TIDMSEV
RNS Number : 7702J
SerVision plc
30 June 2017
30 June 2017
SerVision plc
("SerVision" or the "Company")
Financial Results for the year ended 31 December 2016
SerVision (AIM: SEV), the AIM quoted developer and manufacturer
of digital security systems, is today announcing its audited
results for the year ended 31 December 2016.
A copy of the annual report and accounts will be posted to
shareholders today and will be available shortly from the Company's
website, www.servision.net. Notice of the Company's Annual General
Meeting will be posted to shareholders in due course.
-ends-
SerVision plc +972 2535 0000
Gidon Tahan, Chairman and CEO
Allenby Capital Limited (Nominated +44 (0) 20 3328
Adviser and Joint Broker) 5656
Nick Athanas / Richard Short
Beaufort Securities Limited (Joint
Broker)
+44 (0) 20 7382
Elliot Hance 8300
Leander PR (Financial PR)
+44 (0) 7795 168
Christian Taylor-Wilkinson 157
*Certain information contained with this announcement is deemed
by the Company to constitute inside information according to
REGULATION (EU) No 596/2014 (MAR).
Notes to Editors
SerVision is a pioneer in the field of security communications
technology and a leading developer and manufacturer of fully
integrated video recording and transmission systems for homeland
security and transportation applications. The Company's core
technology is proprietary video compression which is optimised for
streaming real-time video over any type of cellular or narrowband
network.
CHAIRMAN'S STATEMENT
The Board today announces SerVision's consolidated group
financial statements for the year ended 31 December 2016. The
Group's annual revenue for this period was $2,145,000 and our net
loss was $3,050,000 compared with a revenue of $2,154,000 and a net
loss of $2,572,000 for the previous year. Though the Group
experienced disappointing results in 2016, and an increased loss, I
am pleased to report that some new strategic partnerships in the
transportation sector, coupled with many important enhancements to
the IVG platform achieved during this period, have created many new
commercial opportunities going forward.
Sales and Marketing
SerVision UK is making significant progress in the UK bus sector
not only due to superior technology but also the first class local
service provided. Initial orders in the bus sector came from
Cardiff Bus and Skills but we are in constant contact and
negotiations with leading names in the industry.
The high security sector has also seen steady growth with
initial orders from Cardtronics (Cash in Transit) and PrimlineVNE
in conjunction with Japan Tobacco International. The solutions
designed for these clients are unique to the industry and provide
the highest level of cutting edge technology.
In the US, the Group had a successful year of cooperation with
Convoy Technologies. In an effort to grow the cooperation and to
keep their end-customers' costs down, we have recently begun
working with Convoy under a new type of business model where
SerVision will supply its video gateway products direct to fleet
customers and Convoy will provide their integrated fleet management
software platform. Other projects with leading cash-in-transit and
private transport companies in the US resulted in several
significant first orders and pilots.
We also experienced further growth in the Dutch construction
sector where SerVision's video gateways are deployed on mobile
trailers for use by construction companies. Tedas Security,
SerVision's local partner integrator in the Netherlands, has been
vigorously testing the IVG platform and supporting it in their
management software, and it plans to use the IVG in a new
generation of trailers intended for leasing to construction
companies outside of Holland. We also began cultivating new ties
with integrators in Japan, Poland and Colombia over the course of
2016, and in recent months we have begun IVG pilots for a number of
bus and other fleet projects in these territories, and in several
countries in Africa.
Outside of the UK, and apart from the projects and opportunities
mentioned above, SerVision had a disappointing year overall. We did
not achieve the results we had hoped for in China due to some
delays in business development with Beijing Sivi Technologies
(BST), in which SerVision has a 19% stake. This resulted in no
income for the Group in China. Following this poor return the group
has fully impaired its 19% stake in BST previously carried at
$118,000.
Research and Development
SerVision's R&D team had some significant achievements in
2016 that are currently enabling us to increase strategic
cooperation with other leading technology companies in the global
transportation sector. Full-scale integration with Mobileye has
transformed the IVG into a remote management platform for driver
safety and transport security. The integrated solution allows
operators to receive alerts when a high number of Mobileye warnings
occur, to generate driver performance reports, and to have
on-demand access to recorded video clips of Mobileye alerts.
SerVision is currently working with Mobileye on a sales plan for
the US market, and is in the process of integrating with Ituran, a
leading telematics company and Mobileye partner. The Group also
successfully added support for a passenger counting solution for
fleets during 2016. The integrated solution IVG-passenger counting
system is in high demand by bus operators who want live video
access to their fleet along with real time data on bus occupancy at
any given time.
Enhancements made to the IVG during 2016 have significantly
increased the system's performance and market value, particularly
in the UK bus market. One key optimization includes bi-directional
audio support enabling the system to be used as standalone
audio/video communication platform for drivers and fleet operators.
Another noteworthy enhancement includes a built-in failover
solution for IVGs equipped with large capacity Hard Disk Drives
(HDDs). Redundant recording on a USB Solid State Disk (SSD) which
also stores the IVG's Operating System, has made the system more
robust and more cost-effective for customers who require local
storage of HD quality video from eight or more cameras for extended
periods of time.
On the software side, SerVision's R&D team has been working
on an entirely new API which will be easier for partners to
support, provide enhanced stability for third party client
applications, and enable live video streaming on any web browser
platform. This is significant for fleet management companies who
are keen to offer the IVG as an add-on but also require video
monitoring to be conducted in a web browser of the customer's
choosing. The capabilities of SVCentral, SerVision's own fleet
tracking video platform, were expanded to include support for
important modules such as the SVDownloader for off-site video
backup and the SVMonitor for real-time management of IVG system
health checks across multiple fleets.
Our R&D team is continuing to improve and expand the
company's suite of software solutions by creating a new
multi-browser web client and a new API for the SVDownloader that
will enable third party fleet management developers to support
on-demand playback of recorded video in web browsers.
Financials - Profit & Loss
-- Revenues for this period were $2,145,000 compared to $2,154,000 for the same period in 2015.
-- Gross profit for the year was $557,000 compared with $894,000 for the same period in 2015.
The reduction in gross profit is as a result of lower selling
prices to customers in order to penetrate the UK public
transportation market. We hope that this will be compensated in the
future as we will earn recurring revenues on part of those systems
sales in the UK.
-- Operating loss for the period was $2,886,000 compared to an
operating loss of $2,416,000 for the same period in 2015.
In 2016 the administrative expenses of the new UK office
increased to $471,000 compared with $155,000 in 2015 since it was
opened in the middle of 2015. The loss was also impacted by our
write off of investment in the company in China as explained
below.
-- Net loss for the period was $3,050,000 compared to a loss of
$2,572,000 for the same period in 2015.
The Group had previously stated that they were cautiously
optimistic of an improved result for the 12 months ended 31
December 2016 when compared to the comparative period in 2015. A
number of sales that had been anticipated for the end of the
calendar year, some of which the Group had received pre-payments
for, have not been recognised in 2016 and slipped into 2017.
However, costs had already been incurred by the Group against their
expected delivery. In addition, the Group has incurred a number of
non-cash accounting adjustments. The result of reduced sales and
increased costs meant that the Group is reporting a total
comprehensive loss for the year that is worse than 2015. Overall,
revenues for 2016 ended up being slightly behind 2015 and slippages
of orders into early 2017, a lower gross margin and the higher
costs referred to above have led to the increased loss.
The Balance Sheet
-- Trade receivables - a significant drop in trade receivables
to $286,000 (compared with $899,000 in 2015) indicates an
improvement of our ability to collect debts from our customers.
-- Cash and Cash equivalents - the amount at the end of the
period was $8,000 (compared with $78,000 in 2015). In order to
maintain and finance the group operations the group successfully
raised $2,000,000 (at a significant premium to the Company share
price) from Cascade SVP, LLC, a US fund, in February 2017 and May
2017. This investment demonstrates a strong belief in the Group's
vision and future.
-- Non-current liabilities - long term loans increased to
$1,240,000 compared with $255,000 in 2015. This increase is due to
a loan from Gabriel Sassoon, an existing shareholder in the group
that was announced in February 2016.
-- We did not achieve the results we had hoped for in China due
to some delays in business development with Beijing Sivi
Technologies (BST), in which SerVision has a 19% stake. Due to the
uncertainty of our cooperation, the Board decided to write off an
investment in BST that was valued at $118,000 in 2015.
Outlook
Sales for the first half of 2017 have been behind our internal
expectations. On a more positive note, the Group has been asked to
tender for a number of new projects, many of which would hopefully
fall into the second half with several being quite substantial in
size. At the time of the announcement of the Cascade subscription
in February 2017, the Board was confident that the improved balance
sheet position coupled with improved trading during 2017 meant that
the Group should have sufficient working capital for the
foreseeable future. Our working capital position is tighter than we
anticipated, not least with the requirement to invest in these
tenders.
As at the date of the announcement a total of US$475,000 is owed
to YA II PN Ltd under the loan arrangements entered into between
the group and YA II PN Ltd. This balance is due to be repaid on 6
July 2017. As a result of the cash requirements in respect of
tenders currently underway, the Group intends to engage with YA II
PN Ltd to discuss revising the payment schedule for the outstanding
loan.
Conclusion
Despite the lacklustre results for 2016, I am cautiously
optimistic about the future. My positive outlook is bolstered by
the growing confidence in our solution that is evident in the UK
bus market, and by our expansion of strategic partnerships with
leading telematics companies and safe driving solution providers
such as Mobileye. As always, I am grateful for the confidence and
support of our shareholders, and to all of our staff for their
ongoing commitment to the success of the Group.
G Tahan
Chairman
STRATEGIC REPORT
Business Model, Strategy and Future Developments
SerVision develops and manufactures IP-based video monitoring
solutions for the global security market and for transport security
applications. The Group's product range is comprised of
professional video gateway systems (Digital Video Recorders/Video
Transmitters) that enable live, remote video surveillance of any
type of site - fixed or moving. It also includes a proprietary
proxy server, video distributor and downloader, as well as a
software-based control centre platform for centralized video
management. SerVision's core technology is based on a proprietary
video compression algorithm that is uniquely optimised for
streaming high quality live/recorded video over any type of cabled,
wireless or cellular network, regardless of bandwidth
constraints.
The Group's revenues are principally derived from the sale of
video gateways systems, and software server licenses. Outside of
the UK and Israel, SerVision sells its solutions through a network
of channel partners comprised of distributors and system
integrators. In the UK and Israel, the Group earns monthly
recurring revenue for 24 or 36 month periods by offering
installation service, support and cellular data. The Group has
recently established an installation team for select projects in
Israel, and our new UK office has begun selling directly to end
customers. Bidding on projects directly, as opposed to offering our
solutions through integrators and other third parties, is a clear
strategic objective of the Group going forward, particularly in the
United States.
SerVision operates in a competitive environment that is
increasingly moving from analogue to IP camera solutions. In
response to this shift, the Group has developed a new, highly
professional mobile NVR solution, the IVG400-N which supports IP
cameras and full HD recording. The unique market advantage which
SerVision currently maintains - outstanding video processing for
low bit rate streaming over cellular and other bandwidth limited
networks - has carried over into the new product line. The primary
differentiators between our new platform and the existing solutions
include the ability to record in HD and to support a much more
extensive range of camera models. This capability provides
customers with the highest available recording quality and gives
them maximum flexibility when selecting cameras. Our technology is
also desirable for customers who require the ability to stream
high-quality live video over any type of cellular networks using
our optimized video transmission protocol.
Other strategic goals of the Group include hardware integration
with third party devices and software platforms to create a more
cohesive security/safety solution for transportation fleets. To
this end, SerVision has provided telematics solution providers with
a brand new API that enables the display of live video in any web
browser - a key requirement for partner companies who offer
web-based fleet management platforms. The Group is currently
working on a new API for its backup solution (SVDownloader) to
accommodate fleet managers who want to access recorded/archived
video in their existing web client.
In terms of hardware integration, SerVision's IVG is now fully
compatible with Mobileye, the global leader in Advanced Driver
Assistance Systems (ADAS). The integrated solution converts
Mobileye's collision avoidance technology into a real-time video
monitoring platform that enables fleet managers to easily identify
problematic driving behaviour. This co-operation has further
broadened the Group's market appeal as the combined solution is
suitable for both transportation security and driver safety
applications. The IVG also now supports a passenger counting
solution that is ideal for public transit companies who want the
benefit of live video access for their fleet and real time updates
about the number of passengers on board at any given time.
Financial Risk Management
Business risks
Government Policy
In territories where the group has significant commercial
activity, sales could be affected by government policy as it
relates to the purchase or subsidy of security technologies. This
risk, however, is tempered by a global trend in favour of adopting
a greater use of technology to increase public safety and security.
As a result of Brexit, from a business perspective, there was no
immediate effect, and the board believes it will not impact the
company save for its impact on the GBP/USD exchange rate. The
company mitigates this risk by establishing cooperation with
companies with large distribution capacity such as Mobileye, and by
targeting costumers in a variety geographical territory.
Economic slowdown
Sales could be adversely affected by a recession in the UK or in
any other large market where SerVision operates
Delayed Delivery of Product Development
Unanticipated delays in the release of new products (such as new
web client) that are currently under development could result in
the delay or cancellation of orders. There is also a risk that
competitors will introduce to the market new technologies that
would be of interest to the Group's potential customers. The Group
is attempting to mitigate these risks by continuing to invest in
R&D initiatives with an eye toward remaining ahead of the
competition.
Dependency on Sales to Distribut0rs/integrators - the Group's
revenues are largely dependent on sales to Distributors and
Integrators, no end users. A failure of payment by the end user to
the Distributer/Integrator may affect the Group's ability to
collect debt. The group is mitigating this by attempting to offer
direct sales to end users when possible, and to lower the exposure
to Distributers.
Foreign Exchange Risks
Most of the Group's sales and income are denominated in US
Dollars which is the currency that the Group reports in. The
Group's expenses however are divided between the US Dollar and the
Israeli Shekel. The cost of goods (components) are paid in dollars
and a portion of the operational costs such as rent and other
service providers quote their fees in dollars. Labour costs are
paid in Israeli Shekels. The Group has therefore a partial currency
risk in the event that the Israeli Shekel strengthens against the
US Dollar which could influence the bottom line of the Group's
financial results. Recently, since the establishment of our UK
office, our revenues and costs in GBP are increasing and this will
give the Group exposure to sterling exchange rate risk. Following
the recent significant sterling exchange rate fluctuation following
the UK's EU referendum these risks will increase.
The Group subscribes to a weekly circular from the two main
Israeli banks regarding the main financial institutions'
expectations for changes in foreign currency. The management
reviews them carefully and will consider with the Board whether it
should purchase financial instruments sold by local banks, to
protect itself from this foreign exchange risk. There are no
financial instruments designed to manage foreign exchange risks in
use at the date of this report.
Interest Rate Risks
The Group is exposed to interest risks as it uses credit lines
and loans from its banks. Changes in the effective "prime" interest
rate published monthly by the Bank of Israel can influence the
financing costs of the Group. The Group has attempted to diversify
its credit lines in order to minimise its exposure to interest rate
fluctuations by dividing its sources of finance into two
categories:
(a) Variable interest rate facilities (which are exposed to
interest rate fluctuations).
(b) Fixed rate facilities (which are not exposed to interest
rate fluctuations).
Credit Risk
The Group is exposed to credit risks if its customers fail to
pay for goods supplied by the Group. In recent years, the Group has
experienced a high level of bad-debt in comparison with revenue.
The Directors examined the Group's credit risk policies and now
operate the following policies to mitigate the credit risk:
(a) In the UK, and in other locations (when possible), the Group
will reduce reliance on integrators and distributors by selling
direct to end-customers. Direct sales to end-customers result in
more control over the deployment and success of the project, and
give us direct knowledge about the project's status and customer's
budget.
(b) Seeking to sell to respectable integrators and distributors
only after having undergone an intense due-diligence investigation
to confirm their financial solvency.
(c) Orders from customers in certain regions are shipped only
after an approved letter of credit is received by the Group's
bank.
(d) Ongoing customers must pay 50% - 100% before products are shipped.
(e) Only customers with high rating credit scores receive credit from the Group.
As a result of revised credit control measures adopted in 2015,
there were no significant bad debt expenses during 2016, compared
to a bad debt expense of $531,000 in the previous year ($461,000 of
this expense had accrued prior to the implementation of the revised
credit control procedures).
Capital Liquidity Risk Management
The Directors are highly aware of the significant losses that
the Group has incurred in recent years and the low level of
available cash of the Group. They are closely monitoring the cash
position of the Group in order to ensure the Group's ability to
continue as a going concern. As a result, in February 2017, the
Group conducted a share Subscription to a private US Investment
fund in the amount of US$2 million. In addition, the fund has been
granted an option to invest a further US$4 million in two equal
tranches. The first option period runs until 20 October 2017, and
the second option period runs until 29 September 2018. For the full
terms of the options please see the Post Balance Sheet Events
section in the Director's Report (pages 8 & 9 of the financial
statements).
In February 2016, the Group entered into an agreement with
Gabriel Sassoon, an existing shareholder in the Group, to provide
the Group with an unsecured working capital loan facility of US$1
million. The Loan, which has been drawn down in full, was used to
provide additional working capital facilities for the Group and
supplement the Group's existing cash resources. The Directors are
pleased that its largest shareholder has demonstrated such
confidence in the Group's future. Since the Group has not yet
reached profitability, the risk of its ability to continue as a
going concern still exists and may need further funding. A failure
of achieving further funding may affect the Group's ability to
operate.
Environmental Matters
SerVision is conscious of its responsibility as a provider of
electronics equipment that it has a specific duty to minimise its
environmental impact. This requires the Group to be fully compliant
with a range of national, regional and international guidelines on
safety, EMC emissions and energy efficiency.
Employment Matters
Employment polices
SerVision places considerable value on the involvement of its
employees and has continued to keep them informed on matters
affecting them as employees and on the various factors affecting
the performance of the Group. This is achieved through both formal
and informal meetings.
The Group gives full and fair consideration to applications for
employment from disabled persons where the candidate's particular
aptitudes and abilities meet the requirements of the job. In the
event of any staff becoming disabled while with the Group, every
effort will be made to ensure that their employment by the Group
continues and that appropriate adjustments are made to their work
environment.
SerVision is a responsible employer that seeks to provide a
pleasant and professional working environment in all locations.
Group management seek to ensure that the group is compliant with
all relevant human resources and health and safety regulations,
while the Group strives to offer competitive employment packages
with opportunities for personal and professional development.
Regular updates on performance are provided in staff meetings
and through internal communications. Clear and transparent company
objectives are set each year which, in turn, are reflected in team
and individual objectives.
Diversity
The Group does not discriminate on the grounds of age, race,
sex, sexual orientation or disability.
The table below shows the number of persons of each sex who were
directors, key management and employees of the Group.
Company Number of Number of Total
Level Female Employees Male Employees
Board - 4 4
Key Management - 4 4
Employees 5 30 35
Human Rights
Through careful selection and vetting of the supply chain - and
strict code of conduct - SerVision is committed to ensuring
manufacturing processes are fully compliant with international and
local environmental and labour regulations.
Other matters
The Business Review of the Group, its results and other
developments in the year, together with Key Performance Indicators
(Revenue, Operating Result and Net Result) are included within the
Chairman's Statement and are not repeated within this Strategic
Report.
ON BEHALF OF THE BOARD
G TAHAN
Chairman
Commonwealth House,
55-58 Pall Mall,
London,
SW1Y 5JH
DIRECTORS' REPORT
The Directors present the annual report together with the
financial statements and auditors' report for the year ended 31
December 2016. The Company is incorporated in the UK but its
principal place of business is in Israel.
PRINCIPAL ACTIVITIES
The Group's principal activity is the development and sale of
video surveillance equipment. Further information on the Business
Review including results of the group, and risks facing the Group
can be found in the Chairman's Statement on pages 1-2 and the Group
Strategic Report on pages 3-6.
ACCOUNTS PRODUCTION
The financial statements for the year ended 31 December 2016
have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU ("IFRS").
DIVIDS
The directors do not propose a final dividend (2015:
GBPnil).
DIRECTORS
The directors who served during the year were:
G Tahan (Chairman)
C Levy (Non Executive Director)
E T Yanuv (Chief Financial Officer)
A Legge (Non-Executive Director, appointed
at 01.08.2016)
FUTURE DEVELOPMENTS
SerVision's R&D team will continue to integrate with other
leading technology companies in the global transportation sector.
Among other things, our cooperation with Mobileye and leading
telematics companies (Matrix, Ituran, Gurtan, etc) has enabled us
to:
-- Become more competitive in terms of system performance and functionality
-- Learn about and pursue new commercial opportunities
-- Reach new potential customers who are looking for a fully
integrated solution (as opposed to our stand-alone solution)
We will continue to expand our cooperation with new technology
partners by adding support for other third party solutions that are
relevant to fleet operators. As noted above, we have recently
integrated with a passenger counting system for bus applications,
and we are now beginning to investigate support for a geo-based
mobile advertising system. In parallel, the company's R&D team
is investing considerable resources in building the necessary
infrastructure to enable a web-based monitoring platform for
customers who wish to use our solution as a stand-alone platform,
and in creating a user-friendly API for technology partners who
wish to integrate SerVision's protocol into their software.
POST BALANCE SHEET EVENTS
In February 2017, the Group secured $2 million of new capital
from Cascade SVP, LLC, a US based investment fund. Cascade agreed
to subscribe for 14,089,084 ordinary shares of 1p each in the
capital of the Group at a price of approximately 11.4 pence per
Subscription Share, which was a significant premium to the closing
mid-market price on 21 February 2017 and valued the Group at
approximately GBP14.4 million.
The proceeds of the Subscription have been used to provide
working capital to finance the increasing number of global
opportunities for selling the IVG40-N product, particularly into
the bus and coach market, as well as to reduce its debt
position.
In addition to the $2 million subscription, Cascade have been
granted an option to invest up to a further $4 million, in two
equal tranches, at the same Group valuation. The first option
period runs until 20 October 2017, with an option price per share
of approximately 10.2p per share, and the second option period runs
until 29 September 2018, with an option price per share of
approximately 9.3p per share.
A condition of the Subscription is that if the Group's shares
are not listed on either the Main Market of the London Stock
Exchange or on Nasdaq, or if the Company has not been sold for a
price higher than the Issue Price, before 21 February 2019, then
any new capital raised by the Company thereafter must first be used
to buy back the Subscription Shares, together with any new ordinary
shares issued pursuant to the Options, that are still held by
Cascade at the same price(s) as they were issued. Such a buy back
would require the Company to have sufficient distributable
reserves, which may involve a capital reduction, and would also
require shareholder approval.
The Company announced on 25 May 2017 that it intends to apply
for a Standard Listing on the Market of the LSE during the first
half of 2018. In order to apply for admission to the Standard
segment of the LSE, the Company must meet certain eligibility
criteria and the Company intends to apply to the Financial Conduct
Authority in this respect in the next few months.
CORPORATE GOVERNANCE
Under the AIM Rules the Group is not obliged to implement the
provisions of the UK Corporate Governance Code. However, the Group
is committed to applying the principles of good governance
contained in the UK Corporate Governance Code as appropriate to a
Group of this size. The Board will continue to review compliance
with the UK Corporate Governance Code at regular intervals.
In common with other organisations of a similar size, the
Executive Directors are heavily involved in the day to day running
of the business and convenes regularly on an informal basis as well
as at board meetings. The Board of Directors meets regularly and is
responsible for formulating strategy, monitoring financial
performance and approving major items of capital expenditure.
CHARITABLE AND POLITICAL DONATIONS
The Group did not make any charitable or political contributions
during the year (2015: $nil).
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic
Report, the Directors' Report and the financial statements in
accordance with applicable laws and regulations. Company law
requires the directors to prepare Group and parent Company
financial statements for each financial year. Under that law the
directors are required to prepare the Group and parent Company
financial statements in accordance with International Financial
Reporting Standards ("IFRS").
The financial statements are required by law to give a true and
fair view of the state of affairs of the Group and parent Company
and of the profit and loss of the Group for the year.
In preparing each of the Group and parent Company financial
statements the directors are required to:
-- Select suitable accounting policies and then apply them consistently;
-- Make judgements and accounting estimates that are reasonable and prudent;
-- State whether they have been prepared in accordance with IFRS
as adopted by the EU subject to any material departures disclosed
and explained in the parent Company financial statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Group and the parent
Company will continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Group and parent Company and to enable
them to ensure that the financial statements comply with the
Companies Act 2006 and Article 4 of the IAS Regulation. They have
general responsibility for taking such steps as are reasonably open
to safeguard the assets of the Group and parent Company and to
prevent and detect fraud and other irregularities. Under applicable
law and regulations the directors are also responsible for
preparing a Directors' Report to comply with that law and those
regulations. In determining how amounts are presented within terms
in the income statement and balance sheet the directors have had
regard to the substance of the reported transaction or arrangement
in accordance with generally accepted accounting principles or
practice.
So far as each of the directors is aware at the time the report
is approved:
-- There is no relevant audit information of which the Company's auditors are unaware; and
-- The Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit information
and to establish that the auditors are aware of that
information.
GOING CONCERN
The Directors have prepared and reviewed sales forecasts and
budgets for the next twelve months and are optimistic that the
Group will make significant progress towards these targets. Having
considered these forecast cash flows together with the availability
of other potential financing sources, including equity finance and
potential sources of debt finance if required, the directors have
concluded that the Group will have access to sufficient resources
to meet its working capital and financing commitments for at least
the next twelve months from the date of this report.
The directors believe that due to the aforementioned post year
end developments, including the US $2 million investment from
Cascade that the Group is a going concern. However, the future of
the Group is dependent on it substantially achieving its trading
projections and on it being successful in securing further funding
as and when required.
Therefore, subject to the success of future developments as
disclosed above, the Directors' review of sales and cash flow
forecasts and having made further relevant enquiries, the Directors
have a reasonable expectation that the Group and the Company have
adequate resources to continue in operational existence for the
foreseeable future. For this reason, they continue to adopt the
going concern basis in preparing the financial statements.
SUPPLIER PAYMENT POLICY
It is the Group's policy to settle the terms of payment with
suppliers when agreeing the terms of the transaction, to ensure
that suppliers are aware of these terms and to abide by them. Trade
creditors at the year-end amount to 96 days (2015: 134 days) of
average supplies for the year.
CREST
The Company's ordinary shares are eligible for settlement
through CREST, the system for securities to be held and transferred
in uncertificated electronic form rather than in certified form.
Shareholders are not obliged to use CREST and can continue to hold
and transfer shares in paper without loss of rights.
AUDITORS
A resolution reappointing haysmacintyre will be proposed at the
AGM in accordance with S485 of the Companies Act 2006.
ELECTRONIC COMMUNICATIONS
The Company may deliver shareholder information including Annual
and Interim Reports, Forms of Proxy and Notices of General Meetings
in an electronic format to shareholders.
If you would like to receive shareholder information in
electronic format, please register your request on the Company's
Registrar's electronic database at www.capitaregistrars.com. You
will initially need your unique 'investor code' which you will find
at the top of your share certificate. There is no charge for this
service. If you wish to subsequently change your mind, you may do
so by contacting the Company's Registrars by post or through their
website.
If you elect to receive shareholder information electronically,
please note that it is the shareholder's responsibility to notify
the Company of any change to their name, address, email address or
other contact details. Shareholders should also note that, with
electronic communication, the Company's obligations will be
satisfied when it transmits the notification of availability of
information or such other document as may be involved to the
electronic address it has on file. The Company cannot be held
responsible for any failure in transmission beyond its control any
more than it can for postal failure. In the event of the Company
becoming aware that an electronic notification is not successfully
transmitted,
a further two attempts will be made. In the event that the
transmission is still unsuccessful a hard copy of the notification
will be mailed to the shareholder. In the event that specific
software is required to access information placed on the Company's
website it will be available via the website without charge. Before
electing for electronic communications shareholders should ensure
that they have the appropriate equipment and computer capabilities
sufficient for the purpose.
The Company takes all reasonable precautions to ensure no
viruses are present in any communication it sends out but cannot
accept responsibility for loss or damage arising from the opening
or use of any email or attachments from the Company and recommends
that shareholders subject all messages to virus checking procedures
prior to use. Any electronic communication received by the Company
that is found to contain any virus will not be accepted.
Shareholders wishing to receive shareholder information in the
conventional printed form will continue to do so and need take no
further action.
Should you have any further questions on this, please contact
the Company's Registrars, Capita Registrars on 0871 664 0300.
ON BEHALF OF THE BOARD
G TAHAN
Chairman
Commonwealth House, 55-58 Pall Mall, London, SW1Y 5JH
Executive Director
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF SERVISION PLC
We have audited the financial statements of SerVision PLC for
the year ended 31 December 2016 which comprise the Consolidated
Comprehensive Income Statement, the Consolidated and Company
Balance Sheets, the Consolidated and Company Cash Flow Statements,
the Consolidated and Company Statement of changes in equity and the
related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European
Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act
2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an Auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the Directors' Responsibilities
Statement set out on pages 9 and 10, the directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
-- The financial statements give a true and fair view of the
state of the Group's and of the parent Company's affairs as at 31
December 2016 and of the Group's loss for the year then ended;
-- The group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- The parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- The financial statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
Emphasis of matter - Going concern
In forming our opinion, which is not modified, we have
considered the adequacy of the disclosures made within note 1 of
the accounting policies concerning the group's and the parent
company's ability to continue as a going concern. The group
incurred a net loss of $3,050,000 during the year ended 31 December
2016 and had net current liabilities of $2,114,000 as at that date.
This, along with the other matters explained within note 1 of the
accounting policies indicate the existence of a material
uncertainty which may cast a significant doubt about the group and
company's ability to continue as a going concern. The financial
statements do not include the adjustments that would result if the
group and company were unable to continue as a going concern.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of
the audit:
-- The information given in the strategic report and the
directors' report for the financial year for which the financial
statements are prepared is consistent with the financial
statements; and
-- The strategic report and the directors' report have been
prepared in accordance with applicable legal requirements.
In the light of our knowledge and understanding of the Company
and its environment obtained in the course of the audit, we have
not identified material misstatements in the Strategic Report and
the Directors Report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Ian Daniels (Senior statutory auditor) 26 Red Lion Square
for and on behalf of haysmacintyre, Statutory Auditors London
WCIR 4AG
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2016
2 0 1
2 0 1 6 5
Notes $'000 $'000
Revenue 2 2,145 2,154
Cost of sales 3 (1,588) (1,260)
GROSS PROFIT 557 894
Administrative expenses (2,632) (2,536)
Depreciation and
amortisation (704) (661)
Exchange rate differences (107) (113)
OPERATING LOSS 4 (2,886) (2,416)
Interest payable 5 (167) (154)
LOSS ON ORDINARY ACTIVITIES
BEFORE
INCOME TAX (3,053) (2,570)
Tax on ordinary activities 6 3 (2)
NET LOSS FOR THE
YEAR (3,050) (2,572)
Translation difference arising
from translating into
presentation currency 128 (329)
TOTAL COMPREHENSIVE LOSS FOR
THE YEAR (2,922) (2,901)
LOSS PER SHARE
BASIC 8 ( 2.30)c ( 3.18)c
DILUTED 8 ( 2.30)c ( 3.18)c
All activities arose from continuing activities.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
AT 31 DECEMBER 2016
2 0 1
2 0 1 6 5
Notes $'000 $'000
ASSETS
Non-current assets
Intangible assets 9 4,830 4,818
Investment 10 -- 118
Deferred tax asset 6 83 80
Property, plant and equipment 11 45 56
4,958 5,072
Current assets
Inventories 13 504 702
Trade and other receivables 14 336 982
Cash and cash equivalents 8 78
848 1,762
5,806 6,834
EQUITY
Capital and reserves attributable
to the Group's
Equity shareholders
Called up share capital 15 2,090 2,090
Share premium account 16,127 16,127
Merger reserve 1,979 1,979
Other reserve 66 66
Retained earnings and translation
reserves (18,951) (16,029)
TOTAL EQUITY 1,311 4,233
LIABILITIES
Non-current liabilities
Loans and borrowings 18 1,240 255
Post-employment benefits 20 293 279
1,533 534
Current liabilities
Loans and borrowings 18 1,504 1,039
Loan from the office of the
chief scientist 1 173 173
Trade and other payables 17 1,285 855
2,962 2,067
TOTAL LIABILITIES 4,495 2,601
TOTAL EQUITY AND LIABILITIES 5,806 6,834
The financial statements were approved and authorised for issue
by the Board of Directors and were signed below on its behalf
by:
E T Yanuv
PARENT COMPANY STATEMENTS OF FINANCIAL POSITION
AT 31 DECEMBER 2016
2 0 1 2 0 1
6 5
Notes $'000 $'000
ASSETS
Non-current assets
Investments 12 200 200
Trade and other
receivables 14 666 321
866 521
Capital and reserves attributable
to the Company's
equity shareholders
Called up share capital 15 2,090 2,090
Share premium account 16,127 16,127
Other reserve 66 66
Retained earnings and translation
reserves (18,156) (18,143)
TOTAL EQUITY 127 140
LIABILITIES
Current liabilities
Loan and borrowings 18 666 321
Trade and other payables 17 73 60
739 381
TOTAL EQUITY AND LIABILITIES 866 521
The parent company loss for the year was $23,000 (2015: loss of
$3,171,000).
The financial statements were approved and authorised for issue
by the Board of Directors and were signed below on its behalf
by:
E T Yanuv
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2016
2 0 1
2 0 1 6 5
Notes $'000 $'000
Cash flows from operating
activities
Net loss for the year (3,050) (2,572)
Adjustments for:
Net finance expenditure 5 167 154
Depreciation and amortisation 704 668
Impairment of available for 118 -
sale assets
Taxation (3) 2
Provision for bad debts -- 531
Movement in trade and other
receivables 646 340
Movement in inventories 198 (105)
Movement in post-retirement
benefits 14 (8)
Movement in trade and other
payables 430 (866)
Net cash used in operating
activities (776) (1,856)
Cash flow from investing activities
Purchase of property, plant
and equipment and intangibles (705) (781)
Investment in available for
sale assets - (118)
Net cash used in investing
activities (705) (899)
Cash flows from financing
activities
Receipts from issue of shares
(net of issue costs) -- 3,405
Net finance costs (167) (154)
Net loans undertaken less
repayments 1,244 (658)
Cash generated from financing
activities 1,077 2,593
Cash and cash equivalents
at beginning of period (61) 101
Net cash used in all activities (404) (162)
Translation differences on 128 -
translation to presentation
currency
Cash and cash equivalents
at end of period (337) (61)
Cash and cash equivalents
comprise:
Cash and cash equivalents 8 78
Overdrafts (345) (139)
(337) (61)
PARENT COMPANY CASH FLOW STATEMENT
FOR THE YEARED 31 DECEMBER 2016
2 0 1 2 0 1
6 5
$'000 $'000
Cash flows from operating
activities
Loss before taxation (13) (3,169)
Adjustments for:
Movement in trade and other
payables 13 1
Net cash used in operating
activities - (3,168)
Cash flows used in investing
activities
Loan (provided to)/received
from subsidiary (345) 233
Cash generated from investing
activities (345) 233
Cash flows from financing
activities
Loans received/(repaid) 345 (472)
Issue of shares (net of issue
costs) - 3,407
Cash (used in)/generated
from financing activities 345 2,935
Cash and cash equivalents
at beginning of period
Net cash used in all activities - -
Cash and cash equivalents - -
at end of period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2016
Share Share Merger Other Retained Translation
Capital Premium Reserve Reserve Earnings Reserve Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2015 1,224 13,588 1,979 62 (13,290) 162 3,729
Issue of shares 866 2,539 - - - - 3,405
Total comprehensive
loss for the
year - - - - (2,572) (329) (2,901)
At 31 December
2015 2,090 16,127 1,979 66 (15,862) (167) 4,233
Total comprehensive
loss for the
year - - - - (3,050) 128 (2,922)
At 31 December
2016 2,090 16,127 1,979 66 (18,912) (39) 1,311
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share Other Retained Translation
Capital Premium Reserve Earnings Reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
At 1 January
2015 1,224 13,588 66 (15,025) 50 (97)
Issue of shares
(net of issue costs) 866 2,539 - - - 3,405
Total comprehensive
loss for the
year - - - (3,171) 3 (3,168)
At 31 December
2015 2,090 16,127 66 (18,196) 53 140
Total comprehensive
loss for the
year - - - (23) 10 (13)
At 31 December
2016 2,090 16,127 66 (18,219) 63 127
NOTES TO THE REPORT AND FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2016
1. ACCOUNTING POLICIES & COMPANY INFORMATION
Company information
Servision PLC is a public limited company, incorporated in
England & Wales and listed on the AIM market of the London
Stock Exchange. The company's registered office address is
Commonwealth House, 55-58 Pall Mall, London, England, SW1Y 5JH and
registered number 05143241. The group's principal activity is the
development and manufacture of IP-based video monitoring solutions
for the global security market.
Basis of Preparation
These financial statements have been prepared in accordance with
International Financial Reporting Standards and IFRIC
interpretations issued and effective or issued and early adopted as
at the time of preparing these statements (June 2017) and with
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The financial statements have been prepared
under the historical cost convention and a summary of the more
important accounting policies is set out below.
The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
revenues and expenses during the reporting period. Although these
estimates are based on management's best knowledge of the amount,
event or actions, actual results ultimately may differ from those
estimates.
Going concern
The directors have prepared and reviewed sales forecasts &
budgets for the next twelve months and are optimistic that the
group will make significant progress towards these targets. Having
considered these forecast cash flows together with the availability
of other potential financing sources, including equity finance and
potential sources of debt finance if required, the directors have
concluded that the group will have access to sufficient resources
to meet its working capital and financing commitments for at least
the next twelve months from the date of this report.
In particular the directors believe that due to the post year
end developments, including the receipt of US$2.0 million that was
secured from a US based investment fund and other facilities that
the directors consider are likely to be available, that the Group
is a going concern. However, the future of the Group is dependent
on it substantially achieving its trading projections and on the
directors being successful in their bid to secure new funding as
and when required.
Therefore, subject to the developments disclosed above, the
directors have a reasonable expectation that the Group and the
Company have adequate resources to continue in operational
existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the
financial statements.
The financial statements do not include any adjustments that
would be necessary should this basis not be appropriate.
Basis of Consolidation
The Group financial statements consolidate the financial
statements of Servision plc and its subsidiaries
(the "Group") for the years ended 31 December 2015 and 2016.
The financial statements of subsidiaries are prepared for the
same reporting year as the parent company, using consistent
accounting policies. All inter-company balances and transactions,
including unrealised profits arising from them, are eliminated.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group and cease to be consolidated from the
date on which control is transferred out of the Group.
No separate income statement is presented for the company as
provided by section 408, Companies Act 2006.
Revenue recognition
Revenue comprises the fair value of the consideration received
or receivable for the sale of goods and the provision of associated
services in the ordinary course of the subsidiaries activities.
When the subsidiaries bears the risks and rewards resulting from
the transaction, revenues are presented on a gross basis,
distinguishing the revenue from the related expenses.
The subsidiaries recognize revenue when the amount can be
reliably measured, it is probable that future economic benefits
will flow to the subsidiaries and when specific criteria have been
met for each of the Company's activities as described below. The
Company bases its estimates on past experience, taking into
consideration the type of customer, the type of transaction and the
specifics of each arrangement.
Revenue recognition
The group generates revenues mainly from sales of systems and
one-off software licenses. The group sells its products directly,
through its subsidiaries and through its distribution networks
worldwide.
Sale of video gateways systems and software server licenses to
Distributors/Integrators
Sales of goods are recognized when the products are delivered to
the customer. The criteria for delivery are satisfied when the
products have been shipped to the specified location, the risks of
obsolescence and loss have been transferred to the customer, and
either the customer has accepted the products in accordance with
the sales contract, the acceptance provisions have lapsed, or the
group has objective evidence that all criteria for acceptance have
been satisfied.
Sales are recorded based on the price specified in the sales
contract, net of estimated volume discounts at the time of sale. At
present all sales are made on normal credit terms, consistent with
the local market conditions, such that there is no element of
financing included in the sales price.
The responsibility of installation and Service to the end user
rests solely on the distributor/integrator.
Sale of video gateways systems and one-off software server
licenses Directly to End Users
Sales of goods are recognized upon the completion of the
installation of the units at the customer's premises and acceptance
of the goods by the customer.
Sale of Non-Recurring Engineering (NRE) services
The group occasionally charges customers for the development of
new software features upon special request. In these cases, the
revenue is recognized after the software has been delivered to the
customer and it has received their approval.
Sale of Support and Cellular Data (UK and Israel Only)
The group also generates monthly recurring revenue for providing
monthly support and maintenance, as well for the supply of cellular
data to enable live video streaming. Revenue for such services is
recognised over the period to which the support and maintenance
services are supplied.
Sale of Support and Cellular Data (UK and Israel Only) -
cont.
Invoices for service, maintenance and cellular data are
submitted to customers on a monthly basis. At the end of the month
the subsidiaries issues an invoice for the service that was
provided
Cost of sales
Cost of sales includes costs of materials, wages and related
benefits, depreciation, and subcontracted work which are
specifically identifiable for products in progress. Other indirect
costs have been proportionately allocated between the various
departments of the Company.
Warranty costs
The Group generally offers a one year warranty for all its
products. The Group recognises a provision for warranty claims
totalling 1.5% of annual sales at the time revenues are recognised,
for estimated material costs during the warranty period.
Property, plant and equipment
Property, plant and equipment are stated at cost less
depreciation. Depreciation is calculated to write down the cost of
all tangible fixed assets by equal monthly instalments over their
estimated useful lives at the following rates:-
Leasehold improvements 10% per annum
Office furniture and equipment 6-15% per annum
Computer equipment 20-33% per annum
Vehicles 15% per annum
Foreign currencies
Transactions in foreign currencies are recorded at the rate
ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at
the rate of exchange ruling at the balance sheet date. The
presentational currency of the Group is the United States Dollar.
The functional currency of the parent company is sterling because
the parent company is based in the United Kingdom and has all its
transactions in that currency. The functional currency of the
subsidiaries is the US Dollar as the majority of revenues are
generated in this currency and the majority of costs are incurred
in dollars. For this reason the group uses the dollar as its
presentational currency.
The exchange rate used at 31 December 2016 was GBP1 = US$1.233
(2015: GBP1 = US$1.476).
Trade and other receivables
Trade and other receivables are recognized initially at fair
value and subsequently measured at amortized cost, less allowance
for doubtful accounts. If collection is expected in one year or
less, they are classified as current assets, if not, they are
presented as non-current assets.
Investments
Investments in subsidiary undertakings are stated at cost less
provisions for impairment.
The available for sale financial asset represents the Group's
investment in a company in China. It was carried at fair value with
changes in fair value recognised in other comprehensive income and
the available for sale reserve. Where there is a significant or
prolonged decline in the fair value of an available for sale asset
which constitutes evidence of impairment, the full amount of the
impairment including any amount previously recognised in other
comprehensive income is recognised in profit or loss. During the
reporting year, the Group wrote off its investment in the company
in China.
Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held
at call with banks, other short-term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within bank loans and overdrafts in
current liabilities on the balance sheet.
Inventories
Inventories are stated at the lower of cost or market value.
Cost is determined as follows:
Raw materials, parts and supplies - using the "First in- First
out" method.
Work in process, finished products: including raw material,
direct labour, subcontracting costs, other direct costs and
overhead costs- on the basis of actual manufacturing costs.
Inventory of customers who have consented to postpone delivery
are not included as inventory of the Company at the balance sheet
date.
Research and development
Expenditure for the development activities of technology used in
the production of systems sold by the Company are capitalised and
presented as an intangible asset in the balance sheet only if all
of the following conditions are met:
-- Development costs of the technology are identifiable and separable.
-- It is probable that the developed technology will generate future economic benefits.
-- The development costs of the technology can be measured reliably.
Development costs meeting these criteria are capitalised and
amortised on a straight-line basis over their useful economic lives
(currently eight years) once the related technology is available
for use.
Software
Intangible assets purchased separately, such as software
licenses that do not form an integral part of related hardware, are
capitalised at cost and amortised over their useful economic
life.
Impairment of tangible and intangible assets
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine whether
there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable
amount of the asset is estimated in order to determine the extent
of the impairment loss (if any). Where the asset does not generate
cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have been adjusted.
Borrowings
Borrowings (including loans, debentures and convertible
debentures) are recognized initially at fair value, net of
transaction costs incurred. The difference, if any, between the
proceeds (net of transaction costs) and the maturity amount is
recognized in the income statements over the period of the
borrowings using the effective interest method.
Post-retirement benefits
The Servision Ltd subsidiary operates defined benefit plans for
the payment of severance pay in accordance with the Severance Pay
Law of Israel at the termination of employment of employee services
for the subsidiary. According to the law in Israel employees are
entitled to receive severance pay in the event that they are fired
or if they retire. The severance is calculated according to the
last month's salary of the employee at the termination period of
services multiplied by the number of years of service at the
subsidiary.
The subsidiary deposits funds for its obligations towards
severance pay for a part of its employees in an ongoing manner to
pension funds and insurance companies and to a general fund
deposited in a banking institution (hereafter the "Plan
Assets").
The calculation of the liabilities, prepared by an authorised
actuary, was established by the use of techniques of an actuarial
estimate which includes established assumptions which include among
other items the capitalisation rate, the expected rate of return on
plan assets, the rate of increase to salaries, and the rate of
employee turnover. There exist material uncertainties for these
estimates since the plan is long-term.
Liabilities for post-employment benefits recorded in the balance
sheets represent the present value of the defined benefit plans
according to the fair value of plan assets. Assets derived from
this calculation are limited to the prior cost of services provided
in addition to the present value of available funds and less future
amounts to be deposited to the plans.
Changes in the post-employment liabilities were attributed,
according to the actuarial report, to salaries and interest
expenses in the profit and loss statement and to actuarial gains or
losses in a separate statement of recognised income and
expenses.
Vacation and recreation benefits
Every employee is legally entitled to vacation and recreation
benefits, both computed on an annual basis. This entitlement is
based on the terms of employment. The Group records a liability and
expense for vacation and recreation pay, based on the benefits that
have been accumulated for each employee.
Provisions
Provisions are recognized when the Group has a present legal or
constructive obligation as a result of a past event; it is probable
that an outflow of resources will be required to settle the
obligation; and the amount can be reliably estimated.
Provisions are measured at present value according to
management's best estimate of the expenditure required to settle
the obligation at the statement of financial position date.
Grants from the Office of the Chief Scientist
Grants were received from the Office of the Chief Scientist
("OCS") in the past to finance research and development costs of
the subsidiary were presented as a long-term loan at the date of
receipt. The loan will be repaid by the payment of royalties to the
Chief Scientist and is calculated as a percentage of sales of the
subsidiary.
Group management reassess the balance repayable at each
reporting date according to their estimates of future sales of
products funded by the OCS funding. These estimates of future sales
are based on demand for, and past sales of, the funded
products.
Share-based payments
The Group grants options to employees and third party suppliers
on a discretionary basis. The cost of granting share options and
other share-based remuneration is recognised through the income
statement with a corresponding increase in other reserves in
equity. The Group uses a Black Scholes model option valuation
model.
Deferred tax
Deferred tax assets are recognised in respect of losses only
where the group considers it probable that taxable profits will be
available against which the losses can be utilised.
Critical accounting estimates and judgments
The Group makes certain estimates and assumptions as it
recognises balances and transactions in the course of the
preparation of the financial statements. Estimates and judgements
are recognised and then continually evaluated based on historical
experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
In the future, actual experience may differ from these estimates
and assumptions. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities are explained below:
Intangible assets - as noted above, the group recognises
Intangible Assets in respect of development assets. Development
costs are capitalised when management consider the chances that a
project will be successful, and both commercially and,
technologically the chances of success are more than probable.
Should the chances of success vary, this judgement would require
reassessment. The director's use their best estimates of the likely
future conditions and were was also assisted by an independent
expert who prepared a report on the company's R&D valuation.
The period of amortisation for the development costs requires the
directors to exercise their judgement as to the period which will
benefit from their profitable exploitation.
Share options - as noted in above, the Group fair values equity
settled share based payments transactions using the Black Scholes
model. The use of the model involves judgements and estimates
including an assessment of whether the shares will vest. Should
actual future outcomes differ from these assessments the amounts
recognised on a straight line basis would vary from those currently
recognised.
Income Recognition - the directors examined the group's income
recognition policies in 2016 to assess their appropriateness. In
particular the directors examined those elements of revenue
recognition policies which may require judgements or estimates. In
assessing the amount of income to recognise in the financial
statements, the directors make judgements in some cases as to the
point at which customers have accepted delivery, either explicitly
or implicitly by their actions, the likelihood of any return and,
where products and services are bundled together the fair value of
each revenue stream.
Bad Debts - the directors are required to examine the trade
receivable balances and exercise their judgement as to the
likelihood of a bad debts arising if settlement has not been made
at the time of approval of the financial statements. In cases of
significant uncertainty on the ability of the Group to collect the
debt a provision is made.
Investments - In determining the carrying value of non-listed
investments the directors are required to make assessments
regarding their value in use and net realisable value, both of
which involve making assessments and judgements on the future which
may not prove to be borne out by future events
Post-employment Benefits - the directors examined the
assumptions and findings included in a report issued by an actuary,
and found them to be appropriate and reasonable.
Warranty costs - as noted above, the group provides for the
costs of meeting warranty claim costs. The allowance is based on
historical experience and currently calculated at 1.5% of sales in
a year. The directors regard this as the best estimate of the costs
that will be incurred in fulfilling warranty claims based on
historical experience. Should actual rates of claims change the
required allowance would need to be increased or decreased
accordingly.
2. BUSINESS SEGMENT ANALYSIS
In identifying its operating segments, management generally
follows the Group's geographical regions, which represent the main
way segments are analysed in the Group.
The measurement policies the Group uses for segment reporting
under IFRS 8 are the same as those used in its financial
statements. Segment assets and liabilities are not reported
internally by management to the Board.
The Group's revenue from external customers is divided into the
following geographical areas, by location of operation.
2 0 2 0
1 6 1 5
$'000 $'000
Europe 1,214 604
Far & Middle East 136 736
North America 530 702
Rest of the world 265 112
2,145 2,154
Sales of systems
and products 2,113 2,122
Sale of software
and other income 32 32
2,145 2,154
All of the Group's non-current assets are held in Israel.
The Group has four customers that accounted for more than 35% of
revenue in 2016 (2015: 37%) one of which is based in North America,
two from Europe and one from the Middle East.
2 0 2 0
3. COST OF SALES 1 6 1 5
$'000 $'000
Materials and parts 1,299 980
Employee benefit expense 232 222
Other costs 57 58
1,588 1,260
2 0 1 2 0 1
4. OPERATING LOSS 6 5
$'000 $'000
The operating loss is stated
after charging/(crediting):
Employee benefit expense (see
below) 1,186 1,039
Exchange rate differences 107 113
Writing-off of investment in 118 -
the company in China
Depreciation and amortisation 704 668
Provision for credit losses 2 531
Operating lease rentals 91 77
Auditors' remuneration
- statutory audit services 22 15
- audit-related assurance services 10 5
Employee benefit expense (including
directors)
Salaries and wages 1,099 987
Social security 73 60
Post-retirement benefits 14 (8)
1,186 1,039
No. No.
The average number of persons
(including directors)
employed by the Group during
the year was as follows: 43 39
$'000 $'000
Director's remuneration
G Tahan 216 208
C Levy 10 10
E T Yanuv 30 30
A Legge 9 -
265 248
E T Yanuv has been granted 30,000 shares in the company under
long term share option incentive schemes. These shares have a term
of ten years and an exercise price of 7p. These remain outstanding
at the year end. The charge to the income statement in the year is
$0 due to the full charge being recognised in prior years.
2 0 2 0
5. INTEREST PAYABLE 1 6 1 5
$'000 $'000
Interest payable and similar
charges on bank loans and
overdrafts 167 154
167 154
6. TAXATION
The Group is controlled and managed by its
Board in Israel. Accordingly, the interaction
of UK domestic tax rules and the taxation
agreement entered into between the U.K. and
Israel operate so as to treat the Company
as solely resident for tax purposes in Israel.
Servision PLC undertakes no business activity
in the UK such as might result in a Permanent
Establishment for tax purposes and accordingly
has no liability to UK corporation tax.
2 0 2 0
1 6 1 5
$'000 $'000
(a) The taxation credit charge:
Deferred tax (3) 2
(b) Factors affecting tax charge for
the period
The tax assessed for the period
is different than the standard
rate of
corporation tax. The differences
are explained below:
Loss on ordinary activities before
taxation (3,050) (2,570)
Multiplied by the standard rate
of corporation tax of 20% (2015:
20.25%) 601 520
Effects of:
Tax losses generated (604) (518)
Current year tax (credit)/charge (3) 2
(c) Factors affecting future
tax charges
The directors believe that the future tax
charge will be reduced by the use of tax losses
carried forward which can be used against
the profits made from the trading activity
in the Israeli subsidiary. Tax losses carried
(d) forward in the Group at 31 December 2016 are
$16,782,000 (2015: $14,340,000). The deferred
tax asset on these losses is not recognised
on the grounds of uncertain recoverability."
Deferred tax
A deferred tax asset is recognised in respect
of United States tax losses carried forward
on the basis that the subsidiary in the United
States is forecast to generate profits in
future periods.
2 0 2 0
1 6 1 5
$'000 $'000
At 1 January 2016 80 82
Credited/(charged) to the income statement 3 (2)
At 31 December 2016 83 80
7. LOSS FOR THE FINANCIAL YEAR
The parent Company has taken advantage of section 408 of the
Companies Act 2006 and has not included its own profit and loss
account in these financial statements. The parent company loss for
the year ended 31 December 2016 was US$ 23,000 (2015: loss US
$3,171,000).
8. LOSS PER SHARE
Basic loss per share is calculated by reference to the loss on
ordinary activities after taxation of $2,942,471 (2015: loss
$2,901,321) and on the weighted average of 126,801,754 (2015:
91,233,375) shares in issue. The calculation of diluted loss per
share is based on the loss on ordinary activities after taxation
and the diluted weighted average of 126,801,754 (2015: 91,233,375)
shares calculated as follows:
Number of shares
31 December 31 December
2 0 1 2 0 1
6 5
Basic weighted average number
of shares 126,801,754 91,233,375
Dilutive potential ordinary shares: - -
Share options
Diluted weighted average
number of shares 126,801,754 91,233,375
9. INTANGIBLE FIXED ASSETS Development
expenditure
Group $'000
Cost or valuation
At 1 January 2015 12,975
Additions 779
At 31 December
2015 13,754
Additions 702
At 31 December
2016 14,456
Amortisation
At 1 January
2015 8,284
Charge in the
year 652
At 31 December
2015 8,936
Charge in the
year 690
At 31 December
2016 9,626
Net Book Value
At 31 December
2016 4,830
At 31 December
2015 4,818
The useful economic life is estimated at 8
years.
10. INVESTMENT IN OTHER COMPANY
The group previously held an investment of 19%
ownership in a company in China (hereafter "the
Other Company in China") which distributed the
Subsidiary's products in China.
During the year the Group recognised an impairment
charge of $118,000 to provide in full against
this investment.
11. TANGIBLE FIXED Office
ASSETS Leasehold furniture
improvements and equipment Vehicles Total
Group $'000 $'000 $'000 $'000
Cost
At 1 January 2015 41 216 66 323
Additions - 5 - 5
At 31 December
2015 41 221 66 328
Additions 3 - - 3
At 31 December
2016 44 221 66 331
Depreciation
At 1 January 2015 37 191 25 253
Charge in the year 3 6 10 19
At 31 December
2015 40 197 35 272
Charge in the year - 4 10 14
At 31 December
2016 40 201 45 286
Net book value
At 31 December
2016 4 20 21 45
At 31 December
2015 1 24 31 56
12. INVESTMENTS $'000
Company
At 31 December 2016 and 31
December 2015 200
At 31 December 2016 the group held 20% or
more of a class of the allotted share capital
of the following:
Proportion Proportion
Country Class Held by Held Nature
Subsidiary of of Servision by of
Incorporation Share Plc Group Business
Capital
Video
Servision Surveillance
Ltd. Israel Ordinary 100% 100% Equipment
Registered office: 11 Hartom St, Har-Hotzvim
Industrial Park, Jerusalem, Israel, 9777511
100% Video
Surveillance
Servision USA Ordinary - Equipment
Inc.
Registered office: Suite #203, 2100 E. Hallandale
Beach Blvd, Miami, FL 33009
Video
Servision Surveillance
UK Limited UK Ordinary 100% 100% Equipment
Registered office: 3000 Aviator Way, Manchester,
England, M22 5TG
2 0 2 0
13. INVENTORIES 1 6 1 5
$'000 $'000
Group
Raw materials 156 215
Work in progress 132 185
Finished goods 216 302
504 702
14. TRADE AND OTHER RECEIVABLES 2 0 1 6 2 0 1 5
Group Company Group Company
$'000 $'000 $'000 $'000
Trade receivables 286 - 899 -
Due from subsidiary - 666 - 321
Other receivables 50 - 83 -
336 666 982 321
2 0 2 0
15. CALLED UP SHARE CAPITAL 1 6 1 5
$'000 $'000
Allotted, called up and
fully paid:
126,801,754 (2015: 126,801,754)
ordinary shares of GBP0.01 each 2,090 2,090
384,615 deferred shares - -
of GBP0.001 each
2,090 2,090
16. SHARE OPTIONS AND WARRANTS
Share options are granted to employees and certain third party
service providers. The Group has no legal or constructive
obligation to repurchase or settle the options in cash.
The options are valued using the Binominal Model option pricing
model and no performance conditions were included in the fair value
calculations.
During the year the Group had the following share options in
issue:
Number of share Exercise Exercise
At 1 January options At 31 December Price Date
2 0 1
6 Expired Granted Exercised 2 0 1 6 (pence)
31.12.21
817,500 - - - 817,500 7 - 31.12.24
1,210,653 - - - 1,210,653 10.74 13.08.2018
2,078,197 - - - 2,078,197 4.81 08.04.2017
6,346,154 - - - 6,346,154 10.4 01.05.2017
1,139,549 - - - 1,139,549 3.5 13.10.2020
1,910,828 1,910,828 - - - 0.523 11.08.2016
13,502,881 1,910,828 - - 11,592,053
8,424,351 of the options expired after the balance sheet
date.
1,139,549 were exercised after the balance date, at an exercise
price of 3.5 pence per share.
The proceeds realisable by the Company from this warrant
exercise are GBP39,884 and have been
received by the Company.
In addition, YA II PN Ltd has an outstanding loan with the
Company, further details which were most recently announced on 8
July 2016. The amount outstanding in relation to the loan is
currently $475,000 and the current repayment schedule envisages the
balance being paid in full by July 2017. As previously announced on
8 July 2016 the loan is capable of conversion into new ordinary
shares in the Company at a conversion price of no less than 3
pence. The Company and YA II PN Ltd have agreed that, save in the
circumstances whereby the Company fails to meet its repayment
obligations under the loan agreement, YA II PN Ltd will not
exercise its conversion rights under the loan agreement.
The primary assumptions which have been used in the calculations
of the fair value of the Options are:
(a) Value of the Parent Company's ordinary share of 4.75p
(b) Variable standard deviation of 66% to 135%
(c) Average risk free rate of interest of 0.3%
(d) Annual dividend yield 0%
17. TRADE AND OTHER PAYABLES 2 0 1 6 2 0 1 5
Group Company Group Company
$'000 $'000 $'000 $'000
Trade payables 419 - 362 -
Other taxes and social
security 32 - 19 -
Other payables 607 - 310 -
Accruals and deferred
income 227 73 164 60
1,285 73 855 60
2 0 1 2 0 1
18. LOANS AND BORROWINGS 6 5
$'000 $'000
Group
Bank overdraft 345 139
Other loan 909 526
Bank loans: amounts
due within one year 250 374
Current liability 1,504 1,039
Non-current liabilities: Other
loan, due within 2 to 5 years 1,233 108
Non-current liabilities: Bank
loans, due within 2 to 5 years 7 147
Noncurrent liabilities 1,240 255
Total bank loans
and overdrafts 2,744 1,294
2 0 1 2 0 1
Company 6 5
$'000 $'000
Other loan 666 321
The other loan included in current liabilities
was received in 2015 and 2016, and stated
net of transaction costs. The total available
facility under the loan agreement is up to
GBP3m as detailed in the announcement released
by the Company on 8 July 2016.
The lender originally has the right to convert
the loan into Ordinary shares, by giving appropriate
notice, at a price equal to 80% of the trading
price at the end of the day of conversion.
On 8 July 2016, the Company and the lender
entered into in a deed of amendment (the "Deed
of Amendment"), whereby the lender agreed
to lend to the Company up to a maximum aggregated
amount of GBP3m.
In addition the agreement was amended to extend
the commitment period by one year to 11 November
2017.
The interest rate payable on the outstanding
amount of the loan is 12% per annum.
The new repayment schedule for the principal
amount drawn down on July 2016 under the loan
agreement is 12 monthly instalments together
with accrued interest until July 2017.
The state guaranteed bank loan that the Group's
Israeli subsidiary received from a banking
institution is repayable in 55 equal monthly
instalments to December 2018, bears interest
at prime plus 1.8% (prime rate as of 31 December
2015 - 1.6%) and is guaranteed by the Parent
Company. The loan is due as follows:
Year $'000
2018 7
7
======
Included within Non-current liabilities is
a loan of US $104,000 (2015: $108,000) from
G. Tahan, a director. The loan is unsecured
and is due in more than one year.
Included within Non-current liabilities is
a loan of US $1,188,000 from G. Sassoon, a
director. The loan is unsecured and is due
in more than one year.
Included within current liabilities is a short
term loan of US $222,750 from CSS ALPHA. The
loan is due within one year.
Included within current liabilities is a short
term loan of US $206,000 (2015: $205,000)
from G. Tahan. The loan is unsecured and due
within one year.
19. OPERATING LEASES
The Group leases business premises in Israel, USA and UK under
operating lease agreements. The lease expenditure charged to the
income statement during the year is disclosed in note 4.
2 0 2 0
1 6 1 5
$'000 $'000
The future aggregate minimum lease
payments under
operating leases are as follows:-
No later than 1 year 127 140
20. POST EMPLOYMENT BENEFITS
Labour laws and severance laws in Israel obligate
the Company to pay severance pay to employees in
the event that they are fired or if they retire.
The severance is calculated for employee benefits
according to valid employment contracts and upon
the salary of the employees which according to
management creates the entitlement to receive severance.
Plan assets include funds deposited to managers'
insurance policies and to a central severance fund
deposited in a banking institution.
2 0 1 2 0
6 1 5
$'000 $'000
Net obligations 293 279
Expenses for defined benefits
plan:
Cost of current service
fees 61 57
Interest expense for obligations 17 15
Expected return on plan
assets (7) (5)
Severance paid (72) (89)
Actuarial loss, net 6 9
Total expenses included
in statement of operations 5 (13)
Activities at fair value for defined
benefits plan:
Balance at beginning of year 280 287
Interest expense 17 15
Cost of current service fees 62 57
Severance paid (72) (89)
Actuarial loss, net 6 9
Balance at end of year 293 279
2 0 1 2 0
6 1 5
$'000 $'000
Primary assumptions in establishing
obligations
Capitalisation rate of obligations 3,80% 3.91%
Expected real rate of return for
plan assets 2,46% 2.11%
21. FINANCIAL RISK MANAGEMENT
The Group's activities give rise to a number of financial risks:
market risk, credit risk and liquidity risk. Market risk includes
foreign exchange risk, liquidity risk, and fair value interest rate
risk. The Group has in place risk management policies that seek to
limit the adverse effects on the financial performance.
Foreign exchange risk
Most of the Group's sales and income are in US dollars; however
the expenses are divided between the US dollar and the Israeli
Shekel. The cost of goods (components) are paid in dollars and part
of the operational costs such as rent and other service providers
quote their fees in dollars. Labour costs however are paid in
Israeli Shekels. The Group has therefore a partial currency risk in
the event the Israeli shekel is strengthened against the US dollar
that could influence the bottom line of the Group's financial
results.
The Group is subscribed to a weekly circular from the two
Israeli main banks regarding the main financial institutions
expectations for foreign currency changes. The management reviews
them carefully and will consider with the board weather it should
purchase financial instruments sold by local banks, to protect
itself from this foreign exchange risk.
Financial Risk Management Objectives
The Group's management monitors and manages the financial risks
relating to the operations of the Group through internal risk
reports which analyse exposures by degree and magnitude of risks.
These risks include market risk (including currency risk, fair
value interest rate risk and price risk), credit risk, liquidity
risk and cash flow interest rate risk.
(a) Liquidity risk
The Group manages its liquid resources so as to obtain the best
available rates of return on cash investments, whilst retaining
access to those resources. Cash that is not needed for short term
requirements is deposited for periods of one month (or more), based
on the Directors' assessment of prevailing interest rate trends,
the interest rates available and the liquid resource requirements
of the Group. In addition, cash is placed on instant access deposit
with the Group's bankers, which is available for shorter-term
requirements.
The following table sets out the contractual maturities of
financial liabilities:
Less 3 to More
Total than 2 to 12 months than
2 months 3 months 1 year
$'000 - 2016
Trade and other
payables 1,285 1,285 - - -
Loans from the
office of the chief
scientist 173 - - 173 -
Loans and overdrafts 2,744 498 36 1,654 556
Post-employment
benefits 293 - - - 293
--------- ----- --- ----- ------------
Total 4,495 1,783 36 1,827 849
$'000 - 2015
Trade and other
payables 855 855 - - -
Loans from the
office of the chief
scientist 173 - - 173 -
Loans and overdrafts 1,294 170 62 807 255
Post-employment
benefits 279 - - - 279
----- ----- --- ----- ---
Total 2,601 1,025 62 980 534
(b) Interest rate risk
The Company, nor any of its subsidiaries, has any debt subject
to rate indexation. Hence there is no major impact on our finances
from potential rate variations.
(c) Currency risk
The Company has not implemented a specific policy to protect
against currency fluctuations. The fact that the Group is trading
in the three main international currencies could have a negative
impact. The Group subscribes to a weekly circular from the two
Israeli main banks regarding the main financial institutions
expectations for foreign currency changes. The management reviews
them carefully and will consider with the board whether it should
purchase financial instruments sold by local banks, to protect
itself from this foreign exchange risk.
(d) Credit risk management
The Group is exposed to credit risks if its customers fail to
pay for goods supplied by the Group. In order to minimise this risk
the Company has a policy of:
-- Selling only to respectable integrators and distributors.
-- Orders from customers in certain regions are shipped only
after an approved letter of credit is received by the group's
bank.
-- Ongoing customers must pay 50% before shipping.
-- Only high rated customers receive credit from the group
The group's maximum exposure to credit risk is $336,000 (2015:
$982,000) represented by Trade and other receivables.
The table below analyses by age the group's trade receivables
which are past due as at the end of the reporting date but are not
impaired
$'000 Total Current 30 days 60 days 90 days
past past past due
due due
2015 982 553 84 93 252
2016 336 188 29 32 87
Financial instruments
The Group does not use derivative financial instruments but has
bank loans. The Group finances its operations simply using bank
balances, plus debtors and creditors. The cash flow is regularly
monitored.
Capital risk management
The Group manages its cash carefully. In order to reduce its
risk, the Group may take measurements to reduce its labour costs if
performance is below the Group's expectations.
Significant accounting policies
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of each class of financial asset, financial
liability and equity instrument are disclosed in note 1 to the
financial statements.
Accounting policies for financial instruments are applied on the
following Balance Sheet items:
All of the Group's liabilities have been classified as other
financial liabilities. The Group does not have assets or
liabilities which are classified as 'Assets or Liabilities at Fair
value through profit and loss.
Fair value of financial instruments
The fair values of financial assets and financial liabilities
with standard terms and conditions and traded on active liquid
markets is determined with reference to quoted market price.
The fair value of other financial assets and financial
liabilities (excluding derivative instruments) is determined in
accordance with generally accepted pricing models based on
discounted cash flow analysis using prices from observable current
market transactions and dealer quotes for similar instruments.
The Group applied the following methods and assumptions during
the estimation of fair value of financial instruments:
Receivables and deposits at banks
For assets which mature within 3 months, carrying value is
similar to fair value due to shortness of these instruments. For
longer-term assets, contracted interest rates do not significantly
defer from current market interest rates, and due to that their
fair value is similar to its carrying value.
Loan liabilities
Fair value of short term liabilities is similar to its carrying
value due to the short term nature of these instruments. For long
term liabilities, contracted interest rates do not significantly
differ from current market interest rates, and due to that their
fair value is similar to their carrying value.
Other financial instruments
Financial instruments of the Group which are not valued at fair
value are trade accounts receivable, other receivables, trade
accounts payable and other payables. Historic carrying value of
assets and liabilities, including the provisions, which are in
accordance with the usual business conditions, is similar to their
fair value.
22. CAPITAL MANAGEMENT
As part of its capital management process group management
monitor "adjusted capital" which comprises all components of equity
(i.e. share capital, share premium, share options, other reserves,
and retained earnings) and debt finance.
Management objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going concern;
-- To provide sufficient working capital to meet trading needs;
-- To allow the group to structure itself in order to position
itself for future growth and therefore to take advantage of
strategic opportunities as they arise so the group can generate
future returns for shareholders and benefits for other
stakeholders.
The Group sets the amount of capital it requires in proportion
to risk. The Group manages its capital structure and makes
adjustments to it in the light of changes in economic conditions
and the risk characteristics of the underlying assets. In order to
optimise, maintain or adjust the capital structure, the Group may
obtain new or repay existing debt instruments, issue new shares, or
sell assets to reduce debt.
There have been no changes to the Group's
capital management processes in the year under
review
23.
ULTIMATE CONTROLLING PARTY
The Directors do not believe there to be an ultimate controlling
party.
24. RELATED PARTY TRANSACTIONS
Included within non-current liabilities is a loan of US $104,000
(2015: $108,000) from G. Tahan, a director. The loan is unsecured
and is due in more than one year.
Included within Non-current liabilities is a loan of US
$1,188,000 from G. Sassoon, a director. The loan is unsecured and
is due in more than one year and attracts interest at 6%.
Included within current liabilities is a short term loan of US
$206,000 (2015: $205,000) from G. Tahan. The loan is unsecured and
due within one year.
25. STANDARDS ISSUED BUT NOT YET EFFECTIVE
Standards issued but not yet effective up to the date of
issuance of the company's financial statements are listed below.
This listing is of standards and interpretations issued, which the
company reasonably expects to be applicable at a future date. The
company intends to adopt those standards when they become
effective. The company does not expect the impact of such changes
on the financial statements to be material.
-- IFRS 15 Revenue Recognition (effective from 1 January 2018).
-- IFRS 16 Leases (effective from 1 January 2019).
The remaining standards in issue but not yet effective are not
deemed to have a material impact on the group.
The directors anticipate that the adoption of these Standards
and Interpretations in future periods will have no material impact
on the financial statements of the Group.
26. RESERVES
Details of movements in reserves are set out in the consolidated
statement of changes in equity (p16).
The following describes the nature and purpose of each reserve
in equity:
-- Share premium - Amounts subscribed for share capital in excess of nominal value
-- Merger Reserve - Difference between the cost of investment
and nominal value of Share Capital under Merger accounting
-- Other reserve - Amount relating to equity based share options
-- Retained Earnings - Cumulative net gains and losses recognised in the income statement
-- Translation reserve - Gains and losses from the retranslation
of net assets of overseas operations into US dollars.
27. POST YEAR END EVENTS
In February 2017, the company secured $2 million of new capital
from Cascade SVP, LLC, a US based investment fund. Cascade agreed
to subscribe for 14,089,084 ordinary shares of 1p each in the
capital of the Company at a price of approximately 11.4 pence per
Subscription Share, which was a significant premium to the closing
mid-market price on 21 February 2017 and which values the Company
at approximately GBP14.4 million.
The proceeds of the Subscription, which were received in
February 2017 and May 2017, have been used to provide working
capital to finance the increasing number of global opportunities
for selling the IVG40-N product, particularly into the bus and
coach market, as well as to reduce its debt position.
In addition to the $2 million subscription, Cascade have been
granted an option to invest up to a further $4 million, in two
equal tranches, at the same Company valuation. The first option
period runs until 20 October 2017, with an option price per share
of approximately 10.2p per share, and the second option period runs
until 29 September 2018, with an option price per share of
approximately 9.3p per share.
A condition of the Subscription is that if the Company's shares
are not listed on either the Main Market of the London Stock
Exchange or on Nasdaq, or if the Company has not been sold for a
price higher than the Issue Price, before 21 February 2019, then
any new capital raised by the Company thereafter must first be used
to buy back the Subscription Shares, together with any new ordinary
shares issued pursuant to the Options, that are still held by
Cascade at the same price(s) as they were issued. Such a buy back
would require the Company to have sufficient distributable
reserves, which may involve a capital reduction, and would also
require shareholder approval.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BDGDLGBXBGRG
(END) Dow Jones Newswires
June 30, 2017 08:30 ET (12:30 GMT)
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