WE TAKE DISTRIBUTED SIMULATION
TRAINING PERSONALLY
2018
ANNUAL
REPORT
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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
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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
Revenues increased by 16% to $5.03 million (2017:
$4.34 million)
Gross margin increases to 81% (2017: 78%)
Operating loss decreased by 21% to $0.76 million
(2017: $0.96 million)
Adjusted operating
loss (excluding doubtful debt
provision) decreased by 68% to $0.31 million (2017:
$0.96 million)
Net loss increased by 6% to $1.01 million (2017: $0.95
million)
Adjusted net loss (excluding doubtful debt provision)
decrease by 41% to $0.56 million (2017: $0.95 million)
Basic and diluted loss per share of $0.02 (2017: loss
per share $0.02)
Cash, cash equivalent, short term investment and
deposits of $6.00 million as at 31 December 2018
(2017: $7.79 million)
Trade receivables increased by 47% to $2.57 million
(2017: $1.75 million)
Operational Highlights
SimiGon has continued to illustrate its ability to
capture new business and significantly expand product
capabilities in core defence-related market:
Awarded additional maintenance and support
services contract for the sixteen T-6A Level 5
Flight Training Devices (“FTDs”) with the United
States Air Force (“USAF”);
Multiple contracts to provide USAF with Virtual
(“VR”) Aircraft Technician De-icing
Reality
Simulation Based Training;
Secured additional work scope for Lockheed
Martin’s UK Military Flight Training System
(“UKMFTS”);
Continued to support major military flight training
programmes including:
The USAF Air Education and Training Command
Undergraduate Remotely Piloted Aircraft Training
(“URT”);
Completion of major development and delivery
in support of Lockheed Martin’s
milestones
UKMFTS program;
Provide software and services as part of long-
term relationship with a strategic European
customer.
Completed multiple delivery milestones for the $2
million Israeli Air Force (“IAF”) F-16 Maintenance
Trainer Program (IAF F16 Maintenance Trainer)
contract announced in June 2016.
Released SIMbox version 5.7 in August 2018, providing
many new platform capabilities including expanded
Virtual Reality (VR) support and significant “under-the-
hood” performance upgrades.
Awarded $1.1 million dollar contract with the IAF for
T-6A aircrew training devices.
Expanded its long-term relationship with an existing
European customer (the “Customer”) and has signed a
contract valued at $0.92 million for the use of SIMbox
in the additional programs across the Customer’s
organization.
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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 expected to grow significantly over the next decade
due to the combination of new training requirements,
emerging technologies and the proven cost savings
delivered through advanced training technology.
The Military Simulation and Virtual Training market,
SimiGon’s traditional core market, will reach US$128.5
billion over the forecast period of 2018-2028. The civilian,
Smart Education and Learning market, representing new
expansion opportunities for SimiGon, is expected to reach
$423.2 billion by 2025, a compound growth rate of 15.2%.
The simulation-based learning segment is anticipated to
exhibit the highest growth due as it enables corporations
and academic institutions to create realistic training in a
controlled environment before they start work in the field,
in high stakes, operational environments. This market
Instructor,
includes
eLearning,
learning, all core
Collaborative, Adaptive and Blended
technology components of SimiGon’s training solutions.
Commercial training, particularly with Virtual Reality (VR)
and Mixed Reality (MR) capabilities, value technology-based
solutions that reduce costs, similar to the ongoing
Government training trend.
Simulation,
Virtual
capable of meeting
Well trained operators are required throughout military and
civilian organizations. There are no flights without sufficient
and properly trained aircrew, including pilots, technicians
and maintainers. Cross-domain training with a scalable
delivery platform with a common, core open system
range
architecture
requirements of each skillset
is highly desirable. No
simulator can fully replicate the pilot’s sensation of a night
landing on a fast moving aircraft carrier; oil drilling on a
deep sea rig; providing maintenance service on a military or
civilian flight line; rapidly de-icing a military or commercial
aircraft readying for taxi; immersive language training; or
customer service training, a large body of research supports
simulation based
significant
usefulness for hard skills and soft skills jobs.
learning and
training’s
vast
the
Through simulations of operating environments 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.
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The military sector is driven by new platform acquisitions
and technology upgrades requiring advanced training of
complex systems. 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 generally 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 individual pace learning.
The market will continue to seek and require cost effective,
advanced
technologies and
solutions.
training and simulation
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.
Additional, sustainable business is won 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 has several market plays that will lead to near
term and long term 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.
HIGH SKILLS JOBS REQUIRE ADVANCED, PERSONALIZED TRAINING &
SIMULATION (CONT.)
The Company’s systems are globally recognized as a
premium 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.
Air carriers, such as Wing, a drone delivery spinoff of
Google’s Alphabet, are beginning to receive Government
certifications to fly drones as a more cost-effective way of
delivering small, high-value orders such as medicine.
Diverse companies such as Amazon, UPS and Domino’s, as
well as traditional aerospace and defense companies, are
investing significantly in this market.
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.
The defense and aerospace sector, according to BlackRock,
“remains the purest way to play any change in defense
spending outlook.” Boeing estimates a worldwide
requirement for 42,730 new jet airplanes, valued at $6.3
trillion, attributing this to evolving aviation product
offerings and growth in emerging markets.
For the period of 2019-2033, the military fixed-wing aircraft
market unit production forecast is 8,016 aircraft, valued at
$578.6 billion. This segment is comprised of trainer aircraft,
fighter aircraft, transport aircraft and special mission
aircraft. 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.
lie
Further market opportunities
in the collaboration
announced by the FAA and USAF, working together to
ensure an aviation workforce for the future, and “address
any barriers to people realizing their dreams of becoming a
pilot or aircraft mechanic,” said Dan Elwell acting FAA
administrator. Brig. Gen. Mike Koscheski, USAF’s Aircrew
Crisis Task Force director, called the pilot shortage “a
wicked problem. The problem is not only ever-changing, it
fights back. You can’t
just fix one aspect. They’re
interrelated.”
The Unmanned Aircraft Vehicles (UAV) market was valued
at $20.71 billion in 2018. This segment is comprised of fixed
wing, multi-rotor, single rotor and Hybrid Vertical Takeoff
and Landing (VTOL) UAVs. The applications of UAVs
continue to diversify and grow for military, commercial,
homeland security, and consumers. The market is forecast
to reach $52.3 billion by 2025, with a growth rate of 14.15%
between 2018 to 2025.
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.
technology
SimiGon’s high
fulfills
multiple roles in this market, comprised of e-learning,
virtual
learning, social
learning, simulation-based learning, and adaptive learning.
instructor-led training, mobile
training platform
In the civilian aviation sector, Boeing’s 2019 Current
Market Outlook (CMO) states the worldwide commercial
aircraft fleet of 22,500 in 2017. Boeing projects a demand
for 42,000 new airplanes over the next 20 years, worth
$6.3 trillion. This growth will place an extraordinary
demand for new airline pilots and technicians. Boeing
forecasts that by 2037 the aviation industry will need to
supply more than two million new aviation personnel—
635,000 commercial airline pilots, 622,000 maintenance
technicians, and 858,000 cabin crew. Skilled Instructors will
also be required to support this workforce. This market
presents the Company with a remarkable and exciting
opportunity. SimiGon’s innovative training technologies,
methodologies and solutions, proven and successful in the
to
military aviation market, are
commercial aviation training.
transferable
fully
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.
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GETTING PERSONAL
WITH DISTRIBUTED SIMULATION SOLUTIONS
SimiGon’s comprehensive portfolio of off-the-shelf solutions – including a state-of-the-art simulation platform and range of
compelling products – “closes the knowledge gap” for professional users. At the same time, SimiGon’s flexible solutions are
easily integrated either by customer organizations or third-party systems integrators for both military and civilian
applications.
SIMbox
SimiGon is the creator of SIMbox, a leading PC-based
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 (LMS),
contains various software modules used for configuration
management of developed content, control over content
distribution, data gathering from end users, and data
analysis and report generation.
SIMbox Runtime delivery environment: SIMbox Runtime
provides hi-fidelity 3D distributed simulations that place the
user in a virtual or constructive environment with numerous
viewpoints for both military and civilian applications.
Major Existing products under SIMbox
VR Aircraft De-icing Simulation System
VR-enabled F-16 Maintenance Training Device
VR-enabled F-16 Aircrew Training Device
VR-enabled T-6A Desktop Training Device
T-6A Level 5 Flight Training Device
C-208 – Cessna Caravan Training Device
Sensor Operator Training System
UAS Training Device
VR-enabled Driver Training System
Air Traffic Control Training Device
After Action Review/Playback System
Simulation Development Environment
Learning Management System
Learning and Content Management System
Image Generator
KnowBook™ Family
KnowBook is a family of PC-based training applications
used by leading organisations for training professional
for
users. KnowBook provides a common platform
learning, training, planning and debriefing.
The key members of the KnowBook family are:
• AirBook™: the family’s flagship application that enables
aircrew and organisations to remain completely updated
with the rapidly changing demands of the military and
civilian aviation world.
• GroundBook, MarineBook and CarBook: the newest
members of the KnowBook family designed for ground,
maritime and driving training scenarios.
advanced
post-mission
Debriefing Systems
SimiGon offers
debriefing
applications that provide critical feedback and improve
operational readiness. Utilizing a standard Windows
graphical user interface (GUI), the PC-based systems can
be deployed at any location and are extremely simple to
operate. SimiGon’s debriefing systems include D-Brief PC
and MDDS Pro. Operated from a server connected to
multiple client workstations, the systems analyse flight
data stored on the aircraft’s PMC or RMM cartridge. D-
Brief PC is used to support real-time air combat debriefing.
MDDS Pro is a digital debriefing solution incorporating
video with 3D simulation.
includes
Air Traffic Control
SimiGon's successfully deployed Air Traffic Control training
solution
instructor operator stations, virtual
pilots, voice recognition and the ability for instructors to
modify training sessions in real time. The systems are used
by ATC instructors to train new controllers in guiding
aircraft through take-off and landing procedures as well as
for recurrent and operational training. The Company aims
to leverage its success in this market to compete for
additional military and civilian ATC training contracts.
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SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP
Chairman & CEO Reviews
Chairman’s Statement
Chief Executive’s Review
“The improvement in the operational
results during the second part of year
2018, indicates that the fundamentals of
the business remained strong”
“We were able to report higher
revenues for 2018 as compared to the
prior year, together with an improved
gross margin and a reduction at the
operating loss level. Our true success is
the strong foundation we created for
to
future
growth
return
and
Alistair Rae, Chairman
profitability”.
SimiGon has continued to deliver its new and ongoing
strategic programs, meeting and exceeding customer
innovative technologies. Throughout
expectations with
2018, the Company continued its organic growth strategy,
expanding into additional contracts within existing and new
strategic programs.
The improvement in the operational results during the
second part of year 2018, indicates that the fundamentals
of the business remained strong, with recurring revenues
and improvements attained across a number of strategic
objectives.
I am also encouraged by the many business and Research &
Development activities the Group is engaged in and which
are expected to deliver long term growth.
SimiGon learning and training technologies and applications
are unique and present significant value-add to
its
customers across defense and civilian markets. The various
arenas, in which SimiGon is actively engaged, combined
with the focus on advancing and leveraging its technologies
to deliver growth in its established aviation market give the
Board of Directors confidence in the Company’s ability to
build sustainable, long term growth.
On behalf of the Board, I would like to thank our customers
for their ongoing loyalty, and to our dedicated employees
whose expertise, passion and drive to make us successful
provide the required forward thrust to the business.
Amos Vizer, President & CEO
The Company has been executing its strategy to deliver
program milestones of long-term strategic contracts and
continue to develop tactical positioning in the market as a
leading technology provider. We have entered 2019 with
more clients, more partners, stronger technology and
greater utilization of our SIMbox technology across more
domains than any other year in our history. SimiGon’s
ability to identify new markets and their need for cost
effective training is exemplified throughout the Period in
several programs, such as the multiple SIMbox-based
Virtual Reality Aircraft Deicing Simulator
(“S-VADS”)
provided to the USAF.
Though 2018 was one of our strongest product delivery
years, the on-going transition to a SaaS model impacted
our financial performance as license revenue is now spread
over 5-12 years. As mentioned on the Company’s previous
trading update, the impact of this migration to a SaaS
model can be demonstrated by the fact that license
revenue is reduced by 85% which in turn impact short term
yet,
long-term financial
improve the
performance of the Company.
I expect, will
I am very proud of our team and our ability to adapt to
changing market trends. Our growing footprint in the
training and simulation industry is propelled by leading,
game-changing technologies, diverse global partners, and
the need for advanced training systems and positions the
Company well to deliver improved financial performance in
2019 and beyond.
Alistair Rae
Chairman
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SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Overview
During the Period, the Company achieved successful
delivery milestones of its strategic contracts. This includes
milestones on the IAF F-16 Maintenance Trainer program,
logistics support provided to the USAF under their T-6A
program and additional work scope for the UK Military
Flight Training System program.
Successful deliveries and advanced proven technology has
led SimiGon to be contracted with strategic programs
throughout the Period which has solidified SIMbox as the
major training technology platform. This
includes the
contract signed with the IAF to provide them with T-6A
training devices utilizing advanced VR capabilities to support
advanced training needs, and the contract award from its
key European customer for SIMbox Commercial off-the-
shelf training and simulation development platform. In
addition, SimiGon’s ability to identify new markets and their
requirements for cost effective personal training systems
was further demonstrated during the Period when the
Company was contracted to deliver a VR Aircraft De-icing
Simulators to the USAF.
Over the past 24 months, the Company’s strategic focus has
been on three main areas:
Sustain the baseline - Continue to successfully deliver
Distributed Learning Solutions to our core strategic partners
worldwide. SimiGon, directly and through its partners, now
has training sites in North America, Europe, Middle East and
in the Asia Pacific markets.
Expand market reach - Expand the utilization of our SIMbox
technology to multiple domains. This was successfully
achieved by targeting several high opportunity markets such
as maintenance training, commercial equipment operators
training and research labs that utilize SIMbox as part of their
research.
Strengthen our technology capabilities - Improve the
technological capabilities of the SIMbox technology in order
to enable the growth of the Company as detailed above.
Beyond the expansion of our graphics engine, simulation
and learning management system, we have added and
delivered Virtual Reality solutions to multiple clients around
the globe.
During the Period, revenue was $5.03 million (2017: $4.34
million) and loss before tax expenses of $0.78 million
(2017: loss before income tax of $0.96 million). The key
contributor to the reported operating loss is the recording
of a doubtful debt provision in a total of $0.45 million
related to a delay in payment from a particular customer
in the civilian training market, as previously announced.
Though discussions continue with that a customer and
legal action has been initiated, the Company has now
recorded a full (as opposed to partial) doubtful debt
provision for the client’s entire outstanding debt. Due to
the removal of expected future revenues from this
customer, our forward backlog order book has been
revised from the previously announced $20 million to $14
million, which we expect to recognize over the next ten
years.
The Company continues to maintain a strong balance
sheet with liquid cash balances of $6 million as at 31
December 2018.
in
The Company’s R&D has made major advances
simulation
Image
Generation (“IG”) capabilities, user performance and data
analytics capabilities.
development
software
tools,
These SIMbox technology improvements serve to increase
opportunities and market penetration across military and
civilian training markets. The team has made major strides
adapting the platform to new domains and better
leverage of the Company’s technology beyond the core
defence market into commercial verticals and civilian /
consumer applications. The Company is well positioned to
take advantage of the fundamental shift in training
through immersive experiences, including Virtual Reality,
Augmented Reality and Mixed Reality.
is well suited to support the
SimiGon’s technology
improved realism and depth perception expected from
high fidelity Virtual Reality solutions as well as being
integrated with our Learning Management System and
immediate training and
virtual
learning value. SimiGon integrated VR capability delivers
time and cost savings with a level of immersion formerly
available only through far more expensive VR headsets
and dome projection systems.
instructor to provide
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SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
safety, energy and other
SimiGon’s civilian training market opportunities range from
maintenance,
industrial
operations skills. The Company’s efforts to grow vertical
Government and Civilian training are pressing forward. The
Company recognizes the growth potential in VR-leveraged,
as well AR training solutions and is aggressively developing
and marketing
this
relevant solutions
fundamental shift in the training world.
to support
The enterprise VR training market is forecasted to grow at
CAGR 140% and expected to generate $216 million in 2018
and grow to $6.3 billion in 2022.
SimiGon’s market position will
improve for multiple
reasons. Foremost, it serves virtually any domain. No less
important, potential customers are seeking solutions
supporting with user data tracking and analytics, high
fidelity graphics, scalability and extensibility to support
synchronous and asynchronous training. The Company
already has these capabilities and is delivering advanced
training solutions to the satisfaction of customers and
partners. Third, SimiGon has a high customer retention
rate, as clients turn to the Company to make additional
deliveries in existing programs and support new programs.
to advance
The Company
its
invests considerably
technologies and improve user experience. The customer
base, combined with the new technologies consistently
being incorporated into our product releases, will meet
and exceed customer requirements to improve our market
share.
Operational Review
SimiGon’s core technology, SIMbox, and support services
were developed for large simulation training programmes
the Government and Commercial sectors. The
for
Company is at the forefront of designing, developing,
implementing and supporting advanced simulation and
training solutions to accelerate learning reduce safety risks
and save training and program development costs for its
clients. By
its robust and agile SIMbox
ecosystem, SimiGon and its partners can deliver simulation
based training content across unlimited domains and
tablets and
from
the hardware spectrum,
across
laptops/PCs to high fidelity training devices.
leveraging
SimiGon’s strategic, simulation-based training solutions
offer flexible licensing models with traditional software
licensing or SaaS. SimiGon’s technologies and capabilities
provide significant added value to multiple sectors.
Markets:
The Company target markets as follows:
Aerospace and defence related industry
The Company’s historical core market is the aerospace
and defence arena, particularly military aviation, where
the Company continues to cement its position as a
preferred technology supplier for the world’s largest
military training programmes. The Company’s track
record of delivering on time and within budget has led to
winning new military-related contracts around the world,
as well as serving to further entrench the Company with
existing customers into new programmes.
Civilian and Commercial vertical markets
The global smart education and learning market size is
expected to reach $423.2 billion by 2025 at a 15.2%
CAGR, offering extensive expansion opportunities for
SimiGon.
Millennials and Generation Z users learning experience is
transforming the training
industry as students are
exposed to digital devices from a young age. Adaptive
learning, simulation-based learning, blended learning, and
collaborative learning, all part of SimiGon products, have
subsequently evolved to offer users enhanced learning
methodologies and experiences.
The simulation-based learning segment is anticipated to
grow the fastest, enabling professional organizations and
educational institutions to virtually experience real world
environments for trainees to practice, navigate, explore,
and obtain more information through a virtual medium
before they start working on real-life tasks.
Growing awareness among people and rising popularity
of smart education are encouraging solution providers to
invest in research and development for creating more
reliable, better, and cost-effective solutions.
is very excited by
The Company
increased market
opportunities occurring in the civilian and mass consumer
training segments being supported with new technologies
such as VR and AR.
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SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
(“OSA”) software
As an Open System Architecture
framework, SimiGon’s ability to
integrate with new
technologies makes it viable long-term training simulation
software fully capable of leveraging the immersive training
needs of the VR civilian markets. SimiGon software offers
an advanced solution to organizations seeking to teach
visual and interactive problem solving in far ranging
markets such as civilian aviation, technician training,
language training, customer service training and corporate
leadership.
SimiGon’s technology, experience and personnel, place it
in a unique position to take advantage of the cultural shifts
democratizing learning and training to reach the wider
consumer market.
The Company’s significant capabilities, proven
in the
defence sector, are being leveraged to pursue new civilian
training contracts. Two examples of potential applications
are aircraft maintenance training and aircraft deicing
technician training.
In 2018, SimiGon has successfully made entries into the
civilian Unmanned Aircraft Systems (“UAS”) segment with
a contract signed with
the US Federal Aviation
Administration ("FAA") announced in Jan 2018, to deliver
SIMbox simulation development tools and training in
support of the FAA's Advanced UAS Research Simulator
(“AURS”).
This contract demonstrated how SIMbox is an effective
R&D toolset for design and development as well as an
advanced training system platform.
The Company continues to further develop its disruptive,
baseline, commercial off-the-shelf (“COTS”) product with
additional top layer application content and capabilities to
reach more end users and vertical markets. Targeted
verticals such as commercial aviation maintenance
training, security training, language training and vocational
training have common requirements to the defence-
related
industries the Company continues to target.
Specifically, they are highly regulated, require complex and
specialized skill training and have zero tolerance for error.
SimiGon is seeking to increase market share and broaden
the end user applications for its base line SIMbox software
platform in new domains.
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For marketing investments, the Company has increased
digital and print advertising, social media efforts and
added presence at industry exhibitions, with booths at
four industry symposiums, including the 2018 Singapore
Airshow, ITEC in Europe, IITSEC and TSIS in the US as well
as participation in smaller industry demos for select
customers.
newest
developments to existing and potential partners and
customers serve to increase the overall potential business
net.
Showcasing
Group’s
the
Business Model
long-term, high value, stable 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 addition, the Company maintains flexibility with
its traditional perpetual license fee model where the
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.
Growth Strategy
SimiGon Group is focused on growing organically through
its existing customer base, offering continuous product
developments and services; leveraging its experience and
IP developed
from existing contracts as a Prime
Contractor and Subcontractor to win new business and
capture sales in established segments; and expanding its
core technology’s applicability for new market domains,
directly and indirectly.
SimiGon’s highly scalable, COTS technology training
management system makes it an ideal solution to address
new training domains with little customization required.
New projects and markets continue to utilize the product
infrastructure and developer tools to create the new
application content; once developed, they are leveraged
to target the wider market.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
R&D
The Company’s R&D investments are working to expand
the Group’s offering to ensure it stays a leading provider of
advanced technologies. This allows SimiGon to identify
prospects while maintaining a programme of solutions,
upgrades and enhancements to expand business with
existing clients and winning new customers.
SimiGon realized numerous R&D milestones
in the
financial year. The Group’s Image Generator (“IG”) has
undergone a complete technology refresh and now
supports higher fidelity training devices, providing industry
leading user experiences, providing high resolution
graphics and accurate environmental conditions.
The Company has also remained astride with its VR device
support, as it has for more than twenty years. VR and AR
remain a Company focus and further R&D investment on
these efforts will positively impact the Company’s growth
potential and are central to remaining a viable technology
option.
Significant contracts
New contracts
the USAF. Under
In February 2018 SimiGon was awarded with additional
onsite support services for the sixteen T-6A Level 5 FTDs
with
the Contract’s period of
performance of 28 months, SimiGon will provide warranty
support for the additional six simulators delivered as part
of the task order with Booz Allen in 2016, and further
onsite hardware and software support for all of the
SIMbox-based simulators, including the ten simulators
delivered to the USAF between 2011-2012 and then
upgraded on 2016. The Contract represents another
milestone for SimiGon as it establishes a full CLS capability
for the T-6A training devices. The simulators are used to
provide thousands of training events annually for the
USAF’s URT program and it further demonstrates the
market’s recognition that SimiGon is capable of delivering
support for the complete ecosystem, including software,
hardware and onsite support.
In February 2018 the Company signed a contract with the
US FAA to deliver the Company's SIMbox simulation
software, SIMbox simulation development tools, and
engineering services for the FAA's AURS.
- 11 -
This was a follow-on order from the original contract
announced
is worth
in September 2017 and
approximately $120,000 and has been factored into
management’s expectations for fiscal year 2018. The
AURS supports human factors research and safety
research within the FAA’s Aerospace Human Factors
Research Division. SIMbox delivers the user interface for
the operators in an aircraft simulation environment as
well as a central repository for all components with the
embedded configuration management capability.
In May 2018 SimiGon was contracted to provide VR
simulation based training for USAF De-icing technicians.
As part of the Contract, SimiGon will deliver its SIMbox-
training product. By
based VR aircraft de-icing
incorporating fully immersive VR with SimiGon’s de-icing
simulation product, USAF technicians will receive
simulation based
scoring,
Playback/After Action Review, feedback reports, as well
as a multi-player training capability.
includes
training
that
the
importance
Aircraft de-icing is a high skills task requiring annual
training of military and commercial personnel working in
cold weather aviation. Ice adds significant weight to
aircraft and having “clean aircraft” is critical to safe
travel. SimiGon understands
for
operators to undergo adequate training to ensure
proper operations, as mistakes can result in significant
aircraft damage and flight cancellations. The Directors
estimates the De-Icing market to include more than
in the civilian market.
100,000 trainees per year
SimiGon’s technology and business model is well suited
for rapid product rollout to meet expected market
looking forward to
demand and the Company
successfully
its aircraft de-icing training
product for substantial business growth.
leveraging
is
In September 2018, SimiGon was awarded with $1.1
million contract from the IAF to provide SIMbox-based T-
6A Simulation Based Trainers to the IAF Flight Academy
(the “Contract”). The Contract for the new trainers is a
progression of SIMbox Ground Based Training Systems
(“GBTS”) for other platforms
in the IAF inventory,
including the M-346 Advanced Jet Trainer (“AJT”). This
Contract solidifies SIMbox as the IAF’s major training
technology platform for its aircrew and maintainer
academies.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
The Contract includes the procurement of SIMbox-based T-
6A training devices in a fully immersive, VR environment.
Up to 4 systems will be delivered in the first phase,
enabling students to train through personal stations on
most of the aspects of their syllabus. The stations will
include high resolution Common Database terrain and VR
headsets to support advanced training of Aerobatic,
Formation, Navigation and Circuit procedures, together
with standard procedural and emergencies training. In the
second phase, a Virtual Instructor and a self-paced syllabus
using high fidelity 3D simulation will be delivered,
providing accelerated, cost-effective training to the IAF
cadets.
and
platform
development
In December 2018, SimiGon further expanded its long-
term relationship with a major existing European customer
(the "Customer"). The contract award is for SimiGon to
provide its SIMbox Commercial Off the Shelf training and
simulation
delivery
environment for its new research & development lab at
the Customer’s facility (the "Contract"). The Customer will
use SIMbox technology as the technology baseline for its
ATC. Under the Contract, valued at $0.92 million, SimiGon
has successfully increased the use of SIMbox in the
additional programs across the Customer’s organization.
The expected revenue from this Contract was already
factored into management's expectations for the years
ended 31 December 2018 and 2019. SIMbox-based
training solutions will be used to design, develop and
implement advanced
flight crew and
training
maintenance staff, for basic, advanced and recurrent
training. The SIMbox Training Management System will
allow the ATC to deploy the content and monitor user
performance. The embedded virtual instructor capability
will ensure dynamic, highly interactive, personalized, cost-
effective training solutions that reduce the cost of real
flights, flight instructor hours and help prevent aviation
mishaps.
for
SimiGon continued its successful delivery milestones for a
$2 million contract announced in June 2016 to provide F-
16 maintenance simulation based training systems to the
IAF’s technician school in Haifa, Israel. This contract, in the
maintenance training domain, is a new, lucrative vertical
for SimiGon and will provide us with the experience and
similar new business
for
credentials
opportunities in other regions and other sectors.
leverage
to
- 12 -
SimiGon continues its successful support for UKMFTS as
a technology and services provider to Lockheed Martin.
The Company continues to deliver under this long term
contract, now in its ninth year of support, exceeding
partner and end user expectations of SimiGon's
technologies and performance.
Ongoing USAF contracts for the continued maintenance
and support for SIMbox-based T-6A FTD demonstrates
the long term relationship with this strategic customer.
Check-6 Inc., one of the leading providers of training
solutions to the energy and mining industries, is another
example of SimiGon's ability to help companies achieve
new growth. Throughout this contract, SimiGon has
successfully executed on its agreed deliverables. This
long term business
relationship continues to yield
prospects. The Company is optimistic that additional
agreements will be executed to extend this relationship.
The Company continues to support a major existing
European customer the Company has been supplying
with software and services since 2009. The customer is
operating SimiGon training solutions in four different
training centers daily and has very positive customer
reviews. SimiGon is certain that this relationship will
continue and lead to additional future orders.
Share buy-back programme
for
shares
its ordinary
On 1 December 2017 the Company put in place an
irrevocable, non-discretionary programme
the
repurchase of up to $106,000 (approximately £79,000)
of
(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
influence of
the Company. Any ordinary shares
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 Programme will last until the end of the Company's
general meeting in 2018 or until the full $106,000 has
been utilized, whichever is the soonest. The Programme
is conducted within the pre-set parameters and in
accordance with the authority granted by the Company's
shareholders to repurchase shares at its last general
meeting held on 8 September 2017. To date, pursuant to
the Programme, a total of 535,571 shares have been
bought back.
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Financial Performance
Revenue for the year ended 31 December 2018 was $5.03
million, compared to $4.34 million in 2017.
29% of SimiGon's revenues came from North America
(2017: 40%), 69% from Europe, Middle East, South America
and Australia (2017: 42%) and 2% from the Far East (2017:
18%).
Gross profit for the year ended 31 December 2018 was
$4.06 million, as compared to $3.36 million for the year
ended 31 December 2017. Accordingly, gross margins
increase to 81% for the year ended 31 December 2018 as
compared to 78% for the year ended 31 December 2017.
Total operating expenses for the year ended 31 December
2018 increased by 12% to $4.82 million as compared to
$4.32 million for the year ended 31 December 2017,
mainly as a result of increase in R&D expenses and
doubtful debt provision in a total amount of $0.45 million
recorded
in year 2018. Research and development
expenses for year ended 31 December 2018 increased by
12% to $2.34 million as compared to $2.09 million for the
year ended 31 December 2017 mainly due to salary
expenses. Marketing expenses for the year ended 31
December 2018 decreased by 13% to $1.02 million as
compared to $1.17 million for the year ended 31
December 2017 mainly due to sales commissions and
salary expenses. General and administration expenses for
the year ended 31 December 2018 increased by 38% to
$1.46 million as compared to $1.06 million the year ended
31 December 2017 mainly due to provision for doubtful
debts recorded in year 2018 of $0.45 million.
Operating loss for the year ended 31 December 2018 was
$0.76 million, as compared to $0.96 million for the year
ended 31 December 2017. Operating
loss excluding
doubtful debt provision decreased by 68% to $0.31 million
as compared to year 2017 ($0.96 million).
The Company has recorded non cash tax expense of $0.24
million for the year ended 31 December 2018 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.
As a consequence of the factors above, net loss for the
fiscal year of $1.01 million (2017: net loss of $0.95
million). The net loss excluding doubtful debt provision,
decrease by 41% to $0.56 million as compared to year
2017 ($0.95 million).
Net basic and diluted loss per share was to $0.02 for the
year ended 31 December 2018 as compared to net basic
and diluted earnings per share of $0.02 for the year
ended 31 December 2017.
As at 31 December 2018 the Company had liquid cash of
$6.00 million as compared to $7.79 million as at 31
December 2017. Trade receivables net increased by 47%
to $2.57 million compared to $1.75 million for the year
ended 31 December 2017, mainly as a result of work
completed as part of the IAF F16 Maintenance Trainer
long-term program. A total of $0.64 million of the year
end trade receivables balance has been collected since
the year end.
Outlook
SimiGon’s impressive past and ongoing performance of
developing and delivering cost effective technologies and
solutions for the simulation and training market remains
solid and due to its latest developments is in fact
trending higher. Combined with strong economic growth
and the focus on ensuring sufficiently trained maintainers
to support military and civilian shortages and essential
investments in training applications for millennials and
Generation Z, the Company looks forward to meeting the
challenges and capturing the growth foreseen by
shareholders. Among the Company’s advantages is its
ability to scale rapidly to support new contracts and
deliver in its vision and business strategy. SimiGon’s push
to reach new verticals and customers is steadfast.
By increasing SaaS-based contracts for more recurring
revenue and better long term visibility, together with
intensive R&D investment and business development
efforts on multiple market opportunities, the Company
expects to quickly resume cash flow positive activities
and profitability.
Amos Vizer
President & CEO
- 13 -
SHARING PERSONAL MESSAGES
FROM CORPORATE LEADERSHIP (CONT.)
Board of Directors
Alistair Rae, Non-Executive Chairman
is currently chief executive of LTG
Alistair
Technologies Plc, an AIM traded company,
having been a non-executive director from 2002
to 2005. He was the group finance director of
Jarvis Plc from 2004 to 2005, guiding the
company through a period of reconstruction.
Prior to this he was a director
in the corporate finance
department of HSBC Investment Bank from 1996 to 2002, and
before that he worked in corporate finance at Cazenove for ten
years in the UK and the Far East. Alistair qualified as a chartered
accountant with KPMG.
Amos Vizer, President & CEO
Prior to founding SimiGon, Amos founded Logi-
Cali, a software development house specializing
in data storage applications. He previously
served as marketing and business development
manager of
ISYS Operational Management
Systems, an international IT company. Amos also
previously worked for the missiles division of RAFAEL Armament
Development Authority Ltd. Additionally, he served ten years in
the Israeli Air Force (IAF) as an F-4 Phantom Fighter navigator, a
flight school course commander, and a Popeye missile weapons
officer. With extensive
software
training
development, Amos holds a BA in business administration.
in advanced
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
in Accounting and Business
Accountant and holds a BA
Administration from the College for Management in Israel.
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.
director
Eyal, Non-Executive
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
LLC, managing a team of experts
in the development and
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.
- 14 -
DISPLAYING PERSONAL COMMITMENT TO
ORGANIZATIONAL SUCCESS (CONT.)
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
Ary Nussbaum, VP Business Development
(Americas)
Mr. Nussbaum has served in multiple roles
with the Company since joining in 2001 and
was most recently Director, 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.
of Human
Merav Nahmani, Director
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.
Management
Amos Vizer, President & CEO
Prior to founding SimiGon, Amos founded Logi-
Cali, a software development house specializing
in data storage applications. He previously
served as marketing and business development
manager of
ISYS Operational Management
Systems, an international IT company. Amos
also previously worked for the missiles division of RAFAEL
Armament Development Authority Ltd. Additionally, he served
ten years in the Israeli Air Force (IAF) as an F-4 Phantom Fighter
navigator, a flight school course commander, and a Popeye
missile weapons officer. With extensive training in advanced
software development, Amos holds a BA
in business
administration.
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, 2018
(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 – 73
74
- 16 -
CORPORATE GOVERNANCE FOR THE PERIOD ENDED 31 DECEMBER 2018
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 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
Omer C. Eyal ***
Mr. Ran Pappo
Deborah M. Bitman
Total
Total 2018
$
414,412
148,455
47,350
-
-
26,400
26,400
663,017
Total 2017
$
412,789
148,651
45,827
25,300
-
26,400
26,400
685,367
* Year 2018 does not include $39,165 paid in respect of vacation days, additional $28,721 paid in respect of
severance allocation transfer and additional $39,165 paid in respect to health insurance.
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 2018 does not include the reimbursement of $49,200, paid in respect to Mr. Efraim Manea relocation costs
for his work at the Company’s subsidiary in USA.
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.
*** On a Board meeting held September 20, 2018, Mr. Omer Eyal informed the Board that he is respectfully declined
any payment for his service to SimiGon as a director and that he has elected to make his membership under the
Company’s Board of Directors and Audit Committee as unpaid volunteer positions.
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 2018.
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, 2018 the total numbers of Ordinary Shares Issued were 50,858,618 (net of 535,571 Ordinary
shares held in treasury).
Share Options
As of 31 December 2018, the outstanding balance of options granted to certain employees of SimiGon is
approximately 1.5 percent of the Company’s issued and outstanding shares (net of treasury shares) at an average
exercise price of $0.247. 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. 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 2018 were as follows.
Directors
Alistair Rae
Ami Vizer
Efraim Manea
Number of Ordinary Shares
Capital
227,249
11,365,489
284,346
Percentage of Ordinary
Shares *
0.45
22.34
0.56
Shares to be issued
-
125,338 **)
32,564 **)
*) Calculated based on a total amount of 50,858,618 Ordinary Shares (net of 535,571 Ordinary shares held in
treasury).
**) 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 2018 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
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 *
22.35%
12.87%
9.93%
6.88%
6.03%
4.47%
3.36%
3.14%
*) Calculated based on a total amount of 50,858,618 Ordinary Shares (net of 535,571 Ordinary shares held in
treasury).
Auditors
Kost Forer Gabbay & Kasierer
(A member of Ernst & Young Global)
3 Aminadav St.
Tel Aviv Israel 67067
- 20 -
Kost Forer Gabbay & Kasierer
144 Menachem Begin St.
Tel-Aviv 6492102, 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, 2018
and 2017, and the consolidated statements of comprehensive income, changes in equity and cash flows for
each of the years ended December 31, 2018, 2017 and 2016, 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, 2018 and 2017, and the results of its
operations and its cash flows for the each of the years ended December 31, 2018, 2017 and 2016, in
accordance with International Financial Reporting Standards as adopted by the European Union.
Tel-Aviv, Israel
April 26, 2019
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,
2018
2017
Note
U.S. dollars in thousands
3
5
4
5
12
6
7
3,143
1,014
1,845
278
2,571
93
8,944
559
32
-
66
1,068
1,725
4,868
1,010
1,912
337
1,748
149
10,024
337
34
226
94
1,068
1,759
10,669
11,783
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:
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
Treasury shares
Accumulated deficit
Total equity attributable to equity holders of the Company
December 31,
2018
2017
Note
U.S. dollars in thousands
8
9
13a
10
159
327
691
133
401
675
1,177
1,209
287
712
999
289
704
993
2,176
2,202
125
16,647
(105)
(8,174)
8,493
125
16,639
-
(7,177)
9,587
Non-controlling interests
-
(6)
Total equity
8,493
9,581
Total liabilities and equity
10,669
11,783
The accompanying notes are an integral part of the consolidated financial statements.
- 23 -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIMIGON LTD.
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
Year ended
December 31,
2017
U.S. dollars in thousands
(except share and per share amounts)
2016
2018
Note
15
14a
14b
14c
14d
5,029
973
4,056
2,335
1,019
1,462
4,816
4,335
975
3,360
2,092
1,170
1,056
4,318
(760)
(958)
14e
14f
134
157
126
125
6,018
1,882
4,136
1,714
1,092
1,107
3,913
223
172
103
292
69
361
Income (loss) before income taxes
(783)
(957)
Income tax benefit (expense)
12
(224)
3
Net income (loss)
(1,007)
(954)
The accompanying notes are an integral part of the consolidated financial statements.
- 24 -
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
SIMIGON LTD.
Year ended
December 31,
2017
U.S. dollars in thousands
(except share and per share amounts)
2018
2016
Note
Net income (loss)
(1,007)
(954)
361
Other comprehensive income not to be
reclassified to profit or loss in subsequent
periods:
Remeasurement gain (loss) from defined benefit
plan
16
(11)
Total comprehensive income (loss)
(991)
(965)
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
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)
(2)
359
365
(4)
361
363
(4)
359
(1,013)
6
(952)
(2)
(1,007)
(954)
(997)
6
(963)
(2)
(991)
(965)
(0.02)
(0.02)
0.01
16
51,259
51,444
51,097
16
51,259
51,444
51,319
The accompanying notes are an integral part of the consolidated financial statements.
- 25 -
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
SIMIGON LTD.
Attributable to equity holders of the Company
Number
of shares
Share
capital
Additional
paid-in
capital
Treasury
shares
Accumulated
deficit
Total
Non-
controlling
interests
Total equity
U .S. dollars in thousands (except share amounts)
Balance as of January 1, 2016
50,993,154
124
16,526
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
-
Balance as of December 31,
2017
Total comprehensive loss
Dividend distribution
Share-based compensation
Balance as of December 31,
2017
Total comprehensive loss
Purchase of Treasury shares
(see Note 10 (f)
Share-based compensation
Balance as of December 31,
2018
51,394,189
125
16,629
-
-
-
-
-
-
-
-
10
51,394,189
125
16,639
-
(535,571)
-
-
-
-
-
-
8
-
-
-
-
-
-
-
-
-
-
-
-
(6,201)
10,449
363
363
(306)
-
-
(306)
65
38
-
1
(6,144)
10,610
(963)
(70)
-
(963)
(70)
10
(7,177)
9,587
(997)
(997)
(105)
-
-
-
(105)
8
-
(4)
-
-
-
-
(4)
(2)
-
-
(6)
6
-
-
10,449
359
(306)
65
38
1
10,606
(965)
(70)
10
9,581
(991)
(105)
8
50,858,618
125
16,647
(105)
(8,174)
8,493
-
8,493
*)
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)
(1,007)
(954)
361
Year ended
December 31,
2017
U.S. dollars in thousands
2016
2018
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 expenses (income), net
Share-based compensation
Change in employee benefit liabilities, net
Changes in asset and liability items:
Decrease (increase) in trade receivables
Decrease (increase) in other accounts receivable and
prepaid expenses (including long-term)
Increase (decrease) in trade payables
Increase (decrease) in deferred revenues
Increase (decrease) in other accounts payable and accrued
expenses
Net cash provided by (used in) operating activities
46
226
64
8
15
55
(3)
(36)
10
57
(823)
1,171
59
26
(74)
-
(453)
(1,460)
(105)
35
(195)
5
994
40
87
(64)
(71)
65
28
796
18
(25)
22
(167)
689
1,050
The accompanying notes are an integral part of the consolidated financial statements.
- 27 -
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIMIGON LTD.
Year ended
December 31,
2017
U.S. dollars in thousands
2016
2018
Cash flows from investing activities:
Increase in restricted cash
Increase in short-term bank deposits
Increase in long-term deposits
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from share issuance
Dividend distribution
Purchase of treasury shares
Receipt of refundable grants
Net cash used in financing activities
(164)
-
(2)
(16)
(182)
-
-
(105)
22
(83)
(300)
-
-
(34)
(334)
-
(70)
-
11
(59)
Decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
(1,725)
4,868
(353)
5,221
-
(1,001)
(26)
(66)
(1,093)
*) -
(306)
-
25
(281)
(324)
5,545
Cash and cash equivalents at end of year
3,143
4,868
5,221
(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
*)
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 (accounting policy applied until December 31, 2017):
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:
As described in Note 2(x)(2) regarding the initial adoption of IFRS 9, "Financial
Instruments" ("the Standard"), the Company elected to adopt the provisions of the
Standard retrospectively without restatement of comparative data.
The accounting policy for financial instruments applied until December 31, 2017, is as
follows:
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.
- 31 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
Short-term receivables (such as trade and other receivables) are measured
based on their terms, normally at face value.
2.
Financial liabilities:
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.
The accounting policy for financial instruments applied commencing from January 1,
2018, is as follows:
1.
Financial assets:
Financial assets are measured upon initial recognition at fair value plus transaction
costs that are directly attributable to the acquisition of the financial assets, except
for financial assets measured at fair value through profit or loss in respect of which
transaction costs are recorded in profit or loss.
The Company classifies and measures debt instruments in the financial statements
based on the following criteria:
-
-
The Company's business model for managing financial assets; and
The contractual cash flow terms of the financial asset.
a)
Debt instruments are measured at amortized cost when:
The Company's business model is to hold the financial assets in order to
collect their contractual cash flows, and the contractual terms of the financial
assets give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding. After initial
recognition, the instruments in this category are measured according to their
terms at amortized cost using the effective interest rate method, less any
provision for impairment.
b)
Equity instruments and other financial assets held for trading:
Investments in equity instruments do not meet the above criteria and
accordingly are measured at fair value through profit or loss.
- 32 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
Other financial assets held for trading such as derivatives, including
embedded derivatives separated from the host contract, are measured at fair
value through profit or loss unless they are designated as effective hedging
instruments.
In respect of certain equity instruments that are not held for trading, on the
date of initial recognition, the Company made an irrevocable election to
present subsequent changes in fair value in other comprehensive income
which changes would have otherwise been recorded in profit or loss. These
changes will not be reclassified to profit or loss in the future, even when the
investment is disposed of.
Dividends from investments in equity instruments are recognized in profit or
loss when the right to receive the dividends is established.
2.
Impairment of financial assets:
The Company evaluates at the end of each reporting period the loss allowance for
financial debt instruments which are not measured at fair value through profit or
loss.
The Company has short-term financial assets such as trade receivables in respect of
which the Company applies a simplified approach and measures the loss allowance
in an amount equal to the lifetime expected credit losses. An impairment loss on
debt instruments measured at amortized cost is recognized in profit or loss with a
corresponding loss allowance that is offset from the carrying amount of the
financial asset.
3.
Financial liabilities:
Financial liabilities measured at amortized cost:
Financial liabilities are initially recognized at fair value less transaction costs that
are directly attributable to the issue of the financial liability.
After initial recognition, the Company measures all financial liabilities at
amortized cost using the effective interest rate method.
4.
Derecognition of financial liabilities:
A financial liability is derecognized only when it is extinguished, that is when the
obligation specified in the contract is discharged or cancelled or expires. A
financial liability is extinguished when the debtor discharges the liability by paying
in cash, other financial assets, goods or services; or is legally released from the
liability.
- 33 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
i.
Leases:
SIMIGON LTD.
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.
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.
- 34 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
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.
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.
- 35 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
n.
Government grants:
SIMIGON LTD.
Government grants are recognized where there is reasonable assurance that the grant will
be received and the Company will comply with the attached conditions.
Government grants received from the Office of the Chief Scientist ("OCS") and the Korea
Israel Industrial R&D Foundation as support for research and development projects which
grants include an obligation to pay royalties that are conditional on future sales arising
from the project, are recognized upon receipt as a liability if future economic benefits are
expected from the project that will result in royalty-bearing sales. If no such economic
benefits are expected, the grants are recognized as a reduction of the related research and
development expenses. In that event, the royalty obligation is treated as contingent
liability in accordance with IAS 37.
At the end of each reporting period, the Company evaluates, based on its best estimate of
future sales, whether there is reasonable assurance that the liability recognized, in whole
or in part, will not be repaid (since the Company will not be required to pay royalties). If
there is such reasonable assurance, the appropriate amount of the liability is derecognized
and recorded in profit or loss as a reduction of research and development expenses. If the
estimate of future sales indicates that there is no such reasonable assurance, the
appropriate amount of the liability that reflects expected future royalty payments is
recognized with a corresponding adjustment to research and development expenses.
Grants received after January 1, 2009, which are recognized as a liability, are accounted
for as forgivable loans, in accordance with IAS 20 (Revised), pursuant to the provisions
of IFRS 9, "Financial Instruments". 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 rate and recorded in profit or loss in accordance with the provisions of
IFRS 9.
Royalty payments are treated as a reduction of the liability.
o.
Revenue recognition:
As described in Note 2x regarding the initial adoption of IFRS 15, "Revenue from
Contracts with Customers" ("the Standard"), the Company elected to adopt the provisions
of the Standard using the modified retrospective method with the application of certain
practical expedients and without restatement of comparative data.
The accounting policy for revenue recognition applied until December 31, 2017, is as
follows:
- 36 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
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. When the
Company acts as an agent and is not exposed to the risks and rewards associated with the
transaction, revenues are presented on a net basis. Revenues are measured at the fair
value of the consideration less any trade discounts, volume rebates and returns.
Following are the specific revenue recognition criteria which must be met before revenue
Revenues from software arrangements:
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 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
stage of completion cannot be determined reliably, revenues are recognized on a straight-
line basis over the agreement period.
Software arrangements generally contain multiple sale 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.
Revenue from software licensing arrangements:
The Company recognizes revenue from software licensing transactions at a point in time
when the Company provides the customer a right to use the Company's intellectual
property as it exists at the point in time at which the license is granted to the customer.
The Company recognizes revenue from software licensing transactions over time when
the Company provides the customer a right to access the Company's intellectual property
throughout the license period.
Revenues from software arrangements:
The accounting policy for revenue recognition applied commencing
from January 1, 2018, is as follows: The accounting policy for
revenue recognition applied commencing from January 1, 2018, is as
follows:
Revenue recognition:
Revenue from contracts with customers is recognized when the control over the goods or
services is transferred to the customer. The transaction price is the amount of the
consideration that is expected to be received based on the contract terms, excluding
amounts collected on behalf of third parties (such as taxes).
- 37 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
In determining the amount of revenue from contracts with customers,
the Company evaluates whether it is a principal or an agent in the
arrangement. The Company is a principal when the Company controls
the promised goods or services before transferring them to the
customer. In these circumstances, the Company recognizes revenue
for the gross amount of the consideration. When the Company is an
agent, it recognizes revenue for the net amount of the consideration,
after deducting the amount due to the principal.
Revenue from rendering of services:
Revenue from rendering of services is recognized over time, during
the period the customer simultaneously receives and consumes the
benefits
provided by the Company's performance. Revenue is recognized in the
reporting periods in which the services are rendered. The Company
charges its customers based on payment terms agreed upon in specific
agreements. When payments are made before or after the service is
performed, the Company recognizes the resulting contract asset or
liability.
Revenue from customization contracts:
At contract inception, the Company identifies the customization work
as a performance obligation. Since the Company's performance
creates or enhances an asset that the customer controls as the asset is
created or enhanced, the Company recognizes revenue over time.
The Company applies a cost-based input method for measuring the progress of
performance obligations that are satisfied over time. The Company believes that the use
of this input method, according to which revenue is recognized based on the inputs
expended by the Company for fulfilling its performance obligations, best reflects the
actual revenue earned. In applying this input method, the Company estimates the costs to
complete contract performance in order to determine the amount of the revenue to be
recognized. These estimated costs include the direct costs and the indirect costs that are
directly attributable to a contract based on a reasonable allocation method. Moreover, in
measuring the percentage of completion, the Company does not consider costs that do not
contribute to the progress in satisfying performance obligations, such as (costs of
uninstalled materials, etc.).
In certain circumstances, the Company is unable to measure the outcome of a contract,
but the Company expects to recover the costs incurred in fulfilling the contract as of the
reporting date. In such circumstances, the Company recognizes revenue to the extent of
the costs incurred as of the reporting date until such time the outcome of the contract can
be reasonably measured.
If a loss is anticipated from a contract, the loss is recognized in full regardless of the
percentage of completion.
- 38 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Contract balances:
SIMIGON LTD.
The Company charges customers as the work progresses in accordance with the
contractual terms. Amounts billed are classified as trade receivables in the statement of
financial position. When revenues from performance of a contract are recognized in profit
or loss before the customer is charged, these amounts are recorded as contract
assets/income receivable.
Amounts received from customers in advance of performance by the
Company are recorded as contract liabilities/deferred revenues from
customers and recognized as revenue in profit or loss when the work
is performed.
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.
Employee benefits:
r.
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.
- 39 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
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.
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.
- 40 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
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.
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.
- 41 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
-
Chief Scientist grants:
SIMIGON LTD.
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.
- 42 -
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. Changes in accounting policies - initial adoption of new financial reporting and accounting
standards and amendments to existing financial reporting and accounting standards:
1.
Initial adoption of IFRS 15, "Revenue from Contracts with Customers":
The IASB issued IFRS 15, "Revenue from Contracts with Customers" ("the new
Standard") in May 2014. The new Standard 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 new Standard introduces a five-step model that applies 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 distinct performance obligations in the contract
Step 3: Determine
to variable
consideration, significant financing components, non-cash consideration and any
consideration payable to the customer.
transaction price, including reference
the
Step 4: Allocate the transaction price to the distinct performance obligations on a
relative stand-alone selling price basis using observable prices, if s available, or
using estimates and assessments.
Step 5: Recognize revenue when a performance obligation is satisfied, either at a
point in time or over time.
- 43 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
The new Standard has been applied for the first time in these financial statements.
The Company elected to adopt the provisions of the new Standard using the
modified retrospective method with the application of certain practical expedients
and without restatement of comparative data. The Company recognizes any
difference between the previous carrying amount and the carrying amount on the
date of initial application of the new Standard as an adjustment to the opening
balance of retained earnings (or another component of equity, as applicable).
The effect of the initial application of the new Standard on the Company's financial
statements was immaterial.
2.
Initial adoption of IFRS 9, "Financial Instruments":
In July 2014, the IASB issued the final and complete version of IFRS 9, "Financial
Instruments" ("the new Standard"), which replaces IAS 39, "Financial Instruments:
Recognition and Measurement". The new Standard mainly focuses on the
classification and measurement of financial assets and it applies to all assets within
the scope of IAS 39.
The new Standard has been applied for the first time in these financial statements
retrospectively without restatement of comparative data.
The effect of the initial adoption of the new Standard on the Company's financial
statements was immaterial.
y.
Disclosure of new standards in the period prior to their adoption IFRS 16, "Leases"
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.
- 44 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SIMIGON LTD.
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.
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.
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:
(i)
Full retrospective adoption, without restating comparative data, by recording the
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 does not expect any material impact on the financial staements.
NOTE 3:- SHORT-TERM INVESTMENTS
December 31,
2018
2017
U.S. dollars in thousands
Financial assets classified as held for trading at fair value
through profit or loss- Mutual Funds *)
1,845
1,912
*)
Short-term investments in mutual funds are considered as highly liquid low risk
investments.
- 45 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: - TRADE RECEIVABLES
Trade receivables (1)
SIMIGON LTD.
December 31,
2018
2017
U.S. dollars in thousands
2,571
1,748
(1) Net of allowance for doubtful debts
705
259
Trade receivables are non-interest bearing and are generally on 30 - 90 days' terms.
The aging analysis of trade receivables is as follows:
Past due but not impaired
Neither past
due nor
impaired
< 30
days
30 - 60
days
60 - 90
day
U.S. dollars in thousands
> 90
days
Total
Year 2018 (before
allowance for bad debts)
2,289
Allowance for bad debts
-
Year 2018 (After
allowance for bad debts)
2,289
2017(After allowance for
bad debts)
1,060
-
-
-
-
16
-
16
25
27
-
27
681
442
239
3,013
442
2,571
110
553
1,748
NOTE 5:- RESTRICTED CASH
a.
b.
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 was held through a deposit bearing annual interest of
0.05%. On October 30, 2018 the Performance Bond has come to an end and expired.
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 to secure deliveries and receiving payments from the
customer. On June 2018 the Performance Bond has been canceled and was replaced
with a Performance Bond issued in October 30, 2018 in a total amount of $ 521
thousand. The Performance Bond was held through a deposit bearing annual interest of
0.55% and its balance as of December 31, 2018 amounted to $ 521 thousand.
On December 12, 2018 an additional Performance Bond was issued in a total amount of
$ 22 thousand to secure deliveries and receiving payments from the customer. The
Performance Bond was held through a deposit bearing annual interest of 0.56% and its
balance as of December 31, 2018 amounted to $ 22 thousand.
- 46 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5:- RESTRICTED CASH (Cont.)
SIMIGON LTD.
c.
d.
e.
As part of the regulatory approval received for a $1.1 million contract with the Israeli
Air Force, on September 20, 2018 the Company issued a Performance Bond deposit in a
total amount of $ 256 thousand to secure deliveries and receiving payments from the
customer. The Performance Bond was held through a deposit bearing annual interest of
0.48% and its balance as of December 31, 2018 amounted to $ 256 thousand.
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.
As part of its premises lease agreement, the Company is obligated to secure a deposit in
the amount of $ 23 thousand in favor of the landlord.
NOTE 6:- PROPERTY, PLANT AND EQUIPMENT
Composition and movement:
Cost:
Balance as of January 1, 2017
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2017
Disposal during the year
Acquisitions during the year
Balance as of December 31, 2018
Accumulated depreciation:
Balance as of January 1, 2017
Disposal during the year
Depreciation during the year
Balance as of December 31, 2017
Disposal during the year
Depreciation during the year
Balance as of December 31, 2018
Depreciated cost as of December 31, 2018
Depreciated cost as of December 31, 2017
Computers
and
peripheral
equipment
Office
furniture
and
equipment
Leasehold
improvements
Total
U.S. dollars in thousands
770
(18)
26
778
(10)
13
781
742
(18)
21
745
(10)
22
757
24
33
213
(2)
2
213
-
3
216
162
(2)
21
181
-
14
195
21
32
91
-
6
97
-
-
97
59
-
9
68
-
8
76
21
29
1,074
(20)
34
1,088
(10)
16
1,094
963
(20)
51
994
(10)
44
1,028
66
94
- 47 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7:- GOODWILL AND INTANGIBLE ASSET
Goodwill *)
Technology **)
Total
SIMIGON LTD.
Carrying amount as of
December 31,
2018
2017
U.S. dollars in thousands
1,068
-
1,068
1,068
-
1,068
*)
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 the date of the approval of the financial statements, 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 and 2016, the Company recorded
amortization in the amount of $ 4 thousand and $ 50 thousand, respectively, which was
recorded in cost of revenues.
NOTE 8:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
December 31,
2018
2017
U.S. dollars in thousands
422
269
691
417
258
675
Employees and payroll accruals
Accrued expenses
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET
a.
Post-employment benefits:
According to the labor laws and Severance Pay Law in Israel, the Company is required to
pay compensation to an employee upon dismissal or retirement or to make current
contributions in defined contribution plans pursuant to Section 14 to the Severance Pay
Law, as specified below.
The Company's liability is accounted for as a post-employment benefit. The computation
of the Company's employee benefit liability is made in accordance with a valid
employment contract based on the employee's salary and employment term which
establish the entitlement to receive the compensation.
- 48 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9:- EMPLOYEE BENEFIT LIABILITIES, NET (Cont.)
SIMIGON LTD.
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. These contributions and contributions
for benefits represent defined contribution plans.
Year ended
December 31,
2017
U.S dollars in thousands
2016
2018
Expenses in respect of defined
contribution plans under Section 14 to
the Severance Pay Law, 1963
126
145
128
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
56
10
(22)
44
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
289
10
(23)
56
(29)
(16)
287
53
9
26
88
222
9
26
53
(32)
11
289
47
8
3
58
192
8
3
47
(30)
2
222
d.
The actuarial assumptions used are as follows:
Discount rate
4.05%
3.59%
4.05%
Future salary increases
3.57%
3.63%
3.60%
Average expected remaining working
years
7.42
7.47
7.85
Remeasurement gain (loss) in respect of
defined benefit plan
17
(11)
(2)
- 49 -
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.
- 50 -
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.
- 51 -
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,
2018, 2017
and 2016
Authorized
2018
December 31,
2017
Issued and outstanding
Number of shares
2016
Ordinary shares of
NIS 0.01 par value each
100,000,000
50,858,618 (*)
51,394,189
51,394,189
(*) Net of 535,571 Ordinary shares held in treasury
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, 2018, an aggregate of 2,463,829
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.
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.
- 52 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD.
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 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 2018, 2017 and 2016 is as follows:
2018
Year ended
December 31,
2017
2016
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
824,333
-
-
$ 0.265
-
-
(40,000) $ 0.605
-
-
907,833
170,000
-
$ 0.372
$ 0.236
-
(40,000) $ 1.716
(213,500) $ 0.428
1,386,507
35,000
(301,035)
$ 0.416
$ 0.241
$ 0.003
(25,000) $ 0.250
(187,639) $ 1.276
784,333
$ 0.247
824,333
$ 0.265
907,833
$ 0.372
Exercisable options
618,497
$ 0.250
523,607
$ 0.312
733,769
$ 0.307
The options outstanding as of December 31, 2018, have been separated into ranges of
exercise price as follows:
Exercise price
$ 0.002 - $ 0.25
$ 0.335 - $ 1.2
Weighted
average
remaining
contractual
life (years)
2.35
2.75
Options
exercisable
as of
December 31,
2018
312,497
306,000
618,497
Options
outstanding
as of
December 31,
2018
473,333
351,000
784,333
- 53 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
d.
Options to the CEO and senior employees:
SIMIGON LTD.
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.
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").
- 54 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10:- EQUITY (Cont.)
SIMIGON LTD.
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:
1.
2.
3.
4.
5.
6.
the absolute maximum value of Ordinary Shares acquired pursuant to the
Repurchase Programme shall not, in aggregate, exceed GBP £800,000;
there will be no minimum price which may be paid for an Ordinary Share;
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
the authority conferred by this resolution shall expire at the end of the General
Meeting in 2018 .
A summary of the Company’s purchasing through finnCap Ltd (acting as the Company's
broker) of its Ordinary Shares for 2018 is as follows:
Number of
Ordinary
Shares
Repurchased
Price per
Ordinary
Share of
0.01 NIS
Purchase
amount
(in
thousand)
225,000
30,000
100,000
117,000
63,571
535,571
$ 0.212
$ 0.229
$ 0.203
$ 0.212
$ 0.212
47
6
18
21
13
105
total
number of
Ordinary
Shares
outstanding
after the
Repurchase
51,169,189
51,139,189
51,039,189
50,922,189
50,858,618
Date
March 2, 2018
June 6, 2018
August 17, 2018
September 7, 2018
October 10, 2018
The Repurchased shares, along with any other Ordinary Shares purchased by the
Company pursuant to the Programme, will be held in treasury.
- 55 -
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,
2018, 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. The Joint Venture never commenced
operations and on March 7, 2019, a request of dissolution of the Joint Venture has been
submitted.
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.
- 56 -
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.
- 57 -
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, 2018, 2017 and 2016, the Company had accumulated losses for
Israeli tax purposes of approximately $ 2.6 million, $ 1.9 million and $ 0.6 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, 2018, 2017 and 2016, the federal tax loss carryforwards of the U.S.
subsidiaries amounted to approximately $4.3 million, $ 5.1 million and $ 5.3 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, 2018, 2017 and 2016, the tax loss carryforwards of the Singaporean
subsidiary amounted to approximately $87 thousand, $ 81 thousand and $ 61 thousand,
respectively, which may be carried forward, in order to offset taxable income in the
future, for an indefinite period.
As of December 31, 2018, 2017 and 2016, the tax loss carryforward of the Colombian
subsidiary amounted to approximately $ 35 thousand, $38 thousand and $ 32 thousand,
respectively, which may be carried forward, in order to offset taxable income in the
future, for an indefinite period.
As of December 31, 2018, no deferred tax assets have been recorded in respect of
carryforward operating losses in due the uncertainty as to their realization.
- 58 -
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 23% in 2018.
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.
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 2018, 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 expense recorded in profit
or loss is the derecognition of prior years' deferred tax benefits due to the uncertainty as
to their realization. In 2017, the main reconciling item is carryforward tax losses for
which no deferred taxes were provided. In 2016, 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.
- 59 -
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.
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, 2018, the Company received a total amount of $ 254 thousand.
The Company shall make repayments to KORIL, based on gross sales derived from
the gross invoiced sales value of the products, processes, inventions, technology,
discoveries, improvements, modifications, methods, software, specifications, or
any form of technical information developed or arising from the proposal (gross
sales). Such payments shall be repaid in U.S. dollars at the rate of 2.5% of the first
year's gross sales until 100% of the conditional grant and other sums have been
repaid.
- 60 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
SIMIGON LTD.
The total non-current liability for the years ended December 31, 2018 and 2017
was $ 192 thousand and $ 189 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, 2018, the Company received total amount of $ 611 thousand.
The Company shall make repayments to the OCS, based on gross sales derived
from the gross invoiced sales value of the products, processes, inventions,
technology, discoveries,
improvements, modifications, methods, software,
specifications, or any form of technical information developed or arising from the
proposals (gross sales). Such payments shall be repaid in NIS at the rate of 3% of
the first year's gross sales until 100% of the conditional grant and other sums have
been repaid.
The total non-current liability for the years ended December 31, 2018 and 2017
was $ 413 thousand and $ 421 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).
- 61 -
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, 2018 and 2017 was
$ 66 thousand and $ 67 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, 2018, the Company received a total amount of $ 57 thousand.
The total non-current liability for the year ended December 31, 2018 and 2017 was
$ 41 thousand and $ 27 thousand, respectively.
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 July 2021.
On January 2019 Company has leased additional motor vehicles under cancelable
operating lease agreements of which the latest expire in January 2022.
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.
- 62 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13:- OTHER LIABILITIES AND COMMITMENTS (Cont.)
SIMIGON LTD.
4.
Future minimum rental payments under non-cancellable operating leases are as
follows:
Year ended December 31,
U.S. dollars
in thousands
2019
2020
2021
251
216
17
483
The total expense for the years ended December 31, 2018, 2017 and 2016 was
$257 thousand, $ 281 thousand and $ 273 thousand, respectively.
5. OCS liabilities
Balance as of December 31, 2017
Grants received in 2018
Income Receivables
Time value
Balance as of December 31, 2018
OCS Liability
U.S. dollars in thousands
704
22
(2)
(12)
691
732
11
-
(39)
704
- 63 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIMIGON LTD.
NOTE 14:- SUPPLEMENTARY INFORMATION TO THE STATEMENT OF COMPREHENSIVE
INCOME
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
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
Year ended
December 31,
2017
U.S. dollars in thousands
2018
2016
581
74
111
12
1
194
973
2,092
246
21
4
(28)
2,335
852
47
45
66
7
2
-
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
1,882
1,567
181
11
6
(51)
1,714
905
49
40
66
5
23
4
d.
General and administrative expenses:
1,019
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
666
33
13
284
5
-
446
15
626
28
34
356
4
-
-
8
596
56
19
301
4
29
80
22
1,462
1,056
1,107
- 64 -
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,
2017
U.S. dollars in thousands
2016
2018
128
6
134
108
32
17
157
56
70
126
104
13
8
125
53
119
172
65
36
2
103
NOTE 15:- REVENUES
The Company manages its business on the basis of one reportable segment.
a.
Revenues:
Software licenses
Customization
Recurring Maintenance & Support
Training
Year ended
December 31,
2017
U.S. dollars in thousands
2016
2018
2,975
1,300
656
98
5,029
2,473
1,000
862
-
4,335
3,354
1,900
728
36
6,018
- 65 -
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,
2017
U.S. dollars in thousands
2018
2016
1,451
106
3,472
5,029
1,750
797
1,788
4,335
2,654
2,244
1,120
6,018
(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
2018
December 31,
2017
U.S. dollars in thousands
2016
24
1,110
1,134
26
1,136
1,162
29
1,154
1,183
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,
2017
45%
7%
4%
16%
10%
3%
2018
23%
13%
18%
-
33%
1%
2016
32%
6%
9%
23%
-
14%
- 66 -
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,
2017
U.S. dollars in thousands
2018
2016
Net income (loss) for the year
(1,007)
(954)
361
Share data (in thousands):
Weighted average number of Ordinary shares
for computing basic earnings (loss) per share
*) 51,259
*) 51,444
51,097
Effect of dilution:
Share options
(**)
(**)
222
Weighted average number of Ordinary shares
adjusted for the effect of dilution
51,259
51,444
51,319
*) Weighted average number of shares includes shares in respect of the Company's
obligation to issue approximately 157,902 Ordinary shares to two officers of the
Company in lieu of cash bonus – see Note 10a5.
Weighted average number of shares is net of 535,571 Ordinary shares of the Company
held in treasury under the Repurchase Programme as described in Note 10f.
**) 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
Year ended
December 31,
2017
U.S. dollars in thousands
2016
2018
42
6
17
12
77
-
-
37
15
15
8
75
3
3
38
10
9
5
62
3
3
a.
Expenses to related party of a
shareholder:
Cost of revenues *)
Research and development *)
Selling and marketing *)
General and administration *)
b.
Balances to related party of a
shareholder:
Other accounts receivable and prepaid
expenses *)
- 67 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
*)
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.
b.
Compensation of key management
personnel of the Company:
Non- Executive directors benefits
Employee benefits *)
Share-based payments **)
Year ended
December 31,
2017
U.S. dollars in thousands
2016
2018
100
1,540
2
1,642
124
1,574
3
1,701
126
1,627
1
1,754
*)
Includes long-term employee benefits in the amount of $67 thousand, of $67
thousand and $ 67 thousand for the years ended December 31, 2017 and 2016,
respectively.
Year 2018 include bonus provision to EVP Biasness Development in the amount of
$ 7 thousand.
Year 2018 and year 2017 include bonus provision to VP R&D in the amount of $7
and $ 3 thousand, respectively.
Year 2018 and year 2017 include bonus provision to VP Products in the amount of
$ 1 thousand and $8 thousands, respectively.
**) 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).
- 68 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
c.
Balances with Directors and Officers:
SIMIGON LTD.
The Company's liability balances to directors and officers as of December 31, 2018, 2017
and 2016 amount to $308 thousand, $ 333 thousand and $ 366 thousand; respectively, out
of which, a total of $ 180 thousand, $ 208 thousand and $ 181 thousand is related to
severance, vacation and recovery liabilities for key employees as of December 31, 2018,
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 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.
- 69 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
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 is reimbursing Mr. Efraim Manea for his
children's education expenses as part of his relocation together with his family to work at
the Company's subsidiary in USA.
In the annual meeting held on December 7, 2018, the shareholders approved an additional
monthly compensation of $ 4,100 commencing August 1, 2017, to Mr. Efraim Manea, the
Company's Chief Financial Officer who also serves as a director of the Company, for his
relocation costs as part of his work for the Company’s subsidiary in the 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.
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.
- 70 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 17:- BALANCES AND TRANSACTIONS WITH RELATED PARTIES (Cont.)
SIMIGON LTD.
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, 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. The total office lease costs in year 2018 amounted to $77 thousand.
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.
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 2018 amounted to an
annual salary of $ 358 thousand, annual social benefits of $ 45 thousand (12.5% 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 $ 38 thousand.
- 71 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18:- DIVIDEND DISTRIBUTION
SIMIGON LTD.
a.
b.
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).
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.
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,
2018, 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.
- 72 -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19:- FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Cont.)
SIMIGON LTD.
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, 2018, cash and cash equivalents together with the Company's short-
term bank deposits and short-term investments amounted to $ 6,002 thousand.
c.
Liquidity risk:
The table below presents the maturity profile of the Company's financial liabilities based
on contractual undiscounted payments:
December 31, 2018:
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
27
159
661
847
155
-
-
155
560
-
-
560
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
654
809
156
-
-
156
548
-
-
548
Total
742
159
661
1,562
Total
726
133
654
1,513
- - - - - - - - - - - - - - - - - -
- 73 -
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
Counsel of the Company
Amit, Pollak, Matalon & Co. Advocates and Notary
Nitsba Tower, 19th Floor, 17 Yitzhak Sadeh St.,
Tel Aviv 67775
Israel
- 74 -
WWW.SIMIGON.COM