Last checked at 2 Sep 2009 15:38
Bright Things plc
("Bright Things" or the "Company")
PRELIMINARY RESULTS for the year ended 31st March 2009
Bright Things today announces today announces its full year results for the year ended 31 March 2009.
Financial Highlights:
Operational Highlights:
Placing
The Company has raised £940,000 before expenses by way of a placing of 75,200,000 new ordinary shares of 1 penny each ("Placing Shares") at a price of 1.25 pence per share ("the Placing"). The Placing Shares will, when issued and fully paid, rank pari passu in all respects with the existing ordinary shares. The Placing is conditional upon admission of the Placing Shares to trading on AIM and application has been made for them to be admitted to trading on AIM with effect from 4 September 2009 ("Admission"). The proceeds of the Placing will be used to market SocialGO and for general working capital purposes.
Dominic Wheatley, Chief Executive, and Ian Livingstone, Chairman, are both participating in the Placing and as a result their interests in the Company will increase to 69,005,102 ordinary shares (25.5 per cent.) and 11,998,880 ordinary shares (4.4 per cent.) respectively. The balance of the Placing Shares have been placed with institutional investors by the Company's broker, Astaire Securities Plc, and with SocialGO staff members.
Following Admission, the Company will have 270,916,328 ordinary shares of 1 penny each in issue.
Annual Report and Accounts
The Annual Report and Accounts will be despatched to Shareholders on Monday 7 September and will be available on the Company's website: www.brightthings.com
For further information please contact:
Bright Things PLC 0845 299 7289
Dominic Wheatley, CEO
Edward Levey, Finance Director
Astaire Securities Plc 020 7448 4400
William Vandyk
Chairman's Statement
The year has seen Bright Things focus on refining and preparing its innovative new product SocialGO, the social network maker, which was launched in February 2009.
SocialGO has been designed to provide secure, dedicated social networks for Groups and Organisations. Whilst "SocialGO" has similar features and functions to social network sites on the Internet such as Facebook, MySpace or Bebo it is distinct by virtue of it enabling Groups and Organisations to create and maintain their own social networks.
SocialGO is designed to be highly customisable in both design and layout to suit the specific requirements of the user. The Directors consider there are numerous types of Groups and Organisations for whom SocialGO could become an indispensable tool, be it for schools, companies, local sports leagues or simply extended family networks.
As I reported in the Interim Results, Group Revenues have declined significantly in the period to 31 March 2009 and this reflected the fact that the historic business of developing iDVD games was beginning to wind down organically as sales of the Tiger Woods golf DVD game slowed which was to be expected given that the game was released prior to Christmas 2007.
The year had been devoted to the development of SocialGO.
Whilst overall Revenues have declined significantly, the Company saw the first income from SocialGO following the February 2009 launch. Month on month revenues have grown since then as we build our subscription income from Premium customers. We expect to have further news on progress in the coming months.
There has been a significant rise in Research & Development costs which has been invested into the development of SocialGO. I can report that other costs have been rigorously controlled and we will continue to work hard to ensure the Company keeps costs to a minimum.
Progress
The group has made progress in a number of areas
Results
Revenue at £30,000 (2008 - £257,000) primarily consists of sales and royalties from iDVD games along with sales from SocialGO after the February 2009 launch. Segmental analysis of revenue can be found in note 3 to the accounts.
The loss before and after tax increased to £1,686,000 (2008 - £984,000), with cost of sales at £48,000 (2008 - £94,000) research & development costs at £838,000 (2008 - £350,000), other administrative expenses at £840,000 (2008 - £824,000) and finance income of £10,000 (2008 - £27,000). Other administrative expenses include no charge for impairment of IP (2008 - £19,000) and a charge for share based payments of £50,000 (2008 - £92,000). Research and development costs include a charge for share based payments of £153,000.
While administrative expenses are materially unchanged from last year, work on SocialGO has increased research and development costs. All expenditure continues to be closely monitored.
The Group had cash deposits of £84,000 (2008 - £601,000) at the Balance Sheet date.
Prospects
Development work on improving the SocialGo product continues.
Sales to date have been through the internet with a small amount of marketing and as I reported in the Interim Report it has become clear that The United States is our largest and most advanced potential customer base. The Company is planning to increase activity in that market towards the end of the year and also increase marketing expenditure.
Whilst early revenues are encouraging, myself and the Board as a whole recognise that, as with any new product in a relatively new market, success is not guaranteed. In light of the inherent uncertainty surrounding our forecast revenues, subsequent to the financial year end, the company has raised, and continue to raise, what we believe to be sufficient funds to continue with our commercialisation of SocialGO for the foreseeable future and refer the reader to the basis of preparation of these financial statements contained within note 1.
The Board remains excited about the prospects offered by SocialGO. The growth of similar types of products is encouraging and the Board considers the product to be well positioned to take a stake in this market.
Placing
We are pleased to announce that we have raised an additional £940,000, before expenses, by way of a placing of 75,200,000 new ordinary shares at a price of 1.25p per share. These funds will be used to expand the marketing operations of the Company in order to promote SocialGO and accelerate its growth. Both Dominic Wheatley and I have participated in the placing and as a result our interests will increase to 25.5% and 4.4% of the company respectively.
Post Balance Sheet Events
On 30 September 2008 the Company announced the appointment of Charles Delamain as Chief Operating Officer and his work and enthusiasm until the year end was superb. It was therefore a great shock when the Company was informed that Charles had died in a road traffic accident on 6 April 2009. Our thoughts continue to be with his family.
On 8 April 2009 the Company raised £750,500 from the issue of 60,040,000 new ordinary shares at 1.25p per share and, as described above, has today announced the placing of a further 75,200,000 new ordinary shares at 1.25p per share.
We continue to explore all opportunities to utilise the Company's expertise and intellectual property.
Overheads have remained constant and your Board will continue to carefully monitor the working capital requirements of the Company.
Finally, I would like to thank all employees for their hard work and dedication during the year.
Ian Livingstone
Chairman
2 September 2009
Chief Executive's Report
The year has been important in laying the foundations for the company's future growth. After several months of beta testing we took SocialGO.com live in February 2009. SocialGO is being used by network owners for numerous different types of communities and there is no limit to the sort of purpose or the number of purposes to which it can be put. We urge shareholders to visit our blog at www.socialgo.com/blog to witness the range of featured networks to get an idea of what users are doing with the product.
I am very pleased with the development effort and I congratulate the team at GOWIT for the quality of SocialGO which is all and more than was envisaged when we started the project two years ago. In many ways the timing of introduction could be good too; whereas social networking was already understood back then, the idea of micro networks was fairly new and while we have been in development the awareness of the possibilities of these types of social tools has increased.
The company's income has risen each month since introduction which is a positive signal. However, it is still early days and aside from building the subscription base we have learnt and are learning from our users. This in turn has led us to a better understanding of the market and the direction that SocialGO should take to maximise its appeal.
Initially, in line with industry comparisons we focused on how many people had created a 'Free' network. However, although those numbers have continued to climb through the period, we also eschewed the 'advertising income' based model favoured by others to concentrate on Premium subscribing and the sale of Widgets (Apps), Themes, extra modules and bandwidth. We see the 'Free' offering as a marketing promotion, not an income producing product. In that sense it is not relevant to the success of the company nor do we allow many key features of the product in our Free version, preferring to guide the user towards our Premium services and usher away those who are unlikely to ever pay or upgrade. The commercial sense is obvious - too many Web 2.0 companies spend vast amounts of investors' money on servers, bandwidth and customer support, only to get a few crumbs of advertising income generated by a costly free customer base in a bid for the glory of big numbers of users of which only a small number produce any income.
I can understand that as this area is so new, many of our shareholders might be curious about the market and try to make metric comparisons to other well known names in the industry. For example, people often ask what the difference is between SocialGO and Facebook or Twitter. There are many differences, but the easiest way to look at it is that SocialGO is in fact a platform and a SaaS (software as a service). To this end it is not in itself a social network, rather it is a tool that allows people to create their own social network, but it also does a range of other things, including acting as a web presence (instead of a normal website for example) and as a way for people to publish their blogs, run forums or even their own marketplace. With the present features and those in the pipeline, this platform will grow more into a commercial tool than something to replicate Facebook and already these micro networks are beginning to be seen as valuable, particularly if they have a membership that is active in a certain niche area.
I spent five years living in Silicon Valley building my video games company in the Nineties. I intend to spend more time there promoting SocialGO in the coming months. We have a small office ready to form a bridgehead to the American market which is not only our largest market (already in traffic terms) but also the most mature in the adoption of the idea of micro networking. We need to be among our Web 2.0 (or indeed 3.0) peers and we need access to those people who can help market the product as well as those companies that can help partner with us to spread its reach.
Dominic Wheatley
Chief Executive Officer
2 September 2009
The financial information in this preliminary announcement does not constitute the company's statutory accounts for the years ended 31 March 2009 or 31 March 2008 but is derived from those accounts. The statutory accounts for the year ended 31 March 2008 have been delivered to the Registrar of Companies and those for the year ended 31 March 2009 will be delivered following the Company's annual general meeting. The auditors have reported on the financial statements for the year ended 31 March 2009; their report was unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain statements under the Companies Act 1985, s 237(2) or (3). The audit report in respect of the year ended 31 March 2008 was also unqualified and did not contain statements under the Companies Act 1985, s 237(2) or (3) however, it did include a reference to material uncertainties over the company's ability to continue as a going concern to which the auditors drew attention by way of emphasis without qualifying their report.
Consolidated income statement for the year ended 31 March 2009
| 31 March 2009 £'000 | 31 March 2008 £'000 | |
| Revenue | 30 | 257 |
| Cost of sales | (48) | (94) |
| _______ | _______ | |
| Gross (loss)/ profit | (18) | 163 |
| Research and development costs | (838) | (350) |
| Administrative expenses - other | (840) | (805) |
| Administrative expenses - exceptional | - | (19) |
| Total administrative expenses | (1,678) | (1,174) |
| _______ | _______ | |
| Loss from operations | (1,696) | (1,011) |
| Finance income | 10 | 27 |
| _______ | _______ | |
| Loss before and after tax for the year | (1,686) | (984) |
| _______ | _______ | |
| Loss per share | ||
| Basic and diluted | (1.8)p | (2.5)p |
| _______ | _______ |
Consolidated balance sheet at 31 March 2009
| | 31 March | 31 March | ||
| | 2009 | 2008 | ||
| | £'000 | £'000 | ||
| Assets | | | | |
| Non-current assets | | | | |
| Property, plant and equipment | | 4 | | 9 |
| Intangible assets | | 424 | | 414 |
| | | ________ | | ________ |
| Total non-current assets | | 428 | | 423 |
| | | | | |
| Current assets | | | | |
| Trade and other receivables | 13 | | 27 | |
| Tax asset | 31 | | 37 | |
| Cash and cash equivalents | 84 | | 601 | |
| | ________ | | ________ | |
| Total current assets | | 128 | | 665 |
| | | ________ | | ________ |
| | | | | |
| Total assets | | 556 | | 1,088 |
| | | | | |
| Liabilities | | | | |
| Current Liabilities | | | | |
| Trade and other payables | (214) | | (118) | |
| Tax liabilities | (12) | | (8) | |
| Accruals | (282) | | (182) | |
| | ________ | | ________ | |
| Total liabilities | | (508) | | (308) |
| | | ________ | | ________ |
| | | | | |
| Total net assets | | 48 | | 780 |
| | | ________ | | ________ |
| Capital and reserves attributable to equity shareholders | | | | |
| Called up share capital – 1p ordinary | | 1,357 | | 618 |
| Called up share capital – 9p deferred | | 2,741 | | 2,741 |
| Share premium account | | 10,137 | | 10,170 |
| Warrant reserve | | 443 | | 267 |
| Merger reserve | | (136) | | (136) |
| Share based payment reserve | | 322 | | 312 |
| Retained deficit | | (14,816) | | (13,192) |
| | | ________ | | ________ |
| | | | | |
| Total equity | | 48 | | 780 |
| | | ________ | | ________ |
Consolidated cash flow statement for the year ended 31 March 2009
| 31 March | 31 March | |||
| 2009 | 2008 | |||
| £'000 | £'000 | |||
| Cash flows from operating activities | ||||
| Loss before tax | (1,686) | (984) | ||
| Share based payments | 203 | 92 | ||
| Depreciation on property plant and equipment | 8 | 33 | ||
| Amortisation of intangible assets | 13 | 70 | ||
| Goodwill and IP impairment | - | 19 | ||
| Finance income | (10) | (27) | ||
| _______ | _______ | |||
| Cash used in operating activities before | (1,472) | (797) | ||
| changes in working capital and provisions | ||||
| Decrease in trade and other receivables | 20 | 120 | ||
| Decrease in inventory | - | 7 | ||
| Increase/(decrease) in trade and other payables | 200 | (248) | ||
| _______ | _______ | |||
| Cash used in operations | (1,252) | (918) | ||
| Investing activities | ||||
| Purchase of property, plant and equipment | (3) | (3) | ||
| Purchase of intangible fixed assets | (23) | (189) | ||
| Finance income | 10 | 27 | ||
| _______ | _______ | |||
| Net cash from/(used in) investing activities | (16) | (165) | ||
| Financing activities | ||||
| Proceeds from issue of new share capital | 785 | 955 | ||
| Costs of issue of new share capital | (34) | (135) | ||
| _______ | _______ | |||
| Net cash from financing activities | 751 | 820 | ||
| Net decrease in cash and cash equivalents | (517) | (263) | ||
| Cash and cash equivalents at beginning of the year | 601 | 864 | ||
| _______ | _______ | |||
| Cash and cash equivalents at end of the year | 84 | 601 | ||
| _______ | _______ | |||
Notes
1 Accounting policies
Principal accounting policies
The Company is a public company incorporated and domiciled in the United Kingdom. The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared in accordance with EU Endorsed International Financial Reporting Standards ('IFRS') and the Companies Act 1985 applicable to companies reporting under IFRS. The Group has adopted all of the standards and interpretations issued by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee that are relevant to its operations and effective for the year ended 31 March 2009.
Going concern
The Board continually monitors the financial position of the Group, taking into account the latest cash flow forecasts and the ability of the Group to generate cash.
Subsequent to the year end, the Company has raised additional funds through a private placing of £750,500 and will shortly complete a further equity fund raising through a private placement of £940,000.
The Board has prepared the financial statements on a going concern basis having given consideration to forecast sales and the marketability of SocialGO, together with the above fundraising activity, for the period to 30 September 2010. Given the level of paid subscription taken up since commercial launch, the Board believe it's most recent sales forecasts, which incorporate continued growth in paid subscriptions to SocialGO, to be achievable. However, given that SocialGO represents a new product in a relatively new market, there remains an inherent uncertainty in the level of growth that will actually be achieved. The Board are confident that any shortfall in forecast growth in revenues, were this to happen, could be sufficiently mitigated by a reduction in the Group's cost base to ensure that the Group will have sufficient working capital to operate as a going concern for the foreseeable future.
The Board therefore believe that it is appropriate to draw up the financial statements on a going concern basis.
Basis of Consolidation
The consolidated Group financial statements incorporate the results of Bright Things Plc and its subsidiary undertaking, Bright Entertainment Limited, using the merger accounting method.
The results also include the results of its other subsidiaries, Bright Things International Limited (date of incorporation 16 February 2005) and Bright Things Inc (date of incorporation 6 April 2005), PushPlay Interactive LLC (purchase date 28 June 2005) using the purchase accounting method.
On 27 December 2007 the Group acquired 100% of the voting equity instruments of CommonWorld Limited, a company whose sole activity was the development of intellectual property supporting a social networking platform ("SocialGO"). This transaction has been deemed to be a purchase of an asset rather than a business combination. On this basis, the acquisition of the SocialGO IP has been recorded at cost (see note 11).
The Company has taken advantage of the exemption provided under section 230 of the Companies Act 1985 not to publish its individual income statement and related notes.
Merger accounting
In the Group financial statements, applying the exemption from the requirement to restate pre-transition date acquisitions available under IFRS1, merged subsidiary undertakings are treated as if they had always been a member of the Group. The results of such a subsidiary are included for the whole period in the year it joins the group. The corresponding figures for the previous year include its results for that period, the assets and liabilities at the previous balance sheet date and the shares issued by the company as consideration as if they had always been in issue. Any difference between the nominal value of the shares acquired by the company and those issued by the company to acquire them is taken to the merger reserve. Assets and liabilities are included at their merger date book values.
Purchase accounting
In the Group financial statements, the results of acquired subsidiary undertakings are taken from the date on which control is obtained. For acquisitions qualifying as 'business combinations' any difference between the fair value of separately identifiable assets, liabilities and contingent liabilities acquired and the consideration paid is treated as goodwill in the consolidated balance sheet.
Revenue recognition
Revenue comprises:
(a) sales of games to retailers and external distributors at invoiced and accrued amounts less value added tax and provision against any subsequent returns. Where advance payments against sales are received, in so far as the Group's obligations have been fulfilled, such advances are recognised at the point at which they become non-refundable and non-recoupable. The Group makes provision against any subsequent returns or price protection.
(b) royalty payments received or accrued from external distributors under licence of the right to distribute games in certain territories. Where advance payments against royalties are received under licence, in so far as the Group's obligations have been fulfilled, such advances are recognised at the point at which they become non-returnable. Revenue from sales of games is recognised at the point at which the product is delivered.
(c) SocialGO services less value added tax and provision against any subsequent refunds. SocialGO subscription income is billed monthly in advance and is recognised during the month of subscription.
Goodwill
Goodwill results from the acquisition of subsidiaries, associates and joint entities and corresponds to the difference between the fair value of the acquisition consideration and the fair value of the assets, liabilities and contingent liabilities identified at the date of acquisition.
The Group has elected to take the exemption not to apply IFRS 3 retrospectively to business combinations occurring prior to the date of transition to IFRS.
Under IFRS 3 Business Combinations and IAS 38 Intangible Assets goodwill is not amortised, but it is subject to an annual impairment review. As the Group has elected not to apply IFRS 3 retrospectively to business combinations prior to 1 April 2006 the original UK GAAP goodwill balance at 1 April 2006 (£832,000) is no longer amortised, but continues to be subject to impairment reviews. The goodwill amortisation charge previously calculated under UK GAAP has been credited to the income statement account.
The recoverable value of goodwill is then estimated on the basis of the higher of market value or value in use. Value in use is defined as the present value relating to the cash flow generating units with which the goodwill is associated. When the market value or value in use is less than the accounting value, impairment is recorded and is irreversible.
Foreign currency
Transactions entered into by group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the balance sheet date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in the consolidated income statement.
On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations, including goodwill arising on the acquisition of those operations, are translated at the rate ruling at the balance sheet date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised directly in equity (the "foreign exchange reserve"). No material differences arise on translation.
Exchange differences recognised in the income statement of group entities' separate financial statements
on the translation of long-term monetary items forming part of the group's net investment in the overseas
operation concerned are reclassified to the foreign exchange reserve on consolidation. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are transferred to the consolidated income statement as part of the profit or loss on disposal.
At the date of transition to 1 April 2006, the Group used an exemption available under IFRS 1, 'First time adoption of International Financial Reporting Standards', which resulted in the cumulative translation differences for all foreign operations being deemed to be zero at the date on transition to IFRS. Any gain or loss on the subsequent disposal of those foreign operations would exclude translation differences that arose before the date of transition to IFRS and include only subsequent translation differences.
Financial assets
The Group classifies its financial assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:
Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), but also incorporate other types of contractual monetary asset. They are carried at amortised cost using effective rate method.
Cash and cash equivalents: Cash and cash equivalents includes cash in hand and deposits held at call with banks.
Financial liabilities
The Group classifies its financial liabilities as other financial liabilities. The Group has no value through profit and loss financial liabilities. The Group's accounting policy is as follows:
Other financial liabilities: Other financial liabilities include the following items: Trade payables and other short-term monetary liabilities, which are recognised at fair value on initial recognition and subsequently carried at amortised cost using the effective interest method.
Share capital
Financial instruments issued by the Group are treated as equity only to the extent that they do not meet the definition of a financial liability. The Groups ordinary shares are classified as equity instruments.
Share based payments
Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the income statement on a straight line basis over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the income statement over the remaining vesting period.
Where equity instruments are granted to persons other than employees, the income statement is charged with the fair value of goods and services received. If it is not possible to identify the fair value of these goods or services provided, the income statement is charged with the fair value of the options granted.
Fair value is calculated using the Black-Scholes model
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight-line basis over their useful economic lives. The amortisation expense is included within the administrative expenses line in the consolidated income statement.
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see note 2 related to critical estimates and judgements). In accordance with IAS 38 "Intangible assets", only elements whose cost can be determined reliably and for which it is probable that future benefits exist are recorded as non current assets.
Where assets are acquired in transactions that do not meet the IFRS 3 definition of a 'business combination', the assets are treated as acquired at cost, being the fair value of consideration.
The significant intangibles recognised by the group, their useful economic lives and the methods used to determine the cost of intangibles acquired in a business combination are as follows:
| Intangible asset | Useful economic life | Valuation method |
| ASIC Intellectual property rights | 3 years | Cost |
| SocialGO Intellectual property rights | 5 years | Cost |
| Goodwill | Annual impairment reviews | Fair value – purchase accounting |
Impairment of Intangible Assets
Impairment tests on goodwill and assets in the course of construction are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset's cash-generating unit (i.e. the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows).
Impairment charges are included in the administrative expenses line item in the consolidated income statement, except to the extent they reverse gains previously recognised in the consolidated statement of
recognised income and expense.
Consideration of impairment indicators and an impairment test (if required) may be performed at any time during an annual period, provided it is performed at the same time every year. Different intangible asset may be tested for impairment at different times. The Board of Bright Things consider impairment of intangible assets annually at the balance sheet date.
Internally generated intangible assets (research and development costs)
Research and development
Expenditure on internally developed products is capitalised if it can be demonstrated that:
Capitalised development costs are amortised straight-line over the useful economic life being the period that prudently simulates the flow of revenues from a typical product. At the close of each fiscal year products are reviewed for any loss of value where there is an indication of impairment. Where the expected contribution made by a product does not exceed the expected total cost of development then an impairment provision is made. The amortisation expense is included within administrative expenses in the consolidated income statement.
Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the consolidated income statement as incurred.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising on:
Recognition of deferred tax assets is restricted to those instances where it is probable that future taxable profit will be available against which the difference can be utilised.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
Property, plant and equipment
Property, plant and equipment are stated at cost net of accumulated depreciation and provision for impairment. Depreciation is provided on all property plant and equipment, at rates calculated to write off the cost less estimated residual value, of each asset on a straight-line basis over its expected useful life. The residual value is the estimated amount that would currently be obtained from disposal of the asset if the asset were already of the age and in the condition expected at the end of its useful economic life.
The method of depreciation for each class of depreciable asset is:
Computer equipment - 3 years straight line
Office fixtures, fittings & equipment - 3 years straight line
The carrying value of tangible fixed assets is assessed annually and any impairment is charged to the income statement.
Taxation
Corporation tax payable is provided on taxable profits at prevailing rates.
Licence fees
Licence fees payable to organisations for use of their Intellectual Property are charged to the income statement over their useful economic lives, which, to the Group, equates to the forecast period of product sales. Management regularly reviews the carrying value of such licences. All licence fees in these Group financial statements have been charged to the income statement as incurred.
Royalties payable
Royalties are accounted for as payable when units of hardware or software are sold into the sales channel by our distributor and calculated in accordance with the commercial terms entered into with licensors
Segmental information
The Group operates in the following main business segments: SocialGO; Interactive DVD software ASIC chips; ASIC sales development kit; Sales of component parts from stock; and Bubble hardware and software.
The Group's primary reporting format is business segments. All amounts relate to continuing activities.
| Year ended 31 March 2009 | ||||||||
| Business Segments | ||||||||
| Bubble hardware and software | ASIC chips | i-DVD software | Sale of component stock | ASIC sales development kit | SocialGO | Not allocated | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Total segment revenue | - | - | 21 | - | - | 9 | - | 30 |
| Cost of sales | - | - | (3) | (2) | - | (43) | - | (48) |
| Gross profit | - | - | 18 | (2) | - | (34) | - | (18) |
| Research and development costs | - | - | - | - | - | (838) | - | (838) |
| Administrative expenses - other | - | - | - | - | - | (228) | (612) | (840) |
| Administrative expenses | - | - | - | - | - | (1,066) | (612) | (1,678) |
| Profit / (Loss) from operations | - | - | 18 | (2) | - | (1,100) | (612) | (1,696) |
| Finance income | - | - | - | - | - | - | 10 | 10 |
| Profit / (Loss) before and after tax for the year | - | - | 18 | (2) | - | (1,100) | (602) | (1,686) |
| Year ended 31 March 2008 | ||||||||
| Business Segments | ||||||||
| Bubble hardware and software | ASIC chips | i-DVD software | Sale of component stock | ASIC sales development kit | SocialGO | Not allocated | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Total segment revenue | - | 139 | 87 | 14 | 17 | - | - | 257 |
| Cost of sales | 2 | (76) | (20) | - | - | - | - | (94) |
| Gross profit | 2 | 63 | 67 | 14 | 17 | - | - | 163 |
| Research and development costs | 30 | (15) | (154) | - | - | (209) | (2) | (350) |
| Administrative expenses - other | (70) | (33) | (90) | - | - | (123) | (489) | (805) |
| Administrative expenses - impairment of intangible assets | (19) | - | - | - | - | - | - | (19) |
| Administrative expenses | (59) | (48) | (244) | - | - | (332) | (491) | (1,174) |
| Profit / (Loss) from operations | (57) | 15 | (177) | 14 | 17 | (332) | (491) | (1,011) |
| Finance income | - | - | - | - | - | - | 27 | 27 |
| Profit / (Loss) before and after tax for the year | (57) | 15 | (177) | 14 | 17 | (332) | (464) | (984) |
The Group's secondary reporting format for reporting segment information is geographic segments by location of customer.
Revenue
| | Year ended | | Year ended |
| | 31 March | | 31 March |
| | 2009 | | 2008 |
| | £'000 | | £'000 |
| | | | |
| United Kingdom | 3 | | 33 |
| United States of America | 24 | | 219 |
| EU | 2 | | (11) |
| Other | 1 | | 16 |
| | 30 | | 257 |
All the Group's assets are UK based.
| | Year ended | | Year ended |
| | 31 March | | 31 March |
| | 2009 | | 2008 |
| | £'000 | | £'000 |
| Revenue arises from | | | |
| Sale of goods | 11 | | 173 |
| Royalties | 19 | | 67 |
| Provision of service | - | | 17 |
| | 30 | | 257 |
| Loss from operations | Year ended | Year ended |
| | 31 March | 31 March |
| | 2009 | 2008 |
| | £'000 | £'000 |
| This is arrived at after charging/(crediting): | | |
| | | |
| Staff costs (see note 7) | 330 | 281 |
| License fees for intellectual properties - advances | - | 50 |
| Depreciation | 8 | 33 |
| Amortisation of intellectual property | 13 | 70 |
| Impairment of intellectual property | - | 19 |
| Exchange differences | 33 | 4 |
| Development expenses and advances | 685 | 260 |
| Auditors' remuneration in respect of Company | 22 | 25 |
| Audit of subsidiary undertakings pursuant to legislation | 23 | 26 |
| Auditors' remuneration - non-audit services - other services | 7 | 9 |
| Auditors' remuneration - non-audit services - taxation | 6 | 11 |
| Share based payments – employee and contractor share options | 50 | 52 |
| Share based payments – consultants incentive and development fees | 153 | 40 |
| | ________ | ________ |
| Research and development costs | Year ended | Year ended |
| | 31 March | 31 March |
| | 2009 | 2008 |
| | £'000 | £'000 |
| | | |
| Consist of: | | |
| | 838 | 300 |
| Development expenses and advances | - | 50 |
| Licence fees for intellectual properties - advances | ________ | ________ |
| | | |
| | 838 | 350 |
| | ________ | ________ |
| Loss per share | | |
| | | |
| Loss per share has been calculated using the following: | | |
| | | |
| | Year ended | Year ended |
| | 31 March | 31 March |
| | 2009 | 2008 |
| | | |
| Loss (£’000) | (1,686) | (984) |
| Weighted average number of shares (‘000s) | 92,108 | 38,680 |
| | ________ | ________ |
| | | |
| Basic and diluted loss per ordinary share | (1.8)p | (2.5)p |
| | ________ | ________ |
Loss per ordinary share has been calculated using the weighted average number of shares in issue during the relevant financial periods. The weighted average number of equity shares in issue, is 92,107,557 (2008 - 38,679,586) and the earnings, being loss after tax is £1,686,000 (2008 - £984,000 loss). There are no potentially dilutive shares in issue. Share options totalling 13,193,105 (2008 - 2,393,105) have not been included in the calculation of diluted loss per share because they are anti-dilutive for the periods presented.
Following completion of the first version of the SocialGO product on 31 July 2008, 3,091,250 new Ordinary Shares were issued to the vendors of CommonWorld Ltd. In addition, if the net proceeds of sales of the Social Network Maker product in the period of two years following the commercial launch exceed £2,000,000, the Company will issue to the vendors of CommonWorld a further 3,091,250 new Ordinary Shares.
After the balance sheet date, on 8 April 2009 the Company raised £750,500 from the issue of 60,040,000 new Ordinary 1p shares at 1.25p per share. This issue would not significantly alter the basic and diluted EPS calculations if it had occurred before the year end.
The company has outstanding issued warrants to subscribe for 540,541 10p ordinary shares at £1.50 per share, 250,000 10p ordinary shares at £2.50 per share and 35,380,000 1p ordinary shares at 5p per share (2008 - 540,541 10p ordinary shares at £1.50 per share and 250,000 10p ordinary shares at £2.50 per share). These outstanding warrants are considered to be anti-dilutive.
Share capital
On 30 July 2008, following the completion of the development and developer testing of SocialGO by 31 July 2008, the Company issued the vendors of CommonWorld Limited, a further 3,091,250 new 1p Ordinary Shares.
On 23 October 2008 the Company raised £784,500 from the issue of 62,760,000 new Ordinary 1p shares at 1.25p per share. Associated costs of issue were £34,000. 31,380,000 warrants exercisable at 5p were also issued.
On 20 February 2009, in lieu of certain development costs due under an agreement in October 2008, the Company issued to Get On With It Limited ('GOWIT'), 8,000,000 new 1p Ordinary Shares. 4,000,000 warrants exercisable at 5p were also issued.
After the balance sheet date, on 8 April 2009 the Company raised £750,500 from the issue of 60,040,000 new Ordinary 1p shares at 1.25p per share.
| Ordinary shares of 1p each | | | | |
| | Authorised | |||
| | 31 March | 31 March | 31 March | 31 March |
| | 2009 | 2008 | 2009 | 2008 |
| | Number | Number | £'000 | £'000 |
| | | | | |
| Ordinary shares of 1p each | 500,000,000 | 500,000,000 | 5,000 | 5,000 |
| | __________ | __________ | ________ | ________ |
| | | | | |
| | Allotted, called up and fully paid | |||
| | 31 March | 31 March | 31 March | 31 March |
| | 2009 | 2008 | 2009 | 2008 |
| | Number | Number | £'000 | £'000 |
| | | | | |
| | | | | |
| Ordinary shares of 1p each | 135,676,328 | 61,825,078 | 1,357 | 618 |
| | __________ | __________ | ________ | ________ |
| | | | | |
| The share price ranged from a low of 0.5 pence to a high of 3.65 pence. | ||||
| | | | | |
| Deferred shares of 9p each | | | | |
| | Authorised | |||
| | 31 March | 31 March | 31 March | 31 March |
| | 2009 | 2008 | 2009 | 2008 |
| | Number | Number | £'000 | £'000 |
| | | | | |
| | | | | |
| Deferred shares of 9p each | 274,050,702 | 274,050,702 | 2,741 | 2,741 |
| | __________ | __________ | ________ | ________ |
| | | | | |
| | Allotted, called up and fully paid | |||
| | 31 March | 31 March | 31 March | 31 March |
| | 2009 | 2008 | 2009 | 2008 |
| | Number | Number | £'000 | £'000 |
| | | | | |
| | | | | |
| Deferred shares of 9p each | 274,050,702 | 274,050,702 | 2,741 | 2,741 |
| | __________ | __________ | ________ | ________ |
| | | | | |
The movement in share capital was as follows:
| | Ordinary shares of 1p each | |
| | Number | £'000 |
| | | |
| In issue at 31 March 2008 | 61,825,078 | 618 |
| 1p Ordinary Shares issued for 1p each – 30 July 2008 | 3,091,250 | 31 |
| 1p Ordinary Shares issued for 1.25p each – 23 October 2008 | 62,760,000 | 628 |
| 1p Ordinary Shares issued for 1.25p each – 20 February 2009 | 8,000,000 | 80 |
| | | |
| In issue at 31 March 2009 | 135,676,328 | 1,357 |
| | __________ | __________ |
At 31 March 2009, options were outstanding over 13,193,105 shares, (2008 - 2,393,105), including options held by directors.
Unapproved Share Options
At 31 March 2009 the following share options were outstanding in respect of the ordinary shares under option agreements entered into by the company:
| Number | Date of | Exercise period | Exercise price |
| of options | Grant | | pence per share |
| 400,000 | 26 April 2004 | 26 April 2004 to 26 April 2014 | 14.0 |
| 155,050 | 26 April 2004 | 26 April 2004 to 30 June 2012 | 10.0 |
| 75,000 | 26 April 2004 | 26 April 2004 to 30 June 2012 | 14.0 |
| 49,055 | 26 April 2004 | 30 April 2004 to 30 April 2011 | 90.0 |
| 100,000 | 31 August 2004 | 31 August 2005 to 3 December 2014 | 90.0 |
| 100,000 | 31 August 2004 | 31 August 2005 to 1 October 2014 | 90.0 |
| 185,000 | 1 October 2004 | 1 October 2005 to 1 October 2014 | 90.0 |
| 24,000 | 30 November 2004 | 30 November 2004 to 30 November 2014 | 90.0 |
| 10,000 | 30 November 2004 | 30 November 2005 to 30 November 2014 | 90.0 |
| 25,000 | 1 December 2004 | 1 December 2005 to 1 December 2014 | 90.0 |
| 75,000 | 21 December 2004 | 1 January 2005 to 1 January 2015 | 90.0 |
| 30,000 | 7 January 2005 | 7 January 2006 to 7 January 2015 | 90.0 |
| 136,666 | 20 July 2005 | 20 July 2006 to 20 July 2015 | 149.5 |
| 91,667 | 20 July 2005 | 20 July 2007 to 20 July 2015 | 149.5 |
| 91,667 | 20 July 2005 | 20 July 2008 to 20 July 2015 | 149.5 |
| 45,000 | 20 September 2006 | 20 September 2007 to 20 September 2016 | 13.5 |
| 166,666 | 20 September 2006 | 20 September 2007 to 20 September 2016 | 13.5 |
| 166,667 | 20 September 2006 | 20 September 2008 to 20 September 2016 | 13.5 |
| 166,667 | 20 September 2006 | 20 September 2009 to 20 September 2016 | 13.5 |
| 100,000 | 21 September 2006 | 21 September 2007 to 21 September 2016 | 11.3 |
| 200,000 | 1 April 2007 | 1 April 2008 to 1 April 2017 | 10.0 |
| 650,000 | 1 May 2008 | 1 May 2009 to 1 May 2018 | 4.0 |
| 275,000 | 1 May 2008 | 1 May 2010 to 1 May 2018 | 4.0 |
| 275,000 | 1 May 2008 | 1 May 2011 to 1 May 2018 | 4.0 |
| 3,466,667 | 24 October 2008 | 24 October 2009 to 24 October 2018 | 1.25 |
| 3,066,666 | 24 October 2008 | 24 October 2010 to 24 October 2018 | 1.25 |
| 3,066,667 | 24 October 2008 | 24 October 2011 to 24 October 2018 | 1.25 |
| ________ | | | |
| 13,193,105 | | | |
| ________ | | | |
EMI Plan
At 31 March 2009 no options were outstanding in respect of the ordinary shares under the EMI plan.
Related party transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are described below.
Matthew Tims is a non-executive director. A contract for his consultancy services with Creative Partners has been in place during the period. £1,000 (2008 - £18,250) was due under this agreement in the period. At 31 March 2009, £nil (2008 - £1,175) was outstanding.
Alex Halliday and Steve Hardman were directors of CommonWorld Ltd prior to its acquisition by Bright Things plc. Steve Hardman and Alex Halliday are currently directors of Get On With It Ltd and as two of the four vendors of CommonWorld Ltd are shareholders in Bright Things plc having received shares as consideration and for post acquisition services and performance. Get On With It Ltd have the contract to complete the development of SocialGO and provide ongoing development support. £576,822 (2008 - £356,463) was due under this agreement in the period. At 31 March 2009, £126,674 (2008 - £61,254) was outstanding.
Events after the balance sheet date
After the balance sheet date, on 8 April 2009 the Company raised £750,500 from the issue of 60,040,000 new Ordinary 1p shares at 1.25p per share.
On 2 September 2009 the Company intends to announce the completion of the raising of additional cash by means of a share placing on AIM.
The financial statements were authorised for issue by the board as a whole following their approval on 1 September 2008.