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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Silanis | LSE:SNS | London | Ordinary Share | JE00B1VK7373 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 2.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMSNS
RNS Number : 4880L
Silanis International Limited
05 September 2012
RNS Release 5 September 2012
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 30 June 2012.
Silanis is the most widely used e-signature solution in the world, responsible for processing over 600 million documents annually. Silanis solutions have strengthened the business processes of thousands of organizations, including four of the top 10 North American banks, eight of the top 15 insurance companies and the entire US Army. Companies and government organizations around the globe depend on Silanis to accelerate business transactions, improve customer experience and reduce costs while improving compliance with legal and regulatory requirements. Silanis' on-premise, cloud and SaaS e-signature solutions eliminate manual, paper-based processing and enable e-commerce and e-government transactions to be electronically executed from start to finish.
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.
"Leveraging the growth and momentum of our strong 2011 results, Silanis is well positioned to realize its any-premise strategy. As the e-signature market continues to grow, our ability to deliver enterprise class solutions either as multitenant SaaS, on a private cloud, or on premise, is a unique differentiator that addresses the broadest possible market opportunities. According to a leading market analyst firm, by 2014, 50% of e-signature implementations will be delivered through SaaS, while the remainder will be delivered on-premise.
Revenues for the first half of 2012 are lower than the comparative period because of last year's extraordinary single-largest perpetual financial services license in our history. What is not reflected in these results are the very strong bookings that we have secured year to date whose revenues will be recognized in subsequent periods. We are very fortunate to be able to invest in transactional recurring revenue streams that, we believe, will significantly enhance Silanis' value." said Tommy Petrogiannis, founder and Chief Executive Officer of the Company and Silanis.
Silanis H1 2012 Financial Highlights
-- Revenue of $3.3 million (H1 2011 - $7.3 million) -- Net loss of $3.6 million (H1 2011 - net earnings of $1.6 million) -- Cash and long-term investments of $9.3 million (Dec. 31, 2011 - $12.9 million)
Silanis H1 2012 Operating Highlights
-- Successful launch of Silanis comprehensive "any-premise" product suite and market offering
-- Silanis' e-SignLive(TM) added new named paying customers at a month over month growth rate greater than 25%
-- Insurance carriers using Silanis private cloud offerings more than doubled their prospective commitments
-- Service providers delivering Silanis solutions experienced material growth in their end-user transactions
Major Contracts Subsequent to H1 2012
-- A major US federal government agency licensed Silanis' e-Sign Enterprise(TM) to bring added transparency and auditability to its organization
-- In a competitive win, a leading financial services provider selected Silanis' e-Sign Enterprise for processing consumer loans and improving customer service
-- Significant transactional software and professional services bookings added to backlog for H2 and beyond
For further details, please contact:
Silanis International Limited
Tommy Petrogiannis, Chief Executive Officer
www.sil-intl.co.uk
Tel: + 1 514 337 5255
Canaccord Genuity Limited
Simon Bridges
Tel: +44 (0)20 7523 8000
C.E.O.'s REVIEW AND OUTLOOK
Today, Silanis is the only provider of electronic signatures to the enterprise marketplace that delivers its solutions as SaaS, both multi-tenant and as a dedicated private instance on the Cloud, or on-premise.
Our vision is simple: to be the most widely used e-signature solution in high-value, regulated and compliance-driven applications worldwide. There are numerous providers of basic e-signature products in the market today that provide simple signing capabilities to be applied to low-value, horizontal applications where the e-signature ostensibly replaces a fax machine. Our strategy is to focus on market segments where signatures matter greatly, requiring us to deliver superior solutions that encompass process orchestration, robust electronic evidence, device independent mobile support, sophisticated transaction management, invaluable customer insight and analytics. The technology investment required to deliver these capabilities is material, but such investment is yielding the capacity to generate per transaction revenues that are multiples greater than the basic e-signature products on the market today.
Our investments in mobile and customer insight analytics solutions are not only being adopted by leading insurance and financial institutions in order to provide a transformational customer experience. They are fuelling a whole new value proposition - having real-time insight into how consumers are interacting with our clients.
We are fully aware that the purposeful transition to increased recurring transactional revenue, at the expense of one-time perpetual license revenue, is very visible in the short-term. But we heartily believe this is a sound strategy because it will successfully align the buying behaviour of our enterprise customers with our long-term strategic growth objectives.
First half total revenue notwithstanding, we have signed more new customers year-to-date than in any other time in our history. We have closed significant services and transactional contracts to be delivered in upcoming periods. The revenue mix will continue to shift - by design. 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, 2012 are included at the end of this release.
The following table outlines Silanis' results of operations for the period indicated:
Unaudited Six months Six months % ended ended in U.S. dollars June 30, 2012 June 30, 2011 Change Revenues Software licenses 550,872 4,435,690 (88%) Maintenance 2,199,356 1,882,303 17% Professional services 550,534 974,478 (44%) Reimbursable expenses and other 34,664 40,321 (14%) ------------------------- -------------------------- ------- 3,335,426 7,332,792 (55%) Cost of revenues 1,545,248 1,998,273 (23%) ------------------------- -------------------------- ------- 1,790,178 5,334,519 (66%) Operating expenses Sales and marketing 2,542,152 2,105,358 21% Research and development 2,802,466 1,915,529 46% Tax credits (964,366) (1,251,260) (23%) General and administrative 1,040,773 1,085,459 (4%) Financial 2,942 (72,260) (104%) Amortization of capital assets 62,121 49,181 26% ------------------------- -------------------------- ------- 5,486,088 3,832,007 43% ------------------------- -------------------------- ------- Earnings (loss) before undernoted item (3,695,910) 1,502,512 (346%) Interest income 52,732 66,508 (21%) ------------------------- -------------------------- ------- Net earnings (loss) (3,643,178) 1,569,020 (332%) ========================= ========================== =======
Revenues, Cost of revenues and Net earnings (loss)
Total revenues decreased by $4 million in the first six months of 2012, from $7.3 million in the same period last year. Almost all of the variance was attributable to a decrease in sales of perpetual software licenses. Whilst Silanis is successfully executing its transition to greater recurring revenues, the H1 results primarily reflect the fact that Silanis realized its largest-ever financial services on-premise license in H1 2011, for which there was no counterpart in H1 2012. Meanwhile year-to-date, through its channel partners, Silanis has closed three times the number of new major named customers than in the same period last year. Silanis' e-SignLive(TM) is adding new customers at a month over month growth rate greater than 25%. The revenue streams associated with these customers typically take over 12 months to achieve anticipated monthly transaction volumes.
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 major new maintenance contracts added in the 12 months ended June 30, 2012, plus the full-period recognition of maintenance contracts added in H1 2011.
Professional services revenues decreased from $1.0 million to $0.6 million for the first six months of 2012 compared to the same period last year. Lower H1 2012 professional services revenues reflected a limited backlog of undelivered contracts from the end of 2011, and a limited amount of new business booked in time to deliver in 2012. Subsequent to the close of H1 2012, Silanis has closed the largest dollar volume of services contracts to start a calendar half in its history. This will permit the delivery of significantly greater services revenues in H2 2012 and furthermore set up a strong backlog into 2013.
Cost of revenues for the first six months of 2012 decreased by $0.5 million compared to the same period last year. These costs are comprised of variable sales compensation and professional services implementation costs. The decrease is primarily attributable to variable sales compensation, itself directly related to the decrease in revenues.
Net loss for the first six months of 2012 was $3.6 million.
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 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 $0.4 million over the same period last year. The increase is due to increased headcount to support the Silanis' direct, partner and existing customer groups. Silanis also executed more significant targeted marketing activities in H1, a highlight of which was the widely attended Insurance Summit hosted in conjunction with IBM.
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 $0.9 million for the six months ended June 30, 2012, which represents a 46% increase from the $1.9 million incurred for the same period last year. This increase is attributable to significant efforts expended in development of Silanis' new products: e-Sign Enterprise 4.6, released in June with tested enterprise capability of processing over 3 billion documents annually, and the new Transaction Manager, released in July. Further major product announcements are forthcoming.
Fully refundable Canadian scientific research and experimental development (SR&ED) tax credits provided an expense recovery of $1 million for the six months ended June 30, 2012. The accrual of tax credits for H1 2011 decreased however by $0.3 million as the Company has now exceeded the expenditure limit at which the rate of refundable tax credits is reduced, and adjusted its provision for 2011 tax credits pursuant to government review in process.
General and Administrative, Financial, Amortization and Interest Income
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. Financial expenses are comprised of bank charges and any exchange gains or losses with respect to foreign currencies. Interest income reflects the rate of interest coupon on invested funds.
These categories of expense and income were, in aggregate, in line with those of the comparative period in 2011, and a reflection of the various cost/income drivers associated with each.
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, 2012 and December 31, 2011
(unaudited)
(U.S. dollars)
Assets
Current assets
Cash 3,387,392 6,910,965
Accounts receivable 671,129 3,965,543
Work in process 149,801 288,138
Tax credits receivable 3,232,753 2,272,651
Prepaid expenses 296,087 202,293
Shareholder and employee loans (Note 6) 238,128 396,074
7,975,290 14,035,664
Capital assets 420,492 393,527
Long-term investments (Note 4) 5,925,210 5,939,702
Other long-term assets 27,820 27,820
14,348,812 20,396,713
Liabilities
Current liabilities
Accounts payable and accrued liabilities 1,651,552 2,600,128
Deferred revenue 1,562,774 2,810,069
3,214,326 5,410,197
Deferred lease inducement 72,773 74,399
3,287,099 5,484,596
Shareholders' equity
Capital stock (Note 3) 28,078,647 28,400,974
Contributed surplus 676,915 561,814
Deficit (17,693,849) (14,050,671)
11,061,713 14,912,117 14,348,812 20,396,713
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)
2012 2011 $ $
Revenues
Software licenses 550,872 4,435,690
Maintenance 2,199,356 1,882,303
Professional services 550,534 974,478
Reimbursable expenses and other 34,664 40,321
3,335,426 7,332,792
Cost of revenues 1,545,248 1,998,273
1,790,178 5,334,519
Operating expenses
Sales and marketing 2,542,152 2,105,358 Research and development 2,802,466 1,915,529
Tax credits (964,366) (1,251,260)
General and administrative 1,040,773 1,085,459
Financial (Note 5) 2,942 (72,260)
Amortization of capital assets 62,121 49,181
5,486,088 3,832,007
(Loss) earnings before undernoted item (3,695,910) 1,502,512
Interest income 52,732 66,508
Net (loss) earnings (3,643,178) 1,569,020
Deficit, beginning of period (14,050,671) (15,750,310)
Deficit, end of period (17,693,849) (14,181,290)
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)
2012 2011 $ $
Operating activities
Net (loss) earnings (3,643,178) 1,569,020 Adjustments for:
Amortization of capital assets 62,121 49,181
Amortization of premiums on long term investments 14,492 14,492
Stock-based compensation 115,101 57,388
Deferred lease inducement (1,626) (1,626)
(3,453,090) 1,688,455
Net changes in non-cash working capital items
Accounts receivable 3,294,414 (1,566,786)
Work in process 138,337 129,870
Tax credits receivable (960,102) 200,023
Prepaid expenses (93,794) (4,541)
Accounts payable and accrued liabilities (948,576) 737,070
Deferred revenue (1,247,295) (665,784)
(3,270,106) 518,307
Investing activities
Net increase in shareholder and employee loans (164,381) (119,869)
Acquisition of capital assets (89,086) (70,297)
(253,467) (190,166)
Financing activities
- -
Increase (decrease) in cash (3,523,573) 328,141
Cash, beginning of period 6,910,965 6,291,722
Cash, end of period 3,387,392 6,619,863
Non-cash financing transaction
Capital distribution (Note 3) 322,327 296,930
The accompanying notes are an integral part of these interim consolidated financial statements.
SILANIS TECHNOLOGY INC.
Notes to the interim consolidated financial statements
For the six-month periods ended June 30, 2012 and 2011
(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
Basis of Presentation
The interim consolidated financial statement have been prepared in accordance with Accounting standards for private enterprises ("ASPE") using the same accounting policies as in Note 2 of the notes to the 2011 annual consolidated financial statements.
During the six months ended June 30, 2012, the Company has continued discussions with the Autorité des marchés financiers du Québec ("AMF"), with whom it files its financial statements, to confirm its financial statements are to be prepared in accordance with ASPE. Having received 100% shareholder approval, these interim consolidated financial statements, and those for the year ended December 31, 2011, have both been prepared under ASPE on the basis that approval from the AMF shall be received.
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
June 30, 2012 December 31, 2011 ------------------------ ------------------------ Number Number of of shares shares ----------- ----------- ----------- ----------- $ $ Class A common shares 21,750,000 14,695,727 21,750,000 15,018,054 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 28,078,647 87,057,026 28,400,974 ----------------------- ----------- ----------- ----------- -----------
In 2012, a capital distribution was declared by the Company on the outstanding Class A common shares in the amount of $322,327 (2011 - $296,930) relating to the ongoing expenses of LTD, paid for by the Company. This transaction settled a portion of the amounts due from LTD and was recorded as a reduction of the Class A common shares carrying amounts.
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, 2012, $NIL compensation expense (2011 -
$7,108) was recorded for these performance-based options.
The following table presents options that were issued and outstanding under the New Plan:
2012 2011 Weighted Weighted average average Number of exercise Number of exercise options price options price GBP GBP
Outstanding, December 31 4,264,166 0.17 3,747,000 0.16
Granted 2,825,000 0.30 -
Outstanding, June 30 7,089,166 0.23 3,747,500 0.16
Exercisable, June 30 2,181,875 0.19 1,695,000 0.21
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 4.97 GBP0.12 825,000 805,000 5.80 GBP0.09 627,500 451,875 6.32 GBP0.119 80,000 40,000 7.18 GBP0.1885 275,000 137,500 7.33 GBP0.111 965,000 272,500 8.30 GBP0.199 1,016,666 - 9.32 GBP0.305 2,825,000 - 9.57 ---------------- ----------- ------------ -------------- 7,089,166 2,181,875 8.21
The fair value of the stock options granted is determined using the Black-Scholes option pricing model, with the following weighted-average assumptions:
2012 2011
Expected dividend yield 0.0% 0.0%
Expected volatility 75% 55%
Risk-free interest rate 1.6% 2.0%
Expected term in years 6.23 6.56
2,825,000 options were granted during the six-months ended June 30, 2012 (2011 - nil), with a fair value of $875,000.
The stock-based compensation expense for the six-month period ended June 30, 2012 amounted to $115,101 (2011 - $57,388), and is included in cost of revenues, 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.
c) Warrants outstanding
As at June 30, 2012 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.
Subsequent to June 30, 2012, these warrants expired unexercised, in accordance with their terms.
4. 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.
5. Financial expenses (income)
2012 2011 $ $ Bank charges 18,574 16,630 Foreign exchange gain (15,632) (88,890) --------- --------- 2,942 (72,260) ========= =========
6. 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, 2012, expenses of $165,577 were incurred on behalf of LTD and are included in shareholder and employee loans, without interest.
-- In 2012, a capital distribution was declared by the Company on the outstanding Class A common shares in the amount of $322,327 relating to the expenses of LTD for the year ended December 31, 2011, paid for by the Company. This transaction settled all amounts due from LTD as at December 31, 2011 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 $72,552 (CDN$73,935), 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.
___________________________________________________________
FINANCIAL STATEMENTS - SILANIS INTERNATIONAL LIMITED
INDEPENDENT REVIEW REPORT TO THE MEMBERS OF SILANIS INTERNATIONAL LIMITED
We have been engaged by Silanis International Limited (the "Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended June 30, 2012, which comprises the balance sheet, the statement of comprehensive income (loss), 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 report 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 annual set of financial statements of the Company are prepared in accordance with IFRSs as issued by IASB. The condensed set of 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 financial report for the six months ended June 30, 2012 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 modifying our conclusion, we have considered 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 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.
Deloitte LLP
Chartered Accountants
St Helier, Jersey
Signed, August 30, 2012
SILANIS INTERNATIONAL LIMITED
Balance sheet
As at
(unaudited)
(in GBP)
June 30, December 31, 2012 2011 GBP GBP
Assets
Non-current asset
Investment in associate (Note 2) 1,762,061 2,398,189
Investment in subsidiary (Note 1) 1 1
Current asset
Prepaid expenses 29,085 13,856
Total assets 1,791,147 2,412,046
Equity and liabilities
Equity
Share capital (Note 3) 217,500 217,500
Share premium (Note 4) 9,787,500 9,787,500
Accumulated losses (9,638,619) (8,969,373)
Translation reserve (Note 2) 1,325,890 1,168,934
Total equity 1,692,271 2,204,561
Current liabilities
Accounts payable to an associate 98,876 207,485
Total equity and liabilities 1,791,147 2,412,046
Net asset value per ordinary share (Note 6) 0.08 0.10
The accompanying notes are an integral part of these condensed interim financial statements.
Approved by the Board
Signed, Tommy Petrogiannis
C.E.O.
SILANIS INTERNATIONAL LIMITED
Statement of comprehensive income (loss)
For the six months ended June 30, 2012
(unaudited)
(in GBP)
2012 2011 GBP GBP
Continuing operations
Operating expenses
General and administrative 83,647 70,992
Share of (loss) profit of associate (Note 2) (585,599) 242,408
Net (loss) profit for the period (669,246) 171,416
Net (loss) profit per ordinary share (Note 6)
(Basic and diluted) (0.03) 0.01
Other comprehensive income for the period, after tax
Foreign currency translation adjustment related to the
investment in associate (Note 2) 156,956 91,810
Other comprehensive income for the period, net of tax 156,956 91,810
Total comprehensive (loss) income for the period (512,290) 263,226
The accompanying notes are an integral part of these condensed interim financial statements.
SILANIS INTERNATIONAL LIMITED
Statement of changes in equity
For the six months ended June 30, 2012
(unaudited)
Six months ended June 30, 2011 ----------------------------------------------------------------------------------------------- Profit and Translation Share capital Share premium loss 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 for the period - - 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, 2012 ----------------------------------------------------------------------------------------------- Profit and Translation Share capital Share premium loss account reserve Total -------------------- ------------------- ------------------- ---------------- ------------- GBP GBP GBP GBP GBP Balance, beginning of period 217,500 9,787,500 (8,969,373) 1,168,934 2,204,561 Foreign currency translation adjustment - - - 156,956 156,956 Net loss for the period - - (669,246) - (669,246) --------------------- -------------------- ------------------- ------------------- ---------------- ------------- Balance, end of period 217,500 9,787,500 (9,638,619) 1,325,890 1,692,271 --------------------- -------------------- ------------------- ------------------- ---------------- -------------
The accompanying notes are an integral part of these condensed interim financial statements.
SILANIS INTERNATIONAL LIMITED
Statement of cash flows
For the six months ended June 30, 2012
(unaudited)
(in GBP)
2012 2011 GBP GBP
Operating activities
Net (loss) profit for the period (669,246) 171,416
Adjustments for:
Share of loss (profit) of associate (Note 2) 585,599 (242,408)
Decrease in accounts payable to an associate (108,609) (117,245)
Increase in prepaid expenses (15,229) (2,139)
Net cash flow used in operating activities (207,485) (190,376)
Investing activities
Capital distribution received from an associate 207,485 190,376
Movement in cash - -
Cash, beginning of period - -
Cash, end of period - -
The accompanying notes are an integral part of these condensed interim financial statements.
SILANIS INTERNATIONAL LIMITED
Notes to the condensed interim financial statements
For the six month period ended June 30, 2012
(unaudited)
(in GBP)
1. Basis of preparation
The condensed interim 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, 2011.
Going concern
As highlighted in note 7 and in accordance with its Articles of Incorporation, Silanis Technology Inc. ("Silanis") provides financial support to Silanis International Limited (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 in, 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 and after any changes in foreign currency translation adjustment.
Investment in a subsidiary
Silanis Canada Inc., a wholly owned subsidiary which is a dormant company, was not consolidated because the resulting impact on the Company's financial statements would not influence the economic decisions of the users due to immateriality. The investment is reflected at cost less impairment.
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 March 31, 2014.
Foreign currencies
The financial statements of the Company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the condensed financial statements, the results and financial position of the Company are expressed in pounds sterling, which is the functional currency of the Company, and the presentation currency for the financial statements.
In preparing the financial statements, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
For the purpose of presenting the financial statements, the assets and liabilities of Silanis are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used.
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 and this is discussed in note 2.
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 January 1, 2012
The following new and revised Standards and Interpretations have been adopted in the current year. Their adoption has not had any significant impact on the amounts reported in these financial statements but may impact accounting for future transactions and arrangements.
-- Amendments to IAS 12, Deferred Tax: Recovery of Underlying Assets, effective January 1, 2012
Standards, amendments and interpretations not yet applicable and not early adopted by the Company
At the date of authorisation 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:
-- Amendments to IAS 1, Presentation of items of other comprehensive income, effective July 1, 2012
-- Amendments to IAS 19, Employee benefits, effective January 1, 2013 -- IFRS 9, Financial Instruments, effective January 1, 2015 -- IFRS 10, Consolidated financial statements, efective January 1, 2013 -- IFRS 11, Joint arrangements, effective January 1, 2013 -- IFRS 12, Disclosure of interests in other entities, effective January 1, 2013 -- IAS 27 (2011), Separate financial statements, effective January 1, 2013 -- IAS 28 (2011), Investments in associates and joint ventures, effective January 1, 2013 -- IFRS 13, Fair value measurement, effective January 1, 2013 -- Improvements to IFRSs 2011, effective January 1, 2013
-- IFRIC 20, Stripping costs in the production phase of a surface mine, effective January 1, 2013
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's in future periods except for IFRS 12 which will impact the disclosure of interests the Company has in other entities. Beyond the information
above, it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.
2. Investment in an associate
Silanis is engaged in the development, distribution and service of computer software, mainly in the U.S. market and was incorporated in Canada.
As at June 30, 2012, the details of the investment are as follows:
GBP
Carrying value as at January 1, 2012 2,398,189
Capital distribution received from the associate (Note 7) (207,485)
Share of loss for the six-month period ended
June 30, 2012 (585,599)
Foreign currency translation adjustment related to the
investment in associate _156,956
Carrying value as at June 30, 2012 1,762,061
The summarized unaudited financial information of Silanis as at and for the six-month period ended June 30, 2012, is as follows:
GBP
Assets 9,148,694
Liabilities 2,095,830
Revenue 2,115,313
Net loss (2,310,488)
As at December 31, 2011, the details of the investment are as follows:
GBP
Carrying value as at January 1, 2011 2,149,821
Capital distribution received from the associate (Note 7) (190,376)
Share of gain for the year ended
December 31, 2011 264,700
Foreign currency translation adjustment _174,045
Carrying value as at December 31, 2011 2,398,189
The summarized financial information of Silanis as at and for the year ended December 31, 2011, is as follows:
GBP
Assets 13,129,522
Liabilities 3,530,477
Revenue 8,548,882
Net profit 1,059,493
IAS 36: Impairment of Assets requires that once there is evidence of an impairment, the asset should be recorded at the lower of the 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 are traded. The directors of the Company are uncertain about the trading prospects of Silanis 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 as at June 30, 2012 and this also equates the approximate fair value. As such, no impairment has been provided for, although the directors recognize the uncertainty surrounding recovery of value from this investment.
A translation reserve is recorded at period-end to account for the foreign currency adjustment.
The reporting date of the financial statements of Silanis is June 30, 2012.
The directors of the Company are represented on the Board of Directors of Silanis. 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 as of June 30, 2012.
The Company holds 21,750,000 Class A common shares in Silanis, an associated company. Share capital of Silanis 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 Class B and Class C shareholders, Silanis 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's wholly owned subsidiary, Silanis Canada Inc., will receive Class D common shares in Silanis which rank pari passu with Class A common shares.
The Class A shares of Silanis, held by the Company rank pari passu with the other classes of shares in Silanis 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, 2012 and December 31, 2011 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, 2012 and December 31, 2011, there was no ultimate controlling party.
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. 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.
The current tax charge is nil (2011 - nil). As at 30 June 2012, the Company has unrecognised deferred tax asset arising from chargeable losses and unutilised management expenses amounting to GBP788k (December 31, 2011: GBP78,000). The directors believe that the recoverability of the deferred tax asset is uncertain hence has not been recognised in these financial statements.
6. Net (loss) profit per ordinary share and net asset value per ordinary share
The calculation of net (loss) profit per ordinary share for the six-month period ended June 30, 2012 was based on the loss attributable to shareholders of GBP669,246 per the statement of comprehensive income (loss) (2011 - profit of GBP171,416) 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, 2012 was based on the net assets attributable to shareholders of GBP1,692,271 (2011 - GBP2,230,435) 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.
7. Related party transactions
Pursuant to the articles of incorporation of Silanis Technology Inc. ("Silanis"), Silanis will provide funds for ongoing expenses of the Company by way of a capital distribution on Silanis' outstanding Class A common shares. As at June 30, 2012 expenses of GBP98,876 (2011 - GBP73,131) incurred by the Company, are included in accounts payable to an associate. As at June 30, 2012, a capital distribution amounting to GBP207,485 (2011 - GBP190,376) was declared by Silanis and satisfied through the reduction of a portion of the amount payable to the associate.
As at June 30, 2012, the key management personnel (Directors) as well as their compensation for the six-month period ended June 30, 2012 from the Company are as follows (2011 - $US 43,750 in aggregate):
GBP David Brereton 5,022 ($US 7,861) Michael Hunt 5,260 ($US 8,234) Justin LaFayette 5,973 ($US 9,361) Vernon Lobo 5,883 ($US 9,220) Jonathan Wener 4,705 ($US 7,361)
8. 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, 2012.
9. Ultimate controlling party
The directors believe that the Company has no immediate or ultimate controlling party.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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