GLOBAL GRAPHICS : reports first quarter 2012 financial results

04/27/2012| 02:35am US/Eastern

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PRESS RELEASE

Contacts   Alain Pronost, Chief Financial Officer
    Tel: + 33 (0)6 62 60 56 51
    Jill Taylor, Director of Corporate Communications
    Tel: + 44 (0)1954 283 074
   
GLOBAL GRAPHICS REPORTS FIRST QUARTER 2012 RESULTS

Pompey (France), Friday 27 April 2012 - GLOBAL GRAPHICS SA (NYSE-Euronext: GLOG), experts in developing e-document and printing software, announces its consolidated results for the quarter ended 31 March 2012, and reports sales of Euro 2.0 million and a net loss of Euro 0.03 per share for the quarter, in line with management's expectations for that period.

Comparisons for the first quarter of the financial year ending 31 December 2012 with the same quarter of the previous financial year include:

• sales of Euro 2.0 million this quarter (Euro 2.0 million also at Q1 2011 exchange rates) compared with Euro 2.1 million in Q1 2011; 

• an operating loss of Euro 0.3 million this quarter, as in Q1 2011; 

• an adjusted operating loss of Euro 0.3 million this quarter, as in Q1 2011; 

• an adjusted pre-tax loss of Euro 0.3 million this quarter (or an adjusted pre-tax loss of Euro 0.03 per share), compared with an adjusted pre-tax loss of Euro 0.4 million (or an adjusted pre-tax loss of Euro 0.04 per share) in Q1 2011; 

• a net loss of Euro 0.3 million this quarter (or a net loss of Euro 0.03 per share), compared with a net loss of Euro 0.1 million (or a net loss of Euro 0.01  per share) in Q1 2011; and 

• an adjusted net loss of Euro 0.3 million this quarter (or an adjusted net loss of Euro 0.03 per share), compared with an adjusted net loss of Euro 0.1 million (or an adjusted net loss of Euro 0.01 per share) in Q1 2011. 

Commenting on the quarter's performance, Gary Fry, Global Graphics' Chief Executive Officer, said:  "Our sales and operating performance in the first quarter of the year was in line with our expectations.

"In the production printing segment this quarter, we have continued our successful run by signing two additional contracts to supply out RIP technology for high-speed inkjet solutions. We also had another successful Page trade show in February for both our printing and electronic document software, which we expect will contribute to new business opportunities in the Japanese markets."

"We launched the Binder software platform into the legal market last January, and the response from both system integrators and law firms has been very positive, underlining how this technology fulfils a real gap in that market."  

Analysis of the Company's performance during the quarter
A detailed discussion of the Company's operating performance for the quarter ended 31 March 2012, including a comparison with the previous financial year's comparative period, is included in notes 2 and 3 to the interim management report of the Company's Board of Directors for that quarter which is attached to this press release, together with the condensed consolidated interim financial statements for the same period.

Future prospects
Gary Fry added: "With the drupa 2012 trade show in Düsseldorf now only a few days away, we are very excited about the new products being launched by our partners using the Harlequin and the Jaws RIP engines and the subsequent shipments and revenues that we anticipate should ensue."
"Equally exciting is the opportunity to scale up our electronic document business around Binder into other vertical markets now that it has been proven in the legal market."

Annual meeting of the Company's shareholders

The annual general meeting will take place today, Friday 27 April 2012 at 11.00 CET, at the Hotel du Châtelain, 17 rue du Châtelain, in Brussels (Belgium).

The final agenda, proposed resolutions and voting procedures are available for download in the investor section of the Company's website at: http://www.globalgraphics.com/investors/annual-shareholders-meeting/:
http://www.globalgraphics.com/investors/annual-shareholders-meeting/.

Second quarter and first six months of 2011 results announcement

Global Graphics expects to announce its consolidated results for the quarter and the six-month period ending 30 June 2012 on Thursday 30 August 2012 before market opening.

About Global Graphics

Global Graphics is a leading developer of e-document and printing software. It provides high-performance solutions to the graphic arts/commercial print and digital print markets and for knowledge worker and professional software applications.  
The Company's customers include Original Equipment Manufacturers (OEMs), system integrators, software developers and resellers and number the world's leading brands of digital pre-press systems, large-format color printers, color proofing systems, digital copiers and printers for the corporate and SOHO (Small Office / Home Office) markets, as well as a wide variety of market leading software applications.

Forward-looking statements
This press release contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These include statements regarding the Company's growth, funding, expansion plans and expected results for future periods. Such statements are based on management's current expectations and are subject to a number of uncertainties and risks that could cause actual results to differ materially from those described in the forward-looking statements. Although management believes that their expectations reflected in the forward-looking statements are reasonable based on information currently available to them, they cannot assure any reader that the expectations will prove to have been correct. Accordingly, any reader should not place undue reliance on these forward-looking statements. In any event, these statements speak only as of the date of this release. The Company undertakes no obligation to revise or update any of them, neither to reflect events or circumstances after the date of this release, nor to reflect new information nor the occurrence of unanticipated events.

GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF INCOME (LOSS)

The accompanying selected explanatory notes are an integral part of the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012.

GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME (LOSS)

The accompanying selected explanatory notes are an integral part of the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION  

The accompanying selected explanatory notes are an integral part of the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012.
Figures for the year ended 31 December 2011 have been extracted from the audited, full consolidated financial statements for that year.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

The accompanying selected explanatory notes are an integral part of the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012.

GLOBAL GRAPHICS SA AND SUBSIDIARIES
CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

The accompanying selected explanatory notes are an integral part of the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
SELECTED EXPLANATORY NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS AT AND FOR THE QUARTER ENDED 31 MARCH 2012

NOTE 1: REPORTING ENTITY
These condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012 comprise Global Graphics SA, a French-based company (the Parent), and its subsidiaries (together referred to as the Company).
These condensed consolidated interim financial statements were authorized for issue by the Parent's Board of Directors on 26 April 2012.

NOTE 2: BASIS OF PREPARATION

(a) Statement of compliance
These condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012 have been prepared in accordance with IAS 34, Interim Financial Reporting ('IAS 34'), and more generally  with International Financial Reporting Standards ('IFRSs') and related interpretations issued by the International Accounting Standards Board, as adopted by the European Union.
For the purposes of their inclusion in the Company's quarterly earnings release, these condensed consolidated interim financial statements do not include all of the information required for full annual consolidated financial statements and should therefore be read in conjunction with the Company's consolidated financial statements as at and for the year ended 31 December 2011.

(b) Basis of measurement
These condensed consolidated interim financial statements have been prepared under the historical cost convention, except for the revaluation of derivative instruments at fair value through the income statement.
Non-current assets are stated at the lower of amortized cost and fair value less disposal costs, when applicable.
The methods used to measure fair value in these condensed consolidated interim financial statements are identical to those used for the preparation of the Company's consolidated financial statements as at and for the year ended 31 December 2011, which are set out in note 4 to the Company's consolidated financial statements for that year.

(c) Functional and presentation currency
These condensed consolidated interim financial statements are presented in euros, which is the Parent's functional and presentation currency, rounded to the nearest thousand, unless otherwise specified.

(d) Going concern
The Company had no outstanding financial debt and a cash position of 1,311 as at 31 March 2012 (2,315 as at 31 December 2011).
On the date these condensed consolidated interim financial statements were drafted, based on their review of updated cash flow projections prepared by management for the period ending 31 December 2013, the members of the Parent's Board of Directors have no reason to believe that a material uncertainty exists that may cast significant doubt about the Company's ability to continue as a going concern.

NOTE 3: ACCOUNTING POLICIES AND METHODS
The accounting policies and methods used for the preparation of these condensed consolidated interim financial statements are the same as those used for the preparation of the Company's consolidated financial statements as at and for the year ended 31 December 2011, which are set out in note 3 to the Company's consolidated financial statements for that year.

NOTE 4: CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements in accordance with IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the Company's accounting policies, and to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses.
The estimates and underlying assumptions are based on historical experience and various other relevant factors that are believed to be reasonable under the circumstances, the results of which form the basis of making management's judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period and future periods if the revision affects both current and future periods.
Judgements made by the Company's management in the application of IFRSs that have a significant effect on the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012, and assumptions or estimates with a significant risk of material adjustment in the coming twelve months, are discussed hereafter.

(a) Impairment of goodwill and other intangible assets
In accordance with paragraph 36 of Appendix B of IAS 34, the Company did not perform a detailed impairment computation at 31 March 2012 as had been done at 31 December 2011, but reviewed indications of possible impairment of goodwill and other intangible assets with indefinite useful lives as at and during the quarter ended 31 March 2012.
Based on the results of this review, the Company concluded that no impairment of goodwill and other intangible assets with indefinite useful lives was required as at and for the quarter ended 31 March 2012.

2. Intangible assets that are subject to amortization 

Intangible assets that are subject to amortization (notably those arising from the capitalization of development costs in accordance with criteria set in IAS 38, Intangible Assets) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

- Intangible assets reported under the Print segment of the Company's business
Intangible assets which are reported as part of the Print segment of the Company's business (see note 14e below) relate to two development projects (namely the Harlequin and Jaws RIP software) which management believes to meet the recognition criteria set out in paragraphs 57 to 62 of IAS 38 (see note 4b below).
Considering the absence of material changes during the quarter ended 31 March 2012 in the assumptions used at 31 December 2011 for identifying any requirement to impair the intangible assets reported under the Print segment of the Company's business, which resulted in management to consider that no impairment was required at the latter date for these intangible assets, management concluded that no impairment for the intangible assets reported under the Print segment of the Company's business was required as at and during the quarter ended 31 March 2012.
- Intangible assets reported under the eDoc segment of the Company's business
Intangible assets which are reported as part of the eDoc segment of the Company's business (see note 14e below) relate to three development projects (namely EDL, gDoc applications, and other conversion technologies) which management believes to meet the recognition criteria set out in paragraphs 57 to 62 of IAS 38 (see note 4b below).
Considering the absence of material changes during the quarter ended 31 March 2012 in the assumptions used at 31 December 2011 for identifying any requirement to impair the intangible assets reported under the eDoc segment of the Company's business, which resulted in management to consider that no impairment was required at the latter date for these intangible assets, management concluded that no impairment for the intangible assets reported under the eDoc segment of the Company's business was required as at and during the quarter ended 31 March 2012.

(b) Capitalization and amortization of computer software development costs

(i) Development cost capitalization and amortization methods used by the Company
As stated in note 3e to the Company's consolidated financial statements for the year ended 31 December 2011, costs associated with maintaining existing computer software technology and programmes are recognised as an expense when incurred.
Are recognized as intangible assets costs that are directly associated with the production of identifiable and unique software products over which the Company has proprietary rights, that can be measured reliably, and where it is probable that future economic benefits attributable to such software products will flow to the Company. Such costs only include software development employee costs.
Development costs recognized as intangible assets are amortised from the point the asset is ready for use on a straight-line basis over its estimated useful life, which do not exceed ten years.
Such amortization charge is included in Research and development expenses in the consolidated statement of income.

(ii) Capitalization of computer software development costs
The following tables provide information on the aggregate amounts of computer software development costs which were capitalized as at 31 March 2012 and 2011, as well as on the amounts which were capitalized during the quarters then ended for those projects the Company considered it could demonstrate that it met all of the abovementioned recognition criteria:

- Quarter ended 31 March 2012

- Quarter ended 31 March 2011

(iii) Amortization of capitalized computer software development costs
The following tables provide information on accumulated amortization as at 31 March 2012 and 2011, as well as on the amortization expenses which were recognized in the quarters then ended for those projects the Company considered it could demonstrate that it met all of the abovementioned recognition criteria:

- Quarter ended 31 March 2012

- Quarter ended 31 March 2011

(c) Income tax

(i) Current income tax
The Company is subject to income tax in France and in all jurisdictions where it has subsidiaries (notably in the UK and the US).
Significant judgement is required in determining the provision for income taxes, as there are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

(ii) Deferred income tax

- Policy used by the Company for recognizing deferred tax assets
The Company recognises deferred tax assets as stated in note 3p to the Company's consolidated financial statements for the financial year ended 31 December 2011.
In evaluating whether it is probable or not that a deferred tax asset recognised in a specific jurisdiction may be utilised against future taxable profits to be recognised in that jurisdiction, the Company uses estimates of future taxable profits over an appropriate period of time from the balance sheet date (currently being four years), based on sales growth and profit assumptions considered to be appropriate by management over that four-year period.
Should these growth assumptions be revised downwards in future periods, the Company may be required to record a significant deferred tax charge during the period in which the downward revision of these assumptions would be effected, resulting in an unfavorable impact on the Company's results of operations.

- Recognized deferred tax assets and liabilities

Deferred tax asset attributable to capital allowances
Deferred tax assets are predominantly attributable to capital allowances available to the UK subsidiaries as the result of the acquisitions made by the Company in the years ended 31 December 1999 and 2000. Although such allowances may be used without any deadline, they can only be used in a given year up to 20% of the outstanding balance at the beginning of that year.
The recognition of a deferred tax asset corresponding to the amount of capital allowances the Company projected to use over the four-year period ending 31 March 2016 to offset projected taxable profit to be made by its UK subsidiary over such period was made using the tax rate that was expected to apply to the period when the deferred tax asset would be expected to be realized, i.e. 24.0% from 1 April 2012, as set out in note 7d below.
It resulted in the recognition of a deferred tax asset of 1,279 as at 31 March 2012 and a deferred tax benefit of 24 in the quarter then ended (see note 7b below).

Deferred tax liability arising from the capitalization of developments costs
The recognition of a deferred tax liability corresponding to the amount of development costs capitalized in accordance with applicable provisions of IAS 38, net of applicable amortization, was made using the tax rate that is expected to apply to the period when the deferred tax liability is expected to be settled realized, i.e. 24.0% from 1 April 2012, as set out note in note 7d below.
It resulted in the recognition of a deferred tax liability of 1,279 as at 31 March 2012, and a deferred tax expense of 14 in the quarter ended 31 March 2012 (see note 7b below).

- Unrecognized deferred tax assets
The amount of capital allowances which were available to the Company's UK subsidiaries as at 31 March 2012, but were not projected to be used in the four-year period ending 31 March 2016, and therefore did not result in the recognition of a deferred tax asset at 31 March 2012, amounted to 13,255 at such date.
Had a deferred tax asset been recognized with regards to such portion of available capital allowances at 31 March 2012, since these allowances would only be used after 1 April 2016, the applicable tax rate at the time these allowances would be used to offset taxable profit was assumed to be the UK statutory rate which would be applicable from 1 April 2012 i.e. 24.0%, as this is the only change in the UK corporation tax rate which was substantially enacted before 31 March 2012: the corresponding, additional deferred tax asset would amount to 3,181 at that date.

(d) Share-based compensation expense

(i) Share options

- Outstanding and exercisable share options as at 31 March 2012
The following table summarises information about the Company's outstanding and exercisable share options as at 31 March 2012, all of which expire on 6 August 2016:

- Main terms and conditions of abovementioned share option grants

Share option grants made in the years ended 31 December 2008 to 2010
Two conditions are attached to the exercise of share options which were granted in the years ended 31 December 2008 to 2010:
- firstly, the recipient of the share option grant must have been an employee and/or a director of the Company at all times between the date when the options were granted to him/her and the date(s) when he/she exercises all of part of these options; and
- secondly, the exercise of options may be done by the recipient of such share option grant but only from the date when the average of the closing prices reported for the Company's share over the last 120 trading days is at least equal to Euro 4.00 for the first quarter of the number of options granted to the recipient of the share option grant, to Euro 8.00 for the second quarter of the number of options granted to the recipient of the share option grant, to Euro 12.00 for the third quarter of the number of options granted to the recipient of the share option grant, and to Euro 16.00 for the last quarter of the number of options granted to the recipient of the share option grant.

An accelerated vesting of these options, regardless of whether or not the abovementioned minimum share price conditions were met, would occur should one or several shareholders acting in concert (as defined by article L.233-3 of French Commercial Law) come to hold more than 30.0% of the total number of shares forming the Company's share capital or of the voting rights attached to such shares, or more than the number of shares and/or voting rights attached to such shares held by Stichting Andlinger & Co. Euro-Foundation, which held approximately 28.0% of the Company's shares and voting rights as at 31 March 2012.

Share option grant made on 2 November 2011
Two conditions are attached to the exercise of the 287,500 share options which were granted on 2 November 2011:
- firstly, the recipient of the share option grant must have been an employee and/or a director of the Company at all times between the date when the options were granted to him/her and the date(s) when he/she exercises all of part of these options; and
- secondly, the exercise of options may be done by the recipient of such share option grant but only from the date when the closing price reported for the Company's share will be at least equal to Euro 2.00 during a minimum of 20 trading days over any period of 60 trading days during which trades occurred in the Company's share for the first half of the number of these options, and at least to Euro 3.00 (computed as mentioned above) for the remaining half.
An accelerated vesting of these options, regardless of whether or not the abovementioned minimum share price conditions were met, would occur should one or several shareholders acting in concert (as defined by article L.233-3 of French Commercial Law) come to hold more than 30.0% of the total number of shares forming the Company's share capital or of the voting rights attached to such shares.

(ii) Share grants

- Grant of shares at no cost to the recipient of such share grant ('free shares')

Grant of free shares made on 29 July 2009
The Parent's Board of Directors made a provisional grant of 24,750 free shares to certain employees of some of the Company's foreign subsidiaries on 29 July 2009.
As at 31 December 2011 and 31 March 2012, after effect of the final grant of shares made to certain employees of the Company when they left the Company's employment since share grant date, a total of 21,750 shares may still be granted at the end of the four-year period starting on share grant date, provided that the recipients of the free share grant have been employees of the Company at all times during that four-year period.
Recipients of such share grant will not be subject to any holding period after final grant date.

Grant of free shares made on 10 March 2011
The Parent's Board of Directors made a provisional grant of 96,000 free shares to certain employees of some of the Company's subsidiaries on 10 March 2011, of which 36,000 shares to Mr. Gary Fry and 4,000 shares to Mr. Alain Pronost in their respective capacities of Chief Executive Officer and Chief Financial Officer of the Company.
As at 31 December 2011 and 31 March 2012, a total of 88,000 shares may still be granted at the end of the vesting period starting on share grant date, provided that the recipients of the free share grant have been employees of the Company at all times during such period, which will last four years for all recipients who are employed by foreign subsidiaries of the Company and two years for those who are employed by the Parent.
Recipients of such share grant will not be subject to any holding period after final grant date, with exception of those employed by the Parent who will be required to hold their shares until the fourth anniversary date of the share grant.

Grant of free shares made on 2 November 2011
The Parent's Board of Directors made a provisional grant of 24,000 free shares to certain employees of some of the Company's foreign subsidiaries on 2 November 2011.
As at 31 December 2011 and 31 March 2012, all of these 24,000 shares may still be granted at the end of the four-year period starting on share grant date, provided that the recipients of the free share grant have been employees of the Company at all times during that four-year period.
Recipients of such share grant will not be subject to any holding period after final grant date.

- Share Incentive Plan
Pursuant to the authorization granted by the Company's shareholders on 29 April 2009, a Share Incentive Plan (SIP) was implemented for the benefit of the Company's employees, notably those of the UK subsidiary of the Company, who may be granted ordinary shares of the Company (Matching Shares) in proportion of the purchase of ordinary shares of the Company (Partnership Shares) made through a deduction on their net pay, being noted that such grant of Matching Shares will become final at the end of a three-year period starting on the date of each purchase of Partnership Shares.
At as 31 March 2012, 40,539 shares were granted as SIP Matching Shares to employees of the UK subsidiary of the Company, of which 1,699 in the quarter ended 31 March 2012.

(iii) Share-based compensation expense analysis

NOTE 5: OTHER OPERATING EXPENSES AND INCOME
In accordance with provisions of paragraph 28 of the IASB Framework and paragraphs 97 & 98 of IAS 1 (revised), Presentation of Financial Statements, when material, the nature and amount of unusual, abnormal and infrequent items of income and expense have to be separately disclosed to enhance the predictive value of the consolidated statement of income (loss).

(a) Other operating expenses
No other operating expenses were incurred in either of the quarters ended 31 March 2012 or 2011.

(b) Other operating income
No other operating income was incurred in the quarter ended 31 March 2011.

An amount of 41 was recognised in the quarter ended 31 March 2011 pursuant to the write-back of a portion of the provision for vacant office space which was recorded as at 31 December 2010 to account for unused office space in the UK, the balance of this provision being written back pursuant to management's decision to re-use all of that office space from 1 July 2011.
Accordingly, the Company also recognised an interest expense corresponding to the unwinding of the discount of that provision, which amounted to 8 in the quarter ended 31 March 2011, as set out in note 6 below.

NOTE 6: NET FINANCING GAINS (LOSSES)

NOTE 7: INCOME TAX EXPENSE (BENEFIT)

(a) Current income tax expense (benefit)
The Company recorded a current income tax expense amounting to 4 in the quarter ended 31 March 2012, compared with a current income tax benefit amounting to 248 in the quarter ended 31 March 2011.
The current income tax benefit which was recorded in the quarter ended 31 March 2011 predominantly resulted from the refund to Global Graphics Software Limited of the research and development tax credit for the year ended 31 December 2010 amounting to 257, which was received by that subsidiary in early April 2011.

 (b) Deferred tax expense (benefit)
The following table provides an analysis of the deferred tax expenses (benefits) which were recorded in the quarters ended 31 March 2012 and 2011, respectively:

(c) Reconciliation of the effective income tax expense (benefit)

(d) Recent and future decreases in the UK corporation tax rate

(i) Applicable accounting rules
In accordance with applicable provisions of IAS 12, Income taxes (IAS 12), any change in corporation tax rates cannot be reflected in a company's consolidated accounts prepared in accordance with IFRSs unless the corporation tax rate changes have been either enacted or substantively enacted on or before the relevant balance sheet date.
In the UK, substantive enactment occurs when the relevant Finance Act has passed through the House of Commons and is awaiting only passage through the House of Lords and Royal Assent, or when a resolution having statutory effect has been passed under the Provisional Collection of Taxes Act 1968.

(ii) Recent decreases of the UK corporation tax rate

- With effect from 1 April 2012
On 26 March 2012, the Chancellor of the Exchequer announced the decrease in the main rate of UK corporation tax from 26.0% to 24.0% with effect from 1 April 2012, which was an additional 1.0% in addition to the 1.0% reduction included in the Finance Bill 2011.
Given the late notice in such rate reduction applying from 1 April 2012, it has been legislatively necessary for the reduction to be included in a resolution which was given effect under the Provisional Collection of Taxes Act 1968. Accordingly, the reduction in the UK corporation tax rate to 24.0% was substantively enacted following the passing of the resolution on 26 March 2012.
The rate of 26.0% has been that applicable for the computation of the tax expense (benefit) arising from the taxable profit (loss) made by the UK subsidiaries of the Company in the year ending 1 April 2012, while the rate of 24.0% has been using when measuring deferred tax assets and liabilities which are expected to be realized or settled after 31 March 2012.

- With effect from 1 April 2013
In his Budget on 26 March 2012, the Chancellor of the Exchequer also proposed a further 1.0% reduction of the UK corporate tax rate to 23.0% from 1 April 2013.
This amendment was included in the Finance (No. 4) Bill that received its second reading in the House of Commons on 16 April 2012.
Accordingly, the decrease in the UK corporate tax rate to 23.0% was not substantively enacted for the purposes of IAS 12 on the date these condensed consolidated interim accounts were drafted by the Board, and was not considered when computing the deferred tax assets and liabilities of the UK subsidiaries of the Company as at 31 March 2012.
The effect on the Company's tax position of this additional reduction of the UK corporation tax rate will be reflected in the Company's consolidated accounts once the corresponding reduction has been enacted.

NOTE 8: EARNINGS PER SHARE

(a) Basic earnings per share

(i) Method used in the computation of basic EPS
Basic earnings per share (EPS) are calculated by dividing profit or loss attributable to the Company's shareholders for a period by the weighted average number of ordinary shares outstanding during that period, after taking into account any free shares the grant of which has become final in the period or any newly issued shares resulting from the exercise of share options, as applicable.

(ii) Computation for the quarters ended 31 March 2012 and 2011
The following table provides for the computation of the weighted average number of ordinary shares to be used for basic EPS computation in the quarters ended 31 March 2012 and 2011, respectively:

(b) Diluted earnings per share

(i) Method used in the computation of basic EPS
Diluted earnings per share are calculated by adjusting profit or loss attributable to the Company's shareholders, and the weighted average number of ordinary shares outstanding, for the effects of all dilutive potential ordinary shares.
However, potential ordinary shares are treated as dilutive when, and only when, their conversion to ordinary shares would decrease earnings per share or increase loss per share: as a result, when the Company reports a net loss for a given period, no adjustment is made for dilutive potential ordinary shares, as management considers this would result in decreasing loss per share.

(ii) Computation for the quarters ended 31 March

NOTE 9: OTHER INTANGIBLE ASSETS

(a) Gross value

(b) Amortisation and impairment

NOTE 10: GOODWILL

(a) Gross value

(b) Amortisation and impairment

NOTE 11: TRADE RECEIVABLES

(a) Gross and net amounts

(b) Aging of trade receivables

NOTE 12: SHARE CAPITAL AND SHARE PREMIUM

(a) Share capital
The number of outstanding, fully paid, ordinary shares of the Company, each of par value of Euro 0.40, was 10,289,781 as at both 31 March 2012 and 31 December 2011, resulting in a share capital amounting to 4,116 at both these dates.

(b) Share premium
An amount of 5 was incurred in relation with the Company's share-based remuneration plans in the quarter ended 31 March 2012, and was offset against the share premium during that period (nil in the quarter ended 31 March 2011).

NOTE 13: OWN SHARES
None of its own shares were repurchased or granted by the Company in either of the quarters ended 31 March 2012 or 2011.
As a result, the total number of own shares held as treasury shares by the Company was 166,267 as at 31 March 2012 and 31 December 2011, compared with 168,081 shares as at 31 March 2011 and 31 December 2010, for respective repurchase values of 1,191 and 1,204.

NOTE 14: SEGMENT REPORTING

1. Identification of operating and reportable segments  

1. Applicable rules 

Management has identified operating segments give rise to reporting pursuant its review of those segments giving rise to reporting to the Company's CEO, who decides upon the best allocation of resources and monitors the operating and financial performance of each operating segment.
Two segments were identified, the Print segment for the printing software segment of the Company's business, and the eDoc segment for the electronic document software segment of the Company's business.
The performance of each of these segments is monitored by the Company's CEO based on their respective gross margin contribution.

2. Allocation of assets and liabilities to operating segments 

Assets and liabilities, whether current or non-current, are allocated based on the operations of the reportable segments.
Goodwill existing at 1 January 2009 has been fully allocated to the Print segment as it relates to acquisitions of assets made in the area of printing software in the years ended 31 December 1999 and 2000.
Items such as deferred tax assets, current assets other than trade receivables, as well as current liabilities other than customer advances and deferred revenue, are not allocated to any of the Company's reportable segments.
Whenever appropriate, management may restate prior year's comparative information to conform to the current year's presentation of operating segment information, notably sales and asset breakdown.

(b) Analysis of the Company's sales

(i) Breakdown of sales by nature of products sold and services rendered
Both segments derive their revenue from the development and sale of software applications and/or solutions, and of related services such as customization, implementation, training, as well as support and maintenance.

The following table provides a breakdown of the Company's sales by nature of products sold and services rendered for those sales made in the quarters ended 31 March 2012 and 2011, respectively:

(ii) Breakdown of sales based on the geographical location of customers

(c) Sales and gross profit by business segment

(i) Quarter ended 31 March 2012

(ii) Quarter ended 31 March 2011

 (d) Reconciliation of gross profit to profit (loss) before income tax

(e) Reconciliation of assets and liabilities

(i) As at 31 March 2012

(ii) As at 31 December 2011 (restated for current assets and liabilities)

(f) Allocation of non-current assets based on their geographical location

NOTE 15: RELATED PARTY TRANSACTIONS
The Company has a related party relationship with its subsidiaries (see note 16 below) as well as with its directors and executive officers, as set out below.

(a) With the Company's directors
The amount of board fees to be allocated among the Company's directors which was recognized in each of the quarters ended 31 March 2012 and 2011 were 15.

(b) With the Company's executive officers

(i) Salaries and other short-term benefits
The executive directors received the following salaries and other short-term benefits (notably bonuses and pension scheme contributions) in the quarters ended 31 March 2012 and 2011, respectively:

(ii) Share-based compensation plans
Executive officers are entitled to participate in the Company's share option and share grant schemes.
No share options or shares were granted to the executive officers in the quarter ended 31 March 2012.
The portions of the share-based compensation expenses which were attributable to the Company's executive officers and were recorded in the quarters 31 March 2012 and 2011, respectively, were as follows:

(c) With a company which is managed by one of the Company's directors
In its meeting on 16 December 2009, approval was given by the Company's Board of Directors to two agreements with Andlinger & Co. CVBA, a Belgium-based company which is managed by Mr. Johan Volckaerts.
The purpose of these agreements was to provide that the Company would be:
- entitled to use a meeting room and related services in Brussels, against the payment of a fee amounting to Euro 1,500 each quarter; and
- provided with advice regarding its strategy, against the payment of a fee amounting to Euro 6,000 per month, which was increased to Euro 6,500 per month from 1 February 2011 as voted by the Board on 8 February 2011, and decreased to Euro 4,500 per month from 1 October 2011 as voted by the Board on 2 November 2011.
The corresponding amounts which were expensed by the Company were 15 and 21 in the quarters ended 31 March 2012 and 2011, respectively.

NOTE 16: SUBSIDIARIES
These condensed consolidated interim financial statements for the quarters ended 31 March 2012 and 2011, respectively, include the accounts of the following companies:

Global Graphics Software (India) Private Limited has been dormant since April 2010 and is currently under liquidation, the completion of which is expected shortly.
Jaws Systems Limited has been dormant since the close of the year ended 31 December 2001.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
ADJUSTED FINANCIAL INFORMATION PREPARED BY MANAGEMENT

NOTE 1: BASIS OF PREPARATION OF ADJUSTED FINANCIAL INFORMATION
The Company's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRSs) and related interpretations issued by the International Accounting Standards Board (IASB), as adopted by the European Union (EU).
However, management of the Company it believes that evaluating the Company's ongoing results may not be as useful if an investor is limited to reviewing only IFRS financial measures, notably because management of the Company uses adjusted financial information to evaluate its ongoing operations as well as for internal planning and forecasting purposes.
To prepare adjusted financial information, management of the Company complies with the principles set in the Recommendation on Alternative Performance Measures which was issued by the Committee of European Securities Regulators (now the European Securities and Markets Authority) in October 2005.
The Company's management does not itself, nor does it suggest that investors should, consider such adjusted financial measures in isolation from, or as a substitute for, financial information prepared in accordance with IFRSs.
The Company presents adjusted financial measures in reporting its financial results to provide investors with an additional tool to evaluate the Company's results in a manner that focuses on what the Company believes to be its ongoing business operations.
The Company's management believes that the inclusion of adjusted financial measures provides consistency and comparability with past reports of financial information and has historically provided comparability to similar companies in the Company's industry, many of which present the same or similar adjusted financial measures to investors.
As a result, investors are encouraged to review the related IFRS financial measures and the reconciliation of these adjusted financial measures to the most directly comparable IFRS financial measures as detailed above.

NOTE 2: INFORMATION ON ADJUSTMENTS MADE TO REPORTED NUMBERS
The purpose of the following adjustments, which are made to reported numbers with respect of the Company's operating, pre-tax, and net profit (loss), is to provide additional information to measure the Company's performance.

(a) Share-based remuneration expense
In accordance with applicable provisions of IFRS 2, Share-based payments, an expense is recognized in the Company's consolidated financial statements with respect of share-based remuneration plans, regardless of any change in the number of outstanding shares of the Company pursuant to the exercise of share options, or before the grant of shares to employees of the Company becomes final.
As a result, management of the Company believes it is appropriate to adjust the Company's operating profit (loss) reported under IFRSs of such expense to provide a relevant measure of the Company's operating performance.

(b) Capitalization and amortization of eligible software development expenses
Costs relating to development projects (consisting of employee costs) which meet all of the criteria set out under paragraphs 57 to 62 of IAS 38, Intangible Assets, are capitalized, and are subsequently amortized over the estimated useful life of the corresponding development project.

Considering the level of judgment required to assess whether a given development project may be eligible to such capitalization, and also to set the duration of the useful life of such project, management of the Company believes it is appropriate to adjust the Company's operating profit (loss) reported under IFRSs of such amounts to provide a relevant measure of the Company's operating performance.

(c) Unusual, abnormal and infrequent items of income and expense
In accordance with provisions of Paragraph 97 of IAS 1 (revised), Presentation of Financial Statements, unusual, abnormal and infrequent items of income and expense have to be disclosed in a separate note, in an attempt to improve the predictive value of the consolidated statement of income (loss).
Management of the Company believes that the most appropriate way of achieving this is, in addition to separate disclosure on the face of the consolidated statement of income under the captions Other operating expenses and Other operating income, and the detailed analysis of corresponding amounts in a separate note, to adjust the Company's operating profit (loss) reported under IFRSs of such items to provide the user of the Company's financial information with a consistent base of comparison, excluding the effect of such items.

NOTE 3: ADJUSTED FINANCIAL INFORMATION COMPUTATION

(a) Adjusted operating profit (loss) computation

(b) Adjusted pre-tax profit (loss) computation

Adjusted pre-tax EPS is computed by dividing the adjusted pre-tax profit (loss) for a given reporting period by the weighted average number of ordinary shares which were outstanding during that period, i.e. 10,123,514 and 10,121,700 shares in the quarters ended 31 March 2012 and 2011, respectively.

(c) Adjusted net profit (loss) computation

Adjusted net EPS is computed by dividing the adjusted net profit (loss) for a given reporting period by the weighted average number of ordinary shares which were outstanding during that period, i.e. 10,123,514 and 10,121,700 shares in the quarters ended 31 March 2012 and 2011, respectively.

GLOBAL GRAPHICS SA AND SUBSIDIARIES
INTERIM MANAGEMENT REPORT OF THE COMPANY'S BOARD OF DIRECTORS
FOR THE QUARTER ENDED 31 MARCH 2012
Translation of the French language original

Pursuant to the transposition under article L.451-1-2 of the French Monetary and Financial Code of the EU Directive 2004/109/CE of the European Parliament and of the Council of 15 December 2004 (the 'Transparency Directive'), we present to you the interim management report of the Parent's Board of Directors for the quarter ended 31 March 2012.
This interim management report was authorized for issue by the Parent's Board of Directors on 26 April 2012.

NOTE 1: ORGANIZATION OF THE GLOBAL GRAPHICS GROUP OF COMPANIES (THE 'COMPANY')

(a) Structure of the Company as at 31 March 2012
No change has occurred in the Company's structure during the quarter ended 31 March 2012.
Global Graphics Software (India) Private Limited has been dormant since late April 2010 and under liquidation since early May 2010.
Please also refer to note 16 to the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012.

(b) Changes in the Company's structure since 1 April 2012
No change has occurred in the Company's structure since 1 April 2012.

NOTE 2: MANAGEMENT DISCUSSION OF CONSOLIDATED FINANCIAL RESULTS
The Company prepares its condensed consolidated interim financial statements in accordance with IAS 34, Interim Financial Reporting, and more generally with International Financial Reporting Standards (IFRSs) as well as related interpretations issued by the International Accounting Standards Board (IASB), as adopted by the European Union (EU).
Amounts indicated hereafter are presented in euros (which is the reporting currency of the Company), rounded to the nearest thousand, unless otherwise specified.

(a) Sales analysis
Sales were 2,048 in the quarter ended 31 March 2012, compared with 2,078 in the first quarter of the financial year ended 31 December 2011, or a sequential decrease of 1.4% at current exchange rates.
Approximately 80.4% of the Company's sales made in the quarter ended 31 March 2012 were denominated in US dollars, which sequentially increased versus the euro, since the average euro/US dollar rate was 1.310 in the quarter ended 31 March 2012, while it was 1.358 in the first quarter of the financial year ended 31 December 2011, or a sequential increase of 3.7%.
At constant exchange rates, sales made in the quarter ended 31 March 2012 would have amounted to approximately 1,969, showing a decrease of 5.2% over the figure reported for sales in the first quarter of the financial year ended 31 December 2011.
Sales made in the Print segment of the Company's business were 1,840 in the quarter ended 31 March 2012, and showed an increase of 8.9% at current exchange rates and of 4.7% at constant exchange rates, over the 1,690 figure reported for sales made in the same segment of the Company's business in the first quarter of the financial year ended 31 December 2011.

Sales made in the eDoc segment of the Company's business were 208 in the quarter ended 31 March 2012, and showed a decrease of 46.4% at current exchange rates and of 48.5% at constant exchange rates over the 388 figure reported for sales made in the same segment of the Company's business in the first quarter of the financial year ended 31 December 2011.

(b) Performance analysis

(i) Operating loss
The Company reported an operating loss of 311 in the quarter ended 31 March 2012 (or 15.2% of the quarter's sales), compared with an operating loss of 287 in the first quarter of the financial year ended 31 December 2011 (or 13.8% of that quarter's sales), or an unfavorable, sequential variance of 24, which can be analyzed as follows:
- sales decreased by 30, as set out in note 2a above;
- cost of sales was 83 in the quarter ended 31 March 2012 (4.1% of the quarter's sales), compared with 107 in the first quarter of the financial year ended 31 December 2011 (5.1% of that quarter's sales), or a favorable variance of 24;
- selling, general and administrative expenses totaled 1,097 in the quarter ended 31 March 2012 (53.6% of the quarter's sales), showing a sequential decrease of 1 (i.e. of 0.1%) over the 1,098 figure reported for such expenses in the first quarter of the financial year ended 31 December 2011 (52.8% of that quarter's sales);
- research & development expenses totaled 1,179 in the quarter ended 31 March 2012 (57.6% of the quarter's sales) showing a sequential decrease of 22 (i.e. of 1.8%) over the 1,201 figure reported for such expenses in the first quarter of the financial year ended 31 December 2011 (57.8% of that quarter's sales).
Such expenses included a benefit of 55 with respect of the effect, after amortization, of the capitalization of eligible development expenses relating to the development projects for which all criteria for such capitalization were met, compared with an benefit of 41 in the first quarter of the financial year ended 31 December 2011 (please refer to note 4b to the Company's condensed consolidated interim financial statements as at and for the quarter ended 31 March 2012 for further details on this);
- there were no other operating expenses in either of the quarters ended 31 March 2012 or 2011;
- there were no other operating income in the quarter ended 31 March 2012, compared with other operating income amounting to 41 in the first quarter of the financial year ended 31 December 2011, or an unfavorable, sequential variance of 41.

(ii) Loss before income tax
The Company reported a loss before income tax of 329 in the quarter ended 31 December 2011 (or 16.1% of the quarter's sales), compared with a loss before income tax of 333 in the first quarter of the financial year ended 31 December 2011 (or 16.0% of that quarter's sales), or a favorable variance of 4 which resulted from the combination of:
- the sequential increase of the operating loss from 287 in the first quarter of the financial year ended 31 December 2011 to 311 in the quarter ended 31 March 2012, or an unfavorable variance of 24 discussed above;
- the decrease in interest income of 1 over the 2 figure reported for interest income in the first quarter of the financial year ended 31 December 2011, or an unfavorable variance of 1;
- no interest expense was recorded in the quarter ended 31 March 2012, compared with an expense of 8 in the first quarter of the financial year ended 31 December 2011, or a favorable variance of 8; and
- the favorable effect of foreign currency exchange differences, which were losses of 19 in the quarter ended 31 March 2012, compared with losses of 40 in the first quarter of the financial year ended 31 December 2011, or a favorable variance of 21.

(iii) Net loss
The Company reported a net loss of 323 in the quarter ended 31 March 2012 (or a net loss of Euro 0.03 per share) after giving effect to an income tax benefit of 6 (including a current income tax expense of 4 and a deferred tax benefit of 10), compared with a net loss of 97 in the first quarter of the financial year ended 31 December 2011 (or a net loss of Euro 0.01 per share), after effect of a tax benefit of 236, principally resulting from the repayment to the Company of a research and development tax credit in the amount of 257.

NOTE 3: MANAGEMENT'S COMMENTS ON THE COMPANY'S PERFORMANCE

(a) Salient features by the Company's Chief Executive Officer (CEO)

(i) Operational highlights

Gary Fry, Global Graphics' Chief Executive Officer, said: "Our sales and operating performance in the first quarter of the year was in line with our expectations.
"In the production printing segment this quarter, we have continued our successful run by signing two additional contracts to supply out RIP technology for high-speed inkjet solutions. We also had another successful Page trade show in February for both our printing and electronic document software, which we expect will contribute to new business opportunities in the Japanese markets."
"We launched the Binder software platform into the legal market last January, and the response from both system integrators and law firms has been very positive, underlining how this technology fulfils a real gap in that market."

(ii) Financial highlights for the quarter ended 31 March 2012

Financial performance
Sales amounted to 2,048 in the year ended 31 December 2011, showing a 1.4% decrease at current exchange rates and of 5.2% at constant exchange rates with the 2,078 figure reported for sales in the first quarter of the financial year ended 31 December 2011.
Sales made in the Print segment of the Company's business showed an increase of 4.7% at constant exchange rates over sales made in the same segment of the Company's business in the first quarter of the financial year ended 31 December 2011.
Sales made in the eDoc segment of the Company's business decreased 48.5% at constant exchange rates over sales made in the same segment of the Company's business in the first quarter of the financial year ended 31 December 2011.

Operating expenses (excluding cost of sales but including other operating income and expenses, as applicable) were 2,276 in the quarter ended 31 March 2012, compared with 2,258 in the first quarter of the financial year ended 31 December 2011, or a sequential increase of 0.8% at current exchange rates.

The Company reported an adjusted operating loss of 333 in the quarter ended 31 March 2012 (or an adjusted operating loss equal to 16.3% of the quarter's sales), compared with an adjusted operating loss of 334 in the first quarter of the financial year ended 31 December 2011 (or an adjusted operating loss equivalent to 16.1% of that quarter's sales).
The Company reported an adjusted pre-tax loss of 351 (or an adjusted pre-tax loss of Euro 0.03 per share) in the quarter ended 31 March 2012, compared with an adjusted pre-tax loss of 372 (or an adjusted pre-tax loss of Euro 0.04 per share) in the first quarter of the financial year ended 31 December 2011.

The Company reported an adjusted net loss of 331 (or an adjusted net loss of Euro 0.03 per share) in the quarter ended 31 March 2012, compared with an adjusted net loss of 115 (or an adjusted net loss of Euro 0.01 per share) in the first quarter of the financial year ended 31 December 2011.

Cash flows for the quarter ended 31 March 2012
Net cash flows used by the Company's operations amounted to 577 in the quarter ended 31 March 2012 (or 28.2% of the quarter's sales), compared with net cash flows provided by the Company's operations amounting to 180 in the first quarter of the financial year ended 31 December 2011 (or 8.7% of that quarter's sales).
Cash balances available at 1 January 2012 (which amounted to 2,315) allowed the Company to fund these operating requirements as well as its capital expenditures incurred in the quarter ended 31 March 2012, either on property, plant and equipment for 41, or those resulting from the capitalization of development expenses for 369, and to close the period with a net cash position of 1,311.

(b) Commentary on the remainder of the current year by the Company's CEO
"With the drupa 2012 trade show in Düsseldorf now only a few days away, we are very excited about the new products being launched by our partners using the Harlequin and the Jaws RIP engines and the subsequent shipments and revenues that we anticipate should ensue."
"Equally exciting is the opportunity to scale up our electronic document business around Binder into other vertical markets now that it has been proven in the legal market."

NOTE 4: SIGNIFICANT OPERATIONAL AND FINANCIAL RISK FACTORS

(a) Significant operational risk factors
Please refer to note 2d to the report on the Company's operations for the financial year ended 31 December 2011 which was drafted by the Parent's Board of Directors and is included in the Company's annual financial report for that year, for a discussion on these risk factors.

(b) Significant financial risk factors
The Company's activities expose it to a variety of financial risks, notably foreign exchange risk, credit risk, liquidity risk and cash flow interest-rate risk.

(i) Foreign exchange risk
The Company operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar and the British pound. Foreign exchange risk arises from future commercial transactions, recognized assets (notably cash and trade receivables) and liabilities, as well as net investments in foreign operations.

• Risk arising from future commercial transactions and balance sheet items 

To manage their foreign exchange risk arising from future commercial transactions, recognized assets and liabilities (i.e. which are denominated in a currency that is not the entity's functional currency), certain entities in the Company use foreign currency option contracts transacted with high-credit-quality financial institutions after review and approval by the Company's Chief Financial Officer.
These contracts gave the Company the right, but not the obligation, to convert at respective maturity dates of these contracts an amount of US dollars into euros at a maximum rate (the 'strike price') assuming that, during the life of the corresponding contract, the exchange rate between the $ and the euro or the British pound, as applicable, was always higher than a minimum rate (the trigger rate). Should this trigger rate occur, the Company would be obliged to convert an amount of $ at the strike price at respective maturity dates of these contracts.
Two Euro call/US dollar put option contracts were outstanding at 31 March 2012, each having a nominal value of $125,000, which expire on 20 June and 24 September 2012 respectively, and have respective option trigger prices of $1.1800 and $1.1990 for 1 Euro, and respective strike prices of $1.3300 and $1.3400 for 1 Euro.
The Company recorded an exchange loss of 1 with respect of abovementioned foreign currency option contracts in the quarter ended 31 March 2012, compared with nil in the first quarter of the financial year ended 31 December 2011 in the absence of such contracts outstanding at either 31 December 2010 or 31 March 2011.

• Risk arising from net investments in foreign subsidiaries 

In addition, the Company has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Company's foreign operations in the UK and in the US is managed primarily through borrowings denominated in the relevant foreign currencies, where appropriate.
Please refer to note 6 to the Company's condensed consolidated interim financial statements for the quarter ended 31 March 2012 for further details on foreign currency exchange differences for those periods.

(ii) Credit risk
Financial instruments that potentially subject the Company to credit risk consist primarily of trade receivables.
As it markets and sells its products and services to a broad base of customers including OEM partners, distributors, and system integrators, the Company has no significant concentration of credit risk though relatively few customers accounted for a substantial portion of the Company's sales within the last few years as a result of the dominance of a limited number of significant players in the Company's markets.
The ten major customers represented approximately 64.3% of the Company's sales in the quarter ended 31 March 2012 (compared with 63.2% for the first quarter of the financial year ended 31 December 2011); approximately 43.6% of sales were made with the five largest customers of the Company in the quarter ended 31 March 2012 (compared with 45.4% for the first quarter of the financial year ended 31 December 2011), and approximately 13.9% with the major customer alone in the quarter ended 31 March (compared with 13.0% for the first quarter of the financial year ended 31 December 2011).

(iii) Liquidity risk
Due to the dynamic nature of its business, the Company aims to maintain flexibility for financing its activities by keeping committed credit lines available. However, considering the Company's cash position of 1,311 as at 31 March 2012, and the absence of any financial debt at such date, the Company did not apply for any lines of credit in the quarter ended 31 March 2012.

(iv) Cash-flow interest-rate risk
As the Company had no significant interest-bearing assets and liabilities at either 31 March 2012 or 31 December 2011, the Company's income and operating cash flows for the quarter ended 31 March 2012 were substantially independent of changes in market interest rates.
Please refer to note 6 to the Company's condensed consolidated interim financial statements for the quarter ended 31 March 2012 for further details on interest income and expenses for that period.

(v) Sovereign debt risk
The Company did not have any exposure to sovereign debt risk as at and during the quarter ended 31 March 2012 as it did hold any financial assets of that nature during that period.

(c) Other significant risk factors

(i) Use of accounting estimates and of forecasts
The preparation of financial statements in accordance with IFRSs requires the use of certain critical accounting estimates and forecasts. It also requires management to exercise judgement in the process of applying the Company's accounting policies, and to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses.
The estimates and underlying assumptions are based on historical experience and various other relevant factors (including projected future sales and related cash inflows either from established software products such as RIP software in the Print segment of the Company's business, or from recently launched software applications such as gDoc Fusion, the adoption of which is expected by the Company's management to sequentially grow at a significant pace over time) that are believed to be reasonable under the circumstances, the results of which form the basis of making management's judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period and future periods if the revision affects both current and future periods.
Please refer to notes 4a (ii) and 4c (ii) to the Company's condensed consolidated interim financial statements for the quarter ended 31 March for further information on critical accounting estimates and the use of sales and cash flow forecasts, as well as the risks attached to them, the downward revisions of which may principally affect the carrying value of goodwill and other intangible assets (including those resulting from the capitalization of development costs) as well as of deferred tax assets.

(ii) Future changes in, or interpretations of, accounting principles
As noted in note 2a to the Company's consolidated financial statements for the financial year ended 31 December 2011, the Company prepares its consolidated financial statements in accordance with IFRSs, as amended from time to time, and related interpretations issued by the IASB, as adopted by the EU.
Accordingly, changes to these standards by the IASB or delays in the adoption of these standards by the EU, may have a significant effect on the Company's reported results and may even retroactively affect previously reported transactions or periods.
Accounting principles used by the Company that may be affected by recently issued exposure drafts notably include the following:

- Income tax
The exposure draft on income tax, which was published for public comments by the IASB on 31 March 2009, outlined proposed changes to the method of accounting for income tax.

The project started as a convergence project with US Generally Accepted Accounting Principles (US GAAP); however, in the light of responses to that exposure draft, the Board of the IASB narrowed the scope of the project, which resulted in certain amendments to the existing standard, IAS 12, Income Taxes, in December 2010.
The IASB hinted that it may consider a fundamental review of the accounting for income taxes as part of its agenda consultation process during 2012.

- Revenue recognition  
The exposure draft, Revenue from Contracts with Customers, which was published for public comment by the IASB and the Financial Accounting Standard Board (FASB) on 24 June 2010, outlined the IASB's intent to publish a final standard on revenue recognition no later than June 2011 to supersede the existing two standards on revenue recognition: IAS 11, Construction Contracts, and IAS 18, Revenue, as well as related interpretations.
On 15 June 2011, the IASB and the FASB issued a joint press release confirming that a new exposure draft would be issued for comments during the third quarter of 2011, the objective being to issue a new standard in the course of the year ending 31 December 2012.
On 14 November 2011, the IASB and the FASB issued for public comment a second exposure draft to improve and converge the financial reporting requirements of IFRSs and US GAAP for revenue (and some related costs) from contracts with customers; both standards-setters now expect to issue a final standard on revenue recognition in the second half of 2012, with an effective date no earlier than 1 January 2015.

NOTE 5: RELATED PARTY TRANSACTIONS
Please refer to note 15 to the Company's condensed consolidated interim financial statements for the quarter ended 31 March 2012 for details on such transactions.

NOTE 6: INFORMATION ON THE COMPANY'S PERSONEL

1. Breakdown by geographical area of employment 

2. Breakdown by nature of employment 

As at 31 March 2012, the Company also employed a total of 4 contractors, of which 2 were software developers.

NOTE 7: VOTING RIGHTS AND SIGNIFICANT SHAREHOLDERS

1. Voting rights attached to shares outstanding as at 31 March 2012 

(i) Theoretical number of voting rights

(ii) Number of voting rights to be used for annual meeting quorum computation

2. Significant shareholders at 31 March 2012 

(i) Stichting Andlinger & Co. Euro-Foundation
At 31 March 2012, Stichting Andlinger & Co. Euro-Foundation held 2,883,001 shares of the Company, or approximately 28.02% of the total number of shares of the Company which were outstanding at such date.
Attached to these 2,883,001 shares were a total of 2,883,021 voting rights, representing approximately 28.00% of the total number of voting rights attached to the Company's ordinary shares which were outstanding at 31 March 2012.

(ii) Other significant shareholders
At 31 March 2012, no other shareholder was known to the Company to hold in excess of either 5.0% of the total number of shares forming the share capital of the Company, or 5.0% of the theoretical number of voting rights attached to such shares as computed in note 7a above.

NOTE 8: INFORMATION REGARDING GLOBAL GRAPHICS SA
Because Global Graphics SA has only one employee and all of its revenue results from the recharge of corporate management fees to the Company's operating entities which are based in the UK and in the US, its statutory results for the quarter ended 31 March 2012 are not provided since they were not considered as meaningful in the context of the reporting of the Company's consolidated results as at and for the quarter ended 31 March 2012.
GLOBAL GRAPHICS SA AND SUBSIDIARIES
STATEMENT MADE BY THE PERSON TAKING RESPONSIBILITY FOR THE INTERIM FINANCIAL REPORT FOR THE QUARTER ENDED 31 MARCH 2012
Translation of the French language original

I hereby confirm that, to the best of my knowledge, the condensed consolidated interim accounts included in the Company's interim financial report for the quarter ended 31 March 2012 have been prepared in accordance with IAS 34, Interim Financial Reporting, and more generally with International Financial Reporting Standards (IFRSs) and related interpretations issued by the International Accounting Standards Board, as adopted by the European Union, and give a true and fair view of the assets, liabilities, financial position, and profit or loss of Global Graphics SA and its subsidiaries as at and for the quarter ended 31 March 2012.

I also hereby confirm that the attached interim management report includes a fair review of the information referred to in article 222-6 of the Règlement général de l'Autorité des marchés financiers, and notably of the material events that occurred in the quarter ended 31 March 2012 and their impact on the condensed consolidated interim accounts for the same period, the main risks and uncertainties for the remaining nine months of the current financial year, and the main transactions with related parties which occurred during the quarter ended 31 March 2012.

Made in Brussels (Belgium), on 26 April 2012,

Gary Fry  
Chief Executive Officer  

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