TIDMSNS
RNS Number : 8429D
Silanis International Limited
30 March 2011
RNS Release 30 March 2011
Silanis International Limited (the "Company") and its sole
investment,
Silanis Technology Inc. ("Silanis")
Final Results for the Year Ended December 31, 2010
The Company (AIM: SNS), today announced its audited final
results, and those of Silanis, for the year ended December 31,
2010.
Silanis is among the world's largest and most experienced
electronic signature and electronic vaulting providers. Its
solutions automate business processes requiring secure, compliant
and legally enforceable electronic signatures and records. Silanis'
Electronic Signature Process Management ("ESPM") solutions address
the complexity of today's business environments, going beyond basic
e-signing to completely manage a signing transaction and the
collection of comprehensive electronic evidence.
The Company's sole investment is a 24.98% interest in 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 2010 Financial Highlights
-- Revenue of $6.3 million (2009 - $6.2 million)
-- Net loss of $0.9 million (2009 - $2.0 million)
-- Cash, short-term and long-term investments of $12.3 million
(December 31, 2009 - $13.4 million)
Silanis 2010 Operational Highlights
-- Silanis increased H2 revenue by 62% over H1 2010.
-- Silanis was profitable in the second half of 2010, and grew
software revenue by 40% over 2009.
-- Four (4) significant ESPM wins within Silanis' target
verticals:
o A Fortune 500 financial services firm selects Silanis' ESPM
solution to enable straight-through processing across its
enterprise to reduce the time, cost and risk of securing customer
signatures;
o US Army G-3/7 Munitions Management Division expands its use of
Silanis ESPM to electronically sign and certify munitions
consumption;
o A Fortune 500 financial services firm chooses Silanis as its
enterprise electronic signature provider to deploy electronic
signatures across all lines of business, distribution channels and
internal operations;
o A leading P&C insurance carrier selects Silanis' ESPM
solution for its e-signature requirements across all personal lines
of business.
-- Continuation of the world's largest electronic signature
deployment as the US Army renews its enterprise license support in
respect of 1.4 million users.
-- Continued strengthening of the IBM partnership as Silanis
announces e-SignLive(TM) and e-SignRoom(TM) integrated electronic
signature services for IBM LotusLive.
-- New partnerships founded with the HP Exstream software group
and Blue Frog's Policybox SAAS Offering.
Tommy Petrogiannis, co-founder and Chief Executive Officer of
the Company and Silanis commented:
"I am very pleased with the strong recovery in our primary
target markets of insurance, banking and government since the
financial market crisis of 2009. During this difficult period, we
did not waver from our course of investing in our technology
leadership and innovation, nor in partnering with the dominant
market players that provide complimentary services to mutual
customers. This long-term strategy was validated when markets
returned in H2 2010, in which the majority of our 2010 new business
was closed.
Whilst the return to overall growth is good, I am most pleased
with the quality of the revenue delivered in 2010. Sales of our
software, from which the primary value of Silanis is derived, were
up by 40% over 2009.Our strategy to develop and deploy industry
best practices packaged as solution accelerators materially
benefitted our enterprise customers' time-to-value realization.
Furthermore, I believe our investment in mobility and social
business collaboration solutions positions us very well to take
advantage of the market opportunity before us.
Looking ahead and based on the market interest we are currently
responding to, I am confident of our prospects for continued growth
in 2011."
Please see section regarding Forward-Looking Statements, which
forms an integral part of this release.
For further details, please contact:
Silanis International Limited Tel: +1 514 337 5255
Tommy Petrogiannis, C.E.O.
www.sil-intl.co.uk
Canaccord Genuity Limited Tel: +44 (0) 20 7050
Mark Williams 6500
C.E.O. REVIEW AND OUTLOOK
2010 Strategy
In 2010, we maintained our strategic course with the expectation
of a return to normal and growing buying patterns, particularly in
the hard hit financial services market.
The pillar of this strategy is unrelenting investment in our
product offerings with a view to market dominance. We believe that
the core value of ESPM to our customers is both increasing and
broadening. The same can be said of evolving software consumption
models. These patterns can only be addressed through technical
innovation to enhance enterprise-class performance across all
customer business channels, be they on the web, in a call centre or
agent based. Likewise, customers demand flexible implementation
alternatives, whether deployed on-premise or on the cloud, procured
as a license or as a service.
We continue to complement our technical leadership with new and
deepening relationships with key technology partners. Since ESPM is
often part of large e-commerce initiatives, it is imperative to
align marketing, sales and delivery models with the top technology
solution providers. IBM is a dominant player with whom we have
chosen to strategically partner with. In 2010, we also formalized
new partnerships with the HP Exstream software group and Blue
Frog.
2010 Results
By the summer of 2010 we were rewarded as the financial services
markets finally recovered. In fact, from a very modest start to the
year, we enjoyed significant growth in sales booked each
consecutive quarter of the year. The majority of new 2010 revenue
was derived from our 4 major new customers - all of whom were added
in H2 2010.
While we would have preferred to see the market thaw earlier in
the year, I am pleased with the strong finish and return to
profitability in H2 2010. Our 2010 loss reflects a conscious and
deliberate investment in research and development in respect of our
mobility and social business collaboration offerings.
2011 Outlook
As a company, the start to 2011 is the busiest in our history.
Our monthly web seminars are seeing among the highest registrant
numbers ever. Interest in our upcoming e-Signature summit for
banking executives has surpassed expectations, requiring us to
change venues to the New York Stock Exchange to accommodate the
demand. Complementing this robust level of activity, our industry
leadership position is being recognized by the market. I am proud
that in January and February of 2011, Silanis won two back to back
industry awards: the IBM Lotus Award for Business Transformation
through Cloud Computing, and the prestigious 2011 Beacon Award for
Best Insurance Industry Solution.
After the strong finish to 2010, we believe a sustained pattern
of growth is emerging. Based on contracts currently in negotiation,
and supported by a strong pipeline of prospects, I am confident
that 2011 will see Silanis continue to grow. We will continue to
announce major contracts closed, as this is the best measure of our
progress. Meanwhile, we will continue to make strategic investments
both in research and development and to further our success with
partners.
This is an exciting time for Silanis, and I will continue to
share news of our progress this year.
Tommy Petrogiannis, C.E.O.
Silanis Technology Inc. and Silanis International Limited
FINANCIAL REVIEW
The audited financial statements of the Company (prepared under
International Financial Reporting Standards) and Silanis (prepared
under Canadian Generally Accepted Accounting Principles) for the
year ended December 31, 2010 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 %
ended Dec 31, ended Dec 31,
in U.S. dollars 2010 2009 Change
Revenues
Software licenses 2,297,107 1,645,983 40%
Maintenance 3,218,611 2,836,423 13%
Professional services 759,215 1,569,549 (52%)
Reimbursable expenses and
other 69,745 139,726 (50%)
-------------- --------------
6,344,678 6,191,681 2%
Cost of revenues 1,419,340 1,503,372 (6%)
-------------- --------------
4,925,338 4,688,309 5%
Operating expenses
Sales and marketing 3,349,276 4,002,088 (16%)
Research and development 2,672,807 2,127,012 26%
Tax credits (1,547,578) (1,383,631) 12%
General and administrative 1,585,904 1,747,505 (9%)
Severance - 249,236 (100%)
Financial (257,435) (51,012) 405%
Amortization of capital assets 106,233 114,509 (7%)
-------------- --------------
5,909,207 6,805,707 (13%)
Loss before undernoted item (983,869) (2,117,398) (54%)
Interest income 58,974 96,779 (39%)
-------------- --------------
Net and comprehensive loss (924,895) (2,020,619) (54%)
Revenue and Net Loss
Revenue for the year ended December 31, 2010 was $6.3 million,
compared with $6.2 million in 2009, representing a 2% increase.
This increase is primarily attributable to the 40% increase in
software license revenues, offset by the 52% decrease in
professional services revenues.
Software license revenues were $0.7 million higher in 2010 than
in 2009. Whilst the number of large ESPM accounts added was
comparable to 2009, the average deal size was over 35% higher in
2010.
Maintenance revenues were $0.4 million higher in 2010 than in
2009 due primarily to the full year revenue recognition of the
renewed US Army maintenance contract and the two (2) ESPM accounts
closed in H2 2009, augmented by the recognizable portion of new
maintenance contracts in respect of 2010 ESPM accounts.
The 52% decrease in professional services revenues is accounted
for by a lower opening services backlog entering 2010, and the
nature and timing of the services engagements contracted. In 2010,
Silanis introduced a new services deployment methodology enabling
customers to implement ESPM solutions significantly faster and more
cost effectively than before. This methodology, and the resulting
decrease in services revenues, is consistent with Silanis' strategy
to emphasize core software revenue growth while ensuring faster
return on investment for customers.
The net and comprehensive loss for the year ended December 31,
2010 more than halved to $0.9 million, compared with $2.0 million
in 2009. The $1.1 million year over year variance is due to the
$0.2 million revenue variance, complemented by a $0.9 million
aggregate savings in operating expenses as described below.
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 ESPM implementations.
Cost of revenues decreased by 6% over 2009, as compared with the
2% increase in revenue. This $0.1 million decrease in cost of
revenues is accounted for by less third-party hardware sold and
lower professional services implementation costs, partially offset
by higher commissions paid as a result of quota 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 lower in 2010 at $3.3 million relative to
the $4.0 million incurred in 2009, representing a 16% decrease.
This result is in line with the 2009 restructuring and optimization
of Silanis' direct and indirect sales infrastructure.
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 $0.5 million
in 2010, which represents a 26% increase over 2009. This increase
is primarily attributable to the new investment in Silanis' SAAS
e-signature platform, e-SignLive.
Tax credits provided an expense recovery of $1.5 million for
2010, up slightly from the recovery of $1.4 million in 2009. 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. Collection of $0.6 million of 2009 tax credits
anticipated for H2 2010 was delayed at the Provincial level due to
Silanis' past election to file tax returns in its currency of
measurement, the United States dollar. Subsequent to year-end, the
2009 Provincial credits were assessed as filed.
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 decreased by $0.2 million in 2010, representing a
9% decrease over expenses incurred in 2009. This reflects the
result of variances in numerous and varied expense categories, that
in aggregate, resulted in significant savings over the prior
period.
Financial Expenses and Interest Income
Financial expenses include bank charges and fluctuations in
foreign exchange. The $0.2 million decrease in financial expense in
2010 is primarily attributable to foreign exchange gains on
non-United States dollar denominated assets. The majority of the
foreign exchange gain relates to the refund of Federal and
Provincial tax credits collected during the year.
Interest income decrease to $0.06 million, a reduction of $0.04
million from 2009. While Silanis' cash, short-term and long-term
investments decreased by $1.1 million during the year, interest
income decreased primarily due to the persisting low interest rates
available on United States dollar deposits of a low-risk profile
consistent with Silanis' treasury management objectives.
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. (the "Company"), which
comprise the consolidated balance sheets as at December 31, 2010
and 2009, and the consolidated statements of operations,
comprehensive income and deficit and cash flows for the years then
ended, 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 generally accepted accounting
principlesand for such internal control as management determines is
necessary to enable the preparation of consolidated financial
statements that are free from material misstatement, whether due to
fraud or error.
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, 2010 and 2009, and its financial
performance and its cash flows for the years then ended in
accordance with Canadian generally accepted accounting
principles.
Signed, Deloitte & Touche LLP (1)
March 28, 2011
Montreal, Quebec
____________________ (1) Chartered accountant auditor permit No.
13556
SILANIS TECHNOLOGY INC.
Consolidated balance sheets
as at December 31
(in U.S. dollars)
2010 2009
$ $
Assets
Current assets
Cash 6,291,722 3,443,646
Short-term investments - 10,004,289
Accounts receivable 1,498,566 869,381
Work in process 397,415 148,977
Tax credits receivable 2,339,371 2,685,770
Prepaid expenses 156,402 137,355
Shareholder and employee
loans (Note 9) 372,335 319,059
------------- -------------
11,055,811 17,608,477
Capital assets (Note 3) 317,695 345,492
Long-term investments (Note
6) 5,968,927 -
Other long-term assets 27,820 28,648
------------- -------------
17,370,253 17,982,617
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 1,318,028 1,125,114
Deferred revenue 2,553,476 2,258,128
------------- -------------
3,871,504 3,383,242
Deferred lease inducement 77,652 96,085
------------- -------------
3,949,156 3,479,327
Commitment and guarantees
(Note 10)
Shareholders' equity
Capital stock (Note 5a) 28,697,904 28,945,339
Contributed surplus 473,503 383,366
Deficit (15,848,164) (14,923,269)
Accumulated other comprehensive
income 97,854 97,854
------------- -------------
13,421,097 14,503,290
------------- -------------
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)
2010 2009
$ $
Revenues
Software licenses 2,297,107 1,645,983
Maintenance 3,218,611 2,836,423
Professional services 759,215 1,569,549
Reimbursable expenses and
other 69,745 139,726
------------- -------------
6,344,678 6,191,681
Cost of revenues 1,419,340 1,503,372
------------- -------------
4,925,338 4,688,309
Operating expenses
Sales and marketing 3,349,276 4,002,088
Research and development 2,672,807 2,127,012
Tax credits (1,547,578) (1,383,631)
General and administrative 1,585,904 1,747,505
Severance (Note 13) - 249,236
Financial (Note 8) (257,435) (51,012)
Amortization of capital
assets 106,233 114,509
------------- -------------
5,909,207 6,805,707
------------- -------------
Loss before undernoted item (983,869) (2,117,398)
Interest income 58,974 96,779
------------- -------------
Net and comprehensive loss (924,895) (2,020,619)
Deficit, beginning of year (14,923,269) (12,902,650)
------------- -------------
Deficit, end of year (15,848,164) (14,923,269)
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 2009
$ $
Operating activities
Net loss (924,895) (2,020,619)
Adjustments for:
Amortization of capital
assets 106,233 114,509
Stock-based compensation
(Note 5b) 90,137 107,120
Deferred lease inducement (18,433) 96,085
------------ ------------
(746,958) (1,702,905)
Net changes in non-cash
working capital items
Accounts receivable (629,185) 855,335
Work in process (248,438) 27,523
Tax credits receivable 346,399 (1,480,805)
Prepaid expenses (19,047) (44,843)
Accounts payable and accrued
liabilities 192,914 66,197
Deferred revenue 295,348 (185,410)
------------ ------------
(808,967) (2,464,908)
Investing activities
Decrease in short-term investments 10,004,289 3,456,141
Increase in long-term investments (5,968,927) -
Increase in Shareholder
and employee loans (300,711) (254,427)
Acquisition of capital assets (78,436) (137,550)
Decrease in other long-term
assets 828 -
------------ ------------
3,657,043 3,064,164
Financing activities
Issuance of capital stock - 39
------------ ------------
- 39
------------ ------------
Increase in cash 2,848,076 599,295
Cash, beginning of year 3,443,646 2,844,351
------------ ------------
Cash, end of year 6,291,722 3,443,646
Non-cash financing transaction
Capital distribution (Note
5) 247,435 359,129
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, 2010 and 2009
(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 U.S. market.
2. Significant accounting policies
Financial statement presentation
The accompanying consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). They 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
Canadian GAAP 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. Significant estimates requiring the use of
management's judgment relate to collectability of accounts
receivable, tax credits, revenue recognition and stock-based
compensation.
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 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 on all issued and
outstanding stock options in accordance with the fair value method
of accounting. 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 earnings.
Segmented information
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 the United States of
America.
Comprehensive income and equity
As at December 31, 2010, accumulated other comprehensive income
is comprised of the cumulative translation adjustment that was
recorded upon the change of the Company's currency of measurement
on January 1, 2004 from the Canadian dollar to the U.S. dollar.
Financial Instruments - Recognition and Measurement
Financial assets and liabilities are classified into one of five
categories: held for trading, held to maturity, loans and
receivables, available for sale financial assets or other financial
liabilities.
Financial assets and liabilities are initially recorded at fair
value. Subsequently, financial instruments classified as financial
assets available for sale, held for trading and derivative
financial instruments, part of a hedging relationship or not, have
to be measured at fair value on the balance sheet at each reporting
date, whereas other financial instruments are measured at amortized
cost using the effective interest method.
The Company classified cash as held for trading. Short-term and
long-term investments are classified as held to maturity. Accounts
receivable, tax credits receivable and shareholder and employee
loans are classified as loans and receivables. Accounts payable and
accrued liabilities are classified as other financial
liabilities.
Future accounting changes
New accounting framework
International Financial Reporting Standards: In February 2008,
Canada's Accounting Standards Board (AcSB) confirmed that Canadian
GAAP, as used by publicly accountable enterprises, will be
superseded by International Financial Reporting Standards (IFRS)
for fiscal years beginning on or after January 1, 2011. For the
Company, the conversion to IFRS will be required for interim and
annual financial statements for the year ending December 31,
2011.
IFRS uses a conceptual framework similar to Canadian GAAP, but
there are significant differences on recognition, measurement and
disclosures. The Company is currently assessing the impact of the
new reporting framework on its consolidated financial statements
and is developing an implementation strategy.
3. Capital assets
Accumulated Net book
Cost amortization value
$ $ $
2010
Furniture and equipment 133,953 107,535 26,418
Computer equipment and
software 620,687 454,370 166,317
Research equipment 293,501 211,343 82,158
Leasehold improvements 53,503 10,701 42,802
---------- ------------- --------------
1,101,644 783,949 317,695
Accumulated Net book
Cost amortization value
$ $ $
2009
Furniture and equipment 133,178 96,379 36,799
Computer equipment and
software 572,660 395,293 177,367
Research equipment 265,341 182,167 83,174
Leasehold improvements 213,729 165,577 48,152
---------- --------------- ------------
1,184,908 839,416 345,492
4. Credit facility
The Company has a line of credit available up to a maximum of
$1,005,400 (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 $1,740,601
(CDN$1,750,000) on the universality of the Company's assets. As of
December 31, 2010, nil was drawn on this line of credit (2009 -
nil). 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
2010 2009
Number Number
of shares $ of shares $
Class A common shares 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
Class C Exchangeable
shares 38,640,566 2,801,298 38,640,566 2,801,298
----------- ----------- ----------- -----------
87,057,026 28,697,904 87,057,026 28,945,339
In 2010 and 2009, capital distributions were declared by the
Company on the outstanding Class A common shares in the amounts of
$247,435 and $359,129, 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 capital stock.
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, 2010,
$1,484 of compensation expense (2009 - nil) was recorded for these
performance-based options.
The following table presents options that were issued under the
New Plan:
2010 2009
Weighted Weighted
average average
Number of exercise Number exercise
options price of options price
GBP GBP
Outstanding,
beginning of
year 2,765,000 0.18 4,461,740 0.15
Granted 1,565,000 0.11 572,500 0.14
Expired/forfeited (582,500) 0.11 (2,269,240) 0.10
---------- --------------- ------------ --------------
Outstanding, end
of year 3,747,500 0.16 2,765,000 0.18
Exercisable,
December 31 1,490,000 0.20 1,113,125 0.20
Options outstanding as at December
31, 2010
Weighted
average
Number of Exercisable remaining
Exercise price options options life (years)
GBP0.46 475,000 375,000 6.47
GBP0.12 825,000 750,000 7.29
GBP0.09 627,500 276,250 7.81
GBP0.119 80,000 20,000 8.67
GBP0.1885 275,000 68,750 8.82
GBP0.111 1,465,000 - 9.80
The fair values of the stock options granted in 2010 and 2009
have been determined using the Black-Scholes option pricing model
with the following weighted-average assumptions:
2010 2009
Expected dividend yield 0.0% 0.0%
Expected volatility 58% 45%
Risk-free interest rate 2.3% 2.5%
Expected term in years 6.98 5.86
The aggregate fair value of stock options granted during 2010
was $159,515 (2009 - $60,560).
The stock-based compensation expense for 2010 amounted to
$90,137 (2009 - $107,120), 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, 507,500 options (2009 - 457,500) expired due to
conditional vesting criteria not met. Management had not recorded
any stock-based compensation expense for these options. An
additional 75,000 options (2009 -1,811,740) were forfeited due to
employment terminations. Accordingly, a net stock-based
compensation expense of nil (2009 - $928) was reversed at the time
of termination.
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 upon the earlier of (i) July 31, 2012
and (ii) three years from the date that any shares of the Company
are listed for trading on any recognized stock exchange in Canada
or in the United States or are quoted for trading on NASDAQ.
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 using the effective interest method.
7. Income taxes
Income taxes
The Company's effective income tax rate differs from the federal
and provincial statutory tax rates as follows:
2010 2009
$ $
Income tax recovery at
statutory rates (276,544) (624,371)
Expiry of non-capital
losses 1,172,900 770,832
Other (116,801) (1,317,957)
Change in valuation allowance (779,555) 1,171,496
---------- ------------
Total income tax recovery - -
Future income taxes
The significant components of the Company's future income tax
assets and liabilities are as follows:
2010 2009
$ $
Future income tax assets
Unclaimed research and development
expenditures 2,166,890 2,019,958
Losses carried forward 2,283,344 3,075,826
Capital assets 397,381 368,652
Provision for deferred revenues 590,069 537,805
Share issue costs 239,699 454,078
Other 41,954 52,529
------------ ------------
Total future income tax assets 5,719,337 6,508,848
Future income tax liabilities
Investment tax credits (208,141) (218,097)
------------ ------------
Net future income tax assets 5,511,196 6,290,751
Valuation allowance (5,511,196) (6,290,751)
------------ ------------
Future income taxes - -
The Company has non-capital losses carried forward available to
reduce federal and provincial taxable income of approximately
$8,900,000 and $8,000,000, respectively, expiring at various dates
from 2011 to 2030. In addition, the Company has research and
development expenditures carried forward for federal and provincial
income tax purposes of approximately $3,900,000 and $13,300,000,
respectively, which can be used to reduce federal and provincial
taxable income at any time in the future and federal investment tax
credits of approximately $121,000 which can be used to reduce
future income taxes payable, expiring at various dates to 2030. The
benefit of these items has not been recorded in these financial
statements.
8. Financial expenses (income)
2010 2009
$ $
Bank charges 23,558 25,908
Foreign exchange gain (280,993) (76,920)
---------- ---------
(257,435) (51,012)
9. 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,
2010, expenses of $296,930 were incurred on behalf of LTD and are
included in due from shareholders, without interest. As at December
31, 2010, no capital distribution has been declared by the Company
relating to the 2010 expenses.
-- In 2010, a capital distribution was declared by the Company
on the outstanding Class A common shares in the amount of $247,435
relating to the expenses of LTD for the year ended December 31,
2009, paid for by the Company. This transaction settled all amounts
due from LTD as at December 31, 2009 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 $75,405
(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.
10. 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:
$
2011 179,802
2012 179,802
2013 179,802
2014 191,574
2015 192,645
Thereafter 593,988
----------
Total 1,517,613
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.
11. 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.
Capital disclosures
The Company manages its capital to ensure that there are
adequate capital resources to ensure that the Company is able to
meet its strategic growth objectives.
The capital structure of the Company consists of shareholders'
equity, excluding accumulated other comprehensive income.
The Company is not subject to any externally imposed capital
requirements, and it ensures that it has sufficient working capital
to meet the needs of its business plan.
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 $2,339,371 (2009 -$2,685,770).
Due from shareholder and an employee include amounts denominated in
foreign currencies of $296,930 and $75,405, respectively (2009 -
$247,435 and $71,625, respectively). Accounts payable and accrued
liabilities include amounts denominated in foreign currencies of
$746,753 (2009 - $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 a receivable and payable in
Pound sterling.
The following table details the Company's sensitivity to a 10%
variation of the Canadian dollar and Pound sterling on net loss
against the U.S. dollar. The sensitivity analysis includes foreign
currency denominated monetary items and adjusts their translation
at period end for a 10% change in foreign currency rates. A
stronger Canadian dollar or Pound sterling with respect to the U.S.
dollar will result in a positive impact while the reverse would
result from a weaker Canadian dollar or Pound sterling.
Canadian dollar Pound sterling
impact impact
Exchange rate as at December
31, 2010 1.0054 1.5597
On net loss $330,706 $73,793
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, 2010, the Company has accounts payable and
accrued liabilities of $1,318,028 due within 12 months and cash of
$6,291,722. 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, 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,
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.
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,
2010
$
Cash 6,291,722
Accounts receivable 1,498,566
Shareholder and employee
loans 372,335
Long-term investments 5,968,927
-------------
14,131,550
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, 2010, the portion of receivables past due represented
approximately 2% of trade receivables. The Company does not believe
there are any material risk with respect to past due amounts.
Concentration of credit risk:
As of December 31, 2010, one customer represented approximately
68% (2009 - 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.
Fair value
Establishing fair value
The fair value of the Company's current financial assets and
liabilities approximate their carrying values as at December 31,
2010 due to their short-term maturity.
Fair value hierarchy
The fair value hierarchy requires the use of observable market
inputs whenever such inputs exist. A financial instrument is
classified to the lowest level of the hierarchy for which a
significant input has been considered in measuring fair value.
The following table presents the financial instruments recorded
at fair value in the Consolidated Balance Sheet, classified using
the following fair value hierarchy levels:
Level 1 - valuation based on quoted prices (unadjusted) in
active markets for identical assets or liabilities;
Level 2 - valuation techniques based on inputs other than quoted
prices included in Level 1 that are observable for the asset or
liability, either directly (such as prices) or indirectly (such as
derived from prices);
Level 3 - valuation techniques using inputs for the asset or
liability that are not based on observable market data
(unobservable inputs).
Total financial
assets at
Level 1 Level 2 Level 3 fair value
$ $ $ $
Financial assets
Cash 6,291,722 - - 6,291,722
---------- -------- -------- ----------------
Total financial assets 6,291,722 - - 6,291,722
During the year, there have been no transfers of amounts between
Level 1 and Level 3.
12. Significant customers
For the year ended December 31, 2010, there were two significant
customers generating more than 10% of the Company's revenue (2009 -
none).
13. Severance
Severance expense relates to severance obligations between the
Company and its terminated employees, all of which has been
settled, as a result of restructuring which occurred in 2009.
SILANIS INTERNATIONAL LIMITED
Directors' report:
The directors submit their report and financial statements for
the year ended December 31, 2010.
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 reflects its share of the
associate's post-acquisition loss and the impairment charge.
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 2010 amounts to GBP2,149,821, and equates to the
Net Asset Value of its share of Silanis and continues to reflect
the uncertainty surrounding Silanis. The Company's share price
would not suggest that a further impairment is required.
RESULTS AND DIVIDENDS
The loss 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 2010.
DIRECTORS
The present directors of the company are:
-- David Brereton
-- Michael Hunt
-- Justin LaFayette
-- Matthew Lane
-- Vernon Lobo
-- Tommy Petrogiannis
-- Jonathan Wener
AUDITORS
Deloitte LLP were re-appointed as auditors to the Company on 30
June 2010.
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, Tommy Petrogiannis
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 2010 which
comprise the statement of comprehensive income, the balance sheet,
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 auditor's 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 Statement of Directors'
Responsibilities, 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.
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, 2010 and of its loss for the year then
ended;
-- have been properly prepared in accordance with IFRSs as
issued by the International Accounting Standards Board; and
-- have been properly prepared in accordance with the Companies
(Jersey) Law 1991.
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:
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the
accounting records and returns; or
-- we have not received all the information and explanations we
require for our audit.
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.
Emphasis of matter - Going Concern
As described in note 8 the Company is dependent on Silanis
Technology Inc. providing financial support to the Company to
enable it to meet its ongoing expenses. Should this financial
support not be available the going concern status of the Company
would be in question. Our opinion is not modified in this
respect.
Gregory Branch, BSc, FCA
For and on behalf of
Deloitte LLP
Chartered Accountants
St. Helier, Jersey
March 28, 2011
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 (IFRSs) 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
IFRSs. 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
(in GBP)
December 31, December 31,
2010 2009
GBP GBP
Assets
Non-current asset
Investment in associate
(Note 2) 2,149,821 2,241,602
Current Assets
Prepaid expenses 7,764 9,170
------------- -------------
Total assets 2,157,585 2,250,772
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) 994,889 784,099
Retained deficit (9,032,680) (8,691,395)
------------- -------------
Total equity 1,967,209 2,097,704
Current liabilities
Accounts payable to an associate 190,376 153,068
------------- -------------
Total equity and liabilities 2,157,585 2,250,772
Net asset value per ordinary
share (Note 5) 0.09 0.10
The accompanying notes are an integral part of these financial
statements.
Approved by the Board
Signed, Tommy Petrogiannis
Director
SILANIS INTERNATIONAL LIMITED
Statement of comprehensive income
(in GBP)
for the year for the year
ended ended
December 31, December 31,
2010 2009
GBP GBP
Continuing operations
Operating expenses
General and administrative 191,782 179,773
Share of loss of associate
(Note 2) 149,503 322,590
------------- -------------
Net loss for the year (341,285) (502,363)
Other comprehensive income
for the year
- translation adjustment 210,790 (77,522)
------------- -------------
Total comprehensive loss
for the year (130,495) (579,885)
Net loss per ordinary share
(Note 5) (0.02) (0.02)
The accompanying notes are an integral part of these financial
statements.
SILANIS INTERNATIONAL LIMITED
Statement of changes in equity
(in GBP)
2010
Profit
Share Share and loss Translation
capital premium 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
Foreign
currency
translation
adjustment - - - 210,790 210,790
Net loss - - (341,285) - (341,285)
---------- ----------- ------------ ------------ ----------
Balance, end
of year 217,500 9,787,500 (9,032,680) 994,889 1,967,209
2009
Profit
Share Share and loss Translation
capital premium account reserve Total
GBP GBP GBP GBP GBP
Balance,
beginning
of year 217,500 9,787,500 (8,189,032) 861,621 2,677,589
Foreign
currency
translation
adjustment - - - (77,522) (77,522)
Net loss - - (502,363) - (502,363)
---------- ----------- ------------ ------------ ----------
Balance, end
of year 217,500 9,787,500 (8,691,395) 784,099 2,097,704
The accompanying notes are an integral part of these financial
statements.
SILANIS INTERNATIONAL LIMITED
Statement of cash flows
(in GBP)
for the year for the year
ended ended
December 31, December 31,
2010 2009
GBP GBP
Operating activities
Net loss (341,285) (502,363)
Adjustments for:
Share of loss of associate 149,503 322,590
Increase / (decrease) in
accounts payable to associate 37,308 (93,247)
Decrease in prepaid expenses 1,406 26,705
------------- -------------
Net cash flow used in operating
activities (153,068) (246,315)
Investing activities
Capital distribution received
from associate (Note 6) 153,068 246,315
------------- -------------
Net cash flow from investing
activities 153,068 246,315
Financing activities - -
------------- -------------
Movement in cash - -
Cash, beginning of year - -
------------- -------------
Cash, end of year - -
The accompanying notes are an integral part of these financial
statements.
SILANIS INTERNATIONAL LIMITED
Notes to the financial statements
for the year ended December 31, 2010
(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 2009.
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, 2012.
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 the United States of America,
through its associate, Silanis Technology Inc.
Accounting standards
A number of new standards, amendments to standards and
interpretations are not yet effective
for the period ended 31 December 2010, and have not been applied
in preparing these financial
statements:
At the date of authorization 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 1 (amended)/IAS Cost of an Investment in a Subsidiary,
27 (amended) Jointly Controlled Entity or Associate
IFRS 7 Financial Instruments Disclosures
IFRS 9 Financial Instruments
IAS 24 (amended) Related Party Disclosures
IAS 27 (revised 2008) Consolidated and Separate Financial Statements
IAS 32 (amended) Classification of Rights Issues
IFRIC 19 Extinguishing Financial Liabilities with
Equity Instruments
IFRIC 14 (amended) Prepayments of a Minimum Funding Requirement
Improvements to IFRSs
(May 2010)
The directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Company in future periods.
2. Investment in associate
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)
The reporting date of the financial statements of Silanis
Technology Inc. is December 31, 2010.
As at December 31, 2009, the details of the investment are as
follows:
GBP
Carrying value as at January
1, 2009 2,888,029
Capital distribution received from the
associate (Note 6) (246,315)
Share of loss for the year ended December
31, 2009 (322,590)
Foreign currency translation
adjustment (77,522)
----------
Carrying value as at December
31, 2009 2,241,602
The summarized financial information of Silanis Technology Inc.
as at and for the year ended December 31, 2009, is as follows:
GBP
Assets 11,124,415
Liabilities 2,152,383
Revenue 3,956,464
Net loss (1,291,169)
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, 2010 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, 2010.
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
currently owns 24.98% of the issued and fully paid shares of
Silanis Technology Inc. as of December 31, 2010. 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, 2010
and 2009 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, 2010 and 2009, 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. Loss per ordinary share and net asset value per ordinary
share
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 loss per
ordinary share for the year ended December 31, 2009 was based on
the loss attributable to shareholders of GBP502,363 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, 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 calculation of net asset value
per ordinary share as at December 31, 2009 was based on the net
assets attributable to shareholders of GBP2,097,704 and the
21,750,000 ordinary shares in issue as at December 31, 2009.
Dilutive loss per ordinary shares is not presented because to do
so would be anti-dilutive.
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, 2010 expenses of GBP190,376
(GBP153,068 as at December 31, 2009) were incurred by the Company
and are included in accounts payable to an associate. As at
December 31, 2010, a capital distribution amounting to GBP153,068
(GBP246,315 as at December 31, 2009) was declared by Silanis and
satisfied through the reduction of a portion of the amount payable
to the associate.
As at December 31, 2010 GBP60,655 ($US 79,200) in aggregate as
at December 31, 2009), the key management personnel (Directors) as
well as their compensation for the year ended December 31, 2010
from the Company were as follows:
GBP
David Brereton 12,778 ($US 19,750)
Michael Hunt 11,484 ($US 17,750)
Justin LaFayette 12,778 ($US 19,750)
Vernon Lobo 12,778 ($US 19,750)
Jonathan Wener 10,837 ($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, 2010.
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. The current economic environment is challenging and
the Company and its associate Silanis have reported an operating
loss for the year. The directors consider that the outlook presents
significant challenges and uncertainties over the Company and
Silanis' future results and cash flows. The Company's directors
have reviewed the cash flow of Silanis and made inquiries of the
board of directors of Silanis and 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, they continue to adopt the going concern basis 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
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