365.L Regulatory News (365)

Iafyds plc

("Iafyds" or the "Company")

Final Results for the Year ended 31 December 2013 and Placing of 3,666,666,666 Ordinary Shares at 0.003pence

Chairman's Statement

Introduction

Unusually for a public company, most of what is in these statutory accounts has little relevance to the future as the business to which the accounts refer is discontinued and has not traded since the interim results which were set out in the circular to shareholders dated 22 January 2014.

What is of importance for the future is the progress made and likely outcome of the search for a new direction.

Background

On 4 September 2013 the then board announced that it had been unable to secure additional funding to continue trading as an energy efficiency technology company. Accordingly the Company has been through an Administration process being subject to a Creditors Voluntary Agreement ("CVA"), while the Group's only trading subsidiary, VPhase Smart Energy Limited ("VSEL"), remains in Administration and will subsequently be liquidated. Although the Company retains its 100% ownership of VSEL, the Administrators have taken full control of VSEL and will maintain ownership of the final CVA outcome. The Company no longer controls VSEL and the entity has been treated as discontinued from the date of administration.

The administration process for VSEL is nearing completion at which point a final creditor's dividend will be paid up from VSEL to the Company. This dividend will be paid out to CVA Creditors of the Company to satisfy the CVA.

Rather than see the Company fail, Henderson Global Investors Limited ("Henderson") agreed to invest additional funds so that once the liabilities of the various business had been removed the Company might use its only remaining asset, the public quotation of its shares, in a new venture. To that end Henderson invested £150,000 of new money by way of the purchase of new shares on 7 February 2014 and accordingly came to own 83.9 per cent of the Company subsequent to the balance sheet date.

Colin Hutchinson and I joined the board on 7 February 2014 to help find and assess a suitable acquisition for the Group. The Company's name was changed from VPhase plc to Iafyds plc subsequent to year-end.

Search for an acquisition

The search for a new direction has coincided with a sharp increase in the number of Initial Public Offerings ("IPO's") on AIM. This has reduced the number of private companies looking for an AIM listing for their shares via a reverse takeover as this route is perceived to be less attractive when the conventional IPO market is strong.

In recent weeks however, investor sentiment towards further IPO activity in 2014 has cooled following the poor performance of some recent IPO's in the aftermarket. It remains to be seen whether this will reduce the number of conventional IPO's in the second half of the year.

Under the AIM rules Iafyds has until 6 February 2015 to complete a reverse takeover. Should it fail to do so it is likely that its quotation on AIM would be cancelled permanently.

Financial position

The Company has no material cash balances and any acquisition would almost certainly require an associated fund raising.

In order to meet the current running costs of the Group Henderson, on 4 June 2014, agreed to invest a further £110,000 at the same revised nominal price per share of 0.003 pence as on 7 February 2014. This is, under the AIM Rules, a related party transaction by virtue of Henderson's existing 83.9 per cent shareholding in the Group. The Directors consider, having consulted with the Company's Nominated Adviser, that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned. Application has been made to the London Stock Exchange for the new Ordinary Shares, which will rank pari passu with the Company's existing Ordinary Shares, to be admitted to trading on AIM. Admission is expected to occur at 8.00 a.m. on 12 June 2014.

Following this investment, Henderson now own 89.8 per cent of the Group's shares.

Outlook

As the typical time to complete a reverse takeover is three months, we recognise that the Group needs to identify and reach agreement in principle with a suitable target by the autumn. Failure to do so is likely to result in the Group's only asset, its quotation, being lost.

Strategic Report

Section 414C of the Companies Act ('the Act') requires that the Company inform its members as to how the Directors have performed their duty to promote the success of the Company by way of a Strategic Report.

The Chairman's Statement also forms a fundamental part of the Strategic Report. 

Business model

Until 4 September 2013 Iafyds plc (then VPhase plc) was an energy efficiency technology company focused on the provision of home energy efficiency products and services designed to reduce energy consumption for domestic and small commercial properties. The disposal of the intellectual property and business assets of VSEL to Southern Fox Investments Limited and Bristol Bluegreen Limited, for £200,000 on 24 September 2013, represented a fundamental change to the business and has resulted in the Company disposing of all of its tangible operating assets and business.

The restructuring of the business has led to a fundamental change in the Company's business as it no longer engages in any trading activities. Consequently, the Company now constitutes an Investing Company, as provided for by Rule 15 of the AIM Rules for Companies issued by the London Stock Exchange.

Investing Policy

The Company's Investing Policy is to invest in businesses that typically have attributed to them some or all of the following criteria and characteristics:

• Strong management;

• An established entity or product in growth mode;

• A differentiated product or offering;

• A significant potential market opportunity; and

• The ability to generate strong cash flows in the future.

The Company will initially focus on projects located in the United Kingdom but will also consider investments in other geographical regions in the future. The Company will consider all sectors; however, the Directors recognise that there are sectors which are unlikely to meet its investment criteria.

The Directors believe that their collective experience, together with their extensive network of contacts will assist it in the identification, evaluation and funding of suitable investment opportunities. When necessary, other external professionals will be engaged to assist in the due diligence of prospective opportunities. The Directors will also consider appointing additional directors with relevant experience if the need arises.

The objective of the Directors is to generate capital appreciation and any income generated by the Company will be applied to cover costs or will be added to the funds available to further implement the investment policy. In view of this, it is unlikely that the Directors will recommend a dividend in the early years. However, they may recommend or declare dividends at some future date depending on the financial position of the Company.

Any proposed investment to be made by the Company is likely to be in just one investment which may be deemed to be a reverse takeover under the AIM Rules, in which case shareholder approval will be required. Investments will be made with a view to yielding returns over the medium to long term.

Review of the business

The loss for the year was £2,220,000 (2012: £1,658,000). 

VPhase Smart Energy Limited began 2013 in a disappointing fashion. The Company had raised £519,000 of new funds and signed the BG contract and expected continued growth. However, the introduction of the Green Deal and the Energy Company Obligation had a detrimental impact on the demand for energy efficiency products including voltage optimisation. In addition the welfare reforms led to a reduction in budgets available for refurbishment and energy efficiency measures. This had a damaging impact on sales which dropped dramatically in the second quarter.

It became apparent that, given downturn in performance and funds available, additional funding would be required to ensure that the Group could continue to trade. An approach was made to our existing institutional investors; however given the deterioration in trading performance and the uncertainty surrounding the wider market for energy efficiency products the existing institutional investors were unwilling to commit funds and new institutions were also deterred by that stance.

The Board explored other sources of funding but it became apparent that funds were either not available in sufficient quantum or as timely as required and on 20 June 2013 we requested the suspension of our shares from trading on the AIM Market of the London Stock Exchange. During this period advice was sought from BDO LLP in relation to the options available. Given the Group's financial position the Directors filed notices of intention to appoint Administrators for the Group on 12 July 2013.

Between 12 July 2013 and 22 August 2013, the business and its assets were marketed and a solvent solution was identified whereby the trading subsidiary would be sold as a going concern and the holding company VPhase plc converted into an investment shell. During this period the Directors took legal advice on the extension to the Intention to Appoint Administrators each time it lapsed and maintained the protection for the Group by extending the notice. On 22 August 2013, the third notice lapsed and it was not deemed appropriate to extend the Notice as the solvent solution for the subsidiary was progressing well. The terms of the restructuring of VPhase plc could not be agreed and on 4 September 2013, the Directors made an application for the appointment of Joint Administrators and Dermot Justin Power and Patrick Alexander Lannagan were appointed.

On 6 September 2013, 9 out of 17 employees were made redundant and the remainder by the 30 September 2013. During this period the Administrators sold the intellectual property and tooling for £200,000 and commenced the disposal of the remaining business assets. On 20 September 2013, Vanda Murray OBE and Duncan Sedgwick both resigned from the Board.

VPhase Smart Energy Limited has been treated as a discontinued operation and deemed disposed of from the date it entered administration. A loss for the year on discontinued operation of £2,118,000 has been recognised (2012: £1,548,000).

On 12 November 2013, at a meeting of creditors the Joint Administrators' proposals were approved, including that the Joint Administrators proposed a Company Voluntary Arrangement ("CVA"). At subsequent meetings of creditors and members, also held on 12 November 2013, the CVA was approved. The CVA commenced on 12 November 2013. The terms of the CVA were discussed in the documents issued to Creditors and Members. Broadly the Supervisors will receive any dividend from Vphase Smart Energy Limited, along with a contribution from a third party, and will distribute these funds to Creditors. Upon the funds being distributed the CVA will be completed.

On 7 January 2014 the Company announced that it had exited administration effective from 27 December 2013. The Company entered into a CVA with its creditors and members, and raised approximately £150,000 through a conditional placing to Henderson of 5,000,000,000 New Ordinary Shares at 0.003 pence per New Ordinary Share. Following shareholder approval of the placing on 7 February 2014, Henderson's total shareholding gave it a controlling stake in the Company at 83.9%. Henderson's acquisition of New Ordinary Shares would normally, without a waiver by the Panel of the obligations under Rule 9 of the Takeover Code, have resulted in Henderson being required to make a general offer for the remaining New Ordinary Shares of the Company. The Panel agreed to such a waiver, following written confirmations, consenting to such waiver being granted, being received from the Consenting Independent Shareholders who held in excess of 50 per cent of the Company's existing voting shares. 

Immediately prior to the placing there was a Capital Reorganisation as the subscription price proposed was lower than the nominal value of existing ordinary shares. The shareholders approved a Capital Reorganisation on the basis that each of the Existing Ordinary Shares of 0.25 pence each will be subdivided into and reclassified as:

(a) One Redenominated Share (being an ordinary share in the capital of the Company with a nominal value of 0.003 pence each); and

(b) One Deferred Share (being a deferred share in the capital of the Company with a nominal value of 0.247 pence each).

The Deferred Shares will not be admitted to trading on AIM (or any other investment exchange). The Deferred Shares will have limited rights, and will be subject to the restrictions, as set out in the Company's New Articles, proposed to be adopted at the General Meeting, and as summarised below.

The Deferred Shares will be transferable only with the consent of the Company and will not be admitted to trading on AIM (or any other investment exchange). The holders of the Deferred Shares shall not, by virtue or in respect of their holdings of Deferred Shares, have the right to receive notice of any general meeting of the Company nor the right to attend, speak or vote at any such general meeting.

On 7 February 2014 Richard Smith and Colin Black resigned from the Board and were replaced by Colin Hutchinson and myself.

Key performance indicators

The Directors will review a range of financial and non-financial key performance indicators of any potential investment target.

Principal Risks and Uncertainties

In order to avoid suspension of its securities from trading, AIM Rule 15 requires an investing company to make an acquisition which constitutes a reverse takeover under AIM Rule 14 or otherwise implement its investing policy to the satisfaction of the London Stock Exchange within twelve months of the disposal occurring. This period will expire on the 6 February 2015.

Future developments

As required by the AIM Rules, until the Investment Policy is substantially implemented, at each Annual General Meeting of the Company shareholder approval of its Investing Policy will be sought.

Going Concern

Due to the events occurring in the year, the Group no longer conducts its original trading activities and as a result of this cessation of trade the Financial Statements of the Group are prepared on a basis other than going concern.

As stated above, the Company has reached an agreement with its creditors and members to execute a CVA. The Directors acknowledge the net liabilities position of the Group and Company at the balance sheet date, however as stated above an injection of funds of £150,000 was made by Henderson by way of a share placing subsequent to year-end end and a further placing of £110,000 was agreed on 4 June 2014. Following finalisation of the CVA, the Company is forecast to have sufficient funds to continue as an investment shell in the short-term. The Directors have considered the Company's new investment policy strategy and remain confident an acquisition can be made over the forthcoming period. As stated above, in order to avoid suspension of its securities from trading, AIM Rule 15 requires an investing company to make an acquisition which constitutes a reverse takeover under AIM Rule 14 or otherwise implement its investing policy to the satisfaction of the London Stock Exchange within twelve months of the disposal occurring. As a consequence there is a material uncertainty as to whether the investing policy will be executed within the prescribed timeframe, which may cast significant doubt on the Company's ability to continue as a going concern.

Clive Carver

Chairman

4th June 2014

For further information please contact:

Iafdys plc: Clive Carver, Chairman iafydsplc@gmail.com

Panmure Gordon: Hugh Morgan / Callum Stewart  +44 (0) 20 7886 2500

About Iafyds plc

Iafyds plc is an Investing Company under AIM rules and the Company does not trade at present. Iafyds plc's shares are listed on the AIM Market of the London Stock Exchange.

The results given below are extracted from the Iafyds full Annual Report which is available from the Company's website www.vphases.co.uk

Directors' Report

The Directors present their annual report and financial statements for the year ended 31 December 2013.

Under section 414C(11) of the Act, the Directors have included information relating to the Going Concern of the Company in the Strategic Report, otherwise required by regulations made under section 416(4) to be disclosed in the Directors' report, given its strategic importance to the Company.

Results and dividends

The loss for the year after taxation was £2.2 million (2012: £1.7 million). The Directors cannot recommend the payment of a dividend.

Directors

The Directors of the Company that served during the year, and subsequently, were as follows:

Richard Smith (resigned 7 February 2014)

Vanda Murray (resigned 20 September 2013)

Colin Black (resigned 7 February 2014)

Duncan Sedgewick (resigned 20 September 2013)

Clive Carver (appointed 7 February 2014)

Colin Hutchinson (appointed 7 February 2014)

Relevant details of the current Directors are set out on page 10.

Directors Interests

The beneficial and non-beneficial interests in the issued share capital of the Company were as follows:

Directors' emoluments

(a) Colin Black was appointed 21 May 2012

(b) Nick Moss resigned 21 May 2012

Third party indemnity provision

The Company has provided liability insurance for its Directors. The annual cost of the cover is not material to the Group. The Company's Articles of Association allow it to provide an indemnity for the benefit of its Directors which is a qualifying indemnity provision for the purposes of the Companies Act 2006.

Share capital

Details of changes to share capital in the year are set out in Note 17 to the Financial Statements.

As at 2 April 2014 the Company has been notified of the following significant interests in its ordinary shares, being a holding of 3% and above:

Henderson Global Investors Limited 83.9%

Flowgroup plc (previously Energetix Group plc) 5.6%

Shareholder communications

The Company has a website, www.vphase.co.uk, for the purposes of improving information flow to shareholders, as well as potential investors. The domain name is the former name of the Company and will be considered to be changed at an appropriate point in time.

Employees

The Company's Board composition provides the platform for sound corporate governance and robust leadership in implementing the Company's strategies to meet its stated goals and objectives.

The Group no longer has any employees following the restructure of the business. The Group held its employees and consultants at all levels to high standards and expects the conduct of its employees to reflect mutual respect, tolerance of cultural differences, adherence to the corporate code of conduct and an ambition to excel in their various disciplines. The Group aims to continue to apply these standards for any new employees.

Disclosure of information to the auditor

In the case of each person who was a Director at the time this report was approved:

· so far as that Director was aware there was no relevant available information of which the Company's auditors was unaware; and

· that Director had taken all steps that the Director ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

This information is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Auditor

In accordance with Section 489 of the Companies Act 2006, a resolution for the reappointment of Deloitte as auditors of the Company is to be proposed at the forthcoming Annual General Meeting.

Approved for issue by the Board of Directors and signed on its behalf:

Clive Carver

Chairman

4th June 2014

Board of Directors

Clive Carver

Non-executive Director

Clive Carver qualified as a chartered accountant in 1986 before spending 8 years in the corporate finance departments of Kleinwort Benson, Price Waterhouse and Shire Trust. He then spent 17 years in the corporate broking arena becoming successively head of corporate finance at Seymour Pierce, Williams de Broë and finnCap.

Since 2006 Clive has been chairman of AIM listed Roxi Petroleum, a Kazakh based oil & gas exploration and production company, becoming Executive Chairman in June 2012. He is also Non-Executive Chairman of Ascent Resources, an AIM listed company with gas interests in Slovenia and a non-executive director of fastjet PLC, an airline focused on Africa.

Colin Hutchinson

Non-executive Director

Colin is a chartered accountant and holds an MBA from Warwick Business School. He has 15 years of international experience gained in commercially orientated finance roles with high growth organisations and start-ups. He has experience across a range of different sectors including telecoms, technology & energy. His most recent role has been as Group Financial Controller & Company Secretary of Ascent Resources plc.

Directors and Advisers

Corporate Responsibility

Directors' Responsibilities Statement

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting Standards ('IFRSs') as adopted by the European Union and have elected to prepared the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on the AIM Market.

In preparing the parent company financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgments and accounting estimates that are reasonable and prudent;

· state whether applicable UK 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 company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· make an assessment of the company's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;

· the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

· the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company's performance, business model and strategy.

Independent Auditor's Report to the Members of Iafyds plc

We have audited the financial statements of Iafyds plc for the year ended 31 December 2013 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Loss, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Financial Position, the Consolidated Cash Flow Statement, the Company Balance Sheet, and the related notes 1 to 21. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. 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 auditor's 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 Auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the Audit of the Financial Statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on Financial Statements

In our opinion:

· the financial statements give a true and fair view of the state of the Group's and of the parent company's affairs as at 31 December 2013 and of the Group's loss for the year then ended;

· the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

· the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Emphasis of matter - Going concern

In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of the disclosure made in note 1 to the financial statements concerning the Company's ability to continue as a going concern. The Group's previous trade ceased during the year and the Company became an investing company under the AIM rules. AIM Rule 15 requires an investing company to make an acquisition which constitutes a reverse takeover under AIM Rule 14 or otherwise implement its investing policy to the satisfaction of the London Stock Exchange within twelve months of the disposal occurring, and hence the Company now has until 6 February 2015 to make an acquisition and recommence trading. As a consequence there is a material uncertainty as to whether the investing policy will be executed within the prescribed timeframe, which may cast significant doubt on the Company's ability to continue as a going concern.

Opinion on Other Matters Prescribed by the Companies Act 2006

In our opinion the information given in the Directors' Report and the Strategic Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

· adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or

· the parent company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of Directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

Jane Boardman Bsc ACA (Senior Statutory Auditor)

for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor

Manchester, United Kingdom

4 June 2014

Consolidated Income Statement

For the year ended 31 December 2013

* The comparatives have been restated to reflect the requirements of IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations. See accounting policies for details.

The loss for each year is also the total comprehensive loss for that year and consequently no separate statement of comprehensive loss is presented.

The notes on pages 22 to 38 are an integral part of these Financial Statements.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2013

Consolidated Statement of Financial Position

As at 31 December 2013

The financial statements of Iafyds plc (registered number 04958332) were approved and authorised for issue on 4 June 2014 and were signed on its behalf by:

Clive Carver

Chairman

Consolidated Cash Flow Statement

For the year ended 31 December 2013

Company Balance Sheet

As at 31 December 2013

The financial statements of Iafyds plc (registered number 04958332) were approved and authorised for issue on 4 June 2014 and were signed on its behalf by:

Clive Carver

Chairman

Notes to the Financial Statements

1. Accounting Policies

Reporting entity

Iafyds plc ("the Company") and its subsidiaries (together 'the Group') previously developed products that provide energy efficiency solutions to certain identified problems in the energy market. The Company is now an investment company. The addresses of its registered office and principal place of business are disclosed on page 11 of the Group Financial Statements. Iafyds plc is a public limited company incorporated in England and Wales under the Companies Act 2006.

Basis of Preparation

The Group Financial Statements of Iafyds plc have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. The Group Financial Statements have been prepared under the historical cost convention.

The comparatives for the consolidated income statement and consolidated statement of cash flows for the year ended 31 December 2012 have been restated to reflect the disclosure of the results of discontinued operations (see note 2).

The Company Financial Statements have been prepared under the historical cost convention and in accordance with the Companies Act 2006 and applicable UK accounting standards (United Kingdom Generally Accepted Accounting Practice).

Going concern

Due to the events occurring in the year, the Group no longer conducts its original trading activities and as a result of this cessation of trade the Financial Statements of the Group are prepared on a basis other than going concern.

As stated above, the Company has reached an agreement with its creditors and members to execute a CVA. The Directors acknowledge the net liabilities position of the Group and Company at the balance sheet date, however as stated above an injection of funds of £150,000 was made by Henderson by way of a share placing subsequent to year-end. Following finalisation of the CVA, and the injection of a further £110,000 the Company is forecast to have sufficient funds to continue as an investment shell in the short-term. The Directors have considered the Company's new investment policy strategy and remain confident an acquisition can be made over the forthcoming period. As stated above, in order to avoid suspension of its securities from trading, AIM Rule 15 requires an investing company to make an acquisition which constitutes a reverse takeover under AIM Rule 14 or otherwise implement its investing policy to the satisfaction of the London Stock Exchange within twelve months of the disposal occurring. As a consequence there is a material uncertainty as to whether the investing policy will be executed within the prescribed timeframe, which may cast significant doubt on the Company's ability to continue as a going concern.

Critical Accounting Estimates and Judgments

The preparation of the Group Financial Statements in conformity with IFRS as adopted by the European Union requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies.

Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the present circumstances.

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group Financial Statements are disclosed below.

Critical accounting judgements and policies

The policy, and the basis of preparation, is contained on page 22.

The Directors have not recognised a deferred tax asset in relation to unrelieved tax losses as the recoverability is currently uncertain due to the ability to generate sufficient profits in the future to utilise the tax losses available. 

Basis of Consolidation

On 26 September 2007, the Company changed its name to VPhase plc and the Company became the legal holding company of VPhase Smart Energy Limited via a share for share exchange. The share for share exchange has been accounted for as a reverse acquisition.

The Group Financial Statements also incorporate the Financial Statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the Group Income Statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The Company continues to hold 100% of the share capital of VPhase Smart Energy Limited ("VSEL"), a former subsidiary of the Group. The Company however no longer has control of that company following VSEL entering Administration on 4 September 2013 resulting in a deemed disposal and VSEL is therefore no longer a subsidiary of the Company. The results of VSEL are consolidated only up to the date that company entered Administration.

In accordance with Section 408 of the Companies Act 2006, no profit and loss account is presented for the Company. The Company made a loss for the year of £8,777,000 (2012: £404,000).

Intangible Assets

The carrying values of intangible assets are tested when events or changes in circumstances indicate that the carrying amount may not be recoverable.

Intangible assets are reviewed annually for impairment, and if necessary an impairment loss is recognised in the Group Income Statement within administrative expenses for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Intangible assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

Property, Plant and Equipment

Property, plant and equipment are stated at historical cost less depreciation. Depreciation of assets is calculated using the straight line method to allocate their cost over their estimated useful lives as follows:

Property, plant and equipment 3 years

Material residual value estimates are updated as required, but at least annually, whether or not the asset is revalued. Gains and losses on disposal are determined by comparing net proceeds with the carrying amount. These are included in the Group Income Statement. Provision is made for any impairment.

Financial Assets

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' ("FVTPL"), 'held to maturity' investments, 'available for sale' ("AFS") financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The Group currently has only loans and receivables.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset/liability and of allocating interest income/expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts/payments through the expected life of the financial asset/liability, or, where appropriate, a shorter period.

Loans and receivables

Trade and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables as is cash and cash equivalents. Loans and receivables are measured initially at fair value and thereafter at amortised cost using the effective interest method, less any impairment. Interest income is applied by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after initial recognition of the financial asset, the estimated cash flows of the investment have been impacted.

For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the financial asset's original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand and demand deposits together with other short term highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

Trade Payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Other Financial Liabilities

Other financial liabilities including borrowings are recognised initially at fair value, net of transaction costs incurred. These are subsequently recorded at amortised cost using the effective interest method, with interest related charges recognised as an expense in finance costs in the income statement.

Revenue Recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the Group's activities excluding VAT and trade discounts. Revenue is recognised as follows:

Sales of goods

Revenue from the sales of goods is recognised when all the following conditions have been satisfied:

· the Group has transferred to the buyer the significant risks and rewards of ownership of the goods which is when the goods have been delivered to, or collected by the buyer;

· the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold which is when the goods have been delivered to, or collected by the buyer;

· the amount of revenue can be measured reliably;

· it is probable that the economic benefits associated with the transaction will flow to the Group; and

· the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Operating leases

Assets leased under operating leases are not recorded on the balance sheet and rental payments are charged directly to the income statement on a straight line basis over the term of the lease.

Research and Development

Research costs are charged against income as incurred. Certain development costs are capitalised once it can be demonstrated that the product is clearly identifiable, technically and commercially feasible, will generate future economic benefits, and the Group has sufficient resources to complete development. Such intangible assets are amortised on a straight line basis from the point at which the asset is ready for use over the period of the expected benefit, and are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Other development costs are charged against income as incurred since the criteria for their recognition as an asset are not met.

Current Tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Group Income Statement because it excludes/includes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred Tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts 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 that are recognised are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the reporting date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Income Statement, except where they relate to items that are charged or credited directly to other comprehensive income or equity in which case the related deferred tax is also charged or credited directly to other comprehensive income or equity as appropriate.

Employee Benefits

Pensions

The Group operated a money purchase pension scheme for its former employees and directors. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amount charged to the income statement represents the contributions payable to the scheme in respect of the accounting period. There were no amounts payable outstanding to the pension scheme at 31 December 2013 (2012: £nil).

All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 January 2005 are recognised in the Group Financial Statements.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments the fair values of employees' services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date. All share options in issue lapsed during the year.

Share options were valued at the date of grant using the Black-Scholes option pricing model for options with non-market vesting conditions attached and the simulation model for options with market vesting conditions attached, and are charged to operating profit over the vesting period of the award with a corresponding credit to the 'other reserves'.

If vesting periods or other non-market vesting conditions apply, the expense was allocated over the vesting period based on the best available estimate of the number of share options expected to vest. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.

New Accounting Standards and IFRIC Interpretations

The following new standards and amendments to standards are mandatory for the first time for the Group for financial year beginning 1 January 2013. The adoption of these standards and amendments has had no material effect on the Group's accounting policies. 

Standards, amendments and interpretations, which are effective for reporting periods beginning after the date of these financial statements which have not been adopted early:

2. Discontinued Operations

The net assets and liabilities at disposal and the profit on disposal were as follows:

During the year VPhase Smart Energy Limited paid £553,000 (2012: paid £1,358,000) to the group's net operating cash flows, paid £29,000 (2012: £432,000) in respect of investing activities and paid £nil (2012: £54,000) in respect of financing activities.

3. Administrative expenses

4. Staff costs

5. Directors' remuneration

6. Taxation

7. Loss per share

8. Intangible fixed assets - Group

9. Tangible fixed assets - Group

10. Investments - Company

The Company holds 100% of the share capital of VPhase Smart Energy Limited ("VSEL"). The Company however no longer has control of VSEL following VSEL entering administration on 4 September 2013. VSEL is therefore no longer a subsidiary of the Company. Accordingly the carrying value of the investment was fully impaired during the year.

11. Inventory - Group

12. Trade & Other receivables - Group

None of the Group's trade receivables held at 31 December 2012 were past due at the reporting date.

13. Debtors - Company

14. Provisions - Group

Provisions represented management's best estimates of liabilities under 5 year warranties extended by VPhase Smart Energy Limited.

15. Trade & Other payables - Group

16. Creditors less than one year - Company

17. Share Capital & Reserves

On 14 January 2013 the Company placed 103,800,000 Ordinary shares at 0.50 pence raising gross proceeds of £519,000. During 2013, the Company issued 5,162,094 Ordinary shares at various prices per share set out below by way of settlement of net fees to the then Non-executive Directors.

18. Cash consumed by operations

19. Events after the balance sheet date

On 7 February 2014, the Company issued 5,000,000,000 New Ordinary Shares at 0.003 pence per New Ordinary Share to Henderson Global Investors Limited ("Henderson"). Further details of the placing and impact upon the existing Ordinary Shares of the Company are contained on page 5.

On 4 June 2014 the Company announced that in order to meet the current running costs of the Group Henderson had agreed to invest a further £110,000 at the same nominal price per share of 0.003 pence they did on 7 February 2014. 

20. Related party transactions

The Directors have taken advantage of the exemption within FRS 8 and have not disclosed transactions with wholly owned subsidiaries. No transactions occurred with other related parties in 2013. In 2012, the Company incurred fees of £154,000 payable to Flowgroup plc (formerly Energetix Group plc, a company that controlled 25.57% of Iafyds plc at 31 December 2013, for administrative services (2013: £nil). At 31 December 2012, the Company owed Flowgroup plc £28,000.

21. Share-based payments

All share options have lapsed in the year. The share options existing at the beginning of the year, including vesting conditions were:

(1) Options were exercisable in tranches of a third on achievement of: breakeven: £100 million market valuation; and £300 million market valuation.

(2) Half of the options were exercisable in tranches of a third on achievement of: breakeven; £100 million market valuation; and £300 million market valuation. The other half were exercisable in tranches of a third after year one, two and three from grant date.

(3) No performance criteria were attached.

(4) Options were exercisable immediately following the first period of three consecutive calendar months the Group did not make a loss (prepared under UKGAAP).

Share options were valued at the date of grant using the Black-Scholes option pricing model for options with non-market vesting conditions attached and the simulation model for options with market vesting conditions attached, and were charged to operating profit over the vesting period of the award with a corresponding credit to 'other reserves'. This resulted in a fair value charge of £82,000 in 2012 and a corresponding credit to other reserves. The weighted average exercise price of share options granted in the 2012 was 0.804 pence. No options were granted in 2013.

Assumptions

The following assumptions were used to determine the fair value of share options at the respective date of grant:

Expected volatility was derived from observation of the volatility of the Company's shares. The expected life used in the model had been adjusted based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural conditions.