22 April 2008
ParOS plc
("ParOS" or the "Company")
Preliminary Results for the year ended 31 December 2007
Chairman's Statement
I announce the results for ParOS plc or with its subsidiaries (`the Group') for
the year ended 31 December 2007. Parametric Optimization Solutions Limited
(`POSL') which, until recently, was the Group's principal trading subsidiary,
was incorporated in 2002 and based in Imperial College, London. In 2005 POSL
lacked the funding, commercial expertise and management team necessary to grow
and to commercialise its intellectual property and expertise in optimisation,
modelling and control systems.
The acquisition of POSL and the admission of the Company's shares to trading on
AIM in March 2006, together with the appointment of a management team with
knowledge of the industry, personal contacts and considerable experience
provided POSL with a stable platform upon which it could build revenues through
the commercialisation of its intellectual property ("IP").
In November 2006, the board examined ParOS's financial performance as part of a
Group strategy review. The board recognised that the selling cycle was longer
than expected. The board addressed this slower than expected selling cycle by
identifying specific commercial target markets within the new energy sectors.
The board aimed, in addition, to conserve cash by employing people only when
revenue-generating projects were won.
Review of the year
Revenue in the year ended 31 December 2007 amounted to �125,204 (2006: �
60,064). The loss before and after taxation was �4,554,370 (2006: �1,927,727).
Due to the reasons specified below, the board has decided to impair the
goodwill and intangible assets arising from the acquisition of POSL by �378,845
and �3,196,667 respectively.
Throughout 2007 POSL and ParOS Technology EPE ("Paros EPE"), the Company's
trading subsidiaries, pursued cash conservation and commercialisation
strategies. The companies had some success winning projects such as hydrogen
powered bus controllers, a refrigerated delivery van controller, three fuel
cell controllers, a reformed gas controller, multiple unmanned aerial vehicle
controllers and a batch polymerisation controller.
By October 2007 it had become clear to the board that, despite the modest
success of the commercialisation and the conservation of cash strategies, the
Group would need substantial investment if it was to be able to complete its
patenting activities and achieve a break even cash position. The board began a
series of discussions with various potential investors and, at the end of the
year, believed it had secured further investment. However, in February 2008,
discussions with the potential investors terminated. The board was therefore
left with no alternative but to initiate an immediate strategic review of the
Group's business to consider various options which would preserve the Group's
remaining cash resources.
On 11 March 2008, the Group announced that it had entered into a conditional
sale and purchase agreement to sell the entire issued share capital of POSL to
a company owned and controlled by Professor Pistikopoulos, former chief
technology officer of the Company, for an initial consideration of �1. In
addition, seven percent of the gross revenue (including, without limitation,
grants and royalties) generated or received by POSL until 31 December 2022 will
be paid to the Company and in the event of a sale of POSL or its assets
including any patents before 1 April 2018, POSL will pay the Company additional
consideration equal to forty percent of the gross proceeds arising from the
transaction.
At a general meeting held on 28 March 2008 all resolutions were duly passed by
the shareholders, including the approval of the disposal of the entire issued
share capital of POSL. Following the disposal, the directors believe that the
AIM listing, together with the small amount of funds remaining in the Company,
could be attractive to a number of potential acquisition targets and the
directors now seek to acquire another company or business in exchange for the
issue of ordinary shares. Any acquisition by the Company will be put to
shareholders for their approval at the appropriate time.
Investing Strategy
Looking ahead, the main investment criteria for the Company in the short to
medium term are: -
* the engineering sector in the UK, Europe and North America;
* businesses which require little or no funding in excess of the cash
resources available to the Company; and
* businesses whose growth prospects, if achieved, will be earnings enhancing
for shareholders.
Under the AIM Rules the Company's shares will be suspended from trading on AIM
if a suitable acquisition has not been made in accordance with the stated
investment strategy by 28 March 2009. The board will keep shareholders fully
informed of any significant developments in the coming months.
At 31 December 2007 the Group had cash deposits of �272,551 and at the date of
this report it has cash deposits of approximately �90,000. The board is
confident that the Company has sufficient cash resources available to it, to
enable it to continue as a going concern for at least the next twelve months.
P McHugh
Chairman
ParOS plc
Patrick McHugh Tel: +44 (0) 20 3008 8223
John East & Partners Limited (Nominated Adviser)
Simon Clements Tel: +44 (0) 20 7628 2200
Square1 Consulting Limited (Financial PR Adviser)
Mike Feltham Tel: +44 (0) 20 7929 5599
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2007
2007 2006
Note � �
Revenue 125,204 60,064
Cost of Sales - (1,213)
Gross Profit 125,204 58,851
Administrative expenses (1,126,801) (860,297)
Impairment of intangible assets and goodwill (3,575,512) (1,170,735)
Operating loss (4,577,109) (1,972,181)
Finance income 22,739 44,454
Loss on ordinary activities before tax (4,554,370) (1,927,727)
Income tax expense - -
Loss on ordinary activities after taxation (4,554,370) (1,927,727)
Attributable to: -
Equity holders of the parent (4,543,237) (1,917,808)
Minority interest (11,133) (9,919)
(4,554,370) (1,927,727)
Loss per share - basic and diluted 2 0.96p 0.45p
CONSOLIDATED BALANCE SHEET
As at 31 December 2007
2007 2006
Note � �
ASSETS
Non-current assets
Property, plant and equipment 6,190 8,471
Intangible assets - 3,498,746
Goodwill - 378,845
6,190 3,886,062
Current assets
Trade and other receivables 61,376 56,742
Cash and cash equivalents 4 272,551 836,770
333,927 893,512
Total assets 340,117 4,779,574
Equity and Liabilities
Equity attributable to equity holders of the
parent
Share capital 472,950 472,950
Share premium account 1,295,730 1,295,730
Other reserves 448,558 4,024,070
Translation reserve (11,449) (1,252)
Retained losses (1,835,676) (867,951)
370,113 4,923,547
Share capital owned by Employee Benefit Trust (161,250) (261,250)
Minority interest 113 (8,048)
Total equity 208,976 4,654,249
Current liabilities
Trade and other payables 131,141 125,325
Total equity and liabilities 340,117 4,779,574
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2007
2007 2006
Note � �
Cash flows from operating activities
Loss before taxation (4,554,370) (1,927,727)
Adjustments for:
Impairment 3 3,575,512 1,170,735
Depreciation and amortisation 3 306,739 239,046
Finance income received (22,739) (44,454)
Movements in translation reserve (10,197) -
Increase in trade and other receivables (4,634) (18,547)
Increase/(decrease) in trade and other 5,816 (62,687)
payables
Net cash outflow from operating activities (703,873) (643,634)
Cash flows from investing activities
Acquisition of subsidiary, net of cash - (203,802)
acquired
Purchase of property, plant and equipment (2,379) (7,859)
Finance income received 22,739 44,454
Net cash flow from/(used in) investing 20,360 (167,207)
activities
Cash flows from financing activities
Proceeds from the sale of shares held by the 5 100,000 -
Employee Benefit Trust on exercise of share
options
Injection of capital from minority interests 19,294 -
Proceeds from issue of share capital - 1,500
Net cash from financing activities 119,294 1,500
Net decrease in cash and cash equivalents (564,219) (809,341)
Cash and cash equivalents at the beginning of 836,770 1,646,111
the year
Cash and cash equivalents at the end of the 4 272,551 836,770
year
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For year ended 31 December 2007
Share Share Other Translation Retained Total Minority Employee Total
Reserve Earnings Interest
Capital Premium Reserves Benefit Equity
Trust
� � � � � � � � �
Balance 1 255,000 1,476,448 - - (120,878) 1,610,570 - - 1,610,570
January 2006
Changes in
equity for
2006
Exchange - - - (1,252) - (1,252) - - (1,252)
differences
on
translating
foreign
operations
Net income - - - (1,252) - (1,252) - - (1,252)
recognised
directly in
equity
Loss for the - - - - (1,917,808) (1,917,808) (8,048) - (1,925,856)
year
Total - - - (1,252) (1,917,808) (1,919,060) (8,048) - (1,927,108)
recognised
income and
expense for
the year
Issue of 217,950 - 5,194,805 - - 5,412,755 - - 5,412,755
share capital
Share issue - (180,718) - - - (180,718) - - (180,718)
costs
Reserve - - (1,170,735) - 1,170,735 - - - -
transfer
Consolidation - - - - - - - (261,250) (261,250)
of Employee
Benefit Trust
Share Share Other Translation Retained Total Minority Employee Total
Reserve Earnings Interest
Capital Premium Reserves Benefit Equity
Trust
� � � � � � � � �
Balance 31 472,950 1,295,730 4,024,070 (1,252) (867,951) 4,923,547 (8,048) (261,250) 4,654,249
December
2006
carried
forward
Changes in
equity for
2007
Exchange - - - (10,197) - (10,197) - - (10,197)
differences
on
translating
foreign
operations
Net income - - - (10,197) - (10,197) - - (10,197)
recognised
directly in
equity
Loss for - - - - (4,543,237) (4,543,237) (11,133) - (4,554,370)
the year
Total - - - (10,197) (4,543,237) (4,553,434) (11,133) - (4,564,567)
recognised
income and
expense for
the year
Injection - - - - - - 19,294 - 19,294
of capital
from
minority
interests
Reserve - - (3,575,512) - 3,575,512 - - - -
transfer
Options - - - - - - - 100,000 100,000
issued by
Employee
Benefit
Trust
Balance 31 472,950 1,295,730 448,558 (11,449) (1,835,676) 370,113 113 (161,250) 208,976
December
2007
carried
forward
NOTES TO THE FINANCIAL STATEMENTS
For year ended 31 December 2007
1. PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The financial information for the year ended 31 December 2007 has been
extracted from the Company's financial statements to that date which have
received an unqualified auditors' report but have not yet been delivered to the
Registrar of Companies.
The financial information for the year ended 31 December 2006 has been
extracted from the Company\'s financial statements to that date, which have been
delivered to the Registrar of Companies. The auditors opinion on those
financial statements was not qualified but contained an emphasis of matter
paragraph relating to the valuation of the intangible asset.
2. LOSS PER SHARE
The calculation of the basic loss per share is based on the following:
Basic 2007 2006
Loss for the year �4,554,370 �1,927,727
Weighted average number of shares 472,950,195 425,308,920
Loss per share 0.96 pence 0.45 pence
Separate diluted loss per share figures are not disclosed due to the fact that
it would decrease the loss per share.
3. INTANGIBLE FIXED ASSETS
Patents Goodwill Total
� � �
COST
At 1 January 2007 and 31 December 4,531,178 753,845 5,285,023
2007
AMORTISATION
At 1 January 2007 236,697 - 236,697
Charge for the year 302,079 - 302,079
At 31 December 2007 538,776 - 538,776
IMPAIRMENT
At 1 January 2007 795,735 375,000 1,170,735
Charge for the year 3,196,667 378,845 3,575,512
At 31 December 2007 3,992,402 753,845 4,746,247
NET BOOK VALUE
At 31 December 2007 - - -
At 31 December 2006 3,498,746 378,845 3,877,591
COST
At 1 January 2006 - - -
Additions 4,531,178 753,845 5,285,023
31 December 2006 4,531,178 753,845 5,285,023
AMORTISATION
At 1 January 2006 - - -
Charge for the year 236,697 - 236,697
At 31 December 2006 236,697 - 236,697
IMPAIRMENT
At 1 January 2006 - - -
Charge for the year 795,735 375,000 1,170,735
At 31 December 2006 795,735 375,000 1,170,735
NET BOOK VALUE
At 31 December 2006 3,498,746 378,845 3,877,591
At 31 December 2005 - - -
The directors consider that goodwill is impaired and the carrying value of
goodwill at the balance sheet date has been written down to �nil (2006: �
378,845).
On 11 March 2008, the Company announced that it had entered into a conditional
sale and purchase agreement to sell the entire issued share capital of POSL to
a company owned and controlled by Professor Pistikopoulos for an initial
consideration of �1. The patents are owned by POSL. The directors consider that
the carrying value of the patents and the carrying value of goodwill arising on
the acquisition of POSL should be fully impaired.
After the year end the Company decided that it could no longer continue to
provide financial support for its Greek subsidiary company, ParOS EPE.
Subsequently the management of ParOS EPE commenced proceedings to liquidate the
company. The directors of the Company consider that the carrying value of
goodwill arising on the acquisition of ParOS EPE should be fully impaired at 31
December 2007.
4. RECONCILIATION OF CASH AND CASH EQUIVALENTS
2007 2006
� �
At 1 January 836,770 1,646,111
Cash Flow (564,219) (809,341)
At 31 December 272,551 836,770
Cash and cash equivalents are made up of bank accounts which are all available
on demand.
5. EMPLOYEE SHARE OWNERSHIP PLAN (ESOP)
POSL established the ParOS Employee Benefit Trust ("EBT") on 14 February 2006.
The trustee of the EBT is Carey Pensions & Benefits Limited, a trustee company
based in Guernsey. The beneficiaries of the EBT are the employees and former
employees of the Company or any of its subsidiaries. POSL made a loan of �
261,250 to the EBT on 15 February 2006 and the EBT used the loan to acquire
5,225 ordinary shares in POSL at a price of �50 per share on the same date.
During the year the P McHugh exercised his vested share options raising �
100,000 for the EBT. The EBT used this �100,000 to repay part of the loan and
will repay the balance to POSL when it receives sufficient funds on the
exercise of the share options.
The EBT holds 30,102,716 (2006: 48,771,067) shares in the Company all of which
are allocated to employee share option agreements that vested on 15 December
2006 with an exercise price of 0.536p per share. At the reporting date market
value is at least �18,062 (2006: �195,084).
On consolidation the Group deducts the outstanding consideration paid for the
shares of �161,250 (2006: �261,250) in arriving at shareholders' funds. The
reduction to shareholders' funds of �161,250 (2006: reduction of �261,250) and
the market value of the shares held are disclosed.
6. POST BALANCE SHEET EVENTS
ParOS EPE
After the financial year end it became clear that the continued financial
support of ParOS EPE by the Company was no longer in the best interests of the
Group. The management of ParOS EPE is in the process of undertaking a members'
voluntary liquidation. The investment in ParOS EPE has been written off in the
accounts of the Company as at 31 December 2007.
POSL
On 11 March 2008, the Group announced that it had entered into a conditional
sale and purchase agreement to sell the entire issued share capital of POSL to
a company owned and controlled by Professor Pistikopoulos for an initial
consideration of �1. In addition, seven percent of the gross revenue
(including, without limitation, grants and royalties) generated or received by
POSL until 31 December 2022 will be paid to the Company and in the event of the
sale of POSL or its assets including any patents before 1 April 2018, POSL will
pay the Company additional consideration equal to forty percent of the gross
proceeds arising from the transaction. As part of the above transaction it was
agreed that ParOS Plc would waive its loan to POSL of �925,000. As a result of
the above, the investment in POSL has been fully written off in the accounts of
the Company as at 31 December 2007.
The directors consider that it is not possible to quantify the financial effect
of these post balance sheet events.
7. DIVIDENDS
No dividends were paid or are proposed in respect of the year ended 31 December
2007.
8. REPORT AND ACCOUNTS
A copy of the Annual Report and Accounts will be sent to all shareholders
shortly and will be available from the Company's registered office, One
Hammersmith Grove, London W6 0NB and on the Company's website
www.parostech.com.
END
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