FST.L Regulatory News (FST)

25 April 2013

Toumaz Limited

Full year results

Toumaz Limited (AIM: TMZ, 'Toumaz', or 'the Group'), a pioneer in low cost, ultra-low power wireless communications technology, has published its results for the year ended 31 December 2012.

Highlights

·; Frontier Silicon ("Frontier") acquired and fully integrated

·; Board strengthened and management team enhanced

·; Strategy refocused to address wireless connectivity for healthcare and consumer markets

·; Significant progress in new wireless chip development programmes across healthcare, digital radio and connected audio markets

·; Digital Radio module and chip unit sales up 10.3% to 3.2m (2011: 2.9m)

·; SensiumVitals® US hospital pilot commenced Q4 2012 and exceeded expectations:

 - White paper and health economics study published today from first six months of pilot

 - Medical and economic case for use of SensiumVitals® clearly demonstrated: real cost savings and improved patient care

·; Pro-forma full year revenues of £22.3m (2011: £24.8m)

o Revenue as reported up to £8.8m (2011: £2.3m)

·; Cash at year end: £15.3m

·; EBITDA loss, excluding acquisition costs, £8.7m (2011: EBITDA loss £5.8m)

·; Loss per share of 2.2p (2011: 1.1p loss)

Anthony Sethill, Chief Executive of Toumaz, commented,

"This has been a pivotal year for us as we move from being an R&D operation to a commercial business of scale. We have significantly enhanced the expertise and capability of the management team and refocused our strategy on providing leading wireless chip solutions for our core healthcare and consumer markets.

"Our chip development programme is making good progress. Each new chip platform targets our core market sectors of digital radio, wireless health and connectivity to the Internet of Things, and are at an advanced stage of development."Toumaz Healthcare has made significant advances in the last six months, with our SensiumVitals monitoring system completing a highly successful pilot and health economics study. The results of this, announced today, comprehensively prove the concept and capability of our SensiumVitals® solution to save lives and reduce monitoring costs. We plan to start rolling out this product in Europe during the rest of this year."

Enquiries:

About Toumaz (www.toumazltd.com)

Toumaz is a pioneer in low cost, ultra-low power wireless technologies for a wide range of markets including medical monitoring and internet connected consumer devices. The recent acquisition of Frontier Silicon brings operational scale and expertise together with a leadership position in digital and networked audio markets.

Overview

During 2012, Toumaz commenced its transformation from an R&D led to a market led organisation, with the aim of becoming a global leader in wireless semiconductor solutions. The Group has reviewed its core strengths and developed a focused strategy, exploiting Toumaz's exceptional technology and expertise. The Group's Board and senior management team have also been significantly strengthened.

The Group's strategy is to become fully self-sufficient in providing new chip solutions focused on the needs of its core digital radio, digital audio and healthcare markets. It aims to ensure these solutions are appropriately commercialised and marketed, to exploit existing market opportunities and to realise the full potential within the healthcare division.

To enable it to deliver on its strategy, the Group acquired Frontier in August 2012. Frontier provides Toumaz with a market leading position in digital radio and connected audio, bringing annual revenues of over £20m and a proven sales, marketing and supply chain infrastructure.

The enlarged Group is now organised into two market-focused operating units; Frontier Digital Audio (incorporating Digital Radio and Connected Audio); and Toumaz Healthcare, which share appropriate infrastructure, enhancing operational efficiencies.

The Frontier Digital Audio division is focused on connectivity within consumer electronics, including the 'Internet of Things', where peripheral devices are wirelessly connected to the internet to enable the automated home.

Toumaz Healthcare's focus is on wireless monitoring of patients in the hospital environment and it plans to extend this into the domestic environment over the next few years. The key differentiator of Toumaz's SensiumVitals® disposable monitoring product is its continuous monitoring of patients' vital signs. The benefits of this include early intervention if a patient's condition deteriorates, and reduced costs to healthcare providers through limiting the need for medication and additional treatment thanks to early intervention.

Toumaz's core technology and IP is common to both divisions' solutions and the enlarged Group now includes all the components to provide complete proprietary platforms, including both hardware and software. Toumaz's radio chip capability is a strong differentiator for its products, as is the Group's ability to provide complete end-to-end solutions, something which many large semiconductor businesses have struggled with.

The Group's transformation will gather pace during 2013 as it begins to sample and launch its new chip platforms, targeting its core markets. Toumaz is confident that it is on the path to delivering sustainable growth in the near future.

Digital Radio

Overview

Prospects for the digital radio business appear healthy. Over the next three years, market volumes are expected to see significant growth as the adoption of digital radio increases in the UK and internationally. Some continued erosion of prices is expected due to competitive pressures. However, this will in turn help to drive volume growth as the cost differential between analogue and digital radio chips narrows. Investments in new chip developments will enable the Group to maintain margins at current levels. The Group's market share in its core markets of DAB / DAB+ consumer radios and automotive aftermarket (currently ~80%) is expected to remain broadly stable.

Market development (UK and international)

In the UK, the Group's largest market, the Government has indicated that it will make a decision by the end of 2013 whether to proceed with digital switchover. A positive decision, supported by the introduction of a Digital Radio Certification Scheme, would be expected to provide a strong uplift to sales of digital radios in the UK, currently 2m units a year. Significant growth potential exists as, currently, only one third of radios, including clock radios and home audio systems, sold are digital (of portable radios, 70% are digital (GfK, 2012)); the automotive aftermarket sector represents an additional opportunity of up to 20m units between now and an eventual switchover date.

Internationally, digital radio is beginning to make significant advances. Norway and Denmark have set target dates for digital switchover (2017 and 2019 respectively), whilst Switzerland and Australia are now firmly established markets - both territories have cumulative sales of over 1m units. Perhaps of greatest interest has been the progress made in Germany, where DAB+ services were launched in August 2011. With support from public and private broadcasters, 2012 saw the first significant volumes from this market. Strong growth is anticipated over the next three years.

Developments in Germany are helping to build a wider momentum for digital radio across Europe:

·; The Netherlands will see the launch of DAB+ in September

·; In Italy, the first regional services went on air at the end of 2012

·; In France, the regulator is in the process of awarding the first licences for Paris, Nice and Marseille

·; In Sweden, the government is to make a decision this year on whether to award licences for DAB+ services

·; In Belgium, broadcasters are seeking government approval to launch DAB+ services.

This momentum is supported by the European Broadcasters Union, representing public broadcasters, which has called for the widespread deployment of digital radio across Europe.

Additional opportunities are emerging in the Americas and Asia; the US has already adopted its version of digital radio - HD radio; in India, the Government has confirmed its support for the DRM standard; and Japan has adopted ISDB-T. The Group's next generation digital radio chip will support all of these standards. The scale of these opportunities has yet to be sized but have the potential to create significant upside for the business.

Competitive positioning and product development

The Group's Digital Radio division is the clear market leader in the provision of digital radio solutions with an ~80% market share in its core markets. It has long established relationships with major consumer electronics brands, including Sony, Philips, Pure, Roberts, Bose, Grundig and Panasonic - plus many retailer own-brands.

As the adoption of digital radio accelerates, new competitors are likely to emerge. To date, these players have had limited success, but a high priority for the business is to protect its market share. The Group's investments in chip and software developments are designed to meet this objective - as well as helping to drive the market. The focus of the engineering teams is to integrate as much functionality onto a single chip solution as possible, minimise power consumption and introduce new functionality which meets the needs of customers, content providers and end-users.

A specific objective for the business is to reduce the price differential between analogue and digital radio chips which will aid digital uptake. The Group's next generation chip, Chorus 4, will narrow this gap substantially.

Connected Audio

Overview

Toumaz sees connected audio as a key component of its long term growth strategy:

·; The networked audio sector is poised for take-off; by 2016, ~70% of new consumer audio devices are expected to be connected

·; The Group already has significant technology expertise in this sphere - a position strengthened through its partnership with Imagination Technologies

·; Toumaz will seek both to leverage its existing customer base and secure new clients (including major consumer electronics brands not active in digital radio).

Over the next two years, the Group expects to launch a number of network audio solutions. The short-term focus will be on Bluetooth products - especially those targeting the wireless dock market; these will be followed by products which combine both Bluetooth and Wi-Fi - with a particular focus on low cost solutions for the broader connected audio market.

Market development

Connected products are a rapidly emerging segment within consumer audio. A worldwide market in 2012 of ~20m connected audio devices is expected to rise to ~70m units by 2016.

Key drivers of this growth are:

·; the rapid adoption of smart devices (smartphones and tablets)

·; the growing popularity of cloud-based music streaming services

·; the falling cost of connected audio solutions

Currently, the connected audio market is mainly Bluetooth-enabled (i.e. music is streamed via Bluetooth from smart devices to wireless speakers). Bluetooth is a low cost, mature technology commonplace in mobile phones.

Over time, Wi-Fi is expected to become more prevalent - becoming the backbone of connected home ecosystems, whilst (compared to Bluetooth) offering superior range and audio quality. The uptake of Wi-Fi in connected audio is expected to rise as the price gap between Wi-Fi and Bluetooth solutions diminishes and the advantages of Wi-Fi are demonstrated.

Competitive positioning and product development

The Group already has significant expertise in connected audio. Frontier Silicon modules are to be found in over 1m internet radios; and the Xenif Wi-Fi chip provides a range of advanced audio applications, including multi-room. The Group's hardware solutions are complemented by a suite of software solutions - for example, for the integration of online music services (e.g. Pandora and Sirius XM), audio processing, wireless streaming and apps for smart devices.

In 2013, Toumaz plans to launch two new modules, Tuscany and Roma. Tuscany is a low-cost module addressing the rapidly expanding wireless dock market. Its primary focus will be on wireless docks with radios (particularly those with digital radios). Roma is a wireless module based on the Group's Xenif Wi-Fi chip which will be able to provide cloud based content and streaming for multi-room speakers

In partnership with Imagination Technologies, the Group is already several months into the development of Symphony, its next generation connected audio chip. This chip will be based on Imagination's MIPS interactive core (including DSP extensions) and will include Wi-Fi, Bluetooth, NFC and audio processing and is scheduled for launch in 2015.

The Internet of Things

Symphony is a keystone of the Group's long term strategy to address the market for the "Internet of Things". As connectivity becomes more pervasive in-home and at work, the market for embedded products is expected to grow exponentially. Toumaz's initial focus is on connected audio and wireless healthcare. Longer term, the Group expects to explore additional opportunities in adjacent sectors, such as home automation, security, smart metering, toys and in-car infotainment. The development of Symphony and Sensium 2 (see Healthcare) are the first steps in this journey.

Healthcare

Overview

Sensium® is Toumaz's platform for ultra-low-power wireless body area monitoring. The global patient monitoring market is estimated at $6.1 billion and the Sensium® platform aims to serve this market by incorporating all the components needed for a healthcare monitoring system including:

·; Unobtrusive, long battery life body nodes with multiple sensor interfaces

·; Wireless networking optimised for health & medical data

·; Server technology to enable enterprise level deployments

·; Efficient algorithms to overcome corruption from motion

Sensium® technology is suitable for a wide range of markets from hospital to care homes/nursing homes and further domestic applications.. The technology can be packaged into different form factors, including disposable and non-disposable, for each of the markets.

The first product based on Sensium® technology is SensiumVitals® - a disposable wireless vital signs monitoring solution aimed at the general wards of hospitals. Toumaz US, Toumaz's licensee for SensiumVitals®, has launched the product in the USA with a pilot at St. John's Health Center. The pilot has progressed extremely well and has clearly demonstrated the patient safety benefits of SensiumVitals®.

SensiumVitals®

General floor or med-surg patients in hospital currently have measurements of their "vital signs" taken and recorded only intermittently; commonly at four to eight hour intervals, unless they have previously been identified as at particular risk of deterioration. Thus deteriorations can occur to a point of serious consequence before it is recognized. A system that automatically measures patient vital signs and can notify a clinician when a patient's condition changes would help to alleviate this situation and increase patient safety. This will also help save costs for hospitals and healthcare trusts since patient deterioration can be treated early on in the general ward and prevent readmission to more costly areas of the hospital such as ICUs/HDUs.

SensiumVitals® is an end to end solution that consists of a disposable wireless plaster with integrated temperature sensor that will be applied to a patient. The disposable plaster is fixed to the patient and captures vital signs (axillary temperature, pulse, and respiratory rate) every 2 minutes. The plaster measures the vital signs using standard techniques that are widely used in patient monitors in hospitals. If any of these vital signs are outside defined upper and lower limits a notification is raised by the server software. The plaster has a five day battery life and can be disposed after use.

SensiumVitals® is currently being piloted at St. John's Health Center in Santa Monica, CA. The pilot has proved extremely successful - heart rate, respiratory rate and temperature are the leading indicators of patient deterioration and the plaster has helped detected patient deterioration many hours before routine vital signs rounds in the general ward.

Separately today, Toumaz has published a white paper on the results and health economics study of the first six months of its pilot at St John's. Results from the pilot exceeded expectations, with the medical and economic case for the use of SensiumVitals® clearly demonstrated. The full white paper can be found at www.toumaz.com ].

There are many case studies of incidents where the plaster has been helpful in early detection of deterioration. Of note is when the plaster helped detect the onset of sepsis which can save the hospital significant cost as well as prevent serious deterioration in the patient. The plaster has also proved useful with non-verbal patients who are unable to vocalise discomfort. Nurse feedback has been very positive - nurses like the fact that the plaster is easy to apply and use and helps highlight the patients that are deteriorating.

SensiumVitals® is a FDA 510(k) cleared product. Regulatory approvals in other regions, including CE marking in Europe, will follow during 2013, and the Group is in advanced planning for a pilot with a private hospital group in the UK.

Competitive positioning and product development

The traditional method of monitoring vital signs in a hospital general ward involves the use of large patient monitors that are wheeled from room to room. Clearly this is not suitable for continuous wireless on-body monitoring. Of the few competitive products in this field SensiumVitals® has the clear advantage - the plaster weighs a mere 15g and is the most unobtrusive and comfortable solution on the market. It is also the only fully disposable solution on the market. This means that it is easier for caregivers to use and has no chance of infection transmission from one patient to another.

Toumaz's key advantages in this space are underpinned by the Group's semiconductor chip development programmes. The current SensiumVitals® plaster is based on Toumaz's first generation Sensium® chip. This uses a proprietary wireless communications protocol optimised for ultra low-power health monitoring applications.

Toumaz has played an important role with the Institute of Electrical and Electronics Engineers (IEEE) in the development of a new standard for body area networking. The new global standard IEEE 802.15.6 was ratified in February 2012 and is aimed at medical body area networks. Recognising the importance of wireless body area monitoring the Federal Communications Commission (FCC) in the USA has granted approval for the allocation of a Medical Body Area Network (MBAN) spectrum. The new IEEE 802.15.6 standard includes the ability to use the MBAN spectrum.

Toumaz is developing a next generation chip that will implement IEEE 802.15.6 as well as Bluetooth Smart (the new Bluetooth low energy standard). This will position the next generation Sensium® chip for use in the medical monitoring market as well as the home health market. These new chip developments, together with the addition of new vital signs, improved algorithms, wireless range and user interface to the SensiumVitals® platform will help protect Toumaz's competitive advantage.

Financial results

The information provided in this section relates to continuing operations unless indicated otherwise. The results for Frontier have been consolidated from 20 August 2012, the effective date of the completion of the acquisition. Where figures are given on a pro-forma basis, this assumes Frontier had been acquired on 1 January 2012 and hence a full year's results have been included.

Group

Group revenue for the year increased from £2.3m to £8.8m due to the acquisition of Frontier Silicon. On a pro-forma basis revenue declined from £24.8m to £22.3m primarily due to one-off non-recurring consulting fees in 2011 of £1.8m.

Group EBITDA loss (loss from continuing operations less depreciation, amortisation and impairment and share based payment costs) in 2012 was £9.2m, (2011: loss of £5.8m). The increased loss is primarily due to extended investment costs in chip development. During the year an impairment review was carried out on the Group's intangible assets and a charge of £10.2m has been taken to reflect the end of life of certain of the intellectual property previously recognised on the balance sheet due to technological advances in the industry.

Revenue

Revenue was derived from the Digital Radio and Connected Audio sector in 2012 and against a difficult economic background performed well with a 10.3% increase in unit sales year on year.

The Healthcare division has yet to record continuing revenue from product sales being still in a developmental phase. In 2011 it recorded revenue of £1.8m from a non-recurring consulting project.

Gross profit margin for the Group, was 45.6% (2011: 35.4%) representing a change in product mix following the acquisition of Frontier.

Costs of acquiring Frontier Silicon

The Group acquired Frontier on 20 August 2012 and incurred £0.6m in professional fees and transaction costs in the process. These costs have been expensed as normal trading costs in the total comprehensive loss for the year.

Pre-tax loss

The Group reports a pre-tax loss of £21.6m for the year (2011: loss of £7.3m) representative of the fact that it is still in a developmental phase which should start to drive further revenues from the end of 2014 onwards.

Taxation

The Group has historically applied for and received tax credits in respect of its research and development expenditure. In 2012 the tax credits amounted to £1.4m (2011: £0.6m). It is expected that similar claims will be made in the future.

As at 31 December 2012 the Group has unutilised tax losses of £39.5m that may be ultilised against taxable future profits. These losses are still to be agreed with the UK tax authorities. In the Board's opinion there is uncertainty over the timing and quantum of their use in the foreseeable future and therefore a deferred tax asset has not been recognised.

Retained loss

Full year retained comprehensive losses in 2012 were £20.4m (2011:£6.8m). The increased loss is as a result of both the investment in new chip development discussed above and also a one off charge of £10.2m as a result of an impairment review of the Group's intangible assets. It is the Board's view that certain of the IP held on the balance sheet at the beginning of the year no longer has the future value to support its carrying value for the reasons explained above. During 2012, no R&D expenditure met the Group's capitalisation criteria as set out in the accounting policies and as such the total research and development expenditure of £6.4m has been recognised in the total comprehensive loss. In addition to the chip development costs, the Group is also investing in the German DAB market to stimulate demand and unit sales

Cash flow

As at the year-end the Group recorded £15.3m of cash and cash equivalents on the balance sheet. On current plans the Group does not see a necessity of seeking further funding in 2013.

Current trading and outlook

Toumaz is trading in line with the Board's expectations. With the combination of Toumaz and Frontier, significant operational benefits and design synergies should be gained. Revenue is underpinned by strong recurring revenues in the Digital Radio sector where the Group enjoys a significant market share. The Digital Radio market is expected to expand over the coming years and although there is likely to be some price erosion on sales, the new chip developments should see costs falling at a greater rate.

Following the successful pilot in North America, the Group believes that it has a commercial product in SensiumVitals® and will be looking to generate revenues in this sector in 2014. The Group's ongoing strategy is to ensure that the timetables for the chip developments currently underway are adhered to, existing markets are maintained and that the potential in the Healthcare market is realised.

As at 31 December 2012, the Group reported cash and cash equivalents of £15.3m. In the Board's view, this is sufficient to fund the Group's activities, as currently planned, until early 2014. Depending on trading and chip development during 2013, elements of the development plan can be deferred to preserve cash if required. In addition, should further funding be required, the Board are confident that a number of alternative sources of finance could be available and a more detailed examination of their relative merits will be considered at that time.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2012

 The accompanying accounting policies and notes form an integral part of these financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

For the year ended 31 December 2012

CONSOLIDATED CASHFLOW STATEMENT

For the year ended 31 December 2012

The accompanying accounting policies and notes form an integral part of these financial statements

NOTES TO THE FINANCIAL STATEMENTS

1. Basis of preparation

The Group was incorporated in the Cayman Islands which do not prescribe the adoption of any particular accounting framework. The Board has therefore adopted and complied with International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial statements have been prepared under the historical cost convention.

The financial information set out in the announcement does not constitute statutory accounts for the years ended 31 December 2012 and 31 December 2011. The financial information for the year ended 31 December 2012 is derived from the statutory accounts for that year which will be delivered to the shareholders shortly and which were approved by the Directors on 24 April 2013. The auditors reported on those accounts was unqualified.

2. Segmental information

As described under Segmental Reporting in the Principal Accounting Policies, Management currently identifies three divisions as operating segments.

Included in revenues in the Digital Radio/ Connected Audio segment for the year ended 31 December 2012 are revenues of £1.7m from the largest customer and £1.2m from its second largest customer and £1.1m from its third largest customer. Together these represent 48% of the reported divisional revenue for the year and 47% of the total Group revenue for the year.

Included in revenues in the Toumaz Healthcare segment for the year ended 31 December 2011 are revenues of £0.6m from the largest customer and £0.6m from its second largest customer and £0.4m from its third largest customer. Together these represent 89% of the reported divisional revenue for the year and 70% of the total Group revenue for the year.

3. Impairment

During the year the Board has reviewed the carrying value of its intangible assets as required by IAS38, as a result of this review the following actions have been taken in the Digital Radio/ Connected Audio segment.

The Group acquired Future Waves Limited on 20 May 2009 and reported goodwill on consolidation of £6m and a further amount of £2.8m in respect of the intellectual property that it owned. Subsequently the group acquired further licences and other Intellectual Property to support this part of the business. Following the review of these assets during the year the Board has written off the remaining unamortised carrying value of these assets. In the Board's view the intellectual property, licences and goodwill relate to design processes and techniques that have been superseded by a combination of technological advances in chip design during the current year and replacement technologies acquired with Frontier Silicon and therefore are no longer of ongoing value to the Group.

Toumaz Microsystems Limited has reported assets in respect of licences and prepayments in use on existing chips. In the Board's view these chips are nearing end of life or will be superseded by new development. The Board have decided to impair these licences by £2m and the prepayments by £0.9m to reflect the value of expected future sales. As at 31 December 2012 the balance remaining on the prepayments is £0.4m.

Toumaz Microsystems Limited will continue to trade and will continue development work on new generation chips. However, the uncertainty over the value of these future developments means the carrying value of its intangible assets and associated goodwill cannot be supported for reasons identified above.

4. Loss per share

The calculation of the basic loss per share of 2.19p (2011: 1.06p) is based on the loss after tax of £20.3m (2011: £6.7m) divided by the weighted average number of ordinary shares in issue during the year of 927,984,462 (2011: 624,072,722).

Due to the losses incurred the impact of the share options and other potential shares in anti-dilutive. As such the diluted earnings per share equals the ordinary earnings per share.

5. Acquisitions and disposals

On 20 August 2012, the Group acquired 100% of the equity instruments of Frontier Silicon (Holdings) Limited ("Frontier"), a UK based business, thereby obtaining control. The acquisition was made to enhance the Group's position in the digital radio market, and to exploit the software systems, commercial expertise and tier one customer access of Frontier.

The details of the business combination are as follows:

The acquisition of Frontier was settled in cash amounting to £24,657,000, plus £1,858,000 settled in shares. The purchase agreement included contingent consideration with an expected value of £3,986,000. £1,081,000 of the deferred consideration will be settled by a fixed number of shares in Toumaz Limited in 2013, 2014 and 2015 if revenue exceeds set targets. The amount shown in reserves represents the fair value of the shares that are expected to be issued in settlement of the deferred considerations, as assessed at the date of the acquisition. The remainder of the deferred consideration, being £2,905,000, will be settled in cash and therefore is accounted for as a financial liability and is disclosed within other payables.

Acquisition-related costs amounting to £569,000 are not included as part of consideration transferred and have been recognised as part of other expenses in the total comprehensive income for the year.

Goodwill

Goodwill of £8,536,000 is primarily related to growth expectations, expected future profitability, tier one customer access, the substantial skill and expertise of Frontier's workforce and expected cost synergies.

Frontier's contribution to the Group results

Frontier incurred a loss of £307,000 for the 4 months and 10 days from 20 August 2012 to the reporting date, which has been included in the Group result

If Frontier had been acquired on 1 January 2012, revenue of the Group for 2012 would have been £22m, and loss for the year would have been greater by £2.5m.

6. Goodwill

Goodwill relating to Toumaz Healthcare results from the acquisition of Toumaz Healthcare Limited on 3 November 2005. Goodwill relating to Frontier Silicon results from the acquisition of the Frontier Silicon group on 21 August 2012.

There is considerable cross over and exchange of knowledge, intellectual property and the application and use of products between the cash generating units. The expertise and know-how of the Group as a whole provides a platform for all of its products. The customer access, supply chain and technical knowhow acquired with Frontier will be used across the Group.

All principal operating divisions incurred losses in the year ended 31 December 2012, which is an indicator of impairment. The Directors have tested the aggregate recoverable value of goodwill, specific intellectual property, and licence & development fees for impairment in accordance with the Group's accounting policy of testing annually for impairment. Recoverable value is assessed by value in use. The Directors have impaired part of the goodwill relating to Digital Radio and Connected audio segment for the reasons set out below. The Directors, in assessing the recoverability of the remaining amount have considered the technical feasibility of the technology and the opportunities for commercial exploitation, including the position with the current commercial relationships.

To determine the value in use, the Directors have produced detailed monthly profit and loss and cash flow forecasts for the two years ended December 2014 and annual profit and loss forecasts for the seven years to December 2018. A seven year forecast period is considered reasonable for the markets that the Group addresses, particularly given the stage of development of the Group's products and expected life of new technologies.

Toumaz Healthcare

The above average growth rates of revenue for Toumaz Healthcare used in the projections are based on the Directors' considered estimates in a developing market and include significant estimates of both the volume and individual value of sales. The introduction of new and untested "disruptive technology" into the market place exposes the Group to the risk that costly developments will take longer than planned or not achieve the forecast financial returns. Should these estimates not be achieved there is a risk these assets will be impaired.

Consistent with 2011, a discount rate of 15% has been applied to the aggregate results of the forecast. The Directors considered the applicability of a discount rate of 20% and are satisfied that even if that rate were to be applied, the carrying value of the Healthcare goodwill is justified

The key assumptions with regard to the revenues and profitability of the cash generating units used in testing the aggregate recoverable value of goodwill, specific intellectual property, and licence & development fees for impairment are as follows:

·; The life cycle of any product introduced into the Healthcare market will be in the order of 7 to 10 years whilst it is first being tested, then gaining adoption and finally being fully rolled out. Revenues are expected to be recorded from 2014 and increase over the remainder of the planning horizon based on expectations of sales volumes and price. The forecast model is built on the Directors' best estimates of addressable market and the Group's resultant share of that market.

·; Further products, based on the Sensium® chip and related technology, are forecast. A licence and development agreement has already been signed for sport and fitness related products. Commercial launch is expected during the second half of the year. Other applications based on a rechargeable Sensium® plaster will be developed.

Digital radio and connected audio - Toumaz Microsystems

Following a review of this part of the business the goodwill has been written off for the reasons set out in note 3.

Digital radio and connected audio - Frontier Silicon

The intangible assets of Frontier Silicon have been independently valued and the difference between the fair value of the net assets and the fair value of the consideration is treated as goodwill.

Deferred tax has not been provided on the above intangible assets on the basis that the Group has sufficient tax losses available to offset any taxable gain that might arise.

Whilst Frontier has continued to make losses post acquisition this is in line with the forecasts at the time of the acquisition and therefore the directors consider the Goodwill arising on consolidation as still valid and no impairment has occurred since acquisition. The long term performance of Frontier is expected to be in line with the expectations made at the time of acquisition. In accordance with the Group's accounting policy goodwill and intellectual property will be tested annually for impairment.

7. Other intangible assets

Intellectual property

Intellectual property at 1 January 2012 relates to the valuation of beneficial licence agreements, trade names and customer relationships in Toumaz Healthcare and Toumaz Microsystems at the date of their original acquisition. The remaining life of the Toumaz Healthcare asset is approximately one year and for Toumaz Microsystems this has been written down to zero following a review of the likely cash flows generated by this chip. The addition during the year relates to the technology fair value associated with the Frontier Silicon acquisition.

Licence & development fees

At 1 January 2012 licence & development fees related to an agreement, dated 14 May 2009, with Imagination Technologies Group plc to license a next generation communication and digital radio multimedia IP platform. The consideration for the license deal consisted of a number of payments scheduled over the duration of the Group's development projects.  The remaining life of this asset is five years. The additions in the year relate to technology on new projects essential to the future development of the new generation digital chips. The licences will be amortised in accordance with the Group accounting policy and will be subject to an annual impairment review.

Marketing

Marketing-related intangible assets are defined as those assets that are primarily used in the marketing or promotion of products and services. The Frontier solutions are well known and preferred by a majority of the consumer electronic brands who specifically instruct their manufacturers to use Frontier modules and solutions in their audio systems.

Customer relationships

Customer-related intangible assets may consist of customer lists, order or production backlogs, customer contracts and relationships, and non-contractual customer relationships. Frontier has developed relationships with both consumer electronic brands and manufacturers. The customer relationship valuation captures the economic benefits of having these trading relationships.

Impairment reviews

The Directors have tested all intangible assets for impairment in conjunction with their testing for Goodwill, in accordance with the Group's accounting policy see note 3 for details.

8. Related party transactions

During the year Frontier Silicon Limited purchased goods, services and assets to the value of £1,764,000 from Imagination Technologies Limited, a company that owns 10.5% of the share capital of Toumaz Limited. At the year end there was an outstanding balance of £311,000 due from Frontier Silicon Limited to Imagination Technologies Limited in respect of these purchases.

During the year Imagination Technologies Limited purchased goods from Frontier Silicon Limited to the value of £36,000. At the year end there was an outstanding balance of £16,000 owing to Frontier Silicon Limited in respect of these sales.

The Group paid Imagination Technologies Limited £18,000 during the year in respect to directors' services from Sir H Yossaie.

The Group has taken advantage of the exemption under IAS 24 'Related Party Disclosures' from disclosing transactions with other members of the group headed by Toumaz Limited.

During the year £531,000 was written off relating to a prior year licence agreement with Cloud Tag Inc a company in which the Group had a 10% interest.

9. Annual Report and Accounts

The Annual Report and Accounts for 2012 will be posted to shareholders on 14 May 2013 and will also be available free of charge on request from the Group's registered office; 115 Olympic Avenue, Building 3, Milton Park, Abingdon, OX14 4SA and on the Group's web-site at www.toumazltd.com.

10. Annual General Meeting

The Annual General Meeting of the Group will be held at 9.00am on Friday 14 June 2013 at the offices of College Hill, The Registry, Royal Mint Court, London EC3N 4QN.