Annual Report and Accounts

RNS Number : 8108J
Immersion Technologies Intl PLC
09 December 2008
 



 FOR IMMEDIATE RELEASE                                                                                                   9 December 2008



Immersion Technologies International plc

('Immersion' or 'Company')



ANNUAL AUDITED RESULTS ANNNOUNCEMENT

FOR THE YEAR TO 30 JUNE 2008


The Company is pleased to announce the audited results of the Company for the year ended 30 June 2008. These results will be posted to shareholders by 19th December 2008.  Extracts of the audited results are set out below.

Chairman's Statement


The Company has had mixed success over the last 12 months in its progress. The setback for the Company was when Nakamichi Corporation Limited ('Nakamichi') failed to take product pursuant to its Supply Agreement with the Company. As a result the Company's strategy has evolved from supplying complete built units to supplying components. There has been some continued interest in the Company's technology from leading consumer electronics companies when the Company displayed its products recently at the IFA Show in Berlin and the Korean Audio Show. In order to minimise the cash burn the Company has streamlined its head count and closed its operations in Singapore and China.

FINANCIAL RESULTS 


The Group's loss for the year is £2,468,816 (period from 2 March 2006 to 30 June 2007 was £2,627,005), in which it earned sales revenue of £18,703, license revenue and interest income of £46,666 and £42,061 respectively. During the year the Group spent £73,017 on research and development and building a broad product range. Amortisation of intangible assets, such as intellectual property, is £245,800 (prior period was £234,941) for the year and the employee and director remuneration costs totalled £951,489 (prior period was £567,850).

REVIEW OF OPERATIONS 


The Technology


The Company has made progress in the evolution of the technology as follows:


Electrostatic Loudspeakers (ESL)

The product development strategy has moved from the manufacturer of complete built units to providing components for customers to add into their product range as necessary. This strategy has the added value of enabling customers to specify the components which the Company can then design and supply in reduced lead times.


Conventional Cone Speakers (CCS)

The CCS technology has evolved from large, standalone sub-woofa products to developing smaller complete units for the consumer electronic industry. In particular the Company has developed a sound bar for use in flat panel TVs. The experience gained from supplying the CCS technology into the automotive industry has enabled small components to be developed producing audiofile quality sound.


Trade Shows


During the year, the Company exhibited its products at trade shows in Germany and Korea where positive interest was shown for our Company products. The Company continues to produce sample and prototypes for potential customers in order to obtain a volume order for its products.


Overseas Facilities


As a result of Nakamichi failing to take manufactured product from the Company, we have decided to shut the manufacturing facility in China. The Company has however retained a small prototype development centre where its sample and prototypes can be produced cost efficiently.


Our Singapore sales and account management office for Nakamichi was closed. Headcount across the Group has been reduced to focus on development of core products.


Nakamichi


The Company signed and executed a design, development and manufacturing contract with Nakamichi dated 22 December 2006 ('the Supply Agreement') for the supply of the Dragon® Hybrid ESL loudspeakers which was due to have the first shipment in December 2007. This contract with Nakamichi for supply of products was worth approximately US$12.1 over a two year period with a minimum commitment for US$5.1m.


The Company completed production of more than 100 pairs of the Dragon® Hybrid ESL loudspeakers for Nakamichi pursuant to the Supply Agreement The first consignment of product was available for collection by Nakamichi on 10 December 2007. However, since that time Nakamichi has failed to collect and pay the balance for the consignment and has failed to issue further purchase orders as required under the Supply Agreement. The Company has placed Nakamichi on notice of this contravention and has reserved all its rights. The Company continues to resolve the matter commercially, failing which it may be required to issue legal proceedings in order to enforce its rights and safeguard the interests of shareholders. 


OUTLOOK


The Company continues to look for ways in which it can exploit the technology. Nakamichi was a setback but the Company is working with other consumer electronic companies in order to solve their audio issues. 


The Company will look at other opportunities in order to preserve shareholder value within the Company and in the meantime we will actively conserve our cash as much as possible. The directors would like to take this opportunity to thank our shareholders for their continued support.






David Lenigas

Non Executive Chairman

9 December 2008





Directors' Report


The Directors are pleased to present this year's annual report together with the consolidated financial statements for the period ended 30 June 2008.


Principal Activities

The principal activity of the Group is the product development, design and manufacture of unique and high performance audio solutions.  


Business Review and future developments

A review of the current and future development of the Group's business is given in the Chairman's Statement on page 3.


Results and Dividends

Loss on ordinary activities of the Group after taxation amounted to £2.47 million. The Directors do not recommend payment of a dividend.


Key Performance Indicators

Given the nature of the business and that the Group is in the development phase of operations, the directors are of the opinion that analysis using KPI's is not appropriate for an understanding of the development, performance or position of our businesses at this time.


Post Balance Sheet events

At the date these financial statements were approved, being 9 December 2008, the Directors were not aware of any significant post balance sheet events other than those set out in the notes to the financial statements.


Substantial Shareholdings

At 9 December 2008 the following had notified the Company of disclosable interests in 3% or more of the nominal value of the Company's shares:


Shareholder

Number of Shares

% of Issued Capital

E D Evans Pty Limited

38,050,000

16.67

Security Transfer Registrars Pty

26,143,749

11.46

CIPAF SA

15,000,000

6.57

Miami Properties Plc

12,000,000

5.26

CIM Special Situations Fund Limited

10,614,285

4.65

Lindsay Alfred Champion

8,150,000

3.57

Vidacos Nominees Limited

7,975,000

3.49



Directors

The names of the Directors who served during the year are set out below:


Director    Date of Appointment    Date of Resignation

Executive Directors

Kiran Morzaria - Executive Director

Craig Evans - Executive Director     29 January 2008


Non-Executive Directors

David Lenigas- Non-executive Chairman     29 January 2008    

Gregory Turnidge -Former Non-executive Chairman          29 January 2008

Alexander Barblett - Non-executive Director 

Vincent Fodera - Executive Director         7 July 2008

Blair Snowball - Executive Director          31 January 2008


Directors' Remuneration

The Company remunerates the Directors at a level commensurate with the size of the Company and the experience of its Directors. The Remuneration Committee has reviewed the Directors' remuneration and believes it upholds the objectives of the Company with regard to this issue. Details of the Director emoluments and payments made for professional services rendered are set out in Note 5 to the financial statements.


Directors' Interests

The beneficial interests of the serving Directors in the shares and options of the Company during the period to 30 June 2008 were as follows:

 

At 30 June 2008

At 30 June 2007

At 30 June 2008

At 30 June 2007

Beneficial and non-beneficial 

Number of Shares

%

Number of Shares

%

Number of Options

Number of Options

David Lenigas

-

-

-

-

2,500,000

-


Kiran Morzaria  (1)


711,428


0.31


711,428


0.32


750,000


-


Alexander John Barblett (3)


600,000


0.26


600,000


0.27


1,250,000


1,500,000


Vincent David Fodera (2)


2,787,384


1.22


1,560,000


0.69


2,500,000


2,750,000


Blair Snowball

-

-

-

-

-

-

Craig Evans

-

-

-

-

-

-

Gregory Turnidge

-

-

-

-

-

-


1) Of which 571,428 of the current shareholding are held on account with TD Waterhouse Nominees (Europe) Limited and 40,000 shares are held by Cornell De Beer Morzaria who is a related party to Kiran Caldas Morzaria. 

2) All shares are beneficially held through Security Transfer Registrars Pty Ltd.

3) Of which 400,000 shares are registered in a third party company, (Entopia Consulting Limited), over which Mr Barblett has an option to acquire the whole or part of the issued share capital therein, and 200,000 are held by Lisa Mitchell who is a related party to the Director.


Corporate Governance

A statement on Corporate Governance is set out on pages 8 - 9. 


Environmental Responsibility

The Company is aware of the potential impact that its subsidiary companies may have on the environment. The Company ensures that it, and its subsidiaries at a minimum comply with the local regulatory requirements and the revised Equator Principles with regard to the environment.


Employment Policies

The Group will be committed to promoting policies which ensure that high calibre employees are attracted, retained and motivated, to ensure the ongoing success for the business. Employees and those who seek to work within the Group are treated equally regardless of sex, marital status, creed, colour, race or ethnic origin. 


Health and Safety

The Group's aim will be to achieve and maintain a high standard of workplace safety. In order to achieve this objective the Group will provide training and support to employees and set demanding standards for workplace safety.


Payment to Suppliers

The Group's policy is to agree terms and conditions with suppliers in advance; payment is then made in accordance with the agreement provided the supplier has met the terms and conditions. There are no material trade payables as at 30 June 2008.


Political Contributions and Charitable Donations

During the period the Group did not make any political contributions or charitable donations.

 

Annual General Meeting ('AGM')

This report and financial statements will be presented to shareholders for their approval at the AGM. The Notice of the AGM will be distributed to shareholders together with the Annual Report.


Statement of disclosure of information to auditors

As at the date of this report the serving directors confirm that:

  • So far as each director is aware, there is no relevant audit information of which the Company's auditors are unaware, and

  • they have taken all the steps that they ought to have taken as directors' in order to make themselves aware of any relevant audit information and to establish that the Company's auditor are aware of that information


Auditors

A resolution to appoint Chapman Davis LLP and to authorise the Directors to fix their remuneration will be proposed at the next Annual General Meeting.


Going Concern

Notwithstanding the loss incurred during the period under review, the Directors are of the opinion that ongoing evaluations of the Company's interests and cash resources, indicate that preparation of the Group's accounts on a going concern basis is appropriate.


Statement of Directors' Responsibilities 

The directors prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing those financial statements, the directors are required to:

  • select suitable accounting policies and then apply them consistently;

  • make judgements and estimates that are reasonable and prudent;

  • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

  • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business.

The directors are responsible for keeping proper accounting records, for safeguarding the assets of the group and for taking reasonable steps for the prevention and detection of fraud and other irregularities. They are also responsible for ensuring that the annual report includes information required by the Alternative Investment Market.

Electronic communication

The maintenance and integrity of the Company's website is the responsibility of the directors: the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

The Company's website is maintained in accordance with AIM Rule 26.

Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions


By order of Board:





Kiran Morzaria

Director

9 December 2008


Group Income Statement for the year ended 30 June 2008









Year


Period


Notes

ended


2 March 2006 to



30 June 2008


30 June 2007



£


£






Revenue

3

68,501


17,971






Cost of Sales


(270,758)


(592)






Gross (Loss)/Profit


(202,257)


17,379






Administrative expenses

4

(2,308,620)


(2,613,438)





 

(Loss) from operations


(2,510,877)


(2,596,059)






Finance Income

7

42,061


38,278






(Loss) before tax


(2,468,816)


(2,557,781)






Tax expense

6

-


(69,224)






(Loss) for the period attributable to shareholders


(2,468,816)


(2,627,005)


















Year


Period

LOSS PER SHARE

Notes

ended


2 March 2006 to



30 June 2008


30 June 2007






Basic

8

1.08 pence


1.80 pence






Diluted

8

1.08 pence


1.80  pence







  Group Balance Sheet as at 30 June 2008









As at


As at


Notes

30 June 2008


30 June 2007



£


£

Non-current assets





Intangible assets

9

800,000


6,683,505

Plant and equipment

10

-


68,758



800,000


6,752,263

Current assets





Trade and other receivables

11

49,588


260,136

Cash and cash equivalents


272,113


2,121,858



321,701


2,381,994






Total assets


1,121,701


9,134,257






Current liabilities





Trade and other payables

13

273,204


360,221

Provisions


1,949


-

Corporation tax liability


-


11,771

Total liabilities


275,153


371,992






Net assets


846,548


8,762,265











Equity





Share capital

16

1,597,573


1,574,087

Share premium reserve


2,868,959


2,824,117

Unissued share capital


185,000


-

Foreign exchange reserve


60,240


51,288

Other reserves


-


5,933,629

Share-based payments


80,360


1,006,149

Accumulated loss


(3,945,584)


(2,627,005)



846,548


8,762,265






The financial statements were approved by the board of directors and authorised for issue on 9 December 2008. They were signed on its behalf by ;




Kiran Mozaria

David Lenigas

Director

Director


  Company Balance Sheet as at 30 June 2008




As at


As at



30 June 2008


30 June 2007


Notes

£


£

Non-Current assets





Investment in subsidiaries

18

2,433,213


18,683,895

Amounts due from subsidiaries

21

885,585


763,688



3,318,798


19,447,583

Current assets





Trade and other receivables

12

31,675


114,865

Cash and cash equivalents


197,305


1,999,166



228,980


2,114,031






Total assets


3,547,778


21,561,614






Current liabilities





Trade and other payables

14

93,315


186,050

Corporation tax liability


-


11,771

Amounts payable to subsidiaries

21



466,669

Total liabilities


93,315


664,490






Net assets


3,454,463


20,897,124











Equity





Share capital

16

1,597,573


1,574,087

Share premium


2,868,959


2,824,117

Unissued share capital


185,000


-

Share-based payment reserve


80,360


59,801

Other reserves


-


16,798,801

Accumulated loss


(1,277,429)


(359,682)



3,454,463


20,897,124






The financial statements were approved by the board of directors and authorised for issue on 9 December 2008. They were signed on its behalf by ;





Kiran Morzaria

David Lenigas

Finance Director

Director




  Group Cash Flow Statement for the year ended 30 June 2008 




 


Period



Year ended


2 March 2006 to



30 June 2008


30 June 2007

OPERATING ACTIVITIES 





Loss after tax for the period


(2,468,816)


(2,627,005)

Adjustments for:





Depreciation


171,541


2,784

Amortisation


245,800


234,941

Loss on disposal of assets


(4,726)


-

Share-based payments


45,559


1,019,302

Finance income


(42,061)


(38,278)

Income tax expense


-


69,224

Increase in provisions


1,949


-

Decrease in receivables


210,548


111,541

(Decrease)/ Increase in payables


(87,017)


90,116

CASH USED IN OPERATING ACTIVITIES


(1,927,223)


(1,137,375)

Income tax paid


(11,771)


-

NET CASH USED IN OPERATING ACTIVITIES


(1,938,994)


(1,137,375)






INVESTING ACTIVITIES





Interest received


42,061


38,278

Cash acquired from business combinations


-


3,434,766

Proceeds from disposal of assets


4,704


-

Purchase of patents


(44,416)


(509,652)

Purchase of plant and equipment


(112,172)


(63,864)

NET CASH USED IN INVESTING ACTIVITIES


(109,823)


2,899,528






FINANCING ACTIVITIES





Proceeds on issuing of ordinary shares


43,328


1,015,000

Proceeds on share capital-un issued


185,000


-

Cost of issue of ordinary shares


-


(604,007)

NET CASH FROM FINANCING ACTIVITIES


228,328


410,993






NET DECREASE IN CASH AND CASH EQUIVALENTS


(1,820,489)


2,173,146






CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


2,121,858


-

Exchange loss on cash and cash equivalents


(29,256)


(51,288)

CASH AND CASH EQUIVALENTS AT END OF PERIOD


272,113


2,121,858


The above Cash Flow should be read in conjunction with the accompanying notes.

  Company Cash Flow Statement for the year ended 30 June 2008









 


Period



Year ended


1 September 2006



30 June 2008


to 30 June 2007


Notes

£


£

OPERATING ACTIVITIES 





Loss after tax for the period


(917,748)


(274,985)

Adjustments for:





Depreciation


2,973


-

Share-based payments


45,559


6,618

Finance income


(40,893)


(132,078)

Income tax expense


-


11,771

Decrease / (Increase) in receivables


83,190


(80,661)

(Decrease) / Increase in payables


(92,735)


133,821






CASH USED IN OPERATING ACTIVITIES


(919,654)


(335,514)

Income tax paid


(11,771)


-






NET CASH USED IN OPERATING ACTIVITIES


(931,425)


(335,514)






INVESTING ACTIVITIES





Interest received


40,893


132,078

Purchase of plant and equipment


(2,973)


-

Loans to subsidiaries


(331,443)


(763,687)

Loans from subsidiaries


(257,122)


-

Investment in Subsidiaries


(548,119)


(187,100)

NET CASH (USED IN) / FROM INVESTING ACTIVITIES


(1,098,764)


(818,709)






FINANCING ACTIVITIES





Proceeds on issuing of ordinary shares


43,328


-

Proceeds on share capital-unissued


185,000


-

Cost of issue of ordinary shares


-


(575,290)

NET CASH (USED IN) / FROM FINANCING ACTIVITIES


228,328


(575,290)






NET (DECREASE) / INCREASE IN CASH AND CASH EQUIVALENTS


(1,801,861)


(1,729,513)






CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD


1,999,166


3,728,679






CASH AND CASH EQUIVALENTS AT END OF PERIOD


197,305


1,999,166


The above Cash Flow should be read in conjunction with the accompanying notes.

  Statement of Changes in Equity for the year ended 30 June 2008


Group





Unissued 

Share






Share 

Share

Share

Based

Foreign

Other

Accumulated



Capital

Premium

Capital

Payments

Exchange

Reserves

Losses

Total


£

£

£

£

£

£

£

£

Balance at 2 March 2006

-

-

-

-

-

-

-

-

Foreign translation differences

-

-

-

-

51,288

-

-

51,288

Loss for the period

-

-

-

-

-

-

(2,627,005)

(2,627,005)

Total recognised income and expense for the period

-

-

-

-

51,288

-

(2,627,005)

(2,575,717)

Share issue

175,904

5,743,257

-

(13,153)

-

-

-

5,906,008

Cost of share issue

-

(28,717)

-

-

-

-

-

(28,717)

Value of reverse acquisition

1,398,183


(2,890,423)

-

-

-

5,933,629

-

4,441,389

Share-based payments

-

-

-

1,019,302

-

-

-

1,019,302

Balance at 30 June 2007

1,574,087

2,824,117

-

1,006,149

51,288

5,933,629

(2,627,005)

8,762,265

Cancelled share based payment

-

-

-

53,183

-

(53,183)

-

-

Cancelled share based payment

-

-

-

(999,530)

-

-

999,530

-

Foreign translation differences

-

-

-

-

-

(150,707)

150,707

-

Balance at 30 June 2007

1,574,087

2,824,117

-

59,802

51,288

5,864,739

(1,476,768)

8,762,265


Foreign translation differences

-

-

-

-

8,952

-

-

8,952

Loss for the period

-

-

-

-

-

-

(2,468,816)

(2,468,816)

Total recognised income and expense for the period

-

-

-

-

8,952

-

(2,468,816)

(2,459,864)

Share issue

23,486

44,842

185,000

-

-

-

-

253,328

Share-based payments

-

-

-

27,177

-

-

-

27,177

Cancelled share based payment

-

-

-

(6,619)

-

-

-

(6,619)

Impairment charge

-

-

-

-

-

(5,682,119)

-

(5,682,119)

Foreign translation differences






(47,620)


(47,620)

Balance at 30 June 2008

1,597,573

2,868,959

185,000

80,360

60,240

-

(3,945,584)

846,548


 

 
 Statement of Changes in Equity for the year ended 30 June 2008
(continued)

Company






Unissued 

Share






Share 

Share

Share

Based

Foreign

Other

Accumulated



Capital

Premium

Capital

Payments

Exchange

Reserves

Losses

Total Equity


£

£

£

£

£

£

£

£

Balance at 31 August 2006

342,762

3,399,407

-

53,183

-

-

(84,698)

3,710,654

Loss for the period

-

-

-

-

-

-

(274,985)

(274,985)

Total recognised income and expense for the period

-

-

-

-

-

-

(274,985)

(274,985)

Share issue

1,231,326

-

-

-

-

-

-

1,231,326

Value of reverse acquisition

-

-

-

-

-

16,798,801

-

16,798,801

Cost of share issue

-

(575,290)

-

-

-

-

-

(575,290)

Share-based payment

-

-


6,618

-

-

-

6,618

Balance at 30 June 2007

1,574,087

2,824,117

-

59,801

-

16,798,801

(359,682)

20,987,124










Loss for the period

-

-

-

-

-

-

(917,747)

(917,747)

Total recognised income and expense for the period

-

-

-

-

-

-

(917,747)

(917,747)

Share issue

23,486

44,842

185,000

-

-

-

-

253,328

Share-based payment

-

-

-

27,177

-

-

-

27,177

Cancelled share based payment




(6,618)




(6,618)

Impairment charge

-

-

-

-

-

(16,798,801)

-

(16,798,801)

Balance at 30 June 2008

1,597,573

2,868,959

185,000

80,360

-

-

(1,277,429)

3,454,463



1

SIGNIFICANT ACCOUNTING POLICIES




The following account policies are those of the Group and apply to the consolidated financial statements.




Authorisation of financial statements



The Group financial statements of Immersion Technologies International Plc for the year ended 30 June 2008 were authorised for issue by the Board on 9 December 2008 and the balance sheets signed on the Board's behalf by Mr. Kiran Morzaria and Mr. David Lenigas. The Company is a public limited Company incorporated in England & Wales under the Companies Act 1985. The Company's ordinary shares are traded on the AIM Market operated by the London Stock Exchange.



Statement of compliance with IFRS


The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Company's financial statements have been prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 1985. The principal accounting policies adopted by the Group and Company are set out below.


Adoption of standards and interpretations


As at the date of authorisation of these financial statements, there were Standards and Interpretations that were in issue but are not yet effective and have not been applied in these financial statements. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the group or company, except for additional disclosures when the relevant Standards come into effect.





Basis of preparation




The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the periods presented, unless otherwise stated.




The financial statements have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and with those parts of the Companies Act 1985 applicable to companies preparing their accounts under IFRS.




These financial statements are presented in Sterling since that is the currency in which the majority of the Company's transactions are denominated. The measurement basis used in the preparation of the financial statements is historical cost, except for financial instruments, which are measured at fair value.




Basis of consolidation




Where the Company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries ('the Group') as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.




Business combinations and goodwill




On acquisition, the assets and liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill.







Revenue recognition




Revenue is recognised to the extent that the right to consideration is obtained in exchange for performance. Payment received in advance of performance is deferred on the balance sheet as a liability and released as services are performed or products are exchanged as per the agreement with the customer. 


Revenue derived from the license royalties are recognised on notification of payment by the licensee. Revenue derived from the sale of manufactured products and recognised when delivered to the customer in accordance with the specific supply contract terms.




Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.




Foreign currencies




Transactions in currencies other than Sterling are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary assets and liabilities that are denominated foreign currencies are retranslated at the rates prevailing on the balance sheet date. Gains and losses arising on retranslation are included in the income statement for the period.




On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of the overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the 'foreign exchange reserve').




Taxation




The tax expense represents the sum of the current tax and deferred tax.




The current tax is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The liability for current tax is calculated by using tax rates that have been enacted or substantively enacted by the balance sheet date.



Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the tax profit nor the accounting profit.




Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.




Internally-generated Intangible Assets - Research and Development Expenditure




Expenditure on internally developed products is capitalised if it can be demonstrated that:


· it is technically feasible to develop the product for it to be sold;


· adequate resources are available to complete the development;


· there is an intention to complete and sell the product;


· the Group is able to sell the product;


· sale of the product will generate future economic benefits; and


· expenditure on the project can be measured reliably.




Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed. The amortisation expense is included within the administrative expenses in the consolidated income statement.




Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated income statement as incurred.




Externally acquired intangible assets




Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. The amortisation expense is included within the administrative expenses line in the consolidated income statement.




Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques.




The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:




Intangible asset Useful economic life Valuation method


Intellectual property Patent life (20 years) Estimated royalty stream if the rights were to be licensed


Licenses 10 years Estimated discounted cash flow




Impairment of tangible and intangible assets excluding goodwill


At each balance sheet date the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If there is such indication then an estimate of the asset's recoverable amount is performed and compared to the carrying amount.




Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.




If the recoverable amount of an asset is estimated to be less that its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a re-valued amount, in which case the impairment loss is treated as a revaluation decrease.




Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.




Property, plant and equipment


Items of property, plant and equipment are initially recognised at cost and subsequently at depreciated cost. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future costs of dismantling and removing items. The corresponding liability is recognised within provisions.




Depreciation is provided on all of property, plant and equipment to write off the carrying value of items over their expected useful economic lives. It is applied at the following rates:


Plant and equipment - 15%-25% per annum straight line


Office equipment - 20%-25% per annum straight line




Inventories




Inventories are initially recognised at cost, and subsequently at the lower of cost and net realisable value. Cost comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition,


Weighted average cost is used to determine the cost of ordinarily interchangeable items.

  




Provisions




Provisions are recognised for liabilities of uncertain timing or amount that have arisen as a result of past transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability.




Financial instruments




Financial assets and financial liabilities are recognised on the balance sheet when the Group has become a party to the contractual provisions of the instrument




Cash and cash equivalents


Cash and cash equivalents comprise cash in hand, cash at bank and short term deposits with banks and similar financial institutions.




Trade and other receivables


Trade and other receivables do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.




Financial liability and equity


Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.




Trade and other payables


Trade and other payables are non interest bearing and are stated at their nominal value.




Equity instruments


Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.



Share-based payments




Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated income statement over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.




Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated income statement over the remaining vesting period.




Where equity instruments are granted to persons other than employees, the consolidated income statement is charged with the fair value of goods and services received. Equity-settled share-based payments are measured at fair value at the date of grant except if the value of the service can be reliably established. The fair value determined at the grant date of equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Company's estimate of shares that will eventually vest. 




Critical accounting estimates and judgements




The Group makes estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

  




Impairment of goodwill


The Group is required to test, on an annual basis, whether goodwill has suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows - actual outcomes may vary. If the carrying amount exceeds the recoverable amount then an impairment is made.




Useful lives of intangible assets and property, plant and equipment


Intangible assets and property, plant and equipment are amortised or depreciated over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue, which are based on judgement and experience and periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the consolidated income statement in specific periods.




Share-based payments


The Group utilised an equity-settled share-based remuneration scheme for employees. Employee services received, and the corresponding increase in equity, are measured by reference to the fair value of the equity instruments at the date of grant, excluding the impact of any non-market vesting conditions. The fair value of share options are estimated by using Black-Scholes valuation method as at the date of grant. The assumptions used in the valuation are described in note 17 and include, among others, the expected volatility, expected life of the options and number of options expected to vest.




Warranty claims


The Group may offer warranties on its products. The Group estimates the amount and cost of future warranty claims for its salesto be 10% of the sales price. 10% accrued warranty provisions for product shipments are provided. Factors that impact the estimated claim information include the success of the Group's productivity and quality initiatives, as well as parts and labour costs. 



Identifying the acquirer in business combinations


IFRS 3 defines the acquirer in a business combination as being the entity that obtains control of the other combining entities and defines control as being held by the combining entity that has the power to govern the financial and operating policies of the other entity so as to obtain benefits from its activities. The Group considers all relevant facts and circumstances to determine which of the combining entities has control, including the voting rights of shareholders, composition of combined entities board and management.




Determination of fair values of intangible assets acquired in business combinations


The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that would have been avoided as a result of the trademark or a patent being owned. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the asset.




Income taxes


The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest will be due. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of such matters is different than the amounts recorded, the differences will impact income tax expense in the period in which such determination is made. 




Deferred taxation


Deferred tax assets are recognised when it is judged more likely than not that they will be recovered.




Going Concern


The financial report for the year ended 30 June 2008 has been prepared on a going concern basis.


  


2

SEGMENT REPORTING 
















For management purposes the Group is organised into 4 operating divisions: Corporate; Product Research, Development and Design; Product Manufacture, and; Sales. These divisions are the basis on which the Group reports its primary segment information. Secondary segment information is presented on a geographic basis. The primary segment information corresponds closely to geographical segments as operational segments reside in distinct locations of the United KingdomAustralia and Asia.










For the year ended 30 June 2008

Corporate

Product 

Product

Sales

Unallocated

Total


Business segments


R&D and

Manufacture


or





Design



Eliminated



Revenue

£

£

£

£

£

£


External sales

5,642

44,799

-

18,060

-

68,501


Total revenue from continuing operations

5,642

44,798

-

18,060

-

68,501


Result








Segment result from continuing operations

(1,178,168)

(795,387)

(192,163)

(345,159)

-

(2,510,877)


Finance income






42,061


Loss before tax






(2,468,816)


Income tax expense






-


Loss for the period from continuing operations





(2,468,816)


Other segment items included in the income statement are as follows:






Depreciation 

3,409

55,133

78,469

34,530

-

171,541


Amortisation 





245,800

245,800










Balance sheet








Segment assets

3,468,816

16,406

37,267

32,426

(2,433,214)

1,121,701


Segment liabilities

(94,246)

(65,772)

(20,336)

(94,799)

-

(275,153)


Net assets

3,374,570

(49,366)

16,931

(62,373)

(2,433,214)

846,548










For the year ended 30 June 2008


United 

Australia

Asia

Unallocated

Total


Geographical segments


Kingdom






Revenue


£

£

£

£

£


External sales


5,642

44,799

18,060


68,501


Total revenue from continuing operations


5,642

44,799

18,060


68,501


Result








Segment result from continuing operations


(1,259,881)

(587,657)

(663,339)

-

(2,510,877)


Finance income

 





42,061


Loss before tax






(2,468,816)


Income tax expense






-


Loss for the period from continuing operations





(2,468,816)










Balance sheet








Segment assets


3,468,816

16,406

69,693

(2,433,214)

1,121,701


Segment liabilities


(94,246)

(65,772)

(115,135)

-

(275,153)


Net assets


3,374,570

(49,366)

(45,442)

(2,433,214)

846,548


Inter-segment transfers are priced along the same lines as sales to external customers, except that an appropriate discount is applied to encourage use of group resources at a rate accepted to local tax authorities.

  




For the period ended 30 June 2007

Corporate

Product 

Product

Sales

Unallocated

Total


Business segments


R&D and

Manufacture


or





Design



Eliminated




£

£

£

£

£

£


Revenue








External sales

-

17,971

-

-

-

17,971


Total revenue from continuing operations

-

17,971

-

-

-

17,971


Result








Segment result from continuing operations

(1,079,804)

(1,258,405)

(62,272)

2,244

(197,822)

(2,596,059)


Finance income






38,278


Loss before tax






(2,557,781)


Income tax expense






(69,224)


Loss for the period from continuing operations





(2,627,005)


Other segment items included in the income statement are as follows:






Depreciation 

781

2,003

-

-

-

2,784


Amortisation 

220,423

14,518

-

-

-

234,941


Balance sheet








Segment assets

10,224,965

92,200

152,811

117,994

(1,453,713)

9,134,257


Segment liabilities

(1,418,232)

(594,632)

(49,792)

(81,530)

1,772,194

(371,992)


Net assets

8,806,733

(502,432)

103,019

36,464

318,481

8,762,265










For the period ended 30 June 2007


United 

Australia

Asia

Unallocated

Total


Geographical segments


Kingdom








£

£

£

£

£


Revenue








External sales


-

17,971

-

-

17,971


Total revenue from continuing operations


-

17,971

-

-

17,971


Result








Segment result from continuing operations


(1,079,804)

(1,258,405)

(60,028)

(197,822)

(2,596,059)


Finance income






38,278


Loss before tax






(2,557,781)


Income tax expense






(69,224)


Loss for the period from continuing operations





(2,627,005)










Balance sheet








Segment assets


10,224,965

92,200

270,805

(1,453,713)

9,134,257


Segment liabilities


(1,418,232)

(594,632)

(131,322)

1,772,194

(371,992)


Net assets


8,806,733

(502,432)

139,483

318,481

8,762,265










Inter-segment transfers are priced along the same lines as sales to external customers, except that an appropriate discount is applied to encourage use of group resources at a rate accepted to local tax authorities.

  

3

CONSOLIDATED REVENUE

Year ended

Period



30 June 2008

2 March 2006 to




30 June 2007



£

£


Revenue arises from:




Sale of goods

18,703

-


Royalties

46,666

10,036


Other Income

3,132

7,935



68,501

17,971





4

CONSOLIDATED LOSS FROM OPERATIONS








Loss from operations has been arrived at after charging:








Directors fees

463,859

441,000


Salaries and wages

469,210

126,850


Consultancy costs

129,350

82,470


Audit fees

68,651

84,135


Other professional fees

77,151

22,555


Amortisation of intangible assets

245,800

234,941


Depreciation

171,541

2,784


Research and development

73,017

188,668


Net Equity settled share-based payments

45,558

1,019,302


Foreign exchange loss

8,314

(5,029)


Other expenses

556,169

410,733



2,308,620

2,613,438






Amounts payable to BDO Stoy Hayward LLP and Chapman Davis LLP and their associates in respect of both audit and non-audit services:




Audit services - group statutory audit (prior year)

64,651

36,000


Other services - company statutory audits

-

25,000


Other services - tax review

-

6,000


Other services - interim audit review

2,500

-


Other services - interim audit review and CT advice

1,500

-






Amounts payable to previous auditors MRI Moores Rowland LLP and their associates in respect of both audit and non-audit services:




Other services - interim audit review

-

4,120


Due diligence on acquisition of Whise Acoustics Limited

-

9,232






Amounts payable to previous auditors of Whise Acoustics Limited, Leydin Freyer Corporate Pty Ltd:




Other services - interim audit review and CT advice

-

3,783







68,651

84,135

  

5

STAFF COSTS and DIRECTORS REMUNERATION






Consolidated




Period



Year ended

2 March 2006 to



30 June 2008

30 June 2007



£

£


The average number of employees (including executive directors) was :

65

19






Their aggregate remuneration comprised :




Wages and salaries

951,489

508,898


Share-based payments

26,862

21,010



978,351

529,908














Consolidated Directors' and Key Management emoluments for the year ending 30 June 2008

Salary & fees

Bonus

Share-based payments

Total 



£

£

£

£


Vincent Fodera-resigned 7/7/2008

120,040

-

13,871

133,911


Sandy Barblett

28,575

-

1,936

30,511


Kiran Morzaria

11,500

-

3,871

15,371


David Lenigas - appointed 29/1/2008

-

-

3,871

3,871


Gregory Turnidge-resigned 29/1/2008

27,140

-

4,936

32,076


Craig Evans-resigned 29/1/2008

142,940

-

1,936

144,876


Blair Snowball-resigned 29/1/2008

66,164

-

12,000

78,164


Arie van der Broek- CEO appointed 15/9/2007

67,500

-

3,871

71,371



463,859


-

46,292

510,151








Consolidated Directors' emoluments for the period ending 30 June 2007

Salary & fees

Bonus

Share-based payments

Total 



£

£

£

£


Vincent Fodera

99,000

15,000

4,988

118,988


Sandy Barblett

33,000

15,000

2,721

50,721


Kiran Morzaria

1,500

-

-

1,500


Gregory Turnidge

19,500

10,000

2,721

32,221


Christopher Lambert

9,000

-

-

9,000


Craig Evans

121,000

15,000

5,443

141,443


Blair Snowball

88,000

15,000

4,988

107,988









371,000

70,000

20,861

461,861

  


6

CONSOLIDATED INCOME TAX EXPENSE






Period



Year ended

2 March 2006 to



30 June 2008

30 June 2007



£

£


Current tax expense




UK corporation tax and income tax of overseas operations on profits for the period

-

69,224






Deferred tax expense




Origination and reversal of temporary differences

-

-






Total income tax expense

-

69,224






The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the UK applied to profits for the year are as follows:








Loss for the period

(2,468,816)

(2,557,781)


Expected tax gain based on the standard rate of corporation tax in the UK of 30%

(728,301)

(767,334)






Expenses not deductible for tax purposes

22,055

57,804


Capital items expensed

-

(64,738)


Share based payments

8,017

7,936


Losses unutilised

84,749

574,238


Utilisation of previously unrecognised tax losses

-

261,318


Different tax rates applied in overseas jurisdictions


-






Total tax (gain) expense

(613,480)

69,224


Tax gain of £613,480 is not recognised as a deferred tax asset








The Group also has a potential deferred tax asset in respect of losses carried forward of £874,257. This has not been recognised due to uncertainty over the amount and timing of future taxable profits against which the asset could be recovered.



7

CONSOLIDATED FINANCE INCOME






Period



Year ended

2 March 2006 to



30 June 2008

30 June 2007



£

£


Interest on bank deposits

42,061

38,278


  

8

LOSS PER SHARE








The calculation of the basic and diluted loss per share is based on the following data:

Year ended

Period ended



30 June 2008

30 June 2007



£

£


Loss




Loss for the purposes of basic and diluted loss per share

(2,468,816)

(2,627,005)






Number of shares




Weighted average number of ordinary shares for the purposes of basic and diluted loss per share

228,220,186

145,569,036






Basic and diluted loss per share

1.08 pence

1.80 pence



The diluted loss per share is equal to the basic loss per share because all of the 18,284,489 options (weighted average being 14,273,530 on issue were considered not potentially dilutive. That is, all options have an exercise price far greater than the weighted average share price during the year (ie they are out-of the-money) and therefore would not be advantageous for the holders to exercise those options.


9

CONSOLIDATED INTANGIBLE ASSETS








Intellectual





Goodwill

Property

Licences

Total



£

£

£

£


Balance at 1 July 2007

1,768,417

4,978,173

171,856

6,918,446


Additions 

-

44,416

-

44,416


Balance at 30 June 2008

1,768,417

5,022,589

171,856

6,962,862








Accumulated amortisation and impairment






Balance at 1 July 2007

-

223,484

11,457

234,941


Amortisation charge for the period

-

228,614

17,186

245,800


Impairment charge

1,768,417

3,770,491

143,213

5,682,121


Balance at 30 June 2008

1,768,417

4,222,589

171,856

6,162,862








Net book value






Balance at 30 June 2008

-

800,000

-

800,000



Goodwill was acquired during the prior period through two separate business combinations. Intellectual property consists of acquired patents, for which amortisation commenced from the date of acquisition. All but three patents have an average remaining useful life of approximately 20 years.


Impairment Review 

At 30 June 2008, the directors have carried out an impairment review and have subsequently written down the value of the Goodwill, Intellectual Property and the Licences by approximately £5.7 million (see Note 19). The directors are of the opinion that the carrying value is now stated at fair value. 




  

10

CONSOLIDATED PLANT AND EQUIPMENT







Plant and

Office

Leasehold




equipment

equipment

improvements

Total


Cost

£

£

£

£


Balance at 1 July 2007

68,319

3,223

-

71,542


Additions

51,284

34,747

26,141

112,172


Disposals

(4,417)

(6,664)

-

(11,081)


Balance at 30 June 2008

115,186

31,306

26,141

172,633








Accumulated depreciation and impairment






Balance at 1 July 2007

2,197

587

-

2,784


Depreciation for the period

112,989

32,411

26,141

171,541


Disposals

-

(1,692)

-

(1,692)


Balance at 30 June 2008

115,186

31,306

26,141

172,633








Net book value






Balance at 30 June 2008

-

-

-

-



Cost






Balance at 2 March 2006

-

-

-

-


Additions

68,319


3,223


-

71,542


Balance at 30 June 2007

68,319

3,223

-

71,542








Accumulated depreciation and impairment






Balance at 2 March 2006

-

-

-

-


Depreciation for the period

2,197


587


-

2,784


Balance at 30 June 2007

2,197


587


-

2,784








Net book value






Balance at 30 June 2007

66,122

2,636

-

68,758


11

CONSOLIDATED TRADE AND OTHER RECEIVABLES





30 June 2008

30 June 2007


Current trade and other receivables

£

£


Trade debtors

17,913

304


Prepayments

25,194

95,647


Tax receivable

-

141,692


Other debtors

6,481

22,493



49,588

260,136






The directors consider that the carrying amount of trade and other receivables approximates their fair value.


  

12

COMPANY TRADE AND OTHER RECEIVABLES





30 June 2008

30 June 2007


Current trade and other receivables

£

£


Prepayments

25,194

13,384


Other debtors

6,481

101,481



31,675

114,865


13

CONSOLIDATED TRADE AND OTHER PAYABLES





30 June 2008

30 June 2007


Current trade and other payables

£

£


Trade payables

69,699

117,583


Accruals

111,099

161,108


Deferred income 

92,406

81,530



273,204

360,221






The directors consider that the carrying amount of trade payables approximates to their fair value.


14

COMPANY TRADE AND OTHER PAYABLES





30 June 2008

30 June 2007


Current trade and other payables

£

£


Trade payables

7,781

46,366


Accruals

85,534

139,684



93,315

186,050


15

FINANCIAL INSTRUMENTS - RISK MANAGEMENT




The Group is exposed through its operations to one or more of the following financial risks:


· Fair value or cash flow interest rate risk


· Foreign currency risk


· Liquidity risk


· Credit risk




Policy for managing these risks is set by the Board following recommendations from the Finance Director. Certain risks are managed centrally, while others are managed locally following guidelines communicated from the centre. The policy for each of the above risks is described in more detail below.




Fair value and cash flow interest rate risk


Currently the Group does not have external borrowings. However, the Group has a policy of holding debt at a floating rate. The directors will revisit the appropriateness of this policy should the Group's operations change in size or nature. Operations are not permitted to borrow long-term from external sources locally. 




Foreign currency risk


Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the same as the functional currency in which the Group companies are operating. The Group's net assets are exposed to currency risk giving rise to gains or losses on retranslation into sterling. Only in exceptional circumstances will the Group consider hedging its net investments in overseas operations as generally it does not consider that the reduction in volatility in consolidated net assets warrants the cash flow risk created from such hedging techniques.

  





Foreign exchange risk also arises when individual Group operations enter into transactions denominated in a currency other than their functional currency. It is Group policy that where the risk to the Group is considered significant, Group treasury will enter into a forward contract with a reputable bank.




Liquidity risk


The liquidity risk of each Group entity is managed centrally by the Group treasury function. Each operation has a facility with Group treasury, the amount of the facility being based on budgets. The budgets are set locally and agreed by the board annually in advance, enabling the Group's cash requirements to be anticipated. Where facilities of Group entities need to be increased, approval must be sought from the Group finance director. Where the amount of the facility is above a certain level agreement of the board is needed.




All surplus cash is held centrally to maximise the returns on deposits through economies of scale. The type of cash instrument used and its maturity date will depend on the Group's forecast cash requirements.




Credit risk


The Group is mainly exposed to credit risk from credit sales. It is Group policy, implemented locally, to assess the credit risk of new customers before entering contracts. Such credit ratings are taken into account by local business practices.




The Group does not enter into complex derivatives to manage credit risk, although in certain isolated cases may take steps to mitigate such risks if it is sufficiently concentrated.


16

SHARE CAPITAL





Consolidated and Company

Consolidated and Company



Year ended

Year ended



30 June 2008


30 June 2007



Number

£

Number

£








Authorised: 






Ordinary shares of £0.007 each

1,000,000,000

7,000,000

1,000,000,000

7,000,000








Issued and Fully Paid:






At the beginning of the period

224,869,614

1,574,087

342,761,601

342,762


Consolidation of share capital

-

-

(293,795,658)

-


Issued ordinary shares of £0.007 each

1,731,645

12,122

-

-


Issued ordinary shares of £0.007 each

1,623,375

11,364

175,903,671

1,231,325


At the end of the period

228,224,634

1,597,573

224,869,614

1,574,087










At the beginning and the end of the period there were no shares issued that were not fully paid.










The following share capital was issued in the period to 30 June 2008;










(1) On 1 July 2007, 1,731,645 shares in Immersion Technology International Limited (representing 0.97% of its issued share capital), were issued to two shareholders who, as described in the Company's Admission Document (12 April 2007) did not waive their rights to compensation shares under the Whise Acoustics Share Purchase Agreement and thus became entitled to the shares on this date. On 11 December 2007 the Group negotiated the purchase of the minority interest by issuing one Immersion Technologies International plc share in exchange for each Immersion Technology International Limited share.



(2) On 6 May 2008 the Company issued 1,623,375 ordinary shares at £0.0154 per share in lieu of cash settlements to current and former directors.

  

17

SHARE-BASED PAYMENTS














During the period the Company issued options to key management and employees



Year ended 30 June 2008


Period ended 30 June 2007



Weighted 

Number


Weighted

Number



average 



average




exercise price 



exercise price



Outstanding at the beginning of the period

£0.13

13,484,489


£0.21

734,489


Granted during the year

£0.0154

17,550,000


£0.125

12,750,000


Forfeited during the year







Cancelled during the year

£0.125

(12,750,000)


-

-


Exercised during the year 

-

-


-

-


Lapsed during the year

-

-


-

-


Outstanding at the end of the year

£0.0232

18,284,489


£0.13

13,484,489















The exercise price of options outstanding at the end of the period ranged between 21p and 1.54p and their weighted average contractual life was 9.8 years.
















The weighted average fair value of each option granted during the year was 0.93p.









The Group used the Black-Scholes model to determine the value of the options and the inputs were as follows:






Year ended

Period ended






30 June 2008

30 June 2007


Weighted average share price




£0.015

£0.051


Weighted average exercise price




£0.232

£0.125


Expected volatility




54%

30%


Expected life




5 years

5 years


Risk free rate




5.00%

5.00%


Expected dividends




£nil

£nil









Expected volatility was determined by using the volatility rate used by listed companies in similar industries and those companies with similar sizes. 









On 6 May 2008 Immersion Technology International Limited also issued 1,623,375 shares as compensation payment to a Director and former Directors.  The total share-based payment charge for the compensations shares is £25,000, which was valued at the date grant based on a valuation of 1.54 pence per share.









The total share-based payment expense in the period for the Group was £52,176, of which £27,176 pertained to new  options to employees and directors which were in relation to options that were issued last year and cancelled and reissued. The cancellation of the charge for previously issued share options was £6,618, and £25,000 of compensation shares as mentioned above, resulting in a net charge of £45,558 in the income statement.

   

18

INVESTMENT IN SUBSIDIARIES





30 June 2008

30 June 2007



£

£


As at 1 July

18,683,895

-


Additions during the year

548,119 

18,683,895


Write-down of investment 

(16,798,801)

-


At 30 June

2,433,213

18,683,895






The subsidiaries of Immersion Technologies International plc, all of which have been included in these consolidated financial statements, are as follows:






Name

Country of incorporation

Proportion of ownership interest






Immersion Technologies UK Limited

UK

100%


Immersion Technology Property Limited

UK

100%


Immersion Technology International Limited

UK

100%


Immersion Technologies (Singapore) Pte Limited

Singapore

100%


Immersion Technology (Nanjing) Co. Limited

China

100%


Immersion Technologies Australia Pty Limited

Australia

100%


Whise Acoustics Limited

Australia

100%


Whise Technologies Pty Limited

Australia

100%



19.    IMPAIRMENT REVIEW


The directors undertook an impairment review of the Group's assets as at 30 June 2008 in view of subsequent events to this date regarding the closure of the operations in Singapore and China. The format of the review was by assessing the carrying value of assets as at 30 June 2008 by country and sector of origin. The analysis and resultant impairment charges were considered as follows:



Category

Net Costs capitalised to 30 June 2008

Impairment charge

Net costs carried forward


£

£

£

GROUP








Intangible assets




Goodwill

1,768,417

(1,768,417)

-

Intellectual property

4,570,491

(3,770,491)

800,000

Licences

143,213

(143,213)

-

Total

6,482,121

(5,682,121)

800,000





Tangible assets




Plant and equipment

103,757

(103,757)

-

Office equipment

23,386

(23,386)

-

Leasehold improvements

17,681

(17,681)

-

Total

144,824

(144,824)

-





COMPANY








Investment in subsidiaries

19,232,014

(16,798,801)

2,433,213










  

20

GROUP RELATED PARTY TRANSACTIONS




Transactions between the parent and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates are disclosed below. Details of directors remuneration, being the only key personnel, are given in note 5.




Directors transactions





During the period, the Group incurred rent payable to ED Evans Holdings Pty Limited, a company owned by ED Evans the father of Craig Evans a former director (resigned 29 January 2008)The total paid for the year was £ 20,395.


Remuneration of Key Management Personnel


The remuneration of the directors, and other key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS24 Related party Disclosures.




2008

2007



£


£



Short-term employee benefits

463,859

441,000


Share-based payments

25,000

20,861



488,859

461,861






21

COMPANY RELATED PARTY TRANSACTIONS 









During the period the Company made loans to the following subsidiaries. The loans provide necessary funds for the subsidiaries to invest in setting up operations. The Company will continue to fund the subsidiaries, in this way, through the set up phase. The Directors believe the loans are fully recoverable but do not expect to make repayment calls within the next reporting period, however these loans are repayable on demand:




As at

As at




30 June 2008

30 June 2007




£

£


Immersion Technology International Limited


-

627,482


Immersion Technologies (Singapore) Pte Limited

18,933

-


Immersion Technologies Australia Pty Limited


1,076,199

136,206




1,095,132

763,688












During the period the Company entered into transactions which resulted in loans payable to the following subsidiaries:




As at

As at




30 June 2008

30 June 2007




£

£


Immersion Technology International Limited


209,347

466,469


Immersion Technology Property Limited


100

100


Immersion Technologies UK Limited


100

100




209,547

466,669







Net amounts due from subsidiaries


885,585

297,019


  

22

ULTIMATE CONTROLLING PARTY


In the opinion of the directors there is no controlling party.


23

OPERATING LEASES








The Group leases all of its properties. The terms of property leases vary from country to country, although the majority are tenant repairing with rent reviews every 3 years and many have break clauses. 






The total future of minimum lease payments are due as follows:





Year ended

Period ended



30 June 2008

30 June 2007



£

£


Not later than one year

37,204

64,456


Later than one year and not later than five years

-

108,889


Later than five years

-

-



37,204

173,345


24

RETIREMENT BENEFIT SCHEME


The Group does not operate either a defined contribution or defined benefit retirement scheme.


25

COMMITMENTS




The Company has a commitment to make an equity investment of US$1,500,000 into its Chinese subsidiary, Immersion Technology (Nanjing) Co. Limited, by the end of April 2009. This commitment is required by rules for establishing a Foreign Controlled Company in NanjingChina. If the Company ceases to require a subsidiary in Nanjing prior to April 2009 then it does not have an obligation to complete the investment. As at the date of publishing the financial statements the Company has invested US$1,300,000 (US$300,000 as at 30 June 2007) and therefore is expected to have a further commitment of US$200,000 to be made  up to April 2009.


The Company is in the process of filing action against Nakamichi Corporation for breach of contract in failing to purchase its manufactured goods for which the Nanjin facility was set up. The financial cost attributable to this action, can not be estimated at this time.


26

POST BALANCE SHEET EVENTS




On 7 July 2008, Mr Vincent Fodera resigned as a director of the Company.


On 22 July 2008 the Company placed 18,500,000 ordinary shares of 0.7p each in the capital of the Company at a price of 1p per ordinary share ('Placing Shares') with certain investors (the 'Placing') rising £185,000. Pursuant to the Placing, participants have additionally been granted one warrant to subscribe for an additional ordinary share in Immersion Technologies for every two new ordinary shares subscribed in the Placing. These warrants are exercisable at 1.5p per share for a period of five years from the date of admission of the Placing Shares to trading on AIM. 


On 18 August 2008, the Company placed 17,500,000 ordinary shares of 0.7p each in the capital of the Company at a price of 1p per ordinary share raising £175,000. Pursuant to the Placing, participants have additionally been granted one warrant to subscribe for an additional ordinary share in Immersion Technologies for every two new ordinary shares subscribed in the Placing. These warrants are exercisable at 1.5p per share for a period of five years from the date of admission of the Placing Shares to trading on AIM. 


The Company has also issued a further 1,100,000 ordinary shares of 0.7p each, in lieu of fees related to the Placing (the 'Fee Shares'). The recipients of the Fee Shares have been granted Warrants on the same basis as the participants in the Placing, as described above.


27

Profit and loss account of the parent company


As permitted by section 230 of the Companies Act 1985, the profit and loss account of the parent company has not been separately presented in these accounts. The parent company loss for the year was £917,748 (2007:loss £274,985).



Additional Notes:


The above financial information comprises non-statutory accounts within the meaning of section 240 of the Companies Act 1985. The financial information for the year ended 30 June 2008 has been extracted from published accounts for the year ended June 2008 that have been delivered to the Registrar of Companies and on which the report of the auditors was unqualified and did not contain statements under s237 (2) or (3) of the Companies Act 1985.


The Report and Accounts will be posted to shareholders by Friday 19th December 2008. Copies may be obtained during normal office hours from the Company's registered office, Level 5, 22 Arlington StreetLondonSW1A 1RD or from the company's website, www.iti-plc.com


Contacts:


Immersion Technologies International plc

 

David Lenigas/Kiran Morzaria

+44 207 016 5100

 

 

Beaumont Cornish - Nominated Adviser 

 

Roland Cornish/Michael Cornish        

+44 (0) 207 628 3396



Pelham Public Relations

 

Archie Berens

+44 (0) 20 7743 6679 / +44 (0) 7802 442 486



This information is provided by RNS
The company news service from the London Stock Exchange
 
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