Interim Results
Immersion Technologies Intl PLC
28 March 2008
IMMERSION TECHNOLOGIES INTERNATIONAL PLC
Incorporated, registered and domiciled in England and Wales
Company number 05542880
Interim Financial Report for the six months ended 31 December 2007
The interim financial report does not include full disclosure of the type
normally included in an Annual Financial Report. Accordingly, this financial
report should be read in conjunction with the Annual Financial Statements for
the period ended 30 June 2007 and any and all public announcements made by
Immersion Technologies International PLC during the interim period.
IMMERSION TECHNOLOGIES INTERNATIONAL PLC
('Immersion' or the 'Company')
INTERIM RESULTS FOR 6 MONTHS ENDED 31 DECEMBER 2007
I am pleased to report Immersion's interim results for the 6 months ended 31
December 2007. The start of the period saw the commencement of manufacturing,
in June 2007, at the Company's facility in Nanjing, China. As a result,
Immersion is now able to manufacture a broad range of audio products, applying
its unique sound technology in both electrostatic loudspeakers ('ESL') and
electromagnetic loudspeakers ('EML'). Importantly, we are able to retain
complete control both of the quality of products that are supplied to customers
and of our own intellectual property.
Results
The Group made a loss for the six month period ended 31 December 2007 of
£1,023,655. The loss for the year ended 30 June 2007 was £2,627,005.
The net cash position of the Group at 31 December 2007 was £918,514.
Review of Operations
Following completion of the Company's manufacturing facility in China, a
significant amount of time and effort was devoted to conducting an extensive
series of tests for the production of a new hybrid ESL. The original
specification of the new hybrid ESL ordered by Nakamichi Corporation Limited ('
Nakamichi') was altered to meet their specific tuning and equalisation
parameters, with a view to mass production.
All of the tests which Nakamichi applied to the speakers were passed by their
chief engineer, Kozo Kobayashi (considered to be one the world's leading audio
engineers), and production of the new hybrid ESL commenced in December 2007.
The rapid development and production of the new hybrid ESL took less than 18
months from the drawing board to a finished product. This is a significant
achievement in an industry where similar products take years to realise.
The work done by the Company in China has been extremely important, as it has
proven the Company's technology and manufacturing capabilities. The design of
the new hybrid ESL represented a new frontier in speaker design and
manufacturing techniques that have not been used before demonstrating that the
Company is a leader in not only speaker technology, but design and manufacturing
as well. This has increased the commercial possibilities available to the
Company, since the technology can now be offered to potential customers 'in
house', so loudspeakers and other related equipment can be manufactured by the
Company to a diverse range of specifications.
In July 2007, Immersion established a sales office in Singapore. This has
extended the Company's potential reach and has created entries to several of the
world's largest manufacturers of consumer electronics.
The Company has also continued to make good progress in a number of other
technical areas including its ESL and EML technologies. The latest third
generation ESL arrays are reaching and exceeding boundaries to an extent never
thought possible by producing enhanced sound pressure level output from smaller
footprint arrays. This advancement in ESL has also been complemented by the
development of new EML subwoofers and high frequency drivers that provide
similar output and frequency responses comparable to EML units that are much
larger in volume without compromising on audio quality.
For the first time, the Company has also completed its new commercial ESL and
EML platforms that offer a wealth of flexibility for audio solutions. The ESL
and EML platforms allow a multitude of 'mix and match' solutions depending on
the particular application required. For example, the Company can now offer a
combination of high frequency ESL or EML drivers to broaden the perspective of
technical features and price points giving potential customers greater
flexibility and options. This achievement now allows the Company to participate
in more price sensitive markets where not only the demand for better quality
audio is growing, but also where the market volumes are much higher. As a
consequence, the Company is well positioned to address the demands in both the
premium and more mainstream consumer electronic markets.
Finally, these new platforms allow the Company to expand its presence in the
automotive markets as well by allowing the Company to become a supplier of full
range audio solutions whereas previously the Company's technology was used only
in low-frequency applications.
Management
Since 31 December 2007, the Board has undergone a number of changes. Following
the Board's decision to relocate the Finance Department to the Company's
headquarters in Melbourne, Blair Snowball resigned as the Company's Finance
Director, with effect from 31 January 2008. As a result, Kiran Morzaria has been
appointed as interim Finance Director and Scott Grimshaw joined the Company as
Group Financial Controller. On 30 January 2008, Craig Evans and Greg Turnidge
resigned as directors of the Company, and I became Non-Executive Chairman and
Arie van den Broek became interim Chief Executive Officer.
I am looking forward to working with Arie. His knowledge and experience of the
audio speaker market is impressive and he has already created a number of
commercial opportunities, which we are actively pursuing.
Outlook
Going forward, we intend to pursue an aggressive sales and marketing strategy.
We have received a large number of expressions of interest in our audio
loudspeaker products. The fact that we are not restricted to licensing the
technology to potential users, but can also manufacture a wide range of products
incorporating the technology gives us a high degree of flexibility in offering
audio solutions.
This flexible approach is proving extremely attractive to Consumer Electronic
Manufacturers ('CEMs') and other retailers of audio equipment. The outstanding
quality of the sound from our loudspeakers is a powerful selling tool and has
been well received by everyone who has experienced it. We are therefore very
optimistic about our long term prospects.
David Lenigas
Non-Executive Chairman
27 March 2008
CONSOLIDATED INCOME STATEMENT
For the six For the period
Notes Months ended 2 March 2006 to
31 December 2007 30 June 2007
Unaudited Audited
£ £
Revenue 27,179 17,971
Cost of Sales (82,120) (592)
Gross Profit (54,941) 17,379
Administrative expenses 3 (1,000,380) (2,613,438)
Loss from operations (1,055,321) (2,596,059)
Finance Income 31,666 38,278
Loss before tax (1,023,655) (2,557,781)
Income tax benefit/(expense) - (69,224)
Loss for the period attributable to shareholders (1,023,655) (2,627,005)
LOSS PER SHARE Six months ended Period ended
31 December 2007 30 June 2007
Basic 6 1.10 pence 4.63 pence
Diluted 6 1.10 pence 4.63 pence
The above income statement should be read in conjunction with the accompanying notes.
CONSOLIDATED BALANCE SHEET
As at As at
Notes 31 December 2007 30 June 2007
Unaudited Audited
£ £
Non-current assets
Intangible assets 6,562,405 6,683,505
Plant and equipment 138,028 68,758
6,700,433 6,752,263
Current assets
Trade and other receivables 272,875 260,136
Inventories 121,559 -
Cash and cash equivalents 918,514 2,121,858
1,312,948 2,381,994
Total assets 8,013,381 9,134,257
Current liabilities
Trade and other payables 117,296 360,221
Prepaid Income 85,792 -
Corporation tax liability - 11,771
Total liabilities 203,088 371,992
Net assets 7,810,293 8,762,265
Equity
Share capital 1,586,209 1,574,087
Share premium reserve 2,855,324 2,824,117
Foreign exchange reserve 64,333 51,288
Other reserves 5,933,629 5,933,629
Share-based payments 1,021,458 1,006,149
Accumulated loss (3,650,660) (2,627,005)
7,810,293 8,762,265
Kiran Morzaria
Finance Director
27 March 2008
The above Balance Sheet should be read in conjunction with the accompanying
notes.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six For the period
Notes Months ended 2 March 2006 to
31 December 2007 30 June 2007
Unaudited Audited
£ £
Total equity at the beginning of the period 8,762,265 -
Loss for the period (1,023,655) (2,627,005)
Total recognised income and expense for the period 7,738,610 (2,627,005)
Transactions with equity holders in their capacity as equity
holders:
Contributions of equity net of transactions cost 43,329 5,877,291
Employee share based expense 15,309 1,019,302
Change in foreign exchange translation reserve 13,045 51,288
Reverse acquisition - 4,441,389
71,683 11,389,270
Total equity at the end of the six month period attributable 7,810,293 8,762,265
to members of Immersion Technologies International Plc
The above Statement of Changes in Equity should be read in conjunction with the
accompanying notes.
CONSOLIDATED CASH FLOW STATEMENT
For the six For the period
Notes Months ended 2 March 2006 to
31 December 2007 30 June 2007
Unaudited Audited
£ £
OPERATING ACTIVITIES
Loss after tax for the period (1,023,655) (2,627,005)
Adjustments for:
Depreciation 3 8,902 2,784
Amortisation 3 121,100 234,941
Share-based payments 3 15,310 1,019,302
Finance income (31,666) (38,278)
Income tax (benefit)/expense - 69,224
Decrease/(Increase) in receivables (12,739) 111,541
Decrease/(Increase) in inventories (121,559) -
(Decrease)/Increase in payables (157,133) 90,116
CASH USED IN OPERATING ACTIVITIES (1,201,440) (1,137,375)
Income tax paid (11,771) -
NET CASH USED IN OPERATING ACTIVITIES (1,213,211) (1,137,375)
INVESTING ACTIVITIES
Interest received 31,666 38,278
Cash acquired from business combinations - 3,434,766
Purchase of patents - (509,652)
Purchase of plant and equipment (78,173) (63,864)
NET CASH USED IN INVESTING ACTIVITIES (46,507) 2,899,528
FINANCING ACTIVITIES
Proceeds on issuing of ordinary shares 43,329 1,015,000
Cost of issue of ordinary shares - (604,007)
NET CASH FROM FINANCING ACTIVITIES 43,329 410,993
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,216,389) 2,173,146
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,121,858 -
Exchange loss on cash and cash equivalents 13,045 (51,288)
CASH AND CASH EQUIVALENTS AT END OF PERIOD 918,514 2,121,858
The above Cash Flow should be read in conjunction with the accompanying notes.
1 SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation of Interim Financial report
The principal accounting policies adopted in the preparation of the financial statements are the same as that
were disclosed in the Financial Statements for the period ended 30 June 2007. These policies have been
consistently applied to all the periods presented, unless otherwise stated.
The financial statements for the half year ended 31 December 2007 have not been audited.
The comparative figures provided for the period to 30 June 2007 do not constitute statutory accounts as
defined in Section 240 of the Companies Act 1985, but are extracted from the company's statutory accounts for
that period.
Comparative figures for the six months ended 31 December 2006 are not included as they are considered not
comparable due to the reverse takeover that was concluded in April 2007.
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.
Reporting Bases and Conventions
The half-year financial report has been prepared on an accrual basis and is based upon historical cots.
Going Concern
The half-year financial report for the six months ended 31 December 2007 has been prepared on a going concern
basis.
Though the company has continued to trade unprofitably causing the cash reserves to reduce through the
period, the Director's believe that there is sufficient cash through existing reserves and forecast revenue
for the Group to continue to operate.
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 Kingdom, Australia and Asia.
Corporate Product Product Sales Unallocated Total
Business segments R&D and Manufacture
Design
Six months ended 31 December £ £ £ £ £ £
2007-Unaudited
Segment Revenue 5,492 21,687 - - - 27,179
Segment loss from operations (470,555) (408,279) (130,352) (46,135) - (1,055,321)
Finance Income 31,666
Loss for the period (1,023,655)
Period ended 30 June
2007-Audited
Segment Revenue - 17,971 - - - 17,971
Segment loss from 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)
Tax expense (69,224)
Loss for the period (2,627,005)
2 SEGMENT REPORTING (CONTINUED)
United Australia Asia Unallocated Total
Geographical segments Kingdom
£ £ £ £ £
Six months ended 31 December
2007-Unaudited
Segment Revenue 5,492 21,687 - - 27,179
Segment Result (596,915) (281,920) (176,486) - (1,055,321)
Finance Income 31,666
Loss for the period (1,023,655)
Period ended 30 June 2007-Audited
Segment Revenue - 17,971 - - 17,971
Segment Result (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 2,627,005
For the six For the period
Months ended 2 March 2006 to
31 December 2007 30 June 2007
Unaudited Audited
£ £
3 CONSOLIDATED LOSS FROM OPERATIONS
Loss from operations has been arrived at after charging:
Directors fees 185,861 441,000
Salaries and wages 285,033 126,850
Consultancy costs 74,850 82,470
Audit fees 24,400 84,135
Other professional fees 55,632 22,555
Amortisation of intangible assets 121,100 234,941
Depreciation 8,902 2,784
Research and development 26,053 188,668
Equity settled share-based payments 15,310 1,019,302
Office rent 34,164 12,073
Other expenses 169,075 398,660
1,000,380 2,613,438
4 SHARE CAPITAL ISSUED
For the six months ended For the period 2 March 2006 to
31 December 2007 30 June 2007
Unaudited Audited
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 - -
Issued ordinary shares of £0.007 1,731,645 12,122 224,869,614 1,574,087
At the end of the period 226,601,259 1,586,209 224,869,614 1,574,087
At the beginning and the end of the period there were no shares issued that were not fully paid.
5 PURCHASE OF MINORITY INTEREST
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.
6 BASIC AND DILUTED LOSS PER ORDINARY SHARE
The calculation of basic loss per share is based on loss after taxation of £1,023,655 (30 June 2007:
£2,627,005) and on 93,082,247 ordinary shares (30 June 2007:56,796,033), being the weighted average number of
ordinary shares on issue during the period.
The diluted loss per share is equal to the basic loss per share because all of the 17,891,424 options
(weighted average being 7,747,055) 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..
7 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 Nanjing, China. If the Company closes its subsidiary in
Nanjing prior to April 2009 then it does not have an obligation to complete the investment. However the
Company expects to complete the commitment in stages over the 2008 year, although precise dates are not yet
determined. As at the date of publishing the financial statements the Company has invested US$850,000
(US$550,000 as at 30 June 2007) and therefore is expected to have a further commitment of US$650,000 to be
made over the next 12 months.
8 EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE
The management is not aware of any significant events other than the Board Changes which are disclosed in
Chairman's Statement.
The financial statements were authorised for issue by the board as a whole following their approval on 27
March 2008.
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