BIDS.L Regulatory News (BIDS)

Fitbug Holdings Plc / Epic: FITB.L / Index: AIM / Sector: Leisure

29 May 2014

Fitbug Holdings Plc ('Fitbug' or 'the Company')

Final Results for the year ended 31 December 2013

Update on Sales and Orders for 2014

Fitbug Holdings Plc, the AIM listed provider of online personal health and well-being services, is pleased to provide its Final Results for the year ended 31 December 2013 as well as an update on sales and orders for the year 2014 to date. The report and accounts for the year ended 31 December 2013 are being sent to shareholders and will be available on the Company's website, www.fitbugholdings.com, shortly. In addition, the Company gives notice of its AGM to be held at 1st Floor Waterside House, 47 Kentish Town Road, London, NW1 8NX on 25 June 2014 at 1.00pm. 

Final Results

· Revenue for year ended 31 December 2013 of £749,000;

· Loss before tax of £2,643,000 reflecting the significant investment in new product, infrastructure and distribution channels to support strategic decision to focus on the consumer market;

· Legal action against Fitbit is scheduled to go to trial in early 2015 - the Company believes that it has a strong case; and

· Supportive financial backers - all loans extended to end July 2015 on attractive terms.

Update on Sales and Orders for 2014 - year to date 60% above 2013 full year

· Sales and confirmed orders the year 2014 to date at £1.2 million - 60% higher than overall sales for the whole of 2013;

· Retailers include Tesco, Dixons and PC World in the UK, Dick Smith and Myer in Australia, Incredible Connections and Dion Wired in South Africa, Mvideo in Russia and Radioshack in the US;

· Ten distribution partners appointed since January 2014 providing strong foundations for future growth; and

· Early results validate strategic decision to prioritise establishing global retail distribution channels.

Malcolm Fried, recently appointed CEO of Fitbug Holdings Plc, said: "In broadening the product range, switching our strategic distribution focus to retail, and bolstering our management team, Fitbug has positioned itself for growth in 2014. The Company's strategy is supported by our financial backers including the Kirsh Group and we look forward to building revenues and market penetration in 2014."

Statement from Chairman and CEO

'Wearable technology' continues to progress strongly as the digital health sector becomes established. We are pleased to report that our new products launched both before and since the year end have strengthened Fitbug's position in the Wearables and Digital Health category. Following substantial investment our core product repertoire now consists of the Fitbug Orb, a Bluetooth Smart, wireless activity and sleep tracker, and KikplanTM, which is in development for release in Q3.

KikplanTM is a personalised coaching service designed to work with activity trackers to meet health, weight and fitness goals. 

Both Fitbug Orb and KikplanTM have been commended on an industry level and, reflecting this, we have to date in 2014 secured new contracts, strengthened our sales teams, increased retail uptake, gained financing on attractive terms, and positioned the business for increased uptake and value enhancement.

At £1,200,000, sales and confirmed orders so far in 2014 are 60% higher than overall sales for the whole of 2013. Since January 2014 we have appointed ten retail distribution partners, to provide coverage in the UK, US, France, Germany, Italy, Russia, South Africa, S.E Asia, Australia and New Zealand. In the US, we signed an exclusive retail sales representative agreement with Griffin International Companies, Inc.

Following these appointments in 2014, we are pleased to announce that so far some 20 retailers have confirmed plans to stock Fitbug products. These retailers include Tesco, Dixons and PC World in the UK, Dick Smith and Myer in Australia, Incredible Connections and Dion Wired in South Africa, Mvideo in Russia and Radioshack in the US.

The Company's new products complement a portfolio of integrated connected health products as Fitbug increases its presence in the mobile healthcare market. Our key focus is now on building our presence and revenues across the retail market. This change in strategy is fuelled by highly positive industry forecasts. For example, in a February 2014 assessment of the market, Canalys Research predict wearable band sales to increase to 17 million in 2014, growing to over 45 million by 2017 (http://www.canalys.com/newsroom/16-million-smart-bands-shipped-h2-2013). Additionally, wearables were recognised as one of the fastest growing product categories at the January 2014 Consumer Electronic Show and, according to ABI research, total wearable adoption is expected to grow to 170 million per annum in 2017.

We have positioned our products as good value and high quality, with multi-wear functionality, to appeal to a broad range of consumers. Fitbug has also invested in App development, significantly broadening Android smartphone connectivity. With this in mind, in order to oversee our sales development we appointed Ann Jones as Group Sales Director post period end and will gain from her strong sales and account management record.

Corporate Review

Post period end we appointed two new members to the Fitbug Board. Malcolm Fried, previously head of Bloomberg's Europe, Mideast & Africa digital and broadcast business unit, has been appointed as CEO with David Turner moving to a non-executive role. We look forward to benefiting from Malcolm's experience in building and structuring operations to optimise efficiency and value. In addition to Malcolm's appointment we are very pleased that Ann Jones, previously at Lowendalmasai, an Enterprise Cost Management Consultancy, where she was European Business Development Director, has joined the Board as Group Sales Director.

Paul Landau remains CEO of the Company's subsidiary, Fitbug Limited, and will continue to oversee its strategic direction and pioneer product development.

Legal Action against Fitbit

The Company's legal action against Fitbit alleging trademark infringement, unfair competition and unfair business practices is progressing and scheduled to go to trial in the U.S. District Court for Northern California in early 2015. We believe that we have a strong case.

Financial Review

Fitbug's financial results for the year ended 31 December 2013 show revenues of £749,000 (31 December 2012: £1,334,000) and a loss before tax of £2,643,000 (31 December 2012: £1,444,000) which reflects the significant investment in new product development and innovation and the strategic decision to focus the Company's product range on the retail consumer market where the Board believe there are substantial growth opportunities as wearable device adoption become mainstream. Fitbug's cash balance at 31 December 2013 was £139,000 (2012: £648,000).

Importantly, we have supportive financial backers in NW1 Investments and Kirsh Group. In 2013 we signed loan agreements for £2,000,000 with NW1 Investments Limited ('NW1') and Kifin Limited ('Kifin'), a Kirsh Group subsidiary, at an interest rate of 5%. Post period end we have signed additional loan agreements for £2,000,000 on the same terms, and were also delighted to announce an agreement that the repayment date of all loans to the Company were extended to 31 July 2015. The funds used will be used to support business development and the marketing of our products.

Outlook

Fitbug, by expanding the product range, switching our strategic distribution focus to retail, and bolstering management, has positioned itself for growth. The Company's strategy is supported by funding on attractive terms and we look forward to building revenues and market penetration in 2014.

Fergus Kee, Chairman, Fitbug Holdings Plc

Malcolm Fried, CEO, Fitbug Holdings Plc

For further information contact:

Consolidated Statement of Changes in Equity

For the year ended 31 December 2013

Notes to the Consolidated Financial Statements for the year to 31 December 2013

1. General Information

Fitbug Holdings plc is a company incorporated in the UK and its activities are as described in the chairman's statement.

The preliminary announcement of results is not the company's statutory accounts. Statutory accounts for the year ended 31 December 2013 have not been delivered to the Registrar of Companies. The auditors have reported on the statutory accounts for the year ended 31 December 2013 on 28 May 2014 and their report was unqualified and included a reference to a matter to which the auditor drew attention by way of emphasis without qualifying the report.

Emphasis of matter

The auditors' report drew attention by emphasis of matter to issues surrounding going concern as set out in note 2.

2. Basis of preparation and significant accounting policies

The consolidated financial statements of Fitbug Holdings Plc have been prepared in accordance with International Financial Reporting Standards (IFRSs), International Accounting Standards (IAS) and International Financial Reporting Interpretations Committee (IFRIC) interpretations (collectively "IFRSs") as adopted for use in the European Union and as issued by the International Accounting Standards Board, and with those parts of the Companies Act applicable to companies reporting under IFRS.

Going concern

The financial statements have been prepared on the going concern basis which assumes that the Group and the Company will have sufficient resources to enable it to continue trading for the foreseeable future.

The directors have since the end of the financial year secured further funds for the Company:

• NW1 Investments Limited ('NW1') has agreed further loan facilities totalling, in aggregate, £2,000,000. These loans are repayable by 31 July 2015, but if during the term of the loan, the Group undertakes an equity issue, NW1 can elect to convert up to £1,000,000 of its outstanding loan into new ordinary shares. The repayment dates for all loans from NW1 and Kifin Limited have been deferred to 31 July 2015

• Repayment terms of directors' loans of £75,000 have also been deferred until 31 July 2015

The directors have prepared financial forecasts which suggest that, based on conversion of the anticipated sales pipeline; sufficient facilities will be available to meet the Group's short term funding requirements. However the board consider that it will be necessary to secure further longer term funding to support the development of the business and planned growth in the US.

The directors have continued to adopt the going concern concept in preparing the financial statements on the basis that they believe that the new funds secured as described above and the anticipated sales pipeline will provide sufficient cash until such time that longer term finance can be sourced. The sales forecasts are however necessarily based on the achievement of timings and revenue forecasts which, although believed reasonable by the directors, are nevertheless outside the Group's control. If significant delays were to take place, these may render the Group's cash resources insufficient.

If as a result the Group were unable to continue as a going concern, then adjustments would be necessary to write assets down to their recoverable amounts, non-current assets and liabilities would be re-classified as current assets and liabilities and provisions would be required for any costs associated with closure.

3. Loss per share

The loss per share from continuing and discontinued operations is based on a loss of the year attributable to equity holders of the Parent Company of £2,643,000 (2012: £1,444,000) and the weighted average number of ordinary shares in issue for the year of 168,514,973 (2012: 159,440,927).

The exercise of the outstanding options would reduce the loss per share and hence have an anti-dilutive effect.

There are 13,000,000 (2012: 13,000,000) shares that could potentially be issued under the terms of options and a further 66,666,667 shares that could potentially be issued under the terms of a convertible loan that will potentially reduce future earnings per share.

**ENDS**

Notes

Fitbug is a leading provider of online health and well-being services to help individuals to improve their lifestyles by making realistic changes to their daily routine. It combines activity tracking devices, which download to the Fitbug app and fitbug.com, to provide an understanding of each user's daily activity achievements, with mobile and web technology providing users with personalised weekly activity and nutrition targets, feedback, advice and encouragement. Key market sectors and distribution channels include retail, health insurance and rewards providers, workplace health programmes fitness operators and consumers. For more information, visit www.fitbug.com.