CURRENT REPORT FOR ISSUERS SUBJECT TO THE
1934 ACT REPORTING REQUIREMENTS
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 3, 2001
Gentner Communications Corporation
----------------------------------- -----------------------------------
(Exact Name of Registrant as Specified in its Charter)
UTAH 17219 87-0398877
--------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
1825 Research Way, Salt Lake City, Utah 84119
---------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(801) 975-7200
--------------- ---------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
---------------------- ---------------
(Former Name or Former Address, if Changed Since Last Report)
INFORMATION TO BE INCLUDED IN REPORT
Item 2. Acquisition or Disposition of Assets.
On October 3, 2001, pursuant to a "Share Purchase Agreement" dated
October 3, 2001, Gentner Communications Corporation ("Gentner") caused its
wholly owned subsidiary, Gentner Ventures, Inc., to purchase all of the issued
and outstanding shares (the "Transaction") of Ivron Systems, Ltd., of Dublin,
Ireland ("Ivron"). As of the Closing, 5,366,637 Ivron common shares were issued
and outstanding. Ivron is a privately-held developer of video conferencing
technology and equipment (the "Business"). Following the closing, Michael
Peirce, the former chairman of Ivron, was appointed to Gentner's board of
directors.
In the Transaction, each shareholder of Ivron (each, a "Shareholder")
received at the closing approximately US$1.12 per Ivron common share. Following
June 30, 2002 each former Shareholder will receive approximately .08 shares of
Gentner's common shares for each Ivron share previously held by each such
shareholder, provided that certain video product development contingencies are
achieved, as set forth in the Share Repurchase Agreement. Thereafter, for
Gentner's completed fiscal years 2003 and 2004, the former Ivron Shareholders
may share in up to US$17,000,000 of additional consideration provided that
certain agreed upon EPS targets for Gentner are achieved.
As part of the Transaction, all outstanding options to purchase Ivron
shares were cancelled in consideration for an aggregate cash payment of
US$650,000, allocated among the optionees by the number of options originally
held by each such optionee. In addition, former optionees of Ivron who remain
with Ivron are eligible to participate in a cash bonus program paid by Ivron and
based on the combined performance of Gentner and Ivron in fiscal years 2003 and
2004. The maximum amount payable under this bonus program is an aggregate of
US$1,000,000. As of the closing of the Transaction, Ivron's thirty employees
were remaining in Ivron's employ.
The total value of the consideration paid in the Transaction was
determined based on arm's length negotiations between Gentner and the
Shareholders, that took into account a number of factors of the business
including historic revenues, operating history, products, intellectual property
and other factors.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. Audited financial statements of
Ivron Systems, Ltd.
Fiscal 2000
Page No.
Report of Independent Auditors......................................F-1
Statement of Accounting Policies....................................F-3
Consolidated Profit and Loss Account for
the year ended December 31, 2000..................................F-5
Consolidated Balance Sheet as of December 31, 2000..................F-6
Company Balance Sheet as of December 31, 2000.......................F-7
Notes to Financial Statements.......................................F-8
Reconciliation between Irish and U.S. accounting principles.........F-18
Operating statement and appendices..................................F-21
Fiscal 1999
Page No.
Report of Independent Auditors......................................F-22
Statement of Accounting Policies....................................F-24
Profit and Loss Account for the year ended December 31, 1999........F-26
Balance Sheet as of December 31, 1999...............................F-27
Notes to Financial Statements.......................................F-28
Reconciliation between Irish and U.S. accounting principles.........F-38
Operating statement and appendices..................................F-41
Fiscal 1998
Page No.
Report of Independent Auditors......................................F-42
Statement of Accounting Policies....................................F-44
Profit and Loss Account for the year ended December 31, 1998........F-46
Balance Sheet as of December 31, 1998...............................F-47
Notes to Financial Statements.......................................F-48
Reconciliation between Irish and U.S. accounting principles.........F-57
Operating statement and appendices..................................F-60
(b) Unaudited Pro Forma Financial Information. Unaudited Pro Forma Condensed
Combined Financial Statements of Gentner Communications Corporation and
Ivron Systems, Ltd.
Page No.
Pro Forma Condensed Combined Financial Information (unaudited)......P-1
Pro Forma Condensed Combined Balance Sheet as of June 30, 2001
(unaudited).......................................................P-1
Pro Forma Condensed Combined Statement of Operations for the year
ended June 30, 2001 (unaudited)................................P-3
Notes to Pro Forma Condensed Financial Information (unaudited)......P-4
(c) Exhibits
--------
The Exhibit Index appearing on page 4 is incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Gentner has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
Gentner Communications Corporation
(the Registrant)
By: /s/Randall J. Wichinski
--------------------------------------
Randall J. Wichinski
Vice President Chief Financial Officer
(Duly authorized Officer and Principal
Financial and Accounting Officer)
Dated: October 18, 2001
EXHIBIT INDEX
Sequentially
Exhibit Numbered
Number Description Page
------ ----------- ----
2.1 Share Purchase Agreement among Gentner #
Communications Corporation, Gentner
Ventures, Inc., and the Shareholders of
Ivron Systems, Ltd.
99.1 Press Release issued October 4, 2001 #
Auditors' report to the members of Ivron Systems Group Limited (formerly known
as Vedia Technology Limited)
We have audited the financial statements on pages 7 to 21.
Respective responsibilities of directors and auditors in relation to the
financial statements
The directors are responsible for preparing the directors' report and, as
described on page 4, the financial statements in accordance with applicable
Irish law and accounting standards. Our responsibilities, as independent
auditors, are established in Ireland by statute, the Auditing Practices Board
and by our professions ethical guidance.
We report to you our opinion as to whether the financial statements give a true
and fair view and are properly prepared in accordance with the Companies Acts.
As also required by the Acts, we state whether we have obtained all the
information and explanations we require for our audit, whether the financial
statements agree with the books of account and report to you our opinion as to
whether:
|X| the company has kept proper books of account;
|X| the directors report is consistent with the financial statements:
|X| at the balance sheet date a financial situation existed that would require
the company to hold an extraordinary general meeting, on the grounds that
the net assets of the company, as shown in the financial statements, are
less than half of its share capital.
We also report to you if, in our opinion, information specified by law regarding
directors' remuneration and transactions with the company is not disclosed.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
F-1
Auditors' report to the members of Ivron Systems Group Limited (formerly known
as Vedia Technology Limited) (continued)
Going concern
In forming our opinion, we have considered the adequacy of the disclosures made
in note 1 to the financial statements concerning continued financial support. In
view of the significance of the reliance on support from the directors and
shareholders, we consider that it should be drawn to your attention. Our opinion
is not qualified in this respect.
Opinion
In our opinion the financial statements give a true and fair view of the state
of the company's affairs at 31 December 2000 and of its loss for the year then
ended and have been properly prepared in accordance with the Companies Acts,
1963 to 1999 and all Regulations to be construed as one with those Acts.
We have obtained all the information and explanations we considered necessary
for the purposes of our audit. In our opinion, proper books of account have been
kept by the company. The financial statements are in agreement with the books of
account.
In our opinion the information given in the directors' report on pages 2 and 3
is consistent with the financial statements.
The net assets of the company, as stated in the company balance sheet on page
11, are more than half of the amount of its called up share capital and, in our
opinion, on that basis there did not exist at 31 December 2000 a financial
situation which, under Section 40(1) of the Companies (Amendment) Act 1983,
would require the convening of an extraordinary general meeting of the company.
Chartered Accountants 20 July 2001
Registered Auditors
F-2
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Statement of accounting policies
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the company's financial
statements.
Basis of preparation
The financial statements are presented in United States dollars (US$) and
prepared in accordance with generally accepted accounting principles under the
historical cost convention and comply with financial reporting standards of the
Accounting Standards Board, as promulgated by the Institute of Chartered
Accountants in Ireland.
Basis of consolidation
The consolidated financial statements include the audited financial statements
of the company and it's subsidiary which are made up to December 31 2000. A
separate profit and loss account for the company is not presented, as provided
for by Section 3 (2) of the Companies (Amendment) Act 1986.
Turnover
Turnover represents the invoiced value of goods and services exclusive of Value
Added Tax.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less accumulated depreciation. The
charge for depreciation is calculated to write down the cost of tangible fixed
assets over their expected useful lives on a straight-line basis at the
following annual rates:
Plant and machinery 33 1/3%
Stocks
Stocks are valued at the lower of cost and net realisable value on an actual
cost basis.
Taxation
Corporation tax is provided on profits should they arise.
Foreign currencies
Transactions arising in foreign currencies are recorded at the monthly average
exchange rates. Monetary items denominated in foreign currencies are translated
at the balance sheet rate and the exchange differences are dealt with in the
profit and loss account.
F-3
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Statement of accounting policies (continued)
Leased assets
Tangible fixed assets acquired under finance leases are included in the balance
sheet at their equivalent capital value and depreciated over the shorter of the
lease term and their useful lives. The corresponding liabilities are recorded as
a creditor and the interest element of the finance lease rentals is charged to
the profit and loss account on an annuity basis.
Research and development
Expenditure on research and development of new products is written off fully in
the year in which it is incurred.
Intangible fixed assets
Intangible fixed assets relates to software licences and are being written off
to the profit and loss account over three years.
Goodwill
Purchased goodwill arising on the acquisition of Mentec Picturecom is
capitalised in the balance sheet and amortised over the estimated economic life
of 10 years.
F-4
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Consolidated profit and loss account
For the year ended 31 December 2000
Notes Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Turnover -continuing operations 1,443,025 1,625,870
Cost of sales (1,363,177) (1,139,159)
---------- ----------
Gross profit - continuing operations 79,848 486,711
Operating expenses 2 (2,384,630) (2,281,669)
---------- ----------
Operating loss - continuing operations (2,304,782) (1,794,958)
Interest receivable and similar income 3 2,792 829
Interest payable 4 (5,917) (7,744)
---------- ----------
Loss on ordinary activities before taxation 5 (2,307,907) (1,801,873)
Tax on loss on ordinary activities 8 - -
---------- ----------
Loss for the financial year (2,307,907) (1,801,873)
Profit and loss account at beginning of year (3,415,812) (1,613,938)
---------- ----------
Profit and loss account at end of year (5,723,719) (3,415,811)
========== ==========
The group had no recognised gains or losses in the financial year or preceding
financial year other than those dealt with in the profit and loss account and,
accordingly, no statement of total recognised gains and losses is included.
On behalf of the board
M. Peirce D. Smyth
Director Director
F-5
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Consolidated balance sheet
at 31 December 2000
Note 2000 1999
US$ US$ US$ US$
Fixed assets
Tangible assets 9 94,830 190,658
Intangible assets 10 52,354 62,135
Goodwill: purchased goodwill 11 1,050,000 1,200,000
--------- ---------
1,197,184 1,452,793
Current assets
Stocks 13 439,732 171,660
Debtors 14 477,488 503,221
Cash at bank and in hand 987,355 83,023
--------- ---------
1,904,575 757,904
Creditors: amounts falling due
within one year 15 (684,958) (840,905)
-------- --------
Net current assets /(liabilities) 1,219,680 (83,001)
-------- --------
Total assets less current liabilities 2,416,801 1,369,792
Creditors: amounts falling due after one year16 (725,000) (766,813)
-------- --------
Net assets 1,691,801 602,979
========= =======
Capital and reserves
Called up share capital 18 3,752,373 2,054,008
Share premium account 3,663,147 1,964,782
Profit and loss account (5,723,719) (3,415,811)
--------- ---------
Shareholders' funds - equity 20 1,691,801 602,979
========= =======
On behalf of the board
M. Peirce D. Smyth
Director Director
F-6
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Company balance sheet
at 31 December 2000
Note 2000 1999
US$ US$ US$ US$
Fixed assets
Tangible assets 9 94,830 190,658
Intangible assets 10 52,354 62,135
Goodwill: purchased goodwill 11 1,050,000 1,200,000
Financial assets 12 1 -
--------- ---------
1,197,185 1,452,793
Current assets
Stocks 13 442,394 171,660
Debtors 14 817,478 503,221
Cash at bank and in hand 968,763 83,023
--------- ---------
2,228,635 757,904
Creditors: amounts falling due
within one year 15 (653,848) (840,905)
--------- ---------
Net current assets /(liabilities) 1,574,787 (83,001)
--------- ---------
Total assets less current liabilities 2,771,972 1,369,792
Creditors: amounts falling due after one year16 (725,000) (766,813)
--------- ---------
Net assets 2,046,972 602,979
========= =======
Capital and reserves
Called up share capital 18 3,752,373 2,054,008
Share premium account 3,663,147 1,964,782
Profit and loss account (5,368,883) (3,415,811)
--------- ---------
Shareholders' funds - equity 20 2,046,972 602,979
========= =======
On behalf of the board
M. Peirce D. Smyth
Director Director
F-7
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes
forming part of the financial statements
1 Financial Support
The company has generated losses of US$5.7 million since incorporation and
the losses have been financed principally by shareholders equity. The
directors have prepared a business plan incorporating cash flow projections
for the period through to 30 June 2002. The company's business plan
envisages that additional finance will be required to fund the company's
activities and certain directors and shareholders have indicated that they
are willing to provide the necessary financial support for the foreseeable
future to enable the company to trade at it's projected level of operation.
The financial statements have, accordingly, been prepared on the going
concern basis.
2 Operating expenses Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Selling, general and administration expenses 1,601,679 1,164,923
Research and development expenses 782,951 1,116,746
------- ---------
2,384,630 2,281,669
========= =========
3 Interest receivable and similar income
Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Deposit interest received 2,792 829
===== ===
4 Interest payable
Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Bank interest 2,005 2,887
Finance lease interest payable
in respect of finance leases 3,912 4,857
----- -----
5,917 7,744
===== =====
F-8
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
5 Statutory information
Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Depreciation and other amounts written off:
Owned tangible fixed assets 163,553 93,319
Leased tangible fixed assets 26,556 36,626
------ ------
Auditors' remuneration 16,000 13,000
====== ======
6 Employees
The average weekly number of employees, analysed by category, were as
follows:
Year ended Year ended
31 December 31 December
2000 1999
Number Number
Sales and administration 5 3
Research and development 10 18
Manufacturing 5 3
------ ------
20 24
====== ======
The aggregate payroll costs of these employees were as follows:
Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Wages and salaries 1,087,751 1,134,978
Social welfare costs 102,351 116,987
Pension cost 5,292 -
------ ------
1,195,394 1,251,965
========= =========
F-9
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
7 Directors' remuneration and transactions
Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Directors' remuneration
Fees - -
Other remuneration including pension contributions 199,942 -
------- -------
199,942 -
======= =======
Details of directors' interests in shares are provided in the directors'
report.
8 Tax on loss on ordinary activities
No corporation tax was payable on the loss on ordinary activities for the
year.
F-10
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
9 Tangible fixed assets (Group and company)
Plant &
Machinery
US$
Cost
At 1 January 2000 377,897
Additions 36,009
------
At 31 December 2000 413,906
=======
Depreciation
At January 2000 187,239
Depreciation 131,837
-------
At 31 December 2000 319,076
=======
Net book value
At 31 December 2000 94,830
=======
At 31 December 1999 190,658
=======
F-11
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
10 Intangible fixed assets (Group and company) Licences
US$
Cost
At beginning of year 95,574
Additions in year 21,935
-------
At end of year 117,509
=======
Amortisation
At beginning of year 33,439
Amortised during the year 31,716
-------
At end of year 65,155
=======
Net book value
At 31 December 2000 52,354
=======
At 31 December 1999 62,135
=======
11 Goodwill (Group and company) Purchased
goodwill
US$
Cost
At beginning of year 1,500,000
Additions in year -
---------
At end of year 1,500,000
=========
Amortisation
At beginning of year 300,000
Amortised during the year 150,000
---------
At end of year 450,000
=========
Net book value
At 31 December 2000 1,050,000
=========
At 31 December 1999 1,200,000
=========
The goodwill relates to the acquisition of the Mentec Picturecom business
on 6 March 1998.
F-12
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
12 Financial assets
Company
Shares in subsidiary at cost
On 29 August 2000, Ivron Systems Limited established a wholly owned
subsidiary (1 ordinary share at US$1 each) of Ivron Systems Inc, a company
incorporated in the United States. The activity of this company is similar
in nature to that of Ivron Systems Limited. The registered office of Ivron
Systems Inc is located at 110 Wild Basin Road, Suite 270, Austin TX 78746,
USA.
13 Stocks 31 December 2000 31 December 1999
Group Company Group Company
US$ US$ US$ US$
Raw materials 328,851 335,331 123,871 123,871
Finished goods 110,881 107,064 47,789 47,789
------- ------- ------ ------
439,732 442,395 171,660 171,660
======= ======= ======= =======
14 Debtors: amounts falling due within one year
31 December 2000 31 December 1999
Group Company Group Company
US$ US$ US$ US$
Trade debtors 325,709 325,709 368,617 368,617
Prepayments and accrued
income 20,112 16,857 16,291 16,291
Intercompany debtors - 347,949 - -
Other debtors 131,667 126,963 118,313 118,313
------- ------- ------- -------
477,488 817,478 503,221 503,221
======= ======= ======= =======
F-13
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
15 Creditors: amounts falling due within one year
31 December 2000 31 December 1999
Group Company Group Company
US$ US$ US$ US$
Trade creditors 60,693 60,963 469,596 469,596
Obligations under finance
leases (note 17) 52,291 52,291 37,034 37,034
Accruals and deferred income 500,006 468,959 278,421 278,421
PAYE/PRSI 71,968 71,905 55,854 55,854
------ ------ ------ ------
Total 684,958 654,183 840,905 840,905
======= ======= ======= =======
16 Creditors: amounts falling due after one year
31 December 2000 31 December 1999
Group Company Group Company
US$ US$ US$ US$
Loan (note 17) 725,000 725,000 725,000 725,000
Obligations under finance
lease (note 17) - - 41,813 41,813
------ ------ ------ ------
725,000 725,000 766,813 766,813
======= ======= ======= =======
The details of the loan are set out on note 22 of the financial statements.
17 Details of borrowings
Between Between
Within one and two two and five
one year years years Total
US$ US$ US$ US$
2000
Repayable by instalments
Obligations under finance leases 52,291 - - 52,291
Loan from Mentec Limited - 725,000 - 725,000
------ ------- ------ -------
At end of year 52,291 725,000 - 777,291
====== ======= ====== =======
F-14
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
18 Called up share capital
2000 1999
US$ US$
Equity
Authorised:
150,000 "A" Ordinary Shares of US$1 each 150,000 150,000
4,850,000 Ordinary Shares of US$1 each 4,850,000 4,850,000
--------- ---------
5,000,000 5,000,000
========= =========
Allotted, called up and fully paid:
Opening share capital 2,054,008 1,416,000
Shares issued during the period:
Ordinary Shares of US$1 each 1,698,365 638,008
--------- ---------
Closing share capital 3,752,373 2,054,008
========= =========
During the year ordinary shares of US$1 each were issued at a premium of $1
each as follows:
Shareholder Number of shares
M. Peirce 1,193,712
Trinity Venture Capital 481,584
Gilbert Little 23,069
19 Reserves
Share Share Profit and
capital premium loss
account account account Total
US$ US$ US$ US$
At beginning of year 2,054,008 1,964,782 (3,415,811) 602,979
Movement during the year 1,698,365 1,698,364 (2,307,907) 1,088,822
--------- --------- ---------- ---------
At end of year 3,752,373 3,664,146 (5,723,718) 1,691,801
========= ========= ========== =========
F-15
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
20 Reconciliation of movement in shareholders' funds
2000 1999
US$ US$
Shareholders' funds at beginning of year 602,979 1,128,831
Shares issued during year 3,396,729 1,276,021
Loss for financial year (2,307,907) (1,801,873)
---------- ----------
Shareholders' funds at end of year 1,691,801 602,979
========= =======
21 Commitments
2000 1999
US$ US$
Capital commitments
Authorised and contracted for - -
Authorised and not contracted for - -
---------- ----------
- -
========= =======
Operating lease commitments
Annual commitments cost under non cancellable operating leases as follows:
Land and 2000 1999
Buildings Total Total
IR(pound) IR(pound) IR(pound)
Expiring
Within one year 51,532 51,532 60,604
Between two and five years - - -
More than five years - - -
------ ------ ------
51,532 51,532 60,604
====== ====== ======
F-16
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Notes (continued)
22 Related party transactions
Mentec Limited is a shareholder of Ivron Systems Limited. The company's
material related parties as defined by FRS 8 - Related Party Disclosures
and the extent of transactions are summarised below:
2000 1999
Mentec Mentec
Limited Limited
US$ US$
Cost of goods/services supplied
to Ivron Systems Limited on
normal trading terms 56,899 7,288
====== =====
Amounts due from/(to) related parties at arising from:
Trading activities (39,942) (7,288)
======= ======
Maximum amount outstanding
during the year 39,942 7,288
====== =====
Mentec Limited provided an interest bearing loan to Ivron Systems Limited
for US$750,000. The terms of the loan required repayment of US$375,000 on
31 March 2000 and 30 September 2000. The interest on the loan is DIBOR plus
3.5% for 3 months funds from the repayment dates. This loan will be repaid
to Mentec Limited at a date which is yet to be determined.
Dr. M. Pierce is a shareholder and director of Mentec Limited and Mr. M.
Horgan is also a director of Mentec Limited. Mr. J. Tracey is a director of
Trinity Venture Capital, a company having a shareholding in Ivron Systems
Limited.
23 Cash flow statement
The company has availed of exemptions in FRS 1 - Cashflow Statements
(Revised) not to prepare a cash flow as it meets the requirements of
Section 8 of the Companies (Amendment) Act 1986 to be treated as a small
company.
24 Approval of financial statements
The financial statements were approved by the board of directors on 20 July
2001.
F-17
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Reconciliation between Irish and U.S. Accounting Principles
The financial statements of the company set out on pages 7 to 21 have been
prepared in accordance with generally accepted accounting principles applicable
in Ireland ("Irish GAAP") which differ in certain significant respects from
those applicable in the U.S. (" U.S. GAAP"). The material differences as they
apply to the financial statements are as follows :
(a) Financial statement format
The format of the financial statements and certain note disclosures under
U.S. GAAP differ from those under Irish GAAP.
(b) Forward - looking statements
To the extent any statement made in these financial statements with
information that is not historical, these statements are necessarily
forward - looking. As such, they are subject to the occurrence of many
events outside of Ivron's control and are subject to various risk factors
that would cause our results to differ materially from those expressed in
any forward - looking statement.
The following is a summary of the material adjustments to loss and
shareholders' equity which would be required had the financial statements
being prepared in accordance with U.S. GAAP.
(i) Effect on loss for the financial year
Year ended 10 months ended
31 December 2000 31 December1999
US$ US$
Loss for the financial year under Irish GAAP 2,307,907 1,801,861
========= =========
Net loss as stated under U.S. GAAP 2,307,907 1,801,861
========= =========
(ii) Effect on shareholders equity
31 December 31 December
2000 1999
US$ US$
Shareholders' equity as stated under Irish GAAP 1,691,801 602,979
========= =========
Shareholders' equity as stated under U.S. GAAP 1,691,801 602,979
========= =========
F-18
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Operating statement
for the year ended 31 December 2000
Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Turnover 1,443,025 1,625,870
Cost of sales (Appendix 1) (1,363,177) (1,139,159)
---------- ----------
Gross profit 79,846 486,711
Operating expenses (Appendix 2) (2,384,630) (2,281,669)
---------- ----------
Operating loss (2,304,782) (1,794,958)
========== ==========
F-19
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Appendix 1: Cost of sales
for the year ended 31 December 2000
Year ended
Year ended 31 December
2000 1999
US$ US$
Direct costs
Opening stock 171,660 85,611
Raw material purchases 1,275,630 1,029,764
Less: Closing stock (442,401) (171,660)
-------- --------
Raw materials consumed 1,004,889 943,715
Manufacturing overheads
Direct labour 192,610 93,907
Freight 55,843 32,686
Production overheads 109,835 68,851
-------- --------
358,288 195,444
------- -------
Cost of sales 1,363,177 1,139,159
========= =========
F-20
Ivron Systems Group Limited
(formerly known as Vedia Technology Limited)
Appendix 2: Operating expenses
for the year ended 31 December 2000
Year ended Year ended
31 December 31 December
2000 1999
US$ US$
Administration expenses
Wages and salaries 587,375 566,098
Commission 37,633 17,422
Contractors 719 34,443
Marketing and advertising 59,855 36,407
Light, heat and power 1,342 3,107
Travel and subsistence 172,178 162,875
Non stock materials - 2,744
Rent and rates 74,943 57,763
Telephone and telex 36,119 25,138
Computer costs 39,291 9,726
Insurance 16,734 22,736
Subscriptions 1,134 1,850
Postage and stationery 5,998 11,512
Bad debts 88,913 11,296
Exchange (gain)/loss (6,166) (8,697)
Cleaning 1,592 4,027
Bank charges 24,128 5,623
General 22,885 17,174
Miscellaneous (8,556) (26,256)
Professional fees 295,562 59,935
Intangible write off 150,000 150,000
------- -------
1,601,679 1,164,923
Research and development expenses
Wages and salaries 495,512 610,238
Travel 12,560 46,168
Non stock materials 48,842 257,906
Computer costs 16,808 23,432
Market research - -
Building costs 11,261 11,291
Depreciation research and development 192,199 156,614
General 5,170 8,464
Consultancy fee 599 2,633
782,951 1,116,746
------- ---------
Operating expenses 2,384,630 2,281,669
========= =========
F-21
Auditors' report to the members of Vedia Technology Limited
(formerly known as Ligurian Limited)
We have audited the financial statements on pages 7 to 20.
Respective responsibilities of directors and auditors in relation to the
financial statements
As described on page 4 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Going concern
In forming our opinion, we have considered the adequacy of the disclosures made
in note 1 to the financial statements concerning continued financial support. In
view of the significance of the reliance on support from the directors and
shareholders, we consider that it should be drawn to your attention. Our opinion
is not qualified in this respect.
Opinion
In our opinion, the financial statements give a true and fair view of the state
of the company's affairs at 31 December 1998 and of its loss for the period then
ended and have been properly prepared in accordance with the Companies Acts,
1963 to 1990 and all Regulations to be construed as one with those Acts.
We have obtained all the information and explanations we considered necessary
for the purposes of our audit. In our opinion, proper books of account have been
kept by the company. The financial statements are in agreement with the books of
account.
In our opinion, the information given in the directors' report on pages 2 and 3
is consistent with the financial statements.
F-22
Auditors' report to the members of Vedia Technology Limited
(formerly known as Ligurian Limited)
Opinion
The net assets of the company, as stated in the balance sheet on page 10, are
more than half of the amount of its called up share capital and, in our opinion,
on that basis there did not exist at 31 December 1998 a financial situation
which, under Section 40(1) of the Companies (Amendment) Act 1983, would require
the convening of an extraordinary general meeting of the company.
Chartered Accountants
Registered Auditors
F-23
Vedia Technology Limited
(formerly known as Ligurian Limited)
Statement of accounting policies
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the company's financial
statements.
Basis of preparation
The financial statements are presented in United States dollars (US$) and
prepared in accordance with generally accepted accounting principles under the
historical cost convention and comply with financial reporting standards of the
Accounting Standards Board, as promulgated by the Institute of Chartered
Accountants in Ireland.
Turnover
Turnover represents the invoiced value of goods and services exclusive of Value
Added Tax.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less accumulated depreciation. The
charge for depreciation is calculated to write down the cost of tangible fixed
assets over their expected useful lives on a straight-line basis at the
following annual rates:
Plant and machinery 33 1/3%
Stocks
Stocks are valued at the lower of cost and net realisable value on an actual
cost basis.
Taxation
Corporation tax is provided on profits should they arise.
Foreign currencies
Transactions arising in foreign currencies are recorded at the monthly average
exchange rates. Monetary items denominated in foreign currencies are translated
at the balance sheet rate and the exchange differences are dealt with in the
profit and loss account.
F-24
Vedia Technology Limited
(formerly known as Ligurian Limited)
Statement of accounting policies (continued)
Leased assets
Tangible fixed assets acquired under finance leases are included in the balance
sheet at their equivalent capital value and depreciated over the shorter of the
lease term and their useful lives. The corresponding liabilities are recorded as
a creditor and the interest element of the finance lease rentals is charged to
the profit and loss account on an annuity basis.
Research and development
Expenditure on research and development of new products is written off fully in
the period in which it is incurred.
Intangible fixed assets
Intangible fixed assets relates to software licences and are being written off
to the profit and loss account over three years.
Goodwill
Purchased goodwill arising on the acquisition of Mentec Picturecom is
capitalised in the balance sheet and amortised over the estimated economic life
of 10 years.
F-25
Vedia Technology Limited
(formerly known as Ligurian Limited)
Profit and loss account
For the period ended 31 December 1998
Period ended
31 December
Notes 1998
US$
Turnover -continuing operations 2,843,386
Cost of sales (1,823,505)
----------
Gross profit - continuing operations 1,019,881
Operating expenses 2 (2,634,970)
----------
Operating loss - continuing operations (1,615,089)
Interest receivable and similar income 3 7,234
Interest payable 4 (6,083)
----------
Loss on ordinary activities before taxation 5 (1,613,938)
Tax on loss on ordinary activities 8 -
----------
Loss for the financial year (1,613,938)
Profit and loss account at beginning of year -
----------
Profit and loss account at end of year (1,613,938)
==========
The company had no recognised gains or losses in the financial period other than
those dealt with in the profit and loss account.
On behalf of the board
Director Director
F-26
Vedia Technology Limited
(formerly known as Ligurian Limited)
Balance sheet
at 31 December 1998
Note 1998
US$ US$
Fixed assets
Tangible assets 9 301,538
Intangible assets 10 30,930
Goodwill: purchased goodwill 11 1,350,000
---------
1,682,468
Current assets
Stocks 12 85,611
Debtors 13 537,756
Cash at bank and in hand 268,787
892,154
Creditors: amounts falling due
within one year 14 (643,885)
---------
Net current assets 248,269
-------
Total assets less current liabilities 1,930,737
Creditors: amounts falling due after one year 15 (801,906)
--------
Net assets 1,128,831
=========
Capital and reserves
Called up share capital 17 1,416,000
Share premium account 1,326,769
Profit and loss account (1,613,938)
---------
Shareholders' funds - equity 19 1,128,831
=========
On behalf of the board
Director Director
F-27
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes
forming part of the financial statements
1 Financial Support
Certain directors and shareholders have indicated that they are willing to
provide financial support for the foreseeable future. The financial
statements have, accordingly, been prepared on the going concern basis.
2 Operating expenses
Period ended
31 December 1998
US$
Selling, general and administration expenses 1,419,338
Research and development expenses 1,215,632
---------
2,634,970
=========
3 Interest receivable and similar income
Period ended
31 December 1998
US$
Deposit interest received 7,234
=========
4 Interest payable
Period ended
31 December 1998
US$
Bank interest 4,236
Finance lease interest payable
in respect of finance leases 1,847
---------
6,083
=========
F-28
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
5 Statutory information
Period ended
31 December
1998
US$
Depreciation and other amounts written off:
Owned tangible fixed assets 54,230
Leased tangible fixed assets 3,059
=========
Auditors' remuneration 12,500
=========
6 Employees
The average weekly number of employees, analysed by category, were as
follows: 1998 Number
Sales and administration 3
Research and development 18
Manufacturing 5
---------
26
=========
The aggregate payroll costs of these employees were as follows:
Period ended
31 December
1998
US$
Wages and salaries 1,402,306
Social welfare costs 163,349
Pension cost -
---------
1,565,655
=========
F-29
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
7 Directors' remuneration and transactions
Period ended
31 December
1998
US$
Directors remuneration
Fees 26,665
Other remuneration including pension contributions -
------
26,665
======
Details of directors' interests in shares are provided in the directors'
report.
F-30
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
8 Tax on loss on ordinary activities
No corporation tax was payable on the loss on ordinary activities for the
period.
9 Tangible fixed assets
Plant &
Machinery Total
US$ US$
Cost
Acquired from Mentec Limited 121,063 121,063
Additions 237,764 237,764
------- -------
At 31 December 1998 358,827 358,827
======= =======
Depreciation
Charge for year 57,289 57,289
------- -------
At 31 December 1998 57,289 57,289
======= =======
Net book value
At 31 December 1998 301,538 301,538
======= =======
F-31
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
10 Intangible fixed assets Licences Total
US$ US$
Cost
Additions in year 37,701 37,701
------ ------
At end of period 37,701 37,701
====== ======
Amortisation
Amortisation in year 6,771 6,771
------ ------
At end of period 6,771 6,771
===== =====
Net book value
At 31 December 1998 30,930 30,930
====== ======
11 Goodwill Purchased
goodwill Total
US$ US$
Cost
At beginning of period - -
Acquisitions 1,500,000 1,500,000
--------- ---------
At end of period 1,500,000 1,500,000
========= =========
Amortisation
At beginning of period - -
Acquisitions - -
Amortised 150,000 150,000
--------- ---------
At end of period 150,000 150,000
========= =========
Net book value
At 31 December 1998 1,350,000 1,350,000
========= =========
The goodwill relates to the acquisition of the Mentec Picturecom business
on 6 March 1998.
F-32
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
12 Stocks 1998
US$
Raw materials 63,057
Finished goods 22,554
------
85,611
======
13 Debtors: amounts falling due within one year
1998
US$
Trade debtors 437,298
Prepayments and accrued income 37,301
VAT repayable 63,157
------
537,756
=======
14 Creditors: amounts falling due within one year
1998
US$
Trade creditors 218,109
Bank overdraft (note 16) 13,789
Loan (note 16) 25,000
Obligations under finance leases (note 16) 40,536
Accruals and deferred income 305,642
PAYE/PRSI 40,809
------
Total 643,885
F-33
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
15 Creditors: amounts falling due after one year 1998
US$
Loan (note 16) 725,000
Obligations under finance lease (note 16) 76,906
------
801,906
=======
16 Details of borrowings
Between Between
Within one and two two and five
one year years years Total
US$ US$ US$ US$
Repayable other than by instalments
Bank overdrafts 13,789 - - 13,789
Repayable by instalments
Obligations under finance leases 40,536 37,034 39,872 117,442
Loan 25,000 725,000 - 750,000
------ ------- ------ -------
At end of year 79,325 762,034 39,872 881,231
====== ======= ====== =======
17 Called up share capital
1998
US$
Equity
Authorised:
150,000 "A" Ordinary Shares of US$1 each 150,000
4,850,000 Ordinary Shares of US$1 each 4,850,000
---------
5,000,000
=========
Allotted, called up and fully paid:
Opening share capital -
Shares issued during the period: Ordinary Shares of US$1 each 1,416,000
---------
Closing share capital 1,416,000
=========
F-34
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
17 Called up share capital (continued)
On 27 February 1998, a special resolution was passed to convert the
authorised share capital from IR(pound)100 to US$5,000,000 by the creation
of 150,000 "A" ordinary shares of US$1 each and 4,850,000 ordinary shares
of US$1 each .
During the year the following shares were allotted for cash at a premium of
US$1 each :
Trinity Venture Capital 500,000
Michael Peirce 380,000
Gilbert Little 175,000
Mentec Limited 345,000
Paul Tierney 16,000
18 Reserves
Share Share Profit and
capital premium loss
account account account Total
US$ US$ US$ US$
At beginning of year - - - -
Movement during the year 1,416,000 1,326,769 (1,613,938) 1,128,831
--------- --------- ---------- ---------
At end of year 1,416,000 1,326,769 (1,613,938) 1,128,831
========= ========= ========== =========
19 Reconciliation of movement in shareholders' funds
1998
US$
Shareholders' funds at beginning of period -
Shares issued during period 2,742,769
Loss for financial period (1,613,938)
----------
Shareholders' funds at end of period 1,128,831
=========
F-35
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
20 Commitments
1998
US$
Capital commitments
Authorised and contracted for -
Authorised and not contracted for -
--------
-
========
Operating lease commitments
Annual commitments cost under non cancellable operating leases as follows:
Land and 1998
Buildings Other Total
IR(pound) IR(pound) IR(pound)
Expiring
Within one year - - -
Between two and five years 60,604 - 60,604
More than five years - - -
------- ------- -------
60,604 - 60,604
======= ======= =======
F-36
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
21 Related party transactions
Mentec Limited is a shareholder of Vedia Technology Limited. The company's
related parties as defined by FRS 8 - Related Party Disclosures and the
extent of transactions are summarised below:
1998
Mentec
Limited
US$
Cost of goods/services supplied
to Vedia Technology Limited on
normal trading terms 475,908
=======
Amounts due from/(to) related parties at arising from:
Trading activities (12,001)
=======
Maximum amount outstanding
during the year 427,056
=======
Mentec Limited provided an interest bearing loan to Vedia Technology
Limited for US$750,000. The terms of the loan required repayment of
US$375,000 on 31 March 1999 and 30 September 1999. The interest on the loan
is DIBOR plus 3.5% for 3 months funds from the repayment dates.
This loan will be repaid to Mentec Limited at a rate which is yet to be
determined.
Dr. M. Pierce is a shareholder and director of Mentec Limited and Mr. M
Horgan is a director of Mentec Limited. Mr. J. Tracey is a director of
Trinity Venture Capital, a company having a shareholding in Vedia
Technology Limited.
22 Cash flow statement
The company has availed of exemptions in FRS 1 - Cashflow Statements
(Revised) not to prepare a cash flow as it meets the requirements of
Section 8 of the Companies (Amendment) Act 1986 to be treated as a small
company.
23 Purchase of business
On 6 March 1998 the company purchased the business and assets of Mentec
Picturecom Limited for a cash consideration of US$1,892,783. The business
was purchased as a going concern and the purchase price was allocated as
follows:Plant and Machinery US$121,064, stock US$271,716 and goodwill
US$1,500,000.
24 Approval of financial statements
The financial statements were approved by the board of directors on
F-37
Vedia Technology Limited
(formerly known as Ligurian Limited)
Reconciliation between Irish and U.S. Accounting Principles
The financial statements of the company set out on pages 7 to 20 have been
prepared in accordance with generally accepted accounting principles
applicable in Ireland ("Irish GAAP") which differ in certain significant
respects from those applicable in the U.S. (" U.S. GAAP"). The material
differences as they apply to the financial statements are as follows :
(a) Financial statement format
The format of the financial statements and certain note disclosures
under U.S. GAAP differ from those under Irish GAAP.
(b) Forward - looking statements
To the extent any statement made in these financial statements with
information that is not historical, these statements are necessarily
forward - looking. As such, they are subject to the occurrence of many
events outside of Vedia's control and are subject to various risk
factors that would cause our results to differ materially from those
expressed in any forward - looking statement.
The following is a summary of the material adjustments to loss and
shareholders' equity which would be required had the financial statements
being prepared in accordance with U.S. GAAP.
(i) Effect on loss for the financial year
10 months ended
31 December1998
US$
Loss for the financial year under Irish GAAP 1,613,938
=========
Net loss as stated under U.S. GAAP 1,613,938
=========
(ii) Effect on shareholders equity
31 December
1998
US$
Shareholders' equity as stated under Irish GAAP 1,128,831
=========
Shareholders' equity as stated under U.S. GAAP 1,128,831
=========
F-38
Vedia Technology Limited
(formerly known as Ligurian Limited)
Operating statement
for the period ended 31 December 1998
Period ended
31 December
1998
US$
Turnover 2,843,386
Cost of sales (Appendix 1) (1,823,505)
----------
Gross profit 1,019,881
Operating expenses (Appendix 2) (2,634,970)
----------
Operating loss (1,615,089)
==========
F-39
Vedia Technology Limited
(formerly known as Ligurian Limited)
Appendix 1: Cost of sales
for the period ended 31 December 1998
Period ended
31 December
1998
US$
Direct costs
Opening stock 271,716
Raw material purchases 1,422,290
Less: Closing stock (85,611)
-------
Raw materials consumed 1,608,395
Manufacturing overheads
Direct labour 124,139
Freight 54,577
Production overheads 9,469
Subcontractors 26,925
------
215,110
-------
Cost of sales 1,823,505
=========
F-40
Vedia Technology Limited
(formerly known as Ligurian Limited)
Appendix 2: Operating expenses
for the period ended 31 December 1998
Period ended
31 December
1998
US$
Administration expenses
Wages and salaries 538,891
Commission 24,402
Contractors 79,380
Marketing and advertising 108,336
Light, heat and power 3,223
Travel and subsistence 175,610
Non stock materials 2,682
Rent and rates 80,679
Telephone and telex 43,739
Computer costs 4,958
Insurance 14,922
Subscriptions 1,474
Postage and stationery 6,672
Professional fees 9,004
Legal expenses 5,108
Bad debts 65,531
Exchange loss 35,041
Cleaning 1,528
Bank charges 1,953
General 3,595
Miscellaneous 26,967
General overheads allocated to finance and planning 35,643
Intangible write off 150,000
-------
1,419,338
Research and development expenses
Wages and salaries 902,465
Travel 47,910
Non stock materials 95,149
Computer costs 72,597
Market research 13,942
Telephone costs 13,780
Depreciation research and development 64,060
General 5,729
-----
1,215,632
---------
Operating expenses 2,634,970
=========
F-41
Auditors' report to the members of Vedia Technology Limited
(formerly known as Ligurian Limited)
We have audited the financial statements on pages 7 to 20.
Respective responsibilities of directors and auditors in relation to the
financial statements
As described on page 4 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Going concern
In forming our opinion, we have considered the adequacy of the disclosures made
in note 1 to the financial statements concerning continued financial support. In
view of the significance of the reliance on support from the directors and
shareholders, we consider that it should be drawn to your attention. Our opinion
is not qualified in this respect.
Opinion
In our opinion, the financial statements give a true and fair view of the state
of the company's affairs at 31 December 1998 and of its loss for the period then
ended and have been properly prepared in accordance with the Companies Acts,
1963 to 1990 and all Regulations to be construed as one with those Acts.
We have obtained all the information and explanations we considered necessary
for the purposes of our audit. In our opinion, proper books of account have been
kept by the company. The financial statements are in agreement with the books of
account.
In our opinion, the information given in the directors' report on pages 2 and 3
is consistent with the financial statements.
F-42
Auditors' report to the members of Vedia Technology Limited
(formerly known as Ligurian Limited)
Opinion
The net assets of the company, as stated in the balance sheet on page 10, are
more than half of the amount of its called up share capital and, in our opinion,
on that basis there did not exist at 31 December 1998 a financial situation
which, under Section 40(1) of the Companies (Amendment) Act 1983, would require
the convening of an extraordinary general meeting of the company.
Chartered Accountants
Registered Auditors
F-43
Vedia Technology Limited
(formerly known as Ligurian Limited)
Statement of accounting policies
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the company's financial
statements.
Basis of preparation
The financial statements are presented in United States dollars (US$) and
prepared in accordance with generally accepted accounting principles under the
historical cost convention and comply with financial reporting standards of the
Accounting Standards Board, as promulgated by the Institute of Chartered
Accountants in Ireland.
Turnover
Turnover represents the invoiced value of goods and services exclusive of Value
Added Tax.
Tangible fixed assets and depreciation
Tangible fixed assets are stated at cost less accumulated depreciation. The
charge for depreciation is calculated to write down the cost of tangible fixed
assets over their expected useful lives on a straight-line basis at the
following annual rates:
Plant and machinery 33 1/3%
Stocks
Stocks are valued at the lower of cost and net realisable value on an actual
cost basis.
Taxation
Corporation tax is provided on profits should they arise.
Foreign currencies
Transactions arising in foreign currencies are recorded at the monthly average
exchange rates. Monetary items denominated in foreign currencies are translated
at the balance sheet rate and the exchange differences are dealt with in the
profit and loss account.
F-44
Vedia Technology Limited
(formerly known as Ligurian Limited)
Statement of accounting policies (continued)
Leased assets
Tangible fixed assets acquired under finance leases are included in the balance
sheet at their equivalent capital value and depreciated over the shorter of the
lease term and their useful lives. The corresponding liabilities are recorded as
a creditor and the interest element of the finance lease rentals is charged to
the profit and loss account on an annuity basis.
Research and development
Expenditure on research and development of new products is written off fully in
the period in which it is incurred.
Intangible fixed assets
Intangible fixed assets relates to software licences and are being written off
to the profit and loss account over three years.
Goodwill
Purchased goodwill arising on the acquisition of Mentec Picturecom is
capitalised in the balance sheet and amortised over the estimated economic life
of 10 years.
F-45
Vedia Technology Limited
(formerly known as Ligurian Limited)
Profit and loss account
For the period ended 31 December 1998
Period ended
31 December
Notes 1998
US$
Turnover -continuing operations 2,843,386
Cost of sales (1,823,505)
----------
Gross profit - continuing operations 1,019,881
Operating expenses 2 (2,634,970)
----------
Operating loss - continuing operations (1,615,089)
Interest receivable and similar income 3 7,234
Interest payable 4 (6,083)
----------
Loss on ordinary activities before taxation 5 (1,613,938)
Tax on loss on ordinary activities 8 -
----------
Loss for the financial year (1,613,938)
Profit and loss account at beginning of year -
----------
Profit and loss account at end of year (1,613,938)
==========
The company had no recognised gains or losses in the financial period other than
those dealt with in the profit and loss account.
On behalf of the board
Director Director
F-46
Vedia Technology Limited
(formerly known as Ligurian Limited)
Balance sheet
at 31 December 1998
Note 1998
US$ US$
Fixed assets
Tangible assets 9 301,538
Intangible assets 10 30,930
Goodwill: purchased goodwill 11 1,350,000
---------
1,682,468
Current assets
Stocks 12 85,611
Debtors 13 537,756
Cash at bank and in hand 268,787
892,154
Creditors: amounts falling due
within one year 14 (643,885)
---------
Net current assets 248,269
-------
Total assets less current liabilities 1,930,737
Creditors: amounts falling due after one year 15 (801,906)
--------
Net assets 1,128,831
=========
Capital and reserves
Called up share capital 17 1,416,000
Share premium account 1,326,769
Profit and loss account (1,613,938)
---------
Shareholders' funds - equity 19 1,128,831
=========
On behalf of the board
Director Director
F-47
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes
forming part of the financial statements
1 Financial Support
Certain directors and shareholders have indicated that they are willing to
provide financial support for the foreseeable future. The financial
statements have, accordingly, been prepared on the going concern basis.
2 Operating expenses
Period ended
31 December 1998
US$
Selling, general and administration expenses 1,419,338
Research and development expenses 1,215,632
---------
2,634,970
=========
3 Interest receivable and similar income
Period ended
31 December 1998
US$
Deposit interest received 7,234
=========
4 Interest payable
Period ended
31 December 1998
US$
Bank interest 4,236
Finance lease interest payable
in respect of finance leases 1,847
---------
6,083
=========
F-48
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
5 Statutory information
Period ended
31 December
1998
US$
Depreciation and other amounts written off:
Owned tangible fixed assets 54,230
Leased tangible fixed assets 3,059
=========
Auditors' remuneration 12,500
=========
6 Employees
The average weekly number of employees, analysed by category, were as
follows: 1998 Number
Sales and administration 3
Research and development 18
Manufacturing 5
---------
26
=========
The aggregate payroll costs of these employees were as follows:
Period ended
31 December
1998
US$
Wages and salaries 1,402,306
Social welfare costs 163,349
Pension cost -
---------
1,565,655
=========
F-49
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
7 Directors' remuneration and transactions
Period ended
31 December
1998
US$
Directors remuneration
Fees 26,665
Other remuneration including pension contributions -
------
26,665
======
Details of directors' interests in shares are provided in the directors'
report.
13
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
8 Tax on loss on ordinary activities
No corporation tax was payable on the loss on ordinary activities for the
period.
9 Tangible fixed assets
Plant &
Machinery Total
US$ US$
Cost
Acquired from Mentec Limited 121,063 121,063
Additions 237,764 237,764
------- -------
At 31 December 1998 358,827 358,827
======= =======
Depreciation
Charge for year 57,289 57,289
------- -------
At 31 December 1998 57,289 57,289
======= =======
Net book value
At 31 December 1998 301,538 301,538
======= =======
F-50
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
10 Intangible fixed assets Licences Total
US$ US$
Cost
Additions in year 37,701 37,701
------ ------
At end of period 37,701 37,701
====== ======
Amortisation
Amortisation in year 6,771 6,771
------ ------
At end of period 6,771 6,771
===== =====
Net book value
At 31 December 1998 30,930 30,930
====== ======
11 Goodwill Purchased
goodwill Total
US$ US$
Cost
At beginning of period - -
Acquisitions 1,500,000 1,500,000
--------- ---------
At end of period 1,500,000 1,500,000
========= =========
Amortisation
At beginning of period - -
Acquisitions - -
Amortised 150,000 150,000
--------- ---------
At end of period 150,000 150,000
========= =========
Net book value
At 31 December 1998 1,350,000 1,350,000
========= =========
The goodwill relates to the acquisition of the Mentec Picturecom business
on 6 March 1998.
F-51
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
12 Stocks 1998
US$
Raw materials 63,057
Finished goods 22,554
------
85,611
======
13 Debtors: amounts falling due within one year
1998
US$
Trade debtors 437,298
Prepayments and accrued income 37,301
VAT repayable 63,157
------
537,756
=======
14 Creditors: amounts falling due within one year
1998
US$
Trade creditors 218,109
Bank overdraft (note 16) 13,789
Loan (note 16) 25,000
Obligations under finance leases (note 16) 40,536
Accruals and deferred income 305,642
PAYE/PRSI 40,809
------
Total 643,885
F-52
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
15 Creditors: amounts falling due after one year 1998
US$
Loan (note 16) 725,000
Obligations under finance lease (note 16) 76,906
------
801,906
=======
16 Details of borrowings
Between Between
Within one and two two and five
one year years years Total
US$ US$ US$ US$
Repayable other than by instalments
Bank overdrafts 13,789 - - 13,789
Repayable by instalments
Obligations under finance leases 40,536 37,034 39,872 117,442
Loan 25,000 725,000 - 750,000
------ ------- ------ -------
At end of year 79,325 762,034 39,872 881,231
====== ======= ====== =======
17 Called up share capital
1998
US$
Equity
Authorised:
150,000 "A" Ordinary Shares of US$1 each 150,000
4,850,000 Ordinary Shares of US$1 each 4,850,000
---------
5,000,000
=========
Allotted, called up and fully paid:
Opening share capital -
Shares issued during the period: Ordinary Shares of US$1 each 1,416,000
---------
Closing share capital 1,416,000
=========
F-53
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
17 Called up share capital (continued)
On 27 February 1998, a special resolution was passed to convert the
authorised share capital from IR(pound)100 to US$5,000,000 by the creation
of 150,000 "A" ordinary shares of US$1 each and 4,850,000 ordinary shares
of US$1 each .
During the year the following shares were allotted for cash at a premium of
US$1 each :
Trinity Venture Capital 500,000
Michael Peirce 380,000
Gilbert Little 175,000
Mentec Limited 345,000
Paul Tierney 16,000
18 Reserves
Share Share Profit and
capital premium loss
account account account Total
US$ US$ US$ US$
At beginning of year - - - -
Movement during the year 1,416,000 1,326,769 (1,613,938) 1,128,831
--------- --------- ---------- ---------
At end of year 1,416,000 1,326,769 (1,613,938) 1,128,831
========= ========= ========== =========
19 Reconciliation of movement in shareholders' funds
1998
US$
Shareholders' funds at beginning of period -
Shares issued during period 2,742,769
Loss for financial period (1,613,938)
----------
Shareholders' funds at end of period 1,128,831
=========
F-54
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
20 Commitments
1998
US$
Capital commitments
Authorised and contracted for -
Authorised and not contracted for -
--------
-
========
Operating lease commitments
Annual commitments cost under non cancellable operating leases as follows:
Land and 1998
Buildings Other Total
IR(pound) IR(pound) IR(pound)
Expiring
Within one year - - -
Between two and five years 60,604 - 60,604
More than five years - - -
------- ------- -------
60,604 - 60,604
======= ======= =======
F-55
Vedia Technology Limited
(formerly known as Ligurian Limited)
Notes (continued)
21 Related party transactions
Mentec Limited is a shareholder of Vedia Technology Limited. The company's
related parties as defined by FRS 8 - Related Party Disclosures and the
extent of transactions are summarised below:
1998
Mentec
Limited
US$
Cost of goods/services supplied
to Vedia Technology Limited on
normal trading terms 475,908
=======
Amounts due from/(to) related parties at arising from:
Trading activities (12,001)
=======
Maximum amount outstanding
during the year 427,056
=======
Mentec Limited provided an interest bearing loan to Vedia Technology
Limited for US$750,000. The terms of the loan required repayment of
US$375,000 on 31 March 1999 and 30 September 1999. The interest on the loan
is DIBOR plus 3.5% for 3 months funds from the repayment dates.
This loan will be repaid to Mentec Limited at a rate which is yet to be
determined.
Dr. M. Pierce is a shareholder and director of Mentec Limited and Mr. M
Horgan is a director of Mentec Limited. Mr. J. Tracey is a director of
Trinity Venture Capital, a company having a shareholding in Vedia
Technology Limited.
22 Cash flow statement
The company has availed of exemptions in FRS 1 - Cashflow Statements
(Revised) not to prepare a cash flow as it meets the requirements of
Section 8 of the Companies (Amendment) Act 1986 to be treated as a small
company.
23 Purchase of business
On 6 March 1998 the company purchased the business and assets of Mentec
Picturecom Limited for a cash consideration of US$1,892,783. The business
was purchased as a going concern and the purchase price was allocated as
follows:Plant and Machinery US$121,064, stock US$271,716 and goodwill
US$1,500,000.
24 Approval of financial statements
The financial statements were approved by the board of directors on
F-56
Vedia Technology Limited
(formerly known as Ligurian Limited)
Reconciliation between Irish and U.S. Accounting Principles
The financial statements of the company set out on pages 7 to 20 have been
prepared in accordance with generally accepted accounting principles
applicable in Ireland ("Irish GAAP") which differ in certain significant
respects from those applicable in the U.S. (" U.S. GAAP"). The material
differences as they apply to the financial statements are as follows :
(a) Financial statement format
The format of the financial statements and certain note disclosures
under U.S. GAAP differ from those under Irish GAAP.
(b) Forward - looking statements
To the extent any statement made in these financial statements with
information that is not historical, these statements are necessarily
forward - looking. As such, they are subject to the occurrence of many
events outside of Vedia's control and are subject to various risk
factors that would cause our results to differ materially from those
expressed in any forward - looking statement.
The following is a summary of the material adjustments to loss and
shareholders' equity which would be required had the financial statements
being prepared in accordance with U.S. GAAP.
(i) Effect on loss for the financial year
10 months ended
31 December1998
US$
Loss for the financial year under Irish GAAP 1,613,938
=========
Net loss as stated under U.S. GAAP 1,613,938
=========
(ii) Effect on shareholders equity
31 December
1998
US$
Shareholders' equity as stated under Irish GAAP 1,128,831
=========
Shareholders' equity as stated under U.S. GAAP 1,128,831
=========
F-57
Vedia Technology Limited
(formerly known as Ligurian Limited)
Operating statement
for the period ended 31 December 1998
Period ended
31 December
1998
US$
Turnover 2,843,386
Cost of sales (Appendix 1) (1,823,505)
----------
Gross profit 1,019,881
Operating expenses (Appendix 2) (2,634,970)
----------
Operating loss (1,615,089)
==========
F-58
Vedia Technology Limited
(formerly known as Ligurian Limited)
Appendix 1: Cost of sales
for the period ended 31 December 1998
Period ended
31 December
1998
US$
Direct costs
Opening stock 271,716
Raw material purchases 1,422,290
Less: Closing stock (85,611)
-------
Raw materials consumed 1,608,395
Manufacturing overheads
Direct labour 124,139
Freight 54,577
Production overheads 9,469
Subcontractors 26,925
------
215,110
-------
Cost of sales 1,823,505
=========
F-59
Vedia Technology Limited
(formerly known as Ligurian Limited)
Appendix 2: Operating expenses
for the period ended 31 December 1998
Period ended
31 December
1998
US$
Administration expenses
Wages and salaries 538,891
Commission 24,402
Contractors 79,380
Marketing and advertising 108,336
Light, heat and power 3,223
Travel and subsistence 175,610
Non stock materials 2,682
Rent and rates 80,679
Telephone and telex 43,739
Computer costs 4,958
Insurance 14,922
Subscriptions 1,474
Postage and stationery 6,672
Professional fees 9,004
Legal expenses 5,108
Bad debts 65,531
Exchange loss 35,041
Cleaning 1,528
Bank charges 1,953
General 3,595
Miscellaneous 26,967
General overheads allocated to finance and planning 35,643
Intangible write off 150,000
-------
1,419,338
Research and development expenses
Wages and salaries 902,465
Travel 47,910
Non stock materials 95,149
Computer costs 72,597
Market research 13,942
Telephone costs 13,780
Depreciation research and development 64,060
General 5,729
-----
1,215,632
---------
Operating expenses 2,634,970
=========
F-60
Pro Forma Financial Information
Gentner Communications Corporation and Ivron Systems, Ltd.
Unaudited Pro Forma Condensed Combined Financial Information
The following unaudited pro forma condensed combined financial information gives
effect to the share purchase transaction of Ivron Systems, Ltd. ("Ivron") by
Gentner using the purchase method of accounting. The unaudited pro forma
condensed combined balance sheet as of June 30, 2001 gives effect to the
acquisition as if the acquisition had occurred on that date. The unaudited pro
forma condensed combined balance sheet as of June 30, 2001 and the unaudited pro
forma condensed combined statement of operations for the year ended June 30,
2001 give effect to the acquisition as if the acquisition had occurred on July
1, 2000. The unaudited pro forma condensed combined statement of operations
presented for the year ended June 30, 2001 includes the audited historical
financial results of Gentner for the year ended June 30, 2001 and unaudited
financial results of Ivron for the fiscal year ended June 30, 2001, comprising
the last six months of operations of Ivron for the year ended December 31, 2000
and the first six months of operations of Ivron for the year ended December 31,
2001. Ivron's year end is December 31; therefore, Ivron's financial results
included in the pro forma information does not reflect Ivron's fiscal year ended
as set forth in the accompanying financial statements.
Unaudited pro forma combined financial information is presented for illustrative
purposes only and is not necessarily indicative of the financial position or
results of operations that would have actually been reported had the purchase
occurred at the beginning of the period presented, nor is it necessarily
indicative of future financial position or results of operations. These
unaudited pro forma combined financial statements are based upon the respective
historical financial statements of Gentner and Ivron and do not incorporate, nor
do they assume, any benefits from cost savings or synergies of operations of the
combined company.
Unaudited Pro Forma Financial Information
Pro Forma Condensed Combined Balance Sheet
As of June 30, 2001
(Historical)
Gentner Ivron Pro Forma Pro Forma
Communications Systems,Ltd. Adjustments Combined
(in `000s) (in `000s) (in `000s) (in `000s)
ASSETS
Current assets
Cash and cash equivalents $ 6,852 $ 92 $ (6,666) A $ 278
Accounts receivable, net 7,213 162 7,375
Note receivable - current portion 71 71
Inventory 4,132 596 4,728
Deferred taxes 247 247
Other current assets 781 26 807
-------- -------- -------- --------
Total current assets 19,296 876 (6,666) 13,506
Property and equipment, net 3,697 50 3,747
Goodwill and other intangibles, net 2,815 1,009 (1,009) B -
6,064 D 8,879
Note receivable - long-term portion 1,717 1,717
Deposits and other assets 73 73
-------- -------- -------- --------
Total assets $ 27,598 $ 1,935 $ (1,611) $ 27,922
======== ======== ======== ========
P-1
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 569 $ 72 $ 641
Accrued expenses 1,551 242 1,793
Current portion of capital lease obligations 182 10 192
Note payable - current portion 300 $ (300) E -
-------- -------- -------- --------
Total current liabilities 2,302 624 (300) 2,626
Capital lease obligations 48 48
Note payable - long-term portion 425 (425) E -
Deferred tax liability 746 746
-------- -------- -------- --------
Total liabilities 3,096 1,049 (725) 3,420
Shareholders' equity
Common stock 9 4,137 (4,137) C 9
Additional paid-in capital 8,963 4,048 (4,048) C 8,963
Retained earnings (accumulated deficit) 15,530 (7,299) 7,299 C 15,530
Total shareholders' equity 24,502 886 (886) C 24,502
-------- -------- -------- --------
Total liabilities and shareholders' equity $ 27,598 $ 1,935 $ (1,611) $ 27,922
======== ======== ======== ========
See accompanying notes to unaudited pro forma condensed combined financial
statements
P-2
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended June 30, 2001
(Historical)
Gentner Ivron Pro Forma Pro Forma
Communications Systems, Ltd. Adjustments Combined
(in `000s) (in `000s) (in `000s) (in `000s)
Net sales $ 39,878 $ 608 $ 40,486
Cost of goods sold 16,503 798 17,301
-------- -------- -------- --------
Gross profit 23,375 (190) 23,185
Operating expenses
Marketing and selling 7,753 1,588 9,341
General and administrative 4,649 555 5,204
Research and product development 2,502 732 3,234
-------- -------- -------- --------
Total operating expenses 14,904 2,875 17,779
Operating income (loss) 8,471 (3,065) 5,406
Other income (expense)
Interest income 397 397
Interest expense (42) (42)
Other, net 18 18
-------- -------- -------- --------
Total other income (expense) 373 373
-------- -------- -------- --------
Income (loss) before income taxes 8,844 (3,065) 5,779
Provision for income taxes (3,319) (3,319)
-------- -------- -------- --------
Net income (loss) 5,525 (3,065) 2,460
======== ======== ======== ========
Basic earnings per common share 0.64 0.29
Diluted earnings per common share 0.61 0.27
Weighted average shares outstanding:
Basic 8,593,510 8,593,510
Diluted 9,015,644 9,015,644
See accompanying notes to unaudited pro forma condensed combined financial
statement
P-3
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
NOTE 1.
On October 3, 2001, Gentner executed its share purchase agreement with
Ivron. Under the terms of the agreement, Gentner purchased the cash, accounts
receivable, fixed assets, inventory, certain other assets, and technological
infrastructure, including patents, of Ivron. Gentner also assumed the accounts
payable, accrued expenses and capital lease obligations of Ivron. Gentner issued
cash of $6,000,000 for all issued and outstanding shares of Ivron, cash of
$650,000 for all outstanding options to purchase common shares of Ivron, and
incurred acquisition costs of $16,000 in the transaction. The following is a
summary of the purchase price allocation (in thousands):
Cash $ 92
Accounts receivable 162
Fixed assets 50
Inventory 596
Goodwill and other intangible assets 6,064
Other assets 26
Accounts payable (72)
Accrued expenses (242)
Current portion of capital lease obligations (10)
--------
Total $6,666
======
NOTE 2.
The unaudited pro forma condensed combined balance sheet includes the
adjustments necessary to give effect to the Ivron purchase as if it had occurred
at June 30, 2001 as noted above. The unaudited pro forma condensed combined
statement of operations includes the adjustments necessary to give effect to the
Ivron purchase as if it had occurred on July 1, 2000, and include Ivron
operations fo rthe last six months of the calendar year ended December 31, 2000
and the first six months of calendar year ended December 31, 2001.
Adjustments included in the pro forma condensed combined financial
statements are summarized as follows:
(A) Cash outlay for acquisition includes:
o $6,000,000 - Cash paid to purchase all of the issued and outstanding
shares of Ivron as specified in the share purchase agreement.
o $650,000 - Cash consideration paid to cancel all outstanding options
to purchase shares of Ivron.
o $16,000 - Cash paid for costs associated with the acquisition.
(B) Elimination of goodwill and other intangibles that were not purchased as
part of the acquisition.
o $975,000 - Goodwill from the acquisition of the Mentec Picturecom
business purchased by Ivron on March 6, 1998.
o $34,000 - Intangibles consisting of software.
(C) Elimination of the equity of Ivron.
(D) Amount represents goodwill of $6,064,000 and capitalized acquisition costs
of approximately $16,000 for the year ended June 30, 2001. (F)
(E) Elimination of the Ivron debt, which was paid in full prior to the closing
of the transaction.
(F) Acquired intangible assets, including goodwill. As required under recently
released FASB Statement No. 141 (FAS No. 141), Business Combinations,
Gentner is required to allocate a portion of the purchase price to
recognize goodwill and intangible assets apart from goodwill. Gentner, in
P-4
conjunction with its advisors, is evaluating the new criteria established
in FAS No. 141 to properly determine the value of each intangible asset
that should be recognized apart from goodwill. In addition, as required
under recently released FASB Statement No. 142 (FAS No. 142), Goodwill and
Other Intangible Assets, a portion of the acquired intangible assets may be
subject to amortization. Such potential amortization has not been reflected
in the accompanying pro forma condensed combined statements of operations.
If the amount reported is subsequently determined to be materially
incorrect, revised pro forma financial statements will be issued.
P-5