Tavistock Regulatory News (TAVI)

23 Nov 2007 15:29

Bright Things plc23 November 2007 Bright Things plc23 November 2007 Bright Things plc ('Bright Things' or the 'Company') Interim Results for the six months ended 30 September 2007 Highlights: •Operating Loss reduced by 70% to £433,000 (2006 - £1,429,000) •Completion of development of Tiger Woods PGA Tour 07 and subsequently launched on schedule in the US and UK in time for Christmas •Reduction of overheads and cost base including a relocation of head office to a more cost effective location •Cash at the end of the period of £336,000 •Positive progress in the pursuit of new initiatives and opportunities Dominic Wheatley, CEO of Bright Things, said: 'Throughout the period we have made encouraging progress in our pursuit of newinitiatives to enhance shareholder value whilst controlling our costs andcontinuing to develop our existing product line in time for its recent launch. We hope to be in a position to announce further details in respect of any newinitiatives in due course.' For further information please contact: Bright Things PLC: Tel: 0870 351 7770Dominic Wheatley, CEOEdward Levey, Finance Director HB CorporateLuke Cairns/ Rory Creedon Tel: +44 (0) 207 510 8600 Brunswick GroupGiles Croot / Mark Antelme Tel: +44 (0) 207 404 5959 Chairman's Statement==================== Introduction As announced in our results for the period ending 31 March 2007, your board hasbeen reviewing a number of new initiatives and opportunities with a view togrowing the business and, in doing so, create value for shareholders. Work hascontinued on the Company's existing products and the Tiger Woods PGA Tour 07game has, subsequent to the period end, been launched on schedule with over30,000 units ordered. In addition we continue to explore new opportunities forthe ASIC chip. We do not expect further orders from the distributor of Bubble and will considerany future Bubble activity at the end of the current distribution agreement. The results for the six months ended 30 September reflect the seasonal nature ofsales in the interactive DVD market. The main focus of activity within theCompany during the period has been on completing development work on Tiger WoodsPGA Tour '07 for its pre Christmas launch both in UK and USA. Product has nowbeen shipped to both the UK distributor and US distributor. In the Annual Report I stated that the Directors had identified a number of waysof utilising the technologies developed to date and skills learnt by our peoplein that process to focus the future direction of the business. In particularother applications of the technology utilised in the Bubble development continueto be explored. Progress--------The group has made progress in a number of areas: •Completed development and launched a Tiger Woods PGA Tour '07 game for release in the US and other territories for Christmas 2007. •Reduced the overhead and cost base and relocated our head office to a more cost effective location •Considered new business opportunities to enhance shareholder value. Results-------Revenue at £96,000 (2006 H1 - £20,000) reflects limited sales of the ASICdevelopment kit, component chips and interactive DVD software. As previouslystated, the i-DVD market is seasonal and sales from the launch of the new TigerWoods PGA '07 game will impact on the second half results The operating loss was £433,000 (2006 H1 loss £1,429,000), with Research &development costs at £82,000 (2006 H1 - £622,000) and Other administrativeexpenses at £448,000 (2006 H1 - £827,000). Cost reductions have reflected on the above overheads and this trend willincrease during the remainder of the current year. Investment in development isnow largely complete on current products. All overhead expenditure continues tobe closely monitored. The Group had cash deposits of £336,000 (2006 H1 - £765,000) at the BalanceSheet date Prospects---------As previously reported opportunities for new applications for the ASIC chipcontinue to be explored. New iDVD products will be considered in the New Year with the Company intendingto remain selective in identifying premium licenses. The Company intends to extend its product range, and enter new marketsorganically and by acquisition. Summary-------We continue to explore all opportunities to utilise the Company's expertise andintellectual property. Overheads have been significantly reduced and your Board will continue tocarefully monitor the working capital requirements of the company. Finally, I would like to thank all employees for their hard work and dedicationduring the year. Ian LivingstoneChairman21 November 2007 Operational and financial review================================ Unaudited interim results for the 6 months ended 30 September 2007 and futureproduct portfolio. Bright Things had no software or hardware product launches in the six monthperiod to 30 September 2007. On 12 November 2007 'Tiger Woods PGA Tour '07' was released in the UnitedKingdom. Development model-----------------We continue to retain the core management and technical skills in house andsubcontract game development to external studios with appropriate expertise inDVD authoring and DVD game development. Manufacturing capabilities--------------------------The i-DVDs are manufactured by Sony DADC located in the UK. Further revenue streams------------------------The Group's Patent and Intellectual Property portfolio is presentingopportunities to generate revenue using our technology within the InteractiveDVD industry. Results for operations====================== The Group made an operating loss of £433,000 (2006 H1 - £1,429,000). Key figures: 6 Months 6 Months Year Ended Ended Ended 30 30 31 September September March 2007 2006 2007 £'000 £'000 £'000 (as restated)(as restated) Revenue 96 20 205________ ________ ________Gross Profit/(Loss) 97 20 101________ ________ ________ Research and Development 82 622 847________ ________ ________ Other administrative expenses 448 827 2,598________ ________ ________ Net assets 236 1,429 627________ ________ ________ Decrease in cash and cash equivalents 528 1,010 911________ ________ ________ Basic and diluted loss per share (1.4p) (6.9p) (13.5p)________ ________ ________ Revenue, £96,000 (2006 H1 - £20,000) Revenue for the period primarily consists of ASIC revenue. Revenue is splitbetween: ASIC revenue £62,000; i-DVD software £5,000; sales development kit£16,000; and chip sales £13,000. Cost of sales, (£1,000) (2006 H1 - nil) Cost of sales is made up of £1,000 commission on chip sales and a credit of£2,000 on royalties payable. Gross profit, £97,000 (2006 H1 - £20,000) The overall gross profit for the year is £97,000. This is split between: Grossprofit on ASIC revenue of £62,000 achieving a gross margin of 100%; Gross Profiton i-DVD of £5,000 achieving a gross margin of 100%; Gross Profit on chip salesof £12,000 achieving a Gross Margin of 77%; Gross profit on royalties of £2,000,and a Gross Margin of £16,000 on sales development kit revenue.Administrative expenses Administrative expenses for the six months ended 30 September 2007 are the maincomponent of the loss on ordinary activities during the period. Administrativeexpenses are in line with expectation and are analysed into four categories: Research & Development, £82,000 (2006 H1 - £622,000) Research and development expenditure in the 6 month period included £18,000spent on the iDVD ASIC platform; £5,000 was spent on software titles that werenot developed; and £94,000 on costs relating to the licensing and development ofTiger Woods PGA Tour 07 (revenue for this title will be included in the yearended 31 March 2008). There was also a credit of £35,000 relating to the Bubble(this cost was included in year ended 31 March 2006). Other administrative expenditure - £422,000 (2006 H1 - £777,000) The main component of general and administrative expenditure relates to humanresource costs, totalling £203,000 (2006 H1 - £366,000) for the period. Alsoincluded in other administrative expenditure is depreciation and amortisation of£54,000 (2006 H1 - £37,000). Office and administration costs reduced to £48,000 (2006 H1 - £116,000) for theperiod, of which office costs were £23,000 (2006 H1 - £83,000). Travel and subsistence costs reduced to £25,000 (2006 H1 - £68,000). Marketing costs reduced to £20,000 (2006 H1 - £51,000) in the period. Thesecosts primarily relate to retained agencies and consultants. £17,000 relate tothe Tiger Woods iDVD. Professional expenses decreased in the year to £49,000 (2006 H1 - £107,000).Included in this, the amount relating to the portfolio of patent applicationsreduced to £1,000 (2006 H1 - £21,000) for the period. The decrease is asexpected as the cost is maintaining patents acquired in previous years. Finance expenses for the period were £23,000 (2006 H1 - £32,000). Share based payment charges - IFRS 2 The charge in respect of share options totalled £26,000 (2006 H1 - £50,000). Exceptional administrative expenditure - Nil (2006 H1 - Nil) In the year to 31 March 2007, due to the uncertain nature of future cash flow,the Group decided to fully impair the goodwill, which related wholly to theacquisition of PushPlay Interactive LLC. Taxation No tax charge arises on the loss for the financial period. At 30 September 2007the Group has approximately £11 million of losses available to carry forward toset against future taxable profits, subject to agreement with the UK and USA taxauthorities. Loss per share Basic and diluted loss per share of 1.4p (2006 H1 loss of 6.9p) has decreaseddue to the scaling back of the research and development activities and a furtherreduction in general overheads. Working Capital The Group's operational cash position has been reduced by the continuedinvestment in research and development during the year together with operationaloverheads and lower than anticipated sell through at retail of our products.Cash at bank at 30 September 2007 is £336,000. This comprises £298,000 held in aSpecial Interest Bearing Account (SIBA) with the remainder of the funds held incurrent accounts. At the end of the financial period the group had net assets of£236,000 (2006 H1 - £1,429,000). Net assets have decreased to £236,000 as at 30 September 2007 from £627,000 at31 March 2007. This is due principally to the operating loss for the period. The Group has made further progress in reducing the monthly cash burn through areduction in head count and down sizing of the serviced office space in alllocations. The board continues to assess the appropriate application of these funds. Financial Instruments During the period, the Group's financial instruments, comprised cash and variousitems such as trade debtors and creditors that arise directly from operations.The main purpose of these financial instruments is to finance the Group'soperations. The Group's policy is, and was throughout the period under review,not to trade in financial instruments. The main risk arising from the Group'sfinancial instruments are liquidity risk and foreign currency risk. The Boardreviews and agrees policies for managing each of these risks on a regular basis. Liquidity risk The Group continually monitors the operational working capital requirements ofthe business. The Group continues to assess appropriate financing opportunitiesbased on future business plans and working capital requirements. Edward LeveyFinance Director21 November 2007 Consolidated income statement for the six month period ended 30 September 2007 Note 6 months ended 6 months ended 12 months to 30 September 30 September 31 March 2007 2007 2006 (audited) (unaudited) (unaudited) (as restated) £'000 (as restated) £'000 £'000 Revenue 96 20 205 Cost of sales 1 - (104) _______ _______ _______ Gross profit 97 20 101 ------------ ------------ ---------Research anddevelopment costs (82) (622) (847)Administrativeexpenses - other (422) (777) (1,659)Administrativeexpenses -exceptional - - (832)Share based paymentcharge (26) (50) (107) ------------ ------------ ---------- Administrativeexpenses (530) (1,449) (3,445) _______ _______ _______ Loss from operations (433) (1,429) (3,344) Finance income 16 28 52 _______ _______ _______Loss before tax andfor the financialperiod (417) (1,401) (3,292) _______ _______ _______Attributable to: === === ===Equity shareholders (417) (1,401) (3,292) _______ _______ _______Loss per share === === ===Basic and diluted (1.4p) (6.9p) (13.5p) ========= ========= Consolidated balance sheet at 30 September 2007 Note 30 September 30 September 31 March 2007 2006 2007 (unaudited) (unaudited) (audited) £'000 (as restated) (as restated) £'000 £'000Non-current assetsProperty, plant and equipment 22 61 38Goodwill - 832 -Intangible assets 54 191 89 _______ _______ _______ 76 1,084 127 _______ _______ _______ Current assetsInventories 10 - 7Trade and other receivables 17 29 165Prepayments and accrued income 134 48 16Cash and cash equivalents 336 765 864 _______ _______ _______ 497 842 1,052 _______ _______ _______ Total assets 573 1,926 1,179 Current liabilitiesTrade and other payables (120) (190) (194)Tax liabilities (8) (16) (11)Accruals and deferred income (209) (291) (347) _______ _______ _______ Total liabilities (337) (497) (552) _______ _______ _______ Net assets 236 1,429 627 _______ _______ _______EquityCalled up share capital4 3,045 2,045 3,045Share premium 9,589 9,559 9,589Warrant reserve 267 267 267Merger reserve (286) (286) (286)Share based payment reserve 246 163 220Retained deficit (12,625) (10,319) (12,208) _______ _______ _______ Total Equity 236 1,429 627 _______ _______ _______ Consolidated cash flow statement for the six month period ended 30 September2007 Note 6 months ended 6 months ended 12 months to 31 March 30 September 30 September 2007 2007 2006 (audited) (unaudited) (unaudited) (as restated) £'000 (as restated) £'000 £'000Operating activitiesNet loss beforetaxation (417) (1,401) (3,292)Share based payments 26 50 107Depreciation onproperty plant andequipment 18 26 38Amortisation ofintangible assets 35 11 113Goodwillamortisation andimpairment - - 832 _______ _______ _______ (338) (1,314) (2,202) (Increase)/decreasein inventory (3) - 7Decrease in tradeand otherreceivables 30 354 250(Decrease)/increasein trade and otherpayables andaccruals anddeferred income (215) (50) 5 _______ _______ _______Cash generated fromoperations (526) (1,010) (1,940) Investing activitiesPurchase ofproperty, plant andequipment (3) - (6)Sale of property,plant and equipment 1 - 5 _______ _______ _______Net cash used ininvesting activities (2) - (1) Financing activitiesProceeds from issueof new share capital - - 1,100Costs of issue ofnew share capital - - (70) _______ _______ _______Net cash generatedby financingactivities - - 1,030 Net decrease in cashand cash equivalents (528) (1,010) (911) Cash and cash equivalents atstart of period 864 1,775 1,775 _______ _______ _______Cash and cashequivalents at endof period 336 765 864 _______ _______ _______ Consolidated statement of changes in equity for the period ended 30 September2007 Other reserves Retained earnings ---------------- ------------------- Called up Share premium Merger reserve Warrant reserve Share based Retained Total share capital payment reserve deficit £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 April2006 -restated 2,045 9,559 (286) 267 113 (8,918) 2,780 Share basedpayment - - - - 50 - 50charge Loss for theperiod - - - - - (1,401) (1,401) ------- -------- ------- ------- ------- ------- -------Totalrecognisedincome andexpense forthe period - - - - 50 (1.401) (1,351) ------- -------- ------- ------- ------- ------- -------Net increase/(decrease) - - - - 50 (1.401) (1,351) ------- -------- ------- ------- ------- ------- -------At 30September2006- restated 2,045 9,559 (286) 267 163 (10,319) 1,429(unaudited) Issue ofshares 1,000 30 - - - - 1,030 Share basedpayment - - - - 57 - 57charge UnrealisedFXgain ontranslationof - - - - - 2 2foreignsubsidiaries Loss for theperiod - - - - - (1,891) (1,891) ------- -------- ------- ------- ------- ------- -------Totalrecognisedincome andexpense forthe period 1,000 30 - - 57 (1,889) (802) ------- -------- ------- ------- ------- ------- -------Net increase/ 1,000 30 - - 57 (1,889) (802)(decrease) ------- -------- ------- ------- ------- ------- -------At 31 March2007 -restated 3,045 9,589 (286) 267 220 (12,208) 627 Share basedpayment - - - - 26 - 26charge Loss for theperiod - - - - - (417) (417) ------- -------- ------- ------- ------- ------- -------Totalrecognisedincome andexpense forthe period - - - - 26 (417) (391) ------- -------- ------- ------- ------- ------- -------Net increase/ - - - - 26 (417) (391)(decrease) ------- -------- ------- ------- ------- ------- -------At 30September2007 3,045 9,589 (286) 267 246 (12,625) 236(unaudited) ------- -------- ------- ------- ------- ------- ------- Notes forming part of the interim financial statements for the period ended 30 September 2007============================================================================================= Accounting Policies---------------------Accounting policies adopted under IFRS These interim financial statements have been prepared using the recognition andmeasurement principles of International Financial Reporting Standards as adoptedby the European Union ('IFRS'). The basis of preparation and accounting policies used in preparing the interimaccounts for the six months ended 30 September 2007 are set out below. The basisof preparation describes how IFRS has been applied under IFRS 1, the assumptionsmade by the Group about the Standards and Interpretations expected to beeffective, and the policies expected to be adopted, when the Group issues itsfirst complete set of IFRS financial statements for the year ending 31 March2008. Basis of preparation--------------------The financial information for the six months ended 30 September 2007, six monthsended 30 September 2006 and the year ended 31 March 2007 is unreviewed andunaudited and, within the meaning of section 240 of the Companies Act 1985, suchaccounts do not constitute full statutory accounts of the Group. The accounting policies which follow set out those policies which are expectedto apply in preparing the financial statements for the year ended 31 March 2008.These policies have been followed in producing these interim statements. The comparative figures for the financial year ended 31 March 2007 are not thestatutory financial statements of Bright Things Plc for that financial year.Those financial statements, which were prepared under UK Generally AcceptedAccounting Principles, have been reported on by the Company's auditors anddelivered to the registrar of companies. The report of the auditors wasunqualified and did not contain statements under section 237(2) or (3) of theCompanies Act 1985, however the auditors' report on those accounts included anemphasis of matter paragraph with regards to the going concern basis ofpreparation of the financial statements. Their opinion was not qualified in thisrespect. Significant accounting judgements and estimates-----------------------------------------------The preparation of these financial statements requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and reported amounts ofrevenues and expenses during the reporting period. These judgements andestimates are based on managements' best knowledge of the relevant facts andcircumstances, having regard to prior experience, but actual results may differfrom the amounts included in the financial statements. Information about suchjudgements and estimations is contained in the accounting policies andaccompanying notes to the financial statements. Going concern-------------The Directors continually monitor the financial position of the Group, takinginto account the latest cash flow forecasts and the ability of the Group togenerate cash. The Directors have prepared the financial statements on a goingconcern basis having given consideration to forecast game sales and themarketability of the ASIC chip for the period to 30 November 2008. While there will always remain some inherent uncertainty within theaforementioned cash flow forecasts, the Directors remain confident that theywill be able to manage the Group's finances and operations so as to achieve theforecasted cash flows and, as a result, that it is appropriate to draw up thefinancial statements on a going concern basis. The financial statements do not include any adjustments that would result if thegoing concern basis of preparation were to become no longer appropriate. Revenue recognition-------------------Revenue comprises: (a) sales of games and technology chips to retailers and external distributorsat invoiced and accrued amounts less value added tax and provision against anysubsequent returns. Where advance payments against sales are received, in so faras the Group's obligations have been fulfilled, such advances are recognised atthe point at which they become non-returnable. The Group makes provision againstany subsequent returns or price protection, and (b) royalty payments received or accrued from external distributors underlicence of the right to distribute games in certain territories. Where advancepayments against royalties are received under licence, in so far as the Group'sobligations have been fulfilled, such advances are recognised at the point atwhich they become non-returnable. Revenue from sales of games and technology chips is recognised at the point atwhich the product is delivered. Basis of Consolidation---------------------The consolidated Group financial statements incorporate the results of BrightThings Plc and its subsidiary undertaking, Bright Entertainment Limited, usingthe merger accounting method. The results also include the results of its other subsidiaries, Bright ThingsInternational Limited (date of incorporation 16 February 2005), Bright ThingsInc (date of incorporation 6 April 2005) and PushPlay Interactive LLC (purchasedate 28 June 2005), using the acquisition accounting method. Merger accounting-----------------In the Group financial statements, merged subsidiary undertakings are treated asif they had always been a member of the Group. The results of such a subsidiaryare included for the whole period in the year it joins the group. Thecorresponding figures for the previous year include its results for that period,the assets and liabilities at the previous balance sheet date and the sharesissued by the company as consideration as if they had always been in issue. Anydifference between the nominal value of the shares acquired by the company andthose issued by the company to acquire them is taken to reserves. Acquisition accounting----------------------In the Group financial statements, the results of acquired subsidiaryundertakings are taken from the date of acquisition. Any difference between thefair value of assets acquired and the consideration paid is treated as goodwillin the consolidated balance sheet.Property, plant and equipment Property, plant and equipment are stated at cost, net of depreciation andprovision for impairment. Depreciation is provided on all property plant andequipment, at rates calculated to write off the cost less estimated residualvalue, of each asset on a straight-line basis over its expected useful life, asfollows: Computer equipment and software - 3 years straight lineOffice fixtures, fittings & equipment - 3 years straight line Goodwill and business combinations----------------------------------Goodwill results from the acquisition of subsidiaries, associates and jointentities and corresponds to the difference between the acquisition cost and thefair value of the assets, liabilities and contingent liabilities identified atthe date of acquisition. The Group has elected to take the exemption not to apply IFRS 3 retrospectivelyto business combinations occurring prior to the date of transition to IFRS. Under IFRS 3 Business Combinations and IAS 38 Intangible Assets goodwill is notamortised, but it is subject to an annual impairment review. As the Group haselected not to apply IFRS 3 retrospectively to business combinations prior to 1April 2006 the original UK GAAP goodwill balance at 1 April 2006 (£832,000) hasbeen included in the opening IFRS consolidated balance sheet and is no longeramortised, but continues to be subject to impairment reviews. The goodwillamortisation charge previously calculated under UK GAAP has been credited to theprofit and loss account. The recoverable value of goodwill is then estimated on the basis of the higherof market value or value in use. Value in use is defined as the present valuerelating to the cash flow generating units with which the goodwill isassociated. When the market value or value in use is less than the accountingvalue, impairment is recorded and is irreversible. IFRS 1 First-time Adoption of International Financial Reporting Standardsrequires that an annual impairment review of goodwill is conducted in accordancewith IAS 36 Impairment of Assets at the date of transition, irrespective ofwhether there is an indication of impairment. The directors conducted impairmentreviews at the date of transition and also at 31 March 2007 and at that timefully impaired goodwill (£832,000). Intangible assets-----------------Intangible assets acquired by the Group are recorded at their valuation or costless the total of amortisation and impairment. In accordance with IAS 38"Intangible assets", only elements whose cost can be determined reliably and forwhich it is probable that future benefits exist are recorded as non currentassets. Intangible assets are amortised over the expected period of use:Intellectual Property - 3 years straight line (2006 - 10 years straight line)Licences - 10 years straight line Having given regard to the market opportunities relating to intellectualproperty the estimated useful life is now considered to be 3 years.Inventory Inventory comprise finished goods for resale, and are stated at the lower ofcost and net realisable value. Cost is calculated as cost of materials. Netrealisable value is based on estimated selling price, less further disposalcosts. The Company reviews the net realisable value of and demand for its inventory onan annual basis to ensure recorded inventory is stated at the lower of cost ornet realisable value, after making due allowance for obsolete and slow-movingitems. Factors that could impact estimated demand and selling prices are the timing andsuccess of future technological innovations, competitor actions, supplier pricesand economic trends. Foreign currency----------------Transactions entered into by Group entities in a currency other than thecurrency of the primary economic environment in which it operates (the"functional currency") are recorded at the rates ruling when the transactionsoccur. Foreign currency monetary assets and liabilities are translated at therates ruling at the balance sheet date. Exchange differences arising on theretranslation of unsettled monetary assets and liabilities are similarlyrecognised immediately in the income statement. On consolidation, the results of overseas operations are translated intosterling at rates approximating to those ruling when the transactions tookplace. All assets and liabilities of overseas operations, including goodwillarising on the acquisition of those operations, are translated at the rateruling at the balance sheet date. Exchange differences arising on translatingthe opening net assets at opening rate and the results of overseas operations atactual rate are recognised directly in equity (the "foreign currency translationreserve"). Exchange differences recognised in the income statement of Groupentities' separate financial statements on the translation of long-term monetaryitems forming part of the Group's net investment in the overseas operationconcerned are reclassified to the foreign exchange reserve if the item isdenominated in the functional currency of the Group or the overseas operationconcerned. On disposal of a foreign operation, the cumulative exchangedifferences recognised in the foreign exchange reserve relating to thatoperation up to the date of disposal are transferred to the income statement aspart of the profit or loss on disposal. 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'saccounting policy for each category is as follows: Fair value through profit or loss:This category comprises only in-the-money derivatives. They are carried in thebalance sheet at fair value with changes in fair value recognised in the incomestatement. The Group does not have any assets held for trading nor does itvoluntarily classify any financial assets as being at fair value through profitor loss.Loans and receivables: These assets are non-derivative financial assets withfixed or determinable payments that are not quoted in an active market. Theyarise 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. Held-to-maturity investments: These assets are non-derivative financial assetswith fixed or determinable payments and fixed maturities that the Group'smanagement has the positive intention and ability to hold to maturity. Theseassets are measured at amortised cost, with changes through the incomestatement.Available-for-sale: Non-derivative financial assets not included in the abovecategories are classified as available-for-sale and comprise the Group'sstrategic investments in entities not qualifying as subsidiaries, associates orjointly controlled entities. They are carried at fair value with changes in fairvalue recognised directly in equity. Where a decline in the fair value of anavailable-for-sale financial asset constitutes objective evidence of impairment,the amount of the loss is removed from equity and recognised in the incomestatement. Financial liabilities---------------------The Group classifies its financial liabilities into one of two categories,depending on the purpose for which the asset was acquired. The Group'saccounting policy for each category is as follows: Fair value through profit or loss: This category comprises only out-of-the-moneyderivatives. They are carried in the balance sheet at fair value with changes infair value recognised in the income statement.Other financial liabilities: Other financial liabilities include the followingitems: Trade payables and other short-term monetary liabilities, which arerecognised at cost. Bank borrowings are initially recognised at the amountadvanced net of any transaction costs directly attributable to the issue of theinstrument. Such interest bearing liabilities are subsequently measured atamortised cost using the effective interest rate method, which ensures that anyinterest expense over the period to repayment is at a constant rate on thebalance of the liability carried in the balance sheet. "Interest expense" inthis context includes initial transaction costs and premia payable onredemption, as well as any interest payable while the liability is outstanding. Capitalised development costs-----------------------------Capitalised development costs correspond to the development of new products oncethe Group has determined that: the product is technically and commerciallyfeasible; the project is clearly defined and related expenditure is separatelyidentifiable; current and future costs are expected to be exceeded by futuresales; the Group has the intention and ability to complete the intangible assetand use or sell it; and adequate resources exist for the product to becompleted. Capitalised development costs are amortised over the period thatprudently simulates the flow of revenues from a typical product. At the close ofeach fiscal year products are reviewed for any loss of value. Where contributionmade by a product does not exceed the expected total cost of development then animpairment provision is made. All research and development expenditure in these Group financial statements hasbeen charged to the income statement as incurred. Licence fees------------Licence fees payable to organisations for use of their Intellectual Property arecharged to the income statement over their useful economic lives, which, to theGroup, equates to the forecast period of product sales. Management regularlyreviews the carrying value of such licences. All licence fees in these Groupfinancial statements have been charged to the income statement as incurred. Royalties payable ----------------Royalties are accounted for as payable when units of hardware or software aresold into the sales channel by our distributor and calculated in accordance withthe commercial terms entered into with licensors. Share based compensation------------------------Where share options are awarded to employees, the fair value of the options atthe date of grant is charged to the income statement over the vesting period.Non-market vesting conditions are taken into account by adjusting the number ofequity instruments expected to vest at each balance sheet date so that,ultimately, the cumulative amount recognised over the vesting period is based onthe number of options that eventually vest. Market vesting conditions arefactored into the fair value of the options granted. As long as all othervesting conditions are satisfied, a charge is made irrespective of whether themarket vesting conditions are satisfied. The cumulative expense is not adjustedfor failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, theincrease in the fair value of the options, measured immediately before and afterthe modification, is also charged to the income statement over the remainingvesting period. Where equity instruments are granted to persons other than employees, the incomestatement is charged with the fair value of goods and services received. If itis not possible to identify the fair value of these goods or services provided,the income statement us charged with the fair value of the options granted. Deferred taxation-----------------Deferred income tax is calculated using the balance sheet asset-liability methodof tax allocation for all temporary differences arising between the book valueof assets and liabilities and their tax bases, except for differences arising onthe initial recognition of goodwill. A deferred income tax asset is recognised only to the extent that it is probablethat there will be future taxable profits on which this asset can be charged.Deferred income tax assets are reduced to the extent that it is no longer likelythat a sufficient taxable benefit will arise. Deferred taxation is shown on the balance sheet separately from current taxassets and liabilities and categorised among non-current items. Deferred tax assets and liabilities are offset when the Group has a legallyenforceable right to offset current tax assets and liabilities and the deferredtax assets and liabilities relate to taxes levied by the same tax authority oneither the same taxable Group company or different Group entities which intendto either settle current tax assets and liabilities on a net basis, or torealise the assets and settle the liabilities simultaneously, in each futureperiod in which significant amounts of deferred tax assets or liabilities areexpected to be settled or recovered. Deferred tax balances are not discounted.Changes in accounting policies IFRS 2 (FRS 2) 'Share based payment' During the year ended 31 March 2007 the Group adopted IFRS 2 (FRS 20) 'Sharebased payment' application of which is obligatory for AIM listed companies withaccounting periods commencing on or after 1 January 2006. The impact of this wasreflected in the 2007 results and the interim 2006 figures have been restated toreflect the change in policy. IFRS 2 (FRS 20) 'Share based payment' requires the recognition of share basedpayment transactions with employees or other parties at fair value at the dateof grant. Prior to the adoption of IFRS 2 (FRS 20), the group recognised thefinancial effect of the share based payment in the following way: when sharesand share options were awarded to employees a charge was made to the profit andloss account based on the difference between the market value of the company'sshares at the date of grant and the option excise price in accordance with UTIFAbstract 17 (revised 2003) 'Employee Share Schemes'. The credit entry for thischarge was taken to the profit and loss reserve and reported in thereconciliation of movements in shareholder's funds. For the year to 31 March 2007, the change in accounting policy resulted in netincrease in loss for the year of £107,000. For the year ended 31 March 2006 theimpact of share based payments was a net charge to income of £113,000. In thesix months to 30 September 2007 the net charge to income is £26,000 (2006 H1 -£50,000). The share based payments expense has been included in the following line of theconsolidated income statement: administrative expenses £530,000 (2006 H1 -£1,449,000). Taxation--------Corporation tax payable is provided on taxable profits at prevailing rates. Transition to IFRS The consolidated financial information for the six months ended 30 September2007 and the year ended 31 March 2007 and the opening balance sheet at 1 April2006 have been prepared in accordance with International Financial ReportingStandards (IFRS) for the first time. The Group's transition date to IFRS is 1 April 2006. The rules for first-timeadoption of IFRS are set out in IFRS 1 'First time adoption of internationalreporting standards'. In preparing the IFRS financial information, thesetransition rules have been applied to the amounts reported previously undergenerally accepted accounting principles in the United Kingdom ('UK GAAP'). IFRS1 generally requires full retrospective application of the Standards andInterpretations in force at the first reporting date. However, IFRS 1 allowscertain exemptions in the application of particular Standards to prior periodsin order to assist companies with the transition process. As the Group has elected not to apply IFRS 3 retrospectively to businesscombinations prior to 1 April 2006 the original UK GAAP goodwill balance at 1April 2006 (£832,000) has been included in the opening IFRS consolidated balancesheet and is no longer amortised, but continues to be subject to impairmentreviews. No amortisation has been charged for the 6 months to 30 September 2006.Previously £45,000 had been charged under UK GAAP. There is no net impairment of IFRS restatement to 31 March 2007. Openinggoodwill at 1 April 2006 was fully impaired at 31 March 2007. Under UK GAAP the figures to 30 September 2006 and 31 March 2007 needed no IFRS2 adjustment as this charge was already reflected by FRS 20. For the period to 30 September 2006, the impact of the restatement of the sharebased payments charge resulted in net charge for the period of £50,000. The IFRS conversion statements have neither been audited nor reviewed by theCompany's auditors BDO Stoy Hayward LLP. IFRS restatement of Income Statement for the year ended 31 March 2007===================================================================== UK GAAP Adjustment IFRS Year ended Year ended Year ended 31 March 2007 31 March 2007 31 March 2007 £'000 £'000 £'000 Revenue 205 205 Cost of sales (104) (104) _______ _______ _______ Gross profit/loss 101 101 ------------- ------------- ------------Research and development costs (847) (847)Administrative expenses -other (1, 749) 90 (1,659)Administrative expenses -exceptional (742) (90) (832)Share based payment charge (107) (107) ------------- ------------- ------------ Administrative expenses (3,445) (3,445) _______ _______ _______ Operating loss (3,344) (3,344) Finance income 52 52 _______ _______ _______Loss before tax and for thefinancial period (3,292) (3,292) _______ _______ _______Attributable to: === === ===Equity shareholders (3,292) (3,292) === ========= _______ _______ _______Loss per share Basic and diluted (13.5p) (13.5)p ======================================= UK GAAP Adjustment IFRS Six months Six months Six months ended ended ended 30 September 30 September 30 September 2006 2006 2006 (as restated) £'000 £'000 £'000 Revenue 20 20 Cost of sales - - _______ _______ _______ Gross profit/loss 20 20 ------------- ------------- -------------Research anddevelopment costs (622) (622)Administrativeexpenses - other (822) 45 (777)Administrative expenses - - -exceptionalShare basedpayment charge (50) (50) ------------- ------------- ------------- Administrativeexpenses (1,494) 45 (1,449) _______ _______ _______ Operating(loss)/profit (1,474) 45 (1,429) Finance income 28 28 _______ _______ _______(Loss)/profit before tax and forthe financialperiod (1,446) 45 (1,401) _______ _______ _______Attributable to: === === ===Equityshareholders (1,446) 45 (1,401) _______ _______ _______Loss per share Basic and diluted (7.1p) 0.2p (6.9p) ========= ======= ========= IFRS restatement of Balance sheet as at 31 March 2007===================================================== UK GAAPAdjustmentIFRS 31 March 31 March 31 March 2007 20072007 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 38 38Intangible assets 89 89________________________ 127 127 Current assetsInventories 7 7Trade and other receivables 165 165Prepayments and accrued income 16 16Cash and cash equivalents 864 864________________________ 1,052 1,052________________________Total assets 1,179 1,179 Current liabilitiesTrade and other payables (194) (194)Tax and social security (11) (11)Accruals and deferred income (347) (347)________________________ Total liabilities (552) (552)________________________ Net assets 627 627________________________ Capital and reserves attributable to equity shareholdersCalled-up share capital 3,045 3,045Share premium account 9,589 9,589Warrant reserve 267 267Merger reserve (286) (286)Share based compensation 220 220Retained losses (12,208) (12,208)________________________ Capital and reserves 627 627________________________ IFRS restatement of Balance sheet as at 1 April 2006==================================================== UK GAAPAdjustmentIFRS1 April1 April1 April 2006 2006 2006 £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 87 87Intangible assets 1,034 1,034 ________ ________ ________ 1,121 1,121 Current assetsInventories - -Trade and other receivables 347 347Prepayments and accrued income 84 84Cash and cash equivalents 1,775 1,775________________________ 2,206 2,206________________________Total assets 3,327 3,327 Current liabilitiesTrade and other payables (227) (227)Tax and social security (32) (32)Accruals and deferred income (288) (288)________________________ Total liabilities (547) (547)________________________ Net assets 2,780 2,780________________________ Capital and reserves attributable to equity shareholdersCalled-up share capital 2,045 2,045Share premium account 9,559 9,559Warrant reserve 267 267Merger reserve (286) (286)Share based compensation 113 113Retained losses (8,918) (8,918)________________________ Capital and reserves 2,780 2,780________________________ IFRS restatement of Balance sheet as at 30 September 2006========================================================= UK GAAPAdjustmentIFRS30 Sept30 Sept30 Sept 2006 2006 2006 (as restated) £'000 £'000 £'000 Non-current assetsProperty, plant and equipment 61 61Intangible assets 978 45 1,023________________________ 1,039 45 1,084 Current assetsInventories - -Trade and other receivables 29 29Prepayments and accrued income 48 48Cash and cash equivalents 765 765________________________ 842 842________________________Total assets 1,881 45 1,926 Current liabilitiesTrade and other payables (190) (190)Tax and social security (16) (16)Accruals and deferred income (291) (291)________________________ Total liabilities (497) (497)________________________ Net assets 1,384 45 1,429________________________ Capital and reserves attributable to equity shareholdersCalled-up share capital 2,045 2,045Share premium account 9,559 9,559Warrant reserve 267 267Merger reserve (286) (286)Share based compensation 163 163Retained losses (10,364) 45 (10,319)________________________ Capital and reserves 1,384 45 1,429________________________ The interim report and financial statements is available in full on theCompany's website www.brightthings.com This information is provided by RNS The company news service from the London Stock Exchange