RNS Number:2957M
Tadpole Technology PLC
22 January 2008
Tadpole Technology Announces Results for the Year Ended 30 September 2007
Revenues increase and profitability improves at Tadpole Technology's Endeavors
application streaming operations.
Operating revenue from the Company's application streaming activities known as
Endeavors Technologies ("continuing operations") increased by 56% to �3.3
million from �2.1 million whilst operating profit before non-cash charges was
�27,000 as opposed to an operating loss of �1.3 million in the previous year.
Taking non-cash charges in to account, the Company's operating results from
continuing operations improved significantly, recording a small loss of �0.3
million compared to last year's loss of �6.7 million.
"The trading performance of our core activities ("Endeavors Technologies")
improved dramatically during 2007 as a new management team became effective and
new licensing agreements were signed," commented David Lee, Tadpole Technology
Chairman. "With the disposal of our Geospatial business activities, we are now
demonstrably focused on exploiting our technological advantages in the
application virtualization marketplace."
Revenues from the discontinued geospatial operations ("discontinued operations")
declined significantly from �7.9m to �4.5m and profitability declined from �0.7m
to �0.5m. The disposal of the Geospatial Division to ESRI(UK) Limited was
concluded in November 2007.
David Lee added, "we will complete our transformation to a single, pure focus
business during the first quarter of 2008, with the proposed name change to
Endeavors plc. At the same time, we plan to offer our shareholders the
opportunity to participate in a fundraising, to be announced in February for
completion in March, in order to maintain existing operations and to provide
working capital to further develop the business."
A full copy of the Annual Report and Financial Statements is available on the
Company's website at www.tadpoletechnology.com/html/investors/financials.html.
The documents can also be viewed at the UKLA's Document Viewing Facility, 25
North Colonade, Canary Wharf, London, E14 5HS.
Overview
The Board's strategic decision to focus solely on application streaming and
virtualisation was a pivotal moment in the Group's evolution to date.
A major step in our corporate transition was achieved in November 2007 with the
disposal of the Geospatial business to ESRI (UK), enabling us to re-position the
Group as a 'pure play' world wide technology development and licensing business
focused on the application virtualisation and Software as a Service (SaaS)
market sectors.
The potential value of the streaming business was initially ratified by two data
points. Firstly, an independent review of our intellectual property portfolio
confirmed that we owned the earliest and broadest range of "application
streaming" patents, indicating a potentially significant latent value in our
technologies and patents. Secondly, the licensing of our technologies and
patents to Microsoft, Citrix, Exent and Appstream has provided an early
validation of this potential value. In more recent months, our interaction with
potential customers has strengthened our confidence in the quality and
functionality of our product offerings compared with those of our competitors.
The management of the streaming business has already focused its product and
corporate marketing activities around the "Endeavors" brand. A major product
development program was also initiated bringing together the two product lines,
"AppExpress" and "Streamflow", into a new product family "Application Jukebox",
launched in October 2007 at Network Interop in New York. To complete the final
step in our Group's corporate transformation, your Board will seek shareholder
approval before the end of March 2008 to change the name of the parent company
from Tadpole Technology plc to Endeavors plc.
Operating Results
Group turnover from continuing operations increased by 56% to �3,276,000
compared with �2,098,000 in the prior year. The current year benefited from
licensing agreements with Microsoft and Citrix, which more than compensated for
lower revenues from Softbank and Wyse.
The operating profit from continuing operations for the year, before non-cash
charges, was �27,000 compared with an operating loss of �1,307,000 in 2006.
Non-cash charges comprise depreciation, amortisation, impairment and the charges
for share based payments and warrants (see note 3). The operating loss from
continuing operations for the year was �272,000 compared with �6,720,000 in
2006.
The turnover from discontinued operations was �4,470,000 (2006 - �7,890,000)
with an operating profit of �542,000 (2006 - �669,000).
Total assets at 30 September 2007 were �2,738,000 compared with �4,621,000 at 30
September 2006, a reduction of �1,883,000 comprising primarily a reduction of
�728,000 in trade and other receivables and a reduction in cash of �821,000, of
which �739,000 relates to the repayment of the DivestCap convertible loan note.
Cash at 30 September 2007 stood at �888,000.
Board Changes
Following the resignation of Steig Westerberg as CEO of the Streaming Division
in September 2006, the Board invited Peter Bondar, a Non-executive Director, to
run the Division as acting CEO whilst carrying out a strategic review of the
business. In June 2007, following the Board's decision to focus on the
application streaming business, Peter accepted an offer to become a full-time
Executive Director and was appointed CEO of the Streaming Division.
In October 2006 Iain Cockburn joined the Board as a Non-executive Director and
subsequently played a
Board Changes (continued)
key role in the Board's decision to rationalise the Group's activities and focus
on application streaming. Regrettably, as a consequence of his accepting a new
full-time appointment as finance director of a listed industrial services
business, Iain was obliged to tender his resignation as a Director of the
Company in September 2007. We wish him well in his new role.
Following the successful disposal of the Group's Geospatial Solutions Division,
Dr Mark Ketteman, CEO of the Division, resigned from the Board in November 2007.
I would like to thank Mark for his selfless support of the Board's decision to
focus the Group's activities on application streaming and for the independent
judgment he demonstrated in negotiating a Geospatial sale transaction that was
in the best interests of the Company and the employees of the Geospatial
Solutions Division.
Following Mark's resignation, Peter Bondar was appointed CEO of the Group. In
November 2007, John Bolitho was appointed as a Non-executive Director. I am
delighted to welcome John to the Board and I look forward to his contribution to
our deliberations as we move forward. It is intended to strengthen the
independence of the Board by adding two further Non-executive Directors during
2008.
Employees
Without the dedication and hard work of our employees, we would not be in a
position to exploit the market opportunities that now exist. On behalf of the
Board, I would like to thank all our employees for their support during the year
and I wish every success in the future to those whose employment was transferred
to ESRI or terminated following the sale of the Geospatial Solutions Division.
Outlook
Our chosen technology and market space is still in the "early adopter" phase and
therefore significant risks remain regarding the rate of development of the
market and the competitive pressures that will arise. However, the entry of
several major software companies into the application streaming / virtualisation
/ SaaS market is providing an endorsement of the technology and increasing the
interest from potential customers. Your board believes that the potential return
from this emerging market justifies the increased investment risk that will be
required to compete effectively.
Following our strategic review, we have concluded that there is a 'window of
opportunity' that must be seized as quickly as possible, and that long term
shareholder value is likely to be best realized by raising additional capital to
maintain existing operations and fund an aggressive growth in sales and
marketing activities to address the emerging market opportunities.
The Board, in consultation with its advisors, has decided to raise (subject to
approval by shareholders) approximately �5m, net of costs, to allow for the
further development of the business and to provide additional working capital.
The Board intends that such fundraising will be by way of a pre-emptive offer
allowing existing shareholders to participate on a pro-rata basis to their
existing shareholding. The Board anticipates being able to announce the terms
of this fundraising and send the necessary documentation to shareholders during
February with funds being received during early March, before existing cash
resources are exhausted (see note 2(a)). An EGM will be required to approve
this, which will also request approval of the proposed name change to Endeavors
plc.
David Lee
Chairman
22 January 2008
Continuing Operations
Highlights
The year was transformational in all aspects. A new management team arrived, a
sense of purpose was created through new product and business strategies and the
year ended strongly in terms of sales activity, rate of product development and
new marketing initiatives.
Sales grew 56% from �2,098,000 to �3,276,000 with a small operating profit
before non-cash charges of �27,000 compared with a loss of �1,307,000 in 2006.
Non-cash charges comprise depreciation, amortisation, impairment and the charges
for share based payments and warrants (see note 3). The operating loss from
continuing operations for the year was �272,000 compared with �6,720,000 in
2006.
Two major licensing agreements (Microsoft and Citrix) and one minor agreement
(AppStream) were consummated during the year, and in October 2007 a further
licensing agreement with Exent was signed, further strengthening the
intellectual property portfolio of the Company. In addition all outstanding
litigation in respect of the patent portfolio was successfully brought to a
close.
The revenues from these agreements together with revenues from existing
customers enabled the Group to maintain a positive operating cash flow whilst
starting to rebuild and re-orientate the business.
The Company consolidated its trading and marketing activities using the
"Endeavors Technologies" brand, in the process renaming one of its subsidiaries
and dropping the use of the "StreamTheory" brand associated with the other
subsidiary.
Positive press and analyst coverage steadily developed throughout the year as
the Company's marketing activities and initiatives gained acceptance and
traction, with the web-based communication activities featuring very strongly.
In July 2007, a new freeware Software as a Service website "Stream24-7.com" was
launched to popularise application streaming and its potential commercial
applications. The integration of monetarisation, web and application streaming
technologies used in the site created a number of new sales opportunities and
possible partnerships.
A major product development program was initiated bringing together the two
product lines "AppExpress" and "Streamflow" into a new product family
"Application Jukebox" which was launched in October 2007.
In December 2007, AppExpress Lite, a "free to use" product was released to
further increase awareness and stimulate use of application streaming, targeting
technically aware and capable home users and encouraging the use of "on demand"
applications within the context of a domestic environment.
The year ended with major new sales and marketing teams operational in both
Europe and the USA with strong commercial activity and press and analyst
coverage in the Software as a Service ("SaaS") and Application Virtualisation
market sectors.
Market Analysis
During fiscal 2007 interest in Application Streaming and its applicability to
the application virtualisation and SaaS markets grew markedly.
Both investor and customer interest has developed rapidly. Microsoft's
acquisition of Softricity and its Softgrid product line in late 2006, together
with Citrix's introduction of new application virtualisation products
accelerated market interest in these technologies culminating in publicity
surrounding the highly
Market Analysis (Continued)
successful IPO of VMware. Late in 2007 Xen (application server virtualisation)
was acquired by Citrix and Thinstall (application client Virtualisation) was
acquired in January 2008 by VMware.
The virtualisation market developed rapidly with server, client and application
virtualisation sectors all seeing increased activity. Thinstall, Citrix and
Microsoft were the predominant beneficiaries of the growing interest in
application virtualisation whilst VMware was the market's focal point in respect
of server based virtualisation.
A significant number of enterprises have now utilized virtualisation products
with mixed results. In many cases the products have been found to have either
performance or functional issues which have resulted in the temporary cessation
of deployments pending later versions or alternative solutions. This has proved
to be opportunistic for Endeavors.
In the Software as a Service market Microsoft, Google and several application
software vendors all made forward looking statements; however there was
relatively little obvious commercial activity amongst the bigger players. The
market evolved and developed with a number of smaller companies seeking to
exploit the new opportunities whilst larger companies were more conservative.
Concerns over cannibalisation of revenues and an unfamiliarity of the landscape
slowed the entry of larger organisations into the SaaS market.
Competitor Analysis
As is the case in any high value emerging market, many new vendors and products
have arrived offering innovative new solutions. However, feedback from a number
of potential customers has indicated that the marketing of competitive products
has often flattered the reality of the products' functionality. As the Company's
sales teams have engaged with potential customers it has become clear that many
organisations have tried product and as a result have abandoned or delayed
deployments based on their experience during initial product trials.
Microsoft recently announced its second generation of application streaming
product "Microsoft Application Virtualisation 4.5". The Company believes that
its own product offering retains certain advantage in terms of functionality.
While many organisations will inevitably buy their products from the market
leader, there remain sizeable opportunities for vendors offering non-Microsoft
solutions.
Citrix's product strategy has been largely defensive, offering tools to existing
users that may consider migrating to other solutions. Endeavors' application
streaming can be a more cost effective solution than Citrix server based
computing and the Group is engaged in several pilots with existing Citrix
customers.
Exent is a small Israeli games focussed supplier of application streaming
technologies. It has chosen to develop a complete solution set including games
content, in line advertising and monetarisation offered as an integrated
solution. Endeavors is now engaged in a number of trials in the games arena and
this has now developed into discussions with other organisations looking to
stream games. Exent is expected to have an initial public offering (IPO) on the
Toronto Stock Exchange in 2008
Appstream, a US privately held company is conceptually the closest logical
competitor to Endeavors. With a similar set of technologies, history and trading
performance Endeavors and Appstream are superficially similar. A number of
Appstream distributors now resell Endeavors products.
Customers
Endeavors' existing major customers continued to develop their activities based
on our technologies.
Parsons Engineering in the United States continued to expand and roll out the
use of AppExpress for on demand applications. An article in September's Computer
World by Parson's CIO explained the substantial business benefits that the
organisation had accrued as a result of using AppExpress.
Softbank, Japan's largest provider of broad band services continued to develop
its deployment of streamed applications to its domestic customers. This is the
world's largest known deployment of application streamed applications and
customers.
Wyse, a leader in managed desktop solutions extended its existing OEM agreement
with Endeavors in July 2007. Wyse integrates Endeavors' applications streaming
with other vendors' operating system streaming technologies to provide a
complete managed desktop services environment.
In the UK, Origin Technology Group became an OEM during 2007. Origin's business
model is to provide an integrated content management and delivery service to
Internet Service Providers. Endeavors' streaming technologies are a core
component of their solution.
The UK's Advertising Standards Agency became an AppExpress user in October 2007
via the recently signed Virtual Network Partners reseller program. The agency
uses the product to reduce the number of software licences it requires to meet
the needs of its users by allowing on demand access to a pool of licenses rather
than distributing a copy to each user.
Partners
In technology licensing businesses partners and customer relationships overlap.
Partnerships are, in this context, relationships where revenues will mostly
accrue from subsequent activities rather than from the initial establishment of
the partnership.
Partners have existing relationships with clients and can provide solution or
system integration capabilities allowing Endeavors products to be used together
with other vendors products, offering a complete solution tailored to specific
markets or customer groupings.
ActivAeon signed a reseller agreement in October 2006 allowing it to offer
AppExpress alongside its software license reporting product set.
Virtual Network Partners signed a pan European distribution agreement in June
2007 adding AppExpress to its range of products and displacing Appstream, a
competing vendor of streaming technologies.
Vector Networks, a Canadian developer of enterprise asset management and
discovery software signed a reseller agreement in December 2007. AppExpress
displaced the incumbent streaming software supplier, Appstream.
Also in December 2007, Blackhawk Consulting, an American regional systems
integrator signed a reseller agreement with Endeavors. Again, AppExpress
displaced the incumbent supplier Appstream. Client-Server Technology Group Inc
and NTAKT7 also signed in January 2008.
In December 2007 Endeavors announced a major new initiative, pre-emptively
positioning itself to exploit the emerging SaaS opportunities in the Microsoft
application products arena. Endeavors partnered with a UK regional Microsoft
reseller to focus on offering retailers and e-commerce organisations the ability
to deliver Microsoft products based on a rental model.
Partners (Continued)
RM, Europe's largest educational service provider selected Endeavors as their
preferred streaming partner in January 2008. As a major content aggregator and
delivery service RM plans to provide a single integrated educational content
service to local educational authorities and schools using streaming technology
and Endeavors' monetisation capabilities.
Wallace Systems became Endeavors' first French partner in 2007. Wallace provides
SaaS solutions to software houses wishing to offer web based solutions of
existing applications. Wallace has integrated another vendor's billing system
into their solution to allow full monetisation capabilities and their first SaaS
customer is expected to be online in quarter one 2008. Their first customer
Groupe Moniteur was announced in January 2008.
The Company announced further developments and extensions to its partner program
expanding the reach, segmentation and capabilities in January 2008.
Operational Activities
The year can be chronicled into three discrete periods which follow the Group's
evolving analysis and strategy with regard to its application streaming
operations.
Stabilisation Phase
During 2006, the previous management of the application streaming business had
failed to achieve any significant new sales activity whilst the strategic focus
on building an integrated value chain in streaming games had failed to gain
acceptance in the market.
Following the resignation of the CEO in September 2006, the Board invited Peter
Bondar, at the time a non-executive director of the Company, to become acting
CEO with a mandate to review the operations and make a recommendation to the
Board as to the future of the business.
Initially some positions in sales and marketing were eliminated. Activities to
build a games solutions integrated offering were halted.
A decision was made to rationalise the product family by producing one
integrated product set based on the best features of both existing product sets.
Engineering were tasked to deliver a new product set by late 2007. In October
2007 Application Jukebox, Endeavors' next generation platform was debuted in New
York at Network Interop.
The StreamTheory branding and image were removed and all sales and marketing
activities were consolidated around the Endeavors brand. In parallel with this
the Endeavors Technology, Inc. company was renamed Endeavors Technologies, Inc.
to emphasise the aggregation of these technologies.
Two new generations of websites were created in 2007. The latter carrying the
current Endeavors corporate brand and style has now been adopted for the Tadpole
Technology corporate website which, subject to shareholder approval, will be
re-branded Endeavors plc in 2008. The house style has now been transferred to
the Stream 24-7 website and the new TryitNow website for the new free to use
AppExpress Lite product set.
During this period key customers were visited and updated and quality of service
and support was increased to address their concerns arising from this period of
corporate uncertainty and restructuring.
Outstanding litigation with a number of competitors was successfully concluded
with licensing agreements with Microsoft and Citrix in March 2007, with
Appstream in June 2007 and Exent in October 2007.
Recovery phase
An independent review of the technologies led to the conclusion that there was
significant latent commercial value in both the products and the associated
intellectual property, particularly the 10 patents granted and 16 patents
pending.
The Board, having reviewed all of the data points, decided in March 2007 to
retain the business and move forward its development.
In Europe a new sales and marketing organisation was created which quickly
started to generate sales activity. It became clear that the Software as a
Service ("SaaS") market was emerging and several pilots have now been undertaken
with Wallace Systems and Research Machines as early publicly visible customers.
The extensive deployment of early pilots using Microsoft and Citrix's products
was interesting, confirming that the market had reached an acceptance/deployment
phase. However, these early pilots had suffered from a number of technical
problems and users' expectations had not been met, offering an opportunity for
Endeavors' sales teams to exploit.
The acquisition of new engineers with their associated web technologies allowed
Endeavors to create Stream 24-7, a free to use download centre for applications
streamed products.
This was pivotal in the European sales and marketing campaigns allowing easy and
quick verification by potential customers of the capabilities of Endeavors in
the application virtualisation and Software as a Service markets.
Expansion Phase
Sales performance in the US had been historically disappointing and failed to
respond to initial attempts to address the issues. The decision was taken in
September 2007 to replace the entire US sales team and rebuild the organisation.
A new sales manager was appointed and a new sales and marketing team created,
modelled on the successful European model. Initial results are encouraging.
US operations moved to new, higher quality but smaller headquarters in Irvine,
California. No significant change in costs resulted from the move.
The Company decided to outsource some of its non core development work during
2007. From a cost perspective, the trial was successful; however delivery
schedules were not met, primarily due to quality issues. As a result the Company
is revaluating its strategy in this area.
Following the strategic decision to dispose of the Company's geospatial
interests and focus entirely on the application streaming opportunities the
Company has escalated its recruitment activities adding further capabilities in
sales, marketing, customer support and engineering.
Administration and financial operations have been centred in Irvine, California,
with a new Chief Financial Officer, Juan Salcedo, responsible globally for all
financial and administrative functions.
With the rapid expansion in potential customer engagement, a decision was taken
to supplement the management team with experienced service delivery and customer
support specialists. With the further development of the European operations it
is anticipated that Endeavors Technologies Ltd will move to new offices near
Leeds, England in March 2008.
Discontinued Operations
In March 2007, a transaction was concluded to sell the Group's US Geospatial
subsidiary, Tadpole Cartesia, Inc. ("TCI") to its President for a nominal
consideration of $1 cash. The loss on disposal was �3,600.
On 1 November 2007 the Company announced that it had entered into an asset
purchase agreement with ESRI (UK) Limited ("ESRI") to dispose of its UK
Geospatial Solutions business. Under the terms of the agreement ESRI acquired
customer and support contracts, product intellectual property rights and
tangible fixed assets for an aggregate consideration of �545,000, comprising
�225,000 in cash and �320,000 in respect of customer support, premises lease and
employee liabilities undertaken by ESRI.
In the year ended 30 September 2007, the Geospatial business reported revenues
of �4,470,000 and an operating profit before non-cash charges of �678,000 (after
providing for �348,000 redundancy and other closure costs) compared with
�7,890,000 revenues and �886,000 operating profit before non-cash charges in the
prior year. Non-cash charges comprise depreciation, amortisation, impairment and
the charges for share based payments and warrants (see note 3). The operating
profit was �542,000 (2006 - �669,000).
The results for the year ended 30 September 2007 included revenue of �3,698,000
and an operating profit of �1,700,000 attributable to the contract with Ordnance
Survey (terminated on 6 October 2007) and revenue of �200,000 and an operating
loss of �200,000 attributable to TCI (sold in March 2007).
Peter Bondar
Chief Executive Officer
22 January 2008
Summary
2007 2006
�'000 �'000
Total revenue from continuing operations 3,276 2,098
--------- ---------
--------- ---------
Operating profit/(loss) from continuing operations
before non-cash charges 27 (1,307)
--------- ---------
--------- ---------
Total net profit / (loss) for the year 257 (5,701)
--------- ---------
--------- ---------
Loss for the year attributable to continuing operations (285) (6,370)
--------- ---------
--------- ---------
Equity attributable to equity holders of the parent 937 528
--------- ---------
--------- ---------
Net cash generated from operating activities before tax 24 202
--------- ---------
--------- ---------
No. No.
Average monthly number of employees - continuing operations 33 29
- total 74 91
--------- ---------
--------- ---------
Pence Pence
Profit / (loss) per share (basic and diluted): 0.06 (1.44)
Loss per share (basic and diluted) on continuing operations (0.07) (1.61)
--------- ---------
--------- ---------
Debt ratio (total liabilities/total assets) 0.66 0.89
--------- ---------
--------- ---------
Financial Statements
The financial results for the year are presented in accordance with
International Financial Reporting Standards ("IFRS"). The principal change
arising from the adoption of IFRS in the prior year was the accounting treatment
of acquisition-related goodwill and intangible assets, and charges made in
relation to share option grants. Charges for the impairment of goodwill and the
amortisation and impairment of intangible assets related to the acquisition of
Stream Theory, Inc., and the charges relating to share based remuneration are
included within operating expenses and increase the reported operating loss of
the continuing operations. It is important to note that these charges do not
reflect the real underlying trading performance and have no impact on cash flow.
Trading Results
Group turnover from continuing operations increased by 56% to �3,276,000
compared with �2,098,000 in the prior year. The current year benefited from
licensing agreements with Microsoft and Citrix, which more than compensated for
lower revenues from Softbank and Wyse.
Operating expenses, including non-cash charges, declined to �3,514,000 in 2007
from �8,818,000 in 2006. Non-cash charges, almost all of which are included
within administrative costs totalled �435,000 in 2007 and �5,630,000 in 2006.
The underlying "cash" operating expenses were therefore flat at �3,079,000 in
2007 compared with �3,188,000 in 2006.
An analysis of the non-cash charges is shown in the table below:
2007 2006
�'000 �'000
Goodwill Impairment - 3,525
Intangible assets Impairment - 878
------- ------
Sub Total Impairment - 4,403
Intangible assets Amortisation 178 667
Property, Plant &
Equipment Depreciation 147 231
------- ------
Total Non-Current
assets Depreciation, Amortisation & Impairment 325 5,301
Share-based
remuneration Charges 110 115
Warrants element of
loan note Charges - 214
------- ------
Total non-cash
charges 435 5,630
------- ------
The operating profit for the year from continuing operations, before non-cash
charges, was �27,000 compared with a loss of �1,307,000 in 2006. However, the
current year profit includes a credit of �208,000 within administrative costs
relating to the release of provisions no longer required and the previous year
loss included �524,000 non-recurring costs, �264,000 charged in Streaming
Division administrative costs in respect of Steig Westerberg's termination and
�260,000 charged in HQ administrative costs in respect of legal fees relating to
the terminated DivestCap transaction. The operating loss from continuing
operations for the year was �272,000 compared with �6,720,000 in 2006.
In the year ended 30 September 2007, the discontinued Geospatial business
reported revenues of �4,470,000 and an operating profit before non-cash charges
of �678,000 (after providing for �348,000 in redundancy and other closure costs)
compared with �7,890,000 in revenues and �886,000 million operating profit
before non-cash charges in the prior year.
The current year revenues and operating profit included �3,698,000 and
�1,700,000 attributable to the contract with Ordnance Survey (terminated on 6
October 2007) and �200,000 and �(200,000) loss attributable to TCI (sold in
March 2007).
The total revenues, including discontinued operations, was �7,746,000 (2006 -
�9,988,000), with an operating profit of �270,000 (2006 - �6,051,000). Total
operating expenses were reduced from �11,169,000 in 2006 to �5,236,000 in the
current year, although the majority of the reduction resulted from a reduced
level of non-cash charges.
Research and Development
The Group continues to invest in research and development activities to enhance
existing products, develop new products and exploit the Group's intellectual
property portfolio. Expenditure in the year on research and development within
continuing operations totalled �1,077,000 (2006 - �925,000). Total expenditure
including discontinued operations was �1,441,000 (2006 - �1,785,000).
Balance Sheet - Assets
Total assets at 30 September 2007 were �2,738,000 compared with �4,621,000 at 30
September 2006, a reduction of �1,883,000 comprising primarily a reduction of
�728,000 in trade and other receivables and a reduction in cash of �821,000, of
which �739,000 related to the repayment of the DivestCap convertible loan note.
Cash at 30 September 2007 stood at �888,000.
Balance Sheet - Equity and Liabilities
The Group's capital structure is as follows: 2007 2006
�'000 �'000
Debt: Convertible loan note - 739
Total equity 937 528
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Total capital employed 937 1,267
--------- ---------
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Gearing - 140.0%
Total debt / total capital employed - 58.3%
--------- ---------
--------- ---------
The Group currently does not utilise any debt finance. The convertible loan was
the only form of debt finance used by the Group during 2006. During the year the
Company issued for cash 8,500,000 ordinary shares of 1p each following the
exercise of share warrants by DivestCap Management Corporation.
Current liabilities reduced by �2,320,000 from �3,971,000 at 30 September 2006
to �1,651,000 at 30 September 2007, due principally to the repayment of the
convertible loan note (�739,000) and a reduction in deferred revenues of
�509,000.
Intellectual Property
The Group's activities benefit from valuable intellectual property and
continuing R & D generates significant new intellectual property. At 30
September 2007, the Group had created 39 patents, registered or pending,
including the earliest known references to application streaming. This is
summarised as follows:
Patents 2007 2006
-------
Granted 7 7
Pending 32 21
-------- --------
39 28
======== ========
Cash Flow & Financing
Cash generated from pre-tax operating activities during the year was �24,000
compared with �202,000 in 2006.
The Group's activities are not capital-intensive; capital expenditure
requirements are primarily personal computers and related software for the
Group's employees. Expenditure on these assets during the year was �122,000
compared with �161,000 in the prior year. The Group has a commitment totalling
�42,000 to acquire software licences in 2008. There were no other capital
commitments at the balance sheet date.
The overall net cash outflow for the year, �810,000 before exchange differences,
arose principally from the repayment of the convertible loan note to DivestCap.
Cash and cash equivalents at 30 September 2007 were �888,000.
The Group's financial instruments comprise cash and cash equivalents, share
warrants and various items such as trade receivables and trade payables that
arise directly from its operations.
It is, and has been throughout the period under review, the Group's policy that
no trading in financial instruments shall be undertaken, other than placing
funds on money market deposits.
Risk Factors
The Group's financial condition and results of operations could be affected
materially by a number of internal or external events or factors. These risks
are broadly categorised under the following headings:
Financial Position
Liquidity risk
The Group's overall objective is to ensure that at all times it is able to meet
its financial commitments as and when they fall due. The Board closely monitors
the liquidity of the Group through the review of monthly management accounts and
working capital forecasts. When appropriate the Board has taken action to secure
additional funding in order to reduce liquidity risk. However, the Group is
likely to require additional capital to sustain or expand its business in
future. There is a risk that sources of finance may not be secured before
existing cash resources are exhausted by the end of March 2008, in which case
the Group would not be a going concern and adjustments to the financial
statements would be necessary to reduce the carrying value of assets to their
recoverable amounts and to provide for any further liabilities that might arise.
The Board, in consultation with its advisors, has decided to raise (subject to
approval by shareholders) approximately �5m, net of costs, to allow for the
further development of the business and to provide additional working capital.
The board intends that such fundraising will be by way of a pre-emptive offer
allowing existing shareholders to participate on a pro-rata basis to their
existing shareholding. The Board anticipates being able to announce the terms
of this fundraising and send the necessary documentation to shareholders during
February with funds being received during early March. An EGM will be required
to approve this, which will also request approval of the proposed name change to
Endeavors plc.
Foreign currency risk
Where possible, the Group manages external currency exposure by transacting
revenues and costs in the same currency. The Group has overseas subsidiaries
whose transactions are denominated almost exclusively in US dollars. These
operations are funded by US dollar denominated loans from the parent company.
The Group has designated these loans, for which settlement is neither planned
nor likely to occur in the foreseeable future, as long term, and treats them as
part of the Group's net investment in a foreign operation; thereby any non-cash
exchange gains and losses that result from translation are taken to reserves.
The remainder of the Group is based in the UK, and revenues and costs are almost
exclusively transacted in Sterling.
Interest rate risk
The Group has placed surplus funds on money market deposits at call. Interest
received for the year amounted to �36,000 (2006 - �44,000) compared with total
interest paid, largely on the convertible loan note, of �41,000 (2006 -
�57,000). The Group does not hedge against its interest rate risk as the Board
considers the costs of such an activity would outweigh the potential benefits,
given the Group's current level of interest-bearing instruments.
Competitive Position
Customer dependence risk
The Group is currently dependent on a small number of customers. The Board seeks
to manage this risk through the development of rolling three year plans with
product roadmaps, market segmentation and customer targeting designed, inter
alia, to broaden the Group's customer base and reduce this dependency. There is
a risk that a change in the relationship with a large customer could have a
material adverse effect on the Group's trading performance and financial
condition before the objective of reducing customer dependence is achieved.
Market, technology and intellectual property risks
The Group operates in a highly competitive market. The Group's technology is
relatively new and the market for applications streaming is still at the "early
adopter" stage. The Group is at risk if the market fails to develop beyond this
stage, develops more slowly than expected or if competitors are able to develop
similar or new technology with better functionality, lower cost and quicker
"time to market" or if the Group is unable to protect its intellectual property
or take steps to prevent its infringement.
Key employees risk
The Group is small and its success depends on retaining key management and
employees in research & development, sales & marketing and customer support. The
Group has a range of policies and practices designed to motivate and retain key
employees. A number of key employees are based in the highly mobile labour
market of Southern California and the Group will be at risk if it fails to
maintain employment practices and remuneration packages that match local
conditions.
External Environment
Political and social risk
The Group operates principally in the UK and Southern California and believes
that the risk of disruption to its operations in these regions is low.
Environmental and regulatory risk
The Group does not operate in a significantly hazardous industry and believes
that the environmental and regulatory risk to its operations is low.
David Lee
Chairman
22 January 2008
2007 2006
Notes �'000 �'000
Revenue 3 3,276 2,098
Cost of sales (34) -
----------- -----------
Gross profit 3,242 2,098
Selling and marketing costs (1,189) (965)
Research and development costs (1,077) (925)
Administrative costs (1,248) (6,995)
Other operating income - 67
----------- -----------
Total operating expenses (3,514) (8,818)
----------- -----------
Operating loss 4 (272) (6,720)
Finance revenue 36 44
Finance expenses (104) (160)
----------- -----------
Loss before taxation (340) (6,836)
Taxation 5 55 466
----------- -----------
Loss for the year attributable to
continuing operations (285) (6,370)
Profit for the year from discontinued operations 542 669
----------- -----------
Profit / (loss) for the year attributable to
the equity holders of the parent 257 (5,701)
----------- -----------
----------- -----------
Profit / (loss) per ordinary share (pence): 6
Basic and diluted EPS from continuing operations (0.07)p (1.61)p
Basic and diluted EPS on profit / (loss) for year 0.06p (1.44)p
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
for the year ended 30 September 2007
2007 2006
�'000 �'000
Exchange differences arising on translation of
foreign operations (43) (285)
----------- -----------
Net income recognised directly in equity (43) (285)
Profit / (loss) for the year 257 (5,701)
----------- -----------
Total recognised income and expense relating
to the year attributable to equity holders 214 (5,986)
----------- -----------
2007 2006
�'000 �'000
Non-Current Assets
Goodwill 915 1,003
Intangible assets 197 408
Property, Plant & Equipment 64 151
----------- -----------
1,176 1,562
----------- -----------
Current Assets
Trade and other receivables 622 1,350
Cash and cash equivalents 888 1,709
----------- -----------
1,510 3,059
----------- -----------
Assets held in disposal groups held for sale 52 -
----------- -----------
TOTAL ASSETS 2,738 4,621
----------- -----------
----------- -----------
EQUITY
Equity share capital 20,936 20,851
Share premium account 40,109 40,109
Retained loss (71,455) (72,012)
Merger reserve 11,190 11,190
Foreign currency translation reserve (33) 10
Equity instruments reserve 190 380
----------- -----------
Total Equity 937 528
----------- -----------
Non-current liabilities
Deferred tax liabilities 59 122
----------- -----------
59 122
----------- -----------
Current liabilities
Trade and other payables 1,644 3,223
Interest-bearing loans and overdrafts - 739
Tax liabilities 7 9
----------- -----------
1,651 3,971
Liabilities held in disposal groups held for sale 91 -
----------- -----------
Total liabilities 1,801 4,093
----------- -----------
TOTAL EQUITY AND LIABILITIES 2,738 4,621
----------- -----------
----------- -----------
The financial statements were approved by the Board of Directors and authorised
for issue on 22 January 2008. They were signed on its behalf by:
David Lee - Chairman
22 January 2008
2007 2006
Note �'000 �'000
Cash flows from operating activities
Profit / (loss) before tax 3 202 (6,167)
Depreciation, amortisation and impairments 326 5,300
Loss on disposal of plant & equipment 1 -
Movement in holiday pay provision 6 (20)
Share-based remuneration 110 115
Warrants costs - 214
Finance revenue (36) (44)
Finance expenses 104 160
Decrease in receivables 560 1,516
Decrease in payables (1,249) (872)
----------- -----------
Cash generated from operating activities before tax 24 202
Income taxes paid (9) (10)
----------- -----------
Net cash from operating activities 15 192
----------- -----------
Cash flows from investing activities
Purchase of plant & equipment (122) (161)
Disposal of subsidiary (21) -
Interest received 36 44
----------- -----------
Net cash from investing activities (107) (117)
----------- -----------
Cash flows from financing activities
Gross proceeds from issue of share capital 85 1
Share issue costs - (4)
Interest paid (41) (57)
Proceeds from issue of loan note to DivestCap - 842
Repayment of Divestcap loan note (761) -
----------- -----------
Net cash generated from financing activities (717) 782
----------- -----------
Net increase in cash and cash equivalents (810) 857
Net foreign exchange difference (11) (226)
Opening cash and cash equivalents 1,709 1,078
----------- -----------
Closing cash and cash equivalents 888 1,709
----------- -----------
----------- -----------
Material non cash transactions in the year comprise the amortisation of other
intangible assets, the depreciation of tangible assets and share-based payment
charges.
1. Corporate Information
Tadpole Technology plc is a public limited company incorporated and domiciled in
England and Wales. The Company's ordinary shares are publicly traded on the
London Stock Exchange. The consolidated financial statements of Tadpole
Technology plc (the "Group") for the year ended 30 September 2007 were
authorised for issue by the board of directors on 22 January 2008.
2. Basis of preparation
The preliminary announcement covers the period 1 October 2006 to 30 September
2007 and was approved by the Board on 22 January 2008.
The preliminary statement has been prepared on a consistent basis with the
accounting policies set out in the last published financial statements for the
year ended 30 September 2006, and are presented in Sterling with all values
rounded to the nearest thousand (�000) except where otherwise indicated.
The financial information contained in this preliminary announcement of audited
results does not constitute the Group's statutory accounts for the years ended
30 September 2007 or 30 September 2006 as defined in section 240 of the
Companies Act 1985. The accounts for the year ended 30 September 2006 have been
delivered to the Registrar of Companies. The statutory accounts for the years
ended 30 September 2007 and 30 September 2006 have been reported on by the
Company's auditors; the reports on these accounts were modified in relation to
an emphasis of matter regarding a material uncertainty regarding going concern
(refer to note 2(a)). These auditors' reports did not contain any statement
under section 237 (2) or (3) of the Companies Act 1985.
The accounts for the year ended 30 September 2007 will be delivered to the
Registrar of Companies and will be posted to shareholders together with the
notice of the annual general meeting. Copies will be available from the
registered office of the Company, 7th Floor, Phoenix House, 18 King William
Street, London, EC4N 7HE and can be accessed on the Tadpole Website,
www.tadpoletechnology.com. The registered number of Tadpole Technology plc is
01766839.
(a) Basis of preparation and going concern
The financial statements have been prepared on the going concern basis which
assumes that the Group will continue in operational existence, and will be able
to meet its liabilities as they fall due, for the foreseeable future.
In concluding that it is appropriate to adopt the going concern basis in
preparing the financial statements the Directors have prepared cash flow
projections to September 2009 which include the impact in November 2007 of the
successful placing of 20 million shares with an institutional investor, the
concluding of a licensing agreement with Exent and the disposal of the
Geospatial Solutions Division.
The cash flow projections to September 2009 are based on the following
assumptions:
* Securing further funding by the end of March 2008, when existing cash
resources will be exhausted, from a planned equity fundraising, to be
notified to shareholders in February 2008 (the "Planned Fundraising");
and
* Obtaining shareholder approval in respect of the Planned Fundraising.
The Directors believe there is a reasonable prospect of the Planned Fundraising
occurring before the end of March 2008. Therefore, the Directors have concluded
that it is appropriate to adopt the going concern basis in preparing the
financial statements.
However, until the Planned Fundraising has occurred there will remain a material
uncertainty as to the future funding of the Group which would cast significant
doubt on the Group's ability to continue as a going concern. In addition, if the
Planned Fundraising occurs, but does not raise adequate amounts, then the
Directors would need to evaluate additional sources of funding, the extent,
timing and availability of which cannot be determined until the results of the
Planned Fundraising are known.
2. Basis of preparation (continued)
In the event that the Planned Fundraising does not occur, or if the Directors
are unable to obtain additional sources of funding in the event that the Planned
Fundraising occurs but does not raise adequate amounts, then the Group would no
longer be a going concern and adjustments to the financial statements would be
necessary to reduce the carrying value of assets to their recoverable amounts,
in particular to the carrying amounts of the intangibles and goodwill, to
provide for any further liabilities that might arise and to reclassify fixed
assets as current assets.
3 Segment information
The primary reporting segment format is determined to be business segments as
this is the basis on which operations were managed during the year. Secondary
information is presented geographically.
For management purposes, the Group was split into two trading operations; the
continuing business comprising the Streaming Division and HQ costs and the
discontinued Geospatial Solutions Division. The Streaming business offers
application software streaming technology for consumer, games-on-demand, and
enterprise delivery and management of applications over the Internet and private
networks. The Streaming business, which incorporates StreamTheory, Inc. and
Endeavors Technologies, Inc. operates out of California, USA and the UK. The
Geospatial business which provided enterprise infrastructure software solutions
to support the management, replication and distribution of geographic data
within and between organizations, was conducted out of the UK and California,
USA.
Divisional segments
Continuing Discontinued 2007 Continuing Discontinued 2006
Streaming Geospatial Total Streaming Geospatial Total
�'000 �'000 �'000 �'000 �'000 �'000
Revenue
Licencing and
support 3,006 777 3,783 1,815 773 2,588
Royalties 242 - 242 267 - 267
Consultancy and
services 28 3,693 3,721 16 7,117 7,133
------- ------- ------- ------- ------- -------
Total revenue 3,276 4,470 7,746 2,098 7,890 9,988
Cost of sales (34) (2,206) (2,240) - (4,920) (4,920)
------- ------- ------- ------- ------- -------
Gross profit 3,242 2,264 5,506 2,098 2,970 5,068
Selling and
marketing costs (1,189) (745) (1,934) (965) (1,101) (2,066)
Research and
development (1,077) (364) (1,441) (925) (860) (1,785)
Administrative
costs (1,248) (613) (1,861) (6,995) (340) (7,335)
Other operating
income - - - 67 - 67
------- ------- ------- ------- ------- -------
Total operating
expenses (3,514) (1,722) (5,236) (8,818) (2,301)(11,119)
------- ------- ------- ------- ------- -------
Operating profit /
(loss) (272) 542 270 (6,720) 669 (6,051)
3. Segment information (continued)
Continuing Discontinued 2007 Continuing Discontinued 2006
Streaming Geospatial Total Streaming Geospatial Total
�'000 �'000 �'000 �'000 �'000 �'000
Finance revenues 36 44
Finance expenses (104) (160)
------- -------
Profit / (loss)
before taxation 202 (6,167)
------- -------
Taxation 55 466
------- -------
Profit / (loss)
for the year
attributable
to the equity
holders of
the parent 257 (5,701)
------- -------
------- -------
Segment assets 1,351 499 1,850 1,658 1,254 2,912
Unallocated asset
- cash - - 888 - - 1,709
------- -------
Total assets 2,738 4,621
------- -------
------- -------
Segment liabilities (769) (1,032) (1,801) (1,453) (1,779) (3,232)
Unallocated
liabilities
- DivestCap loan - - - - - (861)
------- -------
Total liabilities (1,801) (4,093)
------- -------
------- -------
Other segment
information:
Operating profit /
(loss) (272) 542 270 (6,720) 669 (6,051)
Depreciation 11 136 147 14 217 231
Amortisation 178 - 178 667 - 667
Impairment losses - - - 4,403 - 4,403
EBITDA/(LBITDA) (83) 678 595 (1,636) 886 (750)
Non cash charges
Share-based payments 110 - 110 115 - 115
Charge for warrants - - - 214 - 214
Operating profit /
(loss) before
non-cash
charges 27 678 705 (1,307) 886 (421)
Capital expenditure:
Plant & equipment 55 67 122 9 152 161
There was no intra divisional trading arising in the current or prior year.
3. Segment information (continued)
Geographical segments
Origin 2007 Origin 2006
North North
UK America Total UK America Total
Continuing �'000 �'000 �'000 �'000 �'000 �'000
Turnover - Destination
UK - 111 111 - - -
Europe - 49 49 - 104 104
North America - 2,376 2,376 - 278 278
Asia and Rest of
the World - 740 740 - 1,716 1,716
------- ------- ------- ------- ------- -------
- 3,276 3,276 - 2,098 2,098
Discontinued
Turnover - Destination
UK 4,120 - 4,120 6,929 - 6,929
Europe 67 - 67 105 - 105
North America 39 244 283 - 855 855
Asia and Rest of the World - - - - 1 1
------- ------- ------- ------- ------- -------
4,226 244 4,470 7,034 856 7,890
------- ------- ------- ------- ------- -------
Turnover total 4,226 3,520 7,746 7,034 2,954 9,988
------- ------- ------- ------- ------- -------
2007 2006
North North
UK America Total UK America Total
�'000 �'000 �'000 �'000 �'000 �'000
Segment assets 499 1,351 1,850 838 2,074 2,912
Unallocated asset - cash 888 1,709
------- -------
Total assets 2,738 4,621
------- -------
------- -------
Other segment information:
Capital expenditure
Plant & equipment 66 56 122 140 21 161
4. Operating loss
This is stated after charging / (crediting) the following:
2007 2006
�'000 �'000
Amortisation of intangible assets 178 667
Impairment of intangible assets - 878
Impairment of goodwill - 3,525
Depreciation of plant & equipment 147 231
Premises rentals (minimum lease payments) 290 294
Hire of equipment and motor vehicles 2 2
Auditors' remuneration (see below) 104 159
Charge relating to the DivestCap share warrants - 214
Costs relating to the DivestCap transaction - 260
Director termination costs 154 264
Research and development expenditure 1,441 1,785
Net foreign exchange gain (13) (15)
------- -------
------- -------
All charges in respect of amortisation and impairment of goodwill and
intangibles are included within administrative costs.
A more detailed analysis of auditors' remuneration is provided below:
2007 2006
�'000 �'000
Audit fees - Group 85 81
Non audit fees - Tax compliance 19 18
- Other services - IFRS conversion - 60
------- -------
Charged to the loss on ordinary activities 104 159
------- -------
------- -------
5. Income tax expense
(a) Tax on loss on ordinary activities 2007 2006
The tax charge comprises: �'000 �'000
Current tax
UK corporation tax 7 9
Adjustments in respect of previous periods - 1
------- --------
7 10
Foreign tax - -
------- -------
Total current tax 7 10
Deferred tax release (62) (476)
------- -------
Tax on loss on ordinary activities (55) (466)
------- -------
------- -------
5. Income tax expense (continued)
(b) Factors affecting current tax credit: 2007 2006
�'000 �'000
The tax assessed on the loss on ordinary activities for
the year differs from the standard rate of corporation tax
in the UK of 30% (2006 - 30%). The differences are
reconciled below:
Profit /(loss) on ordinary activities before taxation 202 (6,167)
------- -------
Profit / (loss) on ordinary activities multiplied by the
standard rate 61 (1,851)
Tax effect of non-deductible amortisation and impairment
of goodwill - 1,161
Tax effect of non-deductible or non-taxable items 160 7
Other differences 8 18
Higher taxes on overseas earnings 19 (112)
Losses brought forward from previous periods utilised
against current tax (151) (77)
Tax under provided in previous years - 1
Losses (utilised) / arising in the year not relievable
against current tax (78) 448
Reversal of deferred tax on intangibles (63) -
R&D tax credit (11) (61)
------- -------
Total tax credit (note 5(a)) (55) (466)
------- -------
(c) Factors affecting future tax charge
The Group has tax losses arising in the United Kingdom of �1,177,000 (2006 -
�1,611,000) that are available for offset against future trading profits of the
Geospatial Division in the UK. Following the sale of the Geospatial division in
November 2007 these losses will no longer be available. In addition, the Group
has federal tax losses of �20,155,000 (2006 - �24,000,000) and state tax losses
of �11,926,000 (2006 - �2,700,000) arising in the United States of America which
are available for offset against future income. American federal tax losses
expire 20 years after the year they arise and American state tax losses expire
10 years after the year they arise.
Deferred tax assets have not been recognised in respect of these losses.
(d) Deferred Tax: 2007 2006
�'000 �'000
Group:
The unprovided deferred tax assets are as follows:
Decelerated capital allowances (80) (71)
Tax losses carried forward (8,260) (8,674)
Short term timing differences - -
------- -------
Unprovided deferred tax (8,340) (8,745)
------- -------
6. Loss per ordinary share
The calculation of the basic and diluted loss per ordinary share on continuing
operations for the year to 30 September 2007 is based on the Group net loss
attributable to the continuing operations of �285,000 and on 400,951,967
ordinary shares, the weighted average number in issue and ranking for dividend
in the year. In accordance with IAS 33, the 15,085,000 outstanding share options
and 8,500,000 unexercised share warrants have been excluded as the impact of
their inclusion would be anti-dilutive.
The calculation of the basic and diluted profit per ordinary share on total
operations for the year to 30 September 2007 is based on the Group profit for
the financial year of �257,000 and on 400,951,967 ordinary shares, the weighted
average number in issue and ranking for dividend in the year as above.
The calculation of the basic and diluted loss per ordinary share on total
operations for the year ended 30 September 2006 is based on a Group loss for the
financial year of �5,701,000 and on 396,807,911 ordinary shares, the weighted
average number in issue and ranking for dividend during the year. In accordance
with IAS 33, outstanding anti-dilutive share options at the balance sheet date
totalling 14,165,000 were not included within the calculation of diluted loss
per share, as their exercise price is greater than the market price of the
shares. Additionally, warrants and the potential ordinary shares in a subsidiary
company arising from the convertible loan note are anti-dilutive and were
therefore excluded from the calculation.
The calculation of the basic and diluted loss per ordinary share on continuing
operations for the year to 30 September 2006 is based on the Group loss
attributable to the continuing operations of �6,370,000 and on 396,807,911
ordinary shares, the weighted average number in issue and ranking for dividend
in the year as above.
The basic and diluted profit per share from discontinued operations is 13.52p
per share (2006 - 16.86p). The calculation of the basic and diluted profit per
share from discontinued operations is based on the profit on discontinued
operations of �542,000 (2006 - �669,000), and on 400,951,967 (2006: 396,807,911)
ordinary shares, the weighted average number in issue and ranking for dividend
in the year as above.
On 5 November 2007 the Group granted options over a further 18,818,750 shares to
the Directors and employees of the Streaming business at a price of 4.50p per
share. Mr Peter Bondar and Mr David Lee were issued options over 5 million and
2.5 million shares respectively.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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