30th Jun 2005 09:04
SerVision plc30 June 2005 SERVISION PLC REPORT AND FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2004 Company Number: 51433241 SERVISION PLC REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 CONTENTS Page Chairman's statement 1 Directors' report 2 Auditor's report 5 Consolidated profit and loss account 6 Consolidated statement of total recognised gains and losses 6 Consolidated balance sheet 7 Parent balance sheet 8 Consolidated cash flow statement 9 Reconciliation of movements in Group shareholders' funds 10 Notes to the financial statements 11 - 17 SERVISION PLC CHAIRMAN'S STATEMENT REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 I am pleased to report the achievement of significant commercial and corporateprogress during the year. In its fourth year of operation, SerVisiontransitioned from being effectively an R&D house into a revenue-producingmanufacturing company, following the successful launch of its first securitycommunication product, the SVG 400. Revenues for the year increased eightfold to US$1.04m (2003: US$0.13m). Wecontinued to invest heavily in product development and business infrastructureto increase the functionality of your Company's first product and developedfurther products capable of supporting an increased number of cameras. In August 2004 we completed a successful equity financing, welcoming over 250new shareholders to SerVision's shareholder register. Subsequently SerVision'sshares were admitted to trading on AIM on the London Stock Exchange on the 31December 2004, the last day of our financial year. To support our increased sales, your Company's production facilities forassembly and testing were also expanded. In October SerVision's international marketing effort was bolstered by theopening of a new UK sales office in the Heathrow area. Post year-end events An OEM contract has been signed with a major international company covering ourSVG-400, SVG-800, SVG-1000 and IVG-400 products. The contract was signed after alengthy and competitive selection process, during which SerVision's technologyprevailed against a number of other companies. Significant annual revenues areexpected to flow from this contract starting from the end of 2005. Our IVG-400 Video Gateway was launched at the IIPSEC show in Coventry, UK inJanuary. Then during the IIPSEC show in Birmingham, UK in May, five newdistributor contracts were signed. Subsequently we have appointed a distributorfor the UK. Employees Your Board wishes to express its appreciation of the dedicated support of allour staff and their significant individual contributions made to your Company'sprogress during the past year. Outlook Your Company's performance, as measured by its rapid growth in month on monthturnover, continues to demonstrate SerVision's potential. The investment in newproduct development and sales is expected to bear fruit over the next twentyfour months. Our next generation of products the IVG and TVG series are expectedto be released during 2005 and to contribute significantly to our revenues fromthe last quarter of 2005 and thereafter. The continuing rise in crime worldwide, whether assault, burglary, terrorism orvandalism, is driving the transformation of the global security industry fromlocalised alarms to remote video surveillance technology. Against thisbackground, your Board expects that SerVision's superior video transmissiontechnology over both narrow band and cellular networks will continue to achievefurther market penetration. The global security industry consistentlydemonstrates an appetite for new technologically advanced products to combat theabove threats and your Board believes that SerVision is well placed to takeadvantage of this business opportunity. Gideon TahonChairman 27 June 2005 SERVISION PLC DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2004 The directors present the annual report together with the financial statementsand auditors report for the year ended 31 December 2004. DATE OF INCORPORATION AND CHANGE OF NAME The company was incorporated on 2 June 2004 as Forsters Shelfco 202 Limited. Thecompany changed its name to Servision (UK) Limited on 17 June 2004. The companywas re-registered as a PLC and changed its name to Servision PLC on 20 July2004. PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS The group's principal activity is the development and sale of video survellianceequipment. On 20 July 2004, the company purchased the entire issued share capital ofServision Ltd, a company registered in Israel by way of a share for shareexchange. Under Financial Reporting Standard 6, merger accounting has beenadopted as the basis of consolidation. PUBLIC OFFER FOR SUBSCRIPTION During the year the company issued 4,499,689 ordinary shares of £0.01 each at apremium of £0.64 each per share by way of a public offer for subscription. DIVIDENDS The directors do not propose a final dividend. DIRECTORS AND THEIR INTERESTS The directors who served during the year and their direct and indirectbeneficial interest in the company's issued share capital are:- Ordinary shares of £0.01 each 31 December On Incorporation 2004 Dr K W Gray CBE (appointed 20 July 2004 and 76,923 -resigned 14 June 2005) G Tahan (appointed 17 June 2004) 6,341,262 - N Steinberg (appointed 14 December 2004 and resigned 26 May 2005) - - C Levy (appointed 20 July 2004) 30,320 - E T Yanuv (appointed 20 July 2004) - - P Mumford (appointed 2 June 2004 and resigned 17 - 2 June 2004) In December 2004, the company granted options over 30,000 £0.01 ordinary sharesto Mr Eitan Yanuv, the financial director. The options are vested in 3 tranchesof 10,000 ordinary shares, the first in December 2004, the second in December2005 and the third in December 2006, all exercisable at a price of £0.15 pershare. SERVISION PLC DIRECTORS' REPORT (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 SUBSTANTIAL SHAREHOLDINGS In addition to the directors' shareholdings, the directors are aware of thefollowing substantial shareholdings (>3%) in the company: Ordinary shares of £0.01 each 31 December 2004 On Incorporation Number of Per cent Number of Per cent shares shares Orfali Wireless Plc 3,514,024 19.69 - - Moises Cohen Chaiyo 1,069,977 6.00 - - Hanna and Shlomo Ankri 896,109 5.02 - - Charles Street Securities 545,000 3.05 - -Inc CHARITABLE AND POLITICAL DONATIONS The Group made $35,000 of charitable donations to various religiousorganisations in Jerusalem in lieu of Gideon Tahan's salary. The group did notmake any political donations. DIRECTORS' INTERESTS IN CONTRACTS No director was, or is, materially interested in any contract subsisting during,or at the end of the financial year which was significant in relation to thebusiness of the Group. DIRECTORS' RESPONSIBILITIES Company law requires the directors to prepare financial statements for eachfinancial year which give a true and fair view of the state of affairs of thecompany and of the profit or loss of the company for that year. In preparingthose financial statements, the directors are required to; • select suitable accounting policies and then apply them consistently, • make judgements and estimates that are reasonable and prudent, • state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements, • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping proper accounting records whichdisclose with reasonable accuracy at any time the financial position of thecompany and to enable them to ensure that the financial statements comply withthe Companies Act 1985. They are also responsible for safeguarding the assets ofthe company and hence for taking reasonable steps for the prevention anddetection of fraud and other irregularities. SUPPLIER PAYMENT POLICY The company has due regard to the payment terms of suppliers and settles allundisputed accounts in accordance with the payment terms agreed with thesupplier for each business transaction. SERVISION PLC DIRECTORS REPORT (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 AUDITORS A resolution reappointing haysmacintyre will be proposed at the AGM inaccordance with S385(2) of the Companies Act 1985. POST BALANCE SHEET EVENTS Since the year end, Nabarro Wells & Co Limited have become brokers and nominatedadvisors to the company. ON BEHALF OF THE BOARD G TAHANDirector 27 June 2005 INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF SERVISION PLC We have audited the financial statements of Servision Plc for the year ended 31December 2004, which comprise the consolidated profit and loss account, theconsolidated balance sheet, the consolidated cash flow statement, theconsolidated statement of total recognised gains and losses, the parent companybalance sheet and the related notes. These financial statements have beenprepared under the historical cost convention and the accounting policies setout therein. This report is made solely to the company's members, as a body, in accordancewith Section 235 of the Companies Act 1985. Our audit work has been undertakenso that we might state to the company's members those matters we are required tostate to them in an auditor's report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the company and the company's members as a body, for our audit work,for this report, or for the opinions we have formed. Respective responsibilities of directors and auditorsAs described in the Statement of Directors' Responsibilities the company'sdirectors are responsible for the preparation of the financial statements inaccordance with applicable law and United Kingdom Accounting Standards.Our responsibility is to audit the financial statements in accordance withrelevant legal and regulatory requirements and United Kingdom AuditingStandards. We report to you our opinion as to whether the financial statements give a trueand fair view and are properly prepared in accordance with the Companies Act1985. We also report to you if, in our opinion, the Directors' Report is notconsistent with the financial statements, if the company has not kept properaccounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regardingdirectors' remuneration and transactions with the company is not disclosed. We read other information contained in the Annual Report, and consider whetherit is consistent with the audited financial statements. This other informationcomprises only the Directors' Report and the Chairman's Statement. We considerthe implications for our report if we become aware of any apparent misstatementsor material inconsistencies with the financial statements. Our responsibilitiesdo not extend to any other information. Basis of audit opinionWe conducted our audit in accordance with United Kingdom Auditing Standardsissued by the Auditing Practices Board. An audit includes examination, on a testbasis, of evidence relevant to the amounts and disclosures in the financialstatements. It also includes an assessment of the significant estimates andjudgements made by the directors in the preparation of the financial statements,and of whether the accounting policies are appropriate to the company'scircumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements. OpinionIn our opinion the financial statements give a true and fair view of the stateof the group's and company's affairs as at 31 December 2004 and of the group'sloss for the year then ended and have been properly prepared in accordance withthe Companies Act 1985. haysmacintyre Fairfax HouseChartered Accountants 15 Fulwood PlaceRegistered Auditors London WC1V 6AY27 June 2005 SERVISION PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 Notes US$'000 US$'000 TURNOVER 1,2 1,041 132 Cost of sales (815) (68) ------------- -------------GROSS PROFIT 226 64 Administrative expenses (3,085) (1,519) Other income 1 242 281 ------------- ------------- OPERATING LOSS 3 (2,617) (1,174) Interest payable and similar 6 (179) (27)charges ------------- -------------LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (2,796) (1,201) Tax on loss on ordinary 7 - -activities ------------- ------------- RETAINED LOSS (2,796) (1,201) ====== ====== LOSS PER SHAREBasic and diluted 18 (20.05c) (9.72c) ====== ====== All activities arose from continuing activities. CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2004 2003 US$'000 US$'000 Loss for the financial year (2,796) (1,201) Exchange rate movements (112) - ------------- ---------- Total recognised losses relating to (2,908) (1,201)the year ====== ====== SERVISION PLC CONSOLIDATED BALANCE SHEET AT 31 DECEMBER 2004 Notes 2004 2003 US$'000 US$'000 FIXED ASSETS Tangible assets 9 189 115 ------------ ------------ CURRENT ASSETS Stock 11 613 77 Debtors 12 662 339 Cash at bank 2,386 308 ------------ ------------ 3,661 724 CREDITORS: amounts fallingdue within one year 13 (992) (332) ------------ ------------NET CURRENT ASSETS 2,669 392 ------------ ------------ TOTAL ASSETS LESS CURRENT LIABILITIES 2,858 507 CREDITORS: amounts falling due in morethan one year 14 - (180) ------------ ------------ NET ASSETS 2,858 327 ====== ===== CAPITAL AND RESERVES Called up share capital 15 337 231 Share premium account 16 5,172 - Merger reserve 16 1,979 1,818 Profit and loss account 16 (4,630) (1,722) ------------- ---------- EQUITY SHAREHOLDERS' FUNDS 2,858 327 ====== ====== These financial statements were approved by the Board of Directors on 27 June2005 and signed on its behalf by:- C LevyDirector G TahanDirector SERVISION PLC PARENT COMPANY BALANCE SHEET AT 31 DECEMBER 2004 Notes 2004 US$'000 FIXED ASSETS Investments 10 231 ------------ CURRENT ASSETS Debtors 12 4,739 Cash at bank 442 ------------ 5,181 CREDITORS: amounts falling due within one year 13 (251) ------------NET CURRENT ASSETS 4,930 ------------- TOTAL ASSETS LESS CURRENT LIABILITIES 5,161 ====== CAPITAL AND RESERVES Called up share capital 14 337 Share premium account 15 5,172 Profit and loss account 15 (348) ------------ EQUITY SHAREHOLDERS' FUNDS 5,161 ====== These financial statements were approved by the Board of Directors on 27 June2005 and signed on its behalf by:- C LevyDirector G TahanDirector SERVISION PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 US$'000 US$'000 Operating loss (2,617) (1,174) Depreciation 40 17 Increase in debtors (323) (77) Increase in stock (536) (82) Increase in creditors 667 102 -------------- ------------- CASH OUTFLOW FROM OPERATING ACTIVITIES (2,769) (1,214) Return on investment and servicing offinance Interest payable (179) (27) Capital expenditure and financialinvestment Purchase of fixed assets (118) (86) Proceeds for the sale of fixed assets 4 - -------------- -------------- CASH OUTFLOW BEFORE FINANCING (3,062) (1,327) FINANCING Issue of shares in Servision Plc (net of 5,278 -issue costs) Issue of shares in Servision Ltd 161 1,920 Net loans repaid (180) (138) ------------- ------------- INCREASE IN CASH IN THE YEAR 2,197 455 ====== ====== RECONCILIATION OF NET CASH FLOW TO NET FUNDS 2004 US$'000 Increase in cash in the year 2,197 Repayment of loans in the year 180 Exchange differences (112) ------------- Movement in net funds in the year 2,265 Net funds at beginning of year 54 ------------- Net funds at end of year 2,319 ====== ANALYSIS OF CHANGES IN NET At 1 January Cash Exchange At 31FUNDS 2004 flows differences December 2004 US$'000 US$'000 US$'000 US$'000 Cash at bank and in hand 308 2,190 (112) 2,386Bank overdraft (74) 7 - (67) --------- ---------- --------- --------- 234 2,197 (112) 2,319Loans (180) 180 - - --------- ---------- --------- --------- 54 2,377 (112) 2,319 ====== ====== ====== ====== SERVISION PLC RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS FOR THE YEAR ENDED 31 DECEMBER 2004 2004 2003 US$'000 US$'000 Loss for the year (2,796) (1,201) --------------- --------------- (2,796) (1,201) Exchange rate differences (112) -New shares issued in Servision Plc (net of issue 5,278 -costs)New shares issued in Servision Ltd (net of issue 161 1,920costs) --------------- ---------------Net movement in shareholders' funds 2,531 719 Opening shareholders' funds/ 327 (392)(deficit) --------------- ---------------Closing shareholders' funds 2,858 327 ======= ======= SERVISION PLC NOTES TO THE REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2004 1. ACCOUNTING POLICIES The accounting policies, applied on a consistent basis in the preparation of thefinancial information, are as follows: (a) Basis of PreparationThe financial statements are prepared on the historical cost basis in accordancewith the applicable accounting standards. The financial statements are preparedunder UK GAAP. (b) Basis of ConsolidationSubsidiary undertakings are accounted for from the effective date ofacquisition. The parent Company, Servision PLC was incorporated on 2 June 2004and acquired Servision Ltd (and its wholly owned subsidiary Servision Inc.) on20 July 2004 by way of a share for share exchange. Under Financial ReportingStandard 6, merger accounting has been adopted as the basis for consolidation. (c) TurnoverTurnover represents the value of goods and services supplied. All turnover priorto December 2003 relates to providing a consultancy service, whereas turnoverafter this date relates to unit sales and the sale of ancillary products. (d) Tangible fixed assets Fixed assets are stated at cost less accumulated depreciation. Depreciation isprovided at rates calculated to write off the cost less estimated residual valueof each asset by equal monthly instalments over its expected useful life, asfollows:- Leasehold improvements 10% per annumMotor vehicles 15% per annumOffice furniture and equipment 6-15% per annumComputer equipment 20-33% per annum (e) StockStock is valued at the lower of cost and net realisable value. (f) Other incomeGrants receivable from the Israeli Government are recognised at the time theCompany is entitled to such grants. These revenue grants are shown as otherincome. (g) Reporting currencyThe majority of the Group's turnover is generated in US Dollars. For the purposeof reporting requirements, the financial information has been reported in USDollars. The year end rate used was £1 to $1.91589. (h) Research and developmentAll expenditure relating to research and development expenditure is expenseddirectly to the profit and loss account. (i) Foreign CurrencyThe results of the parent company are translated into US Dollars at the averagerate of exchange for the year. The assets and liabilities of the parent companyare translated into US Dollars at the rate of exchange ruling at the year end.Currency translation adjustments on exchange are included in the profit and lossaccount. 2. BUSINESS SEGMENT ANALYSIS The turnover, loss on ordinary activities before taxation and net assets of theGroup are attributable to one activity, that of developing and selling videosurveillance equipment. SERVISION PLC NOTES TO THE REPORT AND FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 3. OPERATING LOSS 2004 2003 US$'000 US$'000 Operating loss is stated after charging:-Depreciation 40 17Auditors - audit fees 29 9- other 49 -Costs of admission to AIM 315 - ======= ======= 4. STAFF COSTSThe staff costs for the year ending 31 December 2004, totalled US$1,427,478(2003: US$779,410). There were no pension expenses for the company for the year ending 31 December2004 (2003: $nil). The average number of persons (including directors) employed by the Group duringthe year was 35 (2003: 21). 5. DIRECTORS' REMUNERATION 2004 2003 US$'000 US$'000 Directors' emoluments 112 42 ======== ======== 6. INTEREST PAYABLE Other interest payable 179 27 ======== ========7. TAXATION The Company is controlled and managed by its Board in Israel. Accordingly, theinteraction of UK domestic tax rules and the taxation agreement entered intobetween the U.K. and Israel operate so as to treat the Company as solelyresident for tax purposes in Israel. The Company undertakes no business activityin the UK such as might result in a Permanent Establishment for tax purposes andaccordingly has no liability to UK corporation tax. (a) Analysis of charge in the year Corporation tax - - ======== ========(b) Factors affecting tax charge for the year The tax assessed for the year is different than the standard rate of corporation tax in Israel of 35%. The differences are explained below: Loss on ordinary activities before (2,796) (1,201) taxation ======== ======== Multiplied by the standard rate of (979) (420) corporation tax in Israel of 35%. Effects of: Disallowable expenditure 130 21 Losses carried forward 849 399 ------------------ ------------------ Current year tax charge £ - £ - ======== ========(c) Factors affecting future tax charges The directors believe that the future tax charge will be reduced by the use of tax losses carried forward which can be used against the profits made from the trading activity in the Israeli subsidiary. SERVISION PLC NOTES TO THE REPORT AND FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 8. LOSS FOR THE FINANCIAL YEAR The parent company has taken advantage of section 230 of the Companies Act 1985and has not included its own profit and loss account in these financialstatements. The group loss for the period includes a loss after taxation ofUS$348,000 which is dealt with in the financial statements of the company. 9. TANGIBLE FIXED ASSETS Leasehold Office Motor furniture GROUP improvements and equipment vehicles Total US$'000 US$'000 US$'000 US$'000 Cost or valuation At 1 January 2004 6 83 53 142 Additions 20 98 - 118 Disposals - - (8) (8) --------------- --------------- ------------ ---------------- At 31 December 2004 26 181 45 252 --------------- --------------- ------------ --------------- Depreciation At 1 January 2004 2 20 5 27 Charge for the year 1 29 10 40 Eliminated on disposal - - (4) (4) -------------- -------------- ------------ -------------- At 31 December 2004 3 49 11 63 -------------- -------------- ------------ -------------- Net Book Value At 31 December 2004 23 132 34 189 ======= ======= ======= ======= At 31 December 2003 4 63 48 115 ======= ======= ======= ======= 10. INVESTMENTS Group Country of Proportion held by Nature of business Name of undertaking registration parent company Held by parent company: Servision Ltd Israel 100% Video surveillance equipment On 20 July 2004, the Company purchased the entire issued share capital of Servision Ltd, and Israeli registered Company by way of a share for share exchange resulting in the issue of 10,627,988 ordinary shares of £0.01 each and 1,732,583 convertible preference shares of £0.01 each in consideration. As mentioned in the accounting policies, this has been accounted for under Financial Reporting Standard 6, whereby merger accounting has been adopted as the basis of consolidation. Held by subsidiary: Servision Inc USA 100% Video surveillance equipment Company Total US$'000 Investment in subsidiary 231 company ======= SERVISION PLC NOTES TO THE REPORT AND FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 10. INVESTMENTS (continued) The split of the profit and loss account is as follows:- Servision Ltd Servision Ltd Servision Plc Pre merger Post merger Post merger Total US$'000 US$'000 US$'000 US$'000 Turnover 570 471 - 1,041 Cost of sales (447) (368) - (815) -------------- -------------- -------------- -------------- Gross Profit 123 103 - 226 Other income 195 47 - 242 Administrative (1,298) (1,439) (348) (3,085) expenses Net interest payable (112) (67) - (179) --------------- --------------- --------------- --------------- Retained loss (1,092) (1,356) (348) (2,796) ======= ======= ======= ======= Servision Plc was dormant until the merger. At the date of the merger, the net liabilities of Servision Plc were $492,015 and the fair value of the consideration was £123,608. 11. STOCK 2004 2003 US$'000 US$'000 Group Goods held for resale 613 77 ======= ======= 12. DEBTORS Group Company Group 2004 2004 2003 US$'000 US$'000 US$'000 Amounts owed by group - 4,738 - undertakings Trade debtors 304 - 13 Other debtors 183 1 203 Grants receivable 159 - 121 Prepayments and accrued income 16 - 2 -------------- --------------- --------------- 662 4,739 339 ======= ======= ======= SERVISION PLC NOTES TO THE REPORT AND FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 13. CREDITORS: AMOUNTS FALLING Group Company Group DUE WITHIN ONE YEAR 2004 2004 2003 US$'000 US$'000 US$'000 Bank loans and overdraft 67 - 74 Trade creditors 364 - 85 Other creditors 97 35 162 Other taxes and social security 192 - - Accruals and deferred income 272 216 11 --------------- --------------- --------------- 992 251 332 ======= ======= ======= 14. CREDITORS: amounts falling due in more than one year Bank loans - - 9 Shareholder's loans - - 171 --------------- --------------- --------------- - - 180 ======= ======= ======= 15. CALLED UP SHARE CAPITAL Authorised: The authorised share capital consists of 30,000,000 ordinary shares of £0.01 each and 1,000,000 deferred ordinary shares of £0.001 each. 2004 2003 Allotted, called up and fully paid: US$'000 US$'000 17,846,990 ordinary shares of 336 231 £0.01 each 384,615 deferred ordinary shares of 1 - £0.001 each --------------- --------------- 337 231 ======= ======= On 20 July 2004, the Company purchased the entire issued share capital ofServision Ltd, and Israeli registered Company by way of share for share exchangeresulting in the issue of 10,627,988 ordinary shares of £0.01 each and 1,732,583convertible preference shares of £0.01 each in consideration. As mentioned inthe accounting policies, this has been accounted for under Financial ReportingStandard 6, whereby merger accounting has been adopted as the basis ofconsolidation. The convertible preference shares converted to ordinary shares on 16 August 2004on the raising of the minimum subscriptions under the public offer. SERVISION PLC NOTES TO THE REPORT AND FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 15. CALLED UP SHARE CAPITAL (continued) On 20 July 2004, the Company issued the following options:-Options over 909,607 £0.01 ordinary shares to Orfali Wirless LLC exercisable ata price of US$0.46 per share which were exercised on 19 August 2004. The Company has also agreed to grant an option over 130,087 £0.01 ordinaryshares to Yacob Nagar exercisable at a price of $0.58 per share until 31 August2005. On 21 July 2004, Charles Street Securities Inc. paid £384.61 for 384,615deferred ordinary shares of £0.001 each. These shares can be converted toordinary shares once the difference between £0.001 and £0.65 is paid. On 22 July 2004, the Company made a public offer for subscription. This resultedin 3,730,459 ordinary shares of £0.01 each being issued at £0.65 per ordinaryshare raising £1,971,429 net of expenses. On 22 October 2004, a further 769,230 £0.01 ordinary shares were issued at £0.65to Orfali Wireless LLC. In December 2004, 76,923 £0.01 ordinary shares were issued at £0.65 each to DrKenneth Gray. In December 2004 the company granted options over 30,000 £0.01 ordinary sharesto Mr Eitan Yanuv, the financial director. The options are vested in 3 tranchesof 10,000 ordinary shares, the first in December 2004, the second in December2005, and the third in December 2006, all exercisable at a price of £0.15 pershare. 16. SHARE PREMIUM AND Share Merger Profit and RESERVES premium reserve loss account US$'000 US$'000 US$'000 Group At 1 January 2004 - 1,818 (1,722) Issue of shares in subsidiary in - 161 - period (net of costs) Issue of shares via 5,172 - - public offer (net of costs) Exchange rate differences - - (112) Retained loss for the - - (2,796) period ----------------- ----------------- ------------------ At 31 December 2004 5,172 1,979 (4,630) ======== ======== =========The merger reserve represents the share capital and share premium in ServisionLtd less the investment by Servision Plc in Servision Ltd. Share Profit and premium loss account US$'000 US$'000 Company Issue of shares (net of 5,172 - costs) Retained loss for the - (348) period ----------------- ------------------ At 31 December 2004 5,172 (348) ======== ========= SERVISION PLC NOTES TO THE REPORT AND FINANCIAL STATEMENTS (continued) FOR THE YEAR ENDED 31 DECEMBER 2004 17. OPERATING LEASE COMMITMENTS At 31 December 2004, the group had annual commitments under non-cancellable operating leases expiring as follows:- 2004 2003 Land and Land and buildings Other buildings Other US$'000 US$'000 US$'000 US$'000 Within one year 67 120 58 102 ======== ======== ========= ======== 18. LOSS PER SHARE The loss per share of 20.05c (2003: 9.72c) has been calculated on the weightedaverage number of share in issue during the year namely 13,945,545 (2003:12,360,771) and losses of US$2,796,046 (2003: US$1,201,245). FRS 14 requires presentation of diluted EPS when a company could be called uponto issue shares that would decrease net profit or increase net loss per share.For a loss making company with outstanding share options, net loss per sharewould only be increased by the exercise of out-of-the-money options. Since it isinappropriate to assume that option holders would act irrationally, noadjustment is made to diluted EPS for out-of-the-money share options. 19. CONTINGENT LIABILITIES Under the company's research and development agreement with the Office of theChief Scientist and pursuant to applicable laws, the Company is required to payroyalties at the rate of 3-6% of sales for products developed with fundsprovided by the Office of the Chief Scientist, up to an amount equal to 100% ofthe grant received plus interest based on the 12 month LIBOR rate applicable todollar deposits. The Company is obligated to repay the Israel Government for thegrants received only to the extent that there are sales for the funded products. As at 31 December 2004, the Company had a contingent obligation to pay royaltiesof US$757,000. This amount has not been provided for, due to the likelihood ofrepayment being remote. 20. POST BALANCE SHEET EVENTS In order to ensure the company has sufficient working capital to support theexpanding business over the coming 12 months, Mr Gideon Tahan, an executivedirector, has personally guaranteed to support the company for up to $1,000,000,to be drawn down, by the company, as and when required. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Servision PLC