INSPIRING YOUR PRODUCTS AND MANUFACTURING 
Annual Report and Accounts 2006
SPI Lasers plc
3 Wellington Park 
Tollbar Way 
Hedge End 
Southampton 
SO30 2QU 
Tel: +44 (0)1489 779696  
Fax: +44 (0)1489 779698 
Email: investors@spilasers.com
Web: www.spilasers.com
SPI Lasers plc  Annual Report and Accounts 2006  CORPORATE STATEMENT
Our goal is to be a leader in the optical  
ﬁbre-based laser market. 
SPI is now a recognised leader in the design and 
manufacture of ﬁbre lasers. The Group’s technology 
is rapidly becoming an integral part of producing 
many end-user products by improving, and in some 
cases enabling, its customers’ manufacturing 
processes. SPI continues to expand the applications 
space for ﬁbre lasers, with powers from mWs to kWs.
  CORPORATE STATEMENT
  HIGHLIGHTS
 01 AT A GLANCE
02 OUR MARKET
 02 OUR TECHNOLOGY
 02 CURRENT PRODUCTS
 04 CHAIRMAN’S STATEMENT
 06 CHIEF EXECUTIVE’S REVIEW
 08 FINANCIAL REVIEW
 10 BOARD OF DIRECTORS
 13 DIRECTORS’ REPORT
 16  STATEMENT OF DIRECTORS’ RESPONSIBILITIES
 17 INDEPENDENT AUDITORS’ REPORT
 18 GROUP PROFIT AND LOSS ACCOUNT
 18  GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
 19 GROUP BALANCE SHEET
 20 COMPANY BALANCE SHEET
 21 GROUP CASH FLOW STATEMENT
 22 NOTES TO THE FINANCIAL STATEMENTS
 36 OFFICERS AND PROFESSIONAL ADVISORS 01
SPI Lasers plc 
Annual Report and Accounts 2006 
HIGHLIGHTS
   Turnover doubled to £7.1 million (2005: 
£3.5 million) in line with market expectations
  Product sales of £4.7 million (2005: £2.0 
million) and contract sales of £2.4 million 
(2005: £1.5 million) representing growth 
of 135% and 60% respectively 
  Continued strong growth in MICRO with 
largest single deployment being in excess 
of 70 lasers 
  102 new accounts, increased demand for 
MARKING, a new market sector established 
in MEDICAL AESTHETICS and several new 
market verticals established within sectors
  Technical problems encountered at mid-year 
have been resolved
  Strong increase in activity in Asia 
  Strengthened balance sheet post year end 
following February 2007 placing raising 
£10 million (net)
WHAT WE DO AT A GLANCE 
MACRO 
Cutting and welding of larger parts in industries such as automotive, 
white goods, etc.
MICRO
A term for a diverse set of applications that require ﬁne or precise cutting 
or welding. These include medical components (e.g. stents), electronic 
assembly, printing etc.
MEDICAL 
A growing range of aesthetic laser applications such as skin resurfacing 
and rejuvenation.
MARKING 
The production of equipment to produce permanent marking on 
a wide range of products. Examples include consumer electronics,  
semi-conductor, automotive and aerospace. 02
SPI Lasers plc 
Annual Report and Accounts 2006 
OUR MARKET
The market is set to grow strongly over the next three 
years. The majority of our business falls into the overall 
category of industrial materials processing. Within this 
market, the ﬁbre laser is set to continue as the fastest 
growing sub-segment. 
OUR TECHNOLOGY AND CURRENT PRODUCTS 
The ﬁbre laser requires the same basic elements as any other laser system.
In the case of the ﬁbre laser, all of the elements are contained within the optical 
ﬁbre, thus leading to an integrated solution which avoids the need for complex 
precision assemblies found in conventional lasers. The ﬂexible nature of the optical 
ﬁbre allows for a compact format which is signiﬁcantly smaller than its industrial 
counterparts. The properties of the optical ﬁbre lead to superior performance in 
many parameters. 
The entire laser unit is contained in a standard 19 inch rack or compact OEM 
unit. One product can serve many markets and they are software conﬁgurable. 
SPI Lasers enjoys a wide range of intellectual property and know-how, most notably 
our GTWave™ technology, which allows robust and simple assembly without the 
use of complex or expensive sub-components. This is deployed as a standard 
technology platform throughout the product set.  03
SPI Lasers plc 
Annual Report and Accounts 2006 
2–20W CW & PULSED
This product has been designed to meet the 
needs of the MARKING market. It operates 
at high speed which translates into faster 
throughput for end-users.
10–20W CW LONG WAVELENGTH
The wavelength of these lasers has been 
matched to maximise their effectiveness 
for aesthetic medical applications.
50–100W AIR COOLED
This laser is used in the MICRO market 
for ﬁne feature cutting. The air cooling 
aids installation where machine mobility 
is required.
The rapid growth of ﬁbre laser sales is due to the widely recognised advantages offered by 
the product:
PERFORMANCE 
Small, highly intense output beams with industry leading stability
SIZE 
Compact and easy to integrate
EFFICIENCY 
Signiﬁcant improvements in efﬁciency compared to conventional lasers
MAINTENANCE 
Little or no replacement parts or post-installation maintenance
50–200W WATER COOLED
Our water cooled product is designed 
to offer industry leading stability, hence 
increasing cut and weld quality for  
end-users in its MICRO market.
Source: ﬁbre laser market penetration per LaserFocusWorld Lasers & Photonics Marketplace Seminar 2006 and 2006 actuals
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SPI Lasers plc 
Annual Report and Accounts 2006 
PERFORMANCE DURING 2006
The twelve months ended 31 December 2006 
was SPI’s ﬁrst full ﬁnancial year as an AIM quoted 
company. It was another period of signiﬁcant 
progress, with turnover doubling for the second 
successive year. Whilst the business advanced 
broadly to plan in the ﬁrst half of the year, the 
Group confronted process related issues during 
the middle of the year that slowed its momentum.
The difﬁculties encountered in power-scaling the 
GTWave ﬁbre resulted in a delay of around three 
months and in additional costs. Nevertheless, at 
the end of year 2006 the Group is back on track 
and turnover is in line with market expectations. 
Fourth quarter product revenues exceeded those 
for the whole of 2005, and the business entered 
2007 with a record order book.
FINANCING
During the ﬁnancial year, the Group raised a total 
of £6.6 million in equity and debt after expenses. 
A placing in August 2006 raised £4.8 million 
(net) and was supported by a wide range of our 
existing investors, as well as some new shareholders. 
In December 2006 ETV Capital S.A. (Luxembourg) 
provided the Company with £1.8 million through 
a convertible loan. Further details are provided in 
the Financial Review and will be covered in the 
Report and Accounts.
In addition, SPI has completed a further equity 
fundraising in February 2007 of £10 million 
(net). This again was well supported by existing 
shareholders and a number of new investors.
THE BOARD
In November 2006 it was announced that 
David Shrigley was stepping down as 
non-executive Director to pursue other interests. 
Dave initially represented one of our venture 
capital investors, but since flotation he 
demonstrated the value of his wide experience in 
a truly independent manner. I would like to thank 
Dave for his guidance and contribution at an 
important stage of the Group’s development.
Equally, I am grateful to the continuing six members 
of the Board for their valuable insights and 
unfailing support over the past twelve months.
EMPLOYEES
As already discussed, 2006 was not without its 
challenges for the business. SPI has managed 
successfully to overcome these issues and ﬁnish 
the year in a strong position. This is due principally 
to the unstinting efforts of management and staff.
CHAIRMAN’S STATEMENT
SUMMARY OF CHAIRMAN’S STATEMENT
  TURNOVER DOUBLED FOR THE SECOND SUCCESSIVE YEAR 
  FOURTH QUARTER PRODUCT REVENUES EXCEEDED THOSE FOR THE WHOLE OF 2005 
  TECHNICAL PROBLEMS RESOLVED
  FIBRE LASER MARKET CONTINUES TO DEVELOP RAPIDLY
  BALANCE SHEET STRENGTHENED
“ CUSTOMER INTEREST IN OUR PRODUCTS REMAINS STRONG. 
THE CORE TASK FOR 2007 IS TO ACHIEVE THE EFFECTIVE 
SCALING UP OF OUR PRODUCTION AT LOWER COSTS.” 05
SPI Lasers plc 
Annual Report and Accounts 2006 
PROSPECTS
The ﬁbre laser market continues to develop rapidly, 
attracting both new customers and displacing 
longer-established laser technologies in an ever 
wider range of applications. The competition to 
share in this opportunity is certain to intensify, 
but the technical barriers to successful market 
entry are signiﬁcant and SPI remains well 
positioned with its product offering.
As promised last year, SPI managed to sustain 
its earlier momentum with a broader range of 
products and across a greater number of market 
verticals. Customer interest in our products 
remains strong. The core task for 2007 is to 
achieve the effective scaling up of our production 
at lower costs.
GRAHAM MEEK
CHAIRMAN
8 MARCH 2007
CUTTING
With a strong ethos of product innovation, technology leadership 
and customer focus, SPI Lasers is enabling the resolution of 
some of today’s most challenging and commercially sensitive 
manufacturing issues. 
Where existing technology has previously limited the precision 
cutting of miniature parts, the ﬁbre laser has enabled manufacturers 
to produce ground breaking microscopic cut detail in some of the 
world’s smallest coronary stents.
The highly competitive electronics sector continues to leverage the 
enormous beneﬁts of SPI’s technology, for example, superior cut 
quality of solder mask stencils for circuit boards. 
WELDING
Most people, when they think lasers, think welding. And this is true of 
the ﬁbre laser from SPI. However, due to SPI’s innovative approach, 
it is now possible to weld various materials, including ones that are 
dissimilar to one another, at incredibly small dimensions.
Previous welding tools, including traditional lasers simply could 
not achieve the diminutive yet robust bond that the ﬁbre laser 
produces. Not only is the ﬁbre laser playing an integral part in the 
miniaturisation of consumer products, the technology is making a 
massive contribution to the quest for sustainable energy sources. 06
SPI Lasers plc 
Annual Report and Accounts 2006 
INTRODUCTION
I am pleased to report that the end of 2006 saw 
the Group executing well on the commercial 
front. The year ﬁnished with a signiﬁcant 
improvement in the sales run-rate, a strong order 
book and a record level of forward visibility. This 
return of momentum was particularly pleasing 
given the process related issues encountered 
in the middle of the year and sets the scene for 
signiﬁcant growth expectations in 2007. The 
post-interims revision of market expectations of 
full year 2006 sales of £7 million still represented 
a top line growth of 100% over 2005. Meeting 
this was a key objective for the second half, on 
which the Group delivered. After resolving the 
technical problems, the next key objective was to 
bring to market the new products that underpin 
the growth potential of 2007 and beyond. This 
was also achieved towards the end of 2006.
In summary, 2006 was a year of meeting and 
tackling challenges head on to ensure that the 
momentum required for sustained growth was 
generated. We believe that we achieved this and 
in doing so there are a number of signiﬁcant 
areas to highlight:
MARKETS, CUSTOMERS AND CHANNEL
The laser industry is a large and established 
market. During 2006, ﬁbre lasers continued to be 
more widely recognised as tools that deliver real 
advantages for a range of applications and many 
end-users. I believe that SPI’s successes to date 
as a supplier of industrial grade products is proof 
of this maturing process.
SPI’s customers are mainly system integrators 
building end-user systems that incorporate our 
lasers as the optical source. In some cases these 
integrators are part of the end-user entity, but in 
the majority of cases they are an intermediary. 
Consequently, we have invested heavily in creating 
awareness of the many advantages of ﬁbre lasers 
in the end-user community to create “pull through” 
in the sales channel. I am pleased to report that 
this strategy is continuing to be successful.
In 2006 the Group continued to gain momentum 
in the MICRO sector. Of note within this sector 
was the further progress we made in penetrating 
the medical device manufacturing market, where 
the ﬁbre laser’s ability to cut and weld ﬁne feature 
size items rapidly and with high quality has been 
a differentiator against traditional lasers. Initial 
successes were gained in stent cutting (a stent is a 
spring-like structure that is expanded within veins 
and arteries) leading to a number of stent industry 
leaders now deploying SPI products and with 
our largest single deployment being in excess of 70 
lasers. Having established ourselves in this sub-sector, 
we are now engaged with a number of other 
customers and working on new applications.
This reﬂects our distinct market approach: excel 
at an application and then drive penetration. 
Corresponding with SPI’s growth, we have 
succeeded in adding further market verticals 
in automotive, consumer electronics and 
semi-conductors. To support this, we have 
invested in our channel resources, both direct 
and through specialist distribution partners, and 
established applications and support capabilities 
in the UK, the USA and, more recently, China.
CHIEF EXECUTIVE’S REVIEW
SUMMARY OF CHIEF EXECUTIVE’S REVIEW
   STRONG FINISH TO THE YEAR AND MOMENTUM RESTORED
  SUSTAINED PROGRESS IN THE MICRO SECTOR
  RAPID TAKE UP OF NEW PRODUCTS IN THE MARKING SECTOR
  NEW GROWTH SECTOR ESTABLISHED IN MEDICAL AESTHETICS
  GROUP ENTERED 2007 WITH STRONG ORDER BOOK
“ THE EXCITING CHALLENGE FOR 2007 AND BEYOND IS 
THEREFORE TO DELIVER ON THE INCREASING NUMBER 
OF OPPORTUNITIES BY DEVELOPING NEW PRODUCTS 
AND ACCELERATING THOSE ALREADY INTRODUCED.” 07
SPI Lasers plc 
Annual Report and Accounts 2006 
Towards the end of 2006, we began shipping our 
pulsed laser products for the MARKING sector 
securing several supply contracts, and establishing 
a strong order book with a number of customers.
We identiﬁed and established ourselves within 
a new sector, namely MEDICAL AESTHETICS, 
wherein the ﬁbre laser is used as a direct tool 
for cosmetic enhancement and correction. The 
majority of our 2006 sales growth in Asia came 
from this new sector.
All of these activities are consistent with our 
strategy of utilising our specialised optical ﬁbre 
capability to establish a technology platform that 
can be sold into multiple markets. We continue 
to strive for products that deliver the end-user 
beneﬁts in performance and cost of ownership 
that industry watchers believe will fuel the rapid 
growth of ﬁbre lasers.
OPERATIONAL
The 2006 year started well with sales of the 
products introduced in 2005 meeting the ﬁrst 
half market expectations of £3 million which 
was almost 90% of the full year 2005 result. 
As previously reported, towards the end of the 
ﬁrst half the Group experienced several process 
related technical issues in relation to power-scaling 
the GTWave ﬁbre. The equipment modiﬁcations 
that were required to resolve the underlying 
problems were completed during the second half 
and have since proved themselves to be reliable.
The cumulative effect of these issues resulted in a 
delay in completion of the development, market 
introduction and production ramp up of both 
higher power and pulsed lasers for the MICRO 
and MARKING sectors respectively. It was the 
resolution of these issues, and the subsequent 
progress towards completion of the associated 
product developments that enabled the strong 
sales performance in the ﬁnal quarter of the year.
In particular we achieved volume shipments of 
our novel pulsed laser for the MARKING sector, 
which is designed to operate faster than the 
competitive offering and the new 200W laser 
for the MICRO sector, which is facilitating several 
new applications in both small feature welding 
as well as cutting.
The Group also made progress in developing the 
basic technology required to allow scale up of 
power in a reliable manner. This was not only 
essential for the products released in 2006, but 
the developments carried out will allow future 
product lines to be released, for example,  
into the MACRO sector.
During 2006 there were a number of other 
initiatives designed to manage the growth of the 
Group in a more reliable and predictable manner. 
These included both human resource and 
infrastructure projects.
OUTLOOK AND KEY EVENTS
In 2007 we expect to sustain the momentum built 
towards the end of 2006. We intend to expand 
our sales channel and manufacturing resources 
to enable us to increase output of the established 
products and address multiple new market verticals. 
The new 200W product will broaden our offering 
in the MICRO sector. This, combined with the 
general release of our MARKING laser and the 
addition of products for MEDICAL AESTHETICS, 
should more than double the size of the market 
available to the Group. We also expect that by 
leveraging our customer funded R&D and through 
organic investment we will make strides towards 
the commercialisation of our technology in the 
MACRO sector for later years.
At the time of the placing in January 2007, our 
order book (including sales made) for the ﬁrst half 
of 2007 stood at £5.0 million and was £0.5 million 
for the second half of the year. I am pleased to 
report that we have continued to make progress 
on this front and now have secured orders 
(including sales made) of nearly £7 million over 
the year. What is particularly pleasing is that most 
of the increase has come from new business wins 
rather than the conversion of framework agreements. 
Given this progress, we remain conﬁdent in 
delivering on market expectations for the year.
The exciting challenge for 2007 and beyond is 
therefore to deliver on the increasing number of 
opportunities by developing new products and 
accelerating those already introduced, to take 
advantage of the expanding market and to do so 
whilst improving the cost structure of the business, 
as we move towards proﬁtability.
DR. DAVID PARKER
CHIEF EXECUTIVE OFFICER
8 MARCH 2007
MEDICAL AESTHETICS
Fibre laser technology from SPI has more to offer than just  
industrial applications. 
There has been signiﬁcant growth in the use of lasers in the area 
of medical aesthetics: techniques such as thermal skin rejuvenation 
and wrinkle removal are becoming widely available, enabled in 
part by ﬁbre lasers.
Where previous technologies were limited by cost, unpleasant side 
effects and long recovery times, the SPI laser when incorporated 
into our customers’ systems revolutionises the way we think about, 
and deal with, scarring and facial skin ageing.
MARKING
SPI Lasers technology leadership is helping to transform the way 
companies identify and track their products. Previously, placing 
unique marks on products or components was greatly limited by 
the type of marks and a potential for a lack of permanence. In a 
world where counterfeit products could endanger the commercial 
viability of an organisation, the ability to cost-effectively make 
unique, complex, permanent and inert identiﬁcation marks is, 
quite literally, changing the face of products.
The ﬁbre laser from SPI is also playing a key role in the development 
of many consumer products. Where complex layer combinations such 
as metal and plastic require material removal in order, for example, 
to produced keypads – the unique properties of SPI’s technology 
enables increased processing accuracy, precision and speed.  08
SPI Lasers plc 
Annual Report and Accounts 2006 
OVERVIEW
2006 was a year of expansion for the SPI Group, 
and we saw very strong growth in the Group’s 
sales of ﬁbre laser products in all of our 
geographic markets. Our investment in 
manufacturing expansion, product development 
and particularly in sales and marketing were all 
important factors in achieving strong top-line 
growth partially funded by the mid-year secondary 
placing that raised £4.8 million (net). However, 
the technical problems encountered in the middle 
of the year led to a slow down in sales and an 
increase in costs. This further increased the 
ﬁnancing need of the Group and lies behind 
our decision to secure debt ﬁnance in the fourth 
quarter and, subsequently in early 2007, a further 
equity placing to raise £10 million (net).
SALES
Total sales grew by 103% over 2005 from 
£3.5 million to £7.1 million. Product sales grew 
from £2.0 million in 2005 to £4.7 million in 
2006, a growth of 135%.
Contract sales, which relate to our US and UK 
defence and aerospace development contracts, 
grew by 60% in the year, building on initial US 
contract awards and now servicing both US and 
UK agencies and contractors.
The US remains our biggest market with £2.6 million 
of total sales, an increase of 24% on the prior year’s 
sales of £2.1 million. However, SPI’s dependency 
upon sales to the US has continued to decrease: 
36% of sales in 2006, down from 60% in 2005 
as other market areas were further expanded. 
Sales to Asia increased from £0.3 million (10% 
of total sales) in 2005 to £1.6 million (23% of 
total sales) in 2006. Sales to Europe (excluding 
the UK) increased from £0.6 million (17% of total 
sales) in 2005 to £1.3 million (18% of total sales) 
in 2006. The balance of sales was in the UK, 
which increased from £0.5 million (13% of total 
sales) in 2005 to £1.6 million (23% of total sales) 
in 2006.
OPERATIONAL CHANGES
GROSS LOSS
The gross loss was £3.1 million (£1.4 million in 
2005). This increase is a reﬂection of, ﬁrstly, the 
increase in ﬁxed costs associated with capability 
and capacity within manufacturing and, secondly, 
the impact of the technical problems that led to 
an increased consumption of materials and a 
delay in product cost reductions. The resolution 
of the technical problems coupled with increased 
volume throughput now enables SPI to leverage 
off its predominantly ﬁxed-cost manufacturing 
base as volumes increase. This trend will continue 
as volumes continue to grow.
ADMINISTRATIVE EXPENSES
Administrative expenses in total, before exceptional 
costs, were £1.0 million higher than in 2005, 
an increase of 14% due to increased R&D and 
expansion in sales.
Administrative expenses include £2.4 million of 
Group funded product research and development 
(R&D) costs, £0.6 million less than in 2005. 
However, in addition, and charged against cost of 
sales, the Group spent £2.1 million on customer 
funded R&D. The total incurred investment in R&D 
was therefore £4.5 million, an increase of 13% 
over the £4.0 million equivalent spend in 2005. 
Sales and marketing costs increased by 28% to 
£2.2 million as the Group expanded its sales 
team and increased its geographic presence. 
Provisions for royalties, warranty costs, and 
inventory obsolescence increased by £0.7 million 
over 2005. The balance of the administrative 
expenses relates to general administration costs.
The exceptional charge in 2005 of £0.3 million 
related to costs associated with the ﬂotation of the 
Company that were not chargeable to the share 
premium account.
TAXATION
SPI has an unrecognised deferred tax asset of 
£12.8 million, which has primarily arisen from 
the losses incurred to date. In 2006, an R&D tax 
credit of £0.4 million (£0.5 million in 2005) was 
recognised; the associated cash receipt from 
HM Revenues & Customs is expected to be 
received in the second half of 2007 (the 2005 
related tax credit was received in January 2007).
LOSS AFTER TAXATION
The loss after taxation for 2006 was £11.0 million 
(2005: £8.5 million). Before exceptional charges, 
the loss increased by £2.8 million (34%) over the 
equivalent loss in 2005 of £8.2 million. This is 
primarily due to the issues referred to above in 
Gross Loss and Administrative Expenses.
DIVIDEND
The directors do not propose to pay a dividend 
(2005: £nil).
HEADCOUNT
Average heads increased from 88 in 2005 to 
126 in 2006 due to investment in manufacturing, 
FINANCIAL REVIEW
SUMMARY OF FINANCE DIRECTOR’S REVIEW
   SALES GREW BY 103% TO £7.1 MILLION 
  GROWTH IN ALL GEOGRAPHIC MARKETS, PARTICULARLY ASIA 
  R&D INVESTMENT INCREASED BY 13% 
  EQUITY PLACING AND LOANS IN 2006 RAISED £6.6 MILLION (NET) 
  FURTHER EQUITY OF £10.0 MILLION (NET) RAISED IN EARLY 2007
“ 2006 WAS A YEAR OF EXPANSION FOR THE SPI GROUP , 
AND WE SAW VERY STRONG GROWTH IN THE GROUP’S 
SALES OF FIBRE LASER PRODUCTS IN ALL OF OUR 
GEOGRAPHIC MARKETS.” 09
SPI Lasers plc 
Annual Report and Accounts 2006 
logistics, engineering and sales. Sales increased 
from £39,000 per head in 2005 to £56,000 per 
head in 2006 and the loss after tax for 2005 and 
2006 reduced from £96,000 per head to £87,000 
per head respectively.
FIXED ASSETS
Gross ﬁxed assets grew by £0.7 million during 
2006, an increase of 6% on the balance as at 
31 December 2005. £0.3 million of this 
expenditure related to the expansion of 
manufacturing capacity. This comparatively low 
level of total expenditure is a reﬂection of the 
signiﬁcant investment in ﬁxed assets in earlier 
years, particularly pre-2004, which created the 
inherent capability to produce ﬁbre lasers in 
volume. The Group’s investment in ﬁxed assets 
is now mostly related to a further increase in 
capacity rather than the underlying capability.
Depreciation for 2006 was £0.6 million (2005: 
£0.5 million). Accumulated depreciation at 
31 December 2006 stands at 80% of the gross 
cost of the assets.
WORKING CAPITAL
Net current assets, excluding cash and loans 
(working capital), increased from £2.2 million 
at 31 December 2005 to £3.0 million at 
31 December 2006. Debtors increased by 
£1.7 million, offset by an increase in creditors 
of £0.8 million and a reduction in stock of 
£0.1 million. The net increase in working capital 
of £0.8 million was primarily as a result of the 
strong sales volume growth experienced by the 
Group during the fourth quarter of 2006.
LOANS
A convertible loan was provided in December 2006 
by ETV Capital S.A. (Luxembourg) to provide 
working capital for the Company in advance of 
the equity placing in February 2007. The loan 
is secured on the assets of the Company, and is 
interest only until June 2007 and is thereafter 
repayable over 33 months at an initial interest 
rate of 13.2% per annum. Additionally, the 
previous loan of £2.0 million provided by ETV in 
2005 was also restructured to be on an interest 
only basis until May 2007.
EQUITY FUNDRAISING
The placing in August 2006 raised £5.0 million 
gross, £4.8 million net after transaction costs of 
£0.2 million. The costs were direct costs of the 
share issue and have been set off against the 
share premium account. The cash balance at 
31 December 2006 was £2.1 million, in line 
with expectations.
POST YEAR END EVENTS
FUNDRAISING
As referred to in my overview, the Company 
raised additional equity in February 2007 of 
£10.0 million (net).
INTERNATIONAL FINANCIAL REPORTING 
STANDARDS
International Financial Reporting Standards (IFRS) 
came into effect for AIM listed companies on 
1 January 2007. The Group’s ﬁrst set of audited 
ﬁnancial statements reported under IFRS will be 
for the year ending 31 December 2007. The 
Group will prepare its interim statement as at 
30 June 2007 under IFRS which will include a 
reconciliation of the adjustments which have been 
made between UK GAAP and IFRS.
STEVE BERG
CHIEF FINANCIAL OFFICER
8 MARCH 2007
2002 2003 2004 2005 2006
0
1000
2000
3000
4000
5000
2002 2003 2004 2005 2006
0
1000
2000
3000
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5000
SPI LASERS PRODUCT SALES (£’000) SPI LASERS CONTRACT SALES (£’000)
2005 SALES 2006 SALES
US 60%
Europe 17%
UK 13%
Asia 10%
US 36%
Europe 18%
UK 23%
Asia 23% 10
SPI Lasers plc 
Annual Report and Accounts 2006 
GRAHAM MEEK *¹ § ¥¹
NON-EXECUTIVE CHAIRMAN
Graham Meek, age 59, joined the Group in 
2005. He is currently chairman of ICM Computer 
Group plc (having served as senior independent 
director from 2002–2004), a non-executive 
director of Filtronic plc and a non-executive 
director of Capital Gearing Trust plc. He has 
had a long career in investment banking and 
stockbroking, with particular experience of the 
information technology and telecommunications 
sectors. Graham was previously head of corporate 
ﬁnance at Beeson Gregory plc, a managing 
director of Merrill Lynch Capital Markets and 
an executive director of Smith New Court plc.
DAVID PARKER ¥
CHIEF EXECUTIVE OFFICER
David Parker, age 44, joined the Group in 2002 
and has been the chief executive ofﬁcer since this 
time. He is the former chief executive ofﬁcer of 
Marconi Optical Components (“MOC”). Under 
his leadership, MOC was sold to Bookham T echnology 
in February 2002. Prior to this, he was vice president 
general manager of Agilent T echnologies’ Ipswich 
components operation and a corporate vice 
president of Agilent. During his tenure, this 
business unit became the market leader in 
the supply of high performance networking 
components. In previous roles, he has gained 
experience in manufacturing, research and 
development and business development. 
He serves as a non-executive director on the 
board of Zinwave, Inc. and was formerly a 
member of the supervisory board of Xignal 
Technologies AG. He was elected a Fellow of 
the Institute of Physics in 1997. David has a 
PhD from Imperial College, University of London 
and a BSc from the University of Leeds.
STEVE BERG
CHIEF FINANCIAL OFFICER AND 
COMPANY SECRETARY
Steve Berg, age 52, has been chief ﬁnancial 
ofﬁcer of the Group since February 2003. Prior 
to joining the Group, he was the chief ﬁnancial 
ofﬁcer of Marconi Optical Components until it 
was sold to Bookham Technology in 2002. Steve 
joined Marconi in 1988, ﬁrst in the GEC-Marconi 
defence division before moving to GEC’s 
telecommunications subsidiary, GPT (GEC-Plessey 
Telecommunications), in 1991 and was appointed 
GPT’s chief ﬁnancial ofﬁcer in 1997. He moved 
to Marconi Capital in 1999 as a director of 
corporate ﬁnance, where he was involved in 
various investment activities in North America, 
Europe, the Middle East and Asia. Prior to joining 
GEC, he gained experience with NORTEL and 
Invensys. Steve is a Chartered Management 
Accountant (Fellow) with a postgraduate diploma 
in management from Coventry University.
DAVID PAYNE 
PART TIME EXECUTIVE DIRECTOR
David Payne, age 62, co-founded SPI Inc. in 
1997 and was its ﬁrst chairman. He heads the 
Optoelectronics Research Centre at the University 
of Southampton (“ORC”) from which today’s ﬁbre 
laser ﬁrst emerged. The facility contains over 60 
research laboratories and more than 150 full-time 
researchers. He led the team that invented the 
erbium-doped ﬁbre ampliﬁer, the enabling 
technology for dense wavelength-division-
multiplexing and the growth of the Internet. 
In 1998, the Franklin Institute recognised this 
achievement and awarded him with its prestigious 
Benjamin Franklin Medal for the invention. David 
is a Fellow of the Royal Society and the Royal 
Academy of Engineering and was awarded the 
CBE in 2004.
BOARD OF DIRECTORS 11
SPI Lasers plc 
Annual Report and Accounts 2006 
PETER SCHULTZ * §¹ ¥
NON-EXECUTIVE DIRECTOR
Peter Schultz, age 64, joined the Group in 2005. 
He is retired president of Heraeus Tenevo Inc., 
a technical glass manufacturer specialising in 
ﬁbre optics and semi-conductor markets, and 
chief technical ofﬁcer North America for Heraeus 
Holding GmbH. Following graduation from 
Rutgers University (BSc 1964, PhD 1967), he 
co-developed the world’s ﬁrst practical glass 
optical ﬁbre for communications in 1970 as 
a scientist at Corning, Inc. He is co-inventor 
of the ﬁbre optics now used worldwide for 
telecommunications. In 1993, he was inducted 
into the National Inventors Hall of Fame and in 
2000 received the National Medal of Technology 
from President Clinton for this accomplishment 
and he was elected member of the US National 
Academy of Engineering in 2001. Peter is the 
recipient of numerous awards, including the 
International Glass Science Award (1977), 
SPIE Technology Achievement Award (1981), 
ASM Engineering Materials Achievement Award 
(1983) and the First American Innovators Award 
(US Department of Commerce 1995).
DAVID CHEESMAN * §
NON-EXECUTIVE DIRECTOR
David Cheesman, age 64, joined the Group 
in 2003. He worked in the computer industry 
for over 20 years, becoming chief engineer at 
Computer and Systems Engineering Limited 
and Univac’s director of technical operations for 
Europe. In 1978, he set up Prime Computer Inc’s 
research and development operations in the UK, 
before becoming managing director of Dowty 
Information Systems Limited. In 1988, he left 
the industry to join the venture capital community, 
becoming a director of 3i’s high-tech unit. 
Subsequently, he was a founding partner in 
TriTech Investment Managers and, in 1997, 
became a partner at Advent Venture Partners, 
specialising in IT investment. David has invested 
in over 40 high-tech companies and been active 
on the boards of 32 of these. David has an 
Honours degree in Electrical Engineering and 
is a Chartered Engineer and a Fellow of the 
Institute of Electrical Engineers. 
BILL O’NEILL
SPECIAL ADVISOR TO THE BOARD 
Dr O’Neill is the Head of the Centre of Industrial 
Photonics which is part of the Cambridge 
University Institute for Manufacturing.
He has written extensively on the subject of 
laser-matter interactions, optical engineering 
and rapid manufacturing process technologies. 
He is a member of a number of government and 
industrial advisory boards, a member of EPSRC 
Peer Review College, and is a non-executive 
director of Advanced Laser Solutions Ltd. More 
recently, he was elected as a director of the Laser 
Institute of America (LIA) to help steer and develop 
worldwide operations in this ﬁeld.
*1 Chairman of Audit Committee
* Member of Audit Committee
§1  Chairman of Remuneration Committee
§  Member of Remuneration Committee 
¥1  Chairman of Nominations Committee
¥  Member of Nominations Committee 13 DIRECTORS’ REPORT
16  STATEMENT OF DIRECTORS’ RESPONSIBILITIES
17 INDEPENDENT AUDITORS’ REPORT
18 GROUP PROFIT AND LOSS ACCOUNT
18  GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
19 GROUP BALANCE SHEET
20 COMPANY BALANCE SHEET
21 GROUP CASH FLOW STATEMENT
22 NOTES TO THE FINANCIAL STATEMENTS
36 OFFICERS AND PROFESSIONAL ADVISERS
FINANCIAL CONTENTS
12
SPI Lasers plc 
Annual Report and Accounts 2006  The directors present their Annual Report and audited Group ﬁnancial statements for the year ended 31 December 2006.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
The Group is a leader in the design, development, engineering and manufacture of optical ﬁbre-based laser sources for a range of markets and applications. 
The Group’s products are based on the innovative and proprietary ﬁbre technology platform which enables high performance together with a substantial 
reduction in the size of the product and the total cost to the end-user compared to more traditional lasers.
Further details of the Group’s performance during the year and expected future developments are contained in the chairman’s and chief executive’s statements and 
the Financial review.
RESULTS AND DIVIDENDS
The loss for the ﬁnancial year of £10,985,000 (restated 2005: loss £8,476,000) has been taken to reserves. The directors do not recommend the payment 
of a dividend (2005: £nil).
CORPORATE GOVERNANCE
INTRODUCTION
SPI Lasers plc was listed on AIM on 26 October 2005. Although the AIM Rules do not require the Group to comply with the Combined Code on Corporate 
Governance (‘the Code’), the Group supports the principles set out in the Code and will attempt to comply wherever it considers it appropriate to do so, 
given both the size and resources available to the Group. Details are provided below of how the Group applies the principles of the Code.
THE BOARD
The Board of directors comprises three executive directors (one of whom is part-time), and three non-executive directors, one of whom is the chairman.
The Board meets each month and receives a Board pack comprising reports from each of the executive directors together with any other material deemed 
necessary for the Board to discharge its duties. It is the Board’s responsibility for formulating, reviewing and approving the Group’s strategy, budgets, major 
items of expenditure and acquisitions.
BOARD COMMITTEES
The Board has established three committees: the Audit Committee, the Remuneration Committee and the Nominations Committee, each of which has written 
terms of delegated responsibilities.
AUDIT COMMITTEE
The Audit Committee, chaired by Graham Meek, comprises three non-executive directors and meets at least three times a year with the chief executive and 
the Chief Financial Ofﬁcer in attendance. It is the Audit Committee’s role to provide formal and transparent arrangements for considering how to apply the 
ﬁnancial reporting and internal control requirements of the Code, whilst maintaining an appropriate relationship with the independent auditors of the Group. 
The Audit Committee assists the Board in the discharge of its duties concerning the announcements of results, the Annual Report and Accounts and the 
maintenance of proper internal controls. It reviews the scope and planning of the audit and the auditor’s ﬁndings and considers Group accounting policies 
and the compliance of those policies with applicable legal and accounting standards. The Audit Committee meets at least twice a year with the auditors 
without the executive directors being present.
REMUNERATION COMMITTEE
The Remuneration Committee, chaired by Peter Schultz, comprises three non-executive directors and meets at least twice a year. It is the Remuneration 
Committee’s role to establish a formal and transparent policy on executive remuneration and to set remuneration packages for individual executive directors, 
within agreed terms of reference. No director may participate in discussions relating to their own terms and conditions of service or remuneration.
NOMINATIONS COMMITTEE
The Nominations Committee, chaired by Graham Meek, comprises two non-executive directors and the chief executive and meets at least twice a year to 
consider the size, structure and composition of the Board, to formulate and review proposals for the appointment and retirement of directors and make 
recommendations thereon to the Board.
INTERNAL CONTROL AND RISK MANAGEMENT
The Board is responsible for the system of internal control and for reviewing its effectiveness. The Group maintains a system of internal control consistent 
with a Group at its stage of development and as it grows, the Board intends to continue to enhance its processes to identify risks facing the business and 
implement procedures to eliminate, mitigate and monitor those risks.
The Group does not currently have an internal audit function due to the small size of the administrative function and the high level of director review and 
authorisation of transactions.
A comprehensive budgeting process is completed once a year and is reviewed and approved by the Board. The Group’s results, as compared against 
budget, are reported to the Board on a monthly basis and discussed in detail at each meeting of the Board.
The Group maintains appropriate insurance cover in respect of legal actions against the directors as well as against material loss or claims against the Group 
and reviews the adequacy of the cover regularly.
ROTATION OF DIRECTORS
At the Annual General Meeting, two directors, one executive and one non-executive, will retire and will then be eligible to stand for re-election. In subsequent 
years, one third of the directors who are subject to retirement by rotation shall retire from ofﬁce, and will be then similarly eligible to stand for re-election. 
Each director is thereby subject to stand for re-election at least once every three years.
A statement of the directors’ responsibilities in respect of the ﬁnancial statements is set out on page 16.
RESEARCH AND DEVELOPMENT (R&D)
During the year the Group spent £2.4 million (2005: £3.0 million) on research and development, representing 34% of turnover (2005: 85%). In addition, 
and charged against cost of sales, the Group spent £2.1 million on customer funded R&D (2005: £1.0 million). The total incurred investment in R&D was 
therefore £4.5 million, an increase of 12% over the £4.0 million equivalent spend in 2005. It is anticipated that the Group will continue to increase total 
research and development expenditure in order to accelerate the development of the product portfolio.
OVERSEAS PRESENCE
The Group has ofﬁces in the US and China for sales representation and product application activities.
DIRECTORS’ REPORT
13
SPI Lasers plc 
Annual Report and Accounts 2006  14
SPI Lasers plc 
Annual Report and Accounts 2006 
KEY PERFORMANCE INDICATORS (KPIS)
Financial KPIs are addressed in the Financial review and include: sales growth, sales by region, sales by product and contract development, R&D spend, 
sales per head, gross proﬁt, selling costs, operating proﬁt and proﬁt after tax.
The Group uses a number of non-ﬁnancial KPIs to monitor its performance in a number of areas on a regular basis. These areas include: order success, 
order acknowledgement, on time delivery, ﬁeld failures, warranty returns, milestones achievement on development programmes, days holding and age of 
inventory, debtor days, creditor days, health and safety related incidents and lost days, staff turnover, and a range of subsidiary KPIs. These KPIs are reviewed 
by management and the Board, as a minimum, on a monthly basis.
RISKS
FINANCIAL RISK
The Group’s sales are predominantly US dollar (USD) denominated or, if in other currencies, are generally based upon the equivalent USD price. This 
leaves the Group exposed to adverse movements in the USD to GB Pound (GBP) exchange rate. However, the Group’s purchases of components and its US 
operational costs are similarly USD-based and so there is a degree of internal hedging of the exchange rate exposure. It is for this reason that the Group 
does not enter into currency hedging contracts. This policy will be under regular review as the Group’s sales and geographic presence expand in the coming 
years. There is also a funding risk if trading does not achieve the expected levels of performance. However management would be able to mitigate this risk 
by reducing the level of investment in additional resources.
DEVELOPMENT RISK
Group sales are reliant upon the success of new or recently introduced products. Consequently, there is a risk of application or ﬁeld related problems that 
could inhibit sales growth. In addition, a key focus for the Group in 2007 will be on the product cost reduction programmes. There is a risk of not achieving 
expected gross proﬁt levels, if such programmes were to fall behind schedule.
COMPETITIVE RISK
In 2006, there were only two industrial scale ﬁbre laser manufactures; ourselves and IPG Photonics. There are signiﬁcant barriers to entry into the ﬁbre laser 
market, including: intellectual property rights; manufacturing know how; and investment in physical infrastructure. However, 2007 may see new entrants into 
the market, attracted by the growth opportunities therein. Such a widening of the competitive landscape could threaten the growth ambitions of the Group.
COMMERCIAL RISK
As the Group enters new market sectors or new market verticals, the customer buying cycle may adversely differ from that experienced to date. This could 
lead to a lower than expected rate of growth.
DIRECTORS AND THEIR INTERESTS
The directors in ofﬁce during the year, their interests in shares in the Group and their emoluments were as follows:
 Ordinary shares
     Total Total 
   31 December 31 December emoluments  emoluments  
   2006 2005 2006 2005 
   Number Number £000 £000
G Meek   34,722 34,722 35 6
D Parker   325,312 322,682 231 288
S Berg   3,472 3,472 162 187
D Payne   169,844 169,844 33 33
P Schultz   9,792 9,792 25 15
D Cheesman   — — — —
D Shrigley   — — 19 —
There have been no changes to directors’ shareholdings between the end of the ﬁnancial year and the date of this report.
* D Shrigley resigned as a director on 1 November 2006.
At the year end and the date of this report, the directors had the following share options:
 At    At 
 31 December     31 December  Date from   
 2005 Granted Exercised  2006 Exercise price which exercisable Expiry date
D Parker* 675 — — 675 £122.37 April 2003 September 2012
D Parker** 299 — — 299 £122.37 April 2003 September 2012
D Parker** 148,599 — — 148,599 £0.07 September 2005 September 2012
D Parker*** — 67,600 — 67,600 £0.025 January 2008 September 2018
D Parker**** — 2,867 — 2,867 £1.20 January 2009 January 2009
S Berg* 180 — — 180 £181.28 February 2004 March 2013
S Berg* 54,700 — — 54,700 £0.03 February 2004 October 2013
S Berg* 26,229 — — 26,229 £0.05 February 2004 August 2014
S Berg* 67,563 — — 67,563 £0.07 September 2005 September 2015
S Berg*** — 13,866 — 13,866 £0.025 January 2008 September 2018
S Berg**** — 2,867 — 2,867 £1.20 January 2009 January 2009
D Payne*** — 25,884 — 25,884 £0.025 January 2008 September 2018
* Award granted under EMI scheme
** Award granted under Unapproved scheme
*** Award granted under Salary & beneﬁts sacriﬁce scheme
**** Award granted under Sharesave scheme
DIRECTORS’ REPORT 15
SPI Lasers plc 
Annual Report and Accounts 2006 
DIRECTORS’ INDEMNITY
The Group has indemniﬁed the directors of the Company against liability in respect of proceedings brought by third parties subject to the conditions set out 
in the Companies Act 1985. Such qualifying third party indemnity provision was in force during the year and continues to be in force as at the date of this 
report. The Group has purchased directors and ofﬁcers’ liability insurance with an indemnity limit of £2.0 million in order to minimise the potential impact 
of such proceedings.
PRINCIPAL SHAREHOLDERS
The Company is aware of the following shareholders holding interests of 3% or more of the Company’s issued ordinary share capital as at 7 March 2007.
     Ordinary  % of issued 
     2.5p shares share capital
AXA Framlington     3,452,780 13.21
Advent Venture Partners     2,884,292 11.04
Artemis Fund Managers     2,479,341 9.49
Interwest Partners     2,244,749 8.59
Sevin Rosen     2,244,749 8.59
Amadeus Capital Partners     1,726,729 6.61
Gartmore Investment Management     1,622,942 6.21
Majedie Asset Management     1,563,900 5.98
Morley Fund Management     1,017,800 3.89
Herald Investment Management     959,400 3.67
Fidelity     859,900 3.29
CHARITABLE CONTRIBUTIONS
During the year, the Group made charitable contributions totalling £400 (2005: £300). There were no political donations.
EMPLOYEE INVOLVEMENT
Details of the number of employees and related costs can be found in note 5 to the ﬁnancial statements on page 24.
The Group is proactive in providing employees with information about the Group.
It operates equal opportunities in recruitment, training and promotion regardless of gender, ethnic origin, nationality, disability or sexual orientation.
ENVIRONMENT
The Group recognises the importance of its environmental responsibilities, monitors its impact on the environment, and designs and implements policies to 
reduce any damage that might be caused by the Group’s activities. 
CREDITOR PAYMENT POLICY AND PRACTICE
It is the Group’s policy to abide by the payment terms agreed between the Group and its suppliers whenever it is satisﬁed that the supplier has provided 
goods and services in accordance with agreed terms and conditions. At 31 December 2006, the Group had 52 days purchases outstanding in trade creditors 
(2005: 35 days).
SUBSEQUENT EVENTS
On 27 February 2007, 5,250,000 ordinary shares of £0.025 each with an aggregate nominal value of £131,250 were issued at 200p per share with total 
gross consideration amounting to £10,500,000 (£10,000,000 net of costs).
PROVISION OF INFORMATION TO AUDITORS
Each of the persons who is a director at the date of approval of this report conﬁrms that:
(1) so far as the director is aware, there is no relevant audit information of which the Group’s auditors are unaware; and
(2)  the director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to 
establish that the Group’s auditors are aware of that information. 
This conﬁrmation is given and should be interpreted in accordance with the provisions of s234ZA of the Companies Act 1985.
AUDITORS 
Deloitte & Touche LLP have indicated that they are willing to continue in ofﬁce and a resolution proposing their reappointment will be put to the shareholders 
at the Annual General Meeting.
STEVE BERG
COMPANY SECRETARY 
8 MARCH 2007  16
SPI Lasers plc 
Annual Report and Accounts 2006 
The directors are responsible for preparing the Annual Report and ﬁnancial statements. The directors have chosen to prepare the accounts for the Company 
and the Group in accordance with United Kingdom Generally Accepted Accounting Practice. Company law requires the directors to prepare ﬁnancial 
statements for each ﬁnancial year which give a true and fair view of the state of affairs of the Company and of the Group and of the proﬁt or loss of the 
Group for that period and comply with UK GAAP and the Companies Act 1985. In preparing those ﬁnancial statements, the directors are required to:
 select suitable accounting policies and then apply them consistently;
 make judgements and estimates that are reasonable and prudent; 
  state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the ﬁnancial 
statements; and
 prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the ﬁnancial position of the Group 
and to enable them to ensure that the ﬁnancial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the 
Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. 
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE FINANCIAL STATEMENTS 17
SPI Lasers plc 
Annual Report and Accounts 2006 
We have audited the Group and parent Company ﬁnancial statements (the “ﬁnancial statements”) of SPI Lasers plc for the year ended 31 December 2006 
which comprise the Group proﬁt and loss account, the Group statement of total recognised gains and losses, the Group and Company balance sheets, the 
Group cash ﬂow statement and the related notes 1 to 28. These ﬁnancial statements have been prepared under the accounting policies set out therein.
This report is made solely to the Company’s members, as a body, in accordance with section 235 of the Companies Act 1985. Our audit work has been 
undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. 
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, 
for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The directors’ responsibilities for preparing the Annual Report and the ﬁnancial statements in accordance with applicable law and United Kingdom 
Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the statement of directors’ responsibilities.
Our responsibility is to audit the ﬁnancial statements in accordance with relevant United Kingdom legal and regulatory requirements and International 
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the ﬁnancial statements give a true and fair view and are properly prepared in accordance with the Companies 
Act 1985. We also report to you on the consistency of the directors’ report with the ﬁnancial statements. In addition we report to you if the Group has not 
kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information speciﬁed by law 
regarding directors’ remuneration and other transactions is not disclosed.
We read the other information contained in the Annual Report for the above year as described in the contents section and consider whether it is consistent 
with the audited ﬁnancial statements. We consider the implications for our report if we become aware of any apparent misstatements or material 
inconsistencies with the ﬁnancial statements. Our responsibilities do not extent to any further information outside the Annual Report.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes 
examination, on a test basis, of evidence relevant to the amounts and disclosures in the ﬁnancial statements. It also includes an assessment of the signiﬁcant 
estimates and judgments made by the directors in the preparation of the ﬁnancial statements, and of whether the accounting policies are appropriate to the 
circumstances of the Company and the Group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufﬁcient 
evidence to give reasonable assurance that the ﬁnancial statements are free from material misstatement, whether caused by fraud or other irregularity or 
error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the ﬁnancial statements.
OPINION
In our opinion:
  the ﬁnancial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Group’s 
and the individual Company’s affairs as at 31 December 2006 and of the Group’s loss for the year then ended; 
 the ﬁnancial statements have been properly prepared in accordance with the Companies Act 1985; and 
 the directors’ report is consistent with the ﬁnancial statements.
DELOITTE & TOUCHE LLP
CHARTERED ACCOUNTANTS AND REGISTERED AUDITORS
SOUTHAMPTON, UNITED KINGDOM
8 MARCH 2007 
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF SPI LASERS PLC 18
SPI Lasers plc 
Annual Report and Accounts 2006 
      Restated
1
 
     2006 2005 
    Notes £000 £000
Turnover    2 7,065 3,468
Cost of sales      (10,115) (4,872)
Gross loss     (3,050) (1,404)
Administrative expenses     (8,394) (7,394)
Exceptional items    4 — (315)
Total administrative expenses     (8,394) (7,709)
Other net operating income     147 131
     (8,247) (7,578)
Operating loss    3 (11,297) (8,982)
Interest receivable and similar income    6 140 161
Interest payable and similar charges    6 (183) (190)
Loss on ordinary activities before taxation     (11,340) (9,011)
Tax credit on loss on ordinary activities    7 355 535
Loss on ordinary activities after taxation     (10,985) (8,476)
Retained loss for the ﬁnancial year    22 (10,985) (8,476)
Loss per ordinary share      
Basic    9 (58.1p) (47.9p)
All amounts are derived from continuing activities.
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
FOR THE YEAR ENDED 31 DECEMBER 2006 
      Restated
1
 
     2006 2005 
    Notes £000 £000
Loss for the ﬁnancial year     (10,985) (8,476)
Foreign exchange differences on retranslation of net assets of subsidiary undertakings     (126) 25
Total recognised gains and losses relating to the year     (11,111) (8,451)
Prior year adjustment for FRS20    10 (52)
Total gains and losses recognised since the last Annual Report and ﬁnancial statements    (11,163)
1
Details of the restatement are given in note 10. 
GROUP PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 DECEMBER 2006 19
SPI Lasers plc 
Annual Report and Accounts 2006 
      Restated
1
 
     2006 2005 
    Notes £000 £000
Fixed assets   
Tangible assets    11 2,596 2,424
Current assets   
Stocks    13 1,991 2,084
Debtors    14 4,371 2,686
Cash at bank and in hand     2,113 8,126
     8,475 12,896
Creditors: amounts falling due within one year    15 (4,171) (3,074)
Net current assets     4,304 9,822
Total assets less current liabilities     6,900 12,246
Creditors: amounts falling due after more than one year    16 (1,950) (1,039)
Provisions for liabilities and charges    19 (104) (165)
Net assets     4,846 11,042
Capital and reserves   
Called up share capital    21 522 442
Share premium account    22 15,330 10,605
Merger reserve    22 50,389 50,389
Equity reserve    22 162 52
Proﬁt and loss account deﬁcit    22 (61,557) (50,446)
Total equity shareholders’ funds     4,846 11,042
1
Details of the restatement are given in note 10.
GRAHAM MEEK
CHAIRMAN
8 MARCH 2007
GROUP BALANCE SHEET
AT 31 DECEMBER 2006 20
SPI Lasers plc 
Annual Report and Accounts 2006 
      Restated
1
 
     2006 2005 
    Notes £000 £000
Fixed assets      
Investments    12 13,076 13,007
Current assets      
Debtors    14 13,465 2,894
Cash at bank and in hand     1,230  7,221
     14,695 10,115
Creditors: amounts falling due within one year    15 (147) (249)
Net current assets     14,548 9,866
Total assets less current liabilities     27,624 22,873
Creditors: amounts falling due after more than one year    16 (12,994) (12,192)
Net assets     14,630 10,681
Capital and reserves      
Called up share capital     21 522 442
Share premium account    22 15,330 10,605
Equity reserve    22 162 52
Proﬁt and loss account deﬁcit    22 (1,384) (418)
Total equity shareholders’ funds      14,630 10,681
1
Details of the restatement are given in note 10.
GRAHAM MEEK
CHAIRMAN
8 MARCH 2007 
COMPANY BALANCE SHEET
AT 31 DECEMBER 2006 21
SPI Lasers plc 
Annual Report and Accounts 2006 
     2006 2005 
    Notes £000 £000
Net cash outﬂow from operating activities    24 (11,176) (9,997)
Returns on investments and servicing of ﬁnance   
Interest received     140 161
Interest paid     (183) (190)
Net cash outﬂow from returns on investments and servicing of ﬁnance     (43) (29)
Taxation    
UK tax credit received     — 451
Net cash inﬂow from taxation     — 451
Capital expenditure and ﬁnancial investment   
Payments to acquire tangible ﬁxed assets     (747) (453)
Net cash outﬂow from capital expenditure and ﬁnancial investment     (747) (453)
Management of liquid resources   
Decrease in current asset investments     — 256
Net cash inﬂow from management of liquid resources      — 256
Net cash outﬂow before ﬁnancing     (11,966) (9,772)
Financing   
Issue of share capital     5,014 12,003
Issue of share capital prior to Group reconstruction     — 3,841
Payments of expenses on issue of equity shares     (209) (1,190)
New borrowings     1,750 2,565
Repayment of borrowings     (573) (898)
Net cash inﬂow from ﬁnancing     5,982 16,321
(Decrease)/increase in cash in the year     (5,984) 6,549 
GROUP CASH FLOW STATEMENT 
FOR THE YEAR ENDED 31 DECEMBER 2006 22
SPI Lasers plc 
Annual Report and Accounts 2006 
1. ACCOUNTING POLICIES 
BASIS OF PREPARATION 
The ﬁnancial statements are prepared under the historical cost convention and in accordance with applicable United Kingdom Generally Accepted 
Accounting Practice. The particular accounting policies adopted are described below. They have all been applied consistently throughout the year and 
preceding year except as noted.
The Group will adopt IFRS accounting and reporting requirements during 2007.
BASIS OF CONSOLIDATION
The Group ﬁnancial statements consolidate the ﬁnancial statements of SPI Lasers plc and all its subsidiary undertakings drawn up to 31 December each year. 
COMPANY
No proﬁt and loss account is presented for SPI Lasers plc as permitted by section 230 of the Companies Act 1985.
TURNOVER
Turnover represents amounts receivable for goods and services provided in the normal course of business, net of trade discounts, VAT and other sales 
related taxes. Turnover is recognised when title passes, or the right to consideration in exchange for performance, has been completed.
Proﬁt is recognised on long term contracts, if the ﬁnal outcome can be assessed with reasonable certainty, by including in the proﬁt and loss account both 
turnover and related costs as contract activity progresses. Turnover is calculated by reference to the value of work performed to date as a proportion of the 
total contract value.
FIXED ASSETS
Tangible ﬁxed assets are included at their original historic cost.
Depreciation of tangible ﬁxed assets is calculated on a straight line basis at rates estimated to write down the cost of each asset to its estimated residual value 
over its useful life.
Expected useful lives are as follows:
Leasehold improvements – ten years from commencement of lease
Plant and machinery  – ﬁve years
Computer equipment  – three years
The carrying values of tangible ﬁxed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be 
recoverable. Any impairment in the value is charged to the proﬁt and loss account. Proﬁts or losses on disposal of ﬁxed assets reﬂect the difference between 
net selling price and net book value at the date of disposal. 
INVESTMENTS
Investments in subsidiary undertakings are stated in the parent Company’s accounts at cost, less provisions for any impairment.
STOCKS
Stocks are stated at the lower of cost and net realisable value with due allowance for any obsolete or slow moving items. Cost includes materials and an 
attributable proportion of manufacturing overheads.
Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.
Stocks held for demonstration purposes are held at original cost and amortised over a period of no more than twelve months.
PROVISIONS FOR LIABILITIES AND CHARGES
A provision is recognised when the Group has a legal or constructive obligation as a result of a past event and it is probable that an outﬂow of economic 
beneﬁts will be required to settle the obligation. 
PROVISION FOR PRODUCT WARRANTY
This relates to estimated warranty costs which are expected to be incurred under the Group’s terms and conditions of sale. 
The costs are expected to arise between one and two years of the balance sheet date.
TAXATION
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have 
been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events 
that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences 
are differences between the Group’s taxable proﬁts and its results as stated in the ﬁnancial statements that arise from the inclusion of gains and losses in tax 
assessments in periods different from those in which they are recognised in the ﬁnancial statements.
A net deferred tax asset is regarded as recoverable and therefore recognised only to the extent that, on the basis of all available evidence, it can be regarded 
as more likely than not that there will be suitable taxable proﬁts from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse, based on 
tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis. 
NOTES TO THE FINANCIAL STATEMENTS
AT 31 DECEMBER 2006 23
SPI Lasers plc 
Annual Report and Accounts 2006 
1. ACCOUNTING POLICIES (CONTINUED)
FINANCIAL LIABILITIES AND EQUITY
Financial liabilities and equity instruments are classiﬁed according to the substance of the contractual arrangements entered into. An equity instrument is any 
contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
CONVERTIBLE DEBT
Convertible debt is regarded as a compound instrument, consisting of a liability component and an equity component. At the date of issue the fair value 
of the liability component is estimated using the prevailing market interest rate for non-convertible debt. The difference between the proceeds of issue of 
the convertible loan and the fair value assigned to the liability element, representing the embedded option to convert the liability into equity of the Group, 
is included in equity.
EQUITY INSTRUMENTS
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
SHARE-BASED PAYMENT
The Group has applied the requirements of FRS20 Share-based Payments. In accordance with the transitional provisions, FRS20 has been applied to all 
grants of equity instruments after 7 November 2002 that had not vested as of 1 January 2006.
The Group issues equity-settled share-based payments to employees. Equity-settled share-based payments are measured at fair value at the date of grant. 
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on 
the Group’s estimate of shares that will eventually vest. Fair value is measured by use of a stochastic model.
The expected life used in the model has been adjusted based on management’s best estimate, for the effects of non-transferability, exercise restrictions 
and behavioural considerations. Further information is given in note 10.
FOREIGN CURRENCIES
COMPANY
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign 
currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the proﬁt and loss account.
GROUP
The ﬁnancial statements of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. The exchange difference 
arising on the translation of the opening net assets is taken directly to reserves. All other translation differences are taken to the proﬁt and loss account.
RESEARCH AND DEVELOPMENT
Research and development expenditure is charged to the proﬁt and loss account as incurred. 
LEASING COMMITMENTS
Rentals payable under operating leases are charged in the proﬁt and loss account on a straight line basis over the lease term.
PENSIONS AND OTHER POST-RETIREMENT BENEFITS
The Group makes deﬁned contributions to employee personal pension plans. The pension cost charged to the proﬁt and loss account represents the 
contributions payable to the pension plans in respect of the accounting year.
LONG TERM CONTRACTS
Amounts recoverable on long term contracts, which are included in debtors, are stated at the net sales value of the work done less amounts received as 
progress payments on account. Excess progress payments are included in creditors as payments on account. 
2. TURNOVER AND SEGMENTAL ANALYSIS
In the opinion of the directors, the Group has only one class of business and turnover and losses were generated predominantly in the United Kingdom. 
     2006 2005 
Geographical analysis of turnover by destination:      £000 £000
North America     2,574 2,077
United Kingdom     1,613 452
Rest of Europe     1,275 589
Asia     1,603 350
     7,065 3,468
     2006 2005 
Geographical analysis of net assets by location:      £000 £000
North America     608 775
United Kingdom     4,238 10,267
     4,846 11,042 24
SPI Lasers plc 
Annual Report and Accounts 2006 
3. OPERATING LOSS
This is stated after charging/(crediting):
     2006 2005 
      £000 £000
Auditors’ remuneration – audit services     65 59
 – non-audit services       32 161
Depreciation and impairment of ﬁxed assets     575 534
Rentals received under operating leases     (199) (131)
Operating lease rentals – land and buildings     304 357
Foreign exchange charge     57 86
Research and development     2,404 2,962
     2006 2005 
      £000 £000
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts     12 12
The audit of the Company’s subsidiaries pursuant to legislation     38 47
Other audit service fees     15 —
Total audit fees     65 59
Other services pursuant to legislation      
Tax services     30 161
Other accounting advice     2 —
Total non-audit fees     32 161
In addition to the above amounts, the auditors received £207,000 in the prior year relating to the listing. These costs were booked to the share premium 
account in line with FRS 4.
4. EXCEPTIONAL ITEMS
     2006 2005 
      £000 £000
Recognised in arriving at operating loss:  
Transaction costs     — 315
     — 315
In 2005 there was an exceptional item of £315,000 that related to costs associated with the ﬂotation of the Company but which was not considered to be 
direct costs of the share issue.
5. STAFF COSTS
(A) STAFF COSTS
Group
     2006 2005 
      £000 £000
Wages and salaries     5,125 3,989
Social security costs     563 450
Other pension costs      463 364
     6,151 4,803
The average monthly number of employees during the year was made up as follows:
     2006 2005 
     Number Number
Production and production support     67 40
Research and development     31 26
Sales and marketing     16 12
Administration     12 10
     126 88
NOTES TO THE FINANCIAL STATEMENTS
AT 31 DECEMBER 2006 25
SPI Lasers plc 
Annual Report and Accounts 2006 
5. STAFF COSTS (CONTINUED)
(A) STAFF COSTS (CONTINUED)
Company
     2006 2005 
      £000 £000
Wages and salaries     516 471
Social security costs     56 58
Other pension costs      78 73
     650 602
The average monthly number of employees during the year was made up as follows:
     2006 2005 
     Number Number
Administration     2 2
In addition, the Company employed three non-executive directors and one part time director.
(B) DIRECTORS’ EMOLUMENTS
     2006 2005 
      £000 £000
Directors’ emoluments     505 529
Company contributions paid to money purchase schemes     77 37
Number of directors who exercised options over shares in the Company     — —
Number of directors accruing beneﬁts under deﬁned contribution schemes     3 3
The amounts in respect of the highest paid director are as follows:
     2006 2005 
      £000 £000
Emoluments     231 288
Company contributions paid to money purchase schemes     62 21
6. FINANCE COSTS (NET)
(A) INTEREST RECEIVABLE AND SIMILAR INCOME
     2006 2005 
      £000 £000
Interest on cash deposits     140 161
(B) INTEREST PAYABLE AND SIMILAR CHARGES
     2006 2005 
      £000 £000
Other loans     183 190
7. TAX 
(A) TAX CREDIT ON ORDINARY ACTIVITIES
The tax credit is made up as follows:
      Restated
1
     2006 2005 
      £000 £000
Current tax:  
UK corporation tax credit     — —
R&D tax credits for the year     352 484
Adjustment in respect of prior years     3 51
Total current tax credit     355 535 26
SPI Lasers plc 
Annual Report and Accounts 2006 
7. TAX (CONTINUED)
(B) FACTORS AFFECTING CURRENT TAX CREDIT
The tax credit on the loss of ordinary activities for the year is lower (2005: lower) than the standard rate of corporation tax in the UK of 30% (2005: 30%). 
The differences are reconciled below:
      Restated
1
     2006 2005 
      £000 £000
Loss on ordinary activities before tax     (11,340) (9,011)
Loss on ordinary activities multiplied by standard rate of corporation tax in the UK of 30% (2005: 30%)    (3,402) (2,703)
Expenses not deductible for tax purposes     273 114
Depreciation in excess of capital allowances     104 155
Losses arising in the year not utilised     2,786 2,819
Movement in short term timing differences     83 47
Unrealised exchange movement     — (1,037)
50% uplift for R&D tax credit     (220) (302)
Losses surrendered for R&D tax credit     661 907
Adjustments in respect of previous years     (3) (51)
R&D tax credit receivable     (352) (484)
Tax relief on exercise of share options     (285) —
Total current tax (note 7(A))     (355) (535)
1
 Details of the restatement are given in note 10.
(C) FACTORS THAT MAY AFFECT FUTURE TAX CHARGES
A deferred tax asset has not been recognised in respect of differences relating primarily to tax losses as there is insufﬁcient evidence that the asset will be 
recovered, due to the uncertainty regarding the timing of relief and in the US, the quantum of losses that will be available to set against proﬁts arising in the 
future. The amount of the asset not recognised is £12.8 million (2005: £10.0 million). 
The unrecognised deferred tax asset is comprised of the following elements.
     2006 2005 
      £000 £000
Tax losses     11,706 9,077
Depreciation in excess of capital allowances     954 908
Other timing differences     158 68
     12,818 10,053
8. LOSS ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY 
The loss on ordinary activities after taxation includes a loss of £966,000 (2005: £384,000) attributable to the parent Company. As permitted by section 230 
of the Companies Act 1985, no separate proﬁt and loss account is prepared in respect of the parent Company.
9. LOSS PER ORDINARY SHARE
Basic loss per share for the year ended 31 December 2006 of 58.1p per ordinary share is calculated using 18,921,668 shares, being the weighted average 
number of shares for 2006.
For the year ended 31 December 2006, the loss attributable to ordinary shareholders and weighted average number of shares for the purpose of calculating the 
diluted loss per share are identical to those used for the basic loss per ordinary share. This is because the potential diluting effect of reducing the loss per ordinary 
share is not dilutive under the terms of FRS 22.
NOTES TO THE FINANCIAL STATEMENTS
AT 31 DECEMBER 2006 27
SPI Lasers plc 
Annual Report and Accounts 2006 
10. EQUITY-SETTLED SHARE OPTION SCHEMES
The Group has six share option schemes for all employees of the Group. The vesting period ranges from one to four years. Options are forfeited if the 
employee leaves the Group before the options vest.
SHARE OPTIONS
The number of options outstanding to directors under the Group’s share option schemes is disclosed in the directors’ report. The total number of shares 
under option is as follows: 
     2006 2005
Number of options outstanding at 1 January      1,073,079 709,991
Options granted during the year     518,103 383,842
Options forfeited during the year     (115,319) (11,018)
Options exercised during the year     (483,456) (9,736)
Number of options outstanding at 31 December     992,407 1,073,079
The analysis by scheme is as follows:
UK EMI SCHEME
 2006  2005
     Weighted   Weighted  
   Number of average Number of  average  
   share options  exercise price share options exercise price
Outstanding at beginning of period   779,725 £0.273 591,557 £0.344
Granted during the period   26,668 £1.875 208,915 £0.067
Forfeited during the period   (14,331) £0.820 (11,011) £0.374
Exercised during the period   (426,071) £0.032 (9,736) £0.020
Outstanding at the end of the period   365,991 £0.649 779,725 £0.273
Exercisable at the end of the period   262,513 £0.717 492,075 £0.353
The total vesting period is four years, with 25% of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the 
employee leaves the Group before the options vest.
UK APPROVED SCHEME
 2006  2005
     Weighted   Weighted  
   Number of average Number of  average  
   share options  exercise price share options exercise price
Outstanding at beginning of period   40,449 £1.497 39,988 £1.599
Granted during the period   — — 468 £0.040
Forfeited during the period   (15) £484.820 (7) £484.820
Exercised during the period   — — — —
Outstanding at the end of the period   40,434 £1.318 40,449 £1.497
Exercisable at the end of the period   40,228 £1.324 31,683 £1.886
The total vesting period is four years, with 25% of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the 
employee leaves the Group before the options vest.
UK UNAPPROVED SCHEME
 2006  2005
     Weighted   Weighted  
   Number of average Number of  average  
   share options  exercise price share options exercise price
Outstanding at beginning of period   148,898 £0.333 299 £130.900
Granted during the period   — — 148,599 £0.070
Forfeited during the period   — — — —
Exercised during the period   — — — —
Outstanding at the end of the period   148,898 £0.333 148,898 £0.333
Exercisable at the end of the period   86,904 £0.520 49,737 £0.799
The total vesting period is four years, with 25% of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the 
employee leaves the Group before the options vest. 28
SPI Lasers plc 
Annual Report and Accounts 2006 
10. EQUITY-SETTLED SHARE OPTION SCHEMES (CONTINUED)
SHARE BONUS PLAN
 2006  2005
     Weighted   Weighted  
   Number of average Number of  average  
   share options  exercise price share options exercise price
Outstanding at beginning of period   — — — —
Granted during the period   396,483 £0.025 — —
Forfeited during the period   (98,387) £0.025 — —
Exercised during the period   — — — —
Outstanding at the end of the period   298,096 £0.025 — —
Exercisable at the end of the period   22,554 £0.025 — —
The vesting period is 13 months. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited 
if the employee leaves the Group before the options vest.
US STOCK PLAN
 2006  2005
     Weighted   Weighted  
   Number of average Number of  average  
   share options  exercise price share options exercise price
Outstanding at beginning of period   104,007 £0.176 78,147 £0.066
Granted during the period   — — 25,860 £0.510
Forfeited during the period   — — — —
Exercised during the period   (57,385) £0.025 — —
Outstanding at the end of the period   46,622 £0.362 104,007 £0.176
Exercisable at the end of the period   24,533 £0.364 56,769 £0.115
The total vesting period is four years, with 25% of the options vesting after twelve months and the remainder vesting equally on a monthly basis over the 
following 36 months. If the options remain unexercised after a period of ten years from the date of grant the options expire. Options are forfeited if the 
employee leaves the Group before the options vest.
SHARESAVE SCHEME
 2006  2005
     Weighted   Weighted  
   Number of average Number of  average  
   share options  exercise price share options exercise price
Outstanding at beginning of period   — — — —
Granted during the period   94,952 £1.200 — —
Forfeited during the period   (2,586) £1.200 — —
Exercised during the period   — — — —
Outstanding at the end of the period   92,366 £1.200 — —
Exercisable at the end of the period   30,701 £1.200 — —
The vesting period is three years. If the options remain unexercised after a period of three years from the date of grant the options expire. Options are 
forfeited if the employee leaves the Group before the options vest.
The weighted average share price at the date of exercise for share options exercised during the period was 199.5p. The options outstanding at 31 December 2006 
had a weighted average exercise price of £0.479 and a weighted average remaining contractual life of 1.2 years. In 2006, options were granted in January, 
May, November and December. The aggregate of the estimated fair values of the options granted in those periods is £1.0 million. In 2005, options were 
granted in May and September. The aggregate of the estimated fair values of the options granted in those periods is £0.3 million.
NOTES TO THE FINANCIAL STATEMENTS
AT 31 DECEMBER 2006 29
SPI Lasers plc 
Annual Report and Accounts 2006 
10. EQUITY-SETTLED SHARE OPTION SCHEMES (CONTINUED)
The inputs into the Black-Scholes option pricing model are as follows:
      2006
Weighted average share price      £1.079
Weighted average exercise price      £0.258
Expected volatility      50%
Weighted average expected life      3.8 years
Risk-free rate      4.25%
Expected dividends      0%
Expected volatility was estimated at 50% in the absence of meaningful historical data for volatility of the Group’s share price since ﬂotation in October 2005. 
The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and 
behavioural considerations.
No comparison for inputs into the model for 2005 is shown as 2006 is the ﬁrst year such a calculation has been made.
The Group recognised total expenses of £110,000 and £40,000 related to equity-settled share-based payment transactions in 2006 and 2005 respectively.
PRIOR YEAR ADJUSTMENT
As described above, during the period the Group has adopted FRS20 Share-based Payments in respect of accounting for employee share option schemes. 
The comparative ﬁgures in the primary statements and notes have been restated to reﬂect the new policy.
The effects of the change in policy are summarised below:
      2005 
       £000
Proﬁt and loss account      
Administrative expenses      (40)
Decrease in proﬁt for the ﬁnancial year      (40)
Balance sheet      
Equity reserve      52
Proﬁt and loss deﬁcit      (52)
Increase/(decrease) in net assets      —
11. TANGIBLE FIXED ASSETS
GROUP
   Leasehold Plant and   
   improvements machinery Computers Total 
   £000 £000 £000 £000
Cost    
At 1 January 2006    3,094 8,270 1,193 12,557
Additions   404 254 89 747
At 31 December 2006   3,498 8,524 1,282 13,304
Depreciation    
At 1 January 2006   1,570 7,408 1,155 10,133
Charge for the year   230 286 59 575
At 31 December 2006    1,800 7,694 1,214 10,708
Net book value at 31 December 2006   1,698 830 68 2,596
Net book value at 31 December 2005   1,524 862 38 2,424
12. INVESTMENTS
COMPANY
      Restated
1
      £000
Shares in Group undertakings:      
At 1 January 2006      13,007
Additions      69
At 31 December 2006       13,076
1 
Details of the restatement are given in note 10.
The increase in investments represents the FRS20 share option charge relating to SPI Lasers UK Limited and SPI Lasers LLC.
Shares in Group undertakings represent the Company’s investment in the following entities:
  Proportion of voting  
Name of company Holding rights and shares held Country of incorporation Nature of business
SPI Lasers UK Limited Ordinary shares 100% England Optical ﬁbre-based lasers
SPI Lasers LLC Declared 100% interest 100% United States Optical ﬁbre-based lasers 30
SPI Lasers plc 
Annual Report and Accounts 2006 
13. STOCKS
GROUP
     2006 2005 
      £000 £000
Raw materials and component parts     982 789
Work in progress     543 508
Finished goods     466 787
     1,991 2,084
The difference between purchase price or production cost of stocks and their replacement cost is not material. 
14. DEBTORS
 Group  Company
   2006 2005 2006 2005 
   £000 £000 £000 £000
Trade debtors   2,796 1,280 — —
Amounts owed by Group undertakings   — — 13,441 2,883
Other debtors   245 532 20 3
Prepayments and accrued income   491 390 4 8
Corporation tax recoverable   839 484  — —
   4,371 2,686 13,465 2,894
All debtors are due within one year.
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
 Group  Company
   2006 2005 2006 2005 
   £000 £000 £000 £000
Loans (note 17)   894 628 — —
Payments received on account   36 95 — —
Trade creditors   2,149 997 13 10
Other creditors including taxation and social security   385 353 26 25
Accruals and deferred income   707 1,001 108 214
   4,171 3,074 147 249
16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
 Group  Company
   2006 2005 2006 2005 
   £000 £000 £000 £000
Loans (note 17)   1,950 1,039 — —
Amounts owed to Group undertakings   — — 12,994 12,192
   1,950 1,039 12,994 12,192
NOTES TO THE FINANCIAL STATEMENTS
AT 31 DECEMBER 2006 31
SPI Lasers plc 
Annual Report and Accounts 2006 
17. LOANS 
 Group  Company
   2006 2005 2006 2005 
   £000 £000 £000 £000
Amounts falling due: in one year or less or on demand   894 628 — —
In more than one year but not more than two years   1,077 714 — —
In more than two years but not more than ﬁve years   873 325 — —
   2,844 1,667 — —
Less: included in creditors: amounts falling due within one year   894 628 — —
   1,950 1,039 — —
Loans consist of two loans provided by ETV Capital SA (Luxembourg) (“ETV”).
LOAN 1.
The loan was provided in June 2005. The loan amount was £2,000,000, repayable by thirty six equal monthly instalments at an interest rate of 12.65%. 
It is secured on the ﬁxed assets of the Group. In December 2006 the loan was restructured to be interest only for the period December 2006 to May 2007 
inclusive and thereafter repayable in twelve equal monthly instalments. ETV was granted a warrant to purchase, at its discretion, 201,388 ordinary shares at the 
IPO price of 144p per share. The warrant is exercisable until June 2015. The warrant may be exchanged without the payment of any additional consideration 
for the Group’s shares based upon the value of the warrant and the shares at the time of the exchange.
LOAN 2.
This convertible loan was provided in December 2006. The loan amount was £1,750,000, on an interest only basis for the period December 2006 to 
June 2007 inclusive and thereafter repayable in thirty three equal monthly instalments at an interest rate of 13.2%. It is secured on all tangible and intangible 
assets of the Group.
ETV may convert part or the entire outstanding principal of the loan, at its discretion, at a price calculated by reference to the market price over the preceding 
two weeks prior to conversion, subject to a maximum price of 244.79p. There is also a minimum price, determined by a restriction on the post conversion 
shareholding of ETV not exceeding 5.0% of the issued shares of the Group. At 31 December 2006, the minimum price is calculated as 167.58p. The 
net proceeds from the issue of the convertible loan have been split between the liability element and an equity element, representing the fair value of the 
embedded option to convert the liability into equity. The value of this option has been determined to be £nil.
18. OBLIGATIONS UNDER LEASES 
Annual commitments under non-cancellable operating leases are as follows:
GROUP
     2006 2005 
Land and buildings      £000 £000
Operating leases which expire:      
In over ﬁve years     344 325
     344 325
19. PROVISIONS FOR LIABILITIES AND CHARGES 
GROUP
     Product  
    Dilapidations  warranty Total 
    £000 £000 £000
At 1 January 2006    77 88 165
Arising during the year    — 202 202
Amounts utilised during the year    (77) (186) (263)
At 31 December 2006    — 104 104
DILAPIDATIONS
Provision was made during 2005 for potential dilapidations to a building for which the lease had expired. The Group vacated the building in September 2005 
and the provision has been utilised during 2006.
PRODUCT WARRANTY
Provision is made for estimated warranty costs which are expected to be incurred under the Group’s terms and conditions of sale. These costs are expected 
to arise between one and two years of the balance sheet date.  32
SPI Lasers plc 
Annual Report and Accounts 2006 
NOTES TO THE FINANCIAL STATEMENTS
AT 31 DECEMBER 2006
20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
An explanation of the Group’s objectives, policies and strategies for the role of derivatives and other ﬁnancial instruments in creating and changing the risks 
of the Group in is activities is discussed in this note. The disclosures below exclude short term debtors and creditors. 
INTEREST RATE RISK PROFILE OF FINANCIAL LIABILITIES
The interest rate proﬁle of the ﬁnancial liabilities of the Group as at 31 December is as follows:
      Fixed rate 
      Financial 
     Total liabilities 
     £000 £000
2006  
Sterling– borrowings     2,844 2,844
2005  
Sterling – borrowings     1,667 1,667
      Weighted  
      average  
     Weighted period 
     average for which  
     interest rate rate is ﬁxed 
     % Years
2006  
Sterling– borrowings     12.68 2.5
2005  
Sterling – borrowings     12.65 2.4
INTEREST RATE RISK PROFILE OF FINANCIAL ASSETS
The interest rate proﬁle of the ﬁnancial assets of the Group as at 31 December is as follows:
      Financial 
      assets on 
    Fixed rate Floating rate which 
    ﬁnancial ﬁnancial no interest 
   Total assets assets is earned 
   £000 £000 £000 £000
2006    
Sterling   1,245 — 1,245 —
US dollar   868 — 868 —
Total   2,113 — 2,113 —
2005    
Sterling   7,887 — 7,887 —
US dollar   239 — 239 —
   8,126 — 8,126 —
Floating rate ﬁnancial assets comprise cash deposits on money market deposit at call. 
CURRENCY EXPOSURES
The Group does not hedge the currency exposures arising from its net investment overseas (in other words, its structural currency exposures). Gains and 
losses from these structural currency exposures are recognised in the statement of total recognised gains and losses.
The table below shows the Group’s currency exposures; in other words, those transactional exposures that give rise to the net currency gains and losses 
recognised in the proﬁt and loss account. Such exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated  
in the operating (or ‘functional’) currency of the operating unit involved. 33
SPI Lasers plc 
Annual Report and Accounts 2006 
20. DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS (CONTINUED)
NET FOREIGN CURRENCY MONETARY ASSETS/(LIABILITIES)
    Total Euros US dollar 
Functional currency of Group operations    £000 £000 £000
2006      
Sterling    1,123 195 928
2005      
Sterling    99 50 49
MATURITY OF FINANCIAL LIABILITIES
The maturity proﬁle of the Group’s ﬁnancial liabilities at 31 December is as follows:
     2006 2005 
      £000 £000
In one year or less, or on demand     894 628
In more than one year but not more than two     1,077 714
In more than two years, but not more than ﬁve     873 325
     2,844 1,667
BORROWING FACILITIES
The Group has no further borrowing facilities available to it, other than the loan with ETV Capital SA (Luxembourg). 
FAIR VALUES OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES
Set out below is a comparison by category of book values and fair values of the Group’s ﬁnancial assets and ﬁnancial liabilities as at 31 December:
   Book value Fair value Book value Fair value 
   2006 2006 2005 2005 
   £000 £000 £000 £000
Primary ﬁnancial instruments      
Short term borrowings and current portion of long term borrowings   894 894 628 628
Current asset investment   — — — —
Long term borrowings   1,950 1,950 1,039 1,039
Cash and short term deposits   2,113 2,113 8,126 8,126
MARKET PRICE RISK
The Group accepts a degree of interest rate risk and currency risk as long as the effects of various changes in rates remain within certain prescribed ranges. 
21. SHARE CAPITAL
The authorised and issued share capital of the Company as at 31 December 2006 is as follows:
     2006 2006 
Authorised     Number £000
Ordinary shares of £0.025 each     100,000,000 2,500
     2006 2006 
Allotted, called up and fully paid     Number £000
Ordinary shares of £0.025 each     20,885,275 522
On 4 August 2006, 2,702,784 ordinary shares of £0.025 each with an aggregate nominal value of £67,570 were issued at 185p per share with total gross 
consideration amounting to £5,000,150. Share issue costs netted against the share premium account total £208,641.
During the year, 483,456 ordinary shares of £0.025 each with an aggregate nominal value of £12,086 were issued upon the exercising of vested share 
options by employees.
SHARE OPTIONS
The number of options outstanding under the Group’s share option schemes is disclosed in note 10. 34
SPI Lasers plc 
Annual Report and Accounts 2006 
22. MOVEMENT IN SHAREHOLDERS’ FUNDS
GROUP
       
 Share Share Merger Equity Proﬁt  
 capital premium reserve reserve and loss Total 
 £000 £000 £000  £000 £000 £000
At 1 January 2006 as previously stated 442 10,605 50,389 — (50,394) 11,042
Prior year adjustment in respect of FRS20 — — — 52 (52) —
At 1 January 2006 as restated 442 10,605 50,389 52 (50,446) 11,042
Arising on share issues 80 4,934 — — — 5,014
Share issue costs — (209) — — — (209)
FRS20 charge — — — 110 — 110
Retained loss for the year — — — — (10,985) (10,985)
Exchange differences on retranslation of net assets of subsidiary undertakings — — — — (126) (126)
At 31 December 2006  522 15,330 50,389 162 (61,557) 4,846
COMPANY
       
  Share Share Equity Proﬁt  
  capital premium reserve and loss Total 
  £000 £000 £000 £000 £000
At 1 January 2006 as previously stated   442 10,605 — (384) 10,663
Prior year adjustment in respect of FRS20  — — 52 (34) 18
At 1 January 2006 as restated  442 10,605 52 (418) 10,681
Arising on share issues  80 4,934 — — 5,014
Share issue costs  — (209) — — (209)
FRS20 charge  — — 110 — 110
Retained loss for the year  — — — (966) (966)
At 31 December 2006  522 15,330 162 (1,384) 14,630
23. RELATED PARTY TRANSACTIONS
The University of Southampton is a related party under FRS 8 as David Payne, a director of SPI Lasers plc, is an employee of the University. Included within 
the proﬁt and loss account are costs of £285,000 (2005: £172,000) in respect of a series of technology development contracts with the University. Purchases 
of goods and services made from the University of Southampton amounted to £90,000 (2005: £66,000). Royalties of £5,000 (2005: £23,000) were 
due to the University under licence agreements. The year end balance with the University totalled £265,000 (2005: £83,000) and is included within trade 
creditors. All transactions were conducted on an arm’s length basis. The Group has an agreement with the University of Southampton whereby the University 
of Southampton has the use of certain facilities at the premises of the Group. The total amount charged in the year to the University of Southampton for these 
facilities was £135,000.
24. NOTES TO THE STATEMENT OF CASH FLOWS
(A) RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
      Restated 
1
 
     2006 2005 
      £000 £000
Operating loss     (11,297) (8,982)
Depreciation charges     575 534
Increase in debtors     (1,330) (1,303)
Decrease/(increase) in stocks     93 (1,508)
Increase in creditors     770 1,136
Exchange difference     (97)  86
FRS20 cost     110 40
Net cash outﬂow from operating activities     (11,176) (9,997)
1
 Details of the restatement are given in note 10.
(B) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
     2006 2005 
      £000 £000
(Decrease)/increase in cash in the year     (5,984) 6,549
Cash inﬂow from increase in debt ﬁnance     (1,750) (2,565)
Cash outﬂow from decrease in debt     573 898
Decrease in liquid resources     — (256)
Change in net debt resulting from cash ﬂows     (7,161) 4,626
Exchange differences     (29)  (61)
Movement in net debt in the year     (7,190) 4,565
Opening net funds     6,459 1,894
Closing net (deﬁcit)/funds     (731) 6,459
NOTES TO THE FINANCIAL STATEMENTS
AT 31 DECEMBER 2006 35
SPI Lasers plc 
Annual Report and Accounts 2006 
24. NOTES TO THE STATEMENT OF CASH FLOWS (CONTINUED)
(C) ANALYSIS OF NET DEBT
  At    At 
  1 January Cash Non cash Exchange 31 December 
  2006 ﬂow movement differences 2006 
  £000 £000 £000 £000 £000
Cash at bank and in hand  8,126 (5,984) — (29) 2,113
Loans – short term  (628) 300 (566) —  (894)
Loans – long term  (1,039) (1,477) 566 —  (1,950)
  6,459 (7,161) — (29)  (731)
(D) MAJOR NON-CASH TRANSACTIONS
There were no major non-cash transactions in the year.
(E) EXCEPTIONAL ITEMS
There were cash ﬂows of £nil relating to operating exceptional items in the year (2005: £315,000).
25. PENSION SCHEMES
The Group pays contributions to personal pension plans for directors and employees. These contributions are charged to the proﬁt and loss account 
as they arise. Contributions made during the year amounted to £455,000 (2005: £359,000). The Group pays contributions to a 401k pension plan for 
US employees. These contributions are charged to the proﬁt and loss account as they arise. Contributions made during the year amounted to £8,000 
(2005: £5,000). At the year end amounts outstanding were £80,000 (2005: £60,000) and these have been included within creditors.
26. CAPITAL COMMITMENTS
Amounts contracted for but not provided in the ﬁnancial statements amounted to £nil (2005: £nil) for the Group and £nil for the Company (2005: £nil).
27. CONTINGENT LIABILITIES
The directors are not aware of any contingent liabilities.
28. SUBSEQUENT EVENTS
On 27 February 2007, 5,250,000 ordinary shares of £0.025 each with an aggregate nominal value of £131,250 were issued at 200p per share with total 
gross proceeds amounting to £10,500,000 (£10,000,000 net of costs). 36
SPI Lasers plc 
Annual Report and Accounts 2006 
OFFICERS AND PROFESSIONAL ADVISORS
DIRECTORS
S Berg 
D Cheesman 
G Meek 
D Parker 
D Payne 
P Schultz
SECRETARY
S Berg
AUDITORS
Deloitte & Touche LLP 
Southampton, United Kingdom
BANKERS
HSBC BANK PLC
165 High Street 
Southampton SO14 2NZ
ANGLO IRISH BANK CORPORATION PLC
10 Old Jewry  
London EC2R 8DN
CALIFORNIA BANK & TRUST 
20,541 Stevens Creek Boulevard 
Cupertino CA 95014 
USA
MERRILL LYNCH
50 West San Fernando Street 
San Jose CA 95113 
USA
SOLICITORS
WILMER CUTLER PICKERING HALE & DORR LLP
Alder Castle 
10 Noble Street 
London EC2V 7QJ
HELLER EHRMAN LLP
30 St Mary Axe 
London EC3A 8BF
BLAKE LAPTHORN LINNELL
Kings Court 
21 Brunswick Place 
Southampton 
Hampshire SO15 2AQ
REGISTRARS
CAPITA REGISTRARS
Northern House 
Woodsome Park 
Fenay Bridge 
Huddersﬁeld HD8 0LA
BROKERS
PANMURE GORDON & CO.
155 Moorgate 
London EC2M 6XB
REGISTERED OFFICE
Alder Castle  
10 Noble Street 
London EC2V 7QJ CORPORATE STATEMENT
Our goal is to be a leader in the optical  
ﬁbre-based laser market. 
SPI is now a recognised leader in the design and 
manufacture of ﬁbre lasers. The Group’s technology 
is rapidly becoming an integral part of producing 
many end-user products by improving, and in some 
cases enabling, its customers’ manufacturing 
processes. SPI continues to expand the applications 
space for ﬁbre lasers, with powers from mWs to kWs.
  CORPORATE STATEMENT
  HIGHLIGHTS
 01 AT A GLANCE
02 OUR MARKET
 02 OUR TECHNOLOGY
 02 CURRENT PRODUCTS
 04 CHAIRMAN’S STATEMENT
 06 CHIEF EXECUTIVE’S REVIEW
 08 FINANCIAL REVIEW
 10 BOARD OF DIRECTORS
 13 DIRECTORS’ REPORT
 16  STATEMENT OF DIRECTORS’ RESPONSIBILITIES
 17 INDEPENDENT AUDITORS’ REPORT
 18 GROUP PROFIT AND LOSS ACCOUNT
 18  GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
 19 GROUP BALANCE SHEET
 20 COMPANY BALANCE SHEET
 21 GROUP CASH FLOW STATEMENT
 22 NOTES TO THE FINANCIAL STATEMENTS
 36 OFFICERS AND PROFESSIONAL ADVISORS INSPIRING YOUR PRODUCTS AND MANUFACTURING 
Annual Report and Accounts 2006
SPI Lasers plc
3 Wellington Park 
Tollbar Way 
Hedge End 
Southampton 
SO30 2QU 
Tel: +44 (0)1489 779696  
Fax: +44 (0)1489 779698 
Email: investors@spilasers.com
Web: www.spilasers.com
SPI Lasers plc  Annual Report and Accounts 2006