Tavistock Regulatory News (TAVI)

Company number:  05066489

SocialGO plc

Interim Results for the six months ended 30 June 2011

Overview

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The Board of Directors of SocialGO plc ('SocialGO' or the 'Group'), the developer and provider of software and related services which allow customers to build their own customised on-line social website, is pleased to report today its consolidated financial results for the six months ended 30 June 2011.

Highlights:

·; Revenues have increased in the period to £432,000 against £418,000 for the six months to 30 September 2010 despite reducing marketing expenditure by £75,000;

·; Gross Profit of £201,000 was reported for the period against a gross profit of £183,000 for the period ended 30 September 2010;

·; Staged release of SocialGO Version 2 commenced in August 2011;

·; Completed equity fund raisings totalling £1,635,500 during the period ;

·; Loss before and after tax for the financial period was reduced to £611,000, in line with expectations, against a loss of £661,000 for the period ended 30 September 2010;

·; First Columbus LLP appointed as Joint-Broker.

"SocialGO is about to enter a transformative period as our second generation platform goes live on SocialGO.com in the next few weeks. The whole team has been working on Version 2's development over the past year and we are extremely excited about where the imminent launch will take our company. I believe that the new platform will allow us to appeal to a wider customer base and that a greater proportion of those customers will have a successful, long-term experience, helping to accelerate our growth through 2012. Over 4,000,000 people a month set out to create a website for themselves, their interests or their business. With growing awareness of the power of social media, we will be offering them a solution which not only gives them a fantastic website but also helps them to harness the power and viral nature of social media.

The Company will continue to aggressively develop Version 2 as we expand our feature set, selection of themes and software flexibility over the coming months. At the same time we will be rolling out a new marketing program for SocialGO™. For the first time in a year, SocialGO will shift from a purely software development focus to a marketing and promotional one. We look forward to greatly expanding our customer base in the coming months as our new platform meets a growing wave of interest in social website building." 

Alex Halliday, CEO

Enquiries

SocialGO Plc: Dominic Wheatley/Alex Halliday, 0845 299 7289

Canaccord Genuity Limited: Mark Williams, 020 7050 6500

First Columbus Investments: Kelly Gardiner/Chris Crawford, 020 3002 2070

Pelham Bell Pottinger: Mark Antelme, 020 7861 3232

SocialGO plc

Chairman's Statement

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The focus of the Company this period has been squarely on developing the software that will form the basis of our second version of SocialGO (Version 2). The first version (Version 1), in common with many internet based products, was a commercial pathfinder for us to establish ourselves within the market and learn from our customers. Gathering the data and experience of Version 1 led to the development of a significantly more sophisticated product, broader in appeal and ambition. Essentially, with Version 2 we have developed a completely new software platform that is a social website building product designed to handle all aspects of a customers online presence - website, social network, blogging platform and sales site, all integrated with the major social networks such as Facebook and Twitter. 

The platform developed for Version 2 is more robust and scalable, providing a framework that allows us to add new features and functionality faster and more effectively than we could on Version 1. This will be important as we continue to develop the product throughout 2012 based on feedback from customers and on new developments within this highly dynamic sector of the Information Technology market. 

We set out originally to get the product developed by the middle of the calendar year. However it took longer than anticipated and was launched mid August when it went into the staging process. This is the phase when it is trialled with a small number of customers on a separate website (www.sgv2.com) while we continue to sell Version 1 on www.socialgo.com, our main website that has continued to attract around 100,000 unique visitors per month, each of whom is a potential customer, actively looking to build their own socially connected website. Sales of Version 1 have been consistent, but we have held back on marketing while we prepared for the launch of Version 2. Feedback from early adopters of Version 2 has been very positive which is encouraging, and we are building an array of exemplar sites to attach to our sales site to demonstrate to visitors on how Version 2 can be used. Amongst higher profile customers, we have been contracted to build sites for a large US insurance company and a major UK rock band.

On the basis of this positive customer feedback and early achievements we aim to switch Version 2 over to the main website within 60 days. In preparation for the full introduction of Version 2, we are moving into the sales and marketing phase of the project. A number of initiatives including consumer PR and advertising are being planned, with the aim of driving more traffic to our website. In the intervening period we are working on trialling the best product messaging and 'on-boarding' experience for the customer, thereby perfecting the customer journey taken from the sales website to setting up their own a social website. 

Aside from our current core customer base, SocialGO will be pitched to customers who want to build a socially connected website, a market which is estimated to be 20 times larger than customers who wish to build a social network. We are also aiming at existing website owners to encourage them to 'refresh' their online presence with a more sophisticated social website with social networking features that will improve communication and build traffic. This will become increasingly important to many businesses, artists, groups and communities. There is a very large market for us to address and we're excited about SocialGO's potential within it.

My thanks as always goes to the dedicated staff at SocialGO plc, all of whom have a stake in the success of the Company.

Dominic Wheatley

Chairman

30 September 2011

SocialGO plc

CEO's statement

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Overview

When SocialGO was first conceived, 'social networking' was a niche, growing category of website. Consumers were seeking to create their own, isolated social networks for their groups, interests and businesses. Our first generation platform responded to this, offering people a fantastic way to create their own social networking websites, growing a significant subscription base for the company. Since our launch, we have seen social networking move from being a niche category to a standard feature across the whole web. Facebook, Twitter and now Google have gained huge user bases and have led a generation of web users to expect the websites that they use to have social networking baked in. The resulting wave of interest in harnessing the power of social media represents an opportunity for SocialGO far greater than the one we tried to tackle with our first generation platform. In early 2010, we decided to modify our focus with the creation of a next generation platform, SocialGO Version 2. The four key objectives of Version 2 were: Firstly we wanted to broaden the appeal of the platform from simply being a social network maker and instead start to additionally target website creators who are not only a far greater market but are increasingly themselves looking for deeper social tools in their websites. Our team has a great deal of experience creating social platforms and consumers now seek this functionality in the websites they create. We saw that by adding website and blogging style features in addition to social networking elements, we could gain a greater number of customers. Secondly, we wanted to change the one-size-fits-all approach of Version 1 and allow people to choose the degree of social functionality within their website. A key requirement of the Version 2 product was that it would work just as well for the creation of a website or a fuller social network. Version 2 works as well for a simple website or blog as it does for a larger style community, meaning the product can grow as a user's website grows. Thirdly, we wanted to improve the experience that customers had during their first 5 minutes of the product. In order to capture a broader spectrum of customers, it is vital that the initial setup is guided, so that when they first see their website they get something which is close to their requirements. Version 1 of the product gave customers a default layout setting that, for a large number of potential customers, might not have been quite right; this has been addressed in Version 2 by providing customers with greater flexibility in the initial design and set-up of their website. Fourthly, the engineering team had learnt a huge amount during the development of the first product and it was important to put this to use by rebuilding the core engine to make it faster, easier to build on, more reliable and a better experience for our customers. The integrity of the new platform is far greater than our Version 1 product (which is a very normal progression for companies in this sector) and will allow features to be released at a consistent pace going forward. We spent a lot of time maintaining our initial version. We do not foresee the core engine of V2 needing to be rebuilt as it now lends itself to more iterative improvements and upgrades. The Version 2 platform went live in August 2011 at www.sgv2.com, this roll-out has been managed on a staged basis and the whole company has been busy working on the marketing, on-boarding, usability and core product based on the feedback and data we are getting from a small number of real users and customers. We are all extremely excited about the upcoming switchover, which will see us replacing the current www.socialgo.com V1 site with the new Version 2 software. For the first time in over a year we will be widely marketing the service with a number of new initiatives to drive sales of both our subscription plans and our 'Gold Star' setup plan. We will be looking to build momentum in adoption of the platform as we continue an aggressive product roadmap and accelerating marketing efforts as we move towards Christmas, with our main push planned for Q1 in 2012.

Financial Review

The results disclosed in this report are for the six month period to 30 June 2011 and unless otherwise stated, the comparatives are for the six month period to 30 September 2010. The reason for the difference in the calendar period of the comparatives is due to the change in the SocialGO year-end during 2010 from 31 March to 31 December.

Revenue for the period was £432,000 (2010 H1: £418,000) and relates entirely to SocialGO™. 

The Group reported a gross profit of £201,000 for the period (2010 H1: £183,000) with a loss from operations of £612,000 (2010 H1 loss: £661,000), with research & development costs at £76,000 (2010 H1: £82,000) and other administrative expenses at £737,000 (2010 H1: £762,000).

All overhead expenditure continues to be closely monitored in order to ensure that cash resources are effectively and efficiently managed to maximise the benefit delivered to the business.

The Group had cash deposits of £736,000 (2010 H1: £28,000) at the Balance Sheet date.

The Directors continually monitor the Group's financial position and have prepared the financial statements on a going concern basis having given consideration to forecast sales and the marketability of SocialGO™ for the foreseeable future, as highlighted in note 1.

Financing

As reported in the Annual Report, on 12 January 2011 and 28 February 2011 the Group raised £300,000 from the issue of 10,909,091 new Ordinary 1p shares at 2.75p per share and £1,335,500 from the issue of 45,271,186 new Ordinary 1p shares at 2.95p per share, respectively.

On 28 February 2011 the Group issued 5,833,333 shares to the vendors of Get On With It Limited as part of the acquisition terms. 5,219,298 of these shares went to directors of SocialGO plc.

On 28 February 2011, the Group issued 598,802 new Ordinary 1p shares to First Columbus LLP at 3.34p per share and 550,000 warrants, exercisable at 2.75p as consideration for brokers' fees.

SocialGO™

The software and its hosting platform are proving to be robust with stability at industry best practice levels. I am pleased with the quality of the service being offered and with the additional value added features that have been introduced to make the social networking experience more interactive and rewarding for the network owner and network members.

The SocialGO™ platform has penetrated into many different communities and businesses stretching from large media organisations, political campaigners and branded apparel companies to small special interest groups as the benefits of social media in the digital market place become apparent. This diversity of application of the platform goes to demonstrate the flexibility of the product and the extent of uses to which it can be put.

Post Balance Sheet Events

On 5 July 2011 the Group announced the issue of 149,333 new Ordinary Shares at the subscription price of 1.25 pence per share, totalling £1,867, for the exercise of options that were granted under the Group's EMI scheme. 

SocialGO Development Ltd filed R&D tax credit claims totalling £234,975 with HMRC for periods ended 31 March 2009 and 31 March 2010, £117,259 of which has been received after the balance sheet date.

Summary

It is an extremely exciting time for SocialGO, after a long time in intensive product development we are preparing to shift gears to take our product and message to a new and far larger audience than ever before. We believe that SocialGO's updated offering is a good match for the growing desire by SME's to be more 'social' and look forward to being the company which provides them with their future websites. I would to thank our shareholders for their support during this quiet period and look forward to an exciting Winter/Spring as SocialGO Version 2 picks up momentum.

Finally, I would like to thank all employees for their continuing hard work and dedication during the period.

Alex Halliday

CEO

30 September 2011

SocialGO plc

Operational and financial review

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Unaudited interim results for the 6 months ended 30 June 2011 and future product portfolio

SocialGO™ Version 2 - The Social Website Creator was released in August 2011.

Strategy for the future

We continue to retain the core management and technical skills in house.

As was the case for the period ended 31 December 2010, Version 2 has been the main focus in the period to 30 June 2011 and the reduction of marketing expenditure continued.

Following the launch of SocialGO Version 2 resources will be focused on further development of SocialGO™ and expanding the customer base through additional marketing with the aim of increasing sales.

Please refer to the CEO's statement for more details on Version 2.

Revenue, £432,000 (2010 H1: £418,000) and cost of sales, £231,000 (2010 H1: £235,000)

Revenue for the year consists of sales from SocialGO™ and ancillary products, such as widgets and themes. 

Cost of sales includes £90,000 of SocialGO™ server costs, £95,000 SocialGO™ sales and support staff, £30,000 transaction costs and £16,000 third party and affiliate commission costs.

Gross profit, £201,000 (2010 H1: £183,000)

The gross profit for the period relates entirely to SocialGO™.

Results for operations

The Group made loss from operations of £612,000 (2010 H1: loss of £661,000).

Research and development and other administrative expenses were the main components of the loss on ordinary activities during the six months to 30 June 2011.

Administrative expenses

Administrative expenses for the six months ended 30 June 2011 are the main component of the loss on ordinary activities during the period. Administrative expenses are in line with expectation and are analysed into two categories:

Research & Development, £76,000 (2010 H1: £82,000)

All research and development expenditure has been charged to the statement of comprehensive income as incurred unless the required criteria for capitalisation are met in which case they are included within intangible fixed assets as capitalised development. Capitalised development costs for the six months ended 30 June 2011 total £198,000 (2010 H1: £216,000) and are not included in the above figure.

Group forecasts show how the capitalised development will generate future economic benefit and support this treatment allowing the cost of new development to be amortised over its expected useful life.

Other administrative expenditure, £737,000 (2010 H1: £762,000)

Other administrative expenses comprise all the costs of running the Group's operating and corporate functions. This includes the staff, contractors and agencies together with associated costs employed in sales, marketing, PR, design, project management, production, IT, quality assurance, finance and legal. There was no impairment of IP or of goodwill in the period (2010 H1: Nil).

The main component of general and administrative expenditure relates to human resources, with costs for the period totalling £228,000 (2010 H1: £319,000). This includes a share based payment charge of £80,000 (2010 H1: £120,000). £34,000 (2010 H1: £51,000) of this related to director share options, £25,000 (2010 H1: £42,000) related to employee share options, and £21,000 (2010 H1: £27,000) related to contractor share options.

Marketing costs were £113,000 (2010 H1: £188,000) in the period. These costs primarily relate to PPC spend for SocialGO™ which was reduced in line with the focus on development. External agencies and contractors have been used to assist in marketing and PR roles.

Also included in other administrative expenses is depreciation and amortisation of £132,000 (2010 H1: £96,000), of this £41,000 (2010 H1: £41,000) related to the amortisation of IP and £85,000 (2010 H1: £53,000) related to the amortisation of capitalised development costs.

Taxation

No tax charge arises on the loss for the financial period (2010 H1: Nil). At 30 June 2011 the Group has approximately £16.8 million (2010 H1: £16.2 million) of losses available to carry forward to set against future taxable profits, subject to agreement with the UK and USA tax authorities.

Loss per share

Basic and diluted loss per share of 0.1p (2010 H1 loss: 0.2p) has decreased principally due to the reduced loss from operations along with the issuing of new shares during the six months to 30 June 2011.

Working Capital

The Group's operational cash position has been reduced by the continued investment in research and development during the period together with operational overheads. At 30 June 2011, the Group had cash of £736,000 (2010 H1; £28,000). Net assets have increased from £1,256,000 at 31 December 2010 to £2,300,000 as at 30 June 2011 (2010 H1; £1,384,000). This is in line with Group forecasts.

Details of funds raised during and after the financial period are provided in the CEO's statement and note 7 to the financial statements.

The board continues to closely monitor the organisation's general overheads making savings and seeking cost efficiencies as appropriate.

Brett Morris

Finance Director

30 September 2011

SocialGO plc

Consolidated statement of comprehensive income for the six month period ended 30 June 2011

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The notes form part of these financial statements.

SocialGO plc

The notes form part of these financial statements.

SocialGO plc

Consolidated statement of changes in equity for the period ended 30 June 2011

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The notes form part of these financial statements.

SocialGO plc

Consolidated statement of financial position as at 30 June 2011

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The interim unaudited balance sheet was approved by the Board and authorised for issue on 30 September 2011.

Brett Morris

Director

The notes form part of these financial statements.

SocialGO plc

Consolidated statement of cash flows for the six month period ended 30 June 2011

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SocialGO plc

Notes forming part of the interim financial information for the period ended 30 June 2011

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1 Accounting Policies

The Company is a public company incorporated and domiciled in the United Kingdom. The principal accounting policies applied in the preparation of this interim financial information are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Basis of preparation

The financial information in these interim results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs).

In December 2010, the Company changed the financial year end for reporting purposes from 31 March to 31 December. This was undertaken by preparing full financial statements for the nine month period ended 31 December 2010, which were audited and are available on the Company's website. For the purposes of this interim statement, the comparative periods presented are the nine months ended 31 December 2010 and the six months ended 30 September 2010. The results of the Group are not seasonal in nature, and therefore it has been considered appropriate to take exemption from certain provisions of AIM Rule 18 for this interim statement. The financial information for the six months ended 30 June 2011 and the six months ended 30 September 2010 is unaudited and unreviewed. The comparative financial information for the nine months ended 31 December 2010 does not constitute the Group's statutory financial statements for that period although it has been derived from the statutory financial statement for the period then ended. A copy of those statutory financial statements has been delivered to the Registrar of Companies. The auditors' report on those accounts 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 a statement under 498(2) or 498(3) of the Companies Act 2006.

The principal accounting policies used in preparing the interim results are those the Group expects to apply in its financial statement for the year ending 31 December 2011 and are unchanged from those disclosed in the Group's Report and Financial Statements for the year ended 31 December 2010. 

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 period end, the Group has received additional funds totalling £117,000 following the submission of two R&D claims to 31 March 2009 and 31 March 2010. 

The Board has prepared the interim results and financial information on a going concern basis having given consideration to forecast sales and the marketability of SocialGO™, together with the above receipt, for the foreseeable future. 

Having reviewed the level of paid subscription taken up since commercial launch, the Board believe its 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 interim results and financial information on a going concern basis.

2 Segmental information

The Group's operations are structured to focus on the development and sale of SocialGOTM networks. The Group's activities are operated through a common infrastructure and support functions and therefore, in the opinion of the Directors, its activities constitute one operating segment through which it provides services.

The Group operates in four main geographic areas:

Revenue

All the Group's assets are UK based.

3 Loss per share

Loss per share has been calculated using the following:

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 427,964,509 (2010 H1: 345,970,973) and the earnings, being loss after tax is £611,000 (2010 H1: £661,000 loss). There are no potentially dilutive shares in issue. Share options totalling 62,593,835 (31 December 2010: 62,593,835, 2010 H1: 60,997,383) have not been included in the calculation of diluted loss per share because they are anti-dilutive for the periods presented.

After the balance sheet date, 149,333 new Ordinary 1p Shares were issued at 1.25p per share on 5 July 2011 following receipt of £1,867 for the exercise of options which were granted under the Group's EMI scheme. This issue would not significantly alter the basic and diluted EPS calculations if it had occurred before the period end.

The Company has outstanding issued warrants to subscribe for 540,541 1p ordinary shares at £1.50 per share, 250,000 1p ordinary shares at £2.50 per share, 35,380,000 1p ordinary shares at 5p per share, 44,515,873 1p ordinary shares at 1.25p per share, 10,000,000 1p ordinary shares at 1.5p per share and 550,000 1p ordinary shares at 2.75p per share (2010 H1: 540,541 10p ordinary shares at £1.50 per share, 250,000 10p ordinary shares at £2.50 per share, 35,380,000 1p ordinary shares at 5p per share, 44,515,873 1p ordinary shares at 1.25p per share and 10,000,000 1p ordinary shares at 1.5p per share). These outstanding warrants are considered to be anti-dilutive.

4 Intangible assets

Cost

Amortisation and impairment

The carrying value of goodwill has been supported by reference to the group's detailed 3 year cash flow forecasts (as referred to in note 1 to the financial statements), that, based on reasonably achievable growth rates, suggest that the carrying value of these assets is not impaired. The group's forecasts are based on revenue growth rates and a reasonably predictable cost base that management believe are reasonably achievable and have been achieved in the period subsequent to the balance sheet date.

An appropriate discount rate has been applied to cash flow forecasts that takes in to account the time value of money, possible variations in the timing and amount of cash flows and uncertainties inherent within the asset.

5 Share capital

The Group raised £300,000 on 12 January 2011 and 28 February 2011 from the issue of 10,909,091 new Ordinary 1p shares at 2.75p per share and £1,335,500 from the issue of 45,271,186 new Ordinary 1p shares at 2.95p per share, respectively.

On 28 February 2011 the Group issued 5,833,333 shares to the vendors of Get On With It Limited as part of the acquisition terms. 5,219,298 of these shares went to directors of SocialGO plc.

On 28 February 2011, the Group issued 598,802 new Ordinary 1p shares to First Columbus LLP at 3.34p per share and 550,000 warrants, exercisable at 2.75p as consideration for brokers' fees.

Post the period end 149,333 new Ordinary 1p Shares were issued at 1.25p per share on 5 July 2011 following receipt of £1,867 for the exercise of options which were granted under the Group's EMI scheme.

The movement in share capital was as follows:

Ordinary shares of 1p each

Number £'000

In issue at 30 September 2010 362,582,995 3,626

1p Ordinary Shares issued for 1.25p each - 3 November 2010 16,000,000 160

1p Ordinary Shares issued as consideration - 19 November 2010 4,000,000 40

__________ __________

In issue at 31 December 2010 382,582,995 3,826

1p Ordinary Shares issued for 2.75p each - 12 January 2011 10,909,091 109

1p Ordinary Shares issued for 2.95p each - 28 February 2011 45,271,186 453

1p Ordinary Shares issued as consideration - 28 February 2011 6,432,135 64

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In issue at 30 June 2011 445,195,407 4,452

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At 30 June 2011, options were outstanding over 62,593,835 shares, (2010 H1: 60,997,383), including options held by directors. The 1,596,452 option movement is an increase of 7,346,452 options and the cancelling of 5,750,000 employee options. The increase refers to; 1,750,000 share options exercisable at 1.3p per Ordinary Share, granted 29 November 2010; 450,000 share options exercisable at 1.25p per Ordinary Share, granted 29 November 2010; 5,146,452 share options exercisable at 1.25p per Ordinary Share, granted 29 November 2010. 350,000 of these options were granted to contractors and the remaining 6,996,452 to employees.

6 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.

During the year ended 31 March 2010 the Company entered into a consultancy agreement with Bentworth Holdings Ltd, the consideration for which is 15,000,000 share options, exercisable between 1 and 5 years. The share based payment charge relating to these options in the period to 30 June 2011 was £15,882 (2010 H1: £26,676). In a separate agreement, so long as it holds not less than 4 per cent of the issued share capital of the Company, Bentworth Holdings Ltd is entitles to appoint a non-executive director to the Board of SocialGO™, subject to approval by the Board and the Company's nominated adviser. The non-executive director appointed was Vikrant Bhargava. Vikrant Bhargava is the founder of and holds an indirect beneficial interest in Veddis Ventures, which is the trading name of Bentworth Holdings Ltd. At 30 June 2011 Veddis Ventures held 8,252,873 warrants, 16,400,000 share options and 77,448,000 shares (2010 H1:- 8,252,873 warrants, 15,000,000 share options and 61,448,000 shares).

Warrants, including those that are deferred, held by Directors at 30 June 2011, totalled 54,112,368 (2010 H1: 51,112,368), with Alex Halliday holding 22,659,841 (2010 H1: 22,659,841); Dominic Wheatley 8,700,000 (2010 H1: 8,700,000); Ian Livingstone 2,500,000 (2010 H1: 2,500,000); and Steve Hardman 20,252,527 (2010 H1: 20,252,527).

Some costs including US server fees are paid for by Directors, when this occurs Directors are reimbursed via expenses. At 30 June 2011, £3,708.69 (2010 H1: £7,541) was outstanding to Dominic Wheatley and £Nil (2010 H1: £1,451) to Brett Morris.

7 Events after the balance sheet date

After the balance sheet date, 149,333 new Ordinary 1p Shares were issued at 1.25p per share on 5 July 2011 following receipt of £1,867 for the exercise of options which were granted under the Group's EMI scheme.