Tavistock Regulatory News (TAVI)

23 Jul 2007 07:01

Bright Things plc23 July 2007 23 July 2007 Bright Things PLC Preliminary Results Bright Things PLC ("Bright Things" or the "Company"), the innovative interactiveentertainment company, today announced Preliminary results for the year ended 31March, 2007. Business Highlights: • Identified new entertainment category, the interactive DVD (iDVD) • Developed and launched first action-style iDVD, "Tomb Raider - The Action Adventure" based around Lara Croft • Agreement with EA to develop "Tiger Woods PGA Tour 07" for release for Christmas 2007 • Significant progress with development of Bright Things' patented ASIC chip, for use in applications other than Bright Things' Bubble games console • Worldwide licensing agreement signed with Radica Games Limited for ASIC chips • Radica are now engaged in concept work to identify uses for the ASIC chip, although at this time no further orders have been received • Completed additional fundraising in November 2006, in which 10,000,000 new ordinary shares were allotted at a placing price of 11p • Completed a review of the overhead and cost base, resulting in a reduced headcount and relocation of head office Dominic Wheatley, CEO, Bright Things, said: "Over the course of the last financial year, Bright Things has continued to makesignificant strategic progress, following the launch of the Bubble gamesconsole. "With the majority of households now owning DVD players, we have identified amarket opportunity to develop games for all ages to play on the DVD player.With a focus on premium licences, we have already brought to market a game basedon Lara Croft and will be launching, in time for Christmas, a Tiger Woods game.Furthermore, we continue to look for opportunities to use the ASIC chip wedeveloped for Bubble in other applications. "Looking ahead, whilst both the iDVDs and ASIC chip are potential revenuestreams, we are also actively considering other initiatives, using our industryexpertise, in order to grow the business and to create value for ourshareholders." For further information please contact: Bright Things PLC 0870 351 7770Dominic Wheatley, CEOEdward Levey, Finance DirectorGiles Croot / Mark Antelme, Brunswick 020 7404 5959David Seal, Blue Oar Securities Plc 020 7448 4400 Chairman's Statement Introduction The results for the year ended 31st March 2007 reflect both the disappointmentsand encouragement experienced by the Company during the past year. As I have previously reported, the distributor of Bubble experienced adisappointing response when the product was initially sold into channels in2005. In the 4th quarter of 2006, the distributor implemented a price reduction,which resulted in them disposing of all remaining stocks. This suggests thatwhilst demand for the product exists, the correct retail price to the marketremains critical. We do not expect further orders from the distributor and willconsider any future Bubble activity at the end of the current distributionagreement. The year also saw the Company develop and launch the first action-style iDVDinto the UK and other territories excluding the US. This was "Tomb Raider - TheAction Adventure" which was based around Lara Croft. Sales were not as high aswe had hoped, but we were encouraged by the support at distribution and retaillevel for this new category of entertainment, which gives us confidence thatthere is a market place for this new genre. The 4th quarter of 2007 will see the US launch, for the Christmas market, ofTiger Woods PGA '07 and Tomb Raider - The Action Adventure. The Tiger Woods gamewill be launched worldwide at the same time. In the interim statement I reported that the Directors had identified a numberof ways of utilising the technologies developed to date and skills learnt by ourpeople in that process to focus the future direction of the business. Inparticular other applications of the technology utilised in the Bubbledevelopment continue to be explored. During the year this resulted in a contractwith Radica Games Limited for the software development kit and an initialquantity of ASIC ("Application Specific Integrated Circuit") chips. An initialprototype has generated trade interest and various games applications are underconsideration and test. Results Without any sales of the Bubble games console during the year, Turnover at£205,000 (2006 - £3,110,000) was significantly reduced from the prior year whichhad included 112,000 units of Bubble hardware and 200,000 units of software soldto our distributor. The operating loss was reduced to £3,344,000 (2006 loss £5,462,000), withResearch & Development costs at £847,000 (2006: £2,708,000) and otheradministrative expenses, which include a one off goodwill impairment charge of£742,000, at £2,491,000 (2006: £2,538,000). The Group is required to test, on an annual basis, whether goodwill has sufferedany impairment. The recoverable amount is determined based on value in usecalculations. The use of this method requires the estimation of future cashflows and the choice of a discount rate in order to calculate the present valueof the cash flows. Due to the uncertain nature of future cash flow, the Group has decided to fullyimpair the goodwill which related wholly to the acquisition of PushPlayInteractive LLC. Cost reductions, excluding the one off goodwill impairment charge, havereflected on the above overheads and this trend will increase during the currentyear. Investment in development is now largely complete and expenditure willdrop significantly from the end of July onwards. All overhead expenditurecontinues to be closely monitored. The Group had cash deposits of £864,000 (2006 - £1,775,000) at the Balance Sheetdate. Prospects Opportunities for new applications for the ASIC chip continue to be explored.Radica are now engaged in concept work to identify suitable games in which touse the ASIC chip. However, at this time, no further orders have been receivedfrom Radica. With development now largely complete and manufacturing agreementsin place, the Company is potentially placed to benefit from the considerableinvestment in R&D made over the past two years provided suitable customers cannow be found. We continue to have discussions with other parties interested in utilising theASIC in their products. I can report that work is well advanced on the Tiger Woods PGA Tour 07 game andis scheduled to be completed within the next month well in time for its plannedChristmas launch. The company will also launch the Lara Croft Tomb Raider DVDinto the US market for this Christmas. New iDVD products will be considered in the New Year with the Company intendingto remain selective in identifying premium licenses. Notwithstanding the continued efforts to create a successful venture, which hasso far been disappointing, the company is also considering possible corporate orproduct initiatives separate from our core activities to date. I will provideupdates as these occur. Summary We continue to explore all opportunities to utilise the Company's expertise andintellectual property. Overheads have been significantly reduced and are expected to decrease furtheras hardware development on the ASIC is finalised and Software development on thecurrent iDVD product is completed and your Board will continue to carefullymonitor the working capital requirements of the company. Finally, I would like to thank all employees for their hard work and dedicationduring the year. Ian LivingstoneChairman23 July 2007 Operational and financial review 2007 financial year and future product portfolio Bright Things launched the following product in the year: Lara Croft Tomb Raider - The Action Adventure i-DVD game (release 6 November2006) The following additional games are scheduled for release Christmas 2007: Tiger Woods PGA Tour 07 Deluxe boxed edition i-DVD gameTiger Woods PGA Tour 07 i-DVD gameLara Croft Tomb Raider - The Action Adventure Deluxe edition i-DVD and boardgame Management are in discussion with our distribution partners as to the releasedates for these games. Development model We continue to retain the core management and technical skills in house andsubcontract game development to an external studio with appropriate expertise inDVD authoring and DVD game development. Manufacturing capabilities The i-DVDs are manufactured by Sony DADC located in the UK. Commercialisation of underlying patented technology Bright Things have completed the engineering of its core bubble technology intoan Application Specific Integrated Circuit 'ASIC' chip set and are now in thefinal stages of testing and modification. This enables the core 'Bubble'functionality, which received US Patent approval during the previous year, to bemade available as a one chip solution for other peripheral devices interactingwith a DVD player or set top box. Further revenue streams The Group's Patent and Intellectual Property portfolio combined with thecontinuing growth of the Interactive DVD industry present opportunities togenerate revenue from the use of our technology in products outside of ourinitial target market . Strategy for the future The company has licensed from EA the well known brand of Tiger Woods to createtheir second DVD game. The development of and plans for marketing of this gameare proceeding well. A key part of the future strategy is finding external customers for the patentedASIC chip. Bright Things continues to meet with other parties interested in using the ASICchip. Results for operations The Group made an operating loss of £3,344,000 (2006 - £5,462,000 as restated)after goodwill impairment of £742,000 and goodwill amortisation charges of£90,000 (2006 £67,000). Administrative expenses were the main components of the loss on ordinaryactivities during the year ended 31 March 2007. Key figures: (restated) Year Year Ended Ended 31 March 31 March 2007 2006 £'000 £'000 Turnover 205 3,110 ________ ________ Gross Profit/(Loss) 101 (103) ________ ________ Research and Development 847 2,708 ________ ________ Other administrative expenses 2,491 2,538 ________ ________ Net assets 627 2,780 ________ ________ Decrease in cash and cash equivalents 911 5,216 ________ ________ Basic and diluted loss per share (13.5)p (26.2)p ________ ________ Turnover, £205,000 (2006 - £3,110,000) Turnover for the year primarily consists of product sales to our distributor(Pinnacle) and royalties receivable on goods sold into the channel by Koch.Turnover is split between: i-DVD software £118,000; sales development kit£35,000; chip sales £31,000; and Bubble hardware bundles revenue of £21,000. Cost of sales, £104,000 (2006 - £3,213,000) Direct costs of manufacturing the products were £27,000. Royalties payable torights holders were £77,000. Gross profit, £101,000 (2006 loss - £103,000) The overall gross profit for the year is £101,000. This is split between: GrossLoss on Bubble hardware bundles of £13,000 achieving a negative gross margin of61.9%; Gross Loss on Bubble software of £37,000 achieving a negative grossmargin of 100%; Gross Profit on i-DVD of £87,000 achieving a gross margin of73.7%; Gross Profit on chip sales of £29,000 achieving a gross margin of 93.5%;and gross margin of £35,000 on sales development kit revenue. Administrative expenses Administrative expenses for the year ended 31 March 2007 are the main componentof the loss on ordinary activities during the year. Administrative expenses arein line with expectation and are analysed into two categories: Research and Development, £847,000 (2006 - £2,708,000) All research and development expenditure has been charged to the profit and lossaccount as incurred per the accounting policy in note 1 to the financialstatements on page 33. This includes all hardware development expenditure,software development expenditure on individual titles and advance royalties paidunder licensing arrangements. Hardware, £238,000 (2006 - £1,408,000) Hardware development spend includes the following: £228,000 relates to the ASICchip development. £10,000 relates to work on speculative development for newbusiness activities. Software, £411,000 (2006 - £1,238,000) Software development spend includes the following: £220,000 relates to thedevelopment of the Tomb Raider titles launched in the year. £63,000 relates toTiger Woods which is to be launched for Christmas 2007. £98,000 relates to thecompletion of five Bubble titles that have not been released. £23,000 relates towork on speculative development for new business activities. £5,000 relates tothe original six Bubble titles. £2,000 relates to reworking Tomb Raider forChristmas 2007. All products are developed through outsource contracts with third partydevelopers and managed via our internal production team. Management have taken the decision to write off all of these costs in theseaccounts due to the uncertainty of the level of future sales. Licensing expenditure, £198,000 (2006 - £62,000) Licensing expenditure includes £225,000 relating to advances which arerecoupable against future royalties payable. Licensing expenditure also includescredits of £12,000, which relates to amounts recouped against royalties payableon sales during the year in respect of titles whose advances were charged to theprevious period's accounts and £15,000 relating to negotiating lower minimumguarantees than accrued for in the previous year. Licence fees payable to organisations for use of their Intellectual Propertyover a number of years are charged to the profit and loss account on the basisof actual product sales. Management relies on forecasts of sales to determinethe relevant amortisation rate of the licence fee. Management regularly reviewsthe carrying value of such licences. Due to the uncertainty of the level of future sales, management have taken thedecision to amortise all licence fee expenditure and write off all advancespaid. Other administrative expenses, £2,491,000 (2006 - £2,538,000) Other administrative costs comprise all the costs of running Bright Things'operating and corporate functions. This includes the staff, contractors andagencies together with associated costs employed in sales, marketing, PR,design, project management, production, IT, quality assurance, finance andlegal. Included in this figure is a one off goodwill impairment charge of£742,000. Another main component of general and administrative expenditure relates tohuman resource costs, totalling £725,000 (2006 - £1,150,000). Staff reductionswere made in both the UK and US offices during the period as the Groupcontracted operationally. The company seeks to outsource as many administrative overheads as possible.External agencies and contractors have been used to assist in sales, marketingand PR roles. Office and administration costs totalled £184,000 (2006 - £380,000). Thelargest component being office costs of £120,000 (2006 - £280,000). The company continued to operate offices in London and California, USA for theyear, closing the office in Connecticut in August 2006. Post year-end theChiswick head office has been relocated to less expensive premises. Travel and subsistence costs decreased in the year to £160,000 (2006 -£288,000). This reduction is primarily due to the decrease in staff and thetravel between the UK & US for new business development activities and managingsoftware development projects. Marketing costs totalled £235,000 (2006 - £291,000). These costs primarilyrelate to retained agencies and consultants. £197,000 relate to the Tomb Raideri-DVD. Legal and professional fees relating to the portfolio of patent applicationswere £26,000 (2006 - £129,000). The decrease is as expected as the cost ismaintaining patents acquired in previous years. Share based payment charges - FRS 20 The adjustment in respect of share options totalled £107,000 (2006 - £113,000) Taxation No tax charge arises on the loss for the financial year. At 31 March 2007 theGroup has approximately £10.6 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 13.5p (2006 restated loss of 26.2p) hasdecreased due to the scaling down of the Group's research and developmentactivities and reduction in administration costs. 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. At31 March 2007, the Group had cash of £864,000 (2006 £1,775,000). At the end ofthe financial year the group had net current assets of £500,000 (2006 netcurrent assets of £1,659,000). Net assets have decreased to £627,000 (2006 - £2,780,000), this is primarily dueto the amortisation and impairment of goodwill and the spend associated with thelaunch of the Tomb Raider i-DVD in October 2006 and continued investment inresearch and development (including a significant amount on development of theASIC chip to enable future income utilising the chip technology in otherbusiness opportunities). 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 monitor the organisation's general overheads and to makesavings where appropriate. The board constantly seeks cost efficiencies asappropriate given the current level of cash resources. Financial Instruments During the period, the Group's financial instruments, comprised cash and variousitems such as trade creditors that arise directly from operations. The mainpurpose of these financial instruments is to finance the Group's operations.The Group's policy is, and was throughout the period under review, not to tradein financial instruments. The main risk arising from the Group's financialinstruments are liquidity risk and foreign currency risk. The Board reviews andagrees 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 Director23 July 2007 Bright Things Plc Consolidated profit and loss account for the year ended 31 March 2007 (restated) Year ended Year ended 31 March 2007 31 March 2006 Note £'000 £'000 Turnover 205 3,110Cost of sales (104) (3,213) _______ _______ Gross profit/loss 101 (103) Research and development costs (847) (2,708)Administrative expenses - other (1,749) (2,538)Administrative expenses - exceptional (742) -Share based payment charge (107) (113) Administrative expenses (3,445) (5,359) _______ _______ Operating loss (3,344) (5,462) Interest receivable 52 184 _______ _______Loss on ordinary activities beforeand after taxation 3 (3,292) (5,278) _______ _______Loss per shareBasic and diluted 4 (13.5)p (26.2)p _______ _______ All amounts relate to continuing activities. Bright Things Plc Consolidated balance sheet at 31 March 2007 (restated) Note 31 March 31 March 31 March 31 March 2007 2007 2006 2006 £'000 £'000 £'000 £'000Fixed assets Intangible assets 89 1,034 Tangible assets 38 87 ________ ________ 127 1,121 Current assets Stock 7 - Debtors 181 431 Cash at bank and in hand 864 1,775 ________ ________ 1,052 2,206 Creditors: amounts falling duewithin one year (552) (547) ________ ________ Net current assets 500 1,659 ________ ________ Total assets less current liabilities 627 2,780 ________ ________ Capital and reserves Called up share capital 3,045 2,045 Share premium account 9,589 9,559 Warrant reserve 267 267 Merger reserve (286) (286) Share based compensation 220 113 Profit and loss account (12,208) (8,918) ________ ________ Shareholders' funds 627 2,780 ________ ________ The financial statements were approved by the Board and authorised for issue on23 July 2007. Edward LeveyDirector Bright Things Plc Consolidated cash flow statement for the year ended 31 March 2007 Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March Note 2007 2007 2006 2006 £'000 £'000 £'000 £'000 Net cash outflow from operatingactivities 6 (1,987) (5,375) Returns on investments andservicing of finance Interest received 48 184 ________ ________ Net cash inflow from returns oninvestment and servicing of finance 48 184 Capital expenditure and financialinvestment Purchase of tangible fixed assets (6) (58) Purchase of intangible fixed assets - (19) Sales of intangible fixed assets 4 - ________ ________ Cash outflow from capital expenditureand financial investment (2) (77) Acquisitions Purchase of subsidiary undertaking - (273) Cash acquired with subsidiary undertaking - 10 ________ ________ Cash outflow from acquisitions - (263) ________ ________ Cash outflow before managementof liquid resources and financing (1,941) (5,531) Management of liquid resources Decrease in fixed term deposits - 6,250 (Increase)/Decrease in blocked deposits 500 (500) ________ ________ Net cash inflow from management ofliquid resources 500 5,750 Financing Net proceeds from issue of new share capital (net of issue costs of £70,000) 1,030 - Exercise of share options - 315 ________ ________ Net cash inflow from financing 1,030 315 ________ ________ (Decrease)/Increase in cash in the year 7 (411) 534 ________ ________ Bright Things Plc Notes forming part of the financial statements for the year ended 31 March 2007 1 Accounting policies Basis of preparation The preliminary announcement has been prepared under the accounting policiesthat applied to the financial statements for the period ended 31 March 2006except for the implementation of FRS 20 Share based payment. In 2007 the change in accounting policy has resulted in net increase in loss forthe year of £107,000. For 2006 the impact of share based payments was a netcharge to income of £113,000. The share based payments expense has been included in the following line of theconsolidated profit and loss account: administrative expenses £3,445,000 (2006 -£5,359,000). The financial information has been prepared in accordance with the accountingpolicies and presentation required by UK GAAP 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 31 July 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. 2 Segment information Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Turnover by activity: Bubble hardware bundles 21 2,354 Bubble software - 753 Consultancy - 3 i-DVD software 118 - Renesas chip sales 31 - Sales development kit 35 - ________ ________ 205 3,110 ________ ________ Gross profit/(loss) by activity: Bubble hardware bundles (13) (321) Bubble software (37) 215 Consultancy - 3 i-DVD software 87 - Renesas chip sales 29 - Sales development kit 35 - ________ ________ 101 (103) ________ ________ All of the Group's turnover, profit and net assets relate to the Group's mainactivities, which are principally in the United Kingdom. No profit before tax or net asset by class of business segment information hasbeen disclosed because any allocation would be arbitrary. 3 Taxation on profit from ordinary activities (restated) Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Loss on ordinary activities before tax (3,292) (5,278) ________ ________ The tax assessed for the period differs from the standard rate of corporationtax in the UK applied to profit before tax. The differences are explained below: (restated) Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Loss on ordinary activities at the standard rate of corporation tax in the UK of 30% (2005 - 30%) (988) (1,583) Effects of: Unutilised losses carried forward 684 1,558 Capital allowances for the year in deficit of depreciation 15 13 Expenses not deductible for tax purposes 289 12 ________ ________ Current tax charge for year - - ________ ________ Deferred Tax At 31 March 2007 the Group had £10.6 million (2006 - £8.9 million) carriedforward as losses, subject to the agreement of the Inland Revenue and US taxauthorities. After assessing the prospects for the 2008 financial year theboard has decided to not recognise any deferred tax asset as it is prudent toestimate that no losses will be utilised in that period. The value of theunprovided deferred tax asset is calculated at £3.18 million (2006 - £2.64million). 4 Loss per share Loss per share has been calculated using the following: (restated) Loss Weighted Loss Weighted average average number of number of shares shares Year ended Year ended Year ended Year ended 31 March 31 March 31 March 31 March 2007 2007 2006 2006 £'000 '000s £'000 '000s Basic and diluted (3,292) 24,311 (5,278) 20,154 ________ ________ ________ ________ Loss per ordinary share has been calculated using the weighted average number ofshares in issue during the relevant financial periods. The weighted averagenumber of equity shares in issue, is 24,310,780 (2006 - 20,154,033) and theearnings, being loss after tax is £3,292,000 (2006 - £5,278,000 as restated).There are no potentially dilutive shares in issue. Share options totalling2,198,105 (2006 - 3,373,105) have not been included in the calculation ofdiluted loss per share because they are anti-dilutive for the periods presented. 5 Dividends No dividend is to be paid. 6 Reconciliation of operating loss to net cash outflow from operatingactivities (restated) Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 Operating loss (3,344) (5,462) Amortisation of intangibles 944 83 Depreciation 50 46 Share option charge 107 113 Loss on sale of fixed asset 1 - Decrease/(Increase) in debtors 250 (239) Increase in creditors 5 84 ________ ________ Net cash outflow from operating activities (1,987) (5,375) ________ ________ All cash flows relate to continuing activities 7 Analysis of cash balances and liquid resources At At 1 April Cash 31 March 2006 2007 £'000 £'000 £'000 Cash 1,275 (411) 864 Liquid resources 500 (500) - ________ ________ ________ Total cash and liquid resources 1,775 (911) 864 ________ ________ ________ 8 Reconciliation of net cash flow to movement in net funds Year ended Year ended 31 March 31 March 2007 2006 £'000 £'000 (Decrease)/Increase in cash in the period (411) 534 Cash outflow from decrease in liquid resources (500) (5,750) ________ ________ Movement in net funds during the period (911) (5,216) ________ ________ Net funds at 1 April 2006 1,775 6,991 ________ ________ Net funds at 31 March 2007 864 1,775 ________ ________ 9 Non statutory information The financial information set out above does not constitute the Company'sstatutory accounts within the meaning of s.240 of the Companies Act 1985 for theyear ended 31 March 2007 or the period ended 31 March 2006, but is derived fromthose accounts. Statutory accounts for 2006 have been delivered to the Registrarof Companies and those for 2007 will be delivered following the Company's annualgeneral meeting. The auditors have reported on those accounts; their reportswere unqualified and did not contain statements under the Companies Act 1985,s.237 (2) or (3). The full annual report will be posted to shareholders on 2 August 2007. Copiesof this report are available from Bright Things plc, Ashley Wood Farm, HindonLane, Tisbury, Wiltshire, SP3 6PY. This information is provided by RNS The company news service from the London Stock Exchange