Following the placing of 7.4m shares, 5.5m of them new, in Tadpole Technology Plc by Henry Cooke Corporate Finance Ltd, trading in the shares on the London International Stock Exchange is scheduled to start on Monday. Keeping it all in house, Henry Cook Lumsden Plc is the broker to the issue. The company does not have a sparkling financial story to tell – it lost UKP1.7m pre-tax on turnover of UKP12.5m in the year to September 30, and its only profitable period in four years was the nine months to September 1991, when it did UKP684,000 pre-tax on sales of UKP9.6m. It lost UKP270,000 on sales of UKP6.7m in the year to December 1989, and lost UKP935,000 on UKP5.7m sales the previous year. The company explains its performance by saying that 1989 was the first year that the US contributed the majority of its sales, 61% of the total, and that it was hit that year by a 35% fall in the UK because it was too reliant on one customer; it raised UKP1.5m in a rights issue. In 1990 a major supplier failed to complete development of an important microprocessor in time to deliver parts during the year – this was the time when Tadpole was bring Intel Corp 80860 boards on stream – so it was unable to fulfil US orders for the board. Everything came through in the first nine months of 1991 so the company was able to trade profitably. In fiscal 1992, the drain on finances was development costs for the Sparcbook, exacerbated by a fall in demand for the board-level products: these were sufficiently severe that the company had to raise UKP572,000 in March in another rights issue after having to throw itself onto the mercy of its bankers and creditors in order to continue trading. Since then, demand for board level products has increased, but the Sparcbook has taken off more slowly than Tadpole hoped, so that by September 30 it had sold 647 of the things, bringing in UKP3.5m. The UKP3m or so net of expenses that it expects from the placing will go to eliminating existing bank loans, which stood at UKP952,200 on November 13, with the balance going for working capital. The company looks for demand for board-level products to continue OEM customers for these have included E-Systems Inc, Polaroid Corp, General Electric Co Inc, Amdahl Corp, Encore Computer Corp, Xerox Corp and Thomson-CSF SA.
IBM to get up to 12.7%
It also plans to develop notebook computers that will be compatible with the workstations made by other manufacturers. The Sparcbook 2 is in development, and the come-on for potential investors in the prospectus is the agreement with IBM Corp – but this is not signed and sealed yet. IBM will market the resulting product – to be manufactured by Tadpole – but continuation of the development agreement beyond January 29 is contingent on successful completion of an investment in the company by IBM. The presently non-binding agreement calls for IBM to subscribe $500,000 for new shares at the placing price of 65 pence, giving IBM 2.7%, and to grant IBM warrants to subscribe for sufficient additional shares to represent a total of 10% of the enlarged equity, also at 65 pence a share, subject to adjustments. The warrants will be exercisable from October 1993 for seven years, and would take IBM’s holding up to 12.4%. The agreement includes granting IBM a non-exclusive licence to the Nomadic Computing Environment. There is no profit forecast.
