TIDMSNS
RNS Number : 2025N
Silanis International Limited
30 August 2011
RNS Release 30 August 2011
Silanis International Limited (the "Company") and its sole
investment,
Silanis Technology Inc. ("Silanis")
Interim Results
The Company (AIM: SNS) today announced its and Silanis' interim
results for the six-month period ended June 30, 2011.
Silanis is among the world's largest and most experienced
enterprise electronic signature and electronic vaulting software
providers. Its solutions automate business processes requiring
secure, compliant and legally enforceable electronic signatures and
records. Whether delivered on-premise, as a dedicated instance on
the Cloud, or as SaaS, Silanis' Electronic Signature Process
Management ("ESPM") solutions address the complexity of today's
business environments, going beyond basic e-signing to
comprehensively manage a signing transaction and the collection of
robust electronic evidence.
The Company's sole investment is a 25% interest in the 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 financial statements for both companies are
attached, and form an integral part of this release.
"Building on the momentum of a strong finish to 2010, I am
pleased to announce our accelerated growth in the first half of
2011 as Silanis revenues were three times those realized in the
comparative period of 2010" said Tommy Petrogiannis, founder and
Chief Executive Officer of the Company and Silanis. "Our strategy
to stay the course of investing in our target markets of insurance
and banking during the recession has been rewarded as we have
emerged as the leader in the enterprise market for ESPM solutions.
With our stable and sound financial position, and as we build on a
pattern of revenue growth and profitability, we are well positioned
to extend our dominance of the high-value segment of the
market."
Silanis H1 2011 Financial Highlights
-- Revenue of $7.3 million (H1 2010 - $2.4 million)
-- Net earnings of $1.6 million (H1 2010 - net loss of $1.1
million)
-- Cash and long-term investments of $12.6 million (Dec. 31,
2010 - $12.3 million)
Silanis H1 2011 Operating Highlights
-- Three Major Contract wins in H1 2011
o Representing the largest financial services contract in
Silanis' history, a major U.S. bank licensed Silanis' ESEP platform
for use across the enterprise
o A North American property and casualty insurer also selected
Silanis' e-signature solution for use across the enterprise, its
first implementation being new business
o ThinkSmart, an international financing company, is integrating
Silanis' e-Sign Enterprise Platform in its move to paperless
processing of consumer applications both on-line and in-store
Additional Major Contracts Subsequent to H1 2011
-- Three more Major Contracts announced since June:
o Another top 10 North American bank licensed Silanis' ESPM
platform to meet its enterprise e-signing needs, allowing the bank
to deliver a seamless and improved client experience across all
channels
o A top U.S bank selected Silanis to meet the e-signing needs of
its Merchant Services subsidiary
o A leading U.S. mutual life insurer contracted Silanis'
Dedicated e-Sign Platform on a recurring, transactional basis
.
For further details, please contact:
Silanis International Limited Tel: +1 514 337 5255
Tommy Petrogiannis
Canaccord Genuity Limited Tel: +44 (0) 20 7050
Mark Williams 6500
C.E.O.'s REVIEW AND OUTLOOK
Pent Up Market Demand
During the recession of 2008 and 2009, Silanis' target financial
services market was heavily hit. Evaluating the alternatives to
push ahead or retrench, we deliberately stayed the course to both
nurture high-value opportunities and extend our technology
leadership. Our belief was that prospects, particularly insurers
and banks, would soon begin to spend again on e-signature projects
that had been in protracted analysis and justification phases. We
have been rewarded handsomely, not as a one-off, but as part of a
trend that began in H2 2010. We are pleased to deliver these
results that have validated our strategy: revenues for H1 have
handily exceeded those of full-year 2010, and our strong bottom
line has ensured that we meet our stated objective to achieve high
revenue growth while not eroding our enviable stable financial
position.
Market Developments
Buying patterns began to return to a growth pattern in the
second half of 2010. Measured by the number of major contracts
closed, we have never been busier than over the last fourteen
months. Meanwhile, we have seen a change in buying behaviour.
Whereas our sales were traditionally driven by the line of
business, we are now experiencing acquisition cycles primarily led
by IT on behalf of the enterprise. In addition to the greater
up-front license scale, we are also quantifying the tangible value
of these large transformational projects. As a direct outgrowth of
the financial crisis, banks and insurers are under unprecedented
pressure to remedy fundamental weaknesses in their contracting
process. This market driven sense of urgency is now driving both an
increased number of deals, and the increased value derived from
them.
Leading analysts confirm both the maturation of the e-signature
marketplace, and Silanis' leadership position in the high-value
enterprise segment which has been our prime focus. Analysts have
concluded that e-signatures are the lynchpin that enables
straight-through processing across the enterprise.
Driving Strategic Value Through Partners
We believe the value of Silanis is primarily derived by its
strategic position in the enterprise market, enhanced through
efforts with partners such as IBM, HP and other major technology
providers. As our customers implement transformational enterprise
solutions, these partners are beneficiaries of consulting,
implementation, ancillary software and hardware fees. Thus we are
tightly aligned as we jointly market, sell and deliver to these
joint customers.
During H1 2011, Silanis' e-SignLive(TM) service, integrated with
IBM LotusLive, earned the IBM Lotus Award for "Business
Transformation through Cloud Computing". This was followed by
Silanis' receipt of the prestigious 2011 IBM Beacon award in the
category of "Best Insurance Industry Solution."
Outlook
While our long term strategy appears sound, we are not immune to
macro market realities. Even as our offerings directly mitigate
some of the fundamental risks of poor business processes that led
to the last recession, we are still dependent on the continued
health of the recovering financial services market.
We have never been busier with our sales prospects, and we will
continue to measure our progress through the number of new
customers announced in the coming months. I look forward to
updating you on our progress.
Tommy Petrogiannis, Chief Executive Officer
Silanis Technology Inc. and Silanis International Limited
Financial Review
The unaudited interim financial statements of the Company and
Silanis for the six months ended June 30, 2011 are included at the
end of this release.
The following table outlines Silanis' results of operations for
the period indicated:
Six months Six months
Unaudited ended ended %
in U.S. dollars June 30, 2011 June 30, 2010 Change
Revenues
Software licenses 4,435,690 333,554 1230%
Maintenance 1,882,303 1,592,017 18%
Professional services 974,478 457,100 113%
Reimbursable expenses
and other 40,321 42,626 (5%)
-------------- -------------- -------
7,332,792 2,425,297 202%
Cost of revenues 1,998,273 498,213 301%
-------------- -------------- -------
5,334,519 1,927,084 177%
Operating expenses
Sales and marketing 2,105,358 1,753,771 20%
Research and development 1,915,529 1,289,879 49%
Tax credits (1,251,260) (756,021) 66%
General and administrative 1,085,459 796,917 36%
Financial (72,260) (103,027) (30%)
Amortization of capital
assets 49,181 52,629 (7%)
-------------- -------------- -------
3,832,007 3,034,148 26%
-------------- -------------- -------
Earnings (loss) before
undernoted item 1,502,512 (1,107,064) (236%)
Interest income 66,508 8,004 731%
-------------- -------------- -------
Net earnings (loss) 1,569,020 (1,099,060) (243%)
============== ============== =======
Revenues, Cost of revenues and Net earnings (loss)
Revenues tripled for the first six months of 2011, increasing by
$4.9 million to $7.3 million compared to the same period last year.
The increase was primarily attributable to growth in software
licenses and professional services.
Software license revenues increased to $4.4 million for the
first six months of 2011 from $0.3 million in the same period last
year. In H1 2010, limited aggregate software license revenues were
derived from a combination of one contract win, recognition of
transactional license fees, and additional software license
capacity sold to an existing customer. By comparison, software
license revenues for H1 2011 were attributable to three new major
contracts, of which one enterprise license represents Silanis'
largest financial services win to date.
Professional services revenues doubled to $1.0 million for the
first six months of 2011 from $0.5 million in the same period last
year. Silanis' professional services team delivered at or above
capacity to implement the numerous major contracts closed in H2
2010 and H1 2011. By comparison, lower H1 2010 professional
services revenues reflected a limited backlog of contracts on
account of slow software sales from 2009 through H1 2010 as the
effects of the recession persisted.
Maintenance revenues, Silanis' measure of customer satisfaction
and retention, continued to steadily increase by $0.3 million over
the comparative period, reflecting the impact of new maintenance
contracts added in the 12 months ended June 30, 2011.
Cost of revenues for the first six months of 2011 increased by
$1.5 million compared to the same period last year. These costs are
comprised of variable sales compensation and professional services
implementation costs. The increase is primarily attributable to
variable sales compensation and directly related to the dramatic
increase in revenues for which commission plans have been fully
accelerated. To a lesser extent, while implementation costs did
increase in the period, they did so at a rate significantly lower
than the rate of growth in services revenues with the group working
at high margins and beyond capacity to deliver.
Net earnings for the first six months of 2011 were $1.6 million,
fully reversing the net loss of $1.1 million for the same period
last year.
Expenses
Corporate Incentive Plan ("CIP")
All non-commissioned Silanis employees are remunerated, in part,
with a variable incentive plan payable upon achievement of
corporate objectives. In respect of the significant results
achieved in H1, $0.5M of variable compensation was accrued. These
expenses are accounted for in the functional group to which the
employees belong, and as no CIP was payable in H1 2010, this
variable compensation is noted below in accounting for variances
where applicable.
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 strategic
partnerships, direct outside sales, direct inbound sales, technical
sales support, lead generation and marketing, but do not include
sales commissions which are classified in cost of revenues. S&M
expenses increased by 20% ($0.4 million) over the same period last
year. The increase is primarily attributable to increased
headcount, significant marketing events held in H1 and accrual of
CIP.
Research and Development
Research and development (R&D) expenses consist primarily of
human resource expenses associated with research and testing of new
products, and the management and development of existing products.
Gross R&D expenditures increased by $0.6 million for the six
months ended June 30, 2011, which represents a 49% increase from
the $1.3 million incurred for the same period last year. This
majority of the increase is attributable to planned additional
R&D investment, representing both headcount and consultants,
and accrual of CIP.
Fully refundable Canadian scientific research and experimental
development (SR&ED) tax credits provided an expense recovery of
$1.3 million for the six months ended June 30, 2011. While the
accrual of tax credits for H1 2011 is otherwise commensurate with
the increase in gross R&D expenses in the period, additional
amounts were recognized on the favourable collection of tax credits
in H1, namely from an adjustment of 2008 foreign exchange due and a
refund assessed greater than the amount accrued for calendar
2010.
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 $0.3 million for the six months ended
June 30, 2011, which represents a 36% increase from the $0.8
million incurred for the same period last year. The increase is
primarily attributable to increased headcount and accrual of
CIP.
Financial
Financial expenses are comprised of bank charges and any
exchange gains or losses with respect to foreign currencies. During
the first 6 months of 2011, financial income was stable over the
prior period and primarily consisted of foreign exchange gains in
both periods.
Interest income
The increase in interest income in H1 2011 reflects higher rates
of return on long-term investments while Silanis held low-yielding
securities during H1 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.
SILANIS TECHNOLOGY INC.
Interim consolidated balance sheets
As at June 30, 2011, December 31, 2010 and January 1, 2010
(unaudited)
(U.S. dollars)
June 30, December 31, January 1,
2011 2010 2010
(Note 2) (Note 2)
Assets
Current assets
Cash 6,619,863 6,291,722 3,443,646
Short-term investments - - 10,004,289
Accounts receivable 3,065,352 1,498,566 869,381
Work in process 267,545 397,415 148,977
Tax credits receivable 2,139,348 2,339,371 2,685,770
Prepaid expenses 160,943 156,402 137,355
Shareholder and employee
loans (Note 5) 195,274 372,335 319,059
------------- ------------- -------------
12,448,325 11,055,811 17,608,477
Capital assets 338,811 317,695 345,492
Long-term investments 5,954,435 5,968,927 -
Other long-term assets 27,820 27,820 28,648
------------- ------------- -------------
18,769,391 17,370,253 17,982,617
============= ============= =============
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 2,055,098 1,318,028 1,125,114
Deferred revenue 1,887,692 2,553,476 2,258,128
------------- ------------- -------------
3,942,790 3,871,504 3,383,242
Deferred lease inducement 76,026 77,652 96,085
------------- ------------- -------------
4,018,816 3,949,156 3,479,327
Shareholders' equity
Capital stock (Note 3) 28,400,974 28,697,904 28,945,339
Contributed surplus 530,891 473,503 383,366
Deficit (14,181,290) (15,750,310) (14,825,415)
------------- ------------- -------------
14,750,575 13,421,097 14,503,290
------------- ------------- -------------
18,769,391 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
C.E.O.
SILANIS TECHNOLOGY INC.
Interim consolidated statements of operations and deficit
For the six-month periods ended June 30
(unaudited)
(U.S. dollars)
2011 2010
$ $
(Note 2)
Revenues
Software licenses 4,435,690 333,554
Maintenance 1,882,303 1,592,017
Professional services 974,478 457,100
Reimbursable expenses and
other 40,321 42,626
------------- -------------
7,332,792 2,425,297
Cost of revenues 1,998,273 498,213
------------- -------------
5,334,519 1,927,084
Operating expenses
Sales and marketing 2,105,358 1,753,771
Research and development 1,915,529 1,289,879
Tax credits (1,251,260) (756,021)
General and administrative 1,085,459 796,917
Financial (Note 4) (72,260) (103,027)
Amortization of capital
assets 49,181 52,629
------------- -------------
3,832,007 3,034,148
------------- -------------
Earnings (loss) before undernoted
items 1,502,512 (1,107,064)
Interest income 66,508 8,004
------------- -------------
Net earnings (loss) 1,569,020 (1,099,060)
Deficit, beginning of period (15,750,310) (14,825,415)
------------- -------------
Deficit, end of period (14,181,290) (15,924,475)
============= =============
The accompanying notes are an integral part of these interim
consolidated financial statements.
SILANIS TECHNOLOGY INC.
Interim consolidated statements of cash flows
For the six-month periods ended June 30
(unaudited)
(U.S. dollars)
2011 2010
$ $
(Note 2)
Operating activities
Net earnings (loss) 1,569,020 (1,099,060)
Adjustments for:
Amortization of capital assets 49,181 52,629
Stock-based compensation 57,388 42,063
Deferred lease inducement (1,626) (16,806)
------------ ------------
1,673,963 (1,021,174)
Net changes in non-cash working
capital items
Accounts receivable (1,566,786) 272,554
Work in process 129,870 (38,768)
Tax credits receivable 200,023 417,181
Prepaid expenses (4,541) 4,634
Accounts payable and accrued
liabilities 737,070 (107,893)
Deferred revenue (665,784) (1,016,923)
------------ ------------
503,815 (1,490,389)
------------ ------------
Investing activities
Decrease in short-term investments - 10,004,289
Decrease in long-term investments 14,492 -
Net increase in shareholder
and employee loans (119,869) (173,425)
Acquisition of capital assets (70,297) (55,234)
------------ ------------
(175,674) 9,775,630
------------ ------------
Financing activities
------------ ------------
- -
------------ ------------
Increase in cash 328,141 8,285,241
Cash , beginning of period 6,291,722 3,443,646
------------ ------------
Cash , end of period 6,619,863 11,728,887
============ ============
Non-cash financing transaction
Capital distribution (Note
3) 296,930 247,435
The accompanying notes are an integral part of these
consolidated financial statements.
SILANIS TECHNOLOGY INC.
Notes to the interim consolidated financial statements
For the six-month periods ended June 30, 2011 and 2010
(unaudited)
(U.S. dollars)
1. Nature of business
Silanis Technology Inc. (the "Company") is engaged in the
development, distribution and service of computer software, mainly
in the U.S. market.
2. Significant accounting policies
Adoption of a new accounting framework
During the six months ended June 30, 2011, the Company was in
discussions with the Autorite des marches financiers du Quebec
("AMF"), with whom it files its financial statements. Subject to
shareholder approval, the Company believes that it shall be
permitted 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"). These interim consolidated financial
statements have been prepared under the new standards on the basis
that the dispensation from the AMF shall be received.
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 the accumulated other comprehensive income.
3. 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,
June 30, 2011 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, a capital distribution was declared by the Company on
the outstanding Class A common shares in the amount of $296,930
(2010 - $247,435) 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
six-months ended June 30, 2011, $7,108 of compensation expense
(2010 - nil) was recorded for these performance-based options.
The following table presents options that were issued under the
New Plan:
2011 2010
Weighted
average
Number Weighted average Number exercise
of options exercise price of options price
GBP GBP
Outstanding,
December 31 3,747,500 0.16 2,765,000 0.18
Granted - - - -
Exercised - - - -
Expired/forfeited - - (266,250) 0.11
------------ ----------------- ------------ ----------
Outstanding, June
30 3,747,500 0.16 2,498,750 0.18
============ ================= ============ ==========
Exercisable, June
30 1,695,000 0.21 1,230,625 0.22
============ ================= ============ ==========
Options outstanding as at June
30, 2011
Weighted
average
Number of Exercisable remaining
Exercise price options options life (years)
GBP0.46 475,000 475,000 5.97
GBP0.12 825,000 767,500 6.80
GBP0.09 627,500 301,250 7.32
GBP0.119 80,000 20,000 8.18
GBP0.1885 275,000 68,750 8.33
GBP0.111 1,465,000 62,500 9.30
The fair value of the stock options granted is determined using
the Black-Scholes option pricing model, with assumptions for
expected dividend yield, expected volatility, risk-free interest
rate and weighted average expected term in years.
No options were granted during the six-months ended June 30,
2011 and 2010.
The stock-based compensation expense for the six-month period
ended June 30, 2011 amounted to $57,388 (2010 - $42,063), 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.
For the six-month period ended June 30, 2011, nil options (2010
- 191,250) expired due to conditional vesting criteria not met.
Additionally, nil options (2010 - 75,000) were forfeited due to
employment terminations. Management had not recorded any
stock-based compensation expense for these options.
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.
4. Financial expenses (income)
2011 2010
$ $
Bank charges 16,630 9,862
Foreign exchange
gain (88,890) (112,889)
--------- ----------
(72,260) (103,027)
========= ==========
5. Related party transactions and balances
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 period ended June 30,
2011, expenses of $117,499 were incurred on behalf of LTD and are
included in shareholder and employee loans, without interest. As at
June 30, 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 3).
-- Shareholder and employee loans includes a loan to an
executive officer by virtue of his employment. This loan, in the
amount of $77,775 (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.
INDEPENDENT REVIEW REPORT TO THE AUDIT COMMITTEE OF SILANIS
INTERNATIONAL LIMITED
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended June 30, 2011, which comprises the balance sheet,
the statement of comprehensive income, the statement of changes in
equity, the statement of cash flows and related notes 1 to 7. We
have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatement or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company, in accordance with
International Standard on Review Engagements 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. Our work has
been undertaken so that we might state to the company those matters
we are required to state to them in an independent review 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, for our review work, for this report, or for the
conclusions we have formed.
Directors' responsibilities
The half-yearly financial information is the responsibility of,
and has been approved by, the directors. The directors are
responsible for preparing the half-yearly financial statements in
accordance with the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the condensed set of financial
statements of the company are prepared in accordance with IFRSs as
issued by IASB. The financial statements included in this
half-yearly financial report have been prepared in accordance with
International Accounting Standard 34, "Interim Financial
Reporting," as issued by IASB.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly report for the six months ended June 30, 2011 is
not prepared, in all material respects, in accordance with
International Accounting Standard 34 as issued by the IASB and the
AIM rules of the London Stock Exchange.
Emphasis of matter - Investment in associate
Without qualifying our opinion, we draw attention to the
disclosures made in note 2 of the financial statements which
describe the method adopted by the directors for recording an
impairment charge in the investment in the associate. In accordance
with this method, the directors have recorded the investment at
GBP2,293,663 based on the Company's share of the net assets of
Silanis Technology Inc. at June 30, 2011. However, because of the
inherent uncertainty of the valuation of the investment, reflected
by the significant decline in the Company's share price since its
shares were listed on the Alternative Investment Market, the amount
at which the investment is held in the accounts may differ
materially from the value that would have been realised had a
disposal of the investment been made between a willing buyer and
seller. There is therefore uncertainty as to the extent of the
impairment, if any, that may exist.
Emphasis of matter - Going concern
In forming our opinion on the financial statements, which is not
qualified, we have considered the adequacy of the disclosure made
in note 1 to the financial statements concerning the company's
ability to continue as a going concern. The financial statements do
not include the adjustments that would result if the company was
unable to continue as a going concern.
Deloitte LLP
Chartered Accountants
St Helier, Jersey
Signed, August 24, 2011
SILANIS INTERNATIONAL LIMITED
Balance sheet
As at
(unaudited)
(in GBP)
December 31,
June 30, 2011 2010
GBP GBP
Assets
Non-current asset
Investment in associate
(Note 2) 2,293,663 2,149,821
Current Asset
Prepaid expenses 9,903 7,764
-------------- -------------
Total assets 2,303,566 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
Deficit (8,861,264) (9,032,680)
Translation reserve (Note
2) 1,086,699 994,889
-------------- -------------
Total equity 2,230,435 1,967,209
Current liabilities
Accounts payable to an associate 73,131 190,376
-------------- -------------
Total equity and liabilities 2,303,566 2,157,585
============== =============
Net asset value per ordinary
share (Note 5) 0.10 0.09
============== =============
The accompanying notes are an integral part of these financial
statements.
Approved by the Board
Signed, Tommy Petrogiannis
C.E.O.
SILANIS INTERNATIONAL LIMITED
Statement of comprehensive income
For the six months ended June 30, 2011
(unaudited)
(in GBP)
2011 2010
GBP GBP
Continuing operations
Operating expenses
General and administrative 70,992 95,875
Share of profit (loss) of
associate (Note 2) 242,408 (179,973)
-------- ----------
Net profit (loss) for the
period 171,416 (275,848)
======== ==========
Net profit (loss) per ordinary share
(Note 5)
(Basic and diluted) 0.01 (0.01)
======== ==========
Other comprehensive income for the period,
after tax
Foreign currency translation adjustment
related
to the investment in associate 91,810 297,750
-------- ----------
Other comprehensive income
for the period, net of tax 91,810 297,750
-------- ----------
Total comprehensive income
for the period 263,226 21,902
======== ==========
The accompanying notes are an integral part of these financial
statements.
SILANIS INTERNATIONAL LIMITED
Statement of changes in equity
For the six months ended June 30, 2011
(unaudited)
(in GBP)
Six months ended June 30, 2011
Profit
Share Share and loss Translation
capital premium account reserve Total
GBP GBP GBP GBP GBP
Balance,
beginning
of period 217,500 9,787,500 (9,032,680) 994,889 1,967,209
Foreign
currency
translation
adjustment - - - 91,810 91,810
Net profit - - 171,416 - 171,416
---------- ----------- ------------ ------------ ----------
Balance, end
of period 217,500 9,787,500 (8,861,264) 1,086,699 2,230,435
========== =========== ============ ============ ==========
Six months ended June 30, 2010
Profit and
Share Share loss Translation
capital premium account reserve Total
GBP GBP GBP GBP GBP
Balance,
beginning
of period 217,500 9,787,500 (8,691,395) 784,099 2,097,704
Foreign
currency
translation
adjustment - - - 297,750 297,750
Net loss - - (275,848) - (275,848)
---------- ----------- ------------ ------------ ----------
Balance, end
of period 217,500 9,787,500 (8,967,243) 1,081,849 2,119,606
========== =========== ============ ============ ==========
The accompanying notes are an integral part of these financial
statements.
SILANIS INTERNATIONAL LIMITED
Statement of cash flows
For the six months ended June 30, 2011
(unaudited)
(in GBP)
2011 2010
GBP GBP
Operating activities
Net profit (loss) 171,416 (275,848)
Adjustments for:
Share of (profit) loss of
associate (Note 2) (242,408) 179,973
Decrease in accounts payable
to an associate (117,245) (36,428)
Increase in prepaid expenses (2,139) (20,765)
---------- ----------
Net cash flow used in operating
activities (190,376) (153,068)
---------- ----------
Investing activities
Capital distribution received
from an associate 190,376 153,068
---------- ----------
Movement in cash - -
Cash, beginning of period - -
---------- ----------
Cash, end of period - -
========== ==========
The accompanying notes are an integral part of these financial
statements.
SILANIS INTERNATIONAL LIMITED
Notes to the financial statements
For the six month period ended June 30, 2011
(unaudited)
(in GBP)
1. Basis of preparation
The financial statements have been prepared in accordance with
International Accounting Standards ("IAS") 34 Interim Financial
Reporting, as 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 period, are set out below. The same
accounting policies were applied for the financial statements for
the year ended December 31, 2010.
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 Company's directors have reviewed the cash flow
of Silanis and made inquiries of the board of directors of Silanis
and consider that the 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 half-yearly report and
accounts.
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, but not control, in 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.
Expenses
Ongoing expenses incurred by the Company are paid for by Silanis
Technology Inc. on its behalf as the Company has no bank account.
Silanis Technology Inc. has confirmed that they will continue to
provide financial support to the Company to continue as a going
concern until at least 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 the United States of America,
through its associate, Silanis Technology Inc.
Accounting standards
Standards, amendments and interpretations effective from 1
January 2011 but not applicable to the Company
The following amendments, improvements and interpretations have
also been issued and are effective from 1 January 2011; these
relate to matters that were not applicable to the Company at the
date of these Half-year financial statements, but which may affect
the accounting for future transactions or arrangements:
-- Amendment to IAS 32 - Financial Instruments: Presentation,
Classification of Rights Issues;
-- Amendment to IFRIC 14 - Prepayments of a Minimum Funding
Requirement;
-- IFRIC 19 - Extinguishing Financial Liabilities with Equity
Instruments;
-- IAS 24 - Related Party Disclosures
-- IAS 34 - Interim Financial Reporting
-- Improvements to IAS/IFRS (2010)
Accounting principles, amendments and interpretations not yet
applicable and not early adopted by the Company
On 12 November 2009, the IASB issued a new standard IFRS 9 -
Financial Instruments that was amended on 28 October 2010. The
standard, having an effective date for mandatory adoption of 1
January 2013, represents the completion of the first part of a
project to replace IAS 39 and introduces new requirements for the
classification and measurement of financial assets and financial
liabilities and for the derecognition of financial assets. The new
standard uses a single approach to determine whether a financial
asset is measured at amortised cost or fair value, replacing the
many different rules in IAS 39. The approach in IFRS 9 is based on
how an entity manages its financial instruments and the contractual
cash flow characteristics of the financial assets. The most
significant effect of the standard regarding the classification and
measurement of financial liabilities relates to the accounting for
changes in fair value attributable to changes in the credit risk of
financial liabilities designated as at fair value through profit or
loss. Under the new standard these changes are recognised in Other
comprehensive income (loss) and are not subsequently reclassified
to the Income statement.
On 7 October 2010, the IASB issued amendments to IFRS 7 -
Financial Instruments: Disclosures. Entities are required to apply
the amendments for annual periods beginning on or after 1 July
2011.The amendments will allow users of financial statements to
improve their understanding of transfers ("derecognition") of
financial assets, including an understanding of the possible
effects of any risks that may remain with the entity that
transferred the assets. The amendments also require additional
disclosures if a disproportionate amount of a transfer transaction
is undertaken at the end of a reporting period.
On 20 December 2010, the IASB issued minor amendments to IAS 12
- Income Taxes that require an entity to measure the deferred tax
relating to an asset depending on whether the entity expects to
recover the carrying amount of the asset through use or sale. As a
result of the amendments, SIC-21 Income Taxes - Recovery of
Revalued Non-Depreciable Assets no longer applies. These amendments
are effective retrospectively from 1 January 2012.
On 12 May 2011, the IASB issued IFRS 10 - Consolidated Financial
Statements replacing SIC-12 - Consolidation-Special Purpose
Entities and parts of IAS 27 - Consolidated and Separate Financial
Statements (which has been renamed Separate Financial Statements
and addresses the accounting treatment of investments in separate
financial statements). The new standard builds on existing
principles by identifying the concept of control as the determining
factor in whether an entity should be included within the
consolidated financial statements of the parent company. The
standard provides additional guidance to assist in the
determination of control where this is difficult to assess. The
standard is effective retrospectively from 1 January 2013.
On 12 May 2011, the IASB issued IFRS 11 - Joint Arrangements
superseding IAS 31 - Interests in Joint Ventures and SIC-13 -
Jointly-controlled Entities-Non-monetary Contributions by
Venturers. The new standard provides the criteria for identifying
joint arrangements by focusing on the rights and obligations of the
arrangement, rather than its legal form and requires a single
method to account for interests in jointly-controlled entities, the
equity method. The standard is effective retrospectively from 1
January 2013. Following the issue of the new standard, IAS 28 -
Investments in Associates has been amended to include accounting
for investments in jointly-controlled entities in its scope of
application (from the effective date of the standard).
On 12 May 2011, the IASB issued IFRS 12 - Disclosure of
Interests in Other Entities, a new and comprehensive standard on
disclosure requirements for all forms of interests in other
entities, including subsidiaries, joint arrangements, associates,
special purpose vehicles and other unconsolidated vehicles. The
standard is effective for annual periods beginning after 1 January
2013.
On 12 May 2011, the IASB issued IFRS 13 - Fair Value
Measurement, clarifying the determination of the fair value for the
purpose of the financial statements and applying to all IFRS
permitting or requiring a fair value measurement or the
presentation of disclosures based on fair value. The standard is
effective prospectively from 1 January 2013.
On 16 June 2011, the IASB issued an amendment to IAS 1 -
Presentation of Financial Statements requiring companies to group
together items within Other Comprehensive income (loss) that may be
reclassified to the profit or loss section of the income statement.
The amendment is applicable from periods beginning on or after 1
July 2012.
The directors of the company believe that the application of the
new Standards will not have a significant impact on amounts
reported in respect of the Company's financial statements and
disclosures, however, it is not practicable to provide a reasonable
estimate of that effect until a detailed review has been
completed.
2. Investment in an associate
As at June 30, 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 profit for the six-month
period ended June 30, 2011 242,408
Foreign currency translation adjustment related
to the investment in associate 91,810
----------
Carrying value as at
June 30, 2011 2,293,663
==========
The summarized financial information of Silanis Technology Inc.
as at and for the six-month period ended June 30, 2011, is as
follows:
GBP
Assets 11,681,951
Liabilities 2,501,286
Revenue 4,534,532
Net profit 970,268
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 related to the
investment in associate 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 June 30, 2011 and this also equates the
approximate fair value.
A translation reserve is recorded at period-end to account for
the foreign currency adjustment.
The reporting date of the financial statements of Silanis
Technology Inc. is June 30, 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
currently owns 24.98% of the issued and fully paid shares of
Silanis Technology Inc. as of June 30, 2011.
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 June 30, 2011 and December
31, 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 June 30, 2011 and December 31, 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 net profit (loss) per ordinary share for the
six-month period ended June 30, 2011 was based on the profit
attributable to shareholders of GBP171,416 per statement of income
(2010 - loss of GBP275,848) 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 June
30, 2011 was based on the net assets attributable to shareholders
of GBP2,230,435 (2010 - GBP2,119,606) and the 21,750,000 ordinary
shares in issue.
Dilutive net profit (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 June 30, 2011 expenses of GBP73,131 (2010 -
GBP116,640) were incurred by the Company and are included in
accounts payable to an associate. As at June 30, 2011, a capital
distribution amounting to GBP190,376 (2010 - GBP153,068) was
declared by Silanis and satisfied through the reduction of a
portion of the amount payable to the associate.
As at June 30, 2011 (2010 - $US 39,600 in aggregate), the key
management personnel (Directors) as well as their compensation for
the six-month period ended June 30, 2011 from the Company are as
follows:
GBP
David Brereton 6,402 ($US 10,350)
Michael Hunt 5,164 ($US 8,350)
Justin LaFayette 4,856 ($US 7,350)
Vernon Lobo 6,402 ($US 10,350)
Jonathan Wener 4,856 ($US 7,350)
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 June 30,
2011.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LIFLRTFIIVIL
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