Final Results

Bright Things plc 29 June 2005 BRIGHT THINGS PLC ('Bright Things' or the 'Company') 29 June 2005 Preliminary Results Bright Things PLC, the developer of an educational games console, Bubble, and associated software for the pre-school market today announced Preliminary results: Business Highlights: •Development of games console, 'Bubble' nearing completion - expected to be available in stores in the UK and Eire in the autumn •Content agreements signed with rights holders to create titles based on characters including Noddy, Balamory, Postman Pat, Bob the Builder and the Teletubbies •Six games expected to be available at launch date with a further six currently under development •UK and Eire distribution agreement in place with Bandai •Progress being made with distribution in Continental Europe and the US •Expenditure in line with expectations •Share placing in March 2005 raised £6 million to secure future development costs •Acquisition of PushPlay strengthens Bright Things' position with regards to patent applications and IP rights Dominic Wheatley, CEO, Bright Things, said: 'This has been an incredibly busy year for Bright Things. We have created the products in line with the timeframe and investment cost expected. The initial response within the industry to Bubble and associated software based upon characters including Bob the Builder, Teletubbies, Noddy and Postman Pat, has been extremely positive. We are pleased to have the distribution agreement with Bandai in place for the UK and Eire and are progressing opportunities for distribution in Europe and the US. 'In the coming months we look forward to the retail launch of Bubble in the UK and Eire. In addition, our recent acquisition of PushPlay gives Bright Things the opportunity to develop an enhanced product range and to plan for second generation products.' For further information please contact: Bright Things PLC 0870 351 7770 Dominic Wheatley, CEO Ady Moores, CFO Matthew Tims, Publishing Director Giles Croot / Mark Antelme, Brunswick 020 7404 5959 Chairman's statement When I wrote to you at the time of our half year report in December 2004, I set out the progress we had made on a number of fronts. This included the considerable effort put into the creation of both the hardware unit (the games console) and the interactive software to accompany it. Today I am pleased to provide further details of your company's development. The Hardware We now have a name for the product - Bubble. After a successful pilot build of 150 Bubbles at the factory in China in May, we are now in main production. The pilot build has enabled us to refine the product and I am pleased to report that the firmware is working well and will shortly be finalised. Meanwhile work continues towards our goal of shrinking the electronics to ever smaller and cheaper components. A key element of the quality control work undertaken was on DVD compatability. We have now tested Bubble's compatability on the majority of DVD makes, and this work continues to ensure even higher compatability thresholds can be achieved. We expect Bubble to be in stores in the Autumn. The Software Our plan was to create six games initially to accompany the launch of the hardware, with more to follow around Christmas and the New Year. So far we have finalised: Balamory, Teletubbies, Tweenies and Fimbles. Noddy and Thomas (the Tank Engine) and Friends were started shortly after the first four and are expected to be finished in the next few weeks. TV rights We have further strengthened our catalogue of children's television show rights with the agreement with HIT Entertainment. We have also agreed terms for several shows from other TV companies and are now conducting contract discussions. We are working towards a portfolio of approximately 20 titles, 10 of which will be available as games by the first quarter next year and the rest by Christmas 2006. We plan to build on the consumer experience of the launch titles to maximise the game play experience for our customers. Marketing All packaging, catalogues, software packs, manuals and materials are now complete. The marketing campaign has been drawn up for the Autumn, including PR and TV advertising. A Bubble magazine has been created which will be bundled with every box and we have a series of trade press advertisements slated for the selling season. Distribution and Bandai Bandai UK will act as our sole distributor in the UK and Eire. We have presented Bubble to key retail buyers over the last few months and we have all been encouraged by the positive reaction we have received. At this stage we are not proposing to raise guidance on likely unit sales, but will continue to monitor the position as we move towards launch. We are also in discussions with potential European and American distributors with the aim of expanding sales next year. The launch in the UK will help us hone the product offering both in terms of the hardware and the software, and the cost reduction efforts will pay dividends when we go to higher volume manufacturing. Acquisition of PushPlay We have recently completed the acquisition of PushPlay Interactive LLC. PushPlay is a US based company which was formed to design and licence a games console product, including methods capable of delivering interactive DVD content through a remote device. Given the similarities of our business aims and the advanced development stage of Bubble, we both concluded that our businesses would offer a stronger, broader competitive offering if we worked together. The acquisition of PushPlay gives us a team with their own strong relationships in the US market. Looking ahead, we believe that the IP of the PushPlay team has potential to be useful for new product development, based on the technology, including second iterations of Bubble. Furthermore, Push Play has identified other commercial uses of the technology that may open new revenue streams to Bright Things. People The original plans have been met and the team at Bright Things have been impressive. I would like to thank not only our employees but also the many contractors who have been so supportive. The developers had the difficult task of creating these games alongside the development of the actual hardware and firmware, and they have my considerable admiration for their achievements. I would like to thank Louise Merlin our head producer and Dominique Colonna-Cesari, Gigi Misra and Christine Webb for their excellent production work. They all came to us from the BBC and, like Shamsul Rosunally and Nick Lowe, have been invaluable members of the team. We are indebted to our friends at Third Butcher who have been so professional in putting the marketing plans together. I warmly welcome the two founders of Push Play, Art and Craig Gravina. Their engineering experience and the research they have done in the area of interactive DVD will hopefully prove an invaluable asset to Bright Things. Outlook I am pleased with the progress that the company has made and we are now approaching a most interesting period. Whilst the pre-school market is competitive, we believe we have created a first class product using much loved childrens' characters. With UK distribution in place for the Christmas period and with progress being made in other territories, we remain confident about the future. We look forward to updating the market further in due course. Ian Livingstone Chairman 28 June 2005 Operational and financial review Bright Things Plc was incorporated on 8 March 2004. On 16 April 2004 the entire share capital of Bright Entertainment Limited (formerly Bright Things Limited) was acquired by Bright Things Plc. The consideration comprised shares in Bright Things Plc which were issued to the shareholders of Bright Entertainment Limited on a share for share exchange basis. Bright Things Plc placed 5,000,000 new ordinary shares at a price of 90 pence per share and was admitted to trading on AIM on 30 April 2004. The company raised £3,957,000 net of costs from this issue of ordinary shares. The shareholders of Bright Things Plc after the share for share exchange and the placing of new ordinary shares comprised both the controlling management shareholders, new institutional and private shareholders, and ex-Bright Entertainment Limited shareholders. Bright Things plc took advantage of the merger accounting relief provisions under s131 Companies Act 1985 when it issued equity shares on a share for share basis to acquire a 100% interest in Bright Entertainment Limited. Merger accounting has been applied and the effect that this has on the consolidated accounts is as follows: (a) the consolidated results include those of the trading company Bright Entertainment Limited for the fifteen month period to 31 March 2005; (b) a merger reserve with a deficit of £858,000 is created being the difference between the cost of the investment in Bright Entertainment Limited (as shown in Bright Things Plc's balance sheet of £1,000,000) and the nominal value of the share capital and share premium as shown in Bright Entertainment Limited's balance sheet of £142,000. Bright Things Plc entered into an agreement with BBC Worldwide Limited on 7 May 2004. This agreement included licensing rights to seven children's properties and the secondment of a dedicated software development management team from BBC Worldwide's award winning multi-media business. Part of the consideration payable on this agreement was settled by the issue of 333,333 ordinary shares at 90 pence each to BBC Worldwide Limited on 14 May 2004. In March 2005 an option holder exercised an option over 350,945 shares at 90 pence per share. These ordinary shares commenced trading on AIM on 9 March 2005. Bright Things Plc placed 4,000,000 new ordinary shares at a price of £1.50 per share. The shares were admitted to trading on AIM on 29 March 2005. The company raised £5,737,000 net of costs from this issue of ordinary shares. Results for operations The group made an operating loss of £3,576,000 (2003 - £98,000) Research and development and administrative expenses relate to the fifteen months ended 31 March 2005; and these are the main components of the loss on ordinary activities during the period. Key figures: Period from Year ended 1 January 2004 31 December to 31 March 2005 2003 £,000 £,000 Research and Development 2,266 26 ----------- ----------- Other administrative expenses 1,310 72 ----------- ----------- Net assets/(liabilities) 6,810 (120) ----------- ----------- Increase/(decrease) in cash 6,988 (19) ----------- ----------- Basic and diluted loss per share (25.1)p (1.0)p =========== =========== Research and Development All research and development expenditure has been charged to the profit and loss account as incurred. This includes all hardware development expenditure, software development expenditure on individual titles and advance royalties paid under licensing arrangements. Hardware, £782,000 Hardware development is taking place using specialised engineering firms primarily based in California, USA. Software, £756,000 All products are developed through outsource contracts with third party developers. As part of the BBC Worldwide contract, six members of staff from BBC Worldwide Limited were seconded to the company to work on the development of the software, this team forms the internal management for all outsource contracts. Licensing expenditure, £728,000 Licensing expenditure includes payments made to acquire the rights to licensed properties and to develop interactive DVD games which work on our hardware platform for commercial exploitation. Licensing expenditure includes £148,000 relating to advances paid which are recoupable against future royalties payable. Licensing expenditure also includes £300,000 which was settled by the issue of 333,333 new ordinary shares. Licence fees payable to organisations for use of their Intellectual Property over a number of years are charged to the profit and loss account on the basis of actual product sales. Management relies on forecasts of sales to determine the relevant amortisation rate of the licence fee. Management regularly reviews the carrying value of such licences. Due to the uncertainty of not having any actual sales data to compare against forecasts, management have taken the decision to amortise all licence fee expenditure during the current period. Administrative expenses Other administrative costs comprise all the costs of running Bright Thing'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, legal and licensing. Total administration costs of £1,310,000 were incurred during the period. The company seeks to outsource as many administrative overheads as possible. External agencies and contractors have been used to assist in sales, marketing and PR roles. The company opened offices in London and Palo Alto, California, USA during the period. The board continues to monitor the organisation's general overhead. The board constantly seeks internal efficiencies as appropriate to the growth phase of the business. Taxation No tax charge arises on the profit for the financial year. At 31 March 2005 the Group has approximately £3.6 million of losses available to carry forward to set against future taxable profits, subject to agreement with the Inland Revenue. Earnings per share Basic loss per share of 25.1p (2003 loss of 1.0p) has increased due to the scaling up of the group's research and development activities. Working Capital The Group's operational cash position has been strengthened by the placing in March 2005. At 31 March 2005, the Group had cash of £6,991,000 (2003 £3,000). The Group has no debt. At the end of the financial year the group had net current assets of £6,732,000 (2003 net current liabilities £130,000). The increase in Net Assets to £6,810,000 (2003 net liabilities £120,000) is largely due to the increase in cash resulting from the issue of new shares from the placing of ordinary shares in April 2004 and March 2005. Financial Instruments During the period, the Group's financial instruments, comprised cash and various items such as trade creditors that arise directly from operations. The main purpose of these financial instruments is to finance the Group's operations. After the period end the Group has entered into derivative transactions in the form of foreign currency contracts in order to manage the currency risk arising from the Group's operations. 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's financial instruments are liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks on a regular basis. Liquidity risk The Group continually monitors the operational working capital requirements of the business. In particular the point where seasonal sales spikes require fulfilling with shipments by sea from the Far East. The group continues to assess whether a trade finance line is appropriate taking into account the current cash position of the company. Foreign currency risk At present the Group makes significant payments in US dollars for the manufacture of finished products and the development of new games. The Group manages the foreign currency exposure from this through forward contracts. Due to the significant nature of this risk the Group has entered into US Dollar forward contracts based on forecast US Dollar requirements up to June 2006. Adrian Moores Finance Director Bright Things Plc Consolidated profit and loss account for the period ended 31 March 2005 Note Period from Year ended 1 January 2004 to 31 December 31 March 2005 2003 £,000 £,000 --------- ---------- Research and Development (2,266) (26) Other administrative expenses (1,310) (72) --------- ---------- --------- ---------- Administrative expenses and operating loss (3,576) (98) Interest receivable 74 - --------- ---------- ========= ========== Loss on ordinary activities before and after taxation (3,502) (98) and retained profit ========= ========== Loss per share Basic and diluted 2 (25.1)p (1.0)p ========= ========== All amounts relate to continuing activities. All recognised gains and losses are included in the profit and loss account. Bright Things Plc Consolidated balance sheet at 31 March 2005 31 March 31 March 31 December 31 December 2005 2005 2003 2003 £,000 £,000 £,000 £,000 Fixed assets Intangible assets 7 9 Tangible assets 71 1 -------- ---------- 78 10 Current assets Debtors 182 - Cash at bank and in hand 6,991 3 -------- ---------- 7,173 3 -------- ---------- Creditors: amounts falling due (441) (133) within one year -------- ---------- Net current assets/(liabilities) 6,732 (130) -------- ---------- Total assets less current liabilities 6,810 (120) ======== ========== Capital and reserves Called up share capital 1,968 1,000 Share premium account 9,342 - Merger reserve (858) (980) Profit and loss account (3,642) (140) -------- ---------- Shareholders' funds - equity 6,810 (120) ======== ========== Bright Things Plc annual report and accounts 2005 Consolidated cash flow statement for the period ended 31 March 2005 Note Period from Period from Year ended Year ended 1 January 2004 to 1 January 2004 to 31 December 31 December 31 March 2005 31 March 2005 2003 2003 £,000 £,000 £,000 £,000 Net cash outflow from operating 3 (2,578) (18) activities Returns on investments and servicing of finance Interest received 74 - -------- -------- Net cash inflow from returns on 74 - investment and servicing of finance Capital expenditure and financial investment Purchase of tangible fixed (90) (1) assets Purchase of intangible fixed assets (428) - -------- -------- -------- -------- Cash outflow from capital expenditure (518) (1) and financial investment -------- -------- Cash outflow before management (3,022) (19) of liquid resources and financing Management of liquid resources Increase in fixed term deposits (6,250) - -------- -------- Net cash outflow from management of liquid (6,250) - resources (6,250) - Financing Net proceeds from issue of new share capital 9,694 - Exercise of share options 316 - -------- -------- Net cash inflow from financing 10,010 - -------- -------- Increase/ (decr ease) in cash 738 (19) in the year ======== ======== Notes 1. The announcement set out above does not constitute a full financial statement of the Company's affairs for the period ended 31 March 2005. The Company's auditors have reported on the full accounts for the said year and have accompanied them with an unqualified report. The accounts have yet to be delivered to the Registrar of Companies. The annual report and accounts will be posted to shareholders in due course. Copies of the annual report and accounts will be available for members of the public at the Company's registered office, 7 Pilgrim Street, London, EC4V 6LB. The preliminary statement was approved by the board on 28 June 2005. 2. Earnings per share Earnings per share has been calculated using the following: Earnings Weighted Earnings Weighted Period from average number Year ended average number 1 January 2004 of shares 31 December of shares to Period from Year ended Year ended 31 31 March 2005 1 January 2004 2003 December to 2003 31 March 2005 £,000 £,000 £,000 £,000 Basic and diluted (3,502) 13,964 (98) 10,000 ========== ============ ========== ============ Earnings per ordinary share have 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 13,963,607 (2003 - 10,000,000) and the earnings, being loss after tax is £3,502,000 (2003 - £98,000). 3. Reconciliation of operating loss to net cash inflow from operating activities Period from Year ended 1 January 2004 to 31 December 31 March 2005 2003 £,000 £,000 Operating loss (3,576) (98) Amortisation of intangibles 730 - Depreciation 20 1 Increase in debtors (182) - Increase in creditors 430 79 ------------ ---------- Net cash inflow from operating activities (2,578) (18) ============ ========== 4. Reconciliation of net cash flow to movement in net funds Period from Year ended 1 January 2004 to 31 December 31 March 2005 2003 £,000 £,000 Increase/(decrease) in cash in the period 738 (98) Cash inflow from increase in liquid resources 6,250 - ------------ ---------- Movement in net funds during the period 6,988 (19) Net funds at 1 January 2004 3 22 ------------ ---------- Net funds at 31 March 2005 6,991 3 ============ ========== 5. Dividend The directors do not recommend the payment of a dividend in the period (2003 £nil). This information is provided by RNS The company news service from the London Stock Exchange

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