TIDMBGTI
RNS Number : 9225O
BgenuineTec Inc.
16 March 2009
FOR IMMEDIATE RELEASE
16 March 2008
BgenuineTec Inc
(AIM: BGTI)
(formerly Secure Design KK)
("BgenuineTec" or "the Company")
Preliminary Results for the year ended 31 December 2008
Chairman's Statement
The past year has been a challenging year for our Company resulting in further
declining revenues and increased losses. New product development has been
considerably delayed, whilst domestic demand for existing products continues to
stall. It was against this background that the board decided that the Company
needed a fresh start under new management and I was delighted to announce the
appointments of Dr. Hiroaki Kunieda and Dr Dongju Li as Chief Executive Officer
and Chief Technical Officer respectively on 10 February 2009. These new board
members were brought in to develop a new range of products using our core
technology and establish a sales and distribution network across a number of
national and international markets.
Dr Kunieda is a Professor, and Dr Li an Assistant Professor, at the Department
of Integrated Systems and Communications at the Tokyo Institute of Technology
and were the founders of Beyond LSI Inc. in which BgenuineTec holds 60.49% of
the shares.
Results
Profit and Loss Account
In the year ended 31 December 2008, revenues fell by 90.6% to JPY 25.5 million
(GBP0.2 million) from JPY 269.76 million (GBP2.0 million). Gross profits have
declined from JPY 115.5 million (GBP0.9 million) in 2007 to a loss of JPY 76.7
million (GBP0.58 million)following an inventory write-down of JPY 86.5 million
(GBP0.66 million). The gross profit before the inventory write down was JPY
9,782 (GBP74,202), a gross margin of 38.4% (2007: 42.8%). The Board has taken
strong measures to address the Company's cost base in order to create a
sustainable business model for the Company. Operating costs were reduced in the
year from JPY 734 million (GBP5.56 million) in 2007 to JPY 424 million (GBP3.22
million). As a result the operating loss was reduced by 23.1% to JPY 497 million
from JPY 645 million and the loss before tax was to JPY 538 million (GBP4.0
million) from JPY 649 million (GBP4.9 million).
The loss per share was JPY 11.5 (GBP0.09) compared to the loss per share of JPY
19.6 (GBP0.15) in 2007.
Balance Sheet
The Balance Sheet reflects, where appropriate, asset write downs for Inventory
JPY 86.5 million (GBP0.66 million) and Non-Current Assets JPY 36.5 million
(GBP0.28 million). Total net assets at the year end were JPY 154 million,
compared to JPY 372 million at 31 December 2007.
The financial statements have been prepared by management on a going concern
basis and do not reflect any adjustments that would be necessary if the going
concern assumption was incorrect. The Board believes that the going concern
assumption is currently valid based on its view of the Company's future trading
and its continued ability to access equity finance.
An exchange rate of GBP1 = JPY 131.83 has been used throughout this statement.
Funding
Throughout FY 2008, additional fund raising of JPY 308 million (GBP2.3 million)
was completed.
In March JPY 30 million, June JPY 106 million, September JPY 20 million,
November JPY 152 million.
Operation Review and Outlook
The Company's strategy for 2009 and beyond will be to focus on providing
products with our core fingerprint authentication technology and strengthen our
commercial partnerships, including those with mobile phone and office automation
manufacturers. The core fingerprint authentication, which uses our algorithm,
sensor, matching engine (processor chip) and modules, is continually being
improved to suit new products specifically mobile phones, door locks, bank
security and office management systems which will open up new markets as
BgenuineTec develops.
Our main focus in our domestic market is to increase sales of our office
management systems and we are excited by the opportunities in fingerprint
authentication for web access and personal computer security in which we expect
to have products by the end of 2009.
In our mobile phone business, we aim to expand our sales of fingerprint
solutions alongside a major phone manufacturer from 1 million mobile phones in
2008, which were brought to market with optical swipe sensors.
In the banking sector, we made good progress last year and we plan to build on
this success by continuing the development of our fingerprint security for the
major Chinese banks
We also see opportunities to commence selling fingerprint door locks primarily
to Chinese door lock makers in cooperation with Japanese door lock vendors.
In developing overseas markets, specifically in China and the USA, we will
expand our sales network for mobile phones, bank and door lock products by
establishing subsidiary partnerships with related companies and distributors and
we aim to establish sales networks over the internet with other distributors.
In order to stimulate these activities during a difficult period for the markets
which we serve, we have undertaken a major reorganisation of the business, both
in terms of sales and technical development. We continue to improve our
business partnerships and our distributor networks as well as developing our
products according to market needs and I believe the actions that the board is
taking will, in due course, result in a much improved performance. This
improvement is predicated on continuing to access capital markets for further
investment into the Company, I remain confident in this regard.
We are mindful of the support and encouragement we have received from
shareholders through a very difficult period and we would like to thank them for
their patience and assure them that board is actively looking increase the sales
of our products, improve margins and return to profit.
Taketoshi Kashiwabara
(Chairman)
For further information, please contact:
BgenuineTec Inc.
Taketoshi KashiwabaraJapan +81-3-5652 -0321
(Chairman)
Toshiya Kurita
Japan +81-3-5652 -0321
(Chief Financial Controller)
Charles Stanley Securities +44
(0) 20 7149 6000
Nominated Adviser
Russell Cook / Freddy Crossley
Cubitt Consulting
+44 (0) 20 7367 5100
Brian Coleman-Smith / James Verstringhe
Background Note on BgenuineTec Inc. (formerly Secure Design KK)
On 14 July 2006, BgenuineTec Inc.(AIM; BGTI) was the first Japanese company to
be admitted to trading on AIM. It offers fingerprint authentication products to
companies and individuals that wish to establish high levels of security using
biometrics. Biometrics uses a physical attribute of the body, such as a
fingerprint to identify and verify the individual with the aim of making
individual authentication efficient and secure.
The Company offers a range of fingerprint authentication products and systems,
from an integrated system to a mobile device. The Company designs and outsources
the production of these products and can tailor them to individual client
specific needs and applications.
Biometric applications provide convenient and reliable security which reduces
the cost associated with the failure of conventional authentication methods. The
principal factor which distinguishes biometrics from conventional password based
authentication is the enhanced security level it provides while maintaining the
privacy of individual users.
BgenuineTec Inc.
CONSOLIDATED INCOME STATEMENTS FOR the years ended 31 December 2008 and 2007
+----------------+--------+-----------+-----------+-------------+-------------+
| | Notes | Year | Year | Year | Year |
| | | Ended | Ended | Ended | Ended |
| | | 31/12/08 | 31/12/07 | 31/12/08 | 31/12/07 |
+----------------+--------+-----------+-----------+-------------+-------------+
| | | JPY'000 | JPY'000 | STG | STG |
+----------------+--------+-----------+-----------+-------------+-------------+
| Revenue | 2/23 | 25,455 | 269,755 | 193,087 | 2,046,230 |
+----------------+--------+-----------+-----------+-------------+-------------+
| Cost | 4 | (102,175) | (154,211) | (775,049) | (1,169,769) |
| of | | | | | |
| sales | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Gross | | (76,720) | 115,544 | (581,962) | 876,461 |
| profit | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Other | | 4,123 | 27,337 | 31,279 | 207,368 |
| operating | | | | | |
| income | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Sales | 4 | (131,250) | (357,652) | (995,604) | (2,712,985) |
| and | | | | | |
| marketing | | | | | |
| expenses | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| General | 4 | (160,900) | (215,619) | (1,220,511) | (1,635,580) |
| and | | | | | |
| administrative | | | | | |
| expenses | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Research | 4 | (131,768) | (215,025) | (999,531) | (1,631,075) |
| and | | | | | |
| development | | | | | |
| expenses | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Loss | 4 | (496,515) | (645,415) | (3,766,329) | (4,895,811) |
| from | | | | | |
| operations | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Finance | 6 | 3,092 | 259 | 23,460 | 7,896 |
| income | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Finance | 5 | (25,016) | (623) | (189,762) | (10,659) |
| costs | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Net | | (21,924) | (364) | (166,302) | (2,763) |
| finance | | | | | |
| costs | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Share | 13 | (19,484) | (3,180) | (147,799) | (24,119) |
| of | | | | | |
| loss | | | | | |
| of | | | | | |
| equity | | | | | |
| accounted | | | | | |
| investee | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Loss | | (537,923) | (648,959) | (4,080,430) | (4,922,693) |
| before | | | | | |
| tax | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Income | 18 | - | - | - | - |
| tax | | | | | |
| expense | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Loss | | (537,923) | (648,959) | (4,080,430) | (4,922,693) |
| for | | | | | |
| the | | | | | |
| year | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Loss | | JPY | JPY | STG | STG |
| per | | | | | |
| share | | | | | |
+----------------+--------+-----------+-----------+-------------+-------------+
| Basic | 7 | (11.51) | (19.58) | (0.09) | (0.15) |
+----------------+--------+-----------+-----------+-------------+-------------+
| Diluted | 7 | (11.51) | (19.58) | (0.09) | (0.15) |
+----------------+--------+-----------+-----------+-------------+-------------+
BgenuineTec Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR the yearS ended 31 DECEMBER
2008 and 2007
+--------------------+---------+-----------+-----------+-----------+--------------+---------+--+-------------+
| | Attributable to equity holder of the Company |
+--------------------+---------------------------------------------------------------------------------------+
| | JPY'000 | STG |
+--------------------+----------------------------------------------------------------------+----------------+
| | Share | Share | Fair | Share | Deficit | Total | |
| | capital | premium | value | option | | | |
| | | | reserve | reserve | | equity | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Balance as | 587,369 | 347,001 | (575) | 2,339 | (177,313) | 758,821 | 5,756,057 |
| at | | | | | | | |
| 1 January | | | | | | | |
| 2007 | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Share | 126,245 | 126,245 | - | - | - | 252,490 | 1,915,270 |
| issued | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Share | - | (991) | - | - | - | (991) | (7,519) |
| issuance | | | | | | | |
| costs | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Fair value | - | - | 150 | - | - | 150 | 1,138 |
| adjustments | | | | | | | |
| of | | | | | | | |
| available-for-sale | | | | | | | |
| investments | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Share | - | - | - | 9,998 | - | 9,998 | 75,837 |
| option | | | | | | | |
| costs | | | | | | | |
| charged to | | | | | | | |
| income for | | | | | | | |
| the year | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Net loss | - | - | - | - | (648,959) | (648,959) | (4,922,693) |
| for year | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Balance as | 713,614 | 472,255 | (425) | 12,337 | (826,272) | 371,509 | 2,818,090 |
| at | | | | | | | |
| 1 January | | | | | | | |
| 2008 | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Share | 159,846 | 148,154 | - | - | - | 308,000 | 2,336,342 |
| issued | | | | | | | |
| (Note 16) | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Share | - | (1,091) | - | - | - | (1,091) | (8,277) |
| issuance | | | | | | | |
| costs | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Fair value | - | - | 425 | - | - | 425 | 3,220 |
| adjustments | | | | | | | |
| of | | | | | | | |
| available-for-sale | | | | | | | |
| investments | | | | | | | |
| (Note 12) | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Share | - | - | - | 13,630 | - | 13,630 | 103,397 |
| option | | | | | | | |
| costs | | | | | | | |
| charged to | | | | | | | |
| income for | | | | | | | |
| year (Note | | | | | | | |
| 16) | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Net loss | - | - | - | - | (537,923) | (537,923) | (4,080,429) |
| for | | | | | | | |
| year (Note | | | | | | | |
| 17) | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+------------+-------------+
| Balance as | 873,460 | 619,318 | - | 25,967 | (1,364,195) | 154,550 | 1,1172,343 |
| at | | | | | | | |
| 31 December | | | | | | | |
| 2008 | | | | | | | |
+--------------------+---------+-----------+-----------+-----------+--------------+---------+--+-------------+
BgenuineTec Inc.
CONSOLIDATED BALANCE SHEETS AS AT 31 DECEMBER 2008 AND 2007
+-------------------+--------+--------------+-----------+--------------+-------------+
| | Notes | 2008 | 2007 | 2008 | 2007 |
+-------------------+--------+--------------+-----------+--------------+-------------+
| | | JPY'000 | JPY'000 | STG | STG |
| | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| ASSETS | | | | | |
| Non-current | | | | | |
| assets | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Property, | 8 | 4,214 | 9,683 | 31,961 | 73,454 |
| plant and | | | | | |
| equipment | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Investment | 12 | 6,446 | 32,682 | 48,895 | 247,913 |
| securities | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Investments | 13 | 68,036 | 57,071 | 516,090 | 432,909 |
| in equity | | | | | |
| accounted | | | | | |
| investee | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Goodwill | 10 | 7,200 | 12,500 | 54,616 | 94,819 |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Intangible | 11 | 4,858 | 77,518 | 36,850 | 588,019 |
| assets | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Other | 9 | 4,636 | 4,858 | 35,168 | 36,850 |
| non-current | | | | | |
| assets | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| | | 95,390 | 194,312 | 723,580 | 1,473,964 |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Current | | | | | |
| assets | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Inventories | 14 | 51,727 | 117,469 | 392,376 | 891,063 |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Trade | 15/23 | 43,442 | 136,433 | 329,534 | 1,034,917 |
| and | | | | | |
| other | | | | | |
| receivables | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Cash | 15 | 45,237 | 9,515 | 343,146 | 72,173 |
| and | | | | | |
| cash | | | | | |
| equivalents | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| | | 140,406 | 263,417 | 1,065,056 | 1,998,153 |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Total | | 235,796 | 457,729 | 1,788,636 | 3,472,117 |
| assets | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| LIABILITIES | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Current | | | | | |
| liabilities | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Trade | 19/23 | 81,246 | 86,220 | 616,293 | 654,027 |
| and | | | | | |
| other | | | | | |
| payables | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| | | 81,246 | 86,220 | 616,293 | 654,027 |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Net | | 59,160 | 177,197 | 448,763 | 1,344,126 |
| current | | | | | |
| assets | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Total | | 81,246 | 86,220 | 616,293 | 654,027 |
| liabilities | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Net | | 154,550 | 371,509 | 1,172,343 | 2,818,090 |
| assets | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| EQUITY | | | | | |
| | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Share | 16 | 873,460 | 713,614 | 6,625,656 | 5,413,139 |
| capital | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Share | 16 | 619,318 | 472,255 | 4,697,848 | 3,582,301 |
| premium | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Fair | 12 | - | (425) | - | (3,220) |
| value | | | | | |
| reserve | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Share | 16 | 25,967 | 12,337 | 196,979 | 93,581 |
| option | | | | | |
| reserve | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Deficit | 17 | (1,364,195) | (826,272) | (10,348,140) | (6,267,711) |
+-------------------+--------+--------------+-----------+--------------+-------------+
| Total | | 154,550 | 371,509 | 1,172,343 | 2,818,090 |
| equity | | | | | |
+-------------------+--------+--------------+-----------+--------------+-------------+
BgenuineTec Inc.
CONSOLIDATED CASH FLOW STATEMENTS FOR the yearS ended 31 December 2008 and 2007
+-------------------+--------+------------+-----------+-------------+-------------+
| | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| | Notes | Year | Year | Year | Year |
| | | Ended | Ended | Ended | Ended |
| | | 31/12/08 | 31/12/07 | 31/12/08 | 31/12/07 |
+-------------------+--------+------------+-----------+-------------+-------------+
| | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| | | JPY'000 | JPY'000 | STG | STG |
+-------------------+--------+------------+-----------+-------------+-------------+
| OPERATING | | | | | |
| ACTIVITIES | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Cash | 20 | (225,105) | (251,331) | (1,707,543) | (1,906,073) |
| used | | | | | |
| in | | | | | |
| operations | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Interest | | 76 | (623) | 582 | (5,132) |
| received | | | | | |
| (paid), | | | | | |
| net | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| NET | | (225,029) | (251,954) | (1,706,961) | (1,911,205) |
| CASH | | | | | |
| USED | | | | | |
| IN | | | | | |
| OPERATING | | | | | |
| ACTIVITIES | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| INVESTING | | | | | |
| ACTIVITIES | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Purchases | | - | (1,101) | - | (8,351) |
| of | | | | | |
| property, | | | | | |
| plant and | | | | | |
| equipment | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Expenditure | | (3,897) | (12,888) | (29,563) | (97,763) |
| on product | | | | | |
| development | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Purchase | | - | (40,500) | - | (307,214) |
| of | | | | | |
| intangible | | | | | |
| assets | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Acquisition | | (30,450) | (60,250) | (230,979) | (457,028) |
| of | | | | | |
| associate | | | | | |
| company | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Proceeds | | 1,644 | - | 12,475 | - |
| from | | | | | |
| sales of | | | | | |
| investment | | | | | |
| securities | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Increase | | (13,400) | (35,000) | (101,646) | (265,493) |
| of | | | | | |
| short-term | | | | | |
| lending | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Decrease | | - | 65,000 | - | 493,059 |
| of | | | | | |
| short-term | | | | | |
| lending | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| NET | | (46,103) | (84,739) | (349,713) | (642,790) |
| CASH | | | | | |
| USED | | | | | |
| IN | | | | | |
| INVESTING | | | | | |
| ACTIVITIES | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| FINANCING | | | | | |
| ACTIVITIES | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Proceeds | | - | 24,135 | - | 183,079 |
| from | | | | | |
| short-term | | | | | |
| borrowings | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Repayments | | - | (24,135) | - | (183,079) |
| of | | | | | |
| short-term | | | | | |
| borrowings | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| Proceeds | | 306,909 | 251,499 | 2,328,065 | 1,907,751 |
| on issue | | | | | |
| of new | | | | | |
| shares, | | | | | |
| net of | | | | | |
| issuance | | | | | |
| cost | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| NET | | 306,909 | 251,499 | 2,328,065 | 1,907,751 |
| CASH | | | | | |
| FROM | | | | | |
| FINANCING | | | | | |
| ACTIVITIES | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| NET | | 35,777 | (85,194) | 271,391 | (646,244) |
| INCREASE | | | | | |
| (DECREASE) | | | | | |
| IN CASH | | | | | |
| AND CASH | | | | | |
| EQUIVALENTS | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| EFFECT | | (55) | 221 | (418) | 1,675 |
| OF | | | | | |
| EXCHANGE | | | | | |
| RATE | | | | | |
| FLUCTUATIONS | | | | | |
| ON CASH HELD | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| CASH | | 9,515 | 94,488 | 72,173 | 716,742 |
| AND | | | | | |
| CASH | | | | | |
| EQUIVALENTS | | | | | |
| AT | | | | | |
| BEGINNING | | | | | |
| OF YEAR | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| CASH | 15 | 45,237 | 9,515 | 343,146 | 72,173 |
| AND | | | | | |
| CASH | | | | | |
| EQUIVALENTS | | | | | |
| AT END OF | | | | | |
| YEAR | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
| | | | | | |
+-------------------+--------+------------+-----------+-------------+-------------+
BgenuineTec Inc.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
+--+------+----------------------------------------------------------------------+
| | | BgenuineTec Inc, hereafter "the Company", is a company incorporated |
| | | and domiciled in Japan. The legal form of the Company is a limited |
| | | liability corporation called "Kabushiki-kaisha". The Company designs |
| | | and manufactures a range of fingerprint authentication technologies |
| | | and products to companies and individuals that wish to establish |
| | | high levels of security in various applications using biometrics. |
| | | The business activity also includes R&D and sales of fingerprint |
| | | systems and components. |
| | | The consolidated financial statements of the Company have been |
| | | prepared in accordance with International Financial Reporting |
| | | Standards ("IFRS"), as adopted by the EU. The designation "IFRSs" |
| | | also includes all valid Internal Accounting Standards (IASs). All |
| | | interpretations of the International Financial Reporting |
| | | Interpretations Committee (IFRIC) mandatory for the financial year |
| | | 2008 have also been applied. Sterling pound amounts included herein |
| | | are given solely for convenience and are stated, as matter of |
| | | arithmetical computation only, at the rate of JPY131.83=GBP1, the |
| | | approximate exchange rate at 31 December 2008. The translation |
| | | should not be construed as representations that the Japanese yen |
| | | amounts have been, could have been, or could in the future be, |
| | | converted into Sterling pound. |
| | | The principal accounting policies adopted are set out below. |
| | | |
+--+------+----------------------------------------------------------------------+
| | | Going-concern |
| | | These consolidated financial statements have been prepared by |
| | | management on the basis of generally accepted accounting principles |
| | | applicable to a "going concern", which assumes the Company will |
| | | continue in operation for the foreseeable future and will be able to |
| | | realize its assets and discharge its liabilities in the normal |
| | | course of operations. |
| | | The Company posted a net loss of JPY538 million in the year ended 31 |
| | | December 2008, due to poor sales of JPY 25 million, valuation loss |
| | | for inventories of JPY 87 million and fixed assets of JPY 34 |
| | | million. The poor sales were resulted from restructuring of both |
| | | sales and development division internally, decreased and deferred |
| | | order from the main clients influenced by worldwide recession |
| | | externally. |
| | | To enable the Company to rectify the continued loss-making, the |
| | | Company is either in the process of or going to carry out following |
| | | actions in 2009;* |
| | | Readjust the product mix by introducing technologies and products |
| | | from the associated company "Beyond LSI Inc".* |
| | | Change sales channel from direct sales to sales through agents and |
| | | distributors.* |
| | | Change of management structure, as already announced* |
| | | Penetration of the Chinese market. |
| | | It is anticipated that in the fiscal year of 2010, distribution of |
| | | fingerprint authentication products for mobile phone, (shipments of |
| | | such products have been subsequent to 31 December 2008) and related |
| | | security products will begin to take full effect to the Company and |
| | | if projections are achieved will enable the Company to be cash flow |
| | | positive. |
| | | To expand its business, the Company needs additional fund of JPY 250 |
| | | million in 2009 from the date of signing of these accounts.. Fund |
| | | raising of JPY 100 million is planned in the 1st half of 2009, rest |
| | | of JPY 150 million in 2nd half of 2009. Fundamental to the Going |
| | | Concern assumption is a belief by the Board that it can raise such |
| | | equity. |
| | | These consolidated financial statements do not reflect adjustments |
| | | that would be necessary if the going concern was not appropriate |
| | | because the Company has a firm conviction to achieve sales and |
| | | operating profits in 2009 and 2010 by execution of above actions, |
| | | and the fund raising in 2009 as mentioned above. |
| | | If the going concern assumption were not appropriate for the |
| | | consolidated financial statements, then adjustment would be |
| | | necessary to the carrying value of the assets and liabilities, the |
| | | reported revenues and expenses, and the balance sheet |
| | | classifications used. |
| | | |
+--+------+----------------------------------------------------------------------+
| | | Basis of consolidation |
| | | Equity method |
| | | Associates are those entities in which the Company has significant |
| | | influence, but not control, over the financial and operating |
| | | policies. Significant influence is presumed to exist when the |
| | | Company holds between 20 and 50 percent of the voting power of |
| | | another entity. Associates are accounted for using the equity method |
| | | (equity accounted investees) according to IAS28 (Investments In |
| | | Associates). The consolidated financial statements include the |
| | | Company's share of the income and expenses of equity accounted |
| | | investees, after adjustments to align the accounting policies with |
| | | those of the Company, from the date that significant influence |
| | | commences until the date that significant influence ceases. When the |
| | | Company's share of losses exceeds its interest in an equity |
| | | accounted investee, the carrying amount of that interest (including |
| | | any long-term investments) is reduced to nil and the recognition of |
| | | further losses is discontinued except to the extent that the Company |
| | | has an obligation or has made payments on behalf of the investee. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Goodwill |
| | | Goodwill arising on business combination represents the excess of |
| | | the cost of acquisition over the fair value of the identifiable |
| | | assets and liabilities of a transferor at the date of acquisition. |
| | | In respect of equity method investees, the carrying amount of |
| | | goodwill is included in the carrying amount of the investment. |
| | | Goodwill is recognised as an asset and reviewed for impairment at |
| | | least annually. Any impairment is recognised immediately in the |
| | | income statement and is not subsequently reversed. |
| | | The Company has only a single cash generating unit for the purpose |
| | | of impairment testing. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Revenue recognition |
| | | Revenue arises from sales of goods. |
| | | Revenue is measured at the fair value of the consideration received |
| | | or receivable and represents amounts receivable for goods and |
| | | services provided in the normal course of business, net of discounts |
| | | and consumption taxes. |
| | | Sales of goods are recognised when goods are delivered and title has |
| | | passed. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Leasing |
| | | Leases are classified as finance leases whenever the terms of the |
| | | lease transfer substantially all the risks and rewards of ownership |
| | | to the lessee. All other leases are classified as operating leases. |
| | | There were no assets under finance lease as of the balance sheet |
| | | date. |
| | | Rentals payable under operating leases are charged to income on a |
| | | straight-line basis over the term of the relevant lease. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Foreign currencies |
| | | The Company's functional and presentational currency is Japanese Yen |
| | | ("JPY"). |
| | | Transactions in currencies other than Japanese Yen are recorded at |
| | | the rates of exchange prevailing on the dates of the transactions. |
| | | At the balance sheet date, monetary assets and liabilities that are |
| | | denominated in foreign currencies are retranslated at the rates |
| | | prevailing on the balance sheet date. Non-monetary assets and |
| | | liabilities carried at fair value that are denominated in foreign |
| | | currencies are translated at the rates prevailing at the date when |
| | | the fair value was determined. Gains and losses arising on |
| | | retranslation are included in the income statement for the year. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Taxation |
| | | The tax expense represents the sum of the tax currently payable and |
| | | deferred tax. |
| | | The tax currently payable is based on taxable profit for the year. |
| | | Taxable profit differs from net profit as reported in the income |
| | | statement because it excludes items of income or expense that are |
| | | taxable or deductible in other years and it further excludes items |
| | | that are never taxable or deductible. The Company's liability for |
| | | current tax is calculated by using tax rates that have been enacted |
| | | or substantively enacted by the balance sheet date. |
| | | Deferred tax is the tax expected to be payable or recoverable on |
| | | differences between the carrying amount of assets and liabilities in |
| | | the financial statements and the corresponding tax bases used in the |
| | | computation of taxable profit, and is accounted for using the |
| | | balance sheet liability method. Deferred tax liabilities are |
| | | recognised for all taxable temporary differences and deferred tax |
| | | assets are recognised to the extent that it is probable that taxable |
| | | profits will be available against which deductible temporary |
| | | differences can be utilised. Such assets and liabilities are not |
| | | recognised if the temporary difference arises from goodwill on the |
| | | initial recognition of goodwill or an asset or liability which is |
| | | not part of a business combination and at the time of recognition |
| | | did not affect accounting or taxable profit. |
| | | The carrying amount of deferred tax assets is reviewed at each |
| | | balance sheet date and reduced to the extent that it is no longer |
| | | probable that sufficient taxable profits will be available to allow |
| | | all or part of the assets to be recovered. |
| | | Deferred tax is calculated at the tax rates that are expected to |
| | | apply to the period when the asset is realised or the liability is |
| | | settled. Deferred tax is charged or credited in the income |
| | | statement, except when it relates to items credited or charged |
| | | directly to equity, in which case the deferred tax is also dealt |
| | | with in equity. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Property, plant and equipment |
| | | Property, plant and equipment are stated at cost less accumulated |
| | | depreciation and any recognised impairment loss. |
| | | Depreciation is charged so as to write off the cost or valuation of |
| | | assets, other than land and properties under construction, over |
| | | their estimated useful lives, using the straight-line method, on the |
| | | following basis: |
| | | Leasehold improvement 0%-17% |
| | | Machinery 25%-50% |
| | | Fixtures and equipment 17%-50% |
| | | The gain or loss arising on the disposal or retirement of an asset |
| | | is determined as the difference between the sales proceeds and the |
| | | carrying amount of the asset and is included in the income statement |
| | | for the year. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Other non-current assets |
| | | Other non-current assets consist of lease deposits for office |
| | | premises and long-term prepaid expenses, which are stated at |
| | | historical cost minus unrefunded amounts. |
| | | |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Development costs |
| | | Development costs concerning software programs developed externally |
| | | are capitalised and measured initially at purchase cost and |
| | | amortised on a straight-line basis over their estimated useful lives |
| | | (3 years). |
| | | An internally-generated intangible asset arising from the Company's |
| | | biometric technology business development is recognised only if all |
| | | of the following conditions are met:* |
| | | an asset is created that can be identified (such as software and new |
| | | processes);* |
| | | it is probable that the asset created will generate future economic |
| | | benefits; and* |
| | | the development cost of the asset can be measured reliably. |
| | | Internally-generated intangible assets are amortised on a |
| | | straight-line basis over their useful lives. |
| | | Expenditure on research activities is recognised as an expense in |
| | | the period in which it is incurred. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Patents, exclusive sales rights and trademarks |
| | | Patents and trademarks are measured initially at purchase cost and |
| | | amortised on a straight-line basis over their estimated useful lives |
| | | (8 years). Exclusive sales rights are not amortised since there is |
| | | substantially no period for termination in the agreement. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Impairment of tangible and intangible assets excluding goodwill |
| | | At each balance sheet date, the Company reviews the carrying amounts |
| | | of its tangible and intangible assets to determine whether there is |
| | | any indication that those assets have suffered an impairment loss. |
| | | If any such indication exists, the recoverable amount of the asset |
| | | is estimated in order to determine the extent of the impairment loss |
| | | (if any). Where the asset does not generate cash flows that are |
| | | independent from other assets, the Company estimates the recoverable |
| | | amount of the cash-generating unit to which the asset belongs. An |
| | | intangible asset with an indefinite useful life is tested for |
| | | impairment annually and whenever there is an indication that the |
| | | asset may be impaired. |
| | | Recoverable amount is the higher of fair value less costs to sell |
| | | and value in use. In assessing value in use, the estimated future |
| | | cash flows are discounted to their present value using a pre-tax |
| | | discount rate that reflects current market assessments of the time |
| | | value of money and the risks specific to the asset for which the |
| | | estimates of future cash flows have not been adjusted. |
| | | If the recoverable amount of an asset (or cash-generating unit) is |
| | | estimated to be less than its carrying amount, the carrying amount |
| | | of the asset (cash-generating unit) is reduced to its recoverable |
| | | amount. An impairment loss is recognised as an expense immediately, |
| | | unless the relevant asset is carried at a revalued amount, in which |
| | | case the impairment loss is treated as a revaluation decrease. |
| | | Where an impairment loss subsequently reverses, the carrying amount |
| | | of the asset (cash-generating unit) is increased to the revised |
| | | estimate of its recoverable amount, but so that the increased |
| | | carrying amount does not exceed the carrying amount that would have |
| | | been determined had no impairment loss been recognised for the asset |
| | | (cash-generating unit) in prior years. A reversal of an impairment |
| | | loss is recognised as income immediately, unless the relevant asset |
| | | is already carried at a revalued amount, in which case the reversal |
| | | of the impairment loss is treated as a revaluation increase. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Inventories |
| | | Inventories are stated at the lower of cost and net realisable |
| | | value. Cost comprises direct materials, transportation and any other |
| | | incidental costs incurred for purchase. Cost is calculated using the |
| | | weighted average method. Net realisable value represents the |
| | | estimated selling price less all estimated costs to completion and |
| | | costs to be incurred in marketing, selling and distribution. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Financial instruments |
+--+------+----------------------------------------------------------------------+
| | | Financial assets and financial liabilities are recognised on the |
| | | Company's balance sheet when the Company has become a party to the |
| | | contractual provisions of the instrument. |
+--+------+----------------------------------------------------------------------+
| | | Trade receivables |
| | | Trade receivables are recognised at fair value and subsequently |
| | | measured at amortised cost and are classified as loans and |
| | | receivables in accordance with IAS 39 Financial Instruments: |
| | | Recognition and Measurement. |
| | | Assessments are made regularly as to whether there is any objective |
| | | evidence that trade receivables may be impaired. Where there is |
| | | objective evidence of impairment, the recoverable amount is |
| | | calculated by estimating the present value of the future cash flows |
| | | discounted using the effective interest rate. Any impairment losses |
| | | identified from the impairment test are recognised as an expense in |
| | | the income statement. |
+--+------+----------------------------------------------------------------------+
| | | Investments securities |
| | | Investments are recognised and derecognised on a trade date where a |
| | | purchase or sale of an investment is under a contract whose terms |
| | | require delivery of the investment within the time frame established |
| | | by the market concerned, and are initially measured at cost, |
| | | including transaction costs. |
| | | Investment securities classified as available-for-sale are |
| | | remeasured to fair value. Gains and losses arising from the changes |
| | | in the fair values of available-for-sale investments are recognised |
| | | directly in the fair value reserve in equity, until the investment |
| | | is sold or otherwise disposed of or until it is determined to be |
| | | impaired. The fair value of an available-for-sale investment is |
| | | based on its quoted bid price in an active market at the balance |
| | | sheet date. The fair value of available-for-sale investment with no |
| | | quoted bid price is based on the future cash flows expected on the |
| | | instrument and discounted using the market rate of interest. |
| | | In accordance with IAS 39, assessments are made regularly as to |
| | | whether there is any objective evidence that investments securities |
| | | may be impaired. Cumulative losses identified after carrying out an |
| | | impairment test are removed from the fair value reserve in equity |
| | | and recognised as an expense in the income statement. |
+--+------+----------------------------------------------------------------------+
| | | Trade payables |
| | | Trade payables are classified as other liabilities in accordance |
| | | with IAS 30, initially recognised at fair value and subsequently |
| | | measured at amortised cost using the effective interest method. |
+--+------+----------------------------------------------------------------------+
| | | Equity instruments |
| | | Ordinary shares are classified as equity instruments and are |
| | | recorded at the fair value, net of direct issue costs. Equity |
| | | instruments are not subsequently remeasured. |
| | | In accordance with IAS39 (Financial Instruments: Recognition and |
| | | Measurement), assessments are made regularly as to whether there is |
| | | any objective evidence that a financial asset or group of assets may |
| | | be impaired. Impairment losses identified after carrying out an |
| | | impairment test are recognised as an expense. Gains and losses on |
| | | available-for-sale investments are recognised directly in equity |
| | | until the financial asset is disposed of or is determined to be |
| | | impaired, at which time the cumulative loss previously recognised in |
| | | equity is included in loss for the year. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Share-based payments |
| | | The Company operates an equity-settled share-based payment scheme. |
| | | Equity-settled share-based payments are measured at fair value of |
| | | the share options at the date of grant. The fair value determined at |
| | | the grant date is expensed on a straight-line basis over the vesting |
| | | period with a corresponding increase in equity, based on the |
| | | Company's estimate of the number of options that will eventually |
| | | vest. |
| | | Fair value is measured by use of a Black-Scholes model, taking into |
| | | account the terms and conditions upon which the options were |
| | | granted. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Critical accounting estimates and judgments |
| | | Estimates and judgments are continually evaluated and are based on |
| | | historical experience and other factors, including expectations of |
| | | future events that are believed to be reasonable under the |
| | | circumstances. |
| | | Critical accounting estimates and assumptions |
| | | The Company makes estimates and assumptions concerning the future. |
| | | The resulting accounting estimates and assumptions will, by |
| | | definition, seldom equal to the related actual results. The |
| | | estimates and assumptions that have a significant risk of causing a |
| | | material adjustment to the carrying amounts of assets and |
| | | liabilities within the next financial year are discussed below. |
| | | The Company is subject to income taxes at city and national level |
| | | within Japan. Significant judgement is required in determining the |
| | | provision for income taxes. There are many transactions and |
| | | calculations for which the ultimate tax determination is uncertain |
| | | during the ordinary course of business. The Company recognises |
| | | liabilities for anticipated tax audit issues based on estimates of |
| | | whether additional taxes will be due. Where the final tax outcome of |
| | | these matters is different from the amounts that were initially |
| | | recorded, such differences will impact the income tax and deferred |
| | | tax provisions in the period in which such determination is made. |
+--+------+----------------------------------------------------------------------+
+--+------+----------------------------------------------------------------------+
| | | Amendments to IFRS standards and interpretations |
| | | Standards applied for the first time |
| | | IFRIC 11 (IFRS 2 - Group and Treasury Share Transactions) deals with |
| | | the issue of how group share-based remuneration should be reported, |
| | | which are the effects of staff changes within a group and how |
| | | share-based payment should be treated when the company issues its |
| | | own shares or needs to acquire shares from a third party. IFRIC 11 |
| | | was published in November 2006 and adopted by the European Union in |
| | | June 2007. IFRIC 11 has no impact on the consolidated financial |
| | | statements of the Company. |
| | | The IFRIC also published interpretation IFRIC 12 (Service Concession |
| | | Arrangements) in November 2006. This guideline addresses the issue |
| | | of reporting on service concession arrangements by companies with |
| | | government or similar grant contracts for the supply of public |
| | | services, such as the construction of roads, airports, prisons or |
| | | energy distribution infrastructure. IFRIC 12 clarifies how companies |
| | | are to report the rights and responsibilities arising from such |
| | | contractual obligations. IFRIC 12 has no impact on the consolidated |
| | | financial statements of the Company. |
| | | In October 2008, IASB published revisions to IAS 39 (Financial |
| | | Instruments: Recognition and Measurement) and an amendment to IFRS 7 |
| | | (Financial Instruments: Disclosures), called "Reclassification of |
| | | Financial Assets". The changes to IAS 39 not only allow some |
| | | reclassifications of non-derivative financial assets (except for |
| | | those "measured at fair value" on the basis of the fair value |
| | | option) from the category "financial assets measured at fair value", |
| | | but also the reclassification of "available for sale financial |
| | | assets" in the category "loans and receivables". The revisions made |
| | | to IFRS 7 also prescribe additional disclosure requirements for |
| | | companies which have carried out reclassifications of financial |
| | | assets in accordance with the revised stipulations contained in IAS |
| | | 39. The changes made to IAS 39 and IFRS 7 took effect retroactively |
| | | to July 1, 2008, and are binding as of December 31, 2008. These |
| | | amendments are described in the accounting policy on financial |
| | | instruments above. |
| | | IFRIC 14 (IAS 19- The Limit on a Defined Benefit Asset, Minimum |
| | | Funding Requirements and their Interaction). IFRIC 14 provides |
| | | general guidance on how to assess the limit in IAS 19 on the amount |
| | | of the surplus that can be recognized as an asset and explains how |
| | | the pension asset or liability may be affected when there is a |
| | | statutory or contractual minimum funding requirement. |
| | | The Company has no pension plan and therefore the amendment is not |
| | | related to the Company. |
| | | Standards which are not yet effective |
| | | As a result of IFRS 8 (Operating Segments), segment reporting has |
| | | switched from what was known as the "risk and reward approach" to |
| | | the "management approach" in terms of segment identification under |
| | | IAS 14. Here the information regularly made available to the "chief |
| | | operating decision maker" for decision-making purposes is the |
| | | decisive factor. At the same time, the valuation of the segments has |
| | | been switched from the "risk and reward approach" to the "management |
| | | approach". IFRS 8 was published in November 2006 and adopted by the |
| | | European Union in November 2007. The standard is binding for |
| | | financial years starting on or after January 1, 2009. Early |
| | | application is permitted. So far, the Company has only a single |
| | | segment and this regulation will have no impact to the Company. |
| | | IFRIC 13 (Customer Loyalty Programmes) which was published in June |
| | | 2007, addresses the accounting policies of companies that grant |
| | | loyalty award credits (e.g. "bonus points") to customers, who buy |
| | | other goods or services. In particular, IFRIC 13 explains how these |
| | | companies should account for their obligations to provide free or |
| | | discounted goods or services to customers who redeem such award |
| | | credits. The interpretation is to be applied for financial years |
| | | starting on or after July 1, 2008. The Company does not make use of |
| | | any such customer loyalty programmes. Therefore, IFRIC 13 is not |
| | | expected to be related to the Company. |
| | | IFRIC15 (Agreements for the Construction of Real Estate), published |
| | | in July 2008, provides guidance on the accounting practice in |
| | | respect to the recognition of revenue for real estate sales before |
| | | construction has been completed. The interpretation is to be applied |
| | | for financial years starting on or after January 1, 2009. The |
| | | construction of real estate is not part of the business operations |
| | | of the Company. For this reason, the revisions in IFRIC 13 will not |
| | | have any impact on the consolidated financial statements of the |
| | | Company. |
| | | IFRIC also published IFRIC 16 (Hedges of a Net Investment in a |
| | | Foreign Operation) in July 2008 , which is designated to clarify |
| | | issues arousing from the application of IAS 39 (Financial |
| | | Instruments: Recognition and Measurement) and IAS 21 (The Effects of |
| | | Changes in Foreign Exchanges Rates) in respect to the accounting for |
| | | the hedging of foreign currency risks within a company and its |
| | | foreign entities. The Company does not make use of any hedging |
| | | transactions. Therefore, IFRIC 16 is not expected to be related to |
| | | the Company. |
| | | In September 2007 the IASB published a revised version of the IAS 1 |
| | | (Presentation of Financial Statements: A revised Presentation), |
| | | which is intended to make it easier for users to analyze and compare |
| | | financial statements. Under this, all non-equity holders related |
| | | changes in equity have to be shown in one single "statement of |
| | | comprehensive income" or in two separate reporting components with |
| | | an income statement taken from the previous statement of |
| | | comprehensive income. The corresponding income tax effect is to be |
| | | shown for the individual components of other comprehensive income. |
| | | The new version of IAS 1 is to be applied to financial years |
| | | starting on or after January 1, 2009. Adoption by the European Union |
| | | is currently outstanding. The presentation of changes in equity will |
| | | be amended accordingly by the Company in line with the requirements |
| | | of IAS 1. |
| | | In February 2008 in a document entitled "Puttable Financial |
| | | Instruments and Obligations Arising on Liquidation", the |
| | | IASB published the amendments to IAS 32 (Financial Instruments: |
| | | Presentation) and IAS 1 (Presentation of Financial Statements). The |
| | | amendments relate essentially to questions relating to the |
| | | demarcation between equity and liability. In particular, the |
| | | revision now permits, under certain circumstances, the option of |
| | | classifying puttable instruments as equity. The amendments are to be |
| | | applied to financial years starting on or after January 1, 2009. |
| | | Early application is permitted. Adoption by the European Union is |
| | | currently outstanding. This regulation will have no impact on the |
| | | Company. |
| | | The main change to IAS 23 (Borrowing Cost) , which was revised in |
| | | April 2007, pertains to the elimination of the option to immediately |
| | | expense borrowing cost that can be classified as directly related to |
| | | the acquisition, construction or production of qualifying assets. In |
| | | this case, qualifying asset is considered to exist if a substantial |
| | | period of time is required to ready the particular asset for use or |
| | | sale. The Company is currently evaluating how the application of |
| | | this regulation will impact the consolidated financial statements. |
| | | Through the publication of the revised version of IFRS 3 (Business |
| | | Combinations) and the amendments to IAS 27 (Consolidated and |
| | | Separate Financial Statements) in January 2008, IASB completed the |
| | | second phase of the "Business Combinations" project. The main |
| | | changes include the accounting treatment of minority interests and |
| | | the re-measurement, through profit or loss, of already existing |
| | | shares at the time control was gained for successive company |
| | | acquisitions. Changes in the participation quota without loss of |
| | | control are to be recorded solely as equity transactions. In future, |
| | | acquisition-related costs are to be recognized as expenses. For |
| | | possible adjustments to acquisition costs, as a result of future |
| | | events which are to be recognized as liabilities at the time of |
| | | acquisition, no adjustment to goodwill in subsequent valuations is |
| | | possible. The new version of IFRS 3 is to be applied to company |
| | | mergers commencing on or after July 1, 2009. Early application is |
| | | permitted, but is limited to reporting periods beginning on or after |
| | | June 30, 2007. The amendments to IAS 27 are to be applied to |
| | | financial years which start on or after July 1, 2009, whereby early |
| | | application is permitted. However, early application of one of the |
| | | two standards is contingent on the simultaneous early application of |
| | | the respective other standard. Adoption by the European Union is |
| | | currently outstanding. The Company expects that the treatment of |
| | | acquisition-related costs in the event of company acquisitions as |
| | | expenses will lead to additional expense, the level of which depends |
| | | on several factors, including the size of the acquisition. The |
| | | impact of reporting adjustments in acquisition costs contingent on |
| | | future events, which at the time of acquisition are to be treated as |
| | | liabilities in the income statement, depends on the individual case. |
| | | IASB published the most recent revisions to IAS 39 (Financial |
| | | Instruments: Recognition and Measurement) in July 2008. In addition |
| | | to existing regulations, which enable a company to encompass the |
| | | entire risk, part of it, or certain risks in connection with an |
| | | underlying financial instrument in a hedge, it is now possible under |
| | | certain circumstances to include inflation risks or one-sided risks |
| | | in a hedge. The amendments are to be applied to financial years |
| | | starting on or after January 1, 2009. The Company has no hedging |
| | | transactions and therefore the application of this regulation will |
| | | have no impact the consolidated financial statements |
| | | In January 2008, the IASB published the amendment to IFRS 2 |
| | | (Share-based Payment: Vesting Conditions and Cancellations). The |
| | | amendments clarify that exercise conditions are only service and |
| | | goal fulfillment conditions. As a result of the changes in the |
| | | definition of exercise conditions, non-exercise conditions are now |
| | | to be taken into account when measuring the fair value of the equity |
| | | instruments granted. The changes are to be applied for financial |
| | | years starting on or after January 1, 2009. Early application is |
| | | permitted where indicated. Adoption by the European Union is |
| | | currently outstanding. Application will not have a material impact |
| | | on the earnings position of the Company. |
| | | |
+--+------+----------------------------------------------------------------------+
BgenuineTec Inc
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR the years ended 31 December 2007 and 2006
+--+------+--------------------------------------------------------------------+
| | 1 | PRESENTATION OF FINANCIAL STATEMENTS |
+--+------+--------------------------------------------------------------------+
| | | The consolidated financial statements have been prepared in |
| | | accordance with International Financial Reporting Standards, as |
| | | adopted by the EU. |
| | | |
+--+------+--------------------------------------------------------------------+
| | | These consolidated financial statements are presented in Japanese |
| | | Yen since that is the currency in which the majority of the |
| | | Company's transactions are denominated. |
| | | |
+--+------+--------------------------------------------------------------------+
+--+------+----------------------------------------+------------+-------+-------------+
| | 2 | REVENUE | | |
+--+------+----------------------------------------+------------+---------------------+
| | | An analysis of the Company's revenue | JPY'000 |
| | | is as follows: | |
+--+------+----------------------------------------+----------------------------------+
| | | | Year ended | Year ended |
| | | | 31/12/08 | 31/12/07 |
+--+------+----------------------------------------+--------------------+-------------+
| | | Continuing operations - sale of goods: | 25,455 | 269,755 |
+--+------+----------------------------------------+--------------------+-------------+
| | | Total revenue | 25,455 | 269,755 |
+--+------+----------------------------------------+------------+-------+-------------+
+--------+--------+----------------+
| | 3 | BUSINESS |
| | | AND |
| | | GEOGRAPHICAL |
| | | SEGMENTS |
+--------+--------+----------------+
| | | Business |
| | | segments |
| | | For |
| | | management |
| | | reporting |
| | | purposes, |
| | | the |
| | | Company is |
| | | currently |
| | | organised |
| | | as a |
| | | single |
| | | operating |
| | | division, |
| | | that is, |
| | | biometric |
| | | technology. |
| | | This |
| | | division is |
| | | the basis |
| | | for segment |
| | | information. |
| | | Principal |
| | | activity is |
| | | to be |
| | | engaged in |
| | | research and |
| | | development |
| | | and sales of |
| | | biometric |
| | | technology |
| | | products |
| | | including |
| | | biometric |
| | | certification |
| | | and |
| | | authentication |
| | | services, |
| | | physical |
| | | access |
| | | systems, |
| | | fingerprint |
| | | image sensors |
| | | and relating |
| | | software. |
| | | Due to the |
| | | single |
| | | segment, the |
| | | segment |
| | | information is |
| | | not reported |
| | | here. |
+--------+--------+----------------+
+--------+--------+--------------+
| | | Geographical |
| | | segments |
| | | The |
| | | Company's |
| | | operations |
| | | are located |
| | | only in |
| | | Japan and |
| | | there was no |
| | | exportation |
| | | from Japan. |
+--------+--------+--------------+
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+---------------------------------------------+
| | 4 | LOSS FROM OPERATIONS |
+----------------------------------+----------------------+---------------------------------------------------------------------------------------------------------------------+
| | | Loss from operations has been arrived at after charging: |
| | | |
+----------------------------------+----------------------+---------------------------------------------------------------------------------------------------------------------+
| | |
+----------------------------------+----------------------+
| | | | JPY'000 |
+----------------------------------+----------------------+----------------------------------+------------------------------------+
| | | | Year ended | Year ended |
| | | | 31/12/08 | 31/12/07 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Staff costs (see below numbers | | |
| | | of staff) | | |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Salaries and wages | 83,021 | 145,550 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Share option expense | 13,631 | 9,998 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Social security costs | 7,701 | 12,992 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | | 104,353 | 168,540 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | | | |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Depreciation | 3,541 | 8,414 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Impairment of property, plant | 1,929 | - |
| | | and equipment | | |
| | | (note 1, described below) | | |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Amortisation | 27,954 | 23,894 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Impairment of intangible assets | 34,604 | 1,900 |
| | | (note 1, described below) | | |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Auditors' remuneration | 5,286 | 6,500 |
| | | -audit for annual report | - | - |
| | | -other | | |
+ + +----------------------------------+----------------------+-------------+
| | | | 5,286 | 6,500 |
+----------------------------------+----------------------+----------------------------------+----------------------+----------------------------------+
| | | Research and development | 24,196 | 66,636 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Advisory fees | 18,212 | 40,702 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Purchased goods | 17,619 | 57,173 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Write-down of inventories | 86,502 | |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Subcontractors fees | 56,112 | 120,930 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Travel expenses | 9,688 | 17,173 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Operating lease expenses (note | 13,219 | 41,671 |
| | | 22) | | |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Advertising and public relation | 19,758 | 40,252 |
| | | expenses | | |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Write-down of receivables | 101,219 | 250,113 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Others | 3,001 | 98,609 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+
| | | Total | 526,093 | 942,507 |
+----------------------------------+----------------------+----------------------------------+----------------------+-------------+---------------------------------------------+
(note 1) Certain assets in the year ended 31December 2008 and 31December 2007
have been impaired since it is no longer considered recoverable from the
Company's continuing operations.
+--+----+----------------------------------------+--------------+--------------+
| | | NUMBER OF STAFF |
+--+----+----------------------------------------------------------------------+
| | | The average monthly number of employees including executive |
| | | directors for the year for each of the Company's principal functions |
| | | was as follows: |
+--+----+----------------------------------------------------------------------+
| | | | Number |
+--+----+----------------------------------------+-----------------------------+
| | | | Year ended | Year ended |
| | | | 31/12/08 | 31/12/07 |
+--+----+----------------------------------------+--------------+--------------+
| | | Engineers | 2 | 3 |
+--+----+----------------------------------------+--------------+--------------+
| | | Head office and administration | 4 | 5 |
+--+----+----------------------------------------+--------------+--------------+
| | | | 6 | 8 |
+--+----+----------------------------------------+--------------+--------------+
+--+-----+--------------------------------------+--------------+--------------+
| | 5 | FINANCE COSTS | JPY'000 |
+--+-----+--------------------------------------+-----------------------------+
| | | | Year ended | Year ended |
| | | | 31/12/08 | 31/12/07 |
+--+-----+--------------------------------------+--------------+--------------+
| | | Interest on borrowings, net of | - | 623 |
| | | interest earned | | |
+--+-----+--------------------------------------+--------------+--------------+
| | | Loss on sale of investment security | 1,724 | - |
+--+-----+--------------------------------------+--------------+--------------+
| | | Loss on devaluation of investment | 23,292 | - |
| | | security (Note 12) | | |
+--+-----+--------------------------------------+--------------+--------------+
| | | | 25,016 | 623 |
+--+-----+--------------------------------------+--------------+--------------+
+--+------+-------------------------------------+----------------+-------------+
| | 6 | FINANCE INCOME |
| | | |
+--+------+--------------------------------------------------------------------+
| | | | JPY'000 |
+--+------+-------------------------------------+------------------------------+
| | | | Year ended | Year ended |
| | | | 31/12/08 | 31/12/07 |
+--+------+-------------------------------------+----------------+-------------+
| | | Interest earned, net of interest | 77 | - |
| | | incurred | | |
+--+------+-------------------------------------+----------------+-------------+
| | | Foreign exchange gain, net | 3,015 | 259 |
+--+------+-------------------------------------+----------------+-------------+
| | | | 3,092 | 259 |
+--+------+-------------------------------------+----------------+-------------+
+--+-----+-----+-----+-----+-----+--+-------+-----+-----+-----+-----+-----+-----+-----------+-----+
| | 7 | EARNINGS PER SHARE | | |
+--------+-----------+----------------------+-----------------------+-----------------------------+
| | | The calculation of the basic and diluted earnings per share is based on |
| | | the following data: |
+--------+-----------+----------------------------------------------------------------------------+
| | | Earnings | JPY'000 |
+--------+-----------+----------------------------------+-----------------------------------------+
| | | | Year ended | Year ended |
| | | | 31/12/08 | 31/12/07 |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | Earnings for the purposes of | (537,923) | (648,959) |
| | | basic earnings per share (net | | |
| | | loss for the year attributable | | |
| | | to equity holders) | | |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | Effect of dilutive potential | - | - |
| | | ordinary shares | | |
| | | (note 1, described below) | | |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | Earnings for the purposes of | (537,923) | (648,959) |
| | | diluted earnings per share | | |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | | | |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | Number of shares | Year ended | Year ended |
| | | | 31/12/08 | 31/12/07 |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | Weighted average number of | 46,753,624 | 33,147,161 |
| | | ordinary shares for the | | |
| | | purposes of basic earnings per | | |
| | | share | | |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | Effect of dilutive potential | - | - |
| | | ordinary shares: | | |
| | | - share option (note 1, | | |
| | | described below) | | |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | Weighted average number of | 46,753,624 | 33,147,161 |
| | | ordinary shares for the | | |
| | | purposes of diluted earnings | | |
| | | per share | | |
+--------+-----------+----------------------------------+-----------------+-----------------------+
| | | (note 1) Share options which the Company and the associated company |
| | | held have anti-dilutive effect on earnings per share for the years. |
| | | |
+--------+-----------+----------------------------------------------------------------------------+
| | 8 | PROPERTY, PLANT AND EQUIPMENT |
+--+-----------+----------------------------------------------------------------------------+
| | | | | JPY'000 |
+--+-----------+-----------+--------+-------------------------------------------------------+
| | | | | Leasehold | Plant & | Fixtures & | Total |
| | | | |Improvement |Machinery | Equipment | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | COST OR VALUATION | | | |
+--+-----------+----------------------------------+-----------+-----------------+-----------+
| | | At 1 January | | 8,835 | 171 | 17,320 | 26,326 |
| | | 2007 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Additions | | 1,487 | - | 614 | 2,101 |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Disposal | | (6,565) | - | - | (6,565) |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | At 1 January | | 3,757 | 171 | 17,934 | 21,862 |
| | | 2008 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Additions | | - | - | - | - |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Deductions | | - | - | - | - |
| | | -disposal | | - | (37) | (1,892) | (1,929) |
| | | -impairment | | | | | |
| | | (note 1, | | | | | |
| | | described | | | | | |
| | | below) | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | At 31 December | | 3,757 | 134 | 16,042 | 19,933 |
| | | 2008 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | ACCUMULATED DEPRECIATION | | | |
+--+-----------+----------------------------------+-----------+-----------------+-----------+
| | | At 1 January | | 3,141 | 49 | 5,130 | 8,320 |
| | | 2007 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Charge for the | | 1,722 | 44 | 6,647 | 8,413 |
| | | year | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Disposal | | (4,554) | - | - | (4,554) |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | At 1 January | | 309 | 93 | 11,777 | 12,179 |
| | | 2008 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Charge for the | | 399 | 41 | 3,100 | 3,540 |
| | | year | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | Disposal | | - | - | - | - |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | At 31 December | | 708 | 134 | 14,877 | 15,719 |
| | | 2008 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | NET BOOK VALUE | | | |
+--+-----------+----------------------------------+-----------+-----------------+-----------+
| | | At 31 December | | 3,049 | - | 1,165 | 4,214 |
| | | 2008 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | At 31 December | | 3,448 | 78 | 6,157 | 9,683 |
| | | 2007 | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | | | | | | |
+--+-----------+-----------------+--+-------------+-----------+-----------------+-----------+
| | | (note 1) A part of property, plant and equipment relating to specific |
| | | research and development has been impaired by estimating future cash |
| | | flows since they were considered not to be recoverable. |
+--+-----+-----+-----+-----+-----+--+-------+-----+-----+-----+-----+-----+-----+-----------+-----+
+--+--+-----------------------------------------------+---------+---------+-----------+
| | 9| OTHER NON-CURRENT ASSETS |
+--+--+---------------------------------------------------------+
| | | | JPY'000 |
+--+--+-----------------------------------------------+-------------------------------+
| | | | Year ended | Year |
| | | | 31/12/08 | ended |
| | | | | 31/12/07 |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Lease deposit for office premises | | |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Beginning balance | 4,673 | 24,725 |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Addition | 270 | 4,673 |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Disposal | (369) | (24,725) |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Ending balance | 4,574 | 4,673 |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Long-term prepaid expense | | |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Beginning balance | 185 | 250 |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Addition | - | 246 |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Amortisation | (123) | (311) |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Ending balance | 62 | 185 |
+--+--+-----------------------------------------------+-------------------+-----------+
| | | Total | 4,636 | 4,858 |
+--+--+-----------------------------------------------+---------+---------+-----------+
+--+------+------------------------------------------------------+------------+
| | 10 | GOODWILL |
+--+------+-------------------------------------------------------------------+
| | | | JPY'000 |
+--+------+------------------------------------------------------+------------+
| | | COST | |
+--+------+------------------------------------------------------+------------+
| | | At 1 January 2007 | 14,400 |
+--+------+------------------------------------------------------+------------+
| | | Additions | - |
+--+------+------------------------------------------------------+------------+
| | | Deductions | (1,900) |
| | | - impairment (note 1, described below) | |
+--+------+------------------------------------------------------+------------+
| | | At 1 January 2008 | 12,500 |
+--+------+------------------------------------------------------+------------+
| | | Additions | - |
+--+------+------------------------------------------------------+------------+
| | | Deductions | (5,300) |
| | | - impairment (note 1, described below) | |
+--+------+------------------------------------------------------+------------+
| | | At 31 December 2008 | 7,200 |
+--+------+------------------------------------------------------+------------+
| | | (note 1) A part of goodwill representing a certain customer |
| | | relationship has been impaired by estimating future cash flows |
| | | since the Company has lost them . |
+--+------+------------------------------------------------------+------------+
+--+---+------+---------------------+--------------+------------+-----------+------+------+
| | 11 | INTANGIBLE ASSETS |
+--+----------+---------------------------------------------------------------------------+
| | | | JPY'000 |
+--+----------+---------------------+-----------------------------------------------------+
| | | | Development | Patents & | Exclusive | Total |
| | | | costs | trademarks | sales | |
| | | | | | right | |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | COST | | | | |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 1 January 2007 | 55,805 | 9,818 | 3,429 | 69,052 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | Additions | 12,888 | 40,500 | - | 53,388 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 1 January 2008 | 68,693 | 50,318 | 3,429 | 122,440 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | Additions | 3,897 | - | - | 3,897 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | Deductions | (7,385) | (18,489) | (3,429) | (29,303) |
| | | -impairment (note | - | (20,400) | - | (20,400) |
| | | 1) | | | | |
| | | -other (returned) | | | | |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 31 December 2008 | 65,205 | 11,429 | - | 76,634 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | | | | | |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | AMORTISATION | | | | |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 1 January 2007 | 19,809 | 1,284 | - | 21,093 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | Charge for the year | 20,113 | 3,716 | - | 23,829 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 1 January 2008 | 39,922 | 5,000 | - | 44,922 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | Charge for the year | 21,602 | 5,252 | - | 26,854 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 31 December 2008 | 61,524 | 10,252 | - | 71,776 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | | | | | |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | CARRYING AMOUNT | | | | |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 31 December 2008 | 3,681 | 1,177 | - | 4,858 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | At 31 December 2007 | 28,771 | 45,318 | 3,429 | 77,518 |
+--+----------+---------------------+--------------+------------+-----------+-------------+
| | | |
+--+---+---------------------------------------------------------------------------+
| | | (note 1) A part of intangible assets relating to specific research and |
| | | development has been impaired by estimating future cash flows since |
| | | they were considered not to be recoverable. A part of intangible assets |
| | | relating to patents& trademarks and exclusive sales right has been |
| | | impaird by estimating future cash flows since they were no more used or |
| | | existent. |
+--+---+------+---------------------+--------------+------------+-----------+------+------+
+--+-----+----------------------------------------+-----------+----------------+
| | 12 | INVESTMENT SECURITIES | | |
+--+-----+----------------------------------------+-----------+----------------+
| | | Available-for-sale investments | | JPY'000 |
+--+-----+----------------------------------------+-----------+----------------+
| | | At 1 January 2007 | | 2,794 |
+--+-----+----------------------------------------+-----------+----------------+
| | | Acquired | | 29,738 |
+--+-----+----------------------------------------+-----------+----------------+
| | | Disposed | | - |
+--+-----+----------------------------------------+-----------+----------------+
| | | Increase in fair value | | 150 |
+--+-----+----------------------------------------+-----------+----------------+
| | | At 1 January 2008 | | 32,682 |
+--+-----+----------------------------------------+-----------+----------------+
| | | Acquired | | - |
+--+-----+----------------------------------------+-----------+----------------+
| | | Disposed | | (2,944) |
+--+-----+----------------------------------------+-----------+----------------+
| | | Impairment | | (23,292) |
+--+-----+----------------------------------------+-----------+----------------+
| | | Increase in fair value | | - |
+--+-----+----------------------------------------+-----------+----------------+
| | | At 31 December 2008 | | 6,446 |
+--+-----+----------------------------------------+-----------+----------------+
| | | |
+--+-----+----------------------------------------+
| | | Available-for-sale investments represent shares in Fingerprint |
| | | Cards AB (Sweden) and Secure Generation Ltd. (Japan, non-listed). |
| | | Fingerprint Cards AB is one of the related parties of the Company |
| | | (see Note 23). The Company directly owns 0.07% of Fingerprint Cards |
| | | AB as of 31 December 2007 and the Company sold all shares in 2008. |
| | | Losses arisen from the revaluation to the fair values are |
| | | recognised directly in the fair value reserve in equity amounting |
| | | to JPY425 thousand for the year ended 31 December 2007 and it was |
| | | reversed for the year ended 31 December 2008. |
| | | The Company acquired shares in Secure Generation Ltd. through the |
| | | take-up of 86,700 newly issued ordinary shares in 2007. The Company |
| | | owns 6.5% of Secure Generation Ltd. at the balance sheet date. The |
| | | Company determined to record JPY 23,292 thousand of impairment loss |
| | | for the investment for the year ended 31 December 2008 remeasured |
| | | at fair value of future cash flows discounted using the market rate |
| | | of interest. |
| | | |
+--+-----+----------------------------------------+-----------+----------------+
+--+-----+-------------------------------------------------------------------+
| | 13 | EQUITY ACCOUNTED INVESTEE |
+--+-----+-------------------------------------------------------------------+
| | | The Company acquired 40.1% of share of Beyond LSI, Ltd |
| | | ("investee") in December 2007, 8.54% shares in June 2008 and |
| | | 11.84% in December 2008. Although the Company's ownership at 31 |
| | | December 2008 was 60.49% in aggregate, taking into account the |
| | | potential voting rights, i.e. share options of the investee, |
| | | which are held by other entities and exercisable at the date, the |
| | | ownership would be reduced to 48.62% when assessing whether the |
| | | Company has the power to govern the financial and operating |
| | | policies of the investee (IAS27, paragraph 14). Based on an |
| | | evaluation of the extent of control over the investee mentioned |
| | | above, it is not consolidated but accounted for using the equity |
| | | method by the Company. |
| | | The Company's share of loss in its equity accounted investee for |
| | | the year ended 31 December 2008 was JPY 19,484 thousand (2007: |
| | | JPY 3,180 thousand). |
+--+-----+-------------------------------------------------------------------+
| | | Summary financial information for equity accounted investees, not |
| | | adjusted for the percentage ownership held by the Company: |
+--+-----+-------------------------------------------------------------------+
+-------------+--------+------+------+------+------+-------------+------+-------------+-------------+-------------+
| 2008 |Owner- | Current | Non- | Total | Current | Non- | Total |
| | ship | Assets | current | assets |liabilities | current |liabilities |
| | | | assets | | |liabilities | |
+-------------+ + + + + + + +
| (Unit: | | | | | | | |
| JPY'000) | | | | | | | |
+-------------+--------+-------------+-------------+--------------------+-------------+-------------+-------------+
| Beyond LSI |60.49% | 13,929 | 14,919 | 28,848 | 78,815 | 162,972 | 241,787 |
| Ltd. | | | | | | | |
+-------------+--------+-------------+-------------+--------------------+-------------+-------------+-------------+
| Revenues | Expenses | Loss |
+ + + +
| | | | |
+----------------------+-------------+-------------+-------------+
| 11,767 | 54,722 | 42,955 |
+-------------+--------+------+------+------+------+-------------+------+-------------+-------------+-------------+
+-------------+------+------+------+------+-------------+------+--------+-------------+-------------+-------------+
| 2007 | Owner- | Current | Non- | Total | Current | Non- | Total |
| | ship | Assets | current |assets |liabilities | current |liabilities |
| | | | assets | | |liabilities | |
+-------------+ + + + + + + +
| (Unit: | | | | | | | |
| JPY'000) | | | | | | | |
+-------------+-------------+-------------+--------------------+--------+-------------+-------------+-------------+
| Beyond LSI | 40% | 19,885 | 30,971 |50,856 | 72,319 | 167,901 | 240,220 |
| Ltd. | | | | | | | |
+-------------+-------------+-------------+--------------------+--------+-------------+-------------+-------------+
| Revenues | Expenses | Loss |
+ + + +
| | | | |
+-------------+-------------+-------------+-------------+
| 13,297 | 46,038 | 32,741 |
+-------------+------+------+------+------+-------------+------+--------+-------------+-------------+-------------+
+--+-----+-------------------------------------+-------------+------------+-----------+
| | 14 | INVENTORIES |
+--+-----+-------------------------------------+
| | | | JPY'000 |
+--+-----+---------------------------------------------------+------------------------+
| | | | Year ended | Year |
| | | | 31/12/08 | ended |
| | | | | 31/12/07 |
+--+-----+---------------------------------------------------+------------+-----------+
| | | Raw Materials (note 1, described below) | 26,063 | 84,883 |
+--+-----+---------------------------------------------------+------------+-----------+
| | | Finished goods (note 2, described below) | 25,664 | 32,586 |
+--+-----+---------------------------------------------------+------------+-----------+
| | | | 51,727 | 117,469 |
+--+-----+-------------------------------------+-------------+------------+-----------+
(note 1) As of 31 December 2008, raw materials have been written down to
their net realisable value by JPY 30,578 thousand. As of 31 December 2007, raw
materials have been properly disposed and presents net realisable value.
.
(note 2) As of 31 December 2008, finished goods have been written down to
their net realisable value by JPY 55,925 thousand. As of 31 December 2007,
finished goods have been properly disposed and presents net realisable value.
+--+-----+----------------------------------------------+-----------+-----------+
| | 15 | TRADE AND OTHER RECEIVABLES | |
+--+-----+----------------------------------------------+-----------------------+
| | | Trade and other receivables comprise | JPY'000 |
| | | following items. | |
+--+-----+----------------------------------------------+-----------------------+
| | | | Year | Year |
| | | | ended | ended |
| | | | 31/12/08 | 31/12/07 |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Trade accounts receivable | 6,516 | 123,761 |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Prepaid expenses | 2,697 | 1,414 |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Advances to employees | - | 1,512 |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Advance payments to third party | 3,119 | - |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Short-term lending to related party (Note | 13,400 | - |
| | | 23) | | |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Other receivables | 2,060 | 5,112 |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Consumption tax recoverable | 15,650 | 4,634 |
+--+-----+----------------------------------------------+-----------+-----------+
| | | Total | 43,442 | 136,433 |
+--+-----+----------------------------------------------+-----------+-----------+
The average credit period taken on sale of goods is 75 days. trade receivables
are shown as fair values after deduction of the likely uncollectible value
amounting to JPY250,113 thousand and JPY101,219 thousand as of December 31, 2007
and 2008, respectively. The directors consider that the carrying amount of trade
and other receivables approximates their fair value.
+--+------+-------------------------------------------------------------------+
| | | |
+--+------+-------------------------------------------------------------------+
| | | Cash and cash equivalents comprise cash and short-term deposits |
| | | held by the Company treasury function. The carrying amount of |
| | | these assets approximates to their fair value. |
| | | |
+--+------+-------------------------------------------------------------------+
| | | Credit risk - The Company's principal financial assets are bank |
| | | balances and cash, investment securities, and trade and other |
| | | receivables, which represent the Company's maximum exposure to |
| | | credit risk in relation to financial assets. |
| | | The Company's credit risk is primarily attributable to its trade |
| | | receivables. The amounts presented in the balance sheet are |
| | | recognised at fair value and subsequently measured by estimating |
| | | the present value of cash flows discounted using the effective |
| | | interest rate if impaired. The Company analyzes default risks and |
| | | customer relations regularly in order to minimize credit risk of |
| | | trade receivables. |
| | | The credit risk on liquid funds is limited because the |
| | | counterparties are banks with high credit-ratings assigned by |
| | | international credit-rating agencies. |
| | | The Company has a concentration of credit risk, with exposure |
| | | spread over only several counterparties and customers. |
| | | Financial risk - The Company has no significant interest risk. |
| | | The Company is exposed to transactions in currencies other than |
| | | Japanese Yen. The Company has a liquidity risk, which is |
| | | described at Going Concern in the summary of significant |
| | | accounting policies. |
| | | The balances under foreign currencies as at 31 December 2008 and |
| | | 2007 were bank deposits of JPY 120 thousand (SEK 10,276.19) and |
| | | JPY 236 thousand (SEK 13,420.19), receivables of JPY 2,185 |
| | | thousand (USD 24,000) and nil, investment securities of nil and |
| | | JPY 2,944 thousand (SEK 165,240), and payables of JPY 1,239 |
| | | thousand (USD 9,000.00 and STG 3,150.00) and JPY 2,598 thousand |
| | | (STG 11,402.17). There were no formal risk management policies in |
| | | place other than management monitoring the level of transactions |
| | | denominated in foreign currencies. |
| | | |
+--+------+-------------------------------------------------------------------+
+--+------+-------------------------+-------------+----------+-------------+----------+
| | 16 | SHARE CAPITAL | | | | |
+--+------+-------------------------+-------------+----------+-------------+----------+
| | | | 2008 | 2008 | 2007 | 2007 |
| | | | Number | JPY'000 | Number | JPY'000 |
+--+------+-------------------------+-------------+----------+-------------+----------+
| | | Ordinary shares with no | | | | |
| | | nominal value | | | | |
+--+------+-------------------------+-------------+----------+-------------+----------+
| | | Authorised: | 125,600,000 | N/A | 125,600,000 | N/A |
+--+------+-------------------------+-------------+----------+-------------+----------+
| | | | | | | |
+--+------+-------------------------+-------------+----------+-------------+----------+
| | | Issued and fully paid: | 20,531,595 | 159,846 | 6,330,000 | 96,120 |
+--+------+-------------------------+-------------+----------+-------------+----------+
| | | Issued in exchange for | - | - | 1,585,526 | 30,125 |
| | | shares of the equity | | | | |
| | | accounted investee | | | | |
+--+------+-------------------------+-------------+----------+-------------+----------+
| | | Balance at the year end | 59,983,821 | 873,460 | 39,452,226 | 713,614 |
+--+------+-------------------------+-------------+----------+-------------+----------+
+--+------+------------------------------------------------------------------+
| | | On 30 October 2007, the Company issued 5,080,000 shares and |
| | | allocated them to some institutional investors and individuals |
| | | outside the Company by a resolution in writing of the |
| | | shareholders' meeting. After such issuance, the aggregate |
| | | number of issued shares was 36,616,700. 50% of the total paid |
| | | amount of JPY 142,240 thousand was allocated to share capital |
| | | and the rest was allocated to share premium. |
| | | On 26 November 2007, the Company issued 1,250,000 shares and |
| | | allocated them to some institutional investors and individuals |
| | | outside the Company by a resolution in writing of the |
| | | shareholders' meeting. After such issuance, the aggregate |
| | | number of issued shares was 37,866,700. 50% of the total paid |
| | | amount of JPY 50,000 thousand was allocated to share capital |
| | | and the rest was allocated to share premium. |
| | | On 28 December 2007, the Company issued 1,585,526 shares and |
| | | allocated to the shareholders of Beyond LSI Ltd (Japan) by a |
| | | Board resolution. After such issuance, the aggregate number of |
| | | issued shares was 39,452,226. For consideration of such |
| | | issuance of shares, the Company acquired 40% of total shares |
| | | of Beyond LSI Ltd (Japan). 50% of the total consideration |
| | | value of JPY 60,250 thousand was allocated to share capital |
| | | and the rest was allocated to share premium. |
| | | On 5 March 2008, the Company issued 1,500,000 shares and |
| | | allocated them to the management by a Board resolution. After |
| | | such issuance, the aggregate number of issued shares was |
| | | 40,952,226. 50% of the total paid amount of JPY 15,000 |
| | | thousand was allocated to share capital and the rest was |
| | | allocated to share premium. |
| | | On 26 June 2008, the Company issued 6,625,000 shares and |
| | | allocated them to an institutional investor and the management |
| | | by a Board resolution. After such issuance, the aggregate |
| | | number of issued shares was 47,577,226. 50% of the total paid |
| | | amount of JPY 53,000 thousand was allocated to share capital |
| | | and the rest was allocated to share premium. |
| | | On 25 September 2008, the Company issued 714,285 shares and |
| | | allocated them to the management by a Board resolution. After |
| | | such issuance, the aggregate number of issued shares was |
| | | 48,291,511. 50% of the total paid amount of JPY 10,000 |
| | | thousand was allocated to share capital and the rest was |
| | | allocated to share premium. |
| | | On 21 November 2008, the Company issued 11,692,310 shares and |
| | | allocated them to the some institutional investors and |
| | | management by a Board resolution. After such issuance, the |
| | | aggregate number of issued shares was 59,983,821. 53.85% of |
| | | the total paid amount of JPY 81,846 thousand was allocated to |
| | | share capital and the rest was allocated to share premium. |
| | | The Company has one class of ordinary shares, which carry no |
| | | right to fixed income. |
| | | The ordinary shares rank equally for voting and rights to |
| | | dividends. |
| | | EQUITY-SETTLED SHARE-BASED COMPENSATION |
| | | The shareholders' meeting authorised the share option plan as |
| | | at 31 January 2006. 2,000 options in total equivalent to the |
| | | 1,000 shares per option were granted to all directors, |
| | | employees and Company's consultants for no consideration. The |
| | | options can be exercised commencing from January 31, 2008 to |
| | | January 30, 2016 at JPY 10 per share. Of 2,000 options, 1,820 |
| | | options were actually allotted to the eligible persons. |
| | | In addition, shareholders' meeting authorised the share option |
| | | plan as at 29 June 2007. 1,500 options in total equivalent to |
| | | the 750 shares per option were granted to all directors, |
| | | employees and Company's consultants for no consideration. The |
| | | options can be exercised commencing from June 30, 2009 to June |
| | | 29, 2010 at JPY 107 per share. Of 1,500 options, 1,460 options |
| | | were actually allotted to the eligible persons. |
| | | Share-based compensation was measured at fair value of the |
| | | share options at the date of grant. The fair value determined |
| | | at the grant date was expensed on a straight-line basis over |
| | | the vesting period, based on the Company's estimate of shares |
| | | that will eventually vest. Fair value was measured by use of |
| | | the Black-Scholes model, taking into account the terms and |
| | | conditions upon which the options were granted. |
| | | |
+--+------+------------------------------------------------------------------+
+--+-------+-------------------------------------------+------------+-----------+
| | | Details of share options granted during | | |
| | | the year ended 31 December 2006, and the | | |
| | | assumptions used in the Black-Scholes | | |
| | | model are as follows: | | |
+--+-------+-------------------------------------------+------------+-----------+
| | | | Number of | Number of |
| | | | Options | shares |
+--+-------+-------------------------------------------+------------+-----------+
| | | Number of share options as of 31 December | 1,360 | 1,360,000 |
| | | 2007 | | |
+--+-------+-------------------------------------------+------------+-----------+
| | | Exercised during the year | 0 | 0 |
+--+-------+-------------------------------------------+------------+-----------+
| | | Forfeited during the year | (460) | (460,000) |
+--+-------+-------------------------------------------+------------+-----------+
| | | Outstanding at December 31, 2008 | 900 | 9,00,000 |
+--+-------+-------------------------------------------+------------+-----------+
| | | | | |
+--+-------+-------------------------------------------+------------+-----------+
| | | Fair value of share at measurement date | 10 | JPY/share |
+--+-------+-------------------------------------------+------------+-----------+
| | | Equity-settled share-based payment fair | 3.14 | JPY/share |
| | | value | | |
+--+-------+-------------------------------------------+------------+-----------+
| | | Exercise price | 10 | JPY/share |
+--+-------+-------------------------------------------+------------+-----------+
| | | Weighted average exercise price | 10 | JPY/share |
+--+-------+-------------------------------------------+------------+-----------+
| | | Expected volatility | 23.26 | % p.a. |
+--+-------+-------------------------------------------+------------+-----------+
| | | Option life | 120 | Month |
+--+-------+-------------------------------------------+------------+-----------+
| | | Expected dividends | Nil | |
+--+-------+-------------------------------------------+------------+-----------+
| | | Risk-free interest rate | 0.8 | % |
+--+-------+-------------------------------------------+------------+-----------+
| | | |
+--+-------+--------------------------------------------------------------------+
| | | The expected volatility is based on historical volatility of |
| | | similar listed entities since the Company was not listed when the |
| | | options were granted. The options are granted under a service |
| | | condition. There are no market conditions associated with the |
| | | option granted. |
+--+-------+-------------------------------------------+------------+-----------+
+--+-------+-------------------------------------------+------------+------------+
| | | Details of share options granted during | | |
| | | the year ended 31 December 2007 and the | | |
| | | assumptions used in the Black-Scholes | | |
| | | model are as follows: | | |
+--+-------+-------------------------------------------+------------+------------+
| | | | Number of | Number of |
| | | | Options | shares |
+--+-------+-------------------------------------------+------------+------------+
| | | Number of share options as of 31 December | 1,160 | 1,160,000 |
| | | 2007 | | |
+--+-------+-------------------------------------------+------------+------------+
| | | Forfeited during the year | (340) | (340,000) |
+--+-------+-------------------------------------------+------------+------------+
| | | Outstanding at December 31, 2008 | 820 | 820,000 |
+--+-------+-------------------------------------------+------------+------------+
| | | | | |
+--+-------+-------------------------------------------+------------+------------+
| | | Fair value of share at measurement date | 53.8 | JPY/share |
+--+-------+-------------------------------------------+------------+------------+
| | | Equity-settled share-based payment fair | 31.0313 | JPY/share |
| | | value | | |
+--+-------+-------------------------------------------+------------+------------+
| | | Exercise price | 107 | JPY/share |
+--+-------+-------------------------------------------+------------+------------+
| | | Weighted average exercise price | 107 | JPY/share |
+--+-------+-------------------------------------------+------------+------------+
| | | Expected volatility | 128.6 | % p.a. |
+--+-------+-------------------------------------------+------------+------------+
| | | Option life | 30 | Month |
+--+-------+-------------------------------------------+------------+------------+
| | | Expected dividends | Nil | |
+--+-------+-------------------------------------------+------------+------------+
| | | Risk-free interest rate | 1.0 | % |
+--+-------+-------------------------------------------+------------+------------+
| | | |
+--+-------+---------------------------------------------------------------------+
| | | The options are granted under a service condition. There are no |
| | | market conditions associated with the option granted. |
+--+-------+-------------------------------------------+------------+------------+
+---+---------+--------------------------------------------------------------+-------------------------+
| | 17 | DEFICIT |
+---+---------+----------------------------------------------------------------------------------------+
| | | | JPY'000 |
+---+---------+--------------------------------------------------------------+-------------------------+
| | | Balance at 1 January 2007 | (177,313) |
+---+---------+--------------------------------------------------------------+-------------------------+
| | | Net loss for the year | (648,959) |
+---+---------+--------------------------------------------------------------+-------------------------+
| | | Balance at 1 January 2008 | (826,272) |
+---+---------+--------------------------------------------------------------+-------------------------+
| | | Net loss for the year | (537,923) |
+---+---------+--------------------------------------------------------------+-------------------------+
| | | Balance at 31 December 2008 | (1,364,195) |
+---+---------+--------------------------------------------------------------+-------------------------+
| | | | |
+---+---------+--------------------------------------------------------------+-------------------------+
+---+--------+------------------------------------------------------------------------------------+
| | 18 | DEFERRED TAX |
+---+--------+------------------------------------------------------------------------------------+
+-----------------------------------------------+--------------+-----------+
| At the balance sheet date, the Company has unused tax losses of JPY |
| 975,061 thousand available to offset against future profits. No |
| deferred tax asset has been recognised in respect of such unused tax |
| losses due to the unpredictability of future profit streams. The |
| unrecognised tax losses of JPY8,742 thousand, JPY 137,271 thousand, |
| JPY319,834 thousand and JPY 509,214 thousand will expire in 2013, |
| 2014, 2015 and 2016, respectively. |
+--------------------------------------------------------------------------+
| | | |
+-----------------------------------------------+--------------+-----------+
| Details of deferred tax assets and | | |
| liabilities are as follows: | | |
+-----------------------------------------------+--------------+-----------+
| | JPY'000 |
+-----------------------------------------------+--------------------------+
| | Year ended | Year |
| | 31/12/08 | ended |
| | | 31/12/07 |
+-----------------------------------------------+--------------+-----------+
| Tax loss carry forward | 393,998 | 183,444 |
+-----------------------------------------------+--------------+-----------+
| Impairment loss on receivables | 58,848 | 101,796 |
+-----------------------------------------------+--------------+-----------+
| Impairment loss on investment securities | 9,480 | - |
+-----------------------------------------------+--------------+-----------+
| Impairment loss on tangible assets | 770 | - |
+-----------------------------------------------+--------------+-----------+
| Impairment loss and loss on disposal of | 11,754 | - |
| intangible assets | | |
+-----------------------------------------------+--------------+-----------+
| Inventory write-down | 35,206 | - |
+-----------------------------------------------+--------------+-----------+
| Differences in depreciation and amortization | 1,994 | 5,814 |
| for tax purposes | | |
+-----------------------------------------------+--------------+-----------+
| Liabilities for expenses disallowed until | 3,450 | 8,855 |
| paid | | |
+-----------------------------------------------+--------------+-----------+
| Equity-settled share-based transactions | 7,211 | 5,021 |
+-----------------------------------------------+--------------+-----------+
| Loss of share of equity method investee | 9,224 | 1,294 |
+-----------------------------------------------+--------------+-----------+
| Others | 70 | 1,973 |
+-----------------------------------------------+--------------+-----------+
| Deferred tax assets total | 532,005 | 308,197 |
+-----------------------------------------------+--------------+-----------+
| | | |
+-----------------------------------------------+--------------+-----------+
| Share issuance costs | 14,827 | 9,499 |
+-----------------------------------------------+--------------+-----------+
| Deferred tax liabilities total | 14,827 | 9,499 |
+-----------------------------------------------+--------------+-----------+
| | | |
+-----------------------------------------------+--------------+-----------+
| Net of deferred tax assets and liabilities | 517,178 | 298,698 |
+-----------------------------------------------+--------------+-----------+
| Valuation allowance | (517,178) | (298,698) |
+-----------------------------------------------+--------------+-----------+
| Deferred tax assets on balance sheet | - | - |
+-----------------------------------------------+--------------+-----------+
| | | |
+-----------------------------------------------+--------------+-----------+
| Tax reconciliation: | | |
+-----------------------------------------------+--------------+-----------+
| | | |
+-----------------------------------------------+--------------+-----------+
| Reported loss before taxation | (537,923) | (648,959) |
+-----------------------------------------------+--------------+-----------+
| Tax rate at 40.7% | (218,934) | (264,126) |
+-----------------------------------------------+--------------+-----------+
| Impact of non-deductible expenses | 445 | 31,372 |
+-----------------------------------------------+--------------+-----------+
| Impact of prior year's reported loss before | (298,698) | (65,944) |
| taxation | | |
+-----------------------------------------------+--------------+-----------+
| Valuation allowance | 517,178 | 298,698 |
+-----------------------------------------------+--------------+-----------+
| Tax charge for the period | - | - |
+-----------------------------------------------+--------------+-----------+
| | | |
+-----------------------------------------------+--------------+-----------+
+--+-------+------------------------------------------------------------------+
| | 19 | OTHER FINANCIAL LIABILITIES |
+--+-------+------------------------------------------------------------------+
| | | Trade and other payables comprise the following items. |
+--+-------+------------------------------------------------------------------+
+------------------------------------------------+----------+----------+
| | JPY'000 |
+------------------------------------------------+---------------------+
| | Year | Year |
| | ended | ended |
| | 31/12/08 | 31/12/07 |
+------------------------------------------------+----------+----------+
| Trade accounts payable | 979 | 7,457 |
+------------------------------------------------+----------+----------+
| Accrued expenses | 8,844 | 14,551 |
+------------------------------------------------+----------+----------+
| Withholding income tax for employees | 3,295 | 3,440 |
+------------------------------------------------+----------+----------+
| Deferred revenue | - | 3,150 |
+------------------------------------------------+----------+----------+
| Miscellaneous tax payable | 2,886 | 3,011 |
+------------------------------------------------+----------+----------+
| Due to employees and directors (Note 23) | 4,929 | 4,890 |
+------------------------------------------------+----------+----------+
| Other payables (Note 23) | 60,313 | 49,721 |
+------------------------------------------------+----------+----------+
| Total | 81,246 | 86,220 |
+------------------------------------------------+----------+----------+
| | | |
+------------------------------------------------+----------+----------+
The average credit period taken for trade purchases is 45 days.
The directors consider that the carrying amount of trade payables and other
payables approximates to their fair value.
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | 20 | RECONCILIATION OF LOSS FROM OPERATIONS TO NET CASH USED IN OPERATING ACTIVITIES |
+---+--------+-------------------------------------------------------------------------------------------+
| | | | JPY'000 |
+---+--------+-------------------------------------------------------------+-----------------------------+
| | | | 2008 | 2007 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Loss from operations | (537,923) | (648,959) |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Adjustments for: | | |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Depreciation of property, plant & equipment | 3,541 | 8,414 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Amortisation of intangible assets and long-term prepaid | 26,977 | 23,894 |
| | | expense | | |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Impairment loss of tangible assets | 1,929 | - |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Impairment loss of goodwill and other intangible assets | 34,604 | 1,900 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Loss on sale of investment security | 1,724 | - |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Loss on devaluation of investment security | 23,292 | - |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Loss on disposal of property, plant & equipment | - | 2,010 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Finance costs, net | (77) | 623 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Share option expense | 13,630 | 9,998 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Foreign exchange (gain) / loss on cash held | 55 | (221) |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Share of loss of equity method investee | 19,484 | 3,180 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Operating cash flows before movements in working capital | (412,764) | (599,161) |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Decrease in inventories | 65,742 | 76,066 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Decrease in receivables | 106,492 | 247,147 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Increase in payables | 15,425 | 24,617 |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | Cash used in operations | (225,105) | (251,331) |
+---+--------+-------------------------------------------------------------+--------------+--------------+
| | | | | |
+---+--------+-------------------------------------------------------------+--------------+--------------+
+--+------+-------------------------------------------------------------------+
| | 21 | CONTINGENT LIABILITIES |
+--+------+-------------------------------------------------------------------+
| | | No major contingent liabilities are existent as of the date of |
| | | issuance of the auditor's report |
| | | |
+--+------+-------------------------------------------------------------------+
+--+------+-------------------------------------------------------------------+
| | 22 | OPERATING LEASE |
| | | The Company leases its office premises and warehouse under |
| | | cancellable lease terms. Such contracts may be cancelled with 6 |
| | | months advance notice. All other lease agreements are |
| | | non-cancellable contracts. The total lease expense for the years |
| | | ended 31 December 2008 and 2007 amounted to JPY 13,219 thousand |
| | | and JPY 27,866 thousand respectively. |
| | | Future minimum lease payments including other operating lease |
| | | contract for the years ended 31 December 2008 and 2007 amounted |
| | | to JPY 7,760 thousand and JPY13,805 thousand, respectively. |
+--+------+-------------------------------------------------------------------+
+----+----------------+------------+------+--+--+------+-----+--+------+--+--+--+---------+-----+--+---+--+--+---------+--------+--+---+--+--+---+--+--+-----+--+
| 23 | RELATED PARTY TRANSACTIONS | | | | | | | |
+----+-------------------------------------------------------+------------+---------------------+---------+---------------------+---------+---------+--------+
| | Transactions between the Company and its related parties are disclosed below. |
+----+-------------------------------------------------------------------------------------------------------------------------------------------------------+
| | | | | | | | | | | |
+----+----------------+----------------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | 2008 | Mr. | Mr. | Mr. | Mr. | Mr. | Fuji | Techno-imagia | I-O | Finger- | Beyond |
| | | Kashiwa- | Kiyomoto | Evans | Cho | Takahashi | Digital | | Network | Print | LSI, |
| | | bara | (Director) | (Director) | (Ex-Director) | (Ex-Director) | Imaging | | | Cards | Inc. |
| | | (Director) | | | | | | | | AB | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | (Unit:JPY'000) | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | Sales of | - | - | - | - | - | - | 1,325 | - | - | 3,896 |
| | goods in the | | | | | | | | | | |
| | year | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | Consulting | - | - | - | - | - | 6,667 | - | - | - | - |
| | fee charged | | | | | | | | | | |
| | to income | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | Short-term | - | - | - | - | - | - | - | - | - | 13,400 |
| | lending made | | | | | | | | | | |
| | to related | | | | | | | | | | |
| | party | | | | | | | | | | |
| | in the year | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | Patent | - | - | - | - | - | - | - | 20,400 | - | - |
| | returned | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | Interest | - | - | - | - | - | - | - | - | - | 12 |
| | earned | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | Amounts owed | - | - | - | - | - | - | - | - | - | 13,400 |
| | by related | | | | | | | | | | |
| | parties | | | | | | | | | | |
| | at year end | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | Amounts owed | 9,255 | 15,415 | - | 8,800 | 6,375 | - | - | - | - | - |
| | to related | | | | | | | | | | |
| | parties | | | | | | | | | | |
| | at year end | | | | | | | | | | |
+----+----------------+------------+------------+---------------+---------------+------------------+---------+---------------------+---------+---------+--------+
| | | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | 2007 | Mr. | Mr. | Mr. | Mr. | Mr. | Fuji | Techno-imagia | I-O | Finger- |
| | | Kashiwa- | Kiyomoto | Cho | Evans | Takahashi | Digital | | Network | Print |
| | | bara | (Director) | (Ex-Director) | (Director) | (Director) | Imaging | | | Cards |
| | | (Director) | | | | | | | | AB |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | (Unit: | | | | | | | | | |
| | JPY'000) | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | Sales of | - | - | - | - | - | - | 2,124 | - | - |
| | goods in the | | | | | | | | | |
| | year | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | Purchase of | - | - | - | - | - | - | - | - | 26,363 |
| | goods or | | | | | | | | | |
| | services | | | | | | | | | |
| | in the year | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | Consulting | - | - | - | - | - | 79,000 | - | - | - |
| | fee charged | | | | | | | | | |
| | to income | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | Patent | - | - | - | - | - | - | - | 40,500 | - |
| | acquired | | | | | | | | | |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | License fee | - | - | - | - | - | - | - | 3,000 | - |
+----+----------------+-------------------+------------+---------------+------------------+------------+---------------+---------------+---------+-----------+
| | Amounts owed | 2,500 | 6,506 | 1,600 | 380 | 8,575 | - | - | 20,400 | - |
| | to related | | | | | | | | | |
| | parties | | | | | | | | | |
| | at year end | | | | | | | | | |
+----+----------------+------------+------+--+--+------+-----+--+------+--+--+--+---------+-----+--+---+--+--+---------+--------+--+---+--+--+---+--+--+-----+--+
Technoimagia is one of the related parties of the Company because Mr. Taketoshi
Kashiwabara owns the Company at 66.6% (66.6% in 2007) and also owns Technoimagia
at 37.5% (37.5% in 2007) directly and indirectly through his controlling
company, Fuji Digital Imaging.
Other related parties include:
* Fuji Digital Imaging: Mr Taketoshi Kashiwabara owns 20.1% (20.1% in 2007) but
substantially controls Fuji Digital Imaging
* Fingerprint Cards AB (Sweden): Technoimagia owns 23.3% (23.3% in 2007)
through Technoimagia Sweden AB
* I-O Network: The representative director is Mr. Shoichi Kiyomoto who is a
representative director of the Company and owns 66.6% of I-O Network (66.6% in
2007).
* Sales of goods to related parties were made at the Company's usual list prices.
* Purchases were made at market price discounted to reflect the quantity of goods
purchased or service rendered.
* All short-term borrowings/lending bear interests, which are subject to the loan
rate offered by Japanese banks.
* No written-offs have been made for doubtful debts in respect of the amounts owed
by related parties.
* Amounts owed to directors/ex-directors at 31 December 2007 mainly consist of
unpaid directors remuneration.
+--+-------+--+--------------------------------------------+------------+--+------------+
| | | Remuneration of key management personnel | | |
+--+-------+-----------------------------------------------+------------+---------------+
| | | The remuneration of the directors, who are the key management personnel of |
| | | the Company, is set out below in aggregate for each of the categories |
| | | specified in IAS 24 Related Party Disclosures. |
+--+-------+----------------------------------------------------------------------------+
| | | | JPY'000 |
+--+----------+--------------------------------------------+----------------------------+
| | | | 2008 | 2007 |
+--+----------+--------------------------------------------+---------------+------------+
| | | Short-term employee benefits | 39,348 | 56,160 |
+--+----------+--------------------------------------------+---------------+------------+
| | | Share-based payment | 8,327 | 5,987 |
+--+----------+--------------------------------------------+---------------+------------+
| | | Total remuneration to directors | 47,675 | 62,147 |
+--+----------+--------------------------------------------+---------------+------------+
| | | There were no directors' transactions except for remuneration and |
| | | short-term borrowing by the Company (see above). |
+--+-------+--+--------------------------------------------+------------+--+------------+
+-------+-----------------------------------------------------------------------+
| 24 | SUBSEQUENT EVENTS |
+-------+-----------------------------------------------------------------------+
| | Issuance of new shares through a third-party allotment: |
| | Subsequent to 31 December 2008, it has resolved, at the meeting of |
| | its board of directors held at 10 February 2009, to issue 5,000,000 |
| | shares through a third-party allotment, which will be funded at 2 |
| | March 2009. The amount of fund raised through this issuance of shares |
| | was JPY 42,000,000. |
| | |
+-------+-----------------------------------------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EADDKFSENEFE
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