___________
|
(1)
|
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission
and generally includes voting or investment power with respect to securities. Ordinary shares relating
to options currently exercisable or exercisable within 60 days of the date of this table are deemed
outstanding for computing the percentage of the person holding such securities but are not deemed
outstanding for computing the percentage of any other person. Except as indicated by footnote,
and
subject to community property laws where applicable, the persons named in the table above have
sole
voting and investment power with respect to all shares shown as beneficially owned by them.
|
|
|
(2)
|
The percentages shown are based on 8,407,742 ordinary shares issued and outstanding as of March 23,
2009 (excluding 1,590,177 ordinary shares held as treasury stock).
|
|
|
(3)
|
Messrs. Itschak Friedman, Dinu Toiba and Chaim Friedman are parties to a voting agreement dated October
31, 1993, as amended on December 21, 2005. The voting agreement also grants the parties a right
of
first refusal on sales of each others shares of our company.
|
|
|
(4)
|
Based solely upon, and qualified in its entirety with reference to, a Schedule 13G filed with the Securities
and Exchange Commission on May 5, 2008. Under the Schedule 13G,Harel Insurance Investments and
Financial Services Ltd. disclaims beneficial ownership of 810,596 of the ordinary shares.
|
|
|
(5)
|
Includes half of the 64,703 ordinary shares held by Sivanir Ltd., an Israeli company jointly owned
by Messrs. Chaim Friedman and Eyal Guterman.
|
|
|
(6)
|
Based solely upon, and qualified in its entirety with reference to, a Schedule 13G/A filed with the
Securities and Exchange Commission on February 18, 2009. Based on the Schedule 13G/A, Gagnon Securities
LLC is a registered investment adviser and furnishes investment advice to several funds, and Mr.
Neil Gagnon is the managing member and the principal owner of Gagnon Securities LLC. Each of Mr.
Neil Gagnon and Gagnon Securities LLC disclaims beneficial ownership of all securities held in such
funds accounts.
|
|
|
(7)
|
Based solely upon, and qualified in its entirety with reference to, a Schedule 13G/A filed with the
Securities and Exchange Commission on February 13, 2009. Under the Schedule 13G/A, Clal Insurance
Enterprises Holdings Ltd., or Clal, and Clal Finance Ltd., a majority-owned subsidiary of Clal, disclaim
beneficial ownership of the ordinary shares. In addition, the Schedule 13G/A states that by reason
of the ownership interest of IDB Development Corporation Ltd. and IDB Holding Corporation (IDB
Holding) in Clal, and by reason of the interests in, and relationships among them, with respect
to IDB Holding, of Mr. Nochi Dankner, Mrs. Shelly Bergman, Mrs. Ruth Manor and Mr. Avraham Livnat,
such entities and persons may each be deemed a beneficial owner of the 559,756 ordinary shares deemed
beneficially owned by Clal; however such persons and entities disclaim beneficial ownership of the
559,756 ordinary shares beneficially owned by Clal.
|
Messrs.
Itschak Friedman, Dinu Toiba and Chaim Friedman are parties to a voting agreement dated October 31,
1993, as amended on December 21, 2005, with respect to our ordinary shares beneficially owned by
them. The voting agreement also grants the parties a right of first refusal on sales of each others
shares of our company. Accordingly, Messrs. Itschak Friedman, Dinu Toiba and Chaim Friedman may be
deemed to have shared voting power of the aggregate ordinary shares of our company beneficially owned
by them. On February 13, 2008, Messrs. Itschak Friedman, Dinu Toiba and Chaim Friedman filed a Schedule
13G with the Securities and Exchange Commission reflecting beneficial ownership, in the case of Mr.
Itschak Friedman, of 1,360,508 of our ordinary shares, in the case of Mr. Dinu Toiba, of 750,000
of our ordinary shares, and, in the case of Mr. Chaim Friedman, of 429,454 of our ordinary shares.
Accordingly, Messrs. Itschak Friedman, Dinu Toiba and Chaim Friedman may be deemed to have shared
voting power of a total of 2,539,782 of our ordinary shares beneficially owned by them as of such
date. On October 28, 2008, Messrs. Itschak Friedman, Dinu Toiba and Chaim Friedman filed a Schedule
13D with the Securities and Exchange Commission reflecting beneficial ownership, in the case of Mr.
Itschak Friedman, of 1,540,256, or 18.02%, of our ordinary shares, in the case of Mr. Dinu Toiba,
of 750,000, or 8.78 %, of our ordinary shares, and, in the case of Mr. Chaim Friedman, of 609,022,
or 7.13%, of our ordinary shares. Messrs. Itschak Friedman, Dinu Toiba and Chaim Friedman may be
deemed to have shared voting power of a total of 2,899,278 of our ordinary shares beneficially owned
by them as of such date. Each of Messrs. Itschak Friedman, Dinu Toiba and Chaim Friedman disclaims
beneficial ownership of the ordinary shares of our company that are not directly held by them or by entities controlled by them.
Other
than described above, we know of no significant changes in the percentage ownership held by any major
shareholders during the past three years, other than changes in the percentage ownership of our major
shareholders resulting from our initial public offering in the United States in May 2007.
Major Shareholders Voting Rights
Our
major shareholders do not have different voting rights
Record Holders
Based
on our register of ordinary shares and information provided to us by our transfer agent, as of March
23, 2009, Cede & Co., the nominee of The Depository Trust Company, was the only holder of record
of our ordinary shares in the United States, holding 2,469,641 of our ordinary shares representing
approximately 29% of our outstanding shares (excluding treasury stock). The number of record
holders in the United States is not representative of the number of beneficial holders nor is it
representative of where such beneficial holders reside, since the record holders of a significant
majority of our ordinary shares are nominees or other brokers, including Israel Discount Bank Nominees
Company, which held ordinary shares representing approximately 71% of our outstanding shares as of
March 23, 2009 (excluding treasury stock).
B. RELATED PARTY TRANSACTIONS
We
have entered into a management and consulting agreement with Sivanir Management, which is jointly
owned by Messrs. Chaim Friedman and Eyal Guterman, both of whom are directors of our company. Under
the agreement, Mr. Chaim Friedman serves as our chief financial officer on a full time basis and
Mr. Eyal Guterman serves as our treasurer and risk management officer on a part time basis, devoting
approximately 25% of his business time and attention to our company. We paid Sivanir Management an
aggregate of $150,000, $153,000 and $159,000 in each of the years ended December 31, 2006, 2007 and
2008, respectively. See Item 6B. Directors, Senior Management and Employees - Compensation.
C.
INTERESTS OF EXPERTS AND COUNSEL
Not
applicable.
ITEM 8.
FINANCIAL INFORMATION
A.
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
Financial Statements
See
the consolidated financial statements, including the notes thereto, and the exhibits listed in Item
19 hereof and incorporated herein by reference.
54
Legal Proceedings
We
are not presently involved in any legal proceedings. During the ordinary course of our business,
we are, from time to time, threatened with, or may become a party to, legal actions and other proceedings.
Dividend Distribution Policy
We
paid dividends of NIS 1.00 per ordinary share in January 2006, NIS 1.25 per ordinary share in January
2007, and NIS 1.15 per ordinary share in June 2008. Although we paid dividends on an annual basis
during the five years prior to our initial public offering in the United States in May 2007, and
once again in June 2008, we do not currently have a dividend distribution policy in place. Future
dividend distributions are subject to the discretion of our board of directors and will depend on
a number of factors, including our operating results, future capital resources available for distribution,
capital requirements, financial condition, the tax implications of dividend distributions on our
income, future prospects and any other factors our board of directors may deem relevant.
The
distribution of dividends also may be limited by Israeli law, which permits the distribution of dividends
only out of profits (as defined by the Israeli Companies Law) or otherwise upon the permission of
the court. Profits are defined in the Israeli Companies Law as the balance of surpluses,
or the surpluses accumulated over the past two years, whichever is the greater, in accordance with
the latest adjusted financial statements, audited or reviewed, prepared by the company, provided
that the date in respect of which the statements were prepared is no earlier than six months prior
to the date of distribution. Surplus means sums included in a companys
shareholders equity originating from the net profit of the company, as determined according
to generally accepted accounting principles, and sums other than share capital or premiums that are
included in shareholders equity under generally accepted accounting principles and the Minister
of Justice prescribed that they are to be considered surplus.
In
the event that we distribute cash dividends from tax exempt income attributable to any of our Approved
Enterprise or Benefited Enterprise, we would have to pay corporate tax in respect of the amount distributed.
See Item 10E. Additional Information - Taxation - Israeli Tax Considerations Tax Benefits
under the Law for the Encouragement of Capital Investments, 1959.
B. Significant Changes
Except
as otherwise disclosed in this annual report, no significant change has occurred since December 31,
2008.
ITEM 9.
THE OFFER AND LISTING
A. OFFER AND LISTING DETAILS
Annual Stock Information
The
following table sets forth, for each of the years indicated, the high and low market prices of our
ordinary shares on the NASDAQ Global Market and the Tel Aviv Stock Exchange:
|
|
NASDAQ Global Market
|
|
Tel Aviv Stock Exchange
|
|
|
|
|
|
|
|
Year
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
|
|
|
|
|
$
|
4.00
|
|
$
|
1.69
|
|
2005
|
|
|
|
|
|
|
|
$
|
10.36
|
|
$
|
3.52
|
|
2006
|
|
|
|
|
|
|
|
$
|
10.94
|
|
$
|
7.35
|
|
2007*
|
|
$
|
13.78
|
|
$
|
10.60
|
|
$
|
14.20
|
|
$
|
10.03
|
|
2008
|
|
$
|
10.99
|
|
$
|
3.15
|
|
$
|
10.74
|
|
$
|
3.29
|
|
_________
___
* Prices of our ordinary shares on the NASDAQ Global Market for 2007 are from May 21, 2007 only.
55
Quarterly Stock Information
The
following table sets forth, for each of the full financial quarters in the years indicated, the high
and low market prices of our ordinary shares on the NASDAQ Global Market and the Tel Aviv Stock Exchange:
|
|
NASDAQ Global Market
|
|
Tel Aviv Stock Exchange
|
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
|
|
|
|
|
$
|
12.43
|
|
$
|
10.03
|
|
Second Quarter*
|
|
$
|
13.78
|
|
$
|
12.45
|
|
$
|
14.20
|
|
$
|
11.84
|
|
Third Quarter
|
|
$
|
13.07
|
|
$
|
10.77
|
|
$
|
12.67
|
|
$
|
10.37
|
|
Fourth Quarter
|
|
$
|
12.50
|
|
$
|
10.60
|
|
$
|
12.63
|
|
$
|
10.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
10.99
|
|
$
|
6.25
|
|
$
|
10.74
|
|
$
|
6.15
|
|
Second Quarter
|
|
$
|
8.39
|
|
$
|
6.52
|
|
$
|
8.26
|
|
$
|
6.28
|
|
Third Quarter
|
|
$
|
8.09
|
|
$
|
6.02
|
|
$
|
7.64
|
|
$
|
5.94
|
|
Fourth Quarter
|
|
$
|
6.77
|
|
$
|
3.15
|
|
$
|
6.36
|
|
$
|
3.29
|
|
__________
* Prices of our ordinary shares on the NASDAQ Global Market are from May 21, 2007.
Monthly Stock Information
The
following table sets forth, for the most recent six months, the high and low market prices of our
ordinary shares on the NASDAQ Global Market and the Tel Aviv Stock Exchange:
|
|
NASDAQ Global Market
|
|
Tel Aviv Stock Exchange
|
|
|
|
|
|
|
|
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2008
|
|
$
|
6.77
|
|
$
|
3.36
|
|
$
|
6.36
|
|
$
|
3.48
|
|
November 2008
|
|
$
|
4.00
|
|
$
|
3.23
|
|
$
|
3.83
|
|
$
|
3.35
|
|
December 2008
|
|
$
|
4.36
|
|
$
|
3.15
|
|
$
|
4.09
|
|
$
|
3.29
|
|
January 2009
|
|
$
|
4.80
|
|
$
|
4.24
|
|
$
|
4.74
|
|
$
|
4.10
|
|
February 2009
|
|
$
|
4.99
|
|
$
|
4.30
|
|
$
|
4.97
|
|
$
|
4.25
|
|
March 2009 (until March 23)
|
|
$
|
4.76
|
|
$
|
3.72
|
|
$
|
4.95
|
|
$
|
3.88
|
|
B. PLAN OF DISTRIBUTION
Not
applicable.
C.
MARKETS
In
November 1993, we completed an initial public offering of our ordinary shares in Israel and our ordinary
shares have traded on the Tel Aviv Stock Exchange since such time. Since our public offering in the
United States in May 2007, our ordinary shares have also been listed on the NASDAQ Global Market
(symbol: LIMS).
D.
SELLING SHAREHOLDERS
Not
applicable.
E.
DILUTION
Not
applicable.
56
F. EXPENSE OF THE ISSUE
Not
applicable.
ITEM 10.
ADDITIONAL INFORMATION
A.
SHARE CAPITAL
Not
applicable.
B.
MEMORANDUM AND ARTICLES OF ASSOCIATION
Set out below is a description of certain provisions of our Articles of Association and of the Israeli
Companies Law related to such provisions. This description is only a summary and does not purport
to be complete and is qualified by reference to the full text of the Articles of Association, which
are incorporated by reference as exhibits to this annual report, and to Israeli law.
Purposes and Objects of the Company
We
are a public company registered under the Israel Companies Law as STARLIMS Technologies Ltd. Our
registration number with the Israeli Companies Registrar is 520040247. Pursuant to our memorandum
of association, we were formed for the purpose of, among other things, trading, marketing, distribution
and export of computers and peripheral computer equipment, software products and measuring equipment
for laboratories.
The Powers of the Directors
Under
the provisions of the Israel Companies Law and our articles of association, a director cannot participate
in a meeting nor vote on a proposal, arrangement or contract in which he or she is materially interested.
In addition, our directors cannot vote compensation to themselves or any members of their body without
the approval of our audit committee and our shareholders at a general meeting. See Item 6B.
Directors, Senior Management and Employees Compensation.
Directors
may not enter into borrowing arrangements on our behalf except in the manner approved by the Company.
Under
our articles of association, retirement of directors from office is not subject to any age limitation
and our directors are not required to own shares in our company in order to qualify to serve as directors.
Rights Attached to Shares
Our
authorized share capital consists of 15,000,000 ordinary shares, each with a par value of NIS 1.0
per share. All of our issued and outstanding ordinary shares are duly authorized, validly issued,
fully paid and non-assessable.
The
rights attached to the ordinary shares are as follows:
Dividend and Liquidation Rights.
The holders of our ordinary shares are entitled to their proportionate share of any cash dividend,
share dividend or dividend in kind subsequently declared with respect to our ordinary shares. Dividends
are paid to the holders of ordinary shares proportionate to the amounts that were paid up or were
treated as having been paid up on the par value of the shares that they hold. Under the Israeli Companies
Law a company may effect a distribution out of its profits (as defined by the Israeli Companies Law)
provided that there is no reasonable concern that such distribution might deprive the company of
its ability to meet its existing and anticipated liabilities as they become due. Profits
are defined in the Israeli Companies Law as the balance of surpluses, or the surpluses accumulated
over the past two years, whichever is the greater, in accordance with the latest adjusted financial
statements, audited or reviewed, prepared by the company, provided that the date in respect of which
the statements were prepared is no earlier than six months prior to the date of distribution. Surplus
means sums included in a companys shareholders equity originating from the net profit
of the company, as determined according to generally accepted accounting principles, and sums other
than share capital or premiums that are included in shareholders equity under generally accepted
accounting principles and the Minister of Justice prescribed that they are to be considered surplus.
57
A company
that does not have profits (within the meaning of the Israeli Companies Law) and wishes to make a
distribution must obtain court permission, which will be granted if the court is convinced that there
is no reasonable concern that such distribution might deprive the company of its ability to meet
its existing and anticipated liabilities as they become due.
Under
the Israeli Companies Law, dividend distributions are determined by the board of directors and do
not require the approval of the shareholders of a company unless the companys articles of association
provide otherwise. Our articles of association do not require shareholder approval of a dividend
distribution.
In
the event of our liquidation, after satisfaction of liabilities to creditors, our assets will be
distributed to the holders of ordinary shares proportionate to the amounts that were paid up or were
treated as having been paid up on the par value of the shares that they hold.
Voting Rights.
Holders of ordinary shares have one vote for each ordinary share held on all matters submitted to
a vote of shareholders. Such voting rights may be affected by the grant of any special voting rights
to the holders of a class of shares with preferential rights that may be authorized in the future.
The
quorum required for a general meeting of shareholders consists of at least two shareholders present
in person or by proxy or by written ballot who hold or represent, in the aggregate, at least one
third of the voting rights of the company. A meeting adjourned for lack of a quorum shall be adjourned
to the same day in the following week at the same time and place or to any time and place as the
board of directors designates in a notice to the shareholders. At the adjourned meeting, the required
quorum consists of at least two shareholders present in person or by proxy or by written ballot.
Under
the Israeli Companies Law, unless otherwise provided in the articles of association or applicable
law, all resolutions of the shareholders require a simple majority of the voting rights represented
at the meeting, in person, by proxy or by written ballot, and voting on the resolution. Under the
Israeli Companies Ordinance, a resolution for the voluntary winding up of the company requires approval
by holders of 75% of the voting rights represented and voting at the general meeting.
Pursuant
to our articles of association, our directors (except the outside directors) are elected at our annual
general meeting of shareholders by a vote of the holders of a majority of the voting power represented
and voting at such meeting and hold office until the next annual general meeting of shareholders.
If directors have not been elected at the general meeting, the directors who were elected at the
previous meeting will continue in office. All the members of our Board of Directors (except the outside
directors) may be reelected upon completion of their term of office. For information regarding the
election of outside directors, see Item 6C. Directors and Senior Management Board
Practices - Outside and Independent Directors.
Rights to Share in our Companys Profits
. Our shareholders have the right to share in our profits distributed as a dividend and any other
permitted distribution. See this Item 10B. Additional Information Memorandum and Articles
of Association Rights Attached to Shares Dividend and Liquidation Rights.
Rights to Share in Surplus in the Event of Liquidation
. In the event of our liquidation, after satisfaction of liabilities to creditors, our assets
will be distributed to the holders of ordinary shares proportionate to the amounts that were
paid up or were treated as having been paid up on the par value of the shares they hold. This right
may be affected by the grant of preferential dividend or distribution rights to the holders of a
class of shares with preferential rights that may be authorized in the future.
Liability to capital calls by our company
. Under our memorandum of association and the Israeli Companies Law, the liability of our shareholders
is limited to the par value of the shares held by them.
58
Limitations on any existing or prospective major shareholder
. See Item 6C. Directors and Senior Management Board Practices - Approval of Related
Party Transactions Under Israeli Law.
Modification of Rights Attached to Shares
The
Israeli Companies Law provides that, unless otherwise provided by the articles of association, the
rights of a particular class of shares may not be adversely modified without the approval of a separate
class meeting of the affected class.
Annual and Special Meetings
Under
the Israeli Companies Law a company must convene an annual meeting of shareholders at least once
every calendar year and within 15 months of the last annual meeting. Depending on the matter to be
voted upon, in general notice of at least 14 days or 35 days prior to the date of the meeting is
required. Our board of directors may, in its discretion, convene additional meetings as special
general meetings. In addition, the board must convene a special general meeting
upon the demand of two of the directors, 25% of the nominated directors, one or more shareholders
having at least 5% of the outstanding share capital and at least 1% of the voting power in the company,
or one or more shareholders having at least 5% of the voting power in the company. The chairman of
the board of directors presides at each of our general meetings. If there is no chairman or he or
she is absent from the meeting within 15 minutes from the time set for the meeting or if he or she
refuses to take the chair at the meeting, the members that are present may elect one of the directors
as chairman of the meeting or where no director is present or if all the directors who are present
refuse to take the chair one of the members present may be elected to chair the meeting. The
chairman of the board of directors is not entitled to a vote at a general meeting in his or her capacity as chairman.
Limitations on the Rights to Own Our Ordinary Shares
Neither
our memorandum of association, our articles of association, nor the laws of the State of Israel restrict
in any way the ownership or voting of ordinary shares by non-residents, except that shares held by
citizens of countries which are in a state of war with Israel will not confer any rights to their
holders unless the Minister of Finance consents otherwise.
Anti-Takeover Provisions; Mergers and Acquisitions
Tender Offer
.
A person wishing to acquire shares, or any class of shares, of a publicly traded Israeli company and
who would as a result hold over 90% of the companys issued and outstanding share capital, or
a class of shares, is required by the Israeli Companies Law to make a tender offer to all of the
companys shareholders for the purchase of all of the remaining issued and outstanding shares
of the company, or the class of shares, as the case may be. If the shareholders who do not respond
to the offer hold less than 5% of the issued share capital of the company, or of the relevant class
of shares, all of the shares that the acquirer offered to purchase will be transferred to the acquirer
by operation of law. However, the shareholders may petition the court to determine that the consideration
for the acquired shares is less than the shares fair value and that the acquiring party should
pay the shares fair value. If the dissenting shareholders hold more than 5% of the issued and
outstanding share capital of the company, or of the relevant class of shares, as the case may be,
the acquirer may not acquire additional shares of the company from shareholders who accepted the
tender offer if following such acquisition the acquirer would own over 90% of the companys
issued and outstanding share capital, or of the relevant class of shares.
The
Israeli Companies Law provides that an acquisition of shares of a public company be made by means
of a tender offer if as a result of the acquisition the purchaser would become the holder of a control
block. Under the Israeli Companies Law shares conferring 25% or more of the voting
rights in the company constitute a control block. The requirement for
a tender offer does not apply if there is already another holder of a control block. Similarly, the
Israeli Companies Law provides that an acquisition of shares in a public company must be made by
means of a tender offer if as a result of the acquisition the acquirer would hold more than 45% of
the voting rights in the company, unless there is another person holding more than 45% of the voting
rights in the company. These requirements do not apply if:
59
|
|
|
|
|
the acquisition was made in a private placement the object of which was to confer to the acquiring
party a control block where there is no holder of a control block,
or to confer to the acquiring party 45% of the voting rights in the company where there is no holder
of 45% of the voting rights in the company, and the private placement received the general meetings
approval; or
|
|
|
|
|
|
the acquisition was from the holder of a control block and resulted in a person
becoming the holder of a control block; or
|
|
|
|
|
|
the acquisition was from a shareholder holding more than 45% of the voting rights in the company and
resulted in a person becoming a holder of more than 45% of the voting rights in the company.
|
Merger
.
The Israeli Companies Law permits merger transactions if approved by each partys
board of directors and, except under certain circumstances specified below, by the majority of each
partys shares voted on the proposed merger at a shareholders meeting convened upon prior notice
of at least 35 days (which may be shortened to 14 days in certain circumstances). A merger is defined
as the transfer of all assets and liabilities, including conditional, future, known and unknown debts
of the target company to the surviving company, as a result of which the target company is liquidated,
and stricken out of the Companies Register.
Under
the Israeli Companies Law, if the approval of a general meeting of the shareholders is required,
merger transactions may be approved by holders of a simple majority of the shares present and voting,
in person or by proxy or by written ballot, at the general meeting convened to approve the transaction.
If one of the merging companies, or a shareholder that holds 25% or more of the means of control
of one of the merging companies, or a 25% shareholder, holds shares of the other merging company,
then a dissenting vote of holders of the majority of the shares of the other merging company present
and voting, excluding shares held by the merging company or a 25% shareholder thereof, or by anyone
acting on behalf of either of them, their relatives and corporations controlled thereby, is sufficient
to reject the merger transaction. Means of control are defined as any of the following: (i) the right
to vote at a general meeting of a company; and (ii) the right to appoint a director of a company.
If the transaction would have been approved but for the exclusion of the votes as previously indicated,
a court may still approve the merger upon the request of holders of at least 25% of the voting rights
of the company. The court will not approve a merger unless it is convinced that the merger is fair
and reasonable, taking into account the values of the merging companies and the consideration offered
to the shareholders. Upon the request of a creditor of either party to the proposed merger, the court
may delay or prevent the merger if it concludes that there exists a reasonable concern that, as a
result of the merger, the surviving company will be unable to satisfy the obligations of the merged
company. In addition, a merger may not be completed unless at least 50 days have passed from the
date that a proposal for approval of the merger was filed with the Israeli Registrar of Companies
and 30 days from the date that shareholder approval of both merging companies was obtained.
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Notwithstanding the foregoing, a merger is not subject to the approval of the shareholders of the target
company if the target company is a wholly-owned subsidiary of the surviving company. A merger is
not subject to the approval of the shareholders of the surviving company if:
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the merger does not require the alteration of the memorandum or articles of association of the surviving
company;
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the acquiring company would not issue more than 20% of the voting rights thereof to the shareholders
of the target company in the course of the merger and no person will become, as a result of the merger,
a controlling shareholder of the surviving company, on a fully diluted basis;
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neither the target company, nor any shareholder that holds 25% of the means of control of the target
company is a shareholder of the surviving company; and
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there is no person that holds 25% or more of the means of control in both companies.
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Disclosure of Shareholders Ownership
The
Israeli Securities Law, 5728-1968 and regulations promulgated thereunder contain various provisions
regarding the ownership threshold above which shareholders must disclose their share ownership. However,
these provisions do not apply to companies, such as ours, whose shares are publicly traded in Israel
as well on the NASDAQ Global Market. We are required pursuant to the Israeli Securities Law and the
regulations promulgated thereunder to submit to the Israeli Companies Registrar, the Israeli Securities
Authority and the Tel Aviv Stock Exchange, among other things, all information that we receive from
our shareholders regarding their shareholdings in our company, provided that such information was
published or is required to be published under applicable foreign law.
Changes in Our Capital
Changes
in our capital are subject to the approval of the shareholders at a general meeting by a simple majority
of the votes of shareholders participating and voting in the general meeting.
C. MATERIAL CONTRACTS
While
we have numerous contracts with customers and distributors we do not deem any such individual contract
to be material.
D.
EXCHANGE CONTROLS
The
Israeli Currency Control Law, 5738-1978 provides that transactions in foreign currencies, and transactions
with foreign residents, require a permit. Since 1998, when a new general permit was issued
under the law, there have been no Israeli currency control restrictions on payments of dividends
or other distributions with respect to our ordinary shares or the proceeds from the sale of the shares,
except for the obligation of Israeli residents to file reports with the Bank of Israel regarding
certain transactions.
E.
TAXATION
The
following is a discussion of Israeli and United States tax consequences material to our shareholders.
To the extent that the discussion is based on new tax legislation which has not been subject to judicial
or administrative interpretation, the views expressed in the discussion might not be accepted by
the tax authorities in question. The discussion is not intended, and should not be construed, as
legal or professional tax advice and does not exhaust all possible tax considerations.
Holders of our ordinary shares should consult their own tax advisors as to the United States, Israeli
or other tax consequences of the purchase, ownership and disposition of ordinary shares, including,
in particular, the effect of any foreign, state or local taxes.
ISRAELI TAX CONSIDERATIONS
The following is a general discussion only and is not exhaustive of all possible tax considerations.
It is not intended, and should not be construed, as legal or professional tax advice and should not
be relied upon for tax planning purposes. In addition, this discussion does not address all of the
tax consequences that may be relevant to purchasers of our ordinary shares in light of their particular
circumstances, or certain types of purchasers of our ordinary shares subject to special tax treatment.
Examples of these kinds of purchasers include residents of Israel and traders in securities who are
subject to special tax regimes not covered in this discussion. Each individual/entity should consult
its own tax or legal advisor as to the Israeli tax consequences of the purchase, ownership and disposition
of our ordinary shares.
To the extent that part of the discussion is based on new tax legislation, which has not been subject
to judicial or administrative interpretation, we cannot assure that the tax authorities or the courts
will accept the views expressed in this section.
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The following summary describes the current tax structure applicable to companies in Israel, with special
reference to its effect on us. The following also contains a discussion of the material Israeli tax
consequences to holders of our ordinary shares.
General Corporate Tax Structure
Israeli
companies were subject to corporate tax at the rate of 27% on taxable income for the year 2008 and
were subject to capital gains tax at a rate of 25% on capital gains (other than gains derived from
the sale of listed securities that are taxed at the prevailing corporate tax rates) derived after
January 1, 2003. The applicable corporate tax for 2009 is 26%; for 2010 and thereafter,
the applicable tax rate will be 25%. However, the effective tax rate payable by a company that derives
income from a benefited enterprise as further discussed below may be lower.
Tax Benefits under the Law for the Encouragement of Industry (Taxes), 1969
Under
the Law for the Encouragement of Industry (Taxes), 1969, or the Industry Encouragement Law, Industrial
Companies (as defined below) are entitled to the following tax benefits:
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amortization of the expenses incurred in the purchase of know-how and patents, over an eight-year period;
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expenses related to a public offering are deductible over a three-year period;
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the right to file, under specified conditions, a consolidated tax return with other Israeli Industrial
Companies under the same control that engage in the same economic sector; and
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accelerated depreciation rates on equipment and buildings.
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Under
the Industry Encouragement Law, an Industrial Company is defined as a company
resident in Israel, at least 90% of the income of which, in any tax year, exclusive of income from
government loans, capital gains, interest and dividends, is derived from an Industrial
Enterprise owned by it. An Industrial Enterprise is defined as
an enterprise whose major activity in a given tax year is industrial production activity.
We
believe that we currently qualify as an Industrial Company within the definition of the Industry
Encouragement Law. No assurance can be given that we will continue to qualify as an Industrial Company
or that the benefits described above will be available in the future.
Tax Benefits under the Law for the Encouragement of Capital Investments, 1959
The
Law for the Encouragement of Capital Investment, 1959, or the Investment Law, provides that certain
capital investments in production facilities that contribute to the economic independence of the
Israeli economy and are deemed competitive facilities that contribute to the Israeli gross domestic
product may, subject to the conditions specified in the law, be entitled to the status of an Approved
Enterprise. A company having an Approved Enterprise is entitled to certain benefits,
including Israeli Government cash grants and tax benefits.
The
Investment Law specifies certain conditions that an Approved Enterprise has to comply with, including
compliance with the definition of an Industrial Enterprise as detailed in
the Investment Law and minimum capital investments. In addition, for the status of an Approved Enterprise
an entity must comply with at least one of the following conditions during the period of entitlement
in order to enjoy the benefits:
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that the Approved Enterprise engage primarily in biotechnology or nanotechnology and receive the prior
approval of the Chairman of the Industrial Research and Technology Administration confirming this;
or
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that the Approved Enterprises revenues from any single country do not exceed 75% of the Approved
Enterprises total revenues; or
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that 25% of the Approved Enterprises revenues during the benefits period derive from sales within
a single country with a population of at least 12 million.
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monitor annually our compliance with the relevant conditions in order to ensure that we preserve
our status as an Approved Enterprise.
An
Approved Enterprise that complies with one of the foregoing conditions and other terms specified
in the Investment Law is a Benefited Enterprise. A Benefited Enterprise
is entitled to accelerated depreciation for its manufacturing assets. In addition, a Benefited Enterprise
is entitled to full exemption from corporate tax on undistributed income for a period of two to ten
years, depending on the geographic location of the Benefited Enterprise within Israel, and a reduced
corporate tax rate of 10% to 25% on undistributed income for the remainder of the benefits period.
The duration of the remainder of the benefits period varies, depending on the level of foreign investment
in the enterprise in each year, and the location of the enterprise. The scope of the reduction in
the corporate tax rate is also dependant on the level of foreign investment in the enterprise. Foreign
investment is determined pursuant to the percentage of a companys share capital (conferring
rights to profits, voting and appointment of directors) and shareholders loans owned by non-Israeli
residents. The minimum amount of foreign investment for purposes of the Investment Law is NIS 5.0
million. A Benefited Enterprise located in Development Zone A, where we established a development
center in November 2006, is exempt from corporate tax on undistributed income for ten years.
A Benefited Enterprise located in Development Zone B is exempt from corporate tax on undistributed
income for six years, and subject to a reduced corporate tax rate of 25% in the seventh year. A Benefited
Enterprise located in an area other than Zone A or B is exempt from corporate tax on undistributed
income for two years and subject to a reduced corporate tax rate of 25% in the following four years.
However, if the enterprise has a foreign investment of 25% or more it will enjoy a reduced corporate
tax rate during the four years following the six years of full exemption if located in Zone B, or
if located in an area other than Zone A or B it will enjoy a reduced corporate tax rate during the
eight years following the two years of full exemption. The reduced corporate tax rate would be 25%,
unless the enterprise has a foreign investment of 49% or more. If the foreign investment is 49% or
more but less than 74%, the reduced corporate tax rate would be 20%, if the foreign investment is
74% or more but less than 90% the reduced corporate tax rate would be 15%, and if the foreign investment
is 90% or more the reduced corporate tax rate would be 10%. The lowest level of foreign investment
during the year will be used to determine the relevant tax rate for that year.
If
the company pays a dividend out of income derived from the Benefited Enterprise during the tax exemption
period, a portion of its income that is equivalent to the amount distributed as dividends will be
subject to corporate tax. Dividends paid to shareholders out of income derived from the Benefited
Enterprise are subject to income tax at a reduced rate of 15% subject to the relevant tax treaty
as detailed below.
A Benefited
Enterprise located in Zone A is entitled to substitute the full exemption from corporate tax on undistributed
income by a reduced corporate tax rate of 11.5%. In this case it would not be subject to additional
corporate tax in case of dividend distributions, dividends distributed from the income of the Benefited
Enterprise to Israeli residents will be subject to 15% income tax, and dividends distributed from
the income of the Benefited Enterprise to non-Israeli residents will be subject to 4% income tax.
The
period of benefits may in no event exceed 14 years from the year the company chooses as the year
of election, within the meaning of the Investment Law, for the Benefited Enterprise. The reduced
income tax on dividends distributed out of income derived from a Benefited Enterprise is applicable
only if the dividends are distributed within 12 years after the benefits period. Dividends distributed
by an enterprise that has a foreign investment of 25% or more are not subject to the 12-year limitation.
If
a company has more than one Approved Enterprise or if only a portion of its capital investments are
approved, its effective tax rate is the result of a weighted combination of the applicable rates.
The tax benefits relate only to taxable profits attributable to the specific Approved Enterprise.
Income derived from activity that is not integral to the activity of the Approved Enterprise does
not enjoy tax benefits.
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In
June 2006, we received a pre-ruling from the Israeli Tax Authority confirming that a development
center which we established in November 2006 in the industrial zone of Ashkelon, Israel will
be regarded a Benefited Enterprise. Benefited Enterprises located in this area, which is qualified
as Zone A, may elect between a full exemption from corporate tax on undistributed profits or a reduced
corporate tax of 11.5%. We have elected the full exemption option, which will apply to taxable income
attributable to the Benefited Enterprise. In addition, we have retained earnings in the amount of
$355,000 from an investment that was recognized as an Approved Enterprise and whose benefit period
terminated in 1997, and retained earnings of approximately $3.2 million from an investment that was
recognized as a Benefited Enterprise and whose benefit period will terminate in 2015. If these earnings
were distributed as a dividend by the company, they would be subject to 25% corporate tax (or 33.33%
under certain conditions), in addition to the income tax that will apply with respect to the dividend
income paid to our shareholders.
The
benefits available to our Benefited Enterprise are conditional upon our fulfilling certain conditions
stipulated in the Investment Law and its regulations and the terms of the pre-ruling that we received
from the Israeli Tax Authority. The pre-ruling that we received is subject to several conditions
which include, among other things, that we remain controlled and managed from Israel throughout the
benefit period and that we not change our line of business or business model, or significantly reduce
the volume of our production or variety of our products. In addition, under the pre-ruling, during
the benefit period, a certain percentage of our employees who are engaged in core research and development
must be located in Israel, a certain percentage of our employees who are engaged in quality control
must be located in Israel and no fewer than 12 of the employees engaged in core research and development
must be recruited and employed in Israel. If we were to violate one or more of these conditions we
could be required to pay the monetary equivalent of the tax benefits, linked to the Israeli consumer
price index, plus interest and penalties. As of the date of this annual report, we were in compliance
with all applicable conditions.
Special Provisions Relating to Taxation under Inflationary Conditions
The
Israeli tax ordinance and regulations promulgated thereunder allow Foreign-Invested Companies,
as defined in the Investments Law, that maintain their accounts in U.S. dollars in compliance with
regulations published by the Israeli Minister of Finance, referred to as the Dollar Regulations,
to base their tax returns on their operating results as reflected in their U.S. dollar financial
statements. For these purposes, a Foreign-Invested Company is a company (i) more than 25% of whose
share capital, in terms of rights to profits, voting and appointment of directors, are held by persons
who are not residents of Israel; and (ii) more than 25% of whose combined share and loan capital
is held by persons who are not residents of Israel. A company that elects to measure its results
for tax purposes based on the U.S. dollar exchange rate cannot change such election for a period
of three years following the election. We qualify as a Foreign-Invested Company
and elected to measure our results for tax purposes in the years 2008-2011 based on the U.S. dollar
exchange rate. Our Israeli subsidiaries are taxed under the Dollar Regulations for the years 2008 to 2010.
Through
tax year 2007, our company was taxed under the provisions of The Income Tax Law (Inflationary Adjustments),
1985, generally referred to as the Inflationary Adjustments Law, pursuant to which, results for tax
purposes were measured in real terms, based on changes in the Israeli consumer price index. On February
26, 2008, the Israeli Parliament (the Knesset) enacted an amendment to the Inflationary Adjustments
Law according to which the effective period of the Inflationary Adjustments Law ceased at the end
of the 2007 tax year and as of the 2008 tax year, the provisions of the law no longer apply, other
than the transitional provisions intended at preventing distortions in the tax calculations. In accordance
with the amendment, commencing the 2008 tax year, income for tax purposes will no longer be adjusted
to a real (net of inflation) measurement basis. Furthermore, the depreciation of inflation immune
assets and carried forward tax losses will no longer be linked to the Israeli consumer price index.
However, the provisions regarding Foreign-Invested Companies remain in force.
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Taxation of our Shareholders
Taxation of Non-Israeli Shareholders
Taxation of Non-Israeli Shareholders on Receipt of Dividends
. According to Israeli tax law, non-Israeli residents are subject to income tax on income accrued
or derived from sources in Israel. Dividends distributed by a company resident in Israel are deemed
income accrued or derived from sources in Israel.
Unless
a lower rate is provided in a treaty between Israel and the shareholders country of residence,
dividends from income attributed to our Approved Enterprise will be subject
to income tax in Israel at the rate of 15%, and dividends from income which is not attributed to
an Approved Enterprise will be subject to income tax in Israel at the rate
of 20%, except for dividend distributed to a substantial shareholder which
will be subject to tax at the rate of 25%. A substantial shareholder is a
shareholder holding, either directly or indirectly, alone or together with another, at least 10%
of any means of control in a company. The term together with another means
together with a relative, or together with someone who is not a relative with whom the individual,
either directly or indirectly, usually cooperates, pursuant to an agreement, with respect to the
material affairs of the company. The relevant holdings for the purpose of determining whether a shareholder
is a substantial shareholder are the shareholders holdings at the time of the distribution
and at any time during the 12 months preceding the distribution. These taxes will be withheld at
source from the amounts distributed as dividends. The withholding tax from dividends derived from
traded securities by a substantial shareholders is limited to 25%.
A non-resident
of Israel who receives dividends from which tax was withheld at source is generally exempt from the
duty to file returns in Israel in respect of such income, provided that the dividends were not derived
from a business conducted in Israel by the taxpayer and the taxpayer has no other taxable sources
of income in Israel.
Under
the Convention between the U.S. Government and the Government of Israel with Respect to Taxes on
Income, or the U.S.-Israel Tax Treaty, the maximum rate of tax chargeable in Israel on dividends
paid to a U.S. resident, within the meaning of the U.S.-Israel Tax Treaty, is 25%. Furthermore, the
maximum rate of tax chargeable on dividends that are paid to a U.S. corporation holding at least
10% of the outstanding shares of the voting stock of the paying company during the part of the tax
year of the paying company that precedes the date of the payment of the dividend and during the whole
of its prior tax year, is 12.5%. This reduced rate will not apply if more than 25% of the paying
companys gross income consists of interest or dividends (other than dividends or interest received
from subsidiary corporations, 50% or more of the outstanding shares of the voting shares of which
are owned by the paying company at the time such dividends or interest is received). These provisions
of the U.S.-Israel Tax Treaty will not apply to dividends constituting industrial or commercial profits
attributable to a permanent establishment which the recipient has in Israel, that are subject to
the specific provisions of the treaty relating to industrial or commercial profits.
Investors
should consult their own tax advisors to determine if they are eligible for benefits under the U.S.
Israel Tax Treaty.
Capital Gains Taxes Applicable to Non-Israeli Shareholders
. In general, Israel imposes a capital gains tax on the sale of capital assets located in Israel,
including shares of Israeli resident companies, by both Israeli and non-Israeli resident shareholders,
unless a specific exemption is available, or unless a tax treaty between Israel and the shareholders
country of residence provides otherwise.
Shareholders
that are not Israeli residents are exempt from Israeli capital gains tax on any gains derived from
the sale of shares that are traded on an Israeli stock exchange, unless such gains are derived from
a permanent establishment of such shareholders in Israel, and provided that the shares were purchased
after the listing of the shares on the stock exchange. Our shares have been traded on the TASE since
1993. Therefore, the exemption will apply to capital gains derived by eligible non-Israeli residents.
Non-Israeli
residents are also exempt from Israeli capital gains tax on any gains derived from the sale of shares
of Israeli companies publicly traded on a recognized stock market outside of Israel, provided such
shareholders did not acquire their shares prior to the issuers initial public offering and
that the gains did not derive from a permanent establishment of such shareholders in Israel, and
that such shareholders are not subject to the Inflationary Adjustments Law or the Income Tax Ordinances
provisions concerning bookkeeping in a foreign currency.
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However,
a non-Israeli corporation will not be entitled to the foregoing exemptions if (i) it is controlled
by Israeli residents; or (ii) Israeli residents are the beneficiaries of or entitled to 25% or more
of the revenues or profits of such non-Israeli corporation, whether directly or indirectly.
In
certain instances where our non-Israeli shareholders may be liable to Israeli tax on the sale of
their ordinary shares, the payment of the consideration may be subject to Israeli withholding tax.
In
addition, the sale, exchange or disposition of our ordinary shares by a shareholder who is a U.S.
resident (within the meaning of the U.S.-Israel Tax Treaty) holding the ordinary shares as a capital
asset will be also exempt from Israeli capital gains tax under the U.S.-Israel Tax Treaty, unless
(i) the shareholder holds, directly or indirectly, shares representing 10% or more of our voting
capital during any part of the 12-month period preceding such sale, exchange or disposition; or (ii)
the capital gains arising from such sale, exchange or disposition are attributable to a permanent
establishment of the shareholder located in Israel; or (iii) an individual shareholder is present
in Israel for a period or periods aggregating 183 days or more during the taxable year. In such case
the U.S. resident would be subject to Israeli capital gain tax, to the extent applicable, as mentioned
above. However, under the U.S.-Israel Tax Treaty, the U.S. resident would be permitted to claim a
credit for such taxes against the U.S. federal income tax imposed on the sale, exchange or disposition,
subject to the limitation in U.S. law applicable to foreign tax credits. The U.S.-Israel Tax Treaty
does not relate to U.S. state or local taxes.
Taxation of Israeli Shareholders
Israeli
resident individuals are generally subject to Israeli income tax on the receipt of dividends paid
on our ordinary shares, other than bonus shares (share dividends) or stock dividends, at the rate
of 20%, or 25% for a shareholder that is considered a material shareholder (within the meaning of
the Israeli Income Tax Ordinance) at any time during the 12-month period preceding such distribution.
Dividends paid on our ordinary shares to Israeli companies are exempt from such tax, except for dividends
distributed from income derived outside of Israel, which are subject to the 25% tax rate.
Dividends
paid from income derived from any of our approved enterprises or benefited enterprises
are subject to tax, which is withheld at the source, at the rate of 15%. We cannot assure you that
we will designate the profits that are being distributed in a way that will reduce shareholders
tax liability to this tax rate.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material U.S. federal income tax considerations applicable
to the purchase, ownership and disposition of our ordinary shares. Unless otherwise stated, this
summary deals only with shareholders that are U.S. Holders (as defined below) who hold their ordinary
shares as capital assets.
As
used in this section, the term U.S. Holder means a beneficial owner of an ordinary share
who is:
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an individual citizen or resident of the United States or an individual treated as a U.S. citizen or
resident for U.S. federal income tax purposes;
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a corporation or other entity taxable as a corporation for U.S. federal income tax purposes created
or organized in or under the laws of the United States, any State or the District of Columbia;
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source;
or
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any trust if (A)(i) a court within the United States is able to exercise primary supervision over the
administration of the trust and (ii) one or more United States persons have the authority to control
all substantial decisions of the trust, or (B) such trust validly elects to be treated as a United
States person.
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The
term Non-U.S. Holder means a beneficial owner of an ordinary share that is an individual,
corporation, estate or trust and is not a U.S. Holder. The tax consequences to a Non-U.S. Holder
may differ substantially from the tax consequences to a U.S. Holder. Certain aspects of U.S. federal
income tax relevant to a Non-U.S. Holder are discussed below.
This
description is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the Code),
existing and proposed U.S. Treasury regulations promulgated thereunder, administrative and judicial
interpretations thereof, and the US-Israel Tax Treaty, each as in effect as of the date of this annual
report. These sources may change, possibly with retroactive effect, and are open to differing interpretations.
This description does not discuss all aspects of U.S. federal income taxation that may be applicable
to investors in light of their particular circumstances or to investors who are subject to special
treatment under U.S. federal income tax law, including:
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insurance companies;
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dealers in stocks, securities or currencies;
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financial institutions and financial services entities;
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real estate investment trusts;
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regulated investment companies;
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persons that receive ordinary shares in connection with the performance of services;
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tax-exempt organizations;
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persons that hold ordinary shares as part of a straddle or appreciated financial position or as part
of a hedging, conversion or other integrated instrument;
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persons who acquire their ordinary shares through the exercise or cancellation of employee stock options
or otherwise as consideration for their services;
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individual retirement and other tax-deferred accounts;
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expatriates of the United States and certain former long-term residents of the United States;
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persons liable for the alternative minimum tax;
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persons having a functional currency other than the U.S. dollar; and
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direct, indirect or constructive owners of 10% or more, by voting power or value, of our company.
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If
a partnership or an entity treated as a partnership for U.S. federal income tax purposes owns ordinary
shares, the U.S. federal income tax treatment of a partner in such a partnership will generally depend
upon the status of the partner and the activities of the partnership. A partnership that owns ordinary
shares and the partners in such partnership should consult their tax own advisors about the U.S.
federal income tax consequences of holding and disposing of ordinary shares.
This
discussion does not consider the possible application of U.S. federal gift or estate tax or alternative
minimum tax.
All investors are urged to consult their own tax advisors as to the particular tax consequences to
them of an investment in our ordinary shares, including the effect and applicability of United States
federal, state, local and foreign income and other tax laws (including estate and gift tax laws)
and tax treaties.
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Distributions Paid on the Ordinary Shares
Subject
to the discussion below under Passive Foreign Investment Company Considerations, a U.S.
Holder generally will be required to include in his or her gross income as ordinary dividend income
the amount of any distributions paid on the ordinary shares, including the amount of any Israeli
taxes withheld, to the extent that those distributions are paid out of our current or accumulated
earnings and profits, as determined for U.S. federal income tax purposes. Subject to the discussion
below under Passive Foreign Investment Company Considerations, distributions in excess
of our earnings and profits will be applied against and will reduce the U.S. Holders tax basis
in its ordinary shares and, to the extent they exceed that tax basis, will be treated as gain from
a sale or exchange of those ordinary shares. Our dividends will not qualify for the dividends-received
deduction applicable in some cases to U.S. corporations.
Dividends
that we pay in NIS, including the amount of any Israeli taxes withheld therefrom, will be included
in your income in a U.S. dollar amount calculated by reference to the exchange rate in effect on
the day such dividends are received, regardless of whether the payment is in fact converted into
U.S. dollars. A U.S. Holder who receives payment in NIS and converts NIS into U.S. dollars at an
exchange rate other than the rate in effect on such day will have a foreign currency exchange gain
or loss that would be treated as ordinary income or loss. U.S. Holders should consult their own tax
advisors concerning the U.S. tax consequences of acquiring, holding and disposing of NIS.
Subject
to certain limitations, qualified dividend income received by a noncorporate U.S. Holder
in tax years beginning on or before December 31, 2010 will be subject to tax at a reduced maximum
tax rate of 15%. Distributions taxable as dividends paid on the ordinary shares should qualify for
the 15% rate provided that we are not a passive foreign investment company (as described below) for
U.S. tax purposes and that either: (i) we are entitled to benefits under the income tax treaty between
the United States and Israel (the U.S.-Israel Tax Treaty) or (ii) the ordinary shares
are readily tradable on an established securities market in the United States and certain other requirements
are met. We believe that we are entitled to benefits under the U.S.-Israel Tax Treaty
and that the ordinary shares currently will be readily tradable on an established securities market
in the United States. However, no assurance can be given that the ordinary shares will remain readily
tradable. The rate reduction does not apply unless certain holding period requirements are satisfied.
With respect to the ordinary shares, the U.S. Holder must have held such shares for at least 61 days
during the 121-day period beginning 60 days before the ex-dividend date. The rate reduction also
does not apply to dividends received from passive foreign investment companies, see discussion below,
or in respect of certain hedged positions or in certain other situations. The legislation enacting
the reduced tax rate contains special rules for computing the foreign tax credit limitation of a
taxpayer who receives dividends subject to the reduced tax rate. U.S. Holders of ordinary shares
should consult their own tax advisors regarding the effect of these rules in their particular circumstances.
Subject
to the discussion below under Information Reporting and Back-up Withholding, a Non-U.S.
Holder generally will not be subject to U.S. federal income or withholding tax on dividends received
on ordinary shares unless that income is effectively connected with the conduct by that Non-U.S.
Holder of a trade or business in the United States, in which case a corporate Non-U.S. Holder may
also be subject to the U.S. branch profits tax.
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Foreign Tax Credit
Any
dividend income resulting from distributions we pay to a U.S. Holder with respect to the ordinary
shares generally will be treated as foreign source income for U.S. foreign tax credit limitation
purposes. Subject to certain conditions and limitations, Israeli tax withheld on dividends may be
deducted from taxable income or credited against a U.S. Holders U.S. federal income tax liability.
The limitation on foreign taxes eligible for credit is calculated separately with respect to specific
classes of income. For this purpose, any dividend that we distribute generally will constitute passive
category income, or, in the case of certain U.S. Holders, general category income.
The rules relating to the determination of foreign source income and the foreign tax credit
are complex, and the availability of a foreign tax credit depends on numerous factors. Each investor
who is a U.S. Holder should consult with its own tax advisor to determine whether its income with
respect to the ordinary shares would be foreign source income and whether and to what extent that
investor would be entitled to a foreign tax credit.
Disposition of Ordinary Shares
Upon
the sale or other disposition of ordinary shares, subject to the discussion below under Passive
Foreign Investment Company Considerations, a U.S. Holder generally will recognize capital gain
or loss equal to the difference between the amount realized on the disposition and the holders
adjusted tax basis in the ordinary shares. U.S. Holders should consult their own advisors with respect
to the tax consequences of the receipt of a currency other than U.S. dollars upon such sale or other
disposition.
Gain
or loss upon the disposition of the ordinary shares will be treated as long-term if, at the time
of the sale or disposition, the ordinary shares were held for more than one year. The deductibility
of capital losses by a U.S. Holder is subject to limitations. In general, any gain or loss recognized
by a U.S. Holder on the sale or other disposition of ordinary shares will be U.S. source income or
loss for U.S. foreign tax credit purposes. U.S. Holders should consult their own tax advisors concerning
the source of income for U.S. foreign tax credit purposes and the effect of the U.S.-Israel Tax Treaty
on the source of income.
Subject
to the discussion below under Information Reporting and Back-up Withholding, a Non-U.S.
Holder generally will not be subject to U.S. federal income or withholding tax on any gain realized
on the sale or exchange of ordinary shares unless:
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that gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in
the United States, and, if a tax treaty applies, is attributable to a permanent establishment or
fixed base of the Non-U.S. Holder in the United States; or
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in the case of any gain realized by an individual Non-U.S. Holder, that holder is present in the United
States for 183 days or more in the taxable year of the sale or exchange, and other conditions are
met.
|
Passive Foreign Investment Company Considerations
Special
U.S. federal income tax rules apply to U.S. Holders owning shares of a passive foreign investment
company. A non-U.S. corporation will be considered a passive foreign investment company for any taxable
year in which, after applying certain look-through rules, 75% or more of its gross income consists
of specified types of passive income, or 50% or more of the average value of its assets consists
of assets that produce, or are held for the production of, passive income. For this purpose, passive
income includes generally dividends, interest, royalties, rents, annuities and the excess of gains
over losses from the disposition of assets which produce passive income.
If
we were classified as a passive foreign investment company, a U.S. Holder could be subject to increased
tax liability upon the sale or other disposition of ordinary shares or upon the receipt of amounts
treated as excess distributions. Under these rules, the excess distribution and any gain
would be allocated ratably over the U.S. Holders holding period for the ordinary shares, and
the amount allocated to the current taxable year and any taxable year prior to the first taxable
year in which we were a passive foreign investment company would be taxed as ordinary income. The
amount allocated to each of the other taxable years would be subject to tax at the highest marginal
tax rate in effect for the applicable class of taxpayer for that year, and an interest charge for
the deemed deferral benefit would be imposed on the resulting tax allocated to such other taxable
years. The tax liability with respect to the amount allocated to years prior to the year of the disposition,
or excess distribution, cannot be offset by any net operating losses. In addition, holders
of stock in a passive foreign investment company may not receive a step-up in basis on
shares acquired from a decedent. If we are a passive foreign investment company in any year, a U.S.
Holder would be required to file an annual return on IRS Form 8621 regarding distributions received
with respect to ordinary shares and any gain realized on the disposition of ordinary shares.
69
Based
on our current and projected income, assets and activities, we do not believe that we will be a passive
foreign investment company for our current taxable year. However, because the determination of whether
we are a passive foreign investment company is based upon the composition of our income and assets
from time to time, we cannot be certain that we will not be considered a passive foreign investment
company for the current taxable year or any future taxable year.
The
passive foreign investment company tax consequences described above will not apply to a U.S. Holder
if the U.S. Holder makes an election to treat us as a qualified electing fund, or QEF. If a U.S.
Holder makes a timely QEF election, the U.S. Holder would be required to include in income for each
taxable year its pro rata share of our ordinary earnings as ordinary income and its pro rata share
of our net capital gain as long-term capital gain, whether or not such amounts are actually distributed
to the U.S. Holder. However, a U.S. Holder would not be eligible to make a QEF election unless we
comply with certain applicable information reporting requirements. We will determine whether or not
we are willing to provide U.S. Holders with the information needed to report income and gain under
a QEF election should we become a passive foreign investment company.
As
an alternative to making a QEF election, a U.S. Holder of passive foreign investment company stock
which is publicly traded may in certain circumstances avoid certain of the tax consequences generally
applicable to holders of a passive foreign investment company by electing to mark the stock to market
annually and recognizing as ordinary income or loss each year an amount equal to the difference as
of the close of the taxable year between the fair market value of the passive foreign investment
company stock and the U.S. Holders adjusted tax basis in the passive foreign investment company
stock. Losses would be allowed only to the extent of net mark-to-market gain previously included
by the U.S. Holder under the election for prior taxable years. Income recognized and deductions allowed
under the mark-to-market provisions, as well as any gain or loss on the disposition of ordinary shares
with respect to which the mark to market election is made, is generally treated as ordinary income
or loss (except that loss is treated as capital loss to the extent the loss exceeds the net mark-to-market
gains, if any, that a U.S. Holder included in its income with respect to such ordinary shares in
prior years). However, gain or loss from the disposition of ordinary shares (as to which a mark-to-market
election was made) in a year in which we are no longer a passive foreign investment company, will
be capital gain or loss. The mark-to-market election is available for so long as our ordinary shares
constitute marketable stock, which includes stock of a passive foreign investment company
that is regularly traded on a qualified exchange or other market. Generally,
a qualified exchange or other market includes a national securities exchange that is
registered with the Securities and Exchange Commission or the national market system established
pursuant to Section 11A of the Exchange Act. A class of stock that is traded on one or more qualified
exchanges or other markets is regularly traded on an exchange or market for any calendar
year during which that class of stock is traded, other than in de minimis quantities, on at least
15 days during each calendar quarter. We believe that The NASDAQ Global Market will constitute a
qualified exchange or other market for this purpose. However, we can not be certain that our ordinary
shares will continue to trade on The NASDAQ Global Market or that the ordinary shares will be regularly traded for this purpose.
The
rules applicable to owning shares of a passive foreign investment company are complex, and each holder
who is a U.S. Holder should consult with its own tax advisor regarding the consequences of investing
in a passive foreign investment company.
Information Reporting and Backup Withholding
Payments
in respect of ordinary shares may be subject to information reporting to the U.S. Internal Revenue
Service and to U.S. backup withholding tax at a rate equal to the fourth lowest income tax rate applicable
to individuals (which, under current law, is 28%). Backup withholding will not apply, however, if
you (i) are a corporation or come within certain exempt categories, and demonstrate the fact when
so required, or (ii) furnish a correct taxpayer identification number and make any other required
certification. U.S. Holders who are required to establish their exempt status generally must provide
such certification on IRS Form W-9.
70
Backup
withholding is not an additional tax. Amounts withheld under the backup withholding rules may
be credited against a U.S. Holders U.S. tax liability, and a U.S. Holder may obtain a refund
of any excess amounts withheld under the backup withholding rules by filing the appropriate claim
for refund with the IRS.
Any
U.S. holder who holds 10% or more in vote or value of our ordinary shares will be subject to certain
additional United States information reporting requirements.
U.S. Gift and Estate Tax
An
individual U.S. Holder of ordinary shares will generally be subject to U.S. gift and estate taxes
with respect to ordinary shares in the same manner and to the same extent as with respect to other
types of personal property.
F. DIVIDEND AND PAYING AGENTS
Not
applicable.
G.
STATEMENT BY EXPERTS
Not
applicable.
H. DOCUMENTS ON DISPLAY
We
are subject to the reporting requirements of the Exchange Act, as applicable to foreign private
issuers as defined in Rule 3b-4 under the Exchange Act, and in accordance therewith, we file
annual and interim reports and other information with the Securities and Exchange Commission.
As
a foreign private issuer, we are exempt from certain provisions of the Exchange Act. Accordingly,
our proxy solicitations are not subject to the disclosure and procedural requirements of Regulation
14A under the Exchange Act and transactions in our equity securities by our officers and directors
are exempt from reporting and the short-swing profit recovery provisions contained in
Section 16 of the Exchange Act. In addition, we are not required under the Exchange Act to file periodic
reports and financial statements as frequently or as promptly as U.S. companies whose securities
are registered under the Exchange Act. However, we file with the Securities and Exchange Commission
an annual report on Form 20-F containing financial statements that have been audited by an independent
registered public accounting firm, and we file reports with the Securities and Exchange Commission
on Form 6-K containing (among other things) unaudited condensed interim financial information for
the first three quarters of each fiscal year and press releases. We post our annual report on Form
20-F and Form 6-Ks on our website (
www.starlims.com
) promptly following their filing with the Securities and Exchange Commission. The information
on our website is not incorporated by reference into this annual report.
This
annual report and the exhibits thereto and any other document we file pursuant to the Exchange Act
may be inspected without charge and copied at prescribed rates at the following Securities and Exchange
Commission public reference rooms: 100 F Street, N.E., Room 1580, Washington, D.C. 20549; and on
the Securities and Exchange Commission Internet site (http://www.sec.gov). You may obtain information
on the operation of the Securities and Exchange Commissions public reference room in Washington,
D.C. by calling the Securities and Exchange Commission at 1-800-SEC-0330 or by visiting the Securities
and Exchange Commissions website at
http://www.sec.gov
. The Exchange Act file number for our Securities and Exchange Commission filings is 001-33487.
The
Securities and Exchange Commission maintains a website at
www.sec.gov
that contains reports,
proxy and information statements, and other information regarding registrants that make electronic
filings with the Securities and Exchange Commission using its EDGAR (Electronic Data Gathering, Analysis,
and Retrieval) system.
71
The
documents concerning our company referred to in this annual report may also be inspected at our offices
located at32B Habarzel Street, Tel Aviv 69710, Israel.
I. SUBSIDIARY INFORMATION
Not
applicable.
ITEM 11.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|
Interest Rate Risk
We
do not believe that we have any material exposure to interest rate risk other than sensitivity to
prevailing interest rates that may affect income from our cash deposits, commercial paper and marketable
securities.
Foreign Currency Exchange Risk
We
operate in the United States, Canada, Israel, Hong Kong and the United Kingdom. Our financial results,
which are reported in U.S. dollars, are affected by changes in foreign currency. In 2008, approximately
12% of our expenses were paid in Canadian dollars, 16% in NIS and 4% in British pounds, which are
primarily attributable to salary and salary-related expenses related to our operations in Canada,
Israel and the United Kingdom. The U.S. dollar cost of our operations in these locations is
influenced by the exchange rate between the U.S. dollar and the foregoing currencies. During
2008, the Canadian dollar depreciated against the U.S. dollar by approximately 24%; the NIS appreciated
against the U.S. dollar by approximately 1%, and the British pound depreciated against the U.S. dollar
by approximately 19%. We cannot assure you that we will not be adversely affected in the future
if the such currencies appreciate against the U.S. dollar.
In
addition, approximately 15% of our marketable securities ($1.1 million, as of December 31,
2008)
are NIS-denominated bonds. Consequently, our financial results are affected by fluctuations
in the
rates of exchange between the U.S. dollar and the NIS. In 2006, 2007 and 2008, the NIS appreciated
against the U.S. dollar by approximately 8%, 9% and 1%, respectively.
In
2006, 2007 and 2008, we recorded foreign currency exchange gains of $166,000, $241,000 and $79,000,
respectively.
ITEM 12.
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
Not
applicable.
PART II
ITEM 13.
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
None.
ITEM 14.
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
Material Modifications to the Rights of Security Holders
None.
Use of Proceeds
We
sold an aggregate of 2,226,300 ordinary shares (including over allotment option shares) in our initial
public offering on May 23, 2007. The aggregate offering price was approximately $30.1 million. The
amount of underwriting discount paid by us in the offering was $2.1 million and the costs of the
offering, not including the underwriting discount, were approximately $1.3 million. The net proceeds
that we received as a result of the offering were approximately $27 million. None of the net proceeds
of the offering was paid directly or indirectly to any director, officer, general partner of ours
or to their associates, persons owning 10% or more of any class of our equity securities, or to any
of our affiliates. As of December 31, 2008, all of our net proceeds were in cash and cash equivalents
and marketable securities. We intend to use such net proceeds for general corporate purposes, including
working capital and capital expenditures.
72
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ITEM 15.
|
CONTROLS AND PROCEDURES
|
Disclosure Controls and Procedures
We
maintain disclosure controls and procedures that are designed to ensure that information required
to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commissions rules and forms, and
that such information is accumulated and communicated to our chief executive officer and chief financial
officer to allow timely decisions regarding required disclosure. Our management, including our chief
executive officer and chief financial officer, conducted an evaluation of our disclosure controls
and procedures, as defined under Exchange Act Rule 13a-15(e), as of the end of the period covered
by this annual report on Form 20-F. Based upon that evaluation, our chief executive officer and chief
financial officer have concluded that, as of such date, our disclosure controls and procedures were effective.
Managements Annual Report on Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal control over our financial
reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated
under the Securities Exchange Act as a process designed by, or under the supervision of, the companys
principal executive and principal financial officers and effected by the companys board of
directors, management and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles and includes those policies and procedures that:
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pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transaction
and dispositions of the assets of the company;
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provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of management and directors
of the company; and
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provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the companys assets that could have a material effect on the financial
statements.
|
Because
of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
Our
management assessed the effectiveness of our internal control over financial reporting as of December
31, 2008. In making this assessment, our management used the criteria set forth by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.
Based on that assessment, our management concluded that as of December 31, 2008, our internal control
over financial reporting is effective.
This
annual report does not include an attestation report of our independent registered public accounting
firm regarding internal control over financial report. Managements report was not subject to
attestation by our independent registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit us to provide only managements report in this
annual report.
73
Changes in Internal Control over Financial Reporting
There
was no change in our internal control over financial reporting that occurred during the period covered
by this annual report that has materially affected, or is reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 16.
|
[
RESERVED
]
|
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ITEM 16A.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
Our
board of directors has determined that each of Dov Kleiman, Martin Bandel and Ron Sandak, each of
whom is an independent director, qualifies as an audit committee financial expert as defined by rules
of the Securities and Exchange Commission.
We
have adopted a code of ethics that applies to our chief executive officer and all senior financial
officers of our company, including the chief financial officer, chief accounting officer or controller,
or persons performing similar functions. Our code of ethics is available on our website at
http://www.starlims.com/company/STARLIMS_Ethics.htm
.
If we make any substantive amendment to the code of ethics or grant any waivers, including
any implicit waiver, from a provision of the codes of ethics, we will disclose the nature of such
amendment or waiver on our website.
ITEM 16C.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
Fees Paid to Independent Public Accountants
The
following table sets forth, for each of the years indicated, the fees billed by our principal independent
registered public accounting firm. Since the listing of our ordinary shares on the NASDAQ Global
Market in May 2007, all of such fees were pre-approved in advance by our Audit Committee.
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Year Ended December 31,
|
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Services Rendered
|
|
2007
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit (1)
|
|
$
|
100,000
|
|
$
|
111,000
|
|
|
|
Audit-related
|
|
|
|
|
|
|
|
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|
Tax (2)
|
|
|
56,000
|
|
|
33,000
|
|
|
|
Other (3)
|
|
|
171,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
327,000
|
|
$
|
144,000
|
|
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|
______________
|
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(1)
|
Audit fees relate to audit services provided for each of the years shown in the table, including fees
associated with the annual audit and reviews of our interim financial results submitted to the Securities
and Exchange Commission on Form 6-K, consultations on various accounting issues and audit services
provided in connection with other statutory or regulatory filings.
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(2)
|
Tax fees relate to services provided by tax experts of our independent registered public accounting
firm in connection with transfer pricing and Israeli tax matters.
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(3)
|
Other fees in 2007 primarily relate to services provided in connection with our initial public offering
in the United States in May 2007.
|
Pre-Approval Policies and Procedures
Our
audit committee has adopted a policy and procedures for the pre-approval of audit and non-audit services
rendered by our independent registered public accounting firm, Brightman Almagor & Co., Certified
Public Accountants, a member firm of Deloitte Touche Tohmatsu. Pre-approval of an audit or non-audit
service may be given as a general pre-approval, as part of the audit committees approval of
the scope of the engagement of our independent registered public accounting firm, or on an individual
basis. Any proposed services exceeding general pre-approved levels also require specific pre-approval
by our audit committee. The policy prohibits retention of the independent registered public accounting
firm to perform the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act
or the rules of the Securities and Exchange Committee, and also requires the audit committee to consider
whether proposed services are compatible with the independence of the independent registered public
accounting firm.
74
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ITEM 16D.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
|
Not
applicable.
|
|
ITEM 16E.
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
|
Issuer Purchase of Equity Securities
In
February 2008, we adopted a share repurchase program, allowing us to repurchase our ordinary shares
over a period of 18 months in the open market, at times and prices that management considers appropriate,
taking into account prevailing market conditions and other corporate considerations. The program
limits us to aggregate purchases of up to $2.0 million. As of December 31, 2008, we had repurchased
326,308 ordinary shares under the program at a total purchase price of approximately $1.9 million,
or an average price of $5.95 per share. In conjunction with our repurchase program, we have established
a Rule 10b5-1 trading plan, which provides for a scheduled repurchase mechanism that is managed by
our broker.
The
following table sets forth, for each of the months indicated, the total number of shares purchased
by us, the average price paid per share, the number of shares purchased as part of our publicly announced
repurchase programs and the approximate dollar value of shares that may yet be purchased under the
programs.
Period in 2008
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs
|
|
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Plans or
Programs
|
|
|
|
|
|
|
|
|
|
|
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|
February
|
|
3,000
|
|
7
.73
|
|
3,000
|
|
1,976,000
|
|
March
|
|
87,727
|
|
7
.47
|
|
87,727
|
|
1,321,000
|
|
April
|
|
27,800
|
|
7
.05
|
|
27,800
|
|
1,126,000
|
|
May
|
|
8,300
|
|
7
.06
|
|
8,300
|
|
1,066,500
|
|
June
|
|
55,420
|
|
6
.76
|
|
55,420
|
|
692,000
|
|
July
|
|
3,500
|
|
6
.24
|
|
3,500
|
|
670,500
|
|
August
|
|
15,900
|
|
7
.46
|
|
15,900
|
|
552,000
|
|
September
|
|
14,024
|
|
7
.21
|
|
14,024
|
|
451,000
|
|
November
|
|
106,932
|
|
3
.57
|
|
106,932
|
|
70,000
|
|
December
|
|
3,705
|
|
3
.35
|
|
3,705
|
|
57,000
|
|
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|
ITEM 16F.
|
CHANGES IN REGISTRANTS CERTIFYING ACCOUNTANT
|
Not
applicable.
ITEM 16G.
|
CORPORATE GOVERNANCE
|
Under
NASDAQ Marketplace Rule 4350, or Rule 4350, foreign private issuers, such as our company, are permitted
to follow certain home country corporate governance practices instead of certain provisions of Rule
4350. A foreign private issuer that elects to follow a home country practice instead of any of such
provisions of Rule 4350, must submit to NASDAQ, in advance, a written statement from an independent
counsel in such issuers home country certifying that the issuers practices are not prohibited
by the home countrys laws.
75
In
connection with our initial public offering in the United States in May 2007, we provided NASDAQ
with a notice of non-compliance with Rule 4350 with respect to the requirements regarding the directors
nominations process. Instead, we follow Israeli law and practice in accordance with which our board
of directors is authorized to recommend to our shareholders director nominees for election, and our
shareholders may nominate candidates for election as directors by the general meeting of shareholders.
See Item 6C. Directors, Senior Management and Employees - Board Practices - Election of Directors.
PART III
ITEM 17.
|
FINANCIAL STATEMENTS
|
We
have elected to furnish financial statements and related information specified in Item 18.
ITEM 18.
|
FINANCIAL STATEMENTS
|
Consolidated Financial Statements of STARLIMS Technologies Ltd.
|
Index to Consolidated Financial Statements
|
|
F-1
|
|
|
|
|
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Report of Independent Registered Public Accounting Firm
|
|
F-2
|
|
|
|
|
|
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|
Consolidated Balance Sheets
|
|
F-3
|
|
|
|
|
|
|
|
Consolidated Statements of Income
|
|
F-4
|
|
|
|
|
|
|
|
Statements of Changes in Shareholders’ Equity and Other Comprehensive Income
|
|
F-5
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
F-6- F-7
|
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
F-8 - F-44
|
|
Index
to Exhibits
|
Exhibit
|
Description
|
|
|
|
|
1.1
|
English Translation of Memorandum of Association of the Registrant (1)
|
|
|
|
|
1.2
|
English Translation of Articles of Association of the Registrant (2)
|
|
|
|
|
1.3
|
English Translation of Certificate of Name Change (3)
|
|
|
|
|
2.1
|
Specimen of Ordinary Share Certificate (4)
|
|
|
|
|
3.1
|
English Translation of Voting Agreement dated October 31, 1993 by and among Messrs. Itschak Friedman,
Dinu Toiba and Chaim Friedman, as amended on December 21, 2005 (5)
|
|
|
|
|
4.1
|
English Translation of Management and Consulting Agreement dated November 1, 1993 with Sivanir (Management
Services) 1992 Ltd. (6)
|
|
|
|
|
4.2
|
2001 Option Plan (7)
|
76
|
|
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|
4.3
|
2005 Option Plan (8)
|
|
|
|
|
4.4
|
English Translation of 2006 Employee Option Plan (9)
|
|
|
|
|
4.5
|
2007 Restricted Stock Unit Plan (10)
|
|
|
|
|
8.1
|
List of Subsidiaries of the Registrant
|
|
|
|
|
12.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act,
as amended
|
|
|
|
|
12.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act,
as amended
|
|
|
|
|
13.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
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|
13.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
|
15.1
|
Consent of Brightman Almagor & Co., a member firm of Deloitte Touche Tohmatsu
|
|
|
|
|
(1)
|
Filed as Exhibit 3.1 to the Registrants Registration Statement on Form F-1/A, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(2)
|
Filed as Exhibit 3.2 to the Registrants Registration Statement on Form F-1/A, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(3)
|
Filed as Exhibit 3.3 to the Registrants Registration Statement on Form F-1, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(4)
|
Filed as Exhibit 4.1 to the Registrants Registration Statement on Form F-1/A, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(5)
|
Filed as Exhibit 10.7 to the Registrants Registration Statement on Form F-1, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(6)
|
Filed as Exhibit 10.3 to the Registrants Registration Statement on Form F-1, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(7)
|
Filed as Exhibit 10.4 to the Registrants Registration Statement on Form F-1, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(8)
|
Filed as Exhibit 10.5 to the Registrants Registration Statement on Form F-1, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(9)
|
Filed as Exhibit 10.6 to the Registrants Registration Statement on Form F-1, registration
number 333-142605, filed with the Securities and Exchange Commission, and incorporated herein by
reference.
|
|
|
|
|
(10)
|
Filed as Exhibit 4.5 to the Registrants Annual Report for the year ended December 31, 2007, and incorporated herein by reference.
|
|
|
|
77
STARLIMS TECHNOLOGIES
LTD.
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
F - 1
|
Brightman Almagor Zohar
1 Azrieli Center
Tel Aviv 67021
P.O.B. 16593, Tel Aviv 61164
Israel
Tel: +972 (3) 608 5555
Fax: +972 (3) 609 4022
info@deloitte.co.il
www.deloitte.co.il
|
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of
Directors and Stockholders of
STARLIMS Technologies Ltd.
We have audited the accompanying consolidated
balance sheets of STARLIMS Technologies
Ltd. and its subsidiaries (the
Company) as of December 31, 2007 and 2008, and the related consolidated
statements of income, changes in shareholders equity and other comprehensive income,
and cash flows for each of the three years in the period ended December 31, 2008. These
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of STARLIMS Technologies
Ltd. and its subsidiaries as of
December 31, 2007 and 2008, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 2008, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Brightman Almagor & Co.
Brightman Almagor & Co.
Certified Public Accountants
A Member Firm of
Deloitte Touche Tohmatsu
Tel Aviv, Israel
March
24, 2009
F - 2
STARLIMS TECHNOLOGIES LTD.
CONSOLIDATED BALANCE SHEETS
(U.S. dollars in thousands, except share data and per share data)
|
|
As of December 31,
|
|
Note
|
2 0 0 7
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
$
|
31,704
|
|
$
|
21,942
|
|
Short-term deposits
|
|
|
|
|
|
|
-
|
|
|
1,191
|
|
Restricted short-term deposits
|
|
|
|
|
|
|
195
|
|
|
338
|
|
Marketable securities
|
|
|
|
4
|
|
|
1,012
|
|
|
5,686
|
|
Trade receivables (net of allowance
|
|
|
for doubtful accounts of $192 and $238, respectively)
|
|
|
|
5
|
|
|
9,215
|
|
|
10,341
|
|
Other current assets
|
|
|
|
6
|
|
|
1,667
|
|
|
2,891
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
43,793
|
|
|
42,389
|
|
|
|
|
|
|
|
|
|
|
Long-Term Assets
|
|
|
Marketable securities - held-to-maturity
|
|
|
|
4
|
|
|
2,206
|
|
|
1,608
|
|
Other long-term assets
|
|
|
|
7
|
|
|
564
|
|
|
949
|
|
Fixed assets, net
|
|
|
|
8
|
|
|
1,601
|
|
|
1,416
|
|
Goodwill
|
|
|
|
3
|
|
|
1,326
|
|
|
2,227
|
|
Other intangible assets, net
|
|
|
|
9
|
|
|
37
|
|
|
213
|
|
|
|
|
|
|
|
Total long-term assets
|
|
|
|
|
|
|
5,734
|
|
|
6,413
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
$
|
49,527
|
|
$
|
48,802
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
|
|
Current Liabilities
|
|
|
Trade accounts payable
|
|
|
|
|
|
$
|
201
|
|
$
|
934
|
|
Deferred revenues
|
|
|
|
|
|
|
2,276
|
|
|
2,876
|
|
Other current liabilities and accrued expenses
|
|
|
|
10
|
|
|
2,291
|
|
|
2,228
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
4,768
|
|
|
6,038
|
|
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
Long-term deferred revenues
|
|
|
|
|
|
|
68
|
|
|
251
|
|
Accrued severance pay
|
|
|
|
11
|
|
|
52
|
|
|
19
|
|
Deferred taxes
|
|
|
|
16
|
|
|
841
|
|
|
483
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
|
|
|
|
961
|
|
|
753
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
Shareholders' Equity
|
|
|
|
13
|
|
|
|
|
Ordinary shares, NIS 1.00 par value;
|
|
|
authorized 15,000,000 shares as of December 31, 2007 and 2008;
|
|
|
issued 9,994,544 and 9,997,919 shares as of December 31, 2007 and 2008
|
|
|
respectively; outstanding 8,724,675, and 8,407,742 shares as of December 31,
|
|
|
2007 and 2008, respectively
|
|
|
|
|
|
|
3,151
|
|
|
3,152
|
|
Additional paid-in capital
|
|
|
|
|
|
|
30,893
|
|
|
31,355
|
|
Accumulated other comprehensive income
|
|
|
|
|
|
|
260
|
|
|
(27
|
)
|
Retained earnings
|
|
|
|
|
|
|
12,267
|
|
|
12,198
|
|
Treasury stock, at cost - 1,269,869 and 1,590,177 ordinary shares, respectively
|
|
|
|
|
|
|
(2,773
|
)
|
|
(4,667
|
)
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
|
|
|
|
43,798
|
|
|
42,011
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
|
|
|
|
$
|
49,527
|
|
$
|
48,802
|
|
|
|
|
|
|
|
The accompanying notes form an
integral part of the consolidated financial statements.
F - 3
STARLIMS TECHNOLOGIES
LTD.
CONSOLIDATED STATEMENTS OF INCOME
(U.S. dollars in thousands, except share data and per share data)
|
|
Year Ended December 31,
|
|
Note
|
2 0 0 6
|
2 0 0 7
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
Software licensing
|
|
|
|
|
|
$
|
8,286
|
|
$
|
10,656
|
|
$
|
10,238
|
|
Maintenance
|
|
|
|
|
|
|
2,841
|
|
|
3,241
|
|
|
5,234
|
|
|
|
|
|
|
|
|
|
Total product revenues
|
|
|
|
|
|
|
11,127
|
|
|
13,897
|
|
|
15,472
|
|
Services
|
|
|
|
|
|
|
8,638
|
|
|
9,878
|
|
|
9,770
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
19,765
|
|
|
23,775
|
|
|
25,242
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues
|
|
|
Cost of products
|
|
|
|
|
|
|
31
|
|
|
374
|
|
|
409
|
|
Cost of services
|
|
|
|
|
|
|
5,557
|
|
|
8,095
|
|
|
9,137
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
|
|
|
|
5,588
|
|
|
8,469
|
|
|
9,546
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
14,177
|
|
|
15,306
|
|
|
15,696
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
Research and development
|
|
|
|
|
|
|
1,866
|
|
|
2,872
|
|
|
3,408
|
|
Selling and marketing
|
|
|
|
|
|
|
4,741
|
|
|
5,792
|
|
|
6,299
|
|
General and administrative
|
|
|
|
|
|
|
2,634
|
|
|
2,799
|
|
|
3,573
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
|
|
|
|
9,241
|
|
|
11,463
|
|
|
13,280
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
|
4,936
|
|
|
3,843
|
|
|
2,416
|
|
|
|
|
Financial income, net
|
|
|
|
15
|
|
|
610
|
|
|
1,551
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
5,546
|
|
|
5,394
|
|
|
3,466
|
|
|
|
|
Income tax expense
|
|
|
|
16
|
|
|
1,762
|
|
|
885
|
|
|
589
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
$
|
3,784
|
|
$
|
4,509
|
|
$
|
2,877
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
$
|
0.59
|
|
$
|
0.58
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares used in
|
|
|
computing basic earnings per share
|
|
|
|
17
|
|
|
6,459,030
|
|
|
7,799,583
|
|
|
8,591,614
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
$
|
0.58
|
|
$
|
0.57
|
|
$
|
0.33
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares used in
|
|
|
computing diluted earnings per share
|
|
|
|
17
|
|
|
6,559,985
|
|
|
7,897,036
|
|
|
8,713,394
|
|
|
|
|
|
|
|
|
|
The accompanying notes form an
integral part of the consolidated financial statements.
F - 4
STARLIMS TECHNOLOGIES LTD.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND OTHER COMPREHENSIVE INCOME
(U.S. dollars in thousands, except share data)
|
Ordinary shares (*)
|
|
|
|
|
|
|
Number
of shares
|
Amount
|
Additional
paid-in
capital
|
Accumulated
other
comprehensive
income
|
Retained
earnings
|
Treasury
Stock,
at cost
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2006
|
|
|
|
7,765
|
|
$
|
2,600
|
|
$
|
4,468
|
|
$
|
12
|
|
$
|
5,888
|
|
$
|
(3,232
|
)
|
$
|
9,736
|
|
Comprehensive income:
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,784
|
|
|
|
|
|
3,784
|
|
Translation adjustment of financial
|
|
|
statements of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
(24
|
)
|
Gains (losses) on marketable
|
|
|
securities available-for-sale, net
|
|
|
of tax:
|
|
|
Realized gains included in net income
|
|
|
|
|
|
|
|
|
|
|
|
|
(103
|
)
|
|
|
|
|
|
|
|
(103
|
)
|
Unrealized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
219
|
|
|
|
|
|
|
|
|
219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of treasury stock against
|
|
|
exercise of options
|
|
|
|
|
|
|
|
|
|
(284
|
)
|
|
|
|
|
|
|
|
500
|
|
|
216
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
141
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2006
|
|
|
|
7,765
|
|
|
2,600
|
|
|
4,325
|
|
|
104
|
|
|
9,672
|
|
|
(2,732
|
)
|
|
13,969
|
|
Comprehensive income:
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,509
|
|
|
|
|
|
4,509
|
|
Translation adjustment of financial
|
|
|
statements of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
232
|
|
|
|
|
|
|
|
|
232
|
|
Gains (losses) on marketable
|
|
|
securities available-for-sale, net
|
|
|
of tax:
|
|
|
Realized gains included in net income
|
|
|
|
|
|
|
|
|
|
|
|
|
(90
|
)
|
|
|
|
|
|
|
|
(90
|
)
|
Unrealized gains
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,665
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of shares, net
|
|
|
|
2,226
|
|
|
551
|
|
|
26,426
|
|
|
|
|
|
|
|
|
|
|
|
26,977
|
|
Dividend declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,914
|
)
|
|
|
|
|
(1,914
|
)
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(93
|
)
|
|
(93
|
)
|
Issuance of treasury stock against
|
|
|
exercise of options
|
|
|
|
3
|
|
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
52
|
|
|
17
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
177
|
|
|
|
|
|
|
|
|
|
|
|
177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
|
9,994
|
|
|
3,151
|
|
|
30,893
|
|
|
260
|
|
|
12,267
|
|
|
(2,773
|
)
|
|
43,798
|
|
Comprehensive income:
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,877
|
|
|
|
|
|
2,877
|
|
Translation adjustments of
|
|
|
financial statements of subsidiaries
|
|
|
|
|
|
|
|
|
|
|
|
|
(259
|
)
|
|
|
|
|
|
|
|
(259
|
)
|
Accumulate effect of first-time
|
|
|
adoption of SFAS 159
|
|
|
|
|
|
|
|
|
|
|
|
|
14
|
|
|
(28
|
)
|
|
|
|
|
(14
|
)
|
Gains (losses) on marketable
|
|
|
securities, net of tax:
|
|
|
Realized gains included in net income
|
|
|
|
|
|
|
|
|
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares against exercise of
|
|
|
options
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
Dividend declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,918
|
)
|
|
|
|
|
(2,918
|
)
|
Issuance of treasury stock against
|
|
|
exercise of options
|
|
|
|
3
|
|
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
49
|
|
|
23
|
|
Purchase of treasury stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,943
|
)
|
|
(1,943
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
$
|
9,997
|
|
$
|
3,152
|
|
$
|
31,355
|
|
$
|
(27
|
)
|
$
|
12,198
|
|
$
|
(4,667
|
)
|
$
|
42,011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Number
of shares is presented in thousands.
|
The accompanying notes form an integral part of the consolidated financial statements.
F - 5
STARLIMS TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. dollars in thousands)
|
Year Ended December 31,
|
|
2 0 0 6
|
2 0 0 7
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS - OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
3,784
|
|
$
|
4,509
|
|
$
|
2,877
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
Depreciation and amortization
|
|
|
|
378
|
|
|
510
|
|
|
593
|
|
Stock-based compensation
|
|
|
|
141
|
|
|
177
|
|
|
488
|
|
Gains related to marketable securities
|
|
|
|
(192
|
)
|
|
(326
|
)
|
|
(79
|
)
|
Capital loss on sale of fixed assets
|
|
|
|
-
|
|
|
8
|
|
|
3
|
|
Increase (decrease) in accrued severance pay
|
|
|
|
-
|
|
|
20
|
|
|
(32
|
)
|
Deferred income taxes
|
|
|
|
174
|
|
|
(732
|
)
|
|
(459
|
)
|
The effect of exchange rate changes
|
|
|
|
(164
|
)
|
|
(241
|
)
|
|
54
|
|
Changes in assets and liabilities:
|
|
|
Increase in trade receivables
|
|
|
|
(1,406
|
)
|
|
(30
|
)
|
|
(834
|
)
|
Increase (decrease) in allowance for doubtful accounts
|
|
|
|
80
|
|
|
(99
|
)
|
|
46
|
|
Decrease (increase) in other current assets
|
|
|
|
(460
|
)
|
|
75
|
|
|
(607
|
)
|
Increase (decrease) in trade accounts payable
|
|
|
|
(15
|
)
|
|
(182
|
)
|
|
509
|
|
Increase in deferred revenues
|
|
|
|
408
|
|
|
395
|
|
|
783
|
|
Increase (decrease) in other current liabilities
|
|
|
|
(587
|
)
|
|
47
|
|
|
(1,132
|
)
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
|
2,141
|
|
|
4,131
|
|
|
2,210
|
|
|
|
|
|
|
|
|
CASH FLOWS - INVESTING ACTIVITIES
|
|
|
Investments in marketable securities
|
|
|
|
(1,982
|
)
|
|
(740
|
)
|
|
(4,761
|
)
|
Proceeds from sale of marketable securities
|
|
|
|
2,380
|
|
|
1,563
|
|
|
703
|
|
Investment in held-to-maturity marketable securities
|
|
|
|
-
|
|
|
(1,706
|
)
|
|
(428
|
)
|
Proceeds from redemption of held-to-maturity securities
|
|
|
|
-
|
|
|
1,685
|
|
|
466
|
|
Investments in deposits, net
|
|
|
|
(235
|
)
|
|
(101
|
)
|
|
(1,245
|
)
|
Loans to employees, net
|
|
|
|
(164
|
)
|
|
(64
|
)
|
|
(281
|
)
|
Purchase of fixed assets
|
|
|
|
(640
|
)
|
|
(523
|
)
|
|
(374
|
)
|
Proceeds from sale of fixed assets
|
|
|
|
-
|
|
|
10
|
|
|
11
|
|
Purchase of other intangible assets
|
|
|
|
-
|
|
|
-
|
|
|
(75
|
)
|
Acquisition of subsidiaries, net of cash acquired, and business operation (A)
|
|
|
|
(1,049
|
)
|
|
-
|
|
|
(950
|
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
(1,690
|
)
|
|
124
|
|
|
(6,934
|
)
|
|
|
|
|
|
|
|
CASH FLOWS - FINANCING ACTIVITIES
|
|
|
Proceeds from issuance of shares, net of issuance costs
|
|
|
|
-
|
|
|
26,785
|
|
|
-
|
|
Deferred share issuance costs and issuance costs
|
|
|
|
(133
|
)
|
|
-
|
|
|
-
|
|
Proceeds from sale of treasury stock against exercise of options
|
|
|
|
216
|
|
|
17
|
|
|
23
|
|
Dividends paid
|
|
|
|
(1,389
|
)
|
|
(1,914
|
)
|
|
(2,918
|
)
|
Purchase of treasury stock by the Company
|
|
|
|
-
|
|
|
(93
|
)
|
|
(1,943
|
)
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
(1,306
|
)
|
|
24,795
|
|
|
(4,838
|
)
|
|
|
|
|
|
|
|
THE EFFECT OF EXCHANGE RATE
|
|
|
CHANGES ON CASH AND CASH EQUIVALENTS
|
|
|
|
(3
|
)
|
|
115
|
|
|
(200
|
)
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
|
(858
|
)
|
|
29,165
|
|
|
(9,762
|
)
|
Cash and cash equivalents at the beginning of the year
|
|
|
|
3,397
|
|
|
2,539
|
|
|
31,704
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year
|
|
|
$
|
2,539
|
|
$
|
31,704
|
|
$
|
21,942
|
|
|
|
|
|
|
|
|
The accompanying notes form an
integral part of the consolidated financial statements.
F - 6
STARLIMS TECHNOLOGIES LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(cont.)
(U.S. dollars in thousands)
|
Year Ended December 31,
|
|
2 0 0 6
|
2 0 0 7
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for income taxes
|
|
|
$
|
1,439
|
|
$
|
1,995
|
|
$
|
1,807
|
|
|
|
|
|
|
|
|
APPENDIX A
ACQUISITION OF SUBSIDIARIES AND BUSINESS OPERATION
|
Year Ended December 31,
|
|
2 0 0 6
|
2 0 0 7
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets (excluding cash and cash equivalents)
|
|
|
$
|
(844
|
)
|
$
|
-
|
|
$
|
(566
|
)
|
Fixed assets, net
|
|
|
|
(120
|
)
|
|
-
|
|
|
(16
|
)
|
Current liabilities
|
|
|
|
1,164
|
|
|
-
|
|
|
707
|
|
Goodwill and other intangible assets
|
|
|
|
(1,249
|
)
|
|
-
|
|
|
(1,075
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,049
|
)
|
$
|
-
|
|
$
|
(950
|
)
|
|
|
|
|
|
|
|
The accompanying notes form an integral part of the consolidated financial statements.
F - 7
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 1
|
|
DESCRIPTION OF BUSINESS AND GENERAL
|
|
STARLIMS
Technologies
Ltd.
(the Company), an Israeli company whose shares are traded on the Tel-Aviv
Stock Exchange and the NASDAQ Global Market (separately and together with its
subsidiaries, the Group), develops, markets and sells configurable
off-the-shelf laboratory information management system (LIMS) software
solutions trade-named STARLIMS.
|
|
STARLIMS
manages the collection, processing, storage, retrieval and analysis of information
generated in laboratories. The STARLIMS software improves the reliability of sampling
processes, supports compliance with domestic and international regulations and industry
standards, and provides comprehensive reporting, monitoring and analysis capabilities.
STARLIMS software is installed in numerous laboratories in many countries around the
world. The configurable nature of the software allows the Group to offer solutions to
customers in a wide range of industries and in multiple disciplines, primarily quality
assurance and control, testing and monitoring, and research and development. The primary
users of STARLIMS are government, manufacturing and life sciences organizations. The
Group generates the majority of its revenues from customers based in North America.
|
|
As
of December 31, 2008, the Group includes the following foreign wholly-owned subsidiaries:
|
|
|
STARLIMS
Corp.
is incorporated and based in Florida, the United States. This subsidiary
sells directly to customers in the United States and engages
distributors in other regions.
|
|
|
STARLIMS
Canada
is incorporated in Canada and based in Montreal. This subsidiary mainly
provides professional services on behalf of STARLIMS Corp. to customers in the life
sciences, and also manages direct sales in Canada.
|
|
|
STARLIMS
Asia Pacific
is incorporated and based in Hong Kong. This subsidiary manages the Groups
operations in Asia.
|
|
|
STARLIMS
Europe,
which was established in July 2006, is incorporated in the United Kingdom and
based in London.
|
|
|
STARLIMS
United Kingdom
is incorporated in the United Kingdom and based in Bolton. This
subsidiary is responsible for the Groups operations in the United Kingdom. The
Company intends to merge this subsidiary with STARLIMS Europe.
|
F - 8
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
|
|
The
Companys consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (GAAP) in the United States of
America.
|
|
B.
|
Principles
of Consolidation
|
|
The
consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned by the Company. Inter-company balances and
transactions have been eliminated. For goodwill and other intangible assets as a result
of business combinations, see Note 3.
|
|
C.
|
Functional
Currency and Financial Statements in U.S. Dollars
|
|
The
reporting currency of the Group is the U.S. dollar. The majority of the Groups
revenues are generated in U.S. dollars (U.S. dollars, or $) or
linked to the U.S. dollar. In addition, a substantial portion of the Groups costs
are incurred in U.S. dollars. The Companys management determined that the U.S.
dollar is the primary currency of the economic environment in which the Group operates.
The functional currency of the Company, its Israeli subsidiaries and STARLIMS Europe is
the U.S. dollar. The functional currency of each of the Companys other subsidiaries
is the respective local currency.
|
|
Transactions
in currencies other than each Group-entitys functional currency are translated into
the respective functional currency based on the currency exchange rates at the date of
the transaction, in accordance with the principles set forth in Statement of Financial
Accounting Standards (SFAS) No. 52,
Foreign Currency Translation
.
All gains and losses from translation of monetary balance sheet items and transactions
denominated in currencies other than the functional currency are recorded in the
statements of income as financial income, net as they arise. Financial income, net in
2006, 2007 and 2008 includes net foreign currency transaction gains (losses) of $164, $241
and ($54), respectively.
|
|
The
financial statements of STARLIMS Canada, STARLIMS Asia Pacific and STARLIMS United
Kingdom, whose functional currency is other than the U.S. dollar, are translated into
U.S. dollars prior to their inclusion in the consolidated financial statements, in
accordance with the provisions of SFAS 52, as follows: assets and liabilities are
translated using the year-end exchange rates; and statements of income transactions are
translated at the date of the transaction using the current exchange rates. Translation
adjustments gains (losses) for 2006, 2007 and 2008 in the amount of $(24), $232 and
$(259), respectively, are presented in shareholders equity as Accumulated
Other Comprehensive Income (OCI).
|
F - 9
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
The
preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities, and
the disclosure of contingent assets and liabilities as of the date of the financial
statements, as well as the reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
|
|
E.
|
Cash
and Cash Equivalents
|
|
The
Group considers as cash equivalents all highly liquid investments, which include high
rated short-term commercial paper and short-term bank deposits with an original maturity
date of three months or less that are not restricted as to withdrawal or use.
|
|
Commencing
January 1, 2008, the Group applies FASB Statement No. 159,
The Fair Value
Option for Financial Assets and Financial Liabilities
, according to which the
Groups investments in marketable securities are presented at fair value, with
changes in fair value recognized in financial income, net. All investments in marketable
securities, other than those classified as held-to-maturity, are presented at fair value.
|
|
Through
December 31, 2007, the Group accounted for investments in marketable securities in
accordance with FASB Statement No. 115,
Accounting for Certain Investments
in Debt and Equity Securities
as follows:
|
|
(1)
|
Marketable
securities available-for-sale Investments in marketable securities that
are not classified as held-to-maturity securities are classified as
available-for-sale securities. Marketable securities available-for-sale
include debt and equity securities and are measured at their fair value as of
the balance sheet date. Gains and losses derived from fair value adjustments,
net of tax, are presented in shareholders equity under OCI. Upon
realization of these securities, gains (losses) presented in the OCI are
classified to financial income, net. Costs attributable to realized securities
and amounts reclassified out of OCI are determined based on the specific
identification method.
|
|
(2)
|
Marketable
securities held-to-maturity Investments in marketable securitie that the Group has the positive intention and ability to hold until maturity
are classified as held-to-maturity securities. Such investments are presented
at amortized cost with the addition of interest accrued to balance sheet date
(such interest represents the computed yield on cost from acquisition to
maturity). Interest and amortization of premium related to these securities are
included in financial income, net.
|
F - 10
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
G.
|
Allowance
for Doubtful Accounts
|
|
The
allowance for doubtful accounts is determined as a percentage of the balance of the trade
receivables based on management estimates and past experience. When and if there is a
specific evidence based on which, in managements estimation, collectibility is not
assured, the allowance for doubtful accounts is computed on the specific identification
basis.
|
|
Fixed
assets are stated at cost, net of accumulated depreciation and amortization. Depreciation
is calculated based on the straight-line method, over the estimated economic useful lives
of the assets, as follows:
|
|
|
Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term land lease and buildings
|
25
|
|
Computers and peripheral equipment
|
3
|
|
Office furniture and equipment (mainly 7 years)
|
5, 7
|
|
Leasehold
improvements are amortized by the straight-line method over the shorter of the term of
the lease or the estimated useful life of the improvements.
|
|
I.
|
Other
Intangible Assets
|
|
Intangible
assets are amortized over their useful lives using a method of amortization that reflects
the pattern in which the economic benefits of the intangible assets are consumed or
otherwise used up, in accordance with FASB Standard No. 142,
Goodwill and Other
Intangible Assets
(SFAS 142). Other acquired intangible assets,
comprised of service and distribution rights, that are not deemed to have indefinite
lives, are amortized on a straight-line method over a period of up to three years.
|
|
J.
|
Impairment
of long-lived assets
|
|
Impairment
examinations and recognition are performed and determined based on the provisions of FASB
Standard No. 144,
Accounting for the Impairment or Disposal of
Long-Lived
Assets
(SFAS 144). SFAS 144 requires long-lived assets and certain
identifiable assets that are held for use be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of an asset to be held and used is determined by a comparison
of the carrying amount of the asset and the amount of undiscounted future net cash flows
to be generated by the asset. In the event that an asset is considered to be impaired, an
impairment charge is recorded in the amount by which the carrying amount of the asset
exceeds its estimated fair value. During 2006, 2007 and 2008, no impairment losses have
been identified.
|
F - 11
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
Goodwill
is the excess of the purchase price over the fair value of identifiable net assets
acquired in business combinations accounted for as purchases. Under SFAS 142, goodwill is
not amortized to earnings, but rather is subject to periodic testing for impairment, at
the reporting unit level, at least annually or more frequently if certain events or
indicators of impairment occur. Impairment is the condition that exists when the carrying
amount of goodwill exceeds its implied fair value. Measurement of an impairment loss is
an estimate, performed based on the following: If the fair value of the reporting unit
exceeds its carrying amount, goodwill of the reporting unit is considered not impaired.
If the carrying amount of the reporting unit goodwill exceeds the implied fair value of
that goodwill, an impairment loss is recognized in an amount equal to that excess. The
Group uses the discounted cash flow method to determine the fair value of the reporting
unit. During 2006, 2007 and 2008, no impairment losses have been identified.
|
|
L.
|
Provision
for Warranty
|
|
The
Group generally provides limited product and services related warranties for a period up
to one year, pursuant to which the Group generally warrants that all licensed products
will perform their stated functions substantially error free and uninterrupted. The Group
also warrants that the software does not include or contain any disabling hardware
device, code, design, or routine that causes the software to be erased or become
inoperable. Accruals for known matters are recorded if a loss is probable and can be
reasonably estimated. Accruals for estimated incurred unidentified matters are recorded
based on managements estimate and past experience. Based on historical experience,
accruals for the periods presented were not recorded due to immateriality.
|
|
The
liability for severance pay benefits to Israeli employees, which according to Israeli law
is not contingent on future service, is accounted for based on the provisions of EITF
88-1
Determination of Vested Benefit Obligation for a Defined Benefit Pension
Plan
. According to this guidance, the obligation is recorded as if it was
payable at each balance sheet date (the so called shut-down method). The
obligation is generally based upon length of service and the employees last monthly
salary and is recognized on an undiscounted basis. See also Note 11A.
|
|
Amounts
contributed
with respect to the Groups non-Israeli employees, all of which
are under defined contribution plans, are accounted for in accordance with the provisions
of FASB Statement No. 87
Employers Accounting for Pensions
. Such
contributions are expensed as incurred.
|
F - 12
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
(1)
|
The
Group accounts for income taxes in accordance with FASB Statement No. 109,
Accounting for Income Taxes
(SFAS 109)
and interpretation related thereto, that is FIN 48
Accounting for
Uncertainty in Income Taxes
(FIN 48).
|
|
(2)
|
Deferred
income taxes are determined by the asset and liability method based on the
estimated future tax effects attributable to temporary differences between
income tax bases of assets and liabilities and their reported amounts in the
financial statements, and to carryforwards for tax losses and deductions.
Deferred tax balances are computed using the enacted tax rates to be in effect
at the time when these differences are expected to reverse, as they are known
at the balance sheet date.
|
|
Deferred
tax assets and liabilities are classified as current or non-current according to the
classification of the respective asset or liability, or the expected reversal date of the
specific temporary difference, if not related to a specific asset or liability.
|
|
Valuation
allowances in respect of deferred tax assets are established when it is more likely than
not that all or a portion of the deferred income tax assets will not be realized.
|
|
(3)
|
Tax
positions taken or expected to be taken are accounted for in accordance with
the provisions of FIN 48. The term tax position refers to a
position in a previously filed tax return or a position expected to be taken in
a future tax return that is reflected in measuring current or deferred income
tax assets and liabilities for interim or annual periods. A tax position can
result in a permanent reduction of income tax payable, a deferral of income
taxes otherwise currently payable to future years, or a change in the expected
realization of deferred tax assets.
|
|
The
financial statements effects of a tax position is initially recorded when it is
more-likely-than-not, based on the technical merits, the facts, circumstances and
information available as of the balance sheet date, that the position will be sustained
upon examination by the relevant taxing position. Management evaluates each tax position
without consideration of the possibility of offset or aggregation with other positions.
|
|
A
tax position that meets the more-likely-than-not threshold measured as the largest amount
of tax benefit that is greater than 50% likely of being realized upon ultimate settlement
with a taxing authority that has full knowledge of all relevant information. A previously
recognized tax position is derecognized in the first period in which it is no longer
more-likely-than-not that the tax position would be sustained upon examination by an
appropriate taxing authority.
|
|
Interest
paid or to be paid on an underpayment of income taxes is included in income tax expense.
Penalties are provided for when a tax position does not meet the minimum statutory
threshold to avoid payment of penalties, and are included in income tax expense.
|
F - 13
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
(4)
|
Taxes
which would apply in the event of disposal of investments in foreign
subsidiaries have not been taken into account in determining deferred income
taxes, as it is the Companys policy to hold these investments for
long-term rather than realizing them in the foreseeable future.
|
|
O.
|
Derivative
Financial Instruments
|
|
The
Group, from time to time, enters into foreign exchange transactions, mainly traded
options. The results of these transactions, which do not qualify for hedge accounting,
are reflected in the statements of income in financial income, net. Gains from such
transactions for each of the years ended December 31, 2006, 2007 and 2008 were determined
based on fair value, and amounted to $2, $0 and $133, respectively.
|
|
P.
|
Fair
Value of Financial Instruments
|
|
The
financial instruments of the Group consist primarily of cash and cash equivalents,
short-term deposits, restricted short-term deposits, marketable securities, trade
receivables, trade accounts payable and other receivables and payables. In view of their
nature, the fair value of financial instruments included in the working capital are
usually identical or close to their carrying amounts as of the balance sheet date.
|
|
The
ordinary shares of the Company held by the Group (treasury stock) are
presented at cost and deducted from the Companys shareholders equity. The
results of realization of the ordinary shares accounted for as treasury stock are
reflected in the statements of changes in shareholders equity.
|
|
The
Groups revenues are derived from licensing its STARLIMS software products, which
include annual maintenance contracts, and rendering services which typically include
consulting, implementation, training and technical support. The Groups typical
licensing transaction provides a perpetual non-exclusive license to use STARLIMS software
products, which use is restricted in terms of either the number of users or the specified
locations of use. The Group generally licenses its software products under multiple
element arrangements, in cases where the customer requires a combination of maintenance,
consulting, implementation, training, or other services, in addition to the software
license.
|
F - 14
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
R.
|
Revenue
Recognition
(cont.)
|
|
The
Group recognizes revenues pursuant to the provisions of American Institute of Certified
Public Accountants Statement of Position 97-2,
Software Revenue Recognition
(SOP
97-2), as amended by SOP 98-9,
Modification of SOP 97-2, Software
Revenue Recognition With Respect to Certain Transactions
. While these
Statements govern the basis for recognition of revenues from the operations of the Group,
judgment and the use of estimates are required in connection with the determination of
the amount of software licensing and services revenues, as well as the amount of deferred
revenues, to be recognized in each accounting period.
|
|
(1)
|
Product
revenues software licensing and maintenance
|
|
Revenues
from software licensing are recognized when all the criteria under SOP 97-2 are met, as
follows: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred,
(iii) the fee is fixed or determinable, and (iv) collectibility is probable.
|
|
Revenues
from post-contract customer support arrangements (Maintenance Contracts),
which are bundled in the initial license, are separated from the initial licensing fee
based on Vendor Specific Objective Evidence (VSOE) of fair value and
recognized ratably over the contractual period of the arrangement (typically one year).
Revenues from renewal of Maintenance Contracts, generally covering a period of one year,
are recognized ratably over the contractual period of the arrangement. Maintenance
Contracts provide the right to unspecified software upgrades and updates on a
when-and-if-available basis.
|
|
In
multiple-element arrangements that include software licensing and services that are not
essential to the functionality of the software, revenues allocated to the services are
accounted for separately. In such cases, revenues are recognized using the residual
method when VSOE of fair value exists for all of the undelivered elements under the
arrangement. The Group allocates revenues to each undelivered element based on its
respective fair value which is the price charged when that element is sold separately, or
by reference to a renewal rate specified in the related arrangement. Revenues are
recognized for the delivered elements when (i) VSOE of the fair values of all undelivered
elements exist, and (ii) all revenue recognition criteria of SOP 97-2 are satisfied.
|
|
Revenues
for arrangements that include services deemed as essential to the functionality of the
software, or involve significant production, modification, or customization of the
software, are recognized in accordance with SOP 81-1,
Accounting for Performance
of Construction-Type and Certain Production-Type Contracts
. Accordingly,
these revenues are recognized based on the percentage of completion method. If such
arrangements include elements that do not qualify for contract accounting (generally
bundled Maintenance Contracts), such elements are accounted for separately provided that
all applicable revenue recognition criteria are satisfied. Provisions for estimated
losses attributable to uncompleted contracts are made in the period in which such losses
are initially determined, in an amount equal to the estimated loss on the entire contract.
|
F - 15
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
R.
|
Revenue
Recognition
(cont.)
|
|
(1)
|
Product
revenues software licensing and maintenance
(cont.)
|
|
In
arrangements in which sales to end customers are made by a distributor and the Group is
the primary obligor and bears the risks associated with the transaction, revenues are
recorded upon the sale to the end-customer in an amount equal to the end customer
purchase price, provided all other revenue recognition criteria of SOP 97-2 are
satisfied. In arrangements in which sales are made to the distributor under
non-exchangeable, non-refundable and non-returnable terms, the distributor is considered
as the end-customer and revenues are recorded upon the sale to the distributor in an
amount equal to distributor purchase price, provided all other revenue recognition
criteria of SOP 97-2 are satisfied.
|
|
Services
include professional services, training and technical support.
|
|
|
Professional
services
Professional services include consulting services and implementation
services. Revenues from professional services that are time-and-material-based are
recognized as such services are provided based on time and materials invested. Revenues
from professional services that are milestone-based are recognized upon the completion of
each respective milestone.
|
|
|
Training
Revenues from training are recognized as the training is provided.
|
|
|
Technical
support
Revenues from technical support arrangements are recognized ratably over the
contractual period of the arrangements (typically one year).
|
|
|
Out-of-pocket
expenses
Reimbursement of out-of-pocket expenses that are billed to customers
are included in revenues from services as such expenses are incurred.
|
|
Payments
for Maintenance Contracts attributable to periods subsequent to the balance sheet date,
as well as payments received from customers for software licensing, for which revenue
recognition criteria have not been met as of the balance sheet date, or payments for
services that have not yet been provided as of such date, are deferred to subsequent
periods.
|
F - 16
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
|
Cost
of products
Cost of products include purchases and royalties for third party
software components, which are directly related to the sale of products.
|
|
|
Cost
of services
Cost of services include payroll costs of professional service
employees, sub-contracting costs related to providing services, and other direct and
indirect costs related to the provision of professional services, training and technical
support.
|
|
T.
|
Research
and Development Costs
|
|
Software
research and development costs incurred prior to the establishment of technological
feasibility are charged to research and development expenses as incurred. Software
development costs incurred subsequent to the establishment of technological feasibility
through the period of general market availability of the products are capitalized,
subject to materiality, in accordance with the provisions set forth in FASB Statement No.
86,
Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed
. Based on the Groups product research and development
process, technological feasibility is established upon completion of a working model only
when all planning, designing, coding and testing have been completed in accordance with
design specifications. To date, software research and development costs associated with
the establishment of technological feasibility were uncertain until release and
accordingly the Group has expensed all software research and development costs.
|
|
U.
|
Selling
and Marketing Costs
|
|
|
Advertising
and sales promotion costs
Advertising and sales promotion costs are charged to
selling and marketing expenses as incurred. Such expenses totaled $752, $1,164 and $782
in the years ended December 31, 2006, 2007 and 2008, respectively.
|
|
|
Commissions
to distributors
In transactions in which the Group is the primary obligor,
entitled commissions to distributors are included in selling and marketing expenses. Such
commissions are accrued for in the period in which the related revenues are recorded.
|
|
In
arrangements in which sales are made to the distributor under non-exchangeable,
non-refundable and non-returnable terms and the distributor is considered as the
end-customer, entitled commissions to distributors are characterized as a reduction from
revenues. Such commissions are accrued for in the period in which the related revenues
are recorded.
|
F - 17
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
V.
|
Other
Comprehensive Income
|
|
Other
comprehensive income, presented in shareholders equity, includes the effect of
translation adjustments of financial statements of subsidiaries whose functional currency
is not the U.S. dollar. The accumulated other comprehensive income as of December 31,
2007 and 2008 amounted to $260 and $(27), respectively. Such amounts are comprised
primarily of the effect of translation adjustments.
|
|
W.
|
Stock-Based
Compensation
|
|
The
Group accounts for stock-based compensation to employees and officers in accordance with
FASB Statement No. 123 (Revised 2004),
Share-Based Payment
(SFAS
123(R)), applying the modified prospective application method, and Securities and
Exchange Commission Staff Accounting Bulletin (SAB) No. 107 (SAB
107) and SAB 110.
|
|
In
accordance with SFAS 123(R), the Group measures the compensation costs associated with
share-based payment transactions, which include grants of options and restricted stock
units (RSUs) to employees, including modifications associated with RSUs, based
on the fair value at the grant date. The costs associated with the awards to employees
are expensed over the vesting period of each grant, according to the straight-line
method. The fair value of each option granted to employees is estimated on the date of
grant using the Black-Scholes option-pricing model; the fair value of each RSU granted to
employees is estimated on the date of grant using the Monte Carlo option-pricing model;
all with the weighted average assumptions detailed in Note 13E(7).
|
|
Share-based
payment transactions also include liability award related to conditional adjustments to
the salaries of certain officers related to potential increased compensation to officers
based on the Companys share price appreciation. The costs associated with the
liability award are expensed over the estimated period over which the liability would
become effective, according to the straight-line method. The fair value of the liability
award is estimated on the date of grant and at each balance sheet date using the Monte
Carlo option-pricing model with the weighted average assumptions detailed in Note 12A.
|
|
Basic
earnings per ordinary share are presented in accordance with SFAS 128
Earnings
per Share
(SFAS 128). Accordingly, the basic earnings per ordinary
share are computed by dividing net income by the weighted-average number of ordinary
shares issued and outstanding during the year. Such number of ordinary shares excludes
treasury stock on a weighted-average basis.
|
|
Diluted
earnings per ordinary share are computed by dividing net income by the weighted-average
number of ordinary shares issued and outstanding during the year with the addition of
potentially dilutive ordinary shares. Such number of ordinary shares excludes treasury
stock on a weighted-average basis. Potentially dilutive ordinary shares reflect the
ordinary shares that would result from the assumed exercise of employee options, computed
using the treasury stock method in accordance with SFAS 128.
|
F - 18
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 2
|
|
SIGNIFICANT ACCOUNTING POLICIES
(cont.)
|
|
Y.
|
Recent
Accounting Pronouncements
|
|
In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments
and Hedging Activities, an amendment of SFAS 133 (SFAS 161). SFAS 161
applies to all derivative instruments and non-derivative instruments that are designated
and qualify as hedging instruments and related hedged items accounted for under SFAS No.
133 Accounting for Derivative Instruments and Hedging Activities (SFAS
133). The provisions of SFAS 161 require entities to provide greater transparency
through additional disclosures about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are accounted for
under SFAS 133 and its related interpretations, and (c) how derivative instruments and
related hedged items affect an entitys financial position, results of operations
and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning
after November 15, 2008, namely January 1, 2009 for the Group. The adoption of SFAS 161
in not expected to have any effect on the Companys, financial position or results
of operations.
|
|
In
April 2008, the FASB issued FASB Staff Position 142-3, Determination of the Useful
Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors
that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets (SFAS 142). The objective of
FSP 142-3 is to improve the consistency between the useful life of a recognized
intangible asset under SFAS 142 and the period of expected cash flows used to measure the
fair value of the asset under SFAS 141(R), Business Combinations, and other
U.S. generally accepted accounting principles. FSP 142-3 will be effective beginning in
fiscal year 2010. The Company is currently evaluating the impact that FSP 142-3 will
have, if any, on its consolidated financial statements and disclosures.
|
|
Certain
financial statement data for prior years have been reclassified to conform to current
year financial statement presentation. The reclassification did not impact net income,
working capital or cash flows from operations as previously reported.
|
F - 19
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 3
|
SIGNIFICANT ACQUISITION
|
|
|
|
|
A.
|
In January 2006, the Company acquired all of the outstanding stock of a Canadian company (STARLIMS Canada), for a consideration of $1,566. STARLIMS Canada
had served as a distributor in Canada of the Groups software products and as a subcontractor
for implementation services in the United States, and has specialized in the life sciences for more
than ten years, was acquired as part of the Groups strategy to expand the Groups presence
in these industries. The transaction was accounted for in accordance with SFAS 141
Business Combination
and SFAS 142. The results of operations of STARLIMS Canada have been included in the consolidated
financial statements commencing January 2006.
|
|
|
|
|
The total purchase price has been allocated to identifiable assets acquired and liabilities assumed
based on their estimated fair value. Fair value for backlog acquired was determined based on signed
arrangements with customers prevailing as of the date of the acquisition. Fair value for distribution
rights was determined based on the discounted forecasted net profits for the period in which such
distribution rights were expected to prevail. The excess of the purchase price over the fair
value of the net assets acquired has been assigned primarily to goodwill. The following table
presents the estimated fair value of the net assets acquired as of the acquisition date:
|
|
|
|
|
|
|
Tangible assets acquired and liabilities assumed
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
517
|
|
|
|
Accounts receivable
|
|
|
|
416
|
|
|
|
Other current assets
|
|
|
|
23
|
|
|
|
Fixed assets
|
|
|
|
120
|
|
|
|
Current liabilities
|
|
|
|
(638
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
438
|
|
|
|
|
|
|
|
|
Identified intangible assets
|
|
|
|
Backlog acquired
|
|
|
$
|
13
|
|
|
|
Distribution rights
|
|
|
|
64
|
|
|
|
Goodwill (*)
|
|
|
|
1,051
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,128
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
With the acquisition of STARLIMS Canada, the Groups abilities in providing services to customers
in the life sciences were significantly enhanced attributable to STARLIMS Canadas experience
and expertise in this field. The goodwill is to be expensed for tax purposes according to the straight-line
method over a ten-year period ending in 2016.
|
F - 20
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 3
|
SIGNIFICANT ACQUISITION
(cont.)
|
|
|
|
|
B.
|
The following table presents data relating to subsidiary initially consolidated and business operation
acquired in 2006 as of the acquisition dates, substantially all of which relates to STARLIMS Canada:
|
|
|
|
|
|
|
|
Current assets
|
|
|
$
|
1,361
|
|
|
|
Fixed assets, net
|
|
|
|
120
|
|
|
|
Goodwill arising on acquisitions
|
|
|
|
1,137
|
|
|
|
Identified intangible assets
|
|
|
|
112
|
|
|
|
Current liabilities
|
|
|
|
(1,164
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
1,566
|
|
|
|
|
|
|
|
|
|
|
|
C.
|
Pro forma financial data
|
|
|
|
|
The following unaudited pro forma summary presents results of operations data for 2005 as though the
acquisition of STARLIMS Canada has been completed at the beginning of that year:
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
Software licensing
|
|
|
$
|
9,700
|
|
|
|
Maintenance
|
|
|
|
2,568
|
|
|
|
|
|
|
|
|
Total product revenues
|
|
|
|
12,268
|
|
|
|
Services
|
|
|
|
4,920
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
$
|
17,188
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
$
|
13,718
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
$
|
5,567
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
3,717
|
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
Basic
|
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
F - 21
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 4
|
MARKETABLE SECURITIES
|
|
|
|
|
A.
|
Marketable securities
|
|
|
|
|
|
Cost
|
|
Gross
unrealized
gains
|
|
Gross
unrealized
losses
|
|
Aggregate
fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
$
|
1,008
|
|
$
|
18
|
|
$
|
14
|
|
$
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
$
|
5,640
|
|
$
|
170
|
|
$
|
124
|
|
$
|
5,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition
|
As of December 31, 2007
|
|
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
Cost
|
|
Fair value
|
|
Cost
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD and USD linked bonds
|
|
|
$
|
997
|
|
$
|
1,002
|
|
$
|
5,319
|
|
$
|
5,384
|
|
|
Other
|
|
|
$
|
11
|
|
$
|
10
|
|
$
|
321
|
|
$
|
302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,008
|
|
$
|
1,012
|
|
$
|
5,640
|
|
$
|
5,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The bonds held as of December 31, 2008 will mature between 2009 and 2030.
|
|
|
|
B.
|
Marketable securities held-to-maturity
|
|
|
|
|
|
Amortized
cost
|
|
Aggregate
fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
2007 (2)
|
|
|
$
|
2,206
|
|
$
|
2,217
|
|
|
|
|
|
|
|
|
2008 (1) (2)
|
|
|
$
|
1,608
|
|
$
|
1,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Composition
|
As of December 31, 2007
|
|
As of December 31, 2008
|
|
|
|
|
|
|
|
|
|
Cost
|
|
Fair value
|
|
Cost
|
|
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD and USD linked bonds
|
|
|
$
|
1,099
|
|
$
|
1,049
|
|
$
|
818
|
|
$
|
832
|
|
|
Other
|
|
|
$
|
1,107
|
|
$
|
1,168
|
|
$
|
790
|
|
$
|
845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,206
|
|
$
|
2,217
|
|
$
|
1,608
|
|
$
|
1,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All bonds held as of December 31, 2007 and December 31, 2008 will mature between 2010 and 2014, primarily
in 2014.
|
|
|
F - 22
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 5
|
TRADE RECEIVABLES
|
|
|
|
|
A.
|
Trade receivables consist of the following:
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Billed trade receivables
|
|
|
$
|
6,285
|
|
$
|
8,262
|
|
|
Unbilled trade receivables
|
|
|
|
2,930
|
|
|
2,079
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,215
|
|
$
|
10,341
|
|
|
|
|
|
|
|
|
|
|
|
B.
|
Changes in allowance for doubtful accounts:
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts - beginning of year
|
|
|
$
|
211
|
|
$
|
291
|
|
$
|
192
|
|
|
Provisions for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
(included in general and administrative expenses)
|
|
|
|
333
|
|
|
(85
|
)
|
|
141
|
|
|
Write off of bad debts
|
|
|
|
(253
|
)
|
|
(14
|
)
|
|
(95
|
)
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts - end of year
|
|
|
$
|
291
|
|
$
|
192
|
|
$
|
238
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6
|
OTHER CURRENT ASSETS
|
|
|
|
|
Other current assets consist of the following:
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
$
|
589
|
|
$
|
410
|
|
|
Deferred tax assets
|
|
|
|
623
|
|
|
1,104
|
|
|
Tax advances, net
|
|
|
|
48
|
|
|
43
|
|
|
Advances to suppliers and sub-contractors
|
|
|
|
113
|
|
|
15
|
|
|
Government authorities
|
|
|
|
14
|
|
|
1,118
|
|
|
Others
|
|
|
|
280
|
|
|
201
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,667
|
|
$
|
2,891
|
|
|
|
|
|
|
|
|
|
NOTE 7
|
OTHER LONG-TERM ASSETS
|
|
|
|
|
Other long-term assets consist of the following:
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
$
|
29
|
|
$
|
131
|
|
|
Loans and grants to employees
|
|
|
|
314
|
|
|
417
|
|
|
Deferred cost
|
|
|
|
|
|
|
36
|
|
|
Deferred tax assets
|
|
|
|
221
|
|
|
365
|
|
|
|
|
|
|
|
|
|
|
|
$
|
564
|
|
$
|
949
|
|
|
|
|
|
|
|
F - 23
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 8
|
FIXED ASSETS, NET
|
|
|
|
|
A.
|
Composition
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost:
|
|
|
|
|
|
|
|
|
|
Long-term land lease and buildings (D below)
|
|
|
$
|
684
|
|
$
|
684
|
|
|
Computers and peripheral equipment
|
|
|
|
1,621
|
|
|
1,848
|
|
|
Office furniture and equipment
|
|
|
|
690
|
|
|
678
|
|
|
Leasehold improvements
|
|
|
|
180
|
|
|
236
|
|
|
|
|
|
|
|
|
|
|
|
|
3,175
|
|
|
3,446
|
|
|
Less: accumulated depreciation and amortization
|
|
|
|
1,574
|
|
|
2,030
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,601
|
|
$
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
B.
|
For the geographical location of the Groups fixed assets, see Note 19C.
|
|
|
|
|
C.
|
Depreciation and amortization expenses for the years ended December 31, 2006, 2007 and 2008 were $252,
$434 and $510, respectively.
|
|
|
|
|
D.
|
The majority of the perpetual land lease and buildings as of December 31, 2008 consists of the Companys
offices in Israel. These premises are currently occupied under a long-term lease from the Israel
Lands Authority. The Company has no obligation for lease payments.
|
|
|
|
NOTE 9
|
OTHER INTANGIBLE ASSETS, NET
|
|
|
|
Other assets, net consist of the following:
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Identified intangible assets (see Note 3)
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
$
|
112
|
|
$
|
371
|
|
|
Less: accumulated amortization
|
|
|
|
(75
|
)
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
37
|
|
$
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Identified intangible assets (see Note 3)
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
$
|
112
|
|
$
|
371
|
|
|
Less: accumulated amortization
|
|
|
|
(75
|
)
|
|
(158
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
37
|
|
$
|
213
|
|
|
|
|
|
|
|
F - 24
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 10
|
OTHER CURRENT LIABILITIES AND ACCRUED EXPENSES
|
|
|
|
Other current liabilities and accrued expenses consist of the following:
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Employees
|
|
|
$
|
532
|
|
$
|
625
|
|
|
Government authorities
|
|
|
|
981
|
|
|
|
|
|
Advances from customers
|
|
|
|
29
|
|
|
|
|
|
Creditors due to purchase of subsidiary
|
|
|
|
|
|
|
262
|
|
|
Commissions to distributors
|
|
|
|
197
|
|
|
321
|
|
|
Accrued expenses
|
|
|
|
441
|
|
|
494
|
|
|
Deferred taxes
|
|
|
|
|
|
|
450
|
|
|
Others
|
|
|
|
111
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,291
|
|
$
|
2,228
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 11
|
ACCRUED SEVERANCE PAY
|
|
|
|
|
A.
|
Israeli Employees
- Israeli law and labor agreements determine the obligations of the Company to make severance
payments to dismissed employees and to employees leaving employment under certain other circumstances.
The liability for severance pay benefits, as determined by Israeli law, is generally based upon length
of service and the employees last monthly salary. The severance pay liability with respect
to Israeli employees, which reflects the undiscounted amount of the liability, is, in part, covered
by insurance policies and by regular deposits with recognized severance pay funds. The amounts so
funded are not reflected separately on the balance sheets, as the severance pay risks have been irrevocably
transferred to the insurance companies and severance pay funds. Severance pay liability not covered
by the insurance policies and severance funds is fully provided for in the financial statements on
an undiscounted basis.
|
|
|
|
|
B.
|
Non-Israeli Employees
- The Groups non-Israeli subsidiaries provide various defined contribution plans for the
benefit of their employees according to each subsidiarys local requirements. Under these plans,
contributions to funds are based on a specified percentage of the employees salaries.
|
|
|
|
|
C.
|
Costs relating to all of the Groups employee severance benefits and defined contribution plans amounted to $151, $263 and $222 in the years ended December 31, 2006, 2007 and 2008, respectively.
|
|
|
|
F - 25
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 12
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
A.
|
Compensation of executive officers whom are also principal shareholders
|
|
|
|
|
(1)
|
Under agreements entered into in November 1993, two executive officers who are also principal shareholders
(Officers) are entitled to an annual salary of $147 and $115, respectively, linked to
the U.S. consumer price index (as of December 31, 2008 - $218 and $171, respectively). Both of the
agreements will continue until terminated in accordance with their terms. Each of the agreements
with these Officers may be terminated by the Company without cause upon 180 days prior written notice.
Upon termination of their agreements for any reason, the Officers are entitled to payment in an amount
equal to 150% of their last monthly salary, multiplied by the number of years of employment starting
from January 1, 1993, which has already been paid.
|
|
|
|
|
In June 2007, the Companys shareholders approved an amendment to the Officers employment
agreements, according to which the Officers will be entitled to an annual salary of $350 and $260,
respectively, subject to and commencing after a period of 45 consecutive trading days during which
the average closing price of the Companys ordinary shares on the NASDAQ Stock Market has been
at least $15.50. Under the approved amendments, the Officers will not be entitled to any cash severance
payments and they will not be entitled to any severance payments upon the termination of their employment.
The amendments will be in force for a period of five years following its effective date. In February
2009, the Company accepted notice from the Officers consenting that in addition to the fulfillment
of the above conditions the amendments will be contingent upon the discretionary approval of the
Companys Audit Committee.
|
|
|
|
(2)
|
In January 1993, the Company entered into a management and consulting agreement with Sivanir (Management
Services) 1992 Ltd. (Sivanir), a company jointly owned by two other executive officers
who are also principal shareholders of the Company. According to the agreement with Sivanir as of
December 31, 2008, Sivanir is entitled to an annual service fee of $108, linked to the U.S. consumer
price index (as of December 31, 2008 - $160). The agreement with Sivanir is renewed automatically
each year for an additional one year period, unless one party notifies the other of its termination
upon 180 days advanced written notice.
|
|
|
|
|
In June 2007, the Companys shareholders approved an amendment to the agreement with Sivanir,
according to which Sivanir will be entitled to an annual service fee of $260 subject to and commencing
after a period of 45 consecutive trading days during which the average closing price of the Companys
ordinary shares on the NASDAQ Stock Market has been at least $15.50. The amendment will be in force
for a period of five years following its effective date. In February 2009, the Company accepted a
notice from Sivanir consenting that in addition to the fulfillment of the above conditions the amendments
will be contingent upon the discretionary approval of the Companys Audit Committee.
|
|
|
|
(3)
|
As of December 31, 2007 and 2008, the additional compensation described above which is based on the
Companys share price, qualifies as a liability award under SFAS 123(R). The total compensation
related thereto as of December 31, 2007 and 2008 amounted to $396 and $62, respectively, determined
based on the Monte Carlo option-pricing model.
|
|
|
|
F - 26
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 12
|
COMMITMENTS AND CONTINGENCIES
(cont.)
|
|
|
|
|
B.
|
Lease agreements
|
|
|
|
|
The Group has entered into operating lease agreements for the premises it uses, which have expiration
dates through 2012. The minimum projected charges under the above leases, which are denominated mainly
in U.S. dollars, are as follows:
|
|
|
|
Year Ending December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
$
|
613
|
|
|
|
2010
|
|
|
|
251
|
|
|
|
2011
|
|
|
|
177
|
|
|
|
2012
|
|
|
|
104
|
|
|
|
2013
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Office lease expenses totaled $378, $668 and $738 for the years ended December 31, 2006, 2007 and 2008,
respectively. The increase in 2008 and 2007 in comparison to 2006 is attributable mainly to the lease
of office space in Canada and Hong Kong for the first time.
|
|
|
|
|
C.
|
Royalties
|
|
|
|
|
|
The Group is committed to pay royalties on revenue derived from the sale of certain software products. Royalties totaled $162 in 2008. Through December 31, 2007, no material transactions requiring the payments of royalties were recorded.
|
|
|
|
|
D.
|
The Company provided letters of indemnification to each of its directors and officers, and to Sivanir.
Such letters bind the Company to indemnify such officers for liabilities or expenses they incur as
a result of their acts in their capacity as directors and officers of the Company, in an aggregate
amount not to exceed $3,500, to the extent that their liability is not covered under the Companys
directors and officers liability insurance policy.
|
|
|
|
F - 27
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 13
|
SHAREHOLDERS EQUITY
|
|
|
|
|
A.
|
Description of ordinary shares
|
|
|
|
|
As of December 31, 2007 and 2008, the Company had 15,000,000 authorized ordinary shares, par value
New Israeli Shekel (NIS) 1.00 each, of which 8,724,675 and 8,407,742 ordinary shares, respectively,
were issued and outstanding as of such dates (net of 1,269,869 and 1,590,177 ordinary shares held
by the Group, respectively).
|
|
|
|
Holders of ordinary shares are entitled to participate equally in the payment of cash dividends and
bonus share (stock dividend) distributions and, in the event of the liquidation of the Company, in
the distribution of assets after satisfaction of liabilities to creditors.
|
|
|
|
Each ordinary share is entitled to one vote on all matters to be voted on by shareholders.
|
|
|
|
In May 2007, the Company completed an initial public offering of its ordinary shares in the United
States, at a price of $13.50 per share. Following the offering, and including the partial exercise
in June 2007 of an over-allotment option the Company granted the underwriters, the Company issued
an aggregate 2,226,300 ordinary shares, in consideration of gross proceeds of $30,055 (net of related
costs - $26,652).
|
|
|
|
In February 2008, the Company adopted a share repurchase program, allowing it to repurchase up to $2,000
of the Companys ordinary shares over a period of 18 months in the open market, at times and
prices that management considers appropriate, taking into account prevailing market conditions and
other corporate considerations. As of December 31, 2008, the Company had repurchased 326,308 of its
ordinary shares under the program at a total purchase price of $1,943, or an average price per share
of $5.95.
|
|
|
|
As of December 31, 2007 and 2008, the Company held 1,269,869 and 1,590,177 ordinary shares, respectively,
constituting 12.7% and 15.9% of the Companys outstanding ordinary shares as of such dates.
An amount equal to the cost of the treasury stock ($4,667 as of December 31, 2008) may not be distributed
as cash dividends. The treasury stock may be used in connection with exercise of options granted
under the Companys option plans.
|
|
|
F - 28
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 13
|
SHAREHOLDERS EQUITY
(cont.)
|
|
|
|
|
D.
|
Dividend policy
|
|
|
|
|
The Company has not adopted a dividend distribution policy. However, in each of the five years between
2003 and 2007, the Company paid dividends on an annual basis. In January 2006 and 2007 and in May
2008, the Company paid annual dividends in respect of previous year of NIS 1.00 ($0.22), NIS 1.25
($0.29) and NIS 1.15 ($0.33) per ordinary share, or a total of $1,389, $1,914 and $2,918, respectively.
|
|
|
|
On March 24, 2009, the Companys board of directors approved the payment of a dividend of NIS
1.34 ($0.33) per ordinary share, or a total of $2,774.
|
|
|
|
Any future dividend distributions are subject to the discretion of the Companys Board of Directors,
dependent on factors deemed relevant by the Board.
|
|
|
|
The distribution of dividends also may be limited by the Israeli Companies Law, which permits the distribution
of dividends only out of retained earnings or otherwise upon the permission of the Court.
|
|
|
|
|
With respect to taxation of dividends distributed out of the Companys Approved and Benefited
Enterprises, see Note 16C.
|
|
|
|
|
(1)
|
2001 option plan
- In March 2001, a committee of the Board of Directors adopted the 2001 option plan, under which
the Company is authorized to grant options to employees to purchase up to an aggregate of 200,000
ordinary shares of the Company. All options under this plan were granted as of the balance sheet
date. As of December 31, 2008, options to purchase 27,625 ordinary shares were exercisable under
this plan at an average exercise price of $2.45. A total of options to purchase 162,125 ordinary
shares that were granted under this plan were exercised through December 31, 2008.
|
|
|
|
|
(2)
|
2005 option plan
- In March 2005, a committee of the Board of Directors adopted the 2005 option plan, under which the Company is authorized to grant
options to employees to purchase up to an aggregate of 200,000 ordinary shares of the Company. All
options under this plan were granted as of the balance sheet date. As of December 31, 2008, options
to purchase 125,625 ordinary shares under this plan are exercisable at an average exercise price
of $6.40. A total of options to purchase 1,250 ordinary shares that were granted under this plan were exercised
through December 31, 2008.
|
|
|
|
F - 29
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 13
|
SHAREHOLDERS EQUITY
(cont.)
|
|
|
|
|
E.
|
Employee option plans
(cont.)
|
|
|
|
|
(3)
|
General terms of 2001 and 2005 option plans
- The terms of the option plans are essentially identical, and stipulate that the exercise price per
ordinary share will be the market price of the Companys ordinary share on the Tel-Aviv Stock
Exchange on the date of grant. Except as otherwise provided, 50% of the options granted under the
plans vest and become exercisable upon the completion of two years of continuous employment with
the Group with an additional amount of 25% of the options granted under the plans vesting and becoming
exercisable upon the completion of each of the third and fourth years of such continuous employment.
Options granted are exercisable for five years from the date of grant.
|
|
|
|
|
The ordinary shares underlying the options may be issued either from the treasury stock or by issuing
new ordinary shares.
|
|
|
|
(4)
|
2007 Restricted Stock Units Plan
|
|
|
|
|
In August 2007, the Companys Board of Directors approved the grant of up to 240,000 restricted
stock units (RSUs) under the 2007 Restricted Stock Units Plan (2007 RSU Plan)
to employees of the Group and non-employee directors and consultants of the Company. According to
this plan, an RSU is a unit whose value is equal to an ordinary share of the Company at the date
of grant (no shares will be actually awarded to a grantee of RSUs). As of August 13, 2008, the Company
awarded a total of 187,000 RSUs under the 2007 Plan. All of such RSUs terminated during the month
of November 2008, when the market price of the Companys ordinary shares fell below 50% of the
grant price in each case. Concurrently with this termination, the Board of Directors replaced the
terminated award of each employee with a new award for the same number of RSUs. As of December 31,
2008, the Company awarded a total of 187,000 RSUs under the 2007 Plan, none of which is currently vested.
|
|
|
|
Seventy five percent (75%) of the RSUs will vest and become exercisable upon the completion of two
years of continuous employment with the Group with an additional amount of 25% of the RSUs granted
under the plan vesting and becoming exercisable upon the completion of the third year of such
continuous employment.
|
|
|
|
According to the 2007 RSU Plan, if the average closing price of the Companys ordinary shares
over any 30-day period is 50% less than the closing price of the ordinary share on the date of award
of the RSUs, the granted RSUs will be automatically cancelled with respect to unvested units.
|
|
|
|
At each anniversary vesting date, the vested RSUs shall be settled by delivery of ordinary shares of
the Company.
|
|
|
|
The total cost of the RSUs granted as of December 31, 2008, determined based on the fair value as of
the grant dates, amounted to a total of $1,317 .The Company utilized the Monte Carlo Model to estimate
fair value, in accordance with SFAS 123(R), utilizing the assumptions presented in section (7) below.
|
|
|
F - 30
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 13
|
SHAREHOLDERS EQUITY
(cont.)
|
|
|
|
|
E.
|
Employee option plans
(cont.)
|
|
|
|
|
(5)
|
Summary of the status of all employee option and RSU plans
|
|
|
|
|
A summary of the status of the Companys three employee option and RSU plans as of
December 31, 2006, 2007 and 2008, as well as changes during each of the years then ended, is presented
below:
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
Number
of share
options
|
|
Weighted
average
exercise
price
|
|
Number
of share
options
|
|
Weighted
average
exercise
price
|
|
Number
of share
options
|
|
Weighted
average
exercise
price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
beginning of the year
|
|
|
|
330,000
|
|
$
|
4.33
|
|
|
229,250
|
|
$
|
5.45
|
|
|
384,575
|
|
|
3.11
|
|
|
|
|
|
|
Granted
|
|
|
|
7,500
|
|
|
9.52
|
|
|
177,300
|
(*)
|
|
|
|
|
25,500
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
(99,000
|
)
|
|
2.20
|
|
|
(17,500
|
)
|
|
2.60
|
|
|
(9,375
|
)
|
|
2.40
|
|
|
|
|
|
|
Forfeited
|
|
|
|
(9,250
|
)
|
|
3.56
|
|
|
(4,475
|
)
|
|
1.81
|
|
|
(15,950
|
)
|
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding -
|
|
|
|
end of the year
|
|
|
|
229,250
|
|
|
5.45
|
|
|
384,575
|
|
|
3.11
|
|
|
384,750
|
|
|
3.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable -
|
|
|
|
end of the year
|
|
|
|
24,750
|
|
|
2.40
|
|
|
105,750
|
|
|
5.41
|
|
|
153,250
|
|
|
5.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Comprised of RSUs granted See Note 13E(4).
|
|
|
|
|
(6)
|
Summary of information about employee share options and RSUs outstanding
|
|
|
|
|
The following table summarizes information about options and RSUs under the Companys three option
and RSU plans that were outstanding as of December 31, 2008:
|
|
|
|
Exercise
price
|
|
Number of options
outstanding as of
December 31, 2008
|
|
Weighted average
remaining contractual
life (in years)
|
|
Number of options
exercisable as of
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.40
|
|
|
27,250
|
|
|
0.38
|
|
|
27,250
|
|
|
|
|
6.27
|
|
|
150,500
|
|
|
1.23
|
|
|
112,875
|
|
|
|
|
6.70
|
|
|
12,500
|
|
|
1.35
|
|
|
9,375
|
|
|
|
|
9.52
|
|
|
7,500
|
|
|
2.63
|
|
|
3,750
|
|
|
|
|
|
|
|
187,000
|
|
|
2.88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
384,750
|
|
|
2.00
|
|
|
153,250
|
|
|
|
|
|
|
|
|
|
|
|
F - 31
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 13
|
SHAREHOLDERS EQUITY
(cont.)
|
|
|
|
|
E.
|
Employee option plans
(cont.)
|
|
|
|
|
(7)
|
Weighted Average grant-date fair value of options and RSUs granted to employees
|
|
|
|
|
|
The weighted average grant-date fair value of the options and RSUs granted during 2006, 2007 and 2008
to employees amounted to $3.89, $5.82 and $1.53 per option/RSU, respectively. The Company utilized
the Black-Scholes (options) and Monte Carlo (RSUs) option-pricing models to estimate fair value utilizing
the following assumptions, based on the requirements of SFAS 123(R), SAB 107 and SAB 110, for the
years 2006, 2007 and 2008 (all in weighted averages):
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend yield
|
5.5%
|
|
0% - 3.5%
|
|
0% -10%
|
|
|
Expected volatility
|
48%
|
|
48% - 61%
|
|
69% - 71%
|
|
|
Risk free interest rate
|
4.8%
|
|
3.3% - 4.5%
|
|
1.1% - 3.1%
|
|
|
Expected holding period (in years)
|
3.5 - 4.5
|
|
2 - 4
|
|
2 - 3
|
|
|
|
|
|
|
|
|
|
|
Dividend yield
- Management used an expected dividend yield based primarily on past experience and managements
forecasts applicable as of the grant date.
|
|
|
|
Expected volatility
- Management estimated volatility based on the historical volatility of the Companys ordinary
shares, being the only traded financial instrument of the Company, using in most cases daily observations
of the Companys price share to determine the standard deviation. Following the initial public
offering in the United States described in section B above and with respect to the RSUs, management
estimated volatility on a blended rate consisting of historical volatility data of the Companys
ordinary shares, along with volatility data of similar companies traded on the NASDAQ.
|
|
|
|
Risk free interest rate
- The risk-free interest rate is based on the implied yield in effect at the time of each option/RSU
grant, based on U.S. Treasury zero-coupon bond issued with equivalent remaining terms.
|
|
|
|
Expected holding period
(expected term)
Management believes that as of the balance sheet date, the Companys historical share
option exercises do not provide a supportable and reasonable basis upon which to estimate expected
term, because its current historical data lacks sufficient experience and is not indicative to make
reasonable expectations regarding the future. Accordingly, and because the Companys employee
option plans have the characteristics of standard option plans (plain vanilla), the expected term is determined based
on the simplified method illustrated by SAB 107 and SAB 110; and with respect to RSUs, the expected
term is identical to the vesting period.
|
|
|
|
Management estimates forfeiture rates at the date of grant, which are adjusted in subsequent periods.
Management uses historical data to estimate pre-vesting option forfeiture rates and records share-based
compensation expense only for those awards that are expected to vest.
|
|
|
F - 32
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 13
|
SHAREHOLDERS EQUITY
(cont.)
|
|
|
|
|
E.
|
Employee option plans
(cont.)
|
|
|
|
|
(8)
|
Total compensation cost for share-based payment arrangements
|
|
|
|
|
The following table summarizes the effects of share-based compensation on statements of income line
items:
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
|
|
|
$
|
18
|
|
$
|
27
|
|
$
|
144
|
|
|
Research and development
|
|
|
|
16
|
|
|
16
|
|
|
59
|
|
|
Selling and marketing
|
|
|
|
96
|
|
|
125
|
|
|
260
|
|
|
General and administrative
|
|
|
|
11
|
|
|
9
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
141
|
|
$
|
177
|
|
$
|
488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefits
|
|
|
$
|
51
|
|
$
|
56
|
|
$
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 14
|
FINANCIAL INSTRUMENTS
|
|
|
|
A financial instrument is defined as cash, evidence of an ownership interest in an entity, or a contract
that imposes on one entity a contractual obligation either to deliver or receive cash or another
financial instrument to or from a second entity. Examples of financial instruments include cash and
cash equivalents, deposits, trade receivables, loans, investments (bonds and equity securities),
trade accounts payable, accrued expenses, options and forward contracts.
|
|
|
|
The Company provides certain disclosures with regard to financial instruments, including derivatives.
These disclosures include, among other matters, the nature and terms of derivative transactions,
information about significant concentrations of credit risk, and the fair value of financial assets
and liabilities.
|
|
|
|
A.
|
Concentrations of credit risks
|
|
|
|
|
All of the Groups cash and cash equivalents as of December 31, 2007 and 2008, and marketable
securities as of such dates, were deposited with major financial institutions in Israel, the United
States, the United Kingdom, Hong Kong and Canada. The Group is of the opinion that the credit risk
with respect to these balances is remote since the financial institutions with which these transactions
are entered into are solid and well-established.
|
|
|
|
Exposure to credit risks relating to trade receivables is also limited, since the majority of the Companys
customers are governmental agencies and large and solid corporations. The Group performs ongoing credit evaluations of its customers and generally does
not require collateral. An appropriate allowance for doubtful accounts is included in trade receivables
(see Notes 2G and 5B).
|
|
|
F - 33
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 14
|
FINANCIAL INSTRUMENTS
(cont.)
|
|
|
|
|
B.
|
Fair value of financial instruments
|
|
|
|
|
The following methods and assumptions were used by the Group in estimating its fair value disclosures
for financial instruments:
|
|
|
|
(1)
|
The fair value of cash and cash equivalents, short-term deposits, trade receivables and trade accounts
payable approximates their carrying amounts due to the short-term maturities of these financial instruments.
|
|
|
|
|
(2)
|
The fair value of marketable securities held-to-maturity is similar to their carrying amounts since
the addition of interest accrued to balance sheet date approximately reflects the changes in the
fair value of these securities.
|
|
|
|
|
(3)
|
Cash deposits and marketable securities are presented according to their fair value based on the closing
market prices of the securities at the balance sheet date.
|
|
|
|
|
C.
|
Derivative financial instruments
|
|
|
|
|
The Group has only limited involvement with derivative financial instruments, which mainly include
foreign exchange transactions (options contracts). These transactions do not qualify for hedge accounting
under SFAS 133,
Accounting for Derivative Instruments and Hedging Activities
. As of December 31, 2007 and 2008, the Group did not hold any derivative financial instruments.
|
|
|
NOTE 15
|
FINANCIAL INCOME, NET
|
|
|
|
|
A.
|
Composition
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains related to marketable securities
|
|
|
$
|
192
|
|
$
|
326
|
|
$
|
119
|
|
|
Interest from bonds (including commercial paper)
|
|
|
|
168
|
|
|
903
|
|
|
752
|
|
|
Exchange rate gains (losses) and forward transactions, net
|
|
|
|
166
|
|
|
241
|
|
|
79
|
|
|
Interest on cash deposits
|
|
|
|
32
|
|
|
99
|
|
|
161
|
|
|
Other
|
|
|
|
52
|
|
|
(18
|
)
|
|
(61
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
610
|
|
$
|
1,551
|
|
$
|
1,050
|
|
|
|
|
|
|
|
|
|
F - 34
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 16
|
INCOME TAXES
|
|
|
|
|
A.
|
Basis for measurement of results for tax purposes
|
|
|
|
|
|
The Company and its Israeli subsidiaries are taxed under the Israeli Tax Ordinance and Income Tax (Inflationary
Adjustments) Law, 1985 (the Inflationary Adjustments Law). Pursuant to the Inflationary
Adjustments Law, which was canceled for 2008 and thereon, results for tax purposes were measured
in real terms, based on changes in the Israeli consumer price index. Commencing 2008, the Company
and its Israeli subsidiaries are taxed under regulations that allow Foreign-Invested
Companies (as defined in the Investments Law) that maintain their accounts in U.S. dollars
in compliance with regulations published by the Israeli Minister of Finance (the Dollar Regulations),
to base their tax returns on their operating results as reflected in their U.S. dollar financial
statements in lieu of the principles set forth by the Tax Ordinance.
|
|
|
|
|
B.
|
Tax benefits under the Law for the Encouragement of Industry (Taxes), 1969
|
|
The Company is an Industrial Company, as defined by this law, and as such is entitled to
certain tax benefits, consisting mainly of accelerated depreciation, the right to deduct for tax
purposes costs in connection with issuance of its shares to the public and amortization of goodwill.
|
|
|
|
C.
|
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (the Investments
Law)
|
|
|
|
|
|
According to the Investments Law, as amended in April 2005, eligible investments program will qualify
for tax benefits as a Benefited Enterprise (rather than the previous terminology of Approved
Enterprise) if it is a competitive industrial facility (as defined in the Investments Law)
that will contribute to the independence of the Israeli economy and to Israels gross domestic
product. In addition, a Benefited Enterprise should comply with minimum capital investments as provided
in the Investment Law.
|
|
|
|
|
The Companys research and development center, established in Israel in November 2006, was recognized
under the Investments Law as a Benefited Enterprise, entitling the Company to the following primary
tax benefits:
|
|
|
|
|
Tax exemption
Through December 31, 2015, any income tax attributable to increase in the Companys
revenues on a stand alone basis over its average revenues for the years 2003-2005 ($3,456), will
be tax exempt.
In the event of a distribution of a cash dividend from such tax exempt income, the Company would be
required to pay corporate income taxes in respect of the amount distributed.
|
|
|
|
|
|
Accelerated depreciation
Fixed assets used by the Benefited Enterprise are entitled to accelerated depreciation
rates during the first five tax years of the use of these assets.
|
|
|
|
F - 35
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 16
|
INCOME TAXES
(cont.)
|
|
|
|
|
C.
|
Tax benefits under the Israeli Law for the Encouragement of Capital Investments, 1959 (the Investments
Law)
(cont.)
|
|
|
|
|
Entitlement to the above tax benefits is subject to the Companys compliance with the conditions
stipulated by the Investments Law, the regulations promulgated thereunder and a pre-ruling from the Israeli Tax Authority with respect to the Benefited Enterprise.
The major conditions under the pre-ruling relate to the number of research and development employees based in Israel
and to the continuation of the Companys current operations and activities.
|
|
|
|
In the event the Company fails to comply with such conditions, the benefits may be cancelled and the
Company may be required to refund all or part of the amounts saved as a result of such tax benefits
with interest and inflation adjustments based on the Israeli consumer price index. As of December
31, 2008, the Company was in compliance with all applicable conditions.
|
|
|
|
Due to the classification of part of the Companys enterprise as an Approved Enterprise and Benefited
Enterprise under the Investments Law, the Company had accumulated undistributed retained earnings
attributable to the Approved and Benefited Enterprise amounting to $3,544 as of December 31, 2008.
In the event the Company distributes such amount, in whole or in part, as a cash dividend, amounts
distributed out of $355 will be then subject to tax at the rate of 25% (or 33.33% under certain conditions),
and amounts distributed out of $3,189 will be subject to tax at the rate of 20% (in case of foreign
shareholders percentage is over 50%), or 25% (in case of foreign shareholders percentage is less
than 50%).
|
|
|
|
|
Israeli companies
- Taxable income of the Company and its Israeli subsidiaries which is not attributable to an
eligible program under the Investments Law is subject to corporate statutory tax at rates of 27%
in 2008, 26% in 2009 and 25% in 2010 and thereafter. For each of the years ended December 31, 2006
and 2007, the corporate tax rate was 31% and 29%, respectively.
|
|
|
|
|
|
Foreign subsidiaries
- The enacted statutory tax rates applicable to non-Israeli subsidiaries as of December 31, 2008
are as follows:
|
|
Company incorporated in the United States tax rate of approximately 36%.
|
|
Company incorporated in Canada tax rate of approximately 31%.
|
|
Company incorporated in Hong Kong tax rate of 16.5%.
|
|
Company incorporated in the United Kingdom tax rate of 21%.
|
F - 36
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 16
|
INCOME TAXES
(cont.)
|
|
|
|
|
E.
|
Carry forward tax losses
|
|
|
|
|
Carryforward tax losses and capital tax losses of certain subsidiaries as of December 31, 2008 amounted
to approximately $267 and $639, respectively.
|
|
|
|
The Company and its Israeli subsidiaries possess tax assessments which are deemed final through the
year ended December 31, 2004. STARLIMS Corp. has received final assessments through the year ended
December 31, 2006. STARLIMS Canada has received final assessments through the year ended December
31, 2005. STARLIMS UK has received final assessments through the year ended December 31, 2007.
|
|
|
|
The other subsidiaries have not been assessed for tax purposes since their incorporation
|
|
|
|
(1)
|
The following is a summary of the components of the deferred tax benefits and liabilities reflected
on the balance sheets:
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities - current
|
|
|
|
|
|
|
|
|
|
Differences due to tax reporting on cash basis
|
|
|
$
|
449
|
|
$
|
449
|
|
|
Available-for-sale marketable securities
|
|
|
|
(21
|
)
|
|
21
|
|
|
Carryforward tax losses
|
|
|
|
(269
|
)
|
|
(224
|
)
|
|
Allowance for doubtful accounts
|
|
|
|
(61
|
)
|
|
(59
|
)
|
|
Depreciation and amortization
|
|
|
|
12
|
|
|
12
|
|
|
Options
|
|
|
|
(47
|
)
|
|
|
|
|
Deferred revenues
|
|
|
|
(704
|
)
|
|
(654
|
)
|
|
Reserves and accruals
|
|
|
|
(230
|
)(*)
|
|
(359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(871
|
)
|
|
(814
|
)
|
|
Valuation allowance
|
|
|
|
248
|
|
|
160
|
|
|
|
|
|
|
|
|
Total current deferred tax liabilities, net
|
|
|
$
|
(623
|
)
|
|
(654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities - long-term
|
|
|
|
Differences due to tax reporting on cash basis
|
|
|
$
|
898
|
|
$
|
449
|
|
|
Depreciation and amortization
|
|
|
|
81
|
|
|
93
|
|
|
Options
|
|
|
|
(138
|
)
|
|
(340
|
)
|
|
Reserves and accruals
|
|
|
|
(221
|
)(*)
|
|
(84
|
)
|
|
|
|
|
|
|
|
Total long-term deferred tax liabilities, net
|
|
|
$
|
620
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
(*)
|
Balances include short-term and long-term deferred tax assets at an aggregate amount of $325 regarding
share issuance costs charged directly to shareholders equity.
|
|
|
|
F - 37
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 16
|
INCOME TAXES
(cont.)
|
|
|
|
|
G.
|
Deferred income taxes
(cont.)
|
|
|
|
|
(2)
|
The deferred taxes are presented in the balance sheets as follows:
|
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
Short –term assets
|
|
|
$
|
(623
|
)
|
$
|
(1,104
|
)
|
|
Short-term liabilities
|
|
|
|
|
|
|
450
|
|
|
Long-term assets
|
|
|
|
(221
|
)
|
|
(365
|
)
|
|
Long-term liabilities
|
|
|
|
841
|
|
|
483
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3
|
)
|
$
|
(536
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3)
|
The deferred taxes were computed at tax rates of 16.5%-39.5%.
|
|
|
|
|
H.
|
Effective income tax rates
|
|
|
|
|
Following is a reconciliation of the theoretical tax expenses assuming all income before tax is taxed
at the regular tax rates applicable to Israeli companies (2006-31%, 2007-29%, 2008-27%) and the actual
tax expenses:
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes as reported in the
|
|
|
|
|
|
|
|
|
|
|
|
|
consolidated statements of income
|
|
|
$
|
5,546
|
|
$
|
5,394
|
|
$
|
3,466
|
|
|
|
|
|
|
|
|
|
|
Theoretical tax expense
|
|
|
$
|
1,719
|
|
$
|
1,564
|
|
$
|
936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-deductible expenses
|
|
|
|
43
|
|
|
6
|
|
|
28
|
|
|
Tax exempt income
|
|
|
|
(15
|
)
|
|
(3
|
)
|
|
|
|
|
Differences due to statutory tax rates
|
|
|
|
168
|
|
|
70
|
|
|
57
|
|
|
Tax exemption applicable to Approved Enterprises
|
|
|
|
and exempted income
|
|
|
|
|
|
|
(558
|
)
|
|
(301
|
)
|
|
Differences arising from the
|
|
|
|
basis of measurement for tax purposes
|
|
|
|
(96
|
)
|
|
(39
|
)
|
|
|
|
|
Differences attributable to utilization of carryforward
|
|
|
|
tax losses for which no deferred tax assets were
|
|
|
|
recorded
|
|
|
|
6
|
|
|
(78
|
)
|
|
(15
|
)
|
|
Tax income in respect of previous years
|
|
|
|
(22
|
)
|
|
(28
|
)
|
|
(399
|
)
|
|
Tax expense in respect of FIN 48
|
|
|
|
|
|
|
91
|
|
|
275
|
|
|
Other
|
|
|
|
(41
|
)
|
|
(140
|
)
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,762
|
|
$
|
885
|
|
$
|
589
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
|
32
|
%
|
|
16
|
%
|
|
17
|
%
|
|
|
|
|
|
|
|
|
F - 38
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 16
|
INCOME TAXES
(cont.)
|
|
|
|
|
I.
|
Components of tax expenses
|
|
|
|
|
(1)
|
Income before income taxes included in the statements of
income:
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Israeli
|
|
|
$
|
4,878
|
|
$
|
3,923
|
|
$
|
1,984
|
|
|
Non-Israeli
|
|
|
|
668
|
|
|
1,471
|
|
|
1,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,546
|
|
$
|
5,394
|
|
$
|
3,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
Income taxes included in the statements of income:
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
Israeli
|
|
|
$
|
1,362
|
|
$
|
581
|
|
$
|
424
|
|
|
Non-Israeli
|
|
|
|
248
|
|
|
1,064
|
|
|
1,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,610
|
|
|
1,645
|
|
|
1,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Israeli
|
|
|
|
|
|
|
(136
|
)
|
|
27
|
|
|
Non-Israeli
|
|
|
|
174
|
|
|
(596
|
)
|
|
(596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174
|
|
|
(732
|
)
|
|
(569
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In respect of previous years
|
|
|
|
|
|
|
|
|
|
|
|
|
Israeli
|
|
|
|
2
|
|
|
(47
|
)
|
|
(259
|
)
|
|
Non-Israeli
|
|
|
|
(24
|
)
|
|
19
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
(28
|
)
|
|
(399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,762
|
|
$
|
885
|
|
$
|
589
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Each of the Companys foreign subsidiaries files its income tax returns in the jurisdiction of
its home country. The Company adopted the provisions of FASB International No. 48,
Accounting for Uncertainty in Income Taxes
(FIN 48) on January 1, 2007. The initial implementation of FIN 48 resulted
in immaterial amounts to be recorded as liability for unrecognized tax benefits as of January 1,
2007. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as
follows:
|
|
|
|
|
|
|
|
Balance as of January 1, 2007
|
|
|
$
|
|
|
|
|
Additions based on tax position related to the current year
|
|
|
|
69
|
|
|
|
Additions for tax positions of prior years
|
|
|
|
22
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2007
|
|
|
|
91
|
|
|
|
Additions based on tax position related to the current year
|
|
|
|
234
|
|
|
|
Additions for tax positions of prior years
|
|
|
|
41
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2008
|
|
|
$
|
366
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 39
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 17
|
EARNINGS PER SHARE
|
|
|
|
The following table provides a reconciliation of the ordinary shares used in computations of basic
and diluted earnings per share:
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
Thousand of shares
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of issued ordinary shares
|
|
|
|
7,765
|
|
|
9,070
|
|
|
9,997
|
|
|
Less - weighted average number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
held as treasury stock
|
|
|
|
(1,306
|
)
|
|
(1,270
|
)
|
|
(1,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of outstanding ordinary shares used in
|
|
|
|
computation of basic earnings per share
|
|
|
|
6,459
|
|
|
7,800
|
|
|
8,592
|
|
|
|
|
|
|
|
Plus - incremental ordinary shares
|
|
|
|
|
|
|
|
|
|
|
|
|
from assumed exercise of options
|
|
|
|
101
|
|
|
97
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares used in
|
|
|
|
computation of diluted earnings per share
|
|
|
|
6,560
|
|
|
7,897
|
|
|
8,713
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase 7,500, 176,200 and 20,000 ordinary shares were outstanding as of December 31, 2006,
2007 and 2008, respectively, but were not included in the computation of diluted earnings per share
due to their anti-dilutive effect.
|
|
|
NOTE 18
|
RELATED PARTIES BALANCES AND TRANSACTIONS
|
|
|
|
A.
|
Balances
Balances with related parties as of December 31, 2007 and 2008 were insignificant.
|
|
|
|
|
B.
|
Transactions
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation of officers and directors
|
|
|
$
|
589
|
|
$
|
603
|
|
$
|
651
|
|
|
|
|
|
|
|
|
|
|
Expenses related to directors
|
|
|
$
|
28
|
|
$
|
106
|
|
$
|
158
|
|
|
|
|
|
|
|
|
|
F - 40
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 19
|
SEGMENTAL DISCLOSURE
|
|
|
|
|
A.
|
Operating segments
|
|
|
|
|
The Company makes segmental disclosure in accordance with the provisions of SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
(SFAS 131), which requires segmentation based on the Groups internal organization
and reporting of revenue and other performance measures. The Companys segments are designed
to allocate resources internally and provide a framework to determine management responsibility.
According to SFAS No. 131, operating segments are defined as components of an enterprise with respect
to which discrete financial information is available that is evaluated regularly by the chief operating
decision maker, or decision making group, in deciding how to allocate resources and in assessing
performance. Accordingly, the Group has three reportable operating segments evaluated regularly by
the Companys Chief Executive Officer. The types of products and services provided by these
segments are: (i) software licensing, (ii) maintenance, and (iii) services which include professional
services, training and technical support. For additional information regarding these activities, see Note 2R.
|
|
|
|
Currently, the Company does not separately allocate operating expenses (that is, research and development,
selling and marketing and general and administrative expenses) nor does it allocate specific assets
to these segments, other than goodwill associated with the acquisition of STARLIMS Canada that is
assigned in its entirety to the services operating segment. Goodwill associated with the acquisition
of STARLIMS UK is assigned to all of the Companys operating segments. Accordingly, the segment information
disclosed includes only revenues, cost of revenues and gross profit.
|
|
|
F - 41
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 19
|
SEGMENTAL DISCLOSURE
(cont.)
|
|
|
|
|
A.
|
Operating segments
(cont.)
|
|
|
|
|
The following presents revenues and gross profit by each operating segment:
|
|
|
|
Year Ended December 31, 2006
|
|
Year Ended December 31, 2007
|
|
|
Software
licensing
|
|
Maintenance
|
|
Services
|
|
Total
|
|
Software
licensing
|
|
Maintenance
|
|
Services
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
8,286
|
|
$
|
2,841
|
|
$
|
8,638
|
|
$
|
19,765
|
|
$
|
10,656
|
|
$
|
3,241
|
|
$
|
9,878
|
|
$
|
23,775
|
|
|
Cost of revenues (*)
|
|
31
|
|
|
|
|
|
5,557
|
|
|
5,588
|
|
|
374
|
|
|
|
|
|
8,095
|
|
|
8,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
$
|
8,255
|
|
$
|
2,841
|
|
$
|
3,081
|
|
$
|
14,177
|
|
$
|
10,282
|
|
$
|
3,241
|
|
$
|
1,783
|
|
$
|
15,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
Research and development
|
|
|
|
|
|
|
|
|
|
|
1,866
|
|
|
|
|
|
|
|
|
|
|
|
2,872
|
|
|
Selling and marketing
|
|
|
|
|
|
|
|
|
|
|
4,741
|
|
|
|
|
|
|
|
|
|
|
|
5,792
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
2,634
|
|
|
|
|
|
|
|
|
|
|
|
2,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,241
|
|
|
|
|
|
|
|
|
|
|
|
11,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
|
|
|
|
|
4,936
|
|
|
|
|
|
|
|
|
|
|
|
3,843
|
|
|
Financial income, net
|
|
|
|
|
|
|
|
|
|
|
610
|
|
|
|
|
|
|
|
|
|
|
|
1,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
5,546
|
|
|
|
|
|
|
|
|
|
|
|
5,394
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
1,762
|
|
|
|
|
|
|
|
|
|
|
|
885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
$
|
3,784
|
|
|
|
|
|
|
|
|
|
|
$
|
4,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F - 42
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 19
|
SEGMENTAL DISCLOSURE
(cont.)
|
|
|
|
|
A.
|
Operating segments
(cont.)
|
|
Year Ended December 31, 2008
|
|
|
Software
licensing
|
|
Maintenance
|
|
Services
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
$
|
10,238
|
|
$
|
5,234
|
|
$
|
9,770
|
|
$
|
25,242
|
|
|
Cost of revenues (*)
|
|
|
|
409
|
|
|
|
|
|
9,137
|
|
|
9,546
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
$
|
9,829
|
|
$
|
5,243
|
|
$
|
633
|
|
$
|
15,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
Research and development
|
|
|
|
|
|
|
|
|
|
|
|
|
3,408
|
|
|
Selling and marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
6,299
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
3,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,280
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
2,416
|
|
|
Financial income, net
|
|
|
|
|
|
|
|
|
|
|
|
|
1,050
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
3,466
|
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
589
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,877
|
|
|
|
|
|
|
|
|
|
|
F - 43
STARLIMS TECHNOLOGIES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars in thousands, except share data)
NOTE 19
|
SEGMENTAL DISCLOSURE
(cont.)
|
|
|
|
|
B.
|
Revenues by geographical areas
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$
|
14,689
|
|
$
|
16,094
|
|
$
|
17,203
|
|
|
Latin America
|
|
|
|
1,690
|
|
|
1,987
|
|
|
956
|
|
|
Europe
|
|
|
|
2,682
|
|
|
3,235
|
|
|
3,089
|
|
|
Asia
|
|
|
|
516
|
|
|
2,110
|
|
|
3,800
|
|
|
Israel
|
|
|
|
188
|
|
|
349
|
|
|
194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
19,765
|
|
$
|
23,775
|
|
$
|
25,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C.
|
Non current assets by geographical areas
|
|
|
|
|
The composition of the Groups fixed assets, net according to their physical location is as follows:
|
|
|
|
|
As of December 31,
|
|
|
|
|
|
|
|
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
|
|
$
|
690
|
|
$
|
531
|
|
|
|
Asia (Hong Kong)
|
|
|
|
177
|
|
|
161
|
|
|
|
Europe ( United Kingdom)
|
|
|
|
|
|
|
10
|
|
|
|
Israel
|
|
|
|
734
|
|
|
714
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,601
|
|
$
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D.
|
Major customers (as percentage of total revenues)
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
2 0 0 6
|
|
2 0 0 7
|
|
2 0 0 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
|
|
|
|
18
|
%
|
|
9
|
%
|
|
5
|
%
|
F - 44
S I G N A T U R E S
The
registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.
|
|
STARLIMS Technologies Ltd.
By: /s/ Itschak Friedman
Itschak Friedman
Chief Executive Officer
|
|
|
By: /s/ Chaim Friedman
Chaim Friedman
Chief Financial Officer
|
Dated: March 25, 2009
78
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