Tavistock Regulatory News (TAVI)

15 Nov 2005 07:12

Bright Things plc15 November 2005 BRIGHT THINGS PLC ("Bright Things" or the "Company") 15 November 2005 Interim Results Bright Things PLC, the developer of the educational games console, Bubble, andassociated software for the pre-school market, today announces interim resultsfor the six months ended 30 September 2005. Highlights • Bubble now available in stores across UK and Eire following launch in August • Five leading software titles now available • Initial sales data showing encouraging take-up although majority of sell-through not expected until 2006 • Letter of intent signed with Eidos for distribution in France and Spain • Positive industry and consumer feedback • Additional content licensing agreements signed with Nickleodeon, Nelvana and Spellbound • Further six games due to be released in 2006, including Bob the Builder, Postman Pat, Dora the Explorer, Angelina Ballerina, Pingu and Koala Brothers • PushPlay acquisition gives opportunity to develop enhanced product range and to plan for second generation products. Dominic Wheatley, CEO, Bright Things, said: "With the launch of Bubble and our first suite of games, we have come a long waysince the company was founded last year. However, this is just the beginning forBright Things. I am pleased to announce today our agreement with Eidos fordistribution in France and Spain. These markets have great potential for us andwith our exciting pipeline of software releases, we remain confident about thefuture development of our business through the rest of 2005 and beyond." For further information please contact: Bright Things PLC 0870 351 7770Dominic Wheatley, CEOAdy Moores, CFOMatthew Tims, Publishing DirectorGiles Croot / Mark Antelme, Brunswick 020 7404 5959 About Bright Things plc Bright Things plc is an innovative interactive entertainment company created byformer senior executives of video game publisher Eidos. Initially focused on thepre-school market, Bright Things has created 'Bubble', an interactive DVD gamesconsole that enables young children to learn and interact with their favouritetelevision characters and brands. More information, including the Bubble TV advertisement and recent media reviewsof Bubble, is available at www.worldofbubble.com Chairman's Statement Introduction The Bright Things team has made significant progress in the period to 30September 2005. The Bubble console made its debut along with the first softwaretitles, representing a major milestone in our business plan. From now on thefocus is on sales and marketing, the extension of the title library and thereduction of our cost of goods in order to achieve long term profitability. Product summary Bubble is an interactive games console and learning platform that integrateswirelessly with DVD players. Using colourful lights, sounds, buttons andinteractive activity books, Bubble allows children to play and learn with realTV characters just as they appear on TV. Content titles include a DVD, game cartridge and interactive activity book.These, combined with the Bubble console, provide CD-ROM like interactivity notpossible with a DVD player alone. Instead of the usual graphics associated withgames consoles, Bubble iDVDs display real TV images. A further feature, 'Away Play', lets children play with Bubble even when theyare not in front of the TV. Pressing the flashing buttons or the touchpad allowschildren to answer questions and explore games using just the booklet andaccompanying cartridge. Bubble launched in UK and Eire Bubble was launched in August 2005 with a choice of either a 'Balamory' or a'Teletubbies' Interactive DVD game. In late September we introduced 'Tweenies',followed by 'Fimbles' in October 2005. In November 2005 'Thomas & Friends' wasreleased and we anticipate the arrival of 'Noddy' at the end of this month. The launch is being supported by a TV campaign across terrestrial and satellitechannels. Our PR campaign is targeted to create publicity across the mainstreamnewspapers and magazines. A print advertising campaign will be seen across arange of media to help inform parents and grandparents when making theirChristmas gift decision. We recently received a prestigious award from the toy industry for Top TenPre-school Toy of the Year. Significant investment in research and development We continue to invest in the development of games that we believe we need todrive the sales of the Bubble console. We have a further 6 games in development (Bob the Builder, Postman Pat, Dora theExplorer, Angelina Ballerina, Pingu and Koala Brothers) due for launch in thecalendar year 2006. Strong portfolio of protected intellectual property The acquisition of Pushplay Interactive LLC in June 2005 combined twocomplimentary interactive DVD controller patent portfolios. The Group now hasover 20 US and international patent applications. The patent portfoliodefensively tries to cover Bubble product and offensively tries to coveralternative implementations of intelligent interactive DVD consoles. The patentapplications cover core Bubble product, peripherals and additional categories. The Company has received its first Notice of Allowance from the United StatesPatent and Trademark Office for its patent application entitled "Remote Controlfor Providing Interactive DVD Navigation Based on User Response". The technologyis an integral part of Bright Things' interactive DVD product, Bubble, and webelieve protects the core technology of the company. Content development and production of Interactive DVD games Additional content licensing agreements have been signed with Nickelodeon (Dorathe Explorer), Nelvana (Babar, Franklin and The Fairly Odd Parents) andSpellbound (Koala Brothers). Manufacturing process established Bubble is manufactured by our contracted manufacturer in China. We have madesignificant investment in manufacturing technologies for the platform including: • Tooling costs;• Quality Assurance process and systems on all software and hardware integrated into a manufacturing line, and• Digital monitoring and control of factory outputs. Having created Bubble both in terms of hardware electronics and the firmware torun the electronics, we are now progressing with the cost reduction phase of thebusiness plan, which includes making significant engineering investments(including an ASIC chip set) that substantially reduce the cost of goods. Weexpect to make significant progress on this in time for volume production forour main selling season in the calendar year 2006. Distribution outside UK The original business plan called for a 'soft' launch in the UK to establish theBubble platform and allow time to adjust the product and the marketing. We havealready learnt a great deal which will benefit us for next year, in particularthe importance of presenting the consumer with an attractive range of gametitles. North America remains an important opportunity and the productdevelopment process and refinement of the software have to be executed with thatmarket in mind. Having made preliminary presentations to several major USretailers and having received a favourable reaction, we are in the process offinalising our strategy there. Bright Things has an office and an experiencedteam in the US. Bright Things today announces that a letter of intent has been signed withEidos, one of the leading distributors of entertainment software, for thedistribution rights for Bubble and associated software in both France and Spain. Prospects We continue to make progress in launching this platform into the UK marketplace.As with any new product and brand introduction, it takes time getting theproduct offering across to the consumer. Comparative data, supplied by NPD, forproduct introductions into the pre-school category show that year 2 and year 3sales usually increase substantially. As previously stated, margins on the first 100,000 Bubbles are necessarilytight, but are expected to improve next year with the introduction of the ASICchip and with the reduction of the cost of goods. A broader catalogue of gameswill also promote greater sales. From the data available we are seeing sales of our hardware and softwareincreasing each week, which is encouraging. By Easter we expect to have 'Bob the Builder', 'Pingu', 'Postman Pat' and'Angelina Ballerina', taking our total number of games to ten. In the latesummer we hope to introduce 'Dora the Explorer' and 'The Koala Brothers'. We believe that Bubble is a product that can sell throughout the year especiallyif aided by the introduction of key titles. To build the sales levels we needimproved packaging, a bigger library of games, in-store demonstrations and widerdistribution. We have started discussions with key retailers to broaden thenumber of stores taking Bubble next year and execute major promotions. Our distributor, Bandai, has ordered 112,000 units of the hardware, of which86,000 have now shipped from the factory in China, the balance arriving in thefirst quarter 2006. Given present data we believe this stock will take Bandaithrough the next year. As ever, a note of caution must be sounded in thiscompetitive market as the drivers for success can be as varied as a 'must have'new game or a major promotion. We will be attempting to create these drivers inthe course of 2006 and have already started work on this. As we move thecompany's focus from R & D to sales and marketing we expect to continue to buildour business during the course of next year. We are all extremely proud of the product we have produced and firmly believethat we have a strong consumer product offering in the pre-school market place.Crucially, early consumer feedback has been positive and press reviews have beenfavourable. Ian LivingstoneChairman15 November 2005 Acquisition of PushPlay Interactive LLC Bright Things completed the acquisition of PushPlay Interactive LLC ("PPI") on28th June 2005. PPI is a limited liability company incorporated in the US. Theconsideration payable on this acquisition totalled £1,112,000 and this wassettled by the issue of 415,800 10p ordinary shares at £1.375 per share;US$500,000 of cash, and warrants to subscribe for 540,541 10p ordinary shares at£1.50 per share and 250,000 10p ordinary shares at £2.50 per share. The warrantshave been fair valued at £267,000 using the Black-Scholes valuation method. Postacquisition, the PPI team have been integrated into other group companies. Theresults of PPI from 28th June 2005 are included in the consolidated financialstatements. Bright Things, Inc. Bright Things, Inc. was incorporated on 6 April 2005 in the state of California,USA. The results of Bright Things, Inc. are included in these consolidatedaccounts. 2006 financial year and future product portfolio Bright Things launched the following products in the six month period to 30September 2005: Bubble DVD games console bundled with Teletubbies Interactive DVD game (releasedAugust 2005) Bubble DVD games console bundled with Balamory Interactive DVD game (releasedAugust 2005) Teletubbies Interactive DVD game (released August 2005) Balamory Interactive DVD game (released August 2005) Tweenies Interactive DVD game (released September 2005) Our release schedule for the remainder of the financial year to 31 March 2006 isstrong. We are continuing to build our product line-up for financial year to 31March 2007. Our portfolio of Interactive DVD games currently in developmentincludes the following titles: Fimbles Interactive DVD game (released October 2005) Thomas & Friends Interactive DVD game (released November 2005) Noddy Interactive DVD game Bob the Builder Interactive DVD game Postman Pat Interactive DVD game Angelina Ballerina Interactive DVD game Pingu Interactive DVD game Dora the Explorer Interactive DVD game Koala Brothers Interactive DVD game Further revenue streams The strength of the Group's Patent and Intellectual Property portfolio combinedwith the continuing growth of the Interactive DVD industry are increasinglypresenting opportunities to generate revenue from the use of our technology inproducts outside of our initial target market of the pre-school sector. 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 Bubble is manufactured by our contracted manufacturer with the factory locatedin Zhongshan, China. We currently have capacity to produce 90,000 bubble unitsper month. This is based on one production line and is scaleable accordingly. Significant investment has been made in tooling costs and quality assuranceprocesses. We are progressing with the cost reduction phase of the business plan whichincludes making significant engineering investments (including an ASIC chip set)that will substantially reduce the cost of goods of the console on an ongoingbasis. We expect to make significant progress on this in time for volumeproduction for the peak selling season in the calendar year 2006. Turnover Turnover for the period consist of product sales to our distributor (Bandai) androyalties receivable on goods sold into the channel by Bandai. These total£674,000 for the period. Cost of sales Costs of manufacturing and shipping products totalled £685,000. Of this,£571,000 relates to direct costs of manufacturing the products, £64,000 relatesto freight and distribution of the products and £50,000 relates to royaltiespayable to rights holders. Gross loss The overall gross loss for the period to 30 September 2005 is £11,000. This isprimarily due to the higher Cost of Goods associated with the first bubble unitsand Interactive DVD games being produced. Further we air freighted the firstbatch of 5,000 Bubble consoles into the UK to meet retailer deadlines, theseunits would normally be shipped by sea at lower cost. Administrative expenses Administrative expenses for the six months ended 30 September 2005 are the maincomponent of the loss on ordinary activities during the period. Comparativefigures are shown for the nine months ended 30 September 2004 which arecomparable to the current six month period as the results for January to March2004 were insignificant. Administrative expenses are in line with expectationand are analysed into two categories: Research & development expenditure and impairment of licences - £1,461,000 (2004- £994,000) Research and development expenditure incurred on hardware and software has beenwritten off to the profit and loss account. We continue to second staff from BBCWorldwide and have taken on additional internal head count in the period tosupport the internal management and technical support of software developmentprojects. Hardware development is managed out of our US office employing theservices of specialised engineering firms primarily based in California, US. We continue to write off all licensing costs on the basis of an ongoing lack ofcertainty over there recoverability, given that the platform is not yetestablished. General & administrative expenditure - £1,185,000 (2004 - £616,000) The main component of general and administrative expenditure relates to humanresource costs, totalling £504,000 for the period. Headcount has risen to 21 at30 September 2005 (2004 - 6). With an average of 14 heads for the six monthsended 30 September 2005 (2004 - 6). Additional staff were recruited into boththe UK and US offices during the period as the Group expanded operationally. Office and administration costs totalled £178,000 (2004 - £109,000) for theperiod, the largest component of which was office rent of £98,000 (2004 -£47,000). Travel and subsistence costs increased in the period to £124,000 (2004 -£47,000). This increase is primarily due to the increase in staff and the travelbetween the UK & US to oversee software development projects and between US &China to oversee the manufacturing process. Marketing costs totalled £118,000 (2004 - £52,000) in the period. These costsprimarily relate to retained agencies and consultants. Our distributor Bandaihave the financial responsibility in regard to the product marketing and publicrelations campaign. Legal and professional fees relating to the portfolio of patent applicationswere £78,000 (2004 - £7,000) for the period. The main reason for the increasebeing the post acquisition amalgamation of the PushPlay portfolio of patents. Earnings per share Basic loss per share of 12.7p (2004 loss of 12.1p) has increased due to thescaling up of the companies research and development activities and productionactivities. Net assets Net assets have decreased to £5,099,000 as at 30 September 2005 from £6,810,000at 31 March 2005. This is due to the operating loss for the period. Cash at bank at 30 September 2005 is £3,960,000. This comprises £2,578,000 in aSpecial Interest Bearing Account (SIBA) and £129,000 on Money Market CallDeposit. A further £500,000 is held in a blocked account by our bankers (RBS) insupport of our financial market trading position (these funds accrue interest atSIBA rates). The remainder of the funds are held in current accounts. In April2005 the company entered into forward currency option agreements to purchase USdollars. This has substantially reduced the exposure to US Dollar/Sterlingcurrency fluctuations in the period to June 2006. Adrian MooresFinance Director15 November 2005 Consolidated profit and loss account for the period ended 30 September 2005 Note Period from 6 months ended 9 months ended 1 January 2004 30 September 30 September to 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Turnover 674 - - Cost of sales (685) - - _______ _______ _______ Gross loss (11) - - ------------ ------------ ----------Research anddevelopmentcosts (1,461) (994) (2,266)Otheradministrativeexpenses (1,185) (616) (1,310) ------------ ------------ ---------- Administrativeexpenses (2,646) (1,610) (3,576) _______ _______ _______ Operating loss (2,657) (1,610) (3,576)Interestreceivable 128 42 74 _______ _______ _______Loss on ordinaryactivitiesbefore (2,529) (1,568) (3,502)and after taxation Deficit brought forward 6 (3,642) (140) (140) _______ _______ _______ Deficit carried forward 6 (6,171) (1,708) (3,642) _______ _______ _______ === === ===Basic and diluted lossper share 2 (12.7)p (12.1)p (25.1)p ========== =========== ========== _______ _______ _______ All amounts relate to continuing activities.All recognised gains and losses are included in the profit and loss account. Consolidated balance sheet at 30 September 2005 Note 30 September 30 September 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000Fixed assetsIntangible assets 4 1,079 8 7Tangible assets 100 65 71 _______ _______ _______ 1,179 73 78 _______ _______ _______Current assets Stock 543 - -Debtors 679 289 182Cash at bank and in hand 3,960 2,596 6,991 _______ _______ _______ 5,182 2,885 7,173Creditors: amounts falling due (1,262) (267) (441)within one year _______ _______ _______ Net current assets 3,920 2,618 6,732 _______ _______ _______ Total assets less current liabilities 5,099 2,691 6,810 _______ _______ _______ Capital & ReservesCalled up share capital 5 2,010 1,533 1,968Share premium 6 9,851 3,724 9,342Merger reserve 6 (858) (858) (858)Other reserves 6 267 - -Profit and loss account 6 (6,171) (1,708) (3,642) _______ _______ _______ Equity shareholders'funds 7 5,099 2,691 6,810 _______ _______ _______ Consolidated cash flow statement for the period ended 30 September 2005 Note Period from 6 months ended 9 months ended 1 January 2004 30 September 30 September to 31 March 2005 2004 2005 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net cashoutflow fromoperating 8 (2,820) (964) (2,578)activities _______ _______ _______ Returns on investments andservicing of financeInterestreceived 128 7 74 _______ _______ _______Net cashinflow fromreturns on 128 7 74investments and servicing offinanceCapital expenditure andfinancialinvestmentPurchase oftangible fixedassets (45) (71) (90)Purchase ofintangiblefixed assets - (336) (428) _______ _______ _______ Cash outflowfrom capitalexpenditureand financialinvestment (45) (407) (518) AcquisitionsPurchase ofsubsidiaryundertaking (273) - -Cash acquiredwithsubsidiaryundertaking 10 - -Acquisitionexpenses (31) - - _______ _______ _______ Cash Outflowfromacquisitions (294) - - Cash outflowbeforemanagement of (3,031) (1,364) (3,022)liquid resources and financing Management of liquid resourcesDecrease/(increase) in fixedterm deposits 9 6,250 - (6,250)Increase inblockeddeposits 9 (500) - - _______ _______ _______ Decrease/(Increase) ofliquidresources 5,750 - (6,250) FinancingNet proceedsfrom issue of - 3,957 9,694new share capitalExercise ofshare options - - 316 _______ _______ _______ Increase incash 9 2,719 2,593 738 _______ _______ _______ Notes forming part of the interim financial statements for the period ended 30September 2005 Copies of the interim report and accounts will be available for members of thepublic at the Company's registered office, 7 Pilgrim Street, London, EC4V 6LB. Loss per share Basic loss per share is calculated as follows (the effect of all potentialordinary shares is antidilutive): 6 months ended 9 months ended Period from 1 January 2004 to 31 March 30 September 30 September 2005 2005 2004 (audited) (unaudited) (unaudited) Loss aftertaxation forthe period £2,529,000 £1,568,000 £3,502,000 Weightedaverage numberof shares 19,900,130 12,980,535 13,963,607 _______ _______ _______ Basic anddiluted lossper share 12.7p 12.1p 25.1p _______ _______ _______ This information is provided by RNS The company news service from the London Stock Exchange