LBB.L Regulatory News (LBB)

LiteBulb Group Limited

("LiteBulb" or the "Company" or the "Group")

Final Results for the 18 months ended 31 December 2013

LiteBulb (AIM: LBB), the brand and product development specialist, announces audited results for the 18 months ended 31 December 2013.

During the period the Company announced a change in accounting reference date from 30 June to 31 December. The statutory results for the 18 months ended 31 December 2013 are provided in the consolidated statement of comprehensive income, however the Company believes that the results for continuing operations for the 12 months ended 31 December 2013 are more helpful for investors.

Financial highlights for continuing operations (12 months to December 2013)

· Revenue of £8.08m

· Gross profit of £3.28m

· EBITDA loss (before exceptional items) of £0.59m

· Adjusted loss before tax (before exceptional items) of £0.92m

· Cash at bank at 31 December 2013 of £1.8m (30 June 2012: £0.12m)

Operational highlights

· Acquisition of Bluw (Feb 2013), Rizon Studios (March 2013) and Meld (Nov 2013)

§ All acquisitions integrating well and benefitting from Group synergies

· Strong performance from Rizon Studios

§ 10 new clients signed including Disney EMEA, Nickelodeon & Merlin Entertainment

§ Expanded service offering through talent acquisition

· Litebulb Product division integrating Meld, Bluw products, and existing LiteBulb products

· Good pipeline of new licence deals including National Geographic and Star Wars

· Three year deal to produce Mary Berry range of cooking products, launching in spring 2014

Simon McGivern, Chief Executive of LiteBulb, commented: "This last 12 months has seen exciting progress in terms of dramatic growth of the Group. Three years ago our business was turning over less than £1.8m in revenues, whereas in the last year we have built revenues to over £8m. This growth will be further enhanced by acquisition and we will continue to actively seek strategic targets that will help provide significant scale to the Group and returns to our shareholders. LiteBulb's relationships with blue chip retailers strengthen as we grow, and with an extensive forward order book we are confident that we will deliver further significant growth in 2014 and move into profitability."

The Group's Report and Accounts for the 18 months to 31 December 2013 will be posted to shareholders this week and is available on the Group's website www.litebulbgroup.com. The Group's AGM will be held at 10am on 22 April 2014 at the offices of Fladgate LLP, 16 Great Queen Street, London, WC2B 5DG.

About LiteBulb Group

LiteBulb Group designs, manufactures and distributes innovative brands and products to the global retail market.

LiteBulb Products, including Ila, Scootrix and Silly Socks, are sold in over 30 countries through blue chip retailers including: ASDA, BHS, Tesco, Sainsbury's, WH Smith, Halfords, Morrisons, QVC, Next, Fenwicks and Toys R Us.

LiteBulb Creative is a creative agency with global reach, delivering compelling and agile brand extension programmes to the entertainment industry. LiteBulb Creative has designed products and campaigns for clients around the world, including Disney, Hasbro and Miramax.

Chief Executive's Statement

Introduction

2013 was a transformational year for LiteBulb, during which time we made three acquisitions, all of which have made a significant contribution to Group revenues. The integration of the acquisitions is progressing well and all three are benefiting from Group synergies. The last year has seen the Group increase in scale considerably, having been a business turning over just under £1.8m back in 2011, to become a well-established player in brands and products with over £8m in revenue.

Our strategy is to continue to increase scale through acquisitions in order to improve our strong relationships with and offerings to blue-chip retailers, as well as pursue organic growth as the Group position strengthens.

We now have established, trusted relationships with a wide range of global retailers and are seeking to leverage this strong positioning going forward, particularly in light of the renewed confidence within the retail market. We therefore continue to look forward with confidence and expect to deliver further strong progress in 2014.

Financial Results

During the period the Company announced a change in accounting reference date from 30 June to 31 December. The statutory results for the 18 months ended 31 December 2013 are provided in the consolidated statement of comprehensive income. However the Company believes that the results for continuing operations for the year ended 31 December 2013 are a more helpful for investors and will be used as the comparable financial period for future results.

The Company generated revenue from continuing operations for the year to 31 December 2013 of £8.08m, as a result of both organic and acquisitive growth during the year. This produced a gross profit of £3.28m reflecting gross margins of 40.6%. 

The Company recorded an operating loss before exceptional administrative expenses of £0.68m and a loss before tax of £1.16m for the year ended 31 December 2013.

The loss for the year from continuing operations was £1.3m. Following a loss of £0.72m from discontinued operations, we recorded a total loss for the year of £2.03m, which after taking into account of foreign exchange differences resulted in a loss per share of 0.14p.

Cash at bank at 31 December 2013 increased to £1.8m from £0.1m at 30 June 2012

Whilst it is difficult to present comparable numbers to these results because of the change of year end it is worth noting that the business has grown considerably in the last three years. For the year ended 30 June 2011 the Company recorded revenues of £1.76m and an operating loss before exceptionals of £0.88m.

Acquisitions

Bluw

Bluw, a global designer, manufacturer and distributor of award winning innovative gifts and toys was acquired in February 2013 and has been fully integrated into LiteBulb's Product division. 

Since this time Bluw has traded ahead of internal expectations, having benefited through the introduction of its extensive and fast growing product portfolio to our wider base of blue-chip retail clients. Recent achievements for Bluw include signing Avon as a major new UK client, while Underground Toys have taken the full range of Bluw's Star Wars collectibles range with an initial order worth £0.18m. 

Rizon Studios

Rizon Studios, the brand extension agency for global entertainment organisations including Disney, Mattel, Sony Pictures and Paramount, was brought into the Group in March 2013, leading us to establish our Creative Division ("CD") to assist us in developing our clients' brands. Rizon also enabled LiteBulb to become a licensor, enabling us to increase margins on certain products and opening up new relationships with film studios, music publishers and other media firms.

Rizon has proved a considerable success with trading growing strongly since being incorporated into the Group. Ten major new clients were signed in 2013, comprising of Disney EMEA, News UK, Nickelodeon, American Greetings, UKTV, UXUS, Universal, Rubiks, Merlin Entertainment and Playground Productions (a division of Mattel). Post the period end Rizon also signed major clients including Mr & Mrs Smith Entertainment and Marvel (now part of the Disney Group).

In order to service these new clients, and to assist in the brand development of LiteBulb's other clients, staff numbers at Rizon have grown from four to twelve since the acquisition and we expect to expand this number still further in the near term.

Meld

The Meld Group, a brand and product development company focused on books, gifts and games, was brought into the Group in November 2013. With established relationships with retailers, including Marks & Spencer and Sainsburys, the acquisition strengthened our existing retail relationships, expanded LiteBulb's portfolio of high quality brands and products and has provided cross-selling opportunities within the Company's existing client base.

Meld significantly increased the Group's revenues and, as with LiteBulb's other acquisitions, has delivered sales ahead of expectations since being incorporated into the Group.

Fundraisings

£1.1m Fundraising

In February 2013, we completed a £1.1m fundraising to provide expansion capital by means of a secured Convertible Loan Note. This round of fundraising attracted well respected institutional investors, demonstrating confidence in our strategic plans and growth ambitions.

£0.8m Fundraising

In July 2013, LiteBulb raised £0.8m after expenses in order to accelerate the Company's organic and acquisitive growth and to supplement the working capital requirements of the enlarged group following the successful integration of Bluw and Rizon Studios.

£3.0m Fundraising

In November 2013, LiteBulb raised £3.0m before expenses with both existing and new shareholders. The majority of the net proceeds of the placing was for working capital purposes with the remainder used to partly fund the acquisition of Meld.

Board and Management Changes

During the period, LiteBulb has significantly reinforced its management team and we believe we now have the correct Board in place to manage our growing scale, as we seek to leverage our strong positioning with the leading retailers.

Post the period end, in March 2014, Michael Hough, co-founder and former Managing Director of Altium Capital, was appointed to the board as a Non-Executive Chairman. An experienced investment banker, Michael also co-founded private equity funds Iceni Capital and Aurora Investment Advisors Ltd and has chaired a number of public and private companies. Michael began his investment banking career at Goldman Sachs in New York before joining Drexel Burnham Lambert in London in 1988.

As stated in our previous interim results announcement, Michael Brennan was appointed to the board of LiteBulb as a non-executive director in September 2013. He has over 14 years of experience working in equity capital markets, predominantly in a corporate finance capacity, focussing on small and mid-sized companies.

The investment banking experience of our new board members, particularly in respect of their experience in providing advice to fast growing smaller companies and maximising shareholder value, is expected to prove invaluable to LiteBulb going forward.

Outlook

This last 12 months has seen exciting progress in terms of dramatic growth of the Group. Three years ago our business was turning over less than £1.8m in revenues, whereas in the last year we have built revenues to over £8m. This growth will be further enhanced by acquisition and we will continue to actively seek strategic targets that will help provide significant scale to the Group and returns to our shareholders. LiteBulb's relationships with blue chip retailers strengthen as we grow, and with an extensive forward order book we are confident that we will deliver further significant growth in 2014 and move into profitability.

Simon McGivern

Chief Executive

1 April 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The accompanying accounting policies and notes form an integral part of these financial statements.

 CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Approved by the Board on 1 April 2014 and signed on its behalf by

Mr SP McGivern

Director

Company registration number: 91984

Registered in Jersey, Channel Islands

COMPANY STATEMENT OF FINANCIAL POSITION

Approved by the Board on 1 April 2014 and signed on its behalf by

Mr SP McGivern

Director

Company registration number: 91984

Registered in Jersey, Channel Islands

CONSOLIDATED STATEMENT OF CASH FLOWS

COMPANY STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

COMPANY STATEMENT OF CHANGES IN EQUITY

PRINCIPAL ACCOUNTING POLICIES

Basis of preparation and general information

The Company's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and as applied in accordance with the provisions of the Companies (Jersey) Law 1991.

Basis of consolidation

The Group financial statements consolidate the financial statements of the Company and all of its subsidiaries as at 31st December 2013.

Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition.

Going concern

The Company's activities are funded by a combination of long term equity capital and term loans. The day to day operations are funded by cash generated from trading.

The Board has reviewed the Company's profit and cash flow projections and are of the opinion that the Company will meet its obligations as they fall due with the use of existing facilities.

The financial statements do not reflect the adjustments that would be necessary were the trading performance of the Company to deteriorate significantly.

Foreign currencies

The functional currency of the Company and the Group is Pounds Sterling. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

On consolidation, the assets and liabilities of the Group's overseas operations are translated at the exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group's translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of.

Revenue recognition

Revenue is measured at the fair value of consideration received or receivable.

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. All such revenue is reported net of discounts and value added and other sales taxes.

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the amount of revenue can be measured reliably.

Interest expense recognition

Interest is charged to the income statement on an accruals basis using the effective interest method and is added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.

Effective interest method

The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial asset or liability to that asset's or liability's net carrying amount.

Exceptional items

The Group presents as exceptional items on the face of the income statement those significant items of income and expense which, because of their size, nature and infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the period, so as to facilitate comparison with prior periods to assess trends in financial performance more readily.

Investments

Investments in subsidiaries are held at cost less any impairment.

Intangible assets

An intangible asset, which is an identifiable non-monetary asset without physical substance, is recognised to the extent that it is probable that the expected future economic benefits attributable to the asset will flow to the Group and that its cost can be reliably measured. The asset is deemed to be identifiable when it is separable or when it arises from contractual or other legal rights.

Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired is capitalised, is deemed to have an indefinite useful economic life and is reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses.

Other intangible assets are deemed to have a useful economic life of three years and amortisation on these assets is calculated using the straight line method.

Impairment testing of goodwill and other intangible assets

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at the cash-generating unit level. Goodwill is allocated to those cash-generating units that have arisen from business combinations and represent the lowest level within the Group at which management monitors the related cash flows.

Goodwill with an indefinite life is tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

Tangible assets

Property, plant and equipment is stated at historic cost less subsequent depreciation and impairment.

Historic cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation on assets is calculated using the straight line method to allocate their cost less their residual values over their estimated useful lives, as follows:

Plant and equipment: 2-10 years

Short leasehold buildings: over the life of the lease

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. Subsequent costs are included in an asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Litebulb Group and the cost of the item can be measured reliably. The carrying amount of a replaced part is derecognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial year in which they are incurred.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the statement of comprehensive income.

Income tax

Income tax expense represents the sum of the tax currently payable and deferred income tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is provided in full, using the Balance Sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and the carrying amounts in the financial statements.

Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than as a business combination) or other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax is determined using the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, provided they are enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are offset when they relate to income taxed levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

Capital management

Capital is made up of stated capital, retained earnings and non-current borrowings. The objective of the Company's capital management is to ensure that it maintains strong credit ratings and capital ratios. This will ensure that the business is correctly supported and shareholder value is maximised.

The Company manages its capital structure through adjustments that are dependent on economic conditions. In order to maintain or adjust the capital structure, the Company may choose to change or amend dividend payments to shareholders or issue new share capital to shareholders. There were no changes to the objectives, policies or processes during the eighteen months ended 31 December 2013.

Inventories

Inventories are valued at the average cost basis and are included at the lower of cost and net realisable value less any provisions for impairment.

When goods are sold, costs previously included in the measurement of that inventory are recognised as an expense through cost of sales.

Trade and other receivables

Trade and other receivables are recognised by the Company and carried at original invoice amount less an allowance for any uncollectible or impaired amounts. Trade and other receivables are classified as loans and receivables.

Provision against trade receivables is made where there is objective evidence that the Company will not be able to collect all amounts due. Bad debts are written off when they are identified as being bad.

Other receivables are recognised at fair value.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short term deposits. Short term deposits are defined as deposits with an initial maturity of three months or less.

Bank overdrafts that are repayable on demand and form an integral part of the Company's cash management are included as a component of cash and cash equivalents for the purposes of the Cash flow statement.

Trade and other payables

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.

Critical accounting judgements

The preparation of financial statements under IFRS requires the Company to make estimates and assumptions that affect the application of policies and reported amounts. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

Recognition of deferred tax asset

Litebulb Group Limited's management bases its assessment of the profitability of future taxable income on the Company's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is recognised in full.

Employee benefits - Share based payments

The group operates an of equity-settled, share-based payment compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the group. The fair value of the employee service 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 entity 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 statement of comprehensive income, with a corresponding adjustment to equity.

Where options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to stated capital when the options are exercised.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.

Adoption of new revised International Financial Reporting Standards (IFRS)

The IASB and IFRIC issued a number of Standards and Interpretations with an effective date before the date of these financial statements. The new Standards and Interpretations issued include the following:

IAS 12 Amendment - Deferred Tax: Recovery of Underlying Assets

IAS 32 (Amendment) (October 2009) - Classification of Rights Issues

IAS 39 (Amendment) (July 2008) - Eligible Hedged Items

IFRS 1 (revised November 2008) - First-Time Adoption of International Financial Reporting Standards

IFRS 1 (Amendment) (July 2009) - Additional Exemptions for First-Time Adopters

IFRS 1 (Amendment) (January 2010) - Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters

IFRS 3 (revised January 2008) - Business Combinations

IFRS 7 Amendment - Financial Instrument Disclosures: Transfers of Financial Assets

Annual Improvements to IFRSs 2009

IFRIC 17 - Distributions of Non-cash Assets to Owners

IFRIC 18 - Transfers of Assets from Customers

IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments

Adoption of these Standards and Interpretations did not have any effect on the financial statements of the Company, or result in changes in accounting policy or additional disclosure.

The IASB and IFRIC have issued a number of Standards and Interpretations with an effective date after the date of these financial statements. The new Standards and Interpretations issued include:

IFRS 9 - Financial Instruments - effective from 1 January 2013.

IAS 27 (revised 2011) - Separate Financial Statements is effective from 1 January 2013.

IFRS 11 - Joint Arrangements is effective from 1 January 2013.

IFRS 12 - Disclosures of Interest in Other Entities is effective from 1 January 2013.

IFRS 13 - Fair Value Measurement is effective from 1 January 2013.

IFRS 10 - Consolidation is effective from 1 January 2013.

IAS 19 - Employee Benefits is effective from 1 January 2013.

IAS 28 - Investments in Associates and Joint Ventures is effective from 1 January 2013.

The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the Company's financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. SEGMENT ANALYSIS

The Group's principal activity is the design, production and sale of innovative products in the UK and overseas. The segmental results by geographical area are shown below:

The analysis of assets reflects the value of inventories and receivables, as the allocation of other assets and liabilities to geographic segments is not deemed to be appropriate.

2. EXCEPTIONAL ADMINISTRATIVE EXPENSES

The exceptional costs relate to costs comprised of fees and services rendered in relation to following items:

3. OPERATING LOSS

The loss before taxation is stated after charging the following:

4. EMPLOYEE EXPENSES

The following are included in the above in relation to the executive Directors:

No directors are receiving post-employment benefits. Details of Directors' emoluments, including share option awards are given in the Directors' Report.

The average monthly number of staff (including executive directors) employed by the Group during the period was:

5. FINANCE INCOME AND COSTS

6. INCOME TAX

Components of income tax expense

7. DISCONTINUED OPERATIONS

During the period, the Premium Factory was disposed of, via a liquidation process, and its results are shown separately below:

The net liabilities disposed of are show below:

8. LOSS ATTRIBUTABLE TO THE PARENT COMPANY

The loss attributable to the parent company, Litebulb Group Limited, was £nil (2012: £300). As permitted by Companies (Jersey) Law 1991, no separate income statement is presented in respect of the parent company.

9. LOSS PER SHARE

The calculation of basic loss per share is based on the loss attributable to ordinary shareholders and the weighted average number of ordinary shares in issue during the period.

The calculation of diluted loss per share is based on loss per share attributable to ordinary shareholders and the weighted average number of ordinary shares that would be in issue, assuming conversion of all dilutive potential ordinary shares into ordinary shares.

Reconciliations of the loss and weighted average number of shares used in the calculations are set out below:

Due to the Group's loss for the period, the diluted loss per share is the same as the basic loss per share.

10. INTANGIBLE ASSETS

Group

During the period Premium Factory was closed and the attributable goodwill was disposed of.

The recoverable amount for the cash generating units was derived from value-in-use calculations, covering a detailed two year forecast followed by the extrapolation of expected cash flows at growth rates of between 3% and 30% for the following three years. The growth rate reflects the estimated long term average growth rates for the product lines of the cash generating units. A discount rate of 10% has been applied to these calculations, estimated by management using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the Group.

11. PROPERTY PLANT AND EQUIPMENT

Group

12. DEFERRED TAX

All deferred tax assets (including tax losses and other tax credits) have been recognised in the balance sheet.

13. INVESTMENTS

Company

Details of the acquisitions made during the period can be found in note 23.

Interests in group undertakings

Details of the Company's principal subsidiary undertakings (which have been consolidated in the group financial statements) are as follows:

14. INVENTORIES

Group

15. TRADE AND OTHER RECEIVABLES

Group

Amounts receivable from trade customers are non-interest bearing and are generally on 30 - 90 day terms.

All amounts are due within one year. The carrying value of trade receivables is considered a reasonable approximation of fair value.

16. CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash and short-term deposits held by Group companies. The carrying amount of these assets approximates their fair value.

17. STATED CAPITAL

Allotted and called up:

During the period, 1,269,517,180 ordinary shares were issued as follows:

On 19 December 2012, 6,818,180 shares in respect of the acquisition of Scarlett Willow, and 4,511,280 shares in payment of a creditor.

On 18 February 2013, 250,000,000 shares in respect of the acquisition of Bluw Ltd, and 90,000,000 shares in respect of the conversion of a loan note.

On 10 April 2013, 1,117,808 shares in respect of interest.

On 18 July 2013, 137,666,664 shares for £826,000.

On 13 November 2013, 3,189,041 in respect of interest.

On 22 November 2013, 347,642,857 shares in respect of the acquisition of Meld Group Ltd and 428,571,350 shares for £3,000,000.

18. SHARE BASED PAYMENTS

The total charge for the period relating to share based payment plans was £nil (2012: £nil).

The company operates several share option schemes. As at 31 December 2013 options under these schemes, including those held by directors, were outstanding over:

19. FINANCIAL LIABILITIES

Group

The loans are secured by fixed charges over all assets held within the Group both present and future. The interest rates of the loans varies from 5.0% to 10% over the base rate.

Included within the balance is an amount of £988,139 (2012: £nil) in respect of a convertible instrument. Other loans are repayable by instalments.

Convertible loan notes

The principal amount of the convertible loan notes is £1,100,000, which had been drawn down in full at 31 December 2013. Interest accrues at 10% per annum on the amount drawn down and is paid quarterly, either in cash or in ordinary shares on the basis of a pre agreed formula.

The repayment date is February 2016. The noteholders may, by written notice to the Company, convert all or part of the outstanding notes into ordinary shares on the basis of a pre agreed formula.

20. TRADE AND OTHER PAYABLES

Group

All amounts are payable within one year. The fair values of trade and other payables are not materially different from those disclosed above.

Included within Other creditors is an amount of £398,058 which is secured against the trade receivable balances under invoice finance arrangements.

21. OPERATING LEASE COMMITMENTS

As at 31 December 2013 the Group had outstanding annual commitments for future minimum lease payments under non-cancellable leases, which fell due as follows:

22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group and Company's financial instruments comprise cash balances and receivables and payables that arise directly from its operations, for example, accrued income with respect to deposit bank interest and purchases awaiting settlement.

The main risks the Group and Company faces from its financial instruments are (i) credit risk, (ii) liquidity risk. (iii) interest rate risk and (iii) foreign currency risk.

The Board regularly reviews and agrees policies for managing each of these risks. The Company's policies for managing these risks are summarised below and have been applied throughout the period. The numerical disclosures exclude short-term debtors and creditors as their carrying amount is considered to be a reasonable approximation of their fair value.

Credit risk

The Group is exposed to counterparty default or non-performance risk on its holdings of cash and cash equivalents, deposits with banks and trade receivables. The Group trades only with recognised, credit worthy customers. All customers who wish to trade on credit are subject to credit verification checks. Customer balances are checked regularly to ensure that the risk of exposure to doubtful debts is minimised. The amount of bad debts incurred in the year totalled: £nil.

Liquidity risk

The liquidity risk of the company is the risk that the group could be unable to meet its financial obligations as they fall due. The group has given responsibility of liquidity risk management to the board who have formulated liquidity management tools to service this requirement.

Management of liquidity risk is achieved by monitoring budgets and forecasts and actual cash flows.

Interest rate risk

The interest rate risk profile of financial assets of the Group and Company at the balance sheet date was as follows:

As at 31 December 2013 if interest rates had increased by 1%, pre-tax losses would have increased by £510. If interest rates had decreased by 1% pre-tax losses would have accordingly decreased by £510. In the opinion of the directors, a 1% change is a reasonably probable estimate and reflects current market conditions.

Foreign currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the UK pound, the Australian dollar, the US dollar and the euro. At the end of the period the Group held £173,570 (2012: £53,562) of monetary assets as follows:

Foreign exchange differences on retranslation of these assets and liabilities are taken to the income statement.

23. ACQUISITIONS

On 26 September 2012 the Company acquired the entire share capital of Scarlett Willow Limited. The book value, which is the equivalent to fair value, of the liabilities at acquisition were as follows:

On 1 February 2013 the Company acquired the entire share capital of Bluwstuff Limited. The book value, which is the equivalent to fair value, of the liabilities at acquisition were as follows:

On 22 November 2013, the Company acquired the entire share capital of The Meld Group. The book value, which is the equivalent to fair value, of the assets at acquisition were as follows:

24. RELATED PARTY TRANSACTIONS

Entities with joint control or significant influence over the entity

During the period the Group acquired goods totalling £411,112 (2012: £362,923) for resale from Locca Tech Limited, a company of which S McGivern and J Phillips are directors. At the period end, £74,296 (2012: £7,798) was due by the Group to these companies and is included within trade and other payables. It should be noted that the company makes no profit on these purchases. The purchases are made because the company has the licence for the product.

During the period J McGivern, Bluebell PR Limited, a company of which the wife of S McGivern is a director, provided PR services to the Group to the value of £65,900 (2012: £62,030). At the period end, £9,600 (2012: £10,320) was due by the Group to J McGivern and is included within trade and other payables.

During the period the Company purchased services from Zag Limited, a shareholder, in the sum of £21,417 (2012: £8,965). At the period end £25,701 (2012: £7,534) of this amount was included in trade and other payables.

During the period the Company sold goods to Handpicked Companies Limited totalling £188,703 (2012: £39,782), a company who share common Directorship with ILA Security Limited, at the period end a balance of £130,871 (2012; £13,444) was outstanding.

During the period the Company hired space to Handpicked Companies Limited totalling £38,000 (2012: £nil), a company who share common Directorship with ILA Security Limited, at the period end a balance of £45,600 (2012: £nil) was outstanding.

All transactions have been undertaken on an arm's length basis, are unsecured and are on normal commercial terms.