Exhibit 99.1
Kamera Content AB
Corporate Identity Number 556666-2135
Annual report for the financial year 2007 and 2006
The Board of Directors and the Managing Director herewith submit the Annual Report and consolidated accounts.
Contents | Page | ||
- | Administration Report | 2 | |
- | Report of Independent Certified Public Accountants | 4 | |
- | Consolidated Balance Sheets | 5 | |
- | Consolidated Statements of Operations | 7 | |
- | Consolidated Cash Flow Statements | 8 | |
- | Notes to the Consolidated Accounts | 9 |
Unless otherwise stated, all amounts are in thousands of SEK.
Administration report
Information regarding the operations
This Annual report covers the financial year 2007/01/01-2007/12/31.
Kamera Content collaborates with copyright owners e.g. Associated Press Television News (APTN) and Disney ABC and offers publicists, practicing on the digital media market, administration and distribution of video contents such as news, sports and entertainment for publishing on the Internet or in mobile networks.
Result and financial position
The company’s turnover for the financial year 2007/01/01-2007/12/31 amounts to kSEK 16 837
The operating profit/loss is negative, kSEK -10 878
Significant events during the financial year
During the fall Kamera signed an agreement to distribute news clips for the global Internet and mobile market with the world’s largest news channel Disney ABC. Sales will begin in January 2008.
Profound discussions were undertaken regarding a merger with a company in Canada during the fall of 2007. Among other things, due to the uncertainties on the financial market, the discussions were halted in the beginning of November. This has affected the result for the financial year negatively, as great focus has been laid on the process by the management.
The balance sheet for liquidation purposes has been established as of 2007/09/30, 2007/10/31, 2007/11/30 and 2007/12/31. At the first three dates the share capital was intact, but at 2007/12/31 more than half of the share capital was consumed. An opening supervisory general meeting was conducted at 2008/03/31 and the general meeting decided to continue the operations.
Significant events after the end of the financial year
Kamera has initiated a new collaboration with SNTV, the world’s leading producer of sport news. The collaboration includes producing and distributing video clips for the global Internet and mobile market. Production and sales will begin in March 2008.
On May 19, the owners of Kamera made an agreement to dispose of all shares in Kamera Content AB. As of Monday 19th of May 2008 KIT Digital Llc will take over the operations and financial responsibility of Kamera Content AB, including the re-establishment of the share capital that is consumed by more than 50 percent.
Group structure
Kamera Content AB is the parent company of a group consisting of two subsidiaries, Swegypt Company for Telecommunication (S.A.E) (Corporate Identity Number: 200-039-784) and Kamera (S) PTE.LTD (Corporate Identity Number: 200604451W). Swegypt Company for Telecommunication (S.A.E) is owned by 55 % and Kamera (S) PTE.LTD is owned by 95% by Kamera Content AB.
Result and financial position
The result from the operations and the financial position at the end of the financial year are presented in the following income statement and balance sheet including notes to the accounts.
The amounts in the annual report are stated in kSEK.
2
Proposed appropriation of profits
Means at the disposition of the annual general meeting: | ||||
Balanced profits from preceding years | 1 397 | |||
Net loss for the year | -6 967 | |||
-5 570 | ||||
Proposed appropriation of accumulated deficit | ||||
To be carried forward | -5 570 | |||
-5 570 |
3
Report of Independent Certified Public Accountants
Board of Directors
Kamera Content AB
We have audited the accompanying consolidated balance sheets of Kamera Content AB as of December 31, 2007 and 2006, and the related consolidated statements of operations, and cash flows for the years then ended, prepared in accordance with accounting principles generally accepted in Sweden. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America as established by the American Institute of Certified Public Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Kamera Content AB as of December 31, 2007 and 2006, and the consolidated results of its operations and its consolidated cash flows for the years then ended in conformity with accounting principles generally accepted in Sweden.
Accounting principles generally accepted in Sweden vary in certain significant respects from accounting principles generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 16 to the consolidated financial statements.
GRANT THORNTON AB
Falun, Sweden
July 21, 2009
4
Kamera Content AB and Subsidiaries | |||||||||||
Consolidated Balance Sheets | Note | 2007-12-31 | 2006-12-31 | ||||||||
(SEK in thousands) | |||||||||||
Assets | |||||||||||
Fixed assets | |||||||||||
Intangible assets | |||||||||||
Capitalized software development expenses | 7 | 1 461 | 663 | ||||||||
Goodwill | 8 | 952 | 1 624 | ||||||||
2 413 | 2 287 | ||||||||||
Tangible fixed assets | |||||||||||
Equipment and computers | 9 | 939 | 1 067 | ||||||||
Total fixed assets | 3 352 | 3 354 | |||||||||
Current assets | |||||||||||
Current receivables | |||||||||||
Accounts receivable - trade | 1 979 | 2 962 | |||||||||
Other current receivables | 568 | 112 | |||||||||
Prepaid expenses and accrued income | 11 | 2 567 | 1 218 | ||||||||
5 114 | 4 292 | ||||||||||
Cash and bank balances | 1 247 | 1 285 | |||||||||
Total current assets | 6 361 | 5 577 | |||||||||
Total assets | 9 713 | 8 931 | |||||||||
Equity and liabilities | |||||||||||
Equity | 12 | ||||||||||
Share capital | 227 | 227 | |||||||||
Restricted reserve | 336 | 336 | |||||||||
Translation difference | -665 | -186 | |||||||||
Non-restricted reserves | 1 397 | 8 986 | |||||||||
Net loss for the year | -6 967 | -7 589 | |||||||||
Total equity | -5 672 | 1 774 | |||||||||
Minority’s Share | 403 | 203 | |||||||||
Provisions | |||||||||||
Negative goodwill | 6 | - | 359 | ||||||||
Total provisions | - | 359 | |||||||||
Long-term liabilities | 13 | ||||||||||
Liabilities to credit institutions | 3 500 | 2 000 |
5
Kamera Content AB and Subsidiaries | |||||||||||
Consolidated Balance Sheets | Note | 2007-12-31 | 2006-12-31 | ||||||||
(SEK in thousands) | |||||||||||
Total long-term liabilities | 3 500 | 2 000 | |||||||||
Current liabilities | |||||||||||
Other current liabilities | 4 465 | 619 | |||||||||
Accounts payable - trade | 3 716 | 1 938 | |||||||||
Accrued expenses and deferred income | 14 | 3 301 | 2 038 | ||||||||
Total current liabilities | 11 482 | 4 595 | |||||||||
Total equity and liabilities | 9 713 | 8 931 | |||||||||
Pledged assets | 15 | 3 500 | 2 000 | ||||||||
Contingent liabilities | None | None |
The accompanying footnotes form an integral part of these financial statements.
6
Kamera Content AB and Subsidiaries | Year ended | ||||||||||
Consolidated Statements of Operations | Note | 2007 | 2006 | ||||||||
(SEK in thousands) | |||||||||||
Gross profit (loss) | 2, 3, 4 | -145 | 2 226 | ||||||||
Operating expenses | |||||||||||
Personnel costs | 5 | -9 595 | -9 670 | ||||||||
Depreciation of tangible and intangible assets | -1 497 | -855 | |||||||||
Dissolving of negative goodwill | 359 | 443 | |||||||||
Operating loss | -10 878 | -7 856 | |||||||||
Income (loss) from financial items | |||||||||||
Other interest income | 4 045 | 14 | |||||||||
Interest expenses and exchange rate differences | -329 | -142 | |||||||||
Total income (loss) from financial items | 3 716 | -128 | |||||||||
Loss after financial items | -7 162 | -7 984 | |||||||||
Minority’s share of profit/loss | 195 | 395 | |||||||||
Net loss for the year | -6 967 | -7 589 |
The accompanying footnotes form an integral part of these financial statements.
7
Kamera Content AB and Subsidiaries | ||||||||
Consolidated Cash Flow Statement s | 1/1/2007 | 1/1/2006 | ||||||
(SEK in thousands) | 12/31/2007 | 12/31/2006 | ||||||
Current operations | ||||||||
Net operating profit/loss | -10,878 | -7,856 | ||||||
Adjustment for items not included in cash flow | ||||||||
Depreciation | 1,497 | 855 | ||||||
Dissolving of negative goodwill | -359 | -443 | ||||||
-9,740 | -7,444 | |||||||
Interest received and other | 4,045 | 14 | ||||||
Interest paid and other | -329 | -142 | ||||||
Cash flow from current operations before changes in working capital | -6,024 | -7,572 | ||||||
Changes in working capital | ||||||||
Increase of receivables | -822 | -935 | ||||||
Increase/reduction of other current liabilities | 6,803 | -1,698 | ||||||
Cash flow from current operations | -43 | -10,205 | ||||||
Investment activities | ||||||||
Acquisition of tangible fixed assets | -325 | -1,126 | ||||||
Acquisition of intangible assets | -1,170 | -1,775 | ||||||
Cash flow from investment activities | -1,495 | -2,901 | ||||||
Financing activities | ||||||||
New share issues | 0 | 10,554 | ||||||
Loans raised | 1,500 | 2,000 | ||||||
Cash flow from financing activities | 1,500 | 12,554 | ||||||
Reduction of liquid funds | -38 | -552 | ||||||
Liquid funds at beginning of year | 1,285 | 1,837 | ||||||
Liquid funds at end of year | 1,247 | 1,285 |
The accompanying footnotes form an integral part of these financial statements.
8
Notes
Note 1 | Accounting and valuation principles |
The accounts have been prepared in accordance with the Annual Accounts Act. Adopted accounting principles comply with the standards for small companies set out by the Swedish Accounting Standards Board.
The accounting principles remain unchanged compared to the previous year.
Consolidated accounts
Subsidiaries where the parent company directly or indirectly possess more than 50% of the votes, or in any other way posses a significant influence, are included in the consolidated accounts.
The group’s financial statement is prepared according to the purchase method, which means that the subsidiaries’ equity at the date of acquisition, adopted as the difference between assets and liabilities fair value, is eliminated as a whole. Only post-acquisition equity from the subsidiary is thus included in the group’s own equity.
Companies acquired during the year are included in the group’s accounts related to post-acquisition amounts.
Inter-Company profits are eliminated as a whole.
Shares in subsidiaries are accounted in the parent company’s financial statement with possible write-downs deducted. Only received dividends based on post-acquisition earnings are accounted as dividend from subsidiaries.
The consolidated accounts have been prepared using the acquisition method in accordance with Recommendation RR1:00 of the Swedish Financial Accounting Standards Council and includes all subsidiaries.
Revenue recognition
The Company’s revenue recognition for current account work is based on completed work, in line with BFN’s main heading in BFNAR 2003:3. Ongoing, not invoiced service assignments are recognized in the balance sheet at the rate of calculated invoice value of accrued work.
The company is, in line with BFN’s main heading in BFNAR 2003:3, recognizing revenues from completed service assignments based on fixed pricing at the rate of completed work, “percentage of completion”. At the calculation of accrued profit the degree of completion has been calculated as accrued expenses at the closing day, in relation to the calculated sum of expenses to complete the assignment.
Financial fixed assets
Financial assets which are intended to be held over a long period of time are reported at acquisition cost. If a financial fixed asset has, on balance sheet date, a value lower than its book value, the value of the asset is written down to lower value if it can be assumed that such reduction in value is permanent.
Accounts receivable
Accounts receivable are reported as current assets at the amounts expected to be received after deductions for individually-assessed bad debts.
Receivables
Receivables with a maturity of more than 12 months after the closing date are stated as fixed assets, other receivables as current assets.
Foreign currencies
Receivables and liabilities in foreign currencies are valued at the closing day to the rate of exchange. Profit and loss of receivables and liabilities relating to operations are offset under other operating income or other operating expenses. Transactions in foreign currency are translated at the transaction day rate of exchange.
Tangible fixed assets
Tangible fixed assets are reported at acquisition cost reduced by the amount of depreciation. Expenses for improving the performance of the assets beyond their original level increase the asset's reported value. Expenses for repairs and maintenance are reported as costs.
9
Depreciation is allocated on a straight-line over the useful life of the asset. Subsequent costs are included in the assets carrying amount if appropriate.
The straight-line method of depreciation is utilized for all types of tangible fixed assets. The following periods of depreciation are applied:
Equipment | 3 year |
Computers | 3 year |
Write-downs
If there are indications of a decrease in value of an asset or a group of assets, an assessment of its carrying amount is made. When the carrying amount exceeds the calculated recoverable amount, the carrying amount is immediately written down to the recoverable amount.
Intangible assets
Goodwill
Expenses for acquired operations are balanced and depreciated linearly over its assessed useful life, normally up to five years.
Negative Goodwill
Negative group goodwill consists of the amount of the acquisition value that exceeds the fair value of the company’s share of acquired net assets. Negative goodwill is accounted for as other provisions. To the extent that negative goodwill is combined with expectations of future losses and expenses that have been identified in the acquisition and that can be measured in a reliable manner, but do not represent identifiable liabilities, the negative goodwill is accounted in the income statement when the future losses and expenses are realized. Dissolving of negative goodwill is disclosed in the income statement as a reduction of Operating expenses.
Expenses for the development of software
All expenses for the development or maintenance of software are normally expensed immediately. Expenses that are directly connected to identifiable and unique software controlled by the company, including probable financial benefits exceeding expenses within one year, are however capitalized as intangible assets. Capitalized expenditure for the development of software is depreciated linearly over its useful life, in the case of Kamera Content estimated to three years.
Write-downs of intangible assets If there are indications of a decrease in value of an asset or a group of assets, an assessment of its carrying amount is made, including goodwill. When the carrying amount exceeds the calculated recoverable amount, the carrying amount is immediately written down to the recoverable amount.
Note 2 | Remuneration to auditors |
2007 | 2006 | |||||||
Audit | ||||||||
Grant Thornton AB | 65 | 40 | ||||||
Other services | ||||||||
Grant Thornton AB | 4 | 34 | ||||||
Total | 69 | 74 |
Note 3 | Abridged Income Statement |
The Income statement is, in accordance with ЕRL 3 chapter 11 §, disclosed in an abridged state due to reasons of competition. The parent company’s net sales was 16 837 kSEK (17 237 kSEK).
Note 4 | Transactions with related parties |
Purchases and sales between Group companies
The percentages of purchases and sales regarding Group companies are listed below
Purchases (Swegypt Company for Telecommunication
(S.A.E)): 9%
Sales : 0%
The same pricing principles apply to purchases and sales conducted between Group companies as with transactions with external parties.
10
Note 5 | Personnel |
2007 | 2006 | |||||||
Average number of employees | ||||||||
Women (Sweden) | 7 | 6 | ||||||
Men (Sweden) | 9 | 15 | ||||||
Total | 16 | 21 | ||||||
Salaries, remunerations, social costs and pension expenses | ||||||||
Salaries and remunerations for Board of Directors and managing director | 587 | 483 | ||||||
Total salaries and remunerations to other employees | 5 442 | 5 801 | ||||||
6 029 | 6 284 | |||||||
Pension expenses for Board of Directors and managing director | 13 | 40 | ||||||
Statutory and contractual social security contributions | 2 009 | 1 946 | ||||||
Pension expenses, other employees | 142 | 142 | ||||||
Total | 8 193 | 8 412 |
Members of the Board and senior management
Parent Company
2007 | 2006 | |||||||||||||
Number on balance sheet date | of whom men | Number on balance sheet date | of whom men | |||||||||||
Members of the Board | 4 | 100 | % | 5 | 100 | % | ||||||||
Managing Director and other senior managers | 5 | 80 | % | 4 | 75 | % |
Absence due to illness
2007 | 2006 | |||||||
Total absence due to illness * | x | % | 3 | % | ||||
- Long-term absence due to illness | 0 | % | 0 | % |
*Long term absence refers to a period of 60 consecutive days or more.
Other categories consist of fewer than 10 employees why information about these categories is not disclosed.
11
Note 6 | Negative goodwill |
2007 | 2006 | |||||||
Negative goodwill originating from the acquisition of Swegypt plt | 359 | 802 | ||||||
Dissolving of negative goodwill | -359 | -443 | ||||||
Closing residual value according to plan | - | 359 |
Note 7 | Capitalized software development expenses |
2007 | 2006 | |||||||
Opening acquisition cost | 852 | - | ||||||
Capitalization for the year | 1 170 | 852 | ||||||
Closing accumulated acquisition cost | 2 022 | 852 | ||||||
Opening depreciations | -189 | - | ||||||
Depreciation for the year | -372 | -189 | ||||||
Closing accumulated depreciation | -561 | -189 | ||||||
Closing residual value according to plan | 1 461 | 663 |
Note 8 | Goodwill |
2007 | 2006 | |||||||
Opening acquisition cost | 2 016 | 1 093 | ||||||
- Acquisition | - | 923 | ||||||
Closing accumulated acquisition cost | 2 016 | 2 016 | ||||||
- Opening depreciation | -392 | -31 | ||||||
- Depreciation | -672 | -361 | ||||||
Closing accumulated depreciation | -1 064 | -392 | ||||||
Closing residual value according to plan | 952 | 1 624 |
Note 9 | Equipment and computers |
2007 | 2006 | |||||||
Opening acquisition cost | 1 421 | 294 | ||||||
Changes during the year | ||||||||
- Purchases | 325 | 1 127 | ||||||
Closing accumulated acquisition cost | 1 746 | 1 421 | ||||||
Opening depreciation | -354 | -48 | ||||||
- Depreciation | -453 | -306 | ||||||
Closing accumulated depreciation | -807 | -354 | ||||||
Closing residual value according to plan | 939 | 1 067 |
12
Note 10 | Participations in subsidiaries |
Group | Number of shares | Registered office | Proportion of equity | Book value | |||||||||
Kamera (S) PTE.LTD. | 190 000 | Singapore | 95 | % | 930 | ||||||||
Swegypt Company for | 687 500 | Kairo | 55 | % | 0 |
Telecommunication (S.A.E)
The result for Swegypt Copmany for Telecommunications (S.A.E) is, according to the last adopted income statement, -978 kSEK (for the prolonged financial year 2006/02/16-2007/12/31). Equity amounts to 22 kSEK at 2007/12/31.
The result for Kamera (S) PTE.LTD is, according to the last adopted income statement, -375 kSEK (fo the financial year 2007/01/01-2007/12/31). Equity amounts to -137 kSEK at 2007/12/31.
The amounts are translated to SEK using the year-end rate of exchange.
Note 11 | Prepaid expenses and accrued income |
2007-12-31 | 2006-12-31 | |||||||
Prepaid rent | 266 | - | ||||||
Accrued income | 1 211 | 749 | ||||||
Other prepaid expenses | 1 090 | 469 | ||||||
2 567 | 1 218 |
Note 12 | Change in equity |
Group | Share- capital | Statutory reserve | Translation difference | Non-restricted reserves and Net profit/loss for the year | Total equity | |||||||||||||||
Equity 2007/01/01 | 227 | 336 | -186- | 1 397 | 1 774 | |||||||||||||||
Translation difference | - | - | -479 | - | -479 | |||||||||||||||
Net income for the year | - | - | - | -6 967 | -6 967 | |||||||||||||||
Equity 2007-12-31 | 227 | 336 | -665 | -5 570 | -5 672 |
The share capital consists of 2 086 000 A-shares at a par value of 0,1 SEK and 181 000 B-shares at a par value of 0,1 SEK.
Note 13 | Long term liabilities |
2007-12-31 | 2006-12-31 | |||||||
Long-term liabilities | ||||||||
Liabilities to credit institutions | 3 500 | 2 000 | ||||||
Total interest-bearing liabilities | 3 500 | 2 000 |
The loan as a whole is raised from Almi fцretagspartner and has duration of 48 months.
13
Note 14 | Accrued expenses and deferred income |
2007-12-31 | 2006-12-31 | |||||||
Accrued royalty expenses | 1 253 | 725 | ||||||
Accrued vacation pay, social expenses included | 422 | 456 | ||||||
Accrued social security contributions | 269 | 181 | ||||||
Deferred income | 143 | 104 | ||||||
Other items | 1 214 | 572 | ||||||
Total | 3 301 | 2 038 |
Note 15 | Pledged assets |
2007-12-31 | 2006-12-31 | |||||||
For own provisions and liabilities | ||||||||
Floating charges designated to liabilities to credit institutions | 3 500 | 2 000 | ||||||
Total pledged assets | 3 500 | 2 000 |
Note 16 | Summary of significant differences between Swedish GAAP and U.S. GAAP |
The annual financial statements included herein of Kamera Content AB were prepared in accordance with accounting principles generally accepted in Sweden (“Swedish GAAP”) which differ in certain significant respects from accounting principles generally accepted in the United States of America (“US GAAP”). Following is a summary of the significant adjustments to the consolidated statements of operations and the consolidated balance sheets as of and for the years ended December 31, 2007 and 2006 that would be required if US GAAP were to be applied instead of Swedish GAAP.
14
Reconciliation of Net Loss | |||||||||||
Year ended | |||||||||||
(Amounts in thousands of SEK) | December 31, 2007 | December 31, 2006 | |||||||||
Net loss under Swedish GAAP | (6,967 | ) | (7,589 | ) | |||||||
Description of items having the effect of increasing reported income: | |||||||||||
Addback: depreciation on Capitalized software development expenses | a. | 372 | 189 | ||||||||
Addback: depreciation on Goodwill | b. 2. | 672 | 361 | ||||||||
Extraordinary gain on acquisition of Swegypt | b. 2. | - | 802 | ||||||||
Description of items having the effect of decreasing reported income: | |||||||||||
Expense capitalized software development expenses | a. | (1,170 | ) | (852 | ) | ||||||
Addback: dissolving of negative goodwill | b. 3. | (359 | ) | (443 | ) | ||||||
Amortization of intangible assets | b. 1. | (754 | ) | (754 | ) | ||||||
Net loss under US GAAP | (8,206 | ) | (8,286 | ) |
15
Reconciliation of Consolidated Balance Sheet as at December 31, 2007 | US GAAP | ||||||||||||||
Adjustments | |||||||||||||||
Swedish | Increase | US | |||||||||||||
GAAP | (Decrease) | GAAP | |||||||||||||
Assets | |||||||||||||||
Fixed assets | |||||||||||||||
Intangible assets | |||||||||||||||
Capitalized software development expenses | 1,461 | a. | (1,461 | ) | - | ||||||||||
Intangible asset | - | b. 1. | 2,261 | ||||||||||||
b. 1. | (2,073 | ) | 188 | ||||||||||||
Goodwill | 952 | b. 2. | 1,064 | 2,016 | |||||||||||
2,413 | 2,204 | ||||||||||||||
Tangible fixed assets | |||||||||||||||
Equipment and computers | 939 | 939 | |||||||||||||
Total fixed assets | 3,352 | 3,143 | |||||||||||||
Current assets | |||||||||||||||
Current receivables | |||||||||||||||
Accounts receivable - trade | 1,979 | 1,979 | |||||||||||||
Other current receivables | 568 | 568 | |||||||||||||
Prepaid expenses and accrued income | 2,567 | 2,567 | |||||||||||||
5,114 | 5,114 | ||||||||||||||
Cash and bank balances | 1,247 | 1,247 | |||||||||||||
Total current assets | 6,361 | 6,361 | |||||||||||||
Total assets | 9,713 | 9,504 | |||||||||||||
Equity and liabilities | |||||||||||||||
Equity | |||||||||||||||
Share capital | 227 | 227 | |||||||||||||
Restricted reserve | 336 | 2,261 | 2,597 | ||||||||||||
Translation difference | (665 | ) | (665 | ) | |||||||||||
Non-restricted reserves | 1,397 | (1,231 | ) | 166 | |||||||||||
Net loss for the year | (6,967 | ) | (1,239 | ) | (8,206 | ) | |||||||||
Total equity | (5,672 | ) | (5,881 | ) | |||||||||||
Minority’s Share | 403 | 403 | |||||||||||||
Provisions | |||||||||||||||
Negative goodwill | - | - | |||||||||||||
Total provisions | - | - | |||||||||||||
Long-term liabilities | |||||||||||||||
Liabilities to credit institutions | 3,500 | 3,500 | |||||||||||||
Total long-term liabilities | 3,500 | 3,500 | |||||||||||||
Current liabilities | |||||||||||||||
Other current liabilities | 4,465 | 4,465 | |||||||||||||
Accounts payable - trade | 3,716 | 3,716 | |||||||||||||
Accrued expenses and deferred income | 3,301 | 3,301 | |||||||||||||
Total current liabilities | 11,482 | 11,482 | |||||||||||||
Total equity and liabilities | 9,713 | 9,504 | |||||||||||||
Pledged assets | 3,500 | 3,500 | |||||||||||||
Contingent liabilities | None | None |
16
Reconciliation of Consolidated Balance Sheet as at December 31, 2006 | US GAAP | ||||||||||||||
Adjustments | |||||||||||||||
Swedish | Increase | US | |||||||||||||
GAAP | (Decrease) | GAAP | |||||||||||||
Assets | |||||||||||||||
Fixed assets | |||||||||||||||
Intangible assets | |||||||||||||||
Capitalized software development expenses | 663 | a. | (663 | ) | - | ||||||||||
Intangible asset | - | b. 1. | 2,261 | ||||||||||||
b. 1. | (1,319 | ) | 942 | ||||||||||||
Goodwill | 1,624 | b. 2. | 392 | 2,016 | |||||||||||
2,287 | 2,958 | ||||||||||||||
Tangible fixed assets | |||||||||||||||
Equipment and computers | 1,067 | 1,067 | |||||||||||||
Total fixed assets | 3,354 | 4,025 | |||||||||||||
Current assets | |||||||||||||||
Current receivables | |||||||||||||||
Accounts receivable - trade | 2,962 | 2,962 | |||||||||||||
Other current receivables | 112 | 112 | |||||||||||||
Prepaid expenses and accrued income | 1,218 | 1,218 | |||||||||||||
4,292 | 4,292 | ||||||||||||||
Cash and bank balances | 1,285 | 1,285 | |||||||||||||
Total current assets | 5,577 | 5,577 | |||||||||||||
Total assets | 8,931 | 9,602 | |||||||||||||
Equity and liabilities | |||||||||||||||
Equity | |||||||||||||||
Share capital | 227 | 227 | |||||||||||||
Restricted reserve | 336 | 2,261 | 2,597 | ||||||||||||
Translation difference | (186 | ) | (186 | ) | |||||||||||
Non-restricted reserves | 8,986 | (534 | ) | 8,452 | |||||||||||
Net loss for the year | (7,589 | ) | (697 | ) | (8,286 | ) | |||||||||
Total equity | 1,774 | 2,804 | |||||||||||||
Minority’s Share | 203 | 203 | |||||||||||||
Provisions | |||||||||||||||
Negative goodwill | 359 | b. 3. | (359 | ) | - | ||||||||||
Total provisions | 359 | - | |||||||||||||
Long-term liabilities | |||||||||||||||
Liabilities to credit institutions | 2,000 | 2,000 | |||||||||||||
Total long-term liabilities | 2,000 | 2,000 | |||||||||||||
Current liabilities | |||||||||||||||
Other current liabilities | 619 | 619 | |||||||||||||
Accounts payable - trade | 1,938 | 1,938 | |||||||||||||
Accrued expenses and deferred income | 2,038 | 2,038 | |||||||||||||
Total current liabilities | 4,595 | 4,595 | |||||||||||||
Total equity and liabilities | 8,931 | 9,602 | |||||||||||||
Pledged assets | 2,000 | 2,000 | |||||||||||||
Contingent liabilities | None | None |
17
a. Capitalization of software development expenses
Swedish GAAP allows for expenditures during the development phase to be capitalized as intangible assets if it is probable, with a high degree of certainty, that they will result in future economic benefits for the Company.
Under US GAAP, FASB Statement No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, spending on software development is broken down into the following three stages; research and development, software development costs once technological feasibility is established, and costs incurred once the product is available for general sale to customers. Research and development costs are defined as those costs that occur prior to the software product reaching technological feasibility and are expensed as incurred in accordance with Statement of Financial Accounting Standards No. 2, Accounting for Research and Development Costs (“SFAS No. 2”). Software development costs incurred subsequent to establishing technological feasibility but prior to general release shall be capitalized.
The application of US GAAP requires that all capitalized research and development costs and corresponding amortization expense be reversed for all periods presented. Consequently, the application of SFAS No. 2 as of December 31, 2007 and 2006 results in a reduction of capitalized software development expenses of SEK 1,170 and SEK 852, respectively. Similarly, the net loss for the years ended December 31, 2007 and 2006 would decrease to reflect the reversal of the corresponding depreciation expense of the capitalized software development expenses by SEK 372 and SEK 189, respectively.
b. Intangible assets and goodwill
In accordance with Swedish GAAP, the Company amortizes intangible assets based on their statutory useful lives, which is 3 years for goodwill and 3-5 years for capitalized development expenditures. Negative goodwill is required to be disclosed as a provision under Swedish GAAP and reversals be netted e.g. against future losses in the acquired entity.
Under US GAAP, intangible assets and goodwill are covered in FASB Statement No. 141, Business Combinations and FASB Statement No. 142, Goodwill and Other Intangible Assets. Intangible assets are amortized over their expected useful lives, which can sometimes be different from the statutory useful lives and goodwill is not amortized. Under US GAAP, negative goodwill or the excess of fair value over cost would be allocated to reduce the costs of non-current assets acquired (except certain assets) and the remaining excess after reducing the cost of non-current assets acquired to zero would be recognized as extraordinary gain. That extraordinary gain generally is recognized in the period in which the business combination is completed.
1. The application of US GAAP requires that upon acquisition, the fair value of assets acquired are recorded. Consequently, under US GAAP a fair value of SEK 2,261 was recorded as of the end of March 2005 as an intangible asset with a life of three years. The net loss for the years ended December 31, 2007 and 2006 would increase to reflect the amortization of the intangible assets by SEK 754 and SEK 754, respectively. Also, an additional amount of amortization of the intangible asset of SEK 565 would have been recorded in 2005.
2. Additionally, under US GAAP goodwill is not amortized and thus the depreciation related to the goodwill would be reversed for SEK 1,064. Consequently, net loss for the years ended December 31, 2007 and 2006 would decrease for the amounts depreciated by SEK 672 and SEK 361, respectively. Also, an additional amount of SEK 31 would reverse that was recorded in 2005.
3. Under US GAAP, negative goodwill would not be recorded. Therefore, as of December 31, 2007 and 2006, net loss would increase for the reversal of the dissolving of negative goodwill of SEK 359 and SEK 443, respectively. In the year ended December 31, 2006, net loss would decrease for the extraordinary gain on the acquisition of Swegypt of SEK 802.
18