Final Results
Mobile Tornado Group PLC
29 December 2006
Mobile Tornado Group plc
(the 'Company')
Chairman's Statement
Introduction
It is a great pleasure to present Mobile Tornado's first accounts as a publicly
listed Company. The listing was obtained in March 2006 through the reverse
takeover by Mobile Tornado International Limited of TMT Group plc, a Company
already listed on AIM, but with no underlying business. Following this, TMT
changed its name to Mobile Tornado Group plc and the existing business of Mobile
Tornado has continued, unchanged and uninterrupted.
I first became involved with Mobile Tornado as a shareholder in February 2004
having been attracted by the technology platform that had been developed. The
technology was developed from 1999 onwards by Eyal Fishler and Jorge Pinievsky
whilst working for Mobile Tornado Israel Limited, a technology Company which
they co-owned together with other investors. In February 2004, Mobile Tornado
International Limited, a newly incorporated Irish Company, acquired the assets
and employees of Mobile Tornado Israel Limited. Following this acquisition,
Mobile Tornado maintained an Israeli research and development centre, appointed
a new management team based in Dublin, and commenced the process of
commercialising the technology. This 'streaming' technology, for which patents
have been filed in a number of territories, addresses an area of the
telecommunications market, instant communications, which I believe over the next
few years will present enormous opportunity. Mobile Tornado's platform currently
enables the provision of the following services:
Push to Talk - PTT applications allow users to exchange real time voice messages
between mobile phones and/or personal computers. Users can message individuals
in their contact list one-on-one, or broadcast to a larger group of contacts. As
with instant messaging on the internet, users signal their availability status,
known as presence, which is then displayed on phones across their group of
contacts. This allows very quick instant messaging on mobiles worldwide, without
having to text.
Presence - In the same way that instant messaging users on the internet can see
who in their contact group is on-line, the Mobile Tornado platform provides the
same presence functionality for mobile phones. Mobile users can see the current
status being signalled by users in their group, including online, offline and do
not disturb, and choose whether to contact them.
Desktop-Mobile PTT - As well as, or instead of, using their mobile phone to make
PTT calls, users can install a small piece of software on their personal
computer from which they can then make calls to other PTT users. This is
particularly valuable to enterprises with central dispatch functions.
Since February 2004, Mobile Tornado has raised approximately £5.3 million in
equity and convertible loans from a number of private individuals. The reversal
into TMT Group plc in March 2006 was accompanied by a further placing of £880k.
The injection of £4 million into the Company by InTechnology plc in October 2006
has, I believe, now given the Company and it's subsidiaries (together the 'Group
') the financial platform to fully exploit the global opportunity.
Results
The primary focus during the period under review has been to put the business
onto a stable financial platform. The first stage was successfully achieved
through the reversal into TMT Group plc in March 2006. This has significantly
enhanced the Group's status and credibility with its customers and partners who
include some of the biggest global operators in the telecommunications sector.
The second stage of this process was achieved on 23 October 2006 with the £4.0m
investment by InTechnology plc. This investment will provide the Group with the
resources to strengthen its sales and marketing activities and to maintain the
development of its core technology platform.
Turnover in the year amounted to £289k (2005: £766k). Operating losses increased
to £3,381k (2005: £2,809k). After interest charges and other finance costs of
£469k (2005: £232k) the loss on ordinary activities before taxation was £3,850k
(2005: £3,041k). Net cash outflow from operating activities was £1,649k (2005:
£916k inflow) driven by increased investment in research and development.
The full audited accounts will be sent to shareholders today. The Annual General
Meeting of the Company will be held at Central House, Beckwith Knowle,
Harrogate, HG3 1UG on 31 January 2007 at 10 a.m.
Review of operations
A disproportionate amount of executive time has been spent on securing the
Company's listing onto AIM in March of this year and in procuring subsequent
funding. As a consequence, the lack of focus and resources applied to the sales
function has inevitably resulted in a disappointing performance with sales for
the period under review lower than the previous year. This result does not in
any way lessen the opportunity that exists in the market place for the Group's
technology platform. Following the appointment of the new board of Directors on
24 November the primary focus has been to establish a clear sales strategy to
increase the sale of current products and services to mobile operators and
enterprises.
Although Alcatel and Nortel Networks, the Group's existing partners, provide
Mobile Tornado with access to a number of the world's mobile network operators,
we will seek additional distribution partners, particularly targeting specific
markets. Efforts will be focussed on supporting Tier 2 and Tier 3 mobile
operators through such distribution partners, especially those outside the US
and Western Europe. The Directors consider that many mobile operators in Asia,
Africa, South America and Eastern Europe are looking for low-cost, quick to
deploy, tried and tested PTT solutions. These relatively small operators may not
be able to justify an investment in expensive next generation IMS solutions and
therefore represent a good long-term opportunity for the Group.
The Group aims to further establish its indirect sales model and distribution
network to sell enterprise solutions to businesses. Mobile Tornado currently has
distribution agreements with partners in the US, Germany, and the Netherlands.
These partners are considered to be credible providers of mobile data solutions
and managed mobile services, and have customers in the market sectors to which
PTT is attractive. The Directors are in the process of identifying further
potential distribution partners in different geographical regions and aim to
pursue negotiations with a view to entering into contractual arrangements with
them. I expect to make announcements on new partners early in 2007.
On the technology front, the Group will continue to invest in its research and
development operation based in Tel Aviv. The team is currently working on the
following applications to complement its range of services -
• Push to e-mail - sends a voice message to a contact's e-mail;
• Push to call - triggers a normal voice call from within PTT;
• Push to video - lets other users see what one user's phone sees; and
• Push to send content - allows customers to send and receive data such
as pictures and files.
These applications will support the strategy of supplementing initial licence
fees with upgrade fees. We currently believe the Israeli research and
development centre is resourced to complete most of the development programme
for new applications and upgrades to the current platform, although we will
consider outsourcing some elements where appropriate.
Management
At the time of my appointment to the Board a number of other key board
appointments were made. Jeremy Fenn has joined the board as Chief Financial
Officer, David Parry as VP Sales Worldwide and Eyal Fishler as Chief Technical
Officer. I have worked very closely with Jeremy and David in the past and I am
confident that the skill sets they bring will help the Group to realise its
enormous potential. The introduction of Eyal onto the Board demonstrates our
belief in the technical platform he and his team have created and my commitment
to ensure that it remains at the forefront of the instant communications
revolution.
Current trading and future prospects
It is quite clear to me, from the short time I have been on the Board that the
Group does not suffer from a lack of opportunity. The market for instant
communications in a mobile world is starting to grow very rapidly. I believe we
are ideally placed to capitalise on this momentum and I am confident that we can
deliver significant progress during 2007.
I would like to record my appreciation for the continuing commitment of all our
team members throughout the business and thank them for their support during a
year of significant change.
I look forward to the next 12 months with confidence.
Peter Wilkinson
Non Executive Chairman
29 December 2006
Consolidated profit and loss account
For the year ended 30 June 2006
Group Group
12 mths to 12 mths to
30 June 30 June
2006 2005
Note £'000 £'000
Turnover
Continuing operations 289 766
Acquisitions - -
1 289 766
Cost of Sales
Continuing operations (68) (149)
Acquisitions
- -
Gross profit
221 617
Net operating expenses before depreciation
and amortisation
Continuing operations (2,712) (2,832)
Acquisitions (211) -
Depreciation - all continuing operations (77) (65)
Amortisation - all continuing operations (602) (529)
Administrative expenses (3,602) (3,426)
Group operating loss
Continuing operations (3,170) (2,809)
Acquisitions (211) -
(3,381) (2,809)
Interest receivable/(payable) 2 (469) (232)
Loss on ordinary activities before tax (3,850) (3,041)
Taxation 4 - -
Loss sustained for the financial year (3,850) (3,041)
EBITDA (2,702) (2,215)
Loss per share (pence)
Basic and diluted 6 (4.79) (3.89)
There were no recognised gains or losses other than the loss for the financial
year.
Balance sheets
As at 30 June 2006
Group Group Company Company
At At At At
30 June 30 June 30 June 30 June
2006 2005 2006 2005
Notes £'000 £'000 £'000 £'000
Fixed Assets
Intangible Assets 7 1,580 2,182 - -
Tangible Assets 8 67 119 - -
Investment in subsidiary undertakings 9 - - 12,758 -
1,647 2,301 12,758 -
Current Assets
Debtors 10 336 432 1,394 26
Cash at Bank and in hand 192 856 8 938
528 1,288 1,402 964
Creditors - amounts falling
due within one year 11 (1,334) (3,761) (205) (42)
Net Current Assets (806) (2,473) 1,197 922
Total assets less current liabilities 841 (172) 13,955 922
Creditors - amounts falling
due after more than one year 12 (2,463) (3,024) - -
Net Assets (1,622) (3,196) 13,955 922
Capital and Reserves
Share Capital 14 &15 1,844 3 1,844 119
Share Premium 15 1,624 1,359 1,624 974
Reverse Acquisition Reserve 15 (7,620) - - -
Merger Reserve 15 10,938 - 10,938 -
Profit and loss account 15 (8,408) (4,558) (451) (171)
(1,622) (3,196) 13,955 922
Consolidated cash flow statement
For the year ended 30 June 2006
2006 2005
Note £'000 £'000
Net cash (outflow)/inflow from operating activities 16 (1,649) 916
Returns on investments and servicing of finance
Interest received 4 1
Interest paid (473) (224)
Net cash outflow from returns on investments and servicing of finance (469) (223)
Capital expenditure and financial investment
Purchase of tangible fixed assets (37) (10)
Net cash outflow from capital expenditure and financial investment (37) (10)
Acquisitions and disposals
Net cash at bank acquired with purchase
of subsidiary undertakings 584 -
Net cash inflow from acquisitions and disposals 584 -
Net cash (outflow)/inflow before financing (1,571) 683
Financing
Issue of ordinary share capital 1,298 -
Share Issue costs (391) -
Net cash inflow from financing 907 -
(Decrease)/increase in cash in the year 17 & 18 (664) 683
Accounting policies
Basis of preparation
The financial statements have been prepared in accordance with the Companies Act
1985, applicable Accounting Standards in the United Kingdom and the historical
cost convention except for the adoption of reverse acquisition accounting,
described below, which constitutes a true and fair override departure from
United Kingdom accounting standards.
A summary of the main accounting policies which have been applied consistently
is set out as follows.
Basis of consolidation
The Group financial statements consolidate those of the Company and its
subsidiary undertakings at 30 June 2006. Acquisitions of subsidiaries are dealt
with using the acquisition method of accounting except for the reverse takeover
transaction detailed below.
On 7 March 2006 the Company, then named TMT Group plc, became the parent of
Mobile Tornado International Limited, in a share for share transaction. Due to
the relative value of the companies, the former Mobile Tornado International
Limited shareholders became majority shareholders with 97% of the share capital.
Following the transaction, the Company's continuing operations and executive
management were that of Mobile Tornado International Limited. Accordingly the
substance of the combination was that Mobile Tornado International Limited
acquired TMT Group plc in a reverse acquisition. As part of the business
combination TMT Group plc changed its name to Mobile Tornado Group Plc.
The Companies Act 1985, FRS 6 and FRS 7, would normally require the Company's
consolidated accounts to follow the legal form of the business combination. In
that case the pre-acquisition results would be that of TMT Group plc and its
subsidiary undertakings, which would exclude Mobile Tornado International
Limited. The results of Mobile Tornado International Limited would then be
included in the Group from 7 March 2006. However, this would portray the
combination as the acquisition of Mobile Tornado International by TMT Group plc,
and would, in the opinion of the Directors, fail to give a true and fair view of
the substance of the business combination. Accordingly the Directors have
adopted reverse acquisition accounting as the basis of consolidation in order to
give a true and fair view.
In invoking the true and fair override the Directors note that reverse
acquisition accounting is endorsed under International Financial Reporting
Standard 3. Furthermore, the Urgent Issues Task Force of the UK's Accounting
Standards Board considered the subject and concluded that there are instances
where it is right and proper to invoke the true and fair override in such a way.
As a consequence of applying reverse acquisition accounting, the results of the
Group for the year ended 30 June 2006 comprise the results of Mobile Tornado
International Limited to its year ending 30 June 2006 plus the results of TMT
Group plc from 7 March 2006, the date of acquisition, to 30 June 2006. The
comparative figures are those of Mobile Tornado International Limited for the
year ending 30 June 2005. As set out in note 7, goodwill amounting to £448,134
arose on the difference between the sum of the fair value of TMT Group plc's
share capital and the cost of acquisition, and the fair value of its net assets
at the reverse acquisition date. The goodwill has been written off in the year
to 30 June 2006 because TMT Group plc had no continuing business and the
goodwill had no intrinsic value.
The Company is entitled to the merger relief offered by section 131 of the
Companies Act 1985 in respect of the consideration received in excess of the
nominal value of the equity shares issued in connection with the acquisition of
Mobile Tornado International Limited which has been credited to a merger
reserve.
The effect on the consolidated financial statements of adopting reverse
acquisition accounting, rather than following the legal form, are widespread.
However, the following table indicates the principal effect on the composition
of the consolidated reserves:
Reverse Impact of
acquisition Normal reverse
accounting acquisition acquisition
(as accounting accounting
disclosed)
£'000 £'000 £'000
Called up share capital 1,844 1,844 -
Share premium account 1,624 1,624 -
Merger reserve 10,938 10,938 -
Reverse acquisition reserve (7,620) - (7,620)
Profit and loss account (8,408) (1,542) (6,866)
(1,622) 12,864 (14,486)
Goodwill
Goodwill arising on the reverse acquisition of TMT Group plc has been written
off to the reverse acquisition reserve for the reasons explained above.
Intangible fixed assets
The cost of intangible fixed assets is their purchase cost. Amortisation is
calculated so as to write off the cost of an asset, less its estimated residual
value, over the useful economic life of that asset as follows:
Intellectual Property 5 years
Tangible fixed assets
The cost of tangible fixed assets is their purchase cost. Depreciation is
calculated so as to write-off the cost of an asset, less its estimated residual
value, over the useful economic life of that asset as follows:
Office equipment 3 years
Computer equipment 3 years
Investments
Investments in subsidiary undertakings are stated at cost less any provision for
impairment.
Revenue recognition
Turnover represents the invoiced sales price, less trade discounts allowed,
value added tax and other sales taxes (where applicable). The majority of
revenues are derived from software licence sales of Mobile Tornado products.
Licences
For software licence arrangements that do not require significant
modification or customisation of the underlying software, revenues are
recognised on the later of:
1. The entering into a legally binding arrangement with the customer for
the licence of the software.
2. The fulfilment of any related obligation defined in such an arrangement
related to the various stages of the product(s) delivery, such as
installation, upgrades or acceptance.
3. Customer payment being deemed fixed or determinable and free of
material contingencies or other significant uncertainties.
Consulting services (fixed price basis)
Many of these software licence arrangements also include short-term
consulting implementation services.
To the extent that such consulting services are considered distinct
from the installation of Mobile Tornado's licensed product:
• Expenses relating to the provision of such consulting services are
recognised as incurred.
• The related revenues are recognised in the accounting period in which
the work is performed.
• Any related loss on completion of such work is recognised as soon as
it is anticipated.
Factors considered in determining whether consulting service revenues
should be accounted for separately include:- the nature of the services
(ie. whether the services are essential to the functionality of the
licensed product), the degree of risk, the availability of services from
other vendors, timing of payments and the impact of milestones or other
acceptance criteria on the realisation of the software licence fee.
The revenue streams detailed above constitute one class of business.
Revenue invoiced to customers that has not fulfilled the recognition criteria
detailed above, is held in a deferred income account.
Foreign currencies
Transactions in foreign currencies are recorded at the rate of exchange ruling
at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are translated to sterling at the exchange rates ruling at
the balance sheet date.
The results and assets and liabilities of overseas subsidiary undertakings are
translated at the year end exchange rate. Any resulting exchange differences are
taken to reserves and are reported in the statement of total recognised gains
and losses if material.
All other exchange differences are taken to the profit and loss account.
Research and development
Research and development expenditure is written off to the profit and loss
account as incurred.
Deferred taxation
Deferred tax is recognised on all timing differences where the transactions or
events that give the group an obligation to pay more tax in the future, or a
right to pay less tax in the future, have occurred by the balance sheet date.
Deferred tax assets are recognised when it is more likely than not that they
will be recovered.
Share options
The Group grants share options to employees and Directors on a discretionary
basis. When share options are granted to employees a charge is made to the
Group profit and loss account and a reserve created in capital and reserves to
record the fair value of the awards in accordance with UITF Abstract 17 '
Employee Share Schemes'. No charge has been made to date as the exercise price
of all share options granted has been equal to the Company's share price at the
date of award.
Financial instruments
Income and expenditure arising on financial instruments is recognised on an
accruals basis, and credited or charged to the profit and loss account in the
financial period to which it relates. Financial liabilities and equity
instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that evidences a
residual interest in the assets of the entity after deducting all of its
financial liabilities. Where the contractual obligations of financial
instruments (including share capital) are equivalent to a similar debt
instrument, those financial instruments are classed as financial liabilities.
Financial liabilities are presented as such in the balance sheet. Finance costs
and gains or losses relating to financial liabilities are included in the profit
and loss account. Finance costs are calculated so as to produce a constant rate
of return on the outstanding liability. Where the contractual terms of share
capital do not have any terms meeting the definition of a financial liability
then this is classed as an equity instrument. Dividends and distributions
relating to equity instruments are debited direct to equity.
Compound instruments
Compound instruments comprise both a liability and an equity component. At the
date of issue, the fair value of the liability component is estimated using the
prevailing market interest rate for a similar debt instrument. The liability
component is accounted for as a financial liability. The residual is the
difference between the net proceeds of issue and the liability component (at
time of issue). The residual is the equity component, which is accounted for as
an equity instrument. The interest expense on the liability component is
calculated applying the effective interest rate for the liability component of
the instrument. The difference between this amount and any repayments is added
to the carrying amount of the liability in the balance sheet. Where the
contractual obligations of financial instruments (including share capital) are
equivalent to a similar debt instrument, those financial instruments are classed
as financial liabilities. Financial liabilities are presented as such in the
balance sheet. Finance costs and gains or losses relating to financial
liabilities are included in the profit and loss account. Finance costs are
calculated so as to produce a constant rate of return on the outstanding
liability. The impact of applying this accounting policy has been to continue to
classify all preference share capital and the convertible loan notes as
financial liabilities.
1 Segmental information
2006 2005
Turnover by destination £'000 £'000
Europe - 169
Middle East 222 93
Africa 67 300
Asia/Pacific - 204
Total 289 766
Turnover by source
The source of all turnover detailed above is the Republic of Ireland
2006 2005
Turnover by product type £'000 £'000
Licences 48 418
Hardware 127 235
Software 43 89
Maintenance 23 -
Professional services 48 24
Total 289 766
2 Net interest payable
2006 2005
£'000 £'000
Interest payable on convertible loan notes 406 214
Finance charge on 9% cumulative preference shares 22 19
Other interest payable 45 -
473 233
Bank interest receivable (4) (1)
Net interest payable 469 232
The 9% cumulative preference shares are classified as a liability under FRS25.
3 Loss on ordinary activities before taxation
2006 2005
£'000 £'000
Loss on ordinary activities before taxation is stated after
charging / (crediting):
Staff costs (note 22) 1,684 1,252
Depreciation of owned tangible fixed assets (note 8) 77 65
Amortisation of intangible assets 602 529
Other operating lease rentals 109 83
Auditors' remuneration - audit 43 8
Auditors' remuneration - tax compliance 5 4
Net exchange (gain)/loss on foreign currency borrowings (62) 262
Loss on disposal of tangible fixed assets 12 -
4 Tax on loss on ordinary activities
Corporation Tax:
No charge to UK corporation tax arose in the period due to group trading losses incurred.
Deferred Tax:
Unrelieved tax losses of £8,408,000 remain available to offset against future trading profits.
No deferred tax asset has been recognised in respect of these losses.
The tax assessed for the period differs from that resulting from applying the standard rate
of corporation tax, the differences are explained below:
Loss on ordinary activities before taxation (3,850) (3,041)
At standard rate of corporation tax of 30% (2005: 30%) (1,155) (912)
Effects of:
Amortisation of intangible assets 181 159
Expenses not deductible for tax purposes 2 37
Un-utilised tax losses 972 716
- -
5 Loss of the holding company
As permitted by section 230 of the Companies Act 1985, the profit and loss
account of the Company is not presented in these financial statements. The
parent Company's loss for the year ended 30 June 2006 was £279,708 (2005:
£170,899).
6 Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary
shareholders of £3,850,000 (2005: £3,041,000) by the weighted average number of
ordinary shares in issue during the year of 80,339,651 (2005: 78,130,096). The
weighted average number of shares for the year ended 30 June 2006 assumes that
the 78,130,096 ordinary shares issued in relation to the reverse acquisition of
Mobile Tornado Group plc (formerly TMT Group plc) existed for the entire year.
Mobile Tornado Group plc shares have been included since 7 March 2006 the date
of the reverse acquisition, and all other shares have been included in the
computation based on the weighted average number of days since issuance. The
weighted average number of ordinary shares for the year ended 30 June 2005 is
assumed to be equal to the 78,130,096 ordinary shares issued in relation to the
reverse acquisition.
The adjusted basic earnings per share has been calculated to provide a better
understanding of the underlying performance of the Group as follows:
2006 2005
Basic and diluted Basic and diluted
(Loss)/ (Loss)/ (Loss)/ (Loss)/
earnings earnings earnings earnings
per share per share
£'000 pence £'000 pence
Loss attributable to ordinary shareholders (3,850) (4.79) (3,041) (3.89)
Amortisation of goodwill 602 0.75 529 0.68
Adjusted basic earnings per share (3,248) (4.04) (2,512) (3.21)
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 FRS 22 'Earnings per share'.
7 Intangible fixed assets
Purchased
Intellectual
Goodwill Property Total
Group £'000 £'000 £'000
Cost
At 1 July 2005 - 3,009 3,009
Acquisitions 448 - 448
At 30 June 2006 448 3,009 3,457
Amortisation
At 1 July 2005 - 827 827
Charge for the year 448 602 1,050
At 30 June 2006 448 1,429 1,877
Net book amount at 30 June 2006 - 1,580 1,580
Net book amount at 30 June 2005 - 2,182 2,182
8 Tangible fixed assets
Office Computer Leasehold
Group Equipment Equipment Improvement Total
£'000 £'000 £'000 £'000
Cost
At 1 July 2005 5 209 - 214
Additions 8 21 8 37
Disposals (1) (24) - (25)
At 30 June 2006 12 206 8 226
Accumulated depreciation
At 1 July 2005 - 95 - 95
Charge for the year 1 75 1 77
Disposals - (13) - (13)
At 30 June 2006 1 157 1 159
Net book amount at 30 June 2006 11 49 7 67
Net book amount at 30 June 2005 5 114 - 119
9 Investments
Company
£'000
Shares in group undertakings
At 1 April 2005 -
Subsidiary undertakings:
Acquisition of Mobile Tornado International Ltd 12,758
At 30 June 2006 12,758
Investments in Group undertakings are stated at cost.
Details of the principal investments at 30 June 2006 in which the Group or
Company holds more than 20% of the nominal value of ordinary share capital are
as follows:
Subsidiary undertakings Country of Nature of business Group Company
incorporation or proportion proportion
registration held held
Mobile Tornado International Republic of Sale of instant 100% 100%
Ltd Ireland communication
services
M.T. Labs Ltd Israel Sale of instant 100% 0%
communication
services
M.T. Labs Ltd is a wholly owned subsidiary of Mobile Tornado International Ltd.
10 Debtors
Group Company
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Amounts falling due within one year:
Trade debtors 184 348 - -
Other debtors and prepayments 152 84 21 26
Amounts owed by Group undertakings - - 1,373 -
Total 336 432 1,394 26
11 Creditors - amounts falling due within one year
Group Company
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Trade creditors and accruals 653 1,131 187 12
Other taxation and social security 94 13 18 3
Other creditors 278 330 - 27
Deferred income 45 74 - -
Deferred consideration 264 - - -
9% Cumulative Preference Shares - 310 - -
Convertible Loan Notes - 1,903 - -
Total 1,334 3,761 205 42
The convertible loan notes and preference shares were converted to issued
ordinary share capital of Mobile Tornado International Limited on 7 March 2006.
12 Creditors - amounts falling due after more than one year
Group Company
2006 2005 2006 2005
£'000 £'000 £'000 £'000
Deferred consideration 2,463 3,024 - -
Total 2,463 3,024 - -
The deferred consideration represents a royalty payable on future sales of Push
to Talk related product by Mobile Tornado, payable in part consideration for the
acquisition of the rights to the technology underlying such product. The royalty
is payable quarterly on any relevant sales (on a cash receipts basis) as
follows:
(i) 50% of the first US$200,000 relevant sales.
(ii) 15% of any additional relevant sales, subject to any related
cumulative royalty payments being capped at a maximum of US$5.3 million. Direct
reseller and other third party costs may be deducted in arriving at these
royalty payments, subject to such costs not exceeding 10% of the relevant sales.
The deferred consideration is secured by a charge over the intellectual property
of the Mobile Tornado Group.
13 Financial instruments
Interest rate risk profile of financial assets
The financial assets of the Group comprise cash of £192,000, all held in
floating rate accounts, as follows:
2006 2005
£'000 £'000
Currency
Sterling 28 475
US dollar 120 247
Euro 44 134
192 856
The Group's policy of managing financial risk is detailed in the Directors'
report on page 5.
14 Called up share capital
Company
2006 2005
£'000 £'000
Authorised
200,000,000 (2005: 25,000,000) Ordinary shares of 2p each 4,000 500
Total 4,000 500
2006 2005
£'000 £'000
Allotted, called up and fully paid
92,180,096 (2005: 5,937,500) Ordinary shares of 2p each 1,844 119
Total 1,844 119
The share capital in the Group balance sheet at 30 June 2005 reflected that of
Mobile Tornado International Limited prior to the reverse acquisition.
On 7 March 2006 the Company issued 78,130,096 ordinary shares of 2p each in
respect of the reverse acquisition of Mobile Tornado International Limited.
On 7 March 2006 the Company issued 5,500,000 ordinary shares of 2p each in
respect of a placing at 16p per share.
On 21 April 2006 the Company issued 312,500 ordinary shares of 2p each as part
payment for professional fees in relation to the reverse acquisition of Mobile
Tornado International Limited.
On 26 April 2006, the Company announced a placing of 14,551,333 shares at a
price of 16p per share to fund the acceleration of its global marketing and the
development of extensions to its fixed-mobile convergence products. Jorge
Pinievsky, then a Director of the Company, subscribed for 12,251,333 shares in
the April Placing.
On 27 June 2006 the Company announced that it had not received payment for the
shares issued to Mr Pinievsky in the April Placing. Mr Pinievsky subsequently
resigned from the board of Directors of the Company, although he remains an
employee of the Group, owing to his technical expertise in the Group's market.
Mr Pinievsky has surrendered all shares issued to him in the April Placing to
the Company.
Mr Pinievsky's unpaid shares, which have been surrendered to the Company, will
be held by the Company and either re-allotted or cancelled in due course. The
unpaid 12,251,333 shares and the associated debtor are not included in the
balance sheet or associated notes of the Group or the legal parent. If the
surrendered shares are not re-allotted within three years of their surrender,
they must be cancelled. Mr Pinievsky remains liable to the Company for the
unpaid issue price (less any amount realised by the Company if the shares are
re-allotted).
Share issue costs
The Company incurred issue costs of £486,000 in respect of the above shares
issued during the year. These have been debited to the share premium account of
the Company.
Share options
Certain employees hold options to subscribe for shares in the Company at prices
ranging from 2p to 5p under the share option schemes. The number of shares
subject to options is as follows:
Name of scheme No. of shares Exercise
2006 2005 price (p)
Mobile Tornado Group plc scheme 1 2,461,918 - 2.0
Mobile Tornado Group plc scheme 2 3,600,000 - 5.0
6,061,918 -
15 Shareholders' funds
Group Ordinary Share Reverse Profit & Total
share premium acquisition Merger loss shareholders'
capital account reserve reserve account funds
£'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2005 3 1,359 - - (4,558) (3,196)
Issue of shares 1,841 265 - 10,938 - 13,044
Reverse acquisition capital adjustment - - (7,620) - - (7,620)
Loss sustained for the year - - - - (3,850) (3,850)
At 30 June 2006 1,844 1,624 (7,620) 10,938 (8,408) (1,622)
Company Ordinary Share Reverse Profit & Total
share premium acquisition Merger loss shareholders'
capital account reserve reserve account funds
£'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2005 119 974 - - (171) 922
Issue of shares 1,725 650 - 10,938 - 13,313
Loss sustained for the year - - - - (280) (280)
At 30 June 2006 1,844 1,624 - 10,938 (451) 13,955
On 7 March 2006 the company acquired 79,689,970 ordinary shares of €0.0001 of
Mobile Tornado International Limited, being 100% of its nominal share capital
satisfied by the issue of 78,130,096 ordinary shares. Advantage has been taken
of section 131 of the Companies Act 1985 on merger relief in respect of the
premium on the issue of shares to finance the acquisition.
16 Reconciliation of operating loss to net cash (outflow)/ inflow from operating
activities
2006 2005
£'000 £'000
Operating loss (3,381) (1,665)
Depreciation of tangible fixed assets 77 35
Amortisation of intangibles 602 301
Loss on disposal of tangible fixed assets 12 -
Decrease/(increase) in debtors 126 (273)
Increase in creditors and provisions 915 2,518
Net cash (outflow)/inflow from operating activities (1,649) 916
17 Reconciliation of movement in net funds
2006 2005
£'000 £'000
(Decrease)/increase in cash in the year (664) 683
Change in net debt resulting from cash flows (664) 683
Non-cash changes:
Conversion of Convertible Loan Notes 2,213 (1,551)
Movement in net funds in the year 1,549 (868)
Net debt at start of year (1,357) (489)
Net funds/(debt) at end of year 192 (1,357)
18 Analysis of net funds
At 1 July Cashflow Non-cash At 30 June
2005 changes 2006
£'000 £'000 £'000 £'000
Cash at bank and in hand 856 (664) - 192
Convertible loan notes (2,213) - 2,213 -
Net funds (1,357) (664) 2,213 192
19 Post balance sheet event
In October 2006 InTechnology plc subscribed £4 million for 80 million shares at
5p per share. Following this subscription, InTechnology plc held 43.38% of the
enlarged share capital. Peter Wilkinson and Richard James, Directors of
InTechnology, also own approximately 13.3% and 1.6% respectively of the enlarged
share capital in their personal capacities. Peter Wilkinson is also a 57 per
cent shareholder in InTechnology.
InTechnology's principal activity is providing IT services and products via
channel partners for the deployment of data storage and security, and data and
voice services through its wide-area private network infrastructure. The Group
also provides IT professional services relating to pre-sales consultancy,
technical services, customer support and training.
20 Related party transactions
The Company has taken advantage of the exemption available under FRS 8 'Related
Party Disclosures' from disclosing transactions between the Company and its
subsidiary undertakings as these have been eliminated on consolidation of these
financial statements.
Peter Wilkinson and John Swingewood, holders of Mobile Tornado Group plc shares
are shareholders of InTechnology plc. Peter Wilkinson is also a Director of
InTechnology plc. Mobile Tornado International Limited has bought services
totalling £4,000 (2005; £nil) from InTechnology plc in the year. As at 30 June
2006, Mobile Tornado International Limited owed £1,000 (2005; £nil) to
InTechnology plc.
John Swingewood and Jeremy Fenn are Directors and shareholder of YooMedia plc.
Peter Wilkinson also holds shares in YooMedia plc. Mobile Tornado International
Limited has bought services totalling £44,000 (2005; £nil) from YooMedia plc in
the year. As at 30 June 2006, Mobile Tornado International Limited owed £11,000
(2005; £nil) to YooMedia plc.
John Swingewood and Jeremy Fenn are shareholders and Directors of Eescape
Holdings Limited. Mobile Tornado International Limited has bought services
totalling £4,000 (2005; £17,000) from Eescape Holdings Limited in the year. As
at 30 June 2006, Mobile Tornado International Limited owed £11,000 (2005;
£17,000) to Eescape Holdings Limited.
This information is provided by RNS
The company news service from the London Stock Exchange
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