TIDMQTI
RNS Number : 3178F
Qonnectis plc
11 January 2010
QONNECTIS PLC
(AIM: QTI)
SECOND INTERIM RESULTS TO 30 JUNE 2009
GBP395,000 Fundraising Completed, Directorate Change and Change of Accounting
Reference Date
11 January 2010
Qonnectis plc ("the Company"), the data monitoring service provider for
utilities and major commercial users of energy and water, announces its second
interim results for the 6 month period to 30 June 2009.
Key Points for the period
* Sales for the 6 month period to 30 June 2009 of GBP32,245, making a total for
the 12 month period to 30 June 2009 of GBP52,931 (12 months to 30 June 2008:
GBP456,678)
* Operating loss for the 6 month period to 30 June 2009 of GBP285,193, making a
total for the 12 month period to 30 June 2009 of GBP692,893 (12 months to 30
June 2008: loss GBP3,729,641)
* Resignation of Richard Taylor as Chairman on 31 March 2009 and Guy Chant as
Non-Executive Director on 8 June 2009. Harry Offer appointed as Chairman on
31 March 2009
* Product development put on hold pending full review of the market.
Post period-end Highlights
* Fundraising of GBP395,000 through a combination of debt and equity completed in
contemplation of a proposed reverse takeover by water and gas leak detection
specialist, American Leak Detection, Inc. ("ALD")
* Negotiations at an advanced stage
* Appointment of Patrick DeSouza (Chairman of ALD) and Stanford Berenbaum (Chief
Executive Officer of ALD) as Non-Executive Directors
* Accounting reference date changed to 31 December resulting in an 18 month
accounting period ended 31 December 2009
* Merchant John East Securities Limited appointed as nominated adviser and broker
Dealings in the ordinary shares of the Company on AIM will remain suspended
pending publication of an AIM admission document in respect of the proposed
acquisition of American Leak Detection, Inc.
Harry Offer, Chairman, commented:
"After a difficult year, we are delighted to have secured sufficient funds for
our immediate working capital requirements.
We are now working extremely hard to ensure that the proposed acquisition of
American Leak Detection, Inc. is completed and we look forward to working with
Patrick DeSouza and Stanford Berenbaum to build the business of the enlarged
group."
Enquiries:
+------------------------------------------------------------+-----------------+
| Qonnectis plc | 07887 753341 |
| Harry Offer, Chairman | 01223 421714 |
| Barbara Spurrier, Interim Chief Executive | |
| | |
+------------------------------------------------------------+-----------------+
| Merchant John East Securities Limited | 020 7628 2200 |
| David Worlidge/Bidhi Bhoma | |
+------------------------------------------------------------+-----------------+
Chairman's Statement
The 12 months to 30 June 2009 presented significant challenges from both the
market and from our internal organisation. We were sorry to lose the services of
our former Chief Executive through ill health in late 2008. This, along with a
depleted sales team, left the Company struggling to regain the impetus that we
had seen in earlier years. As a result the Company had insufficient funds to
finalise the development of new products or to increase the size of its sales
force.
In January 2009, I, then representing a group of shareholders, was appointed to
the Board first as a Non-Executive Director and then subsequently, at the end of
March 2009, replaced Richard Taylor as Chairman. Guy Chant resigned as
Non-Executive Director in June 2009, having stood in as interim Chief
Executive between October 2008 and March 2009, and Barbara Spurrier was
appointed to the role of interim Chief Executive in March 2009.
With the new team in place we began the difficult challenge of raising new
finance against a falling order book and incomplete product development.
Revenues from Leakfrog, which the Company developed with Thames Water,
continued but did not increase sufficiently, leaving the Company's
finances stretched. The Company generated revenues for the 6 month period to 30
June 2009 of GBP32,245, making a total for the 12 month period to 30 June 2009
of GBP52,931 (12 months to 30 June 2008: GBP456,678). This resulted in an
operating loss for the 6 month period to 30 June 2009 of GBP285,193, making a
total for the 12 month period to 30 June 2009 of GBP692,893 (12 months to 30
June 2008: loss GBP3,729,641). Trading in the Company's shares on AIM was
suspended on 30 July 2009 pending clarification of the Company's financial
position.
Proposed Acquisition
In evaluating potential options, it became clear that the Company would be best
served by combining with another entity and has reached agreement, subject to
contract and shareholder and regulatory approvals for the proposed acquisition
of American Leak Detection, Inc. ("ALD"). The Board also identified and reached
agreement with an experienced sales manager. The new team is enthusiastic about
the future of the business and believe they have a viable plan and momentum to
complete a successful fundraising and the proposed acquisition of ALD.
ALD is a US based operator and franchisor which provides accurate,
non-invasive leak detection services including hidden water, sewer and gas
leaks. Its business was established in 1974 and in addition to a number of
corporate run locations, it has approximately 120 franchisees in the US and in
six other countries including Belgium, Spain,
Australia and Canada. ALD
provides premium solutions for non-invasive water leak detection and repair for
the residential, commercial and municipal markets using proprietary methods and
technology. In the year ended 31 December 2008, ALD generated revenues of
US$6.2 million of which US$3.9 million comprised royalty income from
franchisees.
The Board considers that there are significant opportunities to sell the
Qonnectis smart water metering products into the markets which ALD currently
serves and, likewise, ALD will seek to offer its leak detection services to
water companies in the UK and elsewhere, including to existing Qonnectis
customers.
The Board is now at an advanced stage of discussions with the shareholders of
ALD with respect to its acquisition by the Company. The consideration for the
acquisition will be satisfied entirely by the issue of new ordinary shares in
the capital of the Company and, if completed, will result in a relative
shareholding ratio of 95:5 in favour of the shareholders of ALD, before taking
into account the proceeds of the current fundraising and the proceeds of the
Proposed Placing (as defined below). This transaction, if successful, will
result in a reverse takeover under the AIM Rules and therefore be subject to
shareholder approval. In addition, the enlarged group will aim to undertake a
further, larger fundraising
("Proposed Placing") at the time of the reverse
takeover to expand its UK operations, to maximise franchise and corporate-run
opportunities in the US and to continue the development of Qonnectis'
products with distribution
through ALD channels.
Fundraising
In anticipation of the reverse takeover and in order to provide immediate
working capital for the Company, Merchant John East Securities Limited, as agent
to the Company, has raised GBP395,000 by the issue of GBP295,000 principal of
guaranteed loan notes ("Loan Notes") and the issue of 100,000,000 ordinary
shares of 0.1p each ("Ordinary Shares") at par. The Ordinary Shares have been
subscribed by Bluehone Investors LLP ("Bluehone"), whose holding will represent
18.34 per cent. of the Company's issued capital following admission of the
Ordinary Shares. A further 51,688,080 Ordinary Shares have been issued at the
same price to certain creditors ("Creditors") of the Company in satisfaction of
debts owed. The Company has agreed that if Completion (as defined below) occurs,
Bluehone and the Creditors shall have the right to subscribe for such number of
additional Ordinary Shares ("Placing Subscription Shares"), the number and price
of which shall be calculated so as to result in the average price paid by them
for their initial subscription shares and the Placing Subscription Shares, being
at a discount of twenty five per cent. of the price at which Ordinary Shares are
issued pursuant to the Proposed Placing. The Loan Notes attract an interest rate
of 8 per cent. per annum and are repayable (together with accrued interest) upon
completion of the proposed acquisition of ALD and admission of the enlarged
group's shares to trading on AIM ("Completion"). Holders of Loan Notes have also
been issued with warrants ("Warrants") to subscribe for Ordinary Shares at a 25
per cent. discount to the price at which Ordinary Shares will be issued under
the Proposed Placing. Loan Note holders have agreed to apply the proceeds of the
repayment of Loan Notes upon Completion to exercise the Warrants granted to
them.
If Completion does not occur, the Loan Notes are repayable in two equal tranches
on the first and second anniversaries of the date of issue. Repayment of the
Loan Notes has been guaranteed in full by ALD, in consideration for which, ALD
has been granted security by way of a fixed and floating charge over all of the
Company's assets.Bluehone has also been granted the right but not an obligation
to require ALD to purchase its Ordinary Shares at par should Completion not
occur by 30 April 2010 ("Put Option").
In addition and again, if Completion does not occur by 30 April 2010, the
Company has agreed to issue preferred convertible loan notes ("Preferred Loan
Notes") to ALD in consideration of, among other things, any amounts loaned to
the Company by ALD and any monies paid to any third party by ALD as a result of
the repayment guarantee under the Loan Notes. The Preferred Loan Notes shall
bear interest at 18 per cent. and shall be redeemable at twice the principal
amount (and unpaid interest). The Preferred Loan Notes shall be convertible, at
ALD's option, into Ordinary Shares at 0.1p per share. The Company has also
agreed to permit ALD, at that time, to appoint a majority of the directors on
the Board of the Company.
It is expected that admission of the 151,688,080 new Ordinary Shares will become
effective on 15 January 2010. Following admission, the Company will have
545,296,103 Ordinary Shares in issue. Trading in the Ordinary Shares on AIM
will remain suspended pending publication of an AIM admission document in
respect of the proposed acquisition.
Board changes
In conjunction with ALD guaranteeing repayment of the Loan Notes, Qonnectis is
pleased to announce the appointment of Patrick DeSouza (Chairman of ALD) and
Stanford Berenbaum (Chief Executive Officer of ALD) as Non-Executive Directors
of the Company with immediate effect.
Change of accounting reference date
The Directors have resolved to change the Company's financial year end from 30
June to 31 December. Accordingly, the next accounts to be published will be for
the 18 month accounting period ending 31 December 2009.
Outlook
After a difficult year, we are delighted to have secured sufficient funds for
our immediate working capital requirements.
We are now working extremely hard to ensure that the proposed acquisition of
American Leak Detection, Inc. is completed and we look forward to working with
Patrick DeSouza and Stanford Berenbaum to build the business of the enlarged
group. We hope that we can build a great team and that together we can utilise
the opportunities, both commercial and technical, to fulfil our original
objectives and those of our proposed new partner.
ALD's management is enthusiastic about building its business here in the UK and
it appears that our preparatory work should prove helpful in enabling Qonnectis
to be part of a much larger and more stable enterprise.
Harry Offer
Chairman
11 January 2010
Consolidated interim statement of comprehensive income for the period ended 30
June 2009
+-----------------------------------------+-------+-------------+-------------+-------------+
| | Note | 6 months | 12 months | 12 months |
| | | to 30 June | to 30 June | to 30 June |
| | | 2009 | 2009 | 2008 |
| | | Unaudited | Unaudited | Audited |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | GBP | GBP | GBP |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Revenue | | 32,245 | 52,931 | 456,678 |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Cost of sales | | (26,999) | (36,439) | (220,071) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Gross profit | | 5,246 | 16,493 | 236,607 |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Other income | | 57,373 | 57,373 | 49,514 |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Exceptional item - convertible loan | | - | - | (250,000) |
| funding costs | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Impairment of goodwill | | - | - | (2,920,379) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Administrative expenses | | (347,812) | (766,759) | (845,383) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Operating loss | | (285,193) | (692,893) | (3,729,641) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Finance income | | 6,599 | 8,943 | 6,241 |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Finance cost | | (229) | (679) | (26,198) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Loss for the period before tax | | (278,823) | (684,629) | (3,749,598) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| LOSS FOR THE PERIOD | | (278,823) | (684,629) | (3,749,598) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| TOTAL COMPREHENSIVE LOSS FOR THE PERIOD | | (278,823) | (684,629) | (3,749,598) |
+-----------------------------------------+-------+-------------+-------------+-------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+-------------+
| Loss per share (basic) | 2 | (GBP0.0004) | (GBP0.0013) | (GBP0.0149) |
+-----------------------------------------+-------+-------------+-------------+-------------+
The Company has no other comprehensive income for the period.
The results reflected above relate to continuing operations.
The Company has no recognised gains or losses other than the results for the
period as set out above.
Consolidated interim statement of financial position as at 30 June 2009
+------------------------------------+-------+--------------------+--------------+
| | | 30 June | 30 June |
| | | 2009 | 2008 |
| | | Unaudited | Audited |
+------------------------------------+-------+--------------------+--------------+
| | | GBP | GBP |
+------------------------------------+-------+--------------------+--------------+
| ASSETS | | | |
+------------------------------------+-------+--------------------+--------------+
| Non-current assets | | | |
+------------------------------------+-------+--------------------+--------------+
| Goodwill | | 603,473 | 603,473 |
+------------------------------------+-------+--------------------+--------------+
| Property, plant and equipment | | 20,323 | 4,495 |
+------------------------------------+-------+--------------------+--------------+
| | | 623,796 | 607,968 |
+------------------------------------+-------+--------------------+--------------+
| Current assets | | | |
+------------------------------------+-------+--------------------+--------------+
| Inventories | | 33,823 | 30,137 |
+------------------------------------+-------+--------------------+--------------+
| Trade and other receivables | | 59,882 | 93,327 |
+------------------------------------+-------+--------------------+--------------+
| Cash and cash equivalents | | 20,073 | 697,341 |
+------------------------------------+-------+--------------------+--------------+
| | | 113,778 | 820,805 |
+------------------------------------+-------+--------------------+--------------+
| TOTAL ASSETS | | 737,574 | 1,428,773 |
+------------------------------------+-------+--------------------+--------------+
| | | | |
+------------------------------------+-------+--------------------+--------------+
| EQUITY AND LIABILITIES | | | |
+------------------------------------+-------+--------------------+--------------+
| Equity attributable to holders of | | | |
| the parent | | | |
+------------------------------------+-------+--------------------+--------------+
| Share capital | | 12,020,588 | 12,020,588 |
+------------------------------------+-------+--------------------+--------------+
| Share premium | | 1,600,717 | 1,600,717 |
+------------------------------------+-------+--------------------+--------------+
| Retained loss | | (13,052,880) | (12,368,251) |
+------------------------------------+-------+--------------------+--------------+
| | | 568,425 | 1,253,054 |
+------------------------------------+-------+--------------------+--------------+
| | | | |
+------------------------------------+-------+--------------------+--------------+
| Current liabilities | | | |
+------------------------------------+-------+--------------------+--------------+
| Trade and other payables | | 169,149 | 169,719 |
+------------------------------------+-------+--------------------+--------------+
| Borrowings | | - | 6,000 |
+------------------------------------+-------+--------------------+--------------+
| | | 169,149 | 175,719 |
+------------------------------------+-------+--------------------+--------------+
| | | | |
+------------------------------------+-------+--------------------+--------------+
| TOTAL EQUITY AND LIABILITIES | | 737,574 | 1,428,773 |
+------------------------------------+-------+--------------------+--------------+
The group did not have any non-current liabilities as at the 30 June 2009.
Consolidated interim statement of changes in equity as at 30 June 2009
+--------------------------------+------------+-----------+--------------+-------------+
| | Share | Share | Retained | Total |
| | Capital | Premium | Loss | |
+--------------------------------+------------+-----------+--------------+-------------+
| | GBP | GBP | GBP | GBP |
+--------------------------------+------------+-----------+--------------+-------------+
| | | | | |
+--------------------------------+------------+-----------+--------------+-------------+
| Balance as at 1 July 2007 | 10,270,588 | 1,675,050 | (8,618,653) | 3,326,985 |
+--------------------------------+------------+-----------+--------------+-------------+
| Issue of share capital | 1,750,000 | - | - | 1,750,000 |
+--------------------------------+------------+-----------+--------------+-------------+
| Costs of raising equity | - | (74,333) | - | (74,333) |
+--------------------------------+------------+-----------+--------------+-------------+
| Total comprehensive loss for | - | - | (3,749,598) | (3,749,598) |
| the period | | | | |
+--------------------------------+------------+-----------+--------------+-------------+
| | | | | |
+--------------------------------+------------+-----------+--------------+-------------+
| Balance as at 30 June 2008 | 12,020,588 | 1,600,717 | (12,368,251) | 1,253,054 |
+--------------------------------+------------+-----------+--------------+-------------+
| Total comprehensive loss for | - | - | (684,629) | (684,630) |
| the period | | | | |
+--------------------------------+------------+-----------+--------------+-------------+
| Balance as at 30 June 2009 | 12,020,588 | 1,600,717 | (13,052,880) | 568,424 |
+--------------------------------+------------+-----------+--------------+-------------+
Consolidated interim statement of cash flows for the period to 30 June 2009
+---------------------------------------------+------------+------------+-------------+
| | 6 months | 12 months | 12 months |
| | to 30 June | to 30 June | to 30 June |
| | 2009 | 2009 | 2008 |
| | Unaudited | Unaudited | Audited |
+---------------------------------------------+------------+------------+-------------+
| | GBP | GBP | GBP |
+---------------------------------------------+------------+------------+-------------+
| Cash flows from operating activities | | | |
+---------------------------------------------+------------+------------+-------------+
| Loss from operations | (285,193) | (692,893) | (3,729,641) |
+---------------------------------------------+------------+------------+-------------+
| Adjustments for: | | | |
+---------------------------------------------+------------+------------+-------------+
| Depreciation | 4,060 | 6,697 | 4,352 |
+---------------------------------------------+------------+------------+-------------+
| Impairment losses | - | - | 2,920,379 |
+---------------------------------------------+------------+------------+-------------+
| Funding costs | - | - | 250,000 |
+---------------------------------------------+------------+------------+-------------+
| Operating loss before working capital | (281,133) | (686,196) | (554,910) |
| changes | | | |
+---------------------------------------------+------------+------------+-------------+
| Decrease/(Increase) in inventories | 22,445 | (3,686) | (18,230) |
+---------------------------------------------+------------+------------+-------------+
| (Increase)/Decrease in trade receivables | (5,058) | 33,445 | 1,458 |
+---------------------------------------------+------------+------------+-------------+
| Decrease in trade payables | (20,127) | (570) | (144,568) |
+---------------------------------------------+------------+------------+-------------+
| Net cash used in operating activities | (283,873) | (657,007) | (716,250) |
+---------------------------------------------+------------+------------+-------------+
| | | | |
+---------------------------------------------+------------+------------+-------------+
| Cash flows from investing activities | | | |
+---------------------------------------------+------------+------------+-------------+
| Purchase of property, plant and equipment | (6,956) | (22,526) | (165) |
+---------------------------------------------+------------+------------+-------------+
| Interest received | 6,599 | 8,943 | 6,241 |
+---------------------------------------------+------------+------------+-------------+
| Interest paid | (229) | (679) | (26,198) |
+---------------------------------------------+------------+------------+-------------+
| Net cash used in investing activities | (586) | (14,262) | (20,122) |
+---------------------------------------------+------------+------------+-------------+
| | | | |
+---------------------------------------------+------------+------------+-------------+
| Cash flows from financing activities | | | |
+---------------------------------------------+------------+------------+-------------+
| Proceeds from issue of share capital | - | - | 1,675,667 |
+---------------------------------------------+------------+------------+-------------+
| Exceptional item - convertible loan funding | - | - | (250,000) |
| costs | | | |
+---------------------------------------------+------------+------------+-------------+
| Repayment of borrowings | - | (6,000) | (36,000) |
+---------------------------------------------+------------+------------+-------------+
| Net cash (used in)/generated from financing | - | (6,000) | 1,389,667 |
| activities | | | |
+---------------------------------------------+------------+------------+-------------+
| | | | |
+---------------------------------------------+------------+------------+-------------+
| Net (decrease)/increase in cash and cash | (284,459) | (677,269) | 653,295 |
| equivalents | | | |
+---------------------------------------------+------------+------------+-------------+
| Cash and cash equivalents at the beginning | 304,532 | 697,341 | 44,046 |
| of period | | | |
+---------------------------------------------+------------+------------+-------------+
| Cash and cash equivalents at end of period | 20,073 | 20,073 | 697,341 |
+---------------------------------------------+------------+------------+-------------+
Notes to the unaudited interim financial information for the period to 30 June
2009
1Basis of preparation
The interim consolidated financial statements of Qonnectis plc have been
prepared in accordance with International Financial Reporting Standards,
International Accounting Standards and Interpretations (collectively IFRS). The
interim financial information has also been prepared in accordance with IFRSs
adopted by the European Union and therefore this interim financial information
complies with Article 4 of the EU IAS Regulation. The interim financial
information has been prepared using the accounting policies which will be
applied in the group's statutory financial statements for the 18 month
accounting period ended 31 December 2009.
The consolidated interim financial information for the 12 months ended 30 June
2009 has been prepared in accordance with IAS 34 'Interim Financial Reporting'.
The condensed interim financial information for the 6 month period and the 12
month period to 30 June 2009 are unaudited. In the opinion of the directors, the
condensed interim financial information for the periods present fairly the
financial position and results from operations and cash flows for the period are
in conformity with generally accepted accounting principles consistently
applied. The accounts incorporate comparative figures for the audited financial
period to 30 June 2008.
The financial information contained in these interim results is unaudited and
does not constitute statutory financial statements within the meaning of section
240 of the Companies Act 2006. This interim financial information does not
include all of the disclosures required in full financial statements, and should
be read in conjunction with the consolidated financial statements for the group
for the period ended 30 June 2008. The financial statements for the period ended
30 June 2008 which were presented under IFRS have been delivered to the
Registrar of Companies. The report of the auditors on those financial statements
provided an emphasis of matter paragraph on their opinion relating to going
concern and was not qualified and did not contain a statement under section 498
(2)-(3) of the Companies Act 2006.
2 Loss per share
+---------------------------------------+--------------+--------------+----------------+
| | Six month | 12 month | 12 month |
| | period | period to | period to |
| | to 30 June | 30 June | 30 June |
| | 2009 | 2009 | 2008 |
+---------------------------------------+--------------+--------------+----------------+
| | | GBP | GBP |
+---------------------------------------+--------------+--------------+----------------+
| Basic loss per share | | | |
+---------------------------------------+--------------+--------------+----------------+
| Net loss for the period | (GBP278,823) | (GBP684,629) | (GBP3,749,598) |
+---------------------------------------+--------------+--------------+----------------+
| Weighted average number of ordinary | 688,814,040 | 538,110,694 | 251,073,776 |
| shares | | | |
+---------------------------------------+--------------+--------------+----------------+
| | | | |
+---------------------------------------+--------------+--------------+----------------+
| Loss per share | (GBP0.0004) | (GBP0.0013) | (GBP0.0149) |
+---------------------------------------+--------------+--------------+----------------+
IAS 33 requires presentation of the diluted loss per share amount when a company
could be called upon to issue shares that would decrease net profit or increase
net loss per share. For the group an issue of shares would decrease the net loss
per share, therefore the requirements of IAS 33 are not met and accordingly no
diluted loss per share is presented in these financial statements.
3. Dividends
The Directors do not recommend the payment of a dividend in respect of the six
month period ended 30 June 2009.
4. Availability of this announcement
Copies of this announcement will be available from the Company's website
www.qonnectis.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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