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GENNUM CORPORATION Unaudited ... - Canadian Stocks

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					                            GENNUM CORPORATION

                   Unaudited Consolidated Financial Statements

                      For the Six Months ended May 31, 2011


                        (Amounts in thousands of U.S. Dollars)




The attached consolidated financial statements have been prepared by management of
           Gennum Corporation and have not been reviewed by an auditor.




                                         (1)
Gennum Corporation
CONSOLIDATED BALANCE SHEETS – (unaudited)
(U.S. dollars, amounts in thousands)
                                                      May 31, 2011   November 30, 2010
ASSETS
Current
Cash and cash equivalents                                14,205            52,732
Investments                                                  84                81
Accounts receivable, net                                 26,462            21,924
Inventories (note 3)                                     26,056            21,406
Prepaid expenses and other assets                         4,281             3,733
Consideration receivable (note 5)                         1,041                ---
Income taxes receivable                                   1,856             1,201
Future income taxes                                       7,411            10,043
Total current assets                                     81,396           111,120
Capital assets, net (note 4)                             26,463            24,014
Intangible assets, net (note 7)                          34,182            15,918
Consideration receivable (note 5)                            ---              981
Goodwill (note 7)                                        40,920            22,292
Future income taxes                                      21,703            15,372
                                                        204,664           189,697
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current
Accounts payable and accrued liabilities                 16,306            17,685
Capital lease obligation (note 9)                           183                ---
Deferred revenue (note 8)                                   932               971
Income taxes payable                                        629               768
Total current liabilities                                18,050            19,424
Deferred revenue (note 8)                                 3,553             3,503
Capital lease obligation – long term (note 9)               198                ---
Future income taxes                                       4,707               347
Commitments and contingencies (note 19)
Shareholders’ equity
Capital stock (note 10)                                    9,415             8,893
Deferred compensation                                    (7,514)           (2,909)
Retained earnings                                       126,380           120,758
Contributed surplus                                        6,195             5,610
Accumulated other comprehensive income                   43,680            34,071
Total shareholders’ equity                              178,156           166,423
                                                        204,664           189,697

See accompanying notes




                                                (2)
Gennum Corporation

CONSOLIDATED STATEMENTS OF EARNINGS – (unaudited)
(U.S. dollars, amounts in thousands except per share data)

                                                             Three Months Ended    Six Months Ended
                                                                   May 31                May 31
                                                                 2011      2010       2011      2010

Revenue (note 12)                                             34,414     31,656     65,891    61,205
Cost of goods sold                                            10,258      9,174     18,919    17,182

Gross margin                                                  24,156     22,482     46,972    44,023

Sales, marketing and administration expense                    9,033       8,482    17,315    16,495
Research and development expense                             10,723        8,801    19,722    17,139
Amortization of intangible assets                              1,104         423      1,485       859
   Less government assistance                                (1,320)     (1,047)    (2,683)   (2,421)
Operating expenses                                           19,540      16,659     35,839    32,072

Operating income                                               4,616      5,823     11,133    11,951
Investment income                                                 42         61        154       124
Other expense (note 15)                                        (103)      (522)      (437)     (859)

Earnings before income taxes                                   4,555       5,362    10,850    11,216
Provision for income taxes (note 16)                           (996)     (1,295)    (2,710)   (3,180)


Net earnings for the period                                    3,559      4,067      8,140     8,036

Earnings per share – basic (note 10)                           $0.10      $0.12      $0.24     $0.23
Earnings per share – diluted (note 10)                         $0.10      $0.12      $0.23     $0.23


See accompanying notes




                                                  (3)
Gennum Corporation

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY – (unaudited)
(U.S. dollars, amounts in thousands)

                                                      Three Months Ended     Six Months Ended
                                                            May 31                 May 31
                                                          2011      2010        2011      2010
Capital stock
Balance at beginning of the period                        9,328     8,576       8,893     8,576
Proceeds from shares issued on exercise of options           87        97         522        97
Balance at end of the period                              9,415     8,673       9,415     8,673
Deferred compensation
Balance at beginning of the period                      (5,346)   (4,681)     (2,909)   (2,350)
New awards                                              (3,167)      (24)     (6,386)   (2,865)
Forfeitures                                                 108       185         376       300
Amortization                                                891       624       1,405     1,019
Balance at end of the period                            (7,514)   (3,896)     (7,514)   (3,896)
Retained earnings
Balance at beginning of the period                     124,112    110,963    120,758    106,994
Net earnings                                              3,559      4,067      8,140      8,036
Dividends                                               (1,291)    (2,416)    (2,518)    (2,416)
Balance at end of the period                           126,380    112,614    126,380    112,614
Contributed surplus
Balance at beginning of the period                       5,869      4,284      5,610      3,956
Stock option amortization                                  349        557        721        885
Stock option exercises                                     (23)       (26)     (136)        (26)
Balance at end of the period                             6,195      4,815      6,195      4,815
Accumulated other comprehensive income, net of
   income taxes
Balance at beginning of the period                      42,611     29,922     34,071     29,920
Other comprehensive income for the period                1,069        590      9,609        592
Balance at end of the period                            43,680     30,512     43,680     30,512
Total shareholders’ equity at end of the period        178,156    152,718    178,156    152,718

See accompanying notes




                                                (4)
Gennum Corporation

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – (unaudited)
(U.S. dollars, amounts in thousands)

                                                         Three Months Ended    Six Months Ended
                                                               May 31                May 31
                                                             2011      2010       2011      2010

Net earnings for the period                                 3,559     4,067      8,140     8,036

Other comprehensive income, net of income taxes
 Change in unrealized gains on translating financial
   statements                                               1,069       590      9,597      592
 Change in unrealized gains on available for sale
   financial assets                                            ---       ---        12        ---

 Total other comprehensive income, net of income taxes      1,069       590      9,609       592
Comprehensive income for the period                         4,628     4,657     17,749     8,628


See accompanying notes




                                                 (5)
Gennum Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS – (unaudited)
(U.S. dollars except as noted, amounts in thousands except per share data)
                                                                  Three Months Ended           Six Months Ended
                                                                        May 31                       May 31
                                                                      2011      2010              2011      2010
OPERATING ACTIVITIES
Net earnings from operations for the period                           3,559         4,067         8,140       8,036
Items not affecting cash
  Depreciation and amortization                                        2,825        1,859         4,646       3,591
   Impairment of deferred development costs and other
    intangibles                                                          199            ---         459          ---
  Deferred compensation and stock option amortization                  1,240        1,181         2,127       1,904
  Government assistance                                              (1,320)      (1,047)       (2,683)     (2,421)
  Future income taxes                                                    322        1,446         2,167       3,229
  Other                                                                    6           (6)          414         215
                                                                       6,831        7,500        15,270      14,554
Net change in non-cash working capital balances related
 to operations                                                       (1,397)        1,299        (6,986)      (303)
Cash provided by operating activities                                  5,434        8,799          8,284     14,251
INVESTING ACTIVITIES
Purchase of capital assets                                           (1,465)       (2,112)       (3,258)     (2,976)
Payment of license fees and deferred development
  charges                                                            (1,365)       (2,079)      (2,463)      (3,939)
Acquisition, cash acquired                                               783            ---         783           ---
Acquisition, other than cash acquired                               (30,102)            ---    (30,102)           ---
Proceeds on sale of BST technology group                                  ---           ---          ---         248
Cash used in investing activities                                   (32,149)       (4,191)     (35,040)      (6,667)
FINANCING ACTIVITIES
Deferred compensation paid, net of forfeitures                       (3,059)           161      (6,010)      (2,565)
Proceeds received on exercise of stock options                            64            71          386           71
Repayment of debt assumed in acquisition                             (5,755)            ---     (5,755)           ---
Repayment of capital lease                                              (53)            ---        (53)           ---
Dividends paid                                                       (2,518)       (2,416)      (2,518)      (2,416)
Cash used in financing activities                                   (11,321)       (2,184)     (13,950)      (4,910)
Effect of exchange rate changes on cash and cash
 equivalents                                                           (140)          277         2,179         133
Net increase (decrease) in cash and cash equivalents
during the period                                                   (38,176)        2,701      (38,527)       2,807
Cash and cash equivalents, beginning of the period                    52,381       37,064        52,732      36,958
Cash and cash equivalents, end of the period                         14,205        39,765        14,205      39,765
                                     1
Dividends declared per share                                         $0.036        $0.034        $0.071      $0.067

No interest expense was paid in the first half of 2011 or 2010. Income taxes paid in the second quarter of
2011 were $83 (second quarter of 2010 - $190) and $996 in the first half of 2011 (first half of 2010 -
$446). Cash and cash equivalents at May 31, 2011 is comprised of $14,201 in cash and $4 in cash
equivalents (May 31, 2010 - Cash - $33,196 and cash equivalents - $6,569).
1
    – Dividends were declared in Canadian dollars at a rate of $0.035 per share per quarter. The increase in the U.S.
      dollar dividend declared per share was due to foreign exchange rate changes on conversion.
See accompanying notes

                                                          (6)
GENNUM CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S. dollars except as noted, amounts in thousands except share and per share data)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements of Gennum Corporation (the “Company”)
have been prepared by the Company in accordance with Canadian generally accepted accounting
principles (“GAAP”) on a basis consistent with those followed in the most recent audited financial
statements. These unaudited consolidated financial statements do not include all the information and
footnotes required by GAAP for annual financial statements and therefore should be read in conjunction
with the audited consolidated financial statements and notes included in the Company’s Annual Report
for the year ended November 30, 2010.

Changes in accounting policies

On March 1, 2011, the Company early adopted Emerging Issue Committee (“EIC”) Abstract No. 175
(“EIC-175”), “Revenue Arrangements with Multiple Deliverables” issued by the Canadian Institute of
Chartered Accountants the (“CICA”) in December 2009 which amends the EIC Abstract No. 142,
“Revenue Arrangements with Multiple Deliverables”. The EIC-175 is equivalent to U.S. GAAP standard,
Accounting Standards Update (“ASU”) No. 2009-13 (“ASU 2009-13”), “Multiple-Deliverable Revenue
Arrangement” and applies to arrangements that include multiple deliverables that are not accounted for
pursuant to other specific guidance such as U.S. software revenue recognition guidance. The new
guidance changes the requirements for establishing separate deliverables in a multiple-deliverable
arrangement and requires the allocation of arrangement consideration to each separately identified
deliverable based on the relative selling price. Based on this method, the selling price of each separately
identified deliverable is determined using vendor-specific objective evidence (“VSOE”) of selling price if
available, otherwise third-party evidence (“TPE”) of selling price, or estimated selling price (“ESP”) if
neither VSOE nor TPE of selling price is available. The residual method of allocating arrangement
consideration is no longer permitted. EIC-175 also expands the disclosure required for multiple-
deliverable arrangements which are reflected below.

The Company early adopted EIC-175 in its second quarter of 2011, which is applied prospectively from
the beginning of Gennum’s fiscal year (December 1, 2010). The early adoption of EIC-175 did not have a
material impact on the Company’s first quarter consolidated financial statements. Previously, the
Company had not applied EIC-142 as it was not able to determine selling price using VSOE or TPE for
undelivered items and ESP was not an acceptable method. As a result, intellectual property (“IP”)
contracts were considered one unit of accounting and revenue was recorded using percentage of
completion. With the adoption of EIC-175, the Company has established that there are up to three units
of accounting in an IP contract and revenue is recorded separately for each unit of accounting which
more closely matches activity. Although there was not a material impact in the first quarter, second
quarter revenue was increased by approximately $0.8 million as a result of this change in accounting
policy. The timing of revenue under both methods is dependent on the timing of the contracts and the
magnitude of effort required to complete the deliverable under each unit of accounting.

The Company revised its previously disclosed revenue recognition policy to reflect changes resulting from
the adoption of EIC-175 which applies to multiple-deliverable arrangements entered into or materially
modified on or after December 1, 2010. The changes to the revenue recognition policy are disclosed
below. The previously disclosed revenue recognition policy remains effective for multiple-deliverable
arrangements that were in place as of, and were not materially modified after, November 30, 2010.

Multiple-deliverable arrangements – The Company enters into arrangements with multiple deliverables
that generally include a design package, characterization and post contract support (“PCS”). Under the
new guidance, the total arrangement value is allocated to each element as a separate unit of accounting
if: (1) the delivered item has value to the client on a stand-alone basis; and, (2) in an arrangement that
includes a general right of return relative to the delivered item, the delivery or performance of the
undelivered item is considered probable and substantially in the control of the Company. If these criteria
are met, then the total consideration of the arrangement is allocated among the separate units of
accounting based on their relative selling price. Based on this method, the selling price of each separately
                                                    (7)
identified deliverable is determined using VSOE of selling price if available, otherwise TPE of selling
price, or ESP if neither VSOE nor TPE of selling price is available. VSOE of selling price is established
using the price charged for a deliverable when sold separately by the Company. TPE of selling price is
established using the vendor’s or competitor’s prices for similar deliverables. ESP is the price at which the
Company would offer the service if the deliverable were sold regularly on a stand-alone basis. ESP is
established by considering a number of internal and external factors including, but not limited to,
geographies, Company’s pricing policies, internal costs and margins.

Consideration allocated to the design package and characterization is recognized using the percentage of
completion method based on labour hours, whereas consideration allocated to PCS is recognized
straight-line over the service period or as service is provided where the maximum PCS hours are likely to
be used prior to the end of the term. Billings for time-based contracts are done monthly. Unbilled
receivables are created when the Company accrues revenue before the contract terms permit billing the
customer. Deferred revenue is created when the Company bills a customer in accordance with the
contract, prior to having met the requirements for revenue recognition.

Capital assets – Capital assets are recorded at cost, net of related government assistance and
accumulated depreciation.

Equipment and furniture are depreciated using the straight-line method over estimated useful lives
ranging from five to seven years. Computer software and hardware are amortized using the straight-line
method over the estimated useful life of three years. Capitalized expenditures related to operating
systems are amortized using the straight-line method over their estimated useful life of ten years.
Leasehold improvements are amortized using the straight-line method over the term of the lease,
including one renewal period.

Equipment under capital leases is initially recorded at the present value of minimum lease payments at
the inception of the lease.

Recently issued accounting pronouncements

   International Financial Reporting Standards (“IFRS”) – In February 2008, the Canadian
   Accounting Standards Board announced the adoption of IFRS for publicly accountable enterprises.
   The Company will be required to adopt IFRS no later than December 1, 2011. The Company is
   currently evaluating the effects of adopting these standards.

   Business Combinations, Consolidated Financial Statements and Non-Controlling Interests – In
   December 2008, the CICA approved three new accounting standards; Handbook Section 1582,
   “Business Combinations”, Section 1601, “Consolidated Financial Statements”, and Section 1602,
   “Non-Controlling Interests”, replacing Section 1581, “Business Combinations” and Section 1600,
   “Consolidated Financial Statements”. Section 1582 provides the Canadian equivalent to IFRS 3 –
   “Business Combinations (January 2008)” and Sections 1601 and 1602 to International Accounting
   Standard 27 – “Consolidated and Separate Financial Statements (January 2008)”, respectively.
   Section 1582 requires additional use of fair value measurements, recognition of additional assets and
   liabilities, and increased disclosure for the accounting of a business combination. The section applies
   prospectively to business combinations for which the acquisition date is on or after the beginning of the
   first annual reporting period beginning on or after January 1, 2011. Entities adopting Section 1582 will
   also be required to adopt Sections 1601 and 1602. Section 1601 establishes standards for the
   preparation of consolidated financial statements. Section 1602 establishes standards for accounting
   for a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a
   business combination. These standards will require a change in the measurement of non-controlling
   interest and will require the non-controlling interest to be presented as part of shareholders’ equity on
   the balance sheet. In addition, the net earnings will include 100% of the subsidiary’s results and will be
   allocated between the controlling interest and non-controlling interest. These standards apply to
   interim and annual consolidated financial statements relating to fiscal years beginning on or after
   January 1, 2011. Early adoption of these Sections is permitted and all three Sections must be adopted
   concurrently. All three standards are effective at the same time Canadian public companies will adopt
   IFRS, for fiscal years beginning on or after January 1, 2011. The Company is currently evaluating the
   impact of this standard on its consolidated financial statements.

                                                     (8)
2. REPORTING CURRENCY

Effective December 1, 2007, the Company adopted the U.S. dollar as its reporting currency, but has
retained the Canadian dollar as its functional currency. Management believes that reporting in U.S.
dollars improves the comparability of the Company’s financial position and results of operations to others
in its industry.

During the period, revenue and expenses have been translated from Canadian dollars to U.S. dollars at
the monthly average rates, and cash flows at the quarterly average rates. Assets and liabilities have been
translated at the period end rate of $0.9688 Canadian dollars for one U.S. dollar (November 30, 2010 -
$1.0264).

3. INVENTORIES

                                                                 May 31, 2011       November 30, 2010
Raw materials and supplies                                                 276                      242
Work in process                                                         17,956                   14,209
Finished goods                                                           7,824                    6,955
                                                                        26,056                   21,406

Inventory is reviewed at least quarterly for obsolescence. The Company recorded a write-down of $319
during the quarter (second quarter of 2010 - $84). During the first half of 2011, the Company recorded a
write-down of $432 (first half of 2010 - $227).

Included in the inventory balance at May 31, 2011 was $7,775 in end-of-life inventory (November 30,
2010 - $8,434), a significant portion of which is expected to be sold more than one year out.

4. CAPITAL ASSETS
                                                                 May 31, 2011       November 30, 2010
Land                                                                     1,051                      992
Equipment and furniture                                                 33,339                   28,499
Computer software and hardware                                           9,251                    8,736
Operating systems                                                       11,191                   10,427
Leasehold improvements                                                   3,840                    3,350
                                                                        58,672                   52,004
Less accumulated depreciation
 Equipment and furniture                                                22,441                   19,601
 Computer software and hardware                                          6,559                    5,902
 Operating systems                                                       2,475                    1,844
 Leasehold improvements                                                    734                      643
                                                                        32,209                   27,990
                                                                        26,463                   24,014

Included in equipment and furniture as of May 31, 2011 was $466 (November 30, 2010 - nil) related to
assets purchased under capital leases with accumulated amortization of $44. These capital leases were
assumed as part of the acquisition of Nanotech on April 6, 2011 (see note 6). The amount of amortization
charged to expense in the quarter related to assets under capital lease was $44.

Included in capital assets were assets valued at $1,648 mainly related to information technology
infrastructure and operating system implementations that were not yet in use as of May 31, 2011 and
therefore depreciation had not yet begun.




                                                   (9)
Depreciation expense for the year was as follows:
                                                            Three Months Ended        Six Months Ended
                                                                  May 31                     May 31
                                                               2011       2010            2011      2010
Equipment and furniture                                           914          824         1,708      1,617
Computer software and hardware                                    171          150           255        294
Operating systems                                                 307          263           573        495
Leasehold improvements                                            122           92           210        152
                                                                1,514        1,329         2,746      2,558

5. CONSIDERATION RECEIVABLE

On March 4, 2009, the Company completed the sale of its BST technology group and associated assets
to Paratek Microwave, Inc. ("Paratek") for which the consideration included a non interest bearing long-
term consideration receivable of $1,150 payable by March 4, 2012. The long-term portion as of May 31,
2011 was discounted to $1,041 using a rate of 12%.

The Company is also entitled to royalty payments based on Paratek’s sales of BST related products
through March 2014, but royalty payments could terminate earlier if Paratek were to undergo a change of
control in that time frame. In the event that a change of control occurred on or before March 4, 2012, the
royalty payments may be terminated upon the payment of $2,000 to the Company. No accruals have
been made for royalty payments because an estimate cannot be made at this time.

6. ACQUISITION – NANOTECH SEMICONDUCTOR LIMITED

On April 6, 2011, the Company acquired all of the outstanding shares of Nanotech Semiconductor Limited
(“Nanotech”), a fabless semiconductor company that designs and sells analog and mixed-signal
integrated circuits (“ICs”) principally for fiber-optics based communications, for a total initial cash
consideration of $30,102, which includes transaction related costs of $1,264, and the following future
cash consideration:

    •   Earn-out payments aggregating up to $6 million are required to be made based on attaining
        certain revenue targets in the first twelve months after the closing. This contingent consideration
        has not been accounted for in the initial purchase price because a reasonably accurate estimate
        could not be made at this time. Any earn-out payments made subsequent to closing will be
        treated as purchase price adjustments.

In addition to the purchase price of $30,102, the Company repaid the loan payable of $5,755 immediately
following the acquisition, therefore the total cash payments on close were $35,857.

The acquisition was accounted for under the purchase method from the acquisition date. The preliminary
purchase price allocation was assigned to the net identifiable assets acquired based on their estimated
fair values as follows and is adjusted quarterly for earn-out accruals. The final purchase price allocation is
pending finalization of the valuation of certain assets and liabilities listed below:




                                                     (10)
Cash                                                                                                    783
Accounts receivable                                                                                   1,644
Prepaids and other assets                                                                               224
Inventories                                                                                           2,226
Income taxes receivable                                                                                 122
Capital assets                                                                                          596
Intangible assets                                                                                        57
Identifiable intangible assets subject to amortization                                              17,368
Future income tax asset                                                                               1,327
Accounts payable and accrued liabilities                                                            (1,064)
Assumed capital lease obligations                                                                     (424)
Future income tax liability                                                                         (4,515)
Loan payable                                                                                        (5,755)
Intercompany loan payable to Gennum                                                                     458
Excess of adjusted purchase price over fair value of identifiable net
assets acquired (goodwill) (note 7) *                                                               17,055
Total purchase price, including transaction costs                                                   30,102
* Goodwill is not deductible for tax purposes

The earnings of Nanotech from April 7 to May 31, 2011 have been included in these consolidated results.

7. GOODWILL AND INTANGIBLE ASSETS

(i) Goodwill

For reconciliation purposes only, the following table summarizes goodwill balances translated to U.S.
dollars at the historical exchange rates in effect at the dates of acquisition and the adjustment required to
translate from historical rates to the respective balance sheet rates:

                                                                   May 31, 2011        November 30, 2010
 SiGe Semiconductor Inc.                                                   1,889                     1,889
 Snowbush Microelectronics Inc.                                           19,072                    19,072
 ASIC Architect, Inc.                                                      1,009                     1,009
 Nanotech (note 6)                                                        17,055                        ---
 Exchange translation                                                      1,895                       322
                                                                          40,920                    22,292

Earn-out payments related to the ASIC Architect, Inc. acquisition are required to be made based on
attaining certain annual IP thresholds, the last one ending in July 2011. Goodwill is reviewed annually for
impairment.




                                                    (11)
(ii) Intangible Assets
                                                                 May 31, 2011       November 30, 2010
 License fees                                                              372                       276
 Less accumulated amortization                                           (202)                     (165)
                                                                           170                       111
 SiGe acquired in 2004
 Technology                                                              2,293                     2,164
 Less accumulated amortization                                         (2,293)                   (2,035)
                                                                            ---                      129
 Snowbush acquired in 2007
 Technology                                                              4,232                     3,995
 Supplier relationships                                                  1,342                     1,267
                                                                         5,574                     5,262
 Less accumulated amortization                                         (3,995)                   (3,245)
                                                                         1,579                     2,017
 ASIC Architect acquired in 2008
 Technology                                                                255                       239
 In process development                                                     82                        77
 Customer value                                                            220                       208
 Contracts in process                                                      237                       225
                                                                           794                       749
 Less accumulated amortization                                           (451)                     (376)
                                                                           343                       373
 Nanotech acquired in 2011 (note 6)
 Technology                                                             16,897                        ---
 Order backlog                                                             605                        ---
                                                                        17,502                        ---
 Less accumulated amortization                                           (704)                        ---
                                                                        16,798                        ---

 Deferred development cost                                             16,345                    13,883
 Less accumulated amortization                                         (1,053)                    (595)
                                                                       15,292                    13,288
                                                                       34,182                    15,918

License fees are amortized using the straight-line method over the estimated useful life ranging from
three to five years. New license fees of $78 were incurred in the first half of 2011, including $57 in the
acquisition of Nanotech (note 6) ($70 in 2010).

The intangible assets resulting from the SiGe Semiconductor Inc. acquisition in May 2004 were amortized
using the straight-line method over the estimated useful life of seven years.

Intangible assets resulting from the Snowbush Microelectronics Inc. acquisition in October 2007 are
amortized using the straight-line method over the estimated useful life ranging from one to five years.

Intangible assets resulting from the ASIC Architect, Inc. acquisition in July 2008 are amortized using the
straight-line method over the estimated useful life ranging from five to seven years.

Order backlog and technology intangibles represent those intangible assets resulting from the Nanotech
acquisition in April 2011 as described in note 6. Order backlog is amortized as the orders are filled and
delivered to customers and is expected to be fully amortized within the year. Technology intangibles are
amortized using the straight-line method over an estimated useful life of seven years.

Deferred development charges represent expenditures that are directly related to placing a new product
into commercialization when the expenditure is incremental in nature and it is probable that the

                                                   (12)
expenditure is recoverable from future sales of the associated product. Upon commercial launch of the
product, these costs are amortized to cost of goods sold over the number of expected unit sales to a
maximum of five years.

Additional deferred development costs of $1,365 and $2,463 were capitalized in the second quarter and
first half of 2011, respectively (second quarter of 2010 - $2,079; first half of 2010 - $3,939). These
additions were partially offset by government assistance of $241 and $378 in the second quarter and first
half of 2011 respectively (second quarter and first half of 2010 - $1,377).

Impairments related to deferred development costs that are no longer expected to provide future benefit
were $199 and $459 in the second quarter and first half of 2011 respectively; there were no indicators of
impairment over these intangible assets in the second quarter of 2010 ($52 in the first half of 2010). No
other intangible assets were impaired in the first half of 2010 or 2011. Intangible asset impairments are
charged to research and development expense in the statement of earnings.

Amortization expense related to intangible assets in the second quarter and first half of 2011 were $1,312
and $1,900, respectively (second quarter of 2010 - $530; first half of 2010 - $1,034), of which $208 and
$415 respectively relates to deferred development costs and were charged to cost of goods sold (second
quarter of 2010 - $107; first half of 2010 - $175).

8. DEFERRED REVENUE

Deferred revenue consists of two components. The largest is the unamortized gain created by the sale
leaseback of the corporate headquarters, which was completed in August 2008.

The second component is created in our IP product group when differences occur between the timing of
customer payments and the recognition of revenue. These methods of revenue recognition are prevalent
when IP cores sold to customers require customization to meet their specific requirements.

As of May 31, 2011, deferred revenue related to the unamortized gain was $3,870, of which $317 was
classified as current and the balance of $3,553 as long term (November 30, 2010 - $299 current and
$3,503 long term), and deferred revenue related to collections in excess of earned IP revenue was $615,
all classified as current (November 30, 2010 - $672).

9. CAPITAL LEASE OBLIGATION

The Company has commitments to payments under finance lease agreements, which it assumed as part
of the acquisition of Nanotech in April 2011 (see note 6) as follows:

                                                                                          May 31, 2011
Due within one year                                                                                  221
Due one to three years                                                                               238
Total minimum lease payments                                                                         459
Less amounts representing interest                                                                  (78)
Present value of finance lease obligations                                                           381
Less current portion                                                                               (183)
Non-current portion                                                                                  198

10. CAPITAL STOCK

The Company has authorized an unlimited number of common shares with no par value, of which
35,554,349 common shares (November 30, 2010 - 35,476,909) were issued and outstanding as of May
31, 2011 with a stated value of $9,415 (November 30, 2010 - $8,893). An unlimited number of preferred
shares have also been authorized, none of which have been issued.




                                                   (13)
Reconciliation of common shares outstanding                         Number of Shares          Stated Value
Number of shares outstanding, November 30, 2009                             35,429,086                8,576
Stock options exercised in 2010                                                 47,823                  317
Number of shares outstanding, November 30, 2010                             35,476,909                8,893
Stock options exercised in 2011 to date                                         77,440                  522
Number of shares outstanding, May 31, 2011                                  35,554,349                9,415

Options to purchase common shares
The Company has an incentive stock option plan which provides for the granting of options for the benefit
of employees and officers. The total number of common shares that may be issued upon the exercise of
options granted under the stock option plan is 2,700,000 common shares. To date, 483,225 common
shares have been issued upon the exercise of options granted under the stock option plan, leaving
2,216,775 common shares available for issue under options currently outstanding, or which may be
granted in the future, under the stock option plan. Options to purchase 2,430,745 common shares were
outstanding under the stock option plan at quarter end.

An additional 965,000 options are outstanding as of May 31, 2011, which were issued outside the stock
option plan to new officers upon hiring at exercise prices ranging from Canadian $6.13 - $13.27. This
includes 150,000 options issued outside the stock option plan in 2010 (no stock options were issued
outside the stock option plan in 2011 to date).

All options have been granted for a term of seven years from the grant date with vesting as to 25% of the
option entitlement at the end of each of the first, second, third and fourth years from the date of grant. All
options allow the holder to purchase common shares at the exercise price of the options, which is set at
the closing price of a trade of at least a board lot of the common shares on the Toronto Stock Exchange
on the trading day preceding the date of grant, unless otherwise determined by the Company, but in no
event may the option exercise price be less than the fair market value of a common share on the date of
grant of the option. The following table presents a comparative summary of options outstanding as of May
31, 2011. All exercise prices are presented in Canadian dollars.

                                                        YTD 2011                         YTD 2010
                                                              Weighted                        Weighted
                                                               average                         average
                                                 Number       exercise           Number        exercise
                                                of shares   price (Cdn.$)        of shares price (Cdn.$)
Outstanding, beginning of year                   3,122,393          8.02         2,500,086        9.24
Granted                                            697,131          7.33         1,035,000        5.63
Forfeited                                        (346,339)          5.00         (288,620)       10.58
Exercised                                          (77,440)         8.14           (16,099)       4.55
Outstanding as of May 31                         3,395,745          7.94         3,230,367        7.99

Options exercisable as of May 31                 1,655,699          9.42         1,185,202       10.22

The following table summarizes information about all options outstanding to purchase common shares at
May 31, 2011. Note all exercise prices are presented in Canadian dollars:

                                             Options Outstanding                 Options Exercisable
                                          Weighted         Weighted                          Weighted
     Range of                              average          average                           average
     exercise           Number            remaining         exercise           Number         exercise
  prices (Cdn.$)       outstanding      contractual life price (Cdn.$)        exercisable  price (Cdn.$)
 $ 4.11 - $ 7.16       1,346,550           5.5 years           5.41             408,481           5.19
 $ 7.17 - $10.22       1,612,338           4.5 years           8.77             824,111           9.83
 $10.23 - $13.27         436,857           2.6 years          12.64             423,107          12.68

                                                       (14)
The estimated weighted average fair value of stock options granted during the first half of 2011 was
Canadian $2.48 (first half of 2010 - Canadian $1.88) per share using the Black-Scholes option-pricing
model with the following weighted average assumptions:

                                                                  Six Months Ended       Six Months Ended
                                                                     May 31, 2011          May 31, 2010


 Risk-free interest rate                                                      2.4%                2.1%
 Expected dividend yield                                                      1.9%                2.5%
 Expected volatility                                                        46.7%                48.6%
 Expected time until exercise                                            4.0 years            4.0 years

Restricted share plan
The number and weighted average fair value of restricted common shares granted under employee
incentive plans of the Company in the second quarter of 2011 were 398,621 and Canadian $7.66,
respectively (second quarter of 2010 - 3,526 and Canadian $7.09). For the first half of the year, the
number and weighted average fair values were 817,461 and Canadian $7.73, respectively (2010 -
527,814, Canadian $5.74).

The Company recorded compensation expense and credited to contributed surplus $349 related to stock
options during the second quarter of 2011 (second quarter of 2010 - $557) and $721 year to date (2010
year to date - $885). Compensation expense in the second quarter of 2011 related to the restricted share
plan was $891 (second quarter of 2010 - $624) and $1,405 year to date (2010 year to date - $1,019).

Earnings per share
The Company uses the treasury stock method of calculating the dilutive effect of options on earnings per
share. The following is a reconciliation of the numerator and denominator of earnings per share
computations:

                                                             Three Months Ended        Six Months Ended
                                                                   May 31                     May 31
                                                                 2011      2010             2011     2010
 Net earnings for the period                                     3,559        4,067        8,140       8,036
 Weighted average shares outstanding
    (numbers in thousands)                                     35,550        35,435       35,524      35,432
 Shares held in restricted share plan trust fund               (1,272)        (896)       (1,094)      (896)
 Basic weighted average shares outstanding                     34,278        34,539       34,430      34,536
 Effect of dilutive stock options                                  215          153           217         45
 Diluted weighted average shares outstanding                   34,493        34,692       34,647      34,581

 Earnings per share - basic                                      $0.10        $0.12        $0.24       $0.23

 Earnings per share - diluted                                    $0.10        $0.12        $0.23       $0.23

Under the treasury stock method for calculating diluted earnings per share, options to purchase
2,282,695 common shares were not included in the computation of diluted earnings per share for the
quarter ended May 31, 2011 because they were anti-dilutive.

11. FINANCIAL INSTRUMENTS

Categories of financial assets and liabilities

Under Canadian GAAP, financial instruments are classified into one of the following five categories: held
for trading; held to maturity investments; loans and receivables; available for sale financial assets; and
other financial liabilities. The carrying values of the Company’s financial instruments, including those held
for sale on the consolidated balance sheet are classified into the following categories:
                                                    (15)
                                                                                     May, 2011           November 30, 2010
                       1
    Held for trading                                                                     14,185                          52,807
    Available for sale 2                                                                     67                              49
    Loans and receivables 3                                                              30,274                          25,160
    Other financial liabilities 4                                                        17,316                          18,453
1
       Includes cash and cash equivalents and foreign exchange forward contracts that are not effective hedges
2
       Includes an investment in common shares designated as available for sale
3
       Includes accounts receivable, income taxes receivable, consideration receivable and certain financial instruments included in
       prepaid expenses and other assets
4
       Includes accounts payable and accrued liabilities, capital lease obligations and income taxes payable

The Company, through its financial assets and liabilities, is exposed to various risks. The Company’s
overall risk management program focuses on the unpredictability of financial markets and seeks to
minimize potential adverse effects on the Company’s financial performance. The Company uses
derivative financial instruments to hedge certain risk exposures. The Company does not purchase any
derivative financial instruments for speculative purposes.

Risk management is the responsibility of the corporate finance function. The Company’s domestic and
foreign operations along with the corporate finance function identify, evaluate and, where appropriate,
hedge financial risks. Material risks are monitored and are discussed with the audit committee. The
following analysis provides information regarding certain financial risks as of May 31, 2011:

(a) Fair Value

The carrying amounts for cash and cash equivalents, accounts receivable, other assets and accounts
payable and accrued liabilities approximate fair value because of the short maturity of these instruments.

Instruments held for trading and investments classified as available for sale are recorded at fair value
based on the quoted share prices and foreign exchange rates as of May 31, 2011.

(b) Foreign Exchange Rate Risk

The objective of the Company’s foreign exchange risk management activities is to minimize translation
exposures related to the balance sheet and the resulting volatility of the Company’s earnings. The
Company utilizes financial instruments to manage the risk associated with fluctuations in foreign
exchange rates by entering into foreign exchange forward contracts as described below.

The Company’s revenue is mainly denominated in U.S dollars, whereas operating expenses (including
salaries) are mainly in Canadian dollars. Cost of goods sold is a combination of U.S. and Canadian
dollars. As a result of the Company’s U.S. dollar profile, cash, receivables and trade payables on the
Company’s books are primarily denominated in U.S. dollars while the functional currency of the Company
is Canadian dollars. Therefore, translation gains or losses can occur when these net monetary assets are
translated to the Canadian dollar functional currency at the exchange rate in effect on the balance sheet
date. A volatile exchange rate can create significant swings in periodic income. Similarly, the Company’s
UK subsidiary has mainly U.S. dollar revenue, whereas its expenditures are primarily in British pounds.
To mitigate these risks, the Company has a foreign exchange risk management program. The Company’s
policy is to enter into foreign exchange forward contracts equal to the forecasted level of U.S. dollar
denominated net monetary assets. These contracts mature in one month and mitigate the impact of
translation gains or losses due to currency movements from one balance sheet date to the next. In
accordance with this policy, the Company entered into a foreign exchange forward contract on May 31,
2011 to sell $16,400 U.S. in exchange for Canadian dollars and $5,800 U.S. in exchange for British
pounds. These contracts mature on June 30, 2011 at exchange rates of Canadian $0.9680 against the
U.S. dollar and GBP 0.6080 against the U.S. dollar.

The Company also generates revenue in Japanese yen in excess of the Japanese yen expenditures.
These Japanese yen net current asset positions are hedged on a monthly basis in a similar fashion to the
U.S. foreign exchange contracts referred to above. The Company entered into foreign exchange forward
contracts on May 31, 2011 to sell 305,000 Japanese yen in exchange for Canadian dollars. These
                                                                (16)
contracts mature between June 22 and July 29, 2011 at exchange rates between Canadian $0.01191 and
Canadian $0.01190 against the Japanese yen.

The Company estimates that a before tax loss of $37 would have been realized if the U.S. dollar and
Japanese yen contracts had been terminated on May 31, 2011. The fair values of the foreign exchange
forward contracts are based on market information from major financial institutions. These forward
contracts are not considered hedges for accounting purposes and therefore the gains or losses are
included in other income on the statement of earnings. The net impact of these realized foreign exchange
gains were $317 in the second quarter and $1,171 in the first six months of 2011 (second quarter of 2010
- loss of $661; first six months of 2010 - loss of $954) recorded to other expense. In addition, the
Company realized foreign exchange losses of $452 in the acquisition of Nanotech (see note 15).

The Company also recognizes unrealized foreign exchange gains and losses recorded to the statement
of earnings mainly as a result of converting U.S. dollar denominated balances to the Company’s
Canadian dollar functional currency. The exchange rate used to convert U.S. dollar balances on the
balance sheet to the Company’s Canadian dollar functional currency was Canadian $0.9688 against the
U.S. dollar on May 31, 2011 compared to Canadian $1.0264 against the U.S. dollar on November 30,
2010. The net impact on our U.S.-based net monetary assets was a foreign exchange translation gain of
$105 and $1,183 in the second quarter and first half of 2011 (second quarter of 2010 - gain of $171; first
half of 2010 - gain of $198) recorded to other income (expense). The net impact of the realized and
unrealized foreign exchange losses to the statement of earnings was $92 in the quarter and $527 in the
year to date (second quarter of 2010 - loss of $490; first half of 2010 - loss of $756) (see note 15).

The Company’s reporting currency is the U.S. dollar. Therefore, financial results are first consolidated into
the Canadian dollar functional currency and then translated into U.S. dollars using the current rate
method. The translation to the reporting currency does not generate a cash impact and is not hedged by
the Company. Gains or losses created by translating from the functional currency to the reporting
currency are captured as a change in unrealized gains (losses) on translating financial statements and
are captured in the consolidated statement of other comprehensive income. The Company reported a
foreign currency translation gain in the second quarter of 2011 of $1,069 and in the first six months of
2011 of $9,597 (second quarter of 2010 - $590; first six months of 2010 - $592) due mainly from
converting the Canadian dollar consolidation for U.S. dollar reporting. This translation gain is recorded in
other comprehensive income and is due to a strengthening of the Canadian dollar compared to the U.S.
dollar over the period.

(c) Credit Risk

The Company is exposed to commercial credit risk from its customers in the normal course of business,
which is mitigated by the Company’s credit management policies. The Company is exposed to credit risk
from potential default by any of its counterparties on its foreign exchange and DSU derivative financial
instrument contracts and manages these credit risks by dealing only with major financial institutions with
acceptable credit ratings. Credit risks associated with Paratek on the consideration receivable are
managed through regular communication with this company.

As of May 31, 2011, two customers accounted for 23% of revenue, one of which is a distributor (second
quarter of 2010 - two customers, one of which was a distributor, accounted for 26% of revenue) and two
customers accounted for 21% of receivables (second quarter of 2010 - one customer accounted for 13%
of receivables).

The aging of trade receivable balances were as follows:
                                                                   May 31, 2011        November 30, 2010
 Not past due                                                             21,407                    17,464
 Past due 0-30 days                                                        3,290                     3,386
 Past due 31-60 days                                                         731                       431
 Past due over 61 days                                                     1,033                       643
 Accounts receivable, net                                                 26,462                    21,924

These balances are net of provisions of $1,232 against past due over 61 days (November 30, 2010 -
$1,159 against past due over 61 days).
                                                    (17)
(d) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its obligations as they fall due. The
Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing
and financing activities. As of May 31, 2011, the Company was holding cash and cash equivalents of
$14,205 and accounts receivable of $26,462. The Company has undiscounted contractual maturities
related to accounts payable and accrued liabilities and short term capital lease liabilities as of May 31,
2011 of $16,489. All of the Company’s financial liabilities have contractual maturities of less than one
year, except for the long term portion of the capital lease obligations, and are subject to normal trade
terms.

The Company used approximately $36 million of its cash to purchase all of the shares of Nanotech in the
second quarter of 2011 (see note 6). In order to facilitate the ongoing working capital needs of the
Company, a $10 million credit facility was put in place during the quarter. A condition of the credit facility
requires a negative pledge over all assets of the Company, subject to existing liens and liens in the
ordinary course of business. The Company has not drawn upon this credit facility to date.

The current ratio, calculated as current assets divided by current liabilities, for the Company as of May 31,
2011 was 4.5.

(e) Interest Rate Risk

Interest rate risk is the risk that interest-bearing financial instruments will vary in value due to the
variability of the interest rates. The Company is not exposed to any material interest rate risk on its
financial instruments.

(f) Price Risk

Price risk is the risk that the value of an investment will decline in the future. The Company does not
believe it currently has any significant price risks with the exception of its DSU program. Fluctuations in
Gennum share prices impact the DSU expense recognized as outstanding DSU awards are marked to
market. Beginning late in 2010, the Company implemented a DSU derivative financial instrument to help
offset fluctuations in the mark to market of DSUs (see note 14).

12. SEGMENTED INFORMATION

The Company operates and tracks its results in one reportable segment, consisting of numerous product
areas. The Company’s chief operating decision maker is its Chief Executive Officer. The chief operating
decision maker allocates resources and assesses performance of the business and other activities at the
operating segment level.

The revenue by product portfolio within the single reportable segment and revenue by geographic area is
as follows:

Revenue by product portfolio is as follows:
                                                                          Three Months Ended   Six Months Ended
                                                                                May 31                May 31
                                                                              2011      2010        2011     2010
 Analog and Mixed Signal                                                   23,310     23,134     45,887    44,951
 Optical *                                                                  8,024      6,510     14,398    12,266
 IP                                                                         3,080      2,012      5,606     3,988
                                                                           34,414     31,656     65,891    61,205

* Nanotech revenue is included in the Optical product portfolio.




                                                                   (18)
Revenue by principal markets is as follows:
                                                                         Three Months Ended            Six Months Ended
                                                                               May 31                         May 31
                                                                             2011      2010                 2011     2010
 North America                                                               7,550          8,650          14,854       16,534
 Europe                                                                      3,494          3,749           6,260        6,762
 Japan                                                                       8,773          6,896          18,026       14,512
 Pacific Rim                                                                14,597         12,361          26,751       23,397
                                                                            34,414         31,656          65,891       61,205

The methodology for attributing revenue to principal markets is based on the billing location of the
customer.

Capital assets and goodwill per country are as follows:
                                                                                   May, 2011           November 30, 2010
 Canada                                                                                46,432                          43,594
 United States                                                                          1,113                           1,051
 UK                                                                                    19,249                           1,050
 Other                                                                                    589                             611
                                                                                       67,383                          46,306

Goodwill of $22,504 (November 30, 2010 - $21,241) is located in Canada, $1,113 (November 30, 2010 - $1,051) is located in the
United States and $17,303 (November 30, 2010 – nil), which is related to the recent acquisition of Nanotech, is located in the UK
(see note 6).

13. DEFINED CONTRIBUTION PLAN

The Company has a defined contribution plan pursuant to which the Company contributes, for the benefit
of each employee enrolled in the plan, 5% of such employee’s annual base salary earnings. The total
cost incurred in the second quarter and first half of 2011 was $411 and $785 respectively (second quarter
2010 - $392; first half of 2010 - $709).

14. DEFERRED SHARE UNITS

The Company has a deferred share unit ("DSU") plan for the benefit of the directors under which directors
receive an initial award and an annual award in DSUs and can elect to receive up to 100% of their annual
retainer or total compensation in the form of DSUs. Under the terms of the DSU plan, the DSU award is
credited to an account maintained for each director. At such time as any director leaves the board of
directors, such director will receive a lump sum cash payment equal to his credit balance under the DSU
plan.

As of May 31, 2011, 249,503 units were outstanding under the DSU plan at a value of $1,782 (Nov 30,
2010 - 198,144 units, value $1,353). This liability will be paid to directors when they leave the board of
directors. No units were redeemed in 2010 or the first six months of 2011.

The sales, marketing and administration expense is impacted by the expensing of DSU awards and the
re-evaluation of the liability based on the Company’s share value. In November 2010, the Company
entered into a derivative instrument in order to offset the exposure to changes in the fair value of units
issued under its DSU plan. The derivative instrument is settled quarterly and, as of May 31, 2011, the
derivative instrument offset 245,000 units. The net impacts to the statement of earning in the quarter and
first six months are as follows:




                                                              (19)
                                                           Three Months Ended       Six Months Ended
                                                                 May 31                    May 31
                                                               2011      2010            2011     2010
 Expensing of new awards                                        108          105          194        188
 Re-evaluation of the liability based on the Company’s
 shares                                                        (135)         207         104         441
 Derivative instrument offset                                    104          ---        (77)         ---
                                                                  77         312         221         629

15. OTHER EXPENSE
                                                           Three Months Ended       Six Months Ended
                                                                 May 31                    May 31
                                                               2011      2010            2011     2010
 Realized gain (loss) on foreign exchange hedge
 contracts                                                     (135)       (661)          719      (954)
 Foreign exchange gain (loss) on translation                      43         171      (1,244)        198
 Loss on foreign exchange, net                                  (92)       (490)        (525)      (756)

 Corporate development charges                                    ---      (120)           ---     (120)
 Other                                                          (11)          88           88         17
                                                               (103)       (522)        (437)      (859)

16. INCOME TAXES

The following is a reconciliation of the expected income tax expense obtained by applying the combined
corporate tax rates to earnings before income taxes:

                                                           Three Months Ended       Six Months Ended
                                                                 May 31                    May 31
                                                               2011      2010            2011     2010

 Expected income tax expense using statutory tax rates       (1,294)      (1,662)      (3,084)    (3,476)
  Permanent differences                                          (9)           27        (108)       (28)
  Different income tax rates on earnings of foreign
      subsidiaries                                                33         (77)           7        (96)
  Changes in tax rates                                           220          157          302        160
  Adjustment of tax provision                                     54          260          173        260
 Provision for income taxes                                    (996)      (1,295)      (2,710)    (3,180)
 Effective tax rate                                           21.9%        24.2%       25.0%      28.4%

17. SUBSEQUENT EVENTS

On June 22, 2011, Gennum announced a restructuring program to complete outsourcing of its
manufacturing operations. This process began in 2007 with the decision to outsource wafer
manufacturing and will be completed with the outsourcing of its product testing resources. This program
will be formalized during the Company’s third quarter and implemented over the next year. The full impact
and cost of the program are still being finalized.

18. CAPITAL RISK MANAGEMENT

The Company’s objectives when managing capital are to ensure that there is adequate capital to achieve
its business objectives in order to provide returns for shareholders and benefits for other stakeholders.
The Company’s capital is composed of shareholders’ equity, and is not subject to any capital
requirements imposed by a regulator.


                                                  (20)
The Company manages its capital structure and makes adjustments to it in light of changes in economic
conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure,
the Company may attempt to issue or re-acquire shares, acquire or dispose of assets, raise capital
through debt facilities and adjust the amount of cash and cash equivalents balances.

19. COMMITMENTS AND CONTINGENCIES

The Company is committed to future minimum payments under operating leases for software design tools
and buildings and operating and capital leases for equipment as of May 31, 2011 as follows:

                                         Design Tools       Buildings and Equipment                    Total
 2011                                              774                           1,829                 2,603
 2012                                            2,391                           3,102                 5,493
 2013                                              775                           2,553                 3,328
 2014                                               ---                          2,510                 2,510
 2015 and beyond                                    ---                         17,594                17,594
                                                 3,940                          27,588                31,528

The Company has committed to approximately $10.6 million in purchase obligations as of May 31, 2011,
of which $0.3 million is related to authorized capital projects. The remaining purchase obligations relate
primarily to inventory, product development and general operating costs. The majority of purchase
obligations, $9.7 million, are expected to be incurred within the next year.

In the ordinary course of business activities, the Company may be contingently liable for litigation and
claims with customers, suppliers, former employees and third parties. Management believes that
adequate provisions have been recorded in the accounts where required. Although it may not be possible
to accurately estimate the extent of potential costs and losses, if any, management believes that the
ultimate resolution of such contingencies would not have a material adverse effect on the financial
position of the Company.

20. COMPARATIVE AMOUNTS

Certain of the comparative amounts have been reclassified to conform to the presentation adopted in the
current year.




                                                     (21)

				
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