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Eagle-i Holdings plc

('Eagle-i' or the 'Group' and, together with its subsidiaries, the 'Group')

Results for the year ended 30th November 2008

Chairman's Statement

Results 

Group turnover for the year ended 30th November 2008 increased 16.6% to £1,507,000 (2007: £1,293,000) with a loss before tax of £1,677,000 (2007: £1,252,000). Gross margin for the year increased to 70.5% (2007: 44.9%).

Current Trading

Despite the significant restriction in the availability of lease finance for Eagle-i's customers during the second half of 2008, your Board is pleased to announce an improvement in both turnover and gross margins.  

Notwithstanding the difficulties in the financial markets, 2008 has been a year of considerable progress. The Company has substantially completed its strategy to develop and release a new generation of technologies that enable it to engage with key strategic partners in the automotive services, leasing, insurance and risk management sectors in the UK and Europe. Investment in research and development during the period increased to £839,000 (2007: £529,000).

The dividends of this research and development program are now becoming apparent. Monitor3, the Company's latest generation of fleet and risk management software has received several industry innovation awards and its commercial appeal has been demonstrated by the transformational, long term contract wins from Axa Assistance, Homeserve and Hitachi Capital Vehicle Solutions. Wider market acceptance of Eagle-i's product and services portfolio is evidenced in the Company's current 94% contract renewal rate.

Whilst the Company's sales pipeline has strengthened considerably over the past year, your Board remains cautious of the continuing difficulties in the financial markets and the impact on the availability of lease finance. In the short to medium term, the Company has negotiated funding arrangements with its major shareholders that provide an ability to finance a proportion of sales transactions on its own book.

Structure

Since the year end date, the Group has renegotiated its £2.4m loan facility with the RBS, £1.2m has been replaced with a new loan of £1.2m with Mr. T. Krell, a non-executive Director of the Company and the bank loan has been reduced to £1.2m. The new loan facility with RBS is repayable on 30th June 2010 and the new loan from Mr. T. Krell is repayable on 1st June 2010.

Strategy and Outlook 

Your Board believes the European fleet telematics industry is rapidly polarising between providers of simple track and trace products and more sophisticated geo-localisation solutions that can provide additional value to multiple business functions across the enterprise. 

To support Eagle-i's focus on the higher margin geo-localisation solutions market, the Company is committed to the continued development of its open telematics platform, which enables the rapid and cost effective extension of its service offering through standard integration with global device and service providers.

Whilst the shortage of lease finance will undoubtedly impact the telematics sector in the first half of 2009, your Board is optimistic that the Company's management team, technology platform and service offerings are well positioned to take advantage of the market upturn when it occurs.

I would like to take this opportunity on behalf of the Board to thank Eagle-i management and staff for their contribution and commitment during the last twelve months.

Rodney Graves - Chairman

29th May 2009

  For further information, please contact:

Eagle-i Holdings

Ian Walmsley / Rodney Graves

Tel: 01928 795400

WH Ireland

Robin Gwyn 

Tel: 0161 832 2174

  Consolidated income statement

for the year ended 30 November 2008

	Notes	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Revenue		1,507	1,293
Cost of sales		(445)	(712)
Gross profit		1,062	581
Operating costs		(2,599)	(1,473)
Operating loss	1	(1,537)	(892)
Finance income	4	361	7
Finance costs	4	(501)	(367)
Finance costs (net)	4	(140)	(360)
Loss before income tax		(1,677)	(1,252)
Income tax credit	5	85	55
Loss for the year attributable to equity shareholders		(1,592)	(1,197)
Basic and diluted loss per share	6	(0.62)p	(0.65)p

All amounts relate to continuing operations

Consolidated statement of recognised income and expense

for the year ended 30 November 2008

		Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Loss for the year		(1,592)	(1,197)
Total recognised expense for the year		(1,592)	(1,197)

  Consolidated balance sheet as at 30 November 2008

	Notes	2008	2007
		£'000	£'000
Assets
Non-current assets
Plant and equipment	9	39	49
Intangible assets	7&8	3,732	3,372
Trade and other receivables	13	154	448
		3,925	3,869
Current assets
Inventories	12	43	78
Trade and other receivables	13	646	785
Cash and cash equivalents	14	162	39
		851	902
Total Assets		4,776	4,771
Equity and liabilities
Equity attributable to equity holders of the parent
Ordinary shares	15	2,903	2,762
Share premium		10,183	7,540
Merger reserve		17,523	17,523
Equity reserve		-	280
Retained earnings		(30,581)	(28,989)
Total equity	16	28	(884)
Non-current liabilities
Deferred income		145	-
Borrowings	17	986	2,383
		1,131	2,383
Current liabilities
Trade and other payables	19	1,217	872
Current borrowings	17	2,400	2,400
		3,617	3,272
Total liabilities		4,748	5,655
Total equity and liabilities		4,776	4,771

  Consolidated cash flow statement 

for the year ended 30 November 2008

	Notes	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Cash flows from operating activities
Cash generated from/(utilized in) operations	20	217	(754)
Interest paid		(384)	(213)
Interest received		4	7
Income taxes received		140	-
Net cash used in operating activities		(23)	(960)
Cash flow from investing activities
Purchase of plant and equipment		(14)	(22)
Development costs capitalised		(839)	(530)
Net cash used in investing activities		(853)	(552)
Cash flows from financing activities
Proceeds of issue of share capital		-	-
Proceeds from long term borrowings		999	1,224
Net cash from financing activities		999	1,224
Net increase/(decrease) in cash and cash equivalents		123	(288)
Cash and cash equivalents at beginning of year		39	327
Cash and cash equivalents at end of year	14	162	39

  Accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been applied consistently to all the periods presented and in preparing an opening International Financial Reporting Standards (IFRS) balance sheet at 1 December 2006 for the purpose of transition to IFRS.

1) Basis of preparation

These consolidated financial statements have been prepared for the first time in accordance with IFRS as adopted by the European Union, and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. The disclosures required by IFRS 1 concerning the transition from UK GAAP to IFRS are given in note 26.

Full retrospective application of IFRS is required except that certain optional exemptions from the requirements of other international standards are permitted by IFRS 1 - First-time adoption of International Financial Reporting Standards. The Group has elected to take advantage of the following such reliefs: 

• IFRS 3 - Business Combinations will be applied prospectively from the date of transition and hence previous business combinations have not been restated. Goodwill is included at its deemed cost, being the amount recorded under UK GAAP as at 1 December 2006:

• the recognition and measurement principles in IFRS 2 - Share-Based Payment have not been applied to share options granted before 7 November 2002.

The financial statements have been prepared on a going concern basis which assumes that the Company and Group will continue in operational existence for the foreseeable future. Certain investors in the Company have indicated to the Board in writing that they are prepared to provide additional funds to the Group to enable it to continue normal trading operations for a period of at least one year from the date the financial statements were approved.

2) Consolidation of subsidiaries

Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies so as to obtain benefit from their activities. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date on which the control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. Inter-Company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.

Inter-Company transactions and balances and any unrealised profit arising there from, are eliminated on consolidation.

3) Intangible assets

Intangible assets include intellectual property rights, capitalised development costs and goodwill.

Intellectual property rights are amortised using the straight line method over a ten year term.

Development costs are accounted for in accordance with IAS 38, Intangibles. Expenditures on research or the research phase of an internal project are recognised as an expense when incurred. The intangible assets arising from the development phase of an internal project are recognised if the conditions as outlined in IAS 38 are complied with. This includes essentially that the technical feasibility of completing the intangible asset for it to be available for sale or use can be demonstrated and that the intangible asset will generate probable future economic benefits. The intangible assets arising from development are amortised on a straight line basis over the estimated useful economic life of the asset of 6 years. Amortisation of development costs commenced from June 2008, in line with revenue streams which also commenced at the same time.  

In addition the borrowing costs in respect of the development costs have been capitalised together with the development costs in accordance with IAS 23.

At each balance sheet date the Group assesses whether there is any indication of impairment in accordance with IAS 36, Impairment of Assets. If any such indication exists the recoverable amount is calculated.

Goodwill comprises the excess of the fair value of the consideration, plus any associated costs, for investments in subsidiary undertakings over the fair value of the net identifiable assets acquired. Adjustments are made to fair values to bring the accounting policies of acquired businesses into alignment with those of the Group. The costs of integrating and reorganising acquired businesses are charged to the post acquisition income statement.

Goodwill is carried at cost less accumulated impairment losses. Goodwill is tested for impairment annually. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

4) Property, plant and equipment

All property, plant and equipment are stated at cost less accumulated depreciation.

Depreciation of property, plant and equipment is provided to write off the cost, less residual value, on a straight line basis over the estimated useful life.

Plant and machinery	5 years
Office furniture and computer equipment	3 years
Fixtures and Fittings	3 - 4 years

Residual values, remaining useful lives and depreciation methods are reviewed annually and adjusted if appropriate.

Gains or losses on disposal are included in the income statement.

5) Impairment of assets

The Group assess at each balance sheet date whether there is any indication that any of its assets have been impaired. If such indication exists, the asset's recoverable amount is estimated and compared to its carrying value.

For goodwill the recoverable amount is estimated at each balance sheet date and whenever there is an indication of impairment.

An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. Impairment losses are recognised in the income statement.

6) Financial Instruments

The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument, in accordance with the substance of the contractual arrangement.

Financial instruments are recognised on the balance sheet at fair value when the Group becomes a party to the contractual provisions of the instrument.

6a) Trade receivables

Trade and other receivables are non-interest bearing and are stated at their nominal amount as reduced by appropriate allowances for estimated irrecoverable amounts. They are recognised on the trade date of the related transactions. Estimated irrecoverable amounts are based on historical experience together with specific amounts that are not expected to be collectible. 

6b) Trade payables

Trade and other payables are non-interest bearing and are stated at their nominal value. They are recognised on the trade date of the related transactions.

6c) Interest-bearing borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.

Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest rate basis.

7) Share based payments

The Group has applied the exemption available under IFRS 1 and elects to apply IFRS 2 only to awards of equity instruments made after 7 November 2002 that had not vested by 1 December 2007.

Options are measured at fair value at grant date using the Black-Scholes model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.

Cash settled share based payment transactions result in the recognition of a liability at its current fair value. This is reviewed annually, in order to ensure that an appropriate provision has been made. 

8) Revenue

Revenue represents the fair value of consideration received or receivable from customers for goods and services provided by the Group, net of discounts and VAT. Where the time value of money is material, revenue is recognised as the present value of the cash inflows expected to be received from the customer in settlement.

Revenue from the sale of products with no significant service obligation is recognised 100% on delivery. 

Revenue from the sale of products with a significant service obligation is recognised using the percentage of completion method.

In the case of long term contracts, revenue reflects the contract activity during the period and represents the proportion of total contract value, which costs incurred to bear to total expected contract costs. Revenue and profit is recognized in accordance with IAS 18 Revenue Recognition.

9) Inventories

Inventories are stated at cost or net realisable value, whichever is lower. Cost consists of all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

The cost of inventories is determined using the first-in first-out (FIFO) method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated marketing, distribution and selling expenses.

10) Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks and bank overdrafts.

11) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are accounted for as operating leases.

Payments made under operating leases are recognised in the income statement on a straight line basis over the term of the lease. Benefits received as an incentive to sign a lease, whatever form they may take, are credited to the income statement on a straight line basis over the lease term.

12) Deferred taxation

Deferred tax is provided in full using the balance sheet liability method. Deferred tax is the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities shown on the balance sheet. Deferred tax assets and liabilities are not recognised if they arise on the following situations: the initial recognition of goodwill; or the initial recognition of assets and liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of recovery or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

The Group does not recognise deferred tax liabilities, or deferred tax assets, on temporary differences associated with investments in subsidiaries, joint ventures and associates as it is not considered probable that the temporary differences will reverse in the foreseeable future. It is the Group's policy to reinvest undistributed profits arising in Group companies.

The Group only recognises a deferred tax asset to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. The carrying amount of the deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

13) Taxation

Research and development tax credits are recognised when, in the Director's opinion, there is a strong likelihood of the Company receiving them consistent with the receipt of previous tax credits.

14) Provisions

Provisions are recognised in the balance sheet when there is a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to discharge the obligation and the amount can be reliably estimated.

15) Accounting estimates and judgements

The preparation of financial statements in conformity with generally accepted accounting principles requires the use of certain estimates and associated assumptions that affect the application of policies, the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best assessments of amounts, events or actions, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on a regular and ongoing basis. 

The estimates and judgements that have had the most significant effect on the amounts included in these consolidated financial statements are as follows:

Share-based payments 

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the instruments on the date on which they are granted. Estimating fair value requires determining the most appropriate valuation model and making assumptions regarding the inputs to it, including the expected life of the instrument, volatility and dividend yield.

16) Segment reporting

A segment is a distinguishable component of the Group that is engaged in providing products or services (business segment), or in providing products or services within a particular economic environment (geographic segment), which is subject to risks and rewards that are different from those of other segments. Based on the risks and rewards of the Group's products and services, the Directors consider that the primary reporting format is by business segment and the secondary reporting format is geographical.

17) Recent accounting developments

The following IFRS, IFRIC interpretations and amendments have been issued by the International Accounting Standards Board during the year but are not yet effective and have not been early adopted by the Group:

IAS 1 (Revised) - 'Presentation of Financial Statements' was issued in January 2008. It affects the presentation of owner changes in equity and of comprehensive income. It does not change the recognition, measurement or disclosure of specific transactions and other events required by other IFRS. It is required to be implemented by the Group from 1 November 2009 but it is not expected to have a material impact on the consolidated financial statements.

Amendment to IAS 27 (Revised) - 'Consolidated and Separate Financial Statements' was issued in January 2008. The amendments relate primarily to accounting for non-controlling interests and the loss of control of a subsidiary. It is required to be implemented by the Group from 1 November 2009 but it is not expected to have a material impact on the consolidated financial statements. 

Amendment to IFRS 2 'Share-based payments; vesting conditions and cancellations'. The Group will apply the amendment to IFRS 2 from 1 November 2009 but it is not expected to have a material impact on the consolidated financial statements. 

IFRS 3 (Revised) - 'Business Combinations' was issued in January 2008. It addresses the guidance for applying the acquisition method of accounting. It is required to be implemented prospectively by the Group from 1 November 2009. This would be expected to impact the accounting for any future acquisitions of the Group. 

IFRS 8 - 'Operating segments' may require changes in the way the Group discloses information about its operating segments. The Group will apply IFRS 8 from 1 November 2009 but it is not expected to have a material impact on the consolidated financial statements. 

Other IFRS amendments and IFRIC interpretations which have been issued by the International Accounting Standards Board are not considered relevant to the Group's financial statements.

  

Notes to the consolidated financial statements

for the year ended 30 November 2008

1.  Operating loss

Group operating loss for the year is stated after the following;

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Staff costs	1,318	928
Depreciation	24	7
Amortisation of intangible assets	560	160
Operating lease expense	56	57

2.  Auditors remuneration

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Fees payable to the Group's auditor for the audit of the Group's annual financial statements	10	5
Fees payable to the Group's auditor and its associates for;
The audit of the Group's subsidiaries, pursuant to legislation	18	12
Other services pursuant to legislation	1	1
Taxation services	3	3

3.  Staff costs and numbers

Staff costs comprised;

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Wages and salaries	1,128	837
Social security costs	137	91
Share options granted to Directors and employees	53	-
	1,318	928

  The number of employees (including Directors) can be categorised as follows;

	Year ended 30 November 2008	Year ended 30 November 2007
Operations	5	4
Technical, research & development	5	4
Sales	12	6
Finance & administration	8	9
	30	23

Directors' costs comprised;

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Emoluments	24	37
Highest paid Director - emoluments	15	22

No pension contributions were paid in respect of any Director and there were no bonus payments made or share options exercised in respect of either year.

4.  Finance income and costs

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Finance income
Bank interest received	4	7
Interest waived on Directors' and related party borrowings	357	-
	361	7
Finance cost
Interest on bank borrowings	(177)	(219)
Interest on Directors' and related party borrowings	(199)	(183)
Interest charged by finance houses	(206)	-
Borrowing costs capitalised to qualifying assets	81	34
	(501)	(367)
Net finance cost	(140)	(360)

A general borrowing rate of 12% in the first six month period, then 6% in the second six month period (2007 12% throughout the year) was used to capitalise interest expenditure on capitalised assets.

  5.  Income tax expense

Current tax

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
UK corporation tax	(85)	(55)
Deferred tax
Current year	-	-

Corporation tax is calculated at 28% (2007 30%) of the estimated assessable loss for the year. The rate used has been adjusted to reflect changes in the UK tax rates.

The tax charge for the year can be reconciled to the loss for the year as follows;

Loss before tax	(1,677)	(1,252)
Loss at standard rate of corporation tax in the UK	(470)	(376)
Non-deductible expenses	157	85
Unrecognised losses carried forward	313	291
Adjustments to tax charge in respect of previous period	(85)	(55)
Tax credit	(85)	(55)

6.  Basic and diluted loss per share

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Retained loss for the period	(1,592)	(1,197)
	Number of shares	Number of shares
Weighted average number of ordinary shares in issue	257,937,540	185,367,111
	(0.62)p	(0.65)p

The share options issued could potentially dilute earnings per share in the future but have not been included in the calculation of diluted earnings per share, as they are considered anti-dilutive for the periods presented, due to the Group incurring losses.

  7.  Goodwill

	£'000
Cost
Opening balance at 1 December 2006 and 1 December 2007	19,976
Closing balance at 30 November 2008	19,976
Accumulated impairment
Opening balance at 1 December 2006	19,976
Impairment loss	-
Opening cost at 1 December 2007	19,976
Impairment loss	-
Closing cost at 30 November 2008	19,976
Opening carrying value at 1 December 2006	-
Opening carrying value at 1 December 2007	-
Closing carrying value at 30 November 2008	-

8.  Intangible assets

	Intellectual property rights  £'000	Capitalised development costs £'000	Total £'000
Cost
Opening cost at 1 December 2006	1,600	2,327	3,927
Additions	-	565	565
Disposals	-	-	-
Opening cost at 1 December 2007	1,600	2,892	4,492
Additions	-	920	920
Disposals	-	-	-
Closing cost at 30 November 2008	1,600	3,812	5,412
Accumulated amortisation/impairment
Opening balance at 1 December 2006	960	-	960
Amortisation	160	-	160
Disposals	-	-	-
Opening balance at 1 December 2007	1,120	-	1,120
Amortisation	160	400	560
Disposals	-	-	-
Closing balance at 30 November 2008	1,280	400	1,680
Opening carrying value at 1 December 2006	640	2,327	2,967
Opening carrying value at 1 December 2007	480	2,892	3,372
Closing carrying value at 30 November 2008	320	3,412	3,732

Of the total research and development costs incurred in the period, all of the expenditure met the criteria as laid out in IAS 38 for development cost and accordingly has been capitalised, together with the related borrowings as required by IAS 23.

Amortisation of £560,000 is included in the income statement in operating costs. The Intellectual property rights have a remaining life of 2 years and the development costs have a remaining life of 5.5 years.

  9. Plant and equipment 

	Plant & machinery  £'000	Computer equipment £'000	Fixtures & fittings £'000	Total £'000
Cost
Opening cost at 1 December 2006	28	104	57	189
Additions	-	22	-	22
Disposals	-	-	-	-
Opening cost at 1 December 2007	28	126	57	211
Additions	-	14	-	14
Disposals	-	-	-	-
Closing cost at 30 November 2008	28	140	57	225
Depreciation
Opening balance at 1 December 2006	28	70	57	155
Depreciation charge	-	7	-	7
Disposals	-	-	-	-
Opening balance at 1 December 2007	28	77	57	162
Depreciation charge	-	24	-	24
Disposals	-	-	-	-
Closing balance at 30 November 2008	28	101	57	186
Opening carrying value at 1 December 2006	-	34	-	34
Opening carrying value at 1 December 2007	-	49	-	49
Closing carrying value at 30 November 2008	-	39	-	39

10. Investment in subsidiaries 

Name	Country of incorporation	Proportion of ordinary shares held by the parent	Principal activities
Eagle-i Telematics Limited	England & Wales	100%	Vehicle satellite tracking systems
EI Leasing Limited	England & Wales	100%	Vehicle satellite tracking systems

All subsidiary undertakings are included in the consolidation. The proportion of the voting rights in the subsidiary undertakings held directly by the parent does not differ from the proportion of ordinary shares held.

11. Deferred taxation

There is no deferred tax liability at the year end. At the year end there was a total unrecognised deferred tax asset of:

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Depreciation in advance of capital allowances	(51)	(43)
Losses	(3,993)	(3,719)
	(4,044)	(3,762)

Deferred tax assets have not been recognised, as it is uncertain as to when such amounts will be realised. 

12. Inventories

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Raw materials	1	31
Work in progress	1	25
Finished goods	41	22
	43	78

13. Trade and other receivables

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Trade receivables	310	306
Prepayments and accrued income	490	863
Taxation receivable	-	55
VAT recoverable	-	9
	800	1,233
Less non- current portion - prepayments and accrued income	(154)	(448)
	646	785

The Group's trade receivables are stated after a provision for impairment of £36,000 (2007: £18,000). 

As at 30 November 2008 trade receivables of £91,000 were past due but not impaired. The ageing analysis of these trade receivables is:

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Up to three months	50	67
Over three months	41	13
Total	91	80

The fair value of amounts included trade and other receivables approximates to book value. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable. The Group has in place three debentures with an aggregate amount of £600,000 which is held as security against the future value of its contracts, via the subsidiary EI Leasing Limited. 

14. Cash and cash equivalents

Cash and cash equivalents consist of cash on hand and balances with banks. Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts.

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Cash on hand and balances with banks	162	39

15.  Share capital

	Year ended 30 November 2008 £	Year ended 30 November 2007 £
Authorised
3,423,269,679 Ordinary shares of 0.1p each	3,423,270	3,423,270
26,027,579 Deferred ordinary shares of 9.9p each	2,576,730	2,576,730
	6,000,000	6,000,000
Issued and fully paid for
326,576,611 (2007 185,367,111) Ordinary shares of 0.1p each	326,577	185,368
26,027,579 Deferred ordinary shares of 9.9p each	2,576,730	2,576,730
	2,903,307	2,762,098
Reconciliation of the number of shares outstanding
Opening balance	2,762,098	2,762,098
Shares issued:
7 December 2007 16,000,000 Ordinary 0.1p shares	16,000	-
18 June 2008 125,209,500 Ordinary 0.1p shares	125,209	-
Closing balance	2,903,307	2,762,098

Deferred Ordinary Shareholders are not entitled to receive notice of any General Meeting of the Company and shall have no right to vote. The deferred shares do not rank for dividends.  

16. Capital and reserves

	Share Capital	Share Premium	Merger Reserve	Equity Reserve	Retained Earnings	Total Equity
	£'000	£'000	£'000	£'000	£'000	£'000
At 1 December 2006	2,762	7,540	17,523	-	(27,792)	33
Loss for year	-	-	-	-	(1,197)	(1,197)
Reserve for proposed share issue	-	-	-	280	-	280
At 30 November 2007	2,762	7,540	17,523	280	(28,989)	(884)
Loss for year	-	-	-	-	(1,592)	(1,592)
Share issues	141	2,643	-	(280)	-	2,504
At 30 November 2008	2,903	10,183	17,523	-	(30,581)	28

17. Borrowings

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Bank borrowings	2,400	2,400
Directors and related party loans
Non-current borrowings	986	2,383
Current portion of borrowings	-	-
	986	2,383
Total borrowings
Non-current	986	2,383
Current	2,400	2,400
	3,386	4,783

Non-current borrowings include three debentures with an aggregate balance of £600,000 which is secured against future contract valuations with its subsidiary EI Leasing Limited.

18. Retirement benefit obligations

The Group offers all employees the opportunity to join the Group's stakeholder pension scheme. There is no cost to the Group in offering the scheme.

19.  Trade and other payables

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Trade payables	956	364
Accrued expenses	261	241
Amounts due to related parties	-	267
	1,217	872

The fair value of 'amounts' included in trade and other payables approximates to the book value.

20.   Cash inflow from operations

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Loss before taxation	(1,677)	(1,252)
Adjustments for:
Depreciation and amortisation	584	167
Net finance costs	140	360
Decrease/(increase) in trade and other receivables	377	(461)
Decrease in inventories	35	137
Increase in trade payables	758	295
Cash generated from/(utilised in) operations	217	(754)

21.  Operating lease commitments

The Group leases property, items of office equipment and motor vehicles under non-cancellable leases over various periods. The future minimum aggregate lease payments under non-cancellable operating leases are as follows:

	Year ended 30 November 2008 £'000	Year ended 30 November 2007 £'000
Future minimum lease payments under non- cancellable operating leases:
Within one year	57	62
From one to five years	207	214
Over five years	285	335
	549	611

22.   Related party transactions

The Group's investment in subsidiaries has been disclosed in note 10. Transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note.

Relationship	Amounts owed to related parties Year ended 30 November 2008 £'000	Amounts owed to related parties Year ended 30 November 2007 £'000
Key management personnel	441	1,679
Entity controlled by key management personnel	436	704
	877	2,383

Key management includes Directors (executive and non executives).

  During the year the following transactions were carried out with related parties:

Loans from related parties

Loans from key management (and their families) and parties related to key management	Year ended 30 November 2008 £'000		Year ended 30 November 2007 £'000
	Loans	Interest	Loans	Interest
At 1 December	2,662	267	1,438	84
Conversion of loans to equity	(2,784)	-	-	-
Loans advanced in the year	999	-	944	-
Loans treated as equity in the year	-	-	280	-
Interest charged on loans	-	199	-	183
Interest waived on loans	-	(357)	-	-
At 30 November - loans	877	109	2,382	267
At 30 November - equity reserve	-	-	280	-

23.  Financial risk management

The Group's activities expose it to a number of financial risks as detailed below. These risks are managed with the objective of limiting adverse effects in accordance with policies determined by and decisions made by the Group Board. 

There have been no changes in financial risks from the previous year.

Market risks 

Market risk is the risk that changes in market prices, such as currency exchange rates and interest rates will affect the Group's results. The objective of market risk management is to control it within suitable parameters. 

Interest rate risk 

The Group does not use derivative financial instruments to mitigate its exposure to interest rate risk. The main element of interest rate risk is that bank borrowings are based on LIBOR and movements in LIBOR impact the interest paid.

 

Credit risk 

Credit risk is the risk of financial loss to the Group if a customer fails to meet its contractual obligations and arises principally from the Group's trade receivables from customers.  With regard to trade receivables, the Group is not subject to significant concentration of credit risk. The Group obtained trade finance in respect of its debtors and therefore the credit risk is minimised. In respect of non trade financed debtors, the Group set limits based on third party credit references. Customer credit limits and amounts outstanding, together with payment history are reviewed on a regular basis. 

The Group's maximum credit exposure on financial assets is represented by their book value. 

Liquidity risk 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due. 

  24.  Capital risk management

The Group's objectives in managing capital are to safeguard the ability of all entities within the Group to continue as going concerns. 

In order to maintain the capital structure the Group may issue new shares or sell assets to reduce debt. 

25.  Financial instruments

For cash and cash equivalents and trade and other payables and receivables the fair value approximates to their book value due to the short maturity profile of these financial instruments. On receivables, allowances are made within the book value for credit risk. 

The book values and fair values of financial instruments are set out below:

	2008 Book value	2008  Fair value	2007 Book value	2007 Fair value
	£'000	£'000	£'000	£'000
Current:
Trade and other receivables	800	800	1,233	1,233
Cash and cash equivalents	162	162	39	39
Trade and other payables	(1,217)	(1,217)	(872)	(872)
Borrowings	(2,400)	(2,400)	(2,400)	(2,400)
Total	(2,655)	(2,655)	(2,000)	(2,000)
Non-current
Borrowings	(986)	(986)	(2,383)	(2,383)
Deferred income	(145)	(145)	-	-
Total	(1,131)	(1,131)	(2,383)	(2,383)

Sensitivity analysis

The Group's principal exposures in relation to market risks are to changes in UK interest rates. The interest rate on bank borrowings is linked to LIBOR. A 1% increase or decrease in LIBOR would lead to an increase or decrease in post-tax earnings of £24,000 (2007: £24,000). 

26.  Transition to IFRS

This is the first period that the Group has presented its consolidated financial statements under IFRS.

The accounting policies set out in these financial statements have been applied in preparing the financial statements for the year ended 30 November 2008, the year ended 30 November 2007 and in the preparation of the opening IFRS balance sheet at 1 December 2006 (transition date).

In preparing the opening IFRS balance sheet, the Group has adjusted amounts previously reported in financial statements prepared in accordance UK GAAP. An explanation of how the transition from UK GAAP to IFRS has affected the Group's financial position, financial performance and cash flows is set out in the following tables and notes.

  Reconciliation of the consolidated income statement for the year ended 30 November 2007

	<-------------Year to 30 November 2007------------->
	2007 under UK GAAP	IAS 19 Employee benefits	IAS 23 Borrowing costs	2007 under IFRS
	£'000	£'000	£'000	£'000
Revenue	1,293	-	-	1,293
Cost of sales	(712)	-	-	(712)
Gross profit	581	-	-	581
Operating costs	(1,472)	(1)	-	(1,473)
Operating loss	(891)	(1)	-	(892)
Finance costs	(395)	-	35	(360)
Loss before taxation	(1,286)	(1)	35	(1,252)
Income tax credit	55	-	-	55
Loss for the period	(1,231)	(1)	35	(1,197)

  Reconciliation of shareholders' equity at 1 December 2006 (the Group's transition date to IFRS)

	<-------------------1 December 2006-------------------->
	2006 under UK GAAP	IAS 19 Employee benefits	IAS 23 Borrowing costs	2006 under IFRS
	£'000	£'000	£'000	£'000
Assets
Non-current assets
Goodwill	-	-	-	-
Other intangible assets	2,967	-	-	2,967
Plant and equipment	34	-	-	34
	3,001	-	-	3,001
Current assets
Inventories	215	-	-	215
Trade and other receivables	716	-	-	716
Cash and cash equivalents	327	-	-	327
	1,258	-	-	1,258
Total Assets	4,259	-	-	4,259
Equity and liabilities
Equity attributable to equity holders of the parent
Ordinary shares	2,762	-	-	2,762
Share premium	7,540	-	-	7,540
Merger reserve	17,523	-	-	17,523
Equity reserve	-	-	-	-
Retained earnings	(27,770)	(22)	-	(27,792)
Total equity	55	(22)	-	33
Non-current liabilities
Liabilities
Borrowings	3,922	-	-	3,922
Current liabilities
Trade and other payables	282	22	-	304
Total liabilities	4,204	22	-	4,226
Total equity and liabilities	4,259	-	-	4,259

  Reconciliation of shareholders' equity at 30 November 2007

	<-------------------30 November 2007------------------>
	2007 under UK GAAP	IAS 19 Employee benefits	IAS 23 Borrowing costs	2007 under IFRS
	£'000	£'000	£'000	£'000
Assets
Non-current assets
Goodwill	-	-	-	-
Other intangible assets	3,337	-	35	3,372
Plant and equipment	49	-	-	49
	3,386	-	35	3,421
Current assets
Inventories	78	-	-	78
Trade and other receivables	1,233	-	-	1,233
Cash and cash equivalents	39	-	-	39
	1,350	-	-	1,350
Total Assets	4,736	-	35	4,771
Equity and liabilities
Equity attributable to equity holders of the parent
Ordinary shares	2,762	-	-	2,762
Share premium	7,540	-	-	7,540
Merger reserve	17,523	-	-	17,523
Equity reserve	280	-	-	280
Retained earnings	(29,001)	(23)	35	(28,989)
Total equity	(896)	(23)	35	(884)
Liabilities
Non-current liabilities
Borrowings	2,383	-	-	2,383
Current liabilities
Trade and other payables	849	23	-	872
Current borrowings	2,400	-	-	2,400
	3,249	23	-	3,272
Total liabilities	5,632	23	-	5,655
Total equity and liabilities	4,736	-	35	4,771

Notes to the reconciliation 

IAS 19 Employee benefits

IAS 19 requires the recording of a holiday pay accrual. This has been included in the opening IFRS balance sheet at 1 December 2006. Although it is expected that this adjustment will be relatively stable in magnitude from one year to another, when comparing the year end there could be a balance sheet movement and income statement impact. The balance in the relevant income statement reflects the movement on this accrual.

IAS 23 Borrowing costs

IAS 23 was amended in March 2007 requiring all borrowing costs on qualifying assets to be capitalised. Although this requirement is only mandatory for periods commencing after 1 January 2009, the original IAS 23 did allow this treatment. The Group has decided that to remain consistent when this requirement comes into force, the option allowing capitalisation of borrowing costs on qualifying assets be adopted from the date of IFRS transition i.e. 1 December 2006. The inherent interest rate used in capitalising the borrowing costs is 12%.

27.  Events after the balance sheet date

Since the year end date, the Group has renegotiated its £2.4m loan facility with the RBS, £1.2m has been replaced with a new loan of £1.2m with Mr. T. Krell, a non-executive Director of the Company and the bank loan has been  reduced to £1.2m. The new loan facility with RBS is repayable on 30th June 2010 and the new loan from Mr. T. Krell is repayable on 1st June 2010.

On 18th May 2009, the Company succeeded in renegotiating the terms of the remaining £1.2m bank loan, which is not repayable until 30th June 2010; the facility is wholly guaranteed by Mr. R. Stross.

Annual Report

The Annual Report and Accounts for the year ended 30th November 2008 will be despatched to shareholders on 29th May 2009 and will also be available on the Company's website at www.eagle-i-telematics.com.

AGM

The Annual General Meeting of the Company will be held at Apollo House, 41 Halton Station Road, Sutton Weaver, Runcorn, Cheshire WA7 3DN at 10.00am on 30th June 2009.

ENDFR SEDFLUSUSEEI