Final Results

The Board of Formjet PLC, the AIM listed alternative software vendor, is pleased to announce its final results for the twelve month period ended 31 December 2009.

In the financial year ending 31 December 2009 the shape and structure of the group changed considerably.

Group Structure and Management

• Successful disposal of Panda Software (UK) Ltd in July 2009 for at least £1.2 million
• Andrew Monk joined the Board and took a 22.8% shareholding in the company
• Tony Lee retiring as Finance Director to be replaced by Peter Joy
• Lyndon Chapman to step down as Executive Chairman to Non Executive at AGM on March 4th
  

Trading

• Current trading does not provide a reliable view of the Company’s prospects due to the sale of Panda and also the significant restructuring of its cost base
• Continued interest in Ability’s range from major IT distributors, retailers and hardware manufacturers

Acquisitions

• Major acquisition that the company was focussed on was dropped after concerns and to prevent unnecessary payment of expenses if full due diligence had started
• On-going examination of a number of other  potential acquisitions which the board believes will be successfully delivered in 2010

For further information, please contact
Formjet plc
Andrew Monk, CEO  +44 (0) 12 9384 8860 or 07973 224 283

Shore Capital and Corporate Limited
Andrew Raca   +44 (0) 20 7408 4090
Edward Mansfield

Chairman's Statement

Introduction
In the financial year ending 31 December 2009 the shape and structure of the group changed considerably.

These changes cover virtually every aspect of the group’s activities including its product ranges through to subsidiary management and the PLC board.
 
The successful disposal of Panda Software (UK) Ltd in July 2009 was initiated by Panda Security International’s desire to take control of its operations in the major IT markets and I am pleased that we achieved a price of at least £1,200,000, given that our rights to the product range were due to terminate in December 2010.

The Panda subsidiary was the Company’s sole subsidiary at the time of our listing in 2004 and continued to play a major and important part of the group’s turnover. The acquisition in late 2004 of the sales rights to the Ability Software range was originally sought to lessen the dependence on Panda and provide an ongoing business strategy.

The management still retain a strong belief that Ability will provide levels of turnover and profitability in the future but the timings are such that the board believes that it would be unwise to rely on Ability as the principle source of revenue.

It was apparent that in order to achieve significant growth in the short term an ambitious acquisition strategy was necessary together with a management team that could inspire investor confidence. To this end Mr Andrew Monk was invited to join the company and his appointment on 8 July 2009 included his taking a 22.8% shareholding in the company.

Trading
Current trading does not provide a reliable view of the Company’s prospects due to the sale of Panda and also the significant restructuring of its cost base. The management continue to be pleased with the levels of interest from major IT distributors, retailers and hardware manufacturers in the Ability range as an alternative to the market leading brands. The sales patterns are, however, not sufficiently developed to provide reliable forecasting, comprising as they do some very large potential orders that may or may not materialise.

Because of the changing direction of the business a forward view of accounting policies has resulted in a number of exceptional write downs which are considered prudent in current circumstances and have little cash impact.

Board Changes
The Formjet board structure has altered during the year and reflects the changing size and direction of the business. In 2009 Mr David Hennell and Mr Frank Lewis left the board with David now heading up the Ability subsidiary as Managing Director. I would like to thank Frank and David for their contribution and also extend that to Mr Tony Lee who left the company at the end of January. Mr Peter Joy, whom we welcome to the company, has replaced Tony Lee as Finance Director.

Acquisitions
The company is looking carefully at a number of potential acquisitions, some of which are an extension of the current business model and others outside of it but utilising the management skills base. I have previously commented on the importance of our acquisition strategy and the board believes that this will be successfully delivered in 2010.

Outlook
A number of important changes are planned for early 2010 to reflect the changing direction of the group; these include a name change to Third Quad Capital Plc conditional upon shareholder approval.

Further changes and strengthening of the board will be implemented as the group’s strategy evolves during the course of the year. I intend immediately after the AGM on the 4 March 2010 to step down as your Executive Chairman. I have however accepted the offer of the board to continue as non-Executive Chairman.

In my previous statement I commented on the need for a significant shift in scale and direction for the group to justify its AIM listing, and I now believe that we are close to delivering that change.

The Company has changed considerably during the last twelve months and this has largely impacted on the Company’s staff and management who I thank for their ongoing commitment through some difficult situations. I would also like to thank the Company’s advisers and shareholders for their continued support.

Chief Executive Officer Statement

2009 has been a year of significant change for your company. In June the Panda franchise was sold back to Panda Security, S.L. for £1.2m and in July I acquired a 22.8% stake in the company. I started work in September as the new CEO and since then we have been working to reposition the company for the future.

Because of these changes one should treat headline numbers with caution as they are not necessarily a reflection of the performance of your company or of the future performance. 2009 has been a difficult year economically and the ASI Ability range of products have yet to reach a level of maturity that can withstand this environment. Costs were taken out in the first half and further costs have been taken out since my arrival.  Achieving profitability is our goal. Costs must be below revenue and it is our duty to ensure this is the case. We can then look for ways to maximize profitability. Of course this can be achieved either by reducing costs or increasing revenue and having already done the former we are now focussed on the latter.

We have placed a greater emphasis on cash and cash management and I am pleased to say that this has been successful and although we will have some debt until our next instalment of the Panda payment in July, it is quite manageable. We have also put our head office up for sale, although no guarantee of success can be had in this market.

During the year ASI Ability extended the worldwide marketing rights of its office product until 2018. The office software market is changing rapidly and this may open interesting opportunities although not without risk. Currently the market is dominated by Microsoft but this is changing with Open Office and Google Office and this is making people consider alternatives to Microsoft, and we are an attractive one. The way office software is sold is also changing and it is now becoming the norm to be sold direct or as a trial period directly loaded onto the hardware. This also offers opportunities for us as we are happy to sell to retailers and also we are happy to be loaded directly onto hardware at a price that is attractive to the hardware vendors and our product is ideally suited to the rapidly growing Netbook and Smartbook market.

We already have one “licence and royalty” deal with a North American software company and we continue to look for further “licence and royalty” deals.

Our BeAnywhere remote access solution is a very exciting product; adoption of remote access tools has been slow for all providers but we are the lowest cost provider. However as Netbooks and mobile broadband grow, the ability to have remote access to your work or home computer should flourish with SMEs who are regularly outside the work place or on the move.

We also continue to have a successful relationship with Panda since selling the franchise back to them and we continue to act as a specialist reseller for them with our customer base.

As previously announced we considered the strategic options for our loan to the Benelux operation and as we concluded that we are unlikely to recover it we have written it off. We have also taken a very conservative approach towards accounting and have made a series of general provisions. We have also taken an impairment charge on the subsidiary South Coast Distributions Limited.

Going forward it is the group’s intention to make acquisitions as given the costs associated with a listing, the existing operations are too small as a standalone listed company. As a signal of the repositioning of the company, we are proposing to change the name of the company at the Annual General Meeting to Third Quad Capital Plc.

Making acquisitions is not as easy as it sounds and inherently brings risk. It is ensuring the risk is minimised that is vital. We will not make acquisitions for acquisitions’ sake as shareholder value rather than size is our objective. Potential acquisitions should be fundamentally good businesses where we can add value to improve value. We will look to bring good people with any acquisition and to invest and grow the business by being part of our group.

One of the key attractions of any deal will be strong cash flow. Ideally we wish to get the company to the stage when it can have enough internal cash generation that it can make acquisitions without the need to raise equity which is dilutive, although this will take quite a long time. We do believe that over the next few years, due to the problems in the UK economy and the financial crisis, that there will be plenty of ideal companies that can be acquired at attractive prices.

Unfortunately we had been focussed and proceeding with a potential acquisition for the last few months but on closer due diligence serious issues became clear and so we have stepped away as although the target was very attractive it would have been wrong to do anything on the wrong terms. Little money has been expended in advisers’ fees and so the cost of stepping back is time rather than money.

Our Finance Director Tony Lee left the company on 31 January 2010 and I would like to thank him for his efforts and working closely with me in the last five months to reposition the company and focus on cash flow. I am delighted that Peter Joy agreed to replace Tony and he joined the Board on 1 February 2010. Peter is ideally suited for working on acquisitions having spent the last 20 years as the Finance Director of Astaire & Partners Limited in the City.

Finally as shareholders you should be aware that although we are listed on AIM, the cost of being an AIM quoted company compared to a fully listed company is no longer that different. AIM is no longer a low cost alternative but it does still have much more flexibility and so is currently the right market for your company to be listed on.

Current Trading
As mentioned earlier we had hoped to be proceeding with a major acquisition but this has not been forthcoming but we believe it is better to say “No” if things are not quite right than “Yes” and regret it afterwards.

With ASI Ability it is too early in the financial year to comment on progress as orders are likely to be lumpy. We do have some promising enquiries which give us optimism but they do have to be converted into physical orders.

Andrew Monk
Chief Executive Officer
4 February 2010

GROUP INCOME STATEMENT

For The Year Ended 31 December 2009

	2009	2008
	£	£
REVENUE
Continuing Operations	868,733	3,592,144
Discontinued Operations	954,461	-
	1,823,194	3,592,144
Cost of sales	(702,669) _________	(1,652,428) _________
GROSS PROFIT	1,120,525	1,939,716
Administrative expenses	(3,114,859)	(2,791,377)
Exchange gain on sales	-	39,605
	___________	________
OPERATING PROFIT / (LOSS)	(1,994,334)	(812,056)
Continuing Operations	(2,115,715)	(812,056)
Discontinued Operations	121,381 ___________	- ________
	(1,994,334)	(812,056)
Analysed as:
Operating loss before exceptional items	(714,334)	(292,457)
Exceptional items	(1,280,000) ___________	(519,599) _________
Operating loss	(1,994,334)	(812,056)
Profit on disposal of Panda Software (UK) Ltd	538,075	-
Finance income	813	6,514
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION	(1,491,462)	(845,055)
Tax on loss on ordinary activities	-	-
	_________	________
LOSS FOR THE FINANCIAL YEAR AFTER TAXATION	(1,491,462) __________	(845,055) ________
Earnings per share
Basic and diluted earnings per share from continuing operations	(0.50p)	(0.47p)
Basic and diluted earnings per share from discontinued operations	(0.04p)	-

 

GROUP BALANCE SHEET

For The Year Ended 31 December 2009

	2009	2008
	£	£
ASSETS
Non-current assets
Goodwill	50,000	562,207
Intangible assets	-	446,308
Investments held to maturity	-	208,085
Property, plant and equipment	870,342 _______	925,062 ________
Total non-current assets	920,342 _______	2,141,662 ________
Current assets
Inventories	27,285	273,408
Trade and other receivables	875,881	1,250,528
Cash and cash equivalents	23,950	298,345
Total current assets	927,116	1,822,281
	_________	________
Total assets	1,847,458 _________	3,963,943 ________
EQUITY AND LIABILITIES
Capital and reserves attributable to equity holders
Share capital	700,306	500,306
Share premium account	3,945,623	3,901,973
Retained earnings	(3,441,465)	(1,950,003)
	_________	________
Total equity	1,204,464	2,452,276
Non-current liabilities
Borrowings	253,081	314,536
Current liabilities
Trade and other payables	258,097	1,156,042
Borrowings	131,816	41,089
	389,913	1,197,131
Total liabilities	642,994	1,511,667
	________	________
Total equity and liabilities	1,847,458 ________	3,963,943 ________

GROUP CASH FLOW STATEMENT

For The Year Ended 31 December 2009

	2009	2008
	£	£
Cash flows from operating activities
Operating loss	(1,986,259)	(812,056)
Depreciation of property, plant and equipment	38,622	66,924
Amortisation	70,550	143,850
Intangible assets impairment charge	375,758	-
Goodwill impairment charge	164,254	-
Impairment of assets held to maturity	397,405	-
Changes in working capital:
Inventories	213,082	(67,319)
Trade and other receivables	(7,615)	179,588
Trade and other payables	(596,653) _________	65,249 _______
Cash flows used in operating activities	(1,330,856) _________	(423,764) _______
Cash flows from investing activities
Investments held to maturity	(189,320)	(208,085)
Proceeds from disposal of subsidiaries, net of cash transferred	1,011,947	-
Purchases of property, plant and equipment	(10,114)	(18,922)
Purchases of intangible fixed assets	-	(260,823)
Interest received	813 ________	6,514 _________
Net cash flows used in investing activities	813,326 _______	(481,316) ________
Cash flows from financing activities
Proceeds from issue of ordinary shares	250,000	902,846
Costs of issuing shares	(6,350)	(79,140)
(Decrease) / increase in borrowings	(53,055)	(185,663)
Interest paid	(36,016) _______	(39,513) ________
Net cash flows from financing activities	154,579 ______	598,530 _______
Net (decrease) in cash, cash equivalents	(362,951)	(306,550)
Cash, cash equivalents at beginning of year	298,345 ________	604,895 ________
Cash, cash equivalents at end of year	(64,606) _______	298,345 _______

 

EARNINGS PER SHARE

The basic earnings per share is calculated by dividing the loss after taxation by the weighted average number of shares in issue.

	2009 number	2008 number
The weighted average number of shares were: Basic weighted average number of shares	298,636,296	180,153,145

 ACCOUNTS

 The Company will post the Annual Report and Accounts for the year ended 31 December 2009 to shareholders during the course of February. The Accounts will also be made available on the Company's website in due course. Copies of the Annual Report and Accounts will be available for collection from the Company's Trading Office at the address below:

Innovation House
Windsor Place
Faraday Road
Crawley
West Sussex
RH10 9TF