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Interim Results

16th Sep 2008 07:01

RNS Number : 4944D

VPhase PLC

16 September 2008

Press Release

16 September 2008

VPhase plc

("VPhase" or "the Group")

Consolidated Interim Financial Statements for the six months ended 30 June 2008

VPhase plc (AIM:VPHA), a leading developer of energy saving devices for the home and small commercial/retail applications using voltage control technology where the incoming voltage to a property is held to a set point, today reports its Interim Results for the six months ended 30 June 2008.

Financial & operational highlights:

●	Installation and continuous running of a unit in a test house
●	Placing raising funds of £3.3 million (net of expenses)
●	Supply chain established
●	Development team established
●	Preparation for product launch in October 2008

Adrian Hutchings the Chairman of VPhase said "We are delighted with the excellent progress in the first six months of the year. To have established an experienced in-house development team, placed a contract with a specialist provider for 'design for manufacture' and initial volume manufacturing services, strengthened the balance sheet and, subsequent to the 30 June 2008, to have a letter of intent to fund the CERT trial with one of the UK's leading energy providers is a major achievement. VPhase continues to exercise strong cash management and is starting the second six months with a substantially strengthened balance sheet and clear focus on business commercialisation, growth and delivering shareholder value."

- ENDS -

For further information:

VPhase plc
Adrian Hutchings, Chairman Dr Lee Juby, Chief Executive	Tel: +44 (0) 151 348 2111 Tel: +44 (0) 151 348 2139
Richard Smith, Chief Financial Officer	Tel: +44 (0) 151 348 2116
	www.VPhase.com

Novum Securities Limited	Tel: +44 (0) 20 7562 4700
Michael Brennan
Henry Turcan	www.novumsecurities.com

Zimmerman Adams	Tel: +44 (0) 20 7060 1760
Graeme Thom
Charity Walmsley	www.zimmint.com

Media enquiries:

Abchurch Communications Limited	Tel: +44 (0) 20 7398 7700
Justin Heath	Tel: +44 (0) 20 7398 7781
Monique Tsang	Tel: +44 (0) 20 7398 7712
[email protected]	www.abchurch-group.com

Chief Executive's Statement

Overview

In the six months ended 30 June 2008, and indeed the time since the half year, VPhase made significant progress across the board, especially with both technology and commercial development and with potential partners and customers.

To deliver the Group's commercial goals a small experienced in-house development team has been established and via a tender process, they have secured the initial supply chain for the first products to be manufactured and entered into a contract with a specialist design for manufacture provider. This is a major step forward in the Company's commercialisation process.

We are also delighted to be able to announce the signing of a letter of intent with Scottish and Southern Energy plc ("SSE") one of the largest energy companies in the UK to work with them and in particular SSE will fund field trials of VPhase products, in the form of an OFGEM approved Demonstration Action to achieve approval under the UK Carbon Emissions Reduction Targets (CERT) scheme.

In addition, during the period, discussions have been on-going with consumer unit (fuse box) manufacturers and other utility companies. It is through these channels that VPhase expects to achieve volume product sales. Further discussions have been held with market influencers such as Government bodies and third party test and certification providers.

The Group has announced that its first product, called the VX1, will be launched at Interbuild Exhibition, NEC, Birmingham, in October 2008.

Financial performance has been in line with expectations and during the period 70,000,000 new ordinary shares of 0.25 pence each were placed raising £3,305,000 net of expenses for the Group.

Technical development

VX1 is a low cost voltage reduction and regulation system that the Group's own testing has shown can reduce the energy consumption of many household appliances by 5% to 18% whilst delivering an equivalent reduction in CO2 emissions. In the UK the nominal incoming voltage to properties is set to 230 volts; however, the actual level of voltage delivered can legally vary between 207 volts and 253 volts. Most electrical products in the UK are designed to operate at the lower level and for many appliances any excess voltage does not necessarily give additional performance; rather, the surplus energy is wasted as heat.

Under the majority of conditions, VX1 automatically stabilises the voltage in homes or offices to a lower level (usually 220 volts for the UK and EU markets). The Group's tests have shown that the fitting of a VPhase device to the consumer unit in an average UK home would result in a substantial reduction in electricity usage and a corresponding 10% reduction in electricity bills. This would give the homeowner a payback of between two to three years and larger homes will show a shorter payback and increasing electricity bills will also have the same effect. Actual results also demonstrate that appliances such as light bulbs have a longer life when exposed to lower voltage.

Since March 2008 a VPhase device has been installed in a test house running continuously. This device has continued to operate successfully whilst supplying voltage to a range of domestic appliances.

The second half of 2008 will be focused upon obtaining regulatory approvals for the VX1, gaining the necessary CE certification (Conformité Europeénne (CE) is a mandatory conformity mark on products sold in the single market in the European Economic Area to prove the equipment has met the necessary European legislation and directives). This is necessary to enable the product to be sold in the UK and Europe. After this stage, the product will be supplied to partners and select early adopters before anticipated volume roll out in 2009.

Commercial Development

VPhase is focusing on selling the VX1 through multiple channels including consumer unit (fuse box) manufacturers and via partnerships with utilities. In the UK alone, approximately 1.4 million consumer units are sold annually, according to figures from the manufacturers.

The signing of a letter of intent with SSE to fund product trials to achieve CERT approval is a major step forward. It is intended that the relationship with SSE will support the commercialisation of VPhase's energy saving products and that SSE will work with VPhase to identify and explore opportunities to use the VPhase device to promote energy efficiency

The CERT scheme is a Government initiative and is intended to stimulate about £2.8 billion of investment by energy suppliers in promoting carbon reduction measures, usually by subsidising them, in the period from 2008-2011.

The Group is also in discussions with a number of consumer unit manufacturers that have a global presence and that the Directors estimate account for approximately 75% of the UK consumer unit market.

The VX1 is being designed to meet EU standards and will be CE certified and therefore available for sale throughout Europe. The Directors estimate that the consumer unit market in the 15 European Union countries (excluding the UK) equates to approximately an additional 7 million units per annum. The Directors believe that there could be good correlation between market size for consumer units and that for voltage reduction products.

The Group is also looking to produce products suitable for other regions such as the USA. The USA operates at a lower voltage than the UK and Europe with a nominal supply voltage of 120 volts. Accordingly, the relative percentage saving from a VPhase product would be lower; however, as the average US house uses considerably more electricity than the average UK or European home, the Directors believe that the potential monetary savings from VPhase technology in a US application could be at least equal to if not higher than a UK or European application.

Corporate development

The Group announced in May that it had raised £3,305,000 net of expenses by way of a placing of 70,000,000 new ordinary shares of 0.25 pence each, comprising 10.1% of the enlarged issued share capital, at a price of 5p per share (the "Placing Price"). In addition to the placing a further 31,720,000 ordinary were placed at the Placing Price on behalf of a number of existing shareholders to raise a total of £1,600,000 for their benefit. All of the new ordinary shares and the further existing ordinary shares were placed with institutional investors. This share placing has enabled the Group to accelerate the time and access to routes to market and to explore and finance additional opportunities, both domestic and international.

Financial performance

During the six month period to 30 June 2008 pre-tax losses increased in line with the Group's expectations to £356,000 (30 June 2007: £14,000), due to the increased expenditure on development and commercialisation activities following the reversal into Flightstore Group and listing on the AIM Market of the London Stock Exchange in September 2007.

During the period, capital expenditure on tangible fixed assets amounted to £1,000 and on intangible fixed assets £10,000 as Research and Development expenditure was capitalised in accordance with IAS38.

At the end of June 2008, the Group has cash of £3,627,920 leaving the Group in a good position from which to achieve its technical and commercial development targets.

Circulation to Shareholders

Following this RNS announcement, a pdf copy of the consolidated interim Financial Statements will be contained on the Group's website (vphase.com) due to the Group's views on the environmental impact of printing and distributing glossy sets of consolidated interim Financial Statements. The Group's website is the primary source of information on the Group and this includes an overview of the activities of the Group and details on all recent Group announcements.

Lee Juby

Chief Executive

16 September 2008

Consolidated interim income statement

For the six months ended 30 June 2008

		Unaudited 6 months ended 30 June 2008 £	Audited 12 months ended 31 December 2007 £	Unaudited 6 months ended 30 June 2007 £


Continuing activities	Note

Revenue		-	-	-
Cost of sales		-	-	-
Gross profit		-	-	-
Administrative expenses		(369,522)	(733,615)	(13,511)
Operating loss		(369,522)	(733,615)	(13,511)
Finance income		13,071	6,332	-
Loss before income tax		(356,451)	(727,283)	(13,511)
Income tax expense		-	-	-
Loss for the financial period		(356,451)	(727,283)	(13,511)

Attributable to:
Equity holders of the Company			(356,451)		(727,283)		(13,511)

Loss per share attributable to the equity holders of the Company during the period
-Basic and diluted	5		(0.06)p		(0.14)p		(0.003)p

All revenue and costs originate from continuing activities.

The notes are an integral part of these consolidated interim Financial Statements.

Consolidated interim balance sheet

As at 30 June 2008

		Unaudited 6 months ended 30 June 2008 £	Audited 12 months ended 31 December 2007 £	Unaudited 6 months ended 30 June 2007 £
Assets	Note
Non-current assets

Other intangible assets	6	9,935	-	-
Property, plant and equipment		2,073	1,134	810
		12,008	1,134	810
Current assets
Trade and other receivables		83,314	62,437	8,044
Cash and cash equivalents	9	3,627,920	551,477	-
		3,711,234	613,914	8,044
		3,723,242	615,048	8,854

Current liabilities
Trade and other payables		138,180	31,884	78,401
Total Liabilities		138,180	31,884	78,401


Equity
Capital and reserves attributable to equity holders of the Company
Share capital	8	1,744,041	1,562,801	100
Share premium		4,428,259	1,369,499	-
Merger relief reserve		1,149,737	1,149,737	-
Capital redemption reserve		993,726	993,726	-
Retained earnings		(1,139,670)	(783,419)	(69,647)
Reverse acquisition reserve		(3,682,102)	(3,682,102)	-
Warrant reserve	8	105,000	-	-
Other reserves		(13,929)	(27,078)	-
Total shareholders' equity		3,585,062	583,164	(69,547)

Total equity		3,585,062	583,164	(69,547)
Total equity and liabilities		3,723,242	615,048	8,854

The notes are an integral part of these consolidated interim Financial Statements.

Consolidated interim cash flow statement

For the six months ended 30 June 2008

		Unaudited 6 months ended 30 June 2008 £	Audited 12 months ended 31 December 2007 £	Unaudited 6 months ended 30 June 2007 £


	Note

Cash flows from operating activities
Cash consumed by operations	7	(230,516)	(258,031)	191

Cash flows from investing activities
Expenditure on intangible fixed assets		(9,935)	-	-
Purchase of property, plant and equipment		(1,177)	(934)	(290)
Cash acquired on reverse acquisition		-	30,000	-
Interest received		13,071	6,332	-
		1,959	35,398	(290)

Cash flows from financing activities
Net proceeds from the issue of ordinary shares		3,305,000	774,110	99

Net increase in cash and cash equivalents		3,076,443	551,477	-
Cash and cash equivalents at the beginning of the period		551,477	-	-
Cash and cash equivalents at the end of the period		3,627,920	551,477	-

The notes are an integral part of these consolidated interim Financial Statements.

Consolidated interim statement of changes in equity

For the six months ended 30 June 2008

	Attributable to equity holders of the Company

	Share capital	Share Premium	Merger relief Reserve	Capital redemption Reserve	Retained Earnings	Reverse acquisition Reserve	Warrant Reserve	Other Reserves	Total Shareholders Equity
	£	£	£	£	£	£	£	£	£
As previously reported in Energetix Voltage Control Limited as at 1 December 2007	1	-	-	-	(56,136)	-	-	-	(56,135)
Total recognised loss for the period	-	-	-	-	(13,511)	-		-	(13,511)
Shares issued by legal subsidiary before reverse acquisition	99	-	-	-	-	-	-	-	99
Balance as at 30 June 2007	100	-	-	-	(69,647)	-	-	-	(69,547)
Total recognised loss for the period	-	-	-	-	(713,772)	-	-	-	(713,772)
Other share based payments	-	-	-	-	-	-	-	20,200	20,200
Shares issued by legal subsidiary before reverse acquisition:
- 28 August 2007	-	115,009	-	-	-	-	-	-	115,009
- 3 September 2007	33	599,967	-	-	-	-	-		600,000
Share issue expenses	-	(12,005)	-	-	-	-	-	-	(12,005)
Cost of reverse acquisition (note 10)	-	-	-	-	-	572,272	-	-	572,272
Reallocation of reserves on reverse acquisition	1,460,168	698,021	1,149,737	993,726	-	(4,254,374)	-	(47,278)	-
Shares issued by legal parent after reverse acquisition:
- 26 September 2007	100,000	57,000	-	-	-	-	-	-	157,000
- 19 October 2007	2,500	-	-	-	-	-	-	-	2,500
Share issue expenses	-	(88,493)	-	-	-	-	-	-	(88,493)
Balance as at 31 December 2007	1,562,801	1,369,499	1,149,737	993,726	(783,419)	(3,682,102)	-	(27,078)	583,164
Total recognised loss for the period	-	-	-	-	(356,451)	-	-	-	(356,451)
Share based payments (note 9)	-	-	-	-	-	-	-	13,349	13,349
Other share based payments	-	-	-	-	-	-	-	40,000	40,000
Shares issued by legal parent (note9):
- 13 February 2008	3,120	16,880	-	-	200	-	-	(20,200)	-
- 19 May 2008	175,000	3,325,000	-	-	-	-	-	-	3,500,000
- 12 June 2008	3,120	16,880	-	-	-	-	-	(20,000)	-
Share issue expenses	-	(195,000)	-	-	-	-	-	-	(195,000)
Issue of warrants (note 8)	-	(105,000)	-	-	-	-	105,000	-	-
Balance as at 30 June 2008	1,744,041	4,428,259	1,149,737	993,726	(1,139,670)	(3,682,102)	105,000	(13,929)	3,585,062

Total recognised income and expense recognised directly to equity amounts to £200.

The notes are an integral part of these consolidated interim Financial Statements.

Selected explanatory notes

1. Nature of operations and general information

VPhase plc (“the Company”) and its subsidiaries (together “the Group”) is a leading developer of energy saving devices for the home and small commercial/retail applications using voltage control technology where the incoming voltage to a property is held to a set point. The Group’s products are targeted at energy efficiency.

Energetix Group plc is the Group’s ultimate parent company. It is incorporated in England and Wales. The address of the registered office is Steam Packet House, 76 Cross Street, Manchester, M2 4JU. The Group trades through a number of subsidiaries, whose place of business is Capenhurst Technology Park, Capenhurst, Chester, CH1 6EH. VPhase plc’s shares are listed on the AIM Market of the London Stock Exchange.

The financial information set out in these Financial Statements does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The consolidated balance sheet as at 31 December 2007 and the consolidated income statement, consolidated cash flow statement and associated notes for the year then ended have been extracted from the Group's Financial Statements. Those Financial Statements have received an unqualified report from the auditors and have been delivered to the Registrar of Companies. The 2007 statutory accounts contained no statement under section 237(2) or (3) of the Companies Act 1985.

The accounting policies applied by the Group in these interim Financial Statements are the same as those set out in the Group’s annual Financial Statements for the year ended 31 December 2007, with the exception of research and development costs which have been capitalised during the period (see note 6).

The consolidated interim Financial Statements for the period ended 30 June 2008 has not been audited or reviewed in accordance with International Standard on Review Engagement 2410 issued by the Auditing Practices Board.

The consolidated interim Financial Statements has been approved by the Board of Directors on 16 September 2008.

VPhase plc’s consolidated interim Financial Statements are presented in pounds sterling (£), which is also the functional currency of the parent company.

2. Accounting policies

The consolidated interim Financial Statements has been prepared under the historical cost convention. The Group accounting policies used in the interim Financial Statements are consistent with those applied in its most recent annual Financial Statements, except for research and development costs which have been capitalised in the period (see note 6). For further information, please refer to VPhase plc’s annual Financial Statements for the year ended 31 December 2007.

3. Basis of consolidation

Reverse acquisition

On 26 September 2007, the Company changed its name to VPhase plc and the Company became the legal holding company of Energetix Voltage Control Limited via a share for share exchange.

The share for share exchange has been accounted for as a reverse acquisition. Although these consolidated interim Financial statements have been issued in the name of the legal parent, the Company it represents in substance is a continuation of the financial information of the legal subsidiary, Energetix Voltage Control Limited because immediately after the transaction former Energetix Voltage Control Limited shareholders held 55.1% of the share capital of the legal parent which at that time had no business as defined under reverse acquisition methodology. The following accounting treatment has been applied in respect of the reverse acquisition:

a) the asset and liabilities of the legal subsidiary, Energetix Voltage Control Limited are recognised and measured in the Financial Statements at the pre-combination carrying amounts, without reinstatement to fair value;

b) the retained (loss)/earnings and other equity balances recognised in the Group Financial Statements reflect the retained (loss)/earnings and other equity balances of Energetix Voltage Control Limited immediately before the business combination, and the results of the period from 1 January 2007 to the date of the business combination are those of Energetix Voltage Control Limited. However, the equity structure appearing in the Group Financial Statements reflects the equity structure of the legal parent, including the equity instruments issued under the share for share exchange to effect the business combination;

c) comparative numbers presented in the consolidated interim Financial Statements are those reported in the Group Financial statements of the legal subsidiary, Energetix Voltage Control Limited for the year ended 31 December 2006.

d) The cost of the combination has been determined from the perspective of Energetix Voltage Control Limited. The fair value of Energetix Voltage Control Limited has been determined from the issue of shares to a third party on 3 September 2007 for £600,000. An implied value has been ascertained based on the number of new shares Energetix Voltage Control Limited would have had to issue such that its shareholders hold the appropriate post combination ratio. The difference between the fair value of the cost of the combination and the fair value of the net assets acquired has been charged to the Group income statement as a cost of listing.

4. Segmental information

The business of the Group comprises one segment, energy efficiency, and as such no segmental information is provided. The Group operates entirely within the United Kingdom.

5. Loss per share

The loss per share is calculated by reference to the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the period as follows:

	Unaudited 6 months ended 30 June 2008 £	Audited 12 months ended 31 December 2007 £	Unaudited 6 months ended 30 June 2007 £


Loss attributable to equity holders of the Group	(356,451)	(727,283)	(13,511)
Weighted average number of ordinary shares in issue (‘000)	641,190	532,238	500,105
Basic and diluted loss per share (pence)	(0.06)	(0.14)	(0.003)

The weighted average number of ordinary shares for the period ended 30 June 2007 assumes that the 500,105,004 ordinary shares in relation to the reverse acquisition of Energetix Voltage Control Limited existed for the entire period. VPhase plc shares have been included since 26 September 2007, the date of the reverse acquisition, and all shares have been included in the computation based on the weighted average number of days since issue.

The share options and warrants in issue are anti-dilutive in respect of the basic loss per share calculation and have therefore not been included in the above calculations.

6. Other intangible assets

		£
	At 1 January 2008
	Cost	-
	Additions	9,935
	Accumulated amortisation	-
	At 30 June 2008	9,935

Intangibles include internally generated product development costs capitalised in accordance with IAS 38.

On 19 May 2008 the Group raised £3,305,000 (net of expenses) via a placing of 70,000,000 ordinary shares. The Directors consider that the Group has adequate financial resources, following the placing, to complete the development and marketing of the product and that the product is considered to be technically feasible in accordance with IAS 38. Accordingly, development costs incurred subsequent to the placing have been capitalised as intangible assets.

All other development work has been written off as incurred as the criteria for recognition as an asset are not met.

7. Cash consumed by operations

	Unaudited 6 months ended 30 June 2008 £	Audited 12 months ended 31 December 2007 £	Unaudited 6 months ended 30 June 2007 £



Loss before income tax	(356,451)	(727,283)	(13,511)
Adjusted for:
-Depreciation	238	320	-
-Amortisation	-	-	-
-Finance income	(13,071)	(6,332)	-
-Share based payments	13,349	-	-
-Other share based payments	40,000	20,200	-
-Cost of reverse acquisition (note 10)	-	542,272	-

Changes in working capital:
-Increase in trade and other receivables	(20,877)	(61,578)	(7,185)
-Increase/(decrease) in trade and other payables	106,296	(25,630)	20,887
Cash consumed by operations	(230,516)	(258,031)	191

8. Share capital and reserves

Issue of ordinary shares:

On 13 February 2008, the Company issued 1,248,240 ordinary shares of 0.25 pence each at 1.602 pence per share to Novum Securities Limited in settlement of broker fees.

On 19 May 2008, the Company issued 70,000,000 ordinary shares of 0.25 pence each via a placing at 5 pence per share.

On 12 June 2008, the Company issued 1,248,240 ordinary shares of 0.25 pence each at 1.602 pence per share to Novum Securities Limited in settlement of broker fees.

Warrants

The Company granted 3,500,000 warrants on 22 May 2008, with an exercise price of 5 pence to its broker, as part of its agreed placing costs.

These warrants are exercisable during a three year period from the date of grant. On exercise each warrant entitles the holder to one 0.25 pence ordinary share in the Company.

The Group uses the Black-Scholes model to fair value the Group’s warrants which resulted in a total fair value charge of £105,000, this has been charged against the share premium account and credit to the warrant reserve in the period.

Share options

The Company established, in August 2007, two share option scheme in relation to ordinary shares, namely the VPhase Unapproved Share Option Scheme 2007 and the VPhase Enterprise Management Incentive Scheme 2007. Under the present legislation relating to Enterprise Management Incentive (EMI) Schemes, no grants of options may be made under the EMI scheme whilst the Company remains a subsidiary of Energetix Group plc.

The Group grants options over the ordinary shares of the Company at not less than the market value of the Company’s ordinary shares on the date of grant. The vesting period is generally three to four years. If the option remains unexercised after a period of 10 years from the date of grant, the options expire. The Group has no legal or constructive obligation to repurchase or settle the options in cash.

During the period ended 30 June 2008, 15,603,001 options were granted and as at the 30 June 2008, 15,603,001 options were capable of being exercised (2007: Nil). The options outstanding at the 30 June 2008 had a weighted average exercise price of 1.88 pence (2007: N/a), and a weighted average contractual remaining life of 9 years 6 months. The weighted average exercise price of share options granted during the year was 1.88 pence (2007: N/a). No options were exercised during the year.

The Group uses the Black-Scholes model to fair value the Group’s share options which resulted in a total fair value provision of £13,349 (2007: £Nil), this has been charged to the Group Income Statement and a corresponding credit to other reserves.

9. Cash and cash equivalents

	Unaudited 6 months ended 30 June 2008 £		Audited 12 months ended 31 December 2007 £		Unaudited 6 months ended 30 June 2007 £
Cash at bank and in hand	3,627,920		551,477		-

On 19 May 2008, the Group placed 70,000,000 ordinary shares at 5 pence each raising £3,305,000 net of expenses.

10. Acquisition

On 25 September 2007, VPhase plc acquired the whole of the issued share capital of Energetix Voltage Control Limited in exchange for the issue of ordinary shares. This has been accounted for as a reverse acquisition as explained in note 3. As a result of the reverse acquisition cash of £30,000 was acquired. The difference between the cost of the business combination of £572,272 and the fair value of net assets acquired amounting to £30,000 has consequently been charged to the Group Income Statement.

The cost of the combination has been determined from the perspective of Energetix Voltage Control Limited. The fair value of Energetix Voltage Control Limited has been determined from the issue of shares to a third party on 3 September 2007 for £600,000. An implied value has been ascertained based on the number of new shares Energetix Voltage Control Limited would have had to issue such that its shareholders hold the appropriate post combination ratio. The difference between the fair value of the cost of the combination and the fair value of the net assets acquired has been charged to the Group Income Statement as a cost of listing.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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