8PG.L Regulatory News (8PG)

1 September 2011

Legendary Investments Plc

("Legendary" or the "Company")

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2011

REVIEW OF ACTIVITIES 

The year under review has been one of change with the turnaround and rebuilding of Legendary. The Company's liabilities were negotiated down; funding has been raised; new investments have been made; and the Board has been strengthened. Legendary is now on a significantly better footing than at the start of the year under review.

In the early part of the year, Legendary's investments were assessed in the light of the investment environment and capital available. The Company's liabilities were also assessed. Capital was realised by disposing of investments and suppliers and creditors were negotiated with, leading to a significant reduction in liabilities.

Funding was then raised by the Company. At the time (August 2010), the Company's share price was 0.075p. This precluded the issuance of shares so instead funding was raised via a loan facility of £30,000. The facility bears no interest and has no fixed repayment date. At the time the loan was made, the providers of the facility confirmed that there is no intention to call this facility in the foreseeable future. In exchange for the facility, the lenders were issued 260,000,000 warrants with an exercise price of 0.1p over ordinary shares. In order to minimise dilution, the Directors cancelled 250,000,000 options that they held. Thus funding was raised with an increase in the diluted share capital of 10,000,000 shares or 1%.

Having dealt with past issues and raised funding, the Company then sought to make investments with the potential for high capital appreciation over a relatively short period with a focus on high growth companies, sectors and economies.

In November 2010, Legendary negotiated an option to invest in Bosques Energicos EBE S.A. de C.V. ("Bosques"), a Mexican bio fuel company. The option was granted in exchange for the Company providing its expertise and assistance to Bosques in growing Bosques' business. This option enabled Legendary to invest in three tranches and to obtain representation on Bosques' Board. As at the balance sheet date, progress was being made against the business plan. Post the balance sheet date (see below) the first investment was made. Bosques specialises in oil and food crop production in Mexico and has a nursery consisting of 15,000 saplings of Pongamia Pinnata. Pongamia Pinnata is regarded as a premier crop for bio diesel production. The bio fuel industry is still in its infancy and the expectation is that there will be dramatic growth in demand for its use in Europe and world-wide driven by the desire for more environmentally friendly fuels and regulation. 

At the same time, Legendary raised £60,000 by placing 40,000,000 ordinary shares at 0.15 pence each, a 63% premium to the then closing price. The shares had attached to them three warrants for every four shares subscribed to. The warrants have an exercise price of 0.15 pence per share and have a life of three years.

In December 2010, the Board was strengthened with the appointment of Rajesh (Raj) Rai as an Executive Director. Raj was instrumental in bringing and assisting in closing the deal with Bosques. Raj is an entrepreneurial renewable energy specialist. He has significant experience and contacts in that sector. As well as bringing sector expertise, Raj adds to the Board legal expertise. He is a qualified barrister and a member of Lincoln's Inn.

The Bosques deal and the fund raising at a 63% premium to the share price started to attract attention to the Company from both investors and potential investees.

In March 2011, 225,000,000 shares were placed with Ronald Bruce Rowan at a price of 0.1p per share. These shares had attached to them one warrant for each share. The warrants are exercisable at 0.16p per share and have a three year life. This placing gave Mr Rowan an interest of 23.4% of the Company's enlarged share capital. The Board is pleased to have a strong investor with a successful track record.

Also in March 2011, Gavin Preston resigned, (effective 1 April 2011), from the Board. We thank Gavin for his contribution to Legendary. At the same time, Thomas (Tom) Reuner was appointed to the Board as an Executive Director. Tom is an experienced strategy consultant with a deep understanding of the dynamics of IT and telecommunications. A number of opportunities that the Company is seeing are in the IT sector. Tom is well placed to assess these. In addition to his sector experience, Tom brings strategic management consultancy skills to the Board.

With this change the Board now has skills and experience (investment banking, management consulting and legal) pertinent to its investment strategy. In addition to strengthening the Board, Legendary has established an audit committee, remuneration committee and nominations committee. Further, as well as Gavin Preston and Zafar Karim cancelling in August 2010 all of the options that had been granted to them and waiving part or all of their remuneration, the Company has adopted a policy of paying directors only £100 per annum until the Company makes cash realisations from its investments. In order to incentivise directors and align their interest with those of shareholders, directors take their remuneration in options. All options were awarded at a premium to the share price of the Company at the time of award.

During the year under review, Legendary made a net loss on investments of £10,000 (2010: net loss of £7,000). This related to the disposals made in the first half of the year. Administrative costs were £108,000 (2010: £81,000). The rise was primarily due to increased fees associated with consultants and other professional services and travel associated with investments. Along with negotiations with various suppliers to reduce costs, in the first half of the year, a loan of £88,000 which bore no interest and had no repayment terms was cancelled. The non-cash share option charge of £62,000 (2010: £123,000) related to the options granted to the Directors in January 2011. Overall operating loss was £92,000 (2010: £274,000). A non-cash finance charge of £21,000 was incurred. This relates to the warrants issued in August 2010 in connection with the August fund raising.

Overall, Legendary made a net loss of £113,000 (2010: £274,000).

Post the year end, Legendary, has been active. An intellectual property licence and service agreement for the supply of elite Pongamia scions and grafts to Bosques was entered into in April 2011. This agreement enhances the value of Bosques by making available to it materials required to develop the Pongamia mother garden in Mexico. Bosques will pay to Legendary a royalty fee on the sales of elite Pongamia material thereby produced. Following this agreement, and in light of the progress made by Bosques, investment was made thereby obtaining a 15.4% stake in Bosques.

In May 2011, Legendary negotiated a 42.5% stake in Raw Games Limited ("Raw Games"), a company specialising in the development of computer games on several platforms. Legendary assisted the management in putting together a milestone plan, the first milestone of which, development of a publisher demonstration, has already been completed. In July 2011, the principals of Raw Games earned back 2% of the equity of Raw Games for hitting this milestone. The Company is now assisting Raw Games with developing a business plan and is in discussions with international games publishers.

Legendary also made two investments in pre-IPO situations: an investment in Terra Energy Limited in May 2011, a company established to exploit unconventional oil and gas resources, and MedGold Resources Limited, in July 2011, a gold and precious metal discovery and development company.

In total, the above investments amounted to £108,000.

Outlook

As mentioned above, the year under review has been one of turnaround and rebuilding. Legendary now has a strong Board with a mix of skills and expertise which will serve the Company well. In addition, the Directors are remunerated on a basis which preserves cash until the Company realises cash from its investments, and aligns their interests with those of the shareholders. The Company's balance sheet has been strengthened and several investments negotiated and made. The Board looks confidently to building on the progress made thus far.

Profit and Loss Account

A separate statement of recognised gains and losses has not been prepared as the Company has no recognised gains or losses in the current or prior period other than the loss noted above.

All activities derive from continuing operations.

Balance Sheet

Cash Flow Statement

Other than the director's fees of £7,300 (2010: £12,000) paid to directors there were no staff costs paid during the year (2010: £nil).

As at 31 March 2011 the Company had losses of approximately £5.8m (2010: £5.7m) available to carry forward against future income. No deferred tax asset is recognised in respect of these losses due to the uncertainty as to the utilisation of the losses in the foreseeable future.

Future tax charges will be dependent on the split of profits for tax purposes as between revenue and capital items, and the utilisation of losses incurred to date.

The loss attributable to ordinary shareholders and weighted average number of ordinary shares for the purposes of calculating the diluted loss per share are identical to those used for basic loss per ordinary share. This is because the exercise of share options and other benefits would have the effect of reducing loss per share and is therefore not dilutive under the terms of FRS 22 Earnings Per Share.

£238,000 of the other debtors represents the cash balance held in the client account of the Company's accountants as at the year end date. The balance is payable on demand. Due to their short term nature, carrying value approximates to fair value.

Trade creditors represent the company's financial liabilities measured at amortised cost. Due to their short term nature, carrying value approximates to fair value.

The other loan of £88,379 which was interest free and had no repayment terms was cancelled during the year.

The loan represents the funding of £30,000 that was raised in August 2010 by way of a loan facility. The facility bears no interest and has no fixed date for repayment. The loan is not expected to be paid in the foreseeable future and therefore has been classified as due in more than one year as the directors believe this most appropriately reflects the period over which the loan will be repaid. As part of the terms of the loan, Legendary granted 260,000,000 warrants over new ordinary shares at an exercise price of 0.1p per share. At that time, the Company's share price was 0.075p.

On 25 November 2010, the Company placed 40,000,000 ordinary shares of nominal value 0.1p per share at 0.15p per share thereby raising £60,000. On 7 March 2011, the company placed a further 225,000,000 shares of nominal value 0.1p per share at nil premium thereby raising £225,000.

Transaction costs amounting to £49,650 (£38,400 of warrant charge and £11,250 in fees) (2010:nil) in regard to issue of shares were deducted from equity and charged against the share premium account.

12 SHARE BASED PAYMENT

The Company has unapproved and approved share option schemes in which the Directors participate.

Under the Company's approved share option plan, the Company grants options and shares to certain directors and employees of the Company. If the options remain unexercised for a period after 10 years from the date of grant, the options lapse. The options are exercisable immediately on grant.

Details of Directors' outstanding share options as at the year ended are shown below.

During the year 250,000,000 share options relating to Gavin Preston and Zafarullah Karim were cancelled.

Movements in ordinary share options outstanding

All options were exercisable at the end of the year.

12 SHARE BASED PAYMENT (continued)

Fair value

The fair value of the options is estimated at the date of grant using a Black-Scholes option pricing model that uses assumptions noted in the table below. No performance conditions were included in the fair value calculations.

The Company uses historical data to estimate option exercise and employee termination within the valuation model. Expected volatilities are based on implied volatilities as determined by simple average of a sample of listed companies base in similar sectors. The risk free rate for the period within the contractual life of the option is based on the UK gilt yield curve at the time of the grant.

The share based payment charged for the year was £62,000 (2010: £123,000).

Other than the employee share options set out in note 12, warrants have been granted with exercise prices and dates shown in the table below.

The fair value of warrants granted in the year was £75,400 (2010: £nil).

12 SHARE BASED PAYMENT (continued)

Fair value

The fair value of the warrants is estimated at the date of grant using a Black-Scholes option pricing model that uses assumptions noted in the table below. No performance conditions were included in the fair value calculations.

Other Information

Post the balance sheet date, on 16 May 2011,Tom Reuner was awarded 5,000,000 options with an exercise price of 0.35p.

The market price of the Company's ordinary shares ranged from a high of 0.31p to a low of 0.07p during the year.

18 FINANCIAL INSTRUMENTS

Interest rate risk

The Company had no floating rate financial liabilities at 31 March 2011 and 31 March 2010.

Borrowing facilities

At the year end the Company had no overdraft facility (2010: £Nil).

Capital Management

The Company is financed primarily with equity capital, which is then utilised to meeting operating expenses and make investments. Investments are financed primarily from equity capital, though debt may be utilised where it is felt that it is prudent o do so.

Currency risk

The Company makes investments in both UK and foreign companies. In addition, the companies in which the Company invests may or may not have exposure to foreign currency exposure. In this regard the Company has foreign currency exposure. Currency exposure is one the factors considered when making investments, and as such it is implicitly managed at the point of investment.

18 FINANCIAL INSTRUMENTS (continued)

Credit risk

Credit risk arises on the cash balance the Company holds in a client account with its accountants. These balances are held in a segregated account with banks that have high credit ratings assigned to them by international credit agencies.

Liquidity risk

The Company makes investments in unlisted and listed entities. Consequently the Company is exposed to the liquidity risk to the extent that it may not be able to find buyers for its unlisted investments and liquidity in its listed investments may be low. Therefore there can be no certainty that the Company would be able to exit its investments.

Market risk

The Company monitors its investments on a regular basis, and takes action when it deems appropriate.

19 POST BALANCE SHEET EVENTS

Post the year end, in April 2011, the Company entered into an intellectual property licence and service agreement for the supply of elite Pongamia scions and grafts to Bosques. This agreement makes available to Bosques materials required to develop the Pongamia mother garden in Mexico. Bosques will pay to the Company a royalty fee on the sales of elite Pongamia material thereby produced.

Following this agreement, and in light of the progress made by Bosques, the Company invested thereby obtaining a 15.4% stake in Bosques in April 2011.

In May 2011, the Company negotiated a 42.5% stake in Raw Games Limited ("Raw Games"), a company specialising in the development of computer games on several platforms. The Company assisted the management in putting together a milestone plan, the first milestone of which, development of a publisher demonstration, has already been completed. In July 2011, the principals of Raw Games earned back 2% of the equity of Raw Games for hitting this milestone. The Company is now assisting Raw Games with developing a business plan and is in discussions with international games publishers.

The Company also made two investments in pre-IPO situations: an investment in Terra Energy Limited in May 2011, a company established to exploit unconventional oil and gas resources, and MedGold Resources Limited, in July 2011, a gold and precious metal discovery and development company.

In total, the above investments amounted to £108,000.