14th Dec 2006 07:31
Future Internet Technologies PLC14 December 2006 Embargoed for 7.31am, 14 December 2006 Future Internet Technologies plc Proposed acquisition of Artilium N.V. Placing of New Ordinary Shares at 100 pence each (equivalent to 20p per share per Existing Share) Capital Reorganisation Re-Admission to trading on AIM Notice of Annual General Meeting Future Internet Technologies plc ('FIT' or the 'Company') announces thatyesterday it posted a circular to shareholders (the 'Circular' or the 'Re-Admission Document') providing further detail on its proposed acquisition ofthe share capital in Artilium NV ('Artilium') that it does not already own (the'Acquisition'). The Company has also set out its intentions regarding itsstrategy, markets and planned product and service offerings which are, insummary, as follows: • Continue to build on the strong growth of the core Artilium business • Continue to expand Artilium's offering internationally, which has started encouragingly • Focus on new channels identified to broaden the customer base where early sales have been achieved • Leverage opportunity for a new profitable revenue stream already identified Paul Gratton, Executive Chairman of FIT, commented: "Since March, FIT have been exercising management control of Artilium and we arevery encouraged with the progress which has been made to date. In particular,we are pleased with the strong growth of the sales pipeline and are confident ofthe prospects of this business and of the Enlarged Group. In addition to growthalready achieved in Benelux, we are further encouraged by an early salespipeline from outside the Benelux region and the Directors are confident thegeographic expansion of sales for Artilium represent an exciting opportunity tofurther accelerate revenue growth. The Company has also successfully started tobroaden its customer base from its existing voice network operators to nowinclude cable companies and the rapidly growing channel which includes hosters,ISPs and managed service providers. We see the Company as being excellentlypositioned to take advantage of the growing demand for voice integration intomultiple business applications to be made as easy as possible for potentialresellers. This includes the opportunity to pre-integrate bundles of voiceminutes and develop yet another new profitable revenue stream for the company. The combination of Artilium's engineering expertise and our international salesand product marketing skills makes for a compelling global proposition. Theopportunities are certainly there and we believe that we have the rightcombination of products, services and skills to exploit them." Introduction It is expected that trading in the Company's ordinary shares will re-commencetoday following the publication of the Re-Admission Document yesterday. The proposed Acquisition is a reverse takeover of the Company under the AIMRules and therefore requires the approval of Shareholders at the Annual GeneralMeeting ('AGM'), to be held on 5 January 2007. Following completion of the Acquisition, the Company intends to apply for theshare capital of the Enlarged Group to be admitted to AIM. It is anticipatedthat Re-Admission will take place under a new listing and trading in the NewOrdinary Shares will commence on the first dealing day following that on whichthe Resolutions proposed pursuant to the Acquisition are passed at the AGM. At the same time, the Company also proposes to consolidate every five of itsOrdinary Shares of 1 pence each into one New Ordinary Share of 5 pence each. In addition, the Company announces its proposal to raise approximately £3million (before expenses) through a Placing of 3,000,000 New Ordinary Shares of£1.00 each (equivalent to 20p per Existing Share) (the 'Placing'). Of the netproceeds, approximately £1.4 million will be used to fund the cash element ofthe consideration due under the Acquisition, while the balance will provideworking capital to support the growth and development of the Enlarged Group.The Company has also raised approximately £4.3 million via the exercise bycertain holders of their Series 1 Warrants. Also included in the Circular are the financial results for the Company for theyear to 30 June 2006. During the year ended 30 June 2006, FIT achieved a lossbefore tax of £3.8 million which included non-recurring items of £2.8m (2005loss: £0.01 million) on revenues of £0.6 million (2005: £nil). As at 30 June2006, FIT had net assets of £4.3 million (2005: £0.6 million). It is the intention of the Board that, following a period of transition, TomCasaer, who is currently a non-executive director of the Company, will becomeCEO of the Enlarged Group. Tom will work alongside Paul Gratton, ExecutiveChairman and acting Chief Executive, who following the period of transitionwhich is expected to be completed by the end of the first quarter of 2007, willrevert to his original position of Executive Chairman The Acquisition • On 7 March 2006 FIT announced that it had entered into an agreement to acquire 49 per cent. of the outstanding share capital of Artilium NV ('Artilium') for a cash payment of €7.5 million with the option to acquire the balance of the issued share capital of Artilium within 12 months. On 21 June 2006, the Company formally exercised its option to acquire the remaining 49% of the issued share capital of Artilium (the Acquisition). The consideration under the Acquisition will, following a variation of the terms announced on 24 November 2006, be satisfied by a payment of €2.1 million in cash and the issue of 2,000,000 Consideration Shares (equal to 400,000 New Ordinary Shares). This values the whole of Artilium at approximately £6.9 million (based on the cash paid and the shares issued at the Placing Price of £1.00 per New Ordinary Share). Information on Artilium • Artilium provides technology solutions to network operators and enablers. Its core product is a Shared Service Delivery Platform ("SSDP") which comprises a single technology platform offering a variety of services to both the network operator and its subscribers. • Established in Belgium in 1999 by experienced telecoms engineers, Artilium has an established market position which it has developed by supplying its products and services to a number of operators throughout the Benelux region and, in conjunction with its partnership network, has already established installations in more than ten countries across Europe. Background and reason for the Acquisition • Artilium has been successful in selling its platform throughout the Benelux region but as a "software engineering" focused organisation, the management of Artilium focussed on regional deals initially and provided a large amount of bespoke customised software in addition to its platform. • The Directors believe that Artilium has significant experience in the telecoms sector and in acquiring Artilium, FIT will be able to combine its experienced international sales and product marketing team with Artilium's engineering capabilities. • In the Directors' opinion the result is an opportunity to exploit Artilium's past regional success on a global scale, capitalising on demand for service delivery platforms. With a customer base of leading telecoms operators and a proven track record, FIT is confident it can extend Artilium's position as a leader in service delivery platforms from Benelux throughout the world. Intentions regarding the Company • In addition to extending Artilium's core business internationally, the Board believes there is a significant opportunity for Artilium to capitalise on another widespread technology trend, the delivery of software as a service ("SaaS"). • The Directors believe that, increasingly, businesses are coming to recognise that outsourcing the management of their technology is a cost effective decision. With the proliferation of broadband penetration into businesses, leading software providers including Microsoft and SAP have embraced the concept of delivering software over the internet. Warehousing and distribution costs are virtually eliminated, updates are more easily deployed and support can be provided more rapidly. • To obtain business users, software providers seek to include their applications within the product offerings of service providers (such as internet service providers ("ISPs"), system integrators and network operators). The Board believes this pool of service providers represents an ideal opportunity for the sale of the Artilium platform, which integrates business applications with telecoms networks. • In addition, the Enlarged Group can generate revenues via the resale of wholesale voice minutes through these business applications. Once enabled with Artilium technology, businesses will be able to purchase blocks of voice minutes from the same company providing their email service and their broadband access. This bundling of solutions simplifies technology purchasing for businesses and gives Artilium a substantial new market to address. This summary should be read in conjunction with the full text of the AdmissionDocument. The Acquisition will be subject to approval of Shareholders at an AGMto be convened on 5 January 2007. Notice of this meeting is set out in theAdmission Document. Certain definitions and terms used in this Announcement arealso set out in the Admission Document. Enquiries: Future Internet Technologies plc Via Financial DynamicsPaul Gratton, Executive ChairmanTony Lynch, Finance Director Financial Dynamics Tel: 020 7831 3113Harriet Keen/James Melville-Ross/Matt Dixon Future Internet Technologies plc Proposed acquisition of Artilium N.V. Proposed Placing, Re-Admission to trading on AIM and notice of Annual General Meeting Introduction On 7 March 2006 FIT announced that it had entered into an agreement to acquire49 per cent. of the outstanding share capital of Artilium for a cash payment of€7.5 million. In addition, FIT had the option to acquire the balance of theissued share capital of Artilium within 12 months for the issue of six millionShares. The acquisition of the balance of the share capital of Artilium wassubject to, inter alia, Shareholders' approval. On 10 March 2006, Artilium acquired a 49 per cent. stake in Aquanta for €1.5million in cash. Artilium had the option to acquire the balance of the issuedordinary share capital of Aquanta within 12 months for the issue of four millionShares. On 16 March 2006, the Company announced it had decided to exercise its option toacquire the balance of the issued share capital of Artilium. On 21 June 2006,the option was formally exercised. The acquisition of the balance of the sharecapital of Artilium constitutes a reverse takeover pursuant to the AIM Rules andtrading in the Shares was therefore suspended at the Company's request pendingposting of the circular to shareholders. On 24 November 2006, the Company announced that the terms of the acquisition ofthe remaining 51 per cent. of the issued share capital in Artilium had beenvaried, principally to achieve increased certainty around the timescalesrelating to the acquisition. On commercial grounds, the Board decided thatAquanta would not be part of the Company's ongoing strategy and therefore agreedto transfer its shareholding in Aquanta to Aquanta's prior owner. The consideration under the Acquisition will be satisfied by the allotment ofthe Consideration Shares and €2.1 million in cash and values the whole ofArtilium at approximately £6.9 million (based on cash paid and shares issued atthe Placing price of £1.00 per New Ordinary Share). The Company is proposing to raise £3.0 million (before expenses) through thePlacing. Of the net proceeds of the Placing, approximately £1.4 million willfund the cash element of the consideration due under the Acquisition, while thebalance will provide working capital to support the growth and development ofthe Enlarged Group. In addition, the Company has raised approximately £4.3 million via the exerciseby certain holders of their Series 1 Warrants. Pursuant to a vote of the holdersof the Series 1 and Series 2 Warrants on 27 November 2006, the terms of theSeries 1 Warrants were amended such that the latest date for their exercise is27 December 2006. The terms attaching to the Series 2 Warrants remain unchanged. The Consideration Shares and the Placing Shares will represent 0.76 per cent.and 5.72 per cent. of the Enlarged Share Capital respectively. As the transaction is a reverse takeover of the Company under the AIM Rules, theAcquisition requires the approval of the Existing Shareholders at the AnnualGeneral Meeting and it is also conditional upon the passing of certain otherresolutions. If Resolution 3 is duly passed at the AGM, the Company's existing quotation onAIM will be cancelled and the Company will apply immediately for the EnlargedShare Capital to be admitted to trading on AIM. The Directors consider that the Proposals set out in the Circular are in thebest interests of the Company and recommend that Shareholders vote in favour ofthe AGM Resolutions. Background to and reasons for the Acquisition The Company has been considering a number of investments in order to meet thecriteria of the London Stock Exchange for investing companies to make anacquisition or acquisitions which constitute a reverse takeover. The Companyentered into discussions with the Vendor with a view to acquiring Artilium in areverse takeover transaction. The Directors believe that the acquisition of Artilium should substantiallyenhance shareholder value and will be in the interests of both companies andtheir shareholders. In recent years, advances in technology have enabled voice communications to bedelivered across networks as data. Together with the evolution of networks anddevices, this new technology has created a situation in telecoms known as "convergence". The result is that voice communications can now be incorporatedinto software applications and be delivered to end-users over any network,whether fixed-line, mobile or the internet. In the converged world of communications, any company with access to the properinfrastructure can become a provider of innovative voice services. Thisscenario has created a significant opportunity for those companies withexpertise in telephony infrastructure to expand the customer base for theirproducts and services. The Directors believe that Artilium has established itself as one of the leadingtelecoms software providers in the Benelux region. Founded in 1999 byexperienced telecoms engineers, Artilium has developed a service deliveryplatform that enables its telecoms customers to manage voice as data and deliverintegrated services over any network. Services such as intelligent routing ofcalls, number portability, pre and post-paid billing and advanced messaging areexamples of the functionality provided by Artilium's platform. Artilium has been successful in selling its platform throughout the Beneluxregion but as an engineering focused organisation, the management of Artiliumfocussed on regional deals initially and provided a large amount of bespokecustomised software in addition to its platform. The Directors believe thatArtilium has significant experience in the telecoms sector and in acquiringArtilium, FIT will be able to combine its international sales and productmarketing team with Artilium's engineering capabilities. In the Directors'opinion the result is an opportunity to exploit Artilium's past regional successon a global scale, capitalising on demand for service delivery platforms. Witha customer base of leading telecoms operators and a proven track record, FIT isconfident it can extend Artilium's position as a leader in service deliveryplatforms from Benelux throughout the world. Market for Artilium's products The market for Artilium's telecoms Shared Service Delivery Platform ("SSDP") hasbroadened in the past decade and with recent advancements in technology, theDirectors believe the market is now poised to expand substantially.Historically, providers of communication services were large state-ownedtelecoms operators. With the privatisation of most state-owned operators andmarket deregulation intended to foster increased competition, the type andnumber of communication providers has significantly increased. For example, inthe United States this has given rise to independent local exchange carriers ("ILECs"), competitive local exchange carriers ("CLECs"), cable operators, andnew voice over internet protocol ("VoIP") operators. Typically, these newtelecoms providers require a service delivery platform infrastructure. Artilium predominantly markets its products to mobile network operators("MNOs"), mobile virtual network operators ("MVNOs"), mobile virtual networkenablers ("MVNEs") and fixed network operators. MNOs An MNO is a telecoms company that provides mobile services to subscribers. Inorder to provide such services, the MNO owns the necessary infrastructure andwireless spectrum licence. An example of an MNO is Vodafone. In addition to the changes seen in the traditional telecoms market, advancementsin MNO business models have also expanded the market for Artilium's products.Traditionally, governments viewed the wireless spectrum as a scarce resource andauctioned the rights to use portions of this spectrum for telecoms purposes tothe highest bidder. The successful acquirers of the spectrum auctions, typicallybeing the large MNOs, have identified an opportunity to increase the value oftheir rights to this spectrum. Rather than attempting to market a single brandto all consumers, the MNOs have created a new market segment for MVNOs. MVNOs An MVNO is a mobile operator that does not own its own spectrum, and thattypically does not have its own network infrastructure. Some MVNOs relycompletely on the offered infrastructure of the host mobile network operator,whereas others want to own and/or control some of their own infrastructure. TheMVNO is generally granted the right to use the MNO's wireless spectrum andcertain technology in order to create their own targeted brand. MVNOs typically add value such as brand appeal and distribution channels to theresale of mobile services. MVNOs position their operations so that customers donot distinguish any significant differences in service or network performance,yet offer some affinity to their customers. A benefit for the traditional MNO co-operating with MVNOs is that, despite thematurity of the mobile market, it is able to broaden its customer base at a lowcost of acquisition and with a limited investment on its own part while keepingcontrol of its entire network. An example of an MVNO is Virgin Mobile. The Directors believe that, for Artilium, the advent of the MVNO market createsplatform sales opportunities to both the MNO and MVNO that wants more controlover the services they provide to their subscribers. MVNEs An MVNE does not typically have a relationship with subscribers. Rather, an MVNEprovides infrastructure and services enabling MVNOs to offer services to theirsubscribers. As MVNEs may not have a relationship with end-users, they tend tohave a lower public profile than MNOs and MVNOs. Fixed network operators A fixed network operator offers fixed as opposed to mobile telephony services.An example of a fixed network operator is BT. Information on Artilium Established in Belgium in 1999, Artilium is focused on the emerging market ofproviding Shared Service Delivery Platforms ("SSDP") services for the telecomsindustry and internet service providers. It supplies hardware and software aswell as consultancy services. It has considerable experience in this area and inconjunction with its partnership network has already established installationsin more than ten countries across Europe. Artilium creates solutions that are built on and around operating systems. Thisenables operators and service providers to optimise and control their existingoperating systems. Artilium's products can be used for fixed, mobile, ATM and IPnetworks, as well as for diverse and converged operating systems. Information on FIT The Company was originally admitted to trading on AIM in February 2000. By theend of its financial year to 30 June 2002 it had acquired and disposed of atrading business and had become an investment company with a residual holding ina private Hong Kong based internet company. The Company raised funds from shareholders and was until recently a cash shellwith no business. Pursuant to recent changes to the AIM Rules, an AIM listedinvestment company must have, by 5 July 2006, made an acquisition oracquisitions constituting a reverse takeover, failing which its shares would besuspended from trading and de-listed six months thereafter if a reverse takeoverhad not taken place. The Acquisition constitutes a reverse takeover for the purposes of the AIMRules. Accordingly, as the Company announced on 16 March 2006, trading in FIT'sshares was suspended at the Company's request pending the posting of a circularto shareholders providing further detail on the transaction with Artilium.Following consultation with AIM, the Company received an extension to the sixmonths timeframe which would otherwise have resulted in the Company's listingbeing terminated on 16 September 2006 due to the then current suspension havingcontinued for more than a six month period. AIM granted an extension to theCompany's listing to 15 December 2006. Accordingly a resolution is proposed atthe AGM to approve the Proposals as part of the Company's on-going investmentstrategy. Intentions regarding the Company In addition to extending Artilium's core business internationally, the Boardalso believes there is a significant opportunity for Artilium to capitalise onanother widespread technology trend, the delivery of software as a service("SaaS"). The Directors believe that, increasingly, businesses are coming to recognisethat outsourcing the management of their technology is a cost effectivedecision. With the proliferation of broadband penetration into businesses,leading software providers including Microsoft and SAP have embraced the conceptof delivering software over the internet. Warehousing and distribution costs arevirtually eliminated, updates are more easily deployed and support can beprovided more rapidly. To obtain business users, software providers seek to include their applicationswithin the product offerings of service providers (such as internet serviceproviders ("ISPs"), system integrators and network operators). The Boardbelieves this pool of service providers represents an ideal opportunity for thesale of the Artilium platform, which integrates business applications withtelecoms networks. In addition, the Enlarged Group can generate revenues via theresale of wholesale voice minutes through these business applications. The Board believes that many of the most popular business applications areideally suited for integration with voice technology. FIT has identified email,personal information management ("PIM"), workspace collaboration and customerresource management ("CRM") as the priority applications for voice integration.By integrating voice functionality, business users obtain access to a wide arrayof productivity enhancing tools, as well as cost savings for their phoneservices via the use of VoIP technology. One such example would be the abilityto schedule and conduct a conference call with one-click from within an emailapplication, thereby eliminating the difficulties often associated withcoordinating conference calls. Once enabled with Artilium technology, businesses will be able to purchaseblocks of voice minutes from the same company providing their email service andtheir broadband access. This bundling of solutions simplifies technologypurchasing for businesses and gives Artilium a substantial new market toaddress. Although the Directors are of the opinion that the Company, following theProposals, has sufficient working capital at Re-Admission for its presentrequirements, that is for at least the 12 months following Re-Admission, theCompany may need to raise further funds during or after this period in order totake advantage of additional opportunities that may be presented to it. Financial information During the year ended 30 June 2006, FIT achieved a loss before tax of £3.8million (2005 loss: £0.01 million) on revenues of £0.6 million (2005: £nil). Asat 30 June 2006, FIT had net assets of £4.3 million (2005: £0.6 million). The Acquisition Under the terms of the Acquisition, FIT is to acquire all the issued ArtiliumShares it does not already own in exchange for the allotment and issue of theConsideration Shares and €2.1 million in cash. The Acquisition is conditional, inter alia, on: (i) the passing of the Resolution at the AGM to approve the Acquisitionand Re-Admission (ii) the Placing having become unconditional in all respects save asregards completion of the Acquisition and Re-Admission; and (iii) Re-Admission becoming effective. The Acquisition will not complete if these conditions have not been satisfied by31 January 2007 or such later date as FIT and the Vendor may decide. The Artilium shares will be acquired free from all liens, charges, equitableinterests, encumbrances and third party rights now or hereafter attachingthereto, including the right to all dividends and other distributions, if any,hereafter declared, made or paid. The Placing The Company proposes to raise approximately £3 million before expenses throughthe Placing which is conditional only upon Admission. Use of funds An amount of approximately £1.4 million will be used to fund the cash element ofthe consideration due under the Acquisition, while the balance will provideworking capital to support the growth and development of the Enlarged Group. Details of the Consideration Shares, Placing Shares and New Ordinary Shares The Consideration Shares will be issued credited as fully paid and will, inaggregate, represent approximately 0.76 per cent. of the Enlarged Share Capital. The Placing Shares will be issued credited as fully paid and will, in aggregate,represent approximately 5.72 per cent. of the Enlarged Share Capital. The resolutions proposed at the AGM include a resolution to consolidate everyfive Existing Shares of 1 pence each into one New Ordinary Share of 5 penceeach. Any fractions resulting from the consolidation will be aggregated and soldin the market for the benefit of the Company The Consideration Shares and Placing Shares will rank pari passu with the NewOrdinary Shares in all respects, including the right to receive all dividends orother distributions declared, made or paid after the date of this Circular. Directors The Directors and their functions are as follows: Paul Robert Gratton, Executive Chairman and Acting Chief Executive Officer, age47 Mr Gratton joined the Company in June 2006 from Egg plc where he held theposition of CEO from 2001. Mr Gratton has enjoyed an extensive career in retailbanking and was one of the founding members of First Direct, the leading UKtelephone bank and of Egg, the world's largest online direct bank boasting over3.5 million customers. Kieran Anthony Lynch, Chief Financial Officer, age 36 Mr Lynch joined the Company in June 2006 from Aspect Capital, a specialist hedgefund manager where he held the position of Director of Finance. Mr Lynch'sprevious positions include Chief Operating Officer and Company Secretary atSelect Asset Management in Sydney and Group Financial Controller at Egg plc.Previously, Mr Lynch was an audit manager within the Financial Markets Divisionat Arthur Andersen. Tom Casaer, Non-Executive Director and CEO-elect, age 39 Mr Casaer was appointed to the Board in September 2006. Mr Casaer has 15 years'experience in business development and sales and marketing in the IT andcommunications sector, most notably as channel manager for "Software as aService", where he managed hoster relationships in the communications sectorgroup at Microsoft EMEA. Before joining Microsoft in 2000, he held variousmanagement positions at Hilti NV until 1996; and was involved in the Europeanlaunch of Firstmark Communications Inc. in 1998 and the start up of anapplications service provider, Intellimus.com, in 1999. It is the intention of the Board that, following a period of transition, TomCasaer, who is currently a non-executive director of the Company, will becomeCEO of the Enlarged Group. Tom will work alongside Paul Gratton, ExecutiveChairman and acting Chief Executive, who following the period of transitionwhich is expected to be completed by the end of the first quarter of 2007, willrevert to his original position of Executive Chairman. Paul Nicholas Thornton, Senior Non-Executive Director, age 59 Mr Thornton is a management consultant with over 30 years experience. MrThornton held a number of senior positions at PA Consulting during his timethere from 1975 to 1994. In 1994 he founded his own consultancy French Thorntonwhich in 2000 he exited from when the firm was sold to ITNET plc. He wasformerly president of the Management Consultancies Association. Mr Thorntongraduated from Liverpool University in 1967 with a B.Sc (Hons) in mathematicsand in 1969 gained a Certificate of Advanced Study, in Operational Research fromBrunel University. Richard James Armstrong, Non-Executive Director, age 59 Mr Armstrong is currently an associate of Fiske plc, an AIM-listed stockbrokingfirm, where he specialises in floating smaller companies, raising funds for suchcompanies and initiating corporate transactions. He is currently a director ofFortfield Investments plc which is quoted on AIM and also of Crescent TechnologyVentures Plc and BWA Group pc. Corporate governance The Company intends to adopt the Corporate Governance Guidelines for AIMCompanies issued by the Quoted Companies Alliance in July 2005. The Directorsconsider these guidelines to be appropriate for a company of FIT's size. Withthe expected growth of the Enlarged Group, the Directors will undertake a reviewof the Combined Code and the Code of Best Practice published by the London StockExchange and implement those areas deemed to be appropriate for the size andstage of development of the Company. Share and other performance based incentive schemes The Directors consider that it is in the best interests of the Enlarged Group toestablish certain share incentive schemes to incentivise and reward theperformance of employees and executive directors. The Directors accordinglypropose the adoption of an unapproved share option scheme (the "Unapproved ShareOption Scheme") and a long term incentive plan (the "LTIP"). The details of theUnapproved Share Option Scheme and the LTIP are set out in the Circular.Resolutions concerning the Unapproved Share Option Scheme and the LTIP, whichare proposed as ordinary resolutions at the AGM, will, if passed, approve theadoption by the Company of the Unapproved Plan and the LTIP. The Company hasagreed the purchase of 7,500,000 Series 2 Warrants at a price of 2p each fromeach of IC Partners Limited and Cold Investments Limited and has exercised thoseWarrants, the resultant 15,000,000 Existing Shares (equivalent to 3 million NewOrdinary Shares) being held for the benefit of the Company's employee benefittrust. Dealings and trading Application will be made by the Company for the Enlarged Share Capital to beadmitted to AIM following publication of the Circular. It is expected thatRe-Admission will take place and trading in the New Ordinary Shares willcommence on the first dealing day following that on which the Resolutionsrelating to the Proposals are passed at the Annual General Meeting. All the NewOrdinary Shares may be held in either certificated or uncertificated form (i.e.in CREST). Dividends The Directors anticipate that any earnings will, for the forseeable future, beretained by the Company for the development of the business of the EnlargedGroup and will not be distributed to Shareholders as cash or other dividends.The declaration and payment by the Company of dividends will, once the EnlargedGroup has achieved its development objectives, be dependent upon the Company'sresults from operations and other factors deemed to be relevant at that time. Warrant conversions Since the Company's suspension on 16 March 2006, the following Warrants havebeen exercised: Exercise Date Warrant Subscription Existing Shares Series Price Issued13 March 2006 Series 1 12 pence per share 850,0008 July 2006 Series 1 12 pence per share 5,000,0008 July 2006 Series 1 12 pence per share 3,250,00010 August 2006 Series 1 12 pence per share 200,00016 August 2006 Series 1 12 pence per share 4,000,00016 August 2006 Series 1 12 pence per share 750,0006 December 2006 Series 1 12 pence per share 3,850,0008 December 2006 Series 1 12 pence per share 250,0008 December 2006 Series 1 12 pence per share 5,000,0008 December 2006 Series 1 12 pence per share 1,000,00012 December 2006 Series 1 12 pence per share 100,00012 December 2006 Series 2 15 pence per share 15,000,00012 December 2006 Series 1 12 pence per share 1,000,00014 December 2006 Series 1 12 pence per share 28,949,000 Application has been made for the Existing Shares issued pursuant to theconversion of the Warrants to be admitted to trading on AIM. Annual General Meeting An AGM of the Company is to be held at the offices of Morrison & Foerster,CityPoint, One Ropemaker Street, London, EC2Y 9AW at 10 a.m. on 5 January 2007. Further information A copy of the Circular will be available for one month, free of charge, from theregistered office of the Company, MoFo Notices Limited, CityPoint, One RopemakerStreet, London EC2Y 9AW Future Internet Technologies plc Preliminary results for the year to 30 June 2006 Future Internet Technologies plc and its subsidiary (the "Group") announces itspreliminary results for the year ended 30 June 2006 Business review The operating loss for the Group for the year to 30 June 2006 incorporating 4months of trading from Artilium amounted to £2.9 million (2005: £16,000). At 30June 2006 the Group had consolidated net assets of £4.3 million (2005: £0.6million). Total headcount of the Group at year end was 37. On 16 March 2006, trading in FIT's shares was suspended at the Company's requestpending the posting of a circular to shareholders providing further detail oncertain proposed transactions with Advance Global Communications, Inc ("AGC")and Artilium. The Company has been in continual consultation with the AIM teamof the London Stock Exchange concerning a possible extension to the applicationof Rule 41 of the AIM Rules which would otherwise result in the Company'slisting being terminated on 16 September 2006 due to the current suspensionhaving continued for more than a six month period. It has been agreed with theAIM team that the Company's shares will remain suspended pending the publicationof such a circular, which is now envisaged to be on or around 15 December 2006. On 13 October, after extensive discussions with the shareholders of AGC, it wasagreed between the parties that the Company would not proceed to acquire any ofthe share capital of AGC. However, the Company will complete the reversetakeover of Artilium on or around 8 January 2007 upon the approval ofshareholders. The Directors believe that Artilium has established itself as one of the leadingtelecom infrastructure providers in Benelux. Founded in 2000 by experiencedtelecommunication engineers, Artilium has developed a service delivery platformthat enables its telecom customers to manage voice as data and deliverintegrated services over any network. Services such as intelligent routing ofcalls, number portability, pre and post-paid billing and advanced messaging areexamples of the functionality provided by Artilium's platform. Future Internet Technologies plcConsolidated income statementYear ended 30 June 2006 Consolidated Consolidated Note 2006 2005 £'000 £'000 Revenue 612 -Cost of sales (56) - Gross profit 556 - Other operating income - 15Administrative expenses (3,409) (31)Other operating expenses (6) - Operating loss (2,859) (16) Investment revenues 135 25Other losses (698) (15)Finance costs (349) - Loss before tax (3,771) (6) Tax (152) - Loss for the year 2 (3,923) (6) Attributable to:Equity holders of parent (3,159) (6)Minority Interest (764) - (3,923) (6) Consolidated Consolidated Note 2006 2005 pence pence Loss per shareBasic 3 (2.86) (0.03) Diluted 3 (2.86) (0.03) Future Internet Technologies plcConsolidated statement of recognised income and expenseYear ended 30 June 2006 Consolidated Consolidated 2006 2005 £'000 £'000 Exchange differences on translation of foreign operations 2 - Net income recognised directly in equity 2 - Loss for the year (3,923) (6) Total recognised income and expense for the year (3,921) (6) Attributable to:Equity holders of parent (3,158) (6)Minority interest (763) - (3,921) (6) Future Internet Technologies plcConsolidated balance sheet30 June 2006 Consolidated Consolidated 2006 2005 £'000 £'000Non-current assetsGoodwill 2,697 -Intangible assets 837 -Plant and equipment 170 -Deferred tax asset 119 -Investments - 18 3,823 18 Current assetsInventories 118 -Trade and other receivables 1,925 5Cash and cash equivalents 1,911 552 3,954 557 Total assets 7,777 575 Current liabilitiesTrade and other payables 2,849 16Obligations under finance leases 4 -Provisions 425 - 3,278 16 Non-current liabilitiesDeferred tax liabilities 180 - Total liabilities 3,458 16 Future Internet Technologies plcConsolidated balance sheet30 June 2006 Consolidated Consolidated Note 2006 2005 £'000 £'000 EquityShare capital 4 1,769 4,654Share premium account 9,033 2,596Capital redemption reserve 4,493 -Option to acquire minority interest (1,611) -Share warrants reserve 336 -Translation reserve 2 -Retained earnings (9,849) (6,691) Equity attributable to equity holders of the parent 4,173 559 Minority interest 146 - Total equity 4,319 559 Total liabilities and equity 7,777 575 Future Internet Technologies plcConsolidated cash flow statementYear ended 30 June 2006 Consolidated Consolidated Note 2006 2005 £'000 £'000 Net cash used in operating activities 5 (1,732) (23) Investing activitiesInterest received 135 25Sale of investments 21 -Purchases of property, plant and equipment (34) -Purchases of investments (691) -Acquisition of subsidiary (4,370) - Net cash (used in) / from investing activities (4,939) 25 Financing activitiesRepayments of obligations under finance leases (5) -Proceeds on issue of shares 8,046 - Net cash from financing activities 8,041 - Net increase in cash and cash equivalents 1,370 2 Cash and cash equivalents at beginning of year 552 550 Effect of foreign exchange rate changes (11) - Cash and cash equivalents at end of year 1,911 552 Future Internet Technologies plcNotes to the results statementYear ended 30 June 2006 1. Significant accounting policies Basis of accounting The financial statements have been prepared in accordance with InternationalFinancial Reporting Standards (IFRSs) for the first time. Under first timeadoption procedures set out in IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards, the Company is required to establish its IFRSpolicies as at 1 July 2005 and to apply these retrospectively in thedetermination of prior period comparatives from 1 July 2004, the date oftransition. No adjustments affecting the Company's equity, net income and cash flows havebeen identified on transition from UK GAAP to IFRS. Consequently noreconciliation table has been provided. The financial statements have also been prepared in accordance with IFRSsadopted by the European Union and therefore comply with Article 4 of the EU IASRegulation. The financial statements have been prepared on the historical cost basis. Basis of consolidation The consolidated financial statements incorporate the financial statements ofthe Company and the entity controlled by the Company (its subsidiary) made up to30 June each year. Control is achieved where the Company has the power to governthe financial and operating policies of an investee entity so as to obtainbenefits from its activities. The Company acquired its first subsidiary in the year ended 30 June 2006 and asa result the comparative information for the year ended 30 June 2005 is on acompany basis. Minority interests in the net assets of consolidated subsidiariesare identified separately from the Group's equity therein. Minority interestsconsist of the amount of those interests at the date of the original businesscombination (see below) and the minority's share of changes in equity since thedate of the combination. Losses applicable to the minority in excess of theminority's interest in the subsidiary's equity are allocated against theinterests of the Group except to the extent that the minority has a bindingobligation and is able to make an additional investment to cover the losses. The result of the subsidiary acquired during the year is included in theconsolidated income statement from the effective date of acquisition. Where necessary, adjustments are made to the financial statements of thesubsidiary to bring the accounting policies used into line with those used bythe Group. All intra-group transactions, balances, income and expenses are eliminated onconsolidation. 2. Loss for the year Loss for the year has been arrived at after charging / (crediting): Consolidated Consolidated 2006 2005 £'000 £'000 Net foreign exchange gains (11) -Operating lease rentals - land and buildings 47 -Depreciation of plant and equipment 31 -Amortisation of intangibles 60 -Impairment of investment 698 15Profit on sale of investments (14) -Cost of inventories recognised as expense 56 -Staff costs (see note 6) 786 -Employee benefits 14 -Auditors' remuneration for audit services (see below) 30 3 Amounts payable to Deloitte & Touche LLP (2005: Orolus Limited) and theirassociates by the Company and its UK subsidiary undertakings in respect ofnon-audit services were £7,500 (2005: £300). Costs of £131,611 have been recognised during the year in respect of theprofessional costs incurred in connection with an aborted acquisition. 3. Earnings per share The consolidated group has no discontinued operations. The warrants on issue donot have a dilutive effect as the market price of ordinary shares exceeded theexercise price of the warrants during the financial year. As a result, dilutedearnings per share is the same as basic earnings per share. Consolidated Consolidated 2006 2005 £'000 £'000Earnings Earnings for the purposes of basic earnings pershare being net profit attributable to equity holdersof the parent (3,159) (6) Number NumberNumber of sharesWeighted average number of ordinary sharesfor the purposes of basic earnings per share 110,552,747 16,050,006 4. Share capital 2006 2005 £'000 £'000Fully paid ordinary shares:Authorised:1,050,676,947 (2005: 1,050,676,947) ordinaryshares of 1 pence each 10,507 10,507 Issued and fully paid:176,900,006 (2005: 16,050,006) ordinary sharesof 1 pence each 1,769 161 Deferred ordinary shares:Authorised:900,447 (2005: 900,447) deferred ordinaryshares of £4.99 each 4,493 4,493 Issued and fully paid:Nil (2005: 900,447) deferred ordinary sharesof £4.99 each - 4,493 2006 2005 No. '000 £'000 No. '000 £'000Fully paid ordinary shares:Balance at beginning of financial year 16,050 161 16,050 161Shares issued 160,000 1,600 - -Warrant conversion 850 8 - - Issued and fully paid: 176,900 1,769 16,050 161 Fully paid ordinary shares carry one vote per share and carry the rights todividends. 2006 2005 No. '000 £'000 No. '000 £'000Deferred ordinary shares:Balance at beginning of financial year 900 4,493 900 4,493Shares repurchased (900) (4,493) - - Issued and fully paid: - - 900 4,493 Deferred ordinary shares do not carry the right to vote and do not carry therights to dividends. On 22 December 2005 the Company bought back all of its issued deferred sharecapital comprising 900,447 shares with a nominal value of £4.99 each for a totalconsideration of 1 pence. This effect of this transaction has been to reduceissued share capital by £4,493,231 and create a capital redemption reserve ofthe same amount. 5. Notes to the cash flow statement Consolidated Consolidated 2006 2005 £'000 £'000 Loss from continuing operations (3,923) (6) Adjustments for: Investment revenues (135) (25) Impairment of investment 698 15 Tax 152 - Depreciation of property, plant and equipment 31 - Amortisation of intangible assets 60 - Share based payment expense 336 - Gain on disposal of property, plant and equipment (14) - Increase / (decrease) in provisions 425 - (2,370) (16) Operating cash flows before movements inworking capital Increase in inventories (34) - Decrease / (increase) in receivables (1,139) 1 Increase / (decrease) in payables 2,163 (8) Cash generated by operations (1,380) (7) Income taxes paid (352) - Net cash from operating activities 1,732 (23) Cash and cash equivalents (which are presented as a single class of assets onthe face of the balance sheet) comprise cash at bank and other short-term highlyliquid investments with a maturity of three months or less. 6. Events after the balance sheet date On 11 September 2006, the Board agreed the sale, to Flasktent Limited, ofcertain of the Group's intellectual property and physical assets pertaining to apotential consumer offering and the rights related thereto. As a result of the sale of certain assets to Flasktent Limited, the Company willno longer pursue the creation of a consumer branded "Unified CommunicationService". Instead, the Group will focus upon opportunities in the B2B and B2B2Ccommunication sector based on completion of the transactions outlined below. On the same date, Robert Bonnier resigned as Chief Executive and director of FITand left the Company. Paul Gratton, Executive Chairman of FIT, has assumed therole of acting Chief Executive. Pursuant to the transaction, Flasktent Limited acquired certain assets which hadyet to become revenue generating and had a capitalised value of approximately£1.3 million. In consideration for the assets, Flasktent assumed approximately£3.0 million of existing FIT obligations of which £1.2 million were currentlydue at the date of the transaction. FIT may also receive up to £15 million ofdeferred consideration, which is contingent upon a realisation of equity inFlasktent for value within three years of the transaction date. Certainpersonnel also transferred from FIT to Flasktent. FIT agreed to make a furtherpayment in respect of the development costs of Flasktent's proposition, the neteffect to the Group being approximately £0.1 million. Flasktent will assume thefuture commitments relating to the assets thus removing any further obligationsfrom the Company. On 16 March 2006, trading in FIT's shares was suspended at the Company's requestpending the posting of a circular to shareholders providing further detail oncertain proposed transactions with Advance Global Communications, Inc ("AGC")and Artilium. The Company has been in continual consultation with AIMconcerning a possible extension to the application of Rule 41 of the AIM Ruleswhich would otherwise have resulted in the Company's listing being terminated on16 September 2006 due to the current suspension having continued for more than asix month period. It has been agreed with the AIM team that the Company's shareswill remain suspended pending the publication of such a circular, which is nowenvisaged to be on or around 15 December 2006. On 8 December 2006 resolutions were passed at an EGM to reorganise the sharecapital of the Company. The effect of the capital reorganisation is to removeshareholders holding less than 20 shares from the Company's share register. 7. Financial Statements The announcement set out above does not constitute a full financial statement ofthe Group's affairs for the period ended 30 June 2006. The auditors havereported on the full accounts for the period and have accompanied them with anunqualified report. The accounts have yet to be delivered to the Registrar ofCompanies. The annual report and accounts have been posted to shareholders. 8. Further Copies Copies of the annual report and accounts will be available from the Company'sregistered office at MoFo Notices Limited, City Point, One Ropemaker Street,London, EC2Y 9AW. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
ARTA.L