Last checked at 8 Jun 2010 07:00
Mobile Tornado Group plc
("Mobile Tornado" or the "Company")
Final Results
Chairman's Report
Introduction
Mobile Tornado Group plc, the leading provider of mobile applications to the enterprise market, announces its results for the twelve month period to 31 December 2009.
Highlights
·; Operating losses before exchange differences reduced significantly to £1,985,000 (2008 - £3,494,000)
·; Launch of BB3G phone and sale of first 10,000 units to InTechnology plc
·; Launch of Push to Locate and Push to Alert giving Company enhanced product suite alongside Push to Talk
·; Partnership with Psion Teklogix Inc in USA announced
·; Reorganisation of Research and Development function in Israel reducing annualised costbase to c.£1.4 million
Financial results
I am pleased to report a year of steady progress. Whilst we are yet to see this reflected in the bottom line I am confident that the decisions we took during the year and the initiatives that were launched will start to deliver increasing momentum during 2010.
Turnover in the year to 31 December 2009 amounted to £2,340,000 (2008: £466,000). Operating losses before exchange differences reduced significantly to £1,985,000 (2008: £3,494,000). After exchange losses of £424,000 (2008: exchange gain £1,407,000) and net financing costs of £266,000 (2008: £132,000) the loss on ordinary activities before taxation was £2,675,000 (2008: £2,219,000).
The revenue for the year was boosted through the £1.9m sale of 10,000 BB3G phones to InTechnology plc, our exclusive UK partner. The phone was developed in partnership with ZTE, one of the leading mobile phone producers in China and showcases the Mobile Tornado applications suite, which combines Push to Talk, Push to Locate and Push to Alert on an integrated intuitive interface. InTechnology are selling the phone to customers in the UK and have had early successes with NSL, Loomis and a number of local authorities.
Mobile Tornado has access to a stock of handsets which are being trialled by customers in Spain, South Africa, Germany, USA, France, Nigeria and Brazil. The response we have had is extremely positive and I expect the phone to assist us greatly as we seek to develop our customer base around the world.
The balance of revenues in 2009 comprised license fee revenues from our partners in UK, Germany, Israel and Spain, and professional service fees derived from the deployment of new platforms for partners in South Africa and Canada.
Operating expenses in the year were reduced by £700k when compared to the previous period and this reflects our continuing efforts to improve the efficiency of the business. Savings were made through the streamlining of both the technical and sales teams.
Operational review
During the period we have worked at refining our sales proposition into four key target segments :
§ Service integrator/Operator - where the regional partner invests in our proprietary server platform, providing a managed service to enterprises, paying us a monthly license fee for every connection
§ Enterprise - where enterprises have sufficient scale to warrant owning and controlling their own platform, delivering services to their employees
§ Managed hosted- where we have established our own platforms to be used by partners who do not have the resources to invest in their own. Platforms have been deployed in the UK and Spain and we are in the process of deploying one in the USA
§ Specialised devices - where we offer a software developer kit to provide access to our API (application protocol interface) to device manufacturers or software integrators so they can access the functionality of our platform directly
Within each target market we made good progress during the period. InTechnology plc are our principal service integrator partner, operating on an exclusive basis in the UK. In addition we have partners in Germany and Israel and during the period signed up further partners in Canada and South Africa.
We continue to engage with mobile operators and are currently negotiating with two operators in Israel and India respectively. Our preferred deal structure in all target markets is to secure a monthly license fee for each of the services provided as opposed to the perpetual license fee model which is the preferred deal structure for both of these operators. Where we feel it is appropriate we will sacrifice our desire to build up higher quality revenue streams for the benefits that the perpetual license fee model brings to short-term cashflow.
Our plans to launch in the US, which is the biggest PTT market in the world with over 25 million users, continued during the period. We have chosen to establish our own platform in the USA which will be hosted in New York. We have been actively engaged with partners interested in leveraging our software platform into the market and I am pleased to announce today our partnership with Psion Teklogix Inc. The combination of Mobile Tornado software running on Psion Teklogix's devices eliminates the need for workers to carry a separate mobile handset for Push to Talk in addition to their rugged mobile data capture device. Psion customers will now also be able to track employees in the field with Push to Locate, as well as send instant alerts in the event of an emergency with Push to Alert for improved effectiveness and safety. Under the terms of the agreement, Mobile Tornado will run the infrastructure and platform for the Push-to service for Psion customers. I am very hopeful that this deal and the interest we have already generated will lead to a meaningful presence in this huge market.
We completed the development of our API capability during the period which will now allow companies interested in our product set to incorporate the PTT, PTL or PTA functionality into their own technology platforms. Our first engagement is with a company in Germany that delivers communication solutions into the global transportation sector. They have incorporated PTT into their latest offering and are now in the process of trialling it with three bus companies in Germany. There are many businesses in the world offering solutions to enterprises, particularly in the workforce management sector, where the addition of PTT in particular would add greatly to the overall proposition. The advantage to us is that customer bases are already in place and so our ability to now offer these customers easy access to our technology through these API's will significantly enhance our market opportunity.
We have continually sought to operate the business more efficiently and took the decision in the final quarter of 2009 to transition a large part of the Research and Development function from Israel to the UK and India. A new team of engineers have been recruited in India and we expect to complete the transition process by the end of June 2010. This will have a significant impact on the cost base of the business, with a reduction of approximately £700k per annum, delivering an annualised cost base effective from July 2010 of approximately £1.4 million.
Outlook
We have executed some major changes to the organisation structure since the year end. Transitioning our Research and Development function from Israel to India and the UK has been a challenge but I am pleased to say that we are nearing a successful conclusion. Centralising our management team in one location will significantly enhance our effectiveness and the shift of resource to a lower cost environment means that we are in a position to reduce the level at which the business becomes profitable.
There are a number of market developments that give me confidence that we have a solution that will generate increasing demand over the coming months. The global roll-out of 3G networks continues and with this the reduction in data tariffs that help support the competitive price structure of our solution in the market. There is an acceptance amongst both mobile operators and enterprises that the managed services model is attractive, as in these difficult economic conditions, capital expenditure budgets are being reduced or eliminated. There is a high level of interest in our solutions from the developing world, particularly Africa and Latin America. As these nations develop their mobile telecommunications infrastructure they are seeking out applications to suit the needs of their mobile workforces. In addition we are seeing an increasing number of devices being launched with a capability to offer Push to Talk which enhances our ability to penetrate existing customer bases through our API solution.
We stand to benefit from these trends and the renewed focus we have on our sales activities has resulted in an increasing number of engagements with partners and customers around the world. I look forward to reporting on the closure of these in the coming months.
Peter Wilkinson
Chairman
7 June 2010
For further details please contact:
| Mobile Tornado Group plc |
|
| Jeremy Fenn, Chief Executive
| +44 (0) 7734 475888 |
| Astaire Securities Plc | +44 (0)20 7448 4400 |
| Shane Gallwey |
|
Directors' report
The Directors present their annual report and audited financial statements of the Company and the Group for the year ended 31 December 2009.
Principal activity
Mobile Tornado is a provider of next generation instant messaging solutions which serve the market of mobile data services in the mobile communication industry. These services include a Group of services generically termed 'Push to x' services, of which 'Push to Talk' is the most commonly known.
Business review
The information that fulfils the requirements of the Business Review can be found in the Chairman's Report on pages 2 to 4 which forms part of the Directors' report.
Results and dividends
The Directors are unable to recommend the payment of a dividend in respect of the year ended 31 December 2009 (year ended 31 December 2008: £nil). The Company currently intends to reinvest future earnings to finance the growth of the business.
The loss sustained for the year of £2,675,000 (year ended 31 December 2008: £2,219,000) will be deducted from reserves.
Share Issues
On 28 April 2009, InTechnology plc subscribed for 18,750,000 new non-voting preference shares of 8p each. In addition, the terms attached to the pre-existing 18,750,000 non-voting preferences issued to InTechnology plc in October 2007 were varied so that the same terms attach to all non-voting preference shares. The redemption date for all preference shares is 31 December 2010. Further details of these terms are included in note 12 to the financial statements.
Key performance indicators
The key performance indicators used by the Board at this stage of the business to monitor performance are revenue and operating expenses. Revenue has increased by 402% and operating expenses have reduced by 23%.
Directors
The present Directors are detailed below.
·; Peter Robert Wilkinson (56) was appointed Non-Executive Chairman on 24 November 2006. Peter is currently Chief Executive of InTechnology plc. Peter was formerly Chairman of Sports Internet Group plc which was sold to BSkyB plc for £301 million in May 2000. He also invented the free ISP model Freeserve, the internet access service which was launched by the Dixons Group plc.
·; Jeremy Mark Fenn(47) is Managing Director and acting Finance Director and was appointed to the Board on 24 November 2006. Jeremy is a qualified chartered accountant and was formerly Chief Executive of Sports Internet Group plc. Following the sale of that business he remained as a Director of Skysports.com until December 2003. Prior to this he was Managing Director of Leeds United Football Club from 1996 to 1999. He is currently a Non-Executive Director of Eco City Vehicles plc, Commensus plc, Web Marketing Group Ltd, Autovip Ltd and Stonerings Ltd.
·; Richard Mark James (49) was appointed as Director and Company Secretary on 24 November 2006. Richard qualified as a solicitor with Allen & Overy in 1986 and was a Partner at Pinsent Curtis in 1991 before moving to Hammond Suddards as a Partner in 1996. Richard is also a Director and Company Secretary of InTechnology plc.
·; John Paul Swingewood (56) stood down as Executive Chairman of Mobile Tornado on 24 November 2006 to become a Non-Executive Director. John has held senior Director positions with BSkyB plc and BT plc and is currently a Non-Executive Director of Eco City Vehicles plc, Emizon Group Ltd and Swingewood Consulting Ltd.
The Directors and their families have the following beneficial interests in the ordinary share capital of the Company:
|
| 31 December 2009 Number |
|
% |
| 31 December 2008 Number |
|
% |
|
|
|
|
|
|
|
|
|
| Peter Wilkinson | 24,837,725 |
| 13.4 |
| 24,837,725 |
| 13.3 |
| John Swingewood | 7,805,511 |
| 4.2 |
| 7,805,511 |
| 4.2 |
| Jeremy Fenn | 7,670,396 |
| 4.2 |
| 7,670,396 |
| 4.2 |
| Richard James | 2,959,870 |
| 1.6 |
| 2,959,870 |
| 1.6 |
There were no changes in Directors' interests between 1 January 2010 and 7 June 2010.
Third party indemnity insurance is in place for the four Directors above.
Details of related party transactions involving Directors of the Company are given in note 20 to the financial statements.
Substantial shareholdings
At 31 December 2009, InTechnology plc held 92,200,000 shares in the Company representing 49.9% of the issued ordinary share capital. At 31 December 2009, Jorge Pinievsky, a member of the senior management team, held 9,168,624 shares in the Company representing 5.0% of the issued ordinary share capital. There are no other shareholders, other than the Directors detailed above, who hold more than 3% of the Company's issued share capital.
Corporate governance
As an AIM listed Group, Mobile Tornado Group plc applies those principles of good governance appropriate to a Group of its size.
Audit Committee
The Audit Committee is chaired by Peter Wilkinson and its other member is the other Non-Executive Director, John Swingewood. Meetings are also attended, by invitation, by the Executive Directors. This committee normally meets twice during the financial year, around the time of the preparation of the Group's interim and final results.
The committee assists the Board in ensuring that appropriate accounting policies, internal financial controls and compliance procedures are in place.
Internal control
The Directors acknowledge their responsibility for the Group's systems of internal control. The Group maintains systems of internal controls, including suitable monitoring procedures, in order to provide reasonable, but not absolute, assurance of the maintenance of proper accounting records and the consequent reliability of the financial information used within the business to identify and deal with any problems on a timely basis. The monitoring and control procedures include the specification of defined lines of responsibility and authorisation limits, the delegation of authority, the identification of risks and the continual process of the preparation of, and reporting against, annual budgets, forecasts and strategic plans.
Principal risks and uncertainties
The management of the business and the nature of the Group's strategy are subject to a number of risks.
The Directors have set out below the principal risks facing the business. The Directors are of the opinion that a thorough risk management process is adopted which involves the formal review of all the risks identified below. Where possible, processes are in place to monitor and mitigate such risks.
Product obsolescence
Due to the nature of the market in which the Group operates, products are subject to technological advances and as a result, obsolescence. The Directors are committed to the research and development strategy in place, and are confident that the Group is able to react effectively to the developments within the market.
Competition
The market in which the Group operates is highly competitive. As a result there is a risk of eroding margins and of being unable to meet customers' expectations. Policies of constant price monitoring and ongoing market research are in place to mitigate such risks.
Financial risk management
The Group's financial instruments comprise, principally, cash and short-term deposits and preference shares, and various items, such as trade debtors and trade creditors, arising directly from its operations. The main purpose of these financial instruments is to raise finance for the Group's operations. The main risks arising from the Group's financial instruments are currency risk, interest risk and liquidity risk. The Board's policies for managing these risks are summarised as follows:
Currency risk - the Group has no borrowings in foreign currency, and foreign currency liabilities are matched wherever possible by corresponding foreign currency assets. Foreign currency bank accounts are utilised where appropriate. No foreign currency transactions of a speculative nature are undertaken.
Interest risk - the Group is exposed to interest rate risk as it invests surplus cash in floating rate deposit accounts. These funds are invested with the objective of maintaining a balance between accessibility of funds and competitive rates of return.
Liquidity risk - the Group seeks to ensure sufficient liquidity is available to meet its foreseeable needs. The Board reviews cash flow projections and the headroom position in respect of its cash balances and banking facilities to ensure the Group is adequately funded.
Credit risk - the Group's exposure to credit risk is limited to the carrying amount of its financial assets at the balance sheet date. In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty or group of counterparties having similar characteristics. The Group's customers are generally companies with whom the Group has strong trading relationships with no recent history of default. The Group continually monitors its trade receivables and incorporates this information into its credit risk controls.
Going concern
The Company's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Company should be able to operate within the level of its current cash balance, supplemented by additional investment, which has been agreed post year end (as further described in the basis of preparation). On this basis, the Directors consider that the going concern presumption is the correct basis for the preparation of the financial statements.
Employees
The Group places considerable value on the involvement of its employees and has continued its practice of keeping them informed of matters affecting them as employees and the various factors affecting the performance of the Group.
The Directors recognise that continued and sustained improvement in the performance of the Group depends on its ability to attract, motivate and retain employees of the highest calibre. Furthermore, the Directors believe that the Group's ability to sustain a competitive advantage over the long term depends in a large part on ensuring that all employees contribute to the maximum of their potential. The Group is committed to improving the performance of all employees through development and training.
The Group is an equal opportunity employer. The Group's policies seek to promote an environment free from discrimination, harassment and victimisation and to ensure that no employee or applicant is treated less favourably on the grounds of gender, marital status, age, race, colour, nationality or national origin, disability or sexual orientation or is disadvantaged by conditions or requirements, which cannot objectively be justified. Entry into, and progression within the Group, is solely determined on the basis of work criteria and individual merit.
The Group continues to give full and fair consideration to applications for employment made by disabled persons, having regard to their respective aptitudes and abilities. The policy includes, where practicable, the continued employment of those who may become disabled during their employment and the provision of training and career development and promotion, where appropriate.
Share schemes
Share ownership is at the heart of the Group's remuneration philosophy and the Directors believe that the key to the Group's future success lies in a motivated workforce holding a stake in the Company. Details of share options granted are set out in note 14 to the financial statements.
Pension costs
The Group does not operate a pension scheme but makes contributions to the personal pension schemes of some of its employees. These contributions are charged against profits.
Research and development
The Group continues to undertake research and development of new products with the objective of increasing future profitability. The cost to the Group is charged to the profit and loss account as incurred.
Policy and practice on payment of creditors
It is the Group's policy to agree terms and conditions for its business transactions with its suppliers. The Group seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions.
In the year ended 31 December 2009 average creditor days for the Group and Company were 38 days (2008: 31 days) and 35 days (2008: 33 days) respectively.
Environment
The Group recognises the importance of environmental responsibility. The nature of its activities has a minimal effect on the environment but where they do, the Group acts responsibly and is aware of its obligations at all times.
Statement of Directors' responsibilities
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 financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice) for the Parent Company and International Financial Reporting Standards as adopted by the European Union (IFRSs) for the Group. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. The financial statements are required by law to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to:
§ select suitable accounting policies and then apply them consistently
§ make judgments and estimates that are reasonable and prudent
§ state whether applicable UK Accounting Standards/IFRSs have been followed, subject to any material departures disclosed and explained in the financial statements
§ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that 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.
In so far as each of the Directors is aware:
§ there is no relevant audit information of which the Company's auditors are unaware; and
§ the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.
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.
Annual General Meeting
The next AGM of the Company will be held on 30 June 2010.
Independent auditor
Grant Thornton UK LLP have indicated their willingness to continue in office and a resolution proposing that they be reappointed as independent auditor and authorising the Directors to fix their remuneration will be proposed at the Annual General Meeting.
Report of the independent auditor to the
members of Mobile Tornado Group plc
For the year ended 31 December 2009
We have audited the Group and Parent Company financial statements (the 'financial statements') of Mobile Tornado Group plc for the year ended 31 December 2009 which comprise the principal accounting policies, the Consolidated income statement, the Consolidated statement of comprehensive income, the Consolidated statement of changes in shareholders' equity, the Consolidated and Parent Company balance sheets, the Consolidated cash flow statement and notes to the financial statements. 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 Companys' members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Directors' Report, 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 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 (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/UKNP.
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 2009 and of the Group's loss for the year then ended;
§ the Group financial statements have been properly prepared in accordance with IFRS 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
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' 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.
Andrew Wood
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
Date: 7th June 2010
Consolidated income statement
For the year ended 31 December 2009
|
|
| Year ended |
| Year ended |
|
|
| 31 December |
| 31 December |
|
|
| 2009 |
| 2008 |
|
|
|
|
|
|
|
| Note | £'000 |
| £'000 |
| Continuing operations |
|
|
|
|
| Revenue | 2 | 2,340 |
| 466 |
|
|
|
|
|
|
|
|
|
|
|
|
| Cost of sales |
| (1,836) |
| (48) |
| Gross profit |
| 504 |
| 418 |
|
|
|
|
|
|
|
|
|
|
|
|
| Operating expenses |
| (2,358) |
| (3,058) |
| Exchange differences |
| (424) |
| 1,407 |
| Depreciation and amortisation expense |
| (131) |
| (854) |
|
|
|
|
|
|
| Group operating loss |
| (2,409) |
| (2,087) |
|
|
|
|
|
|
| Finance costs |
| (268) |
| (153) |
| Finance income |
| 2 |
| 21 |
| Loss before tax |
| (2,675) |
| (2,219) |
| Income tax expense |
| - |
| - |
| Loss for the year |
| (2,675) |
| (2,219) |
|
|
|
|
|
|
| Attributable to: |
|
|
|
|
| Equity holders of the parent |
| (2,675) |
| (2,219) |
|
|
|
|
|
|
| Loss per share (pence) |
|
|
|
|
| Basic and diluted | 3 | (1.45) |
| (1.20) |
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December 2009
|
|
| Year ended |
| Year ended |
|
|
| 31 December |
| 31 December |
|
|
| 2009 |
| 2008 |
|
|
| £'000 |
| £'000 |
|
|
|
|
|
|
| Loss for the period |
| (2,675) |
| (2,219) |
|
|
|
|
|
|
| Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
| Exchange differences on translation |
|
|
|
|
| of foreign operations |
| 964 |
| (2,683) |
|
|
|
|
|
|
| Total comprehensive income for the period |
| (1,711) |
| (4,902) |
Consolidated statement of changes in equity
For the year ended 31 December 2009
|
| Share | Share | Reverse acquisition | Merger | Translation | Retained | Total |
|
| capital | premium | reserve | reserve | reserve | earnings | equity |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 1 January 2008 | 3,689 | 4,449 | (7,620) | 10,938 | (434) | (13,093) | (2,071) |
|
|
|
|
|
|
|
|
|
| Equity settled share-based payments | - | - | - | - | - | (29) | (29) |
|
|
|
|
|
|
|
|
|
| Issue of share capital | 10 | - | - | - | - | - | 10 |
|
|
|
|
|
|
|
|
|
| Transactions with owners | 10 | - | - | - | - | (29) | (19) |
|
|
|
|
|
|
|
|
|
| Loss for the year | - | - | - | - | - | (2,219) | (2,219) |
|
|
|
|
|
|
|
|
|
| Exchange differences on translation |
|
|
|
|
|
|
|
| of foreign operations | - | - | - | - | (2,683) | - | (2,683) |
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | - | - | - | - | (2,683) | (2,219) | (4,902) |
|
|
|
|
|
|
|
|
|
| Balance at 31 December 2008 | 3,699 | 4,449 | (7,620) | 10,938 | (3,117) | (15,341) | (6,992) |
|
|
|
|
|
|
|
|
|
|
| Share | Share | Reverse acquisition | Merger | Translation | Retained | Total |
|
| capital | premium | reserve | reserve | reserve | earnings | equity |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Balance at 1 January 2009 | 3,699 | 4,449 | (7,620) | 10,938 | (3,117) | (15,341) | (6,992) |
|
|
|
|
|
|
|
|
|
| Equity settled share-based payments | - | - | - | - | - | 12 | 12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Transactions with owners | - | - | - | - | - | 12 | 12 |
|
|
|
|
|
|
|
|
|
| Loss for the year | - | - | - | - | - | (2,675) | (2,675) |
|
|
|
|
|
|
|
|
|
| Exchange differences on translation |
|
|
|
|
|
|
|
| of foreign operations | - | - | - | - | 964 | - | 964 |
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | - | - | - | - | 964 | (2,675) | (1,711) |
|
|
|
|
|
|
|
|
|
| Balance at 31 December 2009 | 3,699 | 4,449 | (7,620) | 10,938 | (2,153) | (18,004) | (8,691) |
Consolidated balance sheet
As at 31 December 2009
|
|
| 2009 |
| 2008 |
|
|
|
|
|
|
|
|
| £'000 |
| £'000 |
| Assets |
|
|
|
|
| Non-current assets |
|
|
|
|
| Intangible assets |
| - |
| 106 |
| Property, plant & equipment |
| 44 |
| 80 |
| Available-for-sale investments |
| - |
| 101 |
|
|
| 44 |
| 287 |
|
|
|
|
|
|
| Current assets |
|
|
|
|
| Trade and other receivables |
| 146 |
| 310 |
| Cash and cash equivalents |
| 160 |
| 206 |
|
|
| 306 |
| 516 |
|
|
|
|
|
|
| Liabilities |
|
|
|
|
| Current liabilities |
|
|
|
|
| Trade and other payables |
| (3,112) |
| (2,911) |
| Borrowings |
| (3,000) |
| - |
|
|
|
|
|
|
| Net current liabilities |
| (5,806) |
| (2,395) |
|
|
|
|
|
|
|
|
|
|
|
|
| Non-current liabilities |
|
|
|
|
| Trade and other payables |
| (2,929) |
| (3,384) |
| Borrowings |
| - |
| (1,500) |
| Net liabilities |
| (8,691) |
| (6,992) |
|
|
|
|
|
|
|
|
|
|
|
|
| Shareholders' equity |
|
|
|
|
| Share capital |
| 3,699 |
| 3,699 |
| Share premium |
| 4,449 |
| 4,449 |
| Reverse acquisition reserve |
| (7,620) |
| (7,620) |
| Merger reserve |
| 10,938 |
| 10,938 |
| Share option reserve |
| 46 |
| 34 |
| Foreign currency translation reserve |
| (2,153) |
| (3,117) |
| Retained earnings |
| (18,050) |
| (15,375) |
| Total equity |
| (8,691) |
| (6,992) |
The financial statements on pages 13 to 35 were approved by the Board of Directors on 7 June 2010 and were signed on its behalf by:
Consolidated cash flow statement
For the year ended 31 December 2009
|
|
| Year ended |
| Year ended |
|
|
| 31 December |
| 31 December |
|
|
| 2009 |
| 2008 |
|
|
| £'000 |
| £'000 |
|
|
|
|
|
|
| Operating activities |
|
|
|
|
| Cash used in operations |
| (1,526) |
| (1,609) |
|
|
|
|
|
|
| Net cash used in operating activities |
| (1,526) |
| (1,609) |
|
|
|
|
|
|
| Investing activities |
|
|
|
|
| Purchase of property, plant & equipment |
| (5) |
| (149) |
| Interest received |
| 1 |
| 21 |
| Interest paid |
| - |
| (3) |
| Net cash used in investing activities |
| (4) |
| (131) |
|
|
|
|
|
|
|
|
|
|
|
|
| Financing |
|
|
|
|
| Net proceeds from issue of ordinary share capital | - |
| 10 | |
| Issue of preference shares |
| 1,500 |
| - |
| Net cash inflow from financing |
| 1,500 |
| 10 |
|
|
|
|
|
|
| Effects of exchange rates on cash |
|
|
|
|
| and cash equivalents |
| (16) |
| 52 |
|
|
|
|
|
|
| Net decrease in cash and |
|
|
|
|
| cash equivalents in the period |
| (46) |
| (1,678) |
| Cash and cash equivalents at beginning of period | 206 |
| 1,884 | |
| Cash and cash equivalents at end of period |
| 160 |
| 206 |
Summary of significant accounting policies
1 Accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
1.1 Basis of preparation
The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards as adopted by the EU.
During the year the Group has applied IAS 1 Presentation of Financial Statements (Revised 2007). IAS 1 Presentation of Financial Statements (Revised 2007) requires presentation of a comparative balance sheet as at the beginning of the first comparative period, in some circumstances. Management considers that this is not necessary this year because the 2008 balance sheet is the same as that previously published.
The adoption of IAS 1 Presentation of Financial Statements (Revised 2007) has introduced a number of terminology changes (including titles for the primary statements) and has resulted in a number of changes in presentation and disclosure. The revised standard has had no impact on the reported results or financial position of the Group.
The Group has elected to present the 'Statement of comprehensive income' in two statements: the 'Income statement' and a 'Statement of comprehensive income'.
Going concern
The stage of development of the business and the current economic conditions create uncertainty particularly over (a) the level of demand for the Company's products; (b) the exchange rate between sterling and US dollar and thus the consequence for the value of revenue and (c) the requirement for funding in the foreseeable future.
The Company's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Company should be able to operate within the level of its current cash balance, supplemented by the additional investment detailed below, which has been agreed post year end with InTechnology plc.
InTechnology plc has agreed to provide an unsecured loan of £450,000. The loan will be advanced in six equal stages against specific performance criteria which the Board has every expectation of delivering against.
Significant accounting estimates and judgements
The preparation of these financial statements requires management to make estimates and judgements that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue during the reporting period. Actual results could differ from these estimates. The key sources of estimation at the balance sheet date are:
Share options - Share-based payments are dependent on estimates of the number of shares which are expected to vest.
Intellectual property - the Group tests annually whether intellectual property has suffered any impairment. This calculation requires the use of estimates.
1.2 Basis of consolidation
The Group financial statements consolidate those of the Company and its subsidiary undertakings at 31 December 2009. A subsidiary is an entity controlled by the Group. Control is achieved where the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Acquisitions of subsidiaries are dealt with using the acquisition method of accounting except for the reverse takeover transaction detailed below. The acquisition method of accounting involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities, of the subsidiary at the acquisition date regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group's accounting policies. Goodwill is stated after separating out identifiable intangible assets. Any difference between the fair value of assets acquired and the consideration paid is treated as goodwill in the consolidated balance sheet. The results of subsidiaries are included from the date that control commences to the date that control ceases.
On 31 October 2009, the trade and net assets of Mobile Tornado International Ltd were transferred to Mobile Tornado Group plc at book value. Further details of the accounting treatment are disclosed in the Company investment note on page 38.
1.3 Intangible assets
Acquired intellectual property
Intellectual property acquired separately and as part of a business combination is capitalised at cost and fair value as at the date of acquisition. Management must estimate the expected useful live of any intellectual property and charge amortisation accordingly. The useful life of the acquired intellectual property is estimated to be 5 years. Residual values and useful lives are reviewed at each reporting date. In addition, they are subject to impairment testing as described below.
Impairment testing of intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Cash-generating units to which intangible assets have been allocated are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the assets' or cash-generating units' carrying amount exceeds its recoverable amount. To determine the recoverable amount, management estimates expected future cash flows from each asset or cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each asset or cash-generating unit and reflect their respective risk profiles as assessed by management.
An impairment charge is reversed if the asset or cash-generating units' recoverable amount exceeds its carrying amount.
Research and development
Research expenditure, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is charged to income in the year in which it is incurred. Internal development expenditure, whereby research findings are applied to a plan for the production of new or substantially improved products or processes, is charged to income in the year in which it is incurred unless it meets the recognition criteria of IAS 38 'Intangible Assets'. Measurement and other uncertainties generally mean that such criteria are not met. Where, however, the recognition criteria are met, intangible assets are capitalised and amortised over their useful economic lives from product launch. Intangible assets relating to products in development are subject to impairment testing at each balance sheet date or earlier upon indication of impairment. Any impairment losses are written off immediately to income.
1.4 Revenue Recognition
Revenue comprises the fair value for the sale of licences, services and goods, excludes inter-company sales and value-added taxes and represents net invoice value less estimated rebates, returns and settlement discounts. Licence and service revenues are recognised over the period to which the licence and services relate. Unrecognised license and service revenues and associated costs of sale are included as deferred income and deferred cost respectively in the balance sheet.
The Group only recognises revenue on the sale of equipment once any obligation to install such equipment has been completed.
1.5 Interest
Interest is recognised on a time-proportion basis using the effective interest method.
1.6 Employee benefits
Pension obligations
The Group does not operate a pension scheme but makes contributions to the personal schemes of some of its employees. These contributions are charged to the income statement.
1.7 Share-based payments
The Group operates equity-settled share-based remuneration plans for its employees.
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using the Black-Scholes pricing model, which takes into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where variations are due only to share prices not achieving the threshold for vesting.
1.8 Foreign currency translation
The consolidated financial statements are presented in UK Sterling (GBP £), which is also the functional currency of the Parent Company.
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates are recognised in profit or loss.
Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.
In the Group's financial statements, all assets, liabilities and transactions of Group entities with a functional currently other than the CU (the Group's presentation currency) are translated into CU upon consolidation. The functional currency of the entities in the Group have remained unchanged during the reporting period.
On consolidation, assets and liabilities have been translated into CU at the closing rate at the reporting date. Income and expenses have been translation into the Group's presentation currency at the average rate over the reporting period. Exchange differences are charged/credited to over comprehensive income and recognised in the currency translation reserve in equity. On disposal of a foreign operation, the cumulative translation differences recognised in equity are reclassified to profit or loss and recognised as part of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into CU at the closing rate.
1.9 Taxation
The charge for taxation is based on the profits for the year and takes into account taxation deferred because of temporary differences between the treatment of certain items for taxation and for accounting purposes.
Temporary differences arise from the inclusion of profits and losses in the accounts in different periods from which they are recognised in tax assessments and primarily arise as a result of the difference between tax allowances on property, plant & equipment and the corresponding depreciation charge. Full provision is made for the tax effects of these differences using tax rates substantively enacted at the balance sheet date.
No provision is made for unremitted earnings of foreign subsidiaries where there is no commitment to remit such earnings. Similarly, no provision is made for temporary differences relating to investments in subsidiaries since realisation of such differences can be controlled and is not probable in the foreseeable future. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.
1.10 Property, plant & equipment
Property, plant and equipment is stated at historical cost less depreciation. The Group's policy is to write off the difference between the cost of all property, plant and equipment and their residual value on a straight line basis over their estimated useful lives as follows:
| Office equipment | 3 years |
| Computer equipment | 3 years |
|
|
|
Reviews are made annually of the estimated remaining lives and residual values of individual productive assets, taking account of commercial and technological obsolescence as well as normal wear and tear, and adjustments are made where appropriate. All individual assets are reviewed for impairment when there are indications that the carrying value may not be recoverable.
1.11 Equity
Equity comprises the following:
▪ "Share capital" represents the nominal value of equity shares.
▪ "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue.
▪ "Reverse acquisition reserve" represents the difference between the required total of the Group's equity instruments and the reported equity of the legal parent.
▪ "Merger reserve" represents the difference between the nominal value of the share capital issued by the Company and their fair value at 7 March 2006, the date of the acquisition of Mobile Tornado International Ltd.
▪ "Share option reserve" represents equity-settled share-based employee remuneration until such share options are exercised.
▪ "Foreign currency translation reserve" represents the differences arising from translation of investments in overseas subsidiaries.
▪ "Retained earnings" represents retained profits.
1.12 Cash and cash equivalents
Cash and cash equivalents comprise cash on 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.
1.13 Financial assets - loans and receivables
Financial assets comprise trade receivables and cash and cash equivalents. Financial assets are recognised in the Group's consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument. Loans and receivables are measured at initial recognition at fair value and are subsequently recorded at amortised cost using the effective interest method. Appropriate allowances for estimated irrecoverable amounts are recognised in the income statement when there is objective evidence that the asset is impaired.
1.14 Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and comprise trade payables and borrowings. Financial liabilities are recognised in the Group's consolidated balance sheet when the Group becomes a party to the contractual provisions of the instrument. They are subsequently recorded at amortised cost using the effective interest method. Trade payables are measured at initial recognition at fair value. Changes in fair value are recognised in the income statement.
Borrowings are initially recorded at fair value and then subsequently recorded at amortised cost using the effective interest method.
1.15 Deferred consideration
Deferred consideration arising on acquisition of intellectual property is held as a creditor in the balance sheet until such time as those amounts are paid.
1.16 Investments
Investments are classified as available-for-sale financial assets. All financial assets within this category are initially measured at historic cost and subsequently at fair value, with changes in value recognised in equity, through the statement of changes in equity. Gains and losses arising from investments classified as available-for-sale are recognised in the income statement when they are sold or when the investment is impaired.
1.17 Standards and interpretations not yet applied
The following standards and interpretations currently in issue but not effective for accounting periods commencing on 1 January 2009 and which have not been applied in the 2009 consolidated financial statements are:
·; IFRS 9 Financial Instruments (effective 1 January 2013)
·; IAS 24 (Revised 2009) Related Party Disclosures (effective 1 January 2011)
·; Improvements to IFRSs 2009 (various effective dates, earliest of which is 1 July 2009, but mostly 2010)
The above is not an exhaustive list but represents those most relevant to the Group. The standards are expected to have an impact on presentation only.
Notes to the financial statements
For the year ended 31 December 2009
2 Segmental analysis
The Group presents its results in accordance with internal management reporting information. Under IFRS 8, the Group has only one operating segment. Therefore the results presented in the income statement are the same as those required under IFRS 8, save for the year end entry of IFRS 2 share option charge of £12,000 (year ended 31 December 2008: £29,000 credit).
Revenue is reported by geographical location of customers. Non-current assets are reported by geographical location of assets.
|
| Year ended | At |
| Year ended | At |
|
| 31 December | 31 December |
| 31 December | 31 December |
|
| 2009 | 2009 |
| 2008 | 2008 |
|
|
| Non-current |
|
| Non-current |
|
| Revenue | assets |
| Revenue | assets |
|
| £'000 | £'000 |
| £'000 | £'000 |
|
|
|
|
|
|
|
| UK | 2,022 | 18 |
| - | - |
| Europe | 153 | - |
| 30 | 246 |
| North America | 56 | - |
| 83 | - |
| South America | 5 | - |
| 153 | - |
| Middle East | 39 | 26 |
| 98 | 41 |
| Africa | 65 | - |
| 76 | - |
| Asia/Pacific | - | - |
| 26 | - |
| Total | 2,340 | 44 |
| 466 | 287 |
Total revenue comprises £2,047,000 relating to the sale of goods and £293,000 relating to the sale of services. Details of sales made to InTechnology plc, a large customer in the period, are detailed in the related party note.
3 Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of £2,675,000 (2008: £2,219,000) by the weighted average number of ordinary shares in issue during the year of 184,953,708 (2008: 184,503,773).
The adjusted basic loss per share has been calculated to provide a better understanding of the underlying performance of the Group as follows:
|
| Year ended |
| Year ended | ||
|
| 31 December 2009 |
| 31 December 2008 | ||
|
|
|
|
|
| |
|
| Basic and diluted |
| Basic and diluted | ||
|
| (Loss)/ | (Loss)/ |
| (Loss)/ | (Loss)/ |
|
| earnings | earnings |
| earnings | earnings |
|
|
| per share |
|
| per share |
|
|
|
|
| (Restated) | (Restated) |
|
| £'000 | pence |
| £'000 | pence |
| Loss attributable to |
|
|
|
|
|
| ordinary shareholders | (2,675) | (1.45) |
| (2,219) | (1.20) |
| Amortisation of goodwill | 97 | 0.05 |
| 693 | 0.38 |
| Adjusted basic loss per share | (2,578) | (1.40) |
| (1,526) | (0.82) |
The loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of share options is not dilutive under the terms of IAS 33.
4 Annual General Meeting
The Annual General Meeting of the Company will be held at Central House, Beckwith Knowle, Harrogate, HG3 1UG on 30 June 2010 at 10.00 a.m. The audited results for the year ended 31 December 2009 will be posted to shareholders shortly and can be obtained from the Company's website at www.mobiletornado.com.