News Details

Preliminary Results for the year ended 31 December 2007

SimiGon Ltd (the Company together with its subsidiary "SimiGon" or the "Group"), a global leader in providing simulation solutions, announces its preliminary results for the year ended 31 December 2007.

Financial Highlights

Revenues were $5.01 million, at the lower end of market expectations (2006: $7.52 million)
Gross margin at 78.91% (2006: 84.09%)
Loss of $2.89 million for the year ended December 31, 2007 (2006: Profit of $2.52 million)
Basic and diluted loss per share $0.08 (2006: Basic earnings per share $0.08 diluted earnings per share $0.07)
Cash and cash equivalents of $5.02 million at 31 December 2007
Operational Highlights

Lockheed Martin selected the SIMbox, Learning Management System, for the F-35 Lightning II Joint Strike Fighter (JSF) training program
SimiGon is the partner of choice to several major long term training programmes including UK's Military Flying Training System providing simulation training technologies and services
$2.4m contract in November 2007 from an international customer
Successfully delivered Air Traffic Controller Trainer System to the Israeli Air Force (IAF)
Portuguese Air Force selected the Company's AirBook software for its desktop training programme
SimiGon selected to provide the technological infrastructure for the Tactical Aviation Training course of Canada's Air Force, extending a successful relationship between the two parties
Ami Vizer, Chief Executive Officer of SimiGon stated: "While it is disappointing that reflecting the nature of the industry we operate in, our expected revenue growth has been delayed from 2007 to 2008, however operationally it has been a year of solid progress for SimiGon. We continue to be successfully in winning contracts in competitive bids. In some instances these contracts are much larger than in previous years and we remain well positioned for long term growth, having established ourselves as the main supplier of simulation training in the world's top pilot computer simulation training programmes.

Looking forward into 2008 and particularly 2009, the company expects to recoup the shortfall of revenues as these large, long-running defence contracts in the US and the UK increase in value, and we expect them to form the basis of stable and growing earnings. This gives us confidence in the long term growth prospects of the Company and our ability to deliver shareholder value."

Overview

SimiGon announces its full year results for 2007, during which period the Group consolidated its position as one of the world's leading developers and global suppliers of computer simulation software to the defence, aviation and industrial sectors through the signing of major new contracts.

As stated in the announcement of 4 January 2008, SimiGon's sales are at the lower end of market expectations due principally to the timing lag between being selected as the preferred supplier of simulation training technology and commencement of the delivery of the systems and increased expenditure in R&D. However, despite these delays, 2007 was an encouraging year for SimiGon from a strategic point of view. The Company continued to bid successfully for contracts that are in some instances much larger than in previous years.

Although there has been a delay in generating revenues from some customer contracts, the Company remains well positioned for long term growth after establishing itself as the main supplier of simulation training in the world's top pilot computer simulation training programmes.

SimiGon also completed a significant milestone in July 2007 when Lockheed Martin selected the SIMbox, Learning Management System, for the F-35 Lightning II Joint Strike Fighter (JSF) training program. Added to this success, the Company is the partner of choice to provide simulation training within Lockheed Martin's winning bids for the UK's Military Flying Training System and Singapore's Basic Wings Course. These deals will help fuel SimiGon's development and provide another affirmation of the viability of SimiGon's training solutions. Using SIMbox's technology extends the long-term productive relationship enjoyed between Lockheed Martin and SimiGon.

Towards the end of the year, the Group signed three further contracts. Firstly, in September the Portuguese Air Force selected the Company's AirBook software for its desktop training programme. Secondly, in November, SimiGon announced it had signed a $2.4m contract from an international customer. Finally, in October, SimiGon successfully delivered its Air Traffic Controller Trainer system to IAF.

Financial Performance

Revenue for the year ended 31 December 2007 was $5.01 million, compared to $7.52 million in 2006, due to certain contracts being delayed. In terms of regional breakdown, 29.2% of SimiGon's revenues came from North America (2006: 57.3%), 70.7% from Europe and the Middle East (2006: 37.8%) and 0.1% from the Far East (2006: 4.9%). Gross profit for the fiscal year was $3.96 million (2006: $6.32 million).

Total operating expenses for the year increased by 86.72% to $7.12 million (2006: $3.81 million), the research and development expenses increased to $2.77 million (2006: $1.99 million) mainly due to salary expenses. Sales and marketing expenses increased to $2.57 million (2006:$0.939 million) mainly due to salary expenses and commission for consultants. General and administration expenses increased to $1.78 million (2006: $0.887 million) mainly due to salary expenses, share-based compensation and the costs related to the company being quoted on a public market.

The operating loss therefore is $3.16 million (2006: operating income $2.51 million) and the net loss is $2.89 million in 2007 compared to net income of $2.52 million in 2006. This resulted in a net basic and diluted loss per share of $0.08 (2006: earnings per share of $0.08 and diluted earnings per share of $0.07). As at 31 December 2007, SimiGon had cash, cash equivalent and deposits in the amount of $5.02 million.

Product Development

In 2007, SimiGon incurred the highest level of annual expenditure to date on research and development as the group sought to further develop its technology lead over its competitors.

SimiGon is committed to remaining innovative and developing new features and products to maintain market relevance and increase market share. In 2007, SimiGon focused on the following areas to increase its competitiveness:

SIMbox Learning Management System has been improved to provide a robust training management platform supporting large scale professional communities. This enables organizations to monitor and track group and individual performance, leading to faster and more effective training.
SIMbox Simulation has been improved to support large scale scenarios.
A new generation of the SIMbox Toolkit has been developed. The tools are now seamlessly integrated to assist both the content developer and the training manager.
SIMbox Graphic Engine has been improved to support urban and ground simulation with high resolution, using more efficient algorithms.
SIMbox Simulation is now fully integrated within the SIMbox Learning Management System environment, including simulation content management, and distribution and trainee's feedback and history.
SimiGon R&D has continued to be one of the earliest adapters of cutting edge software technologies for infrastructure development.
Outlook

While it is disappointing that revenues and a number of contract awards have been delayed, postponing the revenue growth expected from 2007 to 2008, it has been a year of solid progress for SimiGon. The Company remains well positioned for long term growth after establishing itself as the main supplier of simulation training in the world's top pilot computer simulation training programmes.

Looking forward into 2008 and particularly 2009, the company expects to recoup previous year's revenue shortfall as the large, long-running defence contracts in the US and the UK increase in value, and will lead to a stable base from which to increase earnings. The board believes that the Group will continue to grow and deliver shareholder value.