TIDMSNS
RNS Number : 4064A
Silanis International Limited
30 March 2012
RNS Release 30 March 2012
Silanis International Limited (the "Company") and its sole
investment,
Silanis Technology Inc. ("Silanis")
Final Results for the Year Ended December 31, 2011
The Company (AIM: SNS), is today pleased to announce its audited
final results, and those of Silanis, for the year ended 31 December
2011.
Silanis is the world's leading enterprise electronic signature
and electronic vaulting software provider. Adopted by top banks,
insurance companies and government agencies, its solutions
fundamentally enable straight-through processing of high-value
business transactions requiring secure, compliant and legally
enforceable electronic signatures. Based on Silanis' flagship
E-Sign Enterprise, these solutions are delivered on-premise or as
SaaS, whether on public or private cloud, to meet the demanding and
varied needs of enterprise clients.
The Company's sole investment represents an interest of
approximately 25% of the outstanding shares of Silanis. The
following review and analysis reflect the underlying operations of
Silanis, from which the value of the Company is derived. All
figures are expressed in United States dollars unless noted
otherwise. The audited financial statements for both companies are
attached, and form an integral part of this release.
Silanis 2011 Financial Highlights
-- Revenue of $13.7 million (2010 - $6.3 million)
-- Net earnings of $1.7 million (2010 - loss of $0.9 million)
-- Cash and long-term investments of $12.9 million (December 31, 2010 - $12.3 million)
Silanis 2011 Operational Highlights
-- Silanis increased revenues by 116% over 2010 and returned to
significant profitability
-- Nine (9) significant wins within Silanis' target verticals:
-- Banking
o Five major new licensees of Silanis' E-Sign Enterprise were
added, including three more top-10 North American banks.
-- Insurance
o Two new insurers selected Silanis' enterprise solutions, both
on-premise and as SaaS.
-- Government
o Continued dominance in the government market with expansion
among the U.S. Joint Chiefs of Staff, and ongoing renewed support
of the world's largest electronic signature deployment in the US
Army.
-- Premiere partnership success as:
o IBM recognized Silanis' excellence, awarding the IBM Lotus
Award for Business Transformation through Cloud Computing and the
prestigious 2011 Beacon Award for Best Insurance Industry
Solution.
o Silanis and HP significantly expanded their joint marketing
and field sales activities.
o Silanis, through its partners iOCS and Aplifi, delivered SaaS
solutions to the credit and insurance markets, both domestically
and in the United Kingdom.
Tommy Petrogiannis, co-founder and Chief Executive Officer of
the Company and Silanis commented:
"I am very pleased to announce our excellent 2011 results. I
believe they validate the unique merit of our solutions in the eyes
of enterprise customers and our leadership position in that market.
With acknowledged enterprise-grade technology, the most experienced
team in the industry, strong revenue growth, profitability and
financial position, I am confident of our prospects for continued
growth in 2012."
Please see section regarding Forward-Looking Statements, which
forms an integral part of this release.
For further details, please contact:
Silanis International Limited
Tommy Petrogiannis, C.E.O. Tel: +1 514 337 5255
Canaccord Genuity Limited Tel: +44 (0) 20 7050
Simon Bridges 6500
C.E.O. REVIEW AND OUTLOOK
2011 Strategy
Post-recession, we experienced a renewal in our core financial
services market beginning in H2 2010. In December of that year, we
closed the first of a next wave of sophisticated first-time buyers:
clients focused on transforming the customer experience with
straight-through processing across their enterprise. This
distinction has less to do with size of the company than the scale
of their vision. These customers are looking far beyond a simple
generic application or single line of business - they are focused
on transforming their business, asking:
"Is the solution robust and dependable? Can it be tailored to
represent my unique brand? Can it scale to support multiple lines
of business and distribution channels? Will it operate non-stop,
24x7, processing hundreds of millions of transactions annually? Is
the evidence it provides tested by jurisprudence, auditable and
verifiable? What about references - who else is using this in the
manner I envision for my organization?" Our long-standing focus has
enabled us to answer these questions effectively and
affirmatively.
As software consumption models have evolved, we've innovated to
uniquely offer our enterprise-class solutions flexibly to be
delivered both on-premise and as SaaS, be it on a public or private
cloud. We've never let the tail wag the dog - the balance between
enterprise needs for compliance and customer experience cannot be
compromised by convenience, shortcuts or "good enough".
It has been our steadfast strategy to focus on what truly
delivers high return to regulated and compliance-conscious
customers that demand it. By our estimation, we have just scratched
the surface of what this market will yield in the coming years.
2011 Results
Since December of 2010, we have seen yet three more new clients
sign seven-figure initial contracts among the nine major wins
announced in 2011. Today, we proudly count 4 of the top-ten North
American banks as customers along with 5 of the top-ten North
American insurers.
We were thus able to more than double revenues as compared to
2010. And we did so profitably. As a point of emphasis, we have not
deviated from sound business fundamentals. To grow revenue is
admirable, but in the long-term, not at the expense of profit. I am
very proud that Silanis has been profitable in aggregate since
2005. This is evident in our strong and stable balance sheet - a
prerequisite to credibly contract and deliver multi-million dollar
solutions in our marketplace.
2012 Outlook
The strength of a business lies in its core values. At Silanis,
innovation, quality and responsibility are part of our DNA.
Measured by intellectual property and expertise, our marquee
customers and their world-class deployments, our innovation and
quality stand alone as best in class. In a recent customer survey,
an outstanding 94% of respondents rated our products as
"Excellent".
As e-signature pioneers, we have always felt a responsibility to
the marketplace. As a result of this unwavering commitment, of the
world's top electronic signature experts, I count the majority as
long-tenured members of our executive team. To our employees and
our customers, thank you.
Looking ahead, our pipeline is growing in order to deliver
continued growth in 2012. Interest from prospects remains high, and
will be solidified at the various events we have planned for our
market segments this year. We are aligned with the right,
world-class partners that complement our internal efforts and
resonate with our customers. And we have the stable and significant
means to fund our business plans and chart our own path
autonomously.
This is an exciting time for Silanis, with a number of new
product innovations to be announced this year. We will continue to
extend our lead in our target markets and I look forward to sharing
news of our progress.
Tommy Petrogiannis, C.E.O.
Silanis Technology Inc. and Silanis International Limited
FINANCIAL REVIEW
The audited financial statements of the Company for the year
ended December 31, 2011 have been prepared under International
Financial Reporting Standards ("IFRS"). The audited financial
statements of Silanis for the year ended December 31, 2011 have
been prepared under Canadian accounting standards for private
enterprises ("ASPE")(1) .
The financial statements of both the Company and Silanis are
included at the end of this release.
The following table outlines Silanis' results of operations for
the period indicated.
For the year For the year %
in U.S. dollars ended Dec 31, ended Dec 31, Change
2011 2010
Revenues
Software licenses 7,523,853 2,297,107 228%
Maintenance 4,152,743 3,218,611 29%
Professional services 1,951,776 759,215 157%
Reimbursable expenses
and other 85,744 69,745 23%
-------------- --------------
13,714,116 6,344,678 116%
Cost of revenues 3,691,380 1,419,340 160%
-------------- --------------
10,022,736 4,925,338 103%
Operating expenses
Sales and marketing 4,198,031 3,349,276 25%
Research and development 4,372,609 2,672,807 64%
Tax credits (2,368,189) (1,547,578) 53%
General and administrative 2,269,709 1,609,462 41%
Foreign exchange (142,187) (280,993) (49%)
Amortization of capital
assets 115,483 106,233 9%
-------------- --------------
8,445,456 5,909,207 43%
Profit (loss) before
undernoted item 1,577,280 (983,869) 260%
Interest income 122,359 58,974 107%
-------------- --------------
Net earnings (loss) 1,699,639 (924,895) 284%
Revenue and Net Earnings
Revenue for the year ended December 31, 2011 was $13.7 million,
compared with $6.3 million in 2010, representing a 116% increase.
This increase is primarily attributable to the 228% and 157%
increase in software license and professional service revenues
respectively. (1) As described in Note 2 to its financial
statements, Silanis shareholders unanimously approved the
preparation of financial statements under ASPE. Should Silanis not
ultimately receive regulatory approval to do so, it will be
required to prepare its financial statements under IFRS for periods
beginning on or after January 1, 2011.
Software license revenues more than doubled in 2011 to $7.5
million compared to $2.3 million in 2010. This increase is due both
to a 50% increase in the number of large accounts added in 2011 and
to the increase in average deal size for these new accounts.
Maintenance revenues were $0.9 million higher in 2011 than in
2010, reflecting the full-year recognition of new maintenance
contracts closed in 2010, augmented by the recognizable portion of
new maintenance contracts in respect of 2011 new accounts.
The 157% increase in professional services revenues is primarily
due to the implementation of the numerous major contracts closed in
2011 and H2 2010.
As a result of this strong revenue growth, net earnings for 2011
were $1.7 million, an increase of $2.6 million or 284% from
2010.
Cost of Revenues
Cost of revenues includes all variable costs incurred in
delivering Silanis revenues. These variable costs are primarily
comprised of sales commissions and the professional services costs
associated with major account implementations.
Cost of revenues increased by 160% over 2010, as compared with
the 116% increase in revenue. This disproportionate increase in
cost of revenues is largely accounted for by higher commissions
paid as a result of significant sales quota over-achievement.
Expenses
Sales and Marketing
Sales and marketing (S&M) expenses consist of all costs
directly related to the sales, marketing and promotion of Silanis'
software solutions. These activities include direct outside sales,
direct inbound sales, technical sales support, lead generation and
traditional and online marketing. The direct S&M team is
complemented by a dedicated partners and alliances sales team.
S&M expenses were higher in 2011 at $4.2 million relative to
the $3.3 million incurred in 2010, representing a 25% increase.
This increase is primarily attributable to increased headcount and
additional marketing programs run in 2011.
Research and Development
Research and development (R&D) expenses consist primarily of
human resource expenses associated with research and testing of new
products and functionality, and the management and development of
existing products. Gross R&D expenses increased by $1.7 million
in 2011, which represents a 64% increase over 2010. This increase
is attributable to planned additional R&D investment in new
product innovation, including both headcount and consultants.
Tax credits provided an expense recovery of $2.4 million for
2011, up 53% from the recovery of $1.5 million in 2010. Fully
refundable Canadian scientific research and development (SRED)
credits account for the majority of this recovery, and these
credits are typically refunded by the tax authorities in the second
half of each year. While the accrual of tax credits for 2011 is
otherwise commensurate with the increase in gross R&D expenses
in the period, additional amounts were recognized on the favourable
collection of prior tax credits in amounts greater than previously
accrued.
General and Administrative
General and administrative (G&A) expenses include all
overhead incurred to support Silanis' operations, including rental
of premises and utilities, insurance, professional fees, accounting
and administration, and senior executive management compensation.
G&A expenses increased by $0.7 million in 2011, representing a
41% increase over 2010 expenses and reflecting the additional costs
incurred in supporting the significant 2011 growth.
Foreign Exchange and Interest Income
Foreign exchange includes gains and losses on non-United States
dollar denominated assets. The majority of the 2011 foreign
exchange gain of $0.1 million relates to the refund of Federal and
Provincial tax credits collected during the year and revaluations
of the Canadian dollars held for operations.
Interest income increased to $0.1 million in 2011 from $0.06
million in 2010. The 2011 increase reflects higher rates of return
on long-term investments while Silanis held low-yielding securities
during a portion of 2010 for tax on capital planning purposes.
FORWARD-LOOKING STATEMENTS
This document includes statements that are, or may be deemed to
be, 'forward-looking statements'. These forward-looking statements
can be identified by the use of forward-looking terminology,
including the terms 'believes', 'estimates', 'plans', 'projects',
'anticipates', 'expects', 'intends', 'may', 'will', or 'should' or,
in each case, their negative or other variations or comparable
terminology. These forward-looking statements include matters that
are not historical facts. They appear in a number of places
throughout this document and include statements regarding the
Directors' current intentions, beliefs or expectations concerning,
among other things, the Company's and Silanis' results of
operations, financial condition, liquidity, prospects, growth,
strategies and industry.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to future events and circumstances.
Actual results and developments could differ materially from those
expressed or implied by the forward-looking statements.
Forward-looking statements may and often do differ materially
from actual results. Any forward-looking statements in this
document are based on certain factors and assumptions, including
the Directors' current view with respect to future events and are
subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Company's and
Silanis' operations, results of operations, growth strategy and
liquidity. While the Directors consider these assumptions to be
reasonable based on information currently available, they may prove
to be incorrect. Prospective investors should specifically consider
the factors identified in this document that could cause actual
results to differ before making an investment decision. The Company
undertakes no obligation publicly to release the results of any
revisions to any forward-looking statements in this document that
may occur due to any change in the Directors' expectations or to
reflect events or circumstances after the date of this
document.
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Silanis Technology Inc.
We have audited the accompanying consolidated financial
statements of Silanis Technology Inc., which comprise the
consolidated balance sheets as at December 31, 2011, December 31,
2010 and January 1, 2010, and the consolidated statements of
operations and deficit, and cash flows for the years ended December
31, 2011 and December 31, 2010, and a summary of significant
accounting policies and other explanatory information.
Management's Responsibility for the Consolidated Financial
Statements
Management is responsible for the preparation and fair
presentation of these consolidated financial statements in
accordance with Canadian accounting standards for private
enterprises, and for such internal control as management determines
is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or
error.
Auditor's Responsibility
Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted
our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we comply with ethical
requirements and plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor's
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. An audit also
includes evaluating the appropriateness of accounting policies used
and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of Silanis
Technology Inc. as at December 31, 2011, December 31, 2010 and
January 1, 2010, and the results of its operations and its cash
flows for the years ended December 31, 2011 and December 31, 2010
in accordance with Canadian accounting standards for private
enterprises.
Other Matter
These consolidated financial statements have been prepared to
assist Silanis Technology Inc. to provide financial information to
its shareholders. Our report is intended solely for Silanis
Technology Inc. and its shareholders and should not be used by
parties other than Silanis Technology Inc. and its
shareholders.
Signed, Deloitte & Touche LLP (1)
March 28, 2012
____________________ (1) Chartered accountant auditor permit No.
13556
SILANIS TECHNOLOGY INC.
Consolidated balance sheets
As at December 31, 2011 and 2010, and January 1, 2010
(in U.S. dollars)
December December 31, January
31, 2011 2010 1, 2010
(Note 2) (Note 2)
$ $ $
Assets
Current assets
Cash 6,910.965 6,291,722 3,443,646
Short-term investments - - 10,004,289
Accounts receivable 3,965,543 1,498,566 869,381
Work in process 288,138 397,415 148,977
Tax credits receivable 2,272,651 2,339,371 2,685,770
Prepaid expenses 202,293 156,402 137,355
Shareholder and employee
loans (Note 8) 396,074 372,335 319,059
------------- ------------- -------------
14,035,664 11,055,811 17,608,477
Capital assets (Note 3) 393,527 317,695 345,492
Long-term investments (Note
6) 5,939,702 5,968,927 -
Other long-term assets 27,820 27,820 28,648
------------- ------------- -------------
20,396,713 17,370,253 17,982,617
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 2,600,128 1,318,028 1,125,114
Deferred revenue 2,810,069 2,553,476 2,258,128
------------- ------------- -------------
5,410,197 3,871,504 3,383,242
Deferred lease inducement 74,399 77,652 96,085
------------- ------------- -------------
5,484,596 3,949,156 3,479,327
Commitment and guarantees
(Note 9)
Shareholders' equity
Capital stock (Note 5a) 28,400,974 28,697,904 28,945,339
Contributed surplus 561,814 473,503 383,366
Deficit (14,050,671) (15,848,164) (14,923,269)
Accumulated other comprehensive
income 97,854 97,854 97,854
------------- ------------- -------------
14,912,117 13,421,097 14,503,290
------------- ------------- -------------
20,396,713 17,370,253 17,982,617
The accompanying notes are an integral part of these interim
consolidated financial statements.
Approved by the Board
Signed, Tommy Petrogiannis
Director
SILANIS TECHNOLOGY INC.
Consolidated statements of operations, comprehensive loss and
deficit
for the years ended December 31
(in U.S. dollars)
2011 2010
(Note 2)
$ $
Revenues
Software licenses 7,523,853 2,297,107
Maintenance 4,152,743 3,218,611
Professional services 1,951,776 759,215
Reimbursable expenses and
other 85,744 69,745
------------- -------------
13,714,116 6,344,678
Cost of revenues 3,691,380 1,419,340
------------- -------------
10,022,736 4,925,338
Operating expenses
Sales and marketing 4,198,031 3,349,276
Research and development 4,372,609 2,672,807
Tax credits (2,368,189) (1,547,578)
General and administrative 2,269,709 1,609,462
Foreign Exchange (142,187) (280,993)
Amortization of capital
assets 115,483 106,233
------------- -------------
8,445,456 5,909,207
------------- -------------
Profit (loss) before undernoted
item 1,577,280 (983,869)
Interest income 122,359 58,974
------------- -------------
Net earnings (loss) 1,699,639 (924,895)
Deficit, beginning of year (15,750,310) (14,815,415)
------------- -------------
Deficit, end of year (14,050,671) (15,750,310)
The accompanying notes are an integral part of these
consolidated financial statements.
SILANIS TECHNOLOGY INC.
Consolidated statements of cash flows
for the years ended December 31
(in U.S. dollars)
2010
2011 (Note2)
$ $
Operating activities
Net loss 1,699,639 (924,895)
Adjustments for:
Amortization of capital
assets 115,483 106,233
Stock-based compensation
(Note 5b) 88,311 90,137
Deferred lease inducement (3,253) (18,433)
------------------ ------------------
1,900,180 (746,958)
Net changes in non-cash
working capital items
Accounts receivable (2,466,977) (629,185)
Work in process 109,277 (248,438)
Tax credits receivable 66,720 346,399
Prepaid expenses (45,891) (19,047)
Accounts payable and accrued
liabilities 1,282,100 192,914
Deferred revenue 256,593 295,348
------------------ ------------------
1,102,002 (808,967)
Investing activities
Decrease in short-term investments - 10,004,289
Decrease (increase) in long-term
investments 29,225 (5,968,927)
Increase in Shareholder
and employee loans (320,669) (300,711)
Acquisition of capital assets (191,315) (78,436)
Decrease in other long-term
assets - 828
------------------ ------------------
(482,759) 3,657,043
Financing activities
Issuance of capital stock - -
------------------ ------------------
- -
------------------ ------------------
Net increase in cash 619,243 2,848,076
Cash, beginning of year 6,291,722 3,443,646
------------------ ------------------
Cash, end of year 6,910,965 6,291,722
Non-cash financing transaction
Capital distribution (Note
5) 296,930 247,435
The accompanying notes are an integral part of these
consolidated financial statements.
SILANIS TECHNOLOGY INC.
Notes to the consolidated financial statements for the years
ended December 31, 2011 and 2010
(in U.S. dollars)
1. Nature of business
Silanis Technology Inc. (the "Company") is engaged in the
development, distribution, installation and service of computer
software, mainly in the North American market.
2. Significant accounting policies
Adoption of a new accounting framework
During the twelve months ended December 31, 2011, the Company
has been in discussions with the Autorite des marches financiers du
Quebec ("AMF"), with whom it files its financial statements, to
determine whether it's financial statements are to be prepared in
accordance with International Financial Reporting Standards or
Accounting standards for private enterprises. Having received 100%
shareholder approval, the Company believes that it shall be
permitted by the AMF to prepare its financial statements under the
new Canadian accounting standards for private enterprises (the "new
standards") adopted by the Canadian Institute of Chartered
Accountants ("CICA"). Accordingly, these consolidated financial
statements have been prepared under the new standards.
In accordance with Section 1500 of the CICA Handbook, First-time
adoption ("Section 1500"), the date of transition to the new
standards is January 1, 2010 and the Company has prepared an
opening balance sheet at the date of transition to the new
standards. This opening balance sheet is the starting point for the
entity's accounting under the new standards. In its opening balance
sheet, pursuant to the recommendations of Section 1500, the
Company;
a) recognized all assets and liabilities whose recognition is required by the new standards;
b) did not recognize items as assets or liabilities if the new
standards do not permit such recognition;
c) reclassified items that it recognized previously as one type
of asset, liability or component of equity, but are recognized as a
different type of asset, liability or component of equity under the
new standards; and
d) applied the new standards in measuring all recognized assets and liabilities.
In accordance with the requirements of Section 1500, the
accounting policies set out in the annual financial statements have
been consistently applied to all periods presented including cases
where optional exemptions were available under Section 1500.
The adoption of the new standards did not have any impact on the
opening balance sheet prepared as at January 1, 2010, net earnings
reported under previous GAAP for the 2010 period or on required
disclosures, other than with respect to the use by the Company of
the exemption available under Section 1500 relating to foreign
currency translation.
The use of the exemption provides for the inclusion in the
deficit balance of the foreign cumulative translation balance as at
January 1, 2010 in the amount of $97,854, which previously was
presented in accumulated other comprehensive income.
Accounting policies
The consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles
for private enterprises ("ASPE") and reflect the following
significant accounting policies:
Principles of consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Silanis
Technology International. All intercompany transactions and
balances have been eliminated upon consolidation.
Use of estimates
The preparation of financial statements in conformity with ASPE
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the reporting period. Key components of the consolidated financial
statements requiring management to make estimates include the
provision for collectability of accounts receivable, tax credits,
revenue recognition, stock-based compensation, the useful lives of
long-lived assets, income taxes, the fair value of certain
financial instruments, and certain provisions. Actual results could
differ from these estimates.
Research and development costs
Research costs are charged to operations in the period in which
they are incurred. Development costs are charged to operations in
the period in which they are incurred unless they meet specific
criteria related to technical, market and financial feasibility
allowing for their capitalization. To date, no development costs
have been capitalized.
Tax credits
Tax credits are accounted for under the cost reduction method,
whereby the tax credits are applied against the related expense or
carrying value of the asset. Tax credits are recorded when the
qualifying expenditures have been incurred and if there is
reasonable assurance that the tax credits will be realized. Tax
credits are subject to audit by the relevant taxation
authority.
Capital assets
Capital assets are recorded at cost and amortized over their
useful lives on a declining balance basis at the following annual
rates:
Furniture and equipment 30%
Computer equipment and software 30%
Research equipment 30%
Leasehold improvements are amortized on a straight-line basis
over the lesser of the estimated useful life of the asset and the
term of the lease.
Other long-term assets
Other long-term assets consist primarily of cash held in the
bank and restricted from use by the Company for the purpose of
credit card processing payments.
Deferred lease inducement
The deferred lease inducement was received in the form of free
rent for a period of 7 months for the Company's office premises.
The lease inducement is being amortized on a straight-line basis
over the remaining term of the lease of 10 years, as a reduction of
rent expense.
Revenue recognition
Revenue from software license arrangements is recognized upon
delivery of software if persuasive evidence of an arrangement
exists, collection is probable, the fee is fixed or determinable
and vendor-specific objective evidence of an arrangement exists to
allocate the total fee to the different elements of an arrangement.
Vendor-specific objective evidence is typically based on the price
charged when an element is sold separately.
In circumstances where the implementation services are essential
to the functionality of the software or where the software requires
significant customization, the Company recognizes software license
revenue using the percentage-of-completion method over the
implementation period. The percentage-of-completion is measured by
the percentage of implementation hours incurred to date to
estimated total implementation hours. Past experience has shown
expended hours to be the best measure of progress.
Revenue from maintenance services contracts is recognized
ratably over the term of the contract.
Professional services are primarily comprised of implementation
and consulting services, and the revenue generated is recognized as
the services are provided.
Amounts recognized as revenue in excess of billings are
classified as work in process.
Amounts received in advance of the delivery of products or
execution of services are classified as deferred revenue.
Income taxes
The Company follows the liability method of accounting for
income taxes. Under this method, income taxes reflect the expected
future tax consequences of temporary differences between the
accounting basis of assets and liabilities and their tax basis.
Future income tax assets and liabilities are determined for each
temporary difference based on the currently enacted or
substantively enacted tax rates expected to apply when differences
are expected to reverse. A valuation allowance is recorded against
any future income tax asset if it is not more likely than not that
the asset will be realized. The effect of the changes in tax rates
on future income tax assets and liabilities is recognized in
earnings in the year the changes occur.
Impairment of long-lived assets
Long-lived assets, such as capital assets, are tested for
recoverability whenever events or changes in circumstances indicate
that their carrying amount may not be recoverable. An impairment
loss is recognized when the carrying value exceeds the total
undiscounted cash flows expected from their use and eventual
disposal. The amount of the impairment loss is determined as the
excess of the carrying value over its fair value.
Stock-based compensation and other stock-based payments
Stock-based compensation expense is recognized for all issued
and outstanding stock options in accordance with the fair value
method of accounting. The fair value at the grant date of the
options awarded is expensed on a straight line basis over the
vesting period. Any consideration paid on exercise of stock options
is credited to share capital. The Company's stock option plan and
other disclosures are described in Note 5.
Foreign currency translation
Monetary assets and liabilities denominated in foreign
currencies are translated into U.S. dollars, the Company's currency
of measurement, using the exchange rates in effect at the balance
sheet date. Transactions in foreign currencies are translated into
U.S. dollars at the average exchange rate. Exchange gains or losses
are included in net earnings (loss).
Financial Instruments
Financial assets and financial liabilities are initially
recognized at fair value when the Company becomes a party to the
contractual provisions of the financial instrument. Subsequently,
all financial instruments are measured at amortized cost except for
the following instruments:
a) Investments in unlisted shares, which are measured at cost
less any reduction for impairment;
b) Investments in listed shares and derivative financial
instruments that are not designated in a qualifying hedging
relationship, which are measured at fair value at the balance sheet
date. The fair value of listed shares is based on the latest
closing price and the fair value quote received from the bank
counterparty is used as a proxy for the fair value of derivative
financial instruments.
Interest earned on short term investments and bonds, dividends
received on unlisted shares, unrealized gains and losses on listed
shares, and realized gains and losses on sale of short term
investments and bonds are included in other income in the
consolidated statement of operations.
Transaction costs related to financial instruments measured
subsequent to initial recognition at fair value are expensed as
incurred. Transaction costs related to other financial instruments
are added to the carrying value of the asset or netted against the
carrying value of the liability and are then recognized over the
expected life of the instrument using the straight-line method. Any
premium or discount related to an instrument measured at amortized
cost is amortized over the expected life of the item using the
straight-line method and recognized in net earnings as interest
income or expense.
With respect to financial assets measured at cost or amortized
cost, the Company recognizes in net earnings an impairment loss, if
any, when there are indicators of impairment and it determines that
a significant adverse change has occurred during the period in the
expected timing or amount of future cash flows. When the extent of
impairment of a previously written-down asset decreases and the
decrease can be related to an event occurring after the impairment
was recognized, the previously recognized impairment loss is
reversed to net earnings in the period the reversal occurs.
3. Capital assets
Accumulated
Cost amortization Net book value
$ $ $
2011
Furniture and equipment 143,370 116,873 26,497
Computer equipment and
software 742,518 522,539 219,979
Research equipment 346,113 243,883 102,230
Leasehold improvements 60,958 16,137 44,821
---------- -------------- ---------------
1,292,959 899,432 393,527
Net book value Net book value
December 31, January 1,
2010 2010
$ $
2010
Furniture and equipment 26,418 36,799
Computer equipment and
software 166,317 177,367
Research equipment 82,158 83,174
Leasehold improvements 42,802 48,152
--------------- ---------------
317,695 345,492
4. Credit facility
The Company has a line of credit available up to a maximum of
$983,300 (CDN$1,000,000), bearing interest at prime plus 1.25% per
annum, payable monthly and repayable on demand. The credit facility
is secured by a movable hypothec of $1,720,775 (CDN$1,750,000) on
the universality of the Company's assets. As of December 31, 2011
and 2010, nil was drawn on this line of credit. There is no
specific renewal date as per the credit facility agreement.
5. Capital stock
a) Shares
Authorized
The following authorized classes of shares are unlimited in
number and without par value:
Class A common shares
Voting and participating
Class B Exchangeable shares and Class C Exchangeable shares
Voting, participating, exchangeable into ordinary shares of
Silanis International Limited ("LTD"), the Company's significant
shareholder, at the option of the holder, at any time.
Class D common shares
Voting, entitled to an amount of $0.0001 per share in preference
to the other classes of shares, upon the liquidation, dissolution
or winding-up of the Company. The holders of Class D common shares
will be entitled to any remaining property after the preference
payment on a pari-passu basis with the holders of the other classes
of shares.
Issued and fully paid
December 31, 2011 December 31, 2010 January 1, 2010
Number Number Number
of shares $ of shares $ of shares $
Class A common shares 21,750,000 15,018,054 21,750,000 15,314,984 21,750,000 15,562,419
Class B Exchangeable
shares 26,666,460 10,581,622 26,666,460 10,581,622 26,666,460 10,581,622
Class C Exchangeable
shares 38,640,566 2,801,298 38,640,566 2,801,298 38,640,566 2,801,298
----------- ----------- ----------- ----------- ----------- -----------
87,057,026 28,400,974 87,057,026 28,697,904 87,057,026 28,945,339
In 2011 and 2010, capital distributions were declared by the
Company on the outstanding Class A common shares in the amounts of
$296,930 and $247,435, respectively, relating to the ongoing
expenses of LTD, paid for by the Company. This transaction settled
a portion of the amounts due from LTD and was recorded as a
reduction of the class A common shares.
b) Stock options
In June 2007, the Company's stock option plan was amended and
restated (the "New Plan"). Pursuant to the New Plan, options
exercisable for Class C Exchangeable shares of the Company can be
issued from time to time to employees, consultants, directors and
officers of LTD and/or the Company, provided that the aggregate
number of Class C Exchangeable shares that can be issued further to
the exercise of options under the New Plan may not exceed more than
10% of the share capital of LTD on a fully diluted basis (assuming
the exchange of all Class B Exchangeable shares and Class C
Exchangeable shares of the Company). Unless otherwise determined by
the board of directors of the Company at the time of the granting
of a particular option, options granted under the New Plan vest 25%
per year over four years and expire 10 years after their date of
grant. Certain options additionally have vesting that is
conditional upon the Company reaching certain financial targets
and/or individual performance measures. For these performance-based
options, a stock-based compensation expense is recorded based on
the likelihood that the financial targets and/or performance
measures would be reached. For the year ended December 31, 2011,
$8,592 of compensation expense (2010 - $1,484) was recorded for
these performance-based options.
The following table presents options that were issued under the
New Plan:
2011 2010
Weighted
Number of Weighted average Number average exercise
options exercise price of options price
GBP GBP
Outstanding, beginning
of year 3,747,500 0.16 2,765,000 0.18
Granted 1,016,666 0.20 1,565,000 0.11
Expired/forfeited (500,000) 0.11 (582,500) 0.11
---------- ----------------- ------------ -------------------
Outstanding, end of
year 4,264,166 0.17 3,747,500 0.16
Exercisable, December
31 2,164,375 0.19 1,490,000 0.20
Options outstanding as at December
31, 2011
Weighted
Number of Exercisable average remaining
Exercise price options options life (years)
GBP0.46 475,000 475,000 5.47
GBP0.12 825,000 787,500 6.30
GBP0.09 627,500 451,875 6.81
GBP0.119 80,000 40,000 7.67
GBP0.1885 275,000 137,500 7.82
GBP0.111 965,000 272,500 8.80
GBP0.199 1,016,666 - 9.81
The fair values of the stock options granted in 2011 and 2010
have been determined using the Black-Scholes option pricing model
with the following weighted-average assumptions:
2011 2010
Expected dividend yield 0.0% 0.0%
Expected volatility 55% 58%
Risk-free interest rate 2.0% 2.3%
Expected term in years 6.56 6.98
The aggregate fair value of stock options granted during 2011
was $177,617 (2010 - $159,515).
The stock-based compensation expense for 2011 amounted to
$88,311 (2010 - $90,137), and is included in sales and marketing,
research and development, and general and administrative expenses
according to the functional role of the respective optionees.
The Black-Scholes option pricing model requires the use of
subjective assumptions including the expected volatility. Changes
in the assumptions can materially affect the fair value estimate
and, therefore, the Black-Scholes model does not necessarily
provide a reliable single measure of the fair value of the
Company's stock options.
During the year, 500,000 options (2010 - 507,500) expired due to
conditional vesting criteria not met. Management had not recorded
any stock-based compensation expense for these options. No options
(2010 -75,000) were forfeited due to employment terminations.
c) Warrants outstanding
The Company has outstanding warrants to acquire 1,290,025 Class
B Exchangeable shares of the Company at an exercise price of
$0.42634 per share expiring July 31, 2012.
6. Long-term investments
The long-term investments consist of a guaranteed investment
certificate in the amount of $2,000,000 with an annual interest
rate of 1.35%, maturing in 2014, and two corporate bonds with
principal values of $1,912,000 and $1,935,000, bearing interest
rates of 3.00% and 2.375%, respectively, with effective interest
rates of 2.04% and 1.70%, respectively, and maturing in 2014 and
2015, respectively. These investments are measured at amortized
cost.
7. Income taxes
As of December 31, 2011, the Company has losses carried forward
of approximately $9,200,000 and approximately $8,300,000, for
federal and Quebec purposes, which may be used to reduce future
years taxable income for various dates expiring between 2014 and
2029. The benefits resulting from these tax losses have not been
recognized in the consolidated financial statements.
Furthermore, the Company has approximately $4,900,000 and
$15,600,000 of research and development expenditures which can be
used to reduce future years taxable income with no expiry dates,
for federal and Quebec income tax purposes, respectively. The
related benefits have not been recognized in the accounts.
8. Related party transactions
The following transactions are measured at the exchange amount,
which is the consideration established and agreed upon by the
related parties:
-- Pursuant to its articles of incorporation, the Company may
pay ongoing expenses of LTD by way of a capital distribution on the
outstanding Class A common shares. For the year ended December 31,
2011, expenses of $322,327 were incurred on behalf of LTD and are
included in due from shareholders, without interest. As at December
31, 2011, no capital distribution has been declared by the Company
relating to the 2011 expenses.
-- In 2011, a capital distribution was declared by the Company
on the outstanding Class A common shares in the amount of $296,930
relating to the expenses of LTD for the year ended December 31,
2010, paid for by the Company. This transaction settled all amounts
due from LTD as at December 31, 2010 and was recorded as a
reduction of capital stock (see Note 5).
-- In 2007, the Company extended a loan to an executive officer
by virtue of his employment. This loan, in the amount of $73,749
(CDN$75,000), bears interest payable annually at the commercial
prime rate plus 0.25%. The loan is repayable on demand and is
secured by a number of Class C Exchangeable shares with aggregate
market value equal to the outstanding loan including accrued
interest.
9. Commitments and guarantees
a) Commitments
The minimum rentals payable under long-term operating leases,
exclusive of certain operating costs for which the Company is
responsible, are approximately as follows:
Year $
2012 175,849
2013 175,849
2014 187,363
2015 188,410
2016 188,410
Thereafter 392,521
-------------------------
Total 1,308,402
b) Guarantees
The Company has entered into agreements with certain of its
customers that include intellectual-property indemnification
obligations that are customary in the industry. These obligations
would generally require the Company to compensate a third party for
certain damages and claims incurred as a result of third party
intellectual-property claims arising from these agreements.
The nature of these obligations prevents the Company from making
a reasonable estimate of the maximum potential amount it could be
required to pay. Historically, the Company has not made any
payments under such obligations and no amount has been accrued in
the accompanying financial statements with respect to these
obligations.
c) Letter of credit
In 2008, the Company entered into a long-term operating lease
which required a letter of credit, renewable annually, in the
amount of CDN$400,000 to guarantee its obligations under the
long-term operating lease.
10. Financial risk management The Company is exposed to
financial risks of varying degrees of significance which could
affect its ability to achieve its strategic objectives for growth.
The main objectives of the Company's risk management process are to
ensure that risks are properly identified and that the capital base
is adequate in relation to these risks.
Currency risk
The foreign exchange risk is the risk to the Company's earnings
that arises from fluctuations in foreign exchange rates and the
degree of volatility of these rates. The Company does not presently
have derivative instruments to mitigate its exposure to foreign
exchange rate fluctuations. Tax credits receivable include amounts
denominated in Canadian dollars of $2,272,651 (December 31, 2010 -
$2,339,371, January 1, 2010 - $2,685,770). Due from shareholder and
an employee include amounts denominated in foreign currencies of
$322,327 and $73,748, respectively (December 31, 2010 - $296,930
and $75,405 respectively, January 1, 2010 - $247,435 and $71,625
respectively). Accounts payable and accrued liabilities include
amounts denominated in foreign currencies of $1,705,047 (December
31, 2010 - $746,753, January 1, 2010 - $733,606).
The Company is exposed to fluctuations mainly in the Canadian
dollar and Pound sterling due to the fact that a significant
portion of the Company's ongoing expenses are transacted in
Canadian dollars and the Company holds receivables and payables in
Pound sterling.
Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with its financial
obligations as they become due. The Company's growth is financed
through a combination of the available liquidity, issuance of
equity and income tax credits recoverable.
As at December 31, 2011, the Company has accounts payable and
accrued liabilities of $2,498,017 due within 12 months (December
31, 2010 - $1,318,028, January 1, 2010 - $1,125,114) and cash of
$6,910,965 (December 31, 2010 - $6,291,722, January 1, 2010 -
$3,443,646). Given the Company's available liquid resources as
compared to the timing of the payments of liabilities, management
assesses the Company's liquidity risk to be low.
Credit risk
Credit risk is that a customer or counterparty will be unable to
pay the Company in full when amounts become due.
Financial instruments that potentially subject the Company to
credit risk consist of cash, accounts receivable, and long-term
investments.
Credit risk with cash is minimized by ensuring that these
financial assets are placed with creditworthy counterparties. As at
December 31, 2011, December 31, 2010 and January 1, 2010 the
Company has invested most of its cash with a Canadian chartered
bank with an S&P short-term debt rating of A-1+.
The long-term investments consist of guaranteed investment
certificates, and bearer deposit notes offered from reputable
financial institutions and government agencies, from which
management believes the risk of loss to be low. As at December 31,
2011, December 31, 2010 the Company has invested its long-term
investments with a Canadian crown-backed agency, a Canadian
Provincial government, and a Canadian chartered bank with S&P
debt ratings of AAA, A+ and A-1+, respectively (as at January 1,
2010, the Company has invested its short-term investments with a
Canadian crown-backed agency with an S&P short-term debt rating
of A-1+).
Management does not believe that they are subject to any
significant credit risk corresponding to accounts receivable in
view of the customers generating the revenue for the Company. The
Company sells to customers primarily operating in government and
financial services industry sectors. The main customers generating
the revenue for the Company are top-tier companies with healthy
credit ratings as well as government agencies across the United
States of America. Historically, the Company has experienced
nominal bad debts.
The Company's exposure to credit risk is limited to carrying
amount of financial assets recognized at the balance sheet, as
summarized below:
December 31, December 31, January 1,
2011 2010 2010
$ $ $
Cash 6,910,965 6,291,722 3,443,646
Accounts receivable 3,965,543 1,498,566 10,004,289
Shareholder and employee
loans 396,074 372,335 869,381
Long-term investments 5,939,702 5,968,927 319,059
------------- ------------- -----------
17,212,284 14,131,550 14,636,375
The Company typically sells its products and services with
net-30 day payment terms, though the Company may extend credit
beyond this in its discretion. On average, the Company will
generally have a portion of accounts receivable that is outstanding
beyond the respective due date, but is not impaired. As of December
31, 2011, the portion of receivables past due represented
approximately 40% of trade receivables (December 31, 2010 - 2%,
January 1, 2010 - 38%), including one customer that represented 28%
of the total account receivable balance and that has been collected
since then. The Company does not believe there are any material
risk with respect to past due amounts.
Concentration of credit risk:
As of December 31, 2011, two customers represented approximately
66% (December 31, 2010 - 68% from one customer, January 1, 2010 -
79% from five customers) of the accounts receivable balance.
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company currently has no debt
outstanding and the long-term investments are invested at fixed
interest rates with the intention of holding to maturity. The
Company has aligned the maturities of its long-term investments to
its projected cash flows needs, therefore management believes that
the Company is not subject to interest rate risk.
11. Significant customers
For the year ended December 31, 2011, three significant
customers individually generated more than 10% of the Company's
revenue (December 31, 2010 - two customers generating more than
10%).
SILANIS INTERNATIONAL LIMITED
Directors' report:
The directors submit their report and financial statements for
the year ended December 31, 2011.
INCORPORATION
The company was incorporated in Jersey as a public company under
the Companies (Jersey) Law 1991 on February 1, 2007. The company
was successfully admitted to AIM on June 26, 2007 via an issue of
21,750,000 shares, raising gross proceeds of GBP10.05 million. The
money was used to purchase 25.2% of the share capital of Silanis
Technology Inc. ("Silanis").
PRINCIPAL ACTIVITY
The company's principal activity is holding an investment in
another company.
ACCOUNTING FOR INVESTMENT IN SILANIS
The Company was formed for the purpose of investing in shares of
Silanis. The Company records its interest in Silanis by using the
equity method, under which the investment is initially recorded at
cost and subsequently adjusted by the Company's share of the
associate's post-acquisition change in net assets less any
impairment charge and capital distributions. The Company's
statement of comprehensive income (loss) reflects its share of the
associate's post-acquisition profit (loss).
IAS 36: Impairment of Assets provides that an investment be
reviewed for potential impairment on the basis of either a
significant or prolonged decline in value. The Board of Directors
of the Company acknowledged Silanis' material variance to market
expectations for revenue, operating losses, and a significant
decline in the Company's share price since June 26, 2007, primarily
based on the performance of its sole investment. The Board reviewed
the uncertainty surrounding Silanis' trading prospects and cash
flows, and on the basis of this uncertainty recorded an impairment
of GBP7,652,710 in the eleven-month period ended 31 December 2007.
The carrying value of the investment in the Company's balance sheet
as at 31 December 2011 amounts to GBP2,398,189, and equates to the
Net Asset Value of its share of Silanis. The Company's share price
and profitable situation in 2011 would not suggest that a further
impairment is required.
As highlighted in note 6, Silanis Technology Inc. ("Silanis")
provides financial support to the Company on an ongoing basis. The
going concern of the Company is dependent on this continued support
from Silanis. In 2011, the Company and its associate were
profitable and the Company's directors consider that Silanis has
adequate financial resources to enable it to meet its obligations
with regard to the Company. The directors have a reasonable
expectation that the Company will continue to receive funding from
Silanis and therefore have adequate resources to continue in
operational existence for the foreseeable future. For these
reasons, the going concern basis continues to be adopted in
preparing the annual report and accounts.
RESULTS AND DIVIDENDS
The profit for the financial year is set out in the Statement of
Comprehensive Income on page 7.
The directors do not recommend a dividend for the year ended 31
December 2011.
DIRECTORS
The present directors of the company are:
-- David Brereton
-- Michael Hunt
-- Justin LaFayette
-- Matthew Lane
-- Vernon Lobo
-- Tommy Petrogiannis
-- Jonathan Wener
AUDITOR
Deloitte LLP were re-appointed as auditors to the Company on 30
June 2011.
Deloitte LLP have expressed their willingness to continue in
office and a resolution to reappoint Deloitte LLP will be proposed
at the next shareholders' meeting.
Approved by the Board of Directors and signed on behalf of the
Board
Signed
Director
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SILANIS
INTERNATIONAL LIMITED
We have audited the financial statements of Silanis
International Limited for the year ended 31 December 2011 which
comprise the balance sheet, the statement of the comprehensive
income, the statement of changes in equity, the statement of cash
flows and the related notes 1 to 9. The financial reporting
framework that has been applied in their preparation is applicable
law and International Financial Reporting Standards (IFRSs) as
issued by the International Accounting Standards Board.
This report is made solely to the company's members, as a body,
in accordance with Article 113A of the Companies (Jersey) Law 1991.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditors' report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the company's circumstances and have been
consistently applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors; and the
overall presentation of the financial statements. In addition, we
read all the financial and non-financial information in the annual
report to identify material inconsistencies with the audited
financial statements. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for
our report.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the company's affairs as at December 31, 2011 and of the
company's profit for the year then ended;
-- the financial statements have been properly prepared in accordance with IFRSs issued by the International Accounting Standards Board; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies (Jersey) Law 1991.
Emphasis of matter - Investment in associate
In forming our opinion which is not modified we have considered
the disclosures made in the Directors' report and note 2 of the
financial statements, which describe the method adopted by the
Directors for assessing and recording an impairment charge against
the investment in the associate. The calculation of the amount of
the impairment arising is inherently uncertain for the reasons set
out in note 2. It is not possible to quantify the effects of this
uncertainty.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies (Jersey) Law 1991 requires us to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the company; or
-- the company's financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations we require for our audit.
Gregory Branch, BSc, FCA
For and on behalf of
Deloitte LLP
Chartered Accountants
St. Helier, Jersey
March 28, 2012
SILANIS INTERNATIONAL LIMITED
Statement of directors' responsibilities
The directors are responsible for preparing the financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the financial statements in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board. The financial
statements are required by law to be properly prepared in
accordance with the Companies (Jersey) Law 1991.
International Accounting Standard 1 requires that financial
statements present fairly for each financial year the company's
financial position, financial performance and cash flows. This
requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the
definitions and recognition criteria for assets, liabilities,
income and expenses set out in the International Accounting
Standards Board's 'Framework for the preparation and presentation
of financial statements'. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable
IFRS. However, directors are also required to:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- make an assessment of the company's ability to continue as a going concern.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the company and enable them to ensure that
the financial statements comply with the Companies (Jersey) Law
1991. They are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
SILANIS INTERNATIONAL LIMITED
Balance sheet
As at 31 December 2011
(in GBP)
December 31, December 31,
2011 2010
GBP GBP
Assets
Non-current asset
Investment in associate
(Note 2) 2,398,189 2,149,821
Current Assets
Prepaid expenses 13,856 7,764
------------- -------------
Total assets 2,412,045 2,157,585
Equity and liabilities
Equity
Share capital (Note 3) 217,500 217,500
Share premium (Note 4) 9,787,500 9,787,500
Translation reserve (Note
2) 1,168,934 994,889
Retained deficit (8,969,373) (9,032,680)
------------- -------------
Total equity 2,204,561 1,967,209
Current liabilities
Accounts payable to an associate 207,485 190,376
------------- -------------
Total equity and liabilities 2,412,046 2,157,585
Net asset value per ordinary
share (Note 5) 0.10 0.09
The accompanying notes on pages 10-17 are an integral part of
these financial statements.
Approved by the Board
Signed.............................................................
Director
March 28, 2012
SILANIS INTERNATIONAL LIMITED
Statement of comprehensive income
For the year ended December 31 2011
(in GBP)
2011 2010
GBP GBP
Continuing operations
Operating expenses
General and administrative 201,393 191,782
Share of profit (loss) of
associate (Note 2) 264,700 149,503
-------- ----------
Net profit (loss) for the
year 63,307 (341,285)
Other comprehensive income
for the year
- translation adjustment 174,045 210,790
-------- ----------
Total comprehensive income
(loss) for the year 237,352 (130,495)
Net profit (loss) per ordinary
share (Note 5) 0.003 (0.02)
The accompanying notes on pages 10-17 are an integral part of
these financial statements.
SILANIS INTERNATIONAL LIMITED
Statement of changes in equity
For the year ended December 31 2011
(in GBP)
2011
Share capital Share premium Profit and Translation
loss account reserve Total
GBP GBP GBP GBP GBP
Balance, beginning
of year 217,500 9,787,500 (9,032,680) 994,889 1,967,209
Net profit - - 63,307 - 63,307
--------------- -------------- ---------------- --------------- --------------
Other comprehensive
income - translation
adjustment - - - 174,045 174,045
Total comprehensive
income - - 63,307 174,045 237,352
Balance, end of
year 217,500 9,787,500 (8,969,373) 1,168,934 2,204,561
2010
Share capital Share premium Profit and Translation
loss account reserve Total
GBP GBP GBP GBP GBP
Balance, beginning
of year 217,500 9,787,500 (8,691,395) 784,099 2,097,704
Net loss - - (341,285) - (341,285)
Other comprehensive
income - translation
adjustment - - - 210,790 210,790
--------------- -------------- ---------------- --------------- --------------
Total comprehensive
loss - - (341,285) 210,790 (130,495)
--------------- -------------- ---------------- --------------- --------------
Balance, end of
year 217,500 9,787,500 (9,032,680) 994,889 1,967,209
The accompanying notes on pages 10-17 are an integral part of
these financial statements.
SILANIS INTERNATIONAL LIMITED
Statement of cash flows
For the year ended December 31 2011
(in GBP)
2011 2010
GBP GBP
Operating activities
Net profit (loss) 63,307 (341,285)
Adjustments for:
Share of (profit)/ loss of
associate (264,700) 149,503
Increase in accounts payable
to associate 17,109 37,308
(Increase)/decrease in prepaid
expenses (6,092) 1,406
---------- ----------
Net cash flow used in operating
activities (190,376) (153,068)
Investing activities
Capital distribution received
from associate (Note 6) 190,376 153,068
---------- ----------
Net cash flow from investing
activities 190,376 153,068
Financing activities - -
---------- ----------
Movement in cash - -
Cash, beginning of year - -
---------- ----------
Cash, end of year - -
The accompanying notes on pages 10-17 are an integral part of
these financial statements.
SILANIS INTERNATIONAL LIMITED
Notes to the financial statements
for the year ended December 31, 2011
(in GBP)
1. Basis of preparation
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRSs") issued by the
International Accounting Standards Board ("IASB") using the
historical cost basis except for the investment in an associate
which is recorded under the equity method, as described below.
The principal accounting policies, which have been applied
consistently throughout the year, are set out below. The same
accounting policies were applied for the financial statements for
the period ended 31 December 2011.
Investment in an associate
The Company owns an equity investment in an associate over which
it has a significant influence. Significant influence is the power
to participate in, but not control, the financial and operating
decisions of the investee. Investments in associates are accounted
for using the equity method, under which the investment is
initially recorded at cost and subsequently adjusted by the
Company's share of the associate's post-acquisition change in net
assets, less any impairment in value and after any changes in
foreign currency translation adjustment.
Expenses
Ongoing expenses incurred by the Company are paid for by Silanis
Technology Inc. on its behalf as the Company has no bank account.
The directors of Silanis Technology Inc. have confirmed in a letter
to the Company's directors that Silanis Technology Inc. will
continue to provide financial support to the Company to continue as
a going concern until at least March 30, 2013.
Income taxes
The Company is incorporated in Jersey and currently conducts its
affairs in such a way that it is regarded as resident for tax
purposes in the United Kingdom.
UK Corporation tax is provided at amounts expected to be paid /
recovered using the tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.
Full provision is made for deferred tax assets and liabilities
arising from timing differences subject to consideration of
prudence. Deferred tax is measured at the average rates that are
expected to apply in the periods in which the timing differences
are expected to reverse, based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets are recognized to the extent that it is
regarded as more likely than not that they will be recovered.
Deferred tax assets and liabilities are not discounted.
As the Company is tax resident in the United Kingdom, the
company is non-resident for tax purposes in Jersey under the
provisions of Article 123 of the Income Tax (Jersey) law and the
company is not subject to Jersey tax other than in respect of
Jersey source income or on the profits of a permanent establishment
located in Jersey.
Judgments by Management and estimation uncertainty
The preparation of financial statements in conformity with IFRSs
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates. The significant estimate requiring the use of
management's judgment relates to the carrying amount of the
investment in its associate company, Silanis Technology Inc.
Operating segments
Management has determined that the Company operates in one
industry and geographic segment. Specifically, the Company operates
in the distribution and service of computer software industry and
primarily in the geographic region of North America, through its
associate, Silanis Technology Inc.
Adoption of new and revised standards
In the current year, the following new and revised Standards and
Interpretations have been adopted:
The amendment to IAS 24, 'Related party disclosures', clarifies
in which circumstances persons and key management personnel affect
related party relationships of an entity. The adoption of the
amendment did not have any impact on the financial position or
performance of the Company.
IFRS 7 (amendment) 'Financial instruments: Disclosures'. The
amendment emphasizes the interaction between quantitative and
qualitative disclosures about the nature and extent of risk
associated with financial instruments. Adoption of this amendment
did not have a significant impact on the Company's financial
statements.
'Improvements to IFRS', issued in May 2010, with most being
effective for annual periods beginning on or after 1 January 2011,
comprise amendments that result in accounting changes of
presentation, recognition or measurement purposes, as well as
terminology or editorial amendments related to a variety of
individual standards. No material changes to accounting policies
are expected as a result of these amendments.
There are no other standards, interpretations or amendments to
existing standards that are effective that had a material impact on
the Company.
Standards in issue not yet effective
At the date of approval of these financial statements, the
following standards and interpretations which have not been applied
in these financial statements were in issue but not yet
effective:
IFRS 9 'Financial Instruments'; Effective for annual periods
beginning on or after 1 January 2015, specifies
how an entity should classify and measure financial
assets and liabilities, including some hybrid contracts.
The standard improves and simplifies the approach
for classification and measurement of financial
assets compared with the requirements of IAS 39.
Most of the requirements for classification and
measurement of financial liabilities were carried
forward unchanged. The standard applies a consistent
approach to classifying financial assets and replaces
the numerous categories of financial assets in IAS
39, each of which had its own classification criteria.
IFRS 10 'Disclosures of interests in other entities'; Effective
for annual periods beginning on or after 1 January
2013, includes the disclosure requirements for all
forms of interest in other entities, including joint
arrangements, associates, special purpose vehicles
and other off balance sheet vehicles.
IFRS 11 'Joint Arrangements'; Issued in May 2011 and will
supersede existing IAS 31, 'Joint Ventures' effective
for annual periods beginning on or after January
1, 2013, with early application permitted. IFRS
11 provides for the accounting of joint arrangements
by focusing on the rights and obligations of the
arrangement, rather than its legal form (as is currently
the case). The standard also eliminates the option
to account for jointly controlled entities using
the proportionate consolidation method.
IFRS 12 'Disclosures of interests in other entities'; Effective
for annual periods beginning on or after 1 January
2013, includes the disclosure requirements for all
forms of interest in other entities, including joint
arrangements, associates, special purpose vehicles
and other off balance sheet vehicles.
IFRS 13 'Fair value measurement'; Effective for annual periods
beginning on or after 1 January 2013, improves consistency
and reduces complexity by providing a precise definition
of fair value and a single source of fair value
measurement and disclosure requirements for use
across IFRS.
The directors do not expect that the adoption of these standards
and interpretations in future periods will have a material impact
on the financial statements of the Company. All other standards and
interpretations in issue but not effective as yet have been
reviewed and considered not applicable to the Company.
2. Investment in associate
As at December 31, 2011, the details of the investment are as
follows:
GBP
Carrying value as at
January 1, 2011 2,149,821
Capital distribution received from
the associate (Note 6) (190,376)
Share of loss for the year ended December
31, 2011 264,700
Foreign currency translation
adjustment 174,045
----------
Carrying value as at December
31, 2011 2,398,189
The summarized financial information of Silanis Technology Inc.
as at and for the year ended December 31, 2011, is as follows:
GBP
Assets 13,129,522
Liabilities 3,530,477
Revenue 8,548,882
Net profit 1,059,493
As at December 31, 2010, the details of the investment are as
follows:
GBP
Carrying value as at January
1, 2010 2,241,602
Capital distribution received from the
associate (Note 6) (153,068)
Share of loss for the year ended December
31, 2010 (149,503)
Foreign currency translation
adjustment 210,790
----------
Carrying value as at December
31, 2010 2,149,821
The summarized financial information of Silanis Technology Inc.
as at and for the year ended December 31, 2010, is as follows:
GBP
Assets 11,136,920
Liabilities 2,531,998
Revenue 4,104,993
Net loss (598,405)
IAS 36 : Impairment of Assets requires that once there is
evidence of an impairment, the asset should be recorded at the
lower of the previous carrying amount and its recoverable amount.
The recoverable amount is the higher of the fair value (less costs
to sell) and the value in use.
There is no active market in which the shares of Silanis
Technology Inc. are traded. The directors of the company are
uncertain about the trading prospects of Silanis Technology Inc.
and, on the basis of this uncertainty, have determined the value in
use as being equal to its share of the Net Asset Value of Silanis
Technology Inc. as at December 31, 2011 and this also equates the
approximate fair value.
A translation reserve is recorded at year-end to account for the
foreign currency adjustment.
The reporting date of the financial statements of Silanis
Technology Inc. is December 31, 2011.
The directors of the Company are represented on the Board of
Directors of Silanis Technology Inc. The Company is therefore able
to exercise significant influence over its investment. The Company
owns 24.98% of the issued and fully paid shares of Silanis
Technology Inc. as of December 31, 2011. During 2009, Silanis
Technology Inc. issued common shares upon the exercise of options
outstanding resulting in a decrease in the percentage ownership
from 25.2 % to 24.98%.
The Class A shares of Silanis Technology Inc., held by the
Company rank pari passu with the other classes of shares in Silanis
Technology Inc. in respect of voting, dividend and liquidation
rights.
3. Share capital
Ordinary shares with a par value of GBP0.01 per share
As at December 31, 2011
and 2010 Number GBP
Authorized 10,000,000,000 100,000,000
Issued and fully paid 21,750,000 217,500
As per the Articles of Association of the Company, the
authorized share capital of the Company is 10,000,000,000 ordinary
shares of GBP0.01 each.
As at December 31, 2011 and 2010, there was no ultimate
controlling party.
The Company holds Class A common shares in Silanis Technology
Inc., an associated company. Share capital of Silanis Technology
Inc. also includes 26,666,460 Class B Exchangeable shares and
38,640,566 Class C Exchangeable shares, which rank pari passu with
Class A common shares.
In the event of exercise of option to exchange by the holder,
Silanis Technology Inc. will cancel the Class B Exchangeable shares
and Class C Exchangeable shares and the Company will issue an
equivalent number of Ordinary shares to the holders of the
exchangeable shares. In return for issuance of shares, the Company
will receive Class D common shares in Silanis Technology Inc. which
rank pari passu with Class A common shares.
4. Share premium
The share premium arose on issuance of 21,750,000 equity shares
on June 26, 2007 for consideration of GBP10,005,000.
5. Net profit (loss) per ordinary share and net asset value per
ordinary share
The calculation of profit per ordinary share for the year ended
December 31, 2011 was based on the profit attributable to
shareholders of GBP63,307 and a weighted average number of ordinary
shares in issue of 21,750,000. The calculation of loss per ordinary
share for the year ended December 31, 2010 was based on the loss
attributable to shareholders of GBP341,285 and a weighted average
number of ordinary shares in issue of 21,750,000.
The calculation of net asset value per ordinary share as at
December 31, 2011 was based on the net assets attributable to
shareholders of GBP2,204,561 and the 21,750,000 ordinary shares in
issue as at December 31, 2010. The calculation of net asset value
per ordinary share as at December 31, 2010 was based on the net
assets attributable to shareholders of GBP1,967,209 and the
21,750,000 ordinary shares in issue as at December 31, 2010.
The computation of diluted profit(loss) per share assumes the
conversion, exercise or contingent issuance of securities only when
such conversion, exercise or issuance would have a dilutive effect
on earnings per share. The dilutive effect of convertible
securities, as described in Note 3, is reflected in diluted
earnings per share by application of the "if converted" method. The
dilutive effect of outstanding options, as described in Note 3 and
their equivalents is reflected in diluted earnings per share by
application of the treasury stock method. In each period, whether
profitable or not, the effect of potential issuances of shares
under options would be anti-dilutive. Therefore, the assumed
conversion of outstanding common share options has an anti-dilutive
impact in the period end December 31, 2011 and 2010.
6. Related party transactions
Pursuant to the articles of incorporation of Silanis Technology
Inc. ("Silanis"), Silanis will pay ongoing expenses of the Company
by way of a capital distribution on Silanis' outstanding Class A
common shares. As at December 31, 2011 disbursements of GBP207,485
(GBP190,376 as at December 31, 2010) were incurred by the Company
and are included in accounts payable to an associate, including
GBP10,250 for non-audit services performed by Deloitte LLP for the
tax compliant work for the Company. As at December 31, 2011, a
capital distribution amounting to GBP190,376 (GBP153,068 as at
December 31, 2010) was declared by Silanis to pay for the
disbursements incurred during the year ended December 31, 2010 and
satisfied through the reduction of a portion of the amount payable
to the associate.
As at December 31, 2011, the key management personnel
(Directors) as well as their compensation for the year ended
December 31, 2011 from the Company were as follows (GBP60,655 in
aggregate as at December 31, 2010):
2011 (GBP) 2010 (GBP)
David Brereton 17,157 ($US 19,250) 12,778 ($US 19,750)
Michael Hunt 11,874 ($US 17,750) 11,484 ($US 17,750)
Justin LaFayette 15,630 ($US 18,250) 12,778 ($US 19,750)
Vernon Lobo 20,097 ($US 20,750) 12,778 ($US 19,750)
Jonathan Wener 17,998 ($US 16,750) 10,837 ($US 16,750)
7. Capital risk management
The Company manages its capital to ensure it will continue as a
going concern while maximizing the return to stakeholders through
the optimization of its capital structure. The capital structure of
the Company consists of equity, comprising issued share capital and
the retained deficit. The Company had no borrowings as at December
31, 2011.
8. Going concern
As highlighted in note 6, Silanis Technology Inc. ("Silanis")
provides financial support to the Company on an ongoing basis. The
going concern of the Company is dependent on this continued support
from Silanis. In 2011, the Company and its associate were
profitable and the Company's directors consider that Silanis has
adequate financial resources to enable it to meet its obligations
with regard to the Company. The directors have a reasonable
expectation that the Company will continue to receive funding from
Silanis and therefore have adequate resources to continue in
operational existence for the foreseeable future. For these
reasons, the going concern basis continues to be adopted in
preparing the annual report and accounts.
9. Post balance sheet events
There are no material post balance sheet events that require
disclosures in these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAKDNADDAEFF
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