EXHIBIT 99.2
Sigma Wireless Technologies Limited
Consolidated financial statements
YEAR ENDED 31 DECEMBER 2004
Registered number: 178926
Sigma Wireless Technologies Limited
Consolidated financial statements
as of and for the year ended December 31, 2004
Contents Page
- -------- ----
Independent auditors' report 3
Consolidated profit and loss account 4
Statement of total recognised gains and losses 5
Consolidated balance sheet 6
Consolidated cashflow statement 7
Notes forming part of the consolidated financial statements 8
2
Sigma Wireless Technologies Limited
Independent auditors' report on the consolidated financial statements to the
directors of Sigma Wireless Technologies Limited
We have audited the accompanying consolidated financial statements of Sigma
Wireless Technologies Limited and its subsidiary (together the "group")
comprising the consolidated balance sheet as at 31 December 2004 and the related
consolidated profit and loss account statement, consolidated statement of total
recognized gains and losses, consolidated cash flow statement and the
reconciliation of net cash flow to movement in net debt for the year ended 31
December 2004. These consolidated financial statements are the responsibility of
the company's directors and management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in Ireland and the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the group as of 31
December 2004 and the results of its operations and cash flows for the year then
ended, in conformity with generally accepted accounting principles in the
Republic of Ireland.
The accompanying consolidated financial statements have been prepared assuming
that the group will continue as a going concern. As noted in Note 1 to the
consolidated financial statements, the group has incurred substantial retained
losses of E4,709,280. This raises substantial doubt about the group's ability to
continue as a going concern. Management's plans in regard to this matter are
also set out in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Accounting principles generally accepted in the Republic of Ireland 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 29 to the consolidated financial
statements.
/s/ KPMG
KPMG 16 September 2005
Dublin, Ireland
3
Sigma Wireless Technologies Limited
Consolidated profit and loss statement
YEAR ENDED
31 DECEMBER
Note 2004
---- -----------
E
TURNOVER - CONTINUING OPERATIONS 4 9,260,828
Cost of sales (6,960,294)
----------
GROSS PROFIT 2,300,534
Other operating expenses 5 (2,562,324)
----------
OPERATING LOSS - CONTINUING OPERATIONS (261,790)
Interest expense and similar charges 6 (90,071)
----------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (351,861)
Tax on loss on ordinary activities 9 (7,367)
----------
LOSS FOR THE FINANCIAL YEAR (359,228)
Finance cost of non-equity shares 17 (55,773)
----------
RETAINED LOSS FOR THE FINANCIAL YEAR
ATTRIBUTABLE TO EQUITY SHAREHOLDERS (415,001)
Profit and loss account at beginning of year (4,349,526)
Deferral of finance cost of non-equity shares 17 55,773
Foreign exchange translation difference (526)
----------
PROFIT AND LOSS ACCOUNT AT END OF YEAR (4,709,280)
==========
The accompanying notes on pages 8 to 30 are an integral part of the consolidated
financial statements.
/s/ Joseph Moore /s/ Damian Guerin
- ------------------------------------- ----------------------------------------
Joseph Moore Damian Guerin
Director Director
4
Sigma Wireless Technologies Limited
Statement of total recognised gains and losses
YEAR ENDED
31 DECEMBER
Note 2004
---- -----------
E
LOSS FOR THE FINANCIAL YEAR (359,228)
Currency translation adjustment (526)
--------
TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR (359,754)
========
The accompanying notes on pages 8 to 30 are an integral part of the consolidated
financial statements.
5
Sigma Wireless Technologies Limited
Consolidated balance sheet
AT
31 DECEMBER
Note 2004
---- -----------------------
E E
FIXED ASSETS
Intangible assets 10 195,000
Tangible assets 11 4,053,455
----------
4,248,455
CURRENT ASSETS
Stocks 12 2,265,162
Debtors 13 2,676,293
Cash at bank and in hand 14,118
----------
4,955,573
----------
TOTAL ASSETS 9,204,028
==========
CAPITAL AND RESERVES
Share capital 18 1,478,678
Share premium account 19 1,494,545
Revaluation reserve 20 1,786,073
Profit and loss account (4,709,280)
----------
SHAREHOLDERS' FUNDS
Equity (1,328,130)
Non-equity 1,378,146 50,016
----------
CREDITORS: amounts falling due within one year 14 4,578,438
CREDITORS: amounts falling due after one year 15 4,575,574
----------
TOTAL LIABILITIES 9,204,028
==========
The accompanying notes on pages 8 to 30 are an integral part of the consolidated
financial statements
/s/ Joseph Moore /s/ Damian Guerin
- ------------------------------------- ----------------------------------------
Joseph Moore Damian Guerin
Director Director
6
Sigma Wireless Technologies Limited
Consolidated cashflow statement
YEAR ENDED
31 DECEMBER
Notes 2004
----- -----------
E
NET CASH OUTFLOW FROM OPERATING ACTIVITIES 24 (2,082,428)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 25 (90,071)
TAXATION (10,913)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 25 (322,030)
----------
Cash outflow before use of liquid resources and financing (2,505,442)
FINANCING - Issue of shares 492,183
- Increase in net debt 1,967,151
----------
Movement in cash and cash equivalents (46,108)
----------
Reconciliation of net cash flow to movement in net debt (note 26)
Movement in cash and cash equivalents (46,108)
Cash inflow from increase in debt (1,967,151)
----------
Change in net debt arising from cash flows (2,013,259)
New finance leases (44,700)
----------
Movement in net debt in the year (2,057,959)
----------
Net debt at 31 December 2003 (992,927)
----------
NET DEBT AT 31 DECEMBER 2004 (3,050,886)
==========
The accompanying notes on pages 8 to 30 are an integral part of the consolidated
financial statements
7
Sigma Wireless Technologies Limited
Notes
forming part of the consolidated financial statements
1 DESCRIPTION OF BUSINESS AND BASIS OF PREPARATION
The group, which consists of Sigma Wireless Technologies Limited and its
wholly owned subsidiary Sigma Wireless (UK) Limited is engaged in antenna
design and manufacture. The group manufactures a comprehensive line of base
station, mobile, vehicle and inbuilding antennas.
At 31 December 2004, the company's ultimate parent undertaking was BMS
Holdings Limited, a company incorporated in Jersey. BMS Holdings Limited
does not prepare consolidated financial statements. The largest and
smallest group into which the company's results were consolidated is that
headed by Sigma Communications Group Limited and Subsidiaries. The
consolidated financial statements of Sigma Communications Group Limited and
subsidiaries are available for public inspection at the Companies
Registration Office, Parnell House, 14 Parnell Square, Dublin 1.
At 31 December 2004, 24.7% of the voting shares were held by investors who
did not participate in decisions regarding the management and direction of
the company. The remaining 75.3% of the voting shares were held by Sigma
Communications Group Limited and company executives. On this basis Sigma
Communications Group Limited was deemed to have a controlling interest in
the company.
On 4 July 2005, PCTEL INC acquired all of the outstanding share capital of
Sigma Wireless Technologies Limited, pursuant to a Share Acquisition
Agreement. The total purchase price was E23.4m (approximately US$28.4m). Of
this amount, E19.5m (approximately US$23.4m) was paid in cash at the close
of the transaction. Approximately E5.1m of the closing payment was
immediately used to discharge outstanding Sigma indebtedness including
related party indebtedness, bank indebtedness, other third party
liabilities and retire outstanding preferred shares. The remaining E14.4m
was paid to the selling shareholders of Sigma. The balance of the purchase
price related to the acquisition of pension liabilities and the cost of
completing the transaction.
The consolidated financial statements included herein may not necessarily
be indicative of the results of operations, financial position and cash
flows of the group in the future or had it operated as a separate
independent group during the year. The consolidated financial statements
included herein do not reflect any changes that may occur in the financing
of operations of the group as a result of the acquisition.
The consolidated financial statements have been prepared solely for the
purpose of inclusion in the Securities and Exchange Commission, Form 8-K/A
filing for PCTEL INC. They have been prepared under the historical cost
convention in accordance with applicable accounting standards in the
Republic of Ireland.
Accounting principles generally accepted in the Republic of Ireland 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 27 to the consolidated
financial statements.
The group has incurred substantial retained losses of E4,709,280. The
directors have reviewed, in the context of the group's going concern
position, the results for the year ended 31 December 2004, the continuing
future availability of adequate financial resources from shareholders and
the projected performance for a period of one year from the date of
approval of the financial statements.
8
Sigma Wireless Technologies Limited
Notes (continued)
The directors are satisfied the group has adequate resources to continue in
operational existence for the foreseeable future and, for this reason, they
continue to adopt the going concern basis in preparing the financial
statements.
2 ACCOUNTING POLICIES
The following accounting policies have been applied consistently throughout
the year and preceding year, in dealing with items, which are considered
material in relation to the company's consolidated financial statements.
CONSOLIDATION
The consolidated financial statements include the financial statements of
the Company and its subsidiary as of and for the year ended 31 December
2004.
TURNOVER
Turnover represents the fair value of goods, excluding value added tax,
collected by third party customers in the accounting period. Goods are
deemed to have been sold to customers, when the customer has access to the
significant benefits inherent in the goods and exposure to the risks
inherent in those benefits.
INTANGIBLE FIXED ASSETS
Development expenditure is written off in the year of expenditure other
than a certain amount of development expenditure incurred on specific
projects which is carried forward when its recoverability can be foreseen
with reasonable assurance, and amortised in relation to the sales from such
projects. The directors consider that this treatment results in proper
matching of costs and revenue.
TANGIBLE FIXED ASSETS AND DEPRECIATION
Previously, the group availed of the transitional provisions of FRS15,
Tangible Fixed Assets, in continuing to carry certain items of land and
buildings at their previously revalued amounts, which were not updated for
subsequent changes in value, except for subsequent additions, disposals,
depreciation and impairment, if any. In the prior year the company changed
its accounting policy with respect to land and buildings.
Land and buildings, other than those held on short term leases, are carried
at their current value, being the lower of their depreciated replacement
cost and their recoverable amount, at the balance sheet date.
Revaluation gains arising in a year are recognized in the statement of
total recognized gains and losses except to the extent that they reverse
revaluation losses that were previously charged to the profit and loss
account. Revaluation losses which represent a clear consumption of economic
benefit inherent in the asset are recognized in the profit and loss
account. Other revaluation losses are recognized;
- in the statement of total recognized gains and losses until the
carrying amount reaches its depreciated historical cost; and
- thereafter, in the profit and loss account unless it can be
demonstrated that the recoverable amount of the asset is greater than
its revalued amount, in which case the loss is recognized in the
statement of total recognized gains and losses to the extent that the
recoverable amount of the asset is greater than its revalued amount.
All other tangible fixed assets are stated at historical cost less
accumulated depreciation.
9
Sigma Wireless Technologies Limited
Notes (continued)
2 ACCOUNTING POLICIES (continued)
No depreciation is provided on freehold land. The charge for depreciation
is calculated to write down the cost or current value of tangible fixed
assets to their estimated residual values by equal annual instalments over
their expected useful lives which are as follows:
Freehold buildings - 50 years
Plant and machinery - 5 to 20 years
Test Equipment - 5 to 10 years
Motor Vehicles - 3 to 5 years
Office Equipment - 5 to 10 years
Computer Equipment - 3 to 5 years
Provision is also made for any impairments of tangible fixed assets below
their carrying amounts.
REVALUATION RESERVE
Surpluses arising on the revaluation of tangible fixed assets are credited
to the revaluation reserve. Deficits are debited to the profit and loss
account. On the disposal of a revalued fixed asset, any remaining
revaluation surplus corresponding to that asset is transferred to the
profit and loss account.
FINANCIAL FIXED ASSETS
Financial fixed assets are included at cost less provision for any
permanent diminution in value. Income from financial assets, together with
any related tax credit, is recognized in the profit and loss account in the
year in which it is earned.
STOCKS
Stocks are stated at the lower of cost and net realisable value.
Cost incurred in bringing each product to its present location and
condition is based on:
Raw materials - purchase cost on a first in,
first out basis, including
transportation costs.
Work in progress and finished goods - cost of direct materials and
labour plus the attributable
proportion of manufacturing
overheads based on normal levels
of activity.
Net realisable value is based on estimated normal selling price less
further costs expected to be incurred to completion and disposal. Provision
is made for obsolete, slow moving or defective items, where appropriate.
FOREIGN CURRENCIES
The functional currency of the group is the Euro. The results and cash
flows of the non-Euro subsidiary undertaking are translated into Euro using
the average exchange rate and the related balance sheets have been
translated at the rates of exchange ruling at the balance sheet date.
Exchange rate differences arising on translation of the results of the non
Euro subsidiary undertaking and on the restatement of opening net assets
are dealt with through retained profit.
Trading activities denominated in foreign currencies are recorded in Euro
at rates approximating to actual exchange rates as of the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are reported at the rates of exchange
prevailing at the balance sheet date. Any resulting gain or loss arising
from a change in exchange rates subsequent to the date of the transaction
is reported as an exchange gain or loss in the profit and loss account.
10
Sigma Wireless Technologies Limited
Notes (continued)
2 ACCOUNTING POLICIES (continued)
TAXATION
Corporation tax, including Irish corporation tax and foreign tax, is
provided on taxable profits, at amounts expected to be paid (or recovered)
using the tax rates and laws that have been enacted or substantially
enacted by the balance sheet date.
Deferred tax is recognized in respect of all timing differences that have
originated but not reversed at the balance sheet date. Provision for
deferred tax is made at the rates expected to apply when the timing
differences reverse. Timing differences are differences between the
company's taxable profits and its results as stated in the financial
statements that arise from the inclusion of gains and losses in taxable
profits in periods different from those in which they are recognized in the
financial statements.
A net deferred tax asset is regarded as recoverable and therefore
recognized only when, on the basis of all available evidence, it can be
regarded as more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences
can be deducted.
Deferred tax is not recognized when a fixed asset is revalued unless by the
balance sheet date there is a binding agreement to sell the revalued asset
and the gain or loss expected to arise on sale has been recognized in the
financial statements. Neither is deferred tax recognized when a fixed asset
is sold and it is more likely than not that the taxable gain will be rolled
over, being charged to tax only if and when the replacement assets are
sold. Any such deferred tax not provided is disclosed in the financial
statements.
PENSION COSTS
The company has continued to account for pensions in accordance with the
accounting standard SSAP 24.
Pensions for employees, including certain executive directors, are funded
through an external pension scheme in the name of Sigma Communications
Group Limited. The scheme is vested in independent trustees for the sole
benefit of employees and their dependants. The group pays an annual
contribution on behalf of its employees to the Sigma Communication Group
Limited pension scheme. The contribution is based on an actuarial
assessment of that scheme.
The cost of providing pensions to employees is charged to the profit and
loss account on a systematic basis over the service lives of those
employees. Pension costs are determined by an actuary by reference to a
funding plan and funding assumptions. The regular pension cost is expressed
as a substantially level proportion of current and expected future
pensionable payroll. Variations from regular cost are spread over the
remaining service lives of the current employees. To the extent that the
pension cost is different from the cash contributions to the pension
scheme, a provision or prepayment is recognized in the balance sheet.
Under Irish GAAP, FRS 17 'Retirement Benefits' is only applicable for
accounting periods beginning on or after 1 January 2005. Accordingly, there
is no requirement at 31 December 2004 to include pension scheme surpluses
or deficits on the balance sheet.
11
Sigma Wireless Technologies Limited
Notes (continued)
2 ACCOUNTING POLICIES (continued)
LEASED ASSETS
Assets acquired under finance leases, where the group bears substantially
all the risks and rewards of ownership, are included in the balance sheet
as tangible fixed assets and depreciated in accordance with the accounting
policy for tangible fixed assets. Future lease rentals payable, net of
future finance charges, are shown as obligations under finance leases
within creditors. Finance charges are expensed to the profit and loss
account over the primary period of the lease in proportion to the
outstanding lease obligation.
Payments in respect of operating leases are charged to the profit and loss
account as incurred.
3 NOTES OF HISTORICAL COST PROFITS AND LOSSES
YEAR ENDED
31 DECEMBER
2004
-----------
E
REPORTED LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (359,228)
Difference between historical cost depreciation charge and
the actual depreciation charge for the year calculated on
the revalued amount 17,692
--------
HISTORICAL LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (341,536)
========
HISTORICAL COST LOSS FOR THE YEAR RETAINED AFTER
TAXATION AND DIVIDENDS (348,903)
========
4 TURNOVER
The turnover of the company arises from the production and sale of antennas
and related products and power supplies. The analysis of turnover by
geographical area is as follows:
YEAR ENDED
31 DECEMBER
2004
-----------
E
Ireland 334,146
Europe 8,598,191
Rest of the world 328,491
---------
9,260,828
=========
12
Sigma Wireless Technologies Limited
Notes (continued)
5 OTHER OPERATING EXPENSES
YEAR ENDED
31 DECEMBER
2004
-----------
E
Distribution costs 1,209,720
Administrative expenses 912,712
Other operating expenses 439,892
---------
2,562,324
=========
6 INTEREST EXPENSE AND SIMILAR CHARGES
YEAR ENDED
31 DECEMBER
2004
-----------
E
Interest expense on bank loans, overdrafts and other loans
repayable within five years 85,128
Finance lease interest payable in respect of finance leases
and hire purchase contracts 4,176
Interest on late payment of tax 767
------
90,071
======
7 STATUTORY AND OTHER INFORMATION
YEAR ENDED
31 DECEMBER
2004
-----------
E
Directors' emoluments 319,739
Depreciation 404,343
Auditors' remuneration 13,737
Research and development
- current year expenditure 721,023
- amortisation of deferred expenditure 23,837
8 STAFF NUMBERS AND COST
The average weekly number of employees during the year, analysed by
category, was as follows:
YEAR ENDED
31 DECEMBER
2004
-----------
NUMBER
Production 77
Distribution 7
Sales 10
Research and development 11
Administration 8
---
113
===
13
Sigma Wireless Technologies Limited
Notes (continued)
8 STAFF NUMBERS AND COST (continued)
The aggregate payroll costs of the employees were as follows:
YEAR ENDED
31 DECEMBER
2004
-----------
E
Wages and salaries 3,362,109
Social welfare costs 339,066
Other pension costs (note 23) 161,625
---------
3,862,800
=========
9 TAX ON LOSS ON ORDINARY ACTIVITIES
YEAR ENDED
31 DECEMBER
2004
-----------
E
(A) ANALYSIS OF CHARGE IN YEAR
Corporation tax on loss on ordinary activities 7,367
=====
(B) FACTORS AFFECTING TAX CHARGE IN YEAR
The tax assessed for the year is higher than the standard rate of
corporation tax in the Republic of Ireland. The differences are explained
below:
YEAR ENDED
31 DECEMBER
2004
-----------
E
Loss on ordinary activities before tax (351,861)
========
Loss on ordinary activities multiplied by the
standard rate of corporation tax of 12.5% (43,983)
Effects of:
Expenses not deductible for tax purposes 8,947
Capital allowances in excess of depreciation (1,556)
Unutilised losses 38,314
Income taxed at higher rates 3,125
Higher tax rates on overseas earnings 2,520
--------
Current tax charge for year 7,367
========
14
Sigma Wireless Technologies Limited
Notes (continued)
9 TAX ON LOSS ON ORDINARY ACTIVITIES (continued)
(B) FACTORS AFFECTING TAX CHARGE IN YEAR (continued)
Given the uncertainty over the existence of future taxable profits, a
potential deferred tax asset of E644,213 primarily comprising of
available tax losses forward has not been recognized at 31 December 2004.
The total losses of E7,101,706 can be carried forward indefinitely in
the Republic of Ireland.
In the year ended 31 December 1999 the company claimed capital gains tax
rollover relief in respect of the disposal of goodwill, the proceeds from
which were applied in the acquisitions of qualifying assets. In the event
that these qualifying assets are disposed of and the proceeds are not
reinvested in the acquisition in replacement assets the capital gains tax
liability deferred (E323,600) will crystallize.
10 INTANGIBLE FIXED ASSETS
At
31 DECEMBER
2004
-----------
E
DEVELOPMENT EXPENDITURE:
At beginning of year 192,497
Charged to profit and loss account (23,837)
Expenditure capitalised during the year 26,340
-------
AT END OF YEAR 195,000
=======
The deferred development expenditure represents costs incurred on specific
projects, the recoverability of which, in the opinion of the directors,
can be foreseen with reasonable certainty.
15
Sigma Wireless Technologies Limited
Notes (continued)
9 TANGIBLE FIXED ASSETS - GROUP
Freehold Plant & Test Motor Office
Land Buildings Machinery equipment vehicles equipment Computers Total
--------- --------- --------- --------- -------- --------- --------- ---------
E E E E E E E E
COST OR VALUATION
At beginning of year
- - at cost -- -- 1,413,689 1,044,257 137,629 307,753 486,734 3,390,062
- - revaluation 1,187,897 1,860,611 -- -- -- -- -- 3,048,508
Additions in year -- -- 171,398 24,546 54,450 48,168 41,828 340,390
Foreign exchange -- -- -- -- (7) (965) (95) (1,067)
AT END OF YEAR
- - AT COST -- -- 1,585,087 1,068,803 192,072 354,956 528,467 3,729,385
- - AT VALUATION 1,187,897 1,860,611 -- -- -- -- -- 3,048,508
--------- --------- --------- --------- ------- ------- ------- ---------
1,187,897 1,860,611 1,585,087 1,068,803 192,072 354,956 528,467 6,777,893
--------- --------- --------- --------- ------- ------- ------- ---------
DEPRECIATION
At beginning of year -- 248,508 852,735 618,349 85,890 201,455 314,085 2,321,022
Charge for year -- 42,941 188,750 59,012 35,524 26,233 51,883 404,343
Foreign exchange -- -- -- -- (242) (640) (45) (927)
--------- --------- --------- --------- ------- ------- ------- ---------
AT END OF YEAR -- 291,449 1,041,485 677,361 121,172 227,048 365,923 2,724,438
--------- --------- --------- --------- ------- ------- ------- ---------
NET BOOK VALUE
AT 31 DECEMBER 2004 1,187,897 1,569,162 543,602 391,442 70,900 127,908 162,544 4,053,455
========= ========= ========= ========= ======= ======= ======= =========
The net book value of tangible fixed assets includes an amount of E75,463
in respect of assets held under finance leases. The depreciation charge for
the year on these assets amounted to E33,043. The land and buildings of the
company were revalued by Lisney Property Services Limited, Chartered
Surveyors, to an open market value basis reflecting existing use on 31
December 2003. The valuation was carried out in accordance with the SCS
Appraisal Manual, which is the valuation manual pertaining in the Republic
of Ireland.
16
Sigma Wireless Technologies Limited
Notes (continued)
12 STOCKS, NET OF PROVISIONS
AT 31 DECEMBER
2004
--------------
E
Raw materials and consumables 1,905,766
Work in progress 257,258
Finished goods and goods for resale 102,138
---------
2,265,162
=========
There are no material differences between the replacement cost of stocks
and the balance sheet amounts.
13 DEBTORS
AT 31 DECEMBER
2004
--------------
E
Trade debtors 2,271,343
Prepayments 100,854
Pension prepayment 23,170
VAT refundable 151,746
Amounts due from related parties (note 27) 129,180
---------
2,676,293
=========
All amounts fall due within one year.
14 CREDITORS: amounts falling due within one year
AT 31 DECEMBER
2004
--------------
E
Bank overdraft 653,055
Trade creditors 1,650,868
Taxation and social welfare creditors (see below) 251,432
Accruals 1,163,265
Amounts owed to related parties (note 27) 825,687
Obligations under finance leases (note 16) 34,131
---------
4,578,438
=========
Analysis of taxation and social welfare creditors:
Irish payroll taxes 243,830
Corporation tax payable 7,602
---------
251,432
=========
17
Sigma Wireless Technologies Limited
Notes (continued)
15 CREDITORS: amounts falling due after one year
AT 31 DECEMBER
2004
--------------
E
INBS loan 2,300,000
Obligations under finance leases (note 16) 25,696
Loans from shareholders 52,122
Amounts owed to parent undertaking (note 27) 2,197,756
---------
4,575,574
=========
The loan from IBNS is secured by a debenture over the fixed assets of the
company to specifically include a first legal charge over the land and
buildings. The loan is for a period of 10 years at an initial rate of 4.95%
variable.
16 OBLIGATIONS UNDER FINANCE LEASES
The company and group had commitments under finance leases as follows:
AT 31 DECEMBER
2004
--------------
E
Payable within one year 34,131
Payable after one and before five years 25,696
------
59,827
======
17 FINANCE COST OF NON-EQUITY SHARES
AT 31 DECEMBER
2004
--------------
E
525,000 3% cumulative redeemable preference shares
of E1.269738 each 19,998
250,000 7.95% cumulative redeemable preference shares
of E1 each 19,875
200,000 7.95% cumulative redeemable 'A' preference shares
of E1 each 15,900
------
FINANCE COSTS DEFERRED 55,773
======
No dividends have been paid on the cumulative preference shares to date.
The cumulative dividend due at 31 December 2004 is E261,534. This has been
included in the non-equity portion of shareholders' funds.
18
Sigma Wireless Technologies Limited
Notes (continued)
18 SHARE CAPITAL
AT 31 DECEMBER
2004
--------------
E
Authorised
125,939 'A' ordinary shares of E1.269738 each 159,910
159,211 convertible ordinary shares of E1.269738 each 202,156
525,000 3% cumulative redeemable preference shares
of E1.269738 each 666,612
250,000 7.95% cumulative redeemable preference shares
of E1 each 250,000
200,000 7.95% cumulative redeemable "A" preference shares
of E1 each 200,000
---------
1,478,678
=========
AT 31 DECEMBER
2004
--------------
E
Allotted, called up and fully paid
125,939 'A' ordinary shares of E1.269738 each 159,910
159,211 convertible ordinary shares of E1.269738 each 202,156
525,000 3% cumulative redeemable preference shares
of E1.269738 each 666,612
250,000 7.95% cumulative redeemable preference shares
of E1 each 250,000
200,000 7.95% cumulative redeemable "A" preference shares
of E1 each 200,000
---------
1,478,678
=========
On 2 April 2004, the issued share capital of the company was increased by
the sum of E5,298 by the issue of 4,172 convertible ordinary shares of
E1.269738 each.
On 1 November 2004, the issued share capital of the company was increased
by the sum of E20,263 by the issue of 15,959 convertible ordinary shares of
E1.269738 each.
19
Sigma Wireless Technologies Limited
Notes (continued)
18 SHARE CAPITAL (continued)
NON - EQUITY SHARES
At 31 December 2004, the non-equity shares are represented by 125,939 "A"
ordinary shares, 525,000 3% cumulative redeemable preference shares,
250,000 7.95% redeemable preference shares of E1 each and 200,000 7.95%
cumulate redeemable 'A' preference shares of E1 each.
SUMMARY OF RIGHTS OF NON-EQUITY SHARES
'A' Ordinary shares
The 'A' ordinary shares have been issued to the trustees of a BES (Republic
of Ireland government sponsored investment scheme) scheme. The entitlement
of these shares to dividend payments rank pari-passu with the equity
shares. There was an option agreement between Sigma Communications Group
Limited and the trustees granting put and call options to transfer the
shares held by the trustees, five years and one day from the date of
allotment (31 December 1996). The trustees of the BES scheme exercised
their option on 2 January 2002 to transfer the shares held at a purchase
price of E10.384631 per share. The purchase price of E1,307,830 for the
125,939 'A' ordinary shares is due to be paid to the trustees in
instalments, of which E576,968 has been repaid to date.
Preference shares
'A' Preference shares
The holders of the 'A' preference shares, Enterprise Ireland (Republic of
Ireland state agency), are entitled, to a fixed cumulative preference
dividend at the rate of 7.95% per annum on the amount paid up thereon on
the 'A' preference shares.
Preference shares
The holders of the preference shares, Enterprise Ireland (Republic of
Ireland state agency), are entitled to a fixed cumulative preference
dividend at rates of 3% and 7.95%, as applicable above, per annum on the
amount paid up thereon on the preference shares.
In the event of a winding up of the company the holders of the 'A'
preference and preference shares will rank above the holders of the
ordinary shares up to the arrears in dividend if any, whether declared or
earned, and the capital value of the shares. The holders of these shares
shall be entitled to receive notice of, attend, speak at, but not to vote
at, general meetings of the company.
19 SHARE PREMIUM
AT 31 DECEMBER
2004
--------------
E
Share premium at beginning of year 1,027,923
Arising on issue of shares 466,622
---------
SHARE PREMIUM AT END OF YEAR 1,494,545
=========
20
Sigma Wireless Technologies Limited
Notes (continued)
20 REVALUATION RESERVE
AT 31 DECEMBER
2004
--------------
E
Revaluation reserve 1,786,073
=========
The revaluation reserve arose on the revaluation of property as referred to
in note 11.
21 RECONCILIATION OF SHAREHOLDERS' FUNDS
AT 31 DECEMBER
2004
--------------
E
Shareholders' funds at beginning of year (82,413)
Loss for the financial year (359,228)
Transactions with shareholders
Share capital issued including share premium 492,183
Foreign exchange (526)
----------
SHAREHOLDERS' FUNDS AT END OF YEAR 50,016
==========
Profit and loss account retained by: E
Holding Company (4,888,076)
Subsidiaries 178,796
==========
22 COMMITMENTS AND CONTINGENCIES
CAPITAL COMMITMENTS
The directors have neither approved nor contracted for any future capital
commitments.
Under the terms of the grant agreements in place between Sigma Wireless
Technologies Limited and Enterprise Ireland (Republic of Ireland state
agency), government grants amounting to E496,454 (2003: E496,454) could
become repayable in the event that the company fails to comply with certain
conditions set out in grant agreements. On 6 June 2005, E246,921 of this
contingency expired.
From time to time, the company is involved in other claims and legal
actions, which arise in the normal course of business. Based on information
currently available to the company, and legal advice, the directors believe
such litigation will not, individually or in aggregate, have a material
adverse effect on the financial statements and that the company is
adequately positioned to deal with the outcome of any such litigation.
21
Sigma Wireless Technologies Limited
Notes (continued)
23 PENSIONS
The company has continued to account for pensions in accordance with the
accounting standard SSAP 24 and the disclosures given in (a) below are
those required by that standard.
(A) SSAP 24 DISCLOSURES
Pensions for employees, including certain executive directors, are funded
through an external pension scheme in the name of Sigma Communications
Group Limited. The scheme is vested in independent trustees for the sole
benefit of employees and their dependants. The group pays an annual
contribution on behalf of its employees to the Sigma Communication Group
Limited pension scheme. The contribution is based on an actuarial
assessment of that scheme. The latest actuarial valuation was at 1 July
2004 using the "projected unit" method. The total pension contributions to
this scheme by the company for the year were E152,148.
At the date of the valuation, the market value of the assets of the Sigma
Communications Group Limited Scheme was sufficient to cover 66% of the
accrued liability, allowing for expected future increases in earnings. The
scheme actuary has calculated that if the rate of 8.7% mentioned below is
adopted, over time the estimated assets of the scheme would cover 100% of
the estimated liabilities of the scheme. The actuarial report is not
available for public inspection but the results are advised to members of
the scheme.
Under Irish GAAP, FRS 17 'Retirement Benefits' is only applicable for
accounting periods beginning on or after 1 January 2005. Accordingly, there
is no requirement at 31 December 2004 to include pension scheme surpluses
or deficits on the balance sheet.
24 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOWS FROM OPERATING
ACTIVITIES
YEAR ENDED
31 DECEMBER
2004
-----------
E
Operating loss (261,790)
Depreciation 404,343
Amortisation of intangible assets 23,837
Profit on disposal of fixed assets --
(Increase) in stock (688,758)
(Increase) in debtors (800,382)
(Decrease) in creditors (759,292)
Exchange difference (386)
----------
Net cash outflow from operating activities (2,082,428)
==========
22
Sigma Wireless Technologies Limited
Notes (continued)
25 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENTS
YEAR ENDED
31 DECEMBER
2004
-----------
E
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid (85,895)
Interest element of finance lease payments (4,176)
---------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE (90,071)
=========
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (295,690)
Purchase of intangible fixed assets (26,340)
Sale of tangible fixed assets --
---------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT (322,030)
=========
FINANCING
Issue of share capital 492,183
Repayment of shareholders' loans (315,363)
Debt due within one year - new loan 2,300,000
Capital element of finance leases (17,486)
---------
NET CASH INFLOW FROM FINANCING 2,459,334
=========
23
Sigma Wireless Technologies Limited
Notes (continued)
26 ANALYSIS OF NET DEBT
AT 31 AT 31
DECEMBER CASH OTHER DECEMBER
2003 FLOW NON CASH 2004
-------- ---------- -------- ----------
E E E E
Overdraft (649,424) (3,631) -- (653,055)
Cash at bank 56,595 (42,477) -- 14,118
-------- ---------- ------- ----------
(592,829) (46,108) -- (638,937)
Shareholders' loans (367,485) 315,363 -- (52,122)
INBS loan -- (2,300,000) -- (2,300,000)
Finance leases (32,613) 17,486 (44,700) (59,827)
-------- ---------- ------- ----------
(992,927) (2,013,259) (44,700) (3,050,886)
======== ========== ======= ==========
27 RELATED PARTY TRANSACTIONS
The group had the following balances with related parties at the year end.
These companies are under the common control of Michael J. McGinley and
James A. Boyle who were directors and shareholders at year end.
DEBTORS
AT
31 DECEMBER
2004
-----------
E
Finglas Technologies Limited 129,180
=======
CREDITORS: amounts falling due within one year
AT
31 DECEMBER
2004
-----------
E
Sigma Wireless Communications Limited 825,687
=======
24
Sigma Wireless Technologies Limited
Notes (continued)
27 RELATED PARTY TRANSACTIONS (continued)
CREDITORS: amounts falling due after one year
Loan from BMS Holdings Limited 2,197,756
=========
All related party balances are non interest bearing. Apart from the loan
from BMS Holdings Limited, all balances are repayable on demand. The
average balance during the year on the loan from BMS Holdings Limited was
E2,458,641.
During the year, the group had the following sales to related parties.
YEAR ENDED
31 DECEMBER
2004
-----------
E
Sigma Wireless Communications Limited 156,849
========
During the year the company had the following cross charges to group
companies.
YEAR ENDED
31 DECEMBER
2004
-----------
E
Sigma Wireless Communications Limited 399,975
=======
28 POST BALANCE SHEET EVENTS
On 4 July 2005, PCTEL, INC. acquired all of the outstanding share capital
of Sigma Wireless Technologies Limited pursuant to a Share Acquisition
Agreement.
25
Sigma Wireless Technologies Limited
Notes (continued)
29 SUMMARY OF DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
SIGNIFICANT DIFFERENCES
The consolidated financial statements of the Group are prepared in
accordance with generally accepted accounting principles ("GAAP")
applicable in Ireland which differ significantly in certain respects from
GAAP in the United States ("US"). These significant differences are
described below:
(a) Property revaluation
Under Irish GAAP, tangible assets may be carried either at cost less
depreciation, or at a subsequent valuation less depreciation in accordance
with FRS 15. Under US GAAP, tangible assets must be carried at historical
cost less depreciation. The revaluation recognized as part of the Group's
land and buildings at December 31, 2004 under Irish GAAP would therefore be
reversed under US GAAP. Similarly, depreciation expense charged on
revaluation adjustments under Irish GAAP for the period ended December 31,
2004 would be reversed under US GAAP.
(b) Intangible assets
Under Irish GAAP, the Company capitalises development expenditures incurred
on specific identifiable projects in accordance with SSAP No. 13,
"Accounting for Research and Development" where recoverability can be
foreseen with reasonable assurance. The capitalised amount is subsequently
amortised in relation to the sales from such projects.
Under US GAAP, SFAS No. 2, "Accounting for Research and Development Costs"
requires that research and development costs are expensed as incurred. The
net development asset recognized at December 31, 2004 under Irish GAAP
would not have been recognized under US GAAP. Research and development
expense charged under Irish GAAP during the period ended December 31, 2004
would not be materially different under US GAAP.
(c) Deferred tax
In 1999 the Group exited from the moulded antennae business and sold the
related assets and goodwill to a third party. The sale of goodwill was
subject to capital gains tax in Ireland; however the company claimed
capital gains tax rollover relief, whereby after meeting certain conditions
it was allowed to defer the payment of capital gains tax in respect of the
sale of business assets such as goodwill because the proceeds from the sale
were reinvested in new business assets.
26
Sigma Wireless Technologies Limited
Notes (continued)
29 SUMMARY OF DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (continued)
(c) Deferred tax (continued)
Rollover relief operates on a continuous basis. The Group applied the
proceeds from the sale of the goodwill to acquiring plant and equipment
used in its ongoing business. In the event that this plant and equipment
are sold, rollover relief will continue to be available and the payment of
capital gains tax in respect of the goodwill disposal is deferred if the
proceeds from the sale are reinvested. In an ongoing business, rollover
relief is a permanent deferral of the payment of the capital gains tax
liability. Under Irish GAAP, there is no requirement to provide for a
deferred tax liability related to the capital gains tax. In accordance with
SFAS 109, under US GAAP the company would record a deferred tax liability,
which cannot be offset by tax loss carryforwards and as such would be
recognized at December 31, 2004.
(d) Pensions
The employees of the Group participate in the pension scheme operated by
Sigma Communications Group Limited, which operates a multi-employer defined
benefit scheme. Under Irish GAAP, pension costs for defined benefit plans
are accounted for in accordance with SSAP No. 24, "Accounting for Pension
Costs." Under SSAP 24 companies are not required to record their share of
any surplus or deficit on the pension scheme in their financial statements.
However, FRS No. 17 "Retirement Benefits" requires the recognition of the
relevant surplus or deficit on the pension scheme for financial statements
relating to accounting periods beginning on or after January 1, 2005. As
disclosed in note 23 to the consolidated financial statements, prior to and
for the year ended December 31, 2004 pension contributions made by the
Group to the pension scheme were recorded as an expense for Irish GAAP; as
allowed under SSAP 24 no amounts have been recorded on the balance sheet
for any surplus or deficit of the scheme.
In accordance with US GAAP defined benefit plans are accounted for in
compliance with SFAS No. 87, "Employers' Accounting for Pensions." Under
SFAS 87, where the accumulated benefit obligation (being the actuarial
present value of benefits attributed by the pension to employee service
rendered, based on current and past compensation levels) exceeds the fair
value of plan assets, a liability must be recognized in the balance sheet.
Under the Acquisition Agreement dated July 4, 2005 between PCTEL and the
Group, PCTEL will assume the underlying assets and liabilities of the
defined benefit scheme relating to the employees of the Group. An actuarial
report has been obtained which determines the total pension liability
assumed by PCTEL. Under US GAAP, the Group would have followed the
requirements of SFAS 87 and recorded a pension liability on the balance
sheet as of December 31, 2004.
(e) Financial instruments
Under Irish GAAP and in accordance with FRS No. 4, "Capital Instruments",
all instruments that legally are shares are included in shareholders' funds
even where they have characteristics that are more like those of
liabilities.
As of December 31, 2004, the Company has issued and outstanding 'A'
ordinary shares, convertible ordinary shares and three classes of
cumulative redeemable preference shares. The accounting and financial
statement presentation for the 'A' ordinary shares and the cumulative
redeemable preference shares differs between Irish and US GAAP as follows:
27
Sigma Wireless Technologies Limited
Notes (continued)
29 SUMMARY OF DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (continued)
'A' Ordinary shares
As discussed in Note 18 to the company's December 31, 2004 financial
statements, the 'A' ordinary shares were originally issued to trustees of a
Business Expansion Scheme ("BES"). There was an option agreement in
relation to 125,939 'A' Ordinary Shares between Sigma Communications Group
Limited, the ultimate parent of the Group, and the trustees granting put
and call options to transfer the shares held by the trustees to the Group
five years and one day from the date of allotment, December 31, 1996. This
option to transfer the shares was exercised by the trustees on January 2,
2002 at a purchase price E1,307,830 or E10.384631 per share. The book value
of the shares at that date was E1,187,833. Under Irish GAAP, as of 31
December 2004 and 2003 the book value of the shares was included as part of
shareholders' equity in the consolidated financial statements. Under US
GAAP, the book value of the shares would have been reclassified from
shareholders' equity to liabilities as of the date of the option exercise,
or January 2, 2002. In addition, the difference between the book value and
fair value of the shares would have been recorded as an additional
liability and expense under US GAAP.
At December 31, 2004 E576,968 of the total option purchase price of
E1,307,830 had been paid to the BES trustees via repurchase of shares
by Sigma Communications Group Limited. Sigma Communications Group Limited
held approximately 44% of the total shares issued and outstanding. These
share purchases have not resulted in any changes to the Group's
consolidated financial statements under Irish GAAP. Under US GAAP, the
purchase of the Group's shares by its parent would result in a reduction of
the original liability recorded at January 2, 2002 of E1,307,830 by
the amount of repurchases, or E576,968, reflecting a liability of
E730,862 as of December 31, 2004. The amount paid by the parent of
E576,968 would be reflected as a contribution to shareholders' equity
in the Group's consolidated financial statements under US GAAP.
Preference shares
Under Irish GAAP and in accordance with FRS No. 4 "Capital Instruments",
preferred shares meet the definition of Capital Instruments and are
included as part of shareholder funds. All classes of the preference shares
outstanding at December 31, 2004 are mandatorily redeemable for cash
between July 2007 and 2009 and accordingly under US GAAP, SFAS No. 150,
"Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" these instruments would be classified as
liabilities. Further, cumulative unpaid dividends entitled to the holders
of all classes of preference shares have not been recorded under Irish GAAP
because the company has insufficient distributable profits to pay the
dividends. Cumulative unpaid dividends at December 31, 2004 would also be
recorded and classified as liabilities under US GAAP. Amounts recorded as
liabilities for cumulative unpaid dividends would be recorded as interest
expense under US GAAP.
28
Sigma Wireless Technologies Limited
Notes (continued)
29 SUMMARY OF DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (continued)
(f) Revenue Recognition
Under Irish GAAP, goods are deemed to have been sold to customers and
revenue is recognized when the customer has access to the significant
benefits inherent in the goods and exposure to the risks inherent in those
benefits, which generally occurs when goods are shipped. The company's
customer contracts may include requirements to perform testing on shipped
goods prior to customers accepting the goods, which does not necessarily
preclude revenue recognition under Irish GAAP. For the year ended December
31, 2004, the company did not have any arrangements with customers
containing multiple deliverables as it sells antenna equipment that does
not require significant customization or installation.
Under US GAAP, the company would be required to consider the guidance in
Staff Accounting Bulletin (SAB) No. 104, "Revenue Recognition" and other US
GAAP revenue recognition literature including but not limited to Emerging
Issues Task Force No. 00-21, "Accounting for Revenue Arrangements with
Multiple Deliverables" and Concepts statements issued by the US Financial
Accounting Standards Board ("FASB"). Revenue generally should be recognized
when all of the following has occurred: persuasive evidence of an
arrangement exists, generally in writing; delivery has occurred or services
have been rendered; the price is fixed or determinable; and collection of
the price is reasonably assured.
The company does not believe there would be any adjustments required under
US GAAP related to revenue recognition for the year ended December 31, 2004
other than for one bill and hold arrangement entered into in 2004. This
arrangement did not meet the criteria for revenue recognition under US GAAP
because delivery was deemed not to have occurred by December 31, 2004. This
arrangement is not customary for the company. Revenue and associated cost
of sales were recognized under Irish GAAP. Under US GAAP the revenue and
costs would be reversed and recognized at the time all revenue recognition
criteria, including delivery, are deemed to have been met.
(g) Cash flows
In accordance with Irish GAAP, the company complies with FRS No. 1
(revised), "Cash Flow Statements." Its objectives and principles are
similar to those set out in SFAS No. 95, "Statement of Cash Flows." The
principal difference between the standards is in respect to classification.
Under FRS 1, the Company has presented its cash flows for (a) operating
activities; (b) returns on investment and servicing of finance; (c)
taxation; (d) capital expenditure; and (e) financing activities. SFAS 95
requires only three categories of cash flow activities, (a) operating; (b)
investing; and (c) financing. Cash flows arising from taxation and returns
on investments and servicing of finance under FRS 1 are included as
operating activities under SFAS 95.
29
Sigma Wireless Technologies Limited
Notes (continued)
29 SUMMARY OF DIFFERENCES BETWEEN IRISH AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (continued)
(h) Disclosure of accounting policy
Under FRS 1, cash is defined as cash in hand and deposits receivable on
demand, less overdrafts payable on demand. Cash equivalents are not
included but are dealt with in liquid resources and financing. Under SFAS
95, cash excludes overdrafts repayable on demand and changes in the
balances of overdrafts are classified as financing cash flows rather than
being included within cash and cash equivalents.
30 APPROVAL OF FINANCIAL STATEMENTS
The directors approved the financial statements on 16 September 2005.
30