Preliminary Results
Bright Things plc
23 July 2007
23 July 2007
Bright Things PLC
Preliminary Results
Bright Things PLC ('Bright Things' or the 'Company'), the innovative interactive
entertainment company, today announced Preliminary results for the year ended 31
March, 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 make
significant strategic progress, following the launch of the Bubble games
console.
'With the majority of households now owning DVD players, we have identified a
market 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 based
on 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 we
developed for Bubble in other applications.
'Looking ahead, whilst both the iDVDs and ASIC chip are potential revenue
streams, we are also actively considering other initiatives, using our industry
expertise, in order to grow the business and to create value for our
shareholders.'
For further information please contact:
Bright Things PLC 0870 351 7770
Dominic Wheatley, CEO
Edward Levey, Finance Director
Giles Croot / Mark Antelme, Brunswick 020 7404 5959
David Seal, Blue Oar Securities Plc 020 7448 4400
Chairman's Statement
Introduction
The results for the year ended 31st March 2007 reflect both the disappointments
and encouragement experienced by the Company during the past year.
As I have previously reported, the distributor of Bubble experienced a
disappointing response when the product was initially sold into channels in
2005. In the 4th quarter of 2006, the distributor implemented a price reduction,
which resulted in them disposing of all remaining stocks. This suggests that
whilst demand for the product exists, the correct retail price to the market
remains critical. We do not expect further orders from the distributor and will
consider any future Bubble activity at the end of the current distribution
agreement.
The year also saw the Company develop and launch the first action-style iDVD
into the UK and other territories excluding the US. This was 'Tomb Raider - The
Action Adventure' which was based around Lara Croft. Sales were not as high as
we had hoped, but we were encouraged by the support at distribution and retail
level for this new category of entertainment, which gives us confidence that
there is a market place for this new genre.
The 4th quarter of 2007 will see the US launch, for the Christmas market, of
Tiger Woods PGA '07 and Tomb Raider - The Action Adventure. The Tiger Woods game
will be launched worldwide at the same time.
In the interim statement I reported that the Directors had identified a number
of ways of utilising the technologies developed to date and skills learnt by our
people in that process to focus the future direction of the business. In
particular other applications of the technology utilised in the Bubble
development continue to be explored. During the year this resulted in a contract
with Radica Games Limited for the software development kit and an initial
quantity of ASIC ('Application Specific Integrated Circuit') chips. An initial
prototype has generated trade interest and various games applications are under
consideration 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 which
had included 112,000 units of Bubble hardware and 200,000 units of software sold
to our distributor.
The operating loss was reduced to £3,344,000 (2006 loss £5,462,000), with
Research & Development costs at £847,000 (2006: £2,708,000) and other
administrative 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 suffered
any impairment. The recoverable amount is determined based on value in use
calculations. The use of this method requires the estimation of future cash
flows and the choice of a discount rate in order to calculate the present value
of the cash flows.
Due to the uncertain nature of future cash flow, the Group has decided to fully
impair the goodwill which related wholly to the acquisition of PushPlay
Interactive LLC.
Cost reductions, excluding the one off goodwill impairment charge, have
reflected on the above overheads and this trend will increase during the current
year. Investment in development is now largely complete and expenditure will
drop significantly from the end of July onwards. All overhead expenditure
continues to be closely monitored.
The Group had cash deposits of £864,000 (2006 - £1,775,000) at the Balance Sheet
date.
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 to
use the ASIC chip. However, at this time, no further orders have been received
from Radica. With development now largely complete and manufacturing agreements
in place, the Company is potentially placed to benefit from the considerable
investment in R&D made over the past two years provided suitable customers can
now be found.
We continue to have discussions with other parties interested in utilising the
ASIC in their products.
I can report that work is well advanced on the Tiger Woods PGA Tour 07 game and
is scheduled to be completed within the next month well in time for its planned
Christmas launch. The company will also launch the Lara Croft Tomb Raider DVD
into the US market for this Christmas.
New iDVD products will be considered in the New Year with the Company intending
to remain selective in identifying premium licenses.
Notwithstanding the continued efforts to create a successful venture, which has
so far been disappointing, the company is also considering possible corporate or
product initiatives separate from our core activities to date. I will provide
updates as these occur.
Summary
We continue to explore all opportunities to utilise the Company's expertise and
intellectual property.
Overheads have been significantly reduced and are expected to decrease further
as hardware development on the ASIC is finalised and Software development on the
current iDVD product is completed and your Board will continue to carefully
monitor the working capital requirements of the company.
Finally, I would like to thank all employees for their hard work and dedication
during the year.
Ian Livingstone
Chairman
23 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 November
2006)
The following additional games are scheduled for release Christmas 2007:
Tiger Woods PGA Tour 07 Deluxe boxed edition i-DVD game
Tiger Woods PGA Tour 07 i-DVD game
Lara Croft Tomb Raider - The Action Adventure Deluxe edition i-DVD and board
game
Management are in discussion with our distribution partners as to the release
dates for these games.
Development model
We continue to retain the core management and technical skills in house and
subcontract game development to an external studio with appropriate expertise in
DVD 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 into
an Application Specific Integrated Circuit 'ASIC' chip set and are now in the
final stages of testing and modification. This enables the core 'Bubble'
functionality, which received US Patent approval during the previous year, to be
made available as a one chip solution for other peripheral devices interacting
with a DVD player or set top box.
Further revenue streams
The Group's Patent and Intellectual Property portfolio combined with the
continuing growth of the Interactive DVD industry present opportunities to
generate revenue from the use of our technology in products outside of our
initial target market .
Strategy for the future
The company has licensed from EA the well known brand of Tiger Woods to create
their second DVD game. The development of and plans for marketing of this game
are proceeding well.
A key part of the future strategy is finding external customers for the patented
ASIC chip.
Bright Things continues to meet with other parties interested in using the ASIC
chip.
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 ordinary
activities 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 to
rights 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: Gross
Loss on Bubble hardware bundles of £13,000 achieving a negative gross margin of
61.9%; Gross Loss on Bubble software of £37,000 achieving a negative gross
margin of 100%; Gross Profit on i-DVD of £87,000 achieving a gross margin of
73.7%; 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 component
of the loss on ordinary activities during the year. Administrative expenses are
in 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 loss
account as incurred per the accounting policy in note 1 to the financial
statements on page 33. This includes all hardware development expenditure,
software development expenditure on individual titles and advance royalties paid
under licensing arrangements.
Hardware, £238,000 (2006 - £1,408,000)
Hardware development spend includes the following: £228,000 relates to the ASIC
chip development. £10,000 relates to work on speculative development for new
business activities.
Software, £411,000 (2006 - £1,238,000)
Software development spend includes the following: £220,000 relates to the
development of the Tomb Raider titles launched in the year. £63,000 relates to
Tiger Woods which is to be launched for Christmas 2007. £98,000 relates to the
completion of five Bubble titles that have not been released. £23,000 relates to
work on speculative development for new business activities. £5,000 relates to
the original six Bubble titles. £2,000 relates to reworking Tomb Raider for
Christmas 2007.
All products are developed through outsource contracts with third party
developers and managed via our internal production team.
Management have taken the decision to write off all of these costs in these
accounts 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 are
recoupable against future royalties payable. Licensing expenditure also includes
credits of £12,000, which relates to amounts recouped against royalties payable
on sales during the year in respect of titles whose advances were charged to the
previous period's accounts and £15,000 relating to negotiating lower minimum
guarantees than accrued for in the previous year.
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 the level of future sales, management have taken the
decision to amortise all licence fee expenditure and write off all advances
paid.
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 and
agencies together with associated costs employed in sales, marketing, PR,
design, project management, production, IT, quality assurance, finance and
legal. Included in this figure is a one off goodwill impairment charge of
£742,000.
Another main component of general and administrative expenditure relates to
human resource costs, totalling £725,000 (2006 - £1,150,000). Staff reductions
were made in both the UK and US offices during the period as the Group
contracted operationally.
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.
Office and administration costs totalled £184,000 (2006 - £380,000). The
largest component being office costs of £120,000 (2006 - £280,000).
The company continued to operate offices in London and California, USA for the
year, closing the office in Connecticut in August 2006. Post year-end the
Chiswick 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 the
travel between the UK & US for new business development activities and managing
software development projects.
Marketing costs totalled £235,000 (2006 - £291,000). These costs primarily
relate to retained agencies and consultants. £197,000 relate to the Tomb Raider
i-DVD.
Legal and professional fees relating to the portfolio of patent applications
were £26,000 (2006 - £129,000). The decrease is as expected as the cost is
maintaining 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 the
Group has approximately £10.6 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 13.5p (2006 restated loss of 26.2p) has
decreased due to the scaling down of the Group's research and development
activities and reduction in administration costs.
Working Capital
The Group's operational cash position has been reduced by the continued
investment in research and development during the year together with operational
overheads and lower than anticipated sell through at retail of our products. At
31 March 2007, the Group had cash of £864,000 (2006 £1,775,000). At the end of
the financial year the group had net current assets of £500,000 (2006 net
current assets of £1,659,000).
Net assets have decreased to £627,000 (2006 - £2,780,000), this is primarily due
to the amortisation and impairment of goodwill and the spend associated with the
launch of the Tomb Raider i-DVD in October 2006 and continued investment in
research and development (including a significant amount on development of the
ASIC chip to enable future income utilising the chip technology in other
business opportunities).
The Group has made further progress in reducing the monthly cash burn through a
reduction in head count and down sizing of the serviced office space in all
locations.
The board continues to monitor the organisation's general overheads and to make
savings where appropriate. The board constantly seeks cost efficiencies as
appropriate given the current level of cash resources.
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.
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. The Group continues to assess appropriate financing opportunities
based on future business plans and working capital requirements.
Edward Levey
Finance Director
23 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 3,110
Cost 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 before
and after taxation 3 (3,292) (5,278)
_______ _______
Loss per share
Basic 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 £'000
Fixed 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 due
within 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 on
23 July 2007.
Edward Levey
Director
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 operating
activities 6 (1,987) (5,375)
Returns on investments and
servicing of finance
Interest received 48 184
________ ________
Net cash inflow from returns on
investment and servicing of finance 48 184
Capital expenditure and financial
investment
Purchase of tangible fixed assets (6) (58)
Purchase of intangible fixed assets - (19)
Sales of intangible fixed assets 4 -
________ ________
Cash outflow from capital expenditure
and financial investment (2) (77)
Acquisitions
Purchase of subsidiary undertaking - (273)
Cash acquired with subsidiary undertaking - 10
________ ________
Cash outflow from acquisitions - (263)
________ ________
Cash outflow before management
of 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 of
liquid 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 policies
that applied to the financial statements for the period ended 31 March 2006
except for the implementation of FRS 20 Share based payment.
In 2007 the change in accounting policy has resulted in net increase in loss for
the year of £107,000. For 2006 the impact of share based payments was a net
charge to income of £113,000.
The share based payments expense has been included in the following line of the
consolidated profit and loss account: administrative expenses £3,445,000 (2006 -
£5,359,000).
The financial information has been prepared in accordance with the accounting
policies and presentation required by UK GAAP
Going concern
The Directors continually monitor the financial position of the Group, taking
into account the latest cash flow forecasts and the ability of the Group to
generate cash. The Directors have prepared the financial statements on a going
concern basis having given consideration to forecast game sales and the
marketability of the ASIC chip for the period to 31 July 2008.
While there will always remain some inherent uncertainty within the
aforementioned cash flow forecasts, the Directors remain confident that they
will be able to manage the Group's finances and operations so as to achieve the
forecasted cash flows and, as a result, that it is appropriate to draw up the
financial statements on a going concern basis.
The financial statements do not include any adjustments that would result if the
going 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 main
activities, which are principally in the United Kingdom.
No profit before tax or net asset by class of business segment information has
been 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 corporation
tax 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) carried
forward as losses, subject to the agreement of the Inland Revenue and US tax
authorities. After assessing the prospects for the 2008 financial year the
board has decided to not recognise any deferred tax asset as it is prudent to
estimate that no losses will be utilised in that period. The value of the
unprovided deferred tax asset is calculated at £3.18 million (2006 - £2.64
million).
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 of
shares in issue during the relevant financial periods. The weighted average
number of equity shares in issue, is 24,310,780 (2006 - 20,154,033) and the
earnings, being loss after tax is £3,292,000 (2006 - £5,278,000 as restated).
There are no potentially dilutive shares in issue. Share options totalling
2,198,105 (2006 - 3,373,105) have not been included in the calculation of
diluted 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 operating
activities
(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's
statutory accounts within the meaning of s.240 of the Companies Act 1985 for the
year ended 31 March 2007 or the period ended 31 March 2006, but is derived from
those accounts. Statutory accounts for 2006 have been delivered to the Registrar
of Companies and those for 2007 will be delivered following the Company's annual
general meeting. The auditors have reported on those accounts; their reports
were 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. Copies
of this report are available from Bright Things plc, Ashley Wood Farm, Hindon
Lane, Tisbury, Wiltshire, SP3 6PY.
This information is provided by RNS
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