
sustainable, rapid growth.
SimiGon’s role as a Prime Contractor to the US and
Government sector as well as a key technology supplier to
Tier One integrators, is leading to recurring business with
current customers and new business.
The Company’s systems are globally recognized as a leading
training technology for achieving proficiency in complex skills
and operations for individual and collective training. The
Company is building on the expertise it has in delivering
advanced training solutions to develop near term and long
term business in the Government sector.
4
HIGH SKILLS JOBS REQUIRE ADVANCED, PERSONALIZED TRAINING &
SIMULATION (CONT.)
The Company is also successfully expanding into new,
targeted vertical markets such as maintenance training,
commercial aviation training, oil and gas industry training
and homeland security.
According to BlackRock, the aerospace and military
subsector offer additional upside following President
Trump's election, rising geo-political tension, and tax
reform. Boeing estimates a worldwide requirement for
over 39,620 new jet airplanes, valued at $5.9 trillion,
attributing this to evolving aviation product offerings and
growth in emerging markets.
For the period of 2018-2023, the military fixed-wing
aircraft market is expected to be reaching a value of more
than $82 billion by 2023, with a growth rate of 4%. The
military fixed-wing aircraft market growth is expected to be
driven by the replacement of ageing military aircraft,
increased
internal and external security threats, and
modernization strategies.
this market, while
Multi-role and transport aircraft are expected to account
for 59.3% and 23% of
the
reconnaissance and surveillance aircraft and bombers
segments split the rest of the market. Additionally, large
multi-role platform programs are being performed by
countries such as India, South Korea, Pakistan, and Japan.
is
The Unmanned Aircraft Vehicles
estimated to be worth $20.71 billion in 2018 and expected
to be worth $52.3 billion by 2025, with a growth rate of
14.15% between 2018 to 2025.
(UAV) market
Lt. Gen. Chris Nowland, the Air Force deputy chief of staff
for operations, plans and requirements (AF/A3), said, “We
focus on fighter pilots, but it’s not just [them]. Our problem
is capacity. It’s how do we get the throughput up to
produce the number of pilots we want.” The Federal
Aviation Administration's issuing draft rules for commercial
drone flights is having a major effect.
According to BI Intelligence, many companies are already
authorized to fly drones commercially under a US
government
of
consumer drones will quadruple. Price competition and
new technologies will make flying drones easier. Revenues
from drones sales are expected to top $12 billion in 2021.
"exemption"
program.
Shipments
Major multinational tech companies such as Samsung,
Google, Amazon and Facebook, as well as defense and
aerospace corporations are developing UAV businesses
either organically or through acquisitions.
A key component of the aforementioned $586 billion global
smart education & learning market is Learning Management
Systems (LMS). The market share of LMS is expected to
increase due to its ability to create and deliver course
according to customer needs, facilitating students and
instructors collaboration 24/7/365 through mobile access.
The North American market is expected to hold the largest
market share during the forecast period because of the
prevalence of smart devices.
SimiGon’s high technology training platform fulfills multiple
in this market, comprised of e-learning, virtual
roles
learning,
learning, social
instructor-led training, mobile
simulation-based learning, and adaptive learning.
In the civilian aviation sector, Boeing’s Current Aircraft
Finance Market Outlook states there was approximately
$127 billion worth of aircraft deliveries in 2016, up from
$122 billion in 2015. This is expected to reach $172 billion
by 2020. Boeing’s 2016 Current Market Outlook (CMO)
projects a demand for 39,620 new airplanes over the next
20 years, worth $5.9 trillion.
This growth will place an extraordinary demand for new
airline pilots and technicians. Boeing forecasts that by 2035
the aviation industry will need to supply more than two
million new aviation personnel—617,000 commercial airline
pilots, 679,000 maintenance technicians, and 814,000 cabin
crew. Skilled Instructors will also be required to support this
workforce.
This market presents the Company with a remarkable and
training
SimiGon’s
exciting opportunity.
technologies, methodologies and solutions, proven and
successful
in the military aviation market, are fully
transferable to commercial aviation training.
innovative
The Company’s current and past performance is essential to
compete and win new contracts in the Government and
Civilian sectors and achieve growth. The ability to leverage
SimiGon R&D and technologies for multiple domains
remains consistent with the Company’s strategy to be active
in multiple vertical markets. SimiGon delivers the advanced,
training and simulation management systems and services
that high skills and professional organizations demand.
5
GETTING PERSONAL
WITH DISTRIBUTED SIMULATION SOLUTIONS
SimiGon’s comprehensive portfolio of off-the-shelf solutions – including a state-of-the-art simulation platform and range of
compelling products – “closes the knowledge gap” for professional users. At the same time, SimiGon’s flexible solutions are
easily integrated either by customer organizations or third-party systems integrators for both military and civilian
applications.
SIMbox
SimiGon is the creator of SIMbox, a leading PC-based
platform for creating, managing and deploying simulation
based content across multiple domains including training,
mission debriefing, homeland security and entertainment.
SIMbox is a flexible, off-the-shelf 3D simulation engine
comprised of a wide array of software modules that
empowers users to create an unlimited range of new
products and content. Built from the ground up as a robust
flexible platform, SIMbox has been deployed
and
successfully by
large training and simulation systems
providers, leading military contractors, and multiplied air
forces and commercial airlines worldwide. SIMbox
is
comprised of three main environments:
SIMbox Toolkit development environment: SIMbox
Toolkit is an easy-to-use development 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
for
(LMS), contains various software modules used
configuration management of developed content, control
over content distribution, data gathering from end users,
and data analysis and report generation.
SIMbox Runtime delivery environment: SIMbox Runtime
provides hi-fidelity 3D distributed simulations that place
the user in a virtual or constructive environment with
numerous viewpoints
for both military and civilian
applications.
Major Existing products under SIMbox
VR Aircraft De-icing Simulation System
F-16 Maintenance Training Device
F-16 Aircrew Training Devices
T-6A Aircrew Training Devices
C-208 – Cessna Caravan Training Device
Sensor Operator Training System
UAS Training Device
Simulation Development Environment
Learning Management System
Learning and Content Management System
After Action Review/Playback System
Driver Training System
KnowBook™ Family
KnowBook is a family of PC-based training applications used
by leading organisations for training professional users.
learning,
KnowBook provides a common platform for
training, planning and debriefing.
The key members of the KnowBook family are:
• AirBook™: the family’s flagship application that enables
aircrew and organisations to remain completely updated
with the rapidly changing demands of the military and
civilian aviation world.
• GroundBook, MarineBook and CarBook: the newest
members of the KnowBook family designed for ground,
maritime and driving training scenarios.
advanced
post-mission
Debriefing Systems
SimiGon
debriefing
offers
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.
6
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP
Chairman & CEO Reviews
Chairman’s Statement
“I am encouraged by the many exciting
business and Research & Development
activities the Group
in,
which are expected to deliver and long
term success”
is engaged
On behalf of the Board, I would like to thank our dedicated
employees whose expertise, passion and drive to make us
successful provide the required forward thrust to the
business, and to our shareholders and customers for their
ongoing support.
Alistair Rae, Chairman
Though circumstances largely outside of SimiGon’s control
have impacted the financial performance for the year, the
fundamentals of the business remained strong, with a
healthy base of recurring revenues and improvements
attained across a number of strategic objectives.
SimiGon has successfully continued the deliveries for new
and ongoing strategic programs, meeting and exceeding
customer expectations. Throughout year 2017,
the
Company continued its organic growth strategy, winning
new business with existing and new strategic customers.
is
in
its
technology
to deliver growth
focused on successfully advancing and
SimiGon
leveraging
its
established aviation market while entering additional
markets requiring advanced personal training. Based on
the various markets SimiGon is actively engaged in and the
multipliers each represents, the Board of Directors is
confident in the Company’s ability to build sustainable,
long term growth. SimiGon technologies and applications
are truly unique and present significant value-add to its
customers and markets across defense, commercial and
eventually consumers.
SimiGon offers a robust, versatile training platform that is
being used to develop more diverse applications and
capture more opportunities and I am encouraged by the
many exciting business and Research & Development
activities the Group is engaged in, which are expected to
deliver and long term success.
7
Alistair Rae
Chairman
Chief Executive’s Review
is well positioned
in the
“SimiGon
simulation and training market
for
developing and delivering high tech
solutions for the industry and has a
customer
business
foundation to propel the Company to its
next stage of growth”.
partners
and
Amos Vizer, President & CEO
As previously announced the financial results for the Period
have been adversely affected by a number of contributing
factors resulting in both revenue and profit performance
being behind what we had hoped to achieve at the outset of
the year. Procedural delays in concluding the signatory
processes for the significant contract with the Israeli Air
Force resulted in the contract commencing later in the
Period than expected. In addition we have only been able to
recognise half of the revenue, despite recognising all of the
costs, for another significant contract in the civilian training
market.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Despite these frustrating setbacks, related to the timing of
revenue recognition rather than actual underperformance,
the board remains optimistic about the long term growth
profile of the business. We are confident that the work we
in relation to research and
have continued to do
development and repositioning the Company to be seen as
a leading technology partner across a number of markets
will come to fruition. This confidence is underlined by the
fact that we have a backlog of over $20 million over the
next ten years, approximately $5 million of which is
expected to be delivered and recognised in 2018 (including
the contract signed with a particular customer in the
civilian training market).
Overview
While the Company's financial performance for year 2017
has been disappointing, the underlying business remains
profitable and continues to perform well with new
business won and recurring revenues from existing
strategic partners. The pipeline of new business in the
Company's core military, aviation and non-military verticals
remains strong and the Board is encouraged by new
opportunities identified in the mass application market.
This is demonstrated in the Group’s ten year backlog of
over $20 million with $5 million expected to be recognized
as revenue in FY2018 (including the contract signed with a
particular customer in the civilian training market).
As announced in the trading update in January 2018,
procedural delays in concluding the signatory processes
over the IAF F16 Maintenance Trainer were resolved later
in the Period than expected. In addition, the Company has
been unable, as previously announced, to recognize
approximately $0.7 million of revenue related to services
provided to a particular customer in the civilian training
market, for which partial payment has yet to be received.
The Company had initially taken a very prudent approach
to the recognition of revenue from this contract but,
following discussions with
the
Company’s auditors, revenue has been partially recognized
in this period.
and associated costs fully recognized
Discussions continue with that customer.
the customer and
Together with ongoing investment in the business, our
reported results for the Period have been affected. For the
12 months ended 31 December 2017, revenue was $4.34
million (2016: $6.02 million) and loss before income tax of
$0.96 million (2016: profit before income tax of $0.29
million).
The Company maintains a strong balance sheet with liquid
cash balances of $7.79 million as at 31 December 2017 as
compared to $8.14 million as at 31 December 2016.
Notwithstanding the financial performance having been
adversely affected by events outside our control, during the
year, the Company continued to progress operationally with
the underlying business, including the successful delivery
milestones of its long term contracts. This includes, final
deliveries for a $6.7m aviation training contract initially
awarded in June 2013, delivering project milestones with
Check-6 for training in the energy and mining industries and
successfully continuing the URT program. In addition, as a
result of successful deliveries and proven technology,
SimiGon was awarded additional work scope in relation to
UKMFTS program after successfully converting delivery of T-
6A FTD into an additional support contract with the USAF.
The Company’s R&D team continues to stay ahead of the
market with major advances
in simulation streaming,
graphic engine and Image Generation capabilities, Machine
Learning and Training Management System infrastructure to
boost SIMbox technology and increase market penetration
across military and civilian training markets. Significant
progress has been made in adapting the platform for
expansion into new domains in order to leverage the
Company’s technology beyond the core defence market
/ consumer
into commercial verticals and civilian
applications and to be in line with a fundamental shift in
training through immersive experiences, including Virtual
Reality, Augmented Reality and Mixed Reality, rather than
reading manuals.
In addition to its traditional licenses business, SimiGon’s
Software as a Service (“SaaS”) based business model
continued addressing the market with SaaS based contracts.
8
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
It is SimiGon’s flexibility in being able to offer both business
models that is a key differentiator in the market. SaaS
based contracts now represent more than half of the
business in terms of total revenue. The Company expects
to maintain a consistent level of SaaS revenue in the near-
term. The Company’s base annual SaaS based contracts
enhance SimiGon’s recurring revenues, providing greater
visibility and backlog as these are signed, unrecognized
contracts supporting its growth.
SimiGon has been engaged in identifying new market
opportunities in which it can deploy its advanced training
and simulation technology solutions. Identified target
markets include civilian driver training and civilian aviation.
In addition, the company has continued to commercialise
opportunities in other vertical civilian markets such as the
oil and gas industry, maintenance training and construction
equipment training. This provides the Company with an
opportunity to pursue as a result of the fundamental shift
in “learning by doing,” supported by Simulation Based
Training technologies, rather than user manuals.
Markets
Operational Review
The Company remains at the forefront to of design and
application of highly technical simulation and training
solutions. SimiGon’s core technology platform, SIMbox,
and associated services were developed to provide large
simulation training programmes to governments and
private sector organisations. By leveraging the highly agile,
core SIMbox technology platform, simulation content of
can be applied across multiple devices to create a learning
environment for a range of domains.
SimiGon’s strategic, simulation-based training programs
are available in the traditional license fee business model
or as SaaS. The Company’s flexible business strategy allows
it to address a broad range of training domains across
various sectors.
9
Markets:
The Company characterizes its target markets as follows:
Military and defence related industry
The Company’s track record of on-time and cost-effective
solutions and deliveries in the military and defence industry
has led to winning new military and non-military related
contracts in different geographic territories, as well as add-
on contracts with existing customers.
SimiGon has historically supplied
large training and
simulation environments for the US Government and
friendly nations. Within this core market, the Company
continues to cement its position as a preferred technology
supplier for the premier military training programmes, such
as the UKMFTS, IAF F16 Maintenance Trainer and the USAF
T-6A FTD.
The Company is constantly working to position itself to win
large military training mandates opportunities.
Civilian and Commercial vertical markets
The civilian, Smart Education and Learning market
is
expected to grow nearly 25% annually, from $193.24 billion
in 2016 to $586.04 billion by 2021, representing new
opportunities for SimiGon.
The Company has
identified opportunities within the
market as training techniques develop and begin to
encompass more Virtual Reality, Mixed Reality and
Augmented Reality. The emerging trend towards Simulation
Based Training, led by dynamic Virtual Instructors is gaining
momentum, with consumers demanding more immersive
training in learning and training regimes.
is
taking advantage of
SimiGon
this cultural and
demographic shift - and opportunity – amid the wider
consumer market with a mature and comprehensive
market ready training solution. For example, the Company
is using the Israeli Air Force F-16 maintenance contract
announced on 20 June 2016 as a working case study of the
benefits of
its products to pursue civilian aviation
maintenance training mandates.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
The Company’s disruptive, commercial off-the-shelf (COTS)
technologies can be used to create top layer application
content to deliver training environments
in vertical
commercial markets,
including commercial aviation,
homeland security, driver safety, medicine, energy. These
targeted verticals share similar requirements to the
defence-related industries in that they are highly regulated
and require workers to be highly skilled and constantly
developing and training. SimiGon is aggressively pursuing
opportunities to grow market share and broaden the
applications for its software offering in new domains.
Among the Company’s advances in the civilian segment
include a $0.1 million contract with the FAA to deliver its
SIMbox simulation development tools and training in
support of the FAA's advanced Unmanned Aircraft Systems
Research Simulator ("AURS"). This contract is a significant
milestone in SimiGon's expansion into civilian vertical
markets and demonstrates the market's recognition of
SIMbox as an effective R&D toolkit for design and
development as well as an advanced training system
platform. As announced on February 19, 2018, SimiGon has
secured an additional contract with the FAA providing the
Company's SIMbox simulation software, SIMbox simulation
development tools, and engineering services for the FAA's
AURS program.
Business Model
long-term, high value, sticky SaaS
SimiGon's strategy, in line with market requirements, is to
focus on
license
contracts that provide better revenue and profit visibility
as a result of distributing over the Period in which they are
provided rather than on single lump sum license sales.
With SaaS-based contracts, the recurring maintenance and
support stream is already included in the contract terms. In
its
addition, the Company maintains flexibility with
traditional perpetual
the
fee model where
license
Company is paid for software license and support, as well
as providing turnkey solutions for customers and partners
as a Prime contractor or Sub-contractor.
10
Growth Strategy
SimiGon’s focus on business growth is to increase its
footprint within the existing customer base through
continuous product
into new
domains using the experience and technologies developed
from its defence contracts.
innovation and expand
SimiGon’s highly scalable, robust COTS technology
is
ideally positioned to address new domains with minimal
customization. New projects and markets utilize the
existing product infrastructure and developer tools to
create the new application content; once developed, it is
leveraged to target the full market. The Company’s
platform has an extensive track record of success to
support this effort.
The multiple market opportunities provided the Virtual
Reality market which is estimated at more than $30 billion
by Forbes excite the Company, as its training applications
are already benefiting from its plug & play capability with
various Virtual Reality headsets.
R&D
The Company’s commitment to R&D is integral to growth,
ensuring it remains at the forefront of new technologies.
This allows the Company to pursue new opportunities
while maintaining a business of solutions, upgrades and
enhancements to deepen its relationship with existing
clients and capture new customers.
fully
immersive
SimiGon achieved numerous R&D milestones, including
compatibility and support for Virtual Reality headsets. The
Company sees the rise of Virtual Reality as integral to the
provision of cost-effective,
training
solutions, in the near future, and is well prepared to meet
demand. Another major investment has been made in
improving its graphic engine capabilities to support high
resolution simulation models and terrain databases so high
fidelity training devices can now be fully driven by SimiGon
software and provide complete scalability across the
hardware spectrum.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Always seeking ways to improve and better support
training developers and end users, SimiGon has also
turned its attention to enhancing its user interface, further
differentiating SimiGon from the wider market.
On the marketing side, the Company has boosted
marketing efforts and collateral, including the launch of a
new corporate website along with improvements to its
digital marketing capabilities. These have been designed
to support the Group as it ramps up its campaigns to enter
new markets and engage new customers as well as
growing market presence in markets it already operates.
Significant contracts
New contracts
In November 2017, SimiGon received final regulatory
approval for a $2 million purchase order received from the
Israeli Air Force ("IAF") (initially announced on 20 June
2016). As reported in the Company's interim results on 25
September 2017, the approval processes in respect of the
contract has been subject to ongoing procedural delays.
The contract is for the provision of F-16 maintenance
simulation based training systems to the IAF's technician
school in Haifa. The client-server system will support 60
trainees annually and each trainee will have a personal
workstation allowing them to learn avionics and front line
maintenance with the support of a virtual instructor for a
immersive, virtual
self-paced
environment.
syllabus
in a
fully
SimiGon was awarded with a prime contract with the US
FAA to deliver the SIMbox simulation development tools
and training in support of the FAA's advanced Unmanned
Aircraft Systems ("UAS") Research Simulator. This contract
was a significant milestone in SimiGon's expansion into
civilian vertical markets including civilian aviation and
civilian UAS. It also establishes the FAA as a SIMbox
Certified Organization ("SIMCO"), providing the FAA with
an internal SIMbox development capability. This win also
demonstrates the market's recognition of SIMbox as an
effective R&D toolset for design and development as well
as an advanced training system platform.
11
Long term contracts
The Company maintained its solid portfolio of long term
partnerships developing further business and providing
revenue visibility. Many of these partnerships are expected
to continue with additional contracts through 2018 and
beyond.
The support of SimiGon for UKMFTS as a technology and
services provider to Lockheed Martin, has continued and
now in its eighth year. The Company continues to deliver
under this long term contract, exceeding partner and end
user expectations of SimiGon's
technologies and
performance.
A maintenance and support contract awarded to SimiGon
by USAF for the SIMbox based T-6A Modular Training
Devices SimiGon delivered as part of a June 2011 contract
long term nature of the
further demonstrates the
relationship with this strategic customer.
During 2017, SimiGon continued in its efforts to support
this customer and expand this relationship. As a result, The
Company was awarded on February 2018 with a 28 month
contract amendment by the USAF for additional Contractor
Logistics Support (CLS) services for SIMbox-based T-6A
Level 5 FAA Compliant Flight Training Devices (FTD).
Check-6 Inc., one of the leading providers of training
solutions to the energy and mining industries, is a good
example of SimiGon's ability to help companies achieve
new growth. Throughout the life of the contract, SimiGon
has successfully executed its agreed deliverables. This
long term business
relationship continues to yield
opportunities. The Company is optimistic that additional
agreements will be executed to extend this relationship.
SimiGon’s relationship with a major existing European
customer, which it has been supplying with software and
services since 2009, continues to yield long term business.
The customer is operating SimiGon training solutions in
four different training centers daily and is receiving very
positive customer reviews. SimiGon is certain that this
relationship will continue and lead to additional future
orders.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
SimiGon continued its support for successful Unmanned
Aerial Vehicle ("UAV") training solutions for a leading
provider in the small tactical unmanned aircraft systems
remains solid. Through SimiGon's ecosystem, the SIMbox
technology supports initial operator training and advanced
operational training at the schoolhouse.
As announced by the Company on 5 July 2017, SimiGon
had successful completed all systems delivery milestones
and received the requisite client confirmations in relation
to the $6.7 million contract announced in June 2013. The
final solution provided to the customer offers the trainees
with personalized, dynamic training lessons while utilizing
SimiGon's Virtual Instructor technology. The successful
collaboration with the customer has led to a more
system being developed. The
advanced
experience gained from this turnkey programme will be
useful in marketing SIMbox training solution to other
potential customers worldwide, extending SimiGon's
market reach.
training
To date, pursuant to the Programme, 225,000 shares have
been bought back on March 2, 2018 at the price per
Ordinary Share of 15.218 pence. The Board does not
intend to recommend the payment of a dividend.
Financial Performance
Revenue for the year ended 31 December 2017 was $4.34
million, compared to $6.02 million in 2016. 40% of
SimiGon's revenues came from North America (2016:
44%), 42% from Europe, Middle East, South America and
Australia (2016: 19%) and 18% from the Far East (2016:
37%).
Gross profit for the year ended 31 December 2017 was
$3.36 million, as compared to $4.1 million for the year
ended 31 December 2016. Accordingly, gross margins
increased to 78% for the year ended 31 December 2017 as
compared to 69% for the year ended 31 December 2016.
Share buy-back programme and Annual
Dividend
Net loss for the fiscal year of $0.95 million (2016: net profit
of $0.36 million).
Total operating expenses for the year ended 31 December
2017 increased by 10% to $4.32 million as compared to
$3.91 million for the year ended 31 December 2016.
Research and development expenses for year ended 31
December 2017 increased by 22% to $2.09 million as
compared to $1.71 million for the year ended 31
December 2016, mainly due to increase salary expenses.
Marketing expenses for the year ended 31 December 2017
increased by 7% to $1.17 million as compared to $1.09
million for the year ended 31 December 2016 mainly due
sales commissions and salary expenses.
General and administration expenses for the year ended
31 December 2017 decreased by 5% to $1.05 million as
compared to $1.11 million the year ended 31 December
2016 mainly due provision for doubtful debts recorded in
year 2016.
to USD$106,000
On December 1, 2017 the Company put in place an
for
irrevocable, non-discretionary programme
the
repurchase of up
(approximately
£79,000) of its ordinary shares (the "Programme"). The
Programme is independently managed by finnCap Ltd, the
Company's nominated adviser and broker, which will
make trading decisions independently and without the
shares
influence of
repurchased on behalf of the Company will be held in
treasury and will be notified to a Regulatory Information
Service in accordance with the AIM Rules for Companies.
the Company. Any ordinary
The Programme will last until the end of the Company's
general meeting in 2018 or until the full USD$106,000 has
been utilized, whichever is the soonest. The Programme is
conducted within
in
accordance with the authority granted by the Company's
shareholders to repurchase shares at its last general
meeting held on 8 September 2017.
the pre-set parameters and
12
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
The Company has recorded a net income tax credit of
$0.03 million for the year ended 31 December 2017
mainly as a result of a deferred tax asset in relation to the
expected utilization of carry forward
losses against
expected income in future years.
for
future prospects,
SimiGon has positive outlook
underpinned by more than $20 million of contracted
revenue over the next ten years FY2018 (including the
contract signed with a particular customer in the civilian
training market).
As a consequence of the factors above, operating loss for
the year ended 31 December 2017 amounted to $0.96
million, as compared to operating profit of $0.22 million
for the year ended 31 December 2016.
SimiGon’s technology developments, together with its
revenue streams, are the basis for the Board’s belief in the
Company’s a strong foundation for profitability and
revenue growth for many years to come.
Amos Vizer
President & CEO
Net basic and diluted loss per share decreased to $0.02 for
the year ended 31 December 2017 as compared to net
basic and diluted earnings per share $0.01 for the year
ended 31 December 2016.
As at 31 December 2017 the Company had liquid cash of
$7.79 million as compared to $8.14 million as at 31
December 2016 and trade receivables of $1.75 million
compared to $2.92 million for the year ended 31
December 2016. $0.58 million of the year end trade
receivables balance has been collected since the year end.
Outlook
SimiGon is well positioned in the simulation and training
market for developing and delivering high tech solutions
for the industry and has a business partners and customer
foundation to propel the Company to its next stage of
growth. As a provider of advanced training and simulation
technologies and solutions, SimiGon is able to scale rapidly
to support new growth as it continues to execute its
business strategy.
SimiGon’s exposure to new markets
is progressing,
bolstered by unrelenting marketing efforts and continued
growth in the military training market. Increasing its SaaS
based contracts, resulting in recurring revenues and better
revenue visibility, together with its consistent investment
in R&D, the Company expects to recover from the current
period’s results and gain positive momentum.
13
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.
a
software
development
Amos Vizer, President & CEO
Prior to founding SimiGon, Amos founded Logi-
house
Cali,
specializing in data storage applications. He
previously served as marketing and business
development manager of ISYS Operational
IT
Management Systems, an
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.
international
financial
including
Efraim Manea, CFO
Mr. Manea joined the Company as its finance
controller in June 2008, managing its financial
aspects
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. Mr Manea is a Certified
Public Accountant and holds a BA in Accounting and Business
Administration from the College for Management in Israel.
Eitan Cohen, Non-Executive Director (Until
April 17, 2018)
Eitan Cohen is a Co-Founder and Chief
Executive Officer of ASIC Depot OOD an EDA
centre.
Semiconductor design
and
Eitan previously held positions
as CEO and
Country manager for Semiconductor and EDA
in which he led to the award of multi-million
tier-one companies and managed business
companies,
dollardeals with
development activities with potential partners worldwide.
14
Ran Pappo, Independent Non-Executive Director
Mr. Ran Poppo has 25 years of business
experience while delivering results worldwide.
Mr. Pappo is the Chief Executive Officer of Diva
Hirschthal Ltd. a large organization engaged in
designing, manufacturing and world wild selling
of high quality swimwear. Mr. Pappo also serves
as a director in JS Group Srl, supervising its financial activities while
reviewing its manuals and goals. Mr Pappo is a strategic consultant
focusing on organizational workflows,
forecasting,
budgeting, auditing, human resources optimization, production
planning and marketing. Mr Pappo has an extensive financial
knowledge including budgeting, managing and auditing financial
statements for national Organizations. Mr. Pappo holds a BS in
Business Administration, Finance and International Marketing,
from the College for Management in Israel.
financial
Independent Non-
Deborah M. Bitman,
Executive Director
Mrs. Deborah M. Bitman has extensive
experience on school improvement committees
and other school activities and programs. Mrs.
Bitman works with various educators to address
curriculum standards and needs. Working as a
director at the Jewish Academy of Orlando, she has great
experience in school policy guidance, budget review, future plans,
and creating and managing educational curriculum. Mrs. Deborah
M. Bitman holds a Bachelor in English from the University of
Michigan in Ann Arbor and a Masters in Elementary Education
from Indiana University in Bloomington.
C.
Eyal, Non-Executive director
Omer
(commencing April 17, 2018)
Mr. Eyal brings nearly 20 years of business
advisory and entrepreneurial experience to the
board. Mr. Eyal began his career as a corporate
lawyer at global law firm Steptoe & Johnston
LLP. He then went on to join UMA Solar LLC, a
leading thermal and solar power distributor, as the company’s COO
and Legal Affairs Manager for 9 years. Following his exit from UMA
Solar, Mr Eyal went on to become founder and CEO of TEVA Energy
in the development and
LLC, managing a team of experts
distribution of renewable-energy solar solutions across North
America and the Caribbean. Mr. Eyal spearheaded the merger of
Superior Solar Systems LLC and TEVA Energy LLC to form TEVA
Alternative Energy LLC of which he was appointed CEO and
managing member. Mr. Eyal is a qualified D.C. lawyer holding a
Judicial Doctorate from Georgetown University.
DISPLAYING PERSONAL COMMITMENT TO
ORGANIZATIONAL SUCCESS (CONT.)
Management
Koby Ben Yakar, VP Programs
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
SimiGon’s
teams,
leader and
Information Technology
overseeing the architecture, design and development of the
SIMbox LCMS Server infrastructure. Mr. Ben Yakar has over 10
years of experience in large training and simulation technologies
enterprise projects with a proven ability to manage business and
technical relationships for large-scale projects.
including
serving
team
as
recently Director,
Ary Nussbaum, VP Business Development
(Americas)
Mr. Nussbaum has served in multiple roles
with the Company since joining in 2001 and
was most
Business
Development. He has built Government and
Commercial business through partnerships and
direct customer sales in complex business environments. His
winning track record spearheading strategic programs in the US,
Latin America, Asia, Australia and Europe, including SimiGon’s
largest single award program, is part of Mr. Nussbaum’s skillset.
He leads the Company’s business development and sales efforts
to capture existing and vertical markets in Government and
Commercial training sectors in the US, Canada and Latin America.
Mr. Nussbaum is an FAA certified pilot with an MBA from Bar Ilan
University and a BA from William Paterson University.
Merav Nahmani, Director of Human Resources
Ms. Nachmani, joined SimiGon 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.
a
software
development
Amos Vizer, President & CEO
Prior to founding SimiGon, Amos founded Logi-
house
Cali,
specializing in data storage applications. He
previously served as marketing and business
ISYS Operational
development manager of
IT
international
Management Systems, an
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
in
Popeye missile weapons officer. With extensive training
advanced software development, Amos holds a BA in business
administration.
financial
including
Efraim Manea, CFO
Mr Manea joined the Company as its finance
controller in June 2008, managing its financial
aspects
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. Mr Manea is a Certified Public
Accountant and holds a BA
in Accounting and Business
Administration from the College for Management in Israel.
Hagai Pichovich - VP, Product Development
Mr Pichovich joined the company as a software
developer for the LMS team in 2006 and since
then carried out various roles such as team lead
and Director of R&D. He has an extensive
experience with large scale project architecture
and deep knowledge with SimBox based
solutions and internals. Picho has over 15 years of experience
with software development using various technologies and
methodologies, and holds a bachelor degree in computer science.
Alon Shavit, EVP, 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.
15
FINANCIALS
CONSOLIDATED FINANCIAL STATEMENTS OF SIMIGON LTD.
AND ITS SUBSIDIARIES AS OF DECEMBER 31, 2017
(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
17
18
19 – 20
21
22 - 23
24 - 25
26
27 - 28
29 – 71
72
16
CORPORATE GOVERNANCE FOR THE PERIOD ENDED 31 DECEMBER 2017
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 (commencing April 2018 was replaced by Omer C. Eyal), Deborah M. Bitman and
Ran Pappo 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, Deborah M. Bitman and Ran Pappo. 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.
17
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
Mr. Ran Pappo
Deborah M. Bitman
Total
Total 2017
$
412,789
148,651
45,827
25,300
26,400
26,400
685,367
Total 2016
$
410,635
141,140
46,807
26,400
26,400
26,400
677,782
* Year 2017 does not include $41,776 paid in respect of vacation days, additional $28,721 paid in respect of severance
allocation transfer and additional $34,065 paid in respect to health insurance.
Year 2016 does not include $59,651 paid in respect of vacation days, additional $28,721 paid in respect of severance
allocation transfer, additional $35,145 paid in respect to health insurance, annual bonus of $62,500 paid in respect to
year 2015 performance and annual bonus provision of $36,762 in respect to year 2016 performance to be granted as
125,338 Ordinary Shares of 0.01 par value of the Company (calculated based on the closing price on the day of
announcement of the Company's financial results for 2016).
** Year 2017 does not include the reimbursement of $20,500, paid in respect to Mr. Efraim Manea relocation costs for his
work at the Company’s subsidiary in USA.
Year 2016 does not include annual bonus of $16,121 paid in respect to year 2015 performance and annual bonus
provision of $ 9,551 in respect to year 2016.
Please see the Directors Report below for details of options and shares granted to directors.
18
DIRECTORS REPORT
The directors submit their report and the financial statements of the Group for the period ended 31 December 2017.
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, 2017 the total numbers of Ordinary Shares Issued were 51,394,189.
Share Options
As of 31 December 2017, the outstanding balance of options granted to certain employees of SimiGon is approximately 1.6
percent of the Company’s issued and outstanding shares at an average exercise price of $0.26. 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
Further to the Company’s previously declared intention to pay an annual dividend, the following dividend has been distributed
to its shareholders:
On 11 April 2017 an annual dividend of 0.136 cents per share for a total issued and outstanding shares of 51,394,189,
equating to approximately 19% of the Company’s earnings per share and to approximately 19% of the Company's net
profit for year 2016 has been paid to the Company’s shareholders with respect to year 2016.
On 27 May 2016 an annual dividend of 0.6 cents per share for a total issued and outstanding shares of 50,993,154,
equating to approximately 15% of the Company’s earnings per share and to approximately 17% of the Company's net
profit for year 2015 has been paid to the Company’s shareholders with respect to year 2015.
On 29 May 2015 an annual dividend of 0.6 cents per share for a total issued and outstanding shares of 50,079,690,
equating to approximately 20% of the Company’s earnings per share and to approximately 22% of the Company's net
profit for year 2014 has been paid to the Company’s shareholders with respect to year 2014.
On 30 May 2014 an annual dividend of 0.543 cents per share for a total issued and outstanding shares of 47,292,706,
equating to approximately 27% of the Company’s earnings per share and to approximately 30% of the Company's net
profit for year 2013 has been paid to the Company’s shareholders with respect to year 2013.
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.
19
DIRECTORS REPORT (CONT.)
Directors
The following directors have held office during the year:
Mr. Amos Vizer has been an executive director of the Company since 4 November 1998.
Mr. Efraim Manea was appointed as an executive director on July 30, 2010.
Mr. Alistair Rae, appointed as a director and Chairman of the Board on 27 October 2006.
Mr. Eitan Cohen was appointed a non-executive director on June 3, 2008 (Until April 17, 2018).
Mr. Ran Pappo, appointed as an independent director on December 30, 2015.
Mrs. Deborah M Bitman, appointed as an independent director on December 30, 2015.
Mr. Omer C. Eyal was appointed a non-executive director on April 17, 2018.
Directors Interest in Shares and Share Options
The interest of directors in the issued share capital of the company at 31, December 2017 were as follows.
Directors
Alistair Rae
Eitan Cohen
Ami Vizer
Efraim Manea
Number of Ordinary Shares
Capital
227,249
97,000
11,365,489
284,346
Percentage of Ordinary
shares
0.40
0.19
22.11
0.55
Shares to be issued
-
-
125,338 *)
32,564 *)
*) On September 8, 2017 the Company’s shareholders approved the conversion of the 2016 annual cash bonuses approved by
the Company’s Board of Directors on April 14, 2016 in accordance to the Company's Compensation Policy Plan to Mr. Ami
Vizer the Company's Chief Executive Officer and an executive director in a total amount of US £21,934 and to Mr. Efi Manea
the Company's Chief Financial Officer and an executive director in a total amount of US £5,699, into 125,338 and 32,564
Ordinary Shares of 0.01 par value of the Company, respectively, such shares to be issued under the Company's Employees'
Share Option Plans.
Substantial Shareholdings
At 31, December 2017 the Company was informed of the following interests of 3% or more in its ordinary shares issued at that
date:
Shareholder
A. Vizer / A. Vizer Holding Ltd.
Jeffrey Braun
Herald Investment Management Ltd.
Axxion S.A.
Green Venture Capital Ltd.
G.Poran Holding Ltd.
Shroder- euroclear nominees limited
Paul Hill and Immediate family
Auditors
Kost Forer Gabbay & Kasierer
A member of Ernst & Young Global
3 Aminadav St.
Tel Aviv 67067, Israel
Number Of Ordinary Shares
11,365,489
6,543,039
5,050,000
3,500,000
3,067,848
2,273,444
1,711,070
1,595,500
Percentage of issued
22.11%
12.73%
9.83%
6.81%
5.97%
4.42%
3.33%
3.10%
20
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, 2017
and 2016, and the consolidated statements of comprehensive income, changes in equity and cash flows for
each of the years ended December 31, 2017, 2016 and 2015, and the related notes to the consolidated
financial statements, which, as described in Note 2 to the consolidated financial statements, have been
prepared on the basis of International Financial Reporting Standards as adopted by the European Union.
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; this includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation 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 auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of 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 auditor considers 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 in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant 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 referred to above present fairly, in all material respects,
the consolidated financial position of the Group as of December 31, 2017 and 2016, and the results of its
operations and its cash flows for the each of the years ended December 31, 2017, 2016 and 2015, in
accordance with International Financial Reporting Standards as adopted by the European Union.
Tel-Aviv, Israel
May 9, 2018
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
21
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
SIMIGON LTD.
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term bank deposit
Short-term investments
Short-term restricted cash
Trade receivables, net
Other accounts receivable and prepaid expenses
Total current assets
NON-CURRENT ASSETS:
Restricted cash
Long-term prepaid expenses
Deferred tax
Property, plant and equipment
Goodwill and intangible asset
Total non-current assets
Total assets
December 31,
2017
2016
Note
U.S. dollars in thousands
3
5
4
5
12
6
7
4,868
1,010
1,912
337
1,748
149
5,221
1,005
1,913
-
2,919
61
10,024
11,119
337
34
226
94
1,068
1,759
374
39
223
111
1,072
1,819
11,783
12,938
The accompanying notes are an integral part of the consolidated financial statements.
22
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:
Long-term deferred revenues
Employee benefit liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF
THE COMPANY:
Share capital
Additional paid-in capital
Accumulated deficit
Total equity attributable to equity holders of the Company
December 31,
2017
2016
Note
U.S. dollars in thousands
8
9
13a
10
133
401
675
98
558
684
1,209
1,340
-
289
704
993
38
222
732
992
2,202
2,332
125
16,639
(7,177)
9,587
125
16,629
(6,144)
10,610
Non-controlling interests
(6)
(4)
Total equity
9,581
10,606
Total liabilities and equity
11,783
12,938
The accompanying notes are an integral part of the consolidated financial statements.
April 18, 2018
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
23
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIMIGON LTD.
Note
15
14a
14b
14c
14d
14e
14f
Year ended
December 31,
2016
U.S. dollars in thousands
(except share and per share amounts)
2017
2015
4,335
975
3,360
2,092
1,170
1,056
4,318
(958)
126
125
(957)
6,018
1,882
4,136
1,714
1,092
1,107
3,913
223
172
103
292
69
361
6,935
1,534
5,401
1,472
1,245
1,048
3,765
1,636
74
82
1,628
154
1,782
12
3
(954)
Revenues
Cost of revenues
Gross profit
Operating expenses:
Research and development
Selling and marketing
General and administrative
Total operating expenses
Operating profit (loss)
Finance income
Finance expenses
Income (loss) before income taxes
Income tax benefit
Net income (loss)
The accompanying notes are an integral part of the consolidated financial statements.
24
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIMIGON LTD.
Year ended
December 31,
2016
U.S. dollars in thousands
(except share and per share amounts)
2017
2015
Note
Net income (loss)
(954)
361
1,782
Other comprehensive income not to be
reclassified to profit or loss in subsequent
periods:
Remeasurement gain (loss) from defined benefit
plan
(11)
(2)
4
Total comprehensive income (loss)
(965)
359
1,786
Net income (loss) attributable to:
Equity holders of the Company
Non-controlling interests
Total comprehensive income (loss) attributable
to:
Equity holders of the Company
Non-controlling interests
(952)
(2)
365
(4)
1,782
-
(954)
361
1,782
(963)
(2)
363
(4)
1,786
-
(965)
359
1,786
Net basic and diluted earnings (loss) per share
attributable to equity holders of the Company
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)
(0.02)
0.01
0.04
16
51,444
51,097
50,683
16
51,444
51,319
50,818
The accompanying notes are an integral part of the consolidated financial statements.
25
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SIMIGON LTD.
Number
of shares
Share
capital
Attributable to equity holders of the Company
Additional
paid-in
capital
Accumulated
deficit
Total
Non-
controlling
interests
Total
equity
U .S. dollars in thousands (except share amounts)
Balance as of January 1, 2015
50,079,690
121
16,350
(7,687)
8,784
Total comprehensive income
Dividend distribution
Share-based compensation
Share issuance (Note 10 a2)
Exercise of stock options (Note
10a1 till 10a4)
-
-
285,000
628,464
-
-
1
2
-
65
107
4
1,786
1,786
(300)
-
-
-
(300)
65
108
6
8,784
1,786
(300)
65
108
6
-
-
-
-
-
Balance as of December 31, 2015
50,993,154
124
16,526
(6,201)
10,449
-
10,449
Total comprehensive income
-
-
Dividend distribution
Share-based compensation
Share issuance (Note 10 a2)
Exercise of stock options (Note
10a1)
-
-
100,000
-
-
*) -
301,035
1
-
-
65
38
-
363
363
(4)
359
(306)
-
-
-
(306)
65
38
1
-
-
-
-
(306)
65
38
1
Balance as of December 31, 2016
51,394,189
125
16,629
(6,144)
10,610
(4)
10,606
Total comprehensive income (loss)
Dividend distribution
Share-based compensation
-
-
-
-
-
10
(963)
(70)
-
(963)
(70)
10
Balance as of December 31, 2017
51,394,189
125
16,639
(7,177)
9,587
(2)
-
-
(6)
(965)
(70)
10
9,581
*)
Represents an amount lower than $ 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
- 26 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIMIGON LTD.
Cash flows from operating activities:
Net income (loss)
(954)
361
1,782
Year ended
December 31,
2016
U.S. dollars in thousands
2015
2017
Adjustments to reconcile net income(loss) to net cash
provided by (used in) operating activities:
Adjustments to the profit or loss items:
Depreciation and amortization
Deferred tax
Finance income, net
Share-based compensation
Change in employee benefit liabilities, net
Changes in asset and liability items:
Decrease (increase) in trade receivables
Decrease 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
Net cash provided by (used in) operating activities
55
(3)
(36)
10
57
1,171
(105)
35
(195)
5
994
40
87
(64)
(71)
65
28
796
18
(25)
22
(167)
88
(159)
(34)
65
19
(3,209)
11
(30)
(351)
99
689
(3,501)
1,050
(1,719)
The accompanying notes are an integral part of the consolidated financial statements.
- 27 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIMIGON LTD.
Cash flows from investing activities:
Decrease in short-term investments
Increase in restricted cash
Increase in short-term bank deposits
Increase in long-term deposits
Purchase of property, plant and equipment
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Proceeds from share issuance
Exercise of stock options
Dividend distribution
Repayment of refundable grants
Net cash used in financing activities
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Year ended
December 31,
2016
U.S. dollars in thousands
2015
2017
-
(300)
-
-
(34)
(334)
-
-
(70)
11
(59)
(353)
5,221
-
-
(1,001)
(26)
(66)
1,086
-
-
(2)
(16)
(1,093)
1,068
*) -
-
(306)
25
(281)
(324)
5,545
1
5
(300)
-
(294)
(945)
6,490
Cash and cash equivalents at end of year
4,868
5,221
5,545
(a)
Supplemental disclosure of non-cash financing
activities:
Receivable in respect of issuance of shares
Issuance of shares in respect of 2014 annual bonus to
directors and employees
-
-
1
38
2
107
*)
Represents an amount lower than $ 1 thousand.
The accompanying notes are an integral part of the consolidated financial statements.
- 28 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:- GENERAL
SIMIGON LTD.
a.
b.
The Company commenced its operations on October 1, 1998, and is engaged in
developing advanced learning, training and simulation technologies and applications for
use in professional communities. The Company's registered office is in Herzlia, Israel.
The Company has two wholly-owned subsidiaries in the United States, SimiGon Inc. and
National Simulation Services Inc., which are engaged in the marketing of the Company's
products in the United States, and a wholly-owned subsidiary in Singapore, SimiGon Pte
Ltd., which is engaged in the marketing of the Company's products in the Far East and a
70% holding in a subsidiary located in Colombia for the purpose of marketing the
Company’s products in South America.
c.
The Company's shares are traded on the Alternative Investment Market ("the AIM") on
the London Stock Exchange.
d.
Definitions:
In these financial statements:
The Company
- SimiGon Ltd.
The Group
- SimiGon Ltd. and its subsidiaries.
Subsidiaries
- Companies that are controlled by the Company, as defined in IFRS 10.
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 as adopted by the European Union ("IFRS as adopted by the EU").
b.
Functional currency, presentation currency and foreign currency:
The consolidated financial statements are presented in U.S. dollars, which is the
Company's functional 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 the U.S. dollar.
- 29 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Transactions, assets and liabilities in foreign currency:
SIMIGON LTD.
Transactions denominated in foreign currency (other than the functional currency) are
recorded on initial recognition at the exchange rate at the date of the transaction. After
initial recognition, monetary assets and liabilities denominated in foreign currency are
translated at the end of each reporting period into the functional currency at the exchange
rate at that date. Exchange differences, other than those capitalized to qualifying assets or
recorded in equity in hedging transactions, are recognized in profit or loss. Non-monetary
assets and liabilities measured at cost in a foreign currency are translated at the exchange
rate at the date of the transaction. Non-monetary assets and liabilities denominated in
foreign currency and measured at fair value are translated into the functional currency
using the exchange rate prevailing at the date when the fair value was determined.
c.
Consolidated financial statements:
The consolidated financial statements comprise the financial statements of companies that
are controlled by the Company (subsidiaries). Control 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.
Non-controlling interests in subsidiaries represent the equity in subsidiaries not
attributable, directly or indirectly, to a parent. Non-controlling interests are presented in
equity separately from the equity attributable to the equity holders of the Company. Profit
or loss and components of other comprehensive income are attributed to the Company
and to non-controlling interests. Losses are attributed to non-controlling interests even if
they result in a negative balance of non-controlling interests in the consolidated statement
of financial position.
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.
- 30 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
e.
Short-term deposits:
SIMIGON LTD.
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.
The Company did not recognize an allowance in respect of groups of trade receivables
that are collectively assessed for impairment due to immateriality. Impaired receivables
are derecognized when they are assessed as uncollectible.
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 categories:
financial assets at fair value through profit or loss;
loans and receivables.
a)
Financial assets at fair value through profit or loss:
This category includes financial assets held for trading (short-term
investments in mutual funds).
b)
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.
- 31 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
2.
Financial liabilities:
SIMIGON LTD.
Financial liabilities are initially recognized at fair value. After initial recognition,
loans and other liabilities are measured at amortized cost based on their terms net
of directly attributable transaction costs using the effective interest method.
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.
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.
- 32 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
Depreciation of an asset ceases at the earlier of the date that the asset is classified as held
for sale and the date that the asset is derecognized. An asset is derecognized on disposal
or when no further economic benefits are expected from its use. The gain or loss arising
from the derecognizing 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. 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 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 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.
- 33 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
The following criteria are applied in assessing impairment of goodwill in respect of a
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.
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.
- 34 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
Grants received after January 1, 2009, which are recognized as a liability, are accounted
for as forgivable loans, in accordance with IAS 20 (Revised), pursuant to the provisions
of IAS 39, "Financial Instruments: Recognition and Measurement". Accordingly, when
the liability for the loan is first recognized, it is measured at fair value using a discount
rate that reflects a market rate of interest. The difference between the amount of the
grants received and the fair value of the liability is accounted for upon recognition of the
liability as a government grant and recognized as a reduction of research and
development expenses.
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.
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, 2017 and 2016, 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.
- 35 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Revenues from software arrangements:
SIMIGON LTD.
Software arrangements contain multiple elements (software, integration, installation,
upgrades, support, training, consultation etc.). The Company evaluates the arrangement's
elements, including those delivered on a "when and if available basis", in order to
determine if the elements can be separately identified.
The Company recognizes revenues from the sale of software only after the significant
risks and rewards of ownership of the software have been transferred to the buyer for
which a necessary, but not sufficient condition, is delivery of the software, either
physically or electronically, or providing the right to use or permission to make copies, of
the software. The Company recognizes revenues from providing software related services
when the outcome can be measured reliably by reference to the stage of completion of the
transaction at the end of the reporting period.
If the services consist of a number of activities that are not defined over a specified period
of time, revenues are recognized on a straight-line basis over the specified period, unless
there is evidence that some other method better represents the stage of completion.
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.
- 36 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
r.
Employee benefits:
SIMIGON LTD.
The Company's liability for severance pay pursuant to the Israel's Severance Pay Law (for
those who elected not to be fully included under section 14 of the Severance Pay Law,
1963) is based on the last monthly salary of the employee multiplied by the number of
years of employment, as of the date of severance.
The cost of providing severance pay is determined using an independent actuary.
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.
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 deposits, short-term
investments, trade receivables, restricted cash, other accounts receivable, trade payables
and other accounts payable approximate their fair value due to the short-term maturity
and high probability of repayment of such instruments.
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 .
- 37 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
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.
u.
Finance income and expenses:
Finance income includes interest income on amounts invested, government grants and
exchange rate gains.
Finance expenses comprise interest expense on bank loan, government grants, fees and
exchange rate losses.
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 a significant effect on the amounts recognized in the
financial statements:
1.
Judgments:
-
Determining the fair value of share-based payment transactions:
The fair value of share-based payment transactions is determined upon initial
recognition by an acceptable option pricing model. The inputs to the model
include share price and exercise price and judgments regarding expected
volatility, expected life of share option and expected dividend yield.
2.
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.
- 38 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
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 13.
-
Deferred tax assets:
Deferred tax assets are recognized for unused carryforward tax losses and
deductible temporary differences to the extent that it is probable that taxable
profit will be available against which the losses can be utilized. Significant
management judgment is required to determine the amount of deferred tax
assets that can be recognized, based upon the timing and level of future
taxable profits, its source and the tax planning strategy.
w.
Taxes on income:
Current or deferred taxes are recognized in profit or loss, except to the extent that they
relate to items which are recognized in other comprehensive income or equity.
1.
Current taxes:
The current tax liability is measured using the tax rates and tax laws that have been
enacted or substantively enacted by the reporting date as well as adjustments
required in connection with the tax liability in respect of previous years.
2.
Deferred taxes:
Deferred taxes are computed in respect of temporary differences between the
carrying amounts in the financial statements and the amounts attributed for tax
purposes.
Deferred taxes are measured at the tax rate that is expected to apply when the asset
is realized or the liability is settled, based on tax laws that have been enacted or
substantively enacted by the reporting date.
- 39 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
Deferred tax assets are reviewed at each reporting date and reduced to the extent
that it is not probable that they will be utilized. Temporary differences for which
deferred tax assets had not been recognized are reviewed at each reporting date and
a respective deferred tax asset is recognized to the extent that their utilization is
probable.
Taxes that would apply in the event of the disposal of investments in investees
have not been taken into account in computing deferred taxes, as long as the
disposal of the investments in investees is not probable in the foreseeable future.
Also, deferred taxes that would apply in the event of distribution of earnings by
investees as dividends have not been taken into account in computing deferred
taxes, since the distribution of dividends does not involve an additional tax liability
or since it is the Company's policy not to initiate distribution of dividends from a
subsidiary that would trigger an additional tax liability.
Deferred taxes are offset if there is a legally enforceable right to offset a current tax
asset against a current tax liability and the deferred taxes relate to the same
taxpayer and the same taxation authority.
x.
Disclosure of new standards in the period prior to their adoption:
IFRS 15, "Revenue from Contracts with Customers":
In May 2014, the IASB issued IFRS 15 ("IFRS 15").
IFRS 15 replaces IAS 18, "Revenue", IAS 11, "Construction Contracts", IFRIC 13,
"Customer Loyalty Programs", IFRIC 15, "Agreements for the Construction of
Real Estate", IFRIC 18, "Transfers of Assets from Customers" and SIC-31, "Revenue -
Barter Transactions Involving Advertising Services".
The IFRS 15 introduces a five-step model that will apply to revenue earned from
contracts with customers:
Step 1:
Identify the contract with a customer, including reference to contract
combination and accounting for contract modifications.
Step 2:
Identify the separate performance obligations in the contract
Step 3:
the
transaction price,
Determine
to variable
consideration, financing components that are significant to the contract, non-
cash consideration and any consideration payable to the customer.
including
reference
- 40 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
Step 4:
Allocate the transaction price to the separate performance obligations on a
relative stand-alone selling price basis using observable information, if it is
available, or using estimates and assessments.
Step 5:
Recognize revenue when the entity satisfies a performance obligation over
time or at a Point in time.
IFRS 15 is to be applied retrospectively for annual periods beginning on or after January
1, 2018. IFRS 15 allows an entity to choose to apply a modified retrospective approach,
according to which IFRS 15 will only be applied in the current period presented to
existing contracts at the date of initial application. No restatement of comparative periods
is required.
The Company believes that the new Standard is not expected to have a material impact on
the financial statements.
IFRS 9, "Financial Instruments"
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial
Instruments" ("IFRS 9"), which replaces IAS 39, "Financial Instruments: Recognition and
Measurement". IFRS 9 mainly focuses on the classification and measurement of financial
assets and it applies to all assets in the scope of IAS 39.
According to IFRS 9, all financial assets are measured at fair value upon initial
recognition. In subsequent periods, debt instruments are measured at amortized cost only
if certain conditions are met. Subsequent measurement of all other debt instruments and
financial assets should be at fair value.
According to IFRS 9, the provisions of IAS 39 will continue to apply to derecognizing
and to financial liabilities for which the fair value option has not been elected. IFRS 9
also prescribes new hedge accounting requirements.
IFRS 9 is to be applied for annual periods beginning on January 1, 2018.
The Company believes that the new Standard is not expected to have a material impact on
the financial statements.
OCS Liability
U.S. dollars in
thousands
Balance as of December 31, 2016
Grants received in 2017
Time value
Balance as of December 31, 2017
(732)
(11)
39
(704)
- 41 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
IFRS 16, "Leases"
SIMIGON LTD.
In January 2016, the IASB issued IFRS 16, "Leases" ("the new Standard"). According to
the new Standard, a lease is a contract, or part of a contract, that conveys the right to use
an asset for a period of time in exchange for consideration.
According to the new Standard:
Lessees are required to recognize an asset and a corresponding liability in the
statement of financial position in respect of all leases (except in certain cases)
similar to the accounting treatment of finance leases according to the existing IAS
17, "Leases".
Lessees are required to initially recognize a lease liability for the obligation to
make lease payments and a corresponding right-of-use asset. Lessees will also
recognize interest and depreciation expenses separately.
The new Standard includes two exceptions according to which lessees are
permitted to elect to apply a method similar to the current accounting treatment for
operating leases. These exceptions are leases for which the underlying asset is of
low value and leases with a term of up to one year.
The accounting treatment by lessors remains substantially unchanged, namely
classification of a lease as a finance lease or an operating lease.
The new Standard is effective for annual periods beginning on or after January 1, 2019.
Earlier application is permitted provided that IFRS 15 is applied concurrently.
The Company believes that the new Standard is not expected to have a material impact on
the financial statements.
IFRIC 23, "Uncertainty over Income Tax Treatments":
In June 2017, the IASB issued IFRIC 23, "Uncertainty over Income Tax Treatments"
("the Interpretation"). The Interpretation clarifies
the rules of recognition and
measurement of assets or liabilities in accordance with the provisions of IAS 12, "Income
Taxes", in situations of uncertainty involving income taxes. The Interpretation provides
guidance on considering whether some tax treatments should be considered collectively,
examination by the tax authorities, measurement to reflect uncertainty involving income
taxes in the financial statements and accounting for changes in facts and circumstances
underlying the uncertainty.
- 42 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
The Interpretation is to be applied in financial statements for annual periods beginning on
January 1, 2019. Early adoption is permitted. Upon initial adoption, the Company will
apply the Interpretation using one of two approaches:
Full retrospective adoption, without restating comparative data, by recording the
(i)
cumulative effect through the date of initial adoption in the opening balance of retained
earnings.
(ii) Full retrospective adoption including restatement of comparative data.
The Company is evaluating the possible impact of the adoption of the Interpretation but is
presently unable to assess its effect, if any, on the financial statements.
NOTE 3:- SHORT-TERM INVESTMENTS
December 31,
2017
2016
U.S. dollars in thousands
Financial assets classified as held for trading at fair value
through profit or loss- Mutual Funds *)
1,913
1,913
*)
Short-term investments in mutual funds are considered as highly liquid low risk
investments.
NOTE 4: - TRADE RECEIVABLES
Trade receivables (1)
December 31,
2017
2016
U.S. dollars in thousands
1,748
2,919
(1) Net of allowance for doubtful debts
259
259
Trade receivables are non-interest bearing and are generally on 30 - 90 days' terms.
The aging analysis of trade receivables is as follows:
Neither past
due nor
impaired
Past due but not impaired
< 30
days
30 - 60
days
60 - 90
day
U.S. dollars in thousands
2017
2016
1,060
2,279
-
-
25
297
110
-
- 43 -
> 90
days
553
343
Total
1,748
2,919
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5:- RESTRICTED CASH
SIMIGON LTD.
a. As part of a $ 6.7 million contract signed in May 2013 in which the Company 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 customer. The
expiration date of the Performance Bond has been extended to October 30, 2018. The
Performance Bond is held through a deposit that bears annual interest of 0.05% and its
value as of December 31, 2017 amounted to $ 337 thousand.
b. As part of the regulatory approval received for a $2 million contract with the Israeli Air
Force, on May 2, 2017 the Company issued a Performance Bond deposit in a total amount
of $ 299 thousand.
NOTE 5:- RESTRICTED CASH (Cont.)
c. To operate an ongoing business bank account, the Company is obligated to secure a deposit
in the amount of $ 15 thousand in favor of the bank.
d. As part of its premises lease agreement, the Company is obligated to secure a deposit in the
amount of $ 24 thousand in favor of the landlord.
NOTE 6:- PROPERTY, PLANT AND EQUIPMENT
Composition and movement:
Cost:
Balance as of January 1, 2016
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2016
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2017
Accumulated depreciation:
Balance as of January 1, 2016
Disposal during the year
Depreciation during the year
Balance as of December 31, 2016
Disposal during the year
Depreciation during the year
Balance as of December 31, 2017
Depreciated cost as of December 31, 2017
Depreciated cost as of December 31, 2016
Computers
and
peripheral
equipment
Office
furniture
and
equipment
Leasehold
improvements
Total
U.S. dollars in thousands
745
(4)
29
770
(18)
26
778
719
(4)
27
742
(18)
21
745
33
28
212
-
1
213
(2)
2
213
158
-
4
162
(2)
21
181
32
51
55
-
36
91
-
6
97
53
-
6
59
-
9
68
29
32
1,012
(4)
66
1,074
(20)
34
1,088
930
(4)
37
963
(20)
51
994
94
111
- 44 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7:- GOODWILL AND INTANGIBLE ASSET
Technology **)
Goodwill *)
Total
SIMIGON LTD.
Carrying amount as of
December 31,
2017
2016
U.S. dollars in thousands
-
1,068
1,068
4
1,068
1,072
*)
As the activities of Visual Training Solution Group (“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, 2017, the recoverable amount determined using the fair value of the
Company, based on the market price of its shares, exceeded the carrying amount of the
Company's net assets (equity), and therefore, no provision for impairment was recorded.
**) During the years ended December 31, 2017, 2016 and 2015, the Company recorded
amortization in the amount of $ 4 thousand, $ 50 thousand and $ 51 thousand,
respectively, which was recorded in cost of revenues.
NOTE 8:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Employees and payroll accruals
Accrued expenses
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET
a.
Post-employment benefits:
December 31,
2017
2016
U.S. dollars in thousands
417
258
675
373
311
684
According to the labor laws and Severance Pay Law in Israel, the Company is required to
pay compensation to an employee upon dismissal or retirement or to make current
contributions in defined contribution plans pursuant to Section 14 to the Severance Pay
Law, as specified below. The Company's liability is accounted for as a post-employment
benefit. The computation of the Company's employee benefit liability is made in
accordance with a valid employment contract based on the employee's salary and
employment term which establish the entitlement to receive the compensation.
Section 14 to the Severance Pay Law, 1963 applies to part of the compensation payments,
pursuant to which the fixed contributions paid by the Company into pension funds and/or
policies of insurance companies release the Company from any additional liability to
employees for whom said contributions were made.
- 45 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET (Cont.)
These contributions and contributions for benefits represent defined contribution plans.
SIMIGON LTD.
2017
Year ended December 31,
2016
U.S dollars in thousands
2015
Expenses in respect of defined
contribution plans under Section 14 to
the Severance Pay Law, 1963
145
128
123
b.
Amounts recognized in the statements of comprehensive income are as follows:
Current service cost
Interest cost
Exchange rate
Total expense included in profit or loss
c.
Changes in the present value of defined
benefit obligation:
Composition:
Balance at January 1
Interest cost
Exchange rate
Current service cost
Benefits paid
Remeasurement loss (gain)
Balance at December 31
53
9
26
88
222
9
26
53
(32)
11
289
47
8
3
58
192
8
3
47
(30)
2
222
46
7
(1)
52
178
7
(1)
46
(34)
(4)
192
d.
The actuarial assumptions used are as follows:
Discount rate
3.59%
4.05%
4.13%
Future salary increases
3.63%
3.60%
3.55%
Average expected remaining working
years
7.47
7.85
7.57
Remeasurement gain (loss) in respect of
defined benefit plan
(11)
(2)
4
- 46 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 10:- EQUITY
a. Share issuance:
1.
On September 12, 2011, the Board of Directors approved the implementation of a
share bonus plan ("the Share Bonus Plan") for year 2011.
According to the Share Bonus Plan, the Bonus Compensation will be granted with
an equivalent value of Ordinary shares based on the quoted fair market price of the
shares as of September 12, 2011, which is equal to $ 0.0812 per Ordinary share
("the Bonus Shares"). The Bonus Shares will vest upon receiving actual payment
from the customer under the relevant PO ("the Bonus Shares Vested Date").
The fair value, on date of grant equal to $ 0.08 per Ordinary Share.
Based on full vesting as of December 31, 2011, the Company's senior management
and other employees are entitled to a total of 2,889,379 Ordinary Shares and a total
of 3,141,288 Options at an exercise price of NIS 0.01 per share of the Company,
which Ordinary Shares and Options were issued in 2012.
On April 12, 2012 the Company issued a total 2,055,838 Ordinary Shares and
3,141,288 Options at an exercise price of 0.01 NIS each ("Options") to its senior
management and other employees.
On October 11, 2012, a total of 833,541 Ordinary Shares of 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.
Further to the above, on April 30, 2014 a total of 1,712,429 options were exercised
under the Company's Stock Option Plan by senior management into SimiGon's
Ordinary Shares at an exercise price of NIS 0.01 each. Out of the shares issued,
1,497,674 and 37,582 Ordinary Shares were issued to the Company's CEO and
CFO, who are also Directors of the Company; respectively.
On November 11, 2014 a total of 527,554 options were exercised under the
Company's Stock Option Plan into SimiGon's Ordinary Shares at an exercise price
of NIS 0.01 each by the Company's CEO, who is also Director of the Company.
On April 27, 2015, a total of 600,270 options were exercised under the Company’s
Stock Option Plan by the Company’s CEO, Mr. Ami Vizer, who is also a Director
of the Company, into Ordinary shares at an exercise price of NIS 0.01 each.
On September 27, 2016, a total of 301,035 options were exercised under the
Company’s Stock Option Plan by the Company’s CEO, Mr. Ami Vizer, who is also
a Director of the Company, into Ordinary shares at an exercise price of NIS 0.01
each.
- 47 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD.
2.
3.
4.
On February 26, 2015, the Company’s Board of directors approved the grant of an
annual bonus to key employees and Non-Executive Directors of $150 thousand in
recognition of their contribution to the Company's positive financial performance
in 2014 and as part of the Company’s consistent approach to compensate its key
employees and Non-Executive Directors (excluding the Company’s CEO and
CFO). The bonus was to be granted in shares calculated based on the closing price
on the day of announcement of the Company's financial results for 2014. The
bonus granted to the Non-Executive Directors was subject to the approval of the
Company’s shareholders. A provision for this bonus was recorded in the 2014
annual financial statements.
Further to the above, on May 21, 2015 the Company issued a total of 285,000
Ordinary shares to the key employees and Non-Executive Directors
On September 27, 2016 the Company issued a total of 100,000 Ordinary shares to
the Non-Executive Directors, in respect of the above bonus.
On January 21, 2015, a total of 3,194 options were exercised under the Company's
Stock Option Plan by a by a former employee at an average exercise price of $
0.19.
On April 16, 2015, a total of 25,000 options were exercised under the Company's
Stock Option Plan by a by a former employee at an average exercise price of $
0.12.
5. With respect to fiscal year 2016 and in accordance to the Company's Compensation
Policy Plan mentioned below, on April 16, 2016, the Company’s Board of directors
approved the grant of annual bonuses in the amount of up to $ 125 thousand and up
to NIS 125 thousand to Mr. Ami Vizer, the Company's Chief Executive Officer
who is also a Director of the Company and to Mr. Efraim Manea, a director of the
Company and its CFO; respectively. The granted bonuses are subject to revenues,
net profit and share price criteria and milestones.
On April 6, 2017 the Company’s board of directors approved that the bonuses
were to be granted in Ordinary Shares of the Company calculated based on the
closing price on the day of announcement of the Company's financial results for
2016 instead of being payable in cash. The grant of bonuses in Ordinary Shares of
the Company will also be subject to the approval of the Company’s shareholders. A
provision for this bonus was recorded in the 2016 annual financial statements.
- 48 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD.
On September 8, 2017 the Company’s shareholders approved the conversion of the
2016 annual cash bonuses approved by the Company’s Board of Directors on April
14, 2016 in accordance with the Company's Compensation Policy Plan to Mr. Ami
Vizer the Company's Chief Executive Officer and an executive director in a total
amount of GBP £21,934 and to Mr. Efi Manea the Company's Chief Financial
Officer and an executive director in a total amount of GBP £5,699, into the
allotment of 125,338 and 32,564 Ordinary Shares of 0.01 par value of the
Company, respectively, such shares to be issued under the Company's Employees'
Share Option Plans.
As of the date of the approval of the financial statements, the shares have not been
issued yet.
b. Composition of share capital:
December 31,
2017, 2016
and 2015
Authorized
2017
December 31,
2016
Issued and outstanding
2015
Number of shares
Ordinary shares of
NIS 0.01 par value each
100,000,000
51,394,189 51,394,189 50,993,154
c. 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, 2017, an aggregate of 2,383,829
Ordinary shares of the Company are still available for future grant.
On April 14, 2016 the Board of Directors approved a total grant of 40,000 options to
purchase Ordinary shares of the Company to SimiGon’s employees. 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
$ 0.24.
Out of the total approval, the Company granted a total of 35,000 options.
- 49 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:-
EQUITY (Cont.)
SIMIGON LTD.
On September 21, 2017 the Board of Directors approved a total grant of 170,000 options
to purchase Ordinary shares of the Company the SimiGon’s employees. 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 $ 0.236.
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.
Further to the termination of the US Stock Option Plan from December 2006 (USOP
2006), on November 23, 2016 (followed by a shareholders approval), the Company's
Board of directors approved the adoption of a new US Share and Option Plan (USOP)
which will be based on the same terms and conditions of USOP 2006. The new USOP is
subject to the approval of the Company’s shareholders.
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 the years ended
December 31, 2017 and 2016: risk-free interest rate ranging from 0.87% - 2.24%; a
dividend yield of 3%; expected volatility of 80%; and a weighted average expected life of
the options of 6.25 years. The weighted average fair values of the options granted in 2017
and 2016 were $0.127 and $ 0.13, respectively.
A summary of the activity in options to employees, consultants, and directors (including
the senior management, see d. below) for the years 2017, 2016 and 2015 is as follows:
2017
Year ended
December 31,
2016
2015
Number
of
options
Weighted
average
exercise
price
Number
of
options
Weighted
average
exercise
price
Weighted
average
exercise
price
Number
of options
Outstanding at
beginning of year
Granted
Exercised
Expired
Forfeited
Outstanding at end of
year
907,833
170,000
-
$ 0.372
$ 0.236
-
(40,000) $ 1.716
(213,500) $ 0.428
1,386,507 $ 0.416
35,000 $ 0.241
(301,035) $ 0.003
(25,000) $ 0.250
(187,639) $ 1.276
$ 0.297
-
$ 0.008
2,121,188
-
(628,464)
(22,050) $ 0.6
(84,167) $ 0.417
824,333
$ 0.265
907,833 $ 0.372
1,386,507
$ 0.416
Exercisable options
523,607
$ 0.312
733,769 $ 0.307
958,585
$ 0.393
- 50 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD.
The options outstanding as of December 31, 2017, have been separated into ranges of
exercise price as follows:
Exercise price
$ 0.002 - $ 0.25
$ 0.335 - $ 1.2
Options
outstanding
as of
December 31,
2017
473,333
351,000
824,333
Weighted
average
remaining
contractual
life (years)
2.35
2.75
Options
exercisable
as of
December 31,
2017
174,999
348,608
523,607
d. Options to the CEO and senior employees:
Further to note 10a1, (a) 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; (b) on December 20, 2012 the
Annual General meeting of the Company's approved the grant of 37,582 options to
purchase Ordinary Shares to Mr. Efraim Manea, a director of the Company and its CFO and
(c) as of December 31, 2014 and 2013, the Company recorded share-based compensation
expenses in a total of $ 46 thousand and $ 66 thousand in respect to the CEO, respectively.
On April 30, 2014 a total of 1,497,674 and 182,541 Options have been exercised into
Ordinary Shares of the Company by Mr. Ami Vizer and to senior management,
respectively;
On November 11, 2014 a total of 527,554 Options have been exercised into Ordinary
Shares of the Company by Mr. Ami Vizer
On April 27, 2015, a total of 600,270 Options have been exercised into Ordinary Shares of
the Company by Mr. Ami Vizer
On September 27, 2016, a total of 301,035 Options have been exercised into Ordinary
Shares of the Company by Mr. Ami Vizer
e. Shares to the CEO and senior employees:
Further to Note 10a1, (a) 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; (b) On October
11, 2012, a total of 516,921 and 309,711 Ordinary Shares each have been issued, to Mr.
Ami Vizer and to senior management, respectively; (c) On April 30, 2014 a total of
1,497,674 and 214,755 Ordinary Shares have been issued, to Mr. Ami Vizer and to senior
management, respectively; (d) On November 11, 2014 a total of 527,554 Ordinary Shares
have been issued, to Mr. Ami Vizer (e) (f) On April 27, 2015, a total of 600,270 Ordinary
Shares have been issued, to Mr. Ami Vizer and (h) On September 27, 2016, a total of
301,035 Ordinary Shares have been issued, to Mr. Ami Vizer.
- 51 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD.
For the year ended December 31, 2015, the Company recorded share-based compensation
expenses in a total of $ 28 thousand, in respect to the shares granted to the CEO.
f. Shares buyback Program:
On September 8, 2017, the Company’s shareholders approved that the Company be
generally and unconditionally authorised to make one or more irrevocable, non-
discretionary market purchases of its own ordinary shares of 0.01 NIS each in the capital of
the Company (“Ordinary Shares”) (the “Repurchase Programme”).
All purchases will be made by way of on-market purchases for the purposes of the rules of
the London Stock Exchange through a certified broker, in accordance with the authority
conferred by the Articles, the AIM Rules for Companies, this General Meeting and all other
applicable rules and regulations, and will be made subject to the following limitations:
i.
the absolute maximum value of Ordinary Shares acquired pursuant to the Repurchase
Programme shall not, in aggregate, exceed GBP £800,000;
ii.
there will be no minimum price which may be paid for an Ordinary Share;
iii.
iv.
v.
the maximum price which may be paid for an Ordinary Share is 110 percent of the
average of the middle market quotations for an Ordinary Share (as derived from the
Daily Official List) for the 5 business days immediately preceding the day on which the
Ordinary Share is contracted to be purchased;
the minimum and maximum prices per Ordinary Share referred to in sub-paragraphs (ii)
and (iii) of this resolution are in each case exclusive of any expenses payable by the
Company ;
any Ordinary Shares purchased under the Repurchase Programme will be held in
treasury and will be notified to a Regulatory Information Service in accordance with
the AIM Rules for Companies; and
vi.
the authority conferred by this resolution shall expire at the end of the General Meeting
in 2018 .
See Note 20 regarding repurchase of Ordinary shares in 2018
- 52 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11:- JOINT VENTURES
SIMIGON LTD.
On March 30, 2014 SimiGon's subsidiary ("the Subsidiary") entered into a Joint Venture
agreement ("the Joint Venture") with a company based in China that will provide the Joint
Venture with aviation services. Under the terms of the Joint Venture agreement, the Subsidiary
will provide the SIMbox licenses enabling the Joint Venture to develop its own training
solutions. The Subsidiary will invest $ 30 thousand in the Joint Venture representing an interest
of 4% in its shares. As of the date of the approval of the financial statements as of December 31,
2017, the Joint Venture hasn’t started to operate, yet.
On April 20, 2016, SimiGon's subsidiary ("the Subsidiary") entered into an agreement with
Team Systems International LLC (TSI) in which both parties will establish a Joint Venture for
business cooperation (“the Agreement”). Under the term of the Agreement, the Subsidiary will
hold 49% of the Joint Venture while TSI will hold 51%. On February 22, 2017 the Joint
Venture was established under the name TSIM LLC. As of the date of the approval of the
financial statements as of December 31, 2017, the Joint Venture hasn’t started to operate, yet.
NOTE 12:- 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 benefits.
The "Approved Enterprise" status will allow the Company a tax benefit 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 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. The Company expects to remain in the scope
of the preferred tax regime described above until the end of 2018.
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.
- 53 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12:- INCOME TAXES (Cont.)
SIMIGON LTD.
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 derived from "Approved Enterprise" 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. The change in the tax rate will have
immaterial effects on the Company.
As a result of the Amendment, a company is no longer obliged to implement an
"Approved Enterprise" status in order to receive the tax benefits previously available
under the alternative benefits provisions, and therefore there is no need to apply to the
Investment Center for this purpose (Approved Enterprise status remains mandatory for
companies seeking grants).
Rather, a company may claim the tax benefits offered by the Investment Law directly in
its tax returns, provided that its facilities meet the criteria for tax benefits set out by the
Amendment. A company is also granted a right to approach the Israeli Tax Authorities for
a pre-ruling regarding their eligibility for benefits under the Amendment.
Tax benefits are available under the Amendment to production facilities (or other eligible
facilities), which are generally required to derive more than 25% of the company's
business income from export. In order to receive the tax benefits, the Amendment states
that a company must make an investment in the benefited 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 benefited 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 benefited
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.
- 54 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12:- INCOME TAXES (Cont.)
SIMIGON LTD.
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 2012 - 15% (in development area A - 10%), 2013 - 12.5% (in
development area A - 7%) and in 2014 and thereafter - 16% (in development area A -
9%).
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 2b, 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.
Carryforward losses:
Domestic:
As of December 31, 2017, 2016 and 2015, the Company had accumulated losses for
Israeli tax purposes of approximately $ 1.9 million, $ 0.6 million and $ 0.5 million,
respectively, which may be carried forward, in order to offset taxable income in the
future, for an indefinite period (See Note f below).
Foreign:
As of December 31, 2017, 2016 and 2015, the federal tax loss carryforwards of the U.S.
subsidiaries amounted to approximately $ 5.1 million, $ 5.3 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, 2017, 2016 and 2015, the tax loss carryforwards of the Singaporean
subsidiary amounted to approximately $ 81 thousands, $ 61 thousands and $ 59
thousands; respectively, which may be carried forward, in order to offset taxable income
in the future, for an indefinite period.
As of December 31, 2017 and 2016, the tax loss carryforwards of the Colombian
subsidiary amounted to approximately $ 38 thousands and $ 32 thousands; respectively,
which may be carried forward, in order to offset taxable income in the future, for an
indefinite period.
As of December 31, 2017, the total deferred tax assets amounted to $ 226 thousand in
respect of certain carryforward operating losses in SimiGon Ltd and SimiGon Inc.
- 55 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12:- INCOME TAXES (Cont.)
d.
Tax rates applicable to the income of the Company and its subsidiaries:
Domestic:
SIMIGON LTD.
The Israeli corporate income tax rate was 24% in 2017, 25% in 2016 and 26.5% in 2015.
In January 2016, the Law for Amending the Income Tax Ordinance (No. 216) (Reduction
of Corporate Tax Rate), 2016 was approved, which includes a reduction of the corporate
tax rate from 26.5% to 25%, effective from January 1, 2016.
The effect of the reduction of the tax rate on the balance of deferred taxes as of
December 31, 2015, was immaterial.
In December 2016, the Israeli Parliament approved the Economic Efficiency Law
(Legislative Amendments for Applying the Economic Policy for the 2017 and 2018
Budget Years), 2016 which reduces the corporate income tax rate to 24% (instead of
25%) effective from January 1, 2017 and to 23% effective from January 1, 2018.
The deferred tax balance as of December 31, 2016, was calculated based on the revised
tax rates. The effect of the change in the tax rate on the balance of deferred taxes was
immaterial.
A company is taxable on its real capital gains at the corporate income tax rate in the year
of sale.
Foreign:
The U.S. 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%.
e.
Tax assessments:
The Company's tax assessments in Israel for the years until and including 2009 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.
f.
Tax reconciliation:
In 2017, the main reconciling item between the tax benefit assuming loss before taxes
was taxed at the statutory tax rate of the Company, and the tax benefit recorded in profit
or loss, is carryforward tax losses for which no deferred taxes were provided. In years
2016 and 2015, the income tax benefit recorded in profit or loss is due to the recognition
of carryforward losses which were not recognized in prior years - see item c. above.
- 56 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13:- OTHER LIABILITIES AND COMMITMENTS
a.
Royalty commitments:
SIMIGON LTD.
1.
In June 2001, the Company and a third party signed a Cooperation and Project
Funding Agreement with Britech, which is an establishment of the United
Kingdom-Israel Industrial Research and Development Fund. According to the
agreement, Britech agreed to fund, by conditional grant, the implementation of the
proposal submitted by the Company and the third party for a research and
development project in the maximum amount of £ 227 thousand.
The Company shall make repayments to Britech, based on gross sales derived from
the sale, leasing or other marketing or commercial exploitation of the innovation,
including service or maintenance contracts, commencing with the first commercial
transaction. Such payments shall be repaid in Pounds Sterling at the rate of 2.5% of
the first year's gross sales and, in succeeding years, at the rate of 5% of the gross
sales until 100%-150% of the conditional grant and other sums have been repaid
(incremental 50% based upon agreed milestone which was not fulfilled).
The Company received a total amount of $ 324 thousand, of which $ 150 thousand
and $ 174 thousand were deducted from the research and development expenses in
2001 and 2003, respectively.
NOTE 13:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
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, 2017, the Company received a total amount of $ 254 thousand.
- 57 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
SIMIGON LTD.
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, 2017 and 2016
was $ 189 thousand and $ 191 thousand, respectively.
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, 2017, 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,
improvements, modifications, methods, software,
technology, discoveries,
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, 2017 and 2016
was $ 421 thousand and $ 425 thousand, respectively.
4.
On April 7, 2011, the Company and a third party signed a Cooperation and Project
Funding Agreement with 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, 2017, 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).
- 58 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
SIMIGON LTD.
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, 2017 and 2016 was
$ 67 thousand and $ 71 thousand, respectively.
5.
On November 24, 2015, the Company and a third party signed a Cooperation and
Project Funding Agreement with 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 $ 62 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,
improvements, modifications, methods, software,
technology, discoveries,
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.
As of December 31, 2017, the Company received a total amount of $ 36 thousand.
The total non-current liability for the year ended December 31, 2017 and 2016 was
$ 27 thousand and $ 45 thousand, respectively.
6. During 2017, the total grants that the Company received from OCS projects amount
to $ 43 thousand.
b.
Lease commitments:
1.
2.
3.
Premises occupied by the Company are rented under various non-cancelable lease
agreements. The latest rental agreement for the premises expires in October 2020
as determined under a lease agreement signed on October 1, 2014.
The Company has leased various motor vehicles under cancelable operating lease
agreements, which expire on various dates, the latest of which is in August 2018.
On March 2017 Company has leased additional motor vehicles under cancelable
operating lease agreements of which the latest expire in March 2019
Premises occupied by the subsidiaries are rented under non-cancelable lease
agreements. The latest rental agreement for the premises expires in March 2021 as
determined under a lease agreement signed on February 9, 2016 by SimiGon Inc.
- 59 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 13:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
4.
Future minimum rental payments under non-cancellable operating leases are as
follows:
Year ended December 31,
U.S. dollars
in thousands
2018
2019
2020
2021
268
269
230
17
784
The total expense for the years ended December 31, 2017, 2016 and 2015 was
$ 281 thousand, $ 273 thousand and $ 266 thousand, respectively.
- 60 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 14:- SUPPLEMENTARY INFORMATION TO THE STATEMENT OF COMPREHENSIVE
INCOME
Year ended
December 31,
2016
U.S. dollars in thousands
2017
2015
a.
Cost of revenues:
Salaries and related benefits
Lease and office maintenance
Travel expenses
Depreciation and amortization
Share-based compensation
Subcontractors
b.
Research and development expenses:
Salaries and related benefits
Lease and office maintenance
Depreciation and amortization
Share-based compensation
Other
Government grants
c.
Selling and marketing expenses:
Salaries and related benefits
Lease and office maintenance
Advertising and sales promotion
Travel expenses
Depreciation and amortization
Share-based compensation
Commission
689
101
69
22
1
94
975
1,892
219
22
2
-
(43)
2,092
948
50
38
61
7
2
64
857
148
149
67
7
654
910
148
185
66
13
212
1,882
1,534
1,567
181
11
6
-
(51)
1,714
905
49
40
66
5
23
4
1,436
173
13
12
(121)
(41)
1,472
1,006
59
33
77
6
38
26
1,245
648
63
11
394
3
2
(78)
5
d.
General and administrative expenses:
1,170
1,092
Salaries and related benefits
Lease and office maintenance
Travel expenses
Professional fees and public company
expenses
Depreciation and amortization
Share-based compensation
Doubtful debt provision
Other
626
28
34
356
4
*) -
-
8
596
56
19
301
4
29
80
22
1,056
1,107
1,048
*)
Represents an amount lower than $ 1 thousand.
- 61 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 14:- SUPPLEMENTARY INFORMATION TO THE STATEMENT OF COMPREHENSIVE
INCOME (Cont.)
e.
Finance income:
Exchange rate differences
Interest income from banks and short
term investments
f.
Finance cost:
Exchange rate differences
Government grants interest
Bank loans and fees
Year ended
December 31,
2016
U.S. dollars in thousands
2017
2015
56
70
126
104
13
8
125
53
119
172
65
36
2
103
67
7
74
74
4
4
82
NOTE 15:- 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,
2016
U.S. dollars in thousands
2015
2017
3,473
862
-
4,335
5,254
728
36
6,018
5,449
1,460
26
6,935
- 62 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15:- REVENUES (Cont.)
b.
Geographical information:
Revenues classified by geographical destinations based on the end-users location:
SIMIGON LTD.
North America
Asia Pacific
Rest of the world (1)
Year ended
December 31,
2016
U.S. dollars in thousands
2017
2015
1,750
797
1,788
4,335
2,654
2,244
1,120
6,018
3,884
1,172
1,879
6,935
(1) Europe, South America, Middle East and Australia.
The carrying amounts of non-current assets (property, plant and equipment and intangible
assets) based on the location of the assets are as follows:
Asia Pacific and rest of the world
North America
2017
December 31,
2016
U.S. dollars in thousands
2015
26
1,136
1,162
29
1,154
1,183
30
1,174
1,204
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,
2016
32%
6%
2%
14%
23%
-
2017
45%
7%
3%
3%
16%
10%
2015
21%
29%
11%
16%
-
-
- 63 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16:- EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted earnings per share
computations:
SIMIGON LTD.
Year ended
December 31,
2016
U.S. dollars in thousands
2017
2015
Net income (loss) for the year
(952)
365
1,782
Share data (in thousands):
Weighted average number of Ordinary shares
for computing basic earnings (loss) per share
51,444(*
51,097
50,683
Effect of dilution:
Share options
(**)
222
135
Weighted average number of Ordinary shares
adjusted for the effect of dilution
51,444
51,319
50,818
*) 2017 – Weighted average number of shares includes 50 thousand shares in respect of the
Company's obligation to issue approximately 158 thousand Ordinary shares to two officers of
the Company in lieu of cash bonus – see Note 10a5
**) 2017 – All share options are excluded from the calculation of diluted earnings per share
because their effect on the calculation is antidilutive.
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES
a.
Expenses to related party of a
shareholder:
Cost of revenues *)
Research and development *)
Selling and marketing *)
General and administration *)
Year ended
December 31,
2016
U.S. dollars in thousands
2015
2017
37
15
15
8
75
38
10
9
5
62
-
-
-
-
-
- 64 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
b.
Balances to related party of a
shareholder:
Other accounts receivable and prepaid
expenses *)
Year ended
December 31,
2016
U.S. dollars in thousands
2015
2017
3
3
3
3
-
-
*)
On February 9, 2016 the Company’s subsidiary signed an office lease agreement for a
period of 60 months commencing March 15, 2016 for annual rent of $75 thousand with
TwoChi LLC, a company owned (directly and together with relatives) by Mr. Ami Vizer
the Chief Executive Officer of the Company, a Director and a shareholder holding 22% of
the issued share capital of the Company.
c.
Compensation of key management
personnel of the Company:
Non- Executive directors benefits
Employee benefits *)
Share-based payments **)
Year ended
December 31,
2016
U.S. dollars in thousands
2015
2017
124
1,574
3
1,701
126
1,627
1
1,754
133
1,621
41
1,795
*)
Includes long-term employee benefits in the amount of $24 thousand, $ 11
thousand and $ 8 thousand for the years ended December 31, 2017, 2016 and 2015,
respectively.
Year 2017 includes bonus provision to VP R&D in the amount of $ 3 thousand,
respectively.
Year 2017 and year 2016 include bonus provision to VP Products in the amount of
$ 8 thousand and 6 thousands, respectively.
Year 2015 includes bonus provision to Mr. Efraim Manea, a director of the
Company and its CFO with respect to fiscal year 2015 in the amount of $ 16
thousand (see Note 17e).
- 65 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
Year 2015 includes bonus provision to Mr. Ami Vizer, the Company's Chief
Executive Officer and executive director ("the CEO") in respect to fiscal year 2015
in the amount of $ 63 thousand (see Note 17f).
Year 2015 includes bonus provision to VP Marketing with respect to fiscal year
2015 in the amount of $ 23 thousand.
**) Year 2016 includes bonus to Mr. Efraim Manea, a director of the Company and its
CFO with respect to fiscal year 2016 in the amount of $ 9 thousand (see Note 17e).
Year 2016 includes bonus to Mr. Ami Vizer, the Company's Chief Executive
Officer and executive director ("the CEO") to be granted in Ordinary Shares of the
Company in respect to fiscal year 2016 in the amount of $ 37 thousand (see Note
17f).
Year 2015 include share-based compensation of $ 28 thousand, due to the Share
Bonus Plan as described under Note 10e, in respect to the CEO.
c.
Balances with Directors and Officers:
The Company’s liability balances directors and officers as of December 31, 2017 and
2016 amount to $ 333 thousand and $ 366 thousand; respectively, out of which, a total of
$ 208 thousand and $ 181 thousand is related to severance, vacation and recovery
liabilities for key employees as of December 31, 2017 and 2016; respectively.
d.
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.
On December 29, 2016 the Annual General Meeting for year 2016 re-approved the
Compensation Policy Plan.
e.
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 thousand, subject to revenues, net profit and share
price criteria and milestones. The actual bonus was paid on May 2014 and amounted to $
34 thousand.
- 66 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
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 thousand, subject to revenues, net profit
and share price criteria and milestones. The actual bonus was paid on May 2015 and
amounted to $ 21 thousand.
On February 26, 2015, 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 2015 in accordance to the Company's Compensation Policy Plan mentioned above.
The granted bonus is in the amount of up to $ 35 thousand, subject to revenues, net profit
and share price criteria and milestones. As of December 31, 2015, the Company has made
a provision of $ 16 thousand in respect of its CFO annual bonus for year 2015. The actual
bonus was paid on May 2016 and amounted to $ 16 thousand.
On April 14, 2016, 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
2016 in accordance to the Company's Compensation Policy Plan mentioned above. The
granted bonus is in the amount of up to $ 35 thousand, subject to revenues, net profit and
share price criteria and milestones. On April 6, 2017 the Company’s board of directors
approved that the bonus was to be granted in shares calculated based on the closing price
on the day of announcement of the Company's financial results for 2016. The grant of
bonus in Ordinary Shares of the Company will also be subject to the approval of the
Company’s shareholders. For the year ended December 31, 2016, the Company recorded
share based compensation of $ 9 thousand in respect of its CEO annual bonus for year
2016.
On September 8, 2017 the Company’s shareholders approved the conversion of the 2016
annual cash bonuses to Mr. Efi Manea the Company's Chief Financial Officer and an
executive director in a total amount of GBP £5,699, into the allotment of 32,564 Ordinary
Shares of 0.01 par value of the Company, such shares to be issued under the Company's
Employees' Share Option Plans. As of the date of the approval of the financial statements,
the shares have not been issued yet.
Commencing August 1 2017, the Company has reimbursed Mr. Efraim Manea with a
total of $21 thousand for his costs as part of his relocation for his work at the Company’s
subsidiary in USA.
f.
Significant agreements with shareholders:
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.
- 67 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
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 thousand. 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 thousand 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 thousand in
respect to Mr Ami Vizer bonus for year 2012. The actual bonus was paid on April 2013
amounted to $ 120 thousand.
On November 24, 2013, the Board of Directors approved the grant to Mr. Ami Vizer, the
Company's Chief Executive Officer and executive director of a one-time cash bonus to
with respect to fiscal year 2014 in accordance with the Company's Compensation Policy
Plan mentioned above. The granted bonus is in the amount of up to $ 125 thousand,
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. The actual bonus was paid on May 2015 and amounted to $ 80
thousand.
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.
On February 26 2015, the Board of Directors approved the grant to Mr. Ami Vizer, the
Company's Chief Executive Officer and executive director of a one-time cash bonus to
with respect to fiscal year 2015 in accordance with the Company's Compensation Policy
Plan mentioned above. The granted bonus is in the amount of up to $ 125 thousand,
subject to revenues, net profit and share price criteria and milestones. As of December 31,
2015, the Company has made a provision of $ 63 thousand in respect of Mr. Ami Vizer
annual bonus for year 2015. The actual bonus was paid on May 2016 and amounted to $
63 thousand.
Further to the approval of the Company's Board of Directors from November 24, 2015,
on February 9, 2016 the Company’s subsidiary signed an office lease agreement for a
period of 60 months commencing March 15, 2016, for annual rent of $75 thousand with
TwoChi LLC, a company owned (directly and together with relatives) by Mr. Ami Vizer
the Chief Executive Officer of the Company, a Director and a shareholder holding 22%
of the issued share capital of the Company.
On April 14, 2016, the Board of Directors approved the grant of a one-time cash bonus to
Mr. Ami Vizer, a director of the Company and its CEO with respect to fiscal year 2016 in
accordance to the Company's Compensation Policy Plan mentioned above. The granted
bonus is in the amount of up to $ 125 thousand, subject to revenues, net profit and share
price criteria and milestones.
- 68 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
On April 6, 2017 the Company’s board of directors approved that the bonus was to be
granted in Ordinary Shares of the Company calculated based on the closing price on the
day of announcement of the Company's financial results for 2016 instead of being
payable in cash. The grant of bonus in Ordinary Shares of the Company will also be
subject to the approval of the Company’s shareholders. For the year ended December 31,
2016, the Company recorded share based compensation of $ 37 thousand in respect of its
CEO annual bonus for year 2016.
On September 8, 2017 the Company’s shareholders approved the conversion of the 2016
annual cash bonuses to Mr. Ami Vizer the Company's Chief Executive Officer and an
executive director in a total amount of GBP £21,934, into the allotment of 125,338
Ordinary Shares of 0.01 par value of the Company, respectively, such shares to be issued
under the Company's Employees' Share Option Plans. As of the date of the approval of
the financial statements, the shares have not been issued yet.
Total salary including employer tax of Mr. Ami Vizer during year 2017 amounted to an
annual salary of $ 358 thousand, annual social benefits of $ 45 thousand (12.5% out of
his annual salary), expenses allowance and car insurance of $ 8 thousand, recovery fees
of $ 1 thousand, severance pay of $ 29 thousand, vacation days of $ 39 thousand and
health insurance of $ 34 thousand.
NOTE 18:- DIVIDEND DISTRIBUTION
a. In May 2014 the Company's Board paid a dividend in an amount of $ 269 thousands
(approximately $ 0.543 cents per share).
b. In May 2015 the Company paid a dividend in an amount of $300 thousand ($ 0.6 cents per
share, representing approximately 22% of the Company's earnings per share for 2014).
c. In May 2016 the Company paid a dividend in an amount of $306 thousand ($ 0.6 cents per
share, equating to approximately 15% of the Company's earnings per share and to
approximately 17.2% of the Company's net income for year ended December 31, 2015).
d. In May 2017 the Company paid a dividend in an amount of $70 thousand ($ 0.136 cents per
share, equating to approximately 19% of the Company's earnings per share and to
approximately 19% of the Company's net income for the year ended December 31, 2016).
NOTE 19:- 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.
- 69 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 19:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
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,
2017, 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 deposits, restricted cash,
short-term investments, trade receivables and other accounts receivables.
Cash and cash equivalents, including restricted cash and short-term 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.
As of December 31, 2017, cash and cash equivalents together with the Company's short-
term bank deposits and short-term investments amounted to $ 7,790 thousand.
- 70 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
c.
Liquidity risk:
SIMIGON LTD.
The table below presents the maturity profile of the Company's financial liabilities based
on contractual undiscounted payments:
December 31, 2017:
Less than
one year
Between 2 to
4 years
U.S. dollars in thousands
More than 4
years
Government grants
Trade payables
Other accounts payable
and accrued expenses
22
133
675
830
156
-
-
156
585
-
-
585
December 31, 2016:
Less than
one year
Between 2 to
4 years
U.S. dollars in thousands
More than 4
years
Government grants
Trade payables
Other accounts payable
and accrued expenses
26
98
658
782
215
-
-
215
668
-
-
668
Total
764
133
675
1,571
Total
909
98
658
1,665
NOTE 20:- SUBSEQUENT EVENT
Further to Note 10(e), on March 2, 2018 , the Company purchased 225,000 ordinary shares of
0.01 NIS each in the capital of the Company ("Ordinary Shares") at the price per Ordinary
Share of 15.218 pence ("Repurchase") through finnCap Ltd (acting as the Company's broker).
The total cost of the purchase amounted to $47 thousand. The Repurchase shares, along with
any other Ordinary Shares purchased by the Company pursuant to the Programme, will be held
in treasury. Following the purchase of the Repurchase shares, the total number of voting rights
in the Company is 51,169,189 Ordinary shares (excluding the 225,000 Ordinary Shares held in
treasury).
- - - - - - - - - - - - - - - - - -
- 71 -
SHARE INFORMATION
CONTACT 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
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.
111 S. Maitland Avenue,
Suite 210, Maitland, Florida 32751
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
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WWW.SIMIGON.COM