Fundraising and Final Results
Zoo Digital Group PLC
04 September 2006
4 September 2006
ZOO DIGITAL GROUP PLC
('ZOO', 'the Company' or 'the Group')
PLACING OF 110,000,000 NEW ORDINARY SHARES AT 0.65p
AND ISSUE OF £3,496,000 LOAN NOTES
PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31ST MARCH 2006
ZOO Digital Group plc, the DVD and video technology company, today announces a
capital raising of £3.9m (after expenses) and its unaudited results for the 12
month period to 31 March 2006.
Overview
• £3.9m funding for continued development of the business
• Placing of 110m new Ordinary Shares at 0.65p per share to raise £715,000
• Issue of £3,496,000 Convertible Unsecured Loan Notes
• Preliminary announcement of unaudited results for the 12 month period to
31 March 2006
• Group turnover £9.16m (2005: £12.67 m - 15 months period)
• Loss before Interest, Tax, Depreciation and Amortisation £3.37m (2005:
£1.59 m - 15 months period)
• Retained Loss after exceptional disposal costs and goodwill amortisation
£8.25m (2005: £2.23 m - 15 months period)
• Group restructured with disposal of computer games division
• ZOOtech revenues up 322% to £1.9m (2005: £0.45m - 15 months period) with
over 80 customers in 11 countries and signed first major contract for Menu
Regionalisation product
• 15 patents granted and 62 patents applied for
Commenting, Stuart Green, Chief Executive of ZOO said:
'We are undertaking a fundraising that will put the Group in a strong financial
position to execute its three-year business plan and I am delighted by the
confidence shown in the company's strategy by both new and established investors.
I believe that the structural, strategic and financial changes put in place
provide us with a strong foundation for growth, financial stability and profit
ability.
'The Group has undergone significant restructuring and is now focused entirely
on building its leading position as the provider of software to the DVD and
video production industry. We now have over 80 customers in 11 countries whilst
continuing to develop new applications and markets for the technology.'
For further information, please contact:
Stuart Green
Chief Executive, ZOO Digital Group plc
0114 241 3700
Helen Thomas
Weber Shandwick/Square Mile
020 7067 0700
John Llewellyn-Lloyd
Noble & Company Limited
020 7763 2200
The following information is an extract from the 'circular' which will be posted
to shareholders today.
Introduction
The Company has today announced proposals for a capital raising to provide the
Company with additional funds to further enhance the development of its
business. The Company is seeking to raise £4.21 million (before expenses) as set
out herein. The capital raising is to be effected by means of the Convertible
Loan Stock Issue and the Placing of 110,000,000 new Ordinary Shares at the
Placing Price, which have been conditionally placed by Noble with certain new
and existing investors. Foresight Venture Partners is a UK based technology venture
capital investment manager and the FVP VCTs have conditionally agreed to
invest a total of £2.0 million in the Fundraising.
The Fundraising is conditional upon the passing of certain resolutions by the
Company's Shareholders at an extraordinary general meeting of the Company. The
EGM is to be held at 11:00 a.m. on 27 September 2006 at the Company's offices at
20 Furnival Street, Sheffield, S1 4QT, at which the Fundraising Resolutions will
be proposed. The Fundraising is also conditional on Admission of the Placing
Shares to trading on AIM, a market regulated and operated by the London Stock
Exchange, occurring on 28 September 2006, or such later date as the Company and
Noble may agree.
The Company has received irrevocable undertakings from Directors of the Company
holding a total of 80,337,863 Ordinary Shares to vote in favour of the Resolutions
representing approximately 25.3 per cent. of the Existing Ordinary Shares.
Under the terms of the Engagement Letter entered into between the Company and
Noble in connection with the Placing, Noble has agreed to use its reasonable
endeavours to procure placees for the Placing Shares at the Placing Price. The
Placing is not being underwritten.
Reasons for Fundraising
The Company is proposing to raise £4.21 million (before expenses) by way of the
issue of the CULS (excluding the Subscription CULS) at the Issue Price and the
issue of the Placing Shares at the Placing Price, to institutional and other
investors. The Placing Shares will, when issued, be equivalent to approximately
24.80 per cent. of the Company's enlarged ordinary share capital following
Admission (before the conversion of any Convertible Loan Stock). The Placing
Price represents a discount of approximately 35 per cent. to the closing
midmarket price of an existing issued Ordinary Share of 1p on 1 September 2006,
the latest date practicable prior to the production of this document.
Under the Fundraising, Dr. Stuart Green (Chief Executive Officer) has conditionally
subscribed for 5,846,154 Placing Shares at the Placing Price and
£342,000 of the CULS at the Issue Price, Ian Stewart (Non-Executive Director)
has conditionally subscribed for 4,615,385 Placing Shares at the Placing Price
and £270,000 of the CULS at the Issue Price, Robert Deri (Chief Financial
Officer) and his spouse have conditionally subscribed for 8,461,538 Placing
Shares at the Placing Price in aggregate and Brockhill Limited, a company wholly
owned by Dr. Christopher Honeyborne (Non-Executive Director), has conditionally
subscribed for £4,000 of the CULS at the Issue Price. On completion of the
Fundraising, Stuart Green will hold 15,487,654 Ordinary Shares representing
approximately 3.49 per cent. of the Company's enlarged issued ordinary share
capital following Admission, Ian Stewart will hold 65,152,540 Ordinary Shares
representing approximately 14.69 per cent. of the Company's enlarged issued
ordinary share capital following Admission and Robert Deri (along with connected
parties) will hold 8,593,538 Ordinary Shares representing approximately 1.94 per
cent. of the Company's enlarged issued ordinary share capital following
Admission (in all cases before the conversion of any Convertible Loan Stock).
The Fundraising is expected to raise approximately £3.98 million (after
expenses) for ZOO. The Directors intend to use the net proceeds of the
Fundraising to:
• provide additional working capital to continue the development of the
business;
• complete the development of ZOOtech's templated authoring system for
DVD-Video title production;
• invest in sales and sales support to capitalise on revenue opportunities
of current and future ZOOtech products and services;
• continue to invest in patent protection and filing of additional patents;
and
• invest in further new product development of unique technologies for the
video post production market.
The Directors believe that, given the Company's requirements for additional
financing, the Fundraising is the most appropriate way to raise additional funds
for ZOO. The Board has therefore decided to raise these monies by way of the
Fundraising following a limited and targeted marketing exercise, rather than by
offering all shareholders the opportunity to acquire further shares. The Directors
believe that the additional cost and delay incurred in the production of a
prospectus in connection with any such offer would not have been in the best
interests of the Company.
Shareholders should be aware that if the Resolutions are not approved by
Shareholders at the Extraordinary General Meeting then the Company will be
required to seek alternative sources of finance which may or may not be
forthcoming.
Board Changes
With effect from the completion of the Fundraising, John Barnes has decided to
step down from the Board as Chairman and a non-executive director of the Company
in order that he can pursue other business interests. Dr. Christopher
Honeyborne, presently a non-executive director of the Company, will assume the
role of Chairman of the Company with effect from the completion of the
Fundraising. The Board would like to thank John for his significant contribution
to the Company over the past five years and for his advice and wise counsel over
the course of his chairmanship.
Particulars of terms and conditions of Convertible Loan Stock
The Convertible Loan Stock will be issued in multiples of £1 by a resolution of
the Board and will be constituted as unsecured obligations of the Company by the
Loan Stock Instrument which has been conditionally entered into by the Company.
A copy of the Loan Stock Instrument will be available for inspection by Loan
Stock Holders and any person authorised by any of them at all reasonable times
during office hours at the registered office of the Company. Further particulars
of the terms and conditions of the Convertible Loan Stock are set out in the
Circular.
Taxation
On 15 August 2006, confirmation was sought from Her Majesty's Revenue and
Customs ('HMRC') that:
• the Company is a qualifying company for the purposes the Enterprise
Investment Scheme ('EIS') and for investment by a VCT;
• the ordinary shares of the Company are eligible shares pursuant to section
842AA(14) ICTA 1988;
• the Convertible Loan Stock will be capable of being regarded as a
qualifying loan pursuant to section 842AA(12) ICTA 1988; and
• the ordinary shares issued on conversion of the Convertible Loan Stock
will be, if converted in accordance with the conversion provisions, eligible
shares pursuant to section 842AA(14) ICTA 1988.
On 18 August 2006, the Company received confirmation of all the above points
from HMRC. This authorises the Company to issue certificates under section 306
(2) ICTA 1988 in respect of the shares to be issued, confirming the eligibility
of the ordinary shares for the purposes of the EIS scheme.
Detailed legislation exists in respect of qualifying investments by both VCTs
and under the EIS scheme, which sets out the conditions that must be met by both
the Company and the investors in it. Investors should seek advice from their own
advisers to ensure that their circumstances comply as required by the legislat
ion.
Related Party Transactions
Stuart Green has agreed that he will subscribe for 5,846,154 Placing Shares and
£342,000 of the CULS at an aggregate subscription of £380,000. Stuart Green is a
Director and is therefore a related party for the purposes of the AIM Rules. The
subscription by Stuart Green for 5,846,154 Placing Shares and £342,000 of the
CULS constitutes a related party transaction for the purposes of the AIM Rules.
Ian Stewart has agreed that he will subscribe for 4,615,385 Placing Shares and
£270,000 of the CULS at an aggregate subscription of £300,000. Ian Stewart is a
Director and is therefore a related party for the purposes of the AIM Rules. The
subscription by Ian Stewart for 4,615,385 Placing Shares and £270,000 of the
CULS constitutes a related party transaction for the purposes of the AIM Rules.
The Directors (with the exception of Stuart Green in respect of his subscription
for 5,846,154 Placing Shares and £342,000 of the CULS and Ian Stewart in respect
of his subscription for 4,615,385 Placing Shares and £270,000 of the CULS)
consider, having consulted with Noble, the terms of Stuart Green's and Ian
Stewart's subscriptions under the Fundraising to be fair and reasonable insofar
as Shareholders are concerned.
EGM
Notice has been given in the Circular posted today of an EGM of the Company to
be held at the Company's offices at 20 Furnival Street, Sheffield, S1 4QT at
11:00 a.m. on 27 September 2006, at which the resolutions set out in such notice
will be proposed.
Resolution 1 to be considered at the EGM proposes the following:
(a) to grant the Directors authority to allot the Placing Shares, the Convertible
Loan Stock and the Subscription Shares pursuant to section 80 of the
Companies Act 1985; and
(b) to disapply statutory pre-emption rights in respect of the Placing Shares,
the Convertible Loan Stock and the Subscription Shares. Section 89 of the
Companies Act 1985 requires that any equity securities (including any rights to
convert securities into shares) allotted wholly for cash must be offered to
existing shareholders in proportion to their existing holdings. This requirement
was disapplied to a limited extent by a resolution passed at the annual general
meeting held on 26 July 2005. However the extent of the disapplication is
insufficient to enable full take up of the Placing Shares and the Convertible
Loan Stock in aggregate under the Fundraising together with the issue of the
Subscription Shares. Accordingly, the disapplication of statutory pre-emption
rights proposed in paragraph (b) of Resolution 1 is necessary in order to effect
the Fundraising and the Subscription.
Resolution 2 is to increase the Company's authorised share capital, inter alia,
to give the Company sufficient authorised share capital to enable the issue of
Ordinary Shares in the event that conversion of the Convertible Loan Stock takes
place.
Resolutions 3 and 4 (which are conditional on the passing of the Fundraising
Resolutions) are to authorise the Directors to allot further relevant securities
and to disapply statutory pre-emption rights. It is normal for companies to
maintain (and the Company has previously always maintained) the ability to allot
further shares up to a maximum of 33 per cent. of its issued share capital and to
be able to allot up to 5 per cent. of its securities on a non pre-emptive basis.
These limits are in line with the maximum amounts permitted under the Investor
Protection Committee's guidelines and Resolutions 3 and 4 seek to restore these
amounts by reference to the Company's expected enlarged issued share capital
following the Placing and the Subscription.
Recommendation
The Directors consider the Fundraising and the approval of the Resolutions,
including the Fundraising Resolutions upon which the Fundraising is conditional,
to be in the best interests of the Company and its shareholders as a whole and
unanimously recommend that shareholders vote in favour of the Resolutions, as
the Directors have irrevocably undertaken to do or procure to be done in respect
of their beneficial holdings of Ordinary Shares amounting to, in aggregate,
80,337,863 Ordinary Shares, representing approximately 25.3 per cent. of the
Existing Ordinary Shares.
John Barnes
Non-Executive Chairman
Christopher Honeyborne
Non-Executive Director
PRELIMINARY UNAUDITED RESULTS FOR THE YEAR ENDED 31ST MARCH 2006
CHAIRMAN'S STATEMENT
The Financial Year 2005/06 presented ZOO with a number of challenges which resulted
in the Group making fundamental changes under a comprehensive strategic
review. As part of this review Dr. Stuart Green, previously Chief Technology
Officer and the driving force behind the ZOOtech division, was appointed Chief
Executive with Ian Stewart stepping down and becoming a Non Executive Director.
The strategic review has led the Company to focus its resources and capability
on its core technology business of developing and licensing unique productivity
solutions for DVD and video post production; a business characterized by high
margins and outstanding opportunities for growth.
In 'ZOOtech', the R&D and software licensing division, our DVD development system
DVD-EXTRA STUDIO is now proven as the leading solution for interactive DVD title
production and the associated revenues have increased significantly in the
year. A new product - the Regionalization Tool - has provided the first entry
for ZOO into the lucrative video post production market and our Hollywood based
customers are now enjoying the benefits of significantly reduced costs and
accelerated time to market of regionalized DVD titles. ZOO's DVD production
division 'ZOO Interactive Video' ('ZIV') has produced some of the best
performing interactive DVD titles in 2005 and received a number of industry
awards for product excellence and retail performance.
As part of a strategic review following an increasingly difficult computer games
market, the Group decided to close its traditional games publishing arm ZOO
Digital Publishing and sold the remaining assets for a cash consideration of
£250,000. ZOO's business now focuses solely on the development and licensing of
DVD and video production software and the creation and publication of interactive
DVD-Video ('iDVD') titles.
Today's fundraising of £4.2m gross will underpin the Group's business plan and
provide working capital to take the Group forward and move into profit. We
believe that prospects for the Group under its new structure and focus are sound
and look forward to a period of growth as we capitalise on our range of innovative
software products.
John Barnes
Non-Executive Chairman
Christopher Honeyborne
Non-Executive Director
CHIEF EXECUTIVE'S REVIEW
From an operational point of view the year to March 2006 saw ZOOtech gain
significant traction in the market across eleven countries with a number of blue
chip customers and ZOO Interactive Video established as one of the leading
producers of interactive DVD titles. The well-documented difficulties in the
computer games market had a profound effect on our Games Publishing division,
which became apparent over the Christmas period. After careful consideration of
market conditions, the Board concluded that the risks associated with this
non-core part of the business had increased following the Christmas trading
period and took the decision to close it.
We believe that the restructuring of the business allows investors to appreciate
fully the value we have in our DVD-EXTRA software and the potential for growth
driven by our patented technology. We have reduced our operating costs
significantly and now have 66 full time equivalent employees compared with 115
in January 2006.
Financial Review
Following the trading update announced on 23 January 2006, turnover for the twelve
month period to 31 March 2006 fell to £9.16 million (2005: £12.67 million
- 15 months period). Loss before interest, tax, depreciation and amortisation
was £3.37 million (2005: Loss before interest, tax, depreciation and amortisation
£1.59 million - 15 month period), which largely resulted from the decision
not to publish games from the Group's now redundant games publishing business in
the final quarter and disappointing revenues from own developed games. Exceptional
one off closure costs of £2.74 million (2005: nil) and an exceptional
goodwill amortisation of £0.96 million (2005: nil) were incurred from this
restructuring.
As at 31 March 2006 the Group had net assets of £1.93 million (2005: £6.94
million) with a bank overdraft of £316,605. Part of the fundraising announced
today will be used to repay the Group's debt position and provide sufficient
working capital.
ZOOtech Ltd
The past 12 months have been a period of rapid growth for ZOOtech, during which
revenues increased to £1.9m from £452,000 in the 15 month period to 31 March
2005. Following the successful launch of the DVD development system DVD-EXTRA
STUDIO, the Group introduced a second product focusing on 'regionalisation'
which enables DVD publishers to produce versions of their titles for multiple
languages more quickly and less expensively. Following extensive trials, the
system has now been in use for around seven months in the production of mainstream
DVD-Video titles in Hollywood.
The Regionalization Tool represents ZOOtech's first offering for conventional
DVD production and marks its entry into the video post production market. The
Board believes that the post production market, especially in North America,
represents a significant opportunity and the Group has therefore placed a great
er emphasis on commercial operations in this territory.
We continue to pursue our intellectual property programme and protect our
innovations through the filing of patents in multiple territories. Our portfolio
has reached over 60 applications across 21 patent families, of which 14 have been
granted in the UK and one in New Zealand.
ZOOtech, its products and several third party DVD-EXTRA titles have been the
recipients of a number of prestigious awards. ZOOtech was one of 20 winners of the
European IST Prize - the most distinguished prize for innovative products and
services in the field of Information Society Technologies. In March 2006 at the
DVD Association's annual DVD Excellence Awards ceremony, a total of eight awards
were given to products created with DVD-EXTRA STUDIO. ZOOtech was awarded a DTI
grant for R&D to the value of £200k for research and development of its Templated
Authoring System.
The market focus of ZOOtech now lies in two distinct areas: the video post
production market into which we provide productivity tools, and the interactive
DVD market for which ZOOtech licenses the only product available designed
specifically for interactive DVD title development. The Company's strategy is to
develop unique, innovative technology products based upon patented methods that
can be used to enable video content owners and their vendors to simplify the
creation of titles for multiple territories across multiple platforms.
Video Post Production
Video post production is a well established industry within which annual spend
is considerable. ZOOtech's aim within this industry is to provide technologies
that simplify the creation of video products for multiple platforms and territories
and is developing a suite of application programs for this purpose. ZOOtech's
first such product, the Regionalization Tool, and the forthcoming Templated
Authoring System both automate a considerable proportion of work that has
traditionally been performed manually, usually by post production facilities on
behalf of studios and other DVD publishers. These tools are attractive to content
owners because they can dramatically cut the cost of producing each new DVD title
since they significantly reduce labour related to production. Importantly there
are no other commercial products available with this capability.
During the last year we launched the Regionalization Tool and announced our first
major contract with a Hollywood studio. The product has now been independently
benchmarked by a number of organizations, with measured productivity improvements
of 75% or more. In some cases this can equate to savings for our customers of
multiple millions of dollars annually. We have recently licensed the Regionalization
Tool to Elektrofilm, a global digital media services facility with studios
in Los Angeles, Berlin, Cologne, Leipzig, Munich, Potsdam and Stuttgart. Elektrofilm
will use the system as part of its high end DVD production services offered to
Hollywood studios and other publishers and we expect other organizations to take
up the product.
The Templated Authoring System which automates the preparation of video content
for titles on multiple platforms and in multiple territories is due for release
in the autumn. The initial version of the Templated Authoring System is designed
for production of DVD-Video titles, but we are already exploring opportunities
for other video delivery platforms, including next generation optical discs and
TV deployment.
While we remain focused in our product development and commercialization efforts
to secure revenues in the short to medium term, we continue to identify
significant opportunities for new product development in the future, which will
provide incremental revenue streams.
Interactive DVD
The interactive DVD market in the UK, pioneered by ZOO, has demonstrated
significant growth in the past year. Around 30 titles in the category were introduced
prompting retailers including HMV, Virgin, WHSmith and Borders to dedicate
in-store shelf space to the genre for the first time. Collectively interactive
DVD titles sold around 3 million units over the Christmas 2005 period, of
which we estimate around 70% were produced using DVD-EXTRA STUDIO.
According to data reported in the British Video Association (BVA) Yearbook 2006,
interactive DVDs were responsible for a significant market share gain of the
'special interest' genre, up from 2.3% of volume in 2004 to 3.8% in 2005. Of the
top 20 special interest titles, 17 were interactive DVDs and of these 13 were
created using DVD-EXTRA STUDIO. These titles were hugely popular over Christmas
2005 and companies produced a whole range of products to meet demand, growing
the sub-genre by 100% in the year. The best seller in the special interest
category was 'Who Wants to be a Millionaire? 3' developed by ZOO Interactive Video
and published by Universal with 344,000 units sold, making it the 14th best
selling UK DVD overall in December 2005. In the first half of 2006 this product
has sold through a further 71,000 units bringing its total volume sales to
415,000.
A particularly impressive performance was shown by the title 'Now That's What I
Call a Music Quiz' published by EMI/Universal, selling over 410,000 units in
December 2005 and making this title the best seller in the 'music' category for
the year demonstrating the significant revenue and profit potential of interactive
DVD to music publishers.
The UK interactive DVD market is showing further significant growth in 2006 in
terms of the number of new titles in development. We expect there to be over a
hundred titles available over the Christmas period of which we estimate around
half will be created using DVD-EXTRA STUDIO.
New licensees are being added on an on-going basis; in North America new
agreements with Scholastic Media, Brighter Minds Media and Endless Games for
products that use ZOOtech's technology for new interactive DVDs will produce a
broad range of new titles based on popular television, film and book properties.
In Europe further licenses have been agreed with Vivid Imaginations Ltd, Big Red
Frog, Silenn and Compedia. ZOOtech has also signed its first developer and
publisher contracts in Italy with Cinehollywood, demonstrating the continued
expansion and growth in the market for interactive DVDs across multiple
territories. These additions contribute to a robust publishing schedule for 2006
and 2007 across a number of DVD game categories.
ZOO Interactive Video Ltd ('ZIV')
ZIV is focused on the development of interactive DVD titles and partners with
publishers to provide the channel for its products in the market. ZIV's efforts
have been responsible for the establishment of the interactive DVD category at
retail, with dedicated point-of-sale areas appearing for the first time in
December 2005. In the year four new titles were developed by ZIV: 'Who Wants to
be a Millionaire? 3', 'Wallace & Gromit DVD Game', 'Telly Addicts' and
'Interactive Championship Challenge 2', which were published by Universal Pictures
across eight territories including UK, France, Germany and Japan.
At the DVD Association Excellence Awards held in May 2006, ZIV received six
awards including two for technical achievement and one for children's DVD
excellence. The British Video Association presented ZIV with three Retail
Performance Awards for 'Who Wants to be a Millionaire? 3', 'Telly Addicts' and
'Wallace & Gromit DVD Game'.
ZIV is increasing its output for Christmas 2006 to seven titles which will be
published by Universal Pictures and 2 Entertain Ltd. ZIV's strategy is to grow
the interactive DVD market through the development of premium branded titles for
trivia as well as non-quiz genres, and its products rank amongst the most
sophisticated in the market.
Outlook
The Board has taken decisive measures to focus the business as a technology
company. It is clear that we have unique technologies supported by patents and,
following the successful completion of the proposed fundraising, the Board
remains confident about the prospects for the Group.
We believe that ZOO offers an attractive opportunity for investors and expect the
interactive DVD market to grow across a number of territories in the coming
year with revenues increasing accordingly. We believe that revenues generated by
our video post production tools will increase significantly as we further deploy
installations of the Regionalization Tool and introduce the Templated Authoring
System into the market.
The Group has clear objectives and an effective platform for growth and the
business continues to attract new customers as well as developing relationships
with key multi national companies. Our future product development plans are well
defined and are being driven by customer requirements and we expect ZOO's
technology to play an increasingly important role in the video post production
market.
We anticipate that the restructured group will provide a sound base for the
business. The fundraising allows the Group to eliminate debt completely and
provide working capital to take the business forward.
I would like to take the opportunity to express the Boards' deep gratitude to
all our employees for their unstinting dedication and enormous contribution
during the year.
Stuart Green, Chief Executive
ZOO Digital Group plc
PROFIT AND LOSS ACCOUNT
For the year ended 31 March 2006
Unaudited Audited
Year ended 15 months
31 March to 31
2006 March 2005
£'000 £'000
Turnover 9,164 12,669
Cost of sales (6,183) (7,611)
--------- ---------
Gross profit 2,981 5,058
Other operating income 20 260
Other operating expenses
- other (6,373) (6,907)
Loss before interest, tax,
depreciation and amortisation (3,372) (1,589)
- depreciation (173) (155)
- amortisation of goodwill (682) (593)
--------- ---------
(7,228) (7,655)
--------- ---------
Operating loss (4,227) (2,337)
Loss on disposal of discontinued
operation (3,698) -
Other interest receivable and
similar income 25 99
Amounts written off investment (240) -
Interest payable and similar charges (109) (42)
--------- ---------
Loss on ordinary activities before
taxation (8,248) (2,280)
Tax on loss on ordinary activities - 53
--------- ---------
Retained loss for the financial year (8,248) (2,227)
--------- ---------
BALANCE SHEET
As at 31 March 2006
Unaudited Audited
31 March 2006 31 March 2005
£'000 £'000
Fixed assets
Intangible assets 2,007 3,351
Tangible assets 342 377
--------- ---------
2,350 3,728
--------- ---------
Current assets
Stock 48 903
Debtors 2,499 5,937
Cash at bank and in hand - -
--------- ---------
2,547 6,840
Creditors: amounts falling
due within one year (2,962) (3,630)
--------- ---------
Net current liabilities/assets (415) 3,210
--------- ---------
Total assets less
current liabilities 1,934 6,938
Creditors: Amounts falling due
after more than one year - -
--------- ---------
Net assets 1,934 6,938
--------- ---------
Capital and reserves
Called-up share capital 635 559
Share premium account 21,648 18,719
Other reserves 8,598 8,598
Profit and loss account (28,858) (20,609)
--------- ---------
Shareholders' funds 2,023 7,267
Interest in own shares (89) (329)
--------- ---------
1,934 6,938
--------- ---------
CASH FLOW STATEMENT
For the year ended 31 March 2006
Unaudited Audited
Year ended 15 months
31 March to 31
2006 March 2005
£'000 £'000
Net cash outflow from operating activities (2,005) (4,302)
Exceptional items (35) -
Returns on investments and servicing of
finance (84) 57
Tax refund - -
Capital expenditure and financial
investment (470) (1,107)
Acquisitions and disposals - -
--------- ---------
Cash outflow before financing (2,594) (5,352)
Financing 3,004 (828)
--------- ---------
Increase / (decrease) in cash in the year 410 (6,180)
--------- ---------
Reconciliation of net cash flow to movement in net (debt)/funds
2006 2005
£'000 £'000
Increase / (decrease) in cash in year 410 (6,180)
Cash inflow from increase in debt and
lease financing - 858
--------- ---------
Change in net (debt)/funds resulting from
cash flows 410 (5,322)
--------- ---------
Net (debt)/funds at 1 April 2005 (729) 4,593
--------- ---------
Net funds/(debt) at 31 March 2006 (319) (729)
--------- ---------
NOTES:
Basis of Preparation and Accounting
The financial statements have been prepared under the historical cost convention
and in accordance with applicable United Kingdom accounting standards.
The financial information set out in this announcement does not constitute full
accounts within the meaning of section 240 of the Companies Act 1985.
The balance sheet at 31 March 2006 and the profit and loss account, cash flow
statement and associated notes to the year then ended have been extracted from the
Group's financial statements. These financial statements have not yet been
delivered to the Registrar of Companies.
DEFINITIONS
The following definitions apply throughout this announcement unless the context
requires otherwise:
'Admission' the admission of the Placing Shares and the Subscription Shares to
trading on AIM and such admission becoming effective in accordance with
the AIM Rules
'AIM' AIM, an exchange regulated market regulated by the London Stock Exchange
'AIM Rules' the rules for AIM companies and their nominated advisers published by
the London Stock Exchange from time to time, in relation to AIM traded
securities
'Circular' the circular posted to Shareholders (and, for information only, to the
holders of options over Ordinary Shares) today
'Company' or 'ZOO' ZOO Digital Group plc
'Convertible Loan Stock Issue' the conditional subscription for the Convertible Loan Stock (excluding
the Subscription CULS) by certain institutional and other investors,
including the FVP VCTs
'CULS' or 'Convertible Loan Stock' £3,541,000 6 per cent. Unsecured Convertible Redeemable Loan Stock 2011
of the Company proposed to be issued for cash at the Issue Price
'Directors' or 'Board' the directors of the Company whose names are set out on page 4 of
the Circular
'EGM'or the 'Extraordinary General Meeting' extraordinary general meeting of the Company to be held at the Company's
offices at 1 St. Paul's Place, Sheffield, S1 2JX at 11.00 a.m. on 27
September 2006 (or any adjournment thereof), notice of which is set out
at the end of the Circular
'Engagement Letter' an engagement letter dated 31 August 2006 between (1) Noble and (2) the
Company relating to the Fundraising
'Existing Ordinary Shares' the 317,327,828 Ordinary Shares in issue as at the date of the Circular
'Foresight' or 'FVP' VCF LLP (trading as Foresight Venture Partners)
'Fundraising' the proposed fundraising by the Company by way of the Convertible Loan
Stock Issue and Placing
'Fundraising Resolutions' resolutions 1 and 2 as set out in the Notice of EGM
'FVP VCTs' Foresight 2 VCT plc, Foresight 3 VCT plc and Foresight 4 VCT plc
'Group' the Company and its subsidiaries
'HMRC' Her Majesty's Revenue and Customs
'Issue Price' £1 payable for each £1 nominal of Convertible Loan Stock to be issued
'KBC Peel Hunt' KBC Peel Hunt Ltd
'Loan Stock Holder' any person whose name is, at the relevant time, entered as holder of
Convertible Loan Stock in the register following the Fundraising
'Loan Stock Instrument' the conditional deed constituting the Convertible Loan Stock which has
been executed by the Company
'London Stock Exchange' London Stock Exchange plc
'Noble' Noble & Company Limited, the Company's nominated adviser and broker,
which is authorised and regulated by the Financial Services Authority and
has its registered address at 76 George Street, Edinburgh, EH2 3BU
'Notice of EGM' the notice of the EGM set out at the end of the Circular
'Ordinary Shares' ordinary shares of 0.2p each in the capital of the Company
'Placing Price' 0.65p per Placing Share
'Placing Shares' 110,000,000 new Ordinary Shares to be allotted and issued to certain
institutional and other investors, including the FVP VCTs, pursuant to
the Placing
'Placing' the proposed placing by Noble, on behalf of the Company, of the Placing
Shares at the Placing Price details of which are set out in the Circular
'Resolutions' the resolutions to be proposed at the EGM
'Shareholders' the persons who are registered as holders of Ordinary Shares from time to
time
'Subscription' the proposed subscription by Noble for 15,384,615 new Ordinary Shares at
the Placing Price and the proposed subscription by KBC Peel Hunt for
769,231 new ordinary shares at the Placing Price and £45,000 of the CULS
at the Issue Price
'Subscription CULS' the £45,000 of the CULS at the Issue Price proposed to be subscribed for
by KBC Peel Hunt pursuant to the Subscription
'Subscription Shares' the 16,153,846 new Ordinary Shares subject to the Subscription
'UK' the United Kingdom of Great Britain and Northern Ireland
'VCT' Venture Capital Trust
'ZOOtech' ZOOtech Limited
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