9 Dec 2008 14:51
FOR IMMEDIATE RELEASE 9 December 2008
Immersion Technologies International plc
("Immersion" or "Company")
ANNUAL AUDITED RESULTS ANNNOUNCEMENT
FOR THE YEAR TO 30 JUNE 2008
The Company is pleased to announce the audited results of the Company for the year ended 30 June 2008. These results will be posted to shareholders by 19th December 2008. Extracts of the audited results are set out below.
Chairman's Statement
The Company has had mixed success over the last 12 months in its progress. The setback for the Company was when Nakamichi Corporation Limited ("Nakamichi") failed to take product pursuant to its Supply Agreement with the Company. As a result the Company's strategy has evolved from supplying complete built units to supplying components. There has been some continued interest in the Company's technology from leading consumer electronics companies when the Company displayed its products recently at the IFA Show in Berlin and the Korean Audio Show. In order to minimise the cash burn the Company has streamlined its head count and closed its operations in Singapore and China.
FINANCIAL RESULTS
The Group's loss for the year is £2,468,816 (period from 2 March 2006 to 30 June 2007 was £2,627,005), in which it earned sales revenue of £18,703, license revenue and interest income of £46,666 and £42,061 respectively. During the year the Group spent £73,017 on research and development and building a broad product range. Amortisation of intangible assets, such as intellectual property, is £245,800 (prior period was £234,941) for the year and the employee and director remuneration costs totalled £951,489 (prior period was £567,850).
REVIEW OF OPERATIONS
The Technology
The Company has made progress in the evolution of the technology as follows:
Electrostatic Loudspeakers (ESL)
The product development strategy has moved from the manufacturer of complete built units to providing components for customers to add into their product range as necessary. This strategy has the added value of enabling customers to specify the components which the Company can then design and supply in reduced lead times.
Conventional Cone Speakers (CCS)
The CCS technology has evolved from large, standalone sub-woofa products to developing smaller complete units for the consumer electronic industry. In particular the Company has developed a sound bar for use in flat panel TVs. The experience gained from supplying the CCS technology into the automotive industry has enabled small components to be developed producing audiofile quality sound.
Trade Shows
During the year, the Company exhibited its products at trade shows in Germany and Korea where positive interest was shown for our Company products. The Company continues to produce sample and prototypes for potential customers in order to obtain a volume order for its products.
Overseas Facilities
As a result of Nakamichi failing to take manufactured product from the Company, we have decided to shut the manufacturing facility in China. The Company has however retained a small prototype development centre where its sample and prototypes can be produced cost efficiently.
Our Singapore sales and account management office for Nakamichi was closed. Headcount across the Group has been reduced to focus on development of core products.
Nakamichi
The Company signed and executed a design, development and manufacturing contract with Nakamichi dated 22 December 2006 ('the Supply Agreement') for the supply of the Dragon® Hybrid ESL loudspeakers which was due to have the first shipment in December 2007. This contract with Nakamichi for supply of products was worth approximately US$12.1 over a two year period with a minimum commitment for US$5.1m.
The Company completed production of more than 100 pairs of the Dragon® Hybrid ESL loudspeakers for Nakamichi pursuant to the Supply Agreement The first consignment of product was available for collection by Nakamichi on 10 December 2007. However, since that time Nakamichi has failed to collect and pay the balance for the consignment and has failed to issue further purchase orders as required under the Supply Agreement. The Company has placed Nakamichi on notice of this contravention and has reserved all its rights. The Company continues to resolve the matter commercially, failing which it may be required to issue legal proceedings in order to enforce its rights and safeguard the interests of shareholders.
OUTLOOK
The Company continues to look for ways in which it can exploit the technology. Nakamichi was a setback but the Company is working with other consumer electronic companies in order to solve their audio issues.
The Company will look at other opportunities in order to preserve shareholder value within the Company and in the meantime we will actively conserve our cash as much as possible. The directors would like to take this opportunity to thank our shareholders for their continued support.
David Lenigas
Non Executive Chairman
9 December 2008
Directors' Report
The Directors are pleased to present this year's annual report together with the consolidated financial statements for the period ended 30 June 2008.
Principal Activities
The principal activity of the Group is the product development, design and manufacture of unique and high performance audio solutions.
Business Review and future developments
A review of the current and future development of the Group's business is given in the Chairman's Statement on page 3.
Results and Dividends
Loss on ordinary activities of the Group after taxation amounted to £2.47 million. The Directors do not recommend payment of a dividend.
Key Performance Indicators
Given the nature of the business and that the Group is in the development phase of operations, the directors are of the opinion that analysis using KPI's is not appropriate for an understanding of the development, performance or position of our businesses at this time.
Post Balance Sheet events
At the date these financial statements were approved, being 9 December 2008, the Directors were not aware of any significant post balance sheet events other than those set out in the notes to the financial statements.
Substantial Shareholdings
At 9 December 2008 the following had notified the Company of disclosable interests in 3% or more of the nominal value of the Company's shares:
| Shareholder | Number of Shares | % of Issued Capital |
| E D Evans Pty Limited | 38,050,000 | 16.67 |
| Security Transfer Registrars Pty | 26,143,749 | 11.46 |
| CIPAF SA | 15,000,000 | 6.57 |
| Miami Properties Plc | 12,000,000 | 5.26 |
| CIM Special Situations Fund Limited | 10,614,285 | 4.65 |
| Lindsay Alfred Champion | 8,150,000 | 3.57 |
| Vidacos Nominees Limited | 7,975,000 | 3.49 |
Directors
The names of the Directors who served during the year are set out below:
Director Date of Appointment Date of Resignation
Executive Directors
Kiran Morzaria - Executive Director
Craig Evans - Executive Director 29 January 2008
Non-Executive Directors
David Lenigas- Non-executive Chairman 29 January 2008
Gregory Turnidge -Former Non-executive Chairman 29 January 2008
Alexander Barblett - Non-executive Director
Vincent Fodera - Executive Director 7 July 2008
Blair Snowball - Executive Director 31 January 2008
Directors' Remuneration
The Company remunerates the Directors at a level commensurate with the size of the Company and the experience of its Directors. The Remuneration Committee has reviewed the Directors' remuneration and believes it upholds the objectives of the Company with regard to this issue. Details of the Director emoluments and payments made for professional services rendered are set out in Note 5 to the financial statements.
Directors' Interests
The beneficial interests of the serving Directors in the shares and options of the Company during the period to 30 June 2008 were as follows:
|
| At 30 June 2008 | At 30 June 2007 | At 30 June 2008 | At 30 June 2007 | ||
| Beneficial and non-beneficial | Number of Shares | % | Number of Shares | % | Number of Options | Number of Options |
| David Lenigas | - | - | - | - | 2,500,000 | - |
| Kiran Morzaria (1) | 711,428 | 0.31 | 711,428 | 0.32 | 750,000 | - |
| Alexander John Barblett (3) | 600,000 | 0.26 | 600,000 | 0.27 | 1,250,000 | 1,500,000 |
| Vincent David Fodera (2) | 2,787,384 | 1.22 | 1,560,000 | 0.69 | 2,500,000 | 2,750,000 |
| Blair Snowball | - | - | - | - | - | - |
| Craig Evans | - | - | - | - | - | - |
| Gregory Turnidge | - | - | - | - | - | - |
1) Of which 571,428 of the current shareholding are held on account with TD Waterhouse Nominees (Europe) Limited and 40,000 shares are held by Cornell De Beer Morzaria who is a related party to Kiran Caldas Morzaria.
2) All shares are beneficially held through Security Transfer Registrars Pty Ltd.
3) Of which 400,000 shares are registered in a third party company, (Entopia Consulting Limited), over which Mr Barblett has an option to acquire the whole or part of the issued share capital therein, and 200,000 are held by Lisa Mitchell who is a related party to the Director.
Corporate Governance
A statement on Corporate Governance is set out on pages 8 - 9.
Environmental Responsibility
The Company is aware of the potential impact that its subsidiary companies may have on the environment. The Company ensures that it, and its subsidiaries at a minimum comply with the local regulatory requirements and the revised Equator Principles with regard to the environment.
Employment Policies
The Group will be committed to promoting policies which ensure that high calibre employees are attracted, retained and motivated, to ensure the ongoing success for the business. Employees and those who seek to work within the Group are treated equally regardless of sex, marital status, creed, colour, race or ethnic origin.
Health and Safety
The Group's aim will be to achieve and maintain a high standard of workplace safety. In order to achieve this objective the Group will provide training and support to employees and set demanding standards for workplace safety.
Payment to Suppliers
The Group's policy is to agree terms and conditions with suppliers in advance; payment is then made in accordance with the agreement provided the supplier has met the terms and conditions. There are no material trade payables as at 30 June 2008.
Political Contributions and Charitable Donations
During the period the Group did not make any political contributions or charitable donations.
Annual General Meeting ("AGM")
This report and financial statements will be presented to shareholders for their approval at the AGM. The Notice of the AGM will be distributed to shareholders together with the Annual Report.
Statement of disclosure of information to auditors
As at the date of this report the serving directors confirm that:
So far as each director is aware, there is no relevant audit information of which the Company's auditors are unaware, and
they have taken all the steps that they ought to have taken as directors' in order to make themselves aware of any relevant audit information and to establish that the Company's auditor are aware of that information
Auditors
A resolution to appoint Chapman Davis LLP and to authorise the Directors to fix their remuneration will be proposed at the next Annual General Meeting.
Going Concern
Notwithstanding the loss incurred during the period under review, the Directors are of the opinion that ongoing evaluations of the Company's interests and cash resources, indicate that preparation of the Group's accounts on a going concern basis is appropriate.
Statement of Directors' Responsibilities
The directors prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. 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;
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, for safeguarding the assets of the group and for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are also responsible for ensuring that the annual report includes information required by the Alternative Investment Market.
Electronic communication
The maintenance and integrity of the Company's website is the responsibility of the directors: the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
The Company's website is maintained in accordance with AIM Rule 26.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions
By order of Board:
Kiran Morzaria
Director
9 December 2008
Group Income Statement for the year ended 30 June 2008
| Year | Period | |||
| Notes | ended | 2 March 2006 to | ||
| 30 June 2008 | 30 June 2007 | |||
| £ | £ | |||
| Revenue | 3 | 68,501 | 17,971 | |
| Cost of Sales | (270,758) | (592) | ||
| Gross (Loss)/Profit | (202,257) | 17,379 | ||
| Administrative expenses | 4 | (2,308,620) | (2,613,438) | |
|
| ||||
| (Loss) from operations | (2,510,877) | (2,596,059) | ||
| Finance Income | 7 | 42,061 | 38,278 | |
| (Loss) before tax | (2,468,816) | (2,557,781) | ||
| Tax expense | 6 | - | (69,224) | |
| (Loss) for the period attributable to shareholders | (2,468,816) | (2,627,005) | ||
| Year | Period | |||
| LOSS PER SHARE | Notes | ended | 2 March 2006 to | |
| 30 June 2008 | 30 June 2007 | |||
| Basic | 8 | 1.08 pence | 1.80 pence | |
| Diluted | 8 | 1.08 pence | 1.80 pence | |
Group Balance Sheet as at 30 June 2008
| As at | As at | |||
| Notes | 30 June 2008 | 30 June 2007 | ||
| £ | £ | |||
| Non-current assets | ||||
| Intangible assets | 9 | 800,000 | 6,683,505 | |
| Plant and equipment | 10 | - | 68,758 | |
| 800,000 | 6,752,263 | |||
| Current assets | ||||
| Trade and other receivables | 11 | 49,588 | 260,136 | |
| Cash and cash equivalents | 272,113 | 2,121,858 | ||
| 321,701 | 2,381,994 | |||
| Total assets | 1,121,701 | 9,134,257 | ||
| Current liabilities | ||||
| Trade and other payables | 13 | 273,204 | 360,221 | |
| Provisions | 1,949 | - | ||
| Corporation tax liability | - | 11,771 | ||
| Total liabilities | 275,153 | 371,992 | ||
| Net assets | 846,548 | 8,762,265 | ||
| Equity | ||||
| Share capital | 16 | 1,597,573 | 1,574,087 | |
| Share premium reserve | 2,868,959 | 2,824,117 | ||
| Unissued share capital | 185,000 | - | ||
| Foreign exchange reserve | 60,240 | 51,288 | ||
| Other reserves | - | 5,933,629 | ||
| Share-based payments | 80,360 | 1,006,149 | ||
| Accumulated loss | (3,945,584) | (2,627,005) | ||
| 846,548 | 8,762,265 | |||
| The financial statements were approved by the board of directors and authorised for issue on 9 December 2008. They were signed on its behalf by ; | ||||
| Kiran Mozaria | David Lenigas | |||
| Director | Director | |||
Company Balance Sheet as at 30 June 2008
| As at | As at | |||
| 30 June 2008 | 30 June 2007 | |||
| Notes | £ | £ | ||
| Non-Current assets | ||||
| Investment in subsidiaries | 18 | 2,433,213 | 18,683,895 | |
| Amounts due from subsidiaries | 21 | 885,585 | 763,688 | |
| 3,318,798 | 19,447,583 | |||
| Current assets | ||||
| Trade and other receivables | 12 | 31,675 | 114,865 | |
| Cash and cash equivalents | 197,305 | 1,999,166 | ||
| 228,980 | 2,114,031 | |||
| Total assets | 3,547,778 | 21,561,614 | ||
| Current liabilities | ||||
| Trade and other payables | 14 | 93,315 | 186,050 | |
| Corporation tax liability | - | 11,771 | ||
| Amounts payable to subsidiaries | 21 | 466,669 | ||
| Total liabilities | 93,315 | 664,490 | ||
| Net assets | 3,454,463 | 20,897,124 | ||
| Equity | ||||
| Share capital | 16 | 1,597,573 | 1,574,087 | |
| Share premium | 2,868,959 | 2,824,117 | ||
| Unissued share capital | 185,000 | - | ||
| Share-based payment reserve | 80,360 | 59,801 | ||
| Other reserves | - | 16,798,801 | ||
| Accumulated loss | (1,277,429) | (359,682) | ||
| 3,454,463 | 20,897,124 | |||
| The financial statements were approved by the board of directors and authorised for issue on 9 December 2008. They were signed on its behalf by ; | ||||
| Kiran Morzaria | David Lenigas | |||
| Finance Director | Director | |||
Group Cash Flow Statement for the year ended 30 June 2008
|
| Period | |||
| Year ended | 2 March 2006 to | |||
| 30 June 2008 | 30 June 2007 | |||
| OPERATING ACTIVITIES | ||||
| Loss after tax for the period | (2,468,816) | (2,627,005) | ||
| Adjustments for: | ||||
| Depreciation | 171,541 | 2,784 | ||
| Amortisation | 245,800 | 234,941 | ||
| Loss on disposal of assets | (4,726) | - | ||
| Share-based payments | 45,559 | 1,019,302 | ||
| Finance income | (42,061) | (38,278) | ||
| Income tax expense | - | 69,224 | ||
| Increase in provisions | 1,949 | - | ||
| Decrease in receivables | 210,548 | 111,541 | ||
| (Decrease)/ Increase in payables | (87,017) | 90,116 | ||
| CASH USED IN OPERATING ACTIVITIES | (1,927,223) | (1,137,375) | ||
| Income tax paid | (11,771) | - | ||
| NET CASH USED IN OPERATING ACTIVITIES | (1,938,994) | (1,137,375) | ||
| INVESTING ACTIVITIES | ||||
| Interest received | 42,061 | 38,278 | ||
| Cash acquired from business combinations | - | 3,434,766 | ||
| Proceeds from disposal of assets | 4,704 | - | ||
| Purchase of patents | (44,416) | (509,652) | ||
| Purchase of plant and equipment | (112,172) | (63,864) | ||
| NET CASH USED IN INVESTING ACTIVITIES | (109,823) | 2,899,528 | ||
| FINANCING ACTIVITIES | ||||
| Proceeds on issuing of ordinary shares | 43,328 | 1,015,000 | ||
| Proceeds on share capital-un issued | 185,000 | - | ||
| Cost of issue of ordinary shares | - | (604,007) | ||
| NET CASH FROM FINANCING ACTIVITIES | 228,328 | 410,993 | ||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (1,820,489) | 2,173,146 | ||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 2,121,858 | - | ||
| Exchange loss on cash and cash equivalents | (29,256) | (51,288) | ||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 272,113 | 2,121,858 | ||
| The above Cash Flow should be read in conjunction with the accompanying notes. | ||||
Company Cash Flow Statement for the year ended 30 June 2008
|
| Period | |||
| Year ended | 1 September 2006 | |||
| 30 June 2008 | to 30 June 2007 | |||
| Notes | £ | £ | ||
| OPERATING ACTIVITIES | ||||
| Loss after tax for the period | (917,748) | (274,985) | ||
| Adjustments for: | ||||
| Depreciation | 2,973 | - | ||
| Share-based payments | 45,559 | 6,618 | ||
| Finance income | (40,893) | (132,078) | ||
| Income tax expense | - | 11,771 | ||
| Decrease / (Increase) in receivables | 83,190 | (80,661) | ||
| (Decrease) / Increase in payables | (92,735) | 133,821 | ||
| CASH USED IN OPERATING ACTIVITIES | (919,654) | (335,514) | ||
| Income tax paid | (11,771) | - | ||
| NET CASH USED IN OPERATING ACTIVITIES | (931,425) | (335,514) | ||
| INVESTING ACTIVITIES | ||||
| Interest received | 40,893 | 132,078 | ||
| Purchase of plant and equipment | (2,973) | - | ||
| Loans to subsidiaries | (331,443) | (763,687) | ||
| Loans from subsidiaries | (257,122) | - | ||
| Investment in Subsidiaries | (548,119) | (187,100) | ||
| NET CASH (USED IN) / FROM INVESTING ACTIVITIES | (1,098,764) | (818,709) | ||
| FINANCING ACTIVITIES | ||||
| Proceeds on issuing of ordinary shares | 43,328 | - | ||
| Proceeds on share capital-unissued | 185,000 | - | ||
| Cost of issue of ordinary shares | - | (575,290) | ||
| NET CASH (USED IN) / FROM FINANCING ACTIVITIES | 228,328 | (575,290) | ||
| NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS | (1,801,861) | (1,729,513) | ||
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 1,999,166 | 3,728,679 | ||
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | 197,305 | 1,999,166 |
The above Cash Flow should be read in conjunction with the accompanying notes.
Statement of Changes in Equity for the year ended 30 June 2008
Group
| Unissued | Share | ||||||||
| Share | Share | Share | Based | Foreign | Other | Accumulated | |||
| Capital | Premium | Capital | Payments | Exchange | Reserves | Losses | Total | ||
| £ | £ | £ | £ | £ | £ | £ | £ | ||
| Balance at 2 March 2006 | - | - | - | - | - | - | - | - | |
| Foreign translation differences | - | - | - | - | 51,288 | - | - | 51,288 | |
| Loss for the period | - | - | - | - | - | - | (2,627,005) | (2,627,005) | |
| Total recognised income and expense for the period | - | - | - | - | 51,288 | - | (2,627,005) | (2,575,717) | |
| Share issue | 175,904 | 5,743,257 | - | (13,153) | - | - | - | 5,906,008 | |
| Cost of share issue | - | (28,717) | - | - | - | - | - | (28,717) | |
| Value of reverse acquisition | 1,398,183 | (2,890,423) | - | - | - | 5,933,629 | - | 4,441,389 | |
| Share-based payments | - | - | - | 1,019,302 | - | - | - | 1,019,302 | |
| Balance at 30 June 2007 | 1,574,087 | 2,824,117 | - | 1,006,149 | 51,288 | 5,933,629 | (2,627,005) | 8,762,265 | |
| Cancelled share based payment | - | - | - | 53,183 | - | (53,183) | - | - | |
| Cancelled share based payment | - | - | - | (999,530) | - | - | 999,530 | - | |
| Foreign translation differences | - | - | - | - | - | (150,707) | 150,707 | - | |
| Balance at 30 June 2007 | 1,574,087 | 2,824,117 | - | 59,802 | 51,288 | 5,864,739 | (1,476,768) | 8,762,265 | |
| Foreign translation differences | - | - | - | - | 8,952 | - | - | 8,952 | |
| Loss for the period | - | - | - | - | - | - | (2,468,816) | (2,468,816) | |
| Total recognised income and expense for the period | - | - | - | - | 8,952 | - | (2,468,816) | (2,459,864) | |
| Share issue | 23,486 | 44,842 | 185,000 | - | - | - | - | 253,328 | |
| Share-based payments | - | - | - | 27,177 | - | - | - | 27,177 | |
| Cancelled share based payment | - | - | - | (6,619) | - | - | - | (6,619) | |
| Impairment charge | - | - | - | - | - | (5,682,119) | - | (5,682,119) | |
| Foreign translation differences | (47,620) | (47,620) | |||||||
| Balance at 30 June 2008 | 1,597,573 | 2,868,959 | 185,000 | 80,360 | 60,240 | - | (3,945,584) | 846,548 | |
Company
| Unissued | Share | |||||||
| Share | Share | Share | Based | Foreign | Other | Accumulated | ||
| Capital | Premium | Capital | Payments | Exchange | Reserves | Losses | Total Equity | |
| £ | £ | £ | £ | £ | £ | £ | £ | |
| Balance at 31 August 2006 | 342,762 | 3,399,407 | - | 53,183 | - | - | (84,698) | 3,710,654 |
| Loss for the period | - | - | - | - | - | - | (274,985) | (274,985) |
| Total recognised income and expense for the period | - | - | - | - | - | - | (274,985) | (274,985) |
| Share issue | 1,231,326 | - | - | - | - | - | - | 1,231,326 |
| Value of reverse acquisition | - | - | - | - | - | 16,798,801 | - | 16,798,801 |
| Cost of share issue | - | (575,290) | - | - | - | - | - | (575,290) |
| Share-based payment | - | - | 6,618 | - | - | - | 6,618 | |
| Balance at 30 June 2007 | 1,574,087 | 2,824,117 | - | 59,801 | - | 16,798,801 | (359,682) | 20,987,124 |
| Loss for the period | - | - | - | - | - | - | (917,747) | (917,747) |
| Total recognised income and expense for the period | - | - | - | - | - | - | (917,747) | (917,747) |
| Share issue | 23,486 | 44,842 | 185,000 | - | - | - | - | 253,328 |
| Share-based payment | - | - | - | 27,177 | - | - | - | 27,177 |
| Cancelled share based payment | (6,618) | (6,618) | ||||||
| Impairment charge | - | - | - | - | - | (16,798,801) | - | (16,798,801) |
| Balance at 30 June 2008 | 1,597,573 | 2,868,959 | 185,000 | 80,360 | - | - | (1,277,429) | 3,454,463 |
| 1 | SIGNIFICANT ACCOUNTING POLICIES |
| The following account policies are those of the Group and apply to the consolidated financial statements. | |
| Authorisation of financial statements | |
| The Group financial statements of Immersion Technologies International Plc for the year ended 30 June 2008 were authorised for issue by the Board on 9 December 2008 and the balance sheets signed on the Board's behalf by Mr. Kiran Morzaria and Mr. David Lenigas. The Company is a public limited Company incorporated in England & Wales under the Companies Act 1985. The Company's ordinary shares are traded on the AIM Market operated by the London Stock Exchange. | |
| Statement of compliance with IFRS | |
| The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 1985. The principal accounting policies adopted by the Group and Company are set out below. Adoption of standards and interpretations As at the date of authorisation of these financial statements, there were Standards and Interpretations that were in issue but are not yet effective and have not been applied in these financial statements. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the group or company, except for additional disclosures when the relevant Standards come into effect. | |
| Basis of preparation | |
| The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated. | |
| The financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRS. | |
| These financial statements are presented in Sterling since that is the currency in which the majority of the Company's transactions are denominated. The measurement basis used in the preparation of the financial statements is historical cost, except for financial instruments, which are measured at fair value. | |
| Basis of consolidation | |
| Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. | |
| Business combinations and goodwill | |
| On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. |
| Revenue recognition | |
| Revenue is recognised to the extent that the right to consideration is obtained in exchange for performance. Payment received in advance of performance is deferred on the balance sheet as a liability and released as services are performed or products are exchanged as per the agreement with the customer. | |
| Revenue derived from the license royalties are recognised on notification of payment by the licensee. Revenue derived from the sale of manufactured products and recognised when delivered to the customer in accordance with the specific supply contract terms. | |
| Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount. | |
| Foreign currencies | |
| Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in the income statement for the period. | |
| On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of the overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the "foreign exchange reserve"). | |
| Taxation | |
| The tax expense represents the sum of the current tax and deferred tax. | |
| The current tax is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date. |
| Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit. | |
| Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity. | |
| Internally-generated Intangible Assets - Research and Development Expenditure | |
| Expenditure on internally developed products is capitalised if it can be demonstrated that: | |
| ·; it is technically feasible to develop the product for it to be sold; | |
| ·; adequate resources are available to complete the development; | |
| ·; there is an intention to complete and sell the product; | |
| ·; the Group is able to sell the product; | |
| ·; sale of the product will generate future economic benefits; and | |
| ·; expenditure on the project can be measured reliably. | |
| Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed. The amortisation expense is included within the administrative expenses in the consolidated income statement. | |
| Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated income statement as incurred. | |
| Externally acquired intangible assets | |
| Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. The amortisation expense is included within the administrative expenses line in the consolidated income statement. | |
| Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. | |
| The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows: | |
| Intangible asset Useful economic life Valuation method | |
| Intellectual property Patent life (20 years) Estimated royalty stream if the rights were to be licensed | |
| Licenses 10 years Estimated discounted cash flow | |
| Impairment of tangible and intangible assets excluding goodwill | |
| At each balance sheet date the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If there is such indication then an estimate of the asset's recoverable amount is performed and compared to the carrying amount. | |
| Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. | |
| If the recoverable amount of an asset is estimated to be less that its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease. | |
| Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. | |
| Property, plant and equipment | |
| Items of property, plant and equipment are initially recognised at cost and subsequently at depreciated cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. The corresponding liability is recognised within provisions. | |
| Depreciation is provided on all of property, plant and equipment to write off the carrying value of items over their expected useful economic lives. It is applied at the following rates: | |
| Plant and equipment - 15%-25% per annum straight line | |
| Office equipment - 20%-25% per annum straight line | |
| Inventories | |
| Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition, Weighted average cost is used to determine the cost of ordinarily interchangeable items. |
| Provisions | |
| Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability. | |
| Financial instruments | |
| Financial assets and financial liabilities are recognised on the balance sheet when the Group has become a party to the contractual provisions of the instrument | |
| Cash and cash equivalents | |
| Cash and cash equivalents comprise cash in hand, cash at bank and short term deposits with banks and similar financial institutions. | |
| Trade and other receivables | |
| Trade and other receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. | |
| Financial liability 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 Company after deducting all of its liabilities. | |
| Trade and other payables | |
| Trade and other payables are non interest bearing and are stated at their nominal value. | |
| Equity instruments | |
| Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. |
| Share-based payments | |
| Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. | |
| Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated income statement over the remaining vesting period. | |
| Where equity instruments are granted to persons other than employees, the consolidated income statement is charged with the fair value of goods and services received. Equity-settled share-based payments are measured at fair value at the date of grant except if the value of the service can be reliably established. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest. | |
| Critical accounting estimates and judgements | |
| The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. |
| Impairment of goodwill | |
| The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows - actual outcomes may vary. If the carrying amount exceeds the recoverable amount then an impairment is made. | |
| Useful lives of intangible assets and property, plant and equipment | |
| Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are based on judgement and experience and periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the consolidated income statement in specific periods. | |
| Share-based payments | |
| The Group utilised an equity-settled share-based remuneration scheme for employees. Employee services received, and the corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant, excluding the impact of any non-market vesting conditions. The fair value of share options are estimated by using Black-Scholes valuation method as at the date of grant. The assumptions used in the valuation are described in note 17 and include, among others, the expected volatility, expected life of the options and number of options expected to vest. | |
| Warranty claims | |
| The Group may offer warranties on its products. The Group estimates the amount and cost of future warranty claims for its salesto be 10% of the sales price. 10% accrued warranty provisions for product shipments are provided. Factors that impact the estimated claim information include the success of the Group's productivity and quality initiatives, as well as parts and labour costs. |
| Identifying the acquirer in business combinations | |
| IFRS 3 defines the acquirer in a business combination as being the entity that obtains control of the other combining entities and defines control as being held by the combining entity that has the power to govern the financial and operating policies of the other entity so as to obtain benefits from its activities. The Group considers all relevant facts and circumstances to determine which of the combining entities has control, including the voting rights of shareholders, composition of combined entities board and management. | |
| Determination of fair values of intangible assets acquired in business combinations | |
| The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that would have been avoided as a result of the trademark or a patent being owned. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the asset. | |
| Income taxes | |
| The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest will be due. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of such matters is different than the amounts recorded, the differences will impact income tax expense in the period in which such determination is made. | |
| Deferred taxation | |
| Deferred tax assets are recognised when it is judged more likely than not that they will be recovered. | |
| Going Concern | |
| The financial report for the year ended 30 June 2008 has been prepared on a going concern basis. |
| 2 | SEGMENT REPORTING | ||||||
| For management purposes the Group is organised into 4 operating divisions: Corporate; Product Research, Development and Design; Product Manufacture, and; Sales. These divisions are the basis on which the Group reports its primary segment information. Secondary segment information is presented on a geographic basis. The primary segment information corresponds closely to geographical segments as operational segments reside in distinct locations of the United Kingdom, Australia and Asia. | |||||||
| For the year ended 30 June 2008 | Corporate | Product | Product | Sales | Unallocated | Total | |
| Business segments | R&D and | Manufacture | or | ||||
| Design | Eliminated | ||||||
| Revenue | £ | £ | £ | £ | £ | £ | |
| External sales | 5,642 | 44,799 | - | 18,060 | - | 68,501 | |
| Total revenue from continuing operations | 5,642 | 44,798 | - | 18,060 | - | 68,501 | |
| Result | |||||||
| Segment result from continuing operations | (1,178,168) | (795,387) | (192,163) | (345,159) | - | (2,510,877) | |
| Finance income | 42,061 | ||||||
| Loss before tax | (2,468,816) | ||||||
| Income tax expense | - | ||||||
| Loss for the period from continuing operations | (2,468,816) | ||||||
| Other segment items included in the income statement are as follows: | |||||||
| Depreciation | 3,409 | 55,133 | 78,469 | 34,530 | - | 171,541 | |
| Amortisation | 245,800 | 245,800 | |||||
| Balance sheet | |||||||
| Segment assets | 3,468,816 | 16,406 | 37,267 | 32,426 | (2,433,214) | 1,121,701 | |
| Segment liabilities | (94,246) | (65,772) | (20,336) | (94,799) | - | (275,153) | |
| Net assets | 3,374,570 | (49,366) | 16,931 | (62,373) | (2,433,214) | 846,548 | |
| For the year ended 30 June 2008 | United | Australia | Asia | Unallocated | Total | ||
| Geographical segments | Kingdom | ||||||
| Revenue | £ | £ | £ | £ | £ | ||
| External sales | 5,642 | 44,799 | 18,060 | 68,501 | |||
| Total revenue from continuing operations | 5,642 | 44,799 | 18,060 | 68,501 | |||
| Result | |||||||
| Segment result from continuing operations | (1,259,881) | (587,657) | (663,339) | - | (2,510,877) | ||
| Finance income |
| 42,061 | |||||
| Loss before tax | (2,468,816) | ||||||
| Income tax expense | - | ||||||
| Loss for the period from continuing operations | (2,468,816) | ||||||
| Balance sheet | |||||||
| Segment assets | 3,468,816 | 16,406 | 69,693 | (2,433,214) | 1,121,701 | ||
| Segment liabilities | (94,246) | (65,772) | (115,135) | - | (275,153) | ||
| Net assets | 3,374,570 | (49,366) | (45,442) | (2,433,214) | 846,548 | ||
| Inter-segment transfers are priced along the same lines as sales to external customers, except that an appropriate discount is applied to encourage use of group resources at a rate accepted to local tax authorities. | |||||||
| For the period ended 30 June 2007 | Corporate | Product | Product | Sales | Unallocated | Total | |
| Business segments | R&D and | Manufacture | or | ||||
| Design | Eliminated | ||||||
| £ | £ | £ | £ | £ | £ | ||
| Revenue | |||||||
| External sales | - | 17,971 | - | - | - | 17,971 | |
| Total revenue from continuing operations | - | 17,971 | - | - | - | 17,971 | |
| Result | |||||||
| Segment result from continuing operations | (1,079,804) | (1,258,405) | (62,272) | 2,244 | (197,822) | (2,596,059) | |
| Finance income | 38,278 | ||||||
| Loss before tax | (2,557,781) | ||||||
| Income tax expense | (69,224) | ||||||
| Loss for the period from continuing operations | (2,627,005) | ||||||
| Other segment items included in the income statement are as follows: | |||||||
| Depreciation | 781 | 2,003 | - | - | - | 2,784 | |
| Amortisation | 220,423 | 14,518 | - | - | - | 234,941 | |
| Balance sheet | |||||||
| Segment assets | 10,224,965 | 92,200 | 152,811 | 117,994 | (1,453,713) | 9,134,257 | |
| Segment liabilities | (1,418,232) | (594,632) | (49,792) | (81,530) | 1,772,194 | (371,992) | |
| Net assets | 8,806,733 | (502,432) | 103,019 | 36,464 | 318,481 | 8,762,265 | |
| For the period ended 30 June 2007 | United | Australia | Asia | Unallocated | Total | ||
| Geographical segments | Kingdom | ||||||
| £ | £ | £ | £ | £ | |||
| Revenue | |||||||
| External sales | - | 17,971 | - | - | 17,971 | ||
| Total revenue from continuing operations | - | 17,971 | - | - | 17,971 | ||
| Result | |||||||
| Segment result from continuing operations | (1,079,804) | (1,258,405) | (60,028) | (197,822) | (2,596,059) | ||
| Finance income | 38,278 | ||||||
| Loss before tax | (2,557,781) | ||||||
| Income tax expense | (69,224) | ||||||
| Loss for the period from continuing operations | (2,627,005) | ||||||
| Balance sheet | |||||||
| Segment assets | 10,224,965 | 92,200 | 270,805 | (1,453,713) | 9,134,257 | ||
| Segment liabilities | (1,418,232) | (594,632) | (131,322) | 1,772,194 | (371,992) | ||
| Net assets | 8,806,733 | (502,432) | 139,483 | 318,481 | 8,762,265 | ||
| Inter-segment transfers are priced along the same lines as sales to external customers, except that an appropriate discount is applied to encourage use of group resources at a rate accepted to local tax authorities. | |||||||
| 3 | CONSOLIDATED REVENUE | Year ended | Period |
| 30 June 2008 | 2 March 2006 to | ||
| 30 June 2007 | |||
| £ | £ | ||
| Revenue arises from: | |||
| Sale of goods | 18,703 | - | |
| Royalties | 46,666 | 10,036 | |
| Other Income | 3,132 | 7,935 | |
| 68,501 | 17,971 | ||
| 4 | CONSOLIDATED LOSS FROM OPERATIONS | ||
| Loss from operations has been arrived at after charging: | |||
| Directors fees | 463,859 | 441,000 | |
| Salaries and wages | 469,210 | 126,850 | |
| Consultancy costs | 129,350 | 82,470 | |
| Audit fees | 68,651 | 84,135 | |
| Other professional fees | 77,151 | 22,555 | |
| Amortisation of intangible assets | 245,800 | 234,941 | |
| Depreciation | 171,541 | 2,784 | |
| Research and development | 73,017 | 188,668 | |
| Net Equity settled share-based payments | 45,558 | 1,019,302 | |
| Foreign exchange loss | 8,314 | (5,029) | |
| Other expenses | 556,169 | 410,733 | |
| 2,308,620 | 2,613,438 | ||
| Amounts payable to BDO Stoy Hayward LLP and Chapman Davis LLP and their associates in respect of both audit and non-audit services: | |||
| Audit services - group statutory audit (prior year) | 64,651 | 36,000 | |
| Other services - company statutory audits | - | 25,000 | |
| Other services - tax review | - | 6,000 | |
| Other services - interim audit review | 2,500 | - | |
| Other services - interim audit review and CT advice | 1,500 | - | |
| Amounts payable to previous auditors MRI Moores Rowland LLP and their associates in respect of both audit and non-audit services: | |||
| Other services - interim audit review | - | 4,120 | |
| Due diligence on acquisition of Whise Acoustics Limited | - | 9,232 | |
| Amounts payable to previous auditors of Whise Acoustics Limited, Leydin Freyer Corporate Pty Ltd: | |||
| Other services - interim audit review and CT advice | - | 3,783 | |
| 68,651 | 84,135 |
| 5 | STAFF COSTS and DIRECTORS REMUNERATION | ||||||
| Consolidated | |||||||
| Period | |||||||
| Year ended | 2 March 2006 to | ||||||
| 30 June 2008 | 30 June 2007 | ||||||
| £ | £ | ||||||
| The average number of employees (including executive directors) was : | 65 | 19 | |||||
| Their aggregate remuneration comprised : | |||||||
| Wages and salaries | 951,489 | 508,898 | |||||
| Share-based payments | 26,862 | 21,010 | |||||
| 978,351 | 529,908 | ||||||
| Consolidated Directors' and Key Management emoluments for the year ending 30 June 2008 | Salary & fees | Bonus | Share-based payments | Total | |||
| £ | £ | £ | £ | ||||
| Vincent Fodera-resigned 7/7/2008 | 120,040 | - | 13,871 | 133,911 | |||
| Sandy Barblett | 28,575 | - | 1,936 | 30,511 | |||
| Kiran Morzaria | 11,500 | - | 3,871 | 15,371 | |||
| David Lenigas - appointed 29/1/2008 | - | - | 3,871 | 3,871 | |||
| Gregory Turnidge-resigned 29/1/2008 | 27,140 | - | 4,936 | 32,076 | |||
| Craig Evans-resigned 29/1/2008 | 142,940 | - | 1,936 | 144,876 | |||
| Blair Snowball-resigned 29/1/2008 | 66,164 | - | 12,000 | 78,164 | |||
| Arie van der Broek- CEO appointed 15/9/2007 | 67,500 | - | 3,871 | 71,371 | |||
| 463,859 | - | 46,292 | 510,151 | ||||
| Consolidated Directors' emoluments for the period ending 30 June 2007 | Salary & fees | Bonus | Share-based payments | Total | |||
| £ | £ | £ | £ | ||||
| Vincent Fodera | 99,000 | 15,000 | 4,988 | 118,988 | |||
| Sandy Barblett | 33,000 | 15,000 | 2,721 | 50,721 | |||
| Kiran Morzaria | 1,500 | - | - | 1,500 | |||
| Gregory Turnidge | 19,500 | 10,000 | 2,721 | 32,221 | |||
| Christopher Lambert | 9,000 | - | - | 9,000 | |||
| Craig Evans | 121,000 | 15,000 | 5,443 | 141,443 | |||
| Blair Snowball | 88,000 | 15,000 | 4,988 | 107,988 | |||
| 371,000 | 70,000 | 20,861 | 461,861 | ||||
| 6 | CONSOLIDATED INCOME TAX EXPENSE | ||
| Period | |||
| Year ended | 2 March 2006 to | ||
| 30 June 2008 | 30 June 2007 | ||
| £ | £ | ||
| Current tax expense | |||
| UK corporation tax and income tax of overseas operations on profits for the period | - | 69,224 | |
| Deferred tax expense | |||
| Origination and reversal of temporary differences | - | - | |
| Total income tax expense | - | 69,224 | |
| The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the UK applied to profits for the year are as follows: | |||
| Loss for the period | (2,468,816) | (2,557,781) | |
| Expected tax gain based on the standard rate of corporation tax in the UK of 30% | (728,301) | (767,334) | |
| Expenses not deductible for tax purposes | 22,055 | 57,804 | |
| Capital items expensed | - | (64,738) | |
| Share based payments | 8,017 | 7,936 | |
| Losses unutilised | 84,749 | 574,238 | |
| Utilisation of previously unrecognised tax losses | - | 261,318 | |
| Different tax rates applied in overseas jurisdictions | - | ||
| Total tax (gain) expense | (613,480) | 69,224 | |
| Tax gain of £613,480 is not recognised as a deferred tax asset | |||
| The Group also has a potential deferred tax asset in respect of losses carried forward of £874,257. This has not been recognised due to uncertainty over the amount and timing of future taxable profits against which the asset could be recovered. | |||
| 7 | CONSOLIDATED FINANCE INCOME | ||
| Period | |||
| Year ended | 2 March 2006 to | ||
| 30 June 2008 | 30 June 2007 | ||
| £ | £ | ||
| Interest on bank deposits | 42,061 | 38,278 |
| 8 | LOSS PER SHARE | ||
| The calculation of the basic and diluted loss per share is based on the following data: | Year ended | Period ended | |
| 30 June 2008 | 30 June 2007 | ||
| £ | £ | ||
| Loss | |||
| Loss for the purposes of basic and diluted loss per share | (2,468,816) | (2,627,005) | |
| Number of shares | |||
| Weighted average number of ordinary shares for the purposes of basic and diluted loss per share | 228,220,186 | 145,569,036 | |
| Basic and diluted loss per share | 1.08 pence | 1.80 pence | |
| The diluted loss per share is equal to the basic loss per share because all of the 18,284,489 options (weighted average being 14,273,530 on issue were considered not potentially dilutive. That is, all options have an exercise price far greater than the weighted average share price during the year (ie they are out-of the-money) and therefore would not be advantageous for the holders to exercise those options. | |||
| 9 | CONSOLIDATED INTANGIBLE ASSETS | ||||
| Intellectual | |||||
| Goodwill | Property | Licences | Total | ||
| £ | £ | £ | £ | ||
| Balance at 1 July 2007 | 1,768,417 | 4,978,173 | 171,856 | 6,918,446 | |
| Additions | - | 44,416 | - | 44,416 | |
| Balance at 30 June 2008 | 1,768,417 | 5,022,589 | 171,856 | 6,962,862 | |
| Accumulated amortisation and impairment | |||||
| Balance at 1 July 2007 | - | 223,484 | 11,457 | 234,941 | |
| Amortisation charge for the period | - | 228,614 | 17,186 | 245,800 | |
| Impairment charge | 1,768,417 | 3,770,491 | 143,213 | 5,682,121 | |
| Balance at 30 June 2008 | 1,768,417 | 4,222,589 | 171,856 | 6,162,862 | |
| Net book value | |||||
| Balance at 30 June 2008 | - | 800,000 | - | 800,000 | |
| Goodwill was acquired during the prior period through two separate business combinations. Intellectual property consists of acquired patents, for which amortisation commenced from the date of acquisition. All but three patents have an average remaining useful life of approximately 20 years. Impairment Review At 30 June 2008, the directors have carried out an impairment review and have subsequently written down the value of the Goodwill, Intellectual Property and the Licences by approximately £5.7 million (see Note 19). The directors are of the opinion that the carrying value is now stated at fair value. | |||||
| 10 | CONSOLIDATED PLANT AND EQUIPMENT | ||||
| Plant and | Office | Leasehold | |||
| equipment | equipment | improvements | Total | ||
| Cost | £ | £ | £ | £ | |
| Balance at 1 July 2007 | 68,319 | 3,223 | - | 71,542 | |
| Additions | 51,284 | 34,747 | 26,141 | 112,172 | |
| Disposals | (4,417) | (6,664) | - | (11,081) | |
| Balance at 30 June 2008 | 115,186 | 31,306 | 26,141 | 172,633 | |
| Accumulated depreciation and impairment | |||||
| Balance at 1 July 2007 | 2,197 | 587 | - | 2,784 | |
| Depreciation for the period | 112,989 | 32,411 | 26,141 | 171,541 | |
| Disposals | - | (1,692) | - | (1,692) | |
| Balance at 30 June 2008 | 115,186 | 31,306 | 26,141 | 172,633 | |
| Net book value | |||||
| Balance at 30 June 2008 | - | - | - | - |
| Cost | |||||
| Balance at 2 March 2006 | - | - | - | - | |
| Additions | 68,319 | 3,223 | - | 71,542 | |
| Balance at 30 June 2007 | 68,319 | 3,223 | - | 71,542 | |
| Accumulated depreciation and impairment | |||||
| Balance at 2 March 2006 | - | - | - | - | |
| Depreciation for the period | 2,197 | 587 | - | 2,784 | |
| Balance at 30 June 2007 | 2,197 | 587 | - | 2,784 | |
| Net book value | |||||
| Balance at 30 June 2007 | 66,122 | 2,636 | - | 68,758 |
| 11 | CONSOLIDATED TRADE AND OTHER RECEIVABLES | ||
| 30 June 2008 | 30 June 2007 | ||
| Current trade and other receivables | £ | £ | |
| Trade debtors | 17,913 | 304 | |
| Prepayments | 25,194 | 95,647 | |
| Tax receivable | - | 141,692 | |
| Other debtors | 6,481 | 22,493 | |
| 49,588 | 260,136 | ||
| The directors consider that the carrying amount of trade and other receivables approximates their fair value. | |||
| 12 | COMPANY TRADE AND OTHER RECEIVABLES | ||
| 30 June 2008 | 30 June 2007 | ||
| Current trade and other receivables | £ | £ | |
| Prepayments | 25,194 | 13,384 | |
| Other debtors | 6,481 | 101,481 | |
| 31,675 | 114,865 |
| 13 | CONSOLIDATED TRADE AND OTHER PAYABLES | ||
| 30 June 2008 | 30 June 2007 | ||
| Current trade and other payables | £ | £ | |
| Trade payables | 69,699 | 117,583 | |
| Accruals | 111,099 | 161,108 | |
| Deferred income | 92,406 | 81,530 | |
| 273,204 | 360,221 | ||
| The directors consider that the carrying amount of trade payables approximates to their fair value. | |||
| 14 | COMPANY TRADE AND OTHER PAYABLES | ||
| 30 June 2008 | 30 June 2007 | ||
| Current trade and other payables | £ | £ | |
| Trade payables | 7,781 | 46,366 | |
| Accruals | 85,534 | 139,684 | |
| 93,315 | 186,050 |
| 15 | FINANCIAL INSTRUMENTS - RISK MANAGEMENT |
| The Group is exposed through its operations to one or more of the following financial risks: | |
| ·; Fair value or cash flow interest rate risk | |
| ·; Foreign currency risk | |
| ·; Liquidity risk | |
| ·; Credit risk | |
| Policy for managing these risks is set by the Board following recommendations from the Finance Director. Certain risks are managed centrally, while others are managed locally following guidelines communicated from the centre. The policy for each of the above risks is described in more detail below. | |
| Fair value and cash flow interest rate risk | |
| Currently the Group does not have external borrowings. However, the Group has a policy of holding debt at a floating rate. The directors will revisit the appropriateness of this policy should the Group's operations change in size or nature. Operations are not permitted to borrow long-term from external sources locally. | |
| Foreign currency risk | |
| Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the same as the functional currency in which the Group companies are operating. The Group's net assets are exposed to currency risk giving rise to gains or losses on retranslation into sterling. Only in exceptional circumstances will the Group consider hedging its net investments in overseas operations as generally it does not consider that the reduction in volatility in consolidated net assets warrants the cash flow risk created from such hedging techniques. |
| Foreign exchange risk also arises when individual Group operations enter into transactions denominated in a currency other than their functional currency. It is Group policy that where the risk to the Group is considered significant, Group treasury will enter into a forward contract with a reputable bank. | |
| Liquidity risk | |
| The liquidity risk of each Group entity is managed centrally by the Group treasury function. Each operation has a facility with Group treasury, the amount of the facility being based on budgets. The budgets are set locally and agreed by the board annually in advance, enabling the Group's cash requirements to be anticipated. Where facilities of Group entities need to be increased, approval must be sought from the Group finance director. Where the amount of the facility is above a certain level agreement of the board is needed. | |
| All surplus cash is held centrally to maximise the returns on deposits through economies of scale. The type of cash instrument used and its maturity date will depend on the Group's forecast cash requirements. | |
| Credit risk | |
| The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts. Such credit ratings are taken into account by local business practices. | |
| The Group does not enter into complex derivatives to manage credit risk, although in certain isolated cases may take steps to mitigate such risks if it is sufficiently concentrated. |
| 16 | SHARE CAPITAL | |||||||||||||
| Consolidated and Company | Consolidated and Company | |||||||||||||
| Year ended | Year ended | |||||||||||||
| 30 June 2008 | 30 June 2007 | |||||||||||||
| Number | £ | Number | £ | |||||||||||
| Authorised: | ||||||||||||||
| Ordinary shares of £0.007 each | 1,000,000,000 | 7,000,000 | 1,000,000,000 | 7,000,000 | ||||||||||
| Issued and Fully Paid: | ||||||||||||||
| At the beginning of the period | 224,869,614 | 1,574,087 | 342,761,601 | 342,762 | ||||||||||
| Consolidation of share capital | - | - | (293,795,658) | - | ||||||||||
| Issued ordinary shares of £0.007 each | 1,731,645 | 12,122 | - | - | ||||||||||
| Issued ordinary shares of £0.007 each | 1,623,375 | 11,364 | 175,903,671 | 1,231,325 | ||||||||||
| At the end of the period | 228,224,634 | 1,597,573 | 224,869,614 | 1,574,087 | ||||||||||
| At the beginning and the end of the period there were no shares issued that were not fully paid. | ||||||||||||||
| The following share capital was issued in the period to 30 June 2008; | ||||||||||||||
| (1) On 1 July 2007, 1,731,645 shares in Immersion Technology International Limited (representing 0.97% of its issued share capital), were issued to two shareholders who, as described in the Company's Admission Document (12 April 2007) did not waive their rights to compensation shares under the Whise Acoustics Share Purchase Agreement and thus became entitled to the shares on this date. On 11 December 2007 the Group negotiated the purchase of the minority interest by issuing one Immersion Technologies International plc share in exchange for each Immersion Technology International Limited share. | ||||||||||||||
| (2) On 6 May 2008 the Company issued 1,623,375 ordinary shares at £0.0154 per share in lieu of cash settlements to current and former directors. | ||||||||||||||
| 17 | SHARE-BASED PAYMENTS | |||||
| During the period the Company issued options to key management and employees | ||||||
| Year ended 30 June 2008 | Period ended 30 June 2007 | |||||
| Weighted | Number | Weighted | Number | |||
| average | average | |||||
| exercise price | exercise price | |||||
| Outstanding at the beginning of the period | £0.13 | 13,484,489 | £0.21 | 734,489 | ||
| Granted during the year | £0.0154 | 17,550,000 | £0.125 | 12,750,000 | ||
| Forfeited during the year | ||||||
| Cancelled during the year | £0.125 | (12,750,000) | - | - | ||
| Exercised during the year | - | - | - | - | ||
| Lapsed during the year | - | - | - | - | ||
| Outstanding at the end of the year | £0.0232 | 18,284,489 | £0.13 | 13,484,489 | ||
| The exercise price of options outstanding at the end of the period ranged between 21p and 1.54p and their weighted average contractual life was 9.8 years. | ||||||
| The weighted average fair value of each option granted during the year was 0.93p. | ||||||
| The Group used the Black-Scholes model to determine the value of the options and the inputs were as follows: | ||||||
| Year ended | Period ended | |||||
| 30 June 2008 | 30 June 2007 | |||||
| Weighted average share price | £0.015 | £0.051 | ||||
| Weighted average exercise price | £0.232 | £0.125 | ||||
| Expected volatility | 54% | 30% | ||||
| Expected life | 5 years | 5 years | ||||
| Risk free rate | 5.00% | 5.00% | ||||
| Expected dividends | £nil | £nil | ||||
| Expected volatility was determined by using the volatility rate used by listed companies in similar industries and those companies with similar sizes. | ||||||
| On 6 May 2008 Immersion Technology International Limited also issued 1,623,375 shares as compensation payment to a Director and former Directors. The total share-based payment charge for the compensations shares is £25,000, which was valued at the date grant based on a valuation of 1.54 pence per share. | ||||||
| The total share-based payment expense in the period for the Group was £52,176, of which £27,176 pertained to new options to employees and directors which were in relation to options that were issued last year and cancelled and reissued. The cancellation of the charge for previously issued share options was £6,618, and £25,000 of compensation shares as mentioned above, resulting in a net charge of £45,558 in the income statement. | ||||||
| 18 | INVESTMENT IN SUBSIDIARIES | ||
| 30 June 2008 | 30 June 2007 | ||
| £ | £ | ||
| As at 1 July | 18,683,895 | - | |
| Additions during the year | 548,119 | 18,683,895 | |
| Write-down of investment | (16,798,801) | - | |
| At 30 June | 2,433,213 | 18,683,895 | |
| The subsidiaries of Immersion Technologies International plc, all of which have been included in these consolidated financial statements, are as follows: | |||
| Name | Country of incorporation | Proportion of ownership interest | |
| Immersion Technologies UK Limited | UK | 100% | |
| Immersion Technology Property Limited | UK | 100% | |
| Immersion Technology International Limited | UK | 100% | |
| Immersion Technologies (Singapore) Pte Limited | Singapore | 100% | |
| Immersion Technology (Nanjing) Co. Limited | China | 100% | |
| Immersion Technologies Australia Pty Limited | Australia | 100% | |
| Whise Acoustics Limited | Australia | 100% | |
| Whise Technologies Pty Limited | Australia | 100% | |
19. IMPAIRMENT REVIEW
The directors undertook an impairment review of the Group's assets as at 30 June 2008 in view of subsequent events to this date regarding the closure of the operations in Singapore and China. The format of the review was by assessing the carrying value of assets as at 30 June 2008 by country and sector of origin. The analysis and resultant impairment charges were considered as follows:
| Category | Net Costs capitalised to 30 June 2008 | Impairment charge | Net costs carried forward |
| £ | £ | £ | |
| GROUP | |||
| Intangible assets | |||
| Goodwill | 1,768,417 | (1,768,417) | - |
| Intellectual property | 4,570,491 | (3,770,491) | 800,000 |
| Licences | 143,213 | (143,213) | - |
| Total | 6,482,121 | (5,682,121) | 800,000 |
| Tangible assets | |||
| Plant and equipment | 103,757 | (103,757) | - |
| Office equipment | 23,386 | (23,386) | - |
| Leasehold improvements | 17,681 | (17,681) | - |
| Total | 144,824 | (144,824) | - |
| COMPANY | |||
| Investment in subsidiaries | 19,232,014 | (16,798,801) | 2,433,213 |
| 20 | GROUP RELATED PARTY TRANSACTIONS | ||
| Transactions between the parent and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates are disclosed below. Details of directors remuneration, being the only key personnel, are given in note 5. | |||
| Directors transactions | |||
| During the period, the Group incurred rent payable to ED Evans Holdings Pty Limited, a company owned by ED Evans the father of Craig Evans a former director (resigned 29 January 2008). The total paid for the year was £ 20,395. | |||
| Remuneration of Key Management Personnel The remuneration of the directors, and other key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS24 Related party Disclosures. | |||
| 2008 | 2007 | ||
| £ | £ | ||
| Short-term employee benefits | 463,859 | 441,000 | |
| Share-based payments | 25,000 | 20,861 | |
| 488,859 | 461,861 | ||
| 21 | COMPANY RELATED PARTY TRANSACTIONS | ||||
| During the period the Company made loans to the following subsidiaries. The loans provide necessary funds for the subsidiaries to invest in setting up operations. The Company will continue to fund the subsidiaries, in this way, through the set up phase. The Directors believe the loans are fully recoverable but do not expect to make repayment calls within the next reporting period, however these loans are repayable on demand: | |||||
| As at | As at | ||||
| 30 June 2008 | 30 June 2007 | ||||
| £ | £ | ||||
| Immersion Technology International Limited | - | 627,482 | |||
| Immersion Technologies (Singapore) Pte Limited | 18,933 | - | |||
| Immersion Technologies Australia Pty Limited | 1,076,199 | 136,206 | |||
| 1,095,132 | 763,688 | ||||
| During the period the Company entered into transactions which resulted in loans payable to the following subsidiaries: | |||||
| As at | As at | ||||
| 30 June 2008 | 30 June 2007 | ||||
| £ | £ | ||||
| Immersion Technology International Limited | 209,347 | 466,469 | |||
| Immersion Technology Property Limited | 100 | 100 | |||
| Immersion Technologies UK Limited | 100 | 100 | |||
| 209,547 | 466,669 | ||||
| Net amounts due from subsidiaries | 885,585 | 297,019 | |||
| 22 | ULTIMATE CONTROLLING PARTY |
| In the opinion of the directors there is no controlling party. |
| 23 | OPERATING LEASES | ||
| The Group leases all of its properties. The terms of property leases vary from country to country, although the majority are tenant repairing with rent reviews every 3 years and many have break clauses. | |||
| The total future of minimum lease payments are due as follows: | |||
| Year ended | Period ended | ||
| 30 June 2008 | 30 June 2007 | ||
| £ | £ | ||
| Not later than one year | 37,204 | 64,456 | |
| Later than one year and not later than five years | - | 108,889 | |
| Later than five years | - | - | |
| 37,204 | 173,345 | ||
| 24 | RETIREMENT BENEFIT SCHEME |
| The Group does not operate either a defined contribution or defined benefit retirement scheme. |
| 25 | COMMITMENTS |
| The Company has a commitment to make an equity investment of US$1,500,000 into its Chinese subsidiary, Immersion Technology (Nanjing) Co. Limited, by the end of April 2009. This commitment is required by rules for establishing a Foreign Controlled Company in Nanjing, China. If the Company ceases to require a subsidiary in Nanjing prior to April 2009 then it does not have an obligation to complete the investment. As at the date of publishing the financial statements the Company has invested US$1,300,000 (US$300,000 as at 30 June 2007) and therefore is expected to have a further commitment of US$200,000 to be made up to April 2009. The Company is in the process of filing action against Nakamichi Corporation for breach of contract in failing to purchase its manufactured goods for which the Nanjin facility was set up. The financial cost attributable to this action, can not be estimated at this time. |
| 26 | POST BALANCE SHEET EVENTS |
| On 7 July 2008, Mr Vincent Fodera resigned as a director of the Company. On 22 July 2008 the Company placed 18,500,000 ordinary shares of 0.7p each in the capital of the Company at a price of 1p per ordinary share ("Placing Shares") with certain investors (the "Placing") rising £185,000. Pursuant to the Placing, participants have additionally been granted one warrant to subscribe for an additional ordinary share in Immersion Technologies for every two new ordinary shares subscribed in the Placing. These warrants are exercisable at 1.5p per share for a period of five years from the date of admission of the Placing Shares to trading on AIM. On 18 August 2008, the Company placed 17,500,000 ordinary shares of 0.7p each in the capital of the Company at a price of 1p per ordinary share raising £175,000. Pursuant to the Placing, participants have additionally been granted one warrant to subscribe for an additional ordinary share in Immersion Technologies for every two new ordinary shares subscribed in the Placing. These warrants are exercisable at 1.5p per share for a period of five years from the date of admission of the Placing Shares to trading on AIM. The Company has also issued a further 1,100,000 ordinary shares of 0.7p each, in lieu of fees related to the Placing (the "Fee Shares"). The recipients of the Fee Shares have been granted Warrants on the same basis as the participants in the Placing, as described above. | |
| 27 | Profit and loss account of the parent company As permitted by section 230 of the Companies Act 1985, the profit and loss account of the parent company has not been separately presented in these accounts. The parent company loss for the year was £917,748 (2007:loss £274,985). |
Additional Notes:
The above financial information comprises non-statutory accounts within the meaning of section 240 of the Companies Act 1985. The financial information for the year ended 30 June 2008 has been extracted from published accounts for the year ended June 2008 that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and did not contain statements under s237 (2) or (3) of the Companies Act 1985.
The Report and Accounts will be posted to shareholders by Friday 19th December 2008. Copies may be obtained during normal office hours from the Company's registered office, Level 5, 22 Arlington Street, London, SW1A 1RD or from the company's website, www.iti-plc.com.
Contacts:
| Immersion Technologies International plc |
|
| David Lenigas/Kiran Morzaria | +44 207 016 5100 |
|
|
|
| Beaumont Cornish - Nominated Adviser |
|
| Roland Cornish/Michael Cornish | +44 (0) 207 628 3396 |
| Pelham Public Relations |
|
| Archie Berens | +44 (0) 20 7743 6679 / +44 (0) 7802 442 486 |