In April 2015,
the Company entered into a line of credit arrangement with a commercial bank, replacing all previous lines of credit, to provide it with up to €5.5 million ($5.9 million as of
December 31, 2015) in borrowings until further notice.
Borrowings under the line of credit bear interest at EURIBOR plus 3.75% (3.75% as of
December 31, 2015) per annum.
The Company is also subject to an unused line fee of 0.75% per annum, which is payable quarterly. The line of credit is secured by the accounts receivable of five of
the Company’s European
subsidiaries and tangible fixed assets of three of
the Company’s European
subsidiaries. The line of credit cannot exceed 80% of the borrowing base. As of
December
31, 2015 the Company had €5.0 million ($5.5 million as of
December 31, 2015) in outstanding borrowings under the line of credit arrangement.
In January 2016,
the Company entered into a new line of credit arrangement with the same commercial bank, replacing the previous line of credit, to provide it with up to €10.0 million ($10.5 million as of
December 31, 2016) in borrowings until further notice. Borrowings under the line of credit bear interest at one month EURIBOR plus 3.75% with a minimum of 3.5% per annum (3.5% as of
December 31, 2016).
The Company is also subject to an unused line fee of 0.75% per annum, which is payable quarterly. The line of credit is secured by the accounts receivable of five of
the Company’s European
subsidiaries
and tangible fixed assets of three of
the Company’s European
subsidiaries. The line of credit cannot exceed 80% of the borrowing base. As of
December 31, 2016 the Company had €1.9 million ($2.1 million as of
December 31, 2016) in outstanding borrowings under the line of credit arrangement. In December 2016,
the Company and the same commercial bank agreed under the same terms and conditions to raise the existing line of credit to €12.0 million ($12.7 million as of
December 31, 2016).
Related party financing
In May 2014,
the Company entered into an arrangement with an entity related to its main shareholder, which replaced all previous arrangements between the parties, to provide it with up to $37 million in revolving loans through December 2016. The term of the arrangement can be automatically extended for four additional six-month periods at the option of the holder. All outstanding borrowings from previous arrangements were applied to the borrowing capacity of the new arrangement. Loans received under the arrangement bear interest, which is compounded semi-annually and payable at maturity, at the interest rate charged by
the Company’s European commercial bank (LIBOR plus 6% for U.S. dollar-denominated loans and the base rate plus 2% for Euro-denominated loans). The arrangement is secured
by a 26% interest in one of
the Company's European
subsidiaries. In connection with the arrangement, the holder was granted an option to convert outstanding notes payable (including accrued interest) under the arrangement into
the Company's common stock at a price of $1.50 per share.
In October 2015, the Supervisory Board of Directors approved to reduce the convertible price of the unpaid interest from $1.50 per share to $0.75 per share. In addition, the loan period was extended until
January 1, 2018. The terms of the arrangement can be automatically extended for four additional six months periods at the option of the holder.
In September 2016, the Supervisory Board of Directors approved an increase in the interest rate of the loan from the entity related to the main shareholder, by one percent, retroactively for the whole period of the loan. The interest recognized in 2016 regarding increase of the previous years interest rate totaled $1.2 million.
In December 2016, the entity related to the main shareholder converted $5.4 million accrued interest into 7,238,302 shares per share of common stock at a price of $0.75 per share.
At
December 31, 2016 and
2015, convertible notes payable to a related party consist of $25.0 million and $29.0 million, respectively, in principal and $9.4 million and $10.4 million respectively, in accrued interest. Interest expense related to these notes is $4.2 million, $2.6 million and $2.3 million for the years ended
December 31, 2016,
2015 and
2014, respectively
Research and Development Costs
Research and development costs are expensed as incurred and consist primarily of payroll and related costs. Research and development costs are $2.7 million, $2.6 million and $2.2 million during the years ended
December 31, 2016,
2015 and
2014, respectively.
Trend Information
Labor market conditions may require
the Company to increase its prices. Cost of labor is the main variable in determining any cost increases.
The Company might be affected by a worldwide economic slowdown, which might affect the aviation industry. As
the Company is a service provider to this industry, such trends can affect the results of
the Company.
Off-Balance Sheet Arrangements
The Company is a party to a consulting arrangement, an agency agreement and various operating lease arrangements. In addition,
the Company has no unconsolidated special purpose entities.
Future Contractual Obligations
The following table summarizes our future contractual obligations as of
December 31, 2016:
Contractual Obligations
|
|
Payments due by Period (U.S. Dollars in Thousands)
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
4-5
|
|
|
more than
|
|
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
Line of credit in the U.S.
|
|
$
|
6,301
|
|
|
$
|
-
|
|
|
$
|
6,301
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Lines of credit in Europe
|
|
|
2,051
|
|
|
|
-
|
|
|
|
2,051
|
|
|
|
-
|
|
|
|
-
|
|
Consulting agreements
|
|
|
983
|
|
|
|
191
|
|
|
|
475
|
|
|
|
317
|
|
|
|
-
|
|
Purchase of subsidiary in Cyprus
|
|
|
158
|
|
|
|
|
|
|
|
158
|
|
|
|
|
|
|
|
|
|
Convertible notes payable to a related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
including accrued interest
|
|
|
34,511
|
|
|
|
-
|
|
|
|
34,511
|
|
|
|
-
|
|
|
|
-
|
|
Future interest and fees on line of credit and convertible notes payable to a related party (1)
|
|
|
9,000
|
|
|
|
-
|
|
|
|
9,000
|
|
|
|
-
|
|
|
|
-
|
|
Operating lease obligations
|
|
|
3,598
|
|
|
|
1,929
|
|
|
|
1,656
|
|
|
|
13
|
|
|
|
|
|
|
|
$
|
56,602
|
|
|
$
|
2,120
|
|
|
$
|
54,152
|
|
|
$
|
330
|
|
|
$
|
-
|
|
(1) Interest and fees are estimated based on future interest rates expected to be applicable.
Contractual Obligations
|
|
Payments due by Period (U.S. Dollars in Thousands)
|
|
|
|
|
|
|
Less than
|
|
|
1-3
|
|
|
4-5
|
|
|
more than
|
|
|
|
Total
|
|
|
1 year
|
|
|
years
|
|
|
years
|
|
|
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guarantees
|
|
$
|
2,416
|
|
|
$
|
-
|
|
|
$
|
1,862
|
|
|
$
|
-
|
|
|
$
|
554
|
|
Letters of credit
|
|
|
233
|
|
|
|
233
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
2,649
|
|
|
$
|
233
|
|
|
$
|
1,862
|
|
|
$
|
-
|
|
|
$
|
554
|
|
Item 6. Directors, Senior Management and Employees
The following table lists the directors and executive officers of ICTS:
|
|
Age
|
|
Position
|
|
|
|
|
|
Menachem Atzmon
|
|
72
|
|
Chairman of the Supervisory Board
|
David W. Sass
|
|
81
|
|
Member of the Supervisory Board
|
Gail F. Lieberman
|
|
73
|
|
Member of the Supervisory Board, Member of the Audit Committee and Chairman of the Compensation Committee
|
Gordon Hausmann
|
|
71
|
|
Member of the Supervisory Board, Member of the Compensation Committee and Member of the Audit Committee
|
Philip M. Getter
|
|
80
|
|
Member of the Supervisory Board, Chairman of the Audit Committee
|
|
|
71
|
|
Managing Director
|
Alon Raich
|
|
41
|
|
Chief Financial Officer
|
Menachem J. Atzmon is a CPA (Isr). From 1996 until 2012 Mr. Atzmon has been the managing director of Albermale Investment Ltd., an investment company. Since 1998 until 2012 he has served as the Chairman of the Management Board of Seehafen Rostock, Umschlagsgesellschaft GmbH and its Holding Company. Mr. Atzmon has been a member of the Supervisory Board of ICTS since 1999 and acts as the Chairman of the Supervisory Board since 2004. Since 2010 he serves as the Chairman of the of Arrow Ecology & Engineering Overseas (1999) Ltd, an advance recycling company. During 2014 Mr. Atzmon was appointed in addition to his role of Chairman of the Supervisory Board to CEO of the Arrow Ecology & Engineering Overseas Ltd.
David W. Sass for the past 55 years has been a practicing attorney in New York City and is currently a Special Council in the law firm of McLaughlin & Stern, LLP. He has been a director of ICTS since 2002 and is also a director of several privately held corporations. He is an Honorary Trustee of Ithaca College and a director of the TCI College of Technology.
Gail F. Lieberman is the founder and Managing Partner of Rudder Capital, LLC, which provides financial and strategic advisory services for middle-market companies in the services & technology sectors. Previously, she was the Chief Financial Officer for Thomson Corporation’s Financial & Professional Publishing division, Moody’s Investor Service, Inc. and Scali, McCabe, Sloves, Inc. (Ogilvy Group). Ms. Lieberman is a director of Tradeworx, a private financial technology company. Formerly she served as board member for the South Central Connecticut Regional Water Authority, board member, Compensation Committee Chair and Audit Committee Member for Dara Biosciences (NASDAQ: DARA), board member and Audit Committee Chair for I-Trax Inc. (Amex: DMX), board member and Audit and Governance Committee Member for TriPath Imaging Inc. (NASDAQ: TPTH) and board member and Audit Committee Chair
for Breeze-Eastern Corporation (Amex: BZC). She also served on the board of FTEN, a financial technology company. Ms. Lieberman holds a BA in Mathematics and Physics and an MBA in Finance from Temple University.
Gordon Hausmann is the senior partner of his own law firm, founded in London over 35 years ago. He specializes, amongst other things, in corporate and commercial law, including business finance and banking law, litigation and representation of several substantial family offices. He holds office as a board member of numerous companies and institutions, including listed companies in the UK and abroad. These include an international airline, some Embassies, finance companies (including a company associated with a private Swiss banking group) and other well-known and governmental entities. He also holds office and advises a number of charities, including Governor of the Hebrew University.
Philip M. Getter has been Chairman of TCI College of Technology since 2012. Since 1985 he has been managing member of GEMPH Development LLC a major shareholder of EVCI Career Colleges and sole shareholder of TCI. Mr. Getter has more than 30 years of corporate finance experience. From 2000 to 2005 he was president of DAMG Capital, LLC Investment Bankers. Prior thereto he was head of Investment Banking and a member of the board of directors of Prime Charter, Ltd. After graduation from Cornell University he served as Administrative Assistant to the Director of United States Atomic Energy Commission. From 1960 to 1969 he was a partner with Shearson, Hammill and from 1969 to 1975 Senior Partner of Devon Securities, an international investment-banking boutique. From 1975 to 1984 he was President/CEO of Generics Corporation of America, then one of the largest generic drug companies
in the United States. As Chairman and CEO of Wolins Pharmacal (1977 to 1984) he led the reorganization and restructuring of this distributor of medical supplies. Mr. Getter was Chairman of Inksure Technologies, Inc.a manufacturer of security inks and a founder of KIDSRx an all-natural pharmaceutical company. He has been a member of The Broadway League [League of American Theaters and Producers] Executive Vice Chairman of The Kurt Weill Foundation for Music, and Trustee of the American Theatre Wing [TONY and OBIE Awards]. He has been involved in most aspects of the entertainment industry and has produced for Broadway, television and film.
Ran Langer joined ICTS in 1988 through 1998 as General Manager of the German
subsidiaries of ICTS. From 1998 to 2013, he served as General Manager of Seehafen Rostock Umschlagsgesellschaft GmbH, the operator of the Seaport in Rostock, Germany. Mr. Langer became a Managing Director of ICTS in 2004. In 2013 Mr. Langer was appointed also as CEO of I-SEC International Security B.V., a fully owned subsidiary of ICTS.
Alon Raich is a CPA (Isr), joined ICTS in September 2005 as Financial Controller and became Chief Financial Officer (CFO) of
the Company in 2008. From 2001 to 2005 he worked in the accounting firm, Kesselman & Kesselman, PriceWaterhouseCoopers (PwC). Mr. Raich holds a BA degree in economics and accounting and an MA degree in law from Bar-Ilan University, Israel.
Summary Compensation Table
The following table sets forth compensation earned by
the Company’s Managing Directors and the highest paid executives during the years 2014 through 2016 (U.S. Dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-equity
|
|
|
Nonqualified
|
|
|
Number
|
|
|
Number
|
|
|
|
|
Name and
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
of
|
|
|
of
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Plan
|
|
|
Compensation
|
|
|
Option
|
|
|
Stock
|
|
|
|
|
Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Compensations
|
|
|
Compensation
|
|
|
Earnings
|
|
|
Awards
|
|
|
Awards
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
$
|
|
Managing
|
|
2016
|
|
|
332
|
|
|
|
1,106
|
|
|
|
60
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,498
|
|
Director
|
|
2015
|
|
|
222
|
|
|
|
1,110
|
|
|
|
21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,353
|
|
(a)
|
|
2014
|
|
|
191
|
|
|
|
-
|
|
|
|
21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managing
|
|
2016
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Director
|
|
2015
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2014
|
|
|
-
|
|
|
|
-
|
|
|
|
48
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Manager
|
|
2016
|
|
|
145
|
|
|
|
28
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232
|
|
of a subsidiary
|
|
2015
|
|
|
128
|
|
|
|
73
|
|
|
|
22
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
223
|
|
(b)
|
|
2014
|
|
|
153
|
|
|
|
80
|
|
|
|
26
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
259
|
|
a. Highest paid employee in 2016 and 2015.
b. Highest paid employee in 2014.
Each member of the Supervisory Board who is not an employee of
the Company receives an annual fee of $20 and a fee for each Supervisory Board or committee meeting attended of $2. The Chairman of the Audit Committee receives an additional $10 per year. The Chairman of the Board receives an annual fee of $60.
Mr. Langer has been employed as Managing Director without compensation untill 2013. In 2013,
the Company signed an employment agreement with Mr. Langer for which he will be entitled to a yearly salary of €144 per year ($152 as of December 2016). In May 2015 the compensation committee and the Supervisory Board approved to increase Mr. Langer’s salary to €240 per year ($253 as of December 2016) and a bonus of €1,000 ($1,055 as of
December 31, 2016). In May 2016, an additional increase of salary to €300 per year ($317 as of
December 31, 2016) and a bonus of $1,000 ($1,055 as of
December 31, 2016) was approved by the Supervisory Board.
In December 2015 the compensation committee approved an annual fee of $60 for the Chairman of the Supervisory Board, in addition to a one time grant of $660 representing the annual salary for the last eleven years for which he was not compensated. In 2016 the Chairman of the Supervisory Board waived an amount of $600 of the grant.
The following table sets forth information concerning the aggregate compensation paid or accrued on behalf of all of our directors and executive officers as a group for the year ended
December 31, 2016.
|
|
Salaries, fees,
|
|
|
Pension, retirement
|
|
|
|
commissions
|
|
|
and other
|
|
|
|
and bonuses
|
|
|
similar benefits
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Supervisory Directors as a group ( 5 persons)
|
|
$
|
185
|
|
|
$
|
-
|
|
Officers as a group ( 4 persons)
|
|
$
|
1,969
|
|
|
$
|
174
|
|
Background and Compensation Philosophy
Our Compensation Committee consists of Gail Lieberman, Chairman and Gordon Hausmann, all independent directors. The Compensation Committee and, prior to its establishment our Supervisory Board of Directors determined the compensation to be paid to our executive officers based on our financial and operating performance and prospects, the level of compensation paid to similarly situated executives in comparably sized companies, and contributions made by the officers’ to our success. Each of the named officers will be measured by a series of performance criteria by the Supervisory Board of directors, or the compensation committee on a yearly basis. Such criteria will be set forth based on certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills, related experience, personal performance and overall corporate performance.
Our Supervisory Board of Directors and Compensation Committee have not adopted or established a formal policy or procedure for determining the amount of compensation paid to our executive officers. The Compensation Committee makes an independent evaluation of appropriate compensation of key employees, with input from management. The Compensation Committee has oversight of executive compensation plans, policies and programs.
Our compensation program for our executive officers and all other employees is designed such that it will not incentivize unnecessary risk-taking. The base salary component of our compensation program is a fixed amount and does not depend on performance. Our cash incentive program takes into account multiple metrics, thus diversifying the risk associated with any single performance metric, and we believe it does not incentivize our executive officers to focus exclusively on short-term outcomes. Our equity awards are limited by the terms of our equity plans to a fixed maximum specified in the plan, and are subject to vesting to align the long-term interests of our executive officers with those of our stockholders.
Elements of Compensation
We provide our executive officers with a base salary and certain bonuses to compensate them for services rendered during the year. Our policy of compensating our executives with a cash salary has served us well.
Board Practices
We have a Supervisory Board and a Management Board. The Supervisory Board has the primary responsibility for supervising the policies of the Management Board and the general course of corporate affairs and recommending the adoption of the annual financial statements of ICTS by its shareholders. The Management Board is responsible for the day-to-day operations of ICTS. Members of the Supervisory Board and the Management Board are appointed by the shareholders for a term of one year. Non-executive officers are appointed by and serve at the satisfaction of the Management Board.
The members of the Supervisory Board as of
December 31, 2016 and the initial year they joined the Supervisory Board are as follows: Menachem Atzmon (1999), David W. Sass (2002), Philip M. Getter (2003), Gordon Hausmann (2005) and Gail F. Lieberman (2010).
The Audit Committee consists of Philip M. Getter, Chairman, Gail F. Lieberman and Gordon Hausmann, all of whom are independent. Mr. Getter and Ms. Lieberman have financial expertise. The audit committee evaluates ICTS's accounting policies and practices and financial reporting and internal control structures, selects independent auditors to audit
the Company’s financial statements and confers with the auditors and the officers. The Audit Committee has an Operating Charter as well.
We do not have a Nominating Committee. The members of the Audit Committee and Compensation Committee are all independent and were never officers or employees of
the Company.
The Supervisory Board of
the Company has adopted a Code of Ethics for principal Executive Officers, Directors and senior financial officers.
The
Articles of Association of ICTS require at least one member of both the Management Board and the Supervisory Board, but do not specify a maximum number of members for such boards. The general meeting of shareholders determines the exact number of members of both the Management Board and the Supervisory Board. Under the laws of the Netherlands and the
Articles of Association, each member of the Supervisory Board and Management Board holds office until such member's resignation, death or removal, with or without cause, by the shareholders.
Employees
As of
December 31, 2016,
the Company has 6,603 employees, of which 4,458 employees are located in Europe, Far East and Israel and 2,145 are located in the United States.
Share Ownership
See tables under Item 7: "Major Shareholders" and "Related Party Transactions" below.
Options to Purchase Securities
In February 2005, the Company adopted the 2005 Equity Incentive Plan and reserved 1,500,000 shares of common stock for future issuance. The plan expired in 2015 (the
"Plan").
As of
December 31, 2016 there are 150,000 options outstanding under the plan. As the plan expired there are no more options available for grant under this plan.
On December 2008 shareholders adopted the 2008 Employee, Director and Commitment Stock Option Plan (the
"Plan"). The Plan provides a means whereby employees, officers, directors, and certain consultants and independent contractors of
the Company (
"Qualified Grantees") may acquire the Common Shares of
the Company pursuant to grants of (i) Incentive Stock Options (
"ISO") and (ii)
"non-qualified stock options". A summary of the significant provisions of the Plan is set forth below. The following description of the Plan is qualified in its entirety by reference to the Plan itself.
The purpose of the Plan is to further the long-term stability, continuing growth and financial success of
the Company by attracting and retaining key employees, directors and selected advisors through the use of stock incentives, while stimulating the efforts of these individuals upon whose judgment and interest
the Company is and will be largely dependent for the successful conduct of its business.
The Company believes that the Plan will strengthen these individuals' desire to remain with
the Company and will further the identification of their interests with those of
the
Company's shareholders.
The Plan provides that options to purchase up to 1,500,000 Common Shares of
the Company may be issued to the employees and outside directors. All present and future employees shall be eligible to receive incentive awards under the Plan, and all present and future non-employee directors shall be eligible to receive non-statutory options under the Plan. An eligible employee or non-employee director shall be notified in writing, stating the number of shares for which options are granted, the option price per share, and conditions surrounding the grant and exercise of the options.
The exercise price of shares of Company Stock covered by an ISO shall not be less than 100% of the fair market value of such shares on the date of grant; provided that if an ISO is granted to an employee who, at the time of the grant, is a 10% shareholder, then the exercise price of the shares covered by the incentive stock option shall not be less than 110% of the fair market value of such shares on the date of the grant. The exercise price of shares covered by a non-qualified stock option shall be not less than 85% of the fair market value of such shares on the date of the grant. The Plan shall be administered by the Compensation Committee
As of
December 31, 2016, there were no outstanding options under the plan. Options available for grant under the plan are 1,500,000. The plan expires in 2018.
In June 2016 one of
the Company’s
subsidiaries granted 228,000 options to certain employees of one of
the Company’s
subsidiaries. The fair value of the subsidiary’s stock as evaluated by a third party was zero as of the day of the grant. Options were granted at an exercise price of €0.01.
U.S. Federal Income Tax Consequences
The rules governing the U.S. federal tax treatment of stock options, restricted stock and shares acquired upon the exercise of stock options are quite technical. Therefore, the description of U.S. federal income tax consequences set forth below is necessarily general in nature and does not purport to be complete.
Moreover, the statutory provisions are subject to change, as are their interpretations, and their application may vary in individual circumstances. In particular, the “American Jobs Creation Act of 2004” imposed rules concerning the taxation of various deferred compensation arrangements. It is not clear whether, and to what extent, these rules apply to awards under the Plan. Although the Comapny does not believe that awards under the Plan are affected by the rules, there can be no assurance to that effect until adequate guidance is forthcoming fromthe U.S. Treasury Department. Finally, the tax consequences under applicable state, local and foreign income tax laws may not be the same as under the U.S. federal income tax laws.
Incentive Stock Options
ISOs granted pursuant to the Plan are intended to qualify as incentive stock options within the meaning of Section 422A of the Internal Revenue Code. If the participant makes no disposition of the shares acquired pursuant to exercise of an ISO within one year after the transfer of shares to such participant and within two years from grant of the option, such participant will realize no taxable income as a result of the grant or exercise of such option, and any gain or loss that is subsequently realized may be treated as long-term capital gain or loss, as the case may be. Under these circumstances, neither
the Company nor any subsidiary will be entitled to a deduction for federal income tax purposes with respect to either the issuance of the ISOs or the issuance of shares upon their exercise.
If shares acquired upon exercise of ISOs are disposed of prior to the expiration of the above time periods, the participant will recognize ordinary income in the year in which the disqualifying disposition occurs, the amount of which will generally be the lesser of (i) the excess of the fair market value of the shares on the date of exercise over the option price, or (ii) the gain recognized on such disposition. Such amount will ordinarily be deductible for federal income tax purposes by
the Company or subsidiary for which the participant performs services (
"service recipient") in the same year, provided that the amount constitutes reasonable compensation for services that would result in a deduction for U.S. federal income tax purposes and that certain federal income tax withholding requirements are satisfied. In addition, the excess, if any, of the amount realized
on a disqualifying disposition over the market value of the shares on the date of exercise will be treated as capital gain.
The foregoing discussion does not consider the impact of the alternative minimum tax, which may be particularly applicable to the year in which an ISO is exercised.
Non-qualified Stock Options
A participant who acquires shares by exercise of Non Qualified Stock Options generally realizes as taxable ordinary income, at the time of exercise, the difference between the exercise price and the fair market value of the shares on the date of exercise. Such amount will ordinarily be deductible by the service recipient for federal income tax purposes in the same year, provided that the amount constitutes reasonable compensation for services that would result in a deduction for U.S. federal income tax purposes and that certain federal income tax withholding requirements are satisfied. Subsequent appreciation or decline in the value of the shares on the sale or other disposition of the shares will generally be treated as capital gain or loss.
Restricted Stock
A participant granted shares of restricted stock under the Plan is not required to include the value of such shares in ordinary income until the first time such participant's rights in the shares are transferable or are not subject to substantial risk of forfeiture, whichever occurs earlier, unless such participant timely files an election under Section 83(b) of the Internal Revenue Code to be taxed on the receipt of the shares.
In either case, the amount of such income will be equal to the excess of the fair market value of the stock at the time the income is recognized over the amount (if any) paid for the stock.
The service recipient will ordinarily be entitled to a deduction, in the amount of the ordinary income recognized by the participant, for the service recipient's taxable year in which the participant recognizes such income, provided that the amount constitutes reasonable compensation for services that would result in a deduction for U.S. federal income tax purposes and that certain federal income tax withholding requirements are satisfied.
Item 7. Major Shareholders and Related Party Transactions
Major Shareholders
The following table sets forth certain information regarding ownership of
the Company's Common Shares as of
April 15, 2017 with respect to:
(1) Each person who is known by
the Company to own beneficially more than 5% of
the Company's outstanding Common Shares.
(2) All directors and officers as a group.
|
|
Percent of
|
|
|
|
|
|
|
Amount Beneficially
|
|
|
Common Shares
|
|
Name Shareholders Holding Five Percent or More
|
|
Owned (a)
|
|
|
Outstanding (b)
|
|
|
|
|
|
|
|
|
MacPherson Trust ©
|
|
|
57.6
|
%
|
|
|
12,085,528
|
|
|
|
|
|
|
|
|
|
|
Menachem J. Atzmon
|
|
|
14.3
|
%
|
|
|
3,000,000
|
|
|
|
|
|
|
|
|
|
|
Igal Tavori
|
|
|
5.7
|
%
|
|
|
1,202,483
|
|
|
|
|
|
|
|
|
|
|
All officers and directors as a group and the MacPherson Trust (9 persons).
|
|
|
85.1
|
%
|
|
|
17,871,574
|
|
(a) As to each shareholder, the percentage is calculated using the amount beneficially owned by such shareholder divided by the number of total outstanding common shares and the shares issuable pursuant to the exercise of options exercisable within 60 days from the date of the grant, if any held by such shareholder. Common shares subject to options that are immediately exercisable or exercisable within 60 days of the date of the grant are deemed outstanding for computing the ownership percentage of the shareholder holding such options, but are not deemed outstanding for computing the ownership of any other shareholders.
(b) The amounts include common shares owned by each of the above, directly or indirectly.
(c) 1. The MacPherson Trust (“Trust”) was created for the benefit of the family of Mr. Menachem J. Atzmon. The Trust owns Spencer Corporation, Limited, which holds together with the Trust approximately 57.6% of the issued and outstanding Common Shares on behalf of the Trust. Mr. Atzmon disclaims any beneficial interest in the MacPherson Trust. Spencer Corporation, Limited and the MacPherson Trust together with Mr. Atzmon are able to appoint all the directors of ICTS and control the affairs of ICTS.
2. As of
April 15, 2017 the Company received loans from a related party in the total amount of $25.7 million and accrued interest of $10.5 million. The principle is convertible to
the Company’s common stock at a rate of $1.50 per share and the accrued interest is convertible at a rate of $0.75 per share. The calculation above does not take into consideration the conversion of those loans.
Review, Approval or Ratification of Transactions with Related Persons
All ongoing and future transactions between
the Company and any of our officers and directors and their respective affiliates, including loans by our officers and directors, will be on terms believed by us to be no less favorable than are available from unaffiliated third parties. Such transactions or loans, including any forgiveness of loans, will require prior approval by the Audit Committee (whose members are independent directors) and by a majority of our disinterested independent directors (to the extent we have any) or the members of our Supervisory Board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested and independent directors determine that the terms of such transaction are no less favorable to us than
those that would be available to us with respect to such a transaction from unaffiliated third parties. We will not enter into a business combination or invest alongside any of our directors, officers, any affiliate of ours or of any of our directors or officers or a portfolio company of any affiliate of our directors or officers.
Related Party Transactions
Entities related to two of
the Company's Supervisory Board members provide legal services to
the Company. Legal expense related to these services is $58 thousand, $47 thousand and $58 thousand for the years ended
December 31, 2016,
2015 and
2014, respectively. Included in accounts payable on the accompanying consolidated balance sheets is $6 thousand and $28 thousand due for these services as of
December 31, 2016 and
2015, respectively.
In January 2009,
the Company engaged the services of a related party to provide certain selling and management services to its technology segment.
The Company incurred expenses of $227 thousand, $223 thousand and $161 thousand for such services for the years ended
December 31, 2016,
2015 and
2014, respectively.
In May 2013, an entity related to
the Company’s main shareholder provided a letter of credit of $1,000 thousand to a commercial bank to guarantee a borrowing arrangement on behalf of one of
the Company’s
subsidiaries.
In February 2014,
the Company engaged the services of a related party to provide certain selling services to its technology segment.
The Company incurred expenses of $52, $48 and $49 for such services for the years ended
December 31, 2016,
2015 and
2014, respectively.
In May 2014,
the Company engaged the services of a related party to provide certain administrative services.
The Company incurred expenses of $0, $15 and $15 for such services in each of the years ended
December 31, 2016,
2015 and
2014, respectively.
In November 2015,
the Company engaged the services of a related party to provide internal audit services.
The Company incurred expenses of $112 thousand and $13 thousand for such services for the years ended
December 31, 2016 and
2015, respectively.
In December 2015, the Supervisory Board approved an annual compensation for the Chairman of the Supervisory Board, a related party, of $60 thousand. In addition, as the Chairman of the Supervisory Board was not compensated for the last eleven years, a one-time grant of $660 thousand was approved. In September 2016, the chairman of the Supervisory Board forgave $600 thousand of this grant.
In December 2015,
the Company issued 2.9 million shares to certain directors and officers of
the Company for a purchase price of $0.60 per share.
In November and December 2016,
the Company issued 2.8 million shares to certain directors and officers of
the Company for a purchase price ranging from $0.40 - $0.45 per share.
Item 8. Financial Information
The Consolidated Financial Statements and Financial Statement Schedule are included herein on pages F-1 through F-36.
Legal Proceedings
As a result of the
September 11, 2001 terrorist attacks, numerous lawsuits charging
the Company with wrongful death and/or property damage were commenced in the United States District Court, Southern District of New York (the
“Court”), resulting from certain airport security services provided by
the Company for United Flight 175 out of Logan Airport in Boston, Massachusetts.
All the wrongful death personal injury cases have been settled or dismissed at no cost to
the Company because the payments were covered by
the Company’s insurance. The Court approved the settlements.
All but one of the property loss cases also has been settled at no cost to
the Company, because the payments were covered by
the Company’s insurance. One of the property loss cases remain pending against, among others,
the Company. The Court granted defendants motion for summary judgments that the plaintiffs have appealed and oral arguments have been held. The plaintiffs in the case are seeking reimbursement for claimed damages relating to their lease of the towers. The defendants are hopeful that the remaining property loss cases will be dismissed.
In any event,
the Company has already paid the limits of its liability insurance in settlement costs.
The Company contends that a federal statute passed after the events of
September 11, 2001 protects it from having to make any further monetary payments, regardless of whether it is found liable in any of the remaining cases.
Claims by former employees
The Company is subject to wrongful termination claims made by certain former employees of one of its European
subsidiaries. The aggregate amount of such claims is approximately $711. At the present time,
the Company is not able to determine the likelihood of an unfavorable outcome or estimate a range of potential loss related to these matters.
Minimum wage increase
In August 2015,
the Company was informed about a court decision, which approved an increase to the minimum wage for the city of SeaTac, Washington (location of Seattle Airport). The increase to the minimum wage was originally approved by a vote in King County, Washington in 2013 (to be effective
January 1, 2014). However, a court ruled that SeaTac employees were excluded from this increase because the airport was under the jurisdiction of the Port of Seattle and not the city of SeaTac. In August 2015, this decision was overturned by the State Supreme Court and accordingly,
the Company is required to increase the minimum wage of its employees at the SeaTac Airport according to the court decision, effective
January
1, 2014.
The Company has estimated that it has a total liability of approximately $3,600 for back wages (inclusive of interest amounting to approximately $600) as of
December 31, 2016 and has recorded an accrual for this liability.
As the increase in minimum wage was not paid yet to the employees, an employee of
the Company filed a class action lawsuit against
the Company, in the United States District Court, Western District of Washington. The employee alleges
the Company failed to pay the proper SeaTac minimum wage. Plaintiffs served written discovery to the individual defendants. Additional two lawsuits were filed against
the Company in the Circuit Court for King County, State of Washington, on the same subject.
General
The Company is subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. These claims are primarily related to grievances filed by current and former employees for unfair labor practices or discrimination, and for passenger aviation claims. Management recognizes a liability for any matter when the likelihood of an unfavorable outcome is deemed to be probable and the amount is able to be reasonably estimated. Management has concluded that such claims, in the aggregate, would not have a material adverse effect on
the Company's consolidated financial position, results of operations, or cash flows.
Item 9. The Offer and Listing
Our shares of common stock are currently traded on the OTC under the symbol ICTSF.
The reported high and low closing sales prices per shares during the last five years were as follows:
Year
|
|
High
|
|
|
Low
|
|
2012
|
|
$
|
1.60
|
|
|
$
|
0.04
|
|
2013
|
|
$
|
1.39
|
|
|
$
|
0.45
|
|
2014
|
|
$
|
2.39
|
|
|
$
|
0.75
|
|
2015
|
|
$
|
0.85
|
|
|
$
|
0.51
|
|
2016
|
|
$
|
0.71
|
|
|
$
|
0.40
|
|
The reported high and low closing sales prices per share during each quarter for the last 3 years were as follows:
2016
|
|
High
|
|
|
Low
|
|
First Quarter
|
|
$
|
0.55
|
|
|
$
|
0.47
|
|
Second Quarter
|
|
$
|
0.50
|
|
|
$
|
0.45
|
|
Third Quarter
|
|
$
|
0.65
|
|
|
$
|
0.40
|
|
Fourth Quarter
|
|
$
|
0.71
|
|
|
$
|
0.40
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
High
|
|
|
Low
|
|
First Quarter
|
|
$
|
0.85
|
|
|
$
|
0.59
|
|
Second Quarter
|
|
$
|
0.73
|
|
|
$
|
0.55
|
|
Third Quarter
|
|
$
|
0.79
|
|
|
$
|
0.56
|
|
Fourth Quarter
|
|
$
|
0.60
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
High
|
|
|
Low
|
|
First Quarter
|
|
$
|
0.90
|
|
|
$
|
0.75
|
|
Second Quarter
|
|
$
|
2.39
|
|
|
$
|
0.87
|
|
Third Quarter
|
|
$
|
1.30
|
|
|
$
|
0.96
|
|
Fourth Quarter
|
|
$
|
1.20
|
|
|
$
|
0.85
|
|
Item 10. Additional Information
Introduction
The material provisions of
the Company's
Articles of Association are summarized below. Such summaries do not purport to be complete statements of these provisions and are qualified in their entirety by reference to such exhibit.
The Company was registered by the Department of Justice at Amstelveen, Netherlands on
October 9, 1992. The objectives of
the Company are generally to manage and finance businesses, extend loans and invest capital as described in greater detail in Article 2 of
the
Company's
Articles of Association.
Shares
As a Netherlands
"Naamloze Vennootschap" (N.V.), public limited liability company, we are subject to certain requirements not generally applicable to corporations organized under the laws of jurisdictions within the United States. Among other things, the authority to issue shares is vested in the general meeting of shareholders, except to the extent such authority to issue shares has been delegated by the shareholders or by the
Articles of Association to another corporate body for a period not exceeding five years.
The issuance of the common shares is generally subject to shareholder pre-emptive rights, except to the extent that such pre-emptive rights have been excluded or limited by the general meeting of shareholders (subject to a qualified majority of two-thirds of the votes if less than 50% of the outstanding share capital is present or represented) or by the corporate body designated to do so by the general meeting of shareholders or the
Articles of Association. Such a designation may only take place if such corporate body has also been designated to issue shares. The resolution by with the pre-emptive rights are excluded or limited needs to be filed with the Dutch Trade Registry, which is publically accessible, within 8 days of such resolution.
In this regard, the general meeting of shareholders has authorized our Supervisory Board to issue any authorized and unissued shares at any time up to five years from
December 27, 2012, the date of such authorization, and has authorized the Supervisory Board to exclude or limit shareholder pre-emptive rights with respect to any issuance of common shares prior to such date. Such authorizations may be renewed by the general meeting of shareholders from time to time, for up to five years at a time. This authorization would also permit the issuance of shares in an acquisition, provided that shareholder approval is required in connection with a statutory merger (except that, in certain limited circumstances, the board of directors of a surviving company may resolve to legally merge
the company). Shareholders do not have pre-emptive
rights with respect to shares which are issued against payment other than in cash or which are issued to employees of
the Company or subsidiary. Should
the Company issue so-called preferred shares, i.e. shares that exclude or only grant to a limited extent its shareholders a right to share in the profits above a certain percentage of the nominal value of their shares or a share in a liquidation surplus above the nominal value of their shares, then these shareholders do not have pre-emptive rights regarding the issuance of ordinary shares; ordinary shareholders do not have pre-emptive rights regarding the issuance of preferred shares.
On
December 27, 2012, at the general meeting of shareholders it was approved to increase the authorized share capital to €15 million or 33,333,334 shares. In addition, it was approved at the shareholders’ meeting that in the event that at least ninety percent of the authorized share capital is issued, the authorized capital of
the Company can be increased to €67,5 million or 150,000,000 shares.
Our authorized share capital is currently divided into 33,333,334 common shares, par value 0.45 Euro per common share. Article 24, of the
Articles of Association provide that in the event the Management Board files a declaration with the Dutch Chamber of Commerce that at least ninety percent of the authorized share capital is issued, Article 3 of the
Articles of Association will provide as follows:
“The authorized capital of the Company amounts to EUR 67,500,000 dividend into one hundred fifty million (150,000,000) shares, each share having a par value of EUR 0.45.”
The common shares may be in bearer or registered form. As of
December 31, 2016, 21,000,000 shares were issued and outstanding.
Dividends
The Supervisory Board, may decide that all or part of
the Company's profits should be retained and not be made available for distribution to shareholders. Those profits that are not retained shall be distributed to holders of common shares, provided that the distribution does not reduce shareholders' equity below the issued share capital increased by the amount of reserves required by Netherlands law.
Dividends on common shares may be paid out of annual profits shown in
the Company’s annual accounts, which must be adopted by the general meeting. At its discretion, subject to statutory provisions, the Management Board may, with the prior approval of the Supervisory Board, distribute one or more interim dividends on the common shares before the annual accounts have been adopted by
the Company's general meeting. Existing reserves that are distributable in accordance with Netherlands law may be made available for distribution upon proposal by the Management Board, subject to prior approval by the Supervisory Board. With respect to cash payments, the rights to dividends and distributions shall lapse if such dividends or distributions are not claimed within five years following the day
after the date on which they were made payable.
Supervisory Board
Members of our Supervisory Board are appointed by the general meeting for a term of one year.
General Meeting of Shareholders
The Company’s general meeting of shareholders will be held at least once a year, not later than six months after the end of the fiscal year. Notices convening a general meeting will be mailed to holders of registered shares at least 15 days before the general meeting and will be published in national newspapers in the Netherlands and abroad in countries where
the Company's bearer shares are admitted for official quotation.
In order to attend, address and vote at the general meeting of shareholders, the holders of
the Company's registered shares must notify it in writing of their intention to attend the meeting and holders of
the Company's bearer shares must direct the depository to their bearer shares, each as specified in the published notice. However, shareholders and other persons entitled to attend the general meetings of shareholders may be represented by proxies with written authority.
Other general meetings of shareholders may be held as often as deemed necessary by the Supervisory Board or the Management Board and must be held if one or more shareholders or other persons entitled to attend the general meeting of shareholders jointly representing at least 10% of
the Company's issued share capital make a written request to the Supervisory Board or the Management Board that a meeting must be held and specifying in detail the business to be dealt with at such meeting. Resolutions are adopted at general meetings of shareholders by a majority of the votes cast, except where a different proportion of votes are required by the
Articles of Association or Netherlands law, in a meeting in which holders of at least fifty percent (50%) of the outstanding common shares are
represented. Each share carries one vote.
A resolution to dissolve
the Company must be approved by at least a two-third majority of the votes cast, in a meeting in which holders of at least fifty percent (50%) of the outstanding common shares are represented.
Adoption of Annual Accounts
The Company’s annual Netherlands statutory accounts, together with a certificate of its auditors, will be submitted to the general meeting of shareholders for adoption.
Contrary to what is provided in
the Company’s
Articles of Association, approval of the annual accounts by the shareholders does not discharge the Management Board and the Supervisory Board from liability for the performance of their respective duties for the past financial year. In order to discharge the Supervisory Board and Management Board and their members from liability a separate resolution thereto needs to be adopted by the general meeting of shareholders (which resolution can be adopted in the same meeting in which the annual accounts will be adopted). Under Netherlands law, this discharge is not absolute and will not be effective with respect to matters which are not disclosed to the shareholders.
Liquidation Rights
In the event of
the Company's dissolution and liquidation, the assets remaining after payment of all debts and liquidation expenses are to be divided proportionately among the holders of the common shares.
Issues of new shares and pre-emptive rights
The authority to issue shares is vested in the general meeting of shareholders, except to the extent such authority to issue shares has been delegated by the shareholders to another corporate body for a period not exceeding five years.
The issuance of the common shares is generally subject to shareholder pre-emptive rights, except to the extent that such pre-emptive rights have been excluded or limited by the general meeting of shareholders (subject to a qualified majority of two-thirds of the votes if less than 50% of the outstanding share capital is present or represented) or by the corporate body designated to do so by the general meeting of shareholders. Such a designation may only take place if such corporate body has also been designated to issue shares. In this regard, the general meeting of shareholders has authorized our Supervisory Board to issue any authorized and unissued shares at any time up to five years from
December 17, 2012, the date of such authorization, and has authorized the Supervisory Board to exclude or limit shareholder pre-emptive rights with respect to any issuance of common shares prior to such date.
This authorization would also permit the issuance of shares in an acquisition, provided that shareholder approval is required in connection with a statutory merger (except that, in certain limited circumstances, the Supervisory Board of directors of a surviving company may resolve to legally merge
the company).
Repurchase and Cancellation of Shares
We may repurchase our common shares, subject to compliance with the requirements of certain laws of the Netherlands (and provided the aggregate nominal value of
the Company's common shares acquired by it at any one time amounts to no more than one-tenth of its issued share capital). Common shares owned by
the Company may not be voted or counted for quorum purposes. Any such purchases are subject to the authorization of the general meeting of shareholders. Such authorization is not effective for more than 18 months.
The Company may resell shares it purchases. Upon a proposal of the Supervisory Board,
the Company's
general meeting shall have the power to decide to cancel shares acquired by
the Company or to reduce the nominal value of the common shares.
Any such proposal is subject to general requirements of Netherlands law with respect to reduction of share capital.
Only shares which
the Company holds or for which it holds the depository receipts may be cancelled.
Exchange controls
There are no governmental laws, decrees or regulations in The Netherlands,
the Company's jurisdiction of organization, that restrict
the Company's export or import of capital in any material respect, including, but not limited to, foreign exchange controls.
There are no limitations imposed by Netherlands law or
the Company's charter documents on the right of non-resident or foreign owners to hold or vote Common Shares.
Taxation
The following discussion summarizes the material anticipated U.S. federal income tax consequences of the acquisition, ownership and disposition of shares by a U.S. Holder (as defined below). This summary deals only with shares held as capital assets and does not deal with the tax consequences applicable to all categories of investors some of which (such as tax-exempt entities, banks, broker-dealers, investors who hold shares as part of hedging or conversion transactions and investors whose functional currency is not the U.S. dollar) may be subject to special rules.
The summary does not purport to be a complete analysis or listing of all the potential tax consequences of holding shares, nor does it purport to furnish information in the same detail or with the attention to an investor's specific tax circumstances that would be provided by an investor's own tax adviser. Accordingly, U.S. holders of shares are advised to consult their own tax advisers with respect to their particular circumstances and with respect to the effects of U.S. federal, state, local, or other laws to which they may be subject.
As used herein, the term "U.S. Holder" means a beneficial owner of shares that is (i) for United States federal income tax purposes a citizen or resident of the United States, (ii) a corporation or other entity created or organized in or under the laws of the United States or any political subdivision thereof, (iii) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, of (iv) an estate, the income of which is subject to United States federal income taxation regardless of its source.
The summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), judicial decisions, administrative pronouncements, and existing and proposed Treasury Department regulations, changes to any of which after the date of this Annual Report on Form 20-F could apply on a retroactive basis and affect the tax consequences described herein.
Taxation of Dividends
For U.S. federal income tax purposes, the gross amount of distributions, if any, (including any withholding tax thereon) made by
the Company out of its current or accumulated earnings and profits (as determined under U.S. federal income tax principles) will be included in the gross income of a direct U.S. Holder as foreign source dividend income on the date of receipt but will not be eligible for the dividends received deduction generally allowed to U.S. corporations.
Subject to the discussion below regarding passive foreign investment companies,
the Company should be considered to be a
“qualified foreign corporation” so that such dividends should be eligible to be taxed as net capital gains (at a maximum U.S. federal rate of 20 percent).
Distributions in excess of the earnings and profits of
the Company will be treated, for U.S. federal income tax purposes, first as a nontaxable return of capital to the extent of the U.S. Holder's basis in the shares (thereby increasing the amount of any gain and decreasing the amount of any loss realized on the subsequent disposition of such shares) and then as a gain from the sale or exchange of the shares. The amount of any dividend paid in Euro will be equal to the U.S. dollar value of the Euro on the date of receipt regardless of whether the U.S. Holder converts the payment into U.S. dollars.
The declaration of dividends will be at the discretion of
the Company’s Supervisory Board of directors and will depend upon
the Company’s earnings, capital requirements, financial position, general economic conditions, and other pertinent factors.
The Company cannot assure Holders that dividends will be paid in the future.
Foreign Tax Credits
U.S. Holders will generally be entitled to claim a credit against their United States federal income tax liability for the amount of Netherlands dividend withholding tax imposed on dividends paid to U.S. Holders.
See Netherlands Dividend Withholding Tax. U.S. Holders who are entitled to the benefits of a reduced rate of Netherlands dividend withholding tax under the tax treaty between the United States and the Netherlands will be allowed a credit for only the amount of withholding tax provided for under the U.S. Tax Treaty (i.e. 15%).
However, the full amount of the dividend, including any withheld amounts, will be subject to current United States federal income taxation whether or not such Holder obtained a refund of the excess amount withheld. In the event
the Company pays a dividend to a U.S. Holder out of the earnings of a non-Dutch subsidiary, however, it is possible that under certain circumstances such U.S. Holder would not be entitled to claim a credit for a portion of any Dutch taxes withheld by
the Company from such dividend. The portion of Dutch withholding tax that may not be creditable in this instance equals a maximum of 3% of the gross amount of such dividend (or 20% of the Dutch taxes withheld in the case of a U.S. Holder entitled to claim a 15% withholding rate under the U.S. Tax Treaty). This limitation
could potentially apply only under circumstances where
the Company pays dividends on the shares.
Depending on the particular circumstances of the U.S. Holder, dividends accrued from shares will generally be classified, for foreign tax credit purposes, as passive income. A U.S. Holder who finds it more advantageous because of such limitations, to claim the Netherlands dividend withholding tax as a deduction instead of a credit may do so, but only for a year for which such Holder does not claim a credit for any foreign taxes. If the U.S. Holder is a U.S. partnership, trust, or estate, any tax credit is available only to the extent that the income derived by such partnership, trust, or estate is subject to U.S. tax on the income of a resident either in its hands or in the hands of its partners or beneficiaries, as the case may be.
Taxation on Sale or Disposition of Shares
Subject to the discussion below regarding passive foreign investment companies, U.S. Holders will recognize capital gain or loss for U.S. federal income tax purposes on the sale or other disposition of shares in an amount equal to the difference between the U.S. dollar value of the amount realized and the U.S. Holder's adjusted tax basis in the shares. In general, a U.S. Holder's adjusted tax basis in the shares will be equal to the amount paid by the U.S. Holder for such shares reduced by any distribution in excess of the earnings and profits of
the Company.
For shares held for one year or less, any such gain or loss will generally be treated as short-term gain or loss. Short-term capital gains are taxed at the same rate as ordinary income.
If the shares have been held for more than a year, any such gain or loss will generally be treated as long-term capital gain or loss. U.S. Holders are advised to consult a competent tax adviser regarding applicable capital gains tax provisions and sourcing of capital gains and losses for foreign tax credit purposes.
Gift and Estate Tax
An individual U.S. Holder may be subject to U.S. gift and estate taxes on shares in the same manner and to the same extent as on other types of personal property.
Backup Withholding and Information Reporting
Payments in respect of the shares may be subject to information reporting to the IRS and to a 31% U.S. backup withholding tax. Backup withholding generally will not apply, however, to a Holder who furnishes a correct taxpayer identification number or certificate of foreign status and makes any other required certification or who is otherwise exempt from backup withholding. Generally, a U.S. Holder will provide such certification on Form W-9 (Request for Taxpayer Identification Number and Certification) and a non-US Holder will provide such certification on a version of Form W-8 (Certificate of Foreign Status).
Passive Foreign Investment Company
Management has determined that
the Company has not been a passive foreign investment company (
“PFIC”) for United States federal income tax purposes for prior taxable years and believes that
the Company will not be treated as a PFIC for the current and future taxable years, but this conclusion is a factual determination made annually and thus subject to change.
The Company would be a PFIC with respect to a U.S. Holder if, for any taxable year in which such U.S. Holder held shares, either (i) at least 75% of
the Company’s gross income for the taxable year is passive income, or (ii) at least 50% of
the
Company’s assets are assets that produce or are held for the production of passive income. Under a
“look-through” rule, a corporation takes into account a pro rata share of the income and the assets of any corporation in which it owns, directly or indirectly, 25% or more of the stock by value.
Passive income generally includes dividends, interest, royalties, rents (other than rents and royalties derived from the active conduct of a trade or business and not derived from a related person), annuities, and gains from assets that produce passive income. The 50% asset test would apply to
the Company based on fair market values.
If
the Company is a PFIC for any taxable year during which a U.S. Holder holds shares, the U.S. Holder will be subject to special tax rules with respect to:
Any “excess distribution” that the U.S. Holder receives on shares, and
Any gain the U.S. Holder realizes from a sale or other disposition (including a pledge) of the shares unless the U.S. Holder makes a “qualified electing fund” or “mark-to-market” election as discussed below.
Distributions the U.S. Holder receives in a taxable year that are greater than 125% of the average annual distributions the U.S. Holder received during the shorter of the three preceding taxable years or the U.S. Holder’s holding period for the shares will be treated as an excess distribution. Under these special tax rules:
The excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the shares,
The amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which
the Company was a PFIC, will be treated as ordinary income, and
The amount allocated to each other year will be subject to tax at the highest tax rate in effect for that year and the interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to each such year.
The tax liability for amounts allocated to years prior to the year of disposition or “excess distribution” cannot be offset by any net operating losses, and gains (but not losses) realized on the sale of the shares cannot be treated as capital, even if the U.S. Holder holds the shares as capital assets.
If
the Company were to become a PFIC, a U.S. Holder may avoid taxation under the excess distribution rules discussed above by making a
“qualified electing fund” election to include the U.S. Holder’s share of
the Company’s income on a current basis. However, a U.S. Holder may make a qualified electing fund election only if
the Company, as a PFIC, agrees to furnish the shareholder annually with certain tax information. Management has not decided whether, under such circumstances,
the Company would prepare or provide such information.
Alternatively, if
the Company were to become a PFIC, a U.S. Holder might, depending on the volume of trading of our stock, make a mark-to-market election to elect out of the excess distribution rules discussed above.
If a U.S. Holder made a mark-to-market election for the shares, the U.S. Holder would include in income each year an amount equal to the excess, if any, of the fair market value of the shares as of the close of the U.S. Holder’s taxable year over the U.S. Holder’s adjusted basis in such shares. A U.S. Holder is allowed a deduction for the excess, if any, of the adjusted basis of the shares over their fair market value as of the close of the taxable year only to the extent of any net mark-to-market gains on the shares included in the U.S. Holder’s income for prior taxable years. Amounts included in a U.S. Holder’s income under a mark-to-market election, as well as gain on the actual sale or other dispositions of the shares are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the shares, as well as to any loss realized on the actual sale or disposition of the shares, to the extent that
the amount of such loss does not exceed the net mark-to-market gains previously included for such shares. A U.S. Holder’s basis in the shares will be adjusted to reflect any such income or loss amounts.
The mark-to-market election is available only for stock which is regularly traded on 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, or any exchange or market that the IRS has determined has rules sufficient to carry out the purposes of the income tax rules. There can be no assurance that
the Company will continue to satisfy the requirements of the mark-to-market election.
Taxes in the Netherlands
The following is a general non-exhaustive discussion of the tax laws in the Netherlands as they relate to the operations of
the Company.
Corporate Income Taxes
We are incorporated under the laws of the Netherlands and are therefore subject to the tax laws of the Netherlands. In 2016 the standard corporate income tax rate was 20% on profits up to €0.2 million (
$0.2 million as of December 31, 2016) and 25% on the excess. In 2017 the standard corporate income tax rate will be the same as in 2016
.
ICTS International and a number of our Dutch resident subsidiary companies form a fiscal unity for Dutch corporate income tax purposes. As a result, Dutch corporate income tax is levied from these entities on a consolidated basis at the level of ICTS.
For Dutch corporate income tax purposes business affiliates should calculate their profits on an “at arm’s length” basis. In case transactions between such affiliates are made or imposed on conditions (transfer prices) which differ from those conditions which would have been made or imposed between independent entities in the free market, the profits of those entities are determined as if the latter conditions had been agreed.
Participation Exemption
Under the Dutch participation exemption regime that is applicable as from 1 January 2010, roughly summarized, when determining whether or not the participation exemption is applicable, it should first be considered with what objective the parent company holds its participation in the subsidiary company.
If the parent company holds its participation in the subsidiary company as a portfolio investment, the participation exemption is not applicable, unless it is a “qualifying portfolio investment”. This is a subjective test and should be determined on a case by case basis taking into account all of the relevant facts and circumstances.
The parent company would be considered to hold the participation in the subsidiary company as a portfolio investment, if holding this participation is merely aimed at receiving a return therefrom that could be expected for normal asset management. The parent company would generally not be considered to hold the participation in the subsidiary company as a portfolio investment, if the business carried on by the subsidiary company is in line with the business carried on by the parent company. This should normally also apply to a holding company, which, based on its activities on a managerial, policy-making or financial level, performs a material function for the benefit of the group of companies that it forms part of, or to an intermediate holding company in case this company plays a linking role between the business activities of its parent company and the business activities of its subsidiary companies.
The subsidiary company would be deemed to be held as a portfolio investment by the parent company if (i) generally the subsidiary company’s assets consist on a consolidated basis for more than 50% of interests of less than 5% in other entities, or (ii) the subsidiary company’s activities consist for more than 50% of group financing activities. Group finance includes loans, credit instruments and also leasing of equipment, intangibles and other assets.
If the parent company would (be deemed to) hold the participation in the subsidiary company as a portfolio investment, the participation exemption would still be applicable if the investment is a “qualifying portfolio investment”. That would be the case if the “subject-to-tax” test or the “asset test” is met. We will not elaborate on these tests.
In case the participation exemption is applicable, income in the hands of ICTS arising from dividends paid by
subsidiaries or capital gains from the disposal of its shares in such
subsidiaries is exempt from corporate income tax in The Netherlands. Apart from special provisions in relation to certain liquidation losses, capital losses incurred in relation to qualifying participations are not deductible for Dutch corporate income tax purposes.
As of 2016, the participation exemption will no longer be applicable to (interest) income that is tax-deductible in country of the debtor, whereas the corresponding income is exempt under the scope of the paricipation exemption. This will be the case e.g. if the country of the debtor qualifies the distribution as an interst expense, whereas the Netherlands qualifies the income as a dividend.
In case the participation exemption is not applicable, income derived from a subsidiary company will be taxed in the hands of ICTS against ordinary corporate income tax rates, while a (partial) credit may be allowed for underlying taxes. In certain cases, a yearly revaluation of the participation to its fair market value is required.
Costs related to the acquisition of qualifying participations are generally added to the cost price of the participation and are as such not deductible.
Costs related to the disposal of participations falling within the scope of the participation exemption are also not deductible. Other expenses relating to participations (e.g. the cost of financing) are in principle deductible.
Interest deduction limitations
As per
January 1, 2013, the thin capitalization rules have been abandoned. Instead, as per the same date the
“participation debt interest limitation” was introduced in the Netherlands.
The participation debt interest limitation applies to interest and costs of loans that are (deemed to be) related to the financing of
subsidiaries (
“participation debt”). The interest limitation only affects the tax deductibility of the so called
“excessive participation interest”, whereby excessive relates to the fiscal value of participations exceeding the taxpayer’s equity for tax purposes. Financing of
subsidiaries includes the acquisition of
subsidiaries and capital injections in
subsidiaries.
Investments in
subsidiaries that relate to the operational expansion of the activities of the group are excluded from the participation debt interest limitation. The participation debt interest limitation only applies to groups that qualify for the participation exemption.
The first €0.8 million ($0.8 million as of
December 31, 2016) of
“excessive participation interest” is exempt from the interest deduction limitation and is therefore deductible (unless other interest limitation rules apply).
“Excessive participation interest” that exceeds the €0.8 million threshold is not tax deductible; it makes no difference if this interest is paid to related entities or to third parties.
According to the definition of the interest limitation, interest costs include: foreign exchange results, the costs of hedging currency risks and the costs of hedging interest risks. The interest costs also include, besides the cost of loans, the costs of financial lease
contracts and hire-purchase
contracts.
An investment can never be considered to be an expansion of the operational activities in case the financing is artificially constructed in order to obtain a tax advantage, if the interest can be deducted twice in the group (double dip) or when a hybrid loan is used (e.g. a profit participating loan).
In case of ICTS, there is no excessive debt at this stage, since its equity exceeds the cost price of the participations. Insofar this is the situation, participation debt interest limitation rules in principle do not apply.
Besides the participation debt interest limitation, Dutch tax law includes various other sets of anti-abuse provisions in relation to deduction of interest. Further, interest deduction may be disallowed based on case law.
Loss compensation
As of 2007 the term for carry-back of operating losses is reduced to one year. Further, the term for carry-forward of losses is restricted to nine years, subject to certain anti-abuse provisions. Not yet compensated losses will disappear after these terms have lapsed.
Limitations on loss compensation may also apply in the case of so-called "holding losses", being losses incurred in a book year during which the activities of ICTS (jointly with the subsidiary companies that form part of the fiscal unity for Dutch corporate income tax purposes) for the entire or almost entire year, entirely or almost entirely consist of the holding of participations or the financing of related companies. This will be deemed not to be the case if at least 25 employees are engaged in other activities on a full-time basis.
Innovation box
In the innovation box regime, which has entered into force as per 2010, income from self-developed intangible assets will be taxed against an effective tax rate of 5%. The innovation box is not only applicable to intangible assets for which a patent was granted, but also to intangible assets which are eligible for an R&D certificate (S&O verklaring). Further, application of the innovation box regime is subject to the condition that the income generated with an intangible asset, can for 30% or more, be attributed to the intangible. Brands, images and similar assets are excluded from the innovation box regime.
Application of the innovation box regime is optional on a product by product basis. ICTS may also decide to deduct R&D costs against other regularly taxed income when determining its taxable income. At a later stage and subject to certain conditions aiming at avoiding that costs are deducted against regular corporate income tax rates whereas income is taxed under the innovation box regime against an effective rate of 5%, ICTS may in this case still decide to apply the innovation box regime.
Depreciation limitations; depreciation at will
As of
January 1, 2007 restrictions apply on the depreciation amount for goodwill and other business assets. The maximum yearly depreciation charge for goodwill is 10% of the cost price. The maximum yearly depreciation charge for other business assets is 20% of the cost price of said assets. It should still be possible to value assets at lower going-concern value. Further, restrictions have been introduced on the depreciation of real estate property. Depreciation of investment property is no longer allowed in case the book value of the property falls below the official fair market value of the property for tax purposes. The depreciation of real estate property used as part of a trade or business is allowed as long as the book value of the real estate property does not fall below 50% of the official fair market value of the property for tax purposes.
Dutch Tax Consequences of Holding Shares by a non-Dutch resident shareholder
The following is a general, non-exhaustive summary of Dutch tax consequences to a holder of Common Shares who is not, or is not deemed to be, a resident of the Netherlands for purposes of the relevant tax codes (a "non-resident Shareholder") and is based upon laws and relevant interpretations thereof in effect as of the date of this Annual Report, all of which are subject to change, possibly on a retroactive basis.
The summary does not address taxes imposed by the Netherlands other than dividend withholding tax, personal income tax, corporate income tax and gift and inheritance tax. The discussion does not address the tax consequences under tax laws of any other jurisdiction than the Netherlands.
Dividend Withholding Tax in the Netherlands
We currently do not anticipate distributing any dividends in the foreseeable future. To the extent that dividends are distributed by ICTS, such dividends ordinarily would be subject, under the tax laws of the Netherlands, to a withholding tax at a rate of 15%. Dividends include distributions in cash or in kind, deemed dividends and redemption and liquidation proceeds in excess of, for Dutch tax purposes, recognized paid-in capital.
In case there are profits or in case profits can be anticipated, the repayment of ICTS' share premium is also subject to dividend withholding tax. Further, stock dividends are subject to Dutch dividend withholding tax, unless distributed out of the paid-in share premium of ICTS as recognized for tax purposes in the Netherlands.
A non-resident Shareholder could be eligible for a reduction or a refund of Dutch dividend withholding tax under a tax convention which is in effect between the country of residence of the shareholder and the Netherlands, or under provisions similar to the EU Parent/Subsidiary Directive. The Netherlands has concluded such conventions with, among others, the United States, most European Union member states, Canada, Switzerland and Japan. Under most of these conventions, dividend withholding tax in the Netherlands is effectively set at a rate of 15% (primarily applicable to individual shareholder) and may be further reduced to lower rates in the case of a corporate shareholder with a certain percentage of shareholding interest, depending on the applicable tax treaty. Based on Dutch domestic law, a 0% withholding tax rate applies to certain (corporate) shareholders.
Under the tax convention currently in force between the United States and the Netherlands (the "Treaty"), dividends paid by us to an individual shareholder resident in the United States or a corporate shareholder organized under the laws of the United States or any State or territory thereof holding less than 10% of the voting power in ICTS (each, a "U.S. Treaty Shareholder"), are subject to Dutch dividend withholding tax of 15%, unless such U.S. Treaty Shareholder has a permanent establishment or permanent representative in the Netherlands to which or to whom the Common Shares are attributable. Subject to certain conditions, the dividend withholding tax rate may be reduced to 5% or 0% in case a qualifying U.S. resident corporate shareholder would hold at least 10% respectively at least 80% of the voting power in ICTS.
Generally, there is no dividend withholding tax applicable in the Netherlands on the sale or disposition of Common Shares to persons other than ICTS or its
subsidiaries or affiliates. In case of sale or disposition of Common Shares to ICTS or any of its
subsidiaries, dividend withholding tax in the Netherlands may apply.
In addition, in an effort to prevent the practice of dividend stripping, strict beneficial ownership rules are incorporated in the Dutch dividend withholding tax act, which may have an impact on the levy of dividend withholding taks.
Non-resident shareholders; Income Tax and Corporate Income Tax in the Netherlands
Based on Dutch domestic tax law, a non-resident Shareholder is subject to Dutch personal income tax or Dutch corporate income tax with respect to dividends distributed by us on the Common Shares or with respect to capital gains derived from the sale or disposal of Common Shares in case:
(a) the non-resident Shareholder carries on a business in the Netherlands through a permanent establishment or a permanent representative to which or to whom the Common Shares are attributable; or
(b) the non-resident Shareholder has a direct or indirect substantial interest or deemed substantial interest in the share capital of ICTS as defined in the tax code of the Netherlands, which interest does not form part of the assets of an enterprise of that non-resident Shareholder and the interest is held with the main purpose, or one of the main purposes, to prevent the levy of personal income tax or dividend withholding tax at the level of another (legal) person; or
(c) the non-resident Shareholder is entitled to a share in the profits of an enterprise effectively managed in The Netherlands, other than through ownership of securities or, in the case of an individual shareholder, through employment, to which enterprise the Common Shares are attributable.
Generally, there is a substantial interest in the share capital of ICTS if the Shareholder, alone or together with his or her partner (spouse, registered partner or other individuals as defined in Dutch tax law), owns, directly or indirectly, (i) 5% or more of the issued capital of any class of shares in ICTS, (ii) options to acquire 5% or more of the issued capital of any class of shares or (iii) profit-sharing rights to 5% or more of the annual profits or liquidation distributions of ICTS. If an individual, alone or together with his partner, does not have a substantial interest based on these tests, he or she may nevertheless be deemed to have a substantial interest in case certain relatives hold a substantial interest in ICTS. In case of a substantial interest held by a corporate shareholder, a receivable the non-resident Shareholder has from ICTS may also belong to such substantial interest. Non-resident Shareholders owning a substantial interest
in ICTS may be subject to income tax upon the occurrence of certain events, for example when they cease to own a substantial interest.
The Netherlands' right to levy tax with respect to dividends distributed by ICTS to a non-resident Shareholder or capital gains derived from the sale or disposal of shares in ICTS by a non-resident Shareholder may be limited under a tax convention which may be in effect between the country of residence of the shareholder and the Netherlands.
In case Dutch income tax is due with respect to dividends distributed by ICTS, Dutch dividend withholding tax levied with respect to such dividends can generally be credited against the income tax due as a pre-tax.
Netherlands Gift and Inheritance Tax
A gift or inheritance of Common Shares received from a non-resident Shareholder will be subject to Dutch gift or inheritance tax in case:
(a) the non-resident Shareholder has been a resident of the Netherlands at any time during the ten years preceding the time of the gift or death and is a national of the Netherlands at the time of the gift or death; or
(b) for purposes of the tax on gifts, the non-resident Shareholder has been a resident of the Netherlands at any time during the twelve months preceding the time of the gift.
Please note that this summary of Dutch gift and inheritance tax is not exhaustive.
Documents on display
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended. In accordance with these requirements,
the Company files reports and other information with the United States Securities and Exchange Commission (
"SEC").
These materials may be inspected at
the Company's office in Schiphol-Oost, The Netherlands. Documents filed with the SEC may also be read and copied at the SEC's public reference room at 100 F Street N.E. Room 1580 Washington, DC 20549 USA.
For further information please call the SEC at 1-800-SEC-0330. All the SEC filings made electronically by ICTS are available to the public on the SEC
web site at http://www.sec.gov (commission file number
0-28542). Those reports are also available free of charge at
www.icts-int.com.
Subsidiary Information
Not applicable
Item 11. Quantitative and Qualitative Disclosure About Market Risk
Foreign Currency Exchange Risk - applies to our operations outside the USA. In 2016, approximately 19% of the Companies revenues were derived in the United States, and approximately 81% was derived in Europe and the Far East.
The Company is subject to market risks associated with foreign currency exchange rate fluctuations.
We do not utilize derivative instruments to manage the exposure to such market risk. As such, significant foreign currency exchange rate fluctuations can have a material impact of
the Company’s financial position, results of operations, and cash flows.
Interest Rate Risk - We are subject to changes in interest rates based on Federal Reserve actions and general market conditions.
The Company does not utilize derivative instruments to manage its exposure to interest rate risk. We believe that moderate interest rate increases will not have a material impact on
the Company’s consolidated financial position, result of operations and cash flows. An increase of 1% in the interest rate would have increased
the Company's interest expense for bank loans, convertible notes payable to a related party and other parties, by approximately $0.6 million in the year ended
December 31, 2016.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Not applicable
Item 15. Controls and Procedures
Management's report on internal control over financial reporting
(a) Our management, including our Managing Director and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(d) and 15d-15(d) of the Exchange Act) as of the end of the period covered by this annual report (the “Evaluation Date”).
Based on such evaluation, the Managing Director and the Chief Financial Officer have concluded that, as of the Evaluation Date,
the Company’s disclosure controls and procedures are effective.
(b) Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our management, including our Managing Director and our Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) as of the end of the period covered by this report. Based on that evaluation, our management has concluded that our internal control over financial reporting was effective as of
December 31, 2016. Notwithstanding the foregoing, there can be no assurance that our internal control over financial reporting will detect or uncover all failures of persons within
the
Company to comply with our internal procedures, as all internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective may not prevent or detect misstatements.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management's report in this annual report.
(c) On the evaluation conducted by our Managing Director and our Chief Financial Officer pursuant to Rules 13a-15(d) and 15d-15(d) under the Exchange Act, our management has concluded that there was no change in our internal control over financial reporting that occurred during the year ended
December 31, 2016 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 16A. Audit Committee Financial Experts
The members of the Audit Committee consist of Philip M. Getter, Gordon Hausmann and Gail F. Lieberman. All members are independent, with no relationship with management. Mr. Getter and Ms. Lieberman have financial expertise. Mr. Getter is the Chairman of the Audit Committee.
The Company has adopted a Code of Ethics for principal's executive officers and senior financial officers.
Item 16C. Fees Paid to Our Independent Registered Public Accounting Firm
The audit committee has considered whether the provision of these services is compatible with maintaining the principal accountant's independence and has concluded that such services are compatible. All fees were reviewed and pre-approved by the audit committee (U.S. Dollars in thousands).
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|
2016
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|
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2015
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Audit fees
|
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$
|
250
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|
|
$
|
205
|
|
Audit related fees
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-
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-
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Tax fees
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-
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-
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Total Fees
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$
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250
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$
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205
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Item 16D. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
Item 16E. Change in Accountants Disclosure
Not applicable.
Item 16F. Corporate Governance.
There are no significant differences between the corporate governance practices in the Netherlands and the U.S.
The Company has adopted the U.S. practices.
PART III
Item 17. Financial Statements
See Item 18.
Item 18. Financial Statements
The Consolidated Financial Statements and Financial Statement Schedule of
the Company as of
December 31, 2016 and
2015 and for each of the three years in the period ended
December 31, 2016, including the report of our independent registered public accounting firm thereon are set forth on pages F-1 to F-36.
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5. |
Code of Ethics for Principal Executive Officers and Senior Financial Officers.
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Certification by
the Registrant's Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification by
the Registrant's Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
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.
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By:
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Name:
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Title:
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Managing Director
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