Annual Report and Accounts for the 18 months ended 31 December 2007 Mobile Tornado Group plc Company registration number: 5136300 Contents Chairman‟s report Directors‟ report Report of the independent auditor Consolidated profit and loss account Consolidated statement of total recognised gains and losses Balance sheets Consolidated cash flow statement Accounting policies Notes to the financial statements Notice of Annual General Meeting Corporate information Page 2 5 11 13 14 15 16 17 20 31 34 Page 1 Chairman’s report Introduction Mobile Tornado, one of the leading providers of convergent, presence-based instant communications announces its results for the eighteen month period to 31 December 2007. Financial Results Turnover in the eighteen month period to 31 December 2007 amounted to £825k (twelve months to 30 June 2006: £289k). Operating losses increased to £4,773k (2006 restated: £3,413k). After net interest receivable of £75k (2006: net interest payable - £469k) the loss on ordinary activities before taxation was £4,698k (2006 restated: £3,882k). Net cash outflow from operating activities increased in the period to £4,498k (2006: £1,649k). The Group consolidated balance sheet shows a net deficit at 31 December 2007 of £2,071k compared to a net deficit of £1,622k at 30 June 2006. Cash at bank was £1,884k at 31 December 2007 compared to £192k at 31 June 2006. The accounts have been prepared in accordance with UK Generally Accepted Accounting Practice. The Board continues to consider the implications and timetable for implementing International Financial Reporting Standards (IFRS). As an AIM listed Group the Board recognises that IFRS will apply to the Group‟s next accounting period ending 31 December 2008. Review of operations As I highlighted in my last statement, we have taken a very close look at the way in which we deliver our product into the market. Whilst we have had some success with selling directly to mobile operators, we have also been frustrated by the long lead times that this entails. For this reason we have invested heavily in the development of a managed service proposition in conjunction with InTechnology plc, our exclusive UK partner and major shareholder, which allows our mobile applications to be sold directly to enterprises worldwide. The rationale for this is very clear. We are confident that enterprises would use a PTT (Push to Talk) managed service if it was available. This has been borne out in recent months through trials of the managed PTT service with a number of UK enterprises operating in sectors such as transport and logistics, security and construction. Following the success of these trials, InTechnology plc announced the commercial launch of these services on 27 March 2008 and I am pleased to report that this has already generated significant interest and sales activity. Having successfully launched the managed service platform in the UK we strongly believe that the managed service model is one that enterprises throughout the world will embrace. It is our intention to extend this service throughout Europe. We have an existing channel partner in Germany and are in the process of putting in place similar arrangements in other key European countries. We are also in discussions with a major US telecommunications company to launch a managed service in the US in the second half of the current year. Notwithstanding the above, a number of deals were concluded during the second half of the year with commercial partners secured in a number of new territories. We signed a partnership agreement with Technovoz Limited in Argentina which will lead to the rollout of PTT services to enterprises and mobile operators in that market. Further discussions are being held to extend this relationship into other South American countries including Brazil and Mexico. A combination of rapidly developing regional economies with largely untapped customer bases in both corporate and consumer sectors creates a unique opportunity for our products in that region. Further deals were announced with Partner Communications in Israel, Radiomovel Telcomunicacoes in Portugal and Ericsson Hong Kong. This resulted in sales of £538k in the second half, which is a record for the Company. Page 2 Chairman’s report Current trading and future prospects As I have detailed above, I believe the future success of the Company will be determined by our ability to deliver our applications directly into the hands of Enterprises. Enterprise mobility is transforming the way that business is done. The spend across mobile managed services is expected to double by 2009, growing at a cumulative average growth rate of 25% from $2.1bn in 2006 to $4.1bn in 2009 (Gartner 2007). Mobile technology now has the ability to extend core IT processes into the field. It is this trend which has driven the partnership we announced on 21st February with Intermec, a major US manufacturer of handheld computers. The Intermec deal is an exclusive pan-EMEA partnership to provide PTT services on Intermec‟s rugged CN3 handheld computers. For enterprises, the availability of low cost cellular based instant communications dramatically enhances the productivity of every mobile worker. It allows workers to communicate with a supervisor and to resolve issues through immediate dialogue with their head office, resulting in a major reduction in customer service costs. By combining voice communication and data management in one handheld device, users avoid the expense of carrying a separate PDA for data as well as a mobile phone. Additionally, by using the global GSM mobile phone network instead of a local RF transmitter, a device with PTT will have coverage virtually everywhere. At the same time, costly mobile phone tariffs are avoided as the service is web hosted and there is just one small monthly charge per device. As a result of this partnership, we have already entered discussions with many large organisations in the transportation, logistics and field services sectors and expect over the coming months to announce some significant deals. The investment in our core IPRS technology platform continued during the period and I‟m pleased to say that having launched Version 3 in January 2008, we have largely completed the heavy investment phase of the Company‟s development. The platform that has been created is a significant asset which sits at the heart of the Company‟s future strategy. It is our intention to develop and launch many applications from this platform, with Push to Talk being the first of the „Push to Xperience‟ suite of applications. The next application to launch commercially may well be „Push to Video‟. This was showcased at the CTIA show in April 2007 and through our partnership with Nortel Networks in the United States, entered initial trials with two „tier one‟ (greater than 2 million subscribers) operators towards the end of last year. These trials have progressed well and I can confirm that we will be proceeding to a full market trial with one of the operators this year. Assuming that this is successful we could be looking at commercial deployment in early 2009. The Company raised a further £2.3million in October 2007, through the re-issue of the 12,251,333 shares previously held in treasury, and separately, a new issue of £1.5million cumulative redeemable preference shares. InTechnology plc showed its continued support and confidence in the Group‟s plans by subscribing for the majority of the treasury shares, thereby taking their shareholding to 49.9% and taking up the full issue of preference shares. The Group continues to incur losses on a monthly basis but the cost base is in the process of being reduced to a level commensurate with the Group‟s current strategy and business model. This will facilitate renewed focus on a breakeven position which will now be driven by the sale of licenses to our emerging network of managed partners around the world. Page 3 Chairman’s report I would like to thank our employees for their contribution to the Group‟s development. The technical platform that sits at the heart of the Group is the result of many man years of skilled engineering. I believe we are uniquely placed to deliver mobile applications which will transform enterprise communications. Our team has been tasked with significantly increasing our customer base this year, and I am confident they will be successful. Peter Wilkinson Non- Executive Chairman 28 March 2008 Page 4 Directors’ report The Directors present their annual report and audited financial statements of the Company and the Group for the eighteen month period ended 31 December 2007. Principal activities Mobile Tornado is a provider of next generation instant messaging solutions which serve the market of mobile data services in the mobile communication industry. These services include a Group of services generically termed „Push to x' services, of which „Push to Talk‟ is the most commonly known. Business review The information that fulfils the requirements of the Business Review can be found in the Chairman‟s Report on pages 2 to 4. Results and dividends The Directors are unable to recommend the payment of a dividend in respect of the period ended 31 December 2007 (2006: £nil). The Company currently intends to reinvest future earnings to finance the growth of the business. The loss sustained for the eighteen month financial period of £4,716k (twelve months to 30 June 2006 restated: £3,882k) will be deducted from reserves. Key performance indicators The board recognises the importance of setting and monitoring key performance indicators (KPI) across the Group. Maintaining the services of members of the research and development team during the year was seen as key and a KPI concerning staff turnover of this function was set. Performance levels as measured by this indicator were high with a staff turnover of only 5% for the eighteen month financial period (twelve months to 30 June 2006:5%). This was as expected by the Directors. Going forward, the Group‟s KPI will be that of number of licenses sold. Share Issues On 23 October 2006 the Company issued 80,000,000 ordinary shares at a price of 5p each in respect of a subscription for shares by InTechnology Plc. On 26 October 2007 the Company re-issued the 12,251,333 ordinary shares held in Treasury at a price of 7p each. 12,200,000 shares were placed with InTechnology Plc and 51,333 with Peter Wilkinson. On 26 October 2007, InTechnology Plc subscribed for 18,750,000 non-voting preference shares of 8p each. The non-voting preference shares carry a cumulative annual coupon of 10 per cent and may be redeemed at the subscription price (together with any accrued but unpaid coupon). If the non-voting preference shares are not redeemed prior to 31 December 2009 or a third party acquires 75% or more of the issued ordinary share capital of the Company, each non-voting preference share will automatically convert into an ordinary share. The non-voting preference shares will not be admitted to trading on AIM. International Financial Reporting Standards (IFRS) The Board recognises that IFRS is expected to apply to the Group from the first accounting period commencing after 1 January 2007 as an AIM listed Company. The board also recognises that the first set of accounts of the Group that will be prepared under IFRS are those for the period 1 January 2008 to 31 December 2008 and that this will require the Group to develop a corporate reporting structure and policies to meet this requirement. Page 5 Directors’ report Charitable and political donations The Group made no charitable or political contributions during the year (2006: £nil). Directors The present Directors are detailed below. Peter Robert Wilkinson (53) was appointed Non-Executive Chairman on 24 November 2006. Peter is currently Chief Executive of InTechnology plc. Peter was formerly Chairman of Sports Internet Group plc which was sold to BSkyB plc for £301 million in May 2000. He also invented the free ISP model Freeserve, the internet access service which was launched by the Dixons Group plc. Jeremy Mark Fenn (44) was appointed as Chief Financial Officer and acting Chief Executive on 24 November 2006. Jeremy is a qualified chartered accountant and was formerly Chief Executive of Sports Internet Group plc. Following the sale of that business he remained as a Director of Skysports.com until December 2003. Prior to this he was Managing Director of Leeds United Football Club from 1996 to 1999. He is currently a non-Executive Director of Yoomedia plc and a Director of Pannal plc. David Parry (57) was appointed as VP Worldwide Sales on 24 November 2006. David brings significant strategic management and commercial leadership to Mobile Tornado. He has a demonstrable record of achievement growing sales in multi-national technology, manufacturing and distribution enterprises and for the past 6 years has worked with InTechnology plc, leading sales development in the Managed Services and IT Security divisions. Eyal Fishler (30) was appointed as Chief Technology Officer on 24 November 2006. Eyal was the original developer of the Mobile Tornado technology having previously served in a classified communications unit of the Israel Defence Force. Before working for Mobile Tornado, he was involved in developing several innovative technologies, including a three dimensional virtual reality device and a biometrics speech recognition system. Richard Mark James (47) was appointed as Director and Company Secretary on 24 November 2006. Richard qualified as a solicitor with Allen & Overy in 1986 and was a Partner at Pinsent Curtis in 1991 before moving to Hammond Suddards as a Partner in 1996. Richard is also a Director and Company Secretary of InTechnology plc. John Paul Swingewood (52) stood down as Executive Chairman of Mobile Tornado on 24 November 2006 to become a Non-Executive Director. John has held senior Director positions with BSkyB plc and BT plc and is currently deputy chairman of Yoomedia plc and a Director of Pannal plc. Mark Hughes resigned as Finance Director and Company Secretary on 23 October 2006. Christopher Akers resigned as Non Executive Director on 24 November 2006. Page 6 Directors’ report Directors and their families have the following beneficial interests in the ordinary share capital of the Company: * or later date of appointment There were no changes in Directors‟ interests between 1 January 2008 and 28 March 2008. Third party indemnity insurance is in place for the five directors above. Details of related party transactions involving Directors of the Company are given in note 22 to the financial statements. Substantial shareholdings At 31 December 2007, InTechnology plc held 92,200,000 shares in the Company representing 49.9% of the issued ordinary share capital. There are no other shareholders, other than the Directors detailed above, who hold more than 3% of the Company‟s issued share capital. Corporate governance The Directors are committed to a high standard of corporate governance throughout the Group. Audit Committee The Audit Committee is chaired by Peter Wilkinson and its other member is the other non- Executive Director, John Swingewood. Meetings are also attended, by invitation, by the Executive Directors. This committee normally meets twice during the financial year, around the time of the preparation of the Group‟s interim and final results. The committee assists the board in ensuring that appropriate accounting policies, internal financial controls and compliance procedures are in place. Internal control The Directors acknowledge their responsibility for the Group‟s systems of internal control. The Group maintains systems of internal controls, including suitable monitoring procedures, in order to provide reasonable, but not absolute, assurance of the maintenance of proper accounting records and the consequent reliability of the financial information used within the business to identify and deal with any problems on a timely basis. The monitoring and control procedures include the specification of defined lines of responsibility and authorisation limits, the delegation of authority, the identification of risks and the continual process of the preparation of, and reporting against, annual budgets, forecasts and strategic plans. Principal risks and uncertainties The management of the business and the nature of the Group‟s strategy are subject to a number of risks. The Directors have set out below the principle risks facing the business. The Directors are of the opinion that a thorough risk management process is adopted which involves the Page 7 *number%number%Peter Wilkinson (appointed 24 November 2006)24,587,725 13.324,536,39213.3John Swingewood7,805,511 4.27,805,5114.2Jeremy Fenn (appointed 24 November 2006)7,670,396 4.27,670,3964.2Eyal Fishler (appointed 24 November 2006)9,119,259 4.99,119,2595.0Richard James (appointed 24 November 2006)2,959,870 1.62,959,8701.631 December 200730 June 2006 Directors’ report formal review of all the risks identified below. Where possible, processes are in place to monitor and mitigate such risks. Product obsolescence Due to the nature of the market in which the Group operates, products are subject to technological advances and as a result, obsolescence. The Directors are committed to the research and development strategy in place, and are confident that the Group is able to react effectively to the developments within the market. Competition The market in which the Group operates is highly competitive. As a result there is a risk of eroding margins and of being unable to meet customer‟s expectations. Policies of constant price monitoring and ongoing market research are in place to mitigate such risks. Financial risk management The Group‟s financial instruments comprise, principally, cash and short term deposits, and various items, such as trade debtors and trade creditors, arising directly from its operations. The main purpose of these financial instruments is to raise finance for the Group‟s operations. The main risks arising from the Group‟s financial instruments are currency risk, interest risk and liquidity risk. The board‟s policies for managing these risks are summarised as follows: Currency risk – the Group has no borrowings in foreign currency, and foreign currency liabilities are matched wherever possible by corresponding foreign currency assets. Foreign currency bank accounts are utilised where appropriate. No foreign currency transactions of a speculative nature are undertaken. Interest risk – The Group is exposed to interest rate risk as it invests surplus cash in floating rate deposit accounts. These funds are invested with the objective of maintaining a balance between accessibility of funds and competitive rates of return. Liquidity risk – the Group seeks to ensure sufficient liquidity is available to meet its foreseeable needs. The board reviews cash flow projections and the headroom position in respect of its cash balances and banking facilities to ensure the Group is adequately funded. Going concern After reviewing profit and cashflow forecasts for the proceeding twelve months, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Directors continue to adopt the going concern basis in preparing the financial statements. Employees The Group places considerable value on the involvement of its employees and has continued its practice of keeping them informed of matters affecting them as employees and the various factors affecting the performance of the Group. The Directors recognise that continued and sustained improvement in the performance of the Group depends on its ability to attract, motivate and retain employees of the highest calibre. Furthermore, the Directors believe that the Group‟s ability to sustain a competitive advantage over the long term depends in a large part on ensuring that all employees contribute to the maximum of their potential. The Group is committed to improving the performance of all employees through development and training. The Group is an equal opportunity employer. The Group‟s policies seek to promote an environment free from discrimination, harassment and victimisation and to ensure that no Page 8 Directors’ report employee or applicant is treated less favourably on the grounds of gender, marital status, age, race, colour, nationality or national origin, disability or sexual orientation or is disadvantaged by conditions or requirements, which cannot objectively be justified. Entry into, and progression within the Group, is solely determined on the basis of work criteria and individual merit. The Group continues to give full and fair consideration to applications for employment made by disabled persons, having regard to their respective aptitudes and abilities. The policy includes, where practicable, the continued employment of those who may become disabled during their employment and the provision of training and career development and promotion, where appropriate. Share schemes Share ownership is at the heart of the Group‟s remuneration philosophy and the Directors believe that the key to the Group‟s future success lies in a motivated workforce holding a stake in the Company. Details of share options granted are set out in note 14 to the financial statements. Pension costs The Group does not operate a pension scheme but makes contributions to the personal pension schemes of some of its employees. These contributions are charged against profits. Research and development The Group continues to undertake research and development of new products with the objective of increasing future profitability. The cost to the Group is charged to the profit and loss account as incurred. Policy and practice on payment of creditors It is the Group‟s policy to agree terms and conditions for its business transactions with its suppliers. The Group seeks to abide by the payment terms agreed with suppliers whenever it is satisfied that the supplier has provided the goods or services in accordance with the agreed terms and conditions. In the period ended 31 December 2007 average creditor days for the Group and Company were 99 days (2006: 182 days) and 83 days (2006: 313 days) respectively. Environment The Group recognises the importance of environmental responsibility. The nature of its activities has a minimal effect on the environment but where they do, the Group acts responsibly and is aware of its obligations at all times. Statement of Directors’ responsibilities The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare financial statements in accordance with United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The financial statements are required by law to give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing these financial statements, the Directors are required to: - - - select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; Page 9 Directors’ report - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. In so far as the Directors are aware: - - there is no relevant audit information of which the Company‟s auditors are unaware; and the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of the that information. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company‟s website. Legislation in the United Kingdom governing the preparation of financial statements may differ from legislation in other jurisdictions. Annual General Meeting The next AGM of the Company will be held on 1 May 2008. Details of the business to be proposed at the AGM are contained within the Notice of Meeting, which is set out on pages 31 to 33. Independent auditor Grant Thornton UK LLP have indicated their willingness to continue in office and a resolution proposing that they be reappointed as independent auditor and authorising the Directors to fix their remuneration will be proposed at the Annual General Meeting. By order of the Board Jeremy Fenn Managing Director 28 March 2008 Page 10 Report of the independent auditor to the members of Mobile Tornado Group plc For the period ended 31 December 2007 We have audited the Group and parent Company financial statements (the ''financial statements'') of Mobile Tornado Group plc for the period ended 31 December 2007 which comprise the consolidated profit and loss account, the Group and parent Company balance sheet, the consolidated cash flow statement, accounting policies and the related notes. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Company‟s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company‟s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company‟s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and auditor The Directors' responsibilities for preparing the Annual Report and the financial statements in accordance with United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you whether in our opinion the information given in the Directors' Report is consistent with the financial statements. The information given in the Directors‟ Report includes that specific information presented in the Chairman‟s report that is cross referred from the Business Review section of the Directors‟ Report. In addition we report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors' remuneration and other transactions is not disclosed. We read other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. This other information comprises only the Chairman's Report and the Directors' Report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group's and Company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also Page 11 Report of the independent auditor to the members of Mobile Tornado Group plc For the period ended 31 December 2007 evaluated the overall adequacy of the presentation of information in the financial statements. Opinion In our opinion: the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Group's and the parent Company's affairs as at 31 December 2007 and of the Group's loss for the eighteen month period then ended; the financial statements have been properly prepared in accordance with the Companies Act 1985; and the information given in the Directors' Report is consistent with the financial statements. GRANT THORNTON UK LLP REGISTERED AUDITOR CHARTERED ACCOUNTANTS LEEDS 28 March 2008 Page 12 Consolidated profit and loss account For the period ended 31 December 2007 There were no recognised gains or losses other than the loss for the financial year. The accompanying accounting policies and notes form an integral part of these financial statements. Page 13 18 mths to12 mths to31 December30 June20072006(Restated)Note£'000£'000TurnoverContinuing operations8252891825289Cost of salesContinuing operations(143)(68)Gross profit682221Net operating expenses before depreciationand amortisation(4,512)(2,955)Depreciation(51)(77)Amortisation(892)(602)Administrative expenses(5,455)(3,634)Group operating loss(4,773)(3,413)Interest receivable/(payable)275(469)Loss on ordinary activities before tax(4,698)(3,882)Taxation4(18)- Loss sustained for the financial year(4,716)(3,882)Loss per share (pence)Basic and diluted6(3.00) (4.83) Consolidated statement of total recognised gains and losses For the period ended 31 December 2007 Reconciliation of movements in Group Shareholders’ funds For the period ended 31 December 2007 Page 14 18 mths to12 mths to31 December30 June20072006(Restated)£'000£'000Loss sustained for the financial period(4,716) (3,882) Exchange loss on translation of overseas subsidiaries(434) - Total recognised gains and losses relating to the period(5,150) (3,882) 18 mths to12 mths to31 December30 June20072006(Restated)Note£'000£'000Loss sustained for the financial period(4,716) (3,882) Issue of Shares4,670 - Employee share option adjustment31 32 Exchange loss on translation of overseas subsidiaries(434) - Net change in shareholders' funds(449) (3,850) Opening shareholders' funds15(1,622) 2,228 Closing shareholders' funds15(2,071) (1,622) Balance sheets As at 31 December 2007 The Company balance sheet above is that of Mobile Tornado Group plc, the legal parent Company. The financial statements on pages 13 to 30 were approved by the Board of Directors on 28 March 2008 and were signed on its behalf by: Jeremy Fenn Managing Director 28 March 2008 Page 15 31 December30 June31 December30 June2007200620072006(Restated)(Restated)Notes£'000£'000£'000£'000Fixed assetsIntangible assets77221,580- - Tangible assets89467- - Investment in subsidiary undertakings9- - 12,75812,7588161,64712,75812,758Current assetsDebtors108443364,4821,394Cash at bank and in hand1,8841921,73182,7285286,2131,402Creditors - amounts fallingdue within one year11(1,740)(1,334)(466)(205)Net current assets/(liabilities)988(806)5,7471,197Total assets less current liabilities1,80484118,50513,955Creditors - amounts fallingdue after more than one year12(3,875)(2,463)(1,500)- Net (liabilities)/assets(2,071)(1,622)17,00513,955Capital and reservesShare capital14 & 153,6891,8443,6891,844Share premium154,4491,6244,4491,624Reverse acquisition reserve15(7,620)(7,620)- - Merger reserve1510,93810,93810,93810,938Share option reserve1563326332Foreign currency translation reserve15(434)- - - Profit and loss account15(13,156)(8,440)(2,134)(483)(2,071)(1,622)17,00513,955GroupCompany Consolidated cash flow statement For the period ended 31 December 2007 Page 16 18 mths to12 mths to31 December30 June20072006Note£'000£'000Net cash outflow from operating activities16(4,498) (1,649) Returns on investments and servicing of financeInterest received100 4 Interest paid- (473) Net cash inflow/(outflow) from returns oninvestments and servicing of finance100 (469) Capital expenditure and financial investmentPurchase of tangible fixed assets(79) (37) Net cash outflow from capital expenditurefinancial investment(79) (37) AcquisitionsNet cash at bank acquired with purchaseof subsidiary undertakings- 584 Net cash inflow from acquisitions- 584 Net cash outflow before financing(4,477) (1,571) FinancingIssue of ordinary share capital4,858 1,298 Share issue costs(188) (391) Issue of preference shares1,500 - Net cash inflow from financing6,170 907 Increase/(decrease) in cash in the period17 & 181,693 (664) Accounting policies Basis of preparation The financial statements have been prepared in accordance with the Companies Act 1985, applicable Accounting Standards in the United Kingdom and the historical cost convention except for the adoption of reverse acquisition accounting, described below, which constitutes a true and fair override departure from United Kingdom accounting standards. A summary of the main accounting policies which have been applied consistently (except as explained below) is set out as follows. Changes in accounting policies The Group has adopted FRS20, „Share-based Payment‟. The adoption of this standard represents a change in accounting policy and the prior year comparatives have been restated accordingly. The effects of the change on administrative expenses for the year ended 30 June 2006 and Group reserves are summarised as follows: The Group operates a number of equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision to original estimates, if any, in the profit and loss account, with a corresponding adjustment to equity. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised. Revenue Recognition The Group has refined its accounting policy in respect of revenue recognition to give a better reflection in the accounts of the period in which material work was performed to earn the revenue relating to each customer. Previously, license fee, hardware, software and all related professional services revenues (installation, training) were not recognised until final customer sign-off of an internal acceptance document - ATP. Revenues relating to a customer (all types) are now recognised upon completion of that customer‟s installation as opposed to the ATP. The process of moving from a completed installation to ATP was a „fine-tuning‟ exercise, not incurring material cost to the Group nor any significant uncertainty. This change has no effect on the revenue stated for the year ended 30 June 2006. Basis of consolidation The Group financial statements consolidate those of the Company and its subsidiary undertakings at 31 December 2007. Acquisitions of subsidiaries are dealt with using the acquisition method of accounting except for the reverse takeover transaction detailed below. On 7 March 2006 the Company, then named TMT Group plc, became the parent of Mobile Tornado International Limited, in a share for share transaction. Due to the relative value of the companies, the former Mobile Tornado International Limited shareholders became majority shareholders with 97% of the share capital. Following the transaction, the Page 17 AdministrativeShare optionProfitexpensesreserveand loss£'000£'000£'000Year ended 30 June 2006As previously stated3,602 - (8,408) Restated3,634 32 (8,440) Accounting policies Company‟s continuing operations and executive management were that of Mobile Tornado International Limited. Accordingly the substance of the combination was that Mobile Tornado International Limited acquired TMT Group plc in a reverse acquisition. As part of the business combination TMT Group plc changed its name to Mobile Tornado Group Plc. The Companies Act 1985, FRS 6 and FRS 7, would normally require the Company‟s consolidated accounts to follow the legal form of the business combination. In that case the pre-acquisition results would be that of TMT Group plc and its subsidiary undertakings, which would exclude Mobile Tornado International Limited. The results of Mobile Tornado International Limited would then be included in the Group from 7 March 2006. However, this would portray the combination as the acquisition of Mobile Tornado International by TMT Group plc, and would, in the opinion of the Directors, fail to give a true and fair view of the substance of the business combination. Accordingly the Directors have adopted reverse acquisition accounting as the basis of consolidation in order to give a true and fair view. In invoking the true and fair override the Directors note that reverse acquisition accounting is endorsed under International Financial Reporting Standard 3. Furthermore, the Urgent Issues Task Force of the UK‟s Accounting Standards Board considered the subject and concluded that there are instances where it is right and proper to invoke the true and fair override in such a way. As a consequence of applying reverse acquisition accounting, the results of the Group for the year ended 30 June 2006 comprise the results of Mobile Tornado International Limited to its year ending 30 June 2006 plus the results of TMT Group plc from 7 March 2006, the date of acquisition, to 30 June 2006. As set out in note 7, goodwill amounting to £448,134 arose on the difference between the sum of the fair value of TMT Group plc‟s share capital and the cost of acquisition, and the fair value of its net assets at the reverse acquisition date. The goodwill was written off in the year to 30 June 2006 because TMT Group plc had no continuing business and the goodwill had no intrinsic value. Goodwill Goodwill arising on the reverse acquisition of TMT Group plc has been written off to the reverse acquisition reserve for the reasons explained above. Intangible fixed assets The cost of intangible fixed assets is their purchase cost. Amortisation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Intellectual Property 5 years Tangible fixed assets The cost of tangible fixed assets is their purchase cost. Depreciation is calculated so as to write-off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows: Office equipment Computer equipment 3 years 3 years The Directors review tangible fixed assets for impairment if events or changes in circumstances indicate that the carrying value of may not be recoverable. Investments Investments in subsidiary undertakings are stated at cost less any provision for impairment. Page 18 Accounting policies Foreign currencies Transactions in foreign currencies are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to sterling at the exchange rates ruling at the balance sheet date. The results and assets and liabilities of overseas subsidiary undertakings are translated at the year end exchange rate. Any resulting exchange differences are taken to reserves and are reported in the statement of total recognised gains and losses if material. All other exchange differences are taken to the profit and loss account. Research and development Research and development expenditure is written off to the profit and loss account as incurred. Deferred taxation Deferred tax is recognised on all timing differences where the transactions or events that give the group an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Share options The company issues equity-settled share-based payments to employees and Directors on a discretionary basis. Equity-settled share-based payments are measured at fair value at the date of the grant. The fair value determined at the grant date of the equity-settled share- based payments is expensed on a straight-line basis over the vesting period, together with a corresponding increase in equity, based upon the company‟s estimate of the shares that will eventually vest. Fair value is measured using the Black Scholes method. The expected life used in the model has been adjusted, based on management‟s best estimate, for the effects of non- transferability, exercise restrictions and behavioural considerations. Financial instruments Income and expenditure arising on financial instruments is recognised on an accruals basis, and credited or charged to the profit and loss account in the financial period to which it relates. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Finance costs and gains or losses relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the outstanding liability. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity. Page 19 Notes to the financial statements For the period ended 31 December 2007 1 Segmental information Turnover by source The source of all turnover detailed above is the Republic of Ireland. 2 Net interest payable The cumulative preference shares are classified as a liability under FRS25. Net interest payable includes accrued interest on the cumulative preference shares of £25,000. Page 20 18 mths to12 mths to31 December30 June20072006Turnover by destination£'000£'000Europe117 - North America338 - South America80 - Middle East37 222 Africa48 67 Asia/Pacific205 - Total825 289 18 mths to12 mths to31 December30 June20072006Turnover by product type£'000£'000Licences174 48 Hardware & Software269 170 Maintenance44 23 Professional services338 48 Total825 289 18 mths to12 mths to31 December30 June20072006£'000£'000Interest payable on convertible loan notes- (406) Finance charge on preference shares(25) (22) Other interest payable- (45) (25) (473) Bank interest receivable100 4 Net interest receivable/(payable)75 (469) Notes to the financial statements For the period ended 31 December 2007 3 Loss on ordinary activities before taxation Included within staff costs of £2,604,000 (2006: £1,684,000) are research and development costs of £1,374,000 (2006: £790,000). Page 21 18 mths to12 mths to31 December30 June20072006£'000£'000Loss on ordinary activities before taxation is stated aftercharging / (crediting):Staff costs (note 20)2,604 1,684 Depreciation of owned tangible fixed assets (note 8)51 77 Amortisation of intangible assets (note 7)892 602 Other operating lease rentals227 109 Auditor's remuneration - audit of the financial statements17 15 Auditor's remuneration - other fees77 25 Net exchange gain(465) (62) Loss on disposal of tangible fixed assets- 12 18 mths to12 mths to31 December30 June20072006£'000£'000Fees payable to the company's auditor for the auditof the company's annual accounts1715Fees payable to the company's auditor and its associatesfor other services:The audit of the company's subsidiariespursuant to legislation1820Tax services535Other services pursuant to legislation6- Total9440 Notes to the financial statements For the period ended 31 December 2007 4 Tax on loss on ordinary activities The tax assessed for the period differs from that resulting from applying the standard rate of corporation tax, the differences are explained below: Deferred Tax: At 31 December 2007, the Group had accumulated tax losses of £12,238,000 (30 June 2006: £8,408,000) which are available for offset against future trading profits of certain Group operations, subject to agreement with the relevant tax authorities. No deferred tax asset has been recognised in respect of these losses given the level of uncertainty over their recoverability. 5 Loss of the holding company As permitted by section 230 of the Companies Act 1985, the profit and loss account of the Company is not presented in these financial statements. The parent Company‟s loss for the 18 months ended 31 December 2007 was £1,651,000 (2006 restated: £312,000). 6 Loss per share Basic loss per share is calculated by dividing the loss attributable to ordinary shareholders of £4,716,000 (2006 restated: £3,882,000) by the weighted average number of ordinary shares in issue during the year of 157,181,628 (2006: 80,339,651). The weighted average number of shares for the year ended 30 June 2006 assumes that the 78,130,096 ordinary shares issued in relation to the reverse acquisition of Mobile Tornado Group plc (formerly TMT Group plc) existed for the entire year. Mobile Tornado Group plc shares have been included since 7 March 2006 the date of the reverse acquisition, and all other shares have been included in the computation based on the weighted average number of days since issuance. Page 22 18 mths to 12 mths to 31 December30 June20072006£'000£'000Tax charge comprises:United Kingdom corporation tax at 30% (2006: 30%)UK current tax- - Overseas current tax(18) - Total current tax(18) - 18 mths to12 mths to31 December30 June20072006(Restated)£'000£'000Loss on ordinary activities before taxation(4,698) (3,882) At standard rate of corporation tax of 30% (2006: 30%)(1,409) (1,165) Effects of:Amortisation of intangible assets267 181 Expenses not deductible for tax purposes46 12 Un-utilised tax losses1,114 972 Total18 - Notes to the financial statements For the period ended 31 December 2007 The adjusted basic loss per share has been calculated to provide a better understanding of the underlying performance of the Group as follows: The loss attributable to ordinary shareholders and the weighted average number of ordinary shares for the purpose of calculating the diluted earnings per ordinary share are identical to those used for basic earnings per ordinary share. This is because the exercise of share options is not dilutive under the terms of FRS 22 „Earnings per share‟. 7 Intangible fixed assets Page 23 (Loss)/(Loss)/(Loss)/(Loss)/earningsearningsearningsearningsper shareper share(Restated)(Restated)£'000pence£'000penceLoss attributable toordinary shareholders(4,716) (3.00) (3,882) (4.83) Amortisation of goodwill892 0.57 602 0.75 Adjusted basic loss per share(3,824) (2.43) (3,280) (4.08) (Restated)Basic and diluted18 mths to 12 mths to 30 June 200631 December 2007Basic and dilutedPurchasedIntellectualGoodwillPropertyTotalGroup£'000£'000£'000CostAt 1 July 2006448 3,009 3,457 Acquisitions- - - Exchange Adjustments- 199 199 At 31 December 2007448 3,208 3,656 AmortisationAt 1 July 2006448 1,429 1,877 Charge for the year- 892 892 Exchange Adjustments- 165 165 At 31 December 2007448 2,486 2,934 Net book amount at 31 December 2007- 722 722 Net book amount at 30 June 2006- 1,580 1,580 Notes to the financial statements For the period ended 31 December 2007 8 Tangible fixed assets 9 Investment in subsidiary undertakings Investments in Group undertakings are stated at cost. Details of the principal investments at 31 December 2007 in which the Group or Company holds more than 20% of the nominal value of ordinary share capital are as follows: Subsidiary undertakings Country of incorporation or registration Nature of business Mobile Tornado International Ltd Republic of Ireland M.T. Labs Ltd Israel Sale of instant communication services Sale of instant communication services Group proportion held Company proportion held 100% 100% 100% 0% M.T. Labs Ltd is a wholly owned subsidiary of Mobile Tornado International Ltd. Page 24 GroupOfficeComputerLeaseholdEquipmentEquipmentImprovementTotal£'000£'000£'000£'000CostAt 1 July 2006122068226Additions178- 79Disposals- - - - Exchange Adjustments- (12)- (12)At 31 December 2007132728293Accumulated depreciationAt 1 July 200611571159Charge for the year- 51- 51Disposals- - - - Exchange Adjustments- (11)- (11)At 31 December 200711971199Net book amount at 31 December 20071275794Net book amount at 30 June 20061149767Company£'000Shares in group undertakingsAt 1 July 200612,758 Subsidiary undertakings:- At 31 December 200712,758 Notes to the financial statements For the period ended 31 December 2007 10 Debtors 11 Creditors – amounts falling due within one year 12 Creditors – amounts falling due after more than one year The deferred consideration represents a royalty payable on future sales of Push to Talk related products by Mobile Tornado, payable in part consideration for the acquisition of the rights to the technology underlying such product. The royalty is payable quarterly on any relevant sales (on a cash receipts basis) as follows: 50% of the first US$200,000 relevant sales. (i) (ii) 15% of any additional relevant sales, subject to any related cumulative royalty payments being capped at a maximum of US$5.3 million. Direct reseller and other third party costs may be deducted in arriving at these royalty payments, subject to such costs not exceeding 10% of the relevant sales. The deferred consideration is secured by a charge over the intellectual property of the Mobile Tornado Group. The issue of the 10% cumulative preference shares is detailed in note 14. Page 25 31 December30 June31 December30 June2007200620072006£'000£'000£'000£'000Amounts falling due within one year:Trade debtors448 184 - - Other debtors and prepayments396 152 62 21 Amounts owed by Group undertakings- - 4,420 1,373 Total844 336 4,482 1,394 31 December30 June31 December30 June2007200620072006£'000£'000£'000£'000Trade creditors and accruals890 653 383 187 Other taxation and social security150 94 83 18 Other creditors134 278 - - Deferred income403 45 - - Deferred consideration163 264 - - Total1,740 1,334 466 205 Group Company31 December30 June31 December30 June2007200620072006£'000£'000£'000£'000Deferred consideration2,375 2,463 - - 10% cumulative preference shares1,500 - 1,500 - Total3,875 2,463 1,500 - Group Company Notes to the financial statements For the period ended 31 December 2007 13 Financial instruments The Group's policy of managing financial risk is detailed in the Directors‟ report on pages 5 to 10. Short-term debtors and creditors have been excluded from the following disclosures, other than the currency risk disclosures. Interest rate risk profile of financial assets The interest rate profile of the financial assets of the Group comprise cash of £1,884,000, as follows: The sterling, US dollar and euro financial assets relate to cash at bank and bear interest based on GBP LIBOR, US dollar LIBOR and EURIBOR respectively. There are no fixed rate financial assets (2006: £nil). Interest rate risk profile of financial liabilities The interest rate profile of the financial liabilities of the Group is as follows: Currency risk The table below shows the extent to which Group companies have monetary assets and liabilities in currencies other than their local currency. Page 26 31 December30 June20072006£'000£'000CurrencySterling1,734 28 US dollar133 120 Euro17 44 Total1,884 192 Floating rate31 December30 June20072006£'000£'000Fixed rate preference shares1,500 Total1,500 - Sterling31 December30 June20072006£'000£'000Functional currency of operation: SterlingUS Dollar assets (net)3,097 397 Euro assets (net)433 117 Total3,530 514 Functional currency of operation: EuroUS Dollar liabilities (net)(5,288) (3,097) Sterling liabilities (net)(887) (915) Total(6,175) (4,012) Functional currency of operation: US DollarEuro liabilities (net)- - Sterling liabilities (net)- - Total- - Notes to the financial statements For the period ended 31 December 2007 14 Called up share capital On 23 October 2006 the Company issued 80,000,000 ordinary shares at a price of 5p each in respect of a subscription for shares by InTechnology Plc. On 26 October 2007 the Company re-issued the 12,251,333 ordinary shares held in Treasury at a price of 7p each. 12,200,000 shares were placed with InTechnology Plc and 51,333 with Peter Wilkinson. On 26 October 2007, InTechnology Plc subscribed for 18,750,000 non-voting preference shares of 8p each. The non-voting preference shares carry a cumulative annual coupon of 10 per cent and may be redeemed at the subscription price (together with any accrued but unpaid coupon). If the non-voting preference shares are not redeemed prior to 31 December 2009 or a third party acquires 75% or more of the issued ordinary share capital of the Company, each non-voting preference share will automatically convert into an ordinary share. The non-voting preference shares will not be admitted to trading on AIM. Share issue costs The Company incurred issue costs of £188,000 in respect of the above shares issued during the year. These have been debited to the share premium account of the Company. Share options The Group has a share option scheme for certain employees and directors. Options are exerciseable at a price equal to the average market price of the company‟s shares on the date of grant. The vesting period is usually two to three years. The options are settled in equity once settled. Details of the number of shares subject to option and the exercise price outstanding during the year are as follows: The closing mid-market share price on 26 March 2008 was 6.3p Page 27 31 December30 June20072006£'000£'000Authorised475,000,000 (2006: 200,000,000) Ordinary shares of 2p each9,500 4,000 Total9,500 4,000 31 December30 June20072006£'000£'000Allotted, called up and fully paid184,431,430 (2006: 92,180,096) Ordinary shares of 2p each3,689 1,844 Total3,689 1,844 CompanyName of schemeExerciseEarliest31 December30 June price (p)exercise date20072006Mobile Tornado Group plc scheme 12,461,918 2,461,918 2.007/03/06Mobile Tornado Group plc scheme 23,600,000 3,600,000 5.027/10/096,061,918 6,061,918 No. of shares Notes to the financial statements For the period ended 31 December 2007 15 Shareholders’ funds 16 Reconciliation of operating loss to net cash (outflow)/ inflow from operating activities Page 28 GroupOrdinary shareShare premiumReverse acquisitionMergerShare optionForeign currency translationProfit & lossTotal shareholders'capitalaccountreservereservereservereserveaccountfunds£'000£'000£'000£'000£'000£'000£'000£'000At 1 July 2006 aspreviously reported1,844 1,624 (7,620) 10,938 - - (8,408) (1,622) Prior year adjustment- - - - 32 - (32) - At 1 July 2006 (restated)1,844 1,624 (7,620) 10,938 32 - (8,440) (1,622) Issue of shares1,845 2,825 - - - - - 4,670 Employee share option adjustment- - - - 31 - - 31 Exchange loss on translationof overseas subsidiaries- - - - - (434) - (434) Loss sustained for the year- - - - - - (4,716) (4,716) At 31 December 20073,689 4,449 (7,620) 10,938 63 (434) (13,156) (2,071) CompanyOrdinary shareShare premiumReverse acquisitionMergerShare optionForeign currency translationProfit & lossTotal shareholders'capitalaccountreservereservereservereserveaccountfunds£'000£'000£'000£'000£'000£'000£'000£'000At 1 July 2006 aspreviously reported1,844 1,624 - 10,938 - - (451) 13,955 Prior year adjustment- - - - 32 - (32) - At 1 July 2006 (restated)1,844 1,624 - 10,938 32 - (483) 13,955 Issue of shares1,845 2,825 - - - - - 4,670 Employee share option adjustment- - - - 31 - - 31 Exchange loss on translationof overseas subsidiaries- - - - - - - - Loss sustained for the year- - - - - - (1,651) (1,651) At 31 December 20073,689 4,449 - 10,938 63 - (2,134) 17,005 18 mths to12 mths to31 December30 June 20072006(Restated)£'000£'000Operating loss(4,773) (3,413) Depreciation of tangible fixed assets51 77 Amortisation of intangibles892 602 Loss on disposal of tangible fixed assets- 12 Share option non cash charge31 32 (Increase)/Decrease in debtors(528) 126 (Decrease)/Increase in creditors and provisions(171) 915 Net cash outflow from operating activities(4,498) (1,649) Notes to the financial statements For the period ended 31 December 2007 17 Reconciliation of movement in net funds 18 Analysis of net funds 19 Directors’ emoluments These represent emoluments of the Directors of the legal parent Company, Mobile Tornado Group Plc. Page 29 18 mths to12 mths to31 December30 June20072006£'000£'000Increase/(decrease) in cash in the period1,693 (664) Net cash inflow from issue of preference shares(1,500)- Change in net debt resulting from cash flows193 (664) Non-cash changes:Exchange movements(1) - Conversion of Convertible Loan Notes- 2,213 Movement in net funds in the year192 1,549 Net funds/(debt) at start of year192 (1,357) Net funds at end of year384 192 At 30 JuneCashflowNon-cashAt 31 December2006changes2007£'000£'000£'000£'000Cash at bank and in hand192 1,693 (1) 1,884 10% cumulative preference shares- - (1,500) (1,500) Net funds192 1,693 (1,501) 384 18 mths to12 mths to31 December30 June20072006£'000£'000Salary28595Pension 72Other benefits28- Compensation paid to past director for loss of office10- Sums paid to third parties for directors' services294- Total62497Highest Paid DirectorSalary- 39Pension - 2Sums paid to third parties for directors' services166- Total16641 Notes to the financial statements For the period ended 31 December 2007 20 Employee information The average monthly number of persons (including Executive Directors) employed by the Group during the year was: Staff costs for the persons above were: 21 Capital commitments The Group and Company had no capital commitments at 31 December 2007. 22 Related party transactions The Company has taken advantage of the exemption available under FRS 8 „Related Party Disclosures‟ from disclosing transactions between the Company and its subsidiary undertakings as these have been eliminated on consolidation of these financial statements. Peter Wilkinson is a shareholder and Director of InTechnology plc. Mobile Tornado International Limited has bought services totalling £9,000 (2006; £4,000) from InTechnology plc in the eighteen month period to 31 December 2007. As at 31 December 2007, there was no amount owing to InTechnology Plc by Mobile Tornado International Limited (30 June 2006; £1,000). Mobile Tornado Group Plc has bought services totalling £195,000 (2006; £nil) from InTechnology plc in the eighteen month period to 31 December 2007. As at 31 December 2007, Mobile Tornado Group Plc owed InTechnology Plc £1,000 (30 June 2006; £nil). John Swingewood and Jeremy Fenn were Directors and shareholders of YooMedia plc during the eighteen month period to 31 December 2007. Peter Wilkinson also holds shares in YooMedia plc. Mobile Tornado International Limited has bought services totalling £9,000 (2006; £44,000) from YooMedia plc in the eighteen month period to 31 December 2007. As at 31 December 2007, Mobile Tornado International Limited owed £16,000 (30 June 2006; £11,000) to YooMedia plc. Payments to a third party, Jeremy Fenn, are made in respect of the Director services provided by Jeremy Fenn. As at 31 December 2007, Mobile Tornado Group Plc owed £16,000 (30 June 2006: £nil) to Jeremy Fenn. Page 30 Group18 mths to12 mths to31 December30 June20072006NumberNumberSales9 5 Product development30 27 Finance & administration6 5 Total45 37 18 mths to12 mths to31 December30 June20072006£'000£'000Wages and salaries2,147 1,601 Social security costs155 55 Pension costs70 28 Other benefits232 - Total2,604 1,684 Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that an Annual General Meeting of the Company will be held at Central house, Beckwith Knowle, Harrogate, HG3 1UG on 1 May 2008 at 10.00 a.m. for the following purposes, Resolutions 1 to 5 being proposed as ordinary resolutions and Resolution 6 being proposed as a special resolution: As ordinary business: 1. 2. 3. 4. to receive and adopt the report of the Directors and the audited accounts of the Company and its subsidiaries for the eighteen month period ended 31 December 2007 together with the report of the auditors thereon; to re-appoint Grant Thornton UK LLP as auditors to the Company and to authorise the Directors to fix their remuneration; to re-elect Richard James, who retires in accordance with Article 87 of the Company's articles of association and who, being eligible, offers himself for re-appointment, as a Director; to re-elect Jeremy Fenn, who retires in accordance with Article 92 of the Company's articles of association and who, being eligible, offers himself for re-election, as a Director; As special business: 5. THAT in substitution for all existing and unexercised authorities, pursuant to section 80 of the Companies Act 1985 (the “Act”), as amended, the Directors of the Company be generally and unconditionally authorised to exercise all or any of the powers of the Company to allot relevant securities (within the meaning of section 80(2) of the Act) in the capital of the Company up to a maximum nominal amount of £1,229,500 (representing approximately one third of the issued ordinary share capital of the Company), provided that this authority shall, unless previously revoked or varied by the Company in general meeting, expire five years from the date of passing this Resolution save that the Company may before the expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors of the Company may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired; and 6. THAT the Directors of the Company be and they are hereby empowered, pursuant to section 95 of the Act and pursuant to the authority set out in Resolution 5 above, to allot equity securities (as defined in section 94(2) of the Act) for cash out of any relevant securities (as defined in section 80(2) of the Act) which they are from time to time authorised to allot, as if section 89(l) of the Act did not apply to: (i) the grant of options under any share option scheme of the Company; (ii) in connection with or the subject of an offer or invitation, including a rights issue or open or equivalent offer to holders of ordinary shares and such other equity securities of the Company as the Directors may determine on the register on a fixed record date in proportion (as near as may be) to the respective holdings of such shares, but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or any legal or practical problems under the Page 31 Notice of Annual General Meeting laws of, or the requirements of, any recognised regulatory body or any stock exchange in any territory; and (iii) in connection with an issue of equity securities up to an aggregate nominal amount of £184,430 (representing approximately 5 per cent. of the issued share capital of the Company), provided that this authority shall expire on the conclusion of the next annual general meeting of the Company or 15 months from the date of this Resolution, whichever is earlier and the Company may before such expiry make an offer, agreement or other arrangement which would or might require relevant securities to be allotted after such expiry and the Directors of the Company may allot relevant securities pursuant to any such offer, agreement or other arrangement as if the authority hereby conferred had not so expired. By Order of the Board Richard James Company Secretary 28 March 2008 Notes: Registered office: Central House Beckwith Knowle Otley Road Harrogate HG3 1UG 1 2 3 4 5 6 A member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint one or more proxies to attend and, on a poll, vote instead of him. A proxy need not be a member of the Company. A form of proxy is provided with this notice. Completion and return of such a proxy will not prevent a member from attending the Meeting and voting in person. To be effective, the form of proxy and any power of attorney or other authority under which it is signed (or a notarially certified copy of such power or authority) must be deposited with the Company‟s registrars, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not less than 48 hours before the time of the holding of the Meeting or any adjournment thereof. Pursuant to regulation 41(1) of the Uncertificated Securities Regulations 2001 (2001 No. 3755), the Company has specified that only those members registered on the register of members of the Company at 6.00 p.m. on 29 April 2008 or, in the event that the meeting is adjourned, on the register of members 48 hours before the time of any adjourned meeting, shall be entitled to attend and vote at the Meeting in respect of the number of Ordinary Shares registered in their name at that time. Changes to the register of members after 6.00 p.m. on 29 April 2008 or, in the event that the Meeting is adjourned, in the register of members 48 hours before the time of any adjourned Meeting, shall be disregarded in determining the rights of any person to attend and vote at the Meeting. Pursuant to Rule 20 of the AIM Rules, this Notice and the accompanying Form of Proxy and the Directors‟ and Auditors‟ Reports and Financial Statements for the period ended 31 December 2007 will be available for inspection at Central House, Beckwith Knowle, Harrogate, HG3 1UG during usual business hours on any weekday (Saturdays, Sundays and public holidays excluded) for a period of one month from the date of this Notice. Biographical details of the Director who is proposed for reappointment at the Meeting are set out on page 6 of the Directors‟ and Auditors‟ Reports and Financial Statements for the period ended 31 December 2007. Page 32 Notice of Annual General Meeting 7 To appoint more than one proxy you may photocopy this form. Please indicate the proxy holder‟s name and the number of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the number of shares held by you). Please also indicate if the proxy is one of multiple instructions being given. All forms must be signed and should be returned together in the same envelope. Page 33 Corporate information Company Registration Number: 5136300 Registered Office: Directors: Nominated Advisor and Broker: Bankers: Solicitors: Registrars: Auditors: Internet addresses: www.mobiletornado.com Central House Otley road Harrogate HG3 1UG P R Wilkinson (Non-Executive Chairman) J M Fenn (Managing Director) D Parry (VP Worldwide Sales) (Chief Technology Officer) E Fishler J P Swingewood (Non-Executive Director) R M James (Director & Company Secretary) Blue Oar Securities Plc 30 Old Broad Street London EC2N 1HT Barclays Bank Plc Hanover Square 50 Pall Mall London SW1Y 5AX Hammonds 2 Park Lane Leeds LS3 1ES Capita Registrars Ltd The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Grant Thornton UK LLP No 1 Whitehall Riverside Leeds LS1 4BN Page 34