years Driving print-production top-notch technologies, innovation & market leadership 9 Months Report 2013 January 1 st - September 3o th

Transcription

1 years Driving print-production processes through top-notch technologies, innovation & market leadership 9 Months Report 2013 January 1 st - September 3o th.1

2 Dear Shareholders, I am delighted to report to you for the first time since joining Advanced Vision Technology as it s Chief Executive Officer on October 1st. It is truly an honor to serve you, our shareholders, as well as our customers and employees and I look forward to many successful years of growth and profitability for all our stakeholders. AVT s financial results for the third quarter of 2013, under the leadership of my predecessor Shlomo Amir, were good and according to plan. Total order bookings for the quarter were $12.8 million, slightly higher than Q For the first nine months of the year, total order booking amounted to $37.2 million, 4.7% over the same period in Total revenues for the quarter amounted to $12.9 million, 8.9% above the corresponding quarter in Total revenues for the first nine months of 2013 were $37.5 million, 6.2% over the same period in GAAP operating profit in the third quarter of 2013 reached $1.6 million, compared with $1.1 million in the third quarter of 2012, an increase of 38.2%. In the first nine months of 2013, net profit amounted to $3.5 million, compared with $2.9 million in 2012, an increase of 21.8%. In the third quarter, we experienced strong performance in Asia Pacific, primarily in China. Product order bookings in China in the first nine months of the year grew three times over the same period in AVT s penetration into the metal decorative market continued with the official release of PrintVision/ Titan, our new inspection solution for the metal decorative sector, after we secured acceptance of the system from the third beta customer. Over the quarter, the company received many leads for this product, which we expect to turn into orders in the near future. In September this year, AVT presented its full labels market solutions at the Label Expo show in Brussels. We demonstrated several new and innovative solutions, including unique holographic inspection stations aimed at strengthening our offering to the high-end Cosmetic & Pharma market. In addition to our booth, AVT s solutions were demonstrated in the booths of ten partners, reflecting our leading position in the labels market. PrintVision/ Titan installed on KBA metal sheet press Particularly noteworthy is the collaboration with HP Indigo of integrating AVT s PrintVision solutions into the HP Indigo and HP Indigo WS6600 Digital presses. These platforms were equipped with the newly introduced AVT ZeroSet package, to enable the automatic integration of inspection, into the digital-printing process. This partnership and innovative development, is an important milestone in our efforts, to increase our penetration into the growing digital-printing market. Looking forward to a good completion of 2013 and an even better Thank you for your confidence. Sincerely yours, Jaron Lotan, President & CEO 2. AVT 9 Months Report

3 Management s Discussion & Analysis of Management s Discussion & Analysis of The following table sets forth consolidated income statements data for each of the nine month periods ended September and September , the three month periods ended September and September and for the year ended December (in thousands U.S. Dollars, except per share data amounts): U.S. dollars in thousands (except per share amounts) Nine months ended September 30, Three months ended September 30, Year ended December 31, Unaudited Audited Revenues: Product $30,313 $28,958 $10,311 $9,696 $ 39,231 Services 7,223 6,400 2,543 2,109 8,783 Total revenues 37,536 35,358 12,854 11,805 48,014 The following table sets forth selected consolidated income statements data for each of the nine month periods ended September , September and for the year ended December , expressed as a percentage of total revenues: Period Ended Revenues 100% 100% 100% Products Services Cost of revenues Cost of revenues: products 10,512 10,512 3,583 3,610 14,043 Services 6,722 6,263 2,344 2,079 8,360 Total cost of revenues 17,234 16,775 5,927 5,689 22,403 gross profit 20,302 18,583 6,927 6,116 25,611 Operating expenses: research and development 5,599 5,348 1,783 1,800 7,183 Less - grants (205) (523) (19) (194) (685) Selling and marketing 6,787 6,935 2,330 2,230 9,113 general and administrative 3,856 3,567 1,246 1,132 4,706 Total operating expenses 16,037 15,327 5,340 4,968 20,317 Operating income 4,265 3,256 1,587 1,148 5,294 Financial income (expenses), net (105) (16) (25) 9 (31) Gross profit Operating expenses Research and development, gross Less - grants (0.5) (1.4) (1.4) Selling and marketing General and administrative Total operating expenses Operating income Financial expenses, net Income before taxes on income Taxes on income Net income Income before taxes on income 4,160 3,240 1,562 1,157 5,263 taxes on income net income $ 3,535 $ 2,902 $ 1,498 $ 1,087 $ 4,905 Basic earnings per ordinary share $ 0.63 $ 0.54 $ 0.26 $ 0.20 $ 0.91 Diluted earnings per ordinary share $ 0.61 $ 0.52 $ 0.25 $ 0.19 $ AVT 9 Months Report

4 Management s Discussion & Analysis of Management s Discussion & Analysis of The following table sets forth selected proforma consolidated income statements data (adjusted to exclude amortization of acquired intangible assets and stock-based compensation expense) for the nine month periods ended September 30, 2013, September 30, 2012 and for the year ended December 31, 2012 in thousands US Dollars: Revenues 37,536 37,536 35,358 48,014 Cost of revenues 17,234 (227) 17,007 16,543 22,093 Gross profit 20, ,529 18,815 25,921 Gross margin % % 54.0% Operating expenses: Research and development, net 5,394 (45) 5,349 4,774 6,430 Selling and marketing 6,787 (118) 6,669 6,788 8,918 General and administrative 3,856 (47) 3,809 3,521 4,645 Restructuring GAAP Adjustments Nine months ended Non GAAP Non GAAP Year ended Non GAAP Total operating expenses 16,037 (210) 15,827 15,083 19,993 Revenues We derive revenues primarily from two sources: Product revenues, which include hardware and software. Service revenues, which are comprised mainly of income from hardware and software maintenance contracts; time and material charges; consulting, installation and training fees, software updates and sales of spare parts. Revenues in the first nine months of 2013 were $37.5 million, an increase of 6.2% from revenues of $35.4 million in the first nine months of Revenues in the third quarter of 2013 totaled $12.9 million representing an increase of 8.9% of the revenues in Q and an increase of 3.9% from the second quarter of The increase in total revenues in the first nine months of 2013 compared to the same period last year is due to higher sales to the Packaging & Labels convertors markets. During the first nine months of 2013 order booking totaled $37.2 million, representing an increase of 4.7% over the first nine months of 2012 order booking of $35.6 million. The ratio of order booking to revenues was 99.5% and 99.2% in Q and in the first nine months of 2013, respectively. As of September 30, 2013 order back-log totaled $17.5 million, representing an increase of 10.0% as compared with the balance at September 30, 2012 and a decrease of 0.5% from December 31, 2012, providing us with visibility of more than one quarter of revenues. We estimate that out of this back-log, 55%-65% will become revenue during Q4 2013, while major part of the remainder will become revenue in the proceeding three quarters. Operating income 4, ,702 3,732 5,928 Financial expenses, net Income before taxes on income 4, ,597 3,716 5,897 Taxes on income Net income 3, ,972 3,378 5, AVT 9 Months Report

5 Management s Discussion & Analysis of Management s Discussion & Analysis of The following chart sets forth breakdown of revenues by territory for each of the nine months periods ended September 30, 2013 and September 30, 2012: 9M M 2012 compensation expense) increased from 53.2% in the first nine months of 2012 to 54.7% in the first nine months of Gross margin increased from 51.8% in the third quarter of 2012 to 53.9% in the third quarter of Gross margin may fluctuate due to changes in product mix as the sale of software options is generally increasing the platform s selling price while keeping the same bill of material cost, and consequently improving the gross profit. The following table sets forth selected consolidated expenditures data for each of the five quarters ended , , , and expressed as a percentage of total revenues: % % % % 22 % 20 % Q3 / 2012 Q4 / 2012 Q1 / 2013 Q2 / 2013 Q3 / 2013 EMEA Americas AsPac During the first nine months of 2013 the Americas market contributed 46% of total revenues, compared with 39% in the first nine months of 2012 while EMEA (Europe, Middle East & Africa) contributed 34% of total revenues compared with 39% in the first nine months of Revenues generated in the Asia-Pacific contributed 20% of total revenues compared with 22% in the first nine months of Cost of Revenues / Gross Profit Cost of revenues includes materials, labor and an estimation of costs associated with installation, warranty and training. We generally provide a one-year warranty to the end-user. A provision, based on our experience and engineering estimates, is recorded to cover probable costs in connection with such warranty for the 12 months period commencing at the end of installation. The Gross margin in the first nine months of 2013 was 54.1% compared with 52.6% in the first nine months of The increase compared with same period last year is due primarily to favorable mix of products sales and higher volume of revenues coupled with the favorable impact of the Euro exchange rate relative to the US Dollar partly offset by the unfavorable impact of the Israeli Shekel exchange rate relative to the US Dollar. Proforma gross margin (excluding amortization of acquired intangible assets and stock-based Cost of Revenues 48.2% 44.5% 45.8% 45.8% 46.1% R&D, net 13.6% 13.2% 14.8% 14.7% 13.7% Selling & Marketing 18.9% 17.2% 18.2% 18.0% 18.1% General & Administrative 9.6% 9.0% 10.3% 10.9% 9.7% 8. AVT 9 Months Report

6 Management s Discussion & Analysis of Management s Discussion & Analysis of Research and Development Research and development costs are charged to the statement of operations as incurred. Government funding for the development of approved projects is recognized as a reduction of expenses as the related costs are incurred. In the first nine months of 2013, net research and development expenses increased to $5,394 thousand, 11.8% higher than the respective period of 2012 ($4,825 thousand). Proforma-research and development costs in the first nine months of 2013 (excluding stock-based compensation expense) increased to $5,347 thousand, 12.0% higher than in the first nine months of 2012 ($4,774 thousand). The increase compared with first nine months of 2012 is due primarily to a decrease in total government grants and participation and increase in subcontractor s costs reflecting the higher development activities coupled by the impact of the Israeli Shekel appreciation relative to the US Dollar. On a quarterly basis, net research and development expenses in Q were $1,764 thousand, an increase of 9.8% compared to Q The costs of research and development are partially offset by government grants. In the first nine months of 2013 total government grants and participation recorded were $205 thousand compared with $523 thousand recorded in the first nine months of Selling and Marketing In the first nine months of 2013 selling and marketing expenses were $6,787 thousand, a decrease of 2.1% compared with the first nine months of 2012 ($6,935 thousand). Proforma selling and marketing expenses in the first nine months of 2013 (excluding amortization of acquired intangible assets, and stock-based compensation expense) were $6,670 thousand, a decrease of 1.7% from the first nine months of 2012 ($6,788 thousand). The decrease in selling and marketing expenses compared with same period last year is attributable primarily to the higher exhibition expenses related to the company participation in Drupa in May 2012 partly offset by the appreciation of both the Israeli Shekel and the Euro exchange rates relative to the US Dollar. On a quarterly basis, selling and marketing expenses in Q increased to $2,330 thousand, 4.5% higher than in Q due to higher personnel costs coupled by the appreciation of both the Israeli Shekel and the Euro exchange rates relative to the US Dollar. General and Administrative In the first nine months of 2013 general and administrative expenses were $3,856 thousand, an increase of 8.1% compared with the first nine months of 2012 ($3,567 thousand). Proforma general and administrative expenses in the first nine months of 2013 (excluding stockbased compensation expense) increased to $3,809 thousand, 8.2% higher than in the first nine months of 2012 ($3,521 thousand). The increase in general & administration expenses is attributable mainly to higher professional services and allowance for doubtful debts and the unfavorable impact of the Israeli Shekel exchange rate relative to the US Dollar. On a quarterly basis, general and administrative expenses in Q increased to $1,246 thousand, 10.1% - higher than in Q Stock-Based Compensation Based on ASC 718 we recorded commencing January 1, 2006, share-based payments as expenses based on their fair value at the grant date. The compensation is recorded over the requisite service period. The measurement of the benefit is based on the Monte Carlo simulation. Total stock-based compensation expense recorded during the first nine months of 2013 was $182 thousand compared with $204 thousand in the first nine months of Operating and Net Income Net income for the nine months ended September 30, 2013 was $3,535 thousand or - $0.61 per share (diluted) compared with net income of $2,902 thousand or $0.52 per share (diluted) for the first nine months of Proforma net income for the first nine months of 2013 (excluding amortization of acquired intangible assets and stock-based compensation expense and taxes due to dividend payment) was $3,992 thousand compared with proforma net income of $3,378 thousand in the first nine months of Operating income in the first nine months of 2013 was $4,265 thousand compared with operating income of $3,256 thousand in the first nine months of The increase in operating income in the first nine months of 2013 as compared with same period last year is attributable primarily to higher revenues and gross profit partly offset by higher operating expenses. Total operating expenses in the first nine months of 2013 were 42.7% of revenues compared with 43.4% in same period in On a quarterly basis, operating income in Q was $1,587 thousand compared with an income of $1,148 thousand in Q The increase in operating income is due primarily to higher products sales and total gross profit partly offset by higher operating expenses. Proforma EBITDA in the first nine months of 2013 (excluding stock-based compensation expense) was $5,009 thousand as compared with $4,042 thousand in the first nine months of Financial Income (Expense), net Financial expense is comprised of interest income incurred on time deposits less interest expenses on lines of credit and exchange rate differences. Net financial expense in the first nine months of 2013 was $105 thousand compared with net financial expense of $16 thousand in the first nine months of On a quarterly basis, net financial expense in Q was $25 thousand compared with net financial income of $9 thousand in Q3 10. AVT 9 Months Report

7 Management s Discussion & Analysis of Management s Discussion & Analysis of 2012 and net financial income of $1 thousand in Q The net financial expense in Q as compared with net financial income in Q is attributable to the appreciation of the Israeli Shekel relative to the US Dollar partly offset by the Euro appreciation relative to the US Dollar during the third quarter of Financial income for the first nine months of 2013 accounted for $104 thousand compared to $140 thousand for the first nine months of Additional net expenses of $209 thousand were generated from exchange rate differences, interest and bank charges compared with net expenses of $156 thousand for the first nine months of Taxes We operate within multiple taxing jurisdictions and are subject to audit in those jurisdictions. For AVT product line we conducted a Transfer Pricing study during 2010 in the United States. For AVT and GMI product lines we conducted Transfer Pricing study during 2010 in Germany. The recommendations of those studies were incorporated in our tax estimates. In our opinion, an adequate asset and provision for income taxes has been made in the financial statements. This asset and provision takes into consideration the tax reform effective in Israel as of January 1, 2003 and potential tax liability in other jurisdictions. The distribution of cash dividend in Q for a total amount of $2,517 thousand, which was paid in March 1, 2013, included distributing exempt income from Approved Enterprise programs. As a result, the company paid an amount of $167 thousand to the tax authorities in Israel. accounts receivable Days Sales Outstanding (DSO) and inventories. DSO in accounts receivable at the end of September 2013 were 61 days compared with 73 days at the end of September 2012 and 59 days as of December Our net capital expenditures on fixed assets were $259 thousand in the first nine months of 2013, compared with $266 thousand in the same period last year. Employees Our employees consistently remain our major asset, committed to the drive for technological leadership and outstanding customer service. Our dedicated team has repeatedly demonstrated that it shares our vision, and has the motivation, innovation and commitment to customer satisfaction that are the key ingredients of healthy growth. On September , 197 people were employed by us worldwide compared with 194 and 197 we employed at December and September , respectively. On July 30, 2013, the Israeli Parliament (the Knesset) approved the second and third readings of the Economic Plan for ( Amended Budget Law ) which consists, among others, of fiscal changes whose main aim is to enhance the collection of taxes in those years. These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%, cancelling the lowering of the tax rates applicable to preferred enterprises (9% in development area A and 16% in other areas). The deferred tax balances included in the financial statements as of September 30, 2013 are calculated according to the new tax rates that were substantially enacted as of the balance sheet date and therefore comply with the above changes, as applicable to the Company. Following the change in tax rates, deferred taxes increased by approximately $198 thousands. Liquidity and Capital Resources As of September our total current assets were $41.4 million, including a total cash and financial investment balance of $24.5 million compared with cash and financial investment balance of $14.5 million at September 30, 2012 and $19.3 million at December 31, During the first nine months of 2013, $6,862 thousand were provided by operating activities compared with $669 thousand that were provided by operating activities during the first nine months of We focus on managing our working capital, particularly in maintaining the relative low level of 12. AVT 9 Months Report

8 Management s Discussion & Analysis of Management s Discussion & Analysis of The breakdown of employees by activity is as follows: Our employees are based in the following areas per their subsidiary affiliation: 24% R&D 25% Customer Support 15 20% Operations & Manufacturing 18% Selling & Marketing 13% General & Administrative 48 % ISRAEL 35 % AMERICAS % EUROPE 2 % AsPac 14. AVT 9 Months Report

9 Review Report of Independent Auditors The Board of Directors Advanced Vision Technology (A.V.T.) Ltd. We have reviewed the condensed consolidated financial information of Advanced Vision Technology (A.V.T.) Ltd. and its subsidiaries, (the Company ) which comprise the consolidated balance sheet as of September 30, 2013, and the related condensed consolidated statements of income changes in shareholders equity and cash flows for the nine month and three month periods ended September 30, 2013 and financial Table of Contents: Review Report of Independent Auditors 17 Consolidated Balance Sheets Consolidated Statements of Income 20 Consolidated Statements of Changes in Shareholders Equity 21 Consolidated Statements of Cash Flows 22 Notes to Consolidated Financial Statements Management s Responsibility for the Financial Information Management is responsible for the preparation and fair presentation of the condensed financial information in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control sufficient to provide a reasonable basis for the preparation and fair presentation of interim financial information in conformity with U.S. generally accepted accounting principles. Auditors Responsibility Our responsibility is to conduct our reviews in accordance with auditing standards generally accepted in the United States applicable to reviews of interim financial information. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States, the objective of which is the expression of an opinion regarding the financial information. Accordingly, we do not express such an opinion. Conclusion Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial information referred to above for it to be in conformity with U.S. generally accepted accounting principles. Report on Condensed Consolidated Financial Statements as of December 31, 2012 and for the year then ended We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of the Company as of December 31, 2012, and the related consolidated statements of income, changes in shareholders equity, and cash flows for the year then ended and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated April 22, In our opinion, the accompanying condensed consolidated financial statements of the Company as of December 31, 2012 and for the year then ended are consistent, in all material respects, with the consolidated financial statements from which they have been derived. Tel-Aviv,Israel November 17, 2013 KOST FORER GABBAY & KASIERER A Member of Ernst & Young Global 16. AVT 9 Months Report

10 Consolidated Balance Sheets Consolidated Balance Sheets U.S. dollars in thousands U.S. dollars in thousands (except share and per share amounts) September 30, 2013 December 31, 2012 September 30, 2013 December 31, 2012 Unaudited Audited Unaudited Audited ASSETS LIABILITIES AND SHAREHOLDERS EQUITY CURRENT ASSETS: Cash and cash equivalents $ 17,809 $ 12,674 Short-term deposits 6,733 6,672 Trade receivables (net of allowance for doubtful accounts of $ 715 and $ 627 as of September 30, 2013 and December 31, 2012, respectively) 8,354 7,820 Inventories 5,654 5,946 Other accounts receivable and prepaid expenses 2,870 3,078 CURRENT LIABILITIES: Trade payables $ 1,885 $ 1,316 Employees and payroll accruals 2,736 2,688 Customer advances and deferred revenues 3,718 2,344 Accrued expenses and other liabilities 4,274 3,588 Total current liabilities 12,613 9,936 Total current assets 41,420 36,190 ACCRUED SEVERANCE PAY 4,748 4,088 LONG-TERM ASSETS: Deferred income taxes Severance pay fund 3,417 2,951 Total long-term assets 3,915 3,253 PROPERTY AND EQUIPMENT, NET 1,131 1,180 INTANGIBLE ASSETS, NET Total assets $ 46,918 $ 41,329 SHAREHOLDERS EQUITY: Share capital: Ordinary shares of New Israeli Shekels (NIS) 2 par value: 15,000,000 shares authorized at September 30, 2013 and December 31, 2012; 6,565,646 and 6,297,730 shares issued at September 30, 2013 and December 31, 2012; respectively; 5,746,524 and 5,478,608 shares outstanding at September 30, 2013 and December 31, 2012, respectively 3,549 3,402 Additional paid-in capital 63,655 62,568 Treasury shares at cost - 819,122 shares as of September 30, 2013 and December 31, 2012 (6,902) (6,902) Accumulated deficit (30,745) (31,763) Total shareholders equity 29,557 27,305 Total liabilities and shareholders equity $ 46,918 $ 41,329 The accompanying notes are an integral part of the consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements. 18. AVT 9 Months Report

11 Consolidated Statements of Income Consolidated Statements of Changes in Shareholders Equity U.S. dollars in thousands (except per share amounts) Nine months ended September 30, Three months ended September 30, Year ended December 31, Revenues $ 37,536 $ 35,358 $ 12,854 $ 11,805 $ 48,014 Cost of revenues 17,234 16,775 5,927 5,689 22,403 Gross profit 20,302 18,583 6,927 6,116 25,611 Operating expenses: Unaudited Research and development 5,599 5,348 1,783 1,800 7,183 Less - grants (205) (523) (19) (194) (685) Selling and marketing 6,787 6,935 2,330 2,230 9,113 General and administrative 3,856 3,567 1,246 1,132 4,706 Total operating expenses 16,037 15,327 5,340 4,968 20,317 Operating income 4,265 3,256 1,587 1,148 5,294 Financial income (expense), net (105) (16) (25) 9 (31) Income before taxes on income 4,160 3,240 1,562 1,157 5,263 Taxes on income Audited U.S. dollars in thousands Balance as of January 1, 2012 $3,402 $62,655 $(8,069) $(36,196) $21,792 Issuance of treasury shares upon exercise of options - (358) 1,167 (472) 337 Stock-based compensation related to options granted to employees Net income ,905 4,905 Balance as of December 31, 2012 $3,402 $62,568 $(6,902) $(31,763) $27,305 Issuance of shares upon exercise of options ,052 Stock-based compensation related Share capital Additional paid-in capital Treasury shares Accumulated deficit Total Shareholders' equity to options granted to employees Dividend paid to shareholders (2,517) (2,517) Net income ,535 3,535 Balance as of September 30, 2013 (unaudited) $ 3,549 $ 63,655 $ (6,902) $ (30,745) $ 29,557 Net income $ 3,535 $ 2,902 $ 1,498 $ 1,087 $ 4,905 Basic earnings per ordinary share $ 0.63 $ 0.54 $ 0.26 $ 0.20 $ 0.91 Diluted earnings per ordinary share $ 0.61 $ 0.52 $ 0.25 $ 0.19 $ 0.88 The accompanying notes are an integral part of the consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements. 20. AVT 9 Months Report

12 Consolidated Statements of Cash Flows U.S. dollars in thousands Nine months ended Year ended September 30, December 31, Unaudited Cash flows from operating activities: Net income $ 3,535 $ 2,902 $ 4,905 Adjustments to reconcile net income to net cash provided by operating activities: Stock-based compensation related to options granted to employees Depreciation of property and equipment Amortization of intangible assets Revaluation of short-term deposits (58) - - Increase in trade receivables, net (534) (2,213) (470) Decrease in inventories Decrease (increase) in other accounts receivable and prepaid expenses (127) Decrease (increase) in deferred income taxes, net (196) Increase (decrease) in trade payables 569 (334) (543) Increase in employees and payroll accruals Increase (decrease) in customer advances and deferred revenues 1,374 (941) (812) Increase in accrued expenses and other liabilities Increase in accrued severance pay, net Net cash provided by operating activities 6, ,388 Cash flows from investing activities: Investment in short-term deposit (1,503) - (6,672) Proceeds from maturity of short-term deposit 1,500 2,401 7,524 Purchase of property and equipment (259) (266) (325) Net cash provided by (used in) investing activities (262) 2, Cash flows from financing activities: Dividend paid to shareholders (2,517) - - Proceeds from exercise of options granted to employees 1, Net cash provided by (used in) financing activities (1,465) Increase in cash and cash equivalents 5,135 2,945 6,252 Cash and cash equivalents at the beginning of the period 12,674 6,422 6,422 Cash and cash equivalents at the end of the period $ 17,809 $ 9,367 $ 12,674 Supplemental disclosure of cash flows information: Cash paid during the period for income taxes $ 214 $ 88 $ 95 The accompanying notes are an integral part of the consolidated financial statements. Audited Notes to Consolidated Financial Statements Note 1: General Advanced Vision Technology (A.V.T.) Ltd. ( A.V.T. ) and its wholly-owned subsidiaries ( the Company ) design, develop, manufacture, market and support an advanced video-based print inspection system that automatically detects defects in various types of printing processes as well as closed loop color control (CLC) systems, color management and reporting software, and remote digital ink fountain control systems to leading commercial printers and press manufacturers worldwide. Note 2: Significant Accounting Policies The significant accounting policies applied in the annual financial statements of the Company as of December 31, 2012 are applied consistently in these financial statements. Note 3: Unaudited Interim Consolidated Financial Statements The accompanying unaudited interim consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles relating to condensed interim financial information. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine-month and three-month periods ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ended December 31, These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report for the year ended December 31, Note 4: Shareholders Equity On February 6, 2013, the Company s board of directors approved the distribution of cash dividend of $ 0.45 per common share (total amount of $ 2,517 thousands) which was paid on March 1, The distribution included distributing exempt income from Approved Enterprise and Privileged Enterprise programs. As a result, the Company paid an amount of $ 167 thousands to the tax authorities in Israel. Note 5: Taxes On Income On July 30, 2013, the Israeli Parliament (the Knesset) approved the second and third readings of the Economic Plan for ( Amended Budget Law ) which consists, among others, of fiscal changes whose main aim is to enhance the collection of taxes in those years. These changes include, among others, raising the Israeli corporate tax rate from 25% to 26.5%, cancelling the lowering of the tax rates applicable to preferred enterprises (9% in development area A and 16% in other areas) and in certain cases increasing the tax rates on dividends within the scope of the Law for the Encouragement of Capital Investments to 20% effective from January 1, AVT 9 Months Report

13 Notes to Consolidated Financial Statements Other changes introduced by the Amended Budget Law include taxing revaluation gains effective from August 1, The provisions of the changes regarding the taxation of revaluation gains, however, will only become effective once regulations that define non-corporate taxable retained earnings are issued as well as regulations that set forth provisions for avoiding double taxation of assets outside of Israel. As of the date of publication of these interim financial statements, no such regulations have been issued. The deferred tax balances included in the financial statements as of September 30, 2013 are calculated according to the new tax rates that were substantially enacted as of the balance sheet date and therefore comply with the above changes, as applicable to the Company. Following the change in tax rates, deferred taxes increased by approximately $ 198 thousands. 24. AVT 9 Months Report

14 AVT LTD. 6 Hanagar St., P.O.B 7295, Hod-Hasharon 45241, Israel Tel / Fax AVT GmbH Donnersbergerstr. 22a, München, Germany Tel / Fax AVT EMEA Mechelsesteenweg 132, B-2860 Sint-Katelijne-Waver, Belgium Tel. +32 (0) / Fax. +32 (0) AVT China AVT Ltd Shanghai Representative Office, Room 808B, Building 555, No. 555 Nanjing Xilu, Shanghai , China Tel / Fax AVT INC. 900 Circle 75 Parkway, Suite 175, Atlanta, GA 30339, USA Tel / Fax GMI INC Science Place, Rockwall, TX 75032, USA Tel / Fax AVT and PrintVision are trademarks owned by AVT Ltd. AVT reserves the right to make changes to the specifications without prior notification.