Exhibits 99.1
REGISTERED NUMBER: 3110900 (England and Wales)
Financial Statement For The Year ended 31st December 2005
and The Period 1st January 2006 to 31st October 2006
for
Photonic Products Limited
Photonic Products Limited
Contents of the Financial Statements
For The Period 1st January 2006 to 31st October 2006
Page | ||
Company Information | 1 | |
Report of the Independent Auditors | 2 | |
Profit and Loss Account | 3 | |
Balance Sheet | 4 | |
Cash Flow Statement | 5 | |
Notes to the Financial Statements | 8 |
Photonic Products Limited
Company Information
For The Period 1st January 2006 to 31st October 2006
DIRECTORS: | A B Pope | |
D Cookman | ||
M Blodgett | ||
SECRETARIES: | Ms M Molleur | |
REGISTERED OFFICE: | Pierce Williams | |
Sparrow Lane | ||
Hatfield Broad Oak | ||
Hertfordshire | ||
CM22 7BA | ||
REGISTERED NUMBER: | 3110900 (England and Wales) | |
AUDITORS: | Baker Tilly Registered Auditor Chartered Accountants Marlborough House Victoria Road South Chelmsford Essex CM1 1LN |
Page 1
Report of the Independent Auditors to the Board of Directors of Photonic Products Limited
We have audited the financial statements of Photonic Products Limited (the “Company”) which comprise the Profit and Loss Accounts, the Balance Sheets, the Cash Flow Statements and the related notes for the year ended 31 December 2005 and the period ended 31 October 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Photonic Products Limited as at 31 December 2005 and 31 October 2006, and the results of its operations and its cash flows for the year ended 31 December 2005 and the period ended 31 October 2006 in conformity with generally accepted accounting principles in the United Kingdom. Accounting principles generally accepted in the United Kingdom 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 18 to the financial statements.
/s/ Baker Tilly |
Baker Tilly |
Registered Auditor
Chartered Accountants
Marlborough House
Victoria Road South
Chelmsford
Essex
CM1 1LN
Date:12TH January 2007.
Page 2
Photonic Products Limited
Profit and Loss Account
For The Period 1st January 2006 to 31st October 2006
Notes | Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | ||||
£ | £ | |||||
TURNOVER | 2 | 4,255,736 | 4,183,688 | |||
Cost of sales | 2,360,727 | 2,395,232 | ||||
GROSS PROFIT | 1,895,009 | 1,788,456 | ||||
Administrative expenses | 1,425,668 | 1,145,593 | ||||
469,341 | 642,863 | |||||
Other operating income | 27,083 | 27,606 | ||||
OPERATING PROFIT | 3 | 496,424 | 670,469 | |||
Interest receivable and similar income | 1,679 | 1,915 | ||||
498,103 | 672,384 | |||||
Interest payable and similar charges | 10,217 | 11,448 | ||||
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION | 487,886 | 660,936 | ||||
Tax on profit on ordinary activities | 4 | 16,272 | 158,320 | |||
PROFIT FOR THE FINANCIAL PERIOD AFTER TAXATION | �� | 471,614 | 502,616 | |||
The notes form part of these financial statements
Page 3
Photonic Products Limited
Balance Sheet
31st October 2006
31 October 2006 | 31 December 2005 | |||||||||||
Notes | £ | £ | £ | £ | ||||||||
FIXED ASSETS | ||||||||||||
Tangible assets | 6 | 395,447 | 283,819 | |||||||||
CURRENT ASSETS | ||||||||||||
Stocks | 762,155 | 576,129 | ||||||||||
Debtors | 7 | 716,951 | 769,848 | |||||||||
Cash at bank and in hand | 106,595 | 168,861 | ||||||||||
1,585,701 | 1,514,838 | |||||||||||
CREDITORS | ||||||||||||
Amounts falling due within one year | 8 | 820,011 | 854,709 | |||||||||
NET CURRENT ASSETS | 765,690 | 660,129 | ||||||||||
TOTAL ASSETS LESS CURRENT | ||||||||||||
LIABILITIES | 1,161,137 | 943,948 | ||||||||||
CREDITORS | ||||||||||||
Amounts falling due after more than one year | 9 | (181,002 | ) | (156,113 | ) | |||||||
PROVISIONS FOR LIABILITIES | 12 | (60,538 | ) | (39,872 | ) | |||||||
NET ASSETS | 919,597 | 747,963 | ||||||||||
CAPITAL AND RESERVES | ||||||||||||
Called up share capital | 13 | 200 | 180 | |||||||||
Profit and loss account | 14 | 919,397 | 747,783 | |||||||||
SHAREHOLDERS’ FUNDS | 919,597 | 747,963 | ||||||||||
These financial statements have been prepared in accordance with the special provisions of Part VII of the Companies Act 1985 relating to small companies and with the Financial Reporting Standard for Smaller Entities (effective January 2005).
The financial statements were approved by the Board of Directors and authorised for issue on 12TH January 2007 and were signed on its behalf by:
/s/ A B Pope |
A B Pope - Director |
The notes form part of these financial statements
Page 4
Photonic Products Limited
Cash Flow Statement
For The Period 1st January 2006 to 31st October 2006
Period 1/1/06 to 31/10/06 | Period 31/12/05 | ||||||||||||
Notes | £ | £ | £ | £ | |||||||||
Net cash inflow from operating activities | 1 | 581,632 | 545,465 | ||||||||||
Returns on investments and servicing of finance | 2 | (8,538 | ) | (9,533 | ) | ||||||||
Taxation | (171,007 | ) | (135,419 | ) | |||||||||
Capital expenditure | 2 | (90,162 | ) | (64,666 | ) | ||||||||
Equity dividends paid | (300,000 | ) | (275,000 | ) | |||||||||
11,925 | 60,847 | ||||||||||||
Financing | 2 | (54,099 | ) | (35,809 | ) | ||||||||
(Decrease)/Increase in cash in the period | (42,174 | ) | 25,038 | ||||||||||
Reconciliation of net cash flow to movement in net debt | 3 | ||||||||||||
(Decrease)/Increase in cash in the period | (42,174 | ) | 25,038 | ||||||||||
Cash outflow from decrease in debt and lease financing | 54,119 | 35,889 | |||||||||||
Change in net debt resulting from cash flows | 11,945 | 60,927 | |||||||||||
New finance leases | (88,866 | ) | (153,000 | ) | |||||||||
Movement in net debt in the period | (76,921 | ) | (92,073 | ) | |||||||||
Net (debt)/funds at 1st January | (63,655 | ) | 28,418 | ||||||||||
Net debt at 31st October | (140,576 | ) | (63,655 | ) | |||||||||
The notes form part of these financial statements
Page 5
Photonic Products Limited
Notes to the Cash Flow Statement
For The Period 1st January 2006 to 31st October 2006
1. | RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES |
Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | |||||
£ | £ | |||||
Operating profit | 496,424 | 670,469 | ||||
Depreciation charges | 67,400 | 83,228 | ||||
Increase in stocks | (186,026 | ) | (148,783 | ) | ||
Decrease/(Increase) in debtors | 77,489 | (90,642 | ) | |||
Increase in creditors | 126,345 | 31,193 | ||||
Net cash inflow from operating activities | 581,632 | 545,465 | ||||
2. | ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT |
Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | |||||
£ | £ | |||||
Returns on investments and servicing of finance | ||||||
Interest received | 1,679 | 1,915 | ||||
Interest paid | (3,693 | ) | (8,368 | ) | ||
Interest element of hire purchase payments | (6,524 | ) | (3,080 | ) | ||
Net cash outflow for returns on investments and servicing of finance | (8,538 | ) | (9,533 | ) | ||
Capital expenditure | ||||||
Purchase of tangible fixed assets | (90,162 | ) | (64,666 | ) | ||
Net cash outflow for capital expenditure | (90,162 | ) | (64,666 | ) | ||
Financing | ||||||
Loan repayments in year | (23,258 | ) | (25,689 | ) | ||
Capital repayments in year | (30,861 | ) | (10,200 | ) | ||
Share issue | 20 | 80 | ||||
Net cash outflow from financing | (54,099 | ) | (35,809 | ) | ||
The notes form part of these financial statements
Page 6
Photonic Products Limited
Notes to the Cash Flow Statement
For The Period 1st January 2006 to 31st October 2006
3. | ANALYSIS OF CHANGES IN NET DEBT |
At 1/1/06 | Cash flow | Other non-cash changes | At 31/10/06 | |||||||||
£ | £ | £ | £ | |||||||||
Net cash: | ||||||||||||
Cash at bank and in hand | 168,861 | (62,266 | ) | 106,595 | ||||||||
Bank overdraft | (20,092 | ) | 20,092 | — | ||||||||
148,769 | (42,174 | ) | 106,595 | |||||||||
Debt: | ||||||||||||
Hire purchase | (142,800 | ) | 30,861 | (88,866 | ) | (200,805 | ) | |||||
Debts falling due within one year | (25,711 | ) | 11,775 | — | (13,936 | ) | ||||||
Debts falling due after one year | (43,913 | ) | 11,483 | — | (32,430 | ) | ||||||
(212,424 | ) | 54,119 | (88,866 | ) | (247,171 | ) | ||||||
Total | (63,655 | ) | 11,945 | (88,866 | ) | (140,576 | ) | |||||
The notes form part of these financial statements
Page 7
Photonic Products Limited
Notes to the Financial Statements
For The Period 1st January 2006 to 31st October 2006
1. | ACCOUNTING POLICIES |
Basis of preparation
These Photonic Products Limited financial statements have been prepared in accordance with the Financial Reporting Standard for Smaller Entities (effective January 2005) and accordingly have been prepared under generally accepted accounting principles in the United Kingdom (“UK GAAP”).
A Reconciliation has been prepared and included within these financial statements to show the effect of the differences between UK GAAP and generally accepted accounting principles in the United States (“US GAAP”).
The information set out in these financial statements does not constitute the company’s statutory accounts for the year ended 31st December 2005 and for the period ended 31st October 2006. The statutory accounts for the year ended 31st December 2005 have been delivered to the United Kingdom registrar of companies.
Accounting convention
The financial statements have been prepared under the historical cost convention and in accordance with the Financial Reporting Standard for Smaller Entities (effective January 2005).
Turnover
Turnover represents net sales of goods, excluding value added tax. Turnover is recognised once goods have been delivered.
Tangible fixed assets
Depreciation is provided at the following annual rates in order to write off each asset over its estimated useful life or, if held under a finance lease, over the lease term, whichever is the shorter.
Improvements to property | - over the remaining period of the lease | |
Plant and machinery | - 25% on reducing balance | |
Fixtures and fittings | - 25% on reducing balance | |
Motor vehicles | - 25% on reducing balance | |
Computer equipment | - 25% on reducing balance |
Stocks
Stocks and work in progress are valued at the lower of cost and net realisable value, after making due allowance for obsolete and slow moving items.
Cost includes all direct expenditure and an appropriate proportion of fixed and variable overheads.
Deferred tax
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating result.
Hire purchase and leasing commitments
Assets obtained under hire purchase contracts or finance leases are capitalised in the balance sheet. Those held under hire purchase contracts are depreciated over their estimated useful lives. Those held under finance leases are depreciated over their estimated useful lives or the lease term, whichever is the shorter.
The interest element of these obligations is charged to the profit and loss account over the relevant period. The capital element of the future payments is treated as a liability.
Rentals paid under operating leases are charged to the profit and loss account as incurred.
Pensions
The company operates a defined contribution pension scheme. Contributions payable for the period are charged in the profit and loss account.
Page 8 | continued... |
Photonic Products Limited
Notes to the Financial Statements - continued
For The Period 1st January 2006 to 31st October 2006
2. | TURNOVER |
The turnover and profit before taxation are attributable to the one principal activity of the company.
An analysis of turnover by geographical market is given below:
Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | |||||
United Kingdom | 13.21 | % | 12.86 | % | ||
USA | 42.65 | % | 53.20 | % | ||
Europe | 28.13 | % | 21.02 | % | ||
Canada | 8.02 | % | 5.99 | % | ||
Rest of World | 7.99 | % | 6.93 | % | ||
100.00 | % | 100.00 | % | |||
3. | OPERATING PROFIT |
The operating profit is stated after charging:
Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | |||
£ | £ | |||
Depreciation - owned assets | 41,685 | 44,978 | ||
Depreciation - assets on hire purchase contracts | 25,715 | 38,250 | ||
Foreign exchange differences | 146,194 | 26,411 | ||
Pension coats | 8,483 | 7,682 | ||
Directors’ emoluments and other benefits etc | 81,797 | 77,161 | ||
The number of directors to whom retirement benefits were accruing was as follows: | ||||
Money purchase schemes | 2 | 2 | ||
One director exercised share options during the period (2005 - no directors).
4. | TAXATION |
Analysis of the tax charge
The tax charge on the profit on ordinary activities for the period was as follows:
Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | |||
£ | £ | |||
Current tax: | ||||
UK corporation tax | — | 148,941 | ||
Deferred tax | 16,272 | 9,379 | ||
Tax on profit on ordinary activities | 16,272 | 158,320 | ||
Page 9 | continued... |
Photonic Products Limited
Notes to the Financial Statements - continued
For The Period 1st January 2006 to 31st October 2006
4. | TAXATION - continued |
Factors affecting the tax charge
The tax assessed for the period is lower than the standard rate of corporation tax in the UK. The difference is explained below:
Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | |||||
£ | £ | |||||
Profit on ordinary activities before tax | 487,886 | 660,936 | ||||
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 30% (2005 - 30%) | 146,366 | 198,281 | ||||
Effects of: | ||||||
Non deductible expenses | 894 | 807 | ||||
Capital allowances in excess of Depreciation | (14,845 | ) | (8,851 | ) | ||
Small Companies Relief | — | (25,227 | ) | |||
Over provision in prior year | — | (631 | ) | |||
Share option tax credit | (147,853 | ) | — | |||
Losses carried back | 15,438 | (15,438 | ) | |||
Current tax charge | — | 148,941 | ||||
5. | DIVIDENDS |
Period 1/1/06 to 31/10/06 | Year Ended 31/12/05 | |||
£ | £ | |||
Interim | 300,000 | 275,000 | ||
6. | TANGIBLE FIXED ASSETS |
Improvements to property | Plant and machinery | Fixtures and fittings | ||||
£ | £ | £ | ||||
COST | ||||||
At 1st January 2006 | 76,620 | 282,131 | 17,693 | |||
Additions | 19,190 | 124,236 | 4,389 | |||
At 31st October 2006 | 95,810 | 406,367 | 22,082 | |||
DEPRECIATION | ||||||
At 1st January 2006 | 16,941 | 103,439 | 7,966 | |||
Charge for period | 9,374 | 43,089 | 2,485 | |||
At 31st October 2006 | 26,315 | 146,528 | 10,451 | |||
NET BOOK VALUE | ||||||
At 31st October 2006 | 69,495 | 259,839 | 11,631 | |||
At 31st December 2005 | 59,679 | 178,692 | 9,727 | |||
Page 10 | continued... |
Photonic Products Limited
Notes to the Financial Statements - continued
For The Period 1st January 2006 to 31st October 2006
6. | TANGIBLE FIXED ASSETS - continued |
Motor vehicles | Computer equipment | Totals | ||||
£ | £ | £ | ||||
COST | ||||||
At 1st January 2006 | 20,744 | 43,485 | 440,673 | |||
Additions | 13,366 | 17,847 | 179,028 | |||
At 31st October 2006 | 34,110 | 61,332 | 619,701 | |||
DEPRECIATION | ||||||
At 1st January 2006 | 9,183 | 19,325 | 156,854 | |||
Charge for period | 5,190 | 7,262 | 67,400 | |||
At 31st October 2006 | 14,373 | 26,587 | 224,254 | |||
NET BOOK VALUE | ||||||
At 31st October 2006 | 19,737 | 34,745 | 395,447 | |||
At 31st December 2005 | 11,561 | 24,160 | 283,819 | |||
Fixed assets, included in the above, which are held under hire purchase contracts are as follows:
Plant and machinery | ||
£ | ||
COST | ||
At 1st January 2006 | 153,000 | |
Additions | 76,000 | |
At 31st October 2006 | 229,000 | |
DEPRECIATION | ||
At 1st January 2006 | 38,250 | |
Charge for period | 25,715 | |
At 31st October 2006 | 63,965 | |
NET BOOK VALUE | ||
At 31st October 2006 | 165,035 | |
At 31st December 2005 | 114,750 | |
7. | DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
2006 | 2005 | |||
£ | £ | |||
Trade debtors | 615,252 | 694,926 | ||
Other debtors | 101,699 | 74,922 | ||
716,951 | 769,848 | |||
Page 11 | continued... |
Photonic Products Limited
Notes to the Financial Statements - continued
For The Period 1st January 2006 to 31st October 2006
8. | CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR |
2006 | 2005 | |||
£ | £ | |||
Bank loans and overdrafts | 13,936 | 45,803 | ||
Hire purchase contracts | 52,233 | 30,600 | ||
Trade creditors | 552,413 | 510,642 | ||
Taxation and social security | 56,204 | 192,346 | ||
Other creditors | 145,225 | 75,318 | ||
820,011 | 854,709 | |||
9. | CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR |
2006 | 2005 | |||
£ | £ | |||
Bank loans | 32,430 | 43,913 | ||
Hire purchase contracts | 148,572 | 112,200 | ||
181,002 | 156,113 | |||
10. | OPERATING LEASE COMMITMENTS |
The following operating lease payments are committed to be paid within one year:
2006 | 2005 | |||
£ | £ | |||
Expiring: | ||||
Within one year | — | 3,840 | ||
Between one and five years | 5,415 | — | ||
In more than five years | 107,000 | 102,500 | ||
112,415 | 106,340 | |||
11. | SECURED DEBTS |
The following secured debts are included within creditors:
2006 | 2005 | |||
£ | £ | |||
Bank overdraft | — | 20,092 | ||
Bank loans | 46,366 | 69,624 | ||
Hire purchase contracts | 200,805 | 142,800 | ||
247,171 | 232,516 | |||
The loan and overdraft are secured by a debenture over the company’s assets and undertakings. Hire purchase creditors are secured upon the assets concerned.
12. | PROVISIONS FOR LIABILITIES |
2006 | 2005 | |||
£ | £ | |||
Deferred tax | 37,339 | 21,067 | ||
Other provisions | 23,199 | 18,805 | ||
60,538 | 39,872 | |||
Page 12 | continued... |
Photonic Products Limited
Notes to the Financial Statements - continued
For The Period 1st January 2006 to 31st October 2006
12. | PROVISIONS FOR LIABILITIES - continued |
Deferred tax | ||
£ | ||
Balance at 1st January 2006 | 21,067 | |
Transfer to profit & loss | 16,272 | |
Balance at 31st October 2006 | 37,339 | |
13. | CALLED UP SHARE CAPITAL |
Authorised: Number: | Class: | Nominal value: | 2006 | 2005 | ||||
£ | £ | |||||||
500,000 | Ordinary | £1 | 500,000 | 500,000 |
Allotted and issued:
Number: | Class: | Nominal value: | 2006 | 2005 | ||||
£ | £ | |||||||
200 | Share capital 1 | £1 | 200 | 180 | ||||
(2005-180) |
20 Ordinary shares of £1 were issued during the period for cash of £20.
The shares were issued following the exercise of a share option by Mr D Cookman on 31st October 2006. An option was granted on 13th January 2005 for 20 ordinary shares at a grant price of £1 per share. The option was exercised on 31st October 2006 at an exercise price of £1 per share.
14. | RESERVES |
Profit and loss account | |||
£ | |||
At 1st January 2006 | 747,783 | ||
Profit for the period | 471,614 | ||
Dividends | (300,000 | ) | |
At 31st October 2006 | 919,397 | ||
15. | ULTIMATE PARENT COMPANY |
The Shares in the company were purchased on 31st October 2006 by Stocker Yale (UK) Limited and Stocker Yale Inc. The Ultimate Parent Company is Stocker Yale Inc.
16. | TRANSACTIONS WITH DIRECTORS |
The following loan to directors subsisted during the period ended 31st October 2006 and the year ended 31st December 2005:
2006 | 2005 | |||
£ | £ | |||
D Cookman | ||||
Balance outstanding at start of period | — | — | ||
Balance outstanding at end of period | 24,592 | — | ||
Maximum balance outstanding during period | 24,592 | — | ||
Page 13 | continued... |
Photonic Products Limited
Notes to the Financial Statements - continued
For The Period 1st January 2006 to 31st October 2006
16. | TRANSACTIONS WITH DIRECTORS - continued |
PAYE of £24,592 due on the exercise of 20 share options on 31st October 2006, was paid on behalf of D Cookman in November 2006. This is shown as a creditor within PAYE liabilities and as a Director’s current account debtor as at 31st October 2006.
17. | ULTIMATE CONTROLLING PARTY |
Mr A Pope was the ultimate controlling party until October 31st 2006, when control passed on the sale of the shares to the ultimate parent company StockerYale Incorporated.
18. | SUMMARY OF DIFFERENCES BETWEEN UK AND US GAAP |
The financial statements are prepared in accordance with UK GAAP, which differs in certain respects from US GAAP. Differences which have an effect on the profit and loss account and balance sheet are set out below:
2006 | 2005 | ||||
£ | £ | ||||
EFFECT ON PROFIT AND LOSS ACCOUNT | |||||
Profit on ordinary activities after taxation (under UK GAAP) | 471,614 | 502,616 | |||
Adjustment for Share Options | 494,737 | — | |||
LOSS ON ORDINARY ACTIVITIES AFTER TAX AS ADJUSTED FOR US GAAP | (23,123 | ) | 502,616 | ||
Share Options
On 13th January 2005 the company granted share options on 20 Ordinary Shares of £1 each with an exercise price of £1 each to a director. The share options were exercisable on sale of the company. In accordance with UK GAAP, as applying to Photonic Products Limited following its adoption of the Financial Reporting Standard for Smaller Entities (effective January 2005), the company is not required to account for the value of the share option either at the date of grant or at the date of exercise. This methodology differs to US GAAP.
In accordance with SFAS No. 123 (revised 2004) - Share Based Payment as applying to non-public companies, the company has chosen to recognise the share option existing at 1st January 2006 using the prospective transition method and accordingly has applied the accounting principles as would have been applied to the share option at the date of grant, being the provisions of APB Opinion 25.
The provisions of APB Opinion 25 require that the company recognises the compensation cost of the share options at the date of exercise, this date being 31 October 2006, the date of sale of the share capital of the company. The company has adopted the Intrinsic-value-based method for the purposes of calculating the compensation cost of the share options.
There is no effect on reported Shareholders’ Funds or on the Cash Flow Statement in respect of the difference in accounting treatment for the share options under UK GAAP and US GAAP.
Statement of Cash Flows
The cash flow statements presented under UK GAAP have been prepared in accordance with FRS 1 (revised), “Cash Flow Statements.” There are certain differences from UK GAAP to US GAAP with regard to the classification of items within the cash flow statements and with regard to the definition of cash and cash equivalents. In accordance with FRS 1 (revised), cash flows are prepared separately for operating activities, returns on investments and servicing of finance, taxation, capital expenditure and financial investment, acquisitions and disposals, equity dividends paid, management of liquid resources and financing.
US GAAP, however, requires only three categories of cash flow activity to be reported. Under SFAS No. 95, “Statement of Cash Flows,” cash flows are classified under operating activities (including cash flows from taxation and returns on investments and servicing of finance), investing activities and financing activities. Under FRS 1 (revised), cash is defined as cash on hand and deposits repayable on demand, less overdrafts repayable on demand. Under SFAS No. 95, cash and cash equivalents are defined as cash and investments with original maturities of three months or less. Cash and cash equivalents do not include bank overdrafts.
Page 14 | continued... |
Photonic Products Limited
Notes to the Financial Statements - continued
For The Period 1st January 2006 to 31st October 2006
18. | SUMMARY OF DIFFERENCES BETWEEN UK AND US GAAP - continued |
A summary of the Company’s operating, investing and financing activities classified in accordance with US GAAP is presented below:
(in pounds sterling — £) | Period Ended 31 October 2006 | Year Ended 31 December 2005 | ||||
Net cash provided by operating activities | 402,087 | 400,513 | ||||
Net cash used in investing activities | (90,162 | ) | (64,666 | ) | ||
Net cash used in financing activities | (374,191 | ) | (292,116 | ) | ||
Net decrease in cash and cash equivalents | (62,266 | ) | 43,731 | |||
Cash and cash equivalents at beginning of period | 168,861 | 125,130 | ||||
Cash and cash equivalents at end of period | 106,595 | 168,861 | ||||
Page 15