RNS Number:1124T
Visual Defence Inc.
25 April 2008
Visual Defence Inc.
("Visual Defence" or the "Company")
Final Results for the Year Ended 31 December 2007
RICHMOND HILL, ONTARIO - April 25, 2008 - Visual Defence Inc. (LSE:VDI), today
releases its final financial results for the year ended 31 December 2007. All
dollar amounts are in Canadian Dollars.
Highlights
Visual Defence has continued to improve its financial performance in 2007:
* revenue growth of 43% over 2006 to $28.37 million
* a reduction in net losses to $3.7 million down from net losses of $6.7
million in 2006;
* full year operating losses, before stock based compensation, amortization
and depreciation, reduced to $1.68 million compared with $3.62 million in
the prior year; and
* cash and cash equivalents increased to $15.1 million.
Visual Defence signed a new agreement to provide passenger and cargo security
services at the Abidjan Airport in Cote D'Ivoire. This new 25 year
build-operate-transfer contract, established though our 50% owned subsidiary,
Avisecure, represents a key milestone for the Company.
For further information, please contact:
Visual Defence Inc +1 905 731 1254
Barry Tal, Chairman & CEO
Bill Watson, Chief Financial Officer
KBC Peel Hunt Ltd (Nominated Adviser & +44 (0) 20 7418 8816
Broker)
David Anderson
About Visual Defence
Visual Defence provides advanced solutions that manage mission critical systems
for leading organizations around the world. The Company provides government,
airport, public transportation and commercial customers with public safety and
security solutions that increase management efficiency while leveraging existing
security infrastructure. With its Common Management Platform, Visual Defence
provides customers with customizable and scaleable solutions that meet their
business goals. Visual Defence is headquartered in Canada. Additional
information is available at http://www.visualdefence.com
Chairman's Review
Revenue Growth
We have added new contracts to the Company's revenue base as well as expanding
revenue from existing clients. Our new agreement to provide passenger and cargo
security services to Abidjan Airport in Cote D'Ivoire through our 50% owned
subsidiary, Avisecure, represents a key milestone in the company's objective to
increase revenue from recurring service and maintenance agreements. This 25 year
build-operate-transfer contract will utilize the Company's industry leading
technology and practices to substantially improve passenger and airline safety
and contribute to economic development in the region.
Additionally, new orders from Stockholm LokalTrafik (SL), including an
additional 250 IP intercom help phone units, have helped to provide substantial
revenue growth in 2007 and lay the foundation for solid growth in 2008 and
beyond.
In the public sector, we have won an important contract in Canada to deliver
advanced intelligent transportation solutions to a Montreal area transit
organization. The $2.6 million contract is our first major public transit win in
the Province of Quebec.
Installations of our homeland security focused access control and intrusion
detection systems reached a milestone with approximately 3500 installations in
US military armories. Additionally, we have increased our book of business with
the Israel Ministry of Defence with additional revenues in 2007 and orders for
2008.
Financials
I am pleased with the growth in revenues for the Company, up 43% to $28.4
million over the prior year. Gross margins declined slightly over the year to
33% as business generated outside of Canada was negatively influenced by the
strength of the Canadian dollar. The mix of revenues related to lower margin
hardware sales has also negatively influenced gross margins.
Cash and cash equivalents increased to $15.1 million from $14.7 million in the
prior year, with the increase generated primarily from operating activities.
Gross Profit increased to $9.4 million in 2007 versus $6.9 million in the prior
year, due to increased revenues. Controllable expenses in research and
development, sales and marketing and general and administrative overhead were
reduced versus the prior year, however sufficient investment in key areas has
been maintained in order to provide the foundation for growth in future years.
Product Development
The Company's IP centric products and platforms provide our customers with
leading edge solutions. The integration of our DVSSm mobile video recording
solution with our Virtual Matrix System provides customers with an integrated
solution to handle mobile video including remote tagging and downloading of key
video events. The success of this device was recognized by the industry as the
DVSSm was a finalist for Product of the Year at the 2007 IFSEC show.
Our Command and Control Center platform, 3C, continued its enhancement
development plan with the release of version 2.0, increasing the capability of
the system to handle up to 100,000 events or alarms per day. The 3C was built
specifically for large campus and enterprise wide installations that have
extensive alarm and subsystem requirements.
Project Deployment
The continued deployment of Visual Defence's technology across the globe has
resulted in:
* the installation of our video management platform at Terminals 2,3,4 and
the newly commissioned T5 of London Heathrow airport managed by BAA;
* new installations with Air Canada and the Canadian Border Service Agency
at Pearson Airport in Toronto;
* the delivery and installation of 100 3C systems (video, event management
and mapping) at Stockholm transit stations;
* and the current deployment of over 2,000 DVSSm storage devices on busses
also in Stockholm.
Outlook
2008 will see the full implementation of our security project in the Cote
D'Ivoire, completion of first stage of our intelligent transport system in
Quebec, and the installation of our new video intercom help phone system in
Stockholm. We will continue to focus on revenue growth in all key markets and
segments, and will look to reduce controllable costs appropriately whilst
maintaining solid investments in new product development, product enhancement
and our sales network. The markets for our solutions and services continues to
strengthen worldwide and the Board is optimistic that the company is well
positioned to take advantage of this growth.
Barry (Oved) Tal, Chairman of the Board
Auditors' Report
To the Shareholders of
Visual Defence Inc.
We have audited the consolidated balance sheet of Visual Defence Inc. as at
December 31, 2007 and 2006 and the consolidated statements of income (loss),
changes in equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2007
and 2006 and the results of its operations and its cash flows for the years then
ended, in accordance with International Financial Reporting Standards.
Chartered Accountants, Licensed Public Accountants
Toronto, Ontario
April 14, 2008
Visual Defence Inc.
Consolidated Financial Statements
For the year ended December 31, 2007
(In Canadian dollars)
Index
Page
Consolidated Balance Sheets 2
Consolidated Statements of Recognized Income and Expense 3
Consolidated Statements of Changes in Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-31
+-----------------------------------------------------------------------------+
| Visual Defence Inc.|
+-----------------------------------------------------------------------------+
| |
| |
| |
| Consolidated Balance Sheets|
+-----------------------------------------------------------------------------+
| Canadian dollars in thousands|
+-----------------------------------------------------------------------------+
| |
+-----------------------------------------------------------------------------+
|December 31 2007 2006 |
+-----------------------------------------------------------------------------+
| |
+----------------------------------------+------+--+----------+-----+---------+
| | Note | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|ASSETS | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|CURRENT ASSETS: | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|Cash and cash equivalents | | | $5,274| | $399|
+----------------------------------------+------+--+----------+-----+---------+
|Available for sale securities | 5 | | 7,592| | 13,501|
+----------------------------------------+------+--+----------+-----+---------+
|Trade receivables | 6 | | 9,564| | 12,500|
+----------------------------------------+------+--+----------+-----+---------+
|Other accounts receivable and prepaid | 7 | | 813| | 755|
|expenses | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|Inventories | 8 | | 1,149| | 1,498|
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | 24,392| | 28,653|
+----------------------------------------+------+--+----------+-----+---------+
|NON-CURRENT ASSETS: | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|Restricted cash | | | 2,325| | 750|
+----------------------------------------+------+--+----------+-----+---------+
|Property and equipment | 9 | | 1,355| | 1,221|
+----------------------------------------+------+--+----------+-----+---------+
|Other intangible assets | 10a | | 2,821| | 3,503|
+----------------------------------------+------+--+----------+-----+---------+
|Goodwill | 10b | | 7,835| | 7,835|
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | 14,336| | 13,309|
+----------------------------------------+------+--+----------+-----+---------+
|Total assets | | | $38,728| | $41,962|
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|LIABILITIES AND EQUITY | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|CURRENT LIABILITIES: | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|Trade payables | | | $3,589| | $3,588|
+----------------------------------------+------+--+----------+-----+---------+
|Other accounts payable and accrued | 11 | | 2,425| | 2,261|
|expenses | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | 6,014| | 5,849|
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|EQUITY: | 12 | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|Share capital | | | -| | -|
+----------------------------------------+------+--+----------+-----+---------+
|Additional paid-in capital | | | 51,609| | 50,886|
+----------------------------------------+------+--+----------+-----+---------+
|Foreign currency translation adjustments| | | (462)| | (42)|
+----------------------------------------+------+--+----------+-----+---------+
|Accumulated deficit | | | (18,433)| | (14,731)|
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | 32,714| | 36,113|
+----------------------------------------+------+--+----------+-----+---------+
|Total liabilities and equity | | | $38,728| | $41,962|
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|The accompanying notes are an integral part of the consolidated | |
|financial statements. | |
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|The financial statements were approved and authorized for issue by Board of |
|directors on April 2008 |
| |
|and were signed on its behalf by: |
+----------------------------------------+------+--+----------+-----+---------+
| | | | | | |
+----------------------------------------+------+--+----------+-----+---------+
|Bill Watson Dagan Sadeh Barry (Oved) Tal |
+-----------------------------------------------------------------------------+
|Chief Financial Officer Chief Executive Officer Chairman of the Board of |
|Directors |
+-----------------------------------------------------------------------------+
+--------------------------------------------------------------------------------+
| Visual Defence Inc.|
+--------------------------------------------------------------------------------+
| |
| |
| |
| Consolidated Statements of Income (Loss)|
+--------------------------------------------------------------------------------+
| Canadian dollars in thousands (except share and per share data)|
+--------------------------------------------------------------------------------+
| |
+--------------------------------------------------------------------------------+
|December 31 2007 2006 |
+--------------------------------------------------------------------------------+
| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
| | Note | | | | | |
+--------------------------------------+-------+--+-----------+-----+----------+-+
| | | | | | | |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Revenues | 19 | | $28,368| | $19,868| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Cost of revenues | 13 | | 18,966| | 12,920| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Gross profit | | | 9,402| | 6,948| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
| | | | | | | |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Operating expenses: | | | | | | |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Research and development | 13 | | 2,227| | 3,147| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Selling and marketing | 13 | | 5,442| | 5,850| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|General and administrative | 13 | | 5,285| | 5,708| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Total operating expenses | | | 12,954| | 14,705| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
| | | | | | | |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Operating (Loss) | | | (3,552)| | (7,757)| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
| | | | | | | |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Interest Income | | | 562| | 792| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Financial expenses | | | (39)| | (35)| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Foreign exchange gain (loss) | | | (673)| | 350| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Net (loss) | | | ($3,702)| | ($6,650)| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|Basic and diluted (loss) per share | | | ($0.05)| | ($0.09)| |
+--------------------------------------+-------+--+-----------+-----+----------+-+
| | | | | | | |
+--------------------------------------+-------+--+-----------+-----+----------+-+
|The accompanying notes are an integral part of the consolidated | | |
|financial statements. | | |
+-------------------------------------------------------------------+----------+-+
+---------------------------------------------------------------------------------------------------+
| Visual Defence Inc..|
+---------------------------------------------------------------------------------------------------+
| |
| |
| |
| Consolidated Statements of Changes in Equity|
+---------------------------------------------------------------------------------------------------+
| Canadian dollars in thousands (except share data)|
| |
| |
+---------------------------------------------------------------------------------------------------+
| |
+---------------------+---------------------+--+------------+-+------------+-+------------+-+-------+
| | Common shares | | | | | | | | |
| | | | | | | | | | |
| | | | Additional | | Foreign | | Retained | | |
| | | | paid-in | | currency | | earnings | | |
| | | | capital | |translation | |(accumulated| | Total |
| | | | | |adjustments | | deficit) | |equity |
+---------------------+----------+--+-------+--+ +-+ +-+ +-+ |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| |Number of | | Share | | | | | | | | |
| | shares | |capital| | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Balance as of 1 |70,453,487| | -| | $47,916| | $48| | ($8,081)| |$39,883|
|January 2006 | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Net loss | -| | -| | -| | -| | (6,650)| |(6,650)|
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Foreign currency | -| | -| | -| | (90)| | -| | (90)|
|translation | | | | | | | | | | | |
|adjustments | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Total recognized | | | | | | | (90)| | (6,650)| |(6,740)|
|(loss) for the year | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Issuance of Common | 102,608| | -| | 1| | -| | -| | 1|
|shares upon exercise | | | | | | | | | | | |
|of share options | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Share-based | -| | -| | 2,969| | -| | -| | 2,969|
|compensation | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Balance as of 31 |70,556,095| | -| | 50,886| | (42)| | (14,731)| | 36,113|
|December 2006 | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Net loss | -| | -| | -| | -| | (3,702)| |(3,702)|
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Foreign currency | -| | -| | -| | (420)| | -| | (420)|
|translation | | | | | | | | | | | |
|adjustments | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Total recognized | | | | | | | (420)| | (3,702)| |(4,122)|
|(loss) for the year | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Issuance of Common | 90,000| | -| | 1| | -| | -| | 1|
|shares upon exercise | | | | | | | | | | | |
|of share options | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Share-based | -| | -| | 722| | -| | -| | 722|
|compensation | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
|Balance as of 31 |70,646,095| | $0| | $51,609| | ($462)| | ($18,433)| |$32,714|
|December 2007 | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | | | | | | | | |
+---------------------+----------+--+-------+--+------------+-+------------+-+------------+-+-------+
| | | | | |
+-------------------------------+---------+--+---------+--+-----------+--+-+++--+---------+-+-------+
| | | | | | | | | | | | |
+-------------------------------+---------+--+---------+--+-----------+--+-+++--+---------+-+-------+
|The accompanying notes are an integral part of the consolidated financial | | | | |
|statements. | | | | |
+---------------------+---------++--+-----+-++-+-------+--+-+-+-------+--+-+++--+---------+-+-------+
+---------------------+---------++--+-----+-++-+-------+--+-+-+-------+--+-+++--+---------+-+-------+
+-------------------------------------------------------------------------------+
| Visual Defence Inc.|
+-------------------------------------------------------------------------------+
| |
| |
| |
| Consolidated Statements of Cash Flows|
+-------------------------------------------------------------------------------+
| Canadian dollars in thousands|
| |
| |
| |
| For the year ended 2007 2006|
+-------------------------------------------------------------------------------+
| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Cash flows from operating activities: | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Net (loss) | ($3,702)| | ($6,650)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Adjustments to reconcile net loss to net cash used| | | | |
| |in operating activities: | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Depreciation and amortization | 1,155| | 1,166| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Share-based compensation expenses | 722| | 2,969| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Deferred taxes | -| | -| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Decrease (increase) in accounts receivable | 2,936| | (8,819)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Increase in other accounts receivable and prepaid | (58)| | (458)| |
| |expenses | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Decrease (increase) in inventories | 349| | (193)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Increase in trade payables | 1| | 2,144| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Increase in other accounts payable and accrued | 164| | 1,328| |
| |expenses | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Net cash provided by (used in) operating | 1,567| | (8,513)| |
| |activities | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Cash flows from investing activities: | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Purchase of property and equipment | (659)| | (402)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Proceeds from disposal of property and equipment | 16| | 8| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Acquisition of Emergent Systems Corp | -| | (33)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Restricted cash | (1,575)| | (750)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Proceeds from (investment in) available for sale | 5,909| | (7,150)| |
| |securities | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Net cash provided by (used) in investing | 3,691| | (8,327)| |
| |activities | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Cash flows from financing activities: | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Settlement of loan from shareholder | -| | (3,500)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Proceeds from issuance of Common shares upon | 1| | -| |
| |exercise of options | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Net cash (used in) provided by financing | 1| | (3,500)| |
| |activities | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Effect of exchange rate differences on cash and | (384)| | (90)| |
| |cash equivalents | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |(Decrease) Increase in cash and cash equivalents | 4,875| | (20,430)| |
+-+--------------------------------------------------+----------+--+----------+-+
| |Cash and cash equivalents at the beginning of the | 399| | 20,829| |
| |period | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| | | | | | |
+-+--------------------------------------------------+----------+--+----------+-+
| |Cash and cash equivalents at the end of the period| $5,274| | $399| |
+-+--------------------------------------------------+----------+--+----------+-+
| | | |
+-+---------------------------------------------------------------------------+-+
| |The accompanying notes are an integral part of the consolidated financial | |
| |statements. | |
+-+--------------------------------------------------+----------+--+----------+-+
+-+--------------------------------------------------+----------+--+----------+-+
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 1: GENERAL
Visual Defence Inc ("VDI" or "the Company") having its principal place of
business at 9225 Leslie Street, Suite 7, Richmond Hill, ON L4B3H6, Canada was
incorporated on 22 February 2005 in Ontario Canada. The Company provides
security systems using digital Audio-Visual (AV) signals transmitted over
wireless and physical IP networks, enabling digital AV and data to be captured
from a variety of sources, such as fixed or mobile cameras, microphones,
infra-red sensors, access controls and burglar alarms, and delivered to local or
remote locations where it can be managed and monitored.
NOTE 2: SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Company have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by the IASB. The
significant accounting policies applied in the financial statements, on a
consistent basis, are as follows:
a. Presentation currency:
The Company has determined that the Canadian dollar is the currency of the
primary economic environment in which the Company operates, and thus is the
presentation currency for the consolidated financial statements.
Accordingly, transactions in currencies other than the Canadian dollar are
translated into Canadian dollars at the exchange rate on the transaction date
and monetary assets and liabilities in currencies other than the Canadian dollar
are translated into Canadian dollars at the exchange rate at the balance sheet
date, in accordance with International Accounting Standard No. 21, "The Effects
of Changes in Foreign Exchange Rates". All translation differences are reflected
in the consolidated statements of income as financial income or expenses, as
appropriate.
For those subsidiaries whose functional currency has been determined to be their
local currency, assets and liabilities are translated at balance sheet date
exchange rates and income and expenses are translated at average exchange rates
prevailing during the period. Foreign currency translation adjustments are
recorded as a separate component of equity in the foreign currency translation
adjustments reserve.
b. Principles of consolidation:
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Intercompany balances and transactions are eliminated upon
consolidation. Subsidiaries are consolidated from the date of acquisition, being
the date on which control is obtained. The Company's subsidiaries are:
Entity 2007 2006
Visual Defence (USA) 100% 100%
Inc.
Visual Defence (Israel) 100% 100%
Inc.
Visual Defence UK 100% -%
c. Business combinations:
Business combinations in these financial statements are accounted for in
accordance with IFRS No. 3 "Business Combinations". Upon acquisition, the
identifiable assets and liabilities acquired are initially measured at their
fair values at the acquisition date.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
d. Joint venture
Joint venture arrangements that involve the establishment of a separate entity
in which each venturer has an interest are referred to as jointly controlled
entities. The Company reports its interests in jointly controlled entities using
proportionate consolidation. The Company's share of the assets, liabilities,
income and expenses of jointly controlled entities are combined with the
equivalent items in the consolidated financial statements on a line-by-line
basis.
Where the Company transacts with its jointly controlled entities, unrealized
profits and losses are eliminated to the extent of the Company's interest in the
joint venture.
e. Goodwill
Goodwill on acquisition is initially measured at cost, being the excess of the
cost of the business combination over the acquirer's interest in net fair value
of the identifiable assets, liabilities and contingent liabilities. Following
initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill is not amortized and is reviewed for impairment
annually or more frequently if events or changes in circumstances indicate that
the carrying value may be impaired.
f. Cash equivalents:
The Company considers short-term highly liquid investments that are readily
convertible into cash, purchased with maturities of three months or less, to be
cash equivalents.
g. Restricted cash:
Restricted cash represents the short term deposits assigned to the bank for
operating line of credit.
h. Financial assets:
The Company classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. The Company
has not classified any of its financial assets as held to maturity.
Other than financial assets in a qualifying hedging relationship, the Company's
accounting policy for each category is as follows:
Fair value through profit or loss: This category comprises only in-the-money
derivatives. They are carried in the balance sheet at fair value with changes in
fair value recognized in the consolidated income statement in finance income or
expense line. Other than derivative financial instruments which are not
designated as a hedging instrument, the Company does not have any assets held
for trading nor does it voluntarily classify any financial assets as being at
fair value through profit or loss. At the year end the Company has not
classified any financial asset at fair value through profit or loss.
Loans and receivables: These assets are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to customers (e.g.
trade receivables), but also incorporate other types of contractual monetary
asset. They are initially recognized at fair value plus transaction costs that
are directly attributable to their acquisition or issue, and are subsequently
carried at amortized cost using the effective interest rate method, less
provision for impairment.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
Impairment provisions are recognized when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default or
significant delay in payment) that the Company will be unable to collect all of
the amounts due under the terms receivable, the amount of such a provision being
the difference between the net carrying amount and the present value of the
future expected cash flows associated with the impaired receivable. For trade
receivables, which are reported net, such provisions are recorded in a separate
allowance account with the loss being recognized within administrative expenses
in the income statement. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the
associated provision.
The Company's loans and receivables comprise trade and other receivables and
cash and cash equivalents in the balance sheet.
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.
Available-for-sale: Non-derivative financial assets not included in the above
categories are classified as available-for-sale and comprise principally the
Company's strategic investments in entities, not qualifying as subsidiaries,
associates or jointly controlled entities as well as corporate bonds. They are
carried at fair value with changes in fair value recognized directly in a
separate component of equity (available for- sale reserve) other than exchange
differences on corporate bonds denominated in foreign currency, which are
recognized in profit or loss. Where there is a significant or prolonged decline
in the fair value of an available for sale financial asset (which constitutes
objective evidence of impairment), the full amount of the impairment, including
any amount previously charged to equity, is recognized in the income statement.
Purchases and sales of available for sale financial assets are recognized on
settlement date with any change in fair value between trade date and settlement
date being recognized in the available for sale reserve. On sale, the amount
held in the available for sale reserve associated with that asset is removed
from equity and recognized in the income statement. Interest on corporate bonds
classified as available for sale is calculated using the effective interest
method and is recognized in interest income in the income statement.
i. Inventories:
Inventories are initially recognized at cost, and subsequently at the lower of
cost and net realizable value. Cost comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the inventories to their present
location and condition and is determined using the "first-in-first-out" method.
j. Property and equipment, net:
Property and equipment are stated at cost, net of accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets, at the following annual rates:
%
Computers and peripheral equipment 30
Office furniture and equipment 20
Motor vehicles 30
Leasehold improvements are amortized over the residual lease term using
straight-line method.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
k. Intangible assets:
Intangible assets acquired in a business combination are recorded at fair value
at the date of acquisition. Intangible assets acquired separately are measured
at initial recognition at cost. Following initial recognition, intangible assets
are carried at cost less accumulated amortization, and any accumulated
impairment losses.
Intangible assets are amortized using the straight-line method over their useful
economic life as follows:
Years
Technology licensing agreement s 5
Customer relationships 3-10
l. Impairment of tangible and intangible assets excluding goodwill:
At each balance sheet date, the Company 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 it is not possible to estimate the
recoverable amount of an individual asset, the Company estimates the recoverable
amount of the cash-generating unit to which the asset belongs. Where a
reasonable and consistent basis of allocation can be identified, corporate
assets are also allocated to individual cash-generating units, or otherwise they
are allocated to the smallest group of cash-generating units for which a
reasonable and consistent allocation basis can be identified.
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 not been adjusted. If
the recoverable amount of an asset (or cash-generating unit) is estimated to be
less than its carrying amount, the carrying amount of the asset (or
cash-generating unit) is reduced to its recoverable amount. An impairment loss
is recognized immediately in profit or loss, unless the relevant asset is
carried at a revalued amount, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset
(or cash-generating unit) is increased to the revised estimate of its
recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been
recognized for the asset (or cash-generating unit) in prior years. A reversal of
an impairment loss is recognized immediately in profit or loss, unless the
relevant asset is carried at a revalued amount, in which case the reversal of
the impairment loss is treated as a revaluation increase.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
m. Financial liabilities
The Company classifies its financial liabilities into one of two categories,
depending on the purpose for which the asset was acquired.
Other than financial liabilities in a qualifying hedging relationship, the
Company's accounting policy for each category is as follows:
Fair value through profit or loss: This category comprises only out-of-the-money
derivatives. They are carried in the balance sheet at fair value with changes in
fair value recognized in the consolidated income statement. Other than these
derivative financial instruments, the Company does not have any liabilities held
for trading nor has it designated any financial liabilities as being at fair
value through profit or loss.
Other financial liabilities: Other financial liabilities include the following
items:
Trade payables and other short-term monetary liabilities, which are initially
recognized at fair value and subsequently carried at amortized cost using the
effective interest method.
n. Revenue recognition:
The Company generates revenues by providing its solutions to client or system
integrators through comprehensive contracts under which the agreement is to
perform acts required under a contract for a specified price. Revenue from these
contracts is recognized progressively as a percentage of completion. The
percentage of completion is based on the proportion of cost incurred on the
contract to the total estimated cost. Revenues from claims with respect to
delays in projects are recognized as additional contract revenue when the claim
is received. The Company recognizes revenue under these contracts when the
revenues and costs can be measured reliably and the collection is reasonably
assured. Provision is made for all anticipated contract losses when they are
identified.
The Company also generates revenues from sales of alarm systems and monitoring
software. These revenues are recognized when the significant risks and rewards
of ownership of the goods have passed to the buyer and can be reliably measured.
o. Research and development:
Expenditures related to research are recognized in expense in the period they
are incurred. Development expenditures are capitalized when the Company has
established the technical feasibility of the product, has the intention and
ability to use or sell the product, there is an established market for the
product, the Company has the technical and financial resources to bring the
product to market and the development expenditures can be measured reliably. To
date no development expenditure has met the criteria for capitalization.
p. Government incentives:
The Company applies for financial assistance under government incentive programs
including investment tax credits. Government assistance (non-refundable)
relating to research and development expenses is recorded in the accounts when
the related expenditures are incurred and it is probable that the Company is
entitled to such grants. The Company did not record any Government grant
receivable as at 31 December 2007 and 2006.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
q. Income taxes:
The Company accounts for income taxes under the balance sheet liability method
of accounting. Under the liability method, deferred taxes are provided for
temporary differences between the financial statement and tax bases of assets
and liabilities at enacted tax rates that will be in effect in the year in which
the differences are expected to reverse. Deferred tax assets in respect of carry
forward losses and other temporary deductible differences are recognized to the
extent that it is probable that they will be utilized.
The Company's taxes on income are calculated based on the applicable tax rate
based on the Canadian tax rates and laws.
The Company has Federal and Provincial Investment Tax Credits available to
reduce the Company's tax liability. The investment tax credits include
significant claims for scientific research and experimental development
expenditures under existing tax legislation. The full realization of these
investment tax credits is subject to the result of audit by the Canada Revenue
Agency in respect of these expenditures. In management's opinion, these
expenditures do qualify for investments tax credits. However, in the event the
investment tax credits received are less than claimed, the difference will be
reflected in operations in the year determined.
r. Share-based compensation:
Share-based compensation is accounted for in accordance with IFRS 2,
"Share-Based Payment". Share-based compensation is measured at fair value at the
grant date and is calculated using an option-pricing-model.
The cost of equity settled transactions is recognized, together with a
corresponding increase in equity, over the period in which the performance
conditions are fulfilled, ending on the date the options vest. The cumulative
expense, recognized at each reporting date until the vesting date, reflects the
extent to which the vesting period has expired and the company's best estimate
of the number of equity instruments that will ultimately vest. At each balance
sheet date, the Company revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any,
is recognized in profit or loss over the remaining vesting period, with a
corresponding adjustment to the share based payments in the statement of changes
in equity.
s. Basic and diluted net earnings (loss) per share:
Basic net earnings (loss) per share has been computed using the weighted average
number of Common shares outstanding during the year. Outstanding Common shares
that are contingently returnable are excluded from the calculation of basic
earnings (loss) per share until the shares are no longer subject to return.
Diluted net earnings (loss) per share is computed based on the weighted average
number of Common shares outstanding during each period, plus the effect of
potential Common shares considered outstanding during the period, except if the
effect of such potential Common shares is anti-dilutive.
t. Fair value of financial instruments:
The carrying amounts of cash and cash equivalents, trade and other receivables,
trade and other payables approximate their fair value due to the short term
nature of these instruments. The fair value of available for sale securities,
which are publicly traded, are determined by the quoted market values for each
investment.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
u. Leases
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the lessee. All other
leases are classified as operating leases which are expensed on a straight line
basis.
v. Segmental information
The Company identifies reportable segments on the basis of significant
differences in risks and returns from a group of related products and the
economic environment in which the component operates.
NOTE 3: CHANGES IN ACCOUNTING POLICIES
a. New standards, amendments to published standards and interpretations to
existing standards effective in 2007 adopted by the Company are as follows:
IFRS 7, Financial Instruments: disclosures and a complementary amendment to IAS
1, Presentation of Financial Statements - capital disclosures (effective for
accounting periods beginning on or after 1 January 2007). IFRS 7 introduces new
requirements aimed at improving the disclosure of information about financial
instruments. It requires the disclosure of qualitative and quantitative
information about exposure to risks arising from financial instruments,
including specified minimum disclosures about credit risk, liquidity risk and
market risk. Where those risks are deemed to be material to the Company, it
requires disclosures based on the information used by key management. It
replaces the disclosure requirements in IAS 32 'Financial Instruments:
disclosure and presentation'. It is applicable to all entities that report under
IFRS.
The amendment to IAS 1 introduces disclosures about the level and management of
an entity's capital. The Company has applied IFRS 7 and the amendment to IAS 1
to the accounts for the period beginning on 1 January 2007.
b. Standards, interpretations and amendments to published standards
effective in 2007 but which are not relevant to the Company
The following standards, amendments and interpretations to published standards
are mandatory for accounting periods beginning on or after 1 January 2007 but
are currently not relevant to the Company's operations:
IFRIC 7, Applying the restatement approach under IAS 29, Financial Reporting in
Hyperinflationary Economies
IFRIC 8, Scope of IFRS 2
IFRIC 9, Reassessment of embedded derivatives
IFRIC 10, Interim Financial Reporting and Impairment
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
c. Standards, amendments and interpretations to published standards not
yet effective
Certain new standards, amendments and interpretations to existing standards have
been published that are mandatory for the Company's accounting periods beginning
on or after 1 January 2008 or later periods and which the Company has decided
not to adopt early. These are:
IFRS 8, Operating Segments
IAS 23, Borrowing Costs (revised)
IFRIC 11, IFRS 2 - Group and Treasury Share Transactions
IFRIC 12, Service Concession Arrangements
IFRIC 13, Customer Loyalty Programmes
IFRIC 14, IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction
Revised IFRS 3, Business Combinations and complementary Amendments to IAS
27,'Consolidated and separate financial statements
Amendment to IFRS 2, Share-based payments: vesting conditions and cancellations
NOTE 4: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Company makes certain estimates and assumptions regarding the future.
Estimates and judgments are 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 within the next financial year are discussed below.
Estimates and assumptions
a. Impairment of goodwill
The Company is required to test, on an annual basis, whether goodwill has
suffered any impairment. The recoverable amount is determined based on value in
use calculations. The use of this method requires the estimation of future cash
flows and the choice of a discount rate in order to calculate the present value
of the cash flows. Actual outcomes may vary.
b. Useful lives of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are amortized or depreciated
over their useful lives.
Useful lives are based on the management's estimates of the period that the
assets will generate revenue, which are periodically reviewed for continued
appropriateness. Changes to estimates can result in significant variations in
the carrying value and amounts charged to the consolidated income statement in
specific periods.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
c. Inventory
The company reviews the net realizable value of, and demand for, its inventory
on a quarterly basis to
provide assurance that recorded inventory is stated at the lower of cost or net
realizable value. Factors that could impact estimated demand and selling prices
include the timing and success of future technological innovations, competitor
actions, supplier prices and economic trends.
d. Share based payment
The Company has two types of equity-settled share-based remuneration schemes for
employees. Employee services received, and the corresponding increase in equity,
are measured by reference to the fair value of the equity instruments at the
date of grant, excluding the impact of any non-market vesting conditions. The
fair value of share options is estimated by using valuation models, such as
Black-Scholes and binominal lattice, on the date of grant based on certain
assumptions. Those assumptions are described in note 13 and include, among
others, the dividend growth rate, expected volatility, expected life of the
options and number of options expected to vest.
e. Determination of fair values of intangible assets acquired in business
combinations
The fair values of technology licensing agreements acquired in a business
combination are based on the discounted estimated royalty payments that would
have been avoided as a result of the technology licensing agreements owned. The
fair value of other intangible assets is based on the discounted cash flows
expected to be derived from the use and eventual sale of the asset.
f. Income taxes
The Company is subject to income tax in several jurisdictions and significant
judgment is required in determining the provision for income taxes. During the
ordinary course of business, there are transactions and calculations for which
the ultimate tax determination is uncertain. As a result, the company recognizes
tax liabilities based on estimates of whether additional taxes and interest will
be due. These tax liabilities are recognized when, despite the company's belief
that its tax return positions are supportable, the company believes that certain
positions are likely to be challenged and may not be fully sustained upon review
by tax authorities. The company believes that its accruals for tax liabilities
are adequate for all open audit years based on its assessment of many factors
including past experience and interpretations of tax law. This assessment relies
on estimates and assumptions and may involve a series of complex judgments about
future events. To the extent that the final tax outcome of these matters is
different than the amounts recorded, such differences will impact income tax
expense in the period in which such determination is made.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 5: AVAILABLE FOR SALE SECURITIES
Available for sale financial assets include the following:
Year ended 31 December
2007 2006
Short term bank deposit $106 $100
Bankers acceptance 7,486 498
Bearer deposit notes - 12,903
$7,592 $13,501
There is no material fair value adjustment through equity and the yield to
maturity is in the range of 4% to 5%. The range of maturity dates is 1 to 5
months as of 31 December 2007.
NOTE 6: TRADE RECEIVABLES
a. Trade receivables include the following:
Year ended 31 December
2007 2006
Progress billing on contracts & product $9,387 $12,388
sales
Holdback receivables 275 275
9,662 12,663
Less-allowance for doubtful accounts 98 163
$9,564 $12,500
b. Reconciliation of allowance for doubtful accounts is as follows:
Year ended 31 December
2007 2006
Balance at beginning of the year $163 $178
Impairment losses recognized on 97 -
receivables
Amount written off as uncollectible (156) (15)
Impairment losses reversed on (6) -
receivables
$98 $163
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 7:- OTHER ACCOUNTS RECEIVABLE AND PREPAID EXPENSES
Year ended 31 December
2007 2006
Government authorities $30 $65
Employees 19 46
Prepaid expenses 682 610
Other 82 34
$813 $755
NOTE 8:- INVENTORIES
The following table summarizes the amount of inventories recognized as an
expense in the income statements:
Year ended 31 December
2007 2006
Equipments and components $16,064 $9,811
Inventory write -down - 184
$16,064 $9,995
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 9:- PROPERTY AND EQUIPMENT, NET
Computers Office Leasehold Motor Total
and furniture improvements vehicles
peripheral and
equipment equipment
Cost:
Balance at 1 January, $768 $374 $215 $249 $1,606
2006
Additions 307 116 47 10 480
Disposals - - - (29) (29)
Foreign currency
translation adjustments - - - - -
Balance at 31 December, 1,075 490 262 230 2,057
2006
Additions 136 251 12 260 659
Disposals - - - (39) (39)
Foreign currency
translation adjustments (3) - - - (3)
Balance at 31 December, 1,208 741 274 451 2674
2007
Accumulated depreciation
Balance at 1 January, 222 89 42 105 458
2006
Additions 228 84 38 49 399
Disposals - - - (21) (21)
Foreign currency - - - - -
translation adjustments
Balance at 31 December, 450 173 80 133 836
2006
Additions 280 117 44 75 516
Disposals - - - (33) (33)
Foreign currency
translation adjustments - - - - -
730 290 124 175 1,319
Balance at 31 December, $478 $451 $150 $276 $1,355
2007
Balance at 31 December, $625 $317 $182 $97 $1,221
2006
+-----------------------+---------+--+---------+--+------------+--+----------+--+-------+
|Balance at 1 January, | $546| | $285| | $173| | $144| | $1,148|
|2006 | | | | | | | | | |
+-----------------------+---------+--+---------+--+------------+--+----------+--+-------+
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 10: GOODWILL AND OTHER INTANGIBLE ASSETS, NET
a. Other intangible assets:
Customer Technology Total
relationships licensing
agreements
Cost
Balance at 1 January, 2006 $3,053 $1,221 $4,274
Additions - - -
Amortization (370) (305) (675)
Impairment loss - 92 92
Foreign currency translation (2) (2) (4)
adjustments
Balance at 31 December, 2006 2,681 822 3,503
Additions - - -
Amortization (367) (272) (639)
Impairment loss - - -
Foreign currency translation (6) (37) (43)
adjustments
Balance at 31 December, 2007 $2,308 $513 $2,821
Remaining useful life of customer relationship and technology licensing
agreements is 7 and 2 years, respectively.
The Company performed an annual impairment test at 31 December 2007 in
accordance with IAS No. 36, "Impairment of Assets" and no impairment was
indicated. The Company used a discounted cash flow method in determining the
fair value of the intangible assets using a discount rate of 21-23%.
The Company has written down the value of Technology and licensing agreement by
$Nil and $92 as of 31 December 2007 and 2006, respectively and has included this
amount in research and development expenses.
b. Goodwill:
Total
Cost
Balance at 1 January, 2006 $7,634
Additions 201
Balance at 31 December, 2006 7,835
Additions -
Balance at 31 December, 2007 $7,835
The Company performed an annual impairment test at 31 December 2007 in
accordance with IAS No. 36, "Impairment of Assets" and no impairment was
indicated. The key assumptions used in the annual impairment test are growth of
sales and gross margin, together with the rates used for discounting the
forecast cash flows. The discount rate determined for the single cash generating
unit, to which all the goodwill was allocated, was 22%. Sales and gross margin
growth is based on management's internal forecasts for four years, after which a
terminal value is calculated.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 11: OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Year ended 31 December
2007 2006
Government authorities $710 $729
Employees and payroll accruals 863 466
Accrued expenses 659 1,064
Other 193 2
$2,425 $2,261
Financial liabilities are made up of trade payables and accrued expenses
excluding amounts payable to government authorities. The carrying value of
financial liabilities approximates their fair value at 31 December 2007 and
2006.
NOTE 12: EQUITY
a. Share capital is composed of issued and outstanding shares of no par
value, as follows:
Number of shares
Year ended 31 December
2007 2006
Common shares 70,646,095 70,556,095
The number of authorized Common shares is unlimited.
b. Stock compensation:
In the year ended 31 December 2007 and 2006 the Company recognized compensation
expense in the amount of $601 and $2,723 for the restricted shares granted to
executives in March 2005.
c. Stock option plan:
On 31 March 2005 the Company's board of directors approved the 2005 Global Stock
Option Plan ("the Plan"). Under the Plan, options may be granted to employees,
directors, consultants and other service providers of the Company at an exercise
price per share of not less than the fair market value of the share at the date
of grant. The Company has reserved 6,156,487 Common shares for issuance under
the Plan.
Options issued under the Plan vest on a schedule determined at the discretion of
the directors and set out in the applicable option agreement. Each vested option
granted under the Plan is exercisable until 10 years from the date of the grant
of the option. The options vest over a period of two to four years from the date
of grant with proportionate options granted becoming exercisable on the
anniversary of the date of grant. Any options which are forfeited or not
exercised before expiration become available for future grants.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
A summary of the Company's share option activity and related information is as
follows:
Number Weighted
average
exercise
price in
Dollars
Outstanding as of 1 January 2006 1,937,432 $1.01
Granted 890,000 0.79
Exercised (102,608) (0.01)
Forfeited (600,324) (0.64)
Outstanding as of 31 December 2,124,500 1.01
2006
Granted 200,000 0.41
Exercised (90,000) (0.01)
Forfeited (479,000) (0.41)
Outstanding as of 31 December 1,755,500 $0.61
2007
Options exercised as of 31 December 2007 and 2006, were 90,000 and 102,608 and
the respective weighted average share price on the date of exercise was $0.35
and $0.45.
The range of exercise prices for options outstanding and exercisable at 31
December 2007 are as follows:
Weighted
Average
Exercise Contractual
Price in Life in
Dollars Years Number
Exercisable
$0.02 - -
0.41 8 388
1.01 8 5
$1.08 8 226
In the year ended 31 December 2007 and 2006, the Company recognized compensation
expense in the amount of $75 and $246 respectively.
On September 19, 2007 The Company granted 200,000 options to employees with an
exercise price of $0.41 per share. The options vest over a period of two years
from the date of grant. The fair value on grant date and the weighed average
fair value per option granted was $0.15.
The weighted average fair value was estimated using the Black Scholes option
pricing model based on the following data and assumptions: share price $0.41;
expected volatility 83%; risk free interest rate 4.25%; expected dividend 0% and
expected average life of option 2 years. The expected volatility is based on the
historical stock price of the company's stock.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
d. Options re-pricing:
The Company re-priced certain stock options from $1.30 per option to $0.41, as
approved by the board of directors on 19 Sept 2007. The option re-pricing has
resulted in an additional stock based compensation expense in the amount of $46
and $Nil for the years ended 31 December 2007 and 2006, respectively.
e. Earning per share:
The total weighed average number of shares related to the outstanding options
and restricted shares were excluded from the calculations of diluted net
earnings (loss) per share because these securities are anti-dilutive was
6,105,500 and 6,589,608 for the years ended 31 December 2007 and 2006,
respectively.
Weighted average number of shares used in computing loss per share was
70,623,595 and 70,487,690 for the years ended 31 December 2007 and 2006,
respectively.
NOTE 13: SUPPLEMENTARY INFORMATION
a. The following table summarizes salary expenses recorded in the income
statements:
Year ended 31 December
2007 2006
Cost of revenues $2,381 $2,371
Research and development 1,842 1,823
Selling and marketing 2,714 2,862
General and administrative 1,465 1,646
$8,402 $8,702
b. The following table summarizes depreciation and amortization expenses
and impairment losses recorded in the income statements:
Year ended 31 December
2007 2006
Research and development $272 $397
Selling and marketing 367 370
General and administrative 516 399
$1,155 $1,166
c. Share-based compensation is allocated as follows:
Year ended 31 December
2007 2006
Cost of revenues $6 $68
Research and development 8 671
Selling and marketing 446 1308
General and administrative 262 922
$722 $2,969
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 14: INCOME TAXES
a. Reconciliation between the theoretical tax expense assuming all income
(loss) is taxed at the statutory tax rate applicable to income of the Company
and the actual tax expense (benefit) as reported in the income statements is as
follows:
Year ended 31 December
2007 2006
Loss before taxes on income, as reported $(3,702) ($6,650)
in the income statements
Statutory tax rate in Canada 35.83% 36.12%
Theoretical income tax expense (benefit) (1,326) (2,402)
Losses and other items for which 1,053 1,176
deferred tax benefit was not recorded
Non-deductible expenses 273 1,202
Other - 24
Income taxes (benefit) in the income $- $-
statements
b. Deferred tax asset and liabilities have not been recognized for the
following items:
Year ended 31 December
2007 2006
Deferred tax assets:
Net operating losses $3,478 $2,940
Other timing difference 206 482
$3,684 $3,422
Deferred tax
liabilities:
Holdbacks 91 98
c. Net operating losses carry forwards:
The Company has accumulated losses for tax purposes as of 31 December 2007 in
the amount of approximately $10,629. The Company has loss carry forwards related
to Canada in the amount of $7,098, United States of $1,762, and other
jurisdictions in the amount of $1,769. The tax losses related to Canada and the
United States expire as follows:
Canada United
States
2015 $ 4,021 $ -
2025 - 383
2026 1,325 1,153
2027 1,752 226
$ 7,098 $ 1,762
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 15: ACQUISITIONS
a. Acquisition of Emergent Systems Corporation ("Emergent"):
In March 2006, the Company acquired certain assets and assumed certain
liabilities of Emergent businesses in Canada for total consideration of $201
(including acquisition cost in the amount of $33). As per the asset purchase
agreement, the Company has agreed to pay an additional $500 in four equal
installments, payable on the closing date and each of the first three
anniversary dates thereof, provided that each of the Principals is then employed
with the Company. Emergent is a provider of high quality audio and video
systems.
The acquisition was accounted for as a business combination and accordingly, the
purchase price was allocated to the estimated fair value of the assets acquired
and liabilities assumed of Emergent.
The following table summarizes the fair values of the assets acquired and
liabilities assumed:
Cost of acquisition paid in cash $33
Trade receivables 432
Inventories 120
Property and equipment 78
Other receivables, prepaids & 15
deposits
Total assets acquired 645
Trade payables (409)
Accrued expenses and other (404)
liabilities
Total liabilities assumed (813)
Net identifiable assets (liabilities) (168)
acquired
Excess of cost attributable to $201
Goodwill
Estimated fair value of assets acquired and
liabilities assumed at the acquisition date:
Working capital deficiency (excluding cash) ($246)
Property and equipment 78
Goodwill 201
Net cash outflow $33
Upon acquisition the Company has integrated the assets and liabilities of
Emergent into the Company's existing operations, therefore the financial results
including the profit and loss related to Emergent specifically is not
determinable for the year ended 31 December 2007 and 2006.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 16: JOINT VENTURE
The Company entered into a joint venture agreement with Sky link Services, a
Canadian company, during the year with a 50% interest. The joint venture
"Avisecure" is for providing security services to one of the airports in East
Africa.
The following amounts have been recognized in the Company's balance sheet
representing 50% share in joint venture "Avisecure":
Year ended 31 December
2007 2006
Current assets $396 $-
Current liabilities - -
Net assets $396 $-
Revenue $- $-
Expenses 34 -
Loss after tax $34 $-
NOTE 17: RELATED PARTY TRANSACTIONS
a. Compensation of key management personnel of the Company:
Year ended 31 December
2007 2006
Short-term employee benefits $1,264 $1,447
Share-based payments 705 2,829
$1,969 $4,276
In addition to above, the Directors' fee for the year ended 31 December 2007 and
2006, amounted to $210 and $196, respectively.
b. Other related party transactions:
Year ended 31 December
2007 2006
Purchases from related party $41 $92
Related party transactions were in the normal course of business with a company
controlled by one of the directors and were measured and recorded at fair value.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 18: FINANCIAL INSTRUMENTS
The Company has applied IFRS 7 - Financial Instruments Disclosures from 1
January 2007 onwards. The application of this new standard has only resulted in
additional disclosures on financial instruments.
In the course of its business, The Company is exposed to a number of financial
risks: credit risk, liquidity risk and market risk (including foreign currency
and interest rate). This note presents The Company's objectives, policies and
processes for managing its financial risks.
Financial risk management is an integral part of the way The Company is managed.
The Board of Directors establishes The Company's financial policies and the
Chief Executive Officer and the Chief Financial Officer establishes objectives
and strategies in line with these policies.
a. Capital policy:
The Company considers it capital to comprise its ordinary share capital,
additional paid in capital and accumulated retained earnings together with
short-term debt. In managing its capital, the Company's primary objective is to
provide a return for its equity shareholders through capital growth. The Company
has historically considered equity and short-terms debt as the most appropriate
forms of capital. This is kept under review bearing in mind the risks, costs and
benefits to equity shareholders of introducing debt finance.
b. Credit risk
The Company is exposed to credit risk from its operating activities. Credit risk
arises principally from the Company's trade and other accounts receivable. It is
the risk that the counterparty fails to discharge its obligation in respect of
the instrument.
Outstanding debts to the company are continuously monitored centrally by the
company's finance function. The solvency of the business with large customers,
in particular large integration projects, is monitored separately. The company
addresses these risks through negotiated payment plans with both key customers
and key suppliers. The Company's objective is to grant credit based on
counterparty's ownership patterns and market standing. The Company attempts to
avoid the concentration of credit risk on its trade receivables and other
receivables by spreading them over several institutions and sectors.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
Based on the Companies collection history as it relates to overdue accounts and
the fact that the overdue receivables are associated with reputable customers,
the management believes that there is no significant credit risk associated with
overdue amounts. The revenue and ageing of trade receivables by customer, region
and industry as of 31 December 2007 and 2006 is as follows:
2007
Trade receivables
Revenue Total Current 1 to 30 30 to 60 6o to 90 Over 90
Days Days Days days
Totals $28,368 $9,564 $6,151 $2,573 $249 $197 $394
Major
customers
Customer 1 13,883 1,638 813 825 - - -
Customer 2 3,227 2,100 2,100 - - - -
Other 11,258 5,826 3,238 1,748 249 197 394
$28,368 $9,564 $6,151 $2,573 $249 $197 $394
Region
North America 4,331 2,567 1,285 233 10 236
Europe 890 315 214 16 187 158
Other 4,343 3,269 1,074 - - -
$9,564 $6,151 $2,573 $249 $197 $394
Industry
Government 6,202 4,087 1,867 17 181 50
Other 3,362 2,064 706 232 16 344
$9,564 $6,151 $2,573 $249 $197 $394
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
2006
Trade receivables
Revenue Total Current 1 to 30 30 to 60 6o to 90 Over 90
Days Days Days days
Totals $19,868 $12,500 $8,145 $1,956 $842 $753 $804
Major
customers
Customer 1 5,166 4,160 3,921 (87) - 271 55
Customer 2 3,179 2,310 1,872 - - 352 86
Other 11,523 6,030 2,352 2,043 842 130 663
$19,868 $12,500 $8,145 $1,956 $842 $753 $804
Region
North America 5,229 1,948 1,725 839 96 621
Europe 526 236 210 3 35 42
Other 6,745 5,961 21 - 622 141
$12,500 $8,145 $1,956 $842 $753 $804
Industry
Government 4,312 4,034 (86) - 282 82
Other 8,188 4,111 2,042 842 471 722
$12,500 $8,145 $1,956 $842 $753 $804
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
c. Liquidity risk
Liquidity risk arises when a company encounters difficulties to meet commitments
associated with liabilities and other payment obligations. Such risk may result
from inadequate market depth or disruptions. The Company's objective is to
manage this risk by limiting exposures in instruments that may be affected by
liquidity problems and by maintaining sufficient back-up facilities. The
Company's policy is to invest in short term Canadian bank issued Guaranteed
Investment Certificates (GIC) and Canadian Bankers Acceptance (BA) notes. The
Company has sufficient cash reserves and doesn't believe that liquidity risk is
significant at the year end.
The Company has an operating line of credit with a bank in the amount of $2,200
and $750 for the years ended 31 December 2007 and 2006, respectively.
d. Market risk
The Company is exposed to risks from movements in foreign currency exchange
rates and interest rates that affect its assets, liabilities and anticipated
future transactions. The Company is exposed to foreign currency risk from
foreign currency transactions and foreign currency translation. Transaction
exposure arises because the Company and its consolidated subsidiaries undertake
transactions in foreign currencies. Translation exposure arises from the
consolidation of the Financial Statements of subsidiaries in Canadian Dollars.
The Company's objective is to manage its foreign currency exposure, to the
extent possible, by procuring goods and services in the same currency in which
revenue is generated.
Interest rate risk comprises the interest price risk that results from
borrowings at fixed rates and the interest cash flow risk that results from
borrowings at variable rates. The Company has no interest bearing borrowings as
of 31 December 2007 and 2006.
The Company's exposure to financial instruments by currency is as follows:
2007
CAD USD SEK GBP NIS EUR
Financial assets
Cash & cash equivalents $727 $869 $2,369 $1,217 $92 $-
Marketable securities 7,592 - - - - -
Trade receivables 5,839 1,059 1,501 965 200 -
Other receivables 699 19 - 14 81 -
Restricted cash 1000 1,325 - - - -
15,857 3,272 3,870 2,196 373 -
Financial liabilities
Trade payables 921 69 1,978 545 58 18
Other payables 1,661 21 497 171 75 -
2,582 90 2,475 716 133 18
Net financial assets $13,275 $3,182 $1,395 $1,480 $240 ($18)
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
2006
CAD USD SEK GBP NIS EUR
Financial assets
Cash & cash equivalents $157 $5 $- $16 $221 $-
Marketable securities 10,602 2,899 - - - -
Trade receivables 6,108 600 2,980 2,596 216 -
Other receivables 624 8 - - 123 -
Restricted cash 500 250 - - - -
17,991 3,762 2,980 2,612 560 -
Financial liabilities
Trade payables 1,815 2 1,563 1 127 80
Other payables 1,335 65 242 428 191 -
3,150 67 1,805 429 318 80
Net financial assets $14,841 $3,695 $1,175 $2,183 $242 ($80)
e. Sensitivity analysis
The following table summarizes the effect of +/-10% change in currency exchange
rate on the profit or loss for the period:
USD SEK GBP EUR NIS
2007
Effect of 10% increase in ($15) $601 $44 ($74) ($54)
profit (loss)
Effect of 10% decrease in $15 ($601) ($44) $74 $54
profit (loss)
2006
Effect of 10% increase in $37 $214 $199 ($78) ($4)
profit (loss)
Effect of 10% increase in ($37) ($214) ($199) $78 $4
profit (loss)
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
NOTE 19: SEGMENTAL INFORMATION
a. The company manages its business on the basis of one business segments.
All revenues are derived from customers located in North America and Middle
East, Europe & Africa however a substantial portion of the Company's assets are
situated in North America.
b. The following table presents revenue by the Company's geographical
segment for the years ended 31 December 2007 and 2006
North
America
Europe Other Total
Year ended 31 December
2007
External revenue $10,276 $17,315 $777 $28,368
Total assets $38,236 $17 $475 $38,728
Capital expenditure $648 $3 $8 $659
North
America
Europe Other Total
Year ended 31 December
2006
External revenue $10,203 $8,702 $963 $19,868
Total assets $41,254 $- $708 $41,962
Capital expenditure $391 $- $89 $480
NOTE 20: COMMITMENTS AND CONTINGENT LIABILITIES
a. Operating leases:
The company's facilities are leased under several operating lease agreements for
periods through 2009. Future minimum lease commitments under non-cancelable
leases as of 31 December 2006 are as follows:
Year ended 31 December
2007 2006
Not later than one year $380 $433
Later than one year but not 923 287
later than five years
Later than five years - -
$1,303 $720
Total rental expense for the year ended 31 December 2007 and 2006, amounted to
$474 and $488, respectively.
Some of the operating lease can be extended for another term subject to certain
conditions, at the then prevailing rental for similar property.
Visual Defence Inc.
Notes to Consolidated Financial Statements
Canadian dollars in thousands (except share and per share data)
December 31, 2007
b. Capital commitments for joint venture:
The company's share of commitment for the joint venture "Avisecure" as of 31
December 2007 are as follows:
Year ended 31 December
2007 2006
Not later than one year $1,945 $-
Later than one year but not - -
later than five years
Later than five years - -
$1,945 $-
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FKPKNFBKKNQB
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